Document:

AGREEMENT

     

    This
AGREEMENT, dated as of December 18, 2009 (this “Agreement”), is by
and among HIGHBURY FINANCIAL INC., a Delaware corporation (the “Company”), PEERLESS
SYSTEMS CORPORATION, a Delaware corporation (“Peerless”), and
TIMOTHY E. BROG (Mr. Brog and Peerless are collectively referred to herein as
the “Peerless
Parties”).

     

    WHEREAS,
the Company has filed with the Securities and Exchange Commission (the “SEC”) and mailed to
the stockholders of the Company definitive proxy materials for use in connection
with the Company’s 2009 annual meeting of stockholders (the “Annual Meeting”), in
which the Board of Directors of the Company (the “Board of Directors”)
has proposed to elect two candidates nominated by the Board of Directors,
Messrs. Hoyt Ammidon Jr. and John D. Weil (collectively, the “Company Nominees”),
to the Board of Directors, each to serve as a director for a term of three years
expiring in 2012 (the “Company
Proposal”);

     

    WHEREAS,
the Peerless Parties have filed with the SEC and mailed to the stockholders of
the Company definitive proxy materials for use in connection with the Annual
Meeting, in which the Peerless Parties have proposed, among other things, to
(i) elect
Mr. Brog to the Board of Directors to serve as a director for a term of three
years expiring in 2012, (ii) adopt a
non-binding resolution that the Board of Directors amend the certificate of
incorporation and the bylaws of the Company to eliminate the classified Board of
Directors and (iii) adopt a
non-binding resolution that the Board of Directors immediately redeem all rights
under the Rights Agreement, dated as of August 10, 2009, between the Company and
Continental Stock Transfer & Trust Company, and that the Board of Directors
obtain prior stockholder approval of any future implementation of a shareholder
rights plan (the proposals described in items (i) through (iii) above,
collectively, the “Peerless
Proposals”);

     

    WHEREAS,
the Company has solicited proxies from the stockholders of the Company to vote
for the Company Proposal, and the Peerless Parties have solicited proxies from
the stockholders of the Company to vote for the Peerless Proposals (such
solicitation of proxies by the Company and the Peerless Parties to vote for
their respective proposals submitted to the Annual Meeting is referred to herein
as the “Proxy
Contest”); and

     

    WHEREAS,
the Company has entered into an Agreement and Plan of Merger, dated as of
December 12, 2009 (as the same may be amended or supplemented, the “Merger Agreement”),
with Affiliated Managers Group, Inc., a Delaware corporation (“Parent”), and Manor
LLC, a Delaware limited liability company and a wholly owned subsidiary of
Parent (“Merger
Sub”), pursuant to which the Company will merge with and into Merger Sub
(the “Merger”),
with Merger Sub continuing as the surviving company and a wholly owned
subsidiary of Parent following the Merger, all in accordance with the terms and
subject to the conditions set forth in the Merger Agreement.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    NOW,
THEREFORE, in consideration of and reliance upon the mutual covenants and
agreements contained herein, and for other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the parties hereto
agree as follows:

     

    Section
1. 
Board
Composition.  Subject to the terms and conditions set forth in
this Agreement, the Company hereby agrees that if (a) the Merger and the
other transactions contemplated by the Merger Agreement are not consummated on
or prior to July 16, 2010, or (b) the Merger
Agreement has been terminated by any of the parties thereto, then as promptly
thereafter as reasonably practicable, the Board of Directors, at a duly convened
meeting, shall adopt such resolutions, and shall take all other necessary action
in accordance with the certificate of incorporation and the bylaws of the
Company, as necessary to increase the size of the Board of Directors and to
appoint Mr. Brog to serve as a director of the Company for a term expiring at
the 2012 annual meeting of stockholders of the Company, or until his successor
is duly elected and has qualified, provided, however, that if the
Merger is consummated Mr. Brog will resign as a director of the Company as of
the effective time of the Merger.

     

    Section
2. 
Termination of Proxy
Contest; Withdrawal of Request for Stockholders List.

     

    (a)           Immediately
following the execution and delivery of this Agreement by the parties
hereto:

     

    (i)           the
Peerless Parties shall cease all efforts, direct or indirect, in furtherance of
the Proxy Contest and any related solicitation of proxies in connection with the
Annual Meeting, and shall not vote, deliver or otherwise use any proxies
heretofore obtained by the Peerless Parties from any stockholders of the Company
in connection with the Proxy Contest; and

     

    (ii)           the
Company shall cease all direct or indirect negative solicitation efforts
relating to the Annual Meeting concerning the Peerless Parties and their
respective Affiliated Persons.

     

    (b)           Each
of the Peerless Parties hereby agrees that (i) such Peerless
Party shall, or shall cause the holder or holders of record of the Company
Voting Securities held by such Peerless Party (collectively, the “Peerless Securities”)
on the record date for the Annual Meeting to, vote (or cause to be voted) all of
the Peerless Securities at the Annual Meeting, or at any adjournment thereof, in
favor of the election of each of the Company Nominees to the Board of Directors,
and (ii) the
Peerless Parties shall refrain from taking (and refrain from causing others to
take) any action necessary to properly present any of the Peerless Proposals at
the Annual Meeting.

     

    
      
        
        

      

      
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    (c)           The
Peerless Parties hereby irrevocably withdraw their demand for a stockholder list
and other materials previously made pursuant to Section 220 of the Delaware
General Corporation Law or otherwise, and shall promptly return to the Company
all materials and summaries or duplicates thereof that have been delivered to
the Peerless Parties or their respective representatives prior to the date
hereof.

     

    Section
3. 
Standstill.  Except
as required under this Agreement, during the period commencing on the date
hereof and ending upon the termination of this Agreement (the “Standstill Period”),
each of the Peerless Parties hereby agrees that, without the prior approval of
the Board of Directors (as evidenced by a formal resolution adopted by the Board
of Directors and recorded in its minutes), it or he shall not, and it or he
shall cause their respective Affiliated Persons not to, directly or
indirectly:

     

    (a)           acquire,
offer to acquire, agree to acquire, become the beneficial owner of or obtain any
rights in respect of any Company Voting Securities;

     

    (b)           solicit
proxies, assist any other Person in any way, directly or indirectly, in the
solicitation of proxies, or otherwise become a “participant” in a “solicitation”
or assist any “participant” in a “solicitation” (as such terms are defined in
Rule 14a-1 of Regulation 14A under the Exchange Act, as in effect on the date of
this Agreement) in opposition to any recommendation or proposal of the Board of
Directors, or submit any proposal for the vote of stockholders of the Company
(or any successor thereof) or recommend or request or induce or attempt to
induce any other Person to take any such action, or seek to advise, encourage or
influence any other Person with respect to the voting of Company Voting
Securities (including, without limitation, by seeking written authorization or
consent of holders of Company Voting Securities);

     

    (c)           join
in or in any other way participate in a pooling agreement, syndicate, voting
trust or other Group with respect to Company Voting Securities or otherwise act
in concert with any other Person, for the purpose of acquiring, holding, voting
or disposing of Company Voting Securities;

     

    (d)           take
any action, alone or in concert with any other Person, to (i) seek to effect a
change in control of the Company, its successors of any of their Affiliated
Persons, (ii)
seek to effect a Reorganization Transaction (other than the Merger) with respect
to the Company, (iii) seek to effect
any control or influence over the management of the Company, its successors or
any of its Affiliated Persons, the Board of Directors or the policies of the
Company, its successor or any of its Affiliated Persons, (iv) advise, assist or
encourage or finance (or assist or arrange financing to or for) any other Person
in connection with any of the matters restricted by, or to otherwise seek to
circumvent the limitations of the provisions of, this Section 3 (any such action
described in clauses (i) through (iv) of this Section 3(d), a “Company Transaction
Proposal”), (v) publicly suggest
or announce its willingness or desire to engage in a transaction or group of
transactions or have another Person engage in a transaction or group of
transactions that would result in a Company Transaction Proposal, (vi) initiate,
request, induce, encourage or attempt to induce or give encouragement to any
other Person to initiate, or otherwise provide assistance to any Person who has
made or is contemplating making, any proposal that can reasonably be expected to
result in a Company Transaction Proposal, or (vii) request a
waiver, modification or amendment of any provisions of this Section
3;

     

    
      
        
        

      

      
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    provided, however, that nothing
in this Section 3 shall prohibit the Peerless Parties from making a confidential
proposal to the Special Committee of the Board of Directors that the Peerless
Parties reasonably believe constitutes a Superior Proposal (as defined in the
Merger Agreement).

     

    Section
4. 
Voting
Agreement.  Each of the Peerless Parties hereby agrees that
until this Agreement is terminated in accordance with its terms, such Peerless
Party shall, or shall cause the holder or holders of record of the Peerless
Securities on any applicable record date to, be present for quorum purposes and
vote (or cause to be voted) all of the Peerless Securities at any annual or
special meeting, or at any adjournment thereof or pursuant to any consent of the
stockholders of the Company, in lieu of a meeting or otherwise, in accordance
with the recommendation of the Board of Directors with respect to the Merger
Agreement and the transactions contemplated thereby, including the Merger, provided that there
is no change in the material terms from those in effect on December 12,
2009.

     

    Section
5. 
Waiver of Appraisal
Rights.  Each of the Peerless Parties hereby agrees not to
exercise any appraisal rights or dissenter’s rights in respect of any shares of
capital stock or other securities of the Company that such Peerless Party may be
entitled to with respect to the Merger.

     

    Section
6. 
Release and Covenant Not to
Sue.

     

    (a)           Each
of the Peerless Parties, in any and all capacities (including as a stockholder,
employee, officer, director, consultant or service provider of the Company or
any of its subsidiaries), for itself and for each of its affiliates,
stockholders, directors, officers, employees, agents, representatives,
successors and assigns, past, present and future (collectively, and including
the Peerless Parties, the “Releasing Persons”),
hereby agrees and confirms as follows:

     

    
      
        
        

      

      
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    (i)           effective
from and after the date of this Agreement, it hereby forever and fully releases
and discharges the Company and each of its affiliates, controlling persons,
directors, officers, stockholders, employees, agents, representatives, heirs,
assigns, executors, administrators, predecessors and successors, past, present
and future, in each case, both individually and in their official capacities
(collectively, and including the Company, the “Released Persons”),
and agrees to hold each Released Person harmless from, any and all rights,
claims, warranties, demands, debts, obligations, liabilities, costs, attorneys’
fees, expenses, suits, losses, damages, judgments, suits, issues and causes of
action of any kind or nature whatsoever (collectively, “Claims”), whether
known or unknown, suspected or unsuspected, matured or unmatured, contingent or
absolute, hidden or concealed, regarding any matter whatsoever, that such
Releasing Person has, could have, or in the future can or might assert in any
court, tribunal or proceeding against any Released Person, and that have arisen,
could have arisen, arise now, or hereafter arise out of any event, occurrence,
or circumstance taking place on or prior to the date of signing of this
Agreement; provided, however, that if a
class-action lawsuit arising from events on or before the date of signing of
this Agreement were to be filed on behalf of present or former Company
stockholders without any direct or indirect involvement, instigation, or
participation by any Peerless Party, then nothing in this release shall be
deemed to prevent any Peerless Party from receiving its proportionate share of
any benefit that may accrue to current or former Company stockholders by virtue
of such class action lawsuit; and

     

    (ii)           from
and after the date of this Agreement, (A) none of the
Peerless Parties or any of their respective affiliates shall, without the prior consent of the Company, instigate, solicit,
assist, intervene in, or otherwise voluntarily participate in any litigation or
arbitration in which the Company, or any of its directors or officers, are named
as parties with respect to any Claim arising out of any event, occurrence, or
circumstance taking place on or prior to the date of signing of this Agreement;
provided that
the foregoing shall not prevent any Peerless Party or any of their respective
Affiliated Persons and other affiliates from responding to a validly issued
legal process, and (B) the Peerless
Parties agree to give the Company at least five (5) business days notice of the
receipt of any legal process requesting information regarding the Company or any
of its directors or officers.

     

    (b)           The
Company in any and all capacities, for itself and for each of its affiliates,
stockholders, directors, officers, employees, agents, representatives,
successors and assigns, past, present and future (collectively, and including
the Company, the “Company Releasing
Persons”), hereby agrees and confirms as follows:

     

    
      
        
        

      

      
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    (i)           effective
from and after the date of this Agreement, it hereby forever and fully releases
and discharges each of the Peerless Parties, and each of their respective
affiliates, controlling persons, directors, officers, stockholders, employees,
agents, representatives, heirs, assigns, executors, administrators, predecessors
and successors, past, present and future, in each case, both individually and in
their official capacities (collectively, and including Peerless and Mr. Brog,
the “Company Released
Persons”), and agrees to hold each Company Released Person harmless from,
any and all  Claims, whether known or unknown, suspected or
unsuspected, matured or unmatured, contingent or absolute, hidden or concealed,
regarding any matter whatsoever, that such Company Releasing Person has, could
have, or in the future can or might assert in any court, tribunal or proceeding
against any Company Released Person, and that have arisen, could have arisen,
arise now, or hereafter arise out of any event, occurrence, or circumstance
taking place on or prior to the date of signing of this Agreement;
and

     

    (ii)           from
and after the date of this Agreement, (A) neither the
Company nor any of its affiliates shall, without the prior consent of Peerless,
instigate, solicit, assist, intervene in, or otherwise voluntarily participate
in any litigation or arbitration in which the Peerless Parties , or any of their
respective directors or officers, are named as parties with respect to any Claim
arising out of any event, occurrence, or circumstance taking place on or prior
to the date of signing of this Agreement; provided that the
foregoing shall not prevent the Company or any of its Affiliated Persons and
other affiliates from responding to a validly issued legal process, and (B) the Company
agrees to give Peerless at least five (5) business days notice of the receipt of
any legal process requesting information regarding the Peerless Parties or any
of their respective directors or officers.

     

    (c)           Each
of the parties hereby represents that (i) it has had
sufficient time to consider this release of claims and to consult with an
attorney or any other person of its choosing prior to signing this Agreement,
(ii) it is
signing this Agreement voluntarily and with a full understanding of its terms
and (iii) in
signing this Agreement (and the release of claims included herein), it has not
relied on any promises or representations, express or implied, that are not set
forth expressly in the Agreement.

     

    Section
7. 
Non-Disparagement.  From
and after the date hereof, none of the parties hereto or any of their respective
Affiliated Persons, affiliates, directors, officers, stockholders, employees,
agents or representatives shall make, or cause to be made, any statement or
announcement that relates to and constitutes an ad hominem attack on, or
relates to and otherwise disparages, the other parties hereto or any of their
respective affiliates, directors, officers, stockholders, employees, agents or
representatives, past, present or future, in any document or report filed with
or furnished to the SEC or any other governmental agency, in any press release
or other publicly available format, or to any journalist or member of the media
(including, without limitation, in any television, radio, newspaper or magazine
interview).

     

    
      
        
        

      

      
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    Section
8. 
Expenses.  The
Company hereby agrees to pay to Peerless $200,000 to reimburse it for its
expenses incurred in connection with the Proxy Contest.  The Company
agrees to pay such amount to Peerless within three (3) business days after the
date hereof, by wire transfer of immediately available funds to an account
designated by Peerless in writing.

     

    Section
9. 
Public
Announcement.  Each of the parties hereto may announce the
execution and delivery by the parties of this Agreement and the material terms
hereof by means of a press release, each of which shall be in form and substance
reasonably acceptable to the other party hereto (it being understood that each
party may include such press release in any document or report filed with or
furnished to the SEC).  The parties shall use reasonable efforts to
make such announcement on the same date and at the same time, unless otherwise
required by applicable law.  Neither the Company nor the Peerless
Parties shall make any public announcement or statement that is inconsistent
with or contrary to the statements made in the press release described in the
preceding sentence of this Section 9, except (i) with the prior
written consent of the other party or (ii) as required by
applicable law or the rules of any stock exchange on which such party’s
securities are traded; provided that in the case of clause (ii), the disclosing
party shall use reasonable efforts to provide the other parties with an
opportunity to review such announcement prior to its release to the extent
feasible in complying with applicable law.

     

    Section
10. 
Miscellaneous.

     

    (a)           Certain
Definitions.

     

    (i)           “Affiliated Person”
shall mean with respect to any Person, (A) such Person’s
“immediate family” as defined in Rule 16a-1 under the Exchange Act, (B) any other Person
of which such Person or his “immediate family”, individually or collectively,
owns a majority of the voting securities (or in the case of a limited liability
company or partnership, a majority of the economic interest or limited
partnership interests, respectively, or, in the case of a trust, act as trustee
or is a majority economic beneficiary of such trust), and (C) any fund or
collectively investment vehicle in which such Person or any of the Persons
described in clauses (A) or (B) hereof is a advisor, general partner, managing
member or manager.

     

    
      
        
        

      

      
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    (ii)           “Company Voting
Securities” shall mean, collectively, (A) any shares of
capital stock of the Company entitled to vote generally for the election of the
directors of the Company during the term of this Agreement and (B) any other
securities, warrants or options or rights of any nature (whether or not issued
by the Company) that are convertible into, exchangeable for, or exercisable for,
or otherwise give the holder thereof any rights in respect of (whether or not
subject to the passage of time, contingencies or  contractual
restrictions of any combination thereof), any security described in clause (A)
of this definition.

     

    (iii)           
“Exchange Act”
shall mean the Securities Exchange Act of 1934, as amended.

     

    (iv)           “Group” shall mean two
or more Persons acquiring, holding, voting or disposing of securities which
would constitute a “person” within the meaning of Section 13(d)(3) of the
Exchange Act.

     

    (v)           “Person” shall mean an
individual, partnership, corporation, business trust, joint stock company,
trust, unincorporated association, joint venture or other entity of whatever
nature.

     

    (vi)           “Reorganization
Transaction” shall mean (A) any merger,
consolidation, recapitalization, liquidation or other business combination
transaction involving the Company or any of its subsidiaries (or any successors
to any of such entities), (B) any tender offer
or exchange offer for any securities of the Company or any of its subsidiaries
(or any successors to any of such entities) or (C) any sale or other
disposition of assets of the Company or any of its subsidiaries (or any
successors to any of such entities) in a single transaction or in a series of
related transactions in each of the foregoing cases constituting individually or
in the aggregate 5% or more of the assets of the Company (or any successor) or
5% or more of the then outstanding Company Voting Securities.

     

    (b)           Specific
Performance.  Each of the parties hereto acknowledges that the
other parties hereto will be irreparably harmed by any violations of any of the
covenants or agreements of such party that are contained in this Agreement, and
that there will be no adequate remedy at law for such violations.  It
is accordingly agreed that, in addition to any other remedies which may be
available to any of the parties hereto upon the breach by any other party hereto
of such covenants and agreements, such party shall have the right to obtain
injunctive relief to restrain any breach or threatened breach of such covenants
or agreements or otherwise to obtain specific performance of any of such
covenants or agreements.

     

    (c)           Termination.  This
Agreement and all obligations hereunder shall terminate upon the earliest to
occur of (i)
mutual agreement of the Company and the Peerless Parties, (ii) the consummation
of the Merger, (iii) August 13, 2010
or (iv) the
termination of the Merger Agreement; provided, however, that the
obligations set forth in Section 6 shall survive and continue in full force and
effect following any such termination.  If following the date hereof,
(i) the Company
has breached in any material respect any of its covenants or agreements set
forth herein, (ii) the Peerless
Parties have provided written notice of such breach to the Company and (iii) such breach has
not been cured within 30 days of delivery of such notice, all obligations of
Peerless Parties hereunder (except under Section 6) shall
terminate.  If following the date hereof, (i) the Peerless
Parties have breached in any material respect any of their covenants or
agreements set forth herein, (ii) the Company has
provided written notice of such breach to the Peerless Parties and (iii) such breach has
not been cured within 30 days of delivery of such notice, all obligations of the
Company hereunder (except under Section 6) shall terminate.

     

    
      
        
        

      

      
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    (d)           Binding
Effect.  This Agreement shall be binding upon and inure to the
benefit of and be enforceable by the parties hereto and their respective
representatives and permitted successors and assigns.

     

    (e)           Entire
Agreement.  This Agreement contains the entire understanding of
the parties and supersedes all prior agreements and understandings between the
parties with respect to its subject matter.  This Agreement may be
amended only by a written instrument duly executed by the parties
hereto.

     

    (f)           Headings.  The
headings contained in this Agreement are for reference purposes only and shall
not affect in any way the meaning or interpretation of this
Agreement.

     

    (g)           Assignment.  No
party may assign either this Agreement or any of its rights, interests, or
obligations hereunder without the prior written approval of the other
parties.

     

    (h)           Counterparts.  This
Agreement may be executed in one or more counterparts (including by facsimile or
by an electronic scan delivered by electronic mail), each of which shall be an
original, but each of which together shall constitute one and the same
Agreement.

     

    (i)           Notices.  All
notices and other communications hereunder shall be in writing and shall be
deemed duly given (i) on the date of
delivery if delivered personally, or by facsimile, upon confirmation of receipt,
(ii) on the
first business day following the date of dispatch if delivered by a recognized
next-day courier service, or (iii) on the fifth business day following the date
of mailing if delivered by registered or certified mail, return receipt
requested, postage prepaid.  All noticed hereunder shall be delivered
as set forth below, or pursuant to such other instructions as may be designated
in writing by the party to receive such notice:

     

    
      
        
        

      

      
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              (A)

            	
              if
      to the Company, to:

            
	 	 
	 
      	
              Highbury
      Financial Inc.

            
	 
      	
              999
      18th Street

            
	 
      	
              Suite
      3000

            
	 
      	
              Denver,
      Colorado 80202

            
	 
      	
              Attention:
      Chief Financial Officer

            
	 
      	
              Facsimile
      No.: 646-224-8222

            
	 
      	 
      
	 
      	
              with
      a copy to:

            
	 
      	 
      
	 
      	
              Bingham
      McCutchen LLP

            
	 
      	
              399
      Park Avenue

            
	 
      	
              New
      York, New York 10022

            
	 
      	
              Attention:
      Floyd I. Wittlin

            
	 
      	
              Facsimile
      No.: 212-752-5378

            
	 
      	 
      
	 
      	
              with
      a copy to:

            
	 
      	 
      
	 
      	
              Debevoise
      & Plimpton LLP

            
	 
      	
              919
      Third Avenue

            
	 
      	
              New
      York, New York 10022

            
	 
      	
              Attention:
      Michael W. Blair

            
	 
      	
              Facsimile
      No.: 212-521-7531

            
	 
      	 
      
	
              (B)

            	
              If
      to the Peerless Parties, to:

            
	 	 
	 
      	
              Peerless
      Systems Corporation

            
	 
      	
              2361
      Rosecrans Ave.

            
	 
      	
              Suite
      440

            
	 
      	
              El
      Segundo, CA 90245

            
	 
      	
              Attention:
      William Neil

            
	 
      	
              Facsimile
      No.: 310-536-0058

            
	 
      	 
      
	 
      	
              with
      a copy to:

            
	 	 
	 
      	
              Timothy
      Brog

            
	 
      	
              2
      Coventry Lane

            
	 
      	
              Riverside,
      CT 06878

            
	 
      	
              Facsimile
      No.: 310-536-0058

            

    

    

    Any party
may by notice given in accordance with this Section 10(i) to the other parties
to designate updated information for notices hereunder.

     

    
      
        
        

      

      
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    (j)           Governing
Law.  This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of Delaware, without regard to
its principles of conflicts of laws.

     

    (k)           Waiver of Jury
Trial.  EACH PARTY HERETO IRREVOCABLY WAIVES ANY AND ALL RIGHT
TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATED TO THIS
AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.

     

    (l)           Enforceability.  The
invalidity or unenforceability of any provision or provisions of this Agreement
shall not affect the validity or enforceability of any other provision of this
Agreement, which shall remain in full force and effect.  Upon a
determination that any term or other provision is invalid, illegal or incapable
of being enforced, the parties hereto will negotiate in good faith to modify
this Agreement so as to effect the original intent of the parties as closely as
possible in an acceptable manner to the end that the transactions contemplated
hereby are fulfilled to the fullest extent possible and, absent agreement among
the parties, a court is authorized to so modify this Agreement.

     

    (m)           Notice of
Proposals.  Nothing in this Agreement shall prohibit the
Peerless Parties from giving notice to the Company during the term of this
Agreement relating to the nomination of directors or any other matter as to
which a stockholder of the Company may properly make a proposal at the 2010
annual meeting of stockholders, provided, however, that such
notice may not be given prior to the tenth day preceding the latest date it is
required to be given in order to be considered timely under the Company’s
advance notice by-law provisions.

     

    

     

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    IN
WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed as of the day and year first above written.

    

    
      
        
          	 	
                  HIGHBURY
      FINANCIAL INC.

                
	 	 
      
	 	 
      
	 	
                  By: 
      /s/ R. Bradley
      Forth

                
	 	
                  Name:
      R. Bradley Forth

                
	 	
                  Title:
      EVP & CFO

                
	 	 
      
	 	 
      
	 	
                  PEERLESS
      SYSTEMS COPORATION

                
	 	 
      
	 	 
      
	 	
                  By: 
      /s/ Timothy
      Brog

                
	 	
                  Name:
      Timothy Brog

                
	 	
                  Title:
      Chairman of the Board

                
	 	 
      
	 	 
      
	 	
                  TIMOTHY
      E. BROG

                
	 	
                  /s/
      Timothy BrogTHIS WARRANT AND THE SHARES OF COMMON STOCK
ISSUABLE UPON ANY EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY APPLICABLE STATE
SECURITIES LAWS AND MAY NOT BE SOLD OR OTHERWISE TRANSFERRED TO ANY PERSON,
INCLUDING A PLEDGEE, UNLESS (1) EITHER (A) A REGISTRATION STATEMENT
WITH RESPECT THERETO SHALL BE EFFECTIVE UNDER THE SECURITIES ACT, OR
(B) THE COMPANY SHALL HAVE RECEIVED AN OPINION OF COUNSEL SELECTED BY THE
HOLDER, IN A GENERALLY ACCEPTABLE FORM, THAT AN EXEMPTION FROM REGISTRATION
UNDER THE SECURITIES ACT IS AVAILABLE, AND (2) THERE  SHALL HAVE
BEEN COMPLIANCE WITH ALL APPLICABLE STATE SECURITIES OR “BLUE SKY” LAWS. THIS
WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON ANY EXERCISE HEREOF MAY BE
PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY
SUCH SECURITIES.

     

    

               Date
of Issuance: [____], 2009

    

    
      	
              No. ____________

            	
              For
      the Purchase

            

    

    of  [____]
shares

    of Common
Stock

    

    

    WARRANT
TO PURCHASE

    COMMON
STOCK

    OF

    ZOO
ENTERTAINMENT, INC.

    (A
DELAWARE CORPORATION)

    

    

    ZOO
ENTERTAINMENT, INC., a Delaware corporation (the “Company”), for value received,
hereby certifies that [________] (including any designee, successor, or
assignee, the “Holder”), is entitled, subject to the terms set forth herein, to
purchase from the Company, at any time or from time to time on or after the date
hereof (the “Initial Exercise Date”) and at or before 5:00 p.m. New York
City time on [_____], 2014 (the “Expiration Date”), [_____] shares of Common
Stock, par value $0.001 per share, of the Company (the “Common Stock”), at a
purchase price per share equal to $0.01 per share (the “Exercise Price”). The
shares of stock issuable upon exercise of this Warrant, and the purchase price
per share, are hereinafter referred to as the “Warrant Stock” or “Warrant
Shares”, and the “Purchase Price,” respectively.

     

    This
Warrant is being issued pursuant to a Securities Purchase Agreement and a
Registration Rights Agreement between the Company and the initial Holder, each
dated as of the date hereof (together with this Warrant and the other documents
contemplated hereby and thereby, collectively, the “Transaction
Documents”).  Capitalized terms used and not defined herein shall have
the meanings set forth in the Purchase Agreement or the Registration Rights
Agreement as applicable.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    1.           Exercise.

     

    1.1           Manner of Exercise; Payment
in Cash.  This Warrant may be exercised by the Holder, in whole
or in part, at any time or times on or after the Initial Exercise Date and on or
before the Termination Date, by delivery to the Company of the purchase form
(the “Purchase Form”) appended hereto as Exhibit A duly
executed by the Holder, at the principal office of the Company, or at such other
place as the Company may designate, and, within three (3) Trading Days of the
date that such Purchase Form is delivered to the Company, the Company shall have
received the payment of the aggregate Purchase Price payable in respect of the
number of shares of Warrant Stock purchased upon such
exercise.  Payment of the Purchase Price shall be in cash or by
certified or official bank check payable to the order of the Company or by wire
transfer of immediately available funds, unless the exercise is cashless
pursuant to Section 1.4(a). Notwithstanding anything herein to the contrary, the
Holder shall not be required to physically surrender this Warrant to the Company
until the Holder has purchased all of the Warrant Shares available hereunder and
the Warrant has been exercised in full, in which case, the Holder shall
surrender this Warrant to the Company for cancellation within three
(3) Trading Days of the date the final Purchase Form is delivered to the
Company.  Partial exercises of this Warrant resulting in purchases of
a portion of the total number of Warrant Shares available hereunder shall have
the effect of lowering the outstanding number of Warrant Shares purchasable
hereunder in an amount equal to the applicable number of Warrant Shares
purchased.  The Holder and the Company shall maintain records showing
the number of Warrant Shares purchased and the date of such
purchases.  The Company shall deliver any objection to any Purchase
Form within three (3) Trading Days of receipt of such notice.  In
the event of any dispute or discrepancy, the records of the Holder shall be
controlling and determinative in the absence of manifest error. The Holder and
any assignee, by acceptance of this Warrant, acknowledge and agree that, by
reason of the provisions of this Section 1.1, following the purchase of a
portion of the Warrant Shares hereunder, the number of Warrant Shares available
for purchase hereunder at any given time may be less than the amount stated on
the face hereof.

     

    1.2           Effectiveness.  Each
exercise of this Warrant shall be deemed to have been effected immediately prior
to the close of business on the day on which the Purchase Form is delivered to
the Company as provided in Section 1.1 above.  At such time, the
Person or Persons in whose name or names any certificates for Warrant Stock
shall be issuable upon such exercise as provided in Section 1.3 below shall
be deemed to have become the holder or holders of record of the Warrant Stock
represented by such certificates.

     

    1.3           Exercise and Delivery of
Certificates.  As soon as practicable after the exercise of
this Warrant in full or in part, and in any event within ten (10) Business Days
thereafter, the Company, at its sole expense, will cause to be issued in the
name of, and delivered to, the Holder, or, subject to the terms and conditions
hereof, as such Holder (upon payment by such Holder of any applicable transfer
taxes) may direct:

     

    (a)           A
certificate or certificates for the number of full shares of Warrant Stock to
which such Holder shall be entitled upon such exercise plus, in lieu of any
fractional share to which such Holder would otherwise be entitled, cash in an
amount determined pursuant to Section 1.5 hereof; and

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    (b)           In
case such exercise is in part only, the Company’s records shall be adjusted as
provided in Section 1.1 above to reflect that this Warrant represents the
right to acquire the number of such shares called for on the face of this
Warrant minus the number of such shares purchased by the Holder upon such
exercise together with any previous exercise.

     

    (c)           In
lieu of delivering physical certificates for the Warrant Shares, provided the
Company’s Transfer Agent is participating in the Depository Trust Company
(“DTC”) Fast Automated Securities Transfer (“FAST”) program and that any legend
upon the certificates for the Warrant Shares shall have been removed pursuant to
the Purchase Agreement, upon request of the Holder, the Company shall use
commercially reasonable best efforts to cause its transfer agent to
electronically transmit such Warrant Shares to the Holder’s Deposit/Withdrawal
at Custodian (DWAC) account with DTC.

     

    (d)           In
addition to any other rights available to the Holder, if the Company fails to
deliver to the Holder a certificate representing Warrant Shares by the third
Trading Day after the date on which delivery of such certificate is required by
this Warrant, and if after such third Trading Day the Holder purchases (in an
open market transaction or otherwise) shares of Common Stock to deliver in
satisfaction of a sale by the Holder of the Warrant Shares that the Holder
anticipated receiving from the Company (a “Buy-In”), then the Company shall,
within three Trading Days after the Holder’s request and in the Holder’s
discretion, either (i) pay cash to the Holder in an amount equal to the Holder’s
total purchase price (including brokerage commissions, if any) for the shares of
Common Stock so purchased (the “Buy-In Price”), at which point the Company’s
obligation to deliver such certificate (and to issue such Common Stock) shall
terminate, or (ii) promptly honor its obligation to deliver to the Holder a
certificate or certificates representing such Common Stock and pay cash to the
Holder in an amount equal to the excess (if any) of the Buy-In Price over the
product of (A) such number of shares of Common Stock, times (B) the closing bid
price on the date of the event giving rise to the Company’s obligation to
deliver such certificate.

     

    1.4           Right to Convert Warrant
into Stock: Net Issuance.

     

    (a)           Right to
Convert.  In addition to and without limiting the rights of the
Holder under the terms of this Warrant, if at any time or from time to
time the Warrant Stock is not registered pursuant to an effective
registration statement, then from such time and continuing until the Warrant
Stock is so registered, the Holder shall have the right to convert this Warrant
or any portion thereof (the “Conversion Right”) into shares of Warrant Stock as
provided in this Section 1.4 at any time or from time to time during the
term of this Warrant. Upon exercise of the Conversion Right with respect to a
particular number of shares subject to this Warrant (the “Converted Warrant
Shares”), the Company shall deliver to the Holder (without payment by the Holder
of any Purchase Price or any cash or other consideration) that number of shares
of fully paid and nonassessable Warrant Stock equal to the quotient obtained by
dividing (X) the value of this Warrant (or the specified portion hereof) on the
Conversion Date (as defined in Section 1.4(c) hereof), which value shall be
determined by subtracting (A) the aggregate Purchase Price of the Converted
Warrant Shares immediately prior to the exercise of the Conversion Right from
(B) the aggregate fair market value of the Converted Warrant Shares
issuable upon exercise of this Warrant (or the specified portion hereof) on the
Conversion Date by (Y) the fair market value of one share of Warrant Stock
on the Conversion Date.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    Expressed
as a formula, such conversion shall be computed as follows:

     

    X           =           B-A

                 Y

    

    where:

     

    X  =           the
number of shares of Warrant Stock that may be issued to Holder

     

    Y  =           the
fair market value (FMV) of one share of Warrant Stock

     

    A  =           the
aggregate Warrant Price (i.e., Converted Warrant Shares x Purchase
Price)

     

    B  =           the
aggregate FMV (i.e., FMV x Converted Warrant Shares)

     

    No
fractional shares shall be issuable upon exercise of the Conversion Right, and,
if the number of shares to be issued determined in accordance with the foregoing
formula is other than a whole number, the Company shall pay to the Holder an
amount in cash equal to the fair market value of the resulting fractional share
on the Conversion Date.

     

    (b)           Method of
Exercise.  If there is no registration statement then effective
under the Securities Act, the Conversion Right may be exercised by the Holder by
delivery of the Purchase Form in the form attached hereto as Exhibit A duly
completed and executed and indicating the number of shares subject to this
Warrant which are being surrendered (referred to in
Section 1.4(a) hereof as the Converted Warrant Shares) in exercise of
the Conversion Right.  Such conversion shall be effective upon receipt
by the Company of the aforesaid Purchase Form, or on such later date as is
specified on the Purchase Form (the “Conversion Date”), and, at the election of
the Holder hereof, may be made contingent upon the occurrence of any Fundamental
Transaction (as defined in Section 2.4 hereof).  Certificates for the
shares issuable upon exercise of the Conversion Right shall be issued as of the
Conversion Date and shall be delivered to the Holder within ten (10) Business
Days following the Conversion Date.

     

    (c)           Determination of Fair Market
Value.  For purposes of this Section 1.4, “fair market
value” of a share of Warrant Stock as of a particular date (the “Determination
Date”) shall be determined as follows:

     

    (1)           If
the Common Stock is traded on an exchange or is quoted on the National
Association of Securities Dealers, Inc. Automated Quotation (“NASDAQ”) Stock
Market, then the closing bid price on the day before the Determination Date;
or

     

    (2)           If
the Common Stock is not traded on an exchange or on the NASDAQ Stock Market but
is traded in the over-the-counter market, then the closing bid price on the day
before the Determination Date; or

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    (3)           In
the event that the Determination Date is the date of a liquidation, dissolution
or winding up, or any event deemed to be a liquidation, dissolution or winding
up with respect to the Common Stock under the Company’s Certificate of
Incorporation, then the fair market value per share of the Warrant Stock shall
be determined by aggregating all amounts to be payable per share to holders of
the Common Stock in the event of such liquidation, dissolution or winding up,
plus all other amounts to be payable per share in respect of the Warrant Stock
in liquidation, assuming for the purposes of this subsection (3) that all
of the shares of Warrant Stock issuable upon exercise of all of the Warrants are
outstanding at the Determination Date; or

     

    (4)           In
all other cases, the fair market value per share of the Warrant Stock shall be
determined in good faith by the Company’s Board of Directors upon review of
relevant factors.

     

    1.5           Fractional
Shares.  The Company shall not be required upon the exercise of
this Warrant to issue any fractional shares, but shall make an adjustment
therefor in cash on the basis of the fair market value of the Warrant Stock
reasonably determined by The Board of Directors of the Company (and, in the case
of a conversion of this Warrant, in accordance with
Section 1.4(c)).

     

    1.6           Limitations on
Exercise.  For so long as Holder or any of its Affiliates hold
any Preferred Shares, Warrants, Warrant Shares, or shares of Common Stock,
neither Holder nor any Affiliate will engage or participate in any actions,
plans or proposals which relate to or would result in the acquiring by Holder or
any Affiliate of additional securities of the Company, alone or together with
any other Person, which would result in Holder or any Affiliate beneficially
owning or controlling more than 9.99% of the total outstanding Common Stock or
other voting securities of the Company.  To comply with this
restriction, the aggregate number of Warrant Shares issuable upon exercise of
the Warrant on any exercise date, when aggregated with all other shares of
Common Stock deemed beneficially owned by the Holder and its Affiliates (whether
acquired in connection with the transactions contemplated by the Transaction
Documents or otherwise), shall not result in the Holder or any Affiliate
beneficially owning or controlling more than 9.99% of all Common Stock
outstanding on such exercise date, as determined in accordance with Section
13(d) of the Exchange Act.  In addition, as of any date, the aggregate
number of shares of Common Stock with respect to which this Warrant is
exercisable within 61 days, together with all other shares of Common Stock then
beneficially owned (as such term is defined in Rule 13(d) under the Exchange
Act) by Holder and its Affiliates, shall not exceed 9.99% of the total
outstanding shares of Common Stock of the Company as of such date.

     

    2.           Certain
Adjustments.  The number of shares of Warrant Stock deliverable
upon exercise of the Warrant shall be subject to adjustment from time to time as
follows:

     

    2.1           Subdivision, Consolidation,
Reclassification or Change in Common Stock.  In the event of
any subdivision, combination, consolidation, reclassification or other change of
the Common Stock into a greater or lesser number or different class or classes
of stock, the number of shares of Warrant Stock deliverable upon exercise of
this Warrant shall be determined in accordance with the terms of the Certificate
of Incorporation or other document effecting or otherwise determining such
change. Any adjustment made pursuant to this Section 2.1 shall become
effective immediately after the effective date in the case of a subdivision,
combination, consolidation, reclassification or other change. Notwithstanding
the foregoing, the Purchase Price for the shares of Warrant Stock deliverable
upon exercise of this Warrant shall remain $0.01 per share.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    2.2           Subdivision, Consolidation,
Reclassification or Change in Warrant Stock.  In the event of
any subdivision, combination, consolidation, reclassification or other change of
the Warrant Stock into a lesser number or different class or classes of stock,
the number of shares of Warrant Stock deliverable upon exercise of this Warrant
shall be proportionally decreased.  In the event of any subdivision,
combination, consolidation, reclassification or other change of the Warrant
Stock into a greater number or different class or classes of stock, the number
of shares of Warrant Stock deliverable upon exercise of this Warrant shall be
proportionally increased.    Any adjustment made pursuant to
this Section 2.2 shall become effective immediately after the effective
date in the case of a subdivision, combination, consolidation, reclassification
or other change. Notwithstanding the foregoing, the Purchase Price for the
shares of Warrant Stock deliverable upon exercise of this Warrant shall remain
$0.01 per share.

     

    2.3           Dividends or Other
Distributions.

     

    (a)           In
the event that the Company issues additional shares of Common Stock as a
dividend or other distribution with respect to the Common Stock, the number of
shares of Warrant Stock deliverable upon exercise of this Warrant shall be
determined in accordance with the terms of the Certificate of Incorporation or
other document effecting or otherwise determining such change.  Any
adjustment made pursuant to this Section 2.3(a) shall become effective
immediately after the record date for the determination of stockholders entitled
to receive such dividend or distribution. Notwithstanding the foregoing, the
Purchase Price for the shares of Warrant Stock deliverable upon exercise of this
Warrant shall remain $0.01 per share.

     

    (b)           If
the Company, at any time while this Warrant is outstanding, distributes to
holders of Common Stock (i) evidences of its indebtedness, (ii) any security
(other than a distribution of Common Stock covered by Section 2.3(a) above),
(iii) rights or warrants to subscribe for or purchase any security, or (iv) any
other asset (in each case, “Distributed Property”), then in each such case the
Holder shall be entitled upon any partial or complete exercise of this Warrant
to receive the amount of Distributed Property which would have been payable to
the Holder had such Holder been the holder of such Warrant Shares on the record
date for the determination of stockholders entitled to receive the Distributed
Property.  The Company will at all times set aside in escrow and keep
available for distribution to such holder upon exercise of this Warrant a
portion of the Distributed Property to satisfy the distribution to which such
Holder is entitled pursuant to this Section 2.3(b).  Any adjustment
made pursuant to this Section 2.3(b) shall become effective immediately
after the record date for the determination of stockholders entitled to receive
such dividend or distribution.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    2.4           Fundamental
Transactions.

     

    (a)           If,
at any time while this Warrant is outstanding, (i) the Company, directly or
indirectly, in one or more related transactions effects any merger or
consolidation of the Company with or into another Person, (ii) the Company,
directly or indirectly, effects any sale, lease, license, assignment, transfer,
conveyance or other disposition of all or substantially all of its assets in one
or a series of related transactions, (iii) any direct or indirect purchase
offer, tender offer or exchange offer (whether by the Company or another Person)
is completed pursuant to which holders of Common Stock are permitted to sell,
tender or exchange their shares for other securities, cash or property, or such
offer is proposed and has been accepted by the holders of 50% or more of the
outstanding Common Stock, (iv) the Company, directly or indirectly, in one
or more related transactions effects any reclassification, reorganization or
recapitalization of the Common Stock or any compulsory share exchange pursuant
to which the Common Stock is effectively converted into or exchanged for other
securities, cash or property, (v) the Company, directly or indirectly, in
one or more related transactions consummates a stock or share purchase agreement
or other business combination (including, without limitation, a reorganization,
recapitalization, spin-off or scheme of arrangement) with another Person whereby
such other Person acquires more than 50% of the outstanding shares of Common
Stock (not including any shares of Common Stock held by the other Person or
other Persons making or party to, or associated or affiliated with the other
Persons making or party to, such stock or share purchase agreement or other
business combination) (each of the foregoing events described in clauses
(i)-(v), a “Fundamental Transaction”), then, upon any subsequent exercise of
this Warrant, the Holder shall have the right to receive, for each Warrant Share
that would have been issuable upon such exercise immediately prior to the
occurrence of such Fundamental Transaction, at the option of the Holder, the
number of shares of Common Stock of the successor or acquiring corporation (the
“Successor Entity”) or of the Company, if it is the surviving corporation, and
any additional consideration (the “Alternate Consideration”) receivable as a
result of such Fundamental Transaction by a holder of the number of shares of
Common Stock for which this Warrant is exercisable immediately prior to such
Fundamental Transaction. For purposes of any such exercise, the Exercise Price
shall remain $0.01 per share.  If holders of Common Stock are given
any choice as to the securities, cash or property to be received in a
Fundamental Transaction, then the Holder shall be given the same choice as to
the Alternate Consideration it receives upon any exercise of this Warrant
following such Fundamental Transaction.

     

    (b)           The
Company shall cause any Successor Entity to assume in writing all of the
obligations of the Company under this Warrant and the other Transaction
Documents in accordance with the provisions of this Section 2.5(b) and
shall, at the option of the Holder of this Warrant, deliver or cause to be
delivered to the Holder in exchange for this Warrant a security of the Successor
Entity evidenced by a written instrument substantially similar in form and
substance to this Warrant which is exercisable for a corresponding number of
shares of capital stock of such Successor Entity (or its parent entity)
equivalent to the shares of Common Stock acquirable and receivable upon exercise
of this Warrant (without regard to any limitations on the exercise of this
Warrant) prior to such Fundamental Transaction, and with an exercise price which
applies the exercise price hereunder to such shares of capital stock (but taking
into account the relative value of the shares of Common Stock pursuant to such
Fundamental Transaction and the value of such shares of capital stock, such
number of shares of capital stock and such exercise price being for the purpose
of protecting the economic value of this Warrant immediately prior to the
consummation of such Fundamental Transaction).

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    (c)           Upon
the occurrence of any Fundamental Transaction, the Successor Entity, if any,
shall succeed to and be substituted for the Company (so that from and after the
date of such Fundamental Transaction, the provisions of this Warrant and the
other Transaction Documents referring to the “Company” shall refer instead to
the Successor Entity), and may exercise every right and power of the Company,
and shall assume all of the obligations of the Company, under this Warrant and
the other Transaction Documents with the same effect as if such Successor Entity
had been named as the Company herein.

     

    2.5           Certificate of
Adjustment.  When any adjustment is required to be made in the
kind or amount of stock or other securities or property into which this Warrant
shall be exercisable following the occurrence of any of the events specified in
this Section 2, the Company shall promptly provide to the Holder (pursuant
to the notice provisions of Section 9 hereof) a certificate setting forth such
adjustment and a brief statement of the facts requiring such
adjustment.  Delivery of such certificate shall be deemed to be a
final and binding determination with respect to such adjustment unless
challenged by the Holder within ten (10) Business Days of receipt
thereof.

     

    3.           Compliance
with Securities Act.

     

    3.1           Unregistered
Securities.  The Holder acknowledges that this Warrant and the
Warrant Stock have not been registered under the Securities Act of 1933, as
amended, and the rules and regulations thereunder, or any successor legislation
(the “Securities Act”), and agrees not to sell, pledge, distribute, offer for
sale, transfer or otherwise dispose of this Warrant or any Warrant Stock in the
absence of (i) an effective registration statement under the Securities Act
covering this Warrant or such Warrant Stock and registration or qualification of
this Warrant or such Warrant Stock under any applicable “blue sky” or state
securities law then in effect, or (ii) an opinion of counsel selected by
the Holder that such registration and qualification are not
required.  The Company may reasonably delay issuance of the Warrant
Stock until completion of any action or obtaining of any consent, which the
Company reasonably deems necessary under any applicable law (including without
limitation state securities or “blue sky” laws).

     

    3.2           Investment
Compliance.  The Holder, by the acceptance hereof, represents
and warrants that it is acquiring this Warrant and, upon any exercise hereof,
will acquire the Warrant Shares issuable upon such exercise, for its own account
and not with a view to or for distributing or reselling such Warrant Shares or
any part thereof in violation of the Securities Act or any applicable state
securities law, except pursuant to sales registered or exempted under the
Securities Act, without prejudice, however, to the Holder’s right at all times
to sell or otherwise dispose of all or any part of such Warrant or Warrant
Shares in compliance with applicable federal and state securities
laws.  Subject to the immediately preceding sentence, nothing
contained in this Section 3.2 shall be deemed a representation or warranty by
the Holder of any intent to hold the Warrant or Warrant Shares for any period of
time.

     

    3.3           Legend.  Certificates
delivered to the Holder pursuant to Section 1.3 shall bear the following
legend or a legend in substantially similar form and the Company shall have the
obligation to remove such legend as set forth in Section 4.1 of the
Purchase Agreement:

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    “THE
SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”) AND THEY MAY NOT BE
SOLD OR OTHERWISE TRANSFERRED BY ANY PERSON, INCLUDING A PLEDGEE, IN THE ABSENCE
OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SHARES UNDER THE SECURITIES ACT
OR AN OPINION OF COUNSEL SELECTED BY HOLDER THAT AN EXEMPTION FROM REGISTRATION
IS THEN AVAILABLE. THE SHARES REPRESENTED BY THIS CETIFICATE MAY BE PLEDGED IN
CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH
SECURITIES.”

     

    4.           Reservation
of Stock.  The Company does not and will not have a sufficient
number of shares of Common Stock authorized for the issuance of all Warrant
Shares issuable upon exercise of this Warrant until such time as the
effectiveness of the filing of an amendment to the Company’s Certificate of
Incorporation authorizing a sufficient number of shares of Common Stock to
permit such issuance.  This Warrant cannot be exercised until the
prior effectiveness of the filing of such an amendment.  The Company
covenants and agrees that, upon and subsequent to such effectiveness and until
the Expiration Date, the Company will at all times have authorized and in
reserve, and will keep available, solely for issuance or delivery upon the
exercise of this Warrant, the shares of Warrant Stock and other securities and
properties as from time to time shall be issuable upon the exercise of this
Warrant, free and clear of all restrictions on sale or transfer and free and
clear of all preemptive rights and rights of first refusal or any other
contingent purchase rights of persons other than the Holder. The Company will
take all such action as may be necessary to assure that the Warrant Shares may
be issued as provided herein without violation of any applicable law or
regulation, or of any requirements of any Trading Market upon which the Common
Stock may be listed or quoted.

     

    5.           Replacement
of Warrants.  Upon receipt of evidence reasonably satisfactory
to the Company of the loss, theft, destruction or mutilation of this Warrant and
(in the case of loss, theft or destruction) upon delivery of an indemnity
agreement (with surety if reasonably required) in standard form and in an amount
reasonably satisfactory to the Company, or (in the case of mutilation) upon
surrender and cancellation of this Warrant, the Company will issue, in lieu
thereof, a new Warrant of like tenor.

     

    6.           Covenants
and Obligations of Company.

     

    6.1           The
Company covenants that all Warrant Shares shall, upon issuance and the payment
of the applicable Exercise Price in accordance with the terms hereof, be duly
and validly authorized and issued and fully paid and nonassessable.

     

    6.2           The
Company’s obligations to issue and deliver Warrant Shares in accordance with the
terms hereof are absolute and unconditional, irrespective of any action or
inaction by the Holder to enforce the same, any waiver or consent with respect
to any provision hereof, the recovery of any judgment against any Person or any
action to enforce the same, or any setoff, counterclaim, recoupment, limitation
or termination, or any breach or alleged breach by the Holder or any other
Person of any obligation to the Company or any violation or alleged violation of
law by the Holder or any other Person, and irrespective of any other
circumstance which might otherwise limit such obligation of the Company to the
Holder in connection with the issuance of Warrant Shares; provided, however, that the
Company shall be under no obligation to issue and deliver Warrant Shares to any
transferee of the Holder if the transferee is a Person to whom the Warrant or
Warrant Shares could not be sold under applicable securities laws or an
exemption therefrom.  Nothing herein shall limit a Holder’s right to
pursue any other remedies available to the Holder hereunder, at law or in
equity.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    6.3           The
Company will not, by amendment of its Certificate of Incorporation or through
any reorganization, transfer of assets, consolidation, merger, dissolution,
issue or sale of securities or any other voluntary action, avoid or seek to
avoid the observance or performance of any of the terms of this Warrant, but
will at all times in good faith assist in the carrying out of all such terms and
in the taking of all such action as may be necessary or appropriate in order to
protect the rights of the Holder against impairment.

     

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

     

    8.           No Rights
as Stockholder.  Until the exercise of this Warrant, the Holder
shall not have or exercise any rights by virtue hereof as a stockholder of the
Company including, without limitation, any voting rights.

     

    9.           Notices.  Any
and all notices or other communications or deliveries required or permitted to
be provided hereunder shall be in writing and shall be deemed given and
effective on the earliest of (a) the date of transmission, if such notice or
communication is delivered via facsimile at the facsimile number specified in
this Section 9 prior to 6:30 p.m. (New York City time) on a Trading Day, (b) the
next Trading Day after the date of transmission, if such notice or communication
is delivered via facsimile at the facsimile number specified in this Section 9
on a day that is not a Trading Day or later than 6:30 p.m. (New York City time)
on any Trading Day, (c) the Trading Day following the date of mailing, if sent
by U.S. nationally recognized overnight courier service, or (d) upon actual
receipt by the party to whom such notice is required to be given.  The
address for all notices and communications shall be: (1) if to the Company: Zoo
Entertainment, Inc., c/o Zoo Publishing, Inc., 3805 Edwards Road, Suite 605,
Cincinnati, Ohio 45209, Facsimile No.: 513-278-0111, Attn: Mark Seremet, or such
other address as the Company shall so notify the Holder, and (2) if to the
Holder, to the most recent address and facsimile number furnished to the Company
in writing by the Holder.  All notices, requests and other
communications hereunder shall be deemed to have been given (i) by hand, at
the time of the delivery thereof to the receiving party at the address of such
party described above, (ii) if made by facsimile transmission, at the time
that receipt thereof has been acknowledged by electronic confirmation or
otherwise, (iii) if sent by overnight courier, on the next Business Day
following the day such notice is delivered to the courier service, or
(iv) if sent by registered mail, on the fifth Business Day following the
day such mailing is made.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    10.           Amendment,
Modification and Waiver.  This Warrant may be amended or
modified with the written consent of the Company and the Holder.  Any
waiver or consent hereunder must be in writing and shall be effective only in
the specific instance and for the purpose for which it was given, and shall not
constitute a continuing waiver or consent.

     

    11.           Assignment.  This
Warrant may not be assigned by the Company except to a Successor Entity in the
event of a Fundamental Transaction.  This Warrant shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors and assigns.  Subject to the preceding sentence, nothing in
this Warrant shall be construed to give to any Person other than the Company and
the Holder any legal or equitable right, remedy or cause of action under this
Warrant.  This Warrant may be amended only in writing signed by the
Company and the Holder or their respective successors and assigns, as
applicable.

     

    12.           Rescission
and Withdrawal Right.  Notwithstanding anything to the contrary
contained herein or in any of the other Transaction Documents, whenever Holder
exercises a right, election, demand or option owed to Holder by the Company
under a Transaction Document and the Company does not timely perform its related
obligations within the periods therein provided (including any applicable cure
period), then, prior to the performance by the Company of the Company’s related
obligation, Holder may rescind or withdraw, in its sole discretion from time to
time upon written notice to the Company, any relevant notice, demand or election
in whole or in part without prejudice to its future actions and
rights.

     

    13.           Headings.  The
headings in this Warrant are for convenience of reference only and shall in no
way modify or affect the meaning or construction of any of the terms or
provisions of this Warrant.

     

    14.           Governing
Law.  This Warrant will be governed by and construed in
accordance with the laws of the State of New York, without giving effect to
the conflict of law principles thereof.  The Company agrees that all
Proceedings concerning this Warrant or the transactions contemplated hereby may
be commenced exclusively in the state and federal courts sitting in the City of
New York, Borough of Manhattan (the “New York Courts”) and hereby irrevocably
submits to the exclusive jurisdiction of the New York Courts for the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein and hereby irrevocably
waives, and agrees not to assert in any Proceeding, any claim that the Company
is not personally subject to the jurisdiction of any such New York Court or that
such Proceeding has been commenced in an improper or inconvenient
forum.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    IN
WITNESS WHEREOF, the Company has caused this Warrant to be duly executed by its
authorized officer as of the date first indicated above.

     

    
    

     

    
      	 	 	 
	 	 	      
              ZOO
      ENTERTAINMENT, INC.

              

              

              By:
      ______________

              Name:
      David
      Fremed

              Title:
      Chief Financial
      Officer

            
	 	 	 

    

     

     

     

     

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    EXHIBIT A

     

    PURCHASE
FORM

     

    To:           ZOO
ENTERTAINMENT, INC.

     

    The
undersigned pursuant to the provisions set forth in the attached Warrant
(No. W-____), hereby irrevocably elects to (check one):

     

    
      	
               
      

            	
              _____

            	
              (A)

            	
              purchase
      ___ shares of Common Stock, par value $0.001 per share (the “Common
      Stock”) of ZOO ENTERTAINMENT, INC., covered by such Warrant and herewith
      makes payment of $_____________, representing the full purchase price for
      such shares at the price per share provided for in such Warrant;
      or

            

    

     

    
      	
               
      

            	
              _____

            	
              (B)

            	
              convert
      ___ Converted Warrant Shares into that number of shares of fully paid and
      nonassessable shares of Common Stock, determined pursuant to the
      provisions of Section 1.4 of the
Warrant.

            

    

     

    

     

    Desired
Conversion Date:   _______________

     

    

    
      
        
          	 	 	 
	 	 	 	 
	
                   

                	
                  By:
      

                	 
       	 
	 	 	Print
      Name	 
	 	 	 	 
	 	Dated:	  
      	 

        

      

     

                                                                               

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    

    EXHIBIT B

     

    ASSIGNMENT
FORM

     

    (To
assign the foregoing Warrant, execute this form and supply required
information.  Do not use this form to purchase shares.)

     

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

     

     

    
      
        
          
            
              
                
                  
                    
                      
                        
                          
                            	
                                    Name:

                                  	 
      	 
      
	 
      	 
      	
                                    (Please
      Print)

                                  
	 	 	 
	Address:	 
      	 
      
	 	 	  
      
	Dated:
      _________  , 200_	 	      
                                    (Please
      Print)

                                  
	 	 	 
	Holder’s
      Signature: __________________________	 	 
	 	 	 
	Holder’s
      Address: ___________________________	 	 

                          

                        

                      

                    

                  

                

              

            

          

        

         

        NOTE:  The
signature to this Assignment Form must correspond with the name as it appears on
the face of the Warrant, without alteration or enlargement or any change
whatever, unless this Warrant has previously been transferred in which case the
Holder named above must be the prior transferee and current
Holder.  Officers of corporations and those acting in a fiduciary or
other representative capacity should file proper evidence of authority to assign
the foregoing Warrant.

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