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Unassociated Document

    THIS
      WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE NOT
      BEEN
      REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE OFFERED,
      SOLD, ASSIGNED OR TRANSFERRED, IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
      STATEMENT UNDER SAID ACT OR UNLESS THE COMPANY HAS RECEIVED AN OPINION OF
      COUNSEL REASONABLY SATISFACTORY TO THE COMPANY THAT REGISTRATION UNDER SAID
      ACT
      IS NOT REQUIRED. 

    

     

    SERIES
      

     

    Warrant
      No.

     

    COMMON
      STOCK PURCHASE WARRANT

     

    To
      Purchase Shares of Common Stock of DRUGMAX, INC.

     

    THIS
      IS
      TO CERTIFY THAT ___________________________________, or registered assigns
      (the
“Holder”), is entitled, during the Exercise Period (as hereinafter defined), to
      purchase from DrugMax, Inc., a Nevada corporation (the “Company”), the Warrant
      Stock (as hereinafter defined and subject to adjustment as provided herein),
      in
      whole or in part, at a purchase price of $.__  per share, all on and
      subject to the terms and conditions hereinafter set forth.

     

    1. Definitions.
      As used
      in this Warrant, the following terms have the respective meanings set forth
      below: 

     

    “Affiliate”
means
      any person or entity that, directly or indirectly through one or more
      intermediaries, controls or is controlled by or is under common control with
      a
      person or entity, as such terms are used in and construed under Rule 144 under
      the Securities Act. With respect to a Holder of Warrants, any investment fund
      or
      managed account that is managed on a discretionary basis by the same investment
      manager as such Holder will be deemed to be an Affiliate of such Holder.

     

    “Appraised
      Value”
means,
      in respect of any share of Common Stock on any date herein specified, the fair
      saleable value of such share of Common Stock (determined without giving effect
      to the discount for (i) a minority interest or (ii) any lack of liquidity of
      the
      Common Stock or to the fact that the Company may have no class of equity
      registered under the Exchange Act) as of the last day of the most recent fiscal
      month ending prior to such date specified, based on the value of the Company
      on
      a fully-diluted basis, as determined by a nationally recognized investment
      banking firm selected by the Company’s Board of Directors and having no prior
      relationship with the Company. 

     

    “Business
      Day”
means
      any day except Saturday, Sunday and any day which shall be a legal holiday
      or a
      day on which banking institutions in the State of New York generally are
      authorized or required by law or other government actions to close.

     

    “Change
      of Control”
means
      the (i) acquisition by an individual or legal entity or group (as set forth
      in
      Section 13(d) of the Exchange Act) of more than one-half of the voting rights
      or
      equity interests in the Company; or (ii) sale, conveyance, or other disposition
      of all or substantially all of the assets, property or business of the Company
      or the merger into or consolidation with any other corporation (other than
      a
      wholly owned subsidiary corporation) or effectuation of any transaction or
      series of related transactions where holders of the Company’s voting securities
      prior to such transaction or series of transactions fail to continue to hold
      at
      least 50% of the voting power of the Company. 

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    “Closing
      Date”
means
      June 23, 2006.

     

    “Commission”
means
      the Securities and Exchange Commission or any other federal agency then
      administering the Securities Act and other federal securities laws.

     

    “Common
      Stock”
means
      (except where the context otherwise indicates) the Common Stock, $0.001 par
      value per share, of the Company as constituted on the Closing Date, and any
      capital stock into which such Common Stock may thereafter be changed or
      converted, and shall also include (i) capital stock of the Company of any other
      class (regardless of how denominated) issued to the holders of shares of Common
      Stock upon any reclassification thereof which is also not preferred as to
      dividends or assets on liquidation over any other class of stock of the Company
      and which is not subject to redemption and (ii) shares of common stock of any
      successor or acquiring corporation received by or distributed to the holders
      of
      Common Stock of the Company in the circumstances contemplated by Section 4.4.
      

     

    “Current
      Market Price”
means,
      in respect of any share of Common Stock on any date herein specified,

     

    (1) if
      there
      shall not then be a public market for the Common Stock, the higher of

     

    (a)
      the
      book value per share of Common Stock at such date, and 

     

    (b)
      the
      Appraised Value per share of Common Stock at such date, 

     

    or

     

    (2) if
      there
      shall then be a public market for the Common Stock, the higher of (x) the book
      value per share of Common Stock at such date, and (y) the average of the daily
      market prices for the 20 consecutive trading days immediately before such date.
      The daily market price for each such trading day shall be (i) the closing bid
      price on such day on the principal stock exchange (including Nasdaq) on which
      such Common Stock is then listed or admitted to trading, or quoted, as
      applicable, (ii) if no sale takes place on such day on any such exchange, the
      last reported closing bid price on such day as officially quoted on any such
      exchange (including Nasdaq), (iii) if the Common Stock is not then listed or
      admitted to trading on any stock exchange, the last reported closing bid price
      on such day in the over-the-counter market, as furnished by the National
      Association of Securities Dealers Automatic Quotation System or the National
      Quotation Bureau, Inc., (iv) if neither such corporation at the time is engaged
      in the business of reporting such prices, as furnished by any similar firm
      then
      engaged in such business, or (v) if there is no such firm, as furnished by
      any
      member of the National Association of Securities Dealers, Inc. (the “NASD”)
      selected mutually by the holder of this Warrant and the Company or, if they
      cannot agree upon such selection, as selected by two such members of the NASD,
      one of which shall be selected by holder of this Warrant and one of which shall
      be selected by the Company. 

     

    
      
        
        

      

      
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    “Current
      Warrant Price”
means,
      in respect of a share of Common Stock at any date herein specified, the price
      at
      which a share of Common Stock may be purchased pursuant to this Warrant on
      such
      date. Until the Current Warrant Price is adjusted pursuant to the terms herein,
      the initial Current Warrant Price shall be $.61 per share of Common Stock.
      

     

    “Exchange
      Act”
means
      the Securities Exchange Act of 1934, as amended, or any similar federal statute,
      and the rules and regulations of the Commission thereunder, all as the same
      shall be in effect from time to time. 

     

    “Exercise
      Period”
means
      the period during which this Warrant is exercisable pursuant to Section 2.1.
      

     

    “Expiration
      Date”
means
      June 23, 2011.

     

    “NASD”
means
      the National Association of Securities Dealers, Inc., or any successor
      corporation thereto. 

     

    “Other
      Property”
has
      the
      meaning set forth in Section 4.5. 

     

    “Person”
means
      any individual, sole proprietorship, partnership, joint venture, trust,
      incorporated organization, association, corporation, limited liability company,
      institution, public benefit corporation, entity or government (whether federal,
      state, county, city, municipal or otherwise, including, without limitation,
      any
      instrumentality, division, agency, body or department thereof). 

     

    “Purchase
      Agreement”
means
      that certain Note and Warrant Purchase Agreement dated as of June 23, 2006
      among
      the Company, Deerfield Special Situations Fund, L.P., and Deerfield Special
      Situations Fund International, Limited, pursuant to which this Warrant was
      originally issued. 

     

    “Restricted
      Common Stock”
means
      shares of Common Stock which are, or which upon their issuance upon the exercise
      of any Warrant would be required to be, evidenced by a certificate bearing
      the
      restrictive legend set forth in Section 3.2. 

     

    “Securities
      Act”
means
      the Securities Act of 1933, as amended, or any similar federal statute, and
      the
      rules and regulations of the Commission thereunder, all as the same shall be
      in
      effect at the time. 

     

    “Trading
      Day”
means
      any day on which the primary market on which shares of Common Stock are listed
      is open for trading. 

     

    “Transfer”
means
      any disposition of any Warrant or Warrant Stock or of any interest in either
      thereof, which would constitute a sale thereof within the meaning of the
      Securities Act. 

     

    
      
        
        

      

      
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    “Warrants”
means
      this Warrant and all warrants issued upon transfer, division or combination
      of,
      or in substitution for, any thereof. All Warrants shall at all times be
      identical as to terms and conditions and date, except as to the number of shares
      of Common Stock for which they may be exercised. 

     

    “Warrant
      Price”
means
      an amount equal to (i) the number of shares of Common Stock being purchased
      upon
      exercise of this Warrant pursuant to Section 2.1, multiplied by (ii) the Current
      Warrant Price. 

     

    “Warrant
      Stock”
means
      the 2,004,000 shares of Common Stock to be purchased upon the exercise hereof,
      subject to adjustment as provided herein. 

     

    2. Exercise
      of Warrant.
      

     

    2.1. Manner
      of Exercise.
      From
      and after the issuance hereof and until 5:00 P.M., New York time, on the
      Expiration Date (the “Exercise Period”), the Holder may exercise this Warrant,
      on any Business Day, for all or any part of the number of shares of Warrant
      Stock purchasable hereunder. 

     

    In
      order
      to exercise this Warrant, in whole or in part, the Holder shall deliver to
      the
      Company at its principal office or at the office or agency designated by the
      Company pursuant to Section 11, (i) a written notice of the Holder’s election to
      exercise this Warrant, which notice shall specify the number of shares of
      Warrant Stock to be purchased, (ii) payment of the Warrant Price as provided
      herein, and (iii) this Warrant. Such notice shall be substantially in the form
      of the subscription form appearing at the end of this Warrant as Exhibit
      A,
      duly
      executed by the Holder or its agent or attorney. Upon receipt thereof, the
      Company shall, as promptly as practicable, and in any event within three
      Business Days thereafter, execute or cause to be executed and deliver or cause
      to be delivered to the Holder a certificate or certificates representing the
      aggregate number of full shares of Warrant Stock issuable upon such exercise,
      together with cash in lieu of any fraction of a share, as hereinafter provided.
      The stock certificate or certificates so delivered shall be, to the extent
      possible, in such denomination or denominations as the Holder shall request
      in
      the notice and shall be registered in the name of the Holder or such other
      name
      as shall be designated in the notice. This Warrant shall be deemed to have
      been
      exercised and such certificate or certificates shall be deemed to have been
      issued, and the Holder or any other Person so designated to be named therein
      shall be deemed to have become a Holder of record of such shares for all
      purposes, as of the date when the notice, together with the payment of the
      Warrant Price and this Warrant, is received by the Company as described above.
      If this Warrant shall have been exercised in part, the Company shall, at the
      time of delivery of the certificate or certificates representing Warrant Stock,
      deliver to the Holder a new Warrant evidencing the rights of the Holder to
      purchase the unpurchased shares of Common Stock called for by this Warrant,
      which new Warrant shall in all other respects be identical with this Warrant,
      or
      at the request of the Holder, appropriate notation may be made on this Warrant
      and the same returned to the Holder.

     

    Payment
      of the Warrant Price may be made at the option of the Holder by: (i) certified
      or official bank check payable to the order of the Company, (ii) wire transfer
      to the account of the Company or (iii) the surrender and cancellation of a
      portion of shares of Common Stock then held by the Holder or issuable upon
      such
      exercise of this Warrant, which shall be valued and credited toward the total
      Warrant Price due the Company for the exercise of the Warrant based upon the
      Current Market Price of the Common Stock;
      provided, however, that payment of the Warrant Price under this clause (iii)
      may
      only be made if all of the amounts owed by the Company under the promissory
      notes issued under the Purchase Agreement have been paid in full. All shares
      of
      Common Stock issuable upon the exercise of this Warrant pursuant to the terms
      hereof shall be validly issued and, upon payment of the Warrant Price, shall
      be
      fully paid and nonassessable and not subject to any preemptive
      rights.

     

    
      
        
        

      

      
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    2.2. Fractional
      Shares.
      The
      Company shall not be required to issue a fractional share of Common Stock upon
      exercise of any Warrant. As to any fraction of a share which the Holder of
      one
      or more Warrants, the rights under which are exercised in the same transaction,
      would otherwise be entitled to purchase upon such exercise, the Company shall
      pay an amount in cash equal to the Current Market Price per share of Common
      Stock on the date of exercise multiplied by such fraction. 

     

    2.3. Restrictions
      on Exercise Amount.
      

     

    (i) Unless
      a
      Holder delivers to the Company irrevocable written notice at least sixty-one
      days prior to the effective date of the exercise of this Warrant that this
      Section 2.3(i) shall not apply to such Holder, the Holder may not acquire a
      number of shares of Warrant Stock to the extent that, upon such exercise, the
      number of shares of Common Stock then beneficially owned by such Holder and
      its
      Affiliates and any other persons or entities whose beneficial ownership of
      Common Stock would be aggregated with the Holder’s for purposes of Section
13(d)
      of
      the Exchange Act (including shares held by any “group” of which the Holder is a
      member,
      but
      excluding shares beneficially owned by virtue of the ownership of securities
      or
      rights to acquire securities that have limitations on the right to convert,
      exercise or purchase similar to the limitation set forth herein)
      exceeds
      9.95% of
      the total number of shares of Common Stock of the Company then issued and
      outstanding. For purposes hereof, “group” has the meaning set forth in Section
      13(d) of the Exchange Act and applicable regulations of the Securities and
      Exchange Commission, and the percentage held by the Holder shall be determined
      in a manner consistent with the provisions of Section 13(d) of the Exchange
      Act.
      Each delivery of a notice of exercise by a Holder will constitute a
      representation by such Holder that it has evaluated the limitation set forth
      in
      this paragraph and determined, based on the most recent public filings by the
      Company with the Commission, that the issuance of the full number of shares
      of
      Warrant Stock requested in such notice of exercise is permitted under this
      paragraph. 

     

    (ii) In
      the
      event the Company is prohibited from issuing shares of Warrant Stock as a result
      of any restrictions or prohibitions under applicable law or the rules or
      regulations of any stock exchange, interdealer quotation system or other
      self-regulatory organization, the Company shall as soon as possible seek the
      approval of its stockholders and take such other action to authorize the
      issuance of the full number of shares of Common Stock issuable upon exercise
      of
      this Warrant.

     

    3. Transfer,
      Division and Combination.
      

     

    3.1. Transfer.
      The
      Warrants and the Warrant Stock shall be freely transferable, subject to
      compliance with all applicable laws, including, but not limited to the
      Securities Act. If, at the time of the surrender of this Warrant in connection
      with any transfer of this Warrant or the resale of the Warrant Stock, this
      Warrant or the Warrant Stock, as applicable, shall not be registered under
      the
      Securities Act, the Company may require, as a condition of allowing such
      transfer (i) that the Holder or transferee of this Warrant or the Warrant Stock
      as the case may be, furnish to the Company a written opinion of counsel that
      is
      reasonably acceptable to the Company to the effect that such transfer may be
      made without registration under the Securities Act, (ii) that the Holder or
      transferee execute and deliver to the Company an investment letter in form
      and
      substance acceptable to the Company and substantially in the form attached
      as
Exhibit
      C
      hereto
      and (iii) that the transferee be an “accredited investor” as defined in Rule
      501(a) promulgated under the Securities Act. Transfer of this Warrant and all
      rights hereunder, in whole or in part, in accordance with the foregoing
      provisions, shall be registered on the books of the Company to be maintained
      for
      such purpose, upon surrender of this Warrant at the principal office of the
      Company referred to in Section 2.1 or the office or agency designated by the
      Company pursuant to Section 11, together with a written assignment of this
      Warrant substantially in the form of Exhibit
      B
      hereto
      duly executed by the Holder or its agent or attorney and funds sufficient to
      pay
      any transfer taxes payable upon the making of such transfer. Upon such surrender
      and, if required, such payment, the Company shall execute and deliver a new
      Warrant or Warrants in the name of the assignee or assignees and in the
      denomination specified in such instrument of assignment, and shall issue to
      the
      assignor a new Warrant evidencing the portion of this Warrant not so assigned,
      and this Warrant shall promptly be cancelled. Following a transfer that complies
      with the requirements of this Section 3.1, the Warrant may be exercised by
      a new
      Holder for the purchase of shares of Common Stock regardless of whether the
      Company issued or registered a new Warrant on the books of the Company.

     

    
      
        
        

      

      
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    3.2. Restrictive
      Legends.
      Each
      certificate for Warrant Stock initially issued upon the exercise of this
      Warrant, and each certificate for Warrant Stock issued to any subsequent
      transferee of any such certificate, shall be stamped or otherwise imprinted
      with
      legends in substantially the following form: 

     

    “THE
      SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
      SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE OFFERED, SOLD, ASSIGNED
      OR
      TRANSFERRED, IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER SAID
      ACT OR UNLESS THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL REASONABLY
      SATISFACTORY TO THE COMPANY THAT REGISTRATION UNDER SAID ACT IS NOT REQUIRED.”

     

    “THE
      SALE, TRANSFER OR ASSIGNMENT OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE
      IS SUBJECT TO THE TERMS AND CONDITIONS OF A CERTAIN INVESTOR RIGHTS AGREEMENT
      DATED AS OF JUNE 23, 2006, AS AMENDED FROM TIME TO TIME, AMONG THE COMPANY,
      DEERFIELD SPECIAL SITUATIONS FUND, L.P., AND DEERFIELD SPECIAL SITUATIONS FUND
      INTERNATIONAL, LIMITED. COPIES OF SUCH AGREEMENT MAY BE OBTAINED AT NO COST
      BY
      WRITTEN REQUEST MADE BY THE HOLDER OF RECORD OF THIS CERTIFICATE TO THE
      SECRETARY OF THE COMPANY.” 

     

    3.3. Division
      and Combination; Expenses; Books.
      This
      Warrant may be divided or combined with other Warrants upon presentation hereof
      at the aforesaid office or agency of the Company, together with a written notice
      specifying the names and denominations in which new Warrants are to be issued,
      signed by the Holder or its agent or attorney. Subject to compliance with
      Section 3.1 as to any transfer which may be involved in such division or
      combination, the Company shall execute and deliver a new Warrant or Warrants
      in
      exchange for the Warrant or Warrants to be divided or combined in accordance
      with such notice. The Company shall prepare, issue and deliver at its own
      expense the new Warrant or Warrants under this Section 3. The Company agrees
      to
      maintain, at its aforesaid office or agency, books for the registration and
      the
      registration of transfer of the Warrants. 

     

    
      
        
        

      

      
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    4. Adjustments.
      The
      number of shares of Common Stock for which this Warrant is exercisable, and
      the
      price at which such shares may be purchased upon exercise of this Warrant,
      shall
      be subject to adjustment from time to time as set forth in this Section 4.
      The
      Company shall give the Holder notice of any event described below which requires
      an adjustment pursuant to this Section 4 in accordance with Sections 5.1 and
      5.2. 

     

    4.1. Stock
      Dividends, Subdivisions and Combinations.
      If at
      any time while this Warrant is outstanding the Company shall: 

     

    (i) declare
      a
      dividend or make a distribution on its outstanding shares of Common Stock in
      shares of Common Stock, 

     

    (ii) subdivide
      its outstanding shares of Common Stock into a larger number of shares of Common
      Stock, or 

     

    (iii) combine
      its outstanding shares of Common Stock into a smaller number of shares of Common
      Stock, then: 

     

    (1) the
      number of shares of Common Stock acquirable upon exercise of this Warrant
      immediately after the occurrence of any such event shall be adjusted to equal
      the number of shares of Common Stock which a record holder of the same number
      of
      shares of Common Stock that would have been acquirable under this Warrant
      immediately prior to the record date for such dividend or distribution or the
      effective date of such subdivision or combination would own or be entitled
      to
      receive after such record date or the effective date of such subdivision or
      combination, as applicable, and 

     

    (2) the
      Warrant Price shall be adjusted to equal: 

     

    (A) the
      Current Warrant Price in effect at the time of the record date for such dividend
      or distribution or of the effective date of such subdivision or combination,
      multiplied by the number of shares of Common Stock into which this Warrant
      is
      exercisable immediately prior to the adjustment, divided by 

     

    (B) the
      number of shares of Common Stock into which this Warrant is exercisable
      immediately after such adjustment. 

     

    Any
      adjustment made pursuant to clause (i) of this paragraph shall become effective
      immediately after the record date for the determination of stockholders entitled
      to receive such dividend or distribution, and any adjustment pursuant to clauses
      (ii) or (iii) of this paragraph shall become effective immediately after the
      effective date of such subdivision or combination. 

     

    
      
        
        

      

      
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    4.2. Securities
      Issuances.
      In the
      event that the Company or any of its subsidiaries (A) issues or sells any Common
      Stock or convertible securities, warrants, options or other rights to subscribe
      for or to purchase or exchange for, shares of Common Stock (“Convertible
      Securities”) or (B) directly or indirectly effectively reduces the conversion,
      exercise or exchange price for any Convertible Securities which are currently
      outstanding, at or to an effective Per Share Selling Price (as defined below)
      which is less than the greater of (I) the closing sale price per share of the
      Common Stock on the principal market on which the Common Stock is traded the
      trading day next preceding such issue or sale or, in the case of issuances
      to
      holders of its Common Stock, the date fixed for the determination of
      stockholders entitled to receive such warrants, rights, or options (“Fair Market
      Price”), or (II) the Current Warrant Price, then in each such case the Current
      Warrant Price in effect immediately prior to such issue or sale or record date,
      as applicable, shall be automatically reduced effective concurrently with such
      issue or sale to an amount determined by multiplying the Current Warrant Price
      then in effect by a fraction, (x) the numerator of which shall be the sum of
      (1)
      the number of shares of Common Stock outstanding immediately prior to such
      issue
      or sale, plus (2) the number of shares of Common Stock which the aggregate
      consideration received by the Company for such additional shares would purchase
      at such Fair Market Price or Current Warrant Price, as the case may be, and
      (y)
      the denominator of which shall be the number of shares of Common Stock of the
      Company outstanding immediately after such issue or sale. The foregoing
      provision shall not apply to any issuances or sales of Common Stock or
      Convertible Securities (i) pursuant to any Convertible Securities currently
      outstanding on the date hereof in accordance with the terms of such Convertible
      Securities in effect on the date hereof, or (ii) to any officer, director or
      employee of the Company pursuant to a bona fide option or equity incentive
      plan
      duly adopted by the Company. The Company shall give to the Holder written notice
      of any such sale of Common Stock within 24 hours of the closing of any such
      sale
      and shall within such 24 hour period issue a press release announcing such
      sale
      if such sale is a material event for, or otherwise material to, the
      Company.

     

    For
      the
      purposes of the foregoing adjustments, in the case of the issuance of any
      Convertible Securities, the maximum number of shares of Common Stock issuable
      upon exercise, exchange or conversion of such Convertible Securities shall
      be
      deemed to be outstanding, provided that no further adjustment shall be made
      upon
      the actual issuance of Common Stock upon exercise, exchange or conversion of
      such Convertible Securities, and provided further that to the extent such
      Convertible Securities expire or terminate unconverted or unexercised, then
      at
      such time the Current Warrant Price shall be readjusted as if such portion
      of
      such Convertible Securities had not been issued.

     

    For
      purposes of this Section 4.2, if an event occurs that triggers more than one
      of
      the above adjustment provisions, then only one adjustment shall be made and
      the
      calculation method which yields the greatest downward adjustment in the Current
      Warrant Price shall be used.

     

    
      
        
        

      

      
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    “Per
      Share Selling Price” shall include the amount actually paid by third parties for
      each share of Common Stock in a sale or issuance by the Company. In the event
      a
      fee is paid by the Company in connection with such transaction directly or
      indirectly to such third party or its affiliates, any such fee shall be deducted
      from the selling price pro rata to all shares sold in the transaction to arrive
      at the Per Share Selling Price. A sale of shares of Common Stock shall include
      the sale or issuance of Convertible Securities, and in such circumstances the
      Per Share Selling Price of the Common Stock covered thereby shall also include
      the exercise, exchange or conversion price thereof (in addition to the
      consideration received by the Company upon such sale or issuance less the fee
      amount as provided above). In case of any such security issued in a transaction
      in which the purchase price or the conversion, exchange or exercise price is
      directly or indirectly subject to adjustment or reset based on a future date,
      future trading prices of the Common Stock, specified or contingent events
      directly or indirectly related to the business of the Company or the market
      for
      the Common Stock, or otherwise (but excluding standard stock split anti-dilution
      provisions), the Per Share Selling Price shall be deemed to be the lowest
      conversion, exchange, exercise or reset price at which such securities are
      converted, exchanged, exercised or reset or might have been converted,
      exchanged, exercised or reset, or the lowest adjustment, as the case may be,
      over the life of such securities. If shares are issued for a consideration
      other
      than cash, the Per Share Selling Price shall be the fair value of such
      consideration as determined in good faith by independent certified public
      accountants mutually acceptable to the Company and the Holder. In the event
      the
      Company directly or indirectly effectively reduces the conversion, exercise
      or
      exchange price for any Convertible Securities which are currently outstanding,
      then the Per Share Selling Price shall equal such effectively reduced
      conversion, exercise or exchange price. 

     

    4.3. Other
      Provisions Applicable to Adjustments.
      The
      following provisions shall be applicable to the making of adjustments of the
      number of shares of Common Stock into which this Warrant is exercisable and
      the
      Current Warrant Price provided for in Section 4: 

     

    (a)
      When
      Adjustments to Be Made.
      The
      adjustments required by Section 4 shall be made whenever and as often as any
      specified event requiring an adjustment shall occur, except that any that would
      otherwise be required may be postponed (except in the case of a subdivision
      or
      combination of shares of the Common Stock, as provided for in Section 4.1)
      up
      to, but not beyond the date of exercise if such adjustment either by itself
      or
      with other adjustments not previously made adds or subtracts less than 1% of
      the
      shares of Common Stock into which this Warrant is exercisable immediately prior
      to the making of such adjustment. Any adjustment representing a change of less
      than such minimum amount (except as aforesaid) which is postponed shall be
      carried forward and made as soon as such adjustment, together with other
      adjustments required by this Section 4 and not previously made, would result
      in
      a minimum adjustment or on the date of exercise. For the purpose of any
      adjustment, any specified event shall be deemed to have occurred at the close
      of
      business on the date of its occurrence. 

     

    (b)
      Fractional
      Interests.
      In
      computing adjustments under this Section 4, fractional interests in Common
      Stock
      shall be taken into account to the nearest 1/100th of a share. 

     

    (c)
      When
      Adjustment Not Required.
      If the
      Company undertakes a transaction contemplated under this Section 4 and as a
      result takes a record of the holders of its Common Stock for the purpose of
      entitling them to receive a dividend or distribution or subscription or purchase
      rights or other benefits contemplated under this Section 4 and shall, thereafter
      and before the distribution to stockholders thereof, legally abandon its plan
      to
      pay or deliver such dividend, distribution, subscription or purchase rights
      or
      other benefits contemplated under this Section 4, then thereafter no adjustment
      shall be required by reason of the taking of such record and any such adjustment
      previously made in respect thereof shall be rescinded and annulled.

     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

    4.4. Reorganization,
      Reclassification, Merger, Consolidation or Disposition of Assets.
      

     

    (a)
      If
      there shall occur a Change of Control and, pursuant to the terms of such Change
      of Control, shares of common stock of the successor or acquiring corporation,
      or
      any cash, shares of stock or other securities or property of any nature
      whatsoever (including warrants or other subscription or purchase rights) in
      addition to or in lieu of common stock of the successor or acquiring corporation
      (“Other Property”), are to be received by or distributed to the holders of
      Common Stock of the Company, then the Holder of this Warrant shall have the
      right thereafter to receive, upon the exercise of the Warrant, the number of
      shares of common stock of the successor or acquiring corporation or of the
      Company, if it is the surviving corporation, and the Other Property receivable
      upon or as a result of such Change of Control by a holder of the number of
      shares of Common Stock into which this Warrant is exercisable immediately prior
      to such event. 

     

    (b)
      In
      case of any such Change of Control described in Section 4.4(a) above, the
      successor or acquiring corporation (if other than the Company) shall expressly
      assume the due and punctual observance and performance of each and every
      covenant and condition of contained in this Warrant to be performed and observed
      by the Company and all the obligations and liabilities hereunder, subject to
      such modifications as may be deemed appropriate (as determined by resolution
      of
      the Board of Directors of the Company) in order to provide for adjustments
      of
      shares of the Common Stock into which this Warrant is exercisable which shall
      be
      as nearly equivalent as practicable to the adjustments provided for in Section
      4. For purposes of Section 4, common stock of the successor or acquiring
      corporation shall include stock of such corporation of any class which is not
      preferred as to dividends or assets on liquidation over any other class of
      stock
      of such corporation and which is not subject to redemption and shall also
      include any evidences of indebtedness, shares of stock or other securities
      which
      are convertible into or exchangeable for any such stock, either immediately
      or
      upon the arrival of a specified date or the happening of a specified event
      and
      any warrants or other rights to subscribe for or purchase any such stock. The
      foregoing provisions of this Section 4 shall similarly apply to successive
      Change of Control transactions. 

     

    (c)
      At
      the Holder’s option and request, in lieu of the successor or acquiring
      corporation expressly assuming the due and punctual observance and performance
      of each and every covenant and condition of contained in this Warrant to be
      performed and observed by the Company and all the obligations and liabilities
      hereunder as set forth in Section 4.4(b), the successor or acquiring corporation
      shall purchase from the Holder for a purchase price, payable in cash within
      five
      (5) Trading Days after such request (or, if later, on the effective date of
      the
      Change of Control), equal to the Black Sholes value (with an assumed volatility
      equal to the greater of (i) 50% or (ii) the Bloomberg calculated then prevailing
      100 day historical realized volatility) of the remaining unexercised portion
      of
      this Warrant on the date of such request.

     

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

    4.5. Certain
      Limitations.
      Notwithstanding anything herein to the contrary, the Company agrees not to
      enter
      into any transaction which, by reason of any adjustment hereunder, would cause
      the Current Warrant Price to be less than the par value per share of Common
      Stock. 

     

    4.6. Stock
      Transfer Taxes.
      The
      issue of stock certificates upon exercise of this Warrant shall be made without
      charge to the holder for any tax in respect of such issue. The Company shall
      not, however, be required to pay any tax which may be payable in respect of
      any
      transfer involved in the issue and delivery of shares in any name other than
      that of the holder of this Warrant, and the Company shall not be required to
      issue or deliver any such stock certificate unless and until the person or
      persons requesting the issue thereof shall have paid to the Company the amount
      of such tax or shall have established to the satisfaction of the Company that
      such tax has been paid. 

     

    5. Notices
      to Warrant Holders.
      

     

    5.1. Certificate
      as to Adjustments.
      Upon
      the occurrence of each adjustment or readjustment of the Current Warrant Price,
      the Company, at its expense, shall promptly compute such adjustment or
      readjustment in accordance with the terms hereof and prepare and furnish to
      the
      Holder of this Warrant a certificate setting forth such adjustment or
      readjustment and showing in detail the facts upon which such adjustment or
      readjustment is based. The Company shall, upon the written request at any time
      of the Holder of this Warrant, furnish or cause to be furnished to such Holder
      a
      like certificate setting forth (i) such adjustments and readjustments, (ii)
      the
      Current Warrant Price at the time in effect and (iii) the number of shares
      of
      Common Stock and the amount, if any, or other property which at the time would
      be received upon the exercise of Warrants owned by such Holder. 

     

    5.2. Notice
      of Corporate Action.
      If at
      any time: 

     

    (a) the
      Company shall take a record of the holders of its Common Stock for the purpose
      of entitling them to receive a dividend (other than a cash dividend payable
      out
      of earnings or earned surplus legally available for the payment of dividends
      under the laws of the jurisdiction of incorporation of the Company) or other
      distribution, or any right to subscribe for or purchase any evidences of its
      indebtedness, any shares of stock of any class or any other securities or
      property, or to receive any other right, or 

     

    (b) there
      shall be any capital reorganization of the Company, any reclassification or
      recapitalization of the capital stock of the Company or any consolidation or
      merger of the Company with, or any sale, transfer or other disposition of all
      or
      substantially all the property, assets or business of the Company to, another
      corporation, or

     

    (c) there
      shall be a voluntary or involuntary dissolution, liquidation or winding up
      of
      the Company; 

     

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

    then,
      in
      any one or more of such cases, the Company shall give to the Holder (subject
      to
      the Holder’s execution of a reasonable confidentiality agreement) (i) at least
      10 days’ prior written notice of the record date for such dividend, distribution
      or right or for determining rights to vote in respect of any such
      reorganization, reclassification, merger, consolidation, sale, transfer,
      disposition, dissolution, liquidation or winding up, and (ii) in the case of
      any
      such reorganization, reclassification, merger, consolidation, sale, transfer,
      disposition, dissolution, liquidation or winding up, at least 10 days’ prior
      written notice of the date when the same shall take place. Such notice in
      accordance with the foregoing clause also shall specify (i) the record date
      for
      such dividend, distribution or right, the date on which the holders of Common
      Stock shall be entitled to any such dividend, distribution or right, and the
      amount and character thereof, and (ii) the date on which any such
      reorganization, reclassification, merger, consolidation, sale, transfer,
      disposition, dissolution, liquidation or winding up is to take place and the
      time, if any such time is to be fixed, as of which the holders of Common Stock
      shall be entitled to exchange their shares of Common Stock for securities or
      other property deliverable upon such reorganization, reclassification, merger,
      consolidation, sale, transfer, disposition, dissolution, liquidation or winding
      up. Each such written notice shall be sufficiently given if addressed to the
      Holder at the last address of the Holder appearing on the books of the Company
      and delivered in accordance with Section 13.2. 

     

    5.3. No
      Rights as Stockholder.
      This
      Warrant does not entitle the Holder to any voting or other rights as a
      stockholder of the Company prior to exercise and payment for the Warrant Price
      in accordance with the terms hereof.

     

    6. No
      Impairment.
      The
      Company shall not by any action, including, without limitation, amending its
      articles of incorporation or through any reorganization, transfer of assets,
      consolidation, merger, dissolution, issue or sale of securities or any other
      voluntary action, avoid or seek to avoid the observance or performance of any
      of
      the terms of this Warrant, but will at all times in good faith assist in the
      carrying out of all such terms and in the taking of all such actions as may
      be
      necessary or appropriate to protect the rights of the Holder against impairment.
      Without limiting the generality of the foregoing, the Company will (a) not
      increase the par value of any shares of Common Stock receivable upon the
      exercise of this Warrant above the amount payable therefor upon such exercise
      immediately prior to such increase in par value, (b) take all such action as
      may
      be necessary or appropriate in order that the Company may validly and legally
      issue fully paid and nonassessable shares of Common Stock upon the exercise
      of
      this Warrant, and (c) use its best efforts to obtain all such authorizations,
      exemptions or consents from any public regulatory body having jurisdiction
      thereof as may be necessary to enable the Company to perform its obligations
      under this Warrant. Upon the request of the Holder, the Company will at any
      time
      during the period this Warrant is outstanding acknowledge in writing, in form
      satisfactory to the Holder, the continuing validity of this Warrant and the
      obligations of the Company hereunder.

     

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

    7. Reservation
      and Authorization of Common Stock; Registration With Approval of Any
      Governmental Authority.
      From
      and after the Closing Date, the Company shall at all times reserve and keep
      available for issue upon the exercise of Warrants such number of its authorized
      but unissued shares of Common Stock as will be sufficient to permit the exercise
      in full of all outstanding Warrants (without regard to any ownership limitations
      provided in Section 2.3(i)). All shares of Common Stock which shall be so
      issuable, when issued upon exercise of any Warrant and payment therefor in
      accordance with the terms of such Warrant, shall be duly and validly issued
      and
      fully paid and nonassessable, and not subject to preemptive rights. Before
      taking any action which would cause an adjustment reducing the Current Warrant
      Price below the then par value, if any, of the shares of Common Stock issuable
      upon exercise of the Warrants, the Company shall take any corporate action
      which
      may be necessary in order that the Company may validly and legally issue fully
      paid and non-assessable shares of such Common Stock at such adjusted Current
      Warrant Price. Before taking any action which would result in an adjustment
      in
      the number of shares of Common Stock for which this Warrant is exercisable
      or in
      the Current Warrant Price, the Company shall obtain all such authorizations
      or
      exemptions thereof, or consents thereto, as may be necessary from any public
      regulatory body or bodies having jurisdiction thereof. If any shares of Common
      Stock required to be reserved for issuance upon exercise of Warrants require
      registration or qualification with any governmental authority under any federal
      or state law before such shares may be so issued (other than as a result of
      a
      prior or contemplated distribution by the Holder of this Warrant), the Company
      will in good faith and as expeditiously as possible and at its expense endeavor
      to cause such shares to be duly registered.

     

    8. Taking
      of Record; Stock and Warrant Transfer Books.
      In the
      case of all dividends or other distributions by the Company to the holders
      of
      its Common Stock with respect to which any provision of Section 4 refers to
      the
      taking of a record of such holders, the Company will in each such case take
      such
      a record and will take such record as of the close of business on a Business
      Day. The Company will not at any time, except upon dissolution, liquidation
      or
      winding up of the Company, close its stock transfer books or Warrant transfer
      books so as to result in preventing or delaying the exercise or transfer of
      any
      Warrant. 

     

    9. Registration
      Rights.
      The
      resale
      of the
      Warrant
      Stock shall be registered in accordance with the terms and conditions contained
      in that
      certain
      Investor Rights Agreement dated of even date hereof, among Deerfield Special
      Situations Fund, L.P., Deerfield Special Situations Fund International, Limited
      and the Company (the “Investor Rights Agreement”). The Holder acknowledges that
      pursuant to the Investor Rights Agreement, the Company has the right to request
      that the Holder furnish information regarding such Holder and the distribution
      of the Warrant Stock as is required by law or the Commission to be disclosed
      in
      the Registration Statement (as such term is defined in the Investor Rights
      Agreement), and the Company may exclude from such registration the shares of
      Warrant Stock acquirable hereunder if Holder fails to furnish such information
      within a reasonable time prior to the filing of each Registration Statement,
      supplemented prospectus included therein and/or amended Registration Statement.
      

     

    10. Loss
      or Mutilation.
      Upon
      receipt by the Company from the Holder of evidence reasonably satisfactory
      to it
      of the ownership of and the loss, theft, destruction or mutilation of this
      Warrant and indemnity or security reasonably satisfactory to it and
      reimbursement to the Company of all reasonable expenses incidental thereto
      and
      in case of mutilation upon surrender and cancellation hereof, the Company will
      execute and deliver in lieu hereof a new Warrant of like tenor to the Holder;
      provided, however, that in the case of mutilation, no indemnity shall be
      required if this Warrant in identifiable form is surrendered to the Company
      for
      cancellation. 

     

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

    

    11. Office
      of the Company.
      As long
      as any of the Warrants remain outstanding, the Company shall maintain an office
      or agency (which may be the principal executive offices of the Company) where
      the Warrants may be presented for exercise, registration of transfer, division
      or combination as provided in this Warrant. 

     

    12. Limitation
      of Liability.
      No
      provision hereof, in the absence of affirmative action by the Holder to purchase
      shares of Common Stock, and no enumeration herein of the rights or privileges
      of
      the Holder hereof, shall give rise to any liability of the Holder for the
      purchase price of any Common Stock, whether such liability is asserted by the
      Company or by creditors of the Company.

     

    13. Miscellaneous.
      

     

    13.1 Nonwaiver
      and Expenses.
      No
      course of dealing or any delay or failure to exercise any right hereunder on
      the
      part of the Holder shall operate as a waiver of such right or otherwise
      prejudice Holder’s rights, powers or remedies. If the Company fails to make,
      when due, any payments provided for hereunder, or fails to comply with any
      other
      provision of this Warrant, the Company shall pay to the Holder such amounts
      as
      shall be sufficient to cover any third party costs and expenses including,
      but
      not limited to, reasonable attorneys’ fees, including those of appellate
      proceedings, incurred by the Holder in collecting any amounts due pursuant
      hereto or in otherwise enforcing any of its rights, powers or remedies
      hereunder. 

     

    13.2 Notice
      Generally.
      All
      notices, requests, demands or other communications provided for herein shall
      be
      in writing and shall be given in the manner and to the addresses set forth
      in
      the Purchase Agreement.

     

    13.3 Successors
      and Assigns.
      Subject
      to compliance with the provisions of Section 3.1, this Warrant and the rights
      evidenced hereby shall inure to the benefit of and be binding upon the
      successors of the Company and the successors and assigns of the Holder. The
      provisions of this Warrant are intended to be for the benefit of all Holders
      from time to time of this Warrant, and shall be enforceable by any such Holder.
      

     

    13.4 Amendment.
      This
      Warrant may be modified or amended or the provisions of this Warrant waived
      with
      the written consent of both the Company and the Holder. 

     

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

     

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

     

    
      
        
        

      

      
        14

        
          

        

      

      
        
        

      

    

    13.7 Governing
      Law.
      This
      Warrant and the transactions contemplated hereby shall be governed by and
      interpreted in accordance with the laws of the State of New York without regard
      to the provisions thereof relating to conflicts of laws. The Company hereby
      irrevocably consents to the exclusive jurisdiction of the State and Federal
      courts located in New York City, New York in connection with any action or
      proceeding arising out of or relating to this Warrant. In any such litigation
      the Company agrees that the service thereof may be made by certified or
      registered mail directed to the Company pursuant to Section 13.2. 

     

    [Signature
      Page Follows]

     

     

    IN
      WITNESS WHEREOF, DrugMax, Inc. has caused this_________________________
      Warrant to be executed by its duly authorized officer and attested by its
      Secretary.

     

    Dated:
      June 23, 2006

    

    

    DRUGMAX,
      INC. 

     

     

    By:______________________________
      

    Name:

    Title:
      

    

    Attest:
      

    

    

    

    By:______________________________

    Name:

    Title:
      Secretary 

    
      
        
        

      

      
        15

        
          

        

      

      
        
        

      

    

    EXHIBIT
      A

     

    SUBSCRIPTION
      FORM

    [To
      be
      executed only upon exercise of Warrant]

     

    DrugMax,
      Inc.

    312
      Farmington Avenue

    Farmington,
      CT 06032-1968

    Attention:
      ___________

    Facsimile
      No.: ____________

    

    The
      undersigned registered owner of this Warrant exercises this Warrant for the
      purchase of ________________ shares of Common Stock of DrugMax, Inc. (“Common
      Stock”), and herewith makes payment therefor, all at the price and on the terms
      and conditions specified in this Warrant and requests that certificates for
      the
      shares of Common Stock hereby purchased (and any securities or other property
      issuable upon such exercise) be issued in the name of and delivered to
      ____________________________________________________ and whose address is
      ___________________________________________________________, and, if such shares
      of Common Stock shall not include all of the shares of Common Stock issuable
      as
      provided in this Warrant, that a new Warrant of like tenor and date for the
      balance of the shares of Common Stock issuable hereunder be delivered to the
      undersigned.

     

    (Delete
      following paragraph if not applicable:)

     

    Holder
      hereby represents to you that it has sold or has current plans to resell all
      of
      such Common Shares received upon this exercise of this Warrant, solely in
      accordance with the terms of the Registration Statement filed with the U.S.
      Securities and Exchange Commission by the Company covering such Common Shares
      as
      described under the section entitled "Plan of Distribution"
      therein.

    

    _____________________________________

    (Name
      of
      Registered Owner) 

    

    _____________________________________

    (Signature
      of Registered Owner) 

    

    _____________________________________

    (Street
      Address) 

    

    _____________________________________

    (State)
      (Zip Code) 

    

    NOTICE:
      The signature on this subscription must correspond with the name as written
      upon
      the face of the Warrant in every particular, without alteration or enlargement
      or any change whatsoever. 

    
 

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    EXHIBIT
      B

     

    ASSIGNMENT
      FORM

     

    FOR
      VALUE
      RECEIVED the undersigned registered owner of this Warrant for the purchase
      of
      shares of common stock of DrugMax, Inc. hereby sells, assigns and transfers
      unto
      the Assignee named below all of the rights of the undersigned under this
      Warrant, with respect to the number of shares of common stock set forth
      below:

    

    

    _______________________________________

    

    _______________________________________

    

    _______________________________________

    (Name
      and
      Address of Assignee)

    

    _______________________________________

    (Number
      of Shares of Common Stock)

    

    

    and
      does
      hereby irrevocably constitute and appoint ____________ attorney-in-fact to
      register such transfer on the books of the Company, maintained for the purpose,
      with full power of substitution in the premises. 

    

    

    Dated:_________________________________

    

    ______________________________________

    (Print
      Name and Title)

    

    ______________________________________

    (Signature)
      

    

    ______________________________________

    (Witness)

    

    

    NOTICE:
      The signature on this assignment must correspond with the name as written upon
      the face of the Warrant in every particular, without alteration or enlargement
      or any change whatsoever. 

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    EXHIBIT
      C

     

    FORM
      OF
      INVESTMENT REPRESENTATION LETTER

     

    
      	
              Re:

            	
              Common
                Stock, par value $0.001 per share (“Common Stock”), of DrugMax, Inc., a
                Nevada corporation
                (“Company”).

            

    

     

    In
      connection with the acquisition by the undersigned (“Transferee”)
      of:

     

    
      	□  	
              warrants
                (“Warrants”) to purchase _______ shares of Common Stock,
                or

            

    

     

    
      	□  	
              _______
                shares of Common Stock issued upon the exercise of
                Warrants,

            

    

     

    the
      Transferee hereby represents and warrants to the Company as follows:

     

    The
      Transferee (i) is an “Accredited Investor” as that term is defined in Rule 501
      of Regulation D promulgated under the Securities Act of 1933, as amended (the
      “Act”); and (ii) has the ability to bear the economic risks of such Transferee’s
      prospective investment, including a complete loss of Transferee’s investment in
      the Warrants and/or the shares of Common Stock issuable upon the exercise
      thereof (collectively, the “Securities”).

     

    The
      Transferee, by acceptance of the Securities, represents and warrants to the
      Company that the Securities and all other securities acquired upon any and
      all
      exercises of the Warrants are purchased for the Transferee’s own account, and
      not with view to distribution of either the Securities or any other securities
      purchasable upon exercise of the Warrants in violation of applicable securities
      laws. 

     

    The
      Transferee acknowledges that (i) the Securities have not been registered under
      the Act, (ii) the Securities are “restricted securities” and the certificate(s)
      representing the Securities shall bear the following legend, or a similar legend
      to the same effect, until (i) in the case of the shares of Common Stock
      underlying the Warrants, such shares shall have been registered for resale
      by
      the Transferee under the Act and effectively been disposed of in accordance
      with
      a registration statement that has been declared effective; or (ii) in the
      opinion of counsel for the Company such Securities may be sold without
      registration under the Act:

     

    “The
      securities represented by this certificate have not been registered under the
      Securities Act of 1933, as amended (the “Act”), and all such securities are
      subject to restrictions on transferability as set forth in this certificate.
      The
      securities represented hereby may not be sold, transferred, or otherwise
      disposed of in the absence of an effective registration statement under the
      Act
      or an opinion of counsel, reasonably acceptable to counsel for the company,
      to
      the effect that the proposed sale, transfer, or disposition may be effectuated
      without registration under the Act.” 

     

    IN
      WITNESS WHEREOF, the Transferee has caused this Investment Representation Letter
      to be duly executed this __ day of __________ 20__. 

     

    Transferee
      Name: __________________________

    

    

    By:
      _______________________

    Name:

    Title:Unassociated Document

     

    INVESTOR
      RIGHTS AGREEMENT

     

    This
      Investor Rights Agreement (this “Agreement”) is made and entered into as of June
      23, 2006, by and among DrugMax, Inc., a Nevada corporation (the “Company”), and
      Deerfield Special Situations Fund, L.P., a Delaware limited partnership, and
      Deerfield Special Situations Fund International Limited, a British Virgin
      Islands company (collectively, the “Purchasers”).

     

    W
      I T N E S S E T H

     

    WHEREAS,
      pursuant to a Note and Warrant Purchase Agreement, dated as of the date hereof,
      among the Company and the Purchasers (the “Purchase
      Agreement”),
      the
      Company has agreed to issue and sell to the Purchasers promissory notes in
      the
      aggregate principal amount of $10 million (collectively, the “Notes”),
      and
      eight warrants (the “Warrants”)
      to
      purchase an aggregate of 16,500,000 shares of the Company’s Common Stock (the
“Shares”);
      

     

    WHEREAS,
      the
      obligations of the Company under the Notes are secured by a security interest
      in
      the assets of the Company pursuant to the Security Agreement, dated as of the
      date hereof, by the Company in favor of the Purchasers (the “Security
      Agreement”);

     

    WHEREAS,
      to
      induce the Purchasers to execute and deliver the Purchase Agreement, the Company
      has agreed to provide to the Purchasers and its permitted assigns certain
      registration rights under the Securities Act of 1933, as amended (the
“Securities
      Act”),
      and
      applicable state securities laws; and 

     

    WHEREAS,
      this
      Agreement, together with the Purchase Agreement, the Notes, the Warrants and
      the
      Security Agreement are hereinafter collectively referred to as the “Transaction
      Documents”.

     

    NOW
      THEREFORE,
      in
      consideration of the foregoing and other good and valuable consideration, the
      parties hereto agree as follows:

     

    1. Definitions.

     

    As
      used
      in this Agreement, the following terms shall have the following
      meanings:

     

    
      	 	
              (a)

            	
              “Claims”
                shall have the meaning ascribed to it in Section
                6(a).

            

    

     

    
      	 	
              (b)

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

            

    

     

    
      	 	
              (c)

            	
              "Holder"
                or “Holders”
                mean a holder or holders of Registrable
                Securities.

            

    

     

    
      	 	
              (d)

            	
              “Indemnified
                Person”
                shall mean a party entitled to indemnification pursuant to Section
                6.

            

    

     

    
      	 	
              (e)

            	
              “Registrable
                Securities”
                shall mean (i) the Shares, (ii) the shares of Common Stock or other
                securities issued or issuable to the Purchasers or their permitted
                transferees or designees (a) upon exercise of the Warrants, or (b)
                upon
                any distribution with respect to, any exchange for or any replacement
                of
                the Warrants, or (c) upon any conversion, exercise or exchange of
                any
                securities issued in connection with any such distribution, exchange
                or
                replacement; (iii) securities issued or issuable upon any stock split,
                stock dividend, recapitalization or similar event with respect to
                such
                shares of Common Stock; and (iv) any other security issued as a dividend
                or other distribution with respect to, in exchange for, or in replacement
                of, the securities referred to in the preceding
                clauses.

            

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    
      	 	
              (f)

            	
              “Registration
                Period”
                shall have the meaning ascribed to it in Section
                2(ii).

            

    

     

    
      	 	
              (g)

            	
              “Registration
                Statement”
                means a registration statement or registration statements of the
                Company
                filed under the Securities Act covering Registrable
                Securities.

            

    

     

    
      	 	
              (h)

            	
              “Register,”
                “Registered”
                and “Registration”
                refer to a registration effected by preparing and filing a registration
                statement in compliance with the Securities Act and pursuant to Rule
                415
                under the Securities Act or any successor rule providing for offering
                securities on a continuous basis (“Rule
                415”),
                and the declaration or ordering of effectiveness of such registration
                statement by the United States Securities and Exchange Commission
                (the
                “Commission”).

            

    

     

    
      	 	
              (i)

            	
              “Rule
                144”
                shall have the meaning ascribed to it in Section
                8.

            

    

     

    
      	 	
              (j)

            	
              “Securities
                Act”
                shall mean the Securities Act of 1933, as
                amended.

            

    

     

    
      	 	
              (k)

            	
              “Violations”
                shall have the meaning ascribed to it in Section
                6(a).

            

    

     

    Capitalized
      terms defined in the introductory paragraph or the recitals to this Agreement
      shall have the respective meanings therein provided. Capitalized terms used
      herein and not otherwise defined herein shall have the meanings set forth in
      the
      Purchase Agreement or elsewhere in the Transaction Documents.

     

    2. Mandatory
      Registration.

     

    (i) The
      Company shall prepare and file with the Securities and Exchange Commission
      (the
“Commission”)
      not
      later than the 60th day (the “Filing
      Date”)
      after
      the Closing Date under the Purchase Agreement a Registration Statement or
      Registration Statements (as necessary) on Form S-3 covering the resale of all
      of
      the Registrable Securities, in an amount sufficient to cover the resale of
      the
      shares issuable upon exercise of the Warrants. In the event that Form S-3 is
      unavailable for such a registration, the Company shall use such other form
      as is
      available and appropriate for such a registration. Any Registration Statement
      prepared pursuant hereto shall register for resale at least that number of
      shares of Common Stock equal to the Shares. The Company shall use its reasonable
      best efforts to cause the Registration Statement to be declared effective under
      the Securities Act as promptly as possible after the filing thereof, but in
      any
      event prior to the 240th
      day
      after the Filing Date (such day referred to herein as the “Effective
      Date”).

     

    (ii) The
      Company shall use its reasonable best efforts to keep each Registration
      Statement effective pursuant to Rule 415 at all times until such date as is
      the
      earlier of (i) the date on which all of the Registrable Securities have been
      sold pursuant to a Registration Statement and (ii) the date on which the
      Registrable Securities (in the opinion of counsel to the Purchasers and
      acceptable to legal counsel for the Company) may be immediately sold without
      restriction (including without limitation as to volume restrictions by each
      holder thereof) and without registration under the Securities Act (the
“Registration
      Period”).

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

    3. Obligations
      of the Company.
      In
      connection with the registration of the Registrable Securities, the Company
      shall do each of the following:

     

    (a) Prepare
      and file with the Commission the Registration Statements required by Section
      2
      of this Agreement and such amendments (including post-effective amendments)
      and
      supplements to the Registration Statements and the prospectuses used in
      connection with the Registration Statements, as may be necessary to keep the
      Registration effective at all times during the Registration Period, and, during
      the Registration Period, to comply with the provisions of the Securities Act
      with respect to the disposition of all of the Registrable Securities until
      such
      time as all of such Registrable Securities have been disposed of in accordance
      with the intended methods of disposition by the seller or sellers thereof as
      set
      forth in the Registration Statements;

     

    (b) If
      the
      Registrable Securities are included in a Registration Statement, the Company
      shall promptly furnish, after such Registration Statement is prepared, filed
      with the Commission, publicly disseminated and distributed by the Company,
      to
      the Holders and their legal counsel, a copy of the Registration Statement,
      each
      preliminary prospectus, each final prospectus, and all amendments and
      supplements thereto and such other documents as the Holders may reasonably
      request in order to facilitate the disposition of its Registrable
      Securities;

     

    (c) As
      soon
      as practicable for the Company and its counsel, but no later than five business
      days after receipt thereof, furnish to the Holders and their counsel copies
      of
      appropriate correspondence between the Company and the Commission with respect
      to any registration statement or amendment or supplement thereto filed pursuant
      to this Agreement;

     

    (d) Use
      its
      reasonable best efforts to (i) register and qualify the Registrable Securities
      covered by the Registration Statement under such other securities or blue sky
      laws, if applicable, of such jurisdictions as any Holder may reasonably request,
      (ii) prepare and file in those jurisdictions such amendments (including
      post-effective amendments) and supplements to such registrations and
      qualifications as may be necessary to maintain the effectiveness thereof at
      all
      times during the Registration Period, (iii) take such other actions as may
      be
      necessary to maintain such registrations and qualifications in effect at all
      times during the Registration Period and (iv) take all other actions necessary
      or advisable to qualify the Registrable Securities for sale in such
      jurisdictions, except that the Company shall not for any such purpose be
      required to qualify generally to do business as a foreign corporation in any
      jurisdiction wherein it would not but for the requirements of this subsection
      (d) be obligated to be so qualified, or to subject itself to taxation in any
      such jurisdiction, or to consent to general service of process in any such
      jurisdiction;

     

    (e) If
      required, list such securities on the Nasdaq Stock Market (“Nasdaq”)
      or
      such other national securities exchanges on which any securities of the Company
      are then listed, and file any filings required by Nasdaq and/or such other
      filings; 

     

    (f) Notify
      the Holders and (if requested by the Holders) confirm such advice in writing,
      (i) when or if the prospectus or any prospectus supplement or post-effective
      amendment has been filed with the Commission, and, with respect to the
      Registration Statement or any post-effective amendment, when the same has been
      declared effective by the Commission, (ii) of any request by the Commission
      for
      amendments or supplements to the Registration Statement or the prospectus or
      for
      additional information, (iii) of the issuance by the Commission of any stop
      order suspending the effectiveness of the Registration Statement or the
      initiation of any proceedings for that purpose, (iv) of the receipt by the
      Company of any notification with respect to the suspension of the qualification
      of the Registrable Shares for sale in any jurisdiction or the initiation or
      threatening of any proceeding for such purpose, and (v) of the happening of
      any
      event as a result of which the prospectus included in such Registration
      Statement, as then in effect, includes an untrue statement of a material fact
      or
      omits to state a material fact required to be stated therein or necessary to
      make the statements therein not misleading in the light of the circumstances
      then existing;

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

    (g) If
      any
      fact contemplated by clause (v) of paragraph (f), above, shall exist, prepare
      a
      supplement or post-effective amendment to the Registration Statement or the
      related prospectus or any document incorporated therein by reference or file
      any
      other required document so that, as thereafter delivered to the purchasers
      of
      the Registrable Securities the prospectus will not contain an untrue statement
      of material fact or omit to state any material fact necessary to make the
      statements therein not misleading;

     

    (h) Cooperate
      with each Holder to facilitate the timely preparation and delivery of
      certificates for the Registrable Securities to be offered pursuant to the
      Registration Statement and to enable such certificates for the Registrable
      Securities to be in such denominations or amounts, as the case may be, as each
      Holder may reasonably request, and registered in such names as each Holder
      may
      request; and, within three business days after a Registration Statement which
      includes Registrable Securities is ordered effective by the Commission, the
      Company shall deliver, and shall cause legal counsel selected by the Company
      to
      deliver, to the transfer agent for the Registrable Securities (with copies
      to
      the Holders) an appropriate instruction and opinion of such counsel,
      satisfactory to the Company, and the Holders and their legal
      counsel;

     

    (i) Enter
      into customary agreements and take all other customary and appropriate actions
      in order to expedite or facilitate the disposition of such Registrable
      Securities. 

     

    (j) The
      Company shall hold in confidence and not make any disclosure of information
      concerning a Holder provided to the Company unless (i) disclosure of such
      information is necessary to comply with federal or state securities laws and/or
      the requests of any self-regulatory organizations, (ii) the disclosure of such
      information is necessary to avoid or correct a misstatement or omission in
      any
      Registration Statement, (iii) the release of such information is ordered
      pursuant to a subpoena or other order from a court or governmental body of
      competent jurisdiction, or (iv) such information has been made generally
      available to the public other than by disclosure in violation of this or any
      other agreement. The Company agrees that it shall, upon learning that disclosure
      of such information concerning a Holder is sought in or by a court or
      governmental body of competent jurisdiction or though other means, give prompt
      notice to such Holder prior to making such disclosure, and allow such Holders,
      at its expense, to undertake appropriate action to prevent disclosure of, or
      to
      obtain a protective order for, such information.

     

    (k) In
      the
      event that, in the judgment of the Company, it is advisable to suspend use
      of a
      prospectus included in a Registration Statement due to pending material
      developments or other events that have not yet been publicly disclosed and
      as to
      which the Company believes public disclosure would be detrimental to the
      Company, the Company shall notify all Holders to such effect, and, upon receipt
      of such notice, each such Holder shall immediately discontinue any sales of
      Registrable Securities pursuant to such Registration Statement until such Holder
      has received copies of a supplemental or amended prospectus or until such Holder
      is advised in writing by the Company that then current prospectus may be used
      and has received copies of any additional or supplemental filings that are
      incorporated or deemed incorporated by reference in such prospectus.
      Notwithstanding anything to the contrary herein, the Company shall not exercise
      its rights under this Section 3(k) to suspend of Registrable Securities for
      a
      period in excess of 45 days consecutively or 90 days in any 365-day
      period.

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

    4. Obligations
      of the Holders to Provide Information.
      In
      connection with the registration of the Registrable Securities, each Holder
      shall furnish to the Company such information regarding itself, the Registrable
      Securities held by it and the intended method of disposition of the Registrable
      Securities held by it as shall be reasonably requested by the Company to effect
      the registration of such Registrable Securities, and the Holders shall execute
      any and all such documents in connection with such registration as the Company
      and its legal counsel may reasonably request. At least five business days prior
      to the first anticipated filing date of the Registration Statement, the Company
      shall notify the Holders of the information the Company requires of the Holders
      to be included in the Registration Statement. The Company shall not be required
      to include the Registrable Securities of a Holder in a Registration Statement
      who fails to furnish the Company with any such information except where such
      failure does not materially prejudice the Company’s ability to register such
      Registrable Securities. The Holders shall give sufficient notice to the Company
      before selling any Registrable Securities so that the Company may prepare and
      file any necessary post-effective amendments to the Registration Statement
      or
      such additional filings as shall be necessary or desirable. 

     

    5. Expenses
      of Registration.
      All
      expenses, other than underwriting discounts and commissions and other fees
      and
      expenses of investment bankers, other brokerage commissions and legal fees
      of
      the Holders, incurred in connection with registrations, filings or
      qualifications pursuant to Section 3, but including, without limitation, all
      registration, listing, and qualification fees, printing and accounting fees,
      and
      the fees and disbursements of counsel for the Company, with respect to the
      Registration Statement filed pursuant hereto, shall be borne by the Company.
      

     

    6. Indemnification.
      In the
      event any Registrable Securities are included in a Registration Statement under
      this Agreement:

     

    (a) The
      Company will indemnify and hold harmless the Holders, each of their respective
      officers, directors, members, managers, partners and shareholders, and each
      person, if any, who controls a Holder within the meaning of the Securities
      Act
      or the Exchange Act against any losses, claims, damages, liabilities or expenses
      (joint or several) incurred (collectively, “Claims”)
      to
      which any of them may become subject under the Securities Act, the Exchange
      Act
      or otherwise, insofar as such Claims (or actions or proceedings, whether
      commenced or threatened, in respect thereof) arise out of or are based upon:
      (i)
      any untrue statement or alleged untrue statement of a material fact contained
      in
      the Registration Statement or any post-effective amendment thereof or the
      omission or alleged omission to state therein a material fact required to be
      stated therein or necessary in order to make the statements therein, in light
      of
      the circumstances in which they were made, not misleading, (ii) any untrue
      statement or alleged untrue statement of a material fact contained in any
      preliminary prospectus if used prior to the effective date of such Registration
      Statement, or contained in the final prospectus (as amended or supplemented,
      if
      the Company files any amendment thereof or supplement thereto with the
      Commission) or the omission to state therein any material fact necessary in
      order to make the statements made therein, in light of the circumstances under
      which they were made, not misleading, or (iii) any violation or alleged
      violation by the Company of the Securities Act, the Exchange Act, any state
      securities law or any rule or regulation under the Securities Act, the Exchange
      Act or any state securities law (the matters in foregoing clauses (i) through
      (iii) being, collectively, “Violations”).
      The
      Company shall, subject to the provisions of Section 6(c) below, reimburse each
      Indemnified Person, promptly as such expenses are incurred and are due and
      payable, for any reasonable legal and other reasonable costs, expenses and
      disbursements in giving testimony or furnishing documents in response to a
      subpoena or otherwise, including without limitation, the costs, expenses and
      disbursements, as and when incurred, of investigating, preparing or defending
      any such action, suit, proceeding or investigation (whether or not in connection
      with litigation in which an Indemnified Person is a party), incurred by it
      in
      connection with the investigation or defense of any such Claim. Notwithstanding
      anything to the contrary contained herein, the indemnification agreement
      contained in this Section 6(a) shall not (i) apply to any Claim arising out
      of
      or based upon any untrue statement or omission made in a Registration Statement,
      preliminary prospectus or prospectus, or any amendment or supplement, in each
      case, in reliance upon and in conformity with information furnished in writing
      to the Company by or on behalf of any Indemnified Person expressly for use
      in
      connection with the preparation of the Registration Statement or any such
      amendment thereof or supplement thereto; (ii) be available to the extent that
      such Claim is based upon a failure of a Holder to deliver or to cause to be
      delivered the prospectus made available by the Company, if such prospectus
      was
      timely made available by the Company pursuant to Section 3(b) hereof; or (iii)
      apply to amounts paid in settlement of any Claim if such settlement is effected
      without the prior written consent of the Company, which consent shall not be
      unreasonably withheld. Such indemnity shall remain in full force and effect
      regardless of any investigation made by or on behalf of an Indemnified Person
      and shall survive the transfer of the Registrable Securities by the Purchasers
      pursuant to Section 9. 

     

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

    (b) Each
      Holder will indemnify the Company and its officers and directors and each person
      if any, who controls the Company within the meaning of the Securities Act or
      the
      Exchange Act against any Claims arising out of or based upon a Violation which
      occurs in reliance upon and in conformity with information furnished in writing
      to the Company, by or on behalf of such Holder, expressly for use in connection
      with the preparation of the Registration Statement, preliminary prospectus
      or
      prospectus (including any modifications, amendments or supplements thereto)
      provided, however, that in no event shall any indemnity by a Holder under this
      Section 6 exceed the amount of the net proceeds received by such Holder in
      connection with the offering effected through such Registration
      Statement.

     

    (c) Promptly
      after receipt by an Indemnified Person under this Section 6 of notice of the
      commencement of any action (including any governmental action), such Indemnified
      Person shall, if a Claim in respect thereof is to be made against any
      indemnifying party under this Section 6, deliver to the indemnifying party
      a
      written notice of the commencement thereof, and the indemnifying party shall
      have the right to participate in, and to the extent that the indemnifying party
      so desires, jointly with any other indemnifying party similarly notified, to
      assume control of the defense thereof with counsel mutually satisfactory to
      the
      indemnifying party and the Indemnified Person; provided, however, that an
      Indemnified Person shall have the right to retain its own counsel with the
      reasonable fees and expenses to be paid by the indemnifying party, if, in the
      reasonable opinion of counsel retained by the Indemnified Person, the
      representation of the Indemnified Person by counsel retained by the indemnifying
      party would be inappropriate due to actual or potential differing interests
      between such Indemnified Person and any other party represented by such counsel
      in such proceeding. In such event, the Company shall pay for only one separate
      legal counsel for the Holders, and such legal counsel shall be selected by
      the
      Holders. The failure to deliver written notice to an indemnifying party within
      a
      reasonable time after the commencement of any such action shall not relieve
      such
      indemnifying party of any liability to the Indemnified Person under this Section
      6, except to the extent that the indemnifying party is materially prejudiced
      in
      its ability to defend such action. The indemnification required by this Section
      6 shall be made by periodic payments of the amount thereof during the course
      of
      the investigation or defense, as such expense, loss, damage or liability is
      incurred and is due and payable.

     

    (d) No
      indemnifying party, in the defense of any such claim or litigation, shall,
      except with the consent of each Indemnified Party, consent to entry of any
      judgment or enter into any settlement which does not include as an unconditional
      term thereof the giving by the claimant or plaintiff to such Indemnified Person
      of an unconditional and irrevocable release from all liability in respect of
      such claim or litigation and no Indemnified Party shall consent to entry of
      any
      judgment or settle such claim or litigation without the prior written consent
      of
      the indemnifying party, which consent shall not be unreasonably withheld,
      conditioned or delayed.

     

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

    7. Contribution.
      To the
      extent any indemnification by an indemnifying party is prohibited or limited
      under applicable law, the indemnifying party agrees, in lieu of indemnifying
      such Indemnified Person to such extent, to contribute to the amount paid or
      payable by an Indemnified Person as a result of such loss, claim, damage,
      liability or expense in such proportion as is appropriate to reflect the
      relative fault of the indemnifying party on the one hand and the Indemnified
      Person on the other hand in connection with the statements or omissions which
      resulted in such Claim, as well as any other relevant equitable considerations.
      The relative fault of the indemnifying party and the Indemnified Person shall
      be
      determined by reference to, among other things, whether the untrue or alleged
      untrue statement of a material fact or the omission to state a material fact
      on
      which such Claim is based relates to information supplied by the indemnifying
      party or by the Indemnified Person, and the parties’ relative intent, knowledge,
      access to information and opportunity to correct or prevent such statement
      or
      omission. Notwithstanding the foregoing, (a) no contribution shall be made
      under
      circumstances where the payor would not have been liable for indemnification
      under the fault standards set forth in Section 6, (b) no seller of Registrable
      Securities guilty of fraudulent misrepresentation (within the meaning of Section
      11(f) of the Securities Act) shall be entitled to contribution from any seller
      of Registrable Securities who was not guilty of such fraudulent
      misrepresentation and (c) contribution by any seller of Registrable Securities
      shall be limited in amount to the net proceeds received by such seller from
      the
      sale of such Registrable Securities. The Company and the Holders agree that
      it
      would not be just and equitable if contribution pursuant to this Section 7
      were
      determined by pro rata
      allocation (even if the Holders and any other party were treated as one entity
      for such purpose) or by any other method of allocation that does not take
      account of the equitable considerations referred to in this Section. No party
      shall be liable for contribution with respect to any action, suit, proceeding
      or
      claim settled without its prior written consent, which consent shall not be
      unreasonably withheld, conditioned or delayed. 

     

    8. Reports
      Under Exchange Act.
      With a
      view to making available to the Holders the benefits of Rule 144 promulgated
      under the Securities Act or any other similar rule or regulation of the
      Commission that may at any time permit the Holders to sell securities of the
      Company to the public without registration (“Rule
      144”),
      the
      Company agrees to 

     

    (i)
      make
      and keep public information available, as those terms are understood and defined
      in Rule 144;

     

    (ii)
      use
      its reasonable best efforts to file with the Commission in a timely manner
      all
      reports and other documents required of the Company under the Securities Act
      and
      the Exchange Act; and

     

    (iii)
      furnish to any Holder so long as any Holder owns Shares or Warrants promptly
      upon request, (i) a written statement by the Company that it has complied with
      the reporting requirements of the Securities Act and the Exchange Act, (ii)
      a
      copy of the most recent annual or periodic report of the Company and such other
      reports and documents so filed by the Company and (iii) such other information
      as may be reasonably requested to permit the Holders to sell such securities
      pursuant to Rule 144 without registration.

     

    9. Assignment
      of the Registration Rights.
      The
      rights to have the Company register Registrable Securities pursuant to this
      Agreement shall be automatically assigned by a Purchaser to any transferee
      of
      the Shares or Warrants held by such Purchaser if: (a) such Purchaser agrees
      in
      writing with the transferee or assignee to assign such rights, and a copy of
      such agreement is furnished to the Company within a reasonable time after such
      assignment; (b) the Company is, at the time of such transfer within five
      business days after such transfer or assignment, furnished with written notice
      of the name and address of such transferee or assignee; and (c) at or before
      the
      time the Company receives the written notice contemplated by clause (b) of
      this
      sentence, the transferee or assignee agrees in writing with the Company to
      be
      bound by all of the provisions contained herein.

     

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

    10. Amendment
      of Registration Rights.
      Any
      provision of this Agreement may be amended and the observance thereof may be
      waived (either generally or in a particular instance and either retroactively
      or
      prospectively), only with the written consent of the Company and the Holders.
      Any amendment or waiver effected in accordance with this Section 10 shall be
      binding upon the Company and the Holders.

     

    11. Miscellaneous.

     

    (a) A
      person
      or entity is deemed to be a holder of Registrable Securities whenever such
      person or entity owns of record such Registrable Securities or Warrants
      exercisable into such Registrable Securities. If the Company receives
      conflicting instructions, notices or elections from two or more persons or
      entities with respect to the same Registrable Securities, the Company shall
      act
      upon the basis of the instructions, notice or election received from the
      registered owner of such Registrable Securities or Warrants.

     

    (b) Any
      notice required or permitted hereunder shall be given in writing (unless
      otherwise specified herein) and shall be effective upon personal delivery,
      via
      facsimile (upon receipt of confirmation of error-free transmission) or two
      business days following deposit of such notice with an internationally
      recognized courier service, with postage prepaid and addressed to each of the
      other parties thereunto entitled at the address set forth below in this Section
      11(b), or at such other addresses as a party may designate by ten (10) days
      advance written notice to each of the other parties hereto.

     

    All
      notices shall be addressed as follows:

     

    

    If
      to the
      Purchasers, addressed to: 

     

    c/o
      Deerfield Management Company L.P.

    780
      Third
      Avenue, 37th Floor

    New
      York,
      New York 10017

    Attention:
      James E. Flynn

    Facsimile
      No.: (212) 573-8111

    

    With
      a
      copy to:

     

    Katten
      Muchin Rosenman LLP

    575
      Madison Avenue

    New
      York,
      New York 10022

    Attention:
      Robert Weiss, Esq.

    Telecopier
      No: (212) 940-8776

    

     

    If
      to any
      Holder, to such address as such Holder notifies the Company in writing.

     

    In
      each
      case, with a copy to:

     

    Katten
      Muchin Rosenman LLP

    575
      Madison Avenue

    New
      York,
      New York 10022

    Attention:
      Robert Weiss, Esq.

    Telecopier
      No: (212) 940-8776

    

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

     

    If
      to the
      Company, addressed to: 

     

    DrugMax,
      Inc.

    312
      Farmington Avenue

    Farmington,
      CT 06032-1968

    Attention:
      General Counsel

    Facsimile
      No.: (860) 676-8764

    

    With
      a
      copy to:

    

    Robinson
      & Cole LLP

    280
      Trumbull Street

    Hartford,
      CT 06103

    Attention:
      John B. Lynch Jr. Esq.

    Telecopier
      No: (860) 275-8299

    

    (c) Failure
      of any party to exercise any right or remedy under this Agreement or otherwise,
      or delay by a party in exercising such right or remedy, shall not operate as
      a
      waiver thereof.

     

    (d) This
      Agreement shall be governed by and interpreted in accordance with the laws
      of
      the State of New York, without giving effect to conflicts of laws issues. Each
      of the parties agrees to the jurisdiction of the federal courts whose districts
      encompass any part of the City of New York or the state courts of the State
      of
      New York sitting in the City of New York in connection with any dispute arising
      under this Agreement and hereby waives, to the maximum extent permitted by
      law,
      any objection, including any objection based on forum non
      conveniens,
      to the
      bringing of any such proceeding in such jurisdictions. This Agreement may be
      signed in two or more counterparts, each of which shall be deemed an original.
      The headings of this Agreement are for convenience of reference and shall not
      form part of, or affect the interpretation of, this Agreement. If any provision
      of this Agreement shall be invalid or unenforceable in any jurisdiction, such
      validity or unenforceability shall not affect the validity or enforceability
      of
      the remainder of this Agreement or the validity or enforceability of this
      Agreement in any other jurisdiction. Subject to the provisions of Section 10
      hereof, this Agreement may be amended only by an instrument in writing signed
      by
      the party to be charged with enforcement.

     

    (e) This
      Agreement, together with the other Transaction Documents, constitutes the entire
      agreement among the parties hereto with respect to the subject matter hereof.
      This Agreement supersedes all prior agreements and understandings among the
      parties hereto with respect to the subject matter hereof.

     

    (f) Subject
      to the requirements of Section 9 hereof, this Agreement shall inure for the
      benefit of and be binding upon the successors and assigns of each of the parties
      hereto.

     

    (g) All
      pronouns and any variations thereof refer to the masculine, feminine or neuter,
      singular or plural, as the context may require.

     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

    IN
      WITNESS WHEREOF, the parties have caused this Investor Rights Agreement to
      be
      executed as of the date first written above.

     

    
      	 	 	 
	 	DRUGMAX,
              INC.
	 
 	 
 	 
 
	 	By:  	/s/
	 	
              
Name:
	 	Title 

      	 	 	 
	 	DEERFIELD
              SPECIAL SITUATIONS FUND, L.P. 
	 
 	 
 	 
 
	 	By:  	Deerfield
              Capital,
              L.P., its general partner
	 	 	 
	 	By: 	J.E. Flynn Capital, LLC, its general
              partner 
	 	 	 
	 	 	 
	 	By: 	/s/ 
	 	
              
Name: 
	 	Title 

      	 	 	 
	 	DEERFIELD
              SPECIAL SITUATIONS FUND INTERNATIONAL,
              LIMITED
	 
 	 
 	 
 
	 	By:  	/s/
	 	
              
Name:
	 	Title:

    

    
      
        
        

      

      10

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