REGISTRATION RIGHTS AGREEMENT

REGISTRATION RIGHTS AGREEMENT (this “Agreement”), dated as of March 26, 2008, by
and among Proliance International, Inc., a Delaware corporation, with
headquarters located at 100 Gando Drive, New Haven, Connecticut 06513 (the
“Company”), and the warrantholders listed on the Schedule of Warrantholders
attached hereto (each, a “Warrantholder” and collectively, the
“Warrantholders”).

WHEREAS:

The Company is issuing and delivering to each Warrantholder warrants (each a
“Warrant”, and collectively, together with any warrants issued in substitution
therefor or replacement thereof in accordance with the terms thereof, the
“Warrants”) to purchase shares of the Company’s common stock, par value $0.01
per share (the “Common Stock”) (as exercised, the “Warrant Shares”), and the
Company has further agreed to provide certain registration rights under the
Securities Act of 1933, as amended, and the rules and regulations thereunder, or
any similar successor statute (collectively, the “1933 Act”), and applicable
state securities laws in respect of the Registrable Securities (as defined
below) on the terms and subject to the conditions set forth herein.

NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and each of the
Warrantholders hereby agree as follows:

 

1.

Definitions.

Capitalized terms used herein and not otherwise defined herein shall have the
respective meanings set forth in the Warrantholder Rights Agreement, dated as of
March 26, 2008 (the “Warrantholder Rights Agreement”), among the Company and the
Warrantholders. As used in this Agreement, the following terms shall have the
following meanings:

(a) “Additional Effective Date” means the date the Additional Registration
Statement is declared effective by the SEC.

(b) “Additional Effectiveness Deadline” means the earlier of (I) the date which
is sixty (60) calendar days after the earlier of the Additional Filing Date and
the Additional Filing Deadline (or, in the event of a review by the SEC, ninety
(90) calendar days after the earlier of the Additional Filing Date and the
Additional Filing Deadline) and (II) the date which is five (5) Business Days
after the Company learns that no review of the Additional Registration Statement
will be made by the staff of the SEC or that the staff of the SEC has no further
comments on the Additional Registration Statement.

(c) “Additional Filing Date” means the date on which the Additional Registration
Statement is filed with the SEC.

 

 

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(d) “Additional Filing Deadline” means if Cutback Shares are required to be
included in any Additional Registration Statement, the later of (i) the date
sixty (60) days after the date substantially all of the Registrable Securities
registered under the immediately preceding Registration Statement are sold and
(ii) the date six (6) months from the Initial Effective Date or the last
Additional Effective Date, as applicable.

(e) “Additional Registrable Securities” means, (i) any Cutback Shares not
previously included on a Registration Statement and (ii) any capital stock of
the Company issued or issuable with respect to the Cutback Shares as a result of
any stock split, stock dividend, recapitalization, exchange or similar event or
otherwise, without regard to any limitations on exercise of the Warrants.

(f) “Additional Registration Statement” means a registration statement or
registration statements of the Company filed under the 1933 Act covering any
Additional Registrable Securities.

(g) “Additional Required Registration Amount” means (I) (i) any Cutback Shares
not previously included on a Registration Statement or (II) such other amount as
may be required by the staff of the SEC pursuant to Rule 415 with any cutback
applied pro rata to all Registrable Securities.

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

(i) “Closing Date” means March 26, 2008.

(j) “Cutback Shares” means any of the Initial Required Registration Amount or
the Additional Required Registration Amount (without regard to clause (II) in
the definition thereof) of Registrable Securities not included in all
Registration Statements previously declared effective hereunder as a result of a
limitation on the maximum number of shares of Common Stock of the Company
permitted to be registered by the staff of the SEC pursuant to Rule 415.

(k) “Effective Date” means the Initial Effective Date and the Additional
Effective Date, as applicable.

(l) “Effectiveness Deadline” means the Initial Effectiveness Deadline and the
Additional Effectiveness Deadline, as applicable.

(m) “Filing Deadline” means the Initial Filing Deadline and the Additional
Filing Deadline, as applicable.

(n) “Initial Effective Date” means the date that the Initial Registration
Statement has been declared effective by the SEC.

(o) “Initial Effectiveness Deadline” means the earlier of (I) the date which is
sixty (60) calendar days after the Closing Date (or, in the event of a review by
the SEC,

 

 

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ninety (90) calendar days after the Closing Date) and (II) the date which is
five (5) Business Days after the Company learns that no review of the
Registration Statement will be made by the staff of the SEC or that the staff of
the SEC has no further comments on the Registration Statement.

(p) “Initial Filing Deadline” means thirty (30) calendar days after the Closing
Date.

(q) “Initial Registrable Securities” means (i) the Warrant Shares issued or
issuable upon exercise of the Warrants and (ii) any capital stock of the Company
issued or issuable, with respect to the Warrant Shares and the Warrants as a
result of any stock split, stock dividend, recapitalization, exchange or similar
event or otherwise, without regard to any limitations on exercise of the
Warrants.

(r) “Initial Registration Statement” means a registration statement or
registration statements of the Company filed under the 1933 Act covering the
Initial Registrable Securities.

(s) “Initial Required Registration Amount” means (i) 130% of the number of
Warrant Shares issued and issuable pursuant to the Warrants as of the trading
day immediately preceding the applicable date of determination, all subject to
adjustment as provided in Section 2(g) (without regard to any limitations on
exercise of the Warrants) or (ii) such other amount as may be required by the
staff of the SEC pursuant to Rule 415 with any cutback applied pro rata to all
Registrable Securities.

(t) “Investor” means any Warrantholder, any transferee or assignee thereof to
whom a Warrantholder assigns its rights under this Agreement and who agrees to
become bound by the provisions of this Agreement in accordance with Section 9
and any transferee or assignee thereof to whom a transferee or assignee assigns
its rights under this Agreement and who agrees to become bound by the provisions
of this Agreement in accordance with Section 9.

(u) “Person” means any individual, firm, partnership, corporation, trust, joint
venture, association, joint stock company, limited liability company,
unincorporated organization or any other entity or organization, including a
government or agency or political subdivision thereof, and shall include any
successor (by merger or otherwise) of such entity.

(v) “register,” “registered,” and “registration” refer to a registration
effected by preparing and filing one or more Registration Statements (as defined
below) in compliance with the 1933 Act and pursuant to Rule 415, and the
declaration or ordering of effectiveness of such Registration Statement(s) by
the SEC.

(w) “Registrable Securities” means the Initial Registrable Securities and the
Additional Registrable Securities.

(x) “Registration Statement” means a registration statement or registration
statements of the Company filed under the 1933 Act covering the Registrable
Securities.

 

 

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(y) “Required Holders” means the holders of at least a majority of the
Registrable Securities.

(z) “Required Registration Amount” means either the Initial Required
Registration Amount or the Additional Required Registration Amount, as
applicable.

(aa) “Rule 415” means Rule 415 under the 1933 Act or any successor rule
providing for offering securities on a continuous or delayed basis.

(bb) “SEC” means the United States Securities and Exchange Commission.

(cc) “Underwriters” shall mean the underwriters, if any, of the offering being
registered under the 1933 Act.

(dd) “Underwritten Offering” shall mean a sale of securities of the Company to
an Underwriter or Underwriters for reoffering to the public.

 

2.

Registration.

(a) Initial Mandatory Registration. The Company shall prepare, and, as soon as
practicable but in no event later than the Initial Filing Deadline, file with
the SEC the Initial Registration Statement on Form S-3 covering the resale of
all of the Initial Registrable Securities. In the event that Form S-3 is
unavailable for such a registration, the Company shall use such other form as is
available for such a registration on another appropriate form reasonably
acceptable to the Required Holders, subject to the provisions of Section 2(f).
The Initial Registration Statement prepared pursuant hereto shall register for
resale at least the number of shares of Common Stock equal to the Initial
Required Registration Amount determined as of the date the Initial Registration
Statement is initially filed with the SEC, subject to adjustment as provided in
Section 2(g). The Initial Registration Statement shall contain (except if
otherwise directly by the Required Holders) the “Selling Stockholders” and “Plan
of Distribution” sections in substantially the form attached hereto as Annex I.
The Company shall use its reasonable best efforts to have the Initial
Registration Statement declared effective by the SEC as soon as practicable, but
in no event later than the Initial Effectiveness Deadline. Promptly and in no
event later than by 9:30 a.m. New York time on the first Business Day following
the Initial Effective Date, the Company shall file with the SEC in accordance
with Rule 424 under the 1933 Act the final prospectus to be used in connection
with sales pursuant to such Initial Registration Statement.

(b) Additional Mandatory Registrations. The Company shall prepare, and, as soon
as practicable but in no event later than the Additional Filing Deadline, file
with the SEC an Additional Registration Statement on Form S-3 covering the
resale of all of the Additional Registrable Securities not previously registered
on an Additional Registration Statement hereunder. To the extent the staff of
the SEC does not permit the Additional Required Registration Amount to be
registered on an Additional Registration Statement, the Company shall file
Additional Registration Statements successively trying to register on each such
Additional Registration Statement the maximum number of remaining Additional
Registrable Securities until the Additional Required Registration Amount has
been registered with the SEC,

 

 

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provided that the Company shall not be required to file successive Additional
Registration Statements at any time during which the SEC’s staff has prohibited
the Company from making such a filing so long as the Company uses its reasonable
best efforts to resolve the issue that has resulted in such prohibition as soon
as possible. In the event that Form S-3 is unavailable for such a registration,
the Company shall use such other form as is available for such a registration on
another appropriate form reasonably acceptable to the Required Holders, subject
to the provisions of Section 2(f). Each Additional Registration Statement
prepared pursuant hereto shall register for resale at least that number of
shares of Common Stock equal to the Additional Required Registration Amount as
of the date the Additional Registration Statement is initially filed with the
SEC. Each Additional Registration Statement shall contain (except if otherwise
directed by the Required Holders) the “Selling Stockholders” and “Plan of
Distribution” sections in substantially the form attached hereto as Annex I. The
Company shall use its reasonable best efforts to have each Additional
Registration Statement declared effective by the SEC as soon as practicable, but
in no event later than the Additional Effectiveness Deadline. Promptly and in no
event later than by 9:30 a.m. New York time on the first Business Day following
the Additional Effective Date, the Company shall file with the SEC in accordance
with Rule 424 under the 1933 Act the final prospectus to be used in connection
with sales pursuant to such Additional Registration Statement.

(c) Piggyback Registration.

(i) Piggyback Rights. If any time prior to termination of this Agreement, the
Company proposes to file a registration statement with the SEC with respect to
an offering of equity securities, or securities or other obligations exercisable
or exchangeable for, on convertible into, equity securities, for its own account
or for the account of any stockholder of the Company (other than a registration
statement on Form S-4 or Form S-8 or their successors or any other form for a
limited similar purpose or any registration statement covering only securities
proposed to be issued in exchange for securities or assets of another Person),
the Company shall, at least thirty (30) days prior to such filing, give written
notice to all Investors of its intention to do so and, upon the written request
of any Investor or Investors given within twenty (20) days of the receipt of
such notice (which request shall state the intended method of disposition of
such Registrable Securities), the Company shall use its reasonable best efforts
to cause the Registrable Securities that such Investor or Investors request the
Company to register to be included in such registration and shall use its
reasonable best efforts to cause the managing Underwriter or Underwriters (if
any) of a proposed Underwritten Offering to permit such Registrable Securities
to be included in such registration on the same terms and conditions as any
similar securities of the Company, in each case to the extent necessary to
permit their sale or other disposition in accordance with the intended methods
of distribution specified in the request of the Investors; provided that the
Company shall have the right to postpone or withdraw any registration effected
pursuant to this Section 2(c) without obligation to the Investors (any such
registration statement which includes Registrable Securities, a “Piggy-Back
Registration Statement”).

(ii) Underwritten Offerings. In connection with any Underwritten Offering under
this Section 2(c), the notice to the Investors shall state whether such offering
is an Underwritten Offering and the Company shall not be required to include any
Registrable Securities in such Underwritten Offering unless the Investors
requesting inclusion of such

 

 

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Registrable Securities accept the terms of the underwriting as reasonably agreed
upon between the Company and the managing Underwriter or Underwriters, selected
by the Company. Each Investor that has requested that Registrable Securities
held by it be included in such Registration Statement shall (together with the
Company and the other Investors distributing the securities through such
underwriting) enter into such underwriting agreement as reasonably agreed upon
between the Company and the managing Underwriter or Underwriters. In connection
with any Underwritten Offering under this Section 2(c), if in the reasonable and
good faith opinion of the managing Underwriter or Underwriters, the registration
of all, or part of, the Registrable Securities requested to be included in such
registration and any other securities to be included in such registration
adversely affect the marketing of the securities offered by the Company or the
holders of securities initiating such registration (the “Demanding Holders”),
then: (i) in the case of an Underwritten Offering by the Company, (A) the
Company shall not be cutback and (B) the Registrable Securities requested for
inclusion and any other securities requested for inclusion pursuant to similar
piggyback rights shall be reduced first pro rata (on an as-converted,
fully-diluted basis and without giving effect to any exercise limitations
contained in the Warrants) in accordance with the number of securities that each
such Person has requested be included in the registration, regardless of the
number of securities held by each such Person, and (ii) in the case of an
Underwritten Offering by a Demanding Holder, (A) the Demanding Holder (and other
parties that are subject to the same registration rights agreement with such
Demanding Holder) shall not be cutback and (B) the Registrable Securities
requested for inclusion and any other securities requested for inclusion
pursuant to similar piggyback rights shall be reduced first pro rata (on an
as-converted, fully-diluted basis and without giving effect to any exercise
limitations contained in the Warrants) in accordance with the number of
securities that each such Person has requested be included in the registration,
regardless of the number of securities held by each such Person. If any Investor
disapproves of the terms of any such underwriting, it may elect to withdraw
therefrom by written notice to the Company and the managing Underwriter.

(d) Allocation of Registrable Securities. The initial number of Registrable
Securities included in any Registration Statement and each increase or decrease
in the number of Registrable Securities included therein shall be allocated pro
rata among the Investors based on the number of Registrable Securities held by
each Investor at the time the Registration Statement covering such initial
number of Registrable Securities or increase or decrease thereof is declared
effective by the SEC. In the event that an Investor sells or otherwise transfers
any of such Investor’s Registrable Securities, each transferee shall be
allocated a pro rata portion of the then remaining number of Registrable
Securities included in such Registration Statement for such transferor. Any
shares of Common Stock included in a Registration Statement and which remain
allocated to any Person which ceases to hold any Registrable Securities covered
by such Registration Statement shall be allocated to the remaining Investors,
pro rata based on the number of Registrable Securities then held by such
Investors which are covered by such Registration Statement. In no event shall
the Company include any securities other than Registrable Securities on any
Registration Statement without the prior written consent of the Required
Holders.

(e) Legal Counsel. Subject to Section 5 hereof, the Required Holders shall have
the right to select one legal counsel to review and oversee any registration
pursuant to this Section 2 (“Legal Counsel”), which shall be Schulte Roth &
Zabel LLP or such other counsel as thereafter designated by the Required
Holders. The Company and Legal Counsel shall reasonably cooperate with each
other in performing the Company’s obligations under this Agreement.

 

 

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(f) Ineligibility for Form S-3. In the event that Form S-3 is not available for
the registration of the resale of Registrable Securities hereunder, the Company
shall (i) register the resale of the Registrable Securities on another
appropriate form reasonably acceptable to the Required Holders and (ii)
undertake to register the Registrable Securities on Form S-3 as soon as such
form is available, provided that the Company shall maintain the effectiveness of
the Registration Statement then in effect until such time as a Registration
Statement on Form S-3 covering the Registrable Securities has been declared
effective by the SEC.

(g) Sufficient Number of Shares Registered. In the event the number of shares
available under a Registration Statement filed pursuant to Section 2(a) or
Section 2(b) is insufficient to cover all of the Registrable Securities required
to be covered by such Registration Statement or an Investor’s allocated portion
of the Registrable Securities pursuant to Section 2(d), the Company shall amend
the applicable Registration Statement, or file a new Registration Statement (on
the short form available therefor, if applicable), or both, so as to cover at
least the Required Registration Amount as of the trading day immediately
preceding the date of the filing of such amendment or new Registration
Statement, in each case, as soon as practicable, but in any event not later than
fifteen (15) days after the necessity therefor arises. The Company shall use its
reasonable best efforts to cause such amendment and/or new Registration
Statement to become effective as soon as practicable following the filing
thereof. For purposes of the foregoing provision, the number of shares available
under a Registration Statement shall be deemed “insufficient to cover all of the
Registrable Securities” if at any time the number of shares of Common Stock
available for resale under such Registration Statement is less than the number
of Registrable Securities. The calculation set forth in the foregoing sentence
shall be made without regard to any limitations on the exercise of the Warrants
and such calculation shall assume that the Warrants are then exercisable into
shares of Common Stock.

(h) Effect of Failure to File and Obtain and Maintain Effectiveness of
Registration Statement. If (i) a Registration Statement covering all the
Registrable Securities required to be covered thereby and required to be filed
by the Company pursuant to this Agreement is (A) not filed with the SEC on or
before the respective Filing Deadline (a “Filing Failure”) or (B) not declared
effective by the SEC on or before the respective Effectiveness Deadline (an
“Effectiveness Failure”) or (ii) on any day after the respective Effective Date
sales of all the Registrable Securities included on such Registration Statement
cannot be made (other than during an Allowable Grace Period (as defined in
Section 3(r)) pursuant to such Registration Statement or otherwise (including,
without limitation, because of a failure to keep such Registration Statement
effective, to disclose such information as is necessary for sales to be made
pursuant to such Registration Statement, to register a sufficient number of
shares of Common Stock or to maintain the listing of the Common Stock) (a
“Maintenance Failure”) then, as partial relief for the damages to any holder by
reason of any such delay in or reduction of its ability to sell the underlying
shares of Common Stock (which remedy shall not be exclusive of any other
remedies available at law or in equity), (A) the Company shall pay to each
holder of Registrable Securities relating to such Registration Statement an
amount in cash equal to one and

 

 

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one-half percent (1.5%) of the product of (x) the Market Price (as such term is
defined in the Warrant) of such Investor’s Registrable Securities whether or not
included in such Registration Statement and (y) the number of such Investor’s
Registrable Securities whether or not included in such Registration Statement,
on each of the following dates: (i) the day of a Filing Failure and on every
thirtieth day (pro rated for periods totaling less than thirty (30) days)
thereafter until such Filing Failure is cured; (ii) the day of an Effectiveness
Failure and on every thirtieth day (pro rated for periods totaling less than
thirty (30) days) thereafter until such Effectiveness Failure is cured; and
(iii) the initial day of a Maintenance Failure and on every thirtieth day (pro
rated for periods totaling less than thirty (30) days) thereafter until such
Maintenance Failure is cured. The payments to which a holder shall be entitled
pursuant to this Section 2(h) are referred to herein as “Registration Delay
Payments.” Registration Delay Payments shall be paid on the earlier of (I) the
dates set forth above and (II) the third Business Day after the event or failure
giving rise to the Registration Delay Payments is cured. In the event the
Company fails to make Registration Delay Payments in a timely manner, such
Registration Delay Payments shall bear interest at the rate of one and one-half
percent (1.5%) per month (prorated for partial months) until paid in full.

(i) Public Information. At any time during the period commencing on the six (6)
month anniversary of the Closing Date and ending at such time that all of the
Registrable Securities can be sold without the requirement to be in compliance
with Rule 144(c)(1) and otherwise without restriction or limitation pursuant to
Rule 144, if the Company shall fail for any reason to satisfy the current public
information requirement under Rule 144 (a “Public Information Failure”) then, as
partial relief for the damages to any Investor by reason of any such delay in or
reduction of its ability to sell the Registrable Securities (which remedy shall
not be exclusive of any other remedies available at law or in equity), the
Company shall pay to each such Investor an amount in cash equal to one and
one-half percent (1.5%) of the product of (x) the Market Price of such
Investor’s Registrable Securities and (y) the number of such Investor’s
Registrable Securities, on the day of a Public Information Failure and on every
thirtieth day (pro rated for periods totaling less than thirty days) thereafter
until the earlier of (i) the date such Public Information Failure is cured and
(ii) such time that such public information is no longer required pursuant to
Rule 144. The payments to which an Investor shall be entitled pursuant to this
Section 2(i) are referred to herein as “Public Information Failure Payments.”
Public Information Failure Payments shall be paid on the earlier of (I) the last
day of the calendar month during which such Public Information Failure Payments
are incurred and (II) the third Business Day after the event or failure giving
rise to the Public Information Failure Payments is cured. In the event the
Company fails to make Public Information Failure Payments in a timely manner,
such Public Information Failure Payments shall bear interest at the rate of 1.5%
per month (prorated for partial months) until paid in full.

(j) Failure Payments Non-Cumulative. Notwithstanding the provisions of Section
2(h) and 2(i), in the event that more than one of a Filing Failure,
Effectiveness Failure, Maintenance Failure and/or Public Information Failure
occur simultaneously, the Company shall not be required to pay and the Holders
shall not be entitled to receive either Registration Delay Payments or Public
Information Failure Payments (as the case may be) with respect to more than one
such failure during any particular time period.

 

 

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3.

Related Obligations.

At such time as the Company is obligated to file a Registration Statement with
the SEC pursuant to Section 2(a), 2(b), 2(c), 2(f) or 2(g), the Company will use
its reasonable best efforts to effect the registration of the Registrable
Securities in accordance with the intended method of disposition thereof and,
pursuant thereto, the Company shall have the following obligations:

(a) The Company shall promptly prepare and file with the SEC a Registration
Statement with respect to the Registrable Securities and use its reasonable best
efforts to cause such Registration Statement relating to the Registrable
Securities to become effective as soon as practicable after such filing (but in
no event later than the Effectiveness Deadline). The Company shall submit to the
SEC, within two (2) Business Days after the Company learns that no review of a
particular Registration Statement will be made by the staff of the SEC or that
the staff of the SEC has no further comments on a particular Registration
Statement, as the case may be, a request for acceleration of effectiveness of
such Registration Statement to a time and date not later than 48 hours after the
submission of such request. The Company shall keep each Registration Statement
effective pursuant to Rule 415 at all times until the date on which the
Investors shall have sold all the Registrable Securities covered by such
Registration Statement pursuant to such Registration Statement or pursuant to
Rule 144 under the Securities Act (the “Registration Period”). The Company shall
ensure that each Registration Statement (including any amendments or supplements
thereto and prospectuses contained therein) shall not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein, or necessary to make the statements therein (in the case of
prospectuses, in the light of the circumstances in which they were made) not
misleading. The Company shall respond in writing to comments made by the SEC in
respect of a Registration Statement as soon as practicable, but in no event
later than fifteen (15) days after the receipt of comments by or notice from the
SEC that an amendment is required in order for a Registration Statement to be
declared effective.

(b) The Company shall prepare and file with the SEC such amendments (including
post-effective amendments) and supplements to a Registration Statement and the
prospectus used in connection with such Registration Statement, which prospectus
is to be filed pursuant to Rule 424 promulgated under the 1933 Act, as may be
necessary to keep such Registration Statement effective at all times during the
Registration Period, and, during such period, comply with the provisions of the
1933 Act with respect to the disposition of all Registrable Securities of the
Company covered by such Registration Statement until such time as all of such
Registrable Securities shall have been disposed of in accordance with the
intended methods of disposition by the seller or sellers thereof as set forth in
such Registration Statement. In the case of amendments and supplements to a
Registration Statement which are required to be filed pursuant to this Agreement
(including pursuant to this Section 3(b)) by reason of the Company filing a
report on Form 10-K, Form 10-Q or Form 8-K or any analogous report under the
Securities Exchange Act of 1934, as amended (the “1934 Act”), the Company shall
have incorporated such report by reference into such Registration Statement, if
applicable, or shall file such amendments or supplements with the SEC on the
same day on which the 1934 Act report is filed which created the requirement for
the Company to amend or supplement such Registration Statement.

 

 

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(c) The Company shall (A) permit Legal Counsel to review and comment upon (i) a
Registration Statement at least five (5) Business Days prior to its filing with
the SEC and (ii) all amendments and supplements to all Registration Statements
(except for Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current
Reports on Form 8-K and any similar or successor reports) within a reasonable
number of days prior to their filing with the SEC, and (B) not file any
Registration Statement or amendment or supplement thereto in a form to which
Legal Counsel reasonably objects. The Company shall not submit a request for
acceleration of the effectiveness of a Registration Statement or any amendment
or supplement thereto without the prior approval of Legal Counsel, which consent
shall not be unreasonably withheld. The Company shall furnish to Legal Counsel,
without charge, (i) copies of any correspondence from the SEC or the staff of
the SEC to the Company or its representatives relating to any Registration
Statement, (ii) promptly after the same is prepared and filed with the SEC, one
copy of any Registration Statement and any amendment(s) thereto, including
financial statements and schedules, all documents incorporated therein by
reference, if requested by an Investor, and all exhibits and (iii) upon the
effectiveness of any Registration Statement, one copy of the prospectus included
in such Registration Statement and all amendments and supplements thereto. The
Company shall reasonably cooperate with Legal Counsel in performing the
Company’s obligations pursuant to this Section 3.

(d) The Company shall furnish to each Investor whose Registrable Securities are
included in any Registration Statement, without charge, (i) promptly after the
same is prepared and filed with the SEC, at least one copy of such Registration
Statement and any amendment(s) thereto, including financial statements and
schedules, all documents incorporated therein by reference, if requested by an
Investor and not otherwise available on the EDGAR system, all exhibits and each
preliminary prospectus, (ii) upon the effectiveness of any Registration
Statement, ten (10) copies of the prospectus included in such Registration
Statement and all amendments and supplements thereto (or such other number of
copies as such Investor may reasonably request) and (iii) such other documents,
including copies of any preliminary or final prospectus, as such Investor may
reasonably request from time to time in order to facilitate the disposition of
the Registrable Securities owned by such Investor.

(e) The Company shall use its reasonable best efforts to (i) register and
qualify, unless an exemption from registration and qualification applies, the
resale by Investors of the Registrable Securities covered by a Registration
Statement under such other securities or “blue sky” laws of all applicable
jurisdictions in the United States, (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 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 reasonably necessary or advisable to qualify the Registrable Securities
for sale in such jurisdictions; provided, however, that the Company shall not be
required in connection therewith or as a condition thereto to (x) qualify to do
business in any jurisdiction where it would not otherwise be required to qualify
but for this Section 3(e), (y) subject itself to general taxation in any such
jurisdiction, or (z) file a general

 

 

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consent to service of process in any such jurisdiction. The Company shall
promptly notify Legal Counsel and each Investor who holds Registrable Securities
of the receipt by the Company of any notification with respect to the suspension
of the registration or qualification of any of the Registrable Securities for
sale under the securities or “blue sky” laws of any jurisdiction in the United
States or its receipt of actual notice of the initiation or threatening of any
proceeding for such purpose.

(f) The Company shall notify Legal Counsel and each Investor in writing of the
happening of any event, as promptly as practicable after becoming aware of such
event, as a result of which the prospectus included in a Registration Statement,
as then in effect, includes an untrue statement of a material fact or omission
to state a material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading (provided that in no event shall such notice contain any
material, nonpublic information), and, subject to Section 3(r), promptly prepare
a supplement or amendment to such Registration Statement to correct such untrue
statement or omission, and deliver ten (10) copies of such supplement or
amendment to Legal Counsel and each Investor (or such other number of copies as
Legal Counsel or such Investor may reasonably request). The Company shall also
promptly notify Legal Counsel and each Investor in writing (i) when a prospectus
or any prospectus supplement or post-effective amendment has been filed, and
when a Registration Statement or any post-effective amendment has become
effective (notification of such effectiveness shall be delivered to Legal
Counsel and each Investor by facsimile on the same day of such effectiveness and
by overnight mail), (ii) of any request by the SEC for amendments or supplements
to a Registration Statement or related prospectus or related information, and
(iii) of the Company’s reasonable determination that a post-effective amendment
to a Registration Statement would be appropriate. Promptly and in no event later
than by 9:30 a.m. New York City time on the first Business Day following the
date any post-effective amendment has become effective, the Company shall file
with the SEC in accordance with Rule 424 under the 1933 Act the final prospectus
to be used in connection with sales pursuant to such Registration Statement.

(g) The Company shall use its reasonable best efforts to prevent the issuance of
any stop order or other suspension of effectiveness of a Registration Statement,
or the suspension of the qualification of any of the Registrable Securities for
sale in any jurisdiction and, if such an order or suspension is issued, to
obtain the withdrawal of such order or suspension at the earliest possible
moment and to notify Legal Counsel and each Investor who holds Registrable
Securities being sold of the issuance of such order and the resolution thereof
or its receipt of actual notice of the initiation or threat of any proceeding
for such purpose.

(h) If any Investor is required under applicable securities laws to be described
in the Registration Statement as an underwriter or an Investor believes that it
could reasonably be deemed to be an underwriter of Registrable Securities, at
the reasonable request of such Investor, the Company shall furnish to such
Investor, on the date of the effectiveness of the Registration Statement and
thereafter from time to time on such dates as an Investor may reasonably request
(i) a letter, dated such date, from the Company’s independent certified public
accountants in form and substance as is customarily given by independent
certified public accountants to underwriters in an underwritten public offering,
addressed to the Investors, and (ii) an opinion, dated as of such date, of
counsel representing the Company for purposes of such Registration Statement, in
form, scope and substance as is customarily given in an underwritten public
offering, addressed to the Investors.

 

 

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(i) If any Investor is required under applicable securities laws to be described
in the Registration Statement as an underwriter or an Investor believes that it
could reasonably be deemed to be an underwriter of Registrable Securities, the
Company shall make available for inspection by (i) such Investor, (ii) Legal
Counsel and (iii) one firm of accountants or other agents retained by the
Investors (collectively, the “Inspectors”), all pertinent financial and other
records, and pertinent corporate documents and properties of the Company
(collectively, the “Records”), as shall be reasonably deemed necessary by each
Inspector, and cause the Company’s officers, directors and employees to supply
all information which any Inspector may reasonably request; provided, however,
that each Inspector shall agree to hold in strict confidence and shall not make
any disclosure (except to an Investor) or use of any Record or other information
which the Company determines in good faith to be confidential, and of which
determination the Inspectors are so notified, unless (a) the disclosure of such
Records is necessary to avoid or correct a misstatement or omission in any
Registration Statement or is otherwise required under the 1933 Act, (b) the
release of such Records is ordered pursuant to a final, non-appealable subpoena
or order from a court or government body of competent jurisdiction, or (c) the
information in such Records has been made generally available to the public
other than by disclosure in violation of this Agreement. Each Investor agrees
that it shall, upon learning that disclosure of such Records is sought in or by
a court or governmental body of competent jurisdiction or through other means,
give prompt notice to the Company and allow the Company, at its expense, to
undertake appropriate action to prevent disclosure of, or to obtain a protective
order for, the Records deemed confidential. Nothing herein (or in any other
confidentiality agreement between the Company and any Investor) shall be deemed
to limit the Investors’ ability to sell Registrable Securities in a manner which
is otherwise consistent with applicable laws and regulations.

(j) The Company shall hold in confidence and not make any disclosure of
information concerning an Investor provided to the Company unless (i) disclosure
of such information is necessary to comply with federal or state securities
laws, (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 final,
non-appealable 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 Agreement or any other
agreement. The Company agrees that it shall, upon learning that disclosure of
such information concerning an Investor is sought in or by a court or
governmental body of competent jurisdiction or through other means, give prompt
written notice to such Investor and allow such Investor, at the Investor’s
expense, to undertake appropriate action to prevent disclosure of, or to obtain
a protective order for, such information.

(k) The Company shall use its reasonable best efforts either to (i) cause all
the Registrable Securities covered by a Registration Statement to be listed on
each securities exchange on which securities of the same class or series issued
by the Company are then listed, if any, if the listing of such Registrable
Securities is then permitted under the rules of such exchange or (ii) secure the
inclusion for quotation of all of the Registrable Securities on the American
Stock Exchange, and, without limiting the generality of the foregoing, to use
its

 

 

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reasonable best efforts to arrange for at least two market makers to register
with the National Association of Securities Dealers, Inc. (“NASD”) as such with
respect to such Registrable Securities. The Company shall pay all fees and
expenses in connection with satisfying its obligation under this Section 3(k).

(l) The Company shall cooperate with the Investors who hold Registrable
Securities being offered and, to the extent applicable, facilitate the timely
preparation and delivery of certificates (not bearing any restrictive legend)
representing the Registrable Securities to be offered pursuant to a Registration
Statement and enable such certificates to be in such denominations or amounts,
as the case may be, as the Investors may reasonably request and registered in
such names as the Investors may request.

(m) If requested by an Investor, the Company shall as soon as practicable (i)
incorporate in a prospectus supplement or post-effective amendment such
information as an Investor reasonably requests to be included therein relating
to the sale and distribution of Registrable Securities, including, without
limitation, information with respect to the number of Registrable Securities
being offered or sold, the purchase price being paid therefor and any other
terms of the offering of the Registrable Securities to be sold in such offering;
(ii) make all required filings of such prospectus supplement or post-effective
amendment after being notified of the matters to be incorporated in such
prospectus supplement or post-effective amendment; and (iii) supplement or make
amendments to any Registration Statement if reasonably requested by an Investor
holding any Registrable Securities.

(n) The Company shall use its reasonable best efforts to cause the Registrable
Securities covered by a Registration Statement to be registered with or approved
by such other governmental agencies or authorities as may be necessary to
consummate the disposition of such Registrable Securities.

(o) The Company shall make generally available to its security holders as soon
as practical, but not later than ninety (90) days after the close of the period
covered thereby, an earnings statement (in form complying with, and in the
manner provided by, the provisions of Rule 158 under the 1933 Act) covering a
twelve-month period beginning not later than the first day of the Company’s
fiscal quarter next following the Effective Date of a Registration Statement.

(p) The Company shall otherwise use its reasonable best efforts to comply with
all applicable rules and regulations of the SEC in connection with any
registration hereunder.

(q) Within two (2) Business Days after a Registration Statement which covers
Registrable Securities is ordered effective by the SEC, the Company shall
deliver, and shall cause legal counsel for the Company to deliver, to the
transfer agent for such Registrable Securities (with copies to the Investors
whose Registrable Securities are included in such Registration Statement)
confirmation that such Registration Statement has been declared effective by the
SEC in the form attached hereto as Exhibit A.

 

 

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(r) Notwithstanding anything to the contrary herein, at any time after the
Effective Date, the Company may delay the disclosure of material, non-public
information concerning the Company the disclosure of which at the time is not,
in the good faith opinion of the Board of Directors of the Company and its
counsel, in the best interest of the Company and, in the opinion of counsel to
the Company, otherwise required (a “Grace Period”); provided, that the Company
shall promptly (i) notify the Investors in writing of the existence of material,
non-public information giving rise to a Grace Period in conformity with the
provisions of this Section 3(r) (provided that in each notice the Company will
not disclose the content of such material, non-public information to the
Investors) and the date on which the Grace Period will begin, and (ii) notify
the Investors in writing of the date on which the Grace Period ends; and,
provided further, that no Grace Period shall exceed twenty (20) consecutive days
and during any three hundred sixty five (365) day period such Grace Periods
shall not exceed an aggregate of forty-five (45) days and the first day of any
Grace Period must be at least two (2) trading days after the last day of any
prior Grace Period (each, an “Allowable Grace Period”). For purposes of
determining the length of a Grace Period above, the Grace Period shall begin on
and include the date the Investors receive the notice referred to in clause (i)
and shall end on and include the later of the date the Investors receive the
notice referred to in clause (ii) and the date referred to in such notice. The
provisions of Section 3(g) hereof shall not be applicable during the period of
any Allowable Grace Period. Upon expiration of the Grace Period, the Company
shall again be bound by the first sentence of Section 3(f) with respect to the
information giving rise thereto unless such material, non-public information is
no longer applicable. Notwithstanding anything to the contrary, the Company
shall cause its transfer agent to deliver unlegended shares of Common Stock to a
transferee of an Investor in accordance with the terms of the Warrant and the
Warrantholder Rights Agreement in connection with any sale of Registrable
Securities with respect to which an Investor has entered into a contract for
sale prior to the Investor’s receipt of the notice of a Grace Period and for
which the Investor has not yet settled.

(s) Neither the Company nor any subsidiary or affiliate thereof shall identify
any Investor as an underwriter in any public disclosure or filing with the SEC
or any Principal Market (as defined in the Warrant) or Eligible Market (as
defined in the Warrant) and any Investor being deemed an underwriter by the SEC
shall not relieve the Company of any obligations it has under this Agreement or
any other Transaction Document (as defined in the Warrant); provided, however,
that the foregoing shall not prohibit the Company from including the disclosure
found in the “Plan of Distribution” section attached hereto as Annex I in the
Registration Statement.

 

4.

Obligations of the Investors.

(a) At least five (5) Business Days prior to the first anticipated filing date
of a Registration Statement, the Company shall notify each Investor in writing
of the information the Company requires from each such Investor if such Investor
elects to have any of such Investor’s Registrable Securities included in such
Registration Statement. It shall be a condition precedent to the obligations of
the Company to complete any registration pursuant to this Agreement with respect
to the Registrable Securities of a particular Investor that such Investor 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 required to effect the
effectiveness of the registration of such Registrable Securities and shall
execute such documents in connection with such registration as the Company may
reasonably request.

 

 

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(b) Each Investor, by such Investor’s acceptance of the Registrable Securities,
agrees to cooperate with the Company as reasonably requested by the Company in
connection with the preparation and filing of any Registration Statement
hereunder, unless such Investor has notified the Company in writing of such
Investor’s election to exclude all of such Investor’s Registrable Securities
from such Registration Statement.

(c) Each Investor agrees that, upon receipt of any notice from the Company of
the happening of any event of the kind described in Section 3(g) or the first
sentence of 3(f), such Investor will immediately discontinue disposition of
Registrable Securities pursuant to any Registration Statement(s) covering such
Registrable Securities until such Investor’s receipt of copies of the
supplemented or amended prospectus as contemplated by Section 3(g) or the first
sentence of 3(f) or receipt of notice that no supplement or amendment is
required. Notwithstanding anything to the contrary, the Company shall cause its
transfer agent to deliver unlegended shares of Common Stock to a transferee of
an Investor in accordance with the terms of the Warrant and the Warrantholder
Rights Agreement in connection with any sale of Registrable Securities with
respect to which an Investor has entered into a contract for sale prior to the
Investor’s receipt of a notice from the Company of the happening of any event of
the kind described in Section 3(g) or the first sentence of 3(f) and for which
the Investor has not yet settled.

(d) Each Investor covenants and agrees that it will comply with the prospectus
delivery requirements of the 1933 Act as applicable to it or an exemption
therefrom in connection with sales of Registrable Securities pursuant to the
Registration Statement.

 

5.

Expenses of Registration.

All reasonable expenses, other than underwriting discounts and commissions,
incurred in connection with any registrations, filings or qualifications
pursuant to Section 2 or Section 3, including, without limitation, all
registration, listing and qualifications fees, printers and accounting fees, and
fees and disbursements of counsel for the Company shall be paid by the Company.
The Company shall also reimburse the Investors for all of the reasonable and
documented fees and disbursements of Legal Counsel in connection with any
registrations, filings or qualifications pursuant to Section 2 or Section 3 of
this Agreement which amount shall be limited to $25,000 for each such
registration, filing or qualification.

 

6.

Indemnification.

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

(a) To the fullest extent permitted by law, the Company will, and hereby does,
indemnify, hold harmless and defend each Investor, the directors, officers,
managers, partners, members, employees, agents, representatives of, and each
Person, if any, who controls any Investor within the meaning of the 1933 Act or
the 1934 Act (each, an “Indemnified Person”), against any losses, claims,
damages, liabilities, judgments, fines,

 

 

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penalties, charges, costs, reasonable attorneys’ fees, amounts paid in
settlement or expenses, joint or several (collectively, “Claims”), incurred in
investigating, preparing or defending any action, claim, suit, inquiry,
proceeding, investigation or appeal taken from the foregoing by or before any
court or governmental, administrative or other regulatory agency, body or the
SEC, whether pending or threatened, whether or not an indemnified party is or
may be a party thereto (“Indemnified Damages”), to which any of them may become
subject 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 in a Registration
Statement or any post-effective amendment thereto or in any filing made in
connection with the qualification of the offering under the securities or other
“blue sky” laws of any jurisdiction in which Registrable Securities are offered
(“Blue Sky Filing”), or the omission or alleged omission to state a material
fact required to be stated therein or necessary to make the statements therein
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 SEC) or the omission or alleged omission
to state therein any material fact necessary to make the statements made
therein, in the light of the circumstances under which the statements therein
were made, not misleading, (iii) any violation or alleged violation by the
Company of the 1933 Act, the 1934 Act, any other law, including, without
limitation, any state securities law, or any rule or regulation thereunder
relating to the offer or sale of the Registrable Securities pursuant to a
Registration Statement or (iv) any violation of this Agreement (the matters in
the foregoing clauses (i) through (iv) being, collectively, “Violations”).
Subject to Section 6(c), the Company shall reimburse the Indemnified Persons,
promptly as such expenses are incurred and are due and payable, for any legal
fees or other reasonable expenses incurred by them in connection with
investigating or defending any such Claim. Notwithstanding anything to the
contrary contained herein, the indemnification agreement contained in this
Section 6(a): (i) shall not apply to a Claim by an Indemnified Person 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 such Indemnified Person
for such Indemnified Person expressly for use in connection with the preparation
of the Registration Statement or any such amendment thereof or supplement
thereto, if such prospectus was timely made available by the Company pursuant to
Section 3(d); and (ii) shall not 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 or delayed. Such
indemnity shall remain in full force and effect regardless of any investigation
made by or on behalf of the Indemnified Person and shall survive the transfer of
the Registrable Securities by the Investors pursuant to Section 9.

(b) In connection with any Registration Statement in which an Investor is
participating, each such Investor agrees to severally and not jointly indemnify,
hold harmless and defend, to the same extent and in the same manner as is set
forth in Section 6(a), the Company, each of its directors, each of its officers
who signs the Registration Statement and each Person, if any, who controls the
Company within the meaning of the 1933 Act or the 1934 Act (each, an
“Indemnified Party”), against any Claim or Indemnified Damages to which any of
them may become subject, under the 1933 Act, the 1934 Act or otherwise, insofar
as such Claim or Indemnified Damages arise out of or are based upon any
Violation, in each case to the extent, and only to the extent, that such
Violation occurs in reliance upon and in conformity with written

 

 

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information furnished to the Company by such Investor expressly for use in
connection with such Registration Statement; and, subject to Section 6(c), such
Investor will reimburse any legal or other expenses reasonably incurred by an
Indemnified Party in connection with investigating or defending any such Claim;
provided, however, that the indemnity agreement contained in this Section 6(b)
and the agreement with respect to contribution contained in Section 7 shall not
apply to amounts paid in settlement of any Claim if such settlement is effected
without the prior written consent of such Investor, which consent shall not be
unreasonably withheld or delayed; provided, further, however, that an Investor
shall be liable under this Section 6(b) for only that amount of a Claim or
Indemnified Damages as does not exceed the net proceeds to such Investor as a
result of the sale of Registrable Securities pursuant to such Registration
Statement. Such indemnity shall remain in full force and effect regardless of
any investigation made by or on behalf of such Indemnified Party and shall
survive the transfer of the Registrable Securities by the Investors pursuant to
Section 9.

(c) Promptly after receipt by an Indemnified Person or Indemnified Party under
this Section 6 of notice of the commencement of any action or proceeding
(including any governmental action or proceeding) involving a Claim, such
Indemnified Person or Indemnified Party 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
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume control of the defense thereof with counsel
mutually satisfactory to the indemnifying party and the Indemnified Person or
the Indemnified Party, as the case may be; provided, however, that an
Indemnified Person or Indemnified Party shall have the right to retain its own
counsel with the fees and expenses of not more than one counsel for all such
Indemnified Person or Indemnified Party to be paid by the indemnifying party,
if, in the reasonable opinion of the Indemnified Person or the Indemnified
Party, as the case may be, the representation by such counsel of the Indemnified
Person or Indemnified Party and the indemnifying party would be inappropriate
due to actual or potential differing interests between such Indemnified Person
or Indemnified Party and any other party represented by such counsel in such
proceeding. In the case of an Indemnified Person, legal counsel referred to in
the immediately preceding sentence shall be selected by the Investors holding at
least a majority in interest of the Registrable Securities included in the
Registration Statement to which the Claim relates. The Indemnified Party or
Indemnified Person shall cooperate reasonably with the indemnifying party in
connection with any negotiation or defense of any such action or Claim by the
indemnifying party and shall furnish to the indemnifying party all information
reasonably available to the Indemnified Party or Indemnified Person which
relates to such action or Claim. The indemnifying party shall keep the
Indemnified Party or Indemnified Person fully apprised at all times as to the
status of the defense or any settlement negotiations with respect thereto. No
indemnifying party shall be liable for any settlement of any action, claim or
proceeding effected without its prior written consent, provided, however, that
the indemnifying party shall not unreasonably withhold, delay or condition its
consent. No indemnifying party shall, without the prior written consent of the
Indemnified Party or Indemnified Person, consent to entry of any judgment or
enter into any settlement or other compromise which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party or Indemnified Person of a release from all liability in
respect to such Claim or litigation and such settlement shall not include any
admission as to fault on the part of the Indemnified Party.

 

 

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Following indemnification as provided for hereunder, the indemnifying party
shall be subrogated to all rights of the Indemnified Party or Indemnified Person
with respect to all third parties, firms or corporations relating to the matter
for which indemnification has been made. The failure to deliver written notice
to the indemnifying party within a reasonable time of the commencement of any
such action shall not relieve such indemnifying party of any liability to the
Indemnified Person or Indemnified Party under this Section 6, except to the
extent that the indemnifying party is prejudiced in its ability to defend such
action.

(d) 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 and when bills are received or Indemnified Damages are incurred.

(e) The indemnity agreements contained herein shall be in addition to (i) any
cause of action or similar right of the Indemnified Party or Indemnified Person
against the indemnifying party or others, and (ii) any liabilities the
indemnifying party may be subject to pursuant to the law.

 

7.

Contribution.

To the extent any indemnification by an indemnifying party is prohibited or
limited by law, the indemnifying party agrees to make the maximum contribution
with respect to any amounts for which it would otherwise be liable under Section
6 to the fullest extent permitted by law; provided, however, that: (i) no Person
involved in the sale of Registrable Securities which Person is guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the 1933
Act) in connection with such sale shall be entitled to contribution from any
Person involved in such sale of Registrable Securities who was not guilty of
fraudulent misrepresentation; and (ii) contribution by any seller of Registrable
Securities shall be limited in amount to the amount of net proceeds received by
such seller from the sale of such Registrable Securities pursuant to such
Registration Statement.

 

8.

Reports Under the 1934 Act.

With a view to making available to the Investors the benefits of Rule 144
promulgated under the 1933 Act or any other similar rule or regulation of the
SEC that may at any time permit the Investors to sell securities of the Company
to the public without registration (“Rule 144”), the Company agrees to:

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

(b) file with the SEC in a timely manner all reports and other documents
required of the Company under the 1933 Act and the 1934 Act so long as the
Company remains subject to such requirements and the filing of such reports and
other documents is required for the applicable provisions of Rule 144; and

(c) furnish to each Investor so long as such Investor owns Registrable
Securities, promptly upon request, (i) a written statement by the Company, if
true, that it has complied with the reporting requirements of Rule 144, the 1933
Act and the 1934 Act, (ii) a copy

 

 

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of the most recent annual or quarterly 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 Investors to sell such securities
pursuant to Rule 144 without registration.

 

9.

Assignment of Registration Rights.

The rights under this Agreement shall be automatically assignable by the
Investors to any transferee of all or any portion of such Investor’s Registrable
Securities if: (i) the Investor 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; (ii) the Company is,
within a reasonable time after such transfer or assignment, furnished with
written notice of (a) the name and address of such transferee or assignee, and
(b) the securities with respect to which such registration rights are being
transferred or assigned; (iii) immediately following such transfer or assignment
the further disposition of such securities by the transferee or assignee is
restricted under the 1933 Act or applicable state securities laws; (iv) at or
before the time the Company receives the written notice contemplated by clause
(ii) of this sentence the transferee or assignee agrees in writing with the
Company to be bound by all of the provisions contained herein; and (v) such
transfer shall have been made in accordance with the applicable requirements of
the Warrantholder Rights Agreement.

 

10.

Amendment of Registration Rights.

Provisions 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 Required
Holders. Any amendment or waiver effected in accordance with this Section 10
shall be binding upon each Investor and the Company. No such amendment shall be
effective to the extent that it applies to less than all of the holders of the
Registrable Securities. No consideration shall be offered or paid to any Person
to amend or consent to a waiver or modification of any provision of this
Agreement unless the same consideration also is offered to all of the parties to
this Agreement.

 

11.

Miscellaneous.

(a) A Person is deemed to be a holder of Registrable Securities whenever such
Person owns or is deemed to own of record such Registrable Securities. If the
Company receives conflicting instructions, notices or elections from two or more
Persons with respect to the same Registrable Securities, the Company shall act
upon the basis of instructions, notice or election received from the record
owner of such Registrable Securities.

(b) Any notices, consents, waivers or other communications required or permitted
to be given under the terms of this Agreement must be in writing and will be
deemed to have been delivered: (i) upon receipt, when delivered personally; (ii)
upon receipt, when sent by facsimile (provided confirmation of transmission is
mechanically or electronically generated and kept on file by the sending party);
or (iii) one Business Day after deposit with a nationally recognized overnight
delivery service, in each case properly addressed to the party to receive the
same. The addresses and facsimile numbers for such communications shall be:

 

 

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If to the Company:

c/o Proliance International, Inc.

100 Gando Drive

New Haven, Connecticut 06513

Attention: Richard A. Wisot

Facsimile: 203-401-6470

If to Legal Counsel:

Schulte Roth & Zabel LLP

919 Third Avenue

New York, New York 10022

Attention: Frederic L. Ragucci, Esq.

Telecopier: (212) 593-5955

If to a Warrantholder, to its address and facsimile number set forth on the
Schedule of Warrantholders attached hereto, with copies to such Warrantholder’s
representatives as set forth on the Schedule of Warrantholders, or to such other
address and/or facsimile number and/or to the attention of such other Person as
the recipient party has specified by written notice given to each other party
five (5) days prior to the effectiveness of such change. Written confirmation of
receipt (A) given by the recipient of such notice, consent, waiver or other
communication, (B) mechanically or electronically generated by the sender’s
facsimile machine containing the time, date, recipient facsimile number and an
image of the first page of such transmission or (C) provided by a courier or
overnight courier service shall be rebuttable evidence of personal service,
receipt by facsimile or receipt from a nationally recognized overnight delivery
service in accordance with clause (i), (ii) or (iii) above, respectively.

(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) All questions concerning the construction, validity, enforcement and
interpretation of this Agreement shall be governed by the internal laws of the
State of New York, without giving effect to any choice of law or conflict of law
provision or rule (whether of the State of New York or any other jurisdictions)
that would cause the application of the laws of any jurisdictions other than the
State of New York. Each party hereby irrevocably submits to the exclusive
jurisdiction of the state and federal courts sitting in The City of New York,
Borough of Manhattan, for the adjudication of any dispute hereunder or in
connection herewith or with any transaction contemplated hereby or discussed
herein, and hereby irrevocably waives, and agrees not to assert in any suit,
action or proceeding, any claim that it is not personally subject to the
jurisdiction of any such court, that such suit, action or proceeding is brought
in an inconvenient forum or that the venue of such suit, action or proceeding is
improper. Each party hereby irrevocably waives personal service of process and
consents to process being served in any such suit, action or proceeding by
mailing a copy thereof to such party at the address for such notices to it under
this Agreement and agrees that such service shall constitute good and sufficient
service of process and notice thereof. Nothing contained herein shall be deemed
to limit in any

 

 

20

 

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way any right to serve process in any manner permitted by law. EACH PARTY HEREBY
IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY
TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION HEREWITH OR
ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.

(e) This Agreement, the Warrant, the Warrantholder Rights Agreement, the Credit
Agreement (as defined in the Warrant) and the Second Amendment to Credit
Agreement (as defined in the Warrant) (collectively, the “Other Agreements”) and
the instruments referenced herein and therein constitute the entire agreement
among the parties hereto with respect to the subject matter hereof. There are no
restrictions, promises, warranties or undertakings with respect to the subject
matter hereof, other than those set forth or referred to herein and in the Other
Agreements. This Agreement, the Other Agreements and the instruments referenced
herein and therein supersede all prior agreements and understandings among the
parties hereto with respect to the subject matter hereof.

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

(g) The headings in this Agreement are for convenience of reference only and
shall not limit or otherwise affect the meaning hereof.

(h) This Agreement may be executed in identical counterparts, each of which
shall be deemed an original but all of which shall constitute one and the same
agreement. This Agreement, once executed by a party, may be delivered to the
other party hereto by facsimile transmission of a copy of this Agreement bearing
the signature of the party so delivering this Agreement.

(i) Each party shall do and perform, or cause to be done and performed, all such
further acts and things, and shall execute and deliver all such other
agreements, certificates, instruments and documents, as any other party may
reasonably request in order to carry out the intent and accomplish the purposes
of this Agreement and the consummation of the transactions contemplated hereby.

(j) All consents and other determinations required to be made by the Investors
pursuant to this Agreement shall be made, unless otherwise specified in this
Agreement, by the Required Holders, determined as if all of the Warrants held by
Investors then outstanding have been exercised for Registrable Securities
without regard to any limitations on exercise of the Warrants.

(k) The language used in this Agreement will be deemed to be the language chosen
by the parties to express their mutual intent and no rules of strict
construction will be applied against any party.

(l) This Agreement is intended for the benefit of the parties hereto and their
respective permitted successors and permitted assigns, and is not for the
benefit of, nor may any provision hereof be enforced by, any other Person.

 

 

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

(n) The obligations of each Warrantholder hereunder are several and not joint
with the obligations of any other Warrantholder, and no provision of this
Agreement is intended to confer any obligations on any Warrantholder vis-à-vis
any other Warrantholder. Nothing contained herein, and no action taken by any
Warrantholder pursuant hereto, shall be deemed to constitute the Warrantholders
as a partnership, an association, a joint venture or any other kind of entity,
or create a presumption that the Warrantholders are in any way acting in concert
or as a group with respect to such obligations or the transactions contemplated
herein.

* * * * * *

 

 

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IN WITNESS WHEREOF, each Warrantholder and the Company have caused their
respective signature page to this Registration Rights Agreement to be duly
executed as of the date first written above.

 

 

 

COMPANY:

 

 

PROLIANCE INTERNATIONAL, INC.

 

By: 

/s/ Arlen F. Henock

 

 

 

Name: Arlen F. Henock

 

 

 

Title: Executive Vice President, Chief Financial Officer

 

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IN WITNESS WHEREOF, each Warrantholder and the Company have caused their
respective signature page to this Registration Rights Agreement to be duly
executed as of the date first written above.

 

 

 

WARRANTHOLDERS:

 

 

SPCP Group, LLC

 

By: 

/s/ Zachary M. Zeitlin

 

 

 

Name: Zachary M. Zeitlin

 

 

 

Title: Authorized Signatory

 

 

 

SPCP Group III, LLC

       

 

By:

/s/ Zachary M. Zeitlin

 

 

 

Name: Zachary M. Zeitlin

 

 

 

Title: Authorized Signatory

 

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SCHEDULE OF WARRANTHOLDERS

 

Warrantholder

 

Warrantholder Address
and Facsimile Number

 

Warrantholder’s Representative’s
Address
and Facsimile Number

SPCP Group, LLC

 

 

SPCP Group, LLC
Two Greenwich Plaza
Greenwich, Connecticut 06830
Attention: Portfolio Manager - Proliance
Facsimile: 203-542-4550

 

Schulte Roth & Zabel LLP
919 Third Avenue
New York, New York 10022
Attention: Frederic L. Ragucci, Esq.
Facsimile: (212) 593-5955
Telephone: (212) 756-2000

SPCP Group III, LLC

 

SPCP Group III, LLC
Two Greenwich Plaza
Greenwich, Connecticut 06830
Attention: Portfolio Manager - Proliance
Facsimile: 203-542-4550

 

Schulte Roth & Zabel LLP
919 Third Avenue
New York, New York 10022
Attention: Frederic L. Ragucci, Esq.
Facsimile: (212) 593-5955
Telephone: (212) 756-2000

 

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EXHIBIT A

FORM OF NOTICE OF EFFECTIVENESS

OF REGISTRATION STATEMENT

[Transfer Agent]

[Address]

Attention:

Re:

Proliance International, Inc.

Ladies and Gentlemen:

We are counsel to Proliance International, Inc., a Delaware corporation (the
“Company”), and have represented the Company in connection with that certain
Warrantholder Rights Agreement, dated as of March 26, 2008 (the “Agreement”),
entered into by and among SPCP Group, LLC, SPCP Group III, LLC (each a “Holder”
and collectively the “Holders”; the Holders collectively with their successors
and assigns, the “Warrantholders”), and the Company pursuant to which the
Company issued to each Holder warrants (the “Warrants”) exercisable for shares
of the Company’s Common Stock, par value $0.01 per share (the “Common Stock”).
Pursuant to the Agreement, the Company also has entered into a Registration
Rights Agreement with the Holders (the “Registration Rights Agreement”) pursuant
to which the Company agreed, among other things, to register the resale of the
Registrable Securities (as defined in the Registration Rights Agreement),
including the shares of Common Stock issuable upon exercise of the Warrants
under the Securities Act of 1933, as amended (the “1933 Act”). In connection
with the Company’s obligations under the Registration Rights Agreement, on
____________ ___, 2008, the Company filed a Registration Statement on Form S-3
(File No. 333-_____________) (the “Registration Statement”) with the Securities
and Exchange Commission (the “SEC”) relating to the Registrable Securities which
names each of the Warrantholders as a selling stockholder thereunder.

In connection with the foregoing, we advise you that a member of the SEC’s staff
has advised us by telephone that the SEC has entered an order declaring the
Registration Statement effective under the 1933 Act at [ENTER TIME OF
EFFECTIVENESS] on [ENTER DATE OF EFFECTIVENESS] and we have no knowledge, after
telephonic inquiry of a member of the SEC’s staff, that any stop order
suspending its effectiveness has been issued or that any proceedings for that
purpose are pending before, or threatened by, the SEC, and the Registrable
Securities are available for resale under the 1933 Act pursuant to the
Registration Statement.

This letter shall serve as our standing instruction to you that the shares of
Common Stock are freely transferable by the Warrantholders pursuant to the
Registration Statement. You need not require further letters from us to effect
any future legend-free issuance or reissuance of shares of Common Stock to the
Warrantholders.

 

 

 

 

Very truly yours,

[ISSUER’S COUNSEL]

 

 

By:

 

 

 

 

 

 

CC: [LIST NAMES OF HOLDERS]

 

 

A-1

 

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ANNEX I

SELLING STOCKHOLDERS

The shares of common stock being offered by the selling stockholders are those
issuable to the selling stockholders upon exercise of the warrants. For
additional information regarding the issuance of the warrants, see “Private
Placement of Warrants” above. We are registering the shares of common stock in
order to permit the selling stockholders to offer the shares for resale from
time to time. Except for the credit agreement, the credit documents related
thereto and ownership of the warrants, the selling stockholders have not had any
material relationship with us within the past three years.

The table below lists the selling stockholders and other information regarding
the beneficial ownership of the shares of common stock by each of the selling
stockholders. The second column lists the number of shares of common stock
beneficially owned by each selling stockholder, based on its ownership of the
warrants, as of [________], 2008, assuming exercise of the warrants held by the
selling stockholders on that date, without regard to any limitations on
exercise.

The third column lists the shares of common stock being offered by this
prospectus by the selling stockholders.

In accordance with the terms of a registration rights agreement with the selling
stockholders, this prospectus generally covers the resale of at least 130% of
the number of shares of common stock issuable upon exercise of the related
warrants, determined as if the outstanding warrants were exercised, as
applicable, in full, as of the trading day immediately preceding the date this
registration statement was initially filed with the SEC. The fourth column
assumes the sale of all of the shares offered by the selling stockholders
pursuant to this prospectus.

Under the terms of the warrants, a selling stockholder may not exercise the
warrants, to the extent such exercise would cause such selling stockholder,
together with its affiliates, to beneficially own a number of shares of common
stock which would exceed 4.99% of our then outstanding shares of common stock
following such exercise, excluding for purposes of such determination shares of
common stock issuable upon exercise of the warrants which have not been
exercised. The number of shares in the second column does not reflect this
limitation. The selling stockholders may sell all, some or none of their shares
in this offering. See “Plan of Distribution.”

 

 

I-1

 

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Name of Selling Stockholder

 

Number of Shares of
Common Stock Owned Prior
to Offering

 

Maximum Number of Shares of
Common Stock to be Sold
Pursuant to this Prospectus

 

Number of Shares of
Common Stock Owned
After Offering

SPCP Group, LLC (1)

 

 

 

 

 

 

SPCP Group III, LLC (1)

 

 

 

 

 

0

 

(1)

SPCP Group, LLC is owned by Silver Point Capital Fund, L.P. (the “Fund”) and
Silver Point Capital Offshore Fund (the “Offshore Fund”). Silver Point Capital,
L.P. (“Silver Point”) is the investment manager of the Fund and the Offshore
Fund. Silver Point is controlled by Edward A. Mulé and Robert J. O’Shea. SPCP
Group III, LLC is an affiliate of Silver Point (via common ownership) and is
controlled by Messrs. Mulé and O’Shea.

 

 

I-2

 

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PLAN OF DISTRIBUTION

We are registering the shares of common stock issuable upon exercise of the
warrants to permit the resale of these shares of common stock by the holders of
the warrants from time to time after the date of this prospectus. We will not
receive any of the proceeds from the sale by the selling stockholders of the
shares of common stock. We will bear all fees and expenses incident to our
obligation to register the shares of common stock.

The selling stockholders may sell all or a portion of the shares of common stock
beneficially owned by them and offered hereby from time to time directly or
through one or more underwriters, broker-dealers or agents. If the shares of
common stock are sold through underwriters or broker-dealers, the selling
stockholders will be responsible for underwriting discounts or commissions or
agent’s commissions. The shares of common stock may be sold in one or more
transactions at fixed prices, at prevailing market prices at the time of the
sale, at varying prices determined at the time of sale, or at negotiated prices.
These sales may be effected in transactions, which may involve crosses or block
transactions, through

 

•

any national securities exchange or quotation service on which the securities
may be listed or quoted at the time of sale;

 

•

the over-the-counter market;

 

•

transactions otherwise than on these exchanges or systems or in the
over-the-counter market;

 

•

the writing of options, whether such options are listed on an options exchange
or otherwise;

 

•

ordinary brokerage transactions and transactions in which the broker-dealer
solicits purchasers;

 

•

block trades in which the broker-dealer will attempt to sell the shares as agent
but may position and resell a portion of the block as principal to facilitate
the transaction;

 

•

purchases by a broker-dealer as principal and resale by the broker-dealer for
its account;

 

•

an exchange distribution in accordance with the rules of the applicable
exchange;

 

•

privately negotiated transactions;

 

•

short sales;

 

•

sales pursuant to Rule 144;

 

•

transactions in which broker-dealers may agree with the selling securityholders
to sell a specified number of such shares at a stipulated price per share;

 

 

I-3

 

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•

a combination of any such methods of sale; and

 

•

any other method permitted pursuant to applicable law.

If the selling stockholders effect such transactions by selling shares of common
stock to or through underwriters, broker-dealers or agents, such underwriters,
broker-dealers or agents may receive commissions in the form of discounts,
concessions or commissions from the selling stockholders or commissions from
purchasers of the shares of common stock for whom they may act as agent or to
whom they may sell as principal (which discounts, concessions or commissions as
to particular underwriters, broker-dealers or agents may be in excess of those
customary in the types of transactions involved). In connection with sales of
the shares of common stock or otherwise, the selling stockholders may enter into
hedging transactions with broker-dealers, which may in turn engage in short
sales of the shares of common stock in the course of hedging in positions they
assume. The selling stockholders may also sell shares of common stock short and
deliver shares of common stock covered by this prospectus to close out short
positions and to return borrowed shares in connection with such short sales. The
selling stockholders may also loan or pledge shares of common stock to
broker-dealers that in turn may sell such shares.

The selling stockholders may pledge or grant a security interest in some or all
of the warrants or shares of common stock owned by them and, if they default in
the performance of their secured obligations, the pledgees or secured parties
may offer and sell the shares of common stock from time to time pursuant to this
prospectus or any amendment to this prospectus under Rule 424(b)(3) or other
applicable provision of the Securities Act of 1933, as amended, amending, if
necessary, the list of selling stockholders to include the pledgee, transferee
or other successors in interest as selling stockholders under this prospectus.
The selling stockholders also may transfer and donate the shares of common stock
in other circumstances in which case the transferees, donees, pledgees or other
successors in interest will be the selling beneficial owners for purposes of
this prospectus.

The selling stockholders and any broker-dealer participating in the distribution
of the shares of common stock may be deemed to be “underwriters” within the
meaning of the Securities Act, and any commission paid, or any discounts or
concessions allowed to, any such broker-dealer may be deemed to be underwriting
commissions or discounts under the Securities Act. At the time a particular
offering of the shares of common stock is made, a prospectus supplement, if
required, will be distributed which will set forth the aggregate amount of
shares of common stock being offered and the terms of the offering, including
the name or names of any broker-dealers or agents, any discounts, commissions
and other terms constituting compensation from the selling stockholders and any
discounts, commissions or concessions allowed or reallowed or paid to
broker-dealers.

Under the securities laws of some states, the shares of common stock may be sold
in such states only through registered or licensed brokers or dealers. In
addition, in some states the shares of common stock may not be sold unless such
shares have been registered or qualified for sale in such state or an exemption
from registration or qualification is available and is complied with.

 

 

I-4

 

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There can be no assurance that any selling stockholder will sell any or all of
the shares of common stock registered pursuant to the registration statement of
which this prospectus forms a part.

The selling stockholders and any other person participating in such distribution
will be subject to applicable provisions of the Securities Exchange Act of 1934,
as amended, and the rules and regulations thereunder, including, without
limitation, Regulation M of the Exchange Act, which may limit the timing of
purchases and sales of any of the shares of common stock by the selling
stockholders and any other participating person. Regulation M may also restrict
the ability of any person engaged in the distribution of the shares of common
stock to engage in market-making activities with respect to the shares of common
stock. All of the foregoing may affect the marketability of the shares of common
stock and the ability of any person or entity to engage in market-making
activities with respect to the shares of common stock.

We will pay all expenses of the registration of the shares of common stock
pursuant to the registration rights agreement, estimated to be $[____] in total,
including, without limitation, Securities and Exchange Commission filing fees
and expenses of compliance with state securities or “blue sky” laws; provided,
however, that a selling stockholder will pay all underwriting discounts and
selling commissions, if any. We will indemnify the selling stockholders against
liabilities, including some liabilities under the Securities Act, in accordance
with the registration rights agreement, or the selling stockholders will be
entitled to contribution. We may be indemnified by the selling stockholders
against civil liabilities, including liabilities under the Securities Act, that
may arise from any written information furnished to us by the selling
stockholder specifically for use in this prospectus, in accordance with the
related registration rights agreement, or we may be entitled to contribution.

Once sold under the registration statement of which this prospectus forms a
part, the shares of common stock will be freely tradable in the hands of persons
other than our affiliates.

 

 

I-5

 

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