Document:

Exhibit 10.4

November
13, 2006

	
  To:

  	
  Earthlink, Inc.

  
	
   

  	
  1375 Peachtree St.

  
	
   

  	
  Atlanta, Georgia 30309

  
	
   

  	
  Attn: General Counsel

  
	
   

  	
  Telephone: (404) 748-6634

  
	
   

  	
  Facsimile: (404) 892-7616

  
	
   

  	
   

  
	
  From:

  	
  Bank of America,
  N.A.

  
	
   

  	
  c/o Banc of America Securities LLC

  
	
   

  	
  9 West 57th Street

  
	
   

  	
  New York, NY 10019

  
	
   

  	
  Attn: EFP Legal Department

  
	
   

  	
  Telephone: (212) 583-6580

  
	
   

  	
  Facsimile: (212) 203-8610

  
	
   

  	
   

  
	
  Re:

  	
  Issuer Warrant Transaction

  
	
   

  	
  (Bank of America Reference Number: NY-25199)

  
	
   

  	
   

  

Ladies and Gentlemen:

The purpose of this communication (this “Confirmation”)
is to set forth the terms and conditions of the above-referenced transaction
entered into on the Trade Date specified below (the “Transaction”)
between Bank of America, N.A. (“Dealer”) and
Earthlink, Inc. (“Issuer”).  This communication constitutes a “Confirmation”
as referred to in the ISDA Master Agreement specified below.

1. This Confirmation is subject to, and incorporates, the definitions
and provisions of the 2000 ISDA Definitions (including the Annex thereto) (the
“2000 Definitions”) and the definitions
and provisions of the 2002 ISDA Equity Derivatives Definitions (the “Equity Definitions”, and together with the 2000 Definitions,
the “Definitions”), in each case as
published by the International Swaps and Derivatives Association, Inc. (“ISDA”).  In the event
of any inconsistency between the 2000 Definitions and the Equity Definitions,
the Equity Definitions will govern.  For
purposes of the Equity Definitions, each reference herein to a Warrant shall be
deemed to be a reference to a Call Option or an Option, as context requires.

Each party is hereby advised, and each such party
acknowledges, that the other party has engaged in, or refrained from engaging
in, substantial financial transactions and has taken other material actions in
reliance upon the parties’ entry into the Transaction to which this
Confirmation relates on the terms and conditions set forth below.

This Confirmation evidences a complete and binding
agreement between Dealer and Issuer as to the terms of the Transaction to which
this Confirmation relates.  This
Confirmation shall be subject to an agreement (the “Agreement”) in the form of the 2002 ISDA Master Agreement (the
“ISDA Form”) as if Dealer and Issuer had
executed an agreement in such form (without any Schedule but with the elections
set forth in this Confirmation).  For the
avoidance of doubt, the Transaction shall be the only transaction under the
Agreement.

All provisions contained in, or incorporated by reference to, the
Agreement will govern this Confirmation except as expressly modified
herein.  In the event of any
inconsistency between this Confirmation and either the Definitions or the
Agreement, this Confirmation shall govern.

2.  The Transaction is a Warrant
Transaction, which shall be considered a Share Option Transaction for purposes
of the Equity Definitions.  The terms of
the particular Transaction to which this Confirmation relates are as follows:

 

 

	
  General Terms:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Trade Date:

  	
   

  	
  November 13, 2006

  
	
   

  	
   

  	
   

  
	
  Effective Date:

  	
   

  	
  November 17, 2006, subject to Section 8(m) below

  
	
   

  	
   

  	
   

  
	
  Components:

  	
   

  	
  The Transaction will be divided into individual
  Components as set forth in Annex A, each with the terms set forth in this
  Confirmation, and, in particular, with the Number of Warrants and Expiration
  Date set forth in this Confirmation. The payments and deliveries to be made
  upon settlement of the Transaction will be determined separately for each
  Component as if each Component were a separate Transaction under the
  Agreement.

  
	
   

  	
   

  	
   

  
	
  Warrant Style:

  	
   

  	
  European

  
	
   

  	
   

  	
   

  
	
  Warrant Type:

  	
   

  	
  Call

  
	
   

  	
   

  	
   

  
	
  Seller:

  	
   

  	
  Issuer

  
	
   

  	
   

  	
   

  
	
  Buyer:

  	
   

  	
  Dealer

  
	
   

  	
   

  	
   

  
	
  Shares:

  	
   

  	
  The Common Stock of Issuer, par value USD 0.01 per
  share (Ticker Symbol: “ELNK”).

  
	
   

  	
   

  	
   

  
	
  Number of
  Warrants:

  	
   

  	
  For each Component, as provided in Annex A to this
  Confirmation.

  
	
   

  	
   

  	
   

  
	
  Warrant
  Entitlement:

  	
   

  	
  One Share per Warrant

  
	
   

  	
   

  	
   

  
	
  Strike Price:

  	
   

  	
  USD 11.20

  
	
   

  	
   

  	
   

  
	
  Premium:

  	
   

  	
  USD 8,976,825 (Premium per Warrant Approximately USD
  1.10)

  
	
   

  	
   

  	
   

  
	
  Premium Payment
  Date:

  	
   

  	
  The Effective Date

  
	
   

  	
   

  	
   

  
	
  Exchange:

  	
   

  	
  NASDAQ Global Select Market

  
	
   

  	
   

  	
   

  
	
  Related
  Exchange:

  	
   

  	
  All Exchanges

  
	
   

  	
   

  	
   

  
	
  Procedures for Exercise:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  In
  respect of any Component:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Expiration Time:

  	
   

  	
  Valuation Time

  
	
   

  	
   

  	
   

  
	
  Expiration Date:

  	
   

  	
  As provided in Annex A to this Confirmation
  (or, if such date is not a Scheduled Trading Day, the next following
  Scheduled Trading Day that is not already an Expiration Date for another
  Component); provided that if
  that date is a Disrupted Day, the Expiration Date for such Component shall be
  the first succeeding Scheduled Trading Day that is not a Disrupted Day and is
  not or is not deemed to be an Expiration Date in respect of any other
  Component of the Transaction hereunder; and provided
  further that if the Expiration Date has not occurred pursuant to
  the preceding proviso as of the Final Disruption Date, the Final Disruption
  Date shall be the Expiration Date (irrespective of whether such date is an
  Expiration Date in respect of any other Component for the Transaction). “Final
  Disruption Date” means
  August 1, 2012. Notwithstanding the foregoing and anything to the contrary in
  the Equity Definitions, if a Market Disruption Event occurs on any

  

 2
 

 

 

	
  

  	
   

  	
  Expiration Date, the Calculation Agent may determine
  that such Expiration Date is a Disrupted Day only in part, in which case the
  Calculation Agent shall make adjustments to the number of Warrants for the
  relevant Component for which such day shall be the Expiration Date and shall
  designate the Scheduled Trading Day determined in the manner described in the
  immediately preceding sentence as the Expiration Date for the remaining
  Warrants for such Component. Section 6.6 of the Equity Definitions shall not
  apply to any Valuation Date occurring on an Expiration Date.

  
	
   

  	
   

  	
   

  
	
  Market Disruption
  Event:

  	
   

  	
  Section 6.3(a) of the 2002 Definitions is hereby
  amended by deleting the words “during the one hour period that ends at the
  relevant Valuation Time, Latest Exercise Time, Knock-in Valuation Time or
  Knock-out Valuation Time, as the case may be,” in clause (ii) thereof.

  
	
   

  	
   

  	
   

  
	
  Automatic
  Exercise:

  	
   

  	
  Applicable; and means that each Warrant not
  previously exercised under the Transaction will be deemed to be automatically
  exercised at the Expiration Time on
  the Expiration Date unless Buyer notifies Seller (by telephone or in writing)
  prior to the Expiration Time on the Expiration Date that it does not wish
  Automatic Exercise to occur, in which case Automatic Exercise will not apply.

  
	
   

  	
   

  	
   

  
	
  Issuer’s
  Telephone Number

  	
   

  	
   

  
	
  and Telex and/or
  Facsimile Number

  	
   

  	
   

  
	
  and Contact
  Details for purpose of

  	
   

  	
   

  
	
  Giving Notice:

  	
   

  	
  Attn: General Counsel

  
	
   

  	
   

  	
  Telephone: (404) 748-6634

  
	
   

  	
   

  	
  Facsimile: (404) 892-7616

  
	
   

  	
   

  	
   

  
	
  Settlement Terms:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  In
  respect of any Component:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Settlement
  Currency:

  	
   

  	
  USD

  
	
   

  	
   

  	
   

  
	
  Net Share
  Settlement:

  	
   

  	
  On each Settlement Date, Issuer shall deliver to
  Dealer a number of Shares equal to the Number of Shares to be Delivered for
  such Settlement Date to the account specified by Dealer and cash in lieu of
  any fractional shares valued at the Relevant Price on the Valuation Date
  corresponding to such Settlement Date. If, in the reasonable opinion of
  Issuer or Dealer based on advice of counsel, for any reason, the Shares
  deliverable upon Net Share Settlement would not be immediately freely
  transferable by Dealer under Rule 144(k) under the Securities Act of 1933, as
  amended (the “Securities Act”), then Dealer
  may elect to either (x) accept delivery of such Shares notwithstanding any
  restriction on transfer or (y) have the provisions set forth in Section 8(b)
  below apply.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  The Number of Shares to be Delivered shall be
  delivered by Issuer to Dealer no later than 12:00 noon (local time in New
  York City) on the relevant Settlement Date.

  
	
   

  	
   

  	
   

  
	
  Number of Shares
  to be Delivered:

  	
   

  	
  In respect of any Exercise Date, subject to the last
  sentence of Section 9.5 of the Equity Definitions, the product of (i) the
  number of Warrants exercised or deemed exercised on such Exercise Date, (ii)
  the Warrant Entitlement and (iii) (A) the

  

 3
 

 

 

	
  

  	
   

  	
  excess of the VWAP Price on the Valuation Date
  occurring on such Exercise Date over the Strike Price divided by
  (B) such VWAP Price.

  	 

	
   

  	
   

  	
   

  	 

	
  VWAP Price:

  	
   

  	
  For any Valuation Date, the per Share
  volume-weighted average price as displayed under the heading “Bloomberg VWAP”
  on Bloomberg page ELNK <Equity> VAP (or any successor thereto) in
  respect of the period from 9:30 a.m. to 4:00 p.m. (New York City time) on
  such Valuation Date (or if such volume-weighted average price is unavailable,
  the market value of one Share on such Valuation Date, as determined by the
  Calculation Agent). Notwithstanding anything to the contrary in the Equity
  Definitions, if there is a Market Disruption Event on any Valuation Date,
  then the Calculation Agent shall determine the VWAP Price for such Valuation
  Date on the basis of its good faith estimate, determined in a commercially
  reasonable manner, of the market value for the relevant Shares on such
  Valuation Date.

  	 

	
   

  	
   

  	
   

  	 

	
  Other Applicable Provisions:

  	
   

  	
  The provisions of Sections 9.1(c), 9.8, 9.9, 9.10,
  9.11 (except that the Representation and Agreement contained in Section 9.11
  of the Equity Definitions shall be modified by excluding any representations
  therein relating to restrictions, obligations, limitations or requirements
  under applicable securities laws as a result of the fact that Seller is the
  Issuer of the Shares) and 9.12 of the Equity Definitions will be applicable,
  except that all references in such provisions to “Physically-Settled” shall
  be read as references to “Net Share Settled”. “Net Share Settled” in relation
  to any Warrant means that Net Share Settlement is applicable to such Warrant.

  	 

	
   

  	
   

  	
   

  	 

	
  Adjustments:

  	
   

  	
   

  	 

	
   

  	
   

  	
   

  	 

	
  In respect of any Component:

  	
   

  	
   

  	 

	
   

  	
   

  	
   

  	 

	
  Method of Adjustment:

  	
   

  	
  Calculation Agent Adjustment

  	 

	
   

  	
   

  	
   

  	 

	
  Extraordinary Dividend:

  	
   

  	
  Any cash dividend on the shares with an ex-dividend
  date occurring during the period from and including the Trade Date, to but
  excluding the last Expiration Date.

  	 

	
   

  	
   

  	
   

  	 

	
  Extraordinary
  Events:

  	
   

  	
   

  	 

	
   

  	
   

  	
   

  	 

	
  Consequences of Merger Events:

  	
   

  	
   

  	 

	
   

  	
   

  	
   

  	 

	
  (a) Share-for-Share:

  	
   

  	
  Modified Calculation Agent Adjustment

  	 

	
   

  	
   

  	
   

  	 

	
  (b)
  Share-for-Other:

  	
   

  	
  Cancellation and Payment (Calculation Agent
  Determination) or Modified Calculation Agent Adjustment, at the election of
  Buyer, it being understood that Buyer shall have the option to elect for
  Cancellation and Payment (Calculation Agent Determination) to apply to a
  portion of the Transaction and for Modified Calculation Agent Adjustment to
  apply to a portion of the Transaction.

  
	
   

  	
   

  	
   

  
	
  (c)
  Share-for-Combined:

  	
   

  	
  Component Adjustment (Calculation Agent
  Determination)

  
	
   

  	
   

  	
   

  
	
  Tender Offer:

  	
   

  	
  Applicable

  
	
   

  	
   

  	
   

  
	
  Consequences of
  Tender Offers:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  (a)
  Share-for-Share:

  	
   

  	
  Modified Calculation Agent Adjustment

  

 

 4
 

 

 

	
  (b) Share-for-Other:

  	
   

  	
  Cancellation and Payment (Calculation Agent
  Determination) or Modified Calculation Agent Adjustment, at the election of
  Buyer, it being understood that Buyer shall have the option to elect for
  Cancellation and Payment (Calculation Agent Determination) to apply to a
  portion of the Transaction and for Modified Calculation Agent Adjustment to
  apply to a portion of the Transaction.

  
	
   

  	
   

  	
   

  
	
  (c)
  Share-for-Combined:

  	
   

  	
  Component Adjustment (Calculation Agent
  Determination)

  
	
   

  	
   

  	
   

  
	
  Nationalization,
  Insolvency or Delisting:

  	
   

  	
  Cancellation and Payment (Calculation Agent
  Determination); provided that
  in addition to the provisions of Section 12.6(a)(iii) of the Equity
  Definitions, it shall also constitute a Delisting if the Exchange is located
  in the United States and the Shares are not immediately re-listed, re-traded
  or re-quoted on any of the New York Stock Exchange, the American Stock
  Exchange or The NASDAQ Global Select Market (or their respective successors);
  if the Shares are immediately re-listed, re-traded or re-quoted on any such
  exchange or quotation system, such exchange or quotation system shall
  thereafter be deemed to be the Exchange; and provided
  further that the definition of “Delisting” in Section 12.6
  (a)(iii) of the Equity Definitions shall be deemed to be amended by adding “,
  subject to no further conditions,” after the word “will.”

  
	
   

  	
   

  	
   

  
	
  Additional
  Disruption Events:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  (a) Change in
  Law:

  	
   

  	
  Applicable

  
	
   

  	
   

  	
   

  
	
  (b) Failure to
  Deliver:

  	
   

  	
  Applicable

  
	
   

  	
   

  	
   

  
	
  (c) Insolvency
  Filing:

  	
   

  	
  Applicable

  
	
   

  	
   

  	
   

  
	
  (d) Hedging
  Disruption:

  	
   

  	
  Applicable

  
	
   

  	
   

  	
   

  
	
  (e) Increased
  Cost of Hedging:

  	
   

  	
  Applicable

  
	
   

  	
   

  	
   

  
	
  (f) Loss of
  Stock Borrow:

  	
   

  	
  Applicable

  
	
   

  	
   

  	
   

  
	
  Maximum Stock
  Loan Rate:

  	
   

  	
  2.00% per annum

  
	
   

  	
   

  	
   

  
	
  (g) Increased
  Cost of Stock Borrow:

  	
   

  	
  Applicable

  
	
   

  	
   

  	
   

  
	
  Initial Stock
  Loan Rate:

  	
   

  	
  0.25% per annum

  
	
   

  	
   

  	
   

  
	
  Hedging Party:

  	
   

  	
  Buyer for all applicable Additional Disruption
  Events

  
	
   

  	
   

  	
   

  
	
  Determining
  Party:

  	
   

  	
  Buyer for all applicable Additional Disruption
  Events

  
	
   

  	
   

  	
   

  
	
  Non-Reliance:

  	
   

  	
  Applicable

  
	
   

  	
   

  	
   

  
	
  Agreements and
  Acknowledgments

  	
   

  	
   

  
	
  Regarding
  Hedging Activities:

  	
   

  	
  Applicable

  
	
   

  	
   

  	
   

  
	
  Additional
  Acknowledgments:

  	
   

  	
  Applicable

  
	
   

  	
   

  	
   

  
	
  3. Calculation
  Agent:

  	
   

  	
  Dealer

  
	
   

  	
   

  	
   

  
	
  4. Account
  Details:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Dealer Payment
  Instructions:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Bank of America,
  N.A

  	
   

  	
   

  
	
  San Francisco,
  CA

  	
   

  	
   

  
	
  SWIFT: BOFAUS65

  	
   

  	
   

  
	
  Bank Routing:
  121-000-358

  	
   

  	
   

  
	
  Account Name:
  Bank of America

  	
   

  	
   

  
	
  Account No. :
  12333-34172

  	
   

  	
   

  
	
   

  	
   

  	
   

  

 5
 

 

 

        Issuer
Payment Instructions:                     To
be provided by Issuer.

5.   Offices:

The Office of
Dealer for the Transaction is:

Bank of America, N.A.

c/o Banc of America
Securities LLC

Equity Financial Products

9 West 57th Street

New York, NY 10019

Attn: EFP Legal
Department

Telephone:  (212) 583-8373

Facsimile:  (212) 847-5124

The Office of
Issuer for the Transaction is: N/A

For the purpose of
Section 10(c) of the Agreement, neither party is a Multibranch Party.

6.   Notices: For purposes of this
Confirmation:

(a)           Address for notices
or communications to Issuer:

	
  

  	
  To:

  	
  1375 Peachtree St.

  
	
   

  	
   

  	
  Atlanta, Georgia 30309

  
	
   

  	
  Attn:

  	
  General Counsel

  
	
   

  	
  Telephone:

  	
  (404) 748-6634

  
	
   

  	
  Facsimile:

  	
  (404) 892-7616

  
	
   

  	
   

  	
   

  

(b)           Address for notices
or communications to Dealer:

	
  

  	
  To:

  	
  Bank of America, N.A.

  
	
   

  	
   

  	
  c/o Banc of America Securities LLC

  
	
   

  	
   

  	
  9 West 57th Street

  
	
   

  	
   

  	
  New York, NY 10019

  
	
   

  	
  Attn:

  	
  EFP Legal Department

  
	
   

  	
  Telephone:

  	
  (212) 583-6580

  
	
   

  	
  Facsimile:

  	
  (212) 203-8610

  

 

7.  Representations,
Warranties and Agreements:

(a)  In addition to the
representations and warranties in the Agreement and those contained elsewhere
herein, Issuer represents and warrants to and for the benefit of, and agrees
with, Dealer as follows:

(i)            On the Trade Date,
(A) Issuer is not aware of any material nonpublic information regarding Issuer
or the Shares and (B) all reports and other documents filed by Issuer with the
Securities and Exchange Commission pursuant to the Securities Act of 1933, as
amended (the “Securities Act”), and Exchange Act
when considered as a whole (with the more recent such reports and documents
deemed to amend inconsistent statements contained in any earlier such reports
and documents), do not contain any untrue statement of a material fact or any
omission of a material fact required to be stated therein or necessary to make
the statements therein, in the light of the circumstances in which they were
made, not misleading.

(ii)           Without limiting
the generality of Section 13.1 of the Equity Definitions, Issuer acknowledges
that Dealer is not making any representations or warranties with respect to the
treatment of

 6
 

 

 

the Transaction under FASB Statements 149 or 150, EITF
Issue No. 00-19 (or any successor issue statements) or under FASB’s Liabilities
& Equity Project.

(iii)          Prior to the Trade
Date, Issuer shall deliver to Dealer a resolution of Issuer’s board of
directors authorizing the Transaction and such other certificate or
certificates as Dealer shall reasonably request.

(iv)          Issuer is not
entering into this Confirmation to create actual or apparent trading activity
in the Shares (or any security convertible into or exchangeable for Shares) or
to raise or depress or otherwise manipulate the price of the Shares (or any
security convertible into or exchangeable for Shares) or otherwise in violation
of the Exchange Act.

(v)            Issuer is not, and
after giving effect to the transactions contemplated hereby will not be, an
“investment company” as such term is defined in the Investment Company Act of
1940, as amended.

(vi)          On the Trade Date
(A) the assets of Issuer at their fair valuation exceed the liabilities of
Issuer, including contingent liabilities, (B) the capital of Issuer is adequate
to conduct the business of Issuer and (C) Issuer has the ability to pay its
debts and obligations as such debts mature and does not intend to, or does not
believe that it will, incur debt beyond its ability to pay as such debts
mature.

(vii)         Issuer shall not
take any action to decrease the number of Available Shares below the Capped
Number (each as defined below).

(viii)        The representations
and warranties of Issuer set forth in Section 3 of the Agreement and Section 3
of the Underwriting Agreement dated as of the Trade Date among Issuer, UBS
Securities LLC and Banc of America Securities LLC are true and correct and are
hereby deemed to be repeated to Dealer as if set forth herein.

(ix)           Issuer understands
no obligations of Dealer to it hereunder will be entitled to the benefit of
deposit insurance and that such obligations will not be guaranteed by any
affiliate of Dealer or any governmental agency.

(b)           Each of Buyer and
Issuer agrees and represents that it is an “eligible contract participant” as
defined in Section 1a(12) of the U.S. Commodity Exchange Act, as amended.

(c)           Each of Dealer and
Issuer acknowledges that the offer and sale of the Transaction to it is
intended to be exempt from registration under the Securities Act by virtue of
Section 4(2) thereof.  Accordingly, Dealer
represents and warrants to Issuer that (i) it has the financial ability to bear
the economic risk of its investment in the Transaction and is able to bear a
total loss of its investment and its investments in and liabilities in respect
of the Transaction, which it understands are not readily marketable, are not
disproportionate to its net worth, and it is able to bear any loss in
connection with the Transaction, including the loss of its entire investment in
the Transaction, (ii) it is an “accredited investor” as that term is defined in
Regulation D as promulgated under the Securities Act, (iii) it is entering into
the Transaction for its own account without a view to the distribution or
resale thereof, (iv) the assignment, transfer or other disposition of the
Transaction has not been and will not be registered under the Securities Act
and is restricted under this Confirmation, the Securities Act and state
securities laws, (v) its financial condition is such that it has no need for
liquidity with respect to its investment in the Transaction and no need to
dispose of any portion thereof to satisfy any existing or contemplated
undertaking or indebtedness and is capable of assessing the merits of and
understanding (on its own behalf or through independent professional advice),
and understands and accepts, the terms, conditions and risks of the
Transaction.

(d)           Each of Dealer and
Issuer agrees and acknowledges (A) that this Confirmation is (i) a “securities
contract,” as such term is defined in Section 741(7) of Title 11 of the United
States Code (the “Bankruptcy Code”),
with respect to which each payment and delivery hereunder is a “settlement
payment,” as such term is defined in Section 741(8) of the Bankruptcy Code, and
(ii) a “swap agreement,” as such term is defined in Section 101(53B) of the
Bankruptcy Code, with respect to which each payment and delivery hereunder is a
“transfer,” as such term is defined in Section 101(54) of the Bankruptcy Code,
and (B) that Dealer is entitled to the protections afforded by, among other
sections, Section 362(b)(6), 362(b)(17), 546(e), 546(g), 555 and 560 of the
Bankruptcy Code.

(e)           Issuer shall deliver
to Dealer an opinion of counsel, dated as of the Trade Date and reasonably
acceptable to Dealer in form and substance, with respect to the matters set
forth in Section 3(a) of the Agreement.

 7
 

 

 

8.  Other Provisions:

(a)           Alternative Calculations and Payment on Early Termination and on
Certain Extraordinary Events. 
If, subject to Section 8(k) below, Issuer shall owe Buyer any amount
pursuant to Sections 12.2, 12.3, 12.6, 12.7 or 12.9 of the Equity Definitions
(except in the event of a Tender Offer or a Merger Event, in each case, in
which the consideration or proceeds to be paid to holders of Shares consists
solely of cash) or pursuant to Section 6(d)(ii) of the Agreement (except in the
event of an Event of Default in which Issuer is the Defaulting Party or a
Termination Event in which Issuer is the Affected Party, that resulted from an
event or events within Issuer’s control) (a “Payment
Obligation”), Issuer shall have the right, in its sole discretion,
to satisfy any such Payment Obligation by the Share Termination Alternative (as
defined below) by giving irrevocable telephonic notice to Buyer, confirmed in
writing within one Scheduled Trading Day, between the hours of 9:00 A.M. and
4:00 P.M. New York City time on the Merger Date, Tender Offer Date,
Announcement Date or Early Termination Date, as applicable (“Notice of Share Termination”).  Upon such Notice of Share Termination, the
following provisions shall apply on the Scheduled Trading Day immediately
following the Merger Date, the Tender Offer Date, Announcement Date or Early
Termination Date, as applicable:

	
  Share Termination Alternative:

  	
   

  	
  Applicable and means that Issuer shall deliver to
  Dealer the Share Termination Delivery Property on the date on which the
  Payment Obligation would otherwise be due pursuant to Section 12.7 or 12.9 of
  the Equity Definitions or Section 6(d)(ii) of the Agreement, as applicable
  (the “Share Termination Payment Date”), in
  satisfaction of the Payment Obligation.

  
	
   

  	
   

  	
   

  
	
  Share Termination Delivery Property:

  	
   

  	
  A number of Share Termination Delivery Units, as
  calculated by the Calculation Agent, equal to the Payment Obligation divided
  by the Share Termination Unit Price. The Calculation Agent shall adjust the
  Share Termination Delivery Property by replacing any fractional portion of a
  security therein with an amount of cash equal to the value of such fractional
  security based on the values used to calculate the Share Termination Unit
  Price.

  
	
   

  	
   

  	
   

  
	
  Share Termination Unit Price:

  	
   

  	
  The value of property contained in one Share
  Termination Delivery Unit on the date such Share Termination Delivery Units
  are to be delivered as Share Termination Delivery Property, as determined by
  the Calculation Agent in its discretion by commercially reasonable means and
  notified by the Calculation Agent to Issuer at the time of notification of
  the Payment Obligation.

  
	
   

  	
   

  	
   

  
	
  Share Termination Delivery Unit:

  	
   

  	
  In the case of a Termination Event, Event of Default
  or Delisting, one Share or, in the case of an Insolvency, Nationalization,
  Merger Event or Tender Offer, a Share or a unit consisting of the number or
  amount of each type of property received by a holder of one Share (without
  consideration of any requirement to pay cash or other consideration in lieu
  of fractional amounts of any securities) in such Insolvency, Nationalization,
  Merger Event or Tender Offer. If such Insolvency, Nationalization, Merger
  Event or Tender Offer involves a choice of consideration to be received by
  holders, such holder shall be deemed to have elected to receive the maximum
  possible amount of cash.

  
	
   

  	
   

  	
   

  
	
  Failure to Deliver:

  	
   

  	
  Applicable

  
	
   

  	
   

  	
   

  
	
  Other applicable provisions:

  	
   

  	
  If Share Termination Alternative is applicable, the
  provisions of Sections 9.8, 9.9, 9.10, 9.11 (except that the Representation
  and Agreement contained in Section 9.11 of the Equity Definitions shall be
  modified by excluding any representations therein relating to restrictions,
  obligations, limitations or requirements under applicable securities laws as
  a result of the fact that Seller is the issuer of the Shares) and 9.12 of the
  Equity Definitions will be applicable, except that all references in such
  provisions to “Physical Settlement” shall be read as references to “Share
  Termination Alternative” and all references to “Shares” shall be read as
  references to “Share Termination Delivery Units”. If, in the reasonable
  opinion of counsel to Issuer or Dealer, for any reason, any securities
  comprising the Share Termination Delivery Units deliverable pursuant to this
  Section 8(a) would not be immediately freely transferable by Dealer under
  Rule 144(k) under the Securities Act, then Dealer may elect to either (x)

  

 

 8
 

 

 

	
  

  	
   

  	
  accept delivery of such securities notwithstanding
  any restriction on transfer or (y) have the provisions set forth in Section
  8(b) below apply.

  

 

(b)           Registration/Private
Placement Procedures. 
(i)  With respect to the
Transaction, the following provisions shall apply to the extent provided for
above opposite the caption “Net Share Settlement” in Section 2 above.  If so applicable, then, at the election of
Issuer by notice to Buyer within one Exchange Business Day after the relevant
delivery obligation arises,  but in any
event at least one Exchange Business Day prior to the date on which such
delivery obligation is due, either (A) all Shares or Share Termination Delivery
Units, as the case may be, delivered by Issuer to Buyer shall be, at the time
of such delivery, covered by an effective registration statement of Issuer for
immediate resale by Buyer (such registration statement and the corresponding
prospectus (the “Prospectus”) (including, without
limitation, any sections describing the plan of distribution) in form and
content commercially reasonably satisfactory to Buyer) or (B) Issuer shall
deliver additional Shares or Share Termination Delivery Units, as the case may
be, so that the value of such Shares or Share Termination Delivery Units, as
determined by the Calculation Agent to reflect an appropriate liquidity
discount, equals the value of the number of Shares or Share Termination
Delivery Units that would otherwise be deliverable if such Shares or Share
Termination Delivery Units were freely tradeable (without prospectus delivery)
upon receipt by Buyer (such value, the “Freely
Tradeable Value”); provided
that Issuer may not make the election described in this clause (B) if, on the
date of its election, it has taken, or caused to be taken, any action that
would make unavailable either the exemption pursuant to Section 4(2) of the
Securities Act for the sale by Issuer to Dealer (or any affiliate designated by
Dealer) of the Shares or the exemption pursuant to Section 4(1) or Section 4(3)
of the Securities Act for resales of the Shares by Dealer (or any such
affiliate of Dealer).  For the avoidance
of doubt, as used in this paragraph (b) only, the term “Issuer” shall mean the
issuer of the relevant securities, as the context shall require.

(ii)           If Issuer makes the
election described in clause (b)(i)(A) above:

(A)          Buyer (or an
Affiliate of Buyer designated by Buyer) shall be afforded a reasonable
opportunity to conduct a due diligence investigation with respect to Issuer
that is customary in scope for underwritten offerings of equity securities and
that yields results that are commercially reasonably satisfactory to Buyer or
such Affiliate, as the case may be, in its discretion; and

(B)           Buyer (or an
Affiliate of Buyer designated by Buyer) and Issuer shall enter into an
agreement (a “Registration Agreement”) on
commercially reasonable terms in connection with the public resale of such
Shares or Share Termination Delivery Units, as the case may be, by Buyer or
such Affiliate substantially similar to underwriting agreements customary for
underwritten offerings of equity securities, in form and substance commercially
reasonably satisfactory to Buyer or such Affiliate and Issuer, which
Registration Agreement shall include, without limitation, provisions
substantially similar to those contained in such underwriting agreements
relating to the indemnification of, and contribution in connection with the
liability of, Buyer and its Affiliates and Issuer, shall provide for the
payment by Issuer of all expenses in connection with such resale, including all
registration costs and all fees and expenses of counsel for Buyer, and shall
provide for the delivery of accountants’ “comfort letters” to Buyer or such
Affiliate with respect to the financial statements and certain financial
information contained in or incorporated by reference into the Prospectus.

(iii)          If Issuer makes the
election described in clause (a)(i)(B) above:

(A)          Buyer (or an
Affiliate of Buyer designated by Buyer) and any potential institutional purchaser
of any such Shares or Share Termination Delivery Units, as the case may be,
from Buyer or such Affiliate identified by Buyer shall be afforded a
commercially reasonable opportunity to conduct a due diligence investigation in
compliance with applicable law with respect to Issuer customary in scope for
private placements of equity securities (including, without limitation, the
right to have made available to them for inspection all financial and other
records, pertinent corporate documents and other information reasonably
requested by them), subject to execution by such recipients of customary
confidentiality agreements reasonably acceptable to Issuer;

(B)           Buyer (or an
Affiliate of Buyer designated by Buyer) and Issuer shall enter into an
agreement (a “Private Placement Agreement”) on
commercially reasonable terms in connection with the private placement of such
Shares or Share Termination Delivery Units, as the case may be, by Issuer to
Buyer or such Affiliate and the private resale of such shares by Buyer or such
Affiliate, substantially similar to private placement purchase agreements
customary for private placements of equity securities, in

 9
 

 

 

form and substance commercially reasonably
satisfactory to Buyer and Issuer, which Private Placement Agreement shall
include, without limitation, provisions substantially similar to those
contained in such private placement purchase agreements relating to the
indemnification of, and contribution in connection with the liability of, Buyer
and its Affiliates and Issuer, shall provide for the payment by Issuer of all
expenses in connection with such resale, including all fees and expenses of
counsel for Buyer, shall contain representations, warranties and agreements of
Issuer reasonably necessary or advisable to establish and maintain the
availability of an exemption from the registration requirements of the
Securities Act for such resales, and shall use best efforts to provide for the
delivery of accountants’ “comfort letters” to Buyer or such Affiliate with
respect to the financial statements and certain financial information contained
in or incorporated by reference into the offering memorandum prepared for the
resale of such Shares; and

(C)           Issuer agrees that
any Shares or Share Termination Delivery Units so delivered to Dealer, (i) may
be transferred by and among Dealer and its affiliates, and Issuer shall effect
such transfer without any further action by Dealer and (ii) after the minimum
“holding period” within the meaning of Rule 144(d) under the Securities Act has
elapsed with respect to such Shares or any securities issued by Issuer
comprising such Share Termination Delivery Units, Issuer shall promptly remove,
or cause the transfer agent for such Shares or securities to remove, any
legends referring to any such restrictions or requirements from such Shares or
securities upon delivery by Dealer (or such affiliate of Dealer) to Issuer or
such transfer agent of seller’s and broker’s representation letters customarily
delivered by Dealer in connection with resales of restricted securities
pursuant to Rule 144 under the Securities Act, without any further requirement
for the delivery of any certificate, consent, agreement, opinion of counsel,
notice or any other document, any transfer tax stamps or payment of any other
amount or any other action by Dealer (or such affiliate of Dealer).

(c)           Make-whole Shares. If Issuer makes the
election described in clause (b)(i)(B) of this Section 8, then Dealer or its
affiliate may sell (which sale shall be made in a commercially reasonable
manner) such Shares or Share Termination Delivery Units, as the case may be,
during a period (the “Resale Period”)
commencing on the Exchange Business Day following delivery of such Shares or
Share Termination Delivery Units, as the case may be, and ending on the
Exchange Business Day on which Dealer completes the sale of all such Shares or
Share Termination Delivery Units, as the case may be, or a sufficient number of
Shares or Share Termination Delivery Units, as the case may be, so that the realized
net proceeds of such sales exceed the amount of the Payment Obligation or the
Freely Tradeable Value (such amount of the Payment Obligation or Freely
Tradeable Value, as the case may be, the “Required
Proceeds”).  If any of such
delivered Shares or Share Termination Delivery Units remain after such realized
net proceeds exceed the Required Proceeds, Dealer shall return such remaining
Shares or Share Termination Delivery Units to Issuer.  If the Required Proceeds exceed the realized
net proceeds from such resale, Issuer shall transfer to Dealer by the open of
the regular trading session on the Exchange on the Exchange Trading Day
immediately following the last day of the Resale Period the amount of such
excess (the “Additional Amount”) in cash or in
a number of additional Shares (“Make-whole Shares”)
in an amount that, based on the Relevant Price on the last day of the Resale
Period (as if such day was the “Valuation Date” for purposes of computing such
Relevant Price), has a dollar value equal to the Additional Amount.  The Resale Period shall continue to enable
the sale of the Make-whole Shares in the manner contemplated by this Section
8(c).  This provision shall be applied
successively until the Additional Amount is equal to zero, subject to Section
8(e).  Without limiting any of the
obligations of the Issuer under this Section 8(c), the Buyer may from time to
time demand that the Issuer use its reasonable best efforts to cause a
registration statement covering all Shares or Share Termination Delivery Units
to have become effective, whether such Shares or Share Termination Delivery
Units have been or are yet to be delivered to the Buyer.

(d)           Beneficial Ownership. Notwithstanding anything to the
contrary in the Agreement or this Confirmation, in no event shall Buyer be
entitled to receive, or shall be deemed to receive, any Shares if, upon such
receipt of such Shares, the “beneficial ownership” (within the meaning of
Section 13 of the Exchange Act and the rules promulgated thereunder) of Shares
by Buyer or any entity that directly or indirectly controls Buyer
(collectively, “Buyer Group”) would be equal to or
greater than 7.5% or more of the outstanding Shares.  If any delivery owed to Buyer hereunder is
not made, in whole or in part, as a result of this provision, Issuer’s
obligation to make such delivery shall not be extinguished and Issuer shall
make such delivery as promptly as practicable after, but in no event later than
one Exchange Business Day after, Buyer gives notice to Issuer that such
delivery would not result in Buyer Group directly or indirectly so beneficially
owning in excess of 7.5% of the outstanding Shares.

 10
 

 

 

(e)           Limitations on Settlement by Issuer.  Notwithstanding anything herein or in the
Agreement to the contrary, in no event shall Issuer be required to deliver a
number of Shares in connection with the Transaction in excess of twice the
aggregate Number of Warrants hereunder (the “Capped
Number”).  Issuer represents
and warrants (which shall be deemed to be repeated on each day that the
Transaction is outstanding) that the Capped Number is equal to or less than the
number of authorized but unissued Shares of the Issuer that are not reserved
for future issuance in connection with transactions in the Shares (other than
the Transaction) on the date of the determination of the Capped Number (such
Shares, the “Available Shares”).  In the event Issuer shall not have delivered
the full number of Shares otherwise deliverable as a result of this Section
8(e) (the resulting deficit, the “Deficit Shares”),
Issuer shall be continually obligated to deliver, from time to time until the
full number of Deficit Shares have been delivered pursuant to this paragraph,
Shares when, and to the extent, that (i) Shares are repurchased, acquired or
otherwise received by Issuer or any of its subsidiaries after the Trade Date
(whether or not in exchange for cash, fair value or any other consideration),
(ii) authorized and unissued Shares reserved for issuance in respect of other
transactions prior to such date which prior to the relevant date become no
longer so reserved and (iii) Issuer additionally authorizes and unissued Shares
that are not reserved for other transactions. 
Issuer shall immediately notify Dealer of the occurrence of any of the
foregoing events (including the number of Shares subject to clause (i), (ii) or
(iii) and the corresponding number of Shares to be delivered) and promptly
deliver such Shares thereafter.

(f)            Equity Rights.  Buyer
acknowledges and agrees that this Confirmation is not intended to convey to it
rights with respect to the Transaction that are senior to the claims of common
stockholders in the event of Issuer’s bankruptcy.  For the avoidance of doubt, the parties agree
that the preceding sentence shall not apply at any time other than during
Issuer’s bankruptcy to any claim arising as a result of a breach by Issuer of
any of its obligations under this Confirmation or the Agreement.  For the avoidance of doubt, the parties
acknowledge that this Confirmation is not secured by any collateral that would
otherwise secure the obligations of Issuer herein under or pursuant to any
other agreement.

(g)           Amendments to Equity Definitions and the Agreement.  The following amendments shall be made to the
Equity Definitions and to the Agreement:

(i)            The first sentence of Section 11.2(c)
of the Equity Definitions, prior to clause (A) thereof, is hereby amended to
read as follows: ‘(c) If “Calculation Agent Adjustment” is specified as the
Method of Adjustment in the related Confirmation of a Share Option Transaction,
then following the announcement or occurrence of any Potential Adjustment
Event, the Calculation Agent will determine whether such Potential Adjustment
Event has a material effect on the theoretical value of the relevant Shares or
options on the Shares and, if so, will (i) make appropriate  adjustment(s), if any, to any one or more
of:’ and, the portion of such sentence immediately preceding clause (ii)
thereof is hereby amended by deleting the words “diluting or concentrative” and
the words “(provided that no adjustments will be made to account solely for
changes in volatility, expected dividends, stock loan rate or liquidity
relative to the relevant Shares)” and replacing such latter phrase with the
words “(and, for the avoidance of doubt, adjustments may be made to account
solely for changes in volatility, expected dividends, stock loan rate or
liquidity relative to the relevant Shares)”;

(ii)           Section 11.2(e)(vii) of the Equity
Definitions is hereby amended by deleting the words “diluting or concentrative”
and replacing them with “material”; and

(iii)          Section 12.6(a)(ii) of the Equity
Definitions is hereby amended by (1) deleting from the fourth line thereof the
word “or” after the word “official” and inserting a comma therefor, and (2)
deleting the semi-colon at the end of subsection (B) thereof and inserting the
following words therefor “or (C) at Buyer’s option, the occurrence of any of
the events specified in Section 5(a)(vii) (1) through (9) of  the ISDA Master Agreement with respect to
that Issuer.”.

(h)           Transfer and Assignment. 
Buyer may transfer or assign its rights and obligations hereunder and
under the Agreement, in whole or in part, at any time to any financial
institution without the consent of Issuer. 
In connection with any transfer or
assignment by Buyer of its rights and obligations hereunder and under
the Agreement, Buyer shall promptly provide written notice to Issuer of such
transfer or assignment, as the case may be, and the identity of the relevant
transferee or assignee.

(i)            Disclosure.  Effective
from the date of commencement of discussions concerning the Transaction, Issuer
and each of its employees, representatives, or other agents may disclose to any
and all persons, without

 11
 

 

 

limitation of any kind,
the tax treatment and tax structure of the Transaction and all materials of any
kind (including opinions or other tax analyses) that are provided to Issuer
relating to such tax treatment and tax structure.

(j)            Designation by Dealer. 
Notwithstanding any other provision in this Confirmation to the contrary
requiring or allowing Dealer to purchase, sell, receive or deliver any Shares
or other securities to or from Issuer, Dealer may designate any of its
affiliates to purchase, sell, receive or deliver such shares or other
securities and otherwise to perform Dealer obligations in respect of the
Transaction and any such designee may assume such obligations.  Dealer shall be discharged of its obligations
to Issuer to the extent of any such performance.

(k)           Netting and Set-off. 
Each party waives any and all rights it may have to set off, whether
arising under any agreement, applicable law or otherwise.  The provisions of Section 2(c) of the
Agreement shall not be applicable to the Transaction.

(l)            Additional Termination Event.  If within the period commencing on the Trade
Date and ending on the second anniversary of the Premium Payment Date, Buyer
reasonably determines that it is advisable to terminate a portion of the
Transaction so that Buyer’s related hedging activities will comply with
applicable securities laws, rules or regulations, an Additional Termination
Event shall occur in respect of which (1) Issuer shall be the sole Affected
Party and (2) the Transaction shall be the sole Affected Transaction.

(m)          Effectiveness.  If, prior to the Effective Date, Buyer
reasonably determines that it is advisable to cancel the Transaction because of
concerns that Buyer’s related hedging activities could be viewed as not
complying with applicable securities laws, rules or regulations, the
Transaction shall be cancelled and shall not become effective, and neither
party shall have any obligation to the other party in respect of the
Transaction.

(n)           Waiver of Trial by Jury. 
EACH OF ISSUER AND BUYER HEREBY IRREVOCABLY WAIVES
(ON ITS OWN BEHALF AND, TO THE EXTENT PERMITTED BY APPLICABLE LAW, ON BEHALF OF
ITS STOCKHOLDERS) ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR
COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR
RELATING TO THE TRANSACTION OR THE ACTIONS OF BUYER OR ITS AFFILIATES IN THE
NEGOTIATION, PERFORMANCE OR ENFORCEMENT HEREOF.

(o)           Governing Law.  THIS CONFIRMATION SHALL BE GOVERNED BY THE LAWS OF THE STATE OF NEW
YORK.  THE PARTIES HERETO IRREVOCABLY
SUBMIT TO THE EXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK AND
THE UNITED STATES COURT FOR THE SOUTHERN DISTRICT OF NEW YORK IN CONNECTION
WITH ALL MATTERS RELATING HERETO AND WAIVE ANY OBJECTION TO THE LAYING OF VENUE
IN, AND ANY CLAIM OF INCONVENIENT FORUM WITH RESPECT TO, THESE COURTS.

 12
 

 

 

Issuer hereby agrees (a) to
check this Confirmation promptly upon receipt so that errors or discrepancies
can be promptly identified and rectified and (b) to confirm that the
foregoing correctly sets forth the terms of the agreement between us with
respect to the particular Transaction to which this Confirmation relates, by
manually signing this Confirmation and providing any other information
requested herein or in the Master Confirmation and immediately returning an
executed copy to Confirmation Unit via 212-583-8457.  Hard copies should be returned to Bank of
America, N.A., c/o Banc America Securities LLC, Attention John Servidio, 9 West
57th Street, 40th Floor, New York, NY 10019.

Yours
sincerely,

BANK OF AMERICA, N.A.

By:  /s/ Eric P. Hambleton                                   

   Name: Eric P. Hambleton
   Title: Authorized Signatory

Confirmed as of the

date first above written:

EARTHLINK, INC.

By:  /s/
Kevin M. Dotts                                       

   Name: Kevin M. Dotts
   Title: Executive Vice President,
             Chief Financial Officer

 13
 

 

 

Annex A

For each Component of the
Transaction, the Number of Warrants and Expiration Date is set forth below.

 

	
  Component Number

  	
   

  	
  Number of Warrants

  	
   

  	
  Expiration Date

  
	
  1

  	
   

  	
  90,461

  	
   

  	
  March 14, 2012

  
	
  2

  	
   

  	
  90,461

  	
   

  	
  March 15, 2012

  
	
  3

  	
   

  	
  90,461

  	
   

  	
  March 16, 2012

  
	
  4

  	
   

  	
  90,461

  	
   

  	
  March 19, 2012

  
	
  5

  	
   

  	
  90,461

  	
   

  	
  March 20, 2012

  
	
  6

  	
   

  	
  90,461

  	
   

  	
  March 21, 2012

  
	
  7

  	
   

  	
  90,461

  	
   

  	
  March 22, 2012

  
	
  8

  	
   

  	
  90,461

  	
   

  	
  March 23, 2012

  
	
  9

  	
   

  	
  90,461

  	
   

  	
  March 26, 2012

  
	
  10

  	
   

  	
  90,461

  	
   

  	
  March 27, 2012

  
	
  11

  	
   

  	
  90,461

  	
   

  	
  March 28, 2012

  
	
  12

  	
   

  	
  90,461

  	
   

  	
  March 29, 2012

  
	
  13

  	
   

  	
  90,461

  	
   

  	
  March 30, 2012

  
	
  14

  	
   

  	
  90,461

  	
   

  	
  April 2, 2012

  
	
  15

  	
   

  	
  90,461

  	
   

  	
  April 3, 2012

  
	
  16

  	
   

  	
  90,461

  	
   

  	
  April 4, 2012

  
	
  17

  	
   

  	
  90,461

  	
   

  	
  April 5, 2012

  
	
  18

  	
   

  	
  90,461

  	
   

  	
  April 9, 2012

  
	
  19

  	
   

  	
  90,461

  	
   

  	
  April 10, 2012

  
	
  20

  	
   

  	
  90,461

  	
   

  	
  April 11, 2012

  
	
  21

  	
   

  	
  90,461

  	
   

  	
  April 12, 2012

  
	
  22

  	
   

  	
  90,461

  	
   

  	
  April 13, 2012

  
	
  23

  	
   

  	
  90,461

  	
   

  	
  April 16, 2012

  
	
  24

  	
   

  	
  90,461

  	
   

  	
  April 17, 2012

  
	
  25

  	
   

  	
  90,461

  	
   

  	
  April 18, 2012

  
	
  26

  	
   

  	
  90,461

  	
   

  	
  April 19, 2012

  
	
  27

  	
   

  	
  90,461

  	
   

  	
  April 20, 2012

  
	
  28

  	
   

  	
  90,461

  	
   

  	
  April 23, 2012

  
	
  29

  	
   

  	
  90,461

  	
   

  	
  April 24, 2012

  
	
  30

  	
   

  	
  90,461

  	
   

  	
  April 25, 2012

  
	
  31

  	
   

  	
  90,461

  	
   

  	
  April 26, 2012

  
	
  32

  	
   

  	
  90,461

  	
   

  	
  April 27, 2012

  
	
  33

  	
   

  	
  90,461

  	
   

  	
  April 30, 2012

  
	
  34

  	
   

  	
  90,461

  	
   

  	
  May 1, 2012

  
	
  35

  	
   

  	
  90,461

  	
   

  	
  May 2, 2012

  
	
  36

  	
   

  	
  90,461

  	
   

  	
  May 3, 2012

  
	
  37

  	
   

  	
  90,461

  	
   

  	
  May 4, 2012

  
	
  38

  	
   

  	
  90,461

  	
   

  	
  May 7, 2012

  
	
  39

  	
   

  	
  90,461

  	
   

  	
  May 8, 2012

  
	
  40

  	
   

  	
  90,461

  	
   

  	
  May 9, 2012

  
	
  41

  	
   

  	
  90,461

  	
   

  	
  May 10, 2012

  
	
  42

  	
   

  	
  90,461

  	
   

  	
  May 11, 2012

  
	
  43

  	
   

  	
  90,461

  	
   

  	
  May 14, 2012

  
	
  44

  	
   

  	
  90,461

  	
   

  	
  May 15, 2012

  
	
  45

  	
   

  	
  90,461

  	
   

  	
  May 16, 2012

  
	
  46

  	
   

  	
  90,461

  	
   

  	
  May 17, 2012

  
	
  47

  	
   

  	
  90,461

  	
   

  	
  May 18, 2012

  
	
  48

  	
   

  	
  90,461

  	
   

  	
  May 21, 2012

  

 

 14
 

 

 

	
  49

  	
   

  	
  90,461

  	
   

  	
  May 22, 2012

  
	
  50

  	
   

  	
  90,461

  	
   

  	
  May 23, 2012

  
	
  51

  	
   

  	
  90,461

  	
   

  	
  May 24, 2012

  
	
  52

  	
   

  	
  90,461

  	
   

  	
  May 25, 2012

  
	
  53

  	
   

  	
  90,461

  	
   

  	
  May 29, 2012

  
	
  54

  	
   

  	
  90,461

  	
   

  	
  May 30, 2012

  
	
  55

  	
   

  	
  90,461

  	
   

  	
  May 31, 2012

  
	
  56

  	
   

  	
  90,461

  	
   

  	
  June 1, 2012

  
	
  57

  	
   

  	
  90,461

  	
   

  	
  June 4, 2012

  
	
  58

  	
   

  	
  90,461

  	
   

  	
  June 5, 2012

  
	
  59

  	
   

  	
  90,461

  	
   

  	
  June 6, 2012

  
	
  60

  	
   

  	
  90,461

  	
   

  	
  June 7, 2012

  
	
  61

  	
   

  	
  90,461

  	
   

  	
  June 8, 2012

  
	
  62

  	
   

  	
  90,461

  	
   

  	
  June 11, 2012

  
	
  63

  	
   

  	
  90,461

  	
   

  	
  June 12, 2012

  
	
  64

  	
   

  	
  90,461

  	
   

  	
  June 13, 2012

  
	
  65

  	
   

  	
  90,461

  	
   

  	
  June 14, 2012

  
	
  66

  	
   

  	
  90,461

  	
   

  	
  June 15, 2012

  
	
  67

  	
   

  	
  90,461

  	
   

  	
  June 18, 2012

  
	
  68

  	
   

  	
  90,461

  	
   

  	
  June 19, 2012

  
	
  69

  	
   

  	
  90,461

  	
   

  	
  June 20, 2012

  
	
  70

  	
   

  	
  90,461

  	
   

  	
  June 21, 2012

  
	
  71

  	
   

  	
  90,461

  	
   

  	
  June 22, 2012

  
	
  72

  	
   

  	
  90,461

  	
   

  	
  June 25, 2012

  
	
  73

  	
   

  	
  90,461

  	
   

  	
  June 26, 2012

  
	
  74

  	
   

  	
  90,461

  	
   

  	
  June 27, 2012

  
	
  75

  	
   

  	
  90,461

  	
   

  	
  June 28, 2012

  
	
  76

  	
   

  	
  90,461

  	
   

  	
  June 29, 2012

  
	
  77

  	
   

  	
  90,461

  	
   

  	
  July 2, 2012

  
	
  78

  	
   

  	
  90,461

  	
   

  	
  July 3, 2012

  
	
  79

  	
   

  	
  90,461

  	
   

  	
  July 5, 2012

  
	
  80

  	
   

  	
  90,461

  	
   

  	
  July 6, 2012

  
	
  81

  	
   

  	
  90,461

  	
   

  	
  July 9, 2012

  
	
  82

  	
   

  	
  90,461

  	
   

  	
  July 10, 2012

  
	
  83

  	
   

  	
  90,461

  	
   

  	
  July 11, 2012

  
	
  84

  	
   

  	
  90,461

  	
   

  	
  July 12, 2012

  
	
  85

  	
   

  	
  90,461

  	
   

  	
  July 13, 2012

  
	
  86

  	
   

  	
  90,461

  	
   

  	
  July 16, 2012

  
	
  87

  	
   

  	
  90,461

  	
   

  	
  July 17, 2012

  
	
  88

  	
   

  	
  90,461

  	
   

  	
  July 18, 2012

  
	
  89

  	
   

  	
  90,461

  	
   

  	
  July 19, 2012

  
	
  90

  	
   

  	
  90,417

  	
   

  	
  July 20, 2012

  

 

 15Exhibit 4.2

NEITHER
THESE WARRANTS NOR THE COMMON STOCK ISSUABLE UPON EXERCISE OF THESE WARRANTS
HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES
ACT”), OR ANY APPLICABLE STATE SECURITIES LAWS AND MAY NOT BE SOLD, PLEDGED OR
TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR SUCH
SECURITIES UNDER THE ACT OR UNLESS AN EXEMPTION FROM SUCH REGISTRATION IS
AVAILABLE.

No. FW -           

Original Issuance:  November 9,
2006

Warrants               

FERMAVIR PHARMACEUTICALS, INC.

WARRANTS

FermaVir Pharmaceuticals, Inc., a Florida corporation (“FermaVir”), certifies that, for  value 
received,                              ,
or registered assigns (the “Holder”), is
the owner of                              
Warrants of  FermaVir (the “Warrants”).  Each
Warrant entitles the Holder to purchase from FermaVir at any time prior to the
Expiration Date (as defined below) one share of the common stock of FermaVir
(the “Common Stock”) for $1.00 per
share subject to adjustment as hereafter set forth (the “Exercise
Price”), on the terms and conditions hereinafter provided.   The Exercise Price and the number of shares
of Common Stock purchasable upon exercise of each Warrant are subject to
adjustment as provided in this Certificate. The Warrants have been issued as
part of an authorized class of 825,000 warrants of like tenor.

1.             Expiration Date;
Exercise

1.1           Expiration Date.  The Warrants shall expire on December 31,
2016 (the “Expiration Date”).

1.2           Manner of
Exercise.  The Warrants are
exercisable by delivery to FermaVir of the following (the “Exercise Documents”): (a) this Certificate
(b) a written notice of election to exercise the Warrants; and (c) payment of
the Exercise Price in cash, by check or by “net” exercise as contemplated by
Section 1.3 of this Certificate.  Within
three business days following receipt of the foregoing, FermaVir shall execute
and deliver to the Holder: (a) a certificate or certificates representing the
aggregate number of shares of Common Stock purchased by the Holder, and (b) if
less than all of the Warrants evidenced by this Certificate are exercised, a
new certificate evidencing the Warrants not so exercised.

 

 

1.3           Net
Exercise.  In lieu of the payment
methods set forth in Section 1.2 above, the Holder may elect to exchange
all or some of the Warrant for the number of shares of Common Stock computed
using the following formula:

X = Y (A-B)

            A

Where X = the number of shares of Common
Stock to be issued to Holder.

Y = the number of shares of Common Stock
purchasable under the Warrants being exchanged (as adjusted to the date of such
calculation).

A = the Market Price on the date of receipt by
FermaVir of the exercise documents.

B = the Exercise Price of
the Warrants being exchanged (as adjusted in accordance with the terms of
Section 2 hereof).

The
“Market Price” on any trading day
shall be deemed to be the average of the last reported sale price of the Common
Stock for the five trading days immediately preceding  such day, or, in the case no such reported
sales take place on any day, the last reported sale price on the preceding
trading day on which there was a last reported sales price, as officially
reported by the principal securities exchange in which the shares of Common
Stock are listed or admitted to trading or by the Nasdaq Stock Market, or if
the Common Stock is not listed or admitted to trading on any national
securities exchange or the Nasdaq Stock Market, the last sale price, or if
there is no last sale price, the closing bid price, as furnished by the
National Association of Securities Dealers, Inc. (such as through the OTC
Bulletin Board) or a similar organization or if Nasdaq is no longer reporting
such information.  If the Market Price cannot
be determined pursuant to the sentence above, the Market Price shall be
determined in good faith (using customary valuation methods) by the Board of
Directors of FermaVir based on the information best available to it, including
recent arms-length sales of Common Stock to unaffiliated persons.

1.4           Restriction
on “Net” Exercise.  Notwithstanding
any other provision of this Certificate, Holder shall not be permitted to
effect a “net” exercise of the Warrants if on the date of exercise the resale
of the underlying shares by Holder has been registered under the Securities Act
of 1933, as amended, (the “Securities Act”)
pursuant to a registration statement which is then in effect, and on such date
the Holder shall be permitted to resell such shares pursuant to such
registration statement.

1.5           Warrant Exercise
Limitation.  Notwithstanding any
other provision of this Certificate, or the total number of shares of Common
Stock otherwise available for purchase by Holder hereunder, if as of the date
of exercise FermaVir has a class of securities registered under Section 12 of
the Securities Exchange Act of 1934, as amended, Holder may not exercise any
Warrants under this Section 1 if immediately following such exercise Holder
would beneficially own 5% or more of the outstanding Common Stock of FermaVir.  For this purpose, a representation of the
Holder that 

 2
 

 

 

following
such exercise it would not beneficially own 4.99% or more of the outstanding
Common Stock of FermaVir shall be conclusive and binding upon FermaVir.

2.             Certain Adjustments.

2.1           Stock Dividends and Splits. If
FermaVir, 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 FermaVir 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 FermaVir, 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 2.1 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.

2.2           Subsequent Equity Sales.

(a)           If FermaVir or any Subsidiary thereof, 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 then Exercise Price (such lower price, the “Base
Share Price” and such issuances collectively, a “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 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.

(b)           Such adjustments shall be made whenever such Common Stock
or Common Stock Equivalents are issued. 
Notwithstanding the foregoing, no adjustments shall be made, paid or
issued under this Section 2 in respect of an Exempt Issuance (defined below).  FermaVir shall notify the Holder in writing,
no later than the Trading Day following the 

 3
 

 

 

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
FermaVir provides a Dilutive Issuance Notice pursuant to this Section 2.2, upon
the occurrence of any Dilutive Issuance, as applicable, after the date of such
Dilutive Issuance, as applicable, the Holder is entitled to receive a number of
Warrant Shares based upon the Base Share Price, regardless of whether the
Holder accurately refers to the Base Share Price in the Notice of Exercise.

(c)           “Exempt Issuance” means the issuance
of (a) shares of Common Stock or options to employees, officers, directors or
consultants of the Company (including shares of Common Stock issued pursuant to
the exercise of such options) pursuant to any stock or option plan duly adopted
by a majority of the non-employee members of the Board of Directors of the
Company or a majority of the members of a committee of non-employee directors
established for such purpose, (b) securities upon the exercise or exchange of
or conversion of any securities issued hereunder and/or securities exercisable
or exchangeable for or convertible into shares of Common Stock issued and
outstanding on October 31, 2006, provided that such securities have not been
amended since October 31, 2006 to increase the number of such securities or to
decrease the exercise, exchange or conversion price of any such securities
below $1.00 per share (subject to adjustment for reverse and forward stock
splits and the like), or (c) securities issued pursuant to acquisitions or
strategic transactions approved by a majority of the disinterested directors,
provided any such issuance shall only be to a person which is, itself or
through its subsidiaries, an operating company in a business synergistic with
the business of the Company and in which the Company receives benefits in
addition to the investment of funds, but shall not include a transaction in
which the Company is issuing securities primarily for the purpose of raising
capital or to an entity whose primary business is investing in securities.

2.3           Pro Rata
Distributions.  If FermaVir, 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.

2.4           Fundamental
Transaction. If, at any time while this Warrant is outstanding, (A)
FermaVir effects any merger or consolidation of FermaVir with or into another
Person, (B) 

 4
 

 

 

FermaVir
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
FermaVir 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) FermaVir 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 FermaVir, if 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 FermaVir 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 FermaVir 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 FermaVir 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 2.4 and insuring
that this Warrant (or any such replacement security) will be similarly adjusted
upon any subsequent transaction analogous to a Fundamental Transaction.

2.5           Calculations.
All calculations under this Section 2 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 2,
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.

2.6           Voluntary
Adjustment By FermaVir. FermaVir 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 FermaVir.

 5
 

 

 

2.7           Notice to Holders.

(a)           Adjustment to Exercise Price. Whenever the Exercise
Price is adjusted pursuant to this Section 2, FermaVir 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
FermaVir issues a variable rate security, despite the prohibition thereon in
the Purchase Agreement, FermaVir 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).

(b)           Notice to Allow Exercise by Holder. If (i) FermaVir
shall declare a dividend (or any other distribution) on the Common Stock; (ii)
FermaVir shall declare a special nonrecurring cash dividend on or a redemption
of the Common Stock; (iii) FermaVir 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; (iv) the approval of any
stockholders of FermaVir shall be required in connection with any
reclassification of the Common Stock, any consolidation or merger to which
FermaVir is a party, any sale or transfer of all or substantially all of the
assets of FermaVir, of any compulsory share exchange whereby the Common Stock
is converted into other securities, cash or property; (v) FermaVir shall
authorize the voluntary or involuntary dissolution, liquidation or winding up
of the affairs of FermaVir; then, in each case, FermaVir shall cause to be
mailed to the Holder at its last address as it shall appear upon the Warrant
Register of FermaVir, at least 20 calendar days prior to the applicable record
or effective date hereinafter specified, a notice stating (A) 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
(B) 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.

3.             Reservation of Shares. 
FermaVir shall at all times reserve and keep available out of its
authorized but unissued shares of Common Stock, such number of shares of Common
Stock as shall from time to time be issuable upon exercise of the
Warrants.  If at any time the number of
authorized but unissued shares of Common Stock shall not be sufficient to
permit the exercise of the Warrants, FermaVir shall promptly seek such
corporate action as may necessary to increase its authorized but unissued
shares of Common Stock to such number of shares as shall be sufficient for such
purpose.

 6
 

 

 

4.             Certificate as to Adjustments.  In
each case of any adjustment in the Exercise Price, or number or type of shares
issuable upon exercise of these Warrants, the Chief Financial Officer of
FermaVir shall compute such adjustment in accordance with the terms of these
Warrants and prepare a certificate setting forth such adjustment and showing in
detail the facts upon which such adjustment is based, including a statement of
the adjusted Exercise Price.  FermaVir
shall promptly send (by facsimile and by either first class mail, postage
prepaid or overnight delivery) a copy of each such certificate to the Holder.

5.             Loss or Mutilation.  Upon
receipt of evidence reasonably satisfactory to FermaVir of the ownership of and
the loss, theft, destruction or mutilation of this Certificate, and of
indemnity reasonably satisfactory to it, and (in the case of mutilation) upon
surrender and cancellation of these Warrants, FermaVir will execute and deliver
in lieu thereof a new Certificate of like tenor as the lost, stolen, destroyed
or mutilated Certificate.

6.             Representations and Warranties of
FermaVir.  FermaVir hereby represents and warrants to
Holder that:

6.1           Due Authorization.  All corporate action on the part of FermaVir,
its officers, directors and shareholders necessary for (a) the authorization,
execution and delivery of, and the performance of all obligations of FermaVir
under, these Warrants, and (b) the authorization, issuance, reservation for
issuance and delivery of all of the Common Stock issuable upon exercise of
these Warrants, has been duly taken. 
These Warrants constitute a valid and binding obligation of FermaVir
enforceable in accordance with their terms, subject, as to enforcement of remedies,
to applicable bankruptcy, insolvency, moratorium, reorganization and similar
laws affecting creditors’ rights generally and to general equitable principles.

6.2           Organization.  FermaVir is a corporation duly organized,
validly existing and in good standing under the laws of the State referenced in
the first paragraph of this Certificate and has all requisite corporate power
to own, lease and operate its property and to carry on its business as now
being conducted and as currently proposed to be conducted.

6.3           Valid Issuance of
Stock.  Any shares of Common Stock
issued upon exercise of these Warrants will be duly and validly issued, fully
paid and non-assessable.

6.4           Governmental Consents.  All consents, approvals, orders,
authorizations or registrations, qualifications, declarations or filings with
any federal or state governmental authority on the part of FermaVir required in
connection with the consummation of the transactions contemplated herein have
been obtained.

7.             Representations and Warranties of Holder.  Holder hereby represents
and warrants to FermaVir that:

7.1           Holder is acquiring
the Warrants for its own account, for investment purposes only.

7.2           Holder understands
that an investment in the Warrants involves a high degree of risk, and Holder
has the financial ability to bear the economic risk of this investment in the
Warrants, 

 7
 

 

 

including
a complete loss of such investment. Holder has adequate means for providing for
its current financial needs and has no need for liquidity with respect to this
investment.

7.3           Holder has such
knowledge and experience in financial and business matters that it is capable
of evaluating the merits and risks of an investment in the Warrants and in
protecting its own interest in connection with this transaction.

7.4           Holder understands
that the Warrants have not been registered under the Securities Act or under
any state securities laws.  Holder is
familiar with the provisions of the Securities Act and Rule 144 thereunder and
understands that the restrictions on transfer on the Warrants may result in
Holder being required to hold the Warrants for an indefinite period of time.

7.5           Holder agrees not to
sell, transfer, assign, gift, create a security interest in, or otherwise
dispose of, with or without consideration (collectively, “Transfer”) any of the Warrants except
pursuant to an effective registration statement under the Securities Act or an
exemption from registration.  As a
further condition to any such Transfer, except in the event that such Transfer
is made pursuant to an effective registration statement under the Securities
Act, if in the reasonable opinion of counsel to FermaVir any Transfer of the
Warrants by the contemplated transferee thereof would not be exempt from the
registration and prospectus delivery requirements of the Securities Act, FermaVir
may require the contemplated transferee to furnish FermaVir with an investment
letter setting forth such information and agreements as may be reasonably
requested by FermaVir to ensure compliance by such transferee with the
Securities Act.

8.             Notices of Record
Date.

In the event:

8.1           FermaVir shall take
a record of the holders of its Common Stock (or other stock or securities at
the time receivable upon the exercise of these Warrants), for the purpose of
entitling them to receive any dividend or other distribution, or any right to
subscribe for or purchase any shares of stock of any class or any other
securities or to receive any other right; or

8.2           of any consolidation
or merger of FermaVir with or into another corporation, any capital
reorganization of FermaVir, any reclassification of the capital stock of
FermaVir, or any conveyance of all or substantially all of the assets of
FermaVir to another corporation in which holders of FermaVir’s stock are to
receive stock, securities or property of another corporation; or

8.3           of any voluntary
dissolution, liquidation or winding-up of FermaVir; or

8.4           of any redemption or conversion of all outstanding Common
Stock;

then, and in each such case, FermaVir will mail or cause to be mailed
to the Holder a notice specifying, as the case may be, (a) the date on which a
record is to be taken for the purpose of such dividend, distribution or right,
or (b) the date on which such reorganization, reclassification, consolidation,
merger, conveyance, dissolution, liquidation, winding-up, redemption or
conversion is to take place, and the time, if any is to be fixed, as of which
the holders of record of Common Stock (or such stock or securities as at the
time are receivable upon the exercise of these Warrants), shall 

 8
 

 

 

be entitled to exchange their shares of Common Stock (or such other
stock or securities), for securities or other property deliverable upon such
reorganization, reclassification, consolidation, merger, conveyance,
dissolution, liquidation or winding-up. 
FermaVir shall use all reasonable efforts to ensure such notice shall be
delivered at least 5 days prior to the date therein specified.

9.             Registration
Rights.

9.1           Definitions.  For purposes of this Section 9, the following
terms shall have the meanings set forth below:

9.1.1        A “Blackout Event”
means any of the following: (a) the possession by FermaVir of material
information that is not ripe for disclosure in a registration statement or
prospectus, if the disclosure of such information in the Registration Statement
or the prospectus constituting a part thereof would be materially detrimental
to the business and affairs of FermaVir, as determined reasonably and in good
faith by the Board of Directors of FermaVir; or (b) any material engagement or
activity by FermaVir which would, in the reasonable and good faith
determination of the Board of Directors of FermaVir, be materially adversely
affected by disclosure in a registration statement or prospectus at such time.

9.1.2         “Exchange Act” shall mean the Securities Exchange Act of
1934, as amended.

9.1.3        “Included  Shares” shall mean any Registrable Shares included in a Registration.

9.1.4         “Registrable Shares” shall mean the shares
of Common Stock (or such stock or securities as at the time are receivable upon
the exercise of these Warrants) issuable upon exercise of the Warrants and any
other Warrants and or other securities issued to Holder in respect of the
Warrants as a result of stock split, stock dividend or reclassification of such
shares.

9.1.5        “Registration” shall mean a registration of securities
under the Securities Act pursuant to Section 9.2 of this Agreement.

9.1.6        “Registration Period” with respect to any Registration Statement
the period commencing the effective date of the Registration Statement and
ending upon withdrawal or termination of the Registration Statement.

9.1.7        “Registration Statement” shall mean the registration statement, as
amended from time to time, filed with the SEC in connection with a
Registration.

9.1.8         “SEC” shall mean the Securities and Exchange
Commission.

9.2           Registration.   Fermavir shall file a registration
statement by January 31, 2007 and use its reasonable best efforts to cause such
registration to become effective as soon as possible.  If
FermaVir shall determine to register any Common Stock under the Securities Act
for sale in connection with a public offering of Common Stock (other than
pursuant to an employee benefit plan or a merger, acquisition or similar
transaction), FermaVir will give written notice thereof to 

 9
 

 

 

Holder and will include in
such Registration Statement any of the Registrable Shares which Holder may
request be included (“Included Shares”)
by a writing delivered to FermaVir within 15 days after the notice given by
FermaVir to Holder; provided, however, that if the offering is to be firmly
underwritten, and the representative of the underwriters of the offering refuse
in writing to include in the offering all of the shares of Common Stock
requested by FermaVir and others, the shares to be included shall be allocated
first to FermaVir and any shareholder who initiated such Registration and then
among the others based on the respective number of shares of Common Stock held
by such persons.  If FermaVir decides not
to, and does not, file a Registration Statement with respect to such
Registration, or after filing determines to withdraw the same before the
effective date thereof, FermaVir will promptly so inform Holder, and FermaVir
will not be obligated to complete the registration of the Included Shares
included therein.

9.3           Certain Covenants.  In connection with any Registration:

9.3.1        FermaVir shall take
all lawful action such that the Registration Statement, any amendment thereto
and the prospectus forming a part thereof does not contain an untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they are made, not misleading.  Upon becoming aware of the occurrence of any
event or the discovery of any facts during the Registration Period that make
any statement of a material fact made in the Registration Statement or the
related prospectus untrue in any material respect or which material fact is
omitted from the Registration Statement or related prospectus that requires the
making of any changes in the Registration Statement or related prospectus so
that it will not contain any untrue statement of a material fact or omit to
state a material fact necessary to make the statements therein, in light of the
circumstances under which they are made, not misleading (taking into account
any prior amendments or supplements), FermaVir shall promptly notify Holder,
and, as soon as reasonably practicable prepare (but in no event more than five
business days in the case of a supplement or seven business days in the case of
a post-effective amendment) and file with the SEC a supplement or
post-effective amendment to the Registration Statement or the related
prospectus or file any other required document so that, as thereafter delivered
to a purchaser of Shares from Holder, such prospectus will not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements therein, in light of the circumstances under which they
were made, not misleading.  FermaVir
shall use its reasonable best efforts to keep the Registration Statement
effective at all times during the period continuing until the earliest of (i)
the date that is nine months after the last day of the calendar month following
the month in which the Registration Statement is declared effective, (ii) the
date when the Holder may sell all Registrable Securities under Rule 144 without
volume or other restrictions or limits or (iii) the date the Holder no longer
owns any of the Registrable Securities,

9.3.2        At least three business days prior to
the filing with the SEC of the Registration Statement (or any amendment
thereto) or the prospectus forming a part thereof (or any supplement thereto),
FermaVir shall provide draft copies thereof to Holder and shall consider
incorporating into such documents such comments as Holder (and its counsel) may
propose to be incorporated therein. 
Notwithstanding the foregoing, no prospectus supplement, the form of
which has previously been provided to Holder, need be delivered in draft form
to Holder.

 10
 

 

 

9.3.3        FermaVir shall promptly notify Holder
upon the occurrence of any of the following events in respect of the
Registration Statement or the prospectus forming a part thereof: (i) the
receipt of any request for additional information from the SEC or any other
federal or state governmental authority, the response to which would require
any amendments or supplements to the Registration Statement or related
prospectus; (ii) the issuance by the SEC or any other federal or state
governmental authority of any stop order suspending the effectiveness of the
Registration Statement or the initiation of any proceedings for that purpose;
or (iii) the receipt of any notification with respect to the suspension of the
qualification or exemption from qualification of any of the Shares for sale in
any jurisdiction or the initiation or threatening of any proceeding for such
purpose.

9.3.4        FermaVir shall furnish to Holder with
respect to the Included Shares registered under the Registration Statement (and
to each underwriter, if any, of such Shares) such number of copies of
prospectuses and such other documents as Holder may reasonably request, in
order to facilitate the public sale or other disposition of all or any of
the  Included Shares by Holder pursuant
to the Registration Statement.

9.3.5        In connection with any registration
pursuant to Section 9.2, FermaVir shall file or cause to be filed such
documents as are required to be filed by FermaVir for normal Blue Sky clearance
in states specified in writing by Holder; provided, however, that
FermaVir shall not be required to qualify to do business or consent to service
of process in any jurisdiction in which it is not now so qualified or has not
so consented.

9.3.6        FermaVir shall bear and pay all expenses
incurred by it and Holder (other than underwriting discounts, brokerage fees
and commissions and fees and expenses of more than one law firm) in connection
with the registration of the Shares pursuant to the Registration Statement.

9.3.7        As a condition to including Registrable
Shares in a Registration Statement, Holder must provide to FermaVir such
information regarding itself, the Registrable Shares held by it and the
intended method of distribution of such Shares as shall be required to effect
the registration of the Registrable Shares and, if the offering is being
underwritten, Holder must provide such powers of attorney, indemnities and
other documents as may be reasonably requested by the managing underwriter.

9.3.8        Following the effectiveness of the
Registration Statement, upon receipt from FermaVir of a notice that the
Registration Statement contains an untrue statement of material fact or omits
to state any material fact required to be stated therein or necessary to make
the statements therein not misleading in light of the circumstances under which
they were made, Holder will immediately discontinue disposition of Included
Shares pursuant to the Registration Statement until FermaVir notifies Holder
that it may resume sales of Included Shares and, if necessary, provides to
Holder copies of the supplemental or amended prospectus.

9.4           Blackout
Event.  FermaVir shall not be
obligated to file a post-effective amendment or supplement to the Registration Statement
or the prospectus constituting a part thereof during the continuance of a
Blackout Event; provided, however, that no Blackout Event may be deemed to
exist for more than 60 days.  Without the
express written consent of Holder, if required to permit the continued sale of
Shares by Holder, a post-effective amendment or supplement to Registration 

 11
 

 

 

Statement or the prospectus constituting a part thereof must be filed
no later than the 21st day following
commencement of a Blackout Event.

9.5           Rule 144.
With a view to making available to Holder the benefits of Rule 144, FermaVir
agrees, during the period from July 1, 2007 until October 31, 2009, unless the
shares issuable to the Holder may be sold pursuant to an effective Registration
Statement, to:

9.5.1        comply
with the provisions of paragraph (c)(1) of Rule 144; and

9.5.2        file with the SEC in a timely manner all
reports and other documents required to be filed by FermaVir pursuant to
Section 13 or 15(d) under the Exchange Act; and, if at any time it is not
required to file such reports but in the past had been required to or did file
such reports, it will, upon the request of a Holder, make available other
information as required by, and so long as necessary to permit sales of its
Shares pursuant to, Rule 144.

9.6           FermaVir
Indemnification.  FermaVir agrees to
indemnify and hold harmless Holder, and its officers, directors and agents, and
each person, if any, who controls Holder within the meaning of Section 15 of
the Securities Act or Section 20 of the Exchange Act from and against any and all losses, claims, damages and liabilities
caused by (i) any violation or alleged violation by FermaVir of the Securities
Act, Exchange Act, any state securities laws or any rule or regulation
promulgated under the Securities Act, Exchange Act or any state securities
laws, (ii) any untrue statement or alleged untrue statement of a material fact
contained in any registration statement or prospectus relating to the Included
Shares (as amended or supplemented if FermaVir shall have furnished any
amendments or supplements thereto) or any preliminary prospectus, or (iii)
caused by any omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not misleading
in light of the circumstances under which they were made, except insofar as
such losses, claims, damages or liabilities are caused by any such untrue
statement or omission or alleged untrue statement or omission based upon
information furnished in writing to FermaVir by Holder or on Holder’s behalf
expressly for use therein.

9.7           Holder
Indemnification.  Holder agrees to
indemnify and hold harmless FermaVir, its officers, directors and agents and
each person, if any, who controls FermaVir within the meaning of either Section
15 of the Securities Act or Section 20 of the Exchange Act to the same extent
as the foregoing indemnity from FermaVir to Holder, but only with respect to
information furnished in writing by Holder or on Holder’s behalf expressly for
use in any registration statement or prospectus relating to the Registrable
Shares, or any amendment or supplement thereto, or any preliminary prospectus.

9.8           Indemnification
Procedures. In case any proceeding (including any governmental investigation)
shall be instituted involving any person in respect of which indemnity may be
sought pursuant to this Section 9, such person (an “Indemnified Party”) shall promptly notify the person against
whom such indemnity may be sought (the “Indemnifying
Party”) in writing and the Indemnifying Party shall assume the
defense thereof, including the employment of counsel reasonably satisfactory to
such Indemnified Party, and shall assume the payment of all fees and expenses;
provided that the failure of any Indemnified Party so to notify the
Indemnifying Party shall not relieve the Indemnifying Party of its obligations
hereunder except to the extent (and only to the 

 12
 

 

 

extent
that) that the Indemnifying Party is materially prejudiced by such failure to
notify.  In any such proceeding, any
Indemnified Party shall have the right to retain its own counsel, but the fees
and expenses of such counsel shall be at the expense of such Indemnified Party
unless (i) the Indemnifying Party and the Indemnified Party shall have mutually
agreed to the retention of such counsel or (ii) in the reasonable judgment of
such Indemnified Party representation of both parties by the same counsel would
be inappropriate due to actual or potential differing interests between them.  It is understood that the Indemnifying Party
shall not, in connection with any proceeding or related proceedings in the same
jurisdiction, be liable for the reasonable fees and expenses of more than one
separate firm of attorneys (in addition to any local counsel) at any time for
all such Indemnified Parties (including in the case of Holder, all of its
officers, directors and controlling persons) and that all such fees and
expenses shall be reimbursed as they are incurred.  In the case of any such separate firm for the
Indemnified Parties, the Indemnified Parties shall designate such firm in
writing to the Indemnifying Party.  The
Indemnifying Party shall not be liable for any settlement of any proceeding
effected without its written consent (which consent shall not be unreasonably
withheld or delayed), but if settled with such consent, or if there be a final
judgment for the plaintiff, the Indemnifying Party shall indemnify and hold
harmless such Indemnified Parties from and against any loss or liability (to
the extent stated above) by reason of such settlement or judgment.  No Indemnifying Party shall, without the
prior written consent of the Indemnified Party, effect any settlement of any
pending or threatened proceeding in respect of which any Indemnified Party is
or could have been a party and indemnity could have been sought hereunder by
such Indemnified Party, unless such settlement includes an unconditional
release of such Indemnified Party from all liability arising out of such
proceeding.

9.9           Contribution.  To the extent any indemnification by an
Indemnifying Party is prohibited or limited by law, the Indemnifying Party
agrees to make the maximum contribution with respect to any amounts for which,
he, she or it would otherwise be liable under this Section 9.6 to the fullest
extent permitted by law; provided, however, that (i) no contribution shall be
made under circumstances where a party would not have been liable for
indemnification under this Section 9.6 and (ii) no seller of Registrable
Securities guilty of fraudulent misrepresentation (within the meaning used in
the Securities Act) shall be entitled to contribution from any party who was
not guilty of such fraudulent misrepresentation.

10.          Nontransferability.  Holder may not sell or transfer any Warrants
to any person without registration under the Securities Act or providing an
opinion of counsel acceptable to FermaVir that such transfer may lawfully be
made without such registration.  Any such
purported transfer shall not be effective as between such purported transferee
and FermaVir.

11.          Severability.  If
any term, provision, covenant or restriction of these Warrants is held by a
court of competent jurisdiction to be invalid, void or unenforceable, the
remainder of the terms, provisions, covenants and restrictions of these
Warrants shall remain in full force and effect and shall in no way be affected,
impaired or invalidated.

12.          Notices.  All
notices, requests, consents and other communications required hereunder shall
be in writing and shall be effective when delivered or, if delivered by
registered or certified mail, postage prepaid, return receipt requested, shall
be effective on the third day following deposit in United States mail: to the
Holder, at the Holder’s address of record in the Company’s warrant 

 13
 

 

 

register; and if addressed to FermaVir, at FermaVir Pharmaceuticals,
Inc., 420 Lexington Avenue, Suite 445, New York, NY 10170, or such other
address as FermaVir may designate in writing.

13.          No Rights as
Shareholder.  The Holder shall have no rights as a
shareholder of FermaVir with respect to the shares issuable upon exercise of
the Warrants until the receipt by FermaVir of all of the Exercise Documents.

	
  

  	
  FERMAVIR PHARMACEUTICALS, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Geoffrey W. Henson, Chief Executive Officer

  

 

 14

EXHIBIT “A”

NOTICE OF EXERCISE

(To
be signed only upon exercise of the Warrants)

To:          FermaVir Pharmaceuticals, Inc.

The
undersigned hereby elects to purchase shares of Common Stock (the “Warrant Shares”) of FermaVir Pharmaceuticals, Inc. (“FermaVir”), pursuant to the terms of the enclosed warrant
certificate (the “Certificate”).
The undersigned tenders herewith payment of the exercise price pursuant to the
terms of the Certificate.

The undersigned hereby represents and
warrants to, and agrees with, FermaVir as follows:

1.             Holder
is acquiring the Warrant Shares for its own account, for investment purposes
only.

2.             Holder understands
that an investment in the Warrant Shares involves a high degree of risk, and
Holder has the financial ability to bear the economic risk of this investment
in the Warrant Shares, including a complete loss of such investment. Holder has
adequate means for providing for its current financial needs and has no need
for liquidity with respect to this investment.

3.             Holder has such
knowledge and experience in financial and business matters that it is capable
of evaluating the merits and risks of an investment in the Warrant Shares and
in protecting its own interest in connection with this transaction.

4.             Holder understands
that the Warrant Shares have not been registered under the Securities Act or
under any state securities laws.  Holder
is familiar with the provisions of the Securities Act and Rule 144 thereunder
and understands that the restrictions on transfer on the Warrant Shares may result
in Holder being required to hold the Warrant Shares for an indefinite period of
time.

5.             Holder agrees not
to sell, transfer, assign, gift, create a security interest in, or otherwise
dispose of, with or without consideration (collectively, “Transfer”)
any of the Warrant Shares except pursuant to an effective registration
statement under the Securities Act or an exemption from registration.  As a further condition to any such Transfer,
except in the event that such Transfer is made pursuant to an effective
registration statement under the Securities Act, if in the reasonable opinion
of counsel to FermaVir any Transfer of the Warrant Shares by the contemplated
transferee thereof would not be exempt from the registration and prospectus
delivery requirements of the Securities Act, FermaVir may require the
contemplated transferee to furnish FermaVir with an investment letter setting
forth such information and agreements as may be reasonably requested by
FermaVir to ensure compliance by such transferee with the Securities Act.

 

 

Each certificate evidencing the Warrant Shares will
bear the following legend:

“THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE “ACT”) OR ANY APPLICABLE STATE
SECURITIES LAWS AND MAY NOT BE EXERCISED, SOLD, PLEDGED OR TRANSFERRED IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR SUCH SECURITIES UNDER THE
ACT OR UNLESS AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE.

6.             Immediately
following this exercise of Warrants, if as of the date of exercise
FermaVir  has a class  of securities registered under Section 12 of
the Securities Exchange Act of 1934, as amended, the undersigned will not beneficially
own five percent (5%) or more of the then outstanding Common Stock of FermaVir
(based on the number of shares outstanding set forth in the most recent
periodic report filed by FermaVir with the Securities and Exchange Commission
and any additional shares which have been issued since that date of which
Holder is aware have been issued).

	
  Number of Warrants
  Exercised:

  	
   

  	
   

  
	
   

  
	
  Net Exercise

  	
   

  	
  Yes

  	
   

  	
    No

  
	
   

  
	
  Dated:

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
										

 

 2

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