Document:

EX-4.4

 

EXHIBIT 4.4

WARRANT AGREEMENT

     This Warrant Agreement is made as of [               ], 2007 between TM Entertainment and Media,
Inc., a Delaware corporation (the “Company”), and Continental Stock Transfer & Trust
Company, a New York corporation (“Warrant Agent”).

     WHEREAS, the Company has determined to issue and deliver to [               ] (“                                        ”) in a private placement 2,100,000 Warrants (the “Private Warrants”), each of such
Private Warrants evidencing the right of the holder thereof to purchase one share of Common Stock
for $5.50, subject to adjustment as provided herein;

     WHEREAS, the Company is engaged in a public offering (“Public Offering”) of Units (the
“Units”) and, in connection therewith, has determined to issue and deliver to Pali Capital,
Inc. (“Pali” and, together with the other underwriters, the “Underwriters”) (i)
9,000,000 Units (the “Public Units”), each Public Unit consisting of one share of the
Company’s Common Stock, par value $0.001 per share (“Common Stock”), and one warrant (all such
warrants collectively, the “Public Warrants”), (ii) an option to purchase up to 1,350,000
additional units (the “Over-Allotment Units”), each Over-Allotment Unit consisting of one
share of Common Stock, and one warrant (all such warrants collectively, the “Over-Allotment
Warrants”); and (iii) an option to purchase up to 900,000 Units (all such Units collectively,
the “UPO Units”) each UPO Unit consisting of one share of Common Stock, and one warrant
(the “UPO Warrants” and, together with the Public Warrants, the Private Warrants and the
Over-Allotment Warrants, the “Warrants”), each of such Warrants evidencing the right of the
holder thereof to purchase one share of Common Stock, for $5.50, subject to adjustment as described
herein; and

     WHEREAS, the Company has filed with the Securities and Exchange Commission
(“Commission”) a Registration Statement, No. 333-[          ] on Form S-1 (“Registration
Statement”) for the registration, under the Securities Act of 1933, as amended (“Act”)
of, among other securities, the Public Units, the Over Allotment Units and the UPO Units, and the
Common Stock issuable upon exercise of the Public Warrants, the Over-Allotment Warrants and the UPO
Warrants and the Common Stock issuable upon the exercise of such warrants; and

     WHEREAS, the Company desires the Warrant Agent to act on behalf of the Company, and the
Warrant Agent is willing to so act, in connection with the issuance, registration, transfer,
exchange, redemption and exercise of the Warrants; and

     WHEREAS, the Company desires to provide for the form and provisions of the Warrants, the terms
upon which they shall be issued and exercised, and the respective rights, limitation of rights, and
immunities of the Company, the Warrant Agent, and the holders of the Warrants; and

     WHEREAS, all acts and things have been done and performed which are necessary to make the
Warrants, when executed on behalf of the Company and countersigned by or on behalf of the Warrant
Agent, as provided herein, the valid, binding and legal obligations of the Company, and to
authorize the execution and delivery of this Warrant Agreement.

 

 

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

     1. APPOINTMENT OF WARRANT AGENT. The Company hereby appoints the Warrant Agent to act
as agent for the Company for the Warrants, and the Warrant Agent hereby accepts such appointment
and agrees to perform the same in accordance with the terms and conditions set forth in this
Warrant Agreement.

     2. WARRANTS.

          2.1 FORM OF WARRANT. Each Public Warrant, Private Warrant, Over-Allotment Warrant and
UPO Warrant shall be issued in registered form only; except as set forth herein, shall be in
substantially the form of Exhibit A, Exhibit B, Exhibit C and Exhibit
D, respectively, attached hereto, the provisions of which are incorporated herein; and shall be
signed by, or bear the facsimile signature of, the Chairman and Chief Executive Officer of the
Company and shall bear a facsimile of the Company’s seal. In the event the person whose facsimile
signature has been placed upon any Warrant shall have ceased to serve in the capacity in which such
person signed the Warrant before such Warrant is issued, it may be issued with the same effect as
if he or she had not ceased to be such at the date of issuance. All of the Warrants shall initially
be represented by one or more book-entry certificates (each, a “Book Entry Warrant
Certificate”).

          2.2 EFFECT OF COUNTERSIGNATURE. Unless and until countersigned by the Warrant Agent
pursuant to this Warrant Agreement, a Warrant shall be invalid and of no effect and may not be
exercised by the holder thereof.

          2.3 REGISTRATION.

          2.3.1 WARRANT REGISTER. The Warrant Agent shall maintain books (“Warrant
Register”), for the registration of original issuance and the registration of transfer of the
Warrants. Upon the initial issuance of the Warrants, or, in the case of the Private Warrants, the
delivery of definitive warrant certificates in physical form to the Warrant Agent, the Warrant
Agent shall issue and register the Warrants in the names of the respective holders thereof in such
denominations and otherwise in accordance with instructions delivered to the Warrant Agent by the
Company.

          2.3.2 BENEFICIAL OWNER; REGISTERED HOLDER. Prior to due presentment for registration
of transfer of any Warrant, the Company and the Warrant Agent may deem and treat the person in
whose name such Warrant shall be registered upon the Warrant Register (“Registered
Holder”), as the absolute owner of such Warrant and of each Warrant represented thereby
(notwithstanding any notation of ownership or other writing on the Warrant Certificate made by
anyone other than the Company or the Warrant Agent), for the purpose of any exercise thereof, and
for all other purposes, and neither the Company nor the Warrant Agent shall be affected by any
notice to the contrary.

          2.4 DETACHABILITY OF WARRANTS. The securities comprising the Units will not be
separately transferable until 90 days after the later of the consummation by the Company of a
business combination (as described more fully in the Registration Statement, a

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“Business Combination”), or one day after the effective date of the Registration
Statement (the “Detachment Date”), unless Pali informs the Company of its decision to allow
earlier separate trading, but in no event will separate trading of the securities comprising the
Units be allowed until the Company (a) files a Current Report on Form 8-K which includes an audited
balance sheet reflecting the receipt by the Company of the gross proceeds of the Public Offering
including the proceeds received by the Company from the exercise of the Underwriters’ over
allotment option, if the over allotment option is exercised prior to the filing of the Form 8-K,
and (b) issues a press release announcing when such separate trading will begin.

          2.5 PRIVATE WARRANTS, PUBLIC WARRANTS, UPO WARRANTS AND OVER-ALLOTMENT WARRANTS. The
UPO Warrants shall have the same terms and be in the same form as the Public Warrants, except with
respect to the Warrant Price as set forth below in Section 3.1. The Private Warrants shall have the
same terms and be in the same form as the Public Warrants, except (i) that the Private Warrants may
be exercised on a cashless basis as provided for in Section 3.3.1, (ii) with respect to the
restrictions on transferability set forth in Section 3.2 hereof, and (iii) that such Warrants are
not subject to redemption as provided for in Section 6.5. The Over-Allotment Warrants shall have
the same terms and be in the same form as the Public Warrants.

     3. TERMS AND EXERCISE OF WARRANTS.

          3.1 WARRANT PRICE. Each Public Warrant, Private Warrant and Over-Allotment Warrant
shall, when countersigned by the Warrant Agent, entitle the registered holder thereof, subject to
the provisions of such Public Warrant, Private Warrant or Over-Allotment Warrant and of this
Warrant Agreement, to purchase from the Company the number of shares of Common Stock stated
therein, at an exercise price of $5.50 per whole share, subject to the adjustments provided in
Section 4 and in the last sentence of this Section 3.1 hereof. Each UPO Warrant shall, when
countersigned by the Warrant Agent, entitle the registered holder thereof, subject to the
provisions of such UPO Warrant and of this Warrant Agreement, to purchase from the Company the
number of shares of Common Stock stated therein, at an exercise price of $10.00 per whole share,
subject to the adjustments provided in Section 4 hereof and in the last sentence of this Section
3.1. The term “Warrant Price” as used in this Warrant Agreement refers to the price per share at
which Common Stock may be purchased at the time a Warrant is exercised. The Company in its sole
discretion may lower the Warrant Price at any time prior to the Expiration Date; provided, however,
that any change in the Warrant Price must apply equally to all of the Warrants, and provided
further that any reduction in Warrant Price must remain in effect for at least (20) business days.

          3.2 DURATION OF WARRANTS. Except as set forth in this Section 3.2, a Warrant may be
exercised only during the period (“Exercise Period”) commencing on the later of (i) a
Business Combination and (ii) [               ], 2008 [One year from the effective date of the
Registration Statement], and terminating at 5:00 p.m., New York city time on the earlier to occur
of (a) [               ], 2011 [Four years from the effective date of the Registration Statement] or
(b) the date fixed for redemption of the Warrants as provided in Section 6 of this Warrant
Agreement (“Expiration Date”). Notwithstanding the foregoing, the Private Warrants may not
be sold or transferred (except to affiliates of [               ] or to the Company’s directors at the
same cost per Private Warrant originally paid by [               ] until the later of one year after the
effective

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date of the Registration Statement and 60 days after the date on which the Company consummates
a Business Combination. Except with respect to the right to receive the Redemption Price (as set
forth in Section 6 hereunder but excluding the Private Warrants), each Warrant not
exercised on or before the Expiration Date shall become void, and all rights thereunder and all
rights in respect thereof under this Warrant Agreement shall cease at the close of business on the
Expiration Date. The Company in its sole discretion may extend the duration of the Warrants by
delaying the Expiration Date; provided, however, that any extension of the duration of the
Warrants must apply equally to all of the Warrants, except that any amendment to the terms of the
Underwriter’s Warrants shall be subject to any limitations and conditions that may be imposed by
NASD Corporate Financing Rule 2710. Should the Company wish to extend the Expiration Date of the
Warrants, the Company shall provide advance notice to the American Stock Exchange as required by
the American Stock Exchange.

3.3 EXERCISE OF WARRANTS

               3.3.1 PAYMENT. Subject to the provisions of the Warrant and this Warrant Agreement, a
Warrant, when countersigned by the Warrant Agent, may be exercised by the registered holder thereof
by surrendering it, at the office of the Warrant Agent, or at the office of its successor as
Warrant Agent, in the Borough of Manhattan, City and State of New York, with the subscription form,
as set forth in the Warrant, duly executed, and by paying in full the Warrant Price for each whole
share of Common Stock as to which the Warrant is exercised and any and all applicable taxes due in
connection with the exercise of the Warrant, the exchange of the Warrant for the Common Stock, and
the issuance of the Common Stock, as follows:

                              3.3.1.1 in lawful money of the United States, in cash, good certified
check or good bank draft payable to the order of the Company (or as
otherwise agreed to by the Company); or

                              3.3.1.2 with respect to the Private Warrants, by surrendering such
Private Warrants for that number of shares of Common Stock equal to the
quotient obtained by dividing (x) the product of the number of shares of
Common Stock underlying the Warrants, multiplied by the difference between
the exercise price of the Warrants and the “Fair Market Value” (defined
below) by (y) the Fair Market Value. Solely for purposes of this Section,
the “Fair Market Value” shall mean the average reported last sale price of
the Common Stock for the five trading days ending on the trading day prior
to the date on which the Private Warrants are exercised.

               3.3.2 ISSUANCE OF CERTIFICATES. As soon as practicable after the exercise of any
Warrant and the clearance of the funds in payment of the Warrant Price, the Company shall issue to
the registered holder of such Warrant a certificate or certificates for the number of full shares
of Common Stock to which he is entitled, registered in such name or names as may be directed by
him, her or it, and if such Warrant shall not have been exercised in full, a new countersigned
Warrant for the number of shares as to which such Warrant shall not have been exercised.
Notwithstanding the foregoing, the Company shall not be obligated to deliver any securities
pursuant to the exercise of a Warrant unless (i) a registration statement

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under the Act with
respect to the Common Stock is effective, or (ii) in the opinion of counsel to the Company, the exercise of the Warrants is exempt from the registration requirements of the
Act and such securities are qualified for sale or exempt from qualification under applicable
securities laws of the states or other jurisdictions in which the Registered Holders reside.

               3.3.3 LIMITATIONS. Notwithstanding the foregoing, and except with respect to the
Private Warrants, the Company shall not be obligated to deliver any Shares pursuant to the exercise
of a Warrant and shall have no obligation to settle the Warrant exercise unless a registration
statement under the Securities Act of 1933, as amended (the “Securities Act”), with respect to the
Shares is effective and a current Prospectus is on file with the Commission. Except with respect to
the Private Warrants, in the event that a registration statement with respect to the Shares
underlying a Warrant is not effective under the Securities Act or a current Prospectus is not on
file with the Commission, the holder of such Warrant shall not be entitled to exercise such
Warrant. Notwithstanding anything to the contrary in this Warrant Agreement, under no circumstances
will the Company be required to net cash settle the Warrant exercise. Warrants may not be exercised
by, or Shares issued to, any registered holder in any state in which such exercise or issuance
would be unlawful. For the avoidance of doubt, as a result of this Section 3.3.3, any or all of the
Warrants may expire unexercised. In no event shall the registered Holder of a Warrant be entitled
to receive any monetary damages if the Common Stock underlying the Warrants have not been
registered by the Company pursuant to an effective registration statement or if a current
prospectus is not available for delivery by the Warrant Agent, provided the Company has fulfilled
its obligation to use its reasonable best efforts to effect such registration and ensure a current
prospectus is available for delivery by the Warrant Agent.

          3.4 VALID ISSUANCE. All shares of Common Stock issued upon the proper exercise of a
Warrant in conformity with this Warrant Agreement shall be validly issued, fully paid and
nonassessable.

          3.5 DATE OF ISSUANCE. Each person in whose name any such certificate for shares of
Common Stock is issued shall for all purposes be deemed to have become the holder of record of such
shares on the date on which the Warrant was surrendered and payment of the Warrant Price was made,
irrespective of the date of delivery of such certificate, except that, if the date of such
surrender and payment is a date when the stock transfer books of the Company are closed, such
person shall be deemed to have become the holder of such shares at the close of business on the
next succeeding date on which the stock transfer books are open.

     4. ADJUSTMENTS.

               4.1.1 STOCK DIVIDENDS — SPLIT-UPS. If after the date hereof, and subject to the
provisions of Section 4.6 below, the number of outstanding shares of Common Stock is increased by a
stock dividend payable in shares of Common Stock, or by a split-up of shares of Common Stock, or
other similar event, then, on the effective date of such stock dividend, split-up or similar event,
the number of shares of Common Stock issuable on exercise of each Warrant shall be increased in
proportion to such increase in outstanding shares of Common Stock.

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               4.1.2 EXTRAORDINARY DIVIDEND. If the Company, at any time while the Warrants are
outstanding and unexpired, shall pay a dividend in cash or securities to the holders of the Common
Stock (or shares of the Company’s capital stock into which the Warrants are convertible), then upon
the exercise of the Warrants, the registered holder shall be entitled to a proportionate share of
any such dividend as if the shares of Common Stock purchased upon exercise hereof by such
registered holder had been purchased and outstanding on the record date fixed for the determination
of the holders of the Common Stock entitled to receive such dividend.

          4.2 AGGREGATION OF SHARES. If after the date hereof, and subject to the provisions of
Section 4.6, the number of outstanding shares of Common Stock is decreased by a consolidation,
combination, reverse stock split or reclassification of shares of Common Stock or other similar
event, then, on the effective date of such consolidation, combination, reverse stock split,
reclassification or similar event, the number of shares of Common Stock issuable on exercise of
each Warrant shall be decreased in proportion to such decrease in outstanding shares of Common
Stock.

          4.3 ADJUSTMENTS IN EXERCISE PRICE. Whenever the number of shares of Common Stock
purchasable upon the exercise of the Warrants is adjusted, as provided in Section 4.1 and 4.2
above, the Warrant Price shall be adjusted (to the nearest cent) by multiplying such Warrant Price
immediately prior to such adjustment by a fraction (x) the numerator of which shall be the number
of shares of Common Stock purchasable upon the exercise of the Warrants immediately prior to such
adjustment, and (y) the denominator of which shall be the number of shares of Common Stock so
purchasable immediately thereafter.

          4.4 REPLACEMENT OF SECURITIES UPON REORGANIZATION, ETC. In case of any
reclassification or reorganization of the outstanding shares of Common Stock (other than a change
covered by Section 4.1 or 4.2 hereof or that solely affects the par value of such shares of Common
Stock), or in the case of any merger or consolidation of the Company with or into another
corporation (other than a consolidation or merger in which the Company is the continuing
corporation and that does not result in any reclassification or reorganization of the outstanding
shares of Common Stock), or in the case of any sale or conveyance to another corporation or entity
of the assets or other property of the Company as an entirety or substantially as an entirety in
connection with which the Company is dissolved, the Warrant holders shall thereafter have the right
to purchase and receive, upon the basis and upon the terms and conditions specified in the Warrants
and in lieu of the shares of Common Stock of the Company immediately theretofore purchasable and
receivable upon the exercise of the rights represented thereby, the kind and amount of shares of
stock or other securities or property (including cash) receivable upon such reclassification,
reorganization, merger or consolidation, or upon a dissolution following any such sale or transfer,
that the Warrant holder would have received if such Warrant holder had exercised his, her or its
Warrant(s) immediately prior to such event; and if any reclassification also results in a change in
shares of Common Stock covered by Section 4.1 or 4.2, then such adjustment shall be made pursuant
to Sections 4.1, 4.2, 4.3 and this Section 4.4. The provisions of this Section 4.4 shall similarly
apply to successive reclassifications, reorganizations, mergers or consolidations, sales or other
transfers.

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          4.5 NOTICES OF CHANGES IN WARRANT. Upon every adjustment of the Warrant Price or the
number of shares issuable upon exercise of a Warrant, the Company shall give written notice thereof
to the Warrant Agent, which notice shall state the Warrant Price resulting from such adjustment and
the increase or decrease, if any, in the number of shares purchasable at such price upon the
exercise of a Warrant, setting forth in reasonable detail the method of calculation and the facts
upon which such calculation is based. Upon the occurrence of any event specified in Sections 4.1,
4.2, 4.3 or 4.4, then, in any such event, the Company shall give written notice to the Warrant
holder, at the last address set forth for such holder in the warrant register, of the record date
or the effective date of the event. Failure to give such notice, or any defect therein, shall not
affect the legality or validity of such event.

          4.6 NO FRACTIONAL SHARES. Notwithstanding any provision contained in this Warrant
Agreement to the contrary, the Company shall not issue fractional shares upon exercise of Warrants.
If, by reason of any adjustment made pursuant to this Section 4, the holder of any Warrant would be
entitled, upon the exercise of such Warrant, to receive a fractional interest in a share, the
Company shall, upon such exercise, round up to the nearest whole number the number of the shares of
Common Stock to be issued to the Warrant holder.

          4.7 FORM OF WARRANT. The form of Warrant need not be changed because of any adjustment
pursuant to this Section 4, and Warrants issued after such adjustment may state the same Warrant
Price and the same number of shares as is stated in the Warrants initially issued pursuant to this
Warrant Agreement. However, the Company may at any time in its sole discretion make any change in
the form of Warrant that the Company may deem appropriate and that does not affect the substance
thereof, and any Warrant thereafter issued or countersigned, whether in exchange or substitution
for an outstanding Warrant or otherwise, may be in the form as so changed.

     5. TRANSFER AND EXCHANGE OF WARRANTS.

          5.1 TRANSFER OF WARRANTS. Prior to the Detachment Date, the Public Warrants may be
transferred or exchanged only together with the Unit in which such Warrant is included, and only
for the purpose of effecting, or in conjunction with, a transfer or exchange of such Unit.
Furthermore, each transfer of a Public Unit on the register relating to such Units shall operate
also to transfer the Warrants included in such Unit. From and after the Detachment Date this
Section 5.1 will have no further force and effect.

          5.2 REGISTRATION OF TRANSFER. The Warrant Agent shall register the transfer, from time
to time, of any outstanding Warrant upon the Warrant Register, upon surrender of such Warrant for
transfer, properly endorsed with signatures properly guaranteed and accompanied by appropriate
instructions for transfer. Upon any such transfer, a new Warrant representing an equal aggregate
number of Warrants shall be issued and the old Warrant shall be cancelled by the Warrant Agent. The
Warrants so cancelled shall be delivered by the Warrant Agent to the Company from time to time upon
request.

          5.3 PROCEDURE FOR SURRENDER OF WARRANTS. Warrants may be surrendered to the Warrant
Agent, together with a written request for exchange or transfer, and thereupon the Warrant Agent
shall issue in exchange therefor one or more new Warrants as

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requested by the registered holder of the Warrants so surrendered, representing an equal
aggregate number of Warrants; provided, however, that except as otherwise provided herein or in any
Book-Entry Warrant Certificate, each Book-Entry Warrant Certificate may be transferred only in
whole and only to the depository, to another nominee of the depository, to a successor depository,
or to a nominee of a successor depository; provided further, however, that in the event that a
Warrant surrendered for transfer bears a restrictive legend, the Warrant Agent shall not cancel
such Warrant and issue new Warrants in exchange therefore until the Warrant Agent has received an
opinion of counsel for the Company stating that such transfer may be made and indicating whether
the new Warrants must also bear a restrictive legend.

          5.4 FRACTIONAL WARRANTS. The Warrant Agent shall not be required to effect any
registration of transfer or exchange which will result in the issuance of a warrant certificate for
a fraction of a warrant.

          5.5 SERVICE CHARGES. No service charge shall be made for any exchange or registration
of transfer of Warrants.

          5.6 WARRANT EXECUTION AND COUNTERSIGNATURE. The Warrant Agent is hereby authorized to
countersign and to deliver, in accordance with the terms of this Warrant Agreement, the Warrants
required to be issued pursuant to the provisions of this Section 5, and the Company, whenever
required by the Warrant Agent, will supply the Warrant Agent with Warrants duly executed on behalf
of the Company for such purpose.

          5.7 PLACEMENT WARRANTS. Notwithstanding anything herein to the contrary, the Warrant
Agent shall not register for transfer any Private Warrants until after the consummation of the
Company’s initial business combination, except for (a) transfers of Private Warrants resulting from
the death of any of the holders thereof, (b) transfers by operation of law, (c) any transfer for
estate planning purposes to persons immediately related to the transferor by blood, marriage or
adoption, or (d) transfers to any trust solely for the benefit of such transferor and/or the
persons described in the preceding clause, on condition that prior to such registration for
transfer, the Warrant Agent shall be presented with written documentation pursuant to which each
permitted transferee or the trustee or legal guardian for each permitted transferee agrees to be
bound by the terms of the private placement of the Private Warrants.

     6. REDEMPTION.

          6.1 REDEMPTION. Subject to Sections 6.4 and 6.5 hereof, not less than all of the
outstanding Warrants may be redeemed, at the option of the Company, at any time after they become
exercisable and prior to their expiration, at the office of the Warrant Agent, upon the notice
referred to in Section 6.2. hereof at a redemption price of $.01 per Warrant (the “Redemption
Price”), provided that the last sales price of the Common Stock has been at least $11.50 per
share, on any twenty (20) trading days within a thirty (30) trading day period ending on the third
business day prior to the date on which notice of redemption is given; and provided,
further, that there is an effective registration statement with respect to the Common Stock
to enable the exercise of the Warrants during the period specified in Section 6.3 hereof. The
provisions of this Section 6.1 may not be modified, amended or deleted without the prior written
consent of Pali.

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          6.2 DATE FIXED FOR, AND NOTICE OF, REDEMPTION. In the event the Company shall elect to
redeem all of the Warrants, the Company shall fix a date for the redemption. Notice of redemption
shall be mailed by first class mail, postage prepaid, by the Company not less than 30 days prior to
the date fixed for redemption to the registered holders of the Warrants to be redeemed at their
last addresses as they shall appear on the Warrant Register. Any notice mailed in the manner herein
provided shall be conclusively presumed to have been duly given whether or not the registered
holder received such notice.

          6.3 EXERCISE AFTER NOTICE OF REDEMPTION. The Warrants may be exercised in accordance
with Section 3 of this Warrant Agreement at any time after notice of redemption shall have been
given by the Company pursuant to Section 6.2 hereof and prior to the time and date fixed for
redemption. On and after the redemption date, the record holder of the Warrants shall have no
further rights except to receive, upon surrender of the Warrants, the Redemption Price.

          6.4 OUTSTANDING WARRANTS ONLY; REGISTRATION OR QUALIFICATION OF COMMON STOCK. The
Company understands that the redemption rights provided for by this Section 6 apply only to
outstanding Warrants. To the extent a person holds rights to purchase Warrants, such purchase
rights shall not be extinguished by redemption. However, once such purchase rights are exercised,
the Company may redeem the Warrants issued upon such exercise provided that the criterion for
redemption is met. In the event that the common stock issuable upon exercise of the Warrants has
not been registered or qualified or deemed to be exempt under the securities laws of the state of
residence of the holder of the Warrants, the Company will not have the right to redeem the
Warrants. The provisions of this Section 6.4 may not be modified, amended or deleted without the
prior written consent of Pali.

          6.5 EXCLUSION OF PRIVATE WARRANTS. Notwithstanding anything in this Warrant Agreement
to the contrary, the Private Warrants shall not be subject to redemption if at the time of
redemption such warrants continue to be held by the Initial Purchaser. However, once such Private
Warrants are transferred, the Company may redeem the Private Warrants provided that the criteria
for redemption are met, including the opportunity of the Warrant holder to exercise prior to
redemption pursuant to Section 6.3.

     7. OTHER PROVISIONS RELATING TO RIGHTS OF HOLDERS OF WARRANTS.

          7.1 NO RIGHTS AS STOCKHOLDER. A Warrant does not entitle the registered holder thereof
to any of the rights of a stockholder of the Company, including, without limitation, the right to
receive dividends, or other distributions, exercise any preemptive rights to vote or to consent or
to receive notice as stockholders in respect of the meetings of stockholders or the election of
directors of the Company or any other matter.

          7.2 LOST, STOLEN, MUTILATED, OR DESTROYED WARRANTS. If any Warrant is lost, stolen,
mutilated, or destroyed, the Company and the Warrant Agent may on such terms as to indemnity or
otherwise as they may in their discretion impose (which shall, in the case of a mutilated Warrant,
include the surrender thereof), issue a new Warrant of like denomination, tenor, and date as the
Warrant so lost, stolen, mutilated, or destroyed. Any such

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new Warrant shall constitute a substitute contractual obligation of the Company, whether or
not the allegedly lost, stolen, mutilated, or destroyed Warrant shall be at any time enforceable by
anyone.

          7.3 RESERVATION OF COMMON STOCK. The Company shall at all times reserve and keep
available a number of its authorized but unissued shares of Common Stock that will be sufficient to
permit the exercise in full of all outstanding Warrants issued pursuant to this Warrant Agreement.

          7.4 REGISTRATION OF COMMON STOCK. The Company agrees that prior to the commencement of
the Exercise Period, it shall file with the Securities and Exchange Commission a post-effective
amendment to the Registration Statement, or a new registration statement, for the registration,
under the Act, of, and it shall use its reasonable best efforts to take such action as is necessary
to qualify for sale, in those states in which the Warrants were initially offered by the Company,
the Common Stock issuable upon exercise of the Warrants. In either case, the Company will use its
reasonable best efforts to cause the same to become effective on or prior to the commencement of
the Exercise Period and to maintain the effectiveness of such registration statement until the
expiration or redemption of the Warrants in accordance with the provisions of this Warrant
Agreement; provided, however, that the Company shall not be obligated to deliver Shares, and shall
not have penalties nor be liable to the Warrant holder for failure to deliver Shares pursuant to
Section 3, if a registration statement is not effective or a current Prospectus is not on file with
the Commission at the time of exercise of the Warrant by the holder. For the avoidance of doubt,
the Company may be liable to a Warrant holder for failure to fulfill its obligations to use
reasonable best efforts pursuant to this Section 7.4. The provisions of this Section 7.4 may not
be modified, amended or deleted without the prior written consent of Pali.

     8. CONCERNING THE WARRANT AGENT AND OTHER MATTERS.

          8.1 PAYMENT OF TAXES. The Company will from time to time promptly pay all taxes and
charges that may be imposed upon the Company or the Warrant Agent in respect of the issuance or
delivery of shares of Common Stock upon the exercise of Warrants, but the Company shall not be
obligated to pay any transfer taxes in respect of the Warrants or such shares.

          8.2 RESIGNATION, CONSOLIDATION, OR MERGER OF WARRANT AGENT.

               8.2.1 APPOINTMENT OF SUCCESSOR WARRANT AGENT. The Warrant Agent, or any successor to
it hereafter appointed, may resign its duties and be discharged from all further duties and
liabilities hereunder after giving sixty (60) days’ notice in writing to the Company. If the office
of the Warrant Agent becomes vacant by resignation or incapacity to act or otherwise, the Company
shall appoint in writing a successor Warrant Agent in place of the Warrant Agent. If the Company
shall fail to make such appointment within a period of 30 days after it has been notified in
writing of such resignation or incapacity by the Warrant Agent or by the holder of the Warrant (who
shall, with such notice, submit his Warrant for inspection by the Company), then the holder of any
Warrant may apply to the Supreme Court

10

 

of the State of New York for the County of New York for the appointment of a successor Warrant
Agent at the Company’s cost. Any successor Warrant Agent, whether appointed by the Company or by
such court, shall be a corporation organized and existing under the laws of the State of New York,
in good standing and having its principal office in the Borough of Manhattan, City and State of New
York, and authorized under such laws to exercise corporate trust powers and subject to supervision
or examination by federal or state authority. After appointment, any successor Warrant Agent shall
be vested with all the authority, powers, rights, immunities, duties, and obligations of its
predecessor Warrant Agent with like effect as if originally named as Warrant Agent hereunder,
without any further act or deed; but if for any reason it becomes necessary or appropriate, the
predecessor Warrant Agent shall execute and deliver, at the expense of the Company, an instrument
transferring to such successor Warrant Agent all the authority, powers, and rights of such
predecessor Warrant Agent hereunder; and upon request of any successor Warrant Agent the Company
shall make, execute, acknowledge, and deliver any and all instruments in writing for more fully and
effectually vesting in and confirming to such successor Warrant Agent all such authority, powers,
rights, immunities, duties, and obligations.

               8.2.2 NOTICE OF SUCCESSOR WARRANT AGENT. In the event a successor Warrant Agent shall
be appointed, the Company shall give notice thereof to the predecessor Warrant Agent and the
transfer agent for the Common Stock not later than the effective date of any such appointment.

               8.2.3 MERGER OR CONSOLIDATION OF WARRANT AGENT. Any corporation into which the Warrant
Agent may be merged or with which it may be consolidated or any corporation resulting from any
merger or consolidation to which the Warrant Agent shall be a party shall be the successor Warrant
Agent under this Warrant Agreement without any further act.

          8.3 FEES AND EXPENSES OF WARRANT AGENT.

               8.3.1 REMUNERATION. The Company agrees to pay the Warrant Agent reasonable
remuneration for its services as such Warrant Agent hereunder and will reimburse the Warrant Agent
upon demand for all expenditures that the Warrant Agent may reasonably incur in the execution of
its duties hereunder.

               8.3.2 FURTHER ASSURANCES. The Company agrees to perform, execute, acknowledge, and
deliver or cause to be performed, executed, acknowledged, and delivered all such further and other
acts, instruments, and assurances as may reasonably be required by the Warrant Agent for the
carrying out or performing of the provisions of this Warrant Agreement.

          8.4 LIABILITY OF WARRANT AGENT.

               8.4.1 RELIANCE ON COMPANY STATEMENT. Whenever in the performance of its duties under
this Warrant Agreement, the Warrant Agent shall deem it necessary or desirable that any fact or
matter be proved or established by the Company prior to taking or suffering any action hereunder,
such fact or matter (unless other evidence in respect

11

 

thereof be herein specifically prescribed) may be deemed to be conclusively proved and
established by a statement signed by the Chairman and Chief Executive Officer of the Company and
delivered to the Warrant Agent. The Warrant Agent may rely upon such statement for any action taken
or suffered in good faith by it pursuant to the provisions of this Warrant Agreement.

               8.4.2 INDEMNITY. The Warrant Agent shall be liable hereunder only for its own
negligence, willful misconduct or bad faith. The Company agrees to indemnify the Warrant Agent and
save it harmless against any and all liabilities, including judgments, costs and reasonable counsel
fees, for anything done or omitted by the Warrant Agent in the execution of this Warrant Agreement
except as a result of the Warrant Agent’s negligence, willful misconduct, or bad faith.

               8.4.3 EXCLUSIONS. The Warrant Agent shall have no responsibility with respect to the
validity of this Warrant Agreement or with respect to the validity or execution of any Warrant
(except its countersignature thereof); nor shall it be responsible for any breach by the Company of
any covenant or condition contained in this Warrant Agreement or in any Warrant; nor shall it be
responsible to make any adjustments required under the provisions of Section 4 hereof or
responsible for the manner, method, or amount of any such adjustment or the ascertaining of the
existence of facts that would require any such adjustment; nor shall it by any act hereunder be
deemed to make any representation or warranty as to the authorization or reservation of any shares
of Common Stock to be issued pursuant to this Warrant Agreement or any Warrant or as to whether any
shares of Common Stock will when issued be valid and fully paid and nonassessable.

          8.5 ACCEPTANCE OF AGENCY. The Warrant Agent hereby accepts the agency established by
this Warrant Agreement and agrees to perform the same upon the terms and conditions herein set
forth and among other things, shall account promptly to the Company with respect to Warrants
exercised and concurrently account for, and pay to the Company, all moneys received by the Warrant
Agent for the purchase of shares of the Company’s Common Stock through the exercise of Warrants.

          8.6 WAIVER. The Warrant Agent hereby waives any and all right, title, interest or
claim of any kind (“Claim”) in or to any distribution of the Trust Account (as defined in
that certain Investment Management Trust Agreement, dated as of the date hereof, by and between the
Company and the Warrant Agent as trustee thereunder), and hereby agrees not to seek recourse,
reimbursement, payment or satisfaction for any Claim against the Trust Account for any reason
whatsoever.

     9. MISCELLANEOUS PROVISIONS.

          9.1 SUCCESSORS. All the covenants and provisions of this Warrant Agreement by or for
the benefit of the Company or the Warrant Agent shall bind and inure to the benefit of their
respective successors and assigns.

          9.2 NOTICES. Any notice, statement or demand authorized by this Warrant Agreement to
be given or made by the Warrant Agent or by the holder of any Warrant to or on the Company shall be
sufficiently given when so delivered if by hand or overnight delivery or if

12

 

sent by certified mail or private courier service within five days after deposit of such
notice, postage prepaid, addressed (until another address is filed in writing by the Company with
the Warrant Agent), as follows:

TM Entertainment and Media, Inc.

307 East 87th Street

New York, NY 10128

Attn: Theodore S. Green

with a copy to:

Morrison Cohen LLP

909 Third Avenue

New York, New York 10022

Attn: Jack Levy, Esq.

     Any notice, statement or demand authorized by this Warrant Agreement to be given or made by
the holder of any Warrant or by the Company to or on the Warrant Agent shall be sufficiently given
when so delivered if by hand or overnight delivery or if sent by certified mail or private courier
service within five days after deposit of such notice, postage prepaid, addressed (until another
address is filed in writing by the Warrant Agent with the Company), as follows:

Continental Stock Transfer & Trust Company

17 Battery Place

New York, New York 10004

Attn: Compliance Department

with a copy to:

Pali Capital, Inc.

650 Fifth Avenue

5th Floor

New York, NY 10019

Attn: David B Boris

and:

Kramer Levin Naftalis & Frankel LLP

1177 Avenue of the Americans

New York, NY 10036

Attn: Christopher S. Auguste, Esq.

          9.3 APPLICABLE LAW. The validity, interpretation, and performance of this Agreement
and of the Warrants shall be governed in all respects by the laws of the State of New York, without
giving effect to the conflicts of law principle thereof. The Company and the Warrant Agent each
hereby agrees that any action, proceeding or claim against it arising out of or relating in any way
to this Agreement shall be brought and enforced in the courts of the State

13

 

of New York or the United States District Court for the Southern District of New York, and
irrevocably submits to such jurisdiction, which jurisdiction shall be exclusive. The Company and
the Warrant Agent each hereby waives any objection to such exclusive jurisdiction and that such
courts represent an inconvenience forum. Any such process or summons to be served upon the Company
or the Warrant Agent may be served by transmitting a copy thereof by registered or certified mail,
return receipt requested, postage prepaid, addressed to it at the address set forth in Section 9.2
hereof. Such mailing shall be deemed personal service and shall be legal and binding upon the
Company or the Warrant Agent in any action, proceeding or claim.

          9.4 AMENDMENT. This Agreement and the warrant certificate issued hereunder may be
amended by the parties hereto without the consent of any registered holder for the purpose of
curing any ambiguity, or curing, correcting or supplementing any defective provision contained
herein or adding or changing any other provisions with respect to matters or questions arising
under this Agreement as the parties may deem necessary or desirable and that the parties deem shall
not adversely affect the interest of the registered holders. All other modifications or amendments,
including any amendment to increase the Warrant Price or shorten the Exercise Period, shall require
the written consent of each of (i) Pali, as representative of the Underwriters and (ii) the
registered holders of a majority of the then outstanding Warrants and no modification or amendment
shall affect the Public Warrants and the Private Warrants differently from one another.
Notwithstanding the foregoing, the Company may lower the Warrant Price or extend the duration of
the Exercise Period in accordance with Sections 3.1 and 3.2 hereof, respectively, without such
consent.

          9.5 PERSONS HAVING RIGHTS UNDER THIS AGREEMENT. Nothing in this Agreement expressed
and nothing that may be implied from any of the provisions hereof is intended, or shall be
construed, to confer upon, or give to, any person or corporation other than the parties hereto and
the registered holders of the Warrants, and, for the purposes of Sections 6.1, 6.4, 7.4, 9.2 and
9.4 hereof, Pali, any right, remedy, or claim under or by reason of this Warrant Agreement or of
any covenant, condition, stipulation, promise, or agreement hereof. Pali shall be deemed to be a
third-party beneficiary of this Warrant Agreement with respect to Sections 6.1, 6.4, 7.4, 9.2 and
9.4 hereof. All covenants, conditions, stipulations, promises, and agreements contained in this
Warrant Agreement shall be for the sole and exclusive benefit of the parties hereto (and Pali with
respect to Sections 6.1, 6.4, 7.4, 9.2 and 9.4 hereof) and their successors and assigns and of the
registered holders of the Warrants.

          9.6 EXAMINATION OF THE WARRANT AGREEMENT. A copy of this Warrant Agreement shall be
available at all reasonable times at the office of the Warrant Agent in the Borough of Manhattan,
City and State of New York, for inspection by the registered holder of any Warrant. The Warrant
Agent may require any such holder to submit his Warrant for inspection by it.

          9.7 COUNTERPARTS. This Warrant Agreement may be executed in any number of counterparts
and each of such counterparts shall for all purposes be deemed to be an original, and all such
counterparts shall together constitute but one and the same instrument.

14

 

          9.8 EFFECT OF HEADINGS. The Section headings herein are for convenience only and are
not part of this Warrant Agreement and shall not affect the interpretation thereof.

          9.9 SEVERABILITY. This Agreement shall be deemed severable, and the invalidity or
unenforceability of any term or provision hereof shall not affect the validity or enforceability of
this Agreement or of any other term or provision hereof. Furthermore, in lieu of any such invalid
or unenforceable term or provision, the parties hereto intend that there shall be added as a part
of this Agreement a provision as similar in terms to such invalid or unenforceable provision as may
be possible and be valid and enforceable.

[Remainder of page intentionally left blank.]

15

 

     IN WITNESS WHEREOF, this Warrant Agreement has been duly executed by the parties hereto as of
the day and year first above written.

	 	 	 	 	 
	 	 	TM ENTERTAINMENT AND MEDIA, INC.
	 
	 	 	 	 
	 

	 	By:	 	 
	 

	 	 	 	 
	 	 	Name:
	 	 	Title:
	 
	 	 	 	 
	 	 	CONTINENTAL STOCK TRANSFER & TRUST

COMPANY
	 
	 	 	 	 
	 

	 	By:	 	 
	 

	 	 	 	 
	 	 	Name:
	 	 	Title:

[Warrant Agreement]

16

 

Exhibit A

[Form of Warrant]

17EX-4.5

 

Exhibit 4.5

THE REGISTERED HOLDER OF THIS PURCHASE OPTION BY ITS ACCEPTANCE HEREOF, AGREES THAT IT WILL
NOT SELL, TRANSFER OR ASSIGN THIS PURCHASE OPTION EXCEPT AS HEREIN PROVIDED AND THE REGISTERED
HOLDER OF THIS PURCHASE OPTION AGREES THAT IT WILL NOT SELL, TRANSFER, ASSIGN, PLEDGE OR
HYPOTHECATE THIS PURCHASE OPTION FOR A PERIOD OF ONE YEAR FOLLOWING THE EFFECTIVE DATE (DEFINED
BELOW) TO ANYONE OTHER THAN (I) PALI CAPITAL, INC. (“PALI”), OR AN UNDERWRITER OR A SELECTED DEALER
IN CONNECTION WITH THE OFFERING, OR (II) A BONA FIDE OFFICER OR PARTNER OF PALI OR OF ANY SUCH
UNDERWRITER OR SELECTED DEALER.

THIS PURCHASE OPTION IS NOT EXERCISABLE PRIOR TO THE LATER OF THE CONSUMMATION BY TM ENTERTAINMENT
AND MEDIA, INC. (“COMPANY”) OF A SHARE CAPITAL EXCHANGE, ASSET ACQUISITION OR OTHER SIMILAR
BUSINESS COMBINATION (“BUSINESS COMBINATION”) (AS DESCRIBED MORE FULLY IN THE COMPANY’S
REGISTRATION STATEMENT (DEFINED HEREIN)) OR __________, 2008. VOID AFTER 5:00 P.M. NEW YORK CITY
LOCAL TIME, __________, 2012.

UNIT PURCHASE OPTION

FOR THE PURCHASE OF

900,000 UNITS

OF

TM ENTERTAINMENT AND MEDIA, INC.

1. PURCHASE OPTION.

     THIS CERTIFIES THAT, in consideration of $100.00 duly paid by or on behalf of Pali or its
designee (“HOLDER”), as registered owner of this Purchase Option, to TM Entertainment and Media,
Inc. (“COMPANY”), Holder is entitled, at any time or from time to time upon the later of the
consummation of a Business Combination or __________, 2008 (“COMMENCEMENT DATE”), and at or
before 5:00 p.m., New York City local time, __________, 2012 (“EXPIRATION DATE”), but not
thereafter, to subscribe for, purchase and receive, in whole or in part, up to 900,000 units
(“UNITS”) of the Company, each Unit consisting of one share of common stock of the Company, par
value $0.001 per share (“COMMON SHARE(S)”), and one warrant (“WARRANT(S)”) expiring four years from
the effective date (“EFFECTIVE DATE”) of the registration statement (“REGISTRATION STATEMENT”)
pursuant to which Units are offered for sale to the public (“OFFERING”). Each Warrant is the same
as the warrants included in the Units being registered for sale to the public by way of the
Registration Statement (“PUBLIC WARRANTS”), including the exercise price of $5.50 per share. If
the Expiration Date is a day on which banking institutions are authorized by law to close, then
this Purchase Option may be exercised on the next succeeding day which is not such a day in
accordance with the terms herein. During the period ending on the Expiration Date, the Company
agrees not to take any action that would terminate the Purchase Option. This Purchase Option is
initially exercisable at $10.00 per Unit so purchased; provided, however, that upon the occurrence
of any of the events specified in Section 6 hereof, the rights granted by this Purchase Option,
including the exercise price per Unit and the number of Units (and Common Shares and Warrants) to
be received upon such exercise, shall be adjusted as therein specified. The term “Exercise Price”
shall mean the initial exercise price or the adjusted exercise price, depending on the context.

2. EXERCISE.

     2.1 EXERCISE FORM. In order to exercise this Purchase Option, the exercise form
attached hereto must be duly executed and completed and delivered to the Company, together with
this Purchase

 

 

Option and payment of the Exercise Price for the Units being purchased payable in cash, by
wire transfer of immediately available funds or by certified check or official bank check. If the
subscription rights represented hereby shall not be exercised at or before 5:00 p.m., New York City
local time, on the Expiration Date this Purchase Option shall become and be void without further
force or effect, and all rights represented hereby shall cease and expire.

     2.2 LEGEND. Each certificate for the securities purchased under this Purchase
Option shall bear a legend as follows unless such securities have been registered under the
Securities Act of 1933, as amended (“ACT”):

“The securities represented by this certificate have not been registered under the Securities Act
of 1933, as amended (“Act”) or applicable state law. The securities may not be offered for sale,
sold or otherwise transferred except pursuant to an effective registration statement under the Act,
or pursuant to an exemption from registration under the Act and applicable state law.”

     2.3 CASHLESS EXERCISE.

          2.3.1 DETERMINATION OF AMOUNT. In lieu of the payment of the Exercise Price
multiplied by the number of Units for which this Purchase Option is exercisable (and in lieu of
being entitled to receive Common Shares and Warrants) in the manner required by Section 2.1, the
Holder shall have the right (but not the obligation) to convert any exercisable but unexercised
portion of this Purchase Option into Units (the “CONVERSION RIGHT”) as follows: upon exercise of
the Conversion Right, the Company shall deliver to the Holder (without payment by the Holder of any
of the Exercise Price in cash) that number of Common Shares and Warrants comprising that number of
Units equal to the quotient obtained by dividing (x) the “Value” (as defined below) of the portion
of the Purchase Option being converted by (y) the Current Market Value (as defined below) of the
portion of the Purchase Option being converted. The “VALUE” of the portion of the Purchase Option
being converted shall equal the remainder derived from subtracting (a) (i) the Exercise Price
multiplied by (ii) the number of Units underlying the portion of this Purchase Option being
converted from (b) the CURRENT MARKET VALUE of a Unit multiplied by the number of Units underlying
the portion of the Purchase Option being converted. As used herein, the term “CURRENT MARKET
VALUE” per Unit at any date means: (A) in the event that neither the Units nor Warrants are still
trading, the remainder derived from subtracting (x) the exercise price of the Warrants multiplied
by the number of Common Shares issuable upon exercise of the Warrants underlying one Unit from (y)
(i) the Current Market Price of the Common Shares multiplied by (ii) the number of Common Shares
underlying one Unit, which shall include the Common Shares underlying the Warrants included in such
Unit; (B) in the event that the Units, Common Shares and Warrants are still trading, (i) if the
Units are listed on a national securities exchange or quoted on the Nasdaq Global Market, Nasdaq
Capital Market or NASD OTC Bulletin Board (or successor such as the Bulletin Board Exchange), the
last sale price of the Units in the principal trading market for the Units as reported by the
exchange, Nasdaq or the NASD, as the case may be, on the last trading day preceding the date in
question; or (ii) if the Units are not listed on a national securities exchange or quoted on the
Nasdaq Global Market, Nasdaq Capital Market or the NASD OTC Bulletin Board (or successor exchange),
but are traded in the residual over-the-counter market, the closing bid price for Units on the last
trading day preceding the date in question for which such quotations are reported by the Pink
Sheets, LLC or similar publisher of such quotations; and (C) in the event that the Units are not
still trading but the Common Shares and Warrants underlying the Units are still trading, the
Current Market Price of the Common Shares plus the product of (x) the Current Market Price of the
Warrants and (y) the number of Common Shares underlying the Warrants included in one Unit. The
“CURRENT MARKET PRICE” shall mean (i) if the Common Shares (or Warrants, as the case may be) are
listed on a national securities exchange or quoted on the Nasdaq Global Market, Nasdaq Capital
Market or NASD OTC Bulletin Board (or successor such as the Bulletin Board Exchange), the last sale
price of the Common Shares (or

-2-

 

Warrants) in the principal trading market for the Common Shares as reported by the exchange,
Nasdaq or the NASD, as the case may be, on the last trading day preceding the date in question;
(ii) if the Common Shares (or Warrants, as the case may be) are not listed on a national securities
exchange or quoted on the Nasdaq Global Market, Nasdaq Capital Market or the NASD OTC Bulletin
Board (or successor exchange), but are traded in the residual over-the-counter market, the closing
bid price for the Common Shares (or Warrants) on the last trading day preceding the date in
question for which such quotations are reported by the Pink Sheets, LLC or similar publisher of
such quotations; and (iii) if the fair market value of the Common Shares cannot be determined
pursuant to clause (i) or (ii) above, such price as the Board of Directors of the Company shall
determine, in good faith.

          2.3.2 MECHANICS OF CASHLESS EXERCISE. The Cashless Exercise Right may be exercised
by the Holder on any business day on or after the Commencement Date and not later than the
Expiration Date by delivering the Purchase Option with the duly executed exercise form attached
hereto with the cashless exercise section completed to the Company, exercising the Cashless
Exercise Right and specifying the total number of Units the Holder will purchase pursuant to such
Cashless Exercise Right.

3. TRANSFER.

     3.1 GENERAL RESTRICTIONS. The registered Holder of this Purchase Option, by its
acceptance hereof, agrees that it will not sell, transfer, assign, pledge or hypothecate this
Purchase Option for a period of one year following the Effective Date to anyone other than (i) Pali
or an underwriter or a selected dealer in connection with the Offering, or (ii) a bona fide officer
or partner of Pali or of any such underwriter or selected dealer. On and after the first
anniversary of the Effective Date, transfers to others may be made subject to compliance with or
exemptions from applicable securities laws. In order to make any permitted assignment, the Holder
must deliver to the Company the assignment form attached hereto duly executed and completed,
together with the Purchase Option and payment of all transfer taxes, if any, payable in connection
therewith. The Company shall within five business days transfer this Purchase Option on the books
of the Company and shall execute and deliver a new Purchase Option or Purchase Options of like
tenor to the appropriate assignee(s) expressly evidencing the right to purchase the aggregate
number of Units purchasable hereunder or such portion of such number as shall be contemplated by
any such assignment.

     3.2 RESTRICTIONS IMPOSED BY THE ACT. The securities evidenced by this Purchase
Option shall not be transferred unless and until (i) the Company has received the opinion of
counsel for the Holder that the securities may be transferred pursuant to an exemption from
registration under the Act and applicable state securities laws, the availability of which is
established to the reasonable satisfaction of the Company (the Company hereby agreeing that the
opinion of Kramer Levin Naftalis & Frankel LLP shall be deemed satisfactory evidence of the
availability of an exemption), or (ii) a registration statement or a post-effective amendment to
the Registration Statement relating to such securities has been filed by the Company and declared
effective by the Securities and Exchange Commission (the “COMMISSION”) and compliance with
applicable state securities law has been established.

4. NEW PURCHASE OPTIONS TO BE ISSUED.

     4.1 PARTIAL EXERCISE OR TRANSFER. Subject to the restrictions in Section 3 hereof,
this Purchase Option may be exercised or assigned in whole or in part. In the event of the
exercise or assignment hereof in part only, upon surrender of this Purchase Option for
cancellation, together with the duly executed exercise or assignment form and except in the case of
an exercise of this Purchase Option contemplated by Section 2.3 hereof, funds sufficient to pay any
Exercise Price and/or transfer tax, the Company shall cause to be delivered to the Holder without
charge a new Purchase Option of like tenor to

-3-

 

this Purchase Option in the name of the Holder evidencing the right of the Holder to purchase
the number of Units purchasable hereunder as to which this Purchase Option has not been exercised
or assigned.

     4.2 LOST CERTIFICATE. Upon receipt by the Company of evidence satisfactory to it of
the loss, theft, destruction or mutilation of this Purchase Option and of reasonably satisfactory
indemnification or the posting of a bond, the Company shall execute and deliver a new Purchase
Option of like tenor and date. Any such new Purchase Option executed and delivered as a result of
such loss, theft, mutilation or destruction shall constitute a substitute contractual obligation on
the part of the Company.

5. REGISTRATION RIGHTS.

     5.1 DEMAND REGISTRATION.

          5.1.1 GRANT OF RIGHT. The Company, upon written demand (“INITIAL DEMAND NOTICE”) of
the Holder(s) of at least 51% of the Purchase Options and/or the underlying Units and/or the
underlying securities (“MAJORITY HOLDERS”), agrees to register (the “DEMAND REGISTRATION”) under
the Act on one occasion, all or any portion of the Purchase Options requested by the Majority
Holders in the Initial Demand Notice and all of the securities underlying such Purchase Options,
including the Units, Common Shares, the Warrants and the Common Shares underlying the Warrants
(collectively, the “REGISTRABLE SECURITIES”). On such occasion, the Company will file a
registration statement or a post-effective amendment to the Registration Statement covering the
Registrable Securities within sixty days after receipt of the Initial Demand Notice and use its
best efforts to have such registration statement or post-effective amendment declared effective as
soon as possible thereafter. The demand for registration may be made at any time during a period
of five years beginning on the Effective Date. The Initial Demand Notice shall specify the number
of shares of Registrable Securities proposed to be sold and the intended method(s) of distribution
thereof. The Company will notify all holders of the Purchase Options and/or Registrable Securities
of the demand within ten days from the date of the receipt of any such Initial Demand Notice. Each
holder of Registrable Securities who wishes to include all or a portion of such holder’s
Registrable Securities in the Demand Registration (each such holder including shares of Registrable
Securities in such registration, a “DEMANDING HOLDER”) shall so notify the Company within fifteen
(15) days after the receipt by the holder of the notice from the Company. Upon any such request,
the Demanding Holders shall be entitled to have their Registrable Securities included in the Demand
Registration, subject to Section 5.1.4.

          5.1.2 EFFECTIVE REGISTRATION. A registration will not count as a Demand
Registration until the registration statement filed with the Commission with respect to such Demand
Registration has been declared effective and the Company has complied with all of its obligations
under this Agreement with respect thereto; provided, however, that if, after such registration
statement has been declared effective, the offering of Registrable Securities pursuant to a Demand
Registration is interfered with by any stop order or injunction of the Commission or any other
governmental agency or court, the registration statement with respect to such Demand Registration
will be deemed not to have been declared effective, unless and until, (i) such stop order or
injunction is removed, rescinded or otherwise terminated, and (ii) a majority-in-interest of the
Demanding Holders thereafter elect to continue the offering.

          5.1.3 UNDERWRITTEN OFFERING. If the Majority Holders so elect and such holders so
advise the Company as part of the Initial Demand Notice, the offering of such Registrable
Securities pursuant to such Demand Registration shall be in the form of an underwritten offering.
In such event, the right of any holder to include its Registrable Securities in such registration
shall be conditioned upon such holder’s participation in such underwriting and the inclusion of
such holder’s Registrable Securities in the underwriting to the extent provided herein. All
Demanding Holders proposing to

-4-

 

distribute their securities through such underwriting shall enter into an underwriting
agreement in customary form with the underwriter or underwriters selected for such underwriting by
the Majority Holders.

          5.1.4 REDUCTION OF OFFERING. If the managing underwriter or underwriters for a
Demand Registration that is to be an underwritten offering advises the Company and the Demanding
Holders in writing that the dollar amount or number of shares of Registrable Securities which the
Demanding Holders desire to sell, taken together with all other Common Shares or other securities
which the Company desires to sell and the Common Shares, if any, as to which registration has been
requested pursuant to written contractual piggy-back registration rights held by other shareholders
of the Company who desire to sell, exceeds the maximum dollar amount or maximum number of shares
that can be sold in such offering without adversely affecting the proposed offering price, the
timing, the distribution method, or the probability of success of such offering (such maximum
dollar amount or maximum number of shares, as applicable, the “MAXIMUM NUMBER OF SHARES”), then the
Company shall include in such registration: (i) first, the Registrable Securities as to which
Demand Registration has been requested by the Demanding Holders (pro rata in accordance with the
number of shares that each such Person has requested be included in such registration, regardless
of the number of shares held by each such Person (such proportion is referred to herein as “PRO
RATA”)) that can be sold without exceeding the Maximum Number of Shares; (ii) second, to the extent
that the Maximum Number of Shares has not been reached under the foregoing clause (i), the Common
Shares or other securities that the Company desires to sell that can be sold without exceeding the
Maximum Number of Shares; (iii) third, to the extent that the Maximum Number of Shares has not been
reached under the foregoing clauses (i) and (ii), the Common Shares or other securities registrable
pursuant to the terms of the Registration Rights Agreement between the Company and the initial
investors in the Company, dated as of __________, 2007 (the “REGISTRATION RIGHTS AGREEMENT” and
such registrable securities, the “INVESTOR SECURITIES”) as to which “piggy-back” registration has
been requested by the holders thereof, Pro Rata, that can be sold without exceeding the Maximum
Number of Shares; and (iv) fourth, to the extent that the Maximum Number of Shares have not been
reached under the foregoing clauses (i), (ii), and (iii), the Common Shares or other securities for
the account of other persons that the Company is obligated to register pursuant to written
contractual arrangements with such persons and that can be sold without exceeding the Maximum
Number of Shares.

          5.1.5 WITHDRAWAL. If a majority-in-interest of the Demanding Holders disapprove of
the terms of any underwriting or are not entitled to include all of their Registrable Securities in
any offering, such majority-in-interest of the Demanding Holders may elect to withdraw from such
offering by giving written notice to the Company and the underwriter or underwriters of their
request to withdraw prior to the effectiveness of the registration statement filed with the
Commission with respect to such Demand Registration. If the majority-in-interest of the Demanding
Holders withdraws from a proposed offering relating to a Demand Registration, then such
registration shall not count as a Demand Registration provided for in Section 5.1.

          5.1.6 TERMS. The Company shall bear all fees and expenses attendant to registering
the Registrable Securities, including the expenses of any legal counsel selected by the Holders to
represent them in connection with the sale of the Registrable Securities, but the Holders shall pay
any and all underwriting commissions. The Company agrees to use its reasonable best efforts to
qualify or register the Registrable Securities in such states as are reasonably requested by the
Majority Holder(s); provided, however, that in no event shall the Company be required to register
the Registrable Securities in a state in which such registration would cause (i) the Company to be
obligated to qualify to do business in such state, or would subject the Company to taxation as a
foreign corporation doing business in such jurisdiction or (ii) the principal shareholders of the
Company to be obligated to escrow their shares of share capital of the Company. The Company shall
cause any registration statement or post-effective

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amendment filed pursuant to the demand rights granted under Section 5.1.1 to remain effective
for a period of nine consecutive months from the effective date of such registration statement or
post-effective amendment.

     5.2 PIGGY-BACK REGISTRATION.

          5.2.1 PIGGY-BACK RIGHTS. If at any time during the seven year period commencing on
the Effective Date the Company proposes to file a registration statement under the Act with respect
to an offering of equity securities, or securities or other obligations exercisable or exchangeable
for, or convertible into, equity securities, by the Company for its own account or for shareholders
of the Company for their account (or by the Company and by shareholders of the Company including,
without limitation, pursuant to Section 5.1), other than a registration statement (i) filed in
connection with any employee share option or other benefit plan, (ii) for an exchange offer or
offering of securities solely to the Company’s existing shareholders, (iii) for an offering of debt
that is convertible into equity securities of the Company or (iv) for a dividend reinvestment plan,
then the Company shall (x) give written notice of such proposed filing to the holders of
Registrable Securities as soon as practicable but in no event less than ten (10) days before the
anticipated filing date, which notice shall describe the amount and type of securities to be
included in such offering, the intended method(s) of distribution, and the name of the proposed
managing underwriter or underwriters, if any, of the offering, and (y) offer to the holders of
Registrable Securities in such notice the opportunity to register the sale of such number of shares
of Registrable Securities as such holders may request in writing within five (5) days following
receipt of such notice (a “PIGGY-BACK REGISTRATION”). The Company shall cause such Registrable
Securities to be included in such registration and shall use its best efforts to cause the managing
underwriter or underwriters of a proposed underwritten offering to permit the Registrable
Securities requested to be included in a Piggy-Back Registration on the same terms and conditions
as any similar securities of the Company and to permit the sale or other disposition of such
Registrable Securities in accordance with the intended method(s) of distribution thereof. All
holders of Registrable Securities proposing to distribute their securities through a Piggy-Back
Registration that involves an underwriter or underwriters shall enter into an underwriting
agreement in customary form with the underwriter or underwriters selected for such Piggy-Back
Registration.

          5.2.2 REDUCTION OF OFFERING. If the managing underwriter or underwriters for a
Piggy-Back Registration that is to be an underwritten offering advises the Company and the holders
of Registrable Securities in writing that the dollar amount or number of Common Shares which the
Company desires to sell, taken together with Common Shares, if any, as to which registration has
been demanded pursuant to written contractual arrangements with persons other than the holders of
Registrable Securities hereunder, the Registrable Securities as to which registration has been
requested under this Section 5.2, and the Common Shares, if any, as to which registration has been
requested pursuant to the written contractual piggy-back registration rights of other shareholders
of the Company, exceeds the Maximum Number of Shares, then the Company shall include in any such
registration:

               (a) If the registration is undertaken for the Company’s account: (A) first, the Common Shares or other securities that the Company desires to sell that can be
sold without exceeding the Maximum Number of Shares; (B) second, to the extent that the Maximum
Number of Shares has not been reached under the foregoing clause (A), the Common Shares or other
securities, if any, comprised of Registrable Securities and Investor Securities, as to which
registration has been requested pursuant to the applicable written contractual piggy-back
registration rights of such security holders, Pro Rata, that can be sold without exceeding the
Maximum Number of Shares; and (C) third, to the extent that the Maximum Number of shares has not
been reached under the foregoing clauses (A) and (B), the Common Shares or other securities for the
account of other persons that the Company is obligated

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to register pursuant to written contractual piggy-back registration rights with such persons
and that can be sold without exceeding the Maximum Number of Shares;

               (b) If the registration is a “demand” registration undertaken at the demand of holders of
Investor Securities, (A) first, the Common Shares or other securities for the account of the
demanding persons, Pro Rata, that can be sold without exceeding the Maximum Number of Shares; (B)
second, to the extent that the Maximum Number of Shares has not been reached under the foregoing
clause (A), the Common Shares or other securities that the Company desires to sell that can be sold
without exceeding the Maximum Number of Shares; (C) third, to the extent that the Maximum Number of
Shares has not been reached under the foregoing clauses (A) and (B), the shares of Registrable
Securities, Pro Rata, as to which registration has been requested pursuant to the terms hereof,
that can be sold without exceeding the Maximum Number of Shares; and (D) fourth, to the extent that
the Maximum Number of Shares has not been reached under the foregoing clauses (A), (B) and (C), the
Common Shares or other securities for the account of other persons that the Company is obligated to
register pursuant to written contractual arrangements with such persons, that can be sold without
exceeding the Maximum Number of Shares; and

               (c) If the registration is a “demand” registration undertaken at the demand of persons other
than either the holders of Registrable Securities or of Investor Securities, (A) first, the Common
Shares or other securities for the account of the demanding persons that can be sold without
exceeding the Maximum Number of Shares; (B) second, to the extent that the Maximum Number of Shares
has not been reached under the foregoing clause (A), the Common Shares or other securities that the
Company desires to sell that can be sold without exceeding the Maximum Number of Shares; (C) third,
to the extent that the Maximum Number of Shares has not been reached under the foregoing clauses
(A) and (B), collectively the Common Shares or other securities comprised of Registrable Securities
and Investor Securities, Pro Rata, as to which registration has been requested pursuant to the
terms hereof and of the Registration Rights Agreement, as applicable, that can be sold without
exceeding the Maximum Number of Shares; and (D) fourth, to the extent that the Maximum Number of
Shares has not been reached under the foregoing clauses (A), (B) and (C), the Common Shares or
other securities for the account of other persons that the Company is obligated to register
pursuant to written contractual arrangements with such persons, that can be sold without exceeding
the Maximum Number of Shares.

          5.2.3 WITHDRAWAL. Any holder of Registrable Securities may elect to withdraw such
holder’s request for inclusion of Registrable Securities in any Piggy-Back Registration by giving
written notice to the Company of such request to withdraw prior to the effectiveness of the
registration statement. The Company (whether on its own determination or as the result of a
withdrawal by persons making a demand pursuant to written contractual obligations) may withdraw a
registration statement at any time prior to the effectiveness of the registration statement.
Notwithstanding any such withdrawal, the Company shall pay all expenses incurred by the holders of
Registrable Securities in connection with such Piggy-Back Registration as provided in Section
5.2.4.

          5.2.4 TERMS. The Company shall bear all fees and expenses attendant to registering
the Registrable Securities, including the expenses of any legal counsel selected by the Holders to
represent them in connection with the sale of the Registrable Securities but the Holders shall pay
any and all underwriting commissions related to the Registrable Securities. In the event of such a
proposed registration, the Company shall furnish the then Holders of outstanding Registrable
Securities with not less than fifteen days written notice prior to the proposed date of filing of
such registration statement. Such notice to the Holders shall continue to be given for each
applicable registration statement filed (during the period in which the Purchase Option is
exercisable) by the Company until such time as all of the Registrable Securities have been
registered and sold. The Holders of the Registrable Securities shall exercise the “piggy-back”
rights provided for herein by giving written notice, within ten days of the

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receipt of the Company’s notice of its intention to file a registration statement. The
Company shall cause any registration statement filed pursuant to the above “piggyback” rights to
remain effective for at least nine months from the date that the Holders of the Registrable
Securities are first given the opportunity to sell all of such securities.

     5.3 NO NET-CASH SETTLEMENT OR DAMAGES UPON FAILURE OF REGISTRATION. In no event
shall the registered Holder of this Purchase Option be entitled to (i) net-cash settlement of this
Purchase Option, regardless of whether any or all of the Registrable Securities have been
registered by the Company pursuant to an effective registration statement, or (ii) receive any
damages if any or all of the Registrable Securities have not been registered by the Company
pursuant to an effective registration statement, subject to the requirement that the Company use
its best efforts to have a registration statement or post-effective amendment filed pursuant to
this Section declared effective as soon as possible after receiving the Initial Demand Notice. In
the event there is no effective registration statement related to the issuance or exercise of the
Warrants contained within the Units, that portion of the Units may not be exercised by the Holder
and therefore may expire and be worthless.

     5.4 GENERAL TERMS.

          5.4.1 INDEMNIFICATION. The Company shall indemnify the Holder(s) of the Registrable
Securities to be sold pursuant to any registration statement hereunder and each person, if any, who
controls such Holders within the meaning of Section 15 of the Act or Section 20(a) of the
Securities Exchange Act of 1934, as amended (“EXCHANGE ACT”), against all loss, claim, damage,
expense or liability (including all reasonable attorneys’ fees and other expenses reasonably
incurred in investigating, preparing or defending against litigation, commenced or threatened, or
any claim whatsoever whether arising out of any action between the underwriter and the Company or
between the underwriter and any third party or otherwise) to which any of them may become subject
under the Act, the Exchange Act or otherwise, arising from such registration statement but only to
the same extent and with the same effect as the provisions pursuant to which the Company has agreed
to indemnify the underwriters contained in Section 5 of the Underwriting Agreement between the
Company, Pali and the other underwriters named therein dated the Effective Date. The Holder(s) of
the Registrable Securities to be sold pursuant to such registration statement, and their successors
and assigns, shall severally, and not jointly, indemnify the Company, its officers and directors
and each person, if any, who controls the Company within the meaning of Section 15 of the Act or
Section 20(a) of the Exchange Act, against all loss, claim, damage, expense or liability (including
all reasonable attorneys’ fees and other expenses reasonably incurred in investigating, preparing
or defending against any claim whatsoever) to which they may become subject under the Act, the
Exchange Act or otherwise, arising from information furnished by or on behalf of such Holders, or
their successors or assigns, in writing, for specific inclusion in such registration statement to
the same extent and with the same effect as the provisions contained in Section 5 of the
Underwriting Agreement pursuant to which the underwriters have agreed to indemnify the Company.

          5.4.2 EXERCISE OF PURCHASE OPTIONS. Nothing contained in this Purchase Option shall
be construed as requiring the Holder(s) to exercise their Purchase Options or Warrants underlying
such Purchase Options prior to or after the initial filing of any registration statement or the
effectiveness thereof.

          5.4.3 DOCUMENTS DELIVERED TO HOLDERS. The Company shall furnish Pali, as
representative of the Holders participating in any of the foregoing offerings, a signed
counterpart, addressed to the participating Holders, of (i) an opinion of counsel to the Company,
dated the effective date of such registration statement (and, if such registration includes an
underwritten public offering, an opinion dated the date of the closing under any underwriting
agreement related thereto), and (ii) a “cold comfort” letter dated the effective date of such
registration statement (and, if such registration includes an

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underwritten public offering, a letter dated the date of the closing under the underwriting
agreement) signed by the independent public accountants who have issued a report on the Company’s
financial statements included in such registration statement, in each case covering substantially
the same matters with respect to such registration statement (and the prospectus included therein)
and, in the case of such accountants’ letter, with respect to events subsequent to the date of such
financial statements, as are customarily covered in opinions of issuer’s counsel and in
accountants’ letters delivered to underwriters in underwritten public offerings of securities. The
Company shall also deliver promptly to Pali, as representative of the Holders participating in the
offering, the correspondence and memoranda described below and copies of all correspondence between
the Commission and the Company, its counsel or auditors and all memoranda relating to discussions
with the Commission or its staff with respect to the registration statement and permit Pali, as
representative of the Holders, to do such investigation, upon reasonable advance notice, with
respect to information contained in or omitted from the registration statement as it deems
reasonably necessary to comply with applicable securities laws or rules of the National Association
of Securities Dealers, Inc. (“NASD”). Such investigation shall include access to books, records
and properties and opportunities to discuss the business of the Company with its officers and
independent auditors, all to such reasonable extent and at such reasonable times and as often as
Pali, as representative of the Holders, shall reasonably request. The Company shall not be
required to disclose any confidential information or other records to Pali, as representative of
the Holders, or to any other person, until and unless such persons shall have entered into
reasonable confidentiality agreements (in form and substance reasonably satisfactory to the
Company), with the Company with respect thereto.

          5.4.4 UNDERWRITING AGREEMENT. The Company shall enter into an underwriting
agreement with the managing underwriter(s), if any, selected by any Holders whose Registrable
Securities are being registered pursuant to this Section 5, which managing underwriter shall be
reasonably acceptable to the Company. Such agreement shall be reasonably satisfactory in form and
substance to the Company, each Holder and such managing underwriters, and shall contain such
representations, warranties and covenants by the Company and such other terms as are customarily
contained in agreements of that type used by the managing underwriter. The Holders shall be
parties to any underwriting agreement relating to an underwritten sale of their Registrable
Securities and may, at their option, require that any or all the representations, warranties and
covenants of the Company to or for the benefit of such underwriters shall also be made to and for
the benefit of such Holders. Such Holders shall not be required to make any representations or
warranties to or agreements with the Company or the underwriters except as they may relate to such
Holders and their intended methods of distribution. Such Holders, however, shall agree to such
covenants and indemnification and contribution obligations for selling shareholders as are
customarily contained in agreements of that type used by the managing underwriter. Further, such
Holders shall execute appropriate custody agreements and otherwise cooperate fully in the
preparation of the registration statement and other documents relating to any offering in which
they include securities pursuant to this Section 5. Each Holder shall also furnish to the Company
such information regarding itself, the Registrable Securities held by it, and the intended method
of disposition of such securities as shall be reasonably required to effect the registration of the
Registrable Securities.

          5.4.5 RULE 144 SALE. Notwithstanding anything contained in this Section 5 to the
contrary, the Company shall have no obligation pursuant to Sections 5.1 or 5.2 for the registration
of Registrable Securities held by any Holder (i) where such Holder would then be entitled to sell
under Rule 144 within any three-month period (or such other period prescribed under Rule 144 as may
be provided by amendment thereof) all of the Registrable Securities then held by such Holder, and
(ii) where the number of Registrable Securities held by such Holder is within the volume
limitations under paragraph (e) of Rule 144 (calculated as if such Holder were an affiliate within
the meaning of Rule 144).

          5.4.6 SUPPLEMENTAL PROSPECTUS. Each Holder agrees, that upon receipt of any notice
from the Company of the happening of any event as a result of which the prospectus included

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in the registration statement, as then in effect, includes an untrue statement of a material
fact or omits to state a material fact required to be stated therein or necessary to make the
statements therein not misleading in light of the circumstances then existing, such Holder will
immediately discontinue disposition of Registrable Securities pursuant to the registration
statement covering such Registrable Securities until such Holder’s receipt of the copies of a
supplemental or amended prospectus, and, if so desired by the Company, such Holder shall deliver to
the Company (at the expense of the Company) or destroy (and deliver to the Company a certificate of
such destruction) all copies, other than permanent file copies then in such Holder’s possession, of
the prospectus covering such Registrable Securities current at the time of receipt of such notice.

6. ADJUSTMENTS.

     6.1 ADJUSTMENTS TO EXERCISE PRICE AND NUMBER OF SECURITIES. The Exercise Price and
the number of Units underlying the Purchase Option shall be subject to adjustment from time to time
as hereinafter set forth:

          6.1.1 SHARE DIVIDENDS — SPLIT-UPS. If after the date hereof, and subject to the
provisions of Section 6.3 below, the number of outstanding Common Shares is increased by a share
dividend payable in Common Shares or by a split-up of Common Shares or other similar event, then,
on the effective date thereof, the number of Common Shares underlying each of the Units purchasable
hereunder shall be increased in proportion to such increase in outstanding shares. In such case,
the number of Common Shares, and the exercise price applicable thereto, underlying the Warrants
underlying each of the Units purchasable hereunder shall be adjusted in accordance with the terms
of the Warrants. For example, if the Company declares a two-for-one share dividend and at the time
of such dividend this Purchase Option is for the purchase of one Unit at $10.00 per whole Unit
(each Warrant underlying the Units is exercisable for $5.50 per share), upon effectiveness of the
dividend, this Purchase Option will be adjusted to allow for the purchase of one Unit at $10.00 per
Unit, each Unit entitling the holder to receive two Common Shares and two Warrants (each Warrant
exercisable for $2.75 per share).

          6.1.2 EXTRAORDINARY DIVIDEND. If the Company, at any time while this Purchase
Option is outstanding and unexpired, shall pay a dividend or make a distribution in cash,
securities or other assets to the holders of Common Stock (or other shares of the Company’s capital
stock receivable upon exercise of the Purchase Option), other than (i) as described in Sections
6.1.1, 6.1.3 or 6.1.4, (ii) regular quarterly or other periodic dividends, (iii) in connection with
the conversion rights of the holders of Common Stock upon consummation of the Company’s initial
Business Combination or (iv) in connection with the Company’s liquidation and the distribution of
its assets upon its failure to consummate a Business Combination (any such non-excluded event being
referred to herein as an “Extraordinary Dividend”), then the Exercise Price shall be decreased,
effective immediately after the effective date of such Extraordinary Dividend, by the amount of
cash and/or the fair market value (as determined by the Company’s Board of Directors, in good
faith) of any securities or other assets paid on each share of Common Stock in respect of such
Extraordinary Dividend.

          6.1.3 AGGREGATION OF SHARES. If after the date hereof, and subject to the
provisions of Section 6.3, the number of outstanding Common Shares is decreased by a consolidation,
combination or reclassification of Common Shares or other similar event, then, on the effective
date thereof, the number of Common Shares underlying each of the Units purchasable hereunder shall
be decreased in proportion to such decrease in outstanding shares. In such case, the number of
Common Shares, and the exercise price applicable thereto, underlying the Warrants underlying each
of the Units purchasable hereunder shall be adjusted in accordance with the terms of the Warrants.

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          6.1.4 REPLACEMENT OF SECURITIES UPON REORGANIZATION, ETC. In case of any
reclassification or reorganization of the outstanding Common Shares other than a change covered by
Section 6.1.1 or 6.1.3 hereof or that solely affects the par value of such Common Shares, or in the
case of any merger or consolidation of the Company with or into another corporation (other than a
consolidation or merger in which the Company is the continuing corporation and that does not result
in any reclassification or reorganization of the outstanding Common Shares), or in the case of any
sale or conveyance to another corporation or entity of the property of the Company as an entirety
or substantially as an entirety in connection with which the Company is dissolved, the Holder of
this Purchase Option shall have the right thereafter (until the expiration of the right of exercise
of this Purchase Option) to receive upon the exercise hereof, for the same aggregate Exercise Price
payable hereunder immediately prior to such event, the kind and amount of shares or other
securities or property (including cash) receivable upon such reclassification, reorganization,
merger or consolidation, or upon a dissolution following any such sale or transfer, by a Holder of
the number of Common Shares of the Company obtainable upon exercise of this Purchase Option and the
underlying Warrants immediately prior to such event; and if any reclassification also results in a
change in Common Shares covered by Section 6.1.1 or 6.1.3, then such adjustment shall be made
pursuant to Sections 6.1.1, 6.1.3 and this Section

          6.1.4. The provisions of this Section 6.1.4 shall similarly apply to successive
reclassifications, reorganizations, mergers or consolidations, sales or other transfers.

          6.1.5 CHANGES IN FORM OF PURCHASE OPTION. This form of Purchase Option need not be
changed because of any change pursuant to this Section, and Purchase Options issued after such
change may state the same Exercise Price and the same number of Units as are stated in the Purchase
Options initially issued pursuant to this Agreement. The acceptance by any Holder of the issuance
of new Purchase Options reflecting a required or permissive change shall not be deemed to waive any
rights to an adjustment occurring after the Commencement Date or the computation thereof.

          6.1.6 ADJUSTMENTS OF WARRANTS. To the extent the price of the Warrants are lowered
pursuant to Section 3.1 of the Warrant Agreement, dated __________, 2007, between the Company and
Continental Stock Transfer & Trust Company (the “WARRANT AGREEMENT”) the price of the Warrants
underlying the Purchase Option shall be reduced on identical percentage terms. To the extent the
duration of the Warrants is extended pursuant to Section 3.2 of the Warrant Agreement, the duration
of the Warrants underlying the Purchase Option shall be extended on identical terms.

     6.2 SUBSTITUTE PURCHASE OPTION. In case of any consolidation of the Company with,
or merger of the Company with, or merger of the Company into, another corporation (other than a
consolidation or merger which does not result in any reclassification or change of the outstanding
Common Shares), the corporation formed by such consolidation or merger shall execute and deliver to
the Holder a supplemental Purchase Option providing that the holder of each Purchase Option then
outstanding or to be outstanding shall have the right thereafter (until the stated expiration of
such Purchase Option) to receive, upon exercise of such Purchase Option, the kind and amount of
shares and other securities and property receivable upon such consolidation or merger, by a holder
of the number of Common Shares of the Company for which such Purchase Option might have been
exercised immediately prior to such consolidation, merger, sale or transfer. Such supplemental
Purchase Option shall provide for adjustments which shall be identical to the adjustments provided
in Section 6. The above provision of this Section shall similarly apply to successive
consolidations or mergers.

     6.3 ELIMINATION OF FRACTIONAL INTERESTS. The Company shall not be required to issue
certificates representing fractions of Common Shares or Warrants upon the exercise of the Purchase
Option, nor shall it be required to issue scrip or pay cash in lieu of any fractional interests, it
being the intent of the parties that all fractional interests shall be eliminated by rounding any
fraction up

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or down to the nearest whole number of Warrants, Common Shares or other securities, properties
or rights.

7. RESERVATION AND LISTING. The Company shall at all times reserve and keep available
out of its authorized Common Shares, solely for the purpose of issuance upon exercise of the
Purchase Options or the Warrants underlying the Purchase Option, such number of Common Shares or
other securities, properties or rights as shall be issuable upon the exercise thereof. The Company
covenants and agrees that, upon exercise of the Purchase Options and payment of the Exercise Price
therefor, all Common Shares and other securities issuable upon such exercise shall be duly and
validly issued, fully paid and non-assessable and not subject to preemptive rights of any
shareholder. The Company further covenants and agrees that upon exercise of the Warrants
underlying the Purchase Options and payment of the respective Warrant exercise price therefor, all
Common Shares and other securities issuable upon such exercise shall be duly and validly issued,
fully paid and non-assessable and not subject to preemptive rights of any shareholder. As long as
the Purchase Options shall be outstanding, the Company shall use its best efforts to cause all (i)
Units and Common Shares issuable upon exercise of the Purchase Options, (iii) Warrants issuable
upon exercise of the Purchase Options and (iv) Common Shares issuable upon exercise of the Warrants
included in the Units issuable upon exercise of the Purchase Option to be listed (subject to
official notice of issuance) on all securities exchanges (or, if applicable on the Nasdaq Global
Market, Capital Market, OTC Bulletin Board or any successor trading market) on which the Units, the
Common Shares or the Public Warrants issued to the public in connection herewith may then be listed
and/or quoted.

8. CERTAIN NOTICE REQUIREMENTS.

     8.1 HOLDER’S RIGHT TO RECEIVE NOTICE. Nothing herein shall be construed as
conferring upon the Holders the right to vote or consent as a shareholder for the election of
directors or any other matter, or as having any rights whatsoever as a shareholder of the Company.
If, however, at any time prior to the expiration of the Purchase Options and their exercise, any of
the events described in Section 8.2 shall occur, then, in one or more of said events, the Company
shall give written notice of such event at least fifteen days prior to the date fixed as a record
date or the date of closing the transfer books for the determination of the shareholders entitled
to such dividend, distribution, conversion or exchange of securities or subscription rights, or
entitled to vote on such proposed dissolution, liquidation, winding up or sale. Such notice shall
specify such record date or the date of the closing of the transfer books, as the case may be.
Notwithstanding the foregoing, the Company shall deliver to each Holder a copy of each notice given
to the other shareholders of the Company at the same time and in the same manner that such notice
is given to the shareholders.

     8.2 EVENTS REQUIRING NOTICE. The Company shall be required to give the notice
described in this Section 8 upon one or more of the following events: (i) if the Company shall take
a record of the holders of its Common Shares for the purpose of entitling them to receive a
dividend or distribution payable otherwise than in cash, or a cash dividend or distribution payable
otherwise than out of retained earnings, as indicated by the accounting treatment of such dividend
or distribution on the books of the Company, or (ii) the Company shall offer to all the holders of
its Common Shares any additional shares of share capital of the Company or securities convertible
into or exchangeable for shares of share capital of the Company, or any option, right or warrant to
subscribe therefor, or (iii) a dissolution, liquidation or winding up of the Company (other than in
connection with a consolidation or merger) or a sale of all or substantially all of its property,
assets and business shall be proposed.

     8.3 NOTICE OF CHANGE IN EXERCISE PRICE. The Company shall, promptly after an event
requiring a change in the Exercise Price pursuant to Section 6 hereof, send notice to the Holders
of such event and change (“PRICE NOTICE”). The Price Notice shall describe the event causing the
change

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and the method of calculating same and shall be certified as being true and accurate by the
Company’s President and Chief Financial Officer.

     8.4 TRANSMITTAL OF NOTICES. All notices, requests, consents and other
communications under this Purchase Option shall be in writing and shall be deemed to have been duly
made when hand delivered, or mailed by express mail or private courier service: (i) if to the
registered Holder of the Purchase Option, to the address of such Holder as shown on the books of
the Company, or (ii) if to the Company, to the following address or to such other address as the
Company may designate by notice to the Holders:

	 	 	 
	 

	 	TM Entertainment and Media, Inc.

307 East 87th Street

New York, New York 10128

Attn: Theodore S. Green, Chairman and Chief Executive Officer

Facsimile: (___) ___-___

9. MISCELLANEOUS.

     9.1 AMENDMENTS. The Company and Pali may from time to time supplement or amend this
Purchase Option without the approval of any of the Holders in order to cure any ambiguity, to
correct or supplement any provision contained herein that may be defective or inconsistent with any
other provisions herein, or to make any other provisions in regard to matters or questions arising
hereunder that the Company and Pali may deem necessary or desirable and that the Company and Pali
deem shall not adversely affect the interest of the Holders. All other modifications or amendments
shall require the written consent of and be signed by the party against whom enforcement of the
modification or amendment is sought.

     9.2 HEADINGS. The headings contained herein are for the sole purpose of convenience
of reference, and shall not in any way limit or affect the meaning or interpretation of any of the
terms or provisions of this Purchase Option.

     9.3 ENTIRE AGREEMENT. This Purchase Option (together with the other agreements and
documents being delivered pursuant to or in connection with this Purchase Option) constitutes the
entire agreement of the parties hereto with respect to the subject matter hereof, and supersedes
all prior agreements and understandings of the parties, oral and written, with respect to the
subject matter hereof.

     9.4 BINDING EFFECT. This Purchase Option shall inure solely to the benefit of and
shall be binding upon, the Holder and the Company and their permitted assignees, respective
successors, legal representative and assigns, and no other person shall have or be construed to
have any legal or equitable right, remedy or claim under or in respect of or by virtue of this
Purchase Option or any provisions herein contained.

     9.5 GOVERNING LAW; SUBMISSION TO JURISDICTION. This Purchase Option shall be
governed by and construed and enforced in accordance with the laws of the State of New York,
without giving effect to conflict of laws. The Company hereby agrees that any action, proceeding
or claim against it arising out of, or relating in any way to this Purchase Option shall be brought
and enforced in the courts of the State of New York or of the United States of America for the
Southern District of New York, and irrevocably submits to such jurisdiction, which jurisdiction
shall be exclusive. The Company hereby waives any objection to such exclusive jurisdiction and
that such courts represent an inconvenient forum. Any process or summons to be served upon the
Company may be served by transmitting a copy thereof by registered or certified mail, return
receipt requested, postage prepaid,

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addressed to it at the address set forth in Section 8 hereof. Such mailing shall be deemed
personal service and shall be legal and binding upon the Company in any action, proceeding or
claim. The Company and the Holder agree that the prevailing party(ies) in any such action shall be
entitled to recover from the other party(ies) all of its reasonable attorneys’ fees and expenses
relating to such action or proceeding and/or incurred in connection with the preparation therefor.

     9.6 WAIVER, ETC. The failure of the Company or the Holder to at any time enforce
any of the provisions of this Purchase Option shall not be deemed or construed to be a waiver of
any such provision, nor to in any way affect the validity of this Purchase Option or any provision
hereof or the right of the Company or any Holder to thereafter enforce each and every provision of
this Purchase Option. No waiver of any breach, non-compliance or non-fulfillment of any of the
provisions of this Purchase Option shall be effective unless set forth in a written instrument
executed by the party or parties against whom or which enforcement of such waiver is sought; and no
waiver of any such breach, non-compliance or non- fulfillment shall be construed or deemed to be a
waiver of any other or subsequent breach or non-compliance.

     9.7 EXCHANGE AGREEMENT. As a condition of the Holder’s receipt and acceptance of
this Purchase Option, Holder agrees that, at any time prior to the complete exercise of this
Purchase Option by Holder, if the Company and Pali enter into an agreement (“EXCHANGE AGREEMENT”)
pursuant to which they agree that all outstanding Purchase Options will be exchanged for securities
or cash or a combination of both, then Holder shall agree to such exchange and become a party to
the Exchange Agreement.

-14-

 

     IN WITNESS WHEREOF, the Company has caused this Purchase Option to be signed by its duly
authorized officer as of the ___day of __________2007.

	 	 	 	 	 
	 	TM ENTERTAINMENT AND MEDIA, INC.

 	 
	 	By:  	
 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 

-15-

 

	 	 	 	 	 

Form to be used to exercise Purchase Option:

TM Entertainment and Media, Inc.

307 East 87th Street

New York, New York 10128

Attn: Theodore S. Green, Chairman and Chief Executive Officer

Facsimile: (___) ___-___

Date:_________________, 20__

     The undersigned hereby elects irrevocably to exercise all or a portion of the within Purchase
Option and to purchase __________Units of TM Entertainment and Media, Inc. and hereby makes payment of
$__________(at the rate of $  per Unit) in payment of the Exercise Price pursuant thereto.
Please issue the Common Shares and Warrants as to which this Purchase Option is exercised in
accordance with the instructions given below.

     or

     The undersigned hereby elects irrevocably to convert its right to purchase __________Units
purchasable under the within Purchase Option by surrender of the unexercised portion of the
attached Purchase Option (with a “Value” of $__________based on a “Market Price” of $__________).
Please issue the securities comprising the Units as to which this Purchase Option is exercised in
accordance with the instructions given below.

     NOTICE: The signature to this assignment must correspond with the name as written upon the
face of the purchase option in every particular, without alteration or enlargement or any change
whatever.

 

Signature(s) Guaranteed:

     THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION (BANKS,
STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH MEMBERSHIP IN AN APPROVED
SIGNATURE GUARANTEE MEDALLION PROGRAM, PURSUANT TO S.E.C. RULE 17Ad-15).

INSTRUCTIONS FOR REGISTRATION OF SECURITIES

Name

 

 

(Print in Block Letters)

Address

 

 

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Form to be used to assign Purchase Option:

ASSIGNMENT

(To be executed by the registered Holder to effect a transfer of the within Purchase Option):

     FOR
VALUE RECEIVED,__________does hereby sell, assign and transfer
unto__________the right to purchase __________Units of TM Entertainment and Media,
Inc. (“COMPANY”) evidenced by the within Purchase Option and does hereby authorize the Company to
transfer such right on the books of the Company.

Dated:___________________, 20__

 

Signature

NOTICE: The signature to this assignment must correspond with the name as written upon the face of
the purchase option in every particular, without alteration or enlargement or any change whatever.

 

Signature(s) Guaranteed:

THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION (BANKS, STOCKBROKERS,
SAVINGS AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE
MEDALLION PROGRAM, PURSUANT TO S.E.C. RULE 17Ad-15).

-17-

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