Document:

Exhibit 4.15

NEITHER
THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE
SECURITIES INTO WHICH THESE SECURITIES ARE EXERCISEABLE HAVE BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS.  THE SECURITIES MAY NOT BE OFFERED FOR SALE,
SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE
REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR (B) AN OPINION OF COUNSEL, IN A FORM REASONABLY ACCEPTABLE TO THE
COMPANY, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD
PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT.  NOTWITHSTANDING THE FOREGOING, THE SECURITIES
MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR
FINANCING ARRANGEMENT SECURED BY THE SECURITIES.

WENTWORTH
ENERGY, INC.

AMENDED AND RESTATED SERIES B
WARRANT TO PURCHASE COMMON STOCK

 

Warrant No.: ARB-        

Number of Shares of Common Stock: [                    ]

 

Original Issuance Date:  July 25, 2006

Exchanged for Amended and Restated Warrant

with Issuance Date:  October31, 2007 (“Issuance Date”)

 

Wentworth Energy, Inc., an Oklahoma corporation, (the “Company”), hereby certifies that, for good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, [Insert Name of Buyer], the registered holder hereof, or its
permitted assigns (the “Holder”),
is entitled, subject to the terms set forth below, to purchase from the
Company, at the Exercise Price (as defined below) then in effect, upon
surrender of this Warrant to Purchase Common Stock (including any Warrants to
purchase Common Stock issued in exchange, transfer or replacement hereof, the “Warrant”), at any time or times on or after
the first Company Mandatory Redemption Notice Date (as defined in the SPA
Securities), but not after 11:59 p.m., New York Time, on the Expiration Date
(as defined below), [                                    ]
fully paid nonassessable shares of Common Stock (as defined below)  (the “Warrant
Shares”).  Except as otherwise
defined herein, capitalized terms in this Warrant shall have the meanings set
forth in Section 16.  This Amended and
Restated Warrant is one of the Warrants to Purchase Common Stock (including new
warrants and amended and restated warrants) issued pursuant to the Securities
Purchase Agreement, as amended by those certain Amendment Agreements, each
dated as of October 31, 2007 (the “Amendment
Agreements”), by and between the Company and respective buyer party
thereto (this Warrant, together with all of the other Amended and Restated
Warrants and the New Warrants (each as defined in the Amendment Agreements),
the “SPA Warrants”) and amends,
supplements, modifies and completely restates and supersedes that certain warrant
of this same series, previously issued 

 

 

 

pursuant to the 2006 Securities Purchase
Agreement (the “Existing Warrant”), issued by the
Company to the Holder (or a predecessor holder) for the exercise of [                         ]
shares of Common Stock, but shall not, except as specifically amended hereby or
as set forth in the Amendment Agreements, constitute a release, satisfaction or
novation of any of the obligations under the Existing Warrant.

 

1.             EXERCISE OF WARRANT.

(a)           Mechanics of Exercise.  Subject to the terms and conditions hereof
(including, without limitation, the limitations set forth in Section 1(f)),
this Warrant may be exercised by the Holder on any day on or after the first
Company Mandatory Redemption Notice Date in whole or in part, by
(i) delivery of a written notice, in the form attached hereto as Exhibit
A (the “Exercise Notice”), of
the Holder’s election to exercise this Warrant and (ii) (A) payment to the
Company of an amount equal to the applicable Exercise Price multiplied by the
number of Warrant Shares as to which this Warrant is being exercised (the “Aggregate Exercise Price”) in cash or wire
transfer of immediately available funds or (B) by notifying the Company that
this Warrant is being exercised pursuant to a Cashless Exercise (as defined in
Section 1(d)).  The Holder shall not be
required to deliver the original Warrant in order to effect an exercise
hereunder.  Execution and delivery of the
Exercise Notice with respect to less than all of the Warrant Shares shall have
the same effect as cancellation of the original Warrant and issuance of a new
Warrant evidencing the right to purchase the remaining number of Warrant
Shares.  On or before the first Business
Day following the date on which the Company has received each of the Exercise
Notice and the Aggregate Exercise Price (or notice of a Cashless Exercise) (the
“Exercise Delivery Documents”),
the Company shall transmit by facsimile an acknowledgment of confirmation of
receipt of the Exercise Delivery Documents to the Holder and the Company’s
transfer agent (the “Transfer Agent”).  On or before the third Business Day following
the date on which the Company has received all of the Exercise Delivery
Documents (the “Share Delivery Date”),
the Company shall (X) provided that the Transfer Agent is participating in The
Depository Trust Company (“DTC”)
Fast Automated Securities Transfer Program, upon the request of the Holder,
credit such aggregate number of shares of Common Stock to which the Holder is
entitled pursuant to such exercise to the Holder’s or its designee’s balance
account with DTC through its Deposit Withdrawal Agent Commission system, or (Y)
if the Transfer Agent is not participating in the DTC Fast Automated Securities
Transfer Program, deliver to be received no later than the Share Delivery Date,
to the address as specified in the Exercise Notice, a certificate, registered
in the Company’s share register in the name of the Holder or its designee, for
the number of shares of Common Stock to which the Holder is entitled pursuant
to such exercise.  Upon delivery of the
Exercise Notice and Aggregate Exercise Price referred to in clause (ii)(A)
above or notification to the Company of a Cashless Exercise referred to in
Section 1(d), the Holder shall be deemed for all corporate purposes to have
become the holder of record of the Warrant Shares with respect to which this
Warrant has been exercised, irrespective of the date of delivery of the
certificates evidencing such Warrant Shares. 
If this Warrant is submitted in connection with any exercise pursuant to
this Section 1(a) and the number of Warrant Shares represented by this Warrant
submitted for exercise is greater than the number of Warrant Shares being
acquired upon an exercise, then the Company shall as soon as practicable and in
no event later than three Business Days after any exercise and at its own
expense, issue a new Warrant (in accordance with Section 7(d)) representing the
right to purchase the number of Warrant Shares 

 

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purchasable immediately
prior to such exercise under this Warrant, less the number of Warrant Shares
with respect to which this Warrant is exercised.  No fractional shares of Common Stock are to
be issued upon the exercise of this Warrant, but rather the number of shares of
Common Stock to be issued shall be rounded up to the nearest whole number.  The Company shall pay any and all taxes
(excluding income taxes, franchise taxes or similar taxes levied on the
earnings, profits or the like of the Holder) which may be payable with respect
to the issuance and delivery of Warrant Shares upon exercise of this
Warrant.  Notwithstanding any provision
of this Warrant to the contrary, no more than the Maximum Eligibility Number of
Warrant Shares shall be exercisable hereunder, except as a result of
anti-dilution adjustments as provided herein.

(b)           Exercise Price. 
For purposes of this Warrant, “Exercise
Price” means $0.65, subject to adjustment as provided herein.

(c)           Company’s Failure to Timely
Deliver Securities. If
the Company shall fail for any reason or for no reason to issue to the Holder
within three (3) Trading Days of receipt of the Exercise Delivery Documents, a
certificate for the number of shares of Common Stock to which the Holder is
entitled and register such shares of Common Stock on the Company’s share
register or to credit the Holder’s balance account with DTC for such number of
shares of Common Stock to which the Holder is entitled upon the Holder’s
exercise of this Warrant, then, in addition to all other remedies available to
the Holder, the Company shall pay in cash to the Holder on each day after such
third  Business Day that the
issuance of such shares of Common Stock is not timely effected an amount equal
to 1.5% of the product of (A) the sum of the number of shares of Common Stock
not issued to the Holder on a timely basis and to which the Holder is entitled
and (B) the Closing Sale Price of the shares of Common Stock on the Trading Day
immediately preceding the last possible date which the Company could have
issued such shares of Common Stock to the Holder without violating Section
1(a).  In addition, if within three
(3) Trading Days after the Company’s receipt of the facsimile copy of an
Exercise Notice the Company shall fail to issue and deliver a certificate to
the Holder and register such shares of Common Stock on the Company’s share
register or credit the Holder’s balance account with DTC for the number of
shares of Common Stock to which the Holder is entitled upon such holder’s exercise
hereunder, and if on or after such 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 shares of Common Stock issuable upon
such exercise that the Holder anticipated receiving from the Company (a “Buy-In”), then the Company shall, within
three Business Days after the Holder’s request and in the Holder’s discretion,
either (i) pay cash to the Holder in an amount equal to the Holder’s total
purchase price (including 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 shares of Common Stock) or credit such Holder’s balance account with
DTC shall terminate, or (ii) promptly honor its obligation to deliver to the
Holder a certificate or certificates representing such shares of Common Stock
or credit such Holder’s balance account with DTC 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 exercise.

(d)     Cashless
Exercise.  Notwithstanding anything contained
herein to the contrary, if a Registration Statement (as defined in the
Registration Rights Agreement) covering 

 

3

 

the Warrant Shares that are
the subject of the Exercise Notice (the “Unavailable
Warrant Shares”) is not available for the resale of such Unavailable
Warrant Shares, the Holder may, in its sole discretion, exercise this Warrant
in whole or in part and, in lieu of making the cash payment otherwise
contemplated to be made to the Company upon such exercise in payment of the Aggregate
Exercise Price, elect instead to receive upon such exercise the “Net Number” of
shares of Common Stock determined according to the following formula (a “Cashless Exercise”):

	
  Net Number =

  	
  (A x B) - (A x C)

  
	
   

  	
  B

  

 

 

                For purposes of the foregoing formula:

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

B= the Closing Sale Price of
the shares of Common Stock (as reported by Bloomberg) on the date immediately
preceding the date of the Exercise Notice.

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

(e)     Disputes.  In the case of a dispute as to the
determination of the Exercise Price or the arithmetic calculation of the
Warrant Shares, the Company shall promptly issue to the Holder the number of
Warrant Shares that are not disputed and resolve such dispute in accordance
with Section 13.

(f)      Limitations on Exercises.

(i)            Beneficial
Ownership.  Notwithstanding any
provision to the contrary contained in this Warrant or any other Transaction
Document, the Company shall not effect the exercise of this Warrant, and the
Holder shall not have the right to exercise this Warrant, to the extent that
after giving effect to such exercise, such Person (together with such Person’s
affiliates) would beneficially own in excess of 4.99% of the shares of Common
Stock outstanding immediately after giving effect to such exercise.  For purposes of the foregoing sentence, the
aggregate number of shares of Common Stock beneficially owned by such Person
and its affiliates shall include the number of shares of Common Stock issuable
upon exercise of this Warrant with respect to which the determination of such
sentence is being made, but shall exclude shares of Common Stock which would be
issuable upon (A) exercise of the remaining, unexercised portion of this
Warrant beneficially owned by such Person and its affiliates and (B) exercise
or conversion of the unexercised or unconverted portion of any other securities
of the Company beneficially owned by such Person and its affiliates (including,
without limitation, any convertible notes or convertible preferred stock or
warrants) subject to a limitation on 

 

4

 

conversion or exercise
analogous to the limitation contained herein. 
Except as set forth in the preceding sentence, for purposes of this
paragraph, beneficial ownership shall be calculated in accordance with Section
13(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).  For
purposes of this Warrant, in determining the number of outstanding shares of
Common Stock, the Holder may rely on the number of outstanding shares of Common
Stock as reflected in (1) the Company’s most recent Form 10-K, 10-KSB, Form
10-Q, 10-QSB, Current Report on Form 8-K or other public filing with the
Securities and Exchange Commission, as the case may be, (2) a more recent
public announcement by the Company or (3) any other notice by the Company or
the Transfer Agent setting forth the number of shares of Common Stock
outstanding.  For any reason at any time,
upon the written or oral request of the Holder, the Company shall within one
(1) Business Day confirm orally and in writing to the Holder the number of shares
of Common Stock then outstanding.  In any
case, the number of outstanding shares of Common Stock shall be determined
after giving effect to the conversion or exercise of securities of the Company,
including the SPA Securities and the SPA Warrants, by the Holder and its
affiliates since the date as of which such number of outstanding shares of
Common Stock was reported.

 

(ii)           Principal Market Regulation.  The Company shall not be obligated to issue
any shares of Common Stock upon exercise of this Warrant or conversion of SPA
Securities and no Buyer (as defined in the Securities Purchase Agreement) or
Holder shall be entitled to receive any shares of Common Stock if the issuance
of such shares of Common Stock would exceed that number of shares of Common
Stock which the Company may issue upon exercise or conversion, as applicable,
of the SPA Warrants and SPA Securities or otherwise without breaching the
Company’s obligations under the rules or regulations of any applicable Eligible
Market (the “Exchange Cap”),
except that such limitation shall not apply in the event that the Company (A)
obtains the approval of its shareholders as required by the applicable rules of
the Eligible Market for issuances of shares of Common Stock in excess of such
amount or (B) obtains a written opinion from outside counsel to the Company
that such approval is not required, which opinion shall be reasonably
satisfactory to the Required Holders. 
Until such approval or written opinion is obtained, no Buyer or Holder
shall be issued in the aggregate, upon exercise or conversion, as applicable,
of any SPA Warrants or SPA Securities, shares of Common Stock in an amount
greater than the product of the Exchange Cap multiplied by a fraction, the
numerator of which is the total number of shares of Common Stock underlying the
SPA Warrants issued to such Buyer or Holder (or its predecessor interest) as of
the Closing Date and the denominator of which is the aggregate number of shares
of Common Stock underlying the SPA Warrants and the SPA Securities issued to
the Buyers as of the Closing Date (with respect to each Holder, the 

 

5

 

“Exchange Cap Allocation”). 
In the event that any Holder shall sell or otherwise transfer any of
such Holder’s SPA Warrants, the transferee shall be allocated a pro rata
portion of such Holder’s Exchange Cap Allocation, and the restrictions of the
prior sentence shall apply to such transferee with respect to the portion of
the Exchange Cap Allocation allocated to such transferee.  In the event that any holder of SPA Warrants
shall exercise all of such holder’s SPA Warrants into a number of shares of
Common Stock which, in the aggregate, is less than such holder’s Exchange Cap
Allocation, then the difference between such holder’s Exchange Cap Allocation
and the number of shares of Common Stock actually issued to such holder shall
be allocated to the respective Exchange Cap Allocations of the remaining
holders of SPA Warrants on a pro rata basis in proportion to the shares of
Common Stock underlying the SPA Warrants then held by each such holder.  In the event that the Company is prohibited
from issuing any Warrant Shares for which an Exercise Notice has been received
as a result of the operation of this Section 1(f)(ii), the Company shall pay
cash in exchange for cancellation of such Warrant Shares, at a price per
Warrant Share equal to the difference between the Closing Sale Price and the
Exercise Price as of the date of the attempted exercise.

 

2.             ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF WARRANT
SHARES.  The Exercise Price and the
number of Warrant Shares shall be adjusted from time to time as follows:

(a)           Adjustment upon Issuance of Shares of Common Stock.  If and whenever on or after the Closing Date
the Company issues or sells, or in accordance with this Section 2 is deemed to
have issued or sold, any shares of Common Stock (including the issuance or sale
of shares of Common Stock owned or held by or for the account of the Company)
for a consideration per share (the “New Issuance Price”)
less than the Exercise Price (the “Applicable
Price”) in effect immediately prior to such issue or sale or deemed
issuance or sale (the foregoing a “Dilutive
Issuance”), then immediately after such Dilutive Issuance, the
Exercise Price then in effect shall be reduced to an amount equal to the New
Issuance Price.  Upon each such
adjustment of the Exercise Price hereunder, the number of Warrant Shares shall
be adjusted to the number of shares of Common Stock determined by multiplying
the Exercise Price in effect immediately prior to such adjustment by the number
of Warrant Shares acquirable upon exercise of this Warrant immediately prior to
such adjustment and dividing the product thereof by the Exercise Price
resulting from such adjustment.  Notwithstanding
any provision to the contrary contained in this Warrant, the provisions of this
Section 2 shall not apply with respect to the issuance or sale or deemed
issuance or sale of shares of Common Stock in connection with any Excluded
Securities. For purposes of determining the adjusted Exercise Price under this
Section 2(a), the following shall be applicable:

(i)            Issuance of Options.  If the Company in any manner grants any
Options and the lowest price per share for which one share of shares of Common
Stock is issuable upon the exercise of any such Option or upon conversion,
exercise or exchange of any Convertible Securities 

 

6

 

issuable upon exercise of
any such Option is less than the Applicable Price, then such share of Common
Stock shall be deemed to be outstanding and to have been issued and sold by the
Company at the time of the granting or sale of such Option for such price per
share.  For purposes of this Section
2(a)(i), the “lowest price per share for which one share of shares of Common
Stock is issuable upon exercise of such Options or upon conversion, exercise or
exchange of such Convertible Securities” shall be equal to the sum of the
lowest amounts of consideration (if any) received or receivable by the Company
with respect to any one share of shares of Common Stock upon the granting or
sale of the Option, upon exercise of the Option and upon conversion, exercise
or exchange of any Convertible Security issuable upon exercise of such
Option.  No further adjustment of the
Exercise Price or number of Warrant Shares shall be made upon the actual
issuance of such shares of Common Stock or of such Convertible Securities upon
the exercise of such Options or upon the actual issuance of such shares of
Common Stock upon conversion, exercise or exchange of such Convertible
Securities.

 

(ii)           Issuance of Convertible Securities.  If the Company in any manner issues or sells
any Convertible Securities and the lowest price per share for which one share
of shares of Common Stock is issuable upon the conversion, exercise or exchange
thereof is less than the Applicable Price, then such share of Common Stock
shall be deemed to be outstanding and to have been issued and sold by the
Company at the time of the issuance or sale of such Convertible Securities for
such price per share.  For the purposes
of this Section 2(a)(ii), the “lowest price per share for which one share of
shares of Common Stock is issuable upon the conversion, exercise or exchange”
shall be equal to the sum of the lowest amounts of consideration (if any)
received or receivable by the Company with respect to one share of shares of
Common Stock upon the issuance or sale of the Convertible Security and upon
conversion, exercise or exchange of such Convertible Security.  No further adjustment of the Exercise Price
or number of Warrant Shares shall be made upon the actual issuance of such
shares of Common Stock upon conversion, exercise or exchange of such
Convertible Securities, and if any such issue or sale of such Convertible
Securities is made upon exercise of any Options for which adjustment of this
Warrant has been or is to be made pursuant to other provisions of this Section
2(a), no further adjustment of the Exercise Price or number of Warrant Shares
shall be made by reason of such issue or sale.

(iii)          Change in Option Price or Rate of
Conversion.  If the purchase price
provided for in any Options, the additional consideration, if any, payable upon
the issue, conversion, exercise or exchange of any Convertible Securities, or
the rate at which any Convertible Securities are convertible into or
exercisable or exchangeable for shares of Common Stock increases or decreases
at any time, the Exercise Price and the 

7

 

number of Warrant Shares in
effect at the time of such increase or decrease shall be adjusted to the
Exercise Price and the number of Warrant Shares which would have been in effect
at such time had such Options or Convertible Securities provided for such
increased or decreased purchase price, additional consideration or increased or
decreased conversion rate, as the case may be, at the time initially granted,
issued or sold.  For purposes of this
Section 2(a)(iii), if the terms of any Option or Convertible Security that were
outstanding as of the Issuance Date are increased or decreased in the manner
described in the immediately preceding sentence, then such Option or
Convertible Security and the shares of Common Stock deemed issuable upon
exercise, conversion or exchange thereof shall be deemed to have been issued as
of the date of such increase or decrease. 
No adjustment pursuant to this Section 2(a)(iii) shall be made if such
adjustment would result in an increase of the Exercise Price then in effect or
a decrease in the number of Warrant Shares. 
A change that permits the holder of an Option or Convertible Security to
utilize a cashless exercise feature shall not be deemed to decrease the
consideration payable by the holder solely by reason of the fact that the
cashless exercise feature would result in a reduction in cash consideration
receivable by the Company.

 

(iv)          Calculation of Consideration
Received.  In case any
Option is issued in connection with the issue or sale of other securities of
the Company, together comprising one integrated transaction in which no
specific consideration is allocated to such Options by the parties thereto, such Options will be deemed to have been
issued for the difference of (x) the aggregate fair market value of such
Options and other securities issued or sold in such integrated transaction,
less (y) the fair market value of the securities other than such Option, issued
or sold in such transaction, and the other securities issued or sold in such
integrated transaction will be deemed to have been issued or sold for the
balance of the consideration received by the Company.  If any shares
of Common Stock are issued or sold or deemed to have been issued or sold, or
provided for in an Option or Convertible Security to be issued or sold for
cash, the consideration received or to be received therefor will be deemed to
be the net amount received by the Company therefor.  If any shares of Common Stock, are issued or
sold or provided for in an Option or Convertible Security to be issued or sold
for a consideration other than cash, the amount of such consideration received
or to be received by the Company will be the fair value of such consideration,
except where such consideration consists of publicly traded securities, in
which case the amount of consideration received by the Company will be the
Closing Sale Price of such security on the date of receipt.  If any shares of Common Stock are issued to
the owners of the non-surviving entity in connection with any merger in which
the Company is the surviving entity, the amount of consideration therefor will
be deemed to be the fair value of such portion of the net assets and business
of the non-surviving entity as is attributable to such 

8

 

shares of Common Stock.  Notwithstanding the provisions of this
Section 2(a)(iv), the purchase price provided for in an Option, or the
additional consideration, if any, paid or payable upon the issue, conversion,
exercise or exchange of any Convertible Securities, to the extent paid or
payable or converted or exercised pursuant to a cashless exercise feature,
shall not be deemed to be an issuance or sale of Common Stock for consideration
other than cash.  The fair value of any
consideration other than cash or publicly traded securities will be determined
jointly by the Company and the Required Holders.  If such parties are unable to reach agreement
within ten (10) days after the occurrence of an event requiring valuation (the
“Valuation Event”), the fair value
of such consideration will be determined within five (5) Business Days after
the tenth day following the Valuation Event by an independent, reputable
appraiser jointly selected by the Company and the Required Holders.  The determination of such appraiser shall be
final and binding upon all parties absent manifest error and the fees and
expenses of such appraiser shall be borne by the Company.

 

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

(b)           Adjustment upon Subdivision or Combination of shares of
Common Stock.  If the Company at any
time on or after the Closing Date subdivides (by any stock split, stock
dividend, recapitalization or otherwise) one or more classes of its outstanding
shares of Common Stock into a greater number of shares, the Exercise Price in
effect immediately prior to such subdivision will be proportionately reduced
and the number of Warrant Shares will be proportionately increased.  If the Company at any time on or after the
Closing Date combines (by combination, reverse stock split or otherwise) one or
more classes of its outstanding shares of Common Stock into a smaller number of
shares, the Exercise Price in effect immediately prior to such combination will
be proportionately increased and the number of Warrant Shares will be
proportionately decreased.  Any
adjustment under this Section 2(b) shall become effective at the close of
business on the date the subdivision or combination becomes effective.

(c)           Other Events. 
If any event occurs of the type contemplated by the provisions of this
Section 2 but not expressly provided for by such provisions (including, without
limitation, the granting of stock appreciation rights, phantom stock rights or
other rights with equity features), then the Company’s Board of Directors will
make an appropriate adjustment in 

9

 

the Exercise Price and the
number of Warrant Shares so as to protect the rights of the Holder; provided
that no such adjustment pursuant to this Section 2(c) will increase the
Exercise Price or decrease the number of Warrant Shares as otherwise determined
pursuant to this Section 2.

(d)           Adjustment Upon Event of Default.  Upon the occurrence of an Event of Default
(as defined in the SPA Securities), when any of the SPA Securities are
outstanding, the Exercise Price shall be reset to the lower of (A) the Exercise
Price then in effect and (B) the Average Market Price of the Common Stock;
provided, however, that no such adjustment pursuant to this Section 2(d) will
increase the Exercise Price.  Upon each
such adjustment of the Exercise Price hereunder, the number of Warrant Shares
shall be adjusted to the number of shares of Common Stock determined by
multiplying the Exercise Price in effect immediately prior to such adjustment
by the number of Warrant Shares acquirable upon exercise of this Warrant
immediately prior to such adjustment and dividing the product thereof by the
Exercise Price resulting from such adjustment. 
Any adjustment under this Section 2(d) shall become effective at the
close of business on the date immediately after such Event of Default.

3.           RIGHTS UPON DISTRIBUTION OF ASSETS.  If the Company shall declare or make any
dividend or other distribution of its assets (or rights to acquire its assets)
to holders of shares of Common Stock, by way of return of capital or otherwise
(including, without limitation, any distribution of cash, stock or other
securities, property or options by way of a dividend, spin off, reclassification,
corporate rearrangement, scheme of arrangement or other similar transaction)
other than the Excluded  Distribution (as
defined in the SPA Securities) (a “Distribution”),
at any time after the Issuance Date, then, in each such case:

(a)           any Exercise Price in effect immediately prior to the
close of business on the record date fixed for the determination of holders of
shares of Common Stock entitled to receive the Distribution shall be reduced,
effective as of the close of business on such record date, to a price
determined by multiplying such Exercise Price by a fraction of which (i) the
numerator shall be the Closing Bid Price of the shares of Common Stock on the
Trading Day immediately preceding such record date minus the value of the
Distribution (as determined in good faith by the Company’s Board of Directors)
applicable to one share of shares of Common Stock, and (ii) the denominator
shall be the Closing Bid Price of the shares of Common Stock on the Trading Day
immediately preceding such record date; and

 

(b)           the number of Warrant Shares shall be increased to a
number of shares equal to the number of shares of Common Stock obtainable
immediately prior to the close of business on the record date fixed for the
determination of holders of shares of Common Stock entitled to receive the
Distribution multiplied by the reciprocal of the fraction set forth in the
immediately preceding paragraph (a); provided that in the event that the
Distribution is of shares of common stock (“Other
Shares of Common Stock”) of a company whose common shares are traded
on a national securities exchange or a national automated quotation system,
then the Holder may elect to receive a warrant to purchase Other Shares of
Common Stock in lieu of an increase in the number of Warrant Shares, the terms
of which shall be identical to those of this Warrant, except that such warrant
shall be exercisable into the number of shares of Other Shares of Common Stock
that would have been payable to the Holder pursuant to the Distribution had

 

10

the Holder exercised this
Warrant immediately prior to such record date and with an aggregate exercise
price equal to the product of the amount by which the exercise price of this
Warrant was decreased with respect to the Distribution pursuant to the terms of
the immediately preceding paragraph (a) and the number of Warrant Shares
calculated in accordance with the first part of this paragraph (b).

4.             PURCHASE RIGHTS; FUNDAMENTAL TRANSACTIONS.

(a)           Purchase Rights. 
In addition to any adjustments pursuant to Section 2 above, if at any
time the Company grants, issues or sells any Options, Convertible Securities or
rights to purchase stock, warrants, securities or other property pro rata to
the record holders of any class of shares of Common Stock (the “Purchase Rights”), then the Holder will be
entitled to acquire, upon the terms applicable to such Purchase Rights, the
aggregate Purchase Rights which the Holder could have acquired if the Holder
had held the number of shares of Common Stock acquirable upon complete exercise
of this Warrant (without regard to any limitations on the exercise of this
Warrant) immediately before the date on which a record is taken for the grant,
issuance or sale of such Purchase Rights, or, if no such record is taken, the
date as of which the record holders of shares of Common Stock are to be
determined for the grant, issue or sale of such Purchase Rights.

(b)           Fundamental Transactions.  The
Company shall not enter into or be party to a Fundamental Transaction unless
(i)  the Successor Entity assumes in writing all of the obligations of the
Company under this Warrant and the other Transaction Documents in accordance
with the provisions of this Section (4)(b) pursuant to written agreements in form and
substance satisfactory to the Required Holders and approved by the Required
Holders prior to such Fundamental Transaction, including agreements to deliver
to each holder of Warrants in exchange for
such Warrants a security of the Successor Entity evidenced by a written
instrument substantially similar in form and substance to this Warrant, including, without limitation, an adjusted
exercise price equal to the value for the shares of Common Stock reflected by
the terms of such Fundamental Transaction, and exercisable for a corresponding
number of shares of capital stock equivalent to the shares of Common Stock
acquirable and receivable upon exercise of this Warrant (without regard to any
limitations on the exercise of this Warrant) prior to such Fundamental
Transaction, and satisfactory to the Required Holders and (ii) the Successor Entity (including its Parent Entity) is a publicly
traded corporation whose common stock is quoted on or listed for trading on an
Eligible Market.  Upon the occurrence of any Fundamental Transaction, the Successor
Entity shall succeed to, and be substituted for (so that from and after the
date of such Fundamental Transaction, the provisions of this Warrant 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 with the same effect as if such Successor Entity
had been named as the Company herein.  Upon
consummation of the Fundamental Transaction, the Successor Entity shall deliver
to the Holder confirmation that there shall be issued upon exercise of this Warrant at any time after the consummation
of the Fundamental Transaction, in lieu of the shares of the Common Stock (or other
securities, cash, assets or other property) purchasable
upon the exercise of the Warrant
prior to such Fundamental Transaction, such shares of stock, securities, cash, assets or
any other property whatsoever (including warrants or other purchase or
subscription rights) which the 

 

11

 

Holder
would have been entitled to receive upon the happening of such Fundamental
Transaction had this Warrant been converted immediately prior to such Fundamental Transaction, as
adjusted in accordance with the provisions of this Warrant.  In addition to and not in
substitution for any other rights hereunder, prior to the consummation of any
Fundamental Transaction pursuant to which holders of shares of Common Stock are
entitled to receive securities or other assets with respect to or in exchange
for shares of Common Stock (a “Corporate Event”),
the Company shall make appropriate provision to insure that the Holder will
thereafter have the right to receive upon an exercise of this Warrant at any time after the consummation of the Fundamental
Transaction but prior to the Expiration Date, in lieu of the shares of the Common Stock (or other securities,
cash, assets or other property) purchasable
upon the exercise of the Warrant prior to such Fundamental Transaction, such shares of stock, securities, cash, assets or
any other property whatsoever (including warrants or other purchase or
subscription rights) which the Holder would have been entitled to receive upon
the happening of such Fundamental Transaction had the Warrant been exercised
immediately prior to such Fundamental Transaction.  Provision made pursuant to the
preceding sentence shall be in a form and substance reasonably satisfactory to
the Required Holders.  The provisions of
this Section shall apply similarly and equally to successive Fundamental
Transactions and Corporate Events and shall be applied without regard to any
limitations on the exercise of this Warrant.

(c)           Notwithstanding the
foregoing and the provisions of Section 4(b) above, in the event of a
Fundamental Transaction, if the Holder has not exercised the Warrant in full
prior to the consummation of the Fundamental Transaction, then the Holder shall have the right to
require such Successor Entity to purchase this Warrant from
the Holder by paying to the Holder, simultaneously with the consummation of the
Fundamental Transaction and in lieu of the warrant referred to in Section 4(b),
cash in an amount equal to the value of the remaining unexercised portion of
this Warrant on the date of such consummation, which value shall be determined
by use of the Black and Scholes Option Pricing Model.

 

12

 

5.             WARRANT HOLDER NOT DEEMED A STOCKHOLDER.  Except as otherwise specifically provided
herein, the Holder, solely in such Person’s capacity as a holder of this
Warrant, shall not be entitled to vote or receive dividends or be deemed the
holder of share capital of the Company for any purpose, nor shall anything
contained in this Warrant be construed to confer upon the Holder, solely in
such Person’s capacity as the Holder of this Warrant, any of the rights of a
shareholder of the Company or any right to vote, give or withhold consent to
any corporate action (whether any reorganization, issue of stock,
reclassification of stock, consolidation, merger, conveyance or otherwise),
receive notice of meetings, receive dividends or subscription rights, or
otherwise, prior to the issuance to the Holder of the Warrant Shares which such
Person is then entitled to receive upon the due exercise of this Warrant.  In addition, nothing contained in this
Warrant shall be construed as imposing any liabilities on the Holder to
purchase any securities (upon exercise of this Warrant or otherwise) or as a
shareholder of the Company, whether such liabilities are asserted by the
Company or by creditors of the Company. 
Notwithstanding this Section 5, the Company shall provide the Holder
with copies of the same notices and other information given to the shareholders
of the Company generally, contemporaneously with the giving thereof to the
shareholders.

6.             NONCIRCUMVENTION.  The Company hereby covenants and agrees that
the Company will not, by amendment of its Certificate of Incorporation, Bylaws
or through any reorganization, transfer of assets, consolidation, merger,
scheme of arrangement, dissolution, issue or sale of securities, or any other
voluntary action, avoid or seek to avoid the observance or performance of any
of the terms of this Warrant, and will at all times in good faith carry out all
the provisions of this Warrant and take all action as may be required to
protect the rights of the Holder. 
Without limiting the generality of the foregoing, the Company
(i) shall not increase the par value of any shares of Common Stock
receivable upon the exercise of this Warrant above the Exercise Price then in
effect, (ii) shall take all such actions as may be necessary or
appropriate in order that the Company may validly and legally issue fully paid
and nonassessable shares of Common Stock upon the exercise of this Warrant, and
(iii) shall, so long as any of the SPA Warrants are outstanding, promptly take
all action necessary to reserve and keep available out of its authorized and
unissued shares of Common Stock, solely for the purpose of effecting the exercise
of the SPA Warrants, 130% of the number of shares of Common Stock as shall from
time to time be necessary to effect the exercise of the SPA Warrants then
outstanding (without regard to any limitations on exercise).

7.             REISSUANCE OF WARRANTS.

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

 

13

 

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

 

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

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

8.             NOTICES. 
Whenever notice is required to be given under this Warrant, unless
otherwise provided herein, such notice shall be given in accordance with
Section 9(f) of the Securities Purchase Agreement.  The Company shall provide the Holder with
prompt written notice of all actions taken pursuant to this Warrant, including
in reasonable detail a description of such action and the reason
therefore.  Without limiting the
generality of the foregoing, the Company will give written notice to the Holder
(i) immediately upon any adjustment of the Exercise Price, setting forth in
reasonable detail, and certifying, the calculation of such adjustment and (ii)
at least fifteen days prior to the date on which the Company closes its books
or takes a record (A) with respect to any dividend or distribution upon the
shares of Common Stock, (B) with respect to any grants, issuances or sales of any
Options, Convertible Securities or rights to purchase stock, warrants,
securities or other property to holders of shares of Common Stock or (C) for
determining rights to vote with respect to any Fundamental Transaction,
dissolution or liquidation, provided in each case that such information shall
be made known to the public prior to or in conjunction with such notice being
provided to the Holder.

9.             AMENDMENT
AND WAIVER.  Except as otherwise
provided herein, the provisions of this Warrant may be amended, modified or
waived and the Company may take any action herein prohibited, or omit to
perform any act herein required to be performed by it, only if the Company has
obtained the written consent of the Required Holders; provided that no 

 

14

 

such action may increase the exercise price of any SPA Warrant or
decrease the number of shares or class of stock obtainable upon exercise of any
SPA Warrant without the written consent of the Holder.  No such amendment shall be effective to the
extent that it applies to less than all of the holders of the SPA Warrants then
outstanding.  In no event shall any
amendment, modification or waiver be made to this Warrant which would adversely
affect the Holder without the written consent of the Holder.

 

10.           GOVERNING LAW. 
This Warrant shall be governed by and construed and enforced in accor­dance
with, and all questions concerning the construction, validity, interpretation
and performance of this Warrant shall be governed by, the internal laws of the
State of New York, without giving effect to any choice of law or conflict of
law provision or rule (whether of the State of New York or any other
jurisdictions) that would cause the application of the laws of any
jurisdictions other than the State of New York.

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

12.           CONSTRUCTION; HEADINGS.  This Warrant shall be deemed to be jointly
drafted by the Company and all the Buyers and shall not be construed against
any person as the drafter hereof.  The
headings of this Warrant are for convenience of reference and shall not form
part of, or affect the interpretation of, this Warrant.

13.           DISPUTE
RESOLUTION.  In the case of a dispute
as to the determination of the Exercise Price or the arithmetic calculation of
the Warrant Shares, the Company shall submit the disputed determinations or
arithmetic calculations via facsimile within two Business Days of receipt of
the Exercise Notice giving rise to such dispute, as the case may be, to the
Holder.  If the Holder and the Company
are unable to agree upon such determination or calculation of the Exercise
Price or the Warrant Shares within three Business Days of such disputed
determination or arithmetic calculation being submitted to the Holder, then the
Company shall, within two Business Days submit via facsimile (a) the disputed
determination of the Exercise Price to an independent, reputable investment
bank selected by the Company and approved by the Holder  or (b) the disputed arithmetic calculation of
the Warrant Shares to the Company’s independent, outside accountant.  The Company shall cause at its expense the
investment bank or the accountant, as the case may be, to perform the
determinations or calculations and notify the Company and the Holder of the
results no later than ten Business

 

15

 

Days from the time it receives the disputed determinations or calculations.  Such investment bank’s or accountant’s
determination or calculation, as the case may be, shall be binding upon all
parties absent demonstrable error.

 

14.           REMEDIES, OTHER OBLIGATIONS, BREACHES AND INJUNCTIVE
RELIEF.  The remedies provided in
this Warrant shall be cumulative and in addition to all other remedies
available under this Warrant and the other Transaction Documents, at law or in
equity (including a decree of specific performance and/or other injunctive
relief), and nothing herein shall limit the right of the Holder to pursue
actual damages for any failure by the Company to comply with the terms of this
Warrant.  The Company acknowledges that a
breach by it of its obligations hereunder will cause irreparable harm to the
Holder and that the remedy at law for any such breach may be inadequate.  The Company therefore agrees that, in the
event of any such breach or threatened breach, the holder of this Warrant shall
be entitled, in addition to all other available remedies, to an injunction
restraining any breach, without the necessity of showing economic loss and
without any bond or other security being required.

15.           TRANSFER. 
This Warrant may be offered for sale, sold, transferred or assigned
without the consent of the Company, except as may otherwise be required by
Section 2(g) of the Securities Purchase Agreement.

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

(a)           “Approved Stock Plan”
means any employee benefit plan, arrangement or other agreement which has been
approved by the Board of Directors of the Company, pursuant to which the
Company’s securities may be issued to any employee, consultant, officer or
director for services provided to the Company.

(b)           “Average Market Price”
means, for any given date, the lesser of (i) the arithmetic average of the
Weighted Average Price of the Common Stock on each of the twenty (20)
consecutive Trading Days ending on the Trading Day immediately prior to such
given date (the “Measuring Period”),
(ii) the arithmetic average of the Weighted Average Price of the Common Stock
on each of the first five (5) consecutive Trading Days of the Measuring Period
and (iii) the arithmetic average of the Weighted Average Price of the Common
Stock on each of the last five (5) consecutive Trading Days of the Measuring
Period ; provided, that all such determinations shall be appropriately adjusted
for any stock split, stock dividend, stock combination or other similar
transaction that proportionately decreases or increases the Common Stock during
such periods.

(c)           “Bloomberg”
means Bloomberg Financial Markets.

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

 

(e)           “Closing Bid Price” and “Closing Sale Price” means, for any security
as of any date, the last closing bid price and last closing trade price,
respectively, for 

 

16

 

such security on the Principal Market, as reported by Bloomberg, or, if
the Principal Market begins to operate on an extended hours basis and does not
designate the closing bid price or the closing trade price, as the case may be,
then the last bid price or last trade price, respectively, of such security
prior to 4:00:00 p.m., New York Time, as reported by Bloomberg, or, if the
Principal Market is not the principal securities exchange or trading market for
such security, the last closing bid price or last trade price, respectively, of
such security on the principal securities exchange or trading market where such
security is listed or traded as reported by Bloomberg, or if the foregoing do
not apply, the last closing bid price or last trade price, respectively, of
such security in the over-the-counter market on the electronic bulletin board
for such security as reported by Bloomberg, or, if no closing bid price or last
trade price, respectively, is reported for such security by Bloomberg, the
average of the bid prices, or the ask prices, respectively, of any market
makers for such security as reported in the “pink sheets” by Pink Sheets LLC
(formerly the National Quotation Bureau, Inc.). 
If the Closing Bid Price or the Closing Sale Price cannot be calculated
for a security on a particular date on any of the foregoing bases, the Closing
Bid Price or the Closing Sale Price, as the case may be, of such security on
such date shall be the fair market value as mutually determined by the Company
and the Holder.  If the Company and the
Holder are unable to agree upon the fair market value of such security, then
such dispute shall be resolved pursuant to Section 13.  All such determinations to be appropriately
adjusted for any stock dividend, stock split, stock combination or other similar
transaction during the applicable calculation period.

 

(f)            “Closing Date”
means the “2007 Closing Date”, as defined in the Securities Purchase Agreement.

(g)           “Common
Stock” means (i) the Company’s shares of Common Stock, par
value $.001 per share, and (ii) any share capital into which such Common
Stock shall have been changed or any share capital resulting from a
reclassification of such Common Stock.

(h)           “Convertible Securities” means any stock or
securities (other than Options) directly or indirectly convertible into or
exercisable or exchangeable for shares of Common Stock.

(i)            “Eligible Market”
means the Principal Market, the American Stock Exchange, The New York Stock
Exchange, Inc., the Nasdaq National Market or The Nasdaq Capital Market, or any
market that is a successor to any of the foregoing.

(j)            “Excluded Securities” means any
Common Stock issued or issuable: (i) in connection with any Approved Stock
Plan; (ii) upon conversion of the SPA Securities or the exercise of the SPA
Warrants issued pursuant to the Securities Purchase Agreement; (iii) in connection with the payment of any
Interest Shares on the SPA Securities; (iv) upon exercise of any
Options or Convertible Securities which are outstanding, or that are subject to
a written agreement as to their issuance listed on a schedule to the Securities Purchase
Agreement; (v) in an amount not to exceed 250,000 shares of Common Stock in the
aggregate pursuant to a judgment or settlement in connection with (i) the PIN
Financial Matter, or (ii) the UOS Energy Matter, including, without limitation,
Common Stock issuable pursuant to Options granted or Convertible Securities
issued pursuant to such judgment or settlement; and (vi) 

 

17

 

otherwise pursuant to a written agreement that is listed on a schedule
to the Securities Purchase Agreement, provided that the terms of conversion
price, exchange price, exercise or other purchase price is not reduced, and the
number of shares of Common Stock issued or issuable is not increased, by virtue
of any amendment, modification or change to such Options, Convertible
Securities or written agreements after the Closing Date.

 

(k)           “Expiration Date”
means the date eighty-four (84) months after the Closing Date or, if such date
falls on a day other than a Business Day or on which trading does not take
place on the Principal Market (a “Holiday”),
the next date that is not a Holiday.

(l)            “Fundamental
Transaction” means that the Company shall directly
or indirectly, in one or more related transactions, (i) consolidate or merge
with or into (whether or not the Company is the surviving corporation)
another Person or Persons, or (ii) sell, assign, transfer, convey or otherwise
dispose of all or substantially all of the properties or assets of the Company
to another Person, or (iii) allow another Person (other then
the Holder) to make a purchase, tender or exchange offer that is accepted by
the holders of more than 50% of the outstanding shares of Common Stock (not
including any shares of Common Stock held by the Person or Persons making or
party to, or associated or affiliated with the Persons making or party to, such
purchase, tender or exchange offer), or (iv) consummate a stock 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 purchase agreement or other business
combination), or (v) reorganize, recapitalize or reclassify its Common Stock,
or (vi) any “person” or “group” (as these terms are used for purposes of
Sections 13(d) and 14(d) of the Exchange Act), become the
“beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly
or indirectly, of 50% of the aggregate ordinary voting power represented by
issued and outstanding Common Stock, provided, however, that
“Fundamental Transaction” shall not include any of the transactions described
above if entered into in order to consummate a Company Full Mandatory
Redemption (as such term is defined in the SPA Securities).

“Maximum Eligibility Number” means
initially, zero, and shall be increased (which increases shall be cumulative)
on each Company Mandatory Redemption Notice Date by 50% of the number of
Conversion Shares underlying the Conversion Amount to be redeemed on the date
of such Company Partial Mandatory Redemption or Company Full Mandatory
Redemption (as such terms are defined in the SPA Securities), as the case may
be.

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

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

 

18

 

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

 

(p)           “PIN Financial Matter”  means the matter pending in the US District Court, Southern
District of New York (06 CV 2779) against the Company by PIN Financial LLC
claiming a commission for introduction to Cornell Capital Partners, L.P., which
has been aggressively denied and disputed by both Wentworth and Cornell
Capital.

(q)           “Principal Market”
means the OTC Bulletin Board.

(r)            “Registration Rights
Agreement” means that certain Amended and Restated Registration
Rights Agreement, dated as of October 31, 2007, by and among the Company and
the Buyers, as the same may be amended, modified or supplemented from time to
time, relating to, among other things, the registration of the resale of the
Common Stock issuable upon conversion of the SPA Securities.

(s)           “Required Holders”
means the holders of the SPA Warrants representing at least a majority of
shares of Common Stock underlying the SPA Warrants then outstanding.

(t)            “Securities Purchase
Agreement” means the 2006 Securities Purchase Agreement, as amended
on or prior to the date hereof (including as amended by the Amendment
Agreements), and as the same may be further amended, modified or supplemented
from time to time.

(u)           “SPA Securities”
means the Notes as defined in and issued pursuant to the Securities Purchase
Agreement.

(v)           “Successor Entity”
means the Person, which may be the
Company, formed by, resulting from or surviving any Fundamental Transaction or
the Person with which such Fundamental Transaction shall have been made,
provided that if such Person is not a publicly traded entity whose
common stock or equivalent equity security is quoted or listed for trading on
an Eligible Market, Successor Entity shall mean such Person’s Parent Entity.

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

(x)            “Trading Price” means, for any given date,
the arithmetic average of the Weighted Average Price of the Common Stock during
the five (5) consecutive Trading 

 

19

 

Day period ending on the
Trading Day immediately prior to such given date, as appropriately adjusted for
any stock split, stock dividend, stock combination or other similar transaction
that proportionately decreases or increases the Common Stock during such
period.

(y)           “Transaction Document”
has the meaning set forth in the Securities Purchase Agreement.

(z)            “2006 Securities
Purchase Agreement” means that certain Securities Purchase
Agreement, dated as of July 24, 2006, by and among the Company and the Buyers,
prior to giving effect to any amendment or other modification thereto.

(aa)         “UOS Energy Matter”
means, the matter pending in the Superior Court of California, County of Los
Angeles, West District (SC09064) against the Company and others by UOS Energy,
LLC relating to the Company’s refusal to purchase certain tar sands leases in
Utah in consideration of 1,000,000 shares of Common Stock.

(bb)         “Weighted Average Price” means, for any security as of any
date, the dollar volume-weighted average price for such security on the
Principal Market during the period beginning at 9:30:01 a.m., New York Time (or
such other time as the Principal Market publicly announces is the official open
of trading), and ending at 4:00:00 p.m., New York Time (or such other time as
the Principal Market publicly announces is the official close of trading) as
reported by Bloomberg through its “Volume at Price” functions, or, if the
foregoing does not apply, the dollar volume-weighted average price of such
security in the over-the-counter market on the electronic bulletin board for
such security during the period beginning at 9:30:01 a.m., New York Time (or
such other time as such market publicly announces is the official open of
trading), and ending at 4:00:00 p.m., New York Time (or such other time as such
market publicly announces is the official close of trading) as reported by
Bloomberg, or, if no dollar volume-weighted average price is reported for such
security by Bloomberg for such hours, the average of the highest closing bid
price and the lowest closing ask price of any of the market makers for such
security as reported in the “pink sheets” by Pink Sheets LLC (formerly the
National Quotation Bureau, Inc.).  If the
Weighted Average Price cannot be calculated for a security on a particular date
on any of the foregoing bases, the Weighted Average Price of such security on
such date shall be the fair market value as mutually determined by the Company
and the Holder.  If the Company and the
Holder are unable to agree upon the fair market value of such security, then
such dispute shall be resolved pursuant to Section 13.  All such determinations are to be
appropriately adjusted for any stock dividend, stock split, stock combination
or other similar transaction during the applicable calculation period.

[Signature Page Follows]

 

20

 

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

 

 

	
   

  	
   

  	
   

  	
   

  	
  WENTWORTH ENERGY, INC.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  
							

 

 

EXHIBIT A

EXERCISE NOTICE

TO BE EXECUTED BY THE REGISTERED HOLDER TO EXERCISE THIS

WARRANT TO PURCHASE COMMON STOCK

 

WENTWORTH
ENERGY, INC.

 

                The
undersigned holder (“Holder”)
hereby exercises the right to purchase _________________ of the shares of
Common Stock (“Warrant Shares”) of
Wentworth Energy, Inc., an Oklahoma corporation (the “Company”), evidenced by the attached
Warrant to Purchase Common Stock (the “Warrant”).  Capitalized terms used herein and not
otherwise defined shall have the respective meanings set forth in the Warrant.

 

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

 

	
   

  	
   

  	
  a “Cash Exercise”
  with respect to 

  	
   

  
	
   

  	
   

  	
   Warrant Shares; and/or

  	
   

  
	
   

  	
   

  	
  a “Cashless Exercise”
  with respect to

  	
   

  
	
   

  	
   

  	
  Warrant Shares.

  	
   

  

 

 

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

 

                3.             Delivery
of Warrant Shares.  The Company shall
deliver to the Holder __________ Warrant Shares in accordance with the terms of
the Warrant.

 

 

	
  Date: 

  	
   

  
	
   

  	
   

  

   Name
of Registered Holder

 

	
  By:

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  

 

 

 

ACKNOWLEDGMENT

                The Company hereby acknowledges
this Exercise Notice and hereby directs Empire Stock Transfer Inc. to issue the
above indicated number of shares of Common Stock in accordance with the
Transfer Agent Instructions dated July 24, 2006 from the Company and
acknowledged and agreed to by Empire Stock Transfer Inc, as amended.

 

	
   

  	
  WENTWORTH
  ENERGY, INC.

  
	
   

  
	
   

  
	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
   

  	
  Title:Exhibit 4.16

NEITHER
THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE
SECURITIES INTO WHICH THESE SECURITIES ARE EXERCISEABLE HAVE BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS.  THE SECURITIES MAY NOT BE OFFERED FOR SALE,
SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE
REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR (B) AN OPINION OF COUNSEL, IN A FORM REASONABLY ACCEPTABLE TO THE
COMPANY, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD
PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT.  NOTWITHSTANDING THE FOREGOING, THE SECURITIES
MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR
FINANCING ARRANGEMENT SECURED BY THE SECURITIES.

WENTWORTH
ENERGY, INC.

[NEW SERIES A WARRANT / OTHER NEW
SERIES A WARRANT] TO PURCHASE COMMON STOCK

 

Warrant No.: NA-     

Number of Shares of Common Stock: [                   ]

 

Issuance Date:  October 31, 2007 (“Issuance Date”)

 

Wentworth Energy, Inc., an
Oklahoma corporation, (the “Company”),
hereby certifies that, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, [Insert Name of Buyer]., the
registered holder hereof, or its permitted assigns (the “Holder”), is entitled, subject to the terms
set forth below, to purchase from the Company, at the Exercise Price (as
defined below) then in effect, upon surrender of this Warrant to Purchase Common
Stock (including any Warrants to purchase Common Stock issued in exchange,
transfer or replacement hereof, the “Warrant”),
at any time or times on or after the Issuance Date, but not after 11:59 p.m.,
New York Time, on the Expiration Date (as defined below), [                                   ]
fully paid nonassessable shares of Common Stock (as defined below)  (the “Warrant
Shares”).  Except as otherwise
defined herein, capitalized terms in this Warrant shall have the meanings set
forth in Section 16.  This Warrant is one
of the Warrants to Purchase Common Stock (including new warrants and amended
and restated warrants) issued pursuant to the Securities Purchase Agreement, as
amended by those certain Amendment Agreements, each dated as of October 31, 2007
(the “Amendment Agreements”) by
and between the Company and respective buyer party thereto (this Warrant,
together with all of the other New Warrants and Amended and Restated Warrants
(each as defined in the Amendment Agreements) the “SPA Warrants”).

1.             EXERCISE OF WARRANT.

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

 

2

 

the like of the Holder) which may be payable with respect to the
issuance and delivery of Warrant Shares upon exercise of this Warrant.

 

(b)           Exercise Price. 
For purposes of this Warrant, “Exercise
Price” means: $0.001, subject to adjustment as provided herein.

(c)           Company’s Failure to Timely
Deliver Securities. If
the Company shall fail for any reason or for no reason to issue to the Holder
within three (3) Trading Days of receipt of the Exercise Delivery Documents, a
certificate for the number of shares of Common Stock to which the Holder is
entitled and register such shares of Common Stock on the Company’s share
register or to credit the Holder’s balance account with DTC for such number of
shares of Common Stock to which the Holder is entitled upon the Holder’s
exercise of this Warrant, then, in addition to all other remedies available to
the Holder, the Company shall pay in cash to the Holder on each day after such
third  Business Day that the
issuance of such shares of Common Stock is not timely effected an amount equal
to 1.5% of the product of (A) the sum of the number of shares of Common Stock
not issued to the Holder on a timely basis and to which the Holder is entitled
and (B) the Closing Sale Price of the shares of Common Stock on the Trading Day
immediately preceding the last possible date which the Company could have
issued such shares of Common Stock to the Holder without violating Section
1(a).  In addition, if within three
(3) Trading Days after the Company’s receipt of the facsimile copy of an
Exercise Notice the Company shall fail to issue and deliver a certificate to
the Holder and register such shares of Common Stock on the Company’s share
register or credit the Holder’s balance account with DTC for the number of
shares of Common Stock to which the Holder is entitled upon such holder’s
exercise hereunder, and if on or after such 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 shares of Common Stock issuable upon
such exercise that the Holder anticipated receiving from the Company (a “Buy-In”), then the Company shall, within
three Business Days after the Holder’s request and in the Holder’s discretion,
either (i) pay cash to the Holder in an amount equal to the Holder’s total
purchase price (including 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 shares of Common Stock) or credit such Holder’s balance account with
DTC shall terminate, or (ii) promptly honor its obligation to deliver to the
Holder a certificate or certificates representing such shares of Common Stock
or credit such Holder’s balance account with DTC 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 exercise.

(d)     Cashless Exercise.  Notwithstanding
anything contained herein to the contrary, if a Registration Statement (as
defined in the Registration Rights Agreement) covering the Warrant Shares that
are the subject of the Exercise Notice (the “Unavailable
Warrant Shares”) is not available for the resale of such Unavailable
Warrant Shares, the Holder may, in its sole discretion, exercise this Warrant
in whole or in part and, in lieu of making the cash payment otherwise
contemplated to be made to the Company upon such exercise in payment of the
Aggregate Exercise Price, elect instead to receive upon such exercise the “Net
Number” of shares of Common Stock determined according to the following formula
(a “Cashless Exercise”):

	
  Net Number =

  	
  (A
  x B) - (A x C)

  
	
   

  	
  B

  
			

 

 

                For purposes of the foregoing formula:

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

B= the Closing Sale Price of
the shares of Common Stock (as reported by Bloomberg) on the date immediately
preceding the date of the Exercise Notice.

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

 

3

 

(e)     Disputes.  In the case of a dispute as to the
determination of the Exercise Price or the arithmetic calculation of the
Warrant Shares, the Company shall promptly issue to the Holder the number of
Warrant Shares that are not disputed and resolve such dispute in accordance
with Section 13.

(f)      Limitations on Exercises.

(i)            Beneficial Ownership.  Notwithstanding any provision to the contrary
contained in this Warrant or any other Transaction Document, the Company shall
not effect the exercise of this Warrant, and the Holder shall not have the
right to exercise this Warrant, to the extent that after giving effect to such exercise,
such Person (together with such Person’s affiliates) would beneficially own in
excess of 4.99% of the shares of Common Stock outstanding immediately after
giving effect to such exercise.  For
purposes of the foregoing sentence, the aggregate number of shares of Common
Stock beneficially owned by such Person and its affiliates shall include the
number of shares of Common Stock issuable upon exercise of this Warrant with
respect to which the determination of such sentence is being made, but shall exclude
shares of Common Stock which would be issuable upon (A) exercise of the
remaining, unexercised portion of this Warrant beneficially owned by such
Person and its affiliates and (B) exercise or conversion of the unexercised or
unconverted portion of any other securities of the Company beneficially owned
by such Person and its affiliates (including, without limitation, any
convertible notes or convertible preferred stock or warrants) subject to a
limitation on conversion or exercise analogous to the limitation contained
herein.  Except as set forth in the
preceding sentence, for purposes of this paragraph, beneficial ownership shall
be calculated in accordance with Section 13(d) of the Securities Exchange Act
of 1934, as amended (the “Exchange Act”).  For purposes of this Warrant, in determining
the number of outstanding shares of Common Stock, the Holder may rely on the
number of outstanding shares of Common Stock as reflected in (1) the 

 

4

 

Company’s
most recent Form 10-K, 10-KSB, Form 10-Q, 10-QSB, Current Report on Form 8-K or
other public filing with the Securities and Exchange Commission, as the case
may be, (2) a more recent public announcement by the Company or (3) any other
notice by the Company or the Transfer Agent setting forth the number of shares
of Common Stock outstanding.  For any
reason at any time, upon the written or oral request of the Holder, the Company
shall within one (1) Business Day confirm orally and in writing to the Holder
the number of shares of Common Stock then outstanding.  In any case, the number of outstanding shares
of Common Stock shall be determined after giving effect to the conversion or
exercise of securities of the Company, including the SPA Securities and the SPA
Warrants, by the Holder and its affiliates since the date as of which such
number of outstanding shares of Common Stock was reported.

(ii)           Principal Market Regulation.  The Company shall not be obligated to issue
any shares of Common Stock upon exercise of this Warrant or conversion of SPA
Securities and no Buyer (as defined in the Securities Purchase Agreement) or
Holder shall be entitled to receive any shares of Common Stock if the issuance
of such shares of Common Stock would exceed that number of shares of Common
Stock which the Company may issue upon exercise or conversion, as applicable,
of the SPA Warrants and SPA Securities or otherwise without breaching the
Company’s obligations under the rules or regulations of any applicable Eligible
Market (the “Exchange Cap”),
except that such limitation shall not apply in the event that the Company (A)
obtains the approval of its shareholders as required by the applicable rules of
the Eligible Market for issuances of shares of Common Stock in excess of such
amount or (B) obtains a written opinion from outside counsel to the Company
that such approval is not required, which opinion shall be reasonably
satisfactory to the Required Holders. 
Until such approval or written opinion is obtained, no Buyer or Holder
shall be issued in the aggregate, upon exercise or conversion, as applicable,
of any SPA Warrants or SPA Securities, shares of Common Stock in an amount
greater than the product of the Exchange Cap multiplied by a fraction, the
numerator of which is the total number of shares of Common Stock underlying the
SPA Warrants issued to such Buyer or Holder (or its predecessor interest) as of
the Closing Date and the denominator of which is the aggregate number of shares
of Common Stock underlying the SPA Warrants and the SPA Securities issued to
the Buyers as of the Closing Date (with respect to each Holder, the “Exchange Cap Allocation”).  In the event that any Holder shall sell or
otherwise transfer any of such Holder’s SPA Warrants, the transferee shall be
allocated a pro rata portion of such Holder’s Exchange Cap Allocation, and the
restrictions of the prior sentence shall apply to such transferee with respect
to the portion of the Exchange Cap Allocation allocated to such
transferee.  In the event that any holder
of SPA Warrants shall exercise all of such holder’s SPA Warrants into a number
of shares of Common Stock 

 

5

 

which,
in the aggregate, is less than such holder’s Exchange Cap Allocation, then the
difference between such holder’s Exchange Cap Allocation and the number of
shares of Common Stock actually issued to such holder shall be allocated to the
respective Exchange Cap Allocations of the remaining holders of SPA Warrants on
a pro rata basis in proportion to the shares of Common Stock underlying the SPA
Warrants then held by each such holder. 
In the event that the Company is prohibited from issuing any Warrant
Shares for which an Exercise Notice has been received as a result of the
operation of this Section 1(f)(ii), the Company shall pay cash in exchange for
cancellation of such Warrant Shares, at a price per Warrant Share equal to the
difference between the Closing Sale Price and the Exercise Price as of the date
of the attempted exercise.

2.               ADJUSTMENT OF EXERCISE PRICE
AND NUMBER OF WARRANT SHARES.  The
Exercise Price and the number of Warrant Shares shall be adjusted from time to
time as follows:

(a)           Adjustment upon Issuance of Shares of Common Stock.  If and whenever on or after the Closing Date
the Company issues or sells, or in accordance with this Section 2 is deemed to
have issued or sold, any shares of Common Stock (including the issuance or sale
of shares of Common Stock owned or held by or for the account of the Company)
for a consideration per share (the “New Issuance Price”)
less than the Exercise Price (the “Applicable
Price”) in effect immediately prior to such issue or sale or deemed
issuance or sale (the foregoing a “Dilutive
Issuance”), then immediately after such Dilutive Issuance, the
Exercise Price then in effect shall be reduced to an amount equal to the New
Issuance Price.  Upon each such
adjustment of the Exercise Price hereunder, the number of Warrant Shares shall
be adjusted to the number of shares of Common Stock determined by multiplying
the Exercise Price in effect immediately prior to such adjustment by the number
of Warrant Shares acquirable upon exercise of this Warrant immediately prior to
such adjustment and dividing the product thereof by the Exercise Price
resulting from such adjustment. 
Notwithstanding any provision to the contrary contained in this Warrant,
the provisions of this Section 2 shall not apply with respect to the issuance
or sale or deemed issuance or sale of shares of Common Stock in connection with
any Excluded Securities. For purposes of determining the adjusted Exercise
Price under this Section 2(a), the following shall be applicable:

(i)            Issuance of Options.  If the Company in any manner grants any
Options and the lowest price per share for which one share of shares of Common
Stock is issuable upon the exercise of any such Option or upon conversion,
exercise or exchange of any Convertible Securities issuable upon exercise of
any such Option is less than the Applicable Price, then such share of Common
Stock shall be deemed to be outstanding and to have been issued and sold by the
Company at the time of the granting or sale of such Option for such price per
share.  For purposes of this Section
2(a)(i), the “lowest price per share for which one share of shares of Common Stock
is issuable upon exercise of such Options or upon conversion, exercise or
exchange of such Convertible 

 

6

 

Securities”
shall be equal to the sum of the lowest amounts of consideration (if any)
received or receivable by the Company with respect to any one share of shares
of Common Stock upon the granting or sale of the Option, upon exercise of the
Option and upon conversion, exercise or exchange of any Convertible Security
issuable upon exercise of such Option. 
No further adjustment of the Exercise Price or number of Warrant Shares
shall be made upon the actual issuance of such shares of Common Stock or of
such Convertible Securities upon the exercise of such Options or upon the
actual issuance of such shares of Common Stock upon conversion, exercise or
exchange of such Convertible Securities.

(ii)           Issuance of
Convertible Securities.  If the
Company in any manner issues or sells any Convertible Securities and the lowest
price per share for which one share of shares of Common Stock is issuable upon
the conversion, exercise or exchange thereof is less than the Applicable Price,
then such share of Common Stock shall be deemed to be outstanding and to have
been issued and sold by the Company at the time of the issuance or sale of such
Convertible Securities for such price per share.  For the purposes of this Section 2(a)(ii),
the “lowest price per share for which one share of shares of Common Stock is
issuable upon the conversion, exercise or exchange” shall be equal to the sum
of the lowest amounts of consideration (if any) received or receivable by the
Company with respect to one share of shares of Common Stock upon the issuance
or sale of the Convertible Security and upon conversion, exercise or exchange
of such Convertible Security.  No further
adjustment of the Exercise Price or number of Warrant Shares shall be made upon
the actual issuance of such shares of Common Stock upon conversion, exercise or
exchange of such Convertible Securities, and if any such issue or sale of such
Convertible Securities is made upon exercise of any Options for which
adjustment of this Warrant has been or is to be made pursuant to other
provisions of this Section 2(a), no further adjustment of the Exercise Price or
number of Warrant Shares shall be made by reason of such issue or sale.

(iii)          Change in Option Price or Rate of
Conversion.  If the purchase price
provided for in any Options, the additional consideration, if any, payable upon
the issue, conversion, exercise or exchange of any Convertible Securities, or
the rate at which any Convertible Securities are convertible into or
exercisable or exchangeable for shares of Common Stock increases or decreases
at any time, the Exercise Price and the number of Warrant Shares in effect at
the time of such increase or decrease shall be adjusted to the Exercise Price
and the number of Warrant Shares which would have been in effect at such time
had such Options or Convertible Securities provided for such increased or
decreased purchase price, additional consideration or increased or decreased
conversion rate, as the case may be, at the time initially granted, issued or
sold.  For purposes of this Section
2(a)(iii), if the terms of any Option or Convertible 

 

7

 

Security
that were outstanding as of the Issuance Date are increased or decreased in the
manner described in the immediately preceding sentence, then such Option or
Convertible Security and the shares of Common Stock deemed issuable upon
exercise, conversion or exchange thereof shall be deemed to have been issued as
of the date of such increase or decrease. 
No adjustment pursuant to this Section 2(a)(iii) shall be made if such
adjustment would result in an increase of the Exercise Price then in effect or
a decrease in the number of Warrant Shares. 
A change that permits the holder of an Option or Convertible Security to
utilize a cashless exercise feature shall not be deemed to decrease the
consideration payable by the holder solely by reason of the fact that the
cashless exercise feature would result in a reduction in cash consideration
receivable by the Company.

(iv)          Calculation of Consideration
Received.  In case any
Option is issued in connection with the issue or sale of other securities of
the Company, together comprising one integrated transaction in which no
specific consideration is allocated to such Options by the parties thereto, such Options will be deemed to have been
issued for the difference of (x) the aggregate fair market value of such
Options and other securities issued or sold in such integrated transaction,
less (y) the fair market value of the securities other than such Option, issued
or sold in such transaction, and the other securities issued or sold in such
integrated transaction will be deemed to have been issued or sold for the
balance of the consideration received by the Company.  If any shares
of Common Stock are issued or sold or deemed to have been issued or sold, or
provided for in an Option or Convertible Security to be issued or sold for
cash, the consideration received or to be received therefor will be deemed to
be the net amount received by the Company therefor.  If any shares of Common Stock, are issued or
sold or provided for in an Option or Convertible Security to be issued or sold
for a consideration other than cash, the amount of such consideration received
or to be received by the Company will be the fair value of such consideration,
except where such consideration consists of publicly traded securities, in
which case the amount of consideration received by the Company will be the
Closing Sale Price of such security on the date of receipt.  If any shares of Common Stock are issued to
the owners of the non-surviving entity in connection with any merger in which
the Company is the surviving entity, the amount of consideration therefor will
be deemed to be the fair value of such portion of the net assets and business
of the non-surviving entity as is attributable to such shares of Common Stock.  Notwithstanding the provisions of this
Section 2(a)(iv), the purchase price provided for in an Option, or the
additional consideration, if any, paid or payable upon the issue, conversion,
exercise or exchange of any Convertible Securities, to the extent paid or payable
or converted or exercised pursuant to a cashless exercise feature, shall not be
deemed to be an issuance or sale of Common Stock for consideration other than
cash.  The fair value of any
consideration other than cash or publicly 

 

8

 

traded
securities will be determined jointly by the Company and the Required
Holders.  If such parties are unable to
reach agreement within ten (10) days after the occurrence of an event requiring
valuation (the “Valuation Event”),
the fair value of such consideration will be determined within five (5)
Business Days after the tenth day following the Valuation Event by an
independent, reputable appraiser jointly selected by the Company and the
Required Holders.  The determination of
such appraiser shall be final and binding upon all parties absent manifest
error and the fees and expenses of such appraiser shall be borne by the
Company.

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

(b)           Adjustment upon Subdivision or Combination of shares of
Common Stock.  If the Company at any
time on or after the Closing Date subdivides (by any stock split, stock
dividend, recapitalization or otherwise) one or more classes of its outstanding
shares of Common Stock into a greater number of shares, the Exercise Price in
effect immediately prior to such subdivision will be proportionately reduced
and the number of Warrant Shares will be proportionately increased.  If the Company at any time on or after the
Closing Date combines (by combination, reverse stock split or otherwise) one or
more classes of its outstanding shares of Common Stock into a smaller number of
shares, the Exercise Price in effect immediately prior to such combination will
be proportionately increased and the number of Warrant Shares will be
proportionately decreased.  Any
adjustment under this Section 2(b) shall become effective at the close of
business on the date the subdivision or combination becomes effective.

(c)           Other Events. 
If any event occurs of the type contemplated by the provisions of this
Section 2 but not expressly provided for by such provisions (including, without
limitation, the granting of stock appreciation rights, phantom stock rights or
other rights with equity features), then the Company’s Board of Directors will
make an appropriate adjustment in the Exercise Price and the number of Warrant
Shares so as to protect the rights of the Holder; provided that no such
adjustment pursuant to this Section 2(c) will increase the Exercise Price or
decrease the number of Warrant Shares as otherwise determined pursuant to this
Section 2.

(d)           Adjustment
Upon Event of Default.  Upon the
occurrence of an Event of Default (as defined in the SPA Securities), when any
of the SPA Securities are outstanding, the Exercise Price shall be reset to the
lower of (A) the Exercise Price then in effect

 

9

 

and (B) the Average Market
Price of the Common Stock; provided, however, that no such adjustment pursuant
to this Section 2(d) will increase the Exercise Price.  Upon each such adjustment of the Exercise
Price hereunder, the number of Warrant Shares shall be adjusted to the number
of shares of Common Stock determined by multiplying the Exercise Price in
effect immediately prior to such adjustment by the number of Warrant Shares
acquirable upon exercise of this Warrant immediately prior to such adjustment
and dividing the product thereof by the Exercise Price resulting from such
adjustment.  Any adjustment under this
Section 2(d) shall become effective at the close of business on the date
immediately after such Event of Default.

3.           RIGHTS UPON DISTRIBUTION OF ASSETS.  If the Company shall declare or make any
dividend or other distribution of its assets (or rights to acquire its assets)
to holders of shares of Common Stock, by way of return of capital or otherwise
(including, without limitation, any distribution of cash, stock or other
securities, property or options by way of a dividend, spin off,
reclassification, corporate rearrangement, scheme of arrangement or other
similar transaction) other than the Excluded 
Distribution (as defined in the SPA Securities) (a “Distribution”), at any time after the
Issuance Date, then, in each such case:

(a)           any Exercise Price in effect immediately prior to the
close of business on the record date fixed for the determination of holders of
shares of Common Stock entitled to receive the Distribution shall be reduced,
effective as of the close of business on such record date, to a price
determined by multiplying such Exercise Price by a fraction of which (i) the
numerator shall be the Closing Bid Price of the shares of Common Stock on the
Trading Day immediately preceding such record date minus the value of the
Distribution (as determined in good faith by the Company’s Board of Directors)
applicable to one share of shares of Common Stock, and (ii) the denominator
shall be the Closing Bid Price of the shares of Common Stock on the Trading Day
immediately preceding such record date; and

(b)           the
number of Warrant Shares shall be increased to a number of shares equal to the
number of shares of Common Stock obtainable immediately prior to the close of
business on the record date fixed for the determination of holders of shares of
Common Stock entitled to receive the Distribution multiplied by the reciprocal
of the fraction set forth in the immediately preceding paragraph (a); provided
that in the event that the Distribution is of shares of common stock (“Other Shares of Common Stock”) of a company
whose common shares are traded on a national securities exchange or a national
automated quotation system, then the Holder may elect to receive a warrant to
purchase Other Shares of Common Stock in lieu of an increase in the number of
Warrant Shares, the terms of which shall be identical to those of this Warrant,
except that such warrant shall be exercisable into the number of shares of
Other Shares of Common Stock that would have been payable to the Holder
pursuant to the Distribution had the Holder exercised this Warrant immediately
prior to such record date and with an aggregate exercise price equal to the
product of the amount by which the exercise price of this Warrant was decreased
with respect to the Distribution pursuant to the terms of the immediately
preceding paragraph (a) and the number of Warrant Shares calculated in
accordance with the first part of this paragraph (b).

 

10

 

 

 

4.             PURCHASE
RIGHTS; FUNDAMENTAL TRANSACTIONS.

 

(a)           Purchase Rights. 
In addition to any adjustments pursuant to Section 2 above, if at any
time the Company grants, issues or sells any Options, Convertible Securities or
rights to purchase stock, warrants, securities or other property pro rata to
the record holders of any class of shares of Common Stock (the “Purchase Rights”), then the Holder will be
entitled to acquire, upon the terms applicable to such Purchase Rights, the
aggregate Purchase Rights which the Holder could have acquired if the Holder
had held the number of shares of Common Stock acquirable upon complete exercise
of this Warrant (without regard to any limitations on the exercise of this
Warrant) immediately before the date on which a record is taken for the grant,
issuance or sale of such Purchase Rights, or, if no such record is taken, the
date as of which the record holders of shares of Common Stock are to be
determined for the grant, issue or sale of such Purchase Rights.

(b)           Fundamental
Transactions.  The Company shall not enter into or be party to a Fundamental
Transaction unless (i)  the Successor Entity assumes in writing all of the
obligations of the Company under this Warrant and the other Transaction
Documents in accordance with the provisions of this Section (4)(b) pursuant to
written agreements in form and substance satisfactory to the Required
Holders and approved by the Required Holders prior to such Fundamental
Transaction, including agreements to deliver to each holder of Warrants in exchange for such Warrants
a security of the Successor
Entity evidenced by a written instrument substantially similar in form and
substance to this Warrant, including,
without limitation, an adjusted exercise price equal to the value for the
shares of Common Stock reflected by the terms of such Fundamental Transaction,
and exercisable for a corresponding number of shares of capital stock
equivalent to the shares of Common Stock acquirable and receivable upon
exercise of this Warrant (without regard to any limitations on the exercise of
this Warrant) prior to such Fundamental Transaction, and satisfactory to the
Required Holders and
(ii) the Successor Entity (including its Parent Entity) is a publicly
traded corporation whose common stock is quoted on or listed for trading on an
Eligible Market.  Upon the occurrence of any Fundamental Transaction, the Successor
Entity shall succeed to, and be substituted for (so that from and after the
date of such Fundamental Transaction, the provisions of this Warrant 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 with the same effect as if such Successor Entity
had been named as the Company herein.  Upon
consummation of the Fundamental Transaction, the Successor Entity shall deliver
to the Holder confirmation that there shall be issued upon exercise of this Warrant at any time after the consummation
of the Fundamental Transaction, in lieu of the shares of the Common Stock (or other
securities, cash, assets or other property) purchasable
upon the exercise of the Warrant
prior to such Fundamental Transaction, such shares of stock, securities, cash, assets or
any other property whatsoever (including warrants or other purchase or
subscription rights) which the Holder would have been entitled to receive upon
the happening of such Fundamental Transaction had this Warrant been converted immediately prior
to such Fundamental Transaction, as adjusted in accordance with the provisions
of this Warrant.  In addition to and not in
substitution for any other rights hereunder, prior to the consummation of any
Fundamental Transaction pursuant to which holders of shares of Common Stock are
entitled to receive securities or other assets with respect to or in exchange
for shares of Common Stock (a “Corporate Event”),
the Company 

 

11

 

shall make appropriate provision to insure that the Holder will
thereafter have the right to receive upon an exercise of this Warrant at any time after the consummation of the Fundamental
Transaction but prior to the Expiration Date, in lieu of the shares of the Common Stock (or other securities,
cash, assets or other property) purchasable
upon the exercise of the Warrant prior to such Fundamental Transaction, such shares of stock, securities, cash, assets or
any other property whatsoever (including warrants or other purchase or
subscription rights) which the Holder would have been entitled to receive upon
the happening of such Fundamental Transaction had the Warrant been exercised
immediately prior to such Fundamental Transaction.  Provision made pursuant to the
preceding sentence shall be in a form and substance reasonably satisfactory to
the Required Holders.  The provisions of
this Section shall apply similarly and equally to successive Fundamental
Transactions and Corporate Events and shall be applied without regard to any
limitations on the exercise of this Warrant.

 

(c)           Notwithstanding the
foregoing and the provisions of Section 4(b) above, in the event of a
Fundamental Transaction, if the Holder has not exercised the Warrant in full
prior to the consummation of the Fundamental Transaction, then the Holder shall have the right to
require such Successor Entity to purchase this Warrant from
the Holder by paying to the Holder, simultaneously with the consummation of the
Fundamental Transaction and in lieu of the warrant referred to in Section 4(b),
cash in an amount equal to the value of the remaining unexercised portion of
this Warrant on the date of such consummation, which value shall be determined
by use of the Black and Scholes Option Pricing Model.

5.             WARRANT HOLDER NOT DEEMED A STOCKHOLDER.  Except as otherwise specifically provided
herein, the Holder, solely in such Person’s capacity as a holder of this
Warrant, shall not be entitled to vote or receive dividends or be deemed the
holder of share capital of the Company for any purpose, nor shall anything contained
in this Warrant be construed to confer upon the Holder, solely in such Person’s
capacity as the Holder of this Warrant, any of the rights of a shareholder of
the Company or any right to vote, give or withhold consent to any corporate
action (whether any reorganization, issue of stock, reclassification of stock,
consolidation, merger, conveyance or otherwise), receive notice of meetings,
receive dividends or subscription rights, or otherwise, prior to the issuance
to the Holder of the Warrant Shares which such Person is then entitled to
receive upon the due exercise of this Warrant. 
In addition, nothing contained in this Warrant shall be construed as
imposing any liabilities on the Holder to purchase any securities (upon
exercise of this Warrant or otherwise) or as a shareholder of the Company,
whether such liabilities are asserted by the Company or by creditors of the
Company.  Notwithstanding this Section 5,
the Company shall provide the Holder with copies of the same notices and other
information given to the shareholders of the Company generally,
contemporaneously with the giving thereof to the shareholders.

6.             NONCIRCUMVENTION.  The Company hereby covenants and agrees that
the Company will not, by amendment of its Certificate of Incorporation, Bylaws
or through any reorganization, transfer of assets, consolidation, merger,
scheme of arrangement, dissolution, issue or sale of securities, or any other
voluntary action, avoid or seek to avoid the observance or performance of any
of the terms of this Warrant, and will at all times in good faith carry out all
the provisions of this Warrant and take all action as may be required to
protect the rights of the Holder. 
Without limiting the generality of the foregoing, the Company
(i) shall not increase the 

 

12

 

par value of any shares of
Common Stock receivable upon the exercise of this Warrant above the Exercise
Price then in effect, (ii) shall take all such actions as may be necessary
or appropriate in order that the Company may validly and legally issue fully
paid and nonassessable shares of Common Stock upon the exercise of this
Warrant, and (iii) shall, so long as any of the SPA Warrants are outstanding,
promptly take all action necessary to reserve and keep available out of its
authorized and unissued shares of Common Stock, solely for the purpose of
effecting the exercise of the SPA Warrants, 130% of the number of shares of
Common Stock as shall from time to time be necessary to effect the exercise of
the SPA Warrants then outstanding (without regard to any limitations on
exercise).

7.             REISSUANCE OF WARRANTS.

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

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

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

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

 

13

 

such new Warrant which is
the same as the Issuance Date, and (iv) shall have the same rights and
conditions as this Warrant.

8.             NOTICES. 
Whenever notice is required to be given under this Warrant, unless
otherwise provided herein, such notice shall be given in accordance with
Section 9(f) of the Securities Purchase Agreement.  The Company shall provide the Holder with
prompt written notice of all actions taken pursuant to this Warrant, including
in reasonable detail a description of such action and the reason
therefore.  Without limiting the
generality of the foregoing, the Company will give written notice to the Holder
(i) immediately upon any adjustment of the Exercise Price, setting forth in
reasonable detail, and certifying, the calculation of such adjustment and (ii)
at least fifteen days prior to the date on which the Company closes its books
or takes a record (A) with respect to any dividend or distribution upon the
shares of Common Stock, (B) with respect to any grants, issuances or sales of
any Options, Convertible Securities or rights to purchase stock, warrants,
securities or other property to holders of shares of Common Stock or (C) for
determining rights to vote with respect to any Fundamental Transaction,
dissolution or liquidation, provided in each case that such information shall
be made known to the public prior to or in conjunction with such notice being
provided to the Holder.

9.             AMENDMENT AND WAIVER.  Except as otherwise provided herein, the
provisions of this Warrant may be amended, modified or waived and the Company
may take any action herein prohibited, or omit to perform any act herein
required to be performed by it, only if the Company has obtained the written
consent of the Required Holders; provided that no such action may increase the
exercise price of any SPA Warrant or decrease the number of shares or class of
stock obtainable upon exercise of any SPA Warrant without the written consent
of the Holder.  No such amendment shall
be effective to the extent that it applies to less than all of the holders of
the SPA Warrants then outstanding.  In no
event shall any amendment, modification or waiver be made to this Warrant which
would adversely affect the Holder without the written consent of the Holder.

10.           GOVERNING LAW. 
This Warrant shall be governed by and construed and enforced in accor­dance
with, and all questions concerning the construction, validity, interpretation
and performance of this Warrant shall be governed by, the internal laws of the
State of New York, without giving effect to any choice of law or conflict of
law provision or rule (whether of the State of New York or any other
jurisdictions) that would cause the application of the laws of any
jurisdictions other than the State of New York.

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

 

14

 

faith negotiations to
replace the prohibited, invalid or unenforceable provision(s) with a valid
provision(s), the effect of which comes as close as possible to that of the
prohibited, invalid or unenforceable provision(s).

12.           CONSTRUCTION; HEADINGS.  This Warrant shall be deemed to be jointly
drafted by the Company and all the Buyers and shall not be construed against
any person as the drafter hereof.  The
headings of this Warrant are for convenience of reference and shall not form
part of, or affect the interpretation of, this Warrant.

13.           DISPUTE RESOLUTION. 
In the case of a dispute as to the determination of the Exercise Price
or the arithmetic calculation of the Warrant Shares, the Company shall submit
the disputed determinations or arithmetic calculations via facsimile within two
Business Days of receipt of the Exercise Notice giving rise to such dispute, as
the case may be, to the Holder.  If the Holder
and the Company are unable to agree upon such determination or calculation of
the Exercise Price or the Warrant Shares within three Business Days of such
disputed determination or arithmetic calculation being submitted to the Holder,
then the Company shall, within two Business Days submit via facsimile (a) the
disputed determination of the Exercise Price to an independent, reputable
investment bank selected by the Company and approved by the Holder  or (b) the disputed arithmetic calculation of
the Warrant Shares to the Company’s independent, outside accountant.  The Company shall cause at its expense the
investment bank or the accountant, as the case may be, to perform the
determinations or calculations and notify the Company and the Holder of the results
no later than ten Business Days from the time it receives the disputed
determinations or calculations.  Such
investment bank’s or accountant’s determination or calculation, as the case may
be, shall be binding upon all parties absent demonstrable error.

14.           REMEDIES, OTHER OBLIGATIONS, BREACHES AND INJUNCTIVE
RELIEF.  The remedies provided in
this Warrant shall be cumulative and in addition to all other remedies
available under this Warrant and the other Transaction Documents, at law or in
equity (including a decree of specific performance and/or other injunctive
relief), and nothing herein shall limit the right of the Holder to pursue
actual damages for any failure by the Company to comply with the terms of this
Warrant.  The Company acknowledges that a
breach by it of its obligations hereunder will cause irreparable harm to the
Holder and that the remedy at law for any such breach may be inadequate.  The Company therefore agrees that, in the
event of any such breach or threatened breach, the holder of this Warrant shall
be entitled, in addition to all other available remedies, to an injunction
restraining any breach, without the necessity of showing economic loss and
without any bond or other security being required.

15.           TRANSFER.  This Warrant may be offered for sale, sold,
transferred or assigned without the consent of the Company, except as may
otherwise be required by Section 2(g) of the Securities Purchase Agreement.

 

15

 

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

(a)           “Approved Stock Plan”
means any employee benefit plan, arrangement or other agreement which has been
approved by the Board of Directors of the Company, pursuant to which the
Company’s securities may be issued to any employee, consultant, officer or
director for services provided to the Company.

(b)           “Average Market Price”
means, for any given date, the lesser of (i) the arithmetic average of the
Weighted Average Price of the Common Stock on each of the twenty (20)
consecutive Trading Days ending on the Trading Day immediately prior to such
given date (the “Measuring Period”),
(ii) the arithmetic average of the Weighted Average Price of the Common Stock
on each of the first five (5) consecutive Trading Days of the Measuring Period
and (iii) the arithmetic average of the Weighted Average Price of the Common
Stock on each of the last five (5) consecutive Trading Days of the Measuring
Period ; provided, that all such determinations shall be appropriately adjusted
for any stock split, stock dividend, stock combination or other similar
transaction that proportionately decreases or increases the Common Stock during
such periods.

(c)           “Bloomberg”
means Bloomberg Financial Markets.

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

(e)           “Closing Bid Price” and “Closing Sale Price” means, for any security
as of any date, the last closing bid price and last closing trade price,
respectively, for such security on the Principal Market, as reported by
Bloomberg, or, if the Principal Market begins to operate on an extended hours
basis and does not designate the closing bid price or the closing trade price,
as the case may be, then the last bid price or last trade price, respectively,
of such security prior to 4:00:00 p.m., New York Time, as reported by
Bloomberg, or, if the Principal Market is not the principal securities exchange
or trading market for such security, the last closing bid price or last trade
price, respectively, of such security on the principal securities exchange or
trading market where such security is listed or traded as reported by
Bloomberg, or if the foregoing do not apply, the last closing bid price or last
trade price, respectively, of such security in the over-the-counter market on
the electronic bulletin board for such security as reported by Bloomberg, or,
if no closing bid price or last trade price, respectively, is reported for such
security by Bloomberg, the average of the bid prices, or the ask prices,
respectively, of any market makers for such security as reported in the “pink
sheets” by Pink Sheets LLC (formerly the National Quotation Bureau, Inc.).  If the Closing Bid Price or the Closing Sale
Price cannot be calculated for a security on a particular date on any of the
foregoing bases, the Closing Bid Price or the Closing Sale Price, as the case
may be, of such security on such date shall be the fair market value as
mutually determined by the Company and the Holder.  If the Company and the Holder are unable to
agree upon the fair market value of such security, then such dispute shall be
resolved pursuant to Section 13.  All
such determinations to be appropriately adjusted for any stock dividend, stock
split, stock combination or other similar transaction during the applicable
calculation period.

 

16

 

(f)            “Closing Date”
means the “2007 Closing Date”, as defined in the Securities Purchase Agreement.

(g)           “Common
Stock” means (i) the Company’s shares of Common Stock, par
value $.001 per share, and (ii) any share capital into which such Common
Stock shall have been changed or any share capital resulting from a
reclassification of such Common Stock.

(h)           “Convertible Securities” means any stock or
securities (other than Options) directly or indirectly convertible into or
exercisable or exchangeable for shares of Common Stock.

(i)            “Eligible Market”
means the Principal Market, the American Stock Exchange, The New York Stock
Exchange, Inc., the Nasdaq National Market or The Nasdaq Capital Market, or any
market that is a successor to any of the foregoing.

(j)            “Excluded Securities” means any
Common Stock issued or issuable: (i) in connection with any Approved Stock
Plan; (ii) upon conversion of the SPA Securities or the exercise of the SPA
Warrants issued pursuant to the Securities Purchase Agreement; (iii) in connection with the payment of any
Interest Shares on the SPA Securities; (iv) upon exercise of any
Options or Convertible Securities which are outstanding, or that are subject to
a written agreement as to their issuance listed on a schedule to the Securities Purchase
Agreement; (v) in an amount not to exceed 250,000 shares of Common Stock in the
aggregate pursuant to a judgment or settlement in connection with (i) the PIN
Financial Matter, or (ii) the UOS Energy Matter, including, without limitation,
Common Stock issuable pursuant to Options granted or Convertible Securities
issued pursuant to such judgment or settlement; and (vi) otherwise pursuant
to a written agreement that is listed on a schedule to the Securities Purchase
Agreement, provided that the terms of conversion price, exchange price,
exercise or other purchase price is not reduced, and the number of shares of
Common Stock issued or issuable is not increased, by virtue of any amendment,
modification or change to such Options, Convertible Securities or written
agreements after the Closing Date.

(k)           “Expiration
Date” means the date eighty-four (84) months after the Closing Date
or, if such date falls on a day other than a Business Day or on which trading
does not take place on the Principal Market (a “Holiday”), the next date that is not a Holiday.

(l)            “Fundamental
Transaction” means that the Company shall directly
or indirectly, in one or more related transactions, (i) consolidate or merge
with or into (whether or not the Company is the surviving corporation)
another Person or Persons, or (ii) sell, assign, transfer, convey or otherwise
dispose of all or substantially all of the properties or assets of the Company
to another Person, or (iii) allow another Person (other then
the Holder) to make a purchase, tender or exchange offer that is accepted by
the holders of more than 50% of the outstanding shares of Common Stock (not
including any shares of Common Stock held by the Person or Persons making or
party to, or associated or affiliated with the Persons making or party to, such
purchase, tender or exchange offer), or (iv) consummate a stock 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 

 

17

 

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 purchase agreement or other business
combination), or (v) reorganize, recapitalize or reclassify its Common Stock,
or (vi) any “person” or “group” (as these terms are used for purposes of
Sections 13(d) and 14(d) of the Exchange Act), become the
“beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly
or indirectly, of 50% of the aggregate ordinary voting power represented by
issued and outstanding Common Stock, provided, however, that
“Fundamental Transaction” shall not include any of the transactions described
above if entered into in order to consummate a Company Full Mandatory
Redemption (as such term is defined in the SPA Securities).

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

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

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

(p)           “PIN Financial Matter”  means the matter pending in the US District Court, Southern
District of New York (06 CV 2779) against the Company by PIN Financial LLC
claiming a commission for introduction to Cornell Capital Partners, L.P., which
has been aggressively denied and disputed by both Wentworth and Cornell
Capital.

(q)           “Principal Market”
means the OTC Bulletin Board.

(r)            “Registration Rights
Agreement” means that certain Amended and Restated Registration
Rights Agreement, dated as of October 31, 2007, by and among the Company and
the Buyers, as the same may be amended, modified or supplemented from time to
time, relating to, among other things, the registration of the resale of the
Common Stock issuable upon conversion of the SPA Securities.

(s)           “Required Holders”
means the holders of the SPA Warrants representing at least a majority of
shares of Common Stock underlying the SPA Warrants then outstanding.

(t)            “Securities Purchase Agreement” means the
2006 Securities Purchase Agreement, as amended on or prior to the date hereof
(including as amended by the Amendment Agreements), and as the same may be
further amended, modified or supplemented from time to time.

 

18

 

(u)           “SPA Securities”
means the Notes as defined in and issued pursuant to the Securities Purchase
Agreement.

(v)           “Successor Entity”
means the Person, which may be the
Company, formed by, resulting from or surviving any Fundamental Transaction or
the Person with which such Fundamental Transaction shall have been made,
provided that if such Person is not a publicly traded entity whose
common stock or equivalent equity security is quoted or listed for trading on
an Eligible Market, Successor Entity shall mean such Person’s Parent Entity.

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

(x)            “Trading Price”
means, for any given date, the arithmetic average of the Weighted Average Price
of the Common Stock during the five (5) consecutive Trading Day period ending
on the Trading Day immediately prior to such given date, as appropriately
adjusted for any stock split, stock dividend, stock combination or other
similar transaction that proportionately decreases or increases the Common
Stock during such period.

(y)           “Transaction Document”
has the meaning set forth in the Securities Purchase Agreement.

(z)            “2006 Securities
Purchase Agreement” means that certain Securities Purchase
Agreement, dated as of July 24, 2006, by and among the Company and the Buyers,
prior to giving effect to any amendment or other modification thereto.

(aa)         “UOS Energy Matter”
means, the matter pending in the Superior Court of California, County of Los
Angeles, West District (SC09064) against the Company and others by UOS Energy,
LLC relating to the Company’s refusal to purchase certain tar sands leases in
Utah in consideration of 1,000,000 shares of Common Stock.

(bb)         “Weighted Average Price” means, for any security as of any
date, the dollar volume-weighted average price for such security on the
Principal Market during the period beginning at 9:30:01 a.m., New York Time (or
such other time as the Principal Market publicly announces is the official open
of trading), and ending at 4:00:00 p.m., New York Time (or such other time as
the Principal Market publicly announces is the official close of trading) as
reported by Bloomberg through its “Volume at Price” functions, or, if the
foregoing does not apply, the dollar volume-weighted average price of such
security in the over-the-counter market on the electronic bulletin board for
such security during the period beginning at 9:30:01 a.m., New York Time (or
such other time as such market publicly announces is the official open of 

 

19

 

trading), and ending at
4:00:00 p.m., New York Time (or such other time as such market publicly
announces is the official close of trading) as reported by Bloomberg, or, if no
dollar volume-weighted average price is reported for such security by Bloomberg
for such hours, the average of the highest closing bid price and the lowest
closing ask price of any of the market makers for such security as reported in
the “pink sheets” by Pink Sheets LLC (formerly the National Quotation Bureau,
Inc.).  If the Weighted Average Price
cannot be calculated for a security on a particular date on any of the
foregoing bases, the Weighted Average Price of such security on such date shall
be the fair market value as mutually determined by the Company and the Holder.  If the Company and the Holder are unable to
agree upon the fair market value of such security, then such dispute shall be
resolved pursuant to Section 13.  All
such determinations are to be appropriately adjusted for any stock dividend,
stock split, stock combination or other similar transaction during the
applicable calculation period.

[Signature Page Follows]

 

20

 

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

 

 

                                                                                                                                WENTWORTH ENERGY, INC.

 

 

	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
				

 

 

EXHIBIT A

EXERCISE NOTICE

TO BE EXECUTED BY THE REGISTERED HOLDER TO EXERCISE THIS

WARRANT TO PURCHASE COMMON STOCK

 

WENTWORTH
ENERGY, INC.

 

                The
undersigned holder (“Holder”)
hereby exercises the right to purchase                              
of the shares of Common Stock (“Warrant
Shares”) of Wentworth Energy, Inc., an Oklahoma corporation (the “Company”), evidenced by the attached
Warrant to Purchase Common Stock (the “Warrant”).  Capitalized terms used herein and not
otherwise defined shall have the respective meanings set forth in the Warrant.

 

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

 

	
   

  	
   

  	
  a “Cash Exercise”
  with respect to

  	
   

  	
   

  
	
   

  	
   

  	
  Warrant Shares; and/or

  	
   

  	
   

  
	
   

  	
   

  	
  a “Cashless Exercise”
  with respect to

  	
   

  	
   

  
	
   

  	
   

  	
  Warrant Shares.

  	
   

  	
   

  

 

 

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

 

                3.             Delivery
of Warrant Shares.  The Company shall
deliver to the Holder                     
Warrant Shares in accordance with the terms of the Warrant.

 

 

	
  Date:

  	
   

  	
   

  	
   

  	
  ,

  	
   

  
	
   

  	
   

  
	
   

  

   Name
of Registered Holder

 

	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  

 

 

 

ACKNOWLEDGMENT

                The Company hereby acknowledges
this Exercise Notice and hereby directs Empire Stock Transfer Inc. to issue the
above indicated number of shares of Common Stock in accordance with the
Transfer Agent Instructions dated July 24, 2006 from the Company and
acknowledged and agreed to by Empire Stock Transfer Inc, as amended.

 

                                                                                                WENTWORTH ENERGY, INC.

 

 

 

	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00131-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00131-of-00352.parquet"}]]