Document:

WWW.EXFILE.COM, INC. -- 888-775-4789 -- ARKADOS GROUP, INC. -- EXHIBIT 4.2 TO FORM 8-K

     

    EXHIBIT
4.2

    

     

    NEITHER
THIS SECURITY NOR THE SECURITIES INTO WHICH THIS SECURITY IS EXERCISABLE HAVE
BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES
COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY,
MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM,
OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS
EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE
SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE
COMPANY.  THIS SECURITY AND THE SECURITIES ISSUABLE UPON EXERCISE OF
THIS SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR
OTHER LOAN SECURED BY SUCH SECURITIES.

    

    COMMON
STOCK PURCHASE WARRANT

    

    To
Purchase ______ Shares of Common Stock of

     

    ARKADOS
GROUP, INC.

     

    THIS
COMMON STOCK PURCHASE WARRANT (the “Warrant”) certifies
that, for value received, ________________ (the “Holder”), is
entitled, upon the terms and subject to the limitations on exercise and the
conditions hereinafter set forth, at any time on or after the date hereof (the
“Initial Exercise
Date”) and on or prior to the close of business on the December 28, 2012
(the “Termination
Date”) but not thereafter, to subscribe for and purchase from Arkados
Group, Inc. (formerly CDKNet.com, Inc.), a Delaware corporation (the “Company”), up to
_________ shares (the “Warrant Shares”) of
Common Stock, par value $.0001 per share, of the Company (the “Common
Stock”).  The purchase price of one share of Common Stock under
this Warrant shall be equal to the Exercise Price, as defined in Section
2(b).

     

    Section 1.    Definitions.  Capitalized
terms used and not otherwise defined herein shall have the meanings set forth in
that certain Securities Purchase Agreement, dated December 28, 2005 or June 30,
2006, as the case may be (the “Purchase Agreement”),
as amended, among the Company and the purchasers signatory thereto.

     

    Section 2.    Exercise.

     

    a)    Exercise of
Warrant.  Exercise of the purchase rights represented by this
Warrant may be made, in whole or in part, at any time or times on or after the
Initial Exercise Date and on or before the Termination Date by delivery to the
Company of a duly executed facsimile copy of the Notice of Exercise Form
annexed  hereto (or such other office or agency of the Company as it
may designate by notice in writing to the 

     

    
      
         

      

      
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    registered
Holder at the address of such Holder appearing on the books of the Company);
provided, however, within 5
Trading Days of the date said Notice of Exercise is delivered to the Company, if
this Warrant is exercised in full, the Holder shall have surrendered this
Warrant to the Company and the Company shall have received  payment of
the aggregate Exercise Price of the shares thereby purchased by wire transfer or
cashier’s check drawn on a United States bank.  Notwithstanding
anything herein to the contrary, the Holder shall not be required to physically
surrender this Warrant to the Company until the Holder has purchased all of the
Warrant Shares available hereunder and the Warrant has been exercised in
full.  Partial exercises of this Warrant resulting in purchases of a
portion of the total number of Warrant Shares available hereunder shall have the
effect of lowering the outstanding number of Warrant Shares purchasable
hereunder in an amount equal to the applicable number of Warrant Shares
purchased.  The Holder and the Company shall maintain records showing
the number of Warrant Shares purchased and the date of such
purchases.  The Company shall deliver any objection to any Notice of
Exercise Form within 1 Business Day of receipt of such notice.  In the
event of any dispute or discrepancy, the records of the Holder shall be
controlling and determinative in the absence of manifest error. The Holder and
any assignee, by acceptance of this Warrant, acknowledge and agree that, by
reason of the provisions of this paragraph, following the purchase of a portion
of the Warrant Shares hereunder, the number of Warrant Shares available for
purchase hereunder at any given time may be less than the amount stated on the
face hereof.

     

    b)    Exercise
Price.  The exercise price of the Common Stock under this
Warrant shall be $0.25,
subject to adjustment hereunder (the “Exercise
Price”).

     

    c)    Cashless
Exercise.  After December 1, 2008, this Warrant may also be
exercised, at the option of the Holder by means of a “cashless exercise” in
which the Holder shall be entitled to receive a certificate for the number of
Warrant Shares equal to the quotient obtained by dividing [(A-B) (X)] by (A),
where:

     

    
      	
              
              

            	
              (A)
      =

            	
              the
      VWAP on the Trading Day immediately preceding the date of such
      election;

            

    

    

    
      	
              
              

            	
              (B)
      =

            	
              the
      Exercise Price of this Warrant, as adjusted;
and

            

    

    

    
      	
              
              

            	
              (X)
      =

            	
              the
      number of Warrant Shares issuable upon exercise of this Warrant in
      accordance with the terms of this Warrant by means of a cash exercise
      rather than a cashless exercise.

            

    

    

    Notwithstanding
anything herein to the contrary, on the Termination Date, this Warrant shall be
automatically exercised via cashless exercise pursuant to this Section
2(c).

    

    d)    Exercise
Limitations.  The Company shall not effect any exercise of this
Warrant, and a  Holder shall not have the right to exercise any
portion of this Warrant, pursuant to Section 2(c) or otherwise, to the extent
that after giving effect to such issuance after exercise, such Holder (together
with such Holder’s affiliates, and any other 

     

    
      
         

      

      
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    person or
entity acting as a group together with such Holder or any of such Holder’s
affiliates), as set forth on the applicable Notice of Exercise, would
beneficially own in excess of the Beneficial Ownership Limitation (as defined
below).  For purposes of the foregoing sentence, the number of shares of
Common Stock beneficially owned by such Holder and its affiliates shall include
the number of shares of Common Stock issuable upon exercise of this Warrant with
respect to which the determination of such sentence is being made, but shall
exclude the number of shares of Common Stock which would be issuable upon (A)
exercise of the remaining, nonexercised portion of this Warrant beneficially
owned by such Holder or any of its affiliates and (B) exercise or conversion of
the unexercised or nonconverted portion of any other securities of the Company
(including, without limitation, any other  Debentures or Warrants)
subject to a limitation on conversion or exercise analogous to the limitation
contained herein beneficially owned by such Holder or any of its
affiliates.  Except as set forth in the preceding sentence, for purposes of
this Section 2(d), beneficial ownership shall be calculated in accordance with
Section 13(d) of the Exchange Act and the rules and regulations promulgated
thereunder, it being acknowledged by a Holder that the Company is not
representing to such Holder that such calculation is in compliance with Section
13(d) of the Exchange Act and such Holder is solely responsible for any
schedules required to be filed in accordance therewith.   To the
extent that the limitation contained in this Section 2(d) applies, the
determination of whether this Warrant is exercisable (in relation to other
securities owned by such Holder) and of which a portion of this Warrant is
exercisable shall be in the sole discretion of a Holder, and the submission of a
Notice of Exercise shall be deemed to be each Holder’s determination of whether
this Warrant is exercisable (in relation to other securities owned by such
Holder) and of which portion of this Warrant is exercisable, in each case
subject to such aggregate percentage limitation, and the Company shall have no
obligation to verify or confirm the accuracy of such
determination.   In addition, a determination as to any group
status as contemplated above shall be determined in accordance with Section
13(d) of the Exchange Act and the rules and regulations promulgated
thereunder.  For purposes of this Section 2(d), in determining the
number of outstanding shares of Common Stock, a Holder may rely on the number of
outstanding shares of Common Stock as reflected in (x) the Company’s most recent
Form 10-QSB or Form 10-KSB, as the case may be, (y) a more recent public
announcement by the Company or (z) any other notice by the Company or the
Company’s Transfer Agent setting forth the number of shares of Common Stock
outstanding.  Upon the written or oral request of a Holder, the Company
shall within two Trading Days confirm orally and in writing to such Holder the
number of shares of Common Stock then outstanding.  In any case, the number
of outstanding shares of Common Stock shall be determined after giving effect to
the conversion or exercise of securities of the Company, including this Warrant,
by such Holder or its affiliates since the date as of which such number of
outstanding shares of Common Stock was reported.  The “Beneficial
Ownership Limitation” shall be 4.99% of the number of shares of the Common Stock
outstanding immediately after 

     

    
      
         

      

      
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    giving
effect to the issuance of shares of Common Stock issuable upon exercise of this
Warrant.  The Beneficial Ownership Limitation provisions of this
Section 2(d) may be waived by such Holder, at the election of such Holder, upon
not less than 61 days’ prior notice to the Company to change the Beneficial
Ownership Limitation to 9.99% of the number of shares of the Common Stock
outstanding immediately after giving effect to the issuance of shares of Common
Stock upon exercise of this Warrant, and the provisions of this Section 2(d)
shall continue to apply.  Upon such a change by a Holder of the
Beneficial Ownership Limitation from such 4.99% limitation to such 9.99%
limitation, the Beneficial Ownership Limitation may not be waived by such
Holder.  The provisions of this paragraph shall be implemented in a
manner otherwise than in strict conformity with the terms of this Section 2(d)
to correct this paragraph (or any portion hereof) which may be defective or
inconsistent with the intended Beneficial Ownership Limitation herein contained
or to make changes or supplements necessary or desirable to properly give effect
to such limitation. The limitations contained in this paragraph shall apply to a
successor holder of this Warrant.

     

    e)    Mechanics of
Exercise.

     

    i.    Authorization of Warrant
Shares.  The Company covenants that all Warrant Shares which
may be issued upon the exercise of the purchase rights represented by this
Warrant will, upon exercise of the purchase rights represented by this Warrant,
be duly authorized, validly issued, fully paid and nonassessable and free from
all taxes, liens and charges in respect of the issue thereof (other than taxes
in respect of any transfer occurring contemporaneously with such
issue).

     

    ii.    Delivery of Certificates
Upon Exercise.  Certificates for shares purchased hereunder
shall be transmitted by the transfer agent of the Company to the Holder by
crediting the account of the Holder’s prime broker with the Depository Trust
Company through its Deposit Withdrawal Agent Commission (“DWAC”) system if the
Company is a participant in such system, and otherwise by physical delivery to
the address specified by the Holder in the Notice of Exercise within 3 Trading
Days from the delivery to the Company of the Notice of Exercise Form, surrender
of this Warrant (if required) and payment of the aggregate Exercise Price as set
forth above (“Warrant
Share Delivery Date”).  This Warrant shall be deemed to have
been exercised on the date the Exercise Price is received by the
Company.  The Warrant Shares shall be deemed to have been issued, and
Holder or any other person so designated to be named therein shall be deemed to
have become a holder of record of such shares for all purposes, as of the date
the Warrant has been exercised by payment to the Company of the Exercise Price
and all taxes required to be paid by the Holder, if any, pursuant to Section
2(e)(vii) prior to the issuance of such shares, have been paid.

     

    iii.    Delivery of New Warrants
Upon Exercise.  If this Warrant shall have been exercised in
part, the Company shall, at the request of a Holder and upon surrender of this
Warrant certificate, at the time of delivery of the certificate or certificates
representing Warrant Shares, deliver to Holder a new Warrant evidencing the
rights of Holder to purchase the unpurchased Warrant Shares called for by this
Warrant, 

     

    
      
         

      

      
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    which new
Warrant shall in all other respects be identical with this Warrant.

     

    iv.    Rescission
Rights.  If the Company fails to cause its transfer agent to
transmit to the Holder a certificate or certificates representing the Warrant
Shares pursuant to this Section 2(e)(iv) by the Warrant Share Delivery Date,
then the Holder will have the right to rescind such exercise.

     

    v.    Compensation for Buy-In on
Failure to Timely Deliver Certificates Upon Exercise.  In
addition to any other rights available to the Holder, if the Company fails to
cause its transfer agent to transmit to the Holder a certificate or certificates
representing the Warrant Shares pursuant to an exercise on or before the Warrant
Share Delivery Date, and if after such date the Holder is required by its broker
to purchase (in an open market transaction or otherwise) shares of Common Stock
to deliver in satisfaction of a sale by the Holder of the Warrant Shares which
the Holder anticipated receiving upon such exercise (a “Buy-In”), then the
Company shall (1) pay in cash to the Holder the amount by which (x) the Holder’s
total purchase price (including brokerage commissions, if any) for the shares of
Common Stock so purchased exceeds (y) the amount obtained by multiplying (A) the
number of Warrant Shares that the Company was required to deliver to the Holder
in connection with the exercise at issue times (B) the price at which the sell
order giving rise to such purchase obligation was executed, and (2) at the
option of the Holder, either reinstate the portion of the Warrant and equivalent
number of Warrant Shares for which such exercise was not honored or deliver to
the Holder the number of shares of Common Stock that would have been issued had
the Company timely complied with its exercise and delivery obligations
hereunder.  For example, if the Holder purchases Common Stock having a
total purchase price of $11,000 to cover a Buy-In with respect to an attempted
exercise of shares of Common Stock with an aggregate sale price giving rise to
such purchase obligation of $10,000, under clause (1) of the immediately
preceding sentence the Company shall be required to pay the Holder $1,000. The
Holder shall provide the Company written notice indicating the amounts payable
to the Holder in respect of the Buy-In, together with applicable confirmations
and other evidence reasonably requested by the Company.  Nothing
herein shall limit a Holder’s right to pursue any other remedies available to it
hereunder, at law or in equity including, without limitation, a decree of
specific performance and/or injunctive relief with respect to the Company’s
failure to timely deliver certificates representing shares of Common Stock upon
exercise of the Warrant as required pursuant to the terms hereof.

     

    vi.    No Fractional Shares or
Scrip.  No fractional shares or scrip representing fractional
shares shall be issued upon the exercise of this Warrant.  As to any
fraction of a share which Holder would otherwise be 

     

    
      
         

      

      
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    entitled
to purchase upon such exercise, the Company shall pay a cash adjustment in
respect of such final fraction in an amount equal to such fraction multiplied by
the Exercise Price.

     

    vii.    Charges, Taxes and
Expenses.  Issuance of certificates for Warrant Shares shall be
made without charge to the Holder for any issue or transfer tax or other
incidental expense in respect of the issuance of such certificate, all of which
taxes and expenses shall be paid by the Company, and such certificates shall be
issued in the name of the Holder or in such name or names as may be directed by
the Holder; provided, however, that in the
event certificates for Warrant Shares are to be issued in a name other than the
name of the Holder, this Warrant when surrendered for exercise shall be
accompanied by the Assignment Form attached hereto duly executed by the Holder;
and the Company may require, as a condition thereto, the payment of a sum
sufficient to reimburse it for any transfer tax incidental thereto.

     

    viii.    Closing of
Books.  The Company will not close its stockholder books or
records in any manner which prevents the timely exercise of this Warrant,
pursuant to the terms hereof.

     

    f)    Redemption at Election of
Holder.  If the Company shall agree to sell substantially all
of its assets in one or more transactions in which the consideration consists
solely of cash, cash equivalents, assumption of indebtedness, or any combination
thereof, the Holder shall have the right to require the Company, by written
notice to the Company, to redeem this Warrant, in full and in cash, at the
closing of such sale of assets.   The aggregate amount payable in
full redemption of the Warrants required to be redeemed upon such sale of assets
shall be equal to the Warrant Cash Sale Redemption Amount (as defined
below).  In the event that the Company fails to pay the Warrant Cash
Sale Redemption Amount within three business days of the closing of the sale
transaction, interest shall accrue on the unpaid Warrant Cash Redemption Amount
at the rate of 18% per annum, or such lower maximum amount of interest permitted
to be charged under applicable law, until the Warrant Cash Sale Redemption
Amount is paid in full.  Concurrently with the payment in full of the
Warrant Cash Sale Redemption Amount, the Holder shall surrender this Warrant to
or as directed by the Company (or the successor
company).    The Holder may
elect to exercise this Warrant pursuant to
Sections 2(a) or 2(c) hereof prior to
actual payment in cash for the redemption.

    

    g)           Definitions Applicable to
Section 2(f).  For the purposes
of Section 2(f):

    

    i.           “Warrant Cash Sale Redemption
Amount”  shall equal the sum of (i)  all unexercised
Warrant Shares underlying this Warrant if the Warrants were issued pursuant to a
cashless exercise exercised on the date the redemption right hereunder is
exercised based on the Effective Price (as defined below) and (ii) all other
amounts, costs, expenses and liquidated damages due in respect of this
Debenture  The “Effective Price”
shall be the cash consideration paid by the acquirer in such event (less the
amount paid in redemption of the Debentures in 

     

    
      
         

      

      
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    clause
(i) of the definition of Cash Sale Redemption Amount set forth therein) divided
by the sum of; (x) the issued and outstanding shares of Common Stock of the
Company then outstanding and (y) the shares of Common Stock into which the
outstanding Debentures may be converted on the day immediately preceding the
record date fixed for determining the holders of shares of Common Stock eligible
to receive a distribution (or if no such date has been fixed, the date of the
day immediately preceding the closing of the transaction) and (z) the number of
shares deemed issuable to the Warrant holders pursuant to the mandatory
redemption provisions in this and the other Warrants which take effect upon sale
of assets for cash consideration whether or not any Warrant holder shall have
elected to have their Warrants Redeemed; provided, however, that the number of shares of
Common Stock issuable on conversion of the Debentures and issuable upon exercise
of the Warrants for this purpose shall be determined on a fully converted or
exercised basis and ignoring any conversion or exercise limitations
therein.

     

    Section 3.    Certain Adjustments.

     

    a)    Stock Dividends and
Splits. If the Company, at any time while this Warrant is outstanding:
(A) pays a stock dividend or otherwise make a distribution or distributions on
shares of its Common Stock or any other equity or equity equivalent securities
payable in shares of Common Stock (which, for avoidance of doubt, shall not
include any shares of Common Stock issued by the Company pursuant to this
Warrant), (B) subdivides outstanding shares of Common Stock into a larger number
of shares, (C) combines (including by way of reverse stock split) outstanding
shares of Common Stock into a smaller number of shares, or (D) issues by
reclassification of shares of the Common Stock any shares of capital stock of
the Company, then in each case the Exercise Price shall be multiplied by a
fraction of which the numerator shall be the number of shares of Common Stock
(excluding treasury shares, if any) outstanding immediately before such event
and of which the denominator shall be the number of shares of Common Stock
outstanding immediately after such event and the number of shares issuable upon
exercise of this Warrant shall be proportionately adjusted.  Any
adjustment made pursuant to this Section 3(a) shall become effective immediately
after the record date for the determination of stockholders entitled to receive
such dividend or distribution and shall become effective immediately after the
effective date in the case of a subdivision, combination or
re-classification.

     

    b)    Subsequent Equity
Sales.

     

    i.    If the
Company or any Subsidiary thereof, as applicable, at any time while this Warrant
is outstanding, shall (except for an Exempt Issuance) offer, sell, grant any
option to purchase or offer, sell or grant any right to reprice its securities,
or otherwise dispose of or issue (or announce any offer, sale, grant or any
option to purchase or other disposition) any Common Stock or Common Stock
Equivalents entitling any Person to acquire shares of Common Stock, at an
effective price per share less than the then Exercise Price (such lower price,
the “Base Share
Price” and such issuances collectively, a “Dilutive Issuance”),
as 

     

    
      
         

      

      
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    adjusted
hereunder (if the holder of the Common Stock or Common Stock Equivalents so
issued shall at any time, whether by operation of purchase price adjustments,
reset provisions, floating conversion, exercise or exchange prices or otherwise,
or due to warrants, options or rights per share which is issued in connection
with such issuance, be entitled to receive shares of Common Stock at an
effective price per share which is less than the Exercise Price, such issuance
shall be deemed to have occurred for less than the Exercise Price on such date
of the Dilutive Issuance), then the Exercise Price shall be reduced and only
reduced to equal the Base Share Price and the number of Warrant Shares issuable
hereunder shall be increased such that the aggregate Exercise Price payable
hereunder, after taking into account the decrease in the Exercise Price, shall
be equal to the aggregate Exercise Price prior to such adjustment.

     

    ii.    If the
Company or any Subsidiary there, as applicable, at any time while this Warrant
is outstanding, shall offer, sell, grant any option to purchase or offer, sell
or grant any right to reprice its securities, or otherwise dispose of or issue
(or announce any offer, sale, grant or any option to purchase or other
disposition) any Common Stock or Common Stock Equivalents entitling any Person
to acquire shares of Common Stock, at an effective price per share less than the
VWAP on either the Trading Day immediately prior to the date agreements for such
issuance are entered into or the date such issuance is consummated, whichever
results in a higher VWAP, but more than the then effective Exercise Price (which
is addressed in 3(b)(i) above) (such lower price, the “Market Base Price”
and such issuances collectively, a “Market Dilutive
Issuance”), as adjusted hereunder (if the holder of the Common Stock or
Common Stock Equivalents so issued shall at any time, whether by operation of
purchase price adjustments, reset provisions, floating conversion, exercise or
exchange prices or otherwise, or due to warrants, options or rights per share
which is issued in connection with such issuance, be entitled to receive shares
of Common Stock at an effective price per share which is less than the Exercise
Price, such issuance shall be deemed to have occurred for less than the Exercise
Price on such date of the Market Dilutive Issuance) then the Exercise Price
shall be reduced to a price determined by multiplying the then effective
Exercise Price by a fraction, the numerator of which is the number of shares of
Common Stock issued and outstanding immediately prior to the Market Dilutive
Issuance plus the number of shares of Common Stock which the aggregate offering
price for such Market Dilutive Issuance would purchase at the then Market Base
Price, and the denominator of which shall be the sum of the number of shares of
Common Stock issued and outstanding immediately prior to the Market Dilutive
Issuance plus the number of shares of Common Stock so issued or issuable in
connection with the Market Dilutive Issuance and the number of Warrant Shares
issuable hereunder shall be increased such that the aggregate Exercise Price
payable hereunder, after taking into account the decrease in the Exercise Price,
shall be equal to the aggregate Exercise Price prior to such
adjustment..

    

    iii.    Such
adjustments shall be made whenever such Common Stock or Common Stock Equivalents
are issued.  Notwithstanding the foregoing, no 

     

    
      
         

      

      
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    adjustments
shall be made, paid or issued under this Section 3(b) in respect of an Exempt
Issuance.  The Company shall notify the Holder in writing, no later
than the Trading Day following the issuance of any Common Stock or Common Stock
Equivalents subject to this section, indicating therein the applicable issuance
price, or of applicable reset price, exchange price, conversion price and other
pricing terms (such notice the “Dilutive Issuance
Notice”).  For purposes of clarification, whether or not the
Company provides a Dilutive Issuance Notice pursuant to this Section 3(b), upon
the occurrence of any Dilutive Issuance or Market Dilutive Issuance, as
applicable, after the date of such Dilutive Issuance or Market Dilutive
Issuance, as applicable, the Holder is entitled to receive a number of Warrant
Shares based upon the Base Share Price or the price determined pursuant to
3(b)(ii), as applicable, regardless of whether the Holder accurately refers to
the Base Share Price or such price determined pursuant to 3(b)(ii) in the Notice
of Exercise.

     

    c)    Pro Rata
Distributions.  If the Company, at any time prior to the
Termination Date, shall distribute to all holders of Common Stock (and not to
Holders of the Warrants) evidences of its indebtedness or assets (including cash
and cash dividends) or rights or warrants to subscribe for or purchase any
security other than the Common Stock (which shall be subject to Section 3(b)),
then in each such case the Exercise Price shall be adjusted by multiplying the
Exercise Price in effect immediately prior to the record date fixed for
determination of stockholders entitled to receive such distribution by a
fraction of which the denominator shall be the VWAP determined as of the record
date mentioned above, and of which the numerator shall be such VWAP on such
record date less the then per share fair market value at such record date of the
portion of such assets or evidence of indebtedness so distributed applicable to
one outstanding share of the Common Stock as determined by the Board of
Directors in good faith.  In either case the adjustments shall be
described in a statement provided to the Holder of the portion of assets or
evidences of indebtedness so distributed or such subscription rights applicable
to one share of Common Stock.  Such adjustment shall be made whenever
any such distribution is made and shall become effective immediately after the
record date mentioned above.

     

    d)    Fundamental
Transaction. If, at any time while this Warrant is outstanding, (A) the
Company effects any merger or consolidation of the Company with or into another
Person, (B) the Company effects any sale of all or substantially all of its
assets in one or a series of related transactions, (C) any tender offer or
exchange offer (whether by the Company or another Person) is completed pursuant
to which holders of Common Stock are permitted to tender or exchange their
shares for other securities, cash or property, or (D) the Company effects any
reclassification of the Common Stock or any compulsory share exchange pursuant
to which the Common Stock is effectively converted into or exchanged for other
securities, cash or property (in any such case, a “Fundamental
Transaction”), then, upon any subsequent exercise of this Warrant, the
Holder shall have the right to receive, for each Warrant Share that would have
been issuable upon such exercise immediately prior to the occurrence of such
Fundamental Transaction, at the option of the Holder, (a) upon exercise of this
Warrant, the number of shares of Common Stock of the successor or acquiring
corporation or of the Company, if 

     

    
      
         

      

      
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    it is the
surviving corporation, and any additional consideration (the “Alternate
Consideration”) receivable upon or as a result of such reorganization,
reclassification, merger, consolidation or disposition of assets by a Holder of
the number of shares of Common Stock for which this Warrant is exercisable
immediately prior to such event or (b) if the Company is acquired in an all cash
transaction, cash equal to the value of this Warrant as determined in accordance
with the Black-Scholes option pricing formula.  For purposes of any
such exercise, the determination of the Exercise Price shall be appropriately
adjusted to apply to such Alternate Consideration based on the amount of
Alternate Consideration issuable in respect of one share of Common Stock in such
Fundamental Transaction, and the Company shall apportion the Exercise Price
among the Alternate Consideration in a reasonable manner reflecting the relative
value of any different components of the Alternate Consideration.  If
holders of Common Stock are given any choice as to the securities, cash or
property to be received in a Fundamental Transaction, then the Holder shall be
given the same choice as to the Alternate Consideration it receives upon any
exercise of this Warrant following such Fundamental Transaction.  To
the extent necessary to effectuate the foregoing provisions, any successor to
the Company or surviving entity in such Fundamental Transaction shall issue to
the Holder a new warrant consistent with the foregoing provisions and evidencing
the Holder’s right to exercise such warrant into Alternate Consideration. The
terms of any agreement pursuant to which a Fundamental Transaction is effected
shall include terms requiring any such successor or surviving entity to comply
with the provisions of this Section 3(d) and insuring that this Warrant (or any
such replacement security) will be similarly adjusted upon any subsequent
transaction analogous to a Fundamental Transaction.

     

    e)    Calculations. All
calculations under this Section 3 shall be made to the nearest cent or the
nearest 1/100th of a share, as the case may be. For purposes of this Section 3,
the number of shares of Common Stock deemed to be issued and outstanding as of a
given date shall be the sum of the number of shares of Common Stock (excluding
treasury shares, if any) issued and outstanding.

     

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

     

    g)    Notice to
Holders.

     

    i.    Adjustment to Exercise
Price. Whenever the Exercise Price is adjusted pursuant to this Section
3, the Company shall promptly mail to each Holder a notice setting forth the
Exercise Price after such adjustment and setting forth a brief statement of the
facts requiring such adjustment. If the Company issues a variable rate security,
despite the prohibition thereon in the Purchase Agreement, the Company shall be
deemed to have issued Common Stock or Common Stock Equivalents at the lowest
possible conversion or exercise price at which such securities may be converted
or exercised in the case of a Variable Rate Transaction (as defined in the
Purchase Agreement).

     

    
      
         

      

      
        10

        
          

        

      

      
         

      

    

    ii.    Notice to Allow Exercise by
Holder. If (A) the Company shall declare a dividend (or any other
distribution) on the Common Stock; (B) the Company shall declare a special
nonrecurring cash dividend on or a redemption of the Common Stock; (C) the
Company shall authorize the granting to all holders of the Common Stock rights
or warrants to subscribe for or purchase any shares of capital stock of any
class or of any rights; (D) the approval of any stockholders of the Company
shall be required in connection with any reclassification of the Common Stock,
any consolidation or merger to which the Company is a party, any sale or
transfer of all or substantially all of the assets of the Company, of any
compulsory share exchange whereby the Common Stock is converted into other
securities, cash or property; (E) the Company shall authorize the voluntary or
involuntary dissolution, liquidation or winding up of the affairs of the
Company; then, in each case, the Company shall cause to be mailed to the Holder
at its last address as it shall appear upon the Warrant Register of the Company,
at least 20 calendar days prior to the applicable record or effective date
hereinafter specified, a notice stating (x) the date on which a record is to be
taken for the purpose of such dividend, distribution, redemption, rights or
warrants, or if a record is not to be taken, the date as of which the holders of
the Common Stock of record to be entitled to such dividend, distributions,
redemption, rights or warrants are to be determined or (y) the date on which
such reclassification, consolidation, merger, sale, transfer or share exchange
is expected to become effective or close, and the date as of which it is
expected that holders of the Common Stock of record shall be entitled to
exchange their shares of the Common Stock for securities, cash or other property
deliverable upon such reclassification, consolidation, merger, sale, transfer or
share exchange; provided that the failure to mail such notice or any defect
therein or in the mailing thereof shall not affect the validity of the corporate
action required to be specified in such notice.  The Holder is
entitled to exercise this Warrant during the 20-day period commencing on the
date of such notice to the effective date of the event triggering such
notice.

     

    Section 4.    Transfer of
Warrant.

     

    a)    Transferability.  Subject
to compliance with any applicable securities laws and the conditions set forth
in Sections 5(a) and 4(d) hereof and to the provisions of Section 4.1 of the
Purchase Agreement, this Warrant and all rights hereunder are transferable, in
whole or in part, upon surrender of this Warrant at the principal office of the
Company, together with a written assignment of this Warrant substantially in the
form attached hereto duly executed by the Holder or its agent or attorney and
funds sufficient to pay any transfer taxes payable upon the making of such
transfer.  Upon such surrender and, if required, such payment, the
Company shall execute and deliver a new Warrant or Warrants in the name of the
assignee or assignees and in the denomination or denominations specified in such
instrument of assignment, and shall issue to the assignor a new Warrant
evidencing the portion of this Warrant not so assigned, and this Warrant

     

    
      
         

      

      
        11

        
          

        

      

      
         

      

    

    shall
promptly be cancelled.  A Warrant, if properly assigned, may be
exercised by a new holder for the purchase of Warrant Shares without having a
new Warrant issued.

     

    b)    New Warrants. This
Warrant may be divided or combined with other Warrants upon presentation hereof
at the aforesaid office of the Company, together with a written notice
specifying the names and denominations in which new Warrants are to be issued,
signed by the Holder or its agent or attorney.  Subject to compliance
with Section 4(a), as to any transfer which may be involved in such division or
combination, the Company shall execute and deliver a new Warrant or Warrants in
exchange for the Warrant or Warrants to be divided or combined in accordance
with such notice.

     

    c)    Warrant Register. The
Company shall register this Warrant, upon records to be maintained by the
Company for that purpose (the “Warrant Register”),
in the name of the record Holder hereof from time to time.  The
Company may deem and treat the registered Holder of this Warrant as the absolute
owner hereof for the purpose of any exercise hereof or any distribution to the
Holder, and for all other purposes, absent actual notice to the
contrary.

     

    d)    Transfer
Restrictions. If, at the time of the surrender of this Warrant in connection with
any transfer of this Warrant, the transfer of this Warrant shall not be
registered pursuant to an effective registration statement under the Securities Act and under applicable state securities or blue sky laws, the
Company may require, as a condition of allowing such transfer (i) that the
Holder or transferee of this Warrant, as the case may be, furnish to the Company
a written opinion of counsel (which opinion shall be in form, substance and
scope customary for opinions of counsel in comparable transactions) to the
effect that such transfer may be made without registration under the Securities Act and under applicable state securities
or blue sky laws, (ii) that the holder or transferee execute and deliver to the
Company an investment letter in form and substance acceptable to the Company and
(iii) that the transferee be an “accredited
investor” as defined in Rule 501(a)(1), (a)(2), (a)(3), (a)(7),
or (a)(8) promulgated under the Securities Act or a qualified institutional
buyer as defined in Rule 144A(a) under the Securities Act.

     

    Section 5.    Miscellaneous.

     

    a)    Title to
Warrant.  Prior to the Termination Date and subject to
compliance with applicable laws and Section 4 of this Warrant, this Warrant and
all rights hereunder are transferable, in whole or in part, at the office or
agency of the Company by the Holder in person or by duly authorized attorney,
upon surrender of this Warrant together with the Assignment Form annexed hereto
properly endorsed.  The transferee shall sign an investment letter in
form and substance reasonably satisfactory to the Company.

     

    b)    No Rights as Shareholder
Until Exercise.  This Warrant does not entitle the Holder to
any voting rights or other rights as a shareholder of the Company prior to the
exercise hereof.  Upon the surrender of this Warrant and the payment
of the aggregate Exercise Price (or by means of a cashless exercise), the
Warrant Shares so purchased shall be and be deemed to be issued to such Holder
as the record owner of such shares as of the close of business on the later of
the date of such surrender or payment.

     

    
      
         

      

      
        12

        
          

        

      

      
         

      

    

    c)    Loss, Theft, Destruction or
Mutilation of Warrant. The Company covenants that upon receipt by the
Company of evidence reasonably satisfactory to it of the loss, theft,
destruction or mutilation of this Warrant or any stock certificate relating to
the Warrant Shares, and in case of loss, theft or destruction, of indemnity or
security reasonably satisfactory to it (which, in the case of the Warrant, shall
not include the posting of any bond), and upon surrender and cancellation of
such Warrant or stock certificate, if mutilated, the Company will make and
deliver a new Warrant or stock certificate of like tenor and dated as of such
cancellation, in lieu of such Warrant or stock certificate.

     

    d)    Saturdays, Sundays,
Holidays, etc.  If the last or appointed day for the taking of
any action or the expiration of any right required or granted herein shall be a
Saturday, Sunday or a legal holiday, then such action may be taken or such right
may be exercised on the next succeeding day not a Saturday, Sunday or legal
holiday.

     

    e)    Authorized
Shares.

     

    The
Company covenants that during the period the Warrant is outstanding, it will
reserve from its authorized and unissued Common Stock a sufficient number of
shares to provide for the issuance of the Warrant Shares upon the exercise of
any purchase rights under this Warrant.  The Company further covenants
that its issuance of this Warrant shall constitute full authority to its
officers who are charged with the duty of executing stock certificates to
execute and issue the necessary certificates for the Warrant Shares upon the
exercise of the purchase rights under this Warrant.  The Company will
take all such reasonable action as may be necessary to assure that such Warrant
Shares may be issued as provided herein without violation of any applicable law
or regulation, or of any requirements of the Trading Market upon which the
Common Stock may be listed.

     

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

     

    
      
         

      

      
        13

        
          

        

      

      
         

      

    

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

     

    f)    Jurisdiction. All
questions concerning the construction, validity, enforcement and interpretation
of this Warrant shall be determined in accordance with the provisions of the
Purchase Agreement.

     

    g)    Restrictions.  The
Holder acknowledges that the Warrant Shares acquired upon the exercise of this
Warrant, if not registered, will have restrictions upon resale imposed by state
and federal securities laws.

     

    h)    Nonwaiver and
Expenses.  No course of dealing or any delay or failure to
exercise any right hereunder on the part of Holder shall operate as a waiver of
such right or otherwise prejudice Holder’s rights, powers or remedies,
notwithstanding the fact that all rights hereunder terminate on the Termination
Date.  If the Company willfully and knowingly fails to comply with any
provision of this Warrant, which results in any material damages to the Holder,
the Company shall pay to Holder such amounts as shall be sufficient to cover any
costs and expenses including, but not limited to, reasonable attorneys’ fees,
including those of appellate proceedings, incurred by Holder in collecting any
amounts due pursuant hereto or in otherwise enforcing any of its rights, powers
or remedies hereunder.

     

    i)    Notices.  Any
notice, request or other document required or permitted to be given or delivered
to the Holder by the Company shall be delivered in accordance with the notice
provisions of the Purchase Agreement.

     

    j)    Limitation of
Liability.  No provision hereof, in the absence of any
affirmative action by Holder to exercise this Warrant or purchase Warrant
Shares, and no enumeration herein of the rights or privileges of Holder, shall
give rise to any liability of Holder for the purchase price of any Common Stock
or as a stockholder of the Company, whether such liability is asserted by the
Company or by creditors of the Company.

     

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

     

    l)    Successors and
Assigns.  Subject to applicable securities laws, this Warrant
and the rights and obligations evidenced hereby shall inure to the benefit of
and be binding upon the successors of the Company and the successors and
permitted assigns of Holder.  The provisions of this Warrant are
intended to be for the benefit of all Holders 

     

    
      
         

      

      
        14

        
          

        

      

      
         

      

    

    from time
to time of this Warrant and shall be enforceable by any such Holder or holder of
Warrant Shares.

     

    m)    Amendment.  This
Warrant may be modified or amended or the provisions hereof waived with the
written consent of the Company and the Holders of  [60%] of the then
outstanding Warrants.

     

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

     

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

     

    

    ********************

    

    

    
      
         

      

      
        15

        
          

        

      

      
         

      

    

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

     

    

    Dated:  August
1, 2008

    
 

    
      	 	
              ARKADOS
      GROUP, INC.

               

               

            
	 	
              By:__________________________________________

                   Name:   Barbara
      Kane-Burke

                    Title:    Chief
      Financial Officer

               

            

    

    

    

    
      
         

      

      
        16

        
          

        

      

      
         

      

    

    NOTICE
OF EXERCISE

    

    TO:           ARKADOS
GROUP, INC.

    

    (1) The
undersigned hereby elects to purchase ________ Warrant Shares of the Company
pursuant to the terms of the attached Warrant (only if exercised in full), and
tenders herewith payment of the exercise price in full, together with all
applicable transfer taxes, if any.

     

    (2) Payment
shall take the form of (check applicable box):

     

    [  ]
in lawful money of the United States; or

     

    [ ] the
cancellation of such number of Warrant Shares as is necessary, in accordance
with the formula set forth in subsection 2(c), to exercise this Warrant with
respect to the maximum number of Warrant Shares purchasable pursuant to the
cashless exercise procedure set forth in subsection 2(c).

     

    (3) Please
issue a certificate or certificates representing said Warrant Shares in the name
of the undersigned or in such other name as is specified below:

     

    _______________________________

    

    

    The
Warrant Shares shall be delivered to the following:

    

    _______________________________

    

    _______________________________

    

    _______________________________

    

    (4)  Accredited
Investor.  The undersigned is an “accredited investor” as
defined in Regulation D promulgated under the Securities Act of 1933, as
amended.

    

    [SIGNATURE
OF HOLDER]

    

    Name of
Investing Entity:
_______________________________________________________________________

    Signature of Authorized Signatory of
Investing Entity:
_________________________________________________

    Name of
Authorized Signatory:
___________________________________________________________________

    Title of
Authorized Signatory:
____________________________________________________________________

    Date:
_______________________________________________________________________________________

    

    

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    ASSIGNMENT
FORM

    

    (To
assign the foregoing warrant, execute

    this form
and supply required information.

    Do not
use this form to exercise the warrant.)

    

    

    

    FOR VALUE
RECEIVED, the foregoing Warrant and all rights evidenced thereby are hereby
assigned to

     

    

    _______________________________________________
whose address is

    

    _______________________________________________________________.

    

    

    

    _______________________________________________________________

    

    Dated:  ______________,
_______

    

    

    Holder’s
Signature:      _____________________________

    

    Holder’s
Address:        _____________________________

     

                                                                                           
_____________________________

    

    

    

    Signature
Guaranteed:  ___________________________________________

    

    

    NOTE:  The
signature to this Assignment Form must correspond with the name as it appears on
the face of the Warrant, without alteration or enlargement or any change
whatsoever, and must be guaranteed by a bank or trust
company.  Officers of corporations and those acting in a fiduciary or
other representative capacity should file proper evidence of authority to assign
the foregoing Warrant.WWW.EXFILE.COM, INC. -- 888-775-4789 -- ARKADOS GROUP, INC. -- EXHIBIT 4.3 TO FORM 8-K

    EXHIBIT
4.3

     

    NEITHER
THIS SECURITY NOR THE SECURITIES INTO WHICH THIS SECURITY IS EXERCISABLE HAVE
BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES
COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY,
MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM,
OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS
EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE
SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY.

     

    
      	
              

                Original
      Issuance:___________

              

            	
              W-___

            

    

     

    COMMON
STOCK PURCHASE WARRANT

    

    To
Purchase ______ Shares of Common Stock of

     

    ARKADOS
GROUP, INC.

     

    THIS
COMMON STOCK PURCHASE WARRANT (the “Warrant”) certifies
that, for value received, ___________ (the “Holder”), is
entitled, upon the terms and subject to the limitations on exercise and the
conditions hereinafter set forth, at any time on or after the Original
Issuance  Date set forth above (the “Initial Exercise
Date”) and on or prior to the close of business on June 30, 2013 (the
“Termination
Date”) but not thereafter, to subscribe for and purchase from Arkados
Group, Inc., a Delaware corporation (the “Company”), up to
_____ shares (the “Warrant Shares”) of
Common Stock, par value $.0001 per share, of the Company (the “Common
Stock”).  The purchase price of one share of Common Stock under
this Warrant shall be equal to the Exercise Price, as defined in Section
2(b).

     

    This
Warrant is part of an authorized class of 6,000,000 Warrants of like tenor
authorized by the Company.  All such Warrants are referred to herein
collectively as the “Warrants.”

     

    Section
1.            
 Definitions.  Capitalized
terms used and not otherwise defined herein shall have the meanings set forth in
that certain Securities Purchase Agreement (the “Purchase Agreement”),
severally dated, among the Company and the purchasers signatory
thereto.

     

    Section
2.            
  Exercise.

     

    a) Exercise of
Warrant.  Exercise of the purchase rights represented by this
Warrant may be made at any time or times on or after the Initial Exercise Date
and on or before the Termination Date by delivery to the Company of a duly
executed facsimile copy of the Notice of Exercise Form annexed hereto (or such
other office or agency of the Company as it may designate by notice in writing
to the registered Holder at the 

     

     

    
      
        
        

      

      
        1

        
          

        

      

      
        
        

      

    

    address
of such Holder appearing on the books of the Company); provided, however, within 5
Trading Days of the date said Notice of Exercise is delivered to the Company,
the Holder shall have surrendered this Warrant to the Company and the Company
shall have received  payment of the aggregate Exercise Price of the
shares thereby purchased by wire transfer or cashier’s check drawn on a United
States bank.

     

    b) Exercise
Price.  The exercise price of the Common Stock under this
Warrant shall be $0.25, subject to adjustment hereunder (the “Exercise
Price”).

     

    c) Net
Exercise.  If at any time after one year from the Original
Issue Date there is no effective Registration Statement registering, or no
current prospectus available for, the resale of the Warrant Shares by the
Holder, then this Warrant may also be exercised at such time by means of a
"cashless exercise" in which the Holder shall be entitled to receive a
certificate for the number of Warrant Shares equal to the quotient obtained by
dividing [(A-B) (X)] by (A), where:

     

    
      	
               
      

            	
              (A)
      = the VWAP on the Trading Day immediately preceding the date of such
      election;

            

    

    

    
      	
               
      

            	
              (B)
      = the Exercise Price of this Warrant, as adjusted;
  and

            

    

    

    
      	
               
      

            	
              (X)
      = the number of Warrant Shares issuable upon exercise of this Warrant in
      accordance with the terms of this Warrant by means of a cash exercise
      rather than a cashless exercise.

            

    

    

    d)  Exercise
Limitations.  The Holder shall not have the right to exercise
any portion of this Warrant, pursuant to Section 2(c) or otherwise, to the
extent that after giving effect to such issuance after exercise, the Holder
(together with the Holder’s affiliates), as set forth on the applicable Notice
of Exercise, would beneficially own in excess of 9.99% of the number of shares
of the Common Stock outstanding immediately after giving effect to such
issuance.  For purposes of the foregoing sentence, the number of shares of
Common Stock beneficially owned by the Holder and its affiliates shall include
the number of shares of Common Stock issuable upon exercise of this Warrant with
respect to which the determination of such sentence is being made.  Except
as set forth in the preceding sentence, for purposes of this Section 2(d),
beneficial ownership shall be calculated in accordance with Section 13(d) of the
Exchange Act, it being acknowledged by Holder that the Company is not
representing to Holder that such calculation is in compliance with Section 13(d)
of the Exchange Act and Holder is solely responsible for any schedules required
to be filed in accordance therewith.   To the extent that the
limitation contained in this Section 2(d) applies, the determination of whether
this Warrant is exercisable (in relation to other securities owned by the
Holder) and of which portion of this Warrant is exercisable shall be in the sole
discretion of such Holder, and the submission of a Notice of Exercise shall be
deemed to be such Holder’s determination of whether this Warrant is exercisable
(in relation to other securities owned by such Holder) and of which portion of
this Warrant is exercisable, in each case subject to such aggregate percentage
limitation, and the Company shall have no obligation to verify or confirm the
accuracy of such determination.  For purposes of this Section 2(d), in

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

    determining
the number of outstanding shares of Common Stock, the Holder may rely on the
number of outstanding shares of Common Stock as reflected in (x) the Company’s
most recent Form 10-Q or Form 10-K, as the case may be, (y) a more recent public
announcement by the Company or (z) any other notice by the Company or the
Company’s Transfer Agent setting forth the number of shares of Common Stock
outstanding.  Upon the written or oral request of the Holder, the Company
shall within two Trading Days confirm orally and in writing to the Holder the
number of shares of Common Stock then outstanding.  In any case, the number
of outstanding shares of Common Stock shall be determined after giving effect to
the conversion or exercise of securities of the Company, including this Warrant,
by the Holder or its affiliates since the date as of which such number of
outstanding shares of Common Stock was reported.  The provisions of
this Section 2(d) may be waived by the Holder upon, at the election of the
Holder, not less than 61 days’ prior notice to the Company, and the provisions
of this Section 2(d) shall continue to apply until such 61st day (or
such later date, as determined by the Holder, as may be specified in such notice
of waiver).

     

    e) Mechanics of
Exercise.

     

    i.  Authorization of Warrant
Shares.  The Company covenants that all Warrant Shares which
may be issued upon the exercise of the purchase rights represented by this
Warrant will, upon exercise of the purchase rights represented by this Warrant,
be duly authorized, validly issued, fully paid and nonassessable and free from
all taxes, liens and charges in respect of the issue thereof (other than taxes
in respect of any transfer occurring contemporaneously with such
issue).  The Company covenants that during the period the Warrant is
outstanding, it will reserve from its authorized and unissued Common Stock a
sufficient number of shares to provide for the issuance of the Warrant Shares
upon the exercise of any purchase rights under this Warrant.  The
Company further covenants that its issuance of this Warrant shall constitute
full authority to its officers who are charged with the duty of executing stock
certificates to execute and issue the necessary certificates for the Warrant
Shares upon the exercise of the purchase rights under this
Warrant.  The Company will take all such reasonable action as may be
necessary to assure that such Warrant Shares may be issued as provided herein
without violation of any applicable law or regulation, or of any requirements of
the Trading Market upon which the Common Stock may be listed.

     

    ii. Delivery of Certificates
Upon Exercise.  Certificates for shares purchased hereunder
shall be transmitted by the transfer agent of the Company to the Holder by
physical delivery to the address specified by the Holder in the Notice of
Exercise within 5 Trading Days from the delivery to the Company of the Notice of
Exercise Form, surrender of this Warrant and payment of the aggregate Exercise
Price as set forth above (“Warrant Share Delivery
Date”).  This Warrant shall be deemed to have been exercised on
the date the Exercise Price is received by the Company.  The Warrant
Shares shall be deemed to have been issued, and Holder or any other person so
designated to be named therein shall be deemed to have become a holder of record
of such shares for all purposes, as of the date the Warrant has been exercised
by payment to the Company of the Exercise Price and all taxes required to be
paid by the Holder, if any, prior to the issuance of such shares, have been
paid.

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

    iii. Delivery of New Warrants
Upon Exercise.  If this Warrant shall have been exercised in
part, the Company shall, at the time of delivery of the certificate or
certificates representing Warrant Shares, deliver to Holder a new Warrant
evidencing the rights of Holder to purchase the unpurchased Warrant Shares
called for by this Warrant, which new Warrant shall in all other respects be
identical with this Warrant.

     

    iv. No Fractional Shares or
Scrip.  No fractional shares or scrip representing fractional
shares shall be issued upon the exercise of this Warrant.  As to any
fraction of a share which Holder would otherwise be entitled to purchase upon
such exercise, the Company shall pay a cash adjustment in respect of such final
fraction in an amount equal to such fraction multiplied by the Exercise
Price.

     

    v. Charges, Taxes and
Expenses.  Issuance of certificates for Warrant Shares shall be
made without charge to the Holder for any issue or transfer tax or other
incidental expense in respect of the issuance of such certificate, all of which
taxes and expenses shall be paid by the Company, and such certificates shall be
issued in the name of the Holder or in such name or names as may be directed by
the Holder; provided, however, that in the
event certificates for Warrant Shares are to be issued in a name other than the
name of the Holder, this Warrant when surrendered for exercise shall be
accompanied by the Assignment Form attached hereto duly executed by the Holder;
and the Company may require, as a condition thereto, the payment of a sum
sufficient to reimburse it for any transfer tax incidental thereto.

     

    vi. Closing of
Books.  The Company will not close its stockholder books or
records in any manner which prevents the timely exercise of this Warrant,
pursuant to the terms hereof.

     

    Section
3.              
Certain Adjustments;
Redemption.

     

    a) Stock Dividends and
Splits. If the Company, at any time while this Warrant is outstanding:
(A) pays a stock dividend or otherwise make a distribution or distributions on
shares of its Common Stock or any other equity or equity equivalent securities
payable in shares of Common Stock (which, for avoidance of doubt, shall not
include any shares of Common Stock issued by the Company pursuant to this
Warrant), (B) subdivides outstanding shares of Common Stock into a larger number
of shares, (C) combines (including by way of reverse stock split) outstanding
shares of Common Stock into a smaller number of shares, or (D) issues by
reclassification of shares of the Common Stock any shares of capital stock of
the Company, then in each case the Exercise Price shall be multiplied by a
fraction of which the numerator shall be the number of shares of Common Stock
(excluding treasury shares, if any) outstanding before such event and of which
the denominator shall be the number of shares of Common Stock outstanding after
such event and the number of shares issuable upon 

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

    exercise
of this Warrant shall be proportionately adjusted.  Any adjustment
made pursuant to this Section 3(a) shall become effective immediately after the
record date for the determination of stockholders entitled to receive such
dividend or distribution and shall become effective immediately after the
effective date in the case of a subdivision, combination or
re-classification.

     

    b) Redemption.  Beginning
twelve (12) months after the Initial Exercise  Date, provided the
Equity Conditions, defined below, are satisfied, if the daily closing price of
the Common Stock equals $0.725 or more (subject to adjustment for stock splits,
reclassifications, combinations and similar adjustments) per share for the 20
consecutive Trading Days (such calculation to occur no earlier than twelve (12)
months after the Initial Exercise Date) and the immediately prior to the
Redemption Notice Date (as defined below), and average daily volume of the
Common Stock on a national securities exchange, Nasdaq or the OTCBB (each a
“Trading
Market”) is at least 100,000 shares, unless the Holder is prohibited from
exercising the Warrants pursuant to Section 2(d) hereof, the Company shall have
the right, on twenty (20) business days’ notice to the Holder (an “Redemption Notice”
and the date such notice is received by the Holder, the “Redemption Notice
Date”), to redeem any portion of the Warrants then held by the Holder for
$0.001 per Warrant. To effect a Redemption hereunder, the Holder shall not be
required to physically surrender the Warrant certificate to the
Company.  “Equity Conditions”
shall mean, during the period in question, (i) the
Company shall have duly honored all Warrant exercises
scheduled to occur or occurring by virtue of one or more Notices of Exercise, if any,
(ii)(A) there is an effective  Registration Statement pursuant
to which the Holder is permitted to utilize the prospectus thereunder to resell
all of the shares issuable pursuant to the Warrants (and the Company believes,
in good faith, that such effectiveness will continue uninterrupted for the
foreseeable future); or (B) the Company’s counsel has delivered a written
opinion to the effect that all Warrant Shares issuable on a net exercise basis
in accordance with Section 2 (c), without regard to the limitations of 2(d), may
be freely sold without registration under the Securities Act (iii) the Common
Stock is trading on the Trading Market and all of the shares issuable pursuant
to the Transaction Documents are listed for trading on a Trading Market (and the
Company believes, in good faith, that trading of the Common Stock on a Trading
Market will continue uninterrupted for the foreseeable future), (iv) there is a
sufficient number of authorized but unissued and otherwise unreserved shares of
Common Stock for the issuance of all of the shares issuable pursuant to the
Transaction Documents, and (v) no public
announcement of a pending or proposed Fundamental Transaction, Change of Control
Transaction or acquisition transaction has occurred that has not been
consummated.

     

    c) Pro Rata
Distributions.  If the Company, at any time prior to the
Termination Date, shall distribute to all holders of Common Stock (and not to
Holders of the Warrants) evidences of its indebtedness or assets or rights or
warrants to subscribe for or purchase any security other than the Common Stock,
then in each such case the Exercise Price shall be adjusted by multiplying the
Exercise Price in effect immediately prior to the record date fixed for
determination of stockholders entitled to receive such distribution by a
fraction of which the denominator shall be the VWAP determined as of

     

     

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

    the
record date mentioned above, and of which the numerator shall be such VWAP on
such record date less the then per share fair market value at such record date
of the portion of such assets or evidence of indebtedness so distributed
applicable to one outstanding share of the Common Stock as determined by the
Board of Directors in good faith.  In either case the adjustments
shall be described in a statement provided to the Holders of the portion of
assets or evidences of indebtedness so distributed or such subscription rights
applicable to one share of Common Stock.  Such adjustment shall be
made whenever any such distribution is made and shall become effective
immediately after the record date mentioned above.

     

    d) Calculations. All
calculations under this Section 3 shall be made to the nearest cent or the
nearest 1/10th of a share, as the case may be. The number of shares of Common
Stock outstanding at any given time shall not includes shares of Common Stock
owned or held by or for the account of the Company, and the description of any
such shares of Common Stock shall be considered on issue or sale of Common
Stock.  For purposes of this Section 3, the number of shares of Common
Stock deemed to be issued and outstanding as of a given date shall be the sum of
the number of shares of Common Stock (excluding treasury shares, if any) issued
and outstanding.

     

    e) Notice to
Holders.

     

    i. Adjustment to Exercise
Price. Whenever the Exercise Price is adjusted pursuant to this Section
3, the Company shall promptly mail to each Holder a notice setting forth the
Exercise Price after such adjustment and setting forth a brief statement of the
facts requiring such adjustment.

     

    ii. Notice to Allow Exercise by
Holder. If (A) the Company shall declare a dividend (or any other
distribution) on the Common Stock; (B) the Company shall declare a special
nonrecurring cash dividend on or a redemption of the Common Stock; (C) the
Company shall authorize the granting to all holders of the Common Stock rights
or warrants to subscribe for or purchase any shares of capital stock of any
class or of any rights; (D) the approval of any stockholders of the Company
shall be required in connection with any reclassification of the Common Stock,
any consolidation or merger to which the Company is a party, any sale or
transfer of all or substantially all of the assets of the Company, of any
compulsory share exchange whereby the Common Stock is converted into other
securities, cash or property; (E) the Company shall authorize the voluntary or
involuntary dissolution, liquidation or winding up of the affairs of the
Company; then, in each case, the Company shall cause to be mailed to the Holder
at its last addresses as it shall appear upon the Warrant Register of the
Company, at least 10 calendar days prior to the applicable record or effective
date hereinafter specified, a notice stating (x) the date on which a record is
to be taken for the purpose of such dividend, distribution, redemption, rights
or warrants, or if a record is not to be taken, the date as of which the holders
of the Common Stock of record to be entitled to such dividend, distributions,
redemption, rights or 

     

    
      
        
        

      

      
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    warrants
are to be determined or (y) the date on which such reclassification,
consolidation, merger, sale, transfer or share exchange is expected to become
effective or close, and the date as of which it is expected that holders of the
Common Stock of record shall be entitled to exchange their shares of the Common
Stock for securities, cash or other property deliverable upon such
reclassification, consolidation, merger, sale, transfer or share exchange; provided, that the
failure to mail such notice or any defect therein or in the mailing thereof
shall not affect the validity of the corporate action required to be specified
in such notice.  The Holder is entitled to exercise this Warrant
during the 10-day period commencing the date of such notice to the effective
date of the event triggering such notice.

     

    f) Reorganizations,
Etc.  In
case, at any time during the Exercise Period, of any capital reorganization, of
any reclassification of the stock of the Company (other than a change in par
value or from par value to no par value or from no par value to par value or as
a result of a stock dividend or subdivision, split-up or combination of shares),
or the consolidation or merger of the Company with or into another corporation
(other than a consolidation or merger in which the Company is the continuing
operation and which does not result in any change or reclassification in the
Warrant Shares) or of the sale of all or substantially all the properties and
assets of the Company as an entirety to any other corporation, the Company, at
its sole discretion, shall have the right and option to (A) provide 10 days
prior written notice of such event to the Holder and this Warrant shall
terminate and be of no further force and effect on and after the effective date
of such capital reorganization or reclassification or the consummation of such
consolidation, sale or merger; or (B) provide that this Warrant shall, after
such reorganization, reclassification, consolidation, merger or sale, be
exercisable for the kind and number of shares of stock or other securities or
property of the Company or of the corporation resulting from such consolidation
or surviving such merger or to which such properties and assets shall have been
sold to which such holder would have been entitled if he, she or it had held the
Warrant Shares issuable upon the exercise hereof immediately prior to such
reorganization, reclassification, consolidation, merger or sale.

     

    g) Exempt Issuance.
Notwithstanding the foregoing, no adjustments, nor notices shall be made, paid
or issued under this Section 3 in respect of : (i) the issuance of securities
upon exercise or conversion of the Company's options, warrants or other
convertible securities outstanding as of the date hereof, (ii) the grant of
additional options or warrants, or the issuance of additional securities, under
any Company stock option plan, restricted stock plan, stock purchase plan or
other plan or written compensation contract for the benefit of the Company's
employees, directors or consultants in effect on the date hereof or any similar
compensatory plans adopted after the date hereof approved by the non-employee
members of the Company’s board of directors or a committee thereof, the majority
of which are non-employee directors, or (iii) the issuance of securities to a
bona fide strategic investor of the Company who is engaged in a business related
or complementary to that of the Company and which is not a public or private
investment company or other financial institution or an investment advisor or
manager.

     

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

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

     

    Section
4.               Transfer of
Warrant.

     

    a) Transferability.  Subject
to compliance with any applicable securities laws and the conditions set forth
in Sections 5(a) and 4(d) hereof and to the provisions of Section 4.2 of the
Purchase Agreement, this Warrant and all rights hereunder are transferable, in
whole or in part, upon surrender of this Warrant at the principal office of the
Company, together with a written assignment of this Warrant substantially in the
form attached hereto duly executed by the Holder or its agent or attorney and
funds sufficient to pay any transfer taxes payable upon the making of such
transfer.  Upon such surrender and, if required, such payment, the
Company shall execute and deliver a new Warrant or Warrants in the name of the
assignee or assignees and in the denomination or denominations specified in such
instrument of assignment, and shall issue to the assignor a new Warrant
evidencing the portion of this Warrant not so assigned, and this Warrant shall
promptly be cancelled.  A Warrant, if properly assigned, may be
exercised by a new holder for the purchase of Warrant Shares without having a
new Warrant issued.

     

    b) New Warrants. This
Warrant may be divided or combined with other Warrants upon presentation hereof
at the aforesaid office of the Company, together with a written notice
specifying the names and denominations in which new Warrants are to be issued,
signed by the Holder or its agent or attorney.  Subject to compliance
with Section 4(a), as to any transfer which may be involved in such division or
combination, the Company shall execute and deliver a new Warrant or Warrants in
exchange for the Warrant or Warrants to be divided or combined in accordance
with such notice.

     

    c) Warrant Register. The
Company shall register this Warrant, upon records to be maintained by the
Company for that purpose (the “Warrant Register”),
in the name of the record Holder hereof from time to time.  The
Company may deem and treat the registered Holder of this Warrant as the absolute
owner hereof for the purpose of any exercise hereof or any distribution to the
Holder, and for all other purposes, absent actual notice to the
contrary.

     

    d) Transfer
Restrictions. If, at the time of the surrender of this Warrant in connection with
any transfer of this Warrant, the transfer of this Warrant shall not be
registered pursuant to an effective registration statement under the Securities Act and under applicable state securities or blue sky laws, the
Company may require, as a condition of allowing such transfer (i) that the
Holder or transferee of this Warrant, as the case may be, furnish to the Company
a written opinion of counsel (which opinion shall be in form, substance and
scope customary for opinions of counsel in comparable transactions) to the
effect that such transfer may be made without registration under the Securities Act and under applicable state securities
or blue sky laws, (ii) that the holder or transferee execute and deliver to the
Company an investment letter in form and substance acceptable to the Company and
(iii) that the transferee be an “accredited
investor” as 

     

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

    defined in Rule 501(a)(1), (a)(2), (a)(3), (a)(7), or
(a)(8) promulgated under the Securities Act or a qualified institutional buyer
as defined in Rule 144A(a) under the Securities Act.

     

    Section
5.               Miscellaneous.

     

    a) Title to
Warrant.  Prior to the Termination Date and subject to
compliance with applicable laws and Section 4 of this Warrant, this Warrant and
all rights hereunder are transferable, in whole or in part, at the office or
agency of the Company by the Holder in person or by duly authorized attorney,
upon surrender of this Warrant together with the Assignment Form annexed hereto
properly endorsed.  The transferee shall sign an investment letter in
form and substance reasonably satisfactory to the Company.

     

    b) No Rights as Shareholder
Until Exercise.  This Warrant does not entitle the Holder to
any voting rights or other rights as a shareholder of the Company prior to the
exercise hereof.  Upon the surrender of this Warrant and the payment
of the aggregate Exercise Price (or by means of a cashless exercise), the
Warrant Shares so purchased shall be and be deemed to be issued to such Holder
as the record owner of such shares as of the close of business on the later of
the date of such surrender or payment.

     

    c) Loss, Theft, Destruction or
Mutilation of Warrant. The Company covenants that upon receipt by the
Company of evidence reasonably satisfactory to it of the loss, theft,
destruction or mutilation of this Warrant or any stock certificate relating to
the Warrant Shares, and in case of loss, theft or destruction, of indemnity or
security reasonably satisfactory to it (which, in the case of the Warrant, shall
not include the posting of any bond), and upon surrender and cancellation of
such Warrant or stock certificate, if mutilated, the Company will make and
deliver a new Warrant or stock certificate of like tenor and dated as of such
cancellation, in lieu of such Warrant or stock certificate.

     

    d) Saturdays, Sundays,
Holidays, etc.  If the last or appointed day for the taking of
any action or the expiration of any right required or granted herein shall be a
Saturday, Sunday or a legal holiday, then such action may be taken or such right
may be exercised on the next succeeding day not a Saturday, Sunday or legal
holiday.

     

    e) Authorized
Shares.

     

    The
Company covenants that during the period the Warrant is outstanding, it will
reserve from its authorized and unissued Common Stock a sufficient number of
shares to provide for the issuance of the Warrant Shares upon the exercise of
any purchase rights under this Warrant.  The Company further covenants
that its issuance of this Warrant shall constitute full authority to its
officers who are charged with the duty of executing stock certificates to
execute and issue the necessary certificates for the Warrant Shares upon the
exercise of the purchase rights under this Warrant.  The Company will
take all such reasonable action as may be necessary to assure that such Warrant
Shares may be issued as provided herein without violation of any applicable law
or regulation, or of any requirements of the Trading Market upon which the
Common Stock may be listed.

     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

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

     

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

     

    f) Jurisdiction. All
questions concerning the construction, validity, enforcement and interpretation
of this Warrant shall be determined in accordance with the provisions of the
Purchase Agreement.

     

    g) Restrictions.  The
Holder acknowledges that the Warrant Shares acquired upon the exercise of this
Warrant, if not registered, will have restrictions upon resale imposed by state
and federal securities laws.

     

    h) Nonwaiver and
Expenses.  No course of dealing or any delay or failure to
exercise any right hereunder on the part of Holder shall operate as a waiver of
such right or otherwise prejudice Holder’s rights, powers or remedies,
notwithstanding the fact that all rights hereunder terminate on the Termination
Date.  If the Company willfully and knowingly fails to comply with any
provision of this Warrant, which results in any material damages to the Holder,
the Company shall pay to Holder such amounts as shall be sufficient to cover any
costs and expenses including, but not limited to, reasonable attorneys’ fees,
including those of appellate proceedings, incurred by Holder in collecting any
amounts due pursuant hereto or in otherwise enforcing any of its rights, powers
or remedies hereunder.

     

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

    i) Notices.  Any
notice, request or other document required or permitted to be given or delivered
to the Holder by the Company shall be delivered in accordance with the notice
provisions of the Purchase Agreement.

     

    j) Limitation of
Liability.  No provision hereof, in the absence of any
affirmative action by Holder to exercise this Warrant or purchase Warrant
Shares, and no enumeration herein of the rights or privileges of Holder, shall
give rise to any liability of Holder for the purchase price of any Common Stock
or as a stockholder of the Company, whether such liability is asserted by the
Company or by creditors of the Company.

     

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

     

    l) Successors and
Assigns.  Subject to applicable securities laws, this Warrant
and the rights and obligations evidenced hereby shall inure to the benefit of
and be binding upon the successors of the Company and the successors and
permitted assigns of Holder.  The provisions of this Warrant are
intended to be for the benefit of all Holders from time to time of this Warrant
and shall be enforceable by any such Holder or holder of Warrant
Shares.

     

    m) Amendment.  This
Warrant may be modified or amended or the provisions hereof waived with the
written consent of the Company and the Holders of 60% of the Warrants then
outstanding.

     

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

     

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

     

    

    ********************

    

    

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

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

     

    

    Dated:  ___________,
_______

    
 

    
      	 	
              ARKADOS
      GROUP, INC.

               

               

            
	 	
              By:
      __________________________________________

                    
      Barbara Kane-Burke, CFO

               

            

    

    

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    
 

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

    

    NOTICE
OF EXERCISE

    

    TO:           ARKADOS
GROUP, INC.

    

    (1) The
undersigned hereby elects to purchase ________ Warrant Shares of the Company
pursuant to the terms of the attached Warrant (only if exercised in full), and
tenders herewith payment of the exercise price in full, together with all
applicable transfer taxes, if any.

     

    (2) Payment
shall take the form of (check applicable box):

     

    [  ]
in lawful money of the United States; or

     

    [ ] the
cancellation of such number of Warrant Shares as is necessary, in accordance
with the formula set forth in subsection 2(c), to exercise this Warrant with
respect to the maximum number of Warrant Shares purchasable pursuant to the
cashless exercise procedure set forth in subsection 2(c).

     

    (3) Please
issue a certificate or certificates representing said Warrant Shares in the name
of the undersigned or in such other name as is specified below1:

     

    _______________________________

    

    

    The
Warrant Shares shall be delivered to the following:

    

    _______________________________

    

    _______________________________

    

    _______________________________

    

    (4)  Accredited
Investor.  The undersigned is an “accredited investor” as
defined in Regulation D promulgated under the Securities Act of 1933, as
amended.

    

    [SIGNATURE
OF HOLDER]

    

    Name of
Investing Entity:
________________________________________________________________________

    

    Signature of Authorized Signatory of
Investing Entity:
_________________________________________________

    

    Name of
Authorized Signatory:
___________________________________________________________________

    

    Title of
Authorized Signatory:
____________________________________________________________________

    

    Date:
__________________________

    

     

    ________________________

    1 If a
name other than the Holder is specified, submit with executed signature
guarantied assignment or a letter stating that the specified other name is
fiduciary for the Holder.

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    ASSIGNMENT
FORM

    

    (To
assign the foregoing warrant, execute

    this form
and supply required information.

    Do not
use this form to exercise the warrant.)

    

    

    

    FOR VALUE
RECEIVED, the foregoing Warrant and all rights evidenced thereby are hereby
assigned to

     

    

    _______________________________________________
whose address is

    

    _______________________________________________________________.

    

    

    

    _______________________________________________________________

    

    Dated:  ______________,
_______

    

    

    Holder's
Signature:     _____________________________

    

    Holder's
Address:       _____________________________

     

                                   
_____________________________

    

     

     

     

     

    Signature
Guaranteed:

    
 

    

    

    _________________________________________

    THE
SIGNATURES MUST BE GUARANTEED BY AN ELIGIBLE

    GUARANTOR
INSTITUTION (BANKS, STOCKBROKERS,

    SAVINGS
AND LOAN ASSOCIATIONS AND CREDIT UNIONS

    WITH
MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE

    MEDALLION
PROGRAM), PURSUANT TO S.E.C. RULE 17Ad 15.

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