Exhibit 10.3
THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE HEREOF HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”),
OR ANY STATE SECURITIES LAW, AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED,
PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF OR EXERCISED UNLESS (i) A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND APPLICABLE STATE SECURITIES
LAWS SHALL HAVE BECOME EFFECTIVE WITH REGARD THERETO, OR (ii) AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS IS
AVAILABLE IN CONNECTION WITH SUCH OFFER, SALE OR TRANSFER.
AN INVESTMENT IN THESE SECURITIES INVOLVES A HIGH DEGREE OF RISK. HOLDERS MUST
RELY ON THEIR OWN ANALYSIS OF THE INVESTMENT AND ASSESSMENT OF THE RISKS
INVOLVED.
SO LONG AS ANY OF THE SENIOR NOTES (AS DEFINED HEREIN) REMAIN OUTSTANDING EACH
HOLDER OF THIS WARRANT COVENANTS AND AGREES BY ACCEPTANCE OF THIS WARRANT THAT
(I) THE COMPANY WILL NOT MAKE (AND THE HOLDER HEREOF SHALL NOT BE ENTITLED TO
RECEIVE) ANY CASH PAYMENT UNDER OR IN RESPECT OF THIS WARRANT OTHER THAN A
REDEMPTION PAYMENT IN CONNECTION WITH A MAJOR TRANSACTION PURSUANT TO SECTION 5
HEREOF IN THE EVENT THE HOLDER OF THE SENIOR NOTES DOES NOT ELECT TO REQUIRE THE
REDEMPTION OF THE SENIOR NOTES IN RESPECT OF SUCH MAJOR TRANSACTION (A
“PERMITTED REDEMPTION PAYMENT”) AND (II) THIS WARRANT MAY NOT BE AMENDED WITHOUT
THE CONSENT OF THE CURRENT HOLDER OF THE SENIOR NOTES, (III) THIS WARRANT AND
THE PAYMENTS OF ANY AMOUNTS IN RESPECT HEREOF (OTHER THAN A PERMITTED REDEMPTION
PAYMENT) ARE EXPRESSLY SUBORDINATED AND JUNIOR TO THE SENIOR NOTES AND (IV) IT
WILL NOT ASSERT ANY CLAIMS OR CAUSES OF ACTION AGAINST THE COMPANY THAT WOULD
REQUIRE THE PAYMENT BY THE COMPANY TO THE HOLDER HEREOF OF ANY AMOUNT OTHER THAT
A PERMITTED REDEMPTION PAYMENT.

     
Warrant to Purchase
     

1,119,855 shares
  Warrant Number 2

Warrant to Purchase Common Stock
of
THIRD WAVE TECHNOLOGIES, INC.
THIS CERTIFIES that DEERFIELD PRIVATE DESIGN INTERNATIONAL, L.P. or any
subsequent holder hereof (“Holder”) has the right to purchase from THIRD WAVE
TECHNOLOGIES, INC., a Delaware corporation, (the “Company”), ONE MILLION ONE
HUNDRED NINETEEN THOUSAND EIGHT HUNDRED FIFTY-FIVE (1,119,855) fully paid and
nonassessable shares, of the Company’s common stock, $0.001 par value per share
(“Common Stock”), subject to adjustment as provided herein, at a price equal to
the Exercise Price as defined in Section 3 below, at any time during the Term
(as defined below).
Holder agrees with the Company that this Warrant to Purchase Common Stock of the
Company (this “Warrant” or this “Agreement”) is issued and all rights hereunder
shall be held subject to all of the conditions, limitations and provisions set
forth herein.
1. Date of Issuance and Term.
This Warrant shall be deemed to be issued on December 10, 2007 (“Date of
Issuance”). The term of this Warrant begins on the Date of Issuance and ends at
5:00 p.m., New York City time, on the date that is five (5) years after the Date
of Issuance (the “Term”). This Warrant was issued in conjunction with that
certain Facility Agreement (the “Facility Agreement”) and the Registration
Rights Agreement (“Registration Rights Agreement”) by and between the Company
and Deerfield Private Design International, L.P. and certain other parties, each
dated December 10, 2007, entered into in conjunction herewith.
Notwithstanding anything herein to the contrary, the Company shall not issue to
the Holder, and the Holder may not acquire, a number of shares of Common Stock
upon exercise of this Warrant to the extent that, upon such exercise, the number
of shares of Common Stock then beneficially owned by the Holder and its
Affiliates and any other persons or entities whose beneficial ownership of
Common Stock would be aggregated with the Holder’s for purposes of Section 13(d)
of the Securities Exchange Act of 1934 (the “Exchange Act”) (including shares
held by any “group” of which the Holder is a member, but excluding shares
beneficially owned by virtue of the ownership of securities or rights to acquire
securities that have limitations on the right to convert, exercise or purchase
similar to the limitation set forth herein) would exceed 9.98% of the total
number of shares of Common Stock of the Company then issued and outstanding. For
purposes hereof, “group” has the meaning set forth in Section 13(d) of the
Exchange Act and applicable regulations of the Securities and Exchange
Commission (the “SEC”), and the percentage held by the Holder shall be
determined in a manner consistent with the provisions of Section 13(d) of the
Exchange Act. Upon the written request of the Holder, the Company

 

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shall, within two (2) Trading Days confirm orally and in writing to the Holder
the number of shares of Common Stock then outstanding.
“Affiliate” means any person or entity that, directly or indirectly through one
or more intermediaries, controls or is controlled by or is under common control
with a person or entity, as such terms are used in and construed under Rule 144
under the Securities Act of 1933, as amended (the “Securities Act”). With
respect to a Holder of Warrants, any investment fund or managed account that is
managed on a discretionary basis by the same investment manager as such Holder
will be deemed to be an Affiliate of such Holder.
“Holder” means Deerfield Private Design International, L.P. and any transferee
or assignee pursuant to the terms of this Warrant.
2. Exercise.
(a) Manner of Exercise. During the Term, this Warrant may be Exercised as to all
or any lesser number of full shares of Common Stock covered hereby (the “Warrant
Shares” or the “Shares”) upon surrender of this Warrant, with the Exercise Form
attached hereto as Exhibit A (the “Exercise Form”) duly completed and executed,
together with the full Exercise Price (as defined below, which may be satisfied
by a Cash Exercise or a Cashless Exercise, as each is defined below) for each
share of Common Stock as to which this Warrant is Exercised, at the office of
the Company, Third Wave Technologies, Inc., 502 S. Rosa Road, Madison, WI 53719;
Phone: (888) 898-2357, Fax: (608) 663-7037, or at such other office or agency as
the Company may designate in writing, by overnight mail, with an advance copy of
the Exercise Form sent to the Company and its transfer agent (“Transfer Agent”)
by facsimile (such surrender and payment of the Exercise Price hereinafter
called the “Exercise” of this Warrant).
(b) Date of Exercise. The “Date of Exercise” of the Warrant shall be defined as
the date that the Exercise Form attached hereto as Exhibit A, completed and
executed, is sent by facsimile to the Company, provided that the original
Warrant and Exercise Form are received by the Company and the Exercise Price is
satisfied, each as soon as practicable and in any event within two (2) business
days thereafter. Alternatively, the Date of Exercise shall be defined as the
date the original Exercise Form is received by the Company and the Exercise
Price is paid, if Holder has not sent advance notice by facsimile. Upon delivery
of the duly completed and executed Exercise Form to the Company by facsimile or
otherwise, the Holder shall be deemed for all corporate purposes to have become
the holder of record of the Warrant Shares with respect to which this Warrant
has been Exercised, irrespective of the date such Warrant Shares are credited to
the Holder’s DTC account or the date of delivery of the certificates evidencing
such Warrant Shares as the case may be.
(c) Delivery of Common Stock Upon Exercise. Within three (3) business days after
any Date of Exercise (the “Delivery Period”), the Company shall issue and
deliver (or cause its Transfer Agent so to issue and deliver) in accordance with
the terms hereof to or upon the order of the Holder that number of shares of
Common Stock (“Exercise Shares”) for the portion of this Warrant Exercised as
shall be determined in accordance herewith. Upon the Exercise of this Warrant or
any part thereof, the Company shall, at its own cost and expense, take all
necessary action, including obtaining and delivering, an opinion of counsel to
assure that the Transfer Agent shall issue stock certificates in the name of
Holder (or its nominee) or such other persons as designated by Holder and in
such denominations to be specified in the Exercise Form representing the number
of shares of Common Stock issuable upon such Exercise. Holder may not revoke its
Exercise or alter its designations following delivery of the Exercise Notice
except as otherwise expressly provided herein. The Company warrants that no
instructions other than these instructions have been or will be given to the
Transfer Agent and that, unless waived by the Holder, this Warrant and the
Exercise Shares will be free-trading, and freely transferable, and will not
contain a legend restricting the resale or transferability of the Exercise
Shares if the Unrestricted Conditions (as defined below) are met.
(d) Delivery Failure. In addition to any other remedies which may be available
to the Holder, in the event that the Company fails to use its best efforts to
effect delivery of the Exercise Shares by the end of the Delivery Period (a
“Delivery Failure”), the Holder will be entitled prior to delivery of the
Exercise Shares to revoke all or part of the relevant Exercise Form by delivery
of a notice to such effect to the Company whereupon the Company and the Holder
shall each be restored to their respective positions immediately prior to the
delivery of such notice, except that the liquidated damages described herein
shall be payable through the date notice of revocation or rescission is given to
the Company.
(e) Legends.
(i) Restrictive Legend. The Holder understands that until such time as this
Warrant and the Exercise Shares have been registered under the Securities Act as
contemplated by the Registration Rights Agreement or otherwise may be sold
pursuant to Rule 144 or Rule 144(k) under the Securities Act or an exemption
from registration under the Securities Act without any restriction as to the
number of securities as of a particular date that can then be immediately sold,
this Warrant and the Exercise Shares may bear a restrictive legend in
substantially the following form (and a stop-transfer order may be placed
against transfer of the certificates for such securities):

    “THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES
LAWS. THE SECURITIES MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF
AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER SAID ACT, OR
PURSUANT TO AN EXEMPTION FROM

2

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    REGISTRATION UNDER SAID ACT INCLUDING, WITHOUT LIMITATION, PURSUANT TO RULES
144 OR 144A UNDER SAID ACT OR PURSUANT TO A PRIVATE SALE EFFECTED UNDER
APPLICABLE FORMAL OR INFORMAL SEC INTERPRETATION OR GUIDANCE, SUCH AS A
SO-CALLED “4(1) AND A HALF” SALE.”       “THE SALE, TRANSFER OR ASSIGNMENT OF
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE TERMS AND
CONDITIONS OF A CERTAIN REGISTRATION RIGHTS AGREEMENT DATED AS OF DECEMBER 10,
2007, AS AMENDED FROM TIME TO TIME, AMONG THE COMPANY AND A CERTAIN HOLDER OF
ITS OUTSTANDING SECURITIES. COPIES OF SUCH AGREEMENT MAY BE OBTAINED AT NO COST
BY WRITTEN REQUEST MADE BY THE HOLDER OF RECORD OF THIS CERTIFICATE TO THE
SECRETARY OF THE COMPANY.”

(ii) Removal of Restrictive Legends. This Warrant and certificates evidencing
the Exercise Shares shall not be required to contain any legend restricting the
transfer thereof (including the legend set forth above in subsection 2(e)(i)):
(A) while a registration statement (including a Registration Statement, as
defined in the Registration Rights Agreement) covering the sale or resale of
such security is effective under the Securities Act, or (B) following any sale
of such Warrant and/or Exercise Shares pursuant to Rule 144, or (C) if such
Warrant and/or Exercise Shares are eligible for sale under Rule 144(k), or
(D) if such legend is not required under applicable requirements of the
Securities Act (including judicial interpretations and pronouncements issued by
the staff of the SEC) (collectively, the “Unrestricted Conditions”). Subject to
Section 2(e)(iii), the Company shall use best efforts to take all actions
necessary to effect the issuance of this Warrant and Exercise Shares without a
restrictive legend or removal of the legend hereunder. If the Unrestricted
Conditions are met at the time of issuance of this Warrant and/or Exercise
Shares, then such Warrant and/or Exercise Shares shall be issued free of all
legends. The Company agrees that following the Effective Date or at such time as
the Unrestricted Conditions are met or such legend is otherwise no longer
required under this Section 2(e), it will, no later than three (3) Trading Days
following the delivery (the “Unlegended Shares Delivery Deadline”) by the Holder
to the Company or the Transfer Agent of this Warrant and a certificate
representing Exercise Shares, as applicable, issued with a restrictive legend
(such third Trading Day, the “Legend Removal Date”), deliver or cause to be
delivered to such Holder this Warrant and/or a certificate (or electronic
transfer) representing such shares that is free from all restrictive legends.
For purposes hereof, “Effective Date” shall mean the date that the Registration
Statement that the Company is required to file pursuant to the Registration
Rights Agreement has been declared effective by the SEC.
(iii) Sale of Unlegended Shares. Holder agrees that the removal of the
restrictive legend from this Warrant and any certificates representing Exercise
Shares as set forth in Section 2(e)(i) above is predicated upon the Company’s
reliance that the Holder will sell this Warrant and/or any Exercise Shares
pursuant to either the registration requirements of the Securities Act,
including any applicable prospectus delivery requirements, or an exemption
therefrom, and that if such securities are sold pursuant to a Registration
Statement, they will be sold in compliance with the plan of distribution set
forth therein.
(f) Cancellation of Warrant. This Warrant shall be canceled upon the full
Exercise of this Warrant, and, as soon as practical after the Date of Exercise,
Holder shall be entitled to receive Common Stock for the number of shares
purchased upon such Exercise of this Warrant, and if this Warrant is not
Exercised in full, Holder shall be entitled to receive a new Warrant (containing
terms identical to this Warrant) representing any unexercised portion of this
Warrant in addition to such Common Stock.
(g) Holder of Record. Except as set forth in Sections 5(a) and 5(j) hereof,
nothing in this Warrant shall be construed as conferring upon Holder any rights
as a stockholder of the Company.
(h) Delivery of Electronic Shares. In lieu of delivering physical certificates
representing the Common Stock issuable upon Exercise or legend removal, provided
the Company’s Transfer Agent is participating in the Depository Trust Company
(“DTC”) Fast Automated Securities Transfer (“FAST”) program and provided further
that the Holder provides the Transfer Agent with information required in order
to issue shares of Common Stock to the Holder electronically, upon written
request of the Holder, the Company shall use its best efforts to cause its
Transfer Agent to electronically transmit the Common Stock issuable upon
Exercise to the Holder by crediting the account of the Holder’s prime broker
with DTC through its Deposit Withdrawal Agent Commission (DWAC) system. The time
periods for delivery and penalties described herein shall apply to the
electronic transmittals described herein. Any delivery not effected by
electronic transmission shall be effected by delivery of physical certificates.
(i) Buy-In. In addition to any other rights available to the Holder, if the
Company fails to cause its Transfer Agent to transmit to the Holder a
certificate or certificates, or electronic shares through DWAC, representing the
Exercise Shares pursuant to an Exercise on or before the Delivery Period, and if
after such date the Holder is required by its broker to purchase (in an open
market transaction or otherwise) or the Holder’s brokerage firm otherwise
purchases shares of Common Stock to deliver in satisfaction of a sale by the
Holder of the Exercise Shares which the Holder was entitled to receive upon such
Exercise (a “Buy-In”), then the Company shall (1) pay in cash to the Holder the
amount by which (x) the Holder’s total purchase price (including brokerage
commissions, if any) for the shares of Common Stock so purchased exceeds (y) the
amount obtained by multiplying (A) the number of Exercise Shares that the
Company was required to deliver to the Holder in connection with the Exercise
not later than the expiration of the Delivery Period, times (B) the price at
which the sell order giving rise to such purchase obligation was executed, and
(2) at the option of the Holder, either reinstate the portion of the Warrant and
equivalent number of Exercise Shares for which such Exercise was not honored or
deliver to the Holder the number of shares of Common Stock that would have been
issued had the Company timely complied with its Exercise and delivery
obligations under Section 2(c). For example, if the Holder purchases Common
Stock having a total purchase

3

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price of $11,000 to cover a Buy-In with respect to an attempted Exercise to
cover the sale of Common Stock with an aggregate sale price giving rise to such
purchase obligation of $10,000, under clause (1) of the immediately preceding
sentence the Company shall be required to pay the Holder $1,000. The Holder
shall provide the Company written notice indicating the amounts payable to the
Holder in respect of the Buy-In, together with applicable confirmations and
other evidence reasonably requested by the Company. Nothing herein shall limit a
Holder’s right to pursue any other remedies available to it hereunder, at law or
in equity including, without limitation, a decree of specific performance and/or
injunctive relief with respect to the Company’s failure to timely deliver
certificates representing shares of Common Stock upon Exercise of the Warrant as
required pursuant to the terms hereof.
3. Payment of Warrant Exercise Price.
(a) Exercise Price. The Exercise Price (“Exercise Price”) shall initially equal
$8.36 per share subject to adjustment pursuant to the terms hereof, including
but not limited to Section 5 below.
Payment of the Exercise Price may be made by either of the following, or a
combination thereof, at the election of Holder:
(i) Cash Exercise: The Holder may exercise this Warrant in cash, bank or
cashier’s check or wire transfer (a “Cash Exercise”); or
(ii) Cashless Exercise: The Holder, at its option, may exercise this Warrant in
a cashless exercise transaction. In order to effect a Cashless Exercise, the
Holder shall surrender this Warrant at the principal office of the Company
together with notice of cashless election, in which event the Company shall
issue Holder a number of shares of Common Stock computed using the following
formula (a “Cashless Exercise”):
X = Y (A-B)/A
where: X = the number of shares of Common Stock to be issued to Holder.

    Y = the number of shares of Common Stock for which this Warrant is being
Exercised.       A = the Market Price of one (1) share of Common Stock (for
purposes of this Section 3(ii), where “Market Price,” as of any date, means the
Volume Weighted Average Price (as defined herein) of the Company’s Common Stock
during the ten (10) consecutive Trading Day period immediately preceding the
date in question.       B = the Exercise Price.       As used herein, the
“Volume Weighted Average Price” for any security as of any date means the volume
weighted average sale price on The NASDAQ Global Market (“NASDAQ”) as reported
by, or based upon data reported by, Bloomberg Financial Markets or an
equivalent, reliable reporting service mutually acceptable to and hereafter
designated by holders of a majority in interest of the Warrants and the Company
(“Bloomberg”) or, if NASDAQ is not the principal trading market for such
security, the volume weighted average sale price of such security on the
principal securities exchange or trading market where such security is listed or
traded as reported by Bloomberg, or, if no volume weighted average sale price is
reported for such security, then the last closing trade price of such security
as reported by Bloomberg, or, if no last closing trade price is reported for
such security by Bloomberg, the average of the bid prices of any market makers
for such security that are listed in the over the counter market by the National
Association of Securities Dealers or in the “pink sheets” by the National
Quotation Bureau, Inc. If the Volume Weighted Average Price cannot be calculated
for such security on such date in the manner provided above, the volume weighted
average price shall be the fair market value as mutually determined by the
Company and the Holders of a majority in interest of the Warrants being
Exercised for which the calculation of the volume weighted average price is
required in order to determine the Exercise Price of such Warrants. “Trading
Day” shall mean any day on which the Common Sock is traded for any period on
NASDAQ, or on the principal securities exchange or other securities market on
which the Common Stock is then being traded.

For purposes of Rule 144 and sub-section (d)(3)(ii) thereof, it is intended,
understood and acknowledged that the Common Stock issuable upon Exercise of this
Warrant in a cashless Exercise transaction shall be deemed to have been acquired
at the time this Warrant was issued. Moreover, it is intended, understood and
acknowledged that the holding period for the Common Stock issuable upon Exercise
of this Warrant in a cashless Exercise transaction shall be deemed to have
commenced on the date this Warrant was issued.
( b) Dispute Resolution. In the case of a dispute as to the determination of the
closing price or the Volume Weighted Average Price of the Company’s Common Stock
or the arithmetic calculation of the Exercise Price, Market Price or any
Redemption Price, the Company shall submit the disputed determinations or
arithmetic calculations via facsimile within two (2) business days of receipt,
or deemed receipt, of the Exercise Notice or Redemption Notice, or other event
giving rise to such dispute, as the case may be, to the Holder. If the Holder
and the Company are unable to agree upon such determination or calculation
within two (2) business days of such disputed determination or arithmetic
calculation being submitted to the Holder, then the Company shall, within two
(2) business days submit via facsimile (i) the disputed determination of the
closing price or the Volume Weighted Average Price of the Company’s Common Stock
to an independent, reputable investment bank selected by the Company and
approved by the Holder, which approval shall not be unreasonably withheld or
(ii) the disputed arithmetic calculation of the Exercise Price, Market Price or
any Major Transaction Warrant Redemption Price to the Company’s independent,
outside accountant. The Company shall cause the investment

4

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bank or the accountant, as the case may be, to perform the determinations or
calculations and notify the Company and the Holder of the results no later than
five (5) business days from the time it receives the disputed determinations or
calculations. If the determination or calculation of such investment bank or
accountant is equal to the determination or calculation of the Company, then the
expenses of the investment bank or accountant shall be borne by the Holder.
Otherwise such expenses shall be borne by the Company. Such investment bank’s or
accountant’s determination or calculation, as the case may be, shall be binding
upon all parties absent demonstrable error.
4. Transfer and Registration.
(a) Transfer Rights. Subject to the provisions of Section 8 of this Warrant,
this Warrant may be transferred on the books of the Company, in whole or in
part, in person or by attorney, upon surrender of this Warrant properly
completed and endorsed. This Warrant shall be canceled upon such surrender and,
as soon as practicable thereafter, the person to whom such transfer is made
shall be entitled to receive a new Warrant or Warrants as to the portion of this
Warrant transferred, and Holder shall be entitled to receive a new Warrant as to
the portion hereof retained.
(b) Registrable Securities. The Common Stock issuable upon the Exercise of this
Warrant have registration rights pursuant to the Registration Rights Agreement.
5. Anti-Dilution Adjustments; Additional Adjustments; Purchase Rights.
(a) Participation. The Holder, as the holder of this Warrant, shall be entitled
to receive such dividends paid and distributions of any kind made to the holders
of Common Stock of the Company to the same extent as if the Holder had Exercised
this Warrant into Common Stock (without regard to any limitations on exercise
herein or elsewhere and without regard to whether or not a sufficient number of
shares are authorized and reserved to effect any such exercise and issuance) and
had held such shares of Common Stock on the record date for such dividends and
distributions. Payments under the preceding sentence shall be made concurrently
with the dividend or distribution to the holders of Common Stock.
(b) Recapitalization or Reclassification. If the Company shall at any time
effect a recapitalization, reclassification or other similar transaction of such
character that the shares of Common Stock shall be changed into or become
exchangeable for a larger or smaller number of shares, then upon the effective
date thereof, the number of shares of Common Stock which Holder shall be
entitled to purchase upon Exercise of this Warrant shall be increased or
decreased, as the case may be, in direct proportion to the increase or decrease
in the number of shares of Common Stock by reason of such recapitalization,
reclassification or similar transaction, and the Exercise Price shall be, in the
case of an increase in the number of shares, proportionally decreased and, in
the case of decrease in the number of shares, proportionally increased. The
Company shall give Holder the same notice it provides to holders of Common Stock
of any transaction described in this Section 5(b).
(c) Rights Upon Major Transaction.
(i) Major Transaction. In the event that a Major Transaction (as defined below)
occurs, the Holder, at its option, may require the Company to redeem the
Holder’s outstanding Warrants in accordance with Section 5(c)(iii) below.
Otherwise, a Major Transaction shall be treated as an Assumption (as defined
below) in accordance with Section 5(c)(ii) below unless the Holder waives its
rights under this Section 5(c) with respect to that Major Transaction. Each of
the following events shall constitute a “Major Transaction”:
(A) a consolidation, merger, exchange of shares, recapitalization,
reorganization, business combination or other similar event, (1) following which
the holders of Common Stock immediately preceding such consolidation, merger,
exchange, recapitalization, reorganization, combination or event either (a) no
longer hold a majority of the shares of Common Stock or (b) no longer have the
ability to elect a majority of the board of directors of the Company or (2) as a
result of which shares of Common Stock shall be changed into (or the shares of
Common Stock become entitled to receive) the same or a different number of
shares of the same or another class or classes of stock or securities of another
entity (collectively, a “Change of Control Transaction”);
(B) the sale or transfer of significant assets of the Company, which shall for
purposes of this subsection (B) mean a sale or transfer of assets in one
transaction or a series of related transactions for a purchase price of more
than $75,000,000 or a sale or transfer of more than 48% of the Company’s assets
in one transaction or a series of related transactions;
(C) a purchase, tender or exchange offer made to the holders of outstanding
shares of Common Stock, such that following such purchase, tender or exchange
offer a Change of Control Transaction shall have occurred;
(D) the liquidation, bankruptcy, insolvency, dissolution or winding-up (or the
occurrence of any analogous proceeding) affecting the Company; or
(E) the shares of Common Stock cease to be listed, traded or publicly quoted on
the NASDAQ Global Market and are not promptly re-listed or requoted on either
the New York Stock Exchange, the American Stock Exchange, the NASDAQ Global
Select Market or the NASDAQ Capital Market.

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(ii) Assumption. The Company shall not enter into or be party to a Major
Transaction (not including one defined in subsection (i)(E) above, to which this
subsection (ii) shall be inapplicable) unless (i) any Person purchasing the
Company’s assets or Common Stock, or any successor entity resulting from such
Major Transaction (in each case, a “Successor Entity”), assumes in writing all
of the obligations of the Company under this Warrant, the Facility Agreement and
the Registration Rights Agreement in accordance with the provisions of this
Section 5(c)(ii) pursuant to written agreements in form and substance
satisfactory to the Holder and approved by the Holder prior to such Major
Transaction, including agreements to deliver to each holder of Warrants in
exchange for such Warrants a security of the Successor Entity evidenced by a
written instrument substantially similar in form and substance to the Warrants,
including, without limitation, representing the appropriate number of shares of
the Successor Entity, having similar exercise rights as the Warrants (including
but not limited to a similar Exercise Price and similar Exercise Price
adjustment provisions based on the price per share or conversion ratio to be
received by the holders of Common Stock in the Major Transaction) and similar
registration rights as provided by the Registration Rights Agreement,
satisfactory to the Holder and (ii) any Successor Entity (including its Parent
Entity) is a publicly traded corporation whose common stock is quoted on or
listed for trading on an Eligible Market. Upon the occurrence of any Major
Transaction, any Successor Entity shall succeed to, and be substituted for (so
that from and after the date of such Major Transaction, the provisions of this
Warrant and the Registration Rights Agreement referring to the “Company” shall
refer instead to the Successor Entity), and may exercise every right and power
of the Company and shall assume all of the obligations of the Company under this
Warrant with the same effect as if such Successor Entity had been named as the
Company herein. Upon consummation of the Major Transaction, the Successor Entity
shall deliver to the Holder confirmation that there shall be issued upon
exercise or redemption of this Warrant at any time after the consummation of the
Major Transaction, in lieu of the shares of Common Stock (or other securities,
cash, assets or other property) issuable upon the exercise of the Warrants prior
to such Major Transaction, such shares of publicly traded common stock (or their
equivalent) of the Successor Entity, as adjusted in accordance with the
provisions of this Warrant. The provisions of this Section shall apply similarly
and equally to successive Major Transactions and shall be applied without regard
to any limitations on the exercise of this Warrant other than any applicable
beneficial ownership limitations. Any assumption of Company obligations under
this paragraph shall be referred to herein as an “Assumption”. Notwithstanding
anything in this Section 5(c)(ii) to the contrary, (i) the Holder shall not have
any rights under this Section 5(c)(ii) with respect to any Major Transaction
that is structured as a transaction in connection with which the Company or its
stockholders receive all cash and (ii) in the case of any Major Transaction that
provides for the payment of both cash and securities to the Company and its
stockholders, the Holder shall only have rights under this Section 5(c)(ii) with
respect to the percentage of Warrants then owned by the Holder equal to the
percentage of the consideration represented by the non-cash portion of the
consideration.
(iii) Notice; Major Transaction Redemption Right. At least thirty (30) days
prior to the consummation of any Major Transaction, but, in any event, on the
first to occur of (x) the date of the public announcement of such Major
Transaction if such announcement is made before 4:00 p.m., New York City time,
or (y) the day following the public announcement of such Major Transaction if
such announcement is made on and after 4:00 p.m., New York City time, the
Company shall deliver written notice thereof via facsimile and overnight courier
to the Holder (a “Major Transaction Notice”). At any time during the period
beginning after the Holder’s receipt of a Major Transaction Notice and ending
five (5) Trading Days prior to the consummation of such Major Transaction, the
Holder may require the Company to redeem (a “Redemption Upon Major Transaction”)
all or any portion of this Warrant by delivering written notice thereof (“Major
Transaction Redemption Notice”) to the Company, which Major Transaction
Redemption Notice shall indicate the portion of the principal amount (the
“Redemption Principal Amount”) of the Warrant that the Holder is electing to
have redeemed. The portion of this Warrant subject to redemption pursuant to
this Section 5(c)(iii) shall be redeemed by the Company in cash at a price (the
“Major Transaction Warrant Redemption Price”) equal to the calculation of the
“Intrinsic Value” as determined in accordance with Schedule I hereto of the
remaining outstanding portion of the Warrant.
(iv) Escrow; Payment of Major Transaction Warrant Redemption Price. Following
the receipt of a Major Transaction Redemption Notice from the Holder, the
Company shall not effect a Major Transaction unless it shall first place into an
escrow account with an independent escrow agent, at least three (3) business
days prior to the closing date of the Major Transaction (the “Major Transaction
Escrow Deadline”), an amount equal to the Major Transaction Warrant Redemption
Price. Concurrently upon closing of any Major Transaction, the Company shall pay
or shall instruct the escrow agent to pay the Major Transaction Warrant
Redemption Price to the Holder. For purposes of determining the amount required
to be placed in escrow pursuant to the provisions of this subsection (iv) and
without affecting the amount of the actual Major Transaction Warrant Redemption
Price, the calculation of the price referred to in clause (1) of the first
column of Schedule 1 hereto with respect to Stock Price shall be determined
based on the Closing Market Price (as defined herein) of the Common Stock on the
Trading Day immediately preceding the date that the funds are deposited with the
escrow agent.
(v) Injunction. Following the receipt of a Major Transaction Redemption Notice
from the Holder, in the event that the Company attempts to consummate a Major
Transaction without placing the Major Transaction Warrant Redemption Price in
escrow in accordance with subsection (iv) above or without payment of the Major
Transaction Warrant Redemption Price to the Holder upon consummation of such
Major Transaction, the Holder shall have the right to apply for an injunction in
any state or federal courts sitting in the City of New York, borough of
Manhattan to prevent the closing of such Major Transaction until the Major
Transaction Redemption Price is paid to the Holder, in full.
Redemptions required by this Section 5(c) shall be made in accordance with the
provisions of Section 12 and shall have priority to payments to holders of
Common Stock in connection with a Major Transaction. To the extent redemptions
required by this

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Section 5(c)(iii) are deemed or determined by a court of competent jurisdiction
to be prepayments of the Warrant by the Company, such redemptions shall be
deemed to be voluntary prepayments. Notwithstanding anything to the contrary in
this Section 5, until the Major Transaction Redemption Price is paid in full,
this Warrant may be exercised, in whole or in part, by the Holder into shares of
Common Stock, or in the event the Exercise Date is after the consummation of the
Major Transaction, shares of publicly traded common stock (or their equivalent)
of the Successor Entity pursuant to Section 5(c). The parties hereto agree that
in the event of the Company’s redemption of any portion of the Warrant under
this Section 5(c), the Holder’s damages would be uncertain and difficult to
estimate because of the parties’ inability to predict future interest rates and
the uncertainty of the availability of a suitable substitute investment
opportunity for the Holder. Accordingly, any redemption premium due under this
Section 5(c) is intended by the parties to be, and shall be deemed, a reasonable
estimate of the Holder’s actual loss of its investment opportunity and not as a
penalty.
For purposes hereof:
“Eligible Market” means the over the counter Bulletin Board, the New York Stock
Exchange, Inc., the NYSE Arca, the NASDAQ Capital Market, the NASDAQ Global
Market, the NASDAQ Global Select Market or the American Stock Exchange.
“Parent Entity” of a Person means an entity that, directly or indirectly,
controls the applicable Person and whose common stock or equivalent equity
security is quoted or listed on an Eligible Market, or, if there is more than
one such Person or Parent Entity, the Person or Parent Entity with the largest
public market capitalization as of the date of consummation of a Major
Transaction.
“Person” means an individual, a limited liability company, a partnership, a
joint venture, a corporation, a trust, an unincorporated organization, any other
entity and a government or any department or agency thereof.
(d) Exercise Price Adjusted. As used in this Warrant, the term “Exercise Price”
shall mean the purchase price per share specified in Section 3 of this Warrant,
until the occurrence of an event stated in this Section 5 or otherwise set forth
in this Warrant, and thereafter shall mean said price as adjusted from time to
time in accordance with the provisions of said subsection. No such adjustment
under this Section 5 shall be made unless such adjustment would change the
Exercise Price at the time by $.01 or more; provided, however, that all
adjustments not so made shall be deferred and made when the aggregate thereof
would change the Exercise Price at the time by $.01 or more. No adjustment made
pursuant to any provision of this Section 5 shall have the net effect of
increasing the Exercise Price in relation to the split adjusted and distribution
adjusted price of the Common Stock. Notwithstanding anything to the contrary in
this Warrant, so long as any of the Company’s Convertible Senior Subordinated
Zero-Coupon Promissory Notes issued in December 2006 (the “Senior Notes”)
continue to remain outstanding, if any adjustment to the Exercise Price pursuant
to Section 5 or otherwise set forth in this Warrant would otherwise result in an
Exercise Price of less than $6.00, then the Exercise Price shall be adjusted to
$6.00; provided, however, the foregoing limitation on adjustments to the
Exercise Price shall not apply to adjustments pursuant to Section 5(b) hereof.
(e) Adjustments: Additional Shares, Securities or Assets. In the event that at
any time, as a result of an adjustment made pursuant to this Section 5 or
otherwise, Holder shall, upon Exercise of this Warrant, become entitled to
receive shares and/or other securities or assets (other than Common Stock) then,
wherever appropriate, all references herein to shares of Common Stock shall be
deemed to refer to and include such shares and/or other securities or assets;
and thereafter the number of such shares and/or other securities or assets shall
be subject to adjustment from time to time in a manner and upon terms as nearly
equivalent as practicable to the provisions of this Section 5.
(f) Adjustment of Exercise Price upon Issuance of Common Stock, Options,
Convertible Securities, Etc. Subject to the limitations contained in Section
5(d) hereof (i) If at any time after the Date of Issuance for so long as any
Warrants are outstanding, the Company (A) issues or sells any Common Stock,
Convertible Securities, warrants, or Options or (B) directly or indirectly
effectively reduces the conversion, exercise or exchange price for any
Convertible Securities or Options which are currently outstanding, at or to an
effective Per Share Selling Price (as defined below) which is less than the
greater of (I) the closing sale price per share of the Common Stock on the
Eligible Market which the Common Stock is traded on the Trading Day immediately
preceding such issue or sale (“Fair Market Price”), or (II) the Exercise Price,
then in each such case the Exercise Price in effect immediately prior to such
issue or sale date, as applicable, shall be automatically reduced effective
concurrently with such issue or sale to an amount determined by multiplying the
Exercise Price then in effect by a fraction, (x) the numerator of which shall be
the sum of (1) the number of shares of Common Stock outstanding immediately
prior to such issue or sale, plus (2) the number of shares of Common Stock which
the aggregate consideration received by the Company for such additional shares
would purchase at such Fair Market Price or Exercise Price, as the case may be,
and (y) the denominator of which shall be the number of shares of Common Stock
of the Company outstanding immediately after such issue or sale. The foregoing
provision shall not apply to any issuances or sales of Common Stock, Convertible
Securities or Options (i) pursuant to any Convertible Securities or Options
currently outstanding on the date hereof in accordance with the terms of such
Convertible Securities in effect on the date hereof provided that such
securities have not been amended since the date hereof to directly or indirectly
effectively reduce the conversion, exercise or exchange price for any
Convertible Securities or Options which are currently outstanding, or (ii) to
the extent that the total number of shares of Common Stock and the shares
underlying all Convertible Securities and Options so issued in any 12 month
period does not exceed an amount equal to 15% of the number of shares of Common
Stock issued and outstanding as of the first day of such 12 month period,
subject to appropriate adjustment to reflect any stock splits,
recapitalizations, reclassifications or other similar events occurring after the
Date of Issuance.

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For the purposes of the foregoing adjustments, in the case of the issuance of
any Convertible Securities or Options, the maximum number of shares of Common
Stock issuable upon exercise, exchange or conversion of such Convertible
Securities or Options shall be deemed to be outstanding, provided that no
further adjustment shall be made upon the actual issuance of Common Stock upon
exercise, exchange or conversion of such Convertible Securities or Options, and
provided further that to the extent such Convertible Securities or Options
expire or terminate unconverted or unexercised, then at such time the Exercise
Price shall be readjusted as if such portion of such Convertible Securities or
Options had not been issued.
For purposes of this Section 5(f), if an event occurs that triggers more than
one of the above adjustment provisions, then only one adjustment shall be made
and the calculation method which yields the greatest downward adjustment in the
Exercise Price shall be used.
For purposes of determining the adjusted Exercise Price under this Section 5(f),
the following shall be applicable:
(i) Record Date. If the Company takes a record of the holders of Common Stock
for the purpose of entitling them (1) to receive a dividend or other
distribution payable in Common Stock, Options or in Convertible Securities or
(2) to subscribe for or purchase Common Stock, Options or Convertible
Securities, then such record date will be deemed to be the date of the issue or
sale of the Common Stock deemed to have been issued or sold upon the declaration
of such dividend or the making of such other distribution or the date of the
granting of such right of subscription or purchase, as the case may be.
(ii) Other Events. If any event occurs of the type contemplated by the
provisions of this Section 5(f) but not expressly provided for by such
provisions (including, without limitation, the granting of stock appreciation
rights, phantom stock rights or other rights with equity features), then the
Company’s Board of Directors will make an appropriate adjustment in the Exercise
Price so as to protect the rights of the Holder under this Warrant; provided
that no such adjustment will increase the Exercise Price as otherwise determined
pursuant to this Section 5(f).
For purposes hereof:
“Convertible Securities” means any stock or securities (other than Options)
directly or indirectly convertible into or exercisable or exchangeable for
Common Stock.
“Options” means any rights, warrants or options to subscribe for or purchase
Common Stock or Convertible Securities.
“Per Share Selling Price” shall include the amount actually paid by third
parties for each share of Common Stock in a sale or issuance by the Company. A
sale of shares of Common Stock shall include the sale or issuance of Convertible
Securities or Options, and in such circumstances the Per Share Selling Price of
the Common Stock covered thereby shall also include the exercise, exchange or
conversion price thereof (in addition to the consideration received by the
Company upon such sale or issuance). In case of any such security issued in a
transaction in which the purchase price or the conversion, exchange or exercise
price is directly or indirectly subject to adjustment or reset based on a future
date, future trading prices of the Common Stock, specified or contingent events
directly or indirectly related to the business of the Company or the market for
the Common Stock, or otherwise (but excluding standard stock split anti-dilution
provisions or weighted-average anti-dilution provisions similar to that set
forth herein, provided that any actual reduction of such price under any such
security pursuant to such weighted-average anti-dilution provision shall be
included and cause an adjustment hereunder), the Per Share Selling Price shall
be deemed to be the lowest conversion, exchange, exercise or reset price at
which such securities are converted, exchanged, exercised or reset or might have
been converted, exchanged, exercised or reset, or the lowest adjustment, as the
case may be, over the life of such securities. If shares are issued for a
consideration other than cash, the Per Share Selling Price shall be the fair
value of such consideration as determined in good faith by independent certified
public accountants mutually acceptable to the Company and the Holder. In the
event the Company directly or indirectly effectively reduces the conversion,
exercise or exchange price for any Convertible Securities or Options which are
currently outstanding, then the Per Share Selling Price shall equal such
effectively reduced conversion, exercise or exchange price .
(g) Subsequent Rights Offerings. Subject to the limitations contained in Section
5(d) hereof, if the Company, at any time prior to the date that all of the
Warrants have been Exercised, redeemed or otherwise satisfied in accordance with
their terms, shall issue rights, options or warrants to all holders of Common
Stock (and not to Holders) entitling them to subscribe for or purchase shares of
Common Stock at a price per share (the “Base Rights Offering Price”) that is
lower than the Volume Weighted Average Price on the record date referenced
below, then the Exercise Price then in effect shall be reduced to the Base
Rights Offering Price. Such adjustment shall be made whenever such rights or
warrants are issued, and shall become effective immediately after the record
date for the determination of stockholders entitled to receive such rights,
options or warrants. No adjustment shall be made hereunder if such adjustment
would result in an increase of the Exercise Price then in effect.
(h) Additional Adjustment to Exercise Price. If on the 18 month anniversary of
the Date of Issuance, the Applicable Market Price is less than $6.00 per share,
the Exercise Price shall be reduced to $6.00. For purposes hereof “Applicable
Market Price” means the average closing price of the Common Stock on NASDAQ, or,
if NASDAQ is not the principal trading market for the Common Stock, the
principal securities exchange or other securities market on which the Common
Stock is then being traded, for the 10 Trading Days immediately preceding the
18 month anniversary of the Date of Issuance. The provisions of this subsection
(h) shall be appropriately adjusted to reflect stock splits, recapitalizations,
reclassifications or other similar events.

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(i) Notice of Adjustments. Whenever the Exercise Price is adjusted pursuant to
the terms of this Warrant, the Company shall promptly mail to the Holder a
notice (an “Exercise Price Adjustment Notice”) setting forth the Exercise Price
after such adjustment and setting forth a statement of the facts requiring such
adjustment. The Company shall, upon the written request at any time of the
Holder, furnish to such Holder a like Warrant setting forth (i) such adjustment
or readjustment, (ii) the Exercise Price at the time in effect and (iii) the
number of shares of Common Stock and the amount, if any, of other securities or
property which at the time would be received upon Exercise of the Warrant. For
purposes of clarification, whether or not the Company provides an Exercise Price
Adjustment Notice pursuant to this Section 5(i), upon the occurrence of any
event that leads to an adjustment of the Exercise Price, the Holders are
entitled to receive a number of Exercise Shares based upon the new Exercise
Price, as adjusted, for exercises occurring on or after the date of such
adjustment, regardless of whether a Holder accurately refers to the adjusted
Exercise Price in the Exercise Form.
(j) Purchase Rights. In addition to any other adjustments described herein, if
at any time the Company grants, issues or sells any Options, Convertible
Securities or rights to purchase stock, warrants, securities or other property
pro rata to the record holders of any class of shares of Common Stock (the
“Purchase Rights”), then the Holder will be entitled to acquire, upon the terms
applicable to such Purchase Rights, the aggregate Purchase Rights which the
Holder could have acquired if the Holder had held the proportionate number of
shares of Common Stock acquirable upon complete exercise of this Warrant
(without regard to any limitations on the exercise of this Warrant) immediately
before the date on which a record is taken for the grant, issuance or sale of
such Purchase Rights, or, if no such record is taken, the date as of which the
record holders of shares of Common Stock are to be determined for the grant,
issue or sale of such Purchase Rights.
6. Fractional Interests.
No fractional shares or scrip representing fractional shares shall be issuable
upon the Exercise of this Warrant, but on Exercise of this Warrant, Holder may
purchase only a whole number of shares of Common Stock. If, on Exercise of this
Warrant, Holder would be entitled to a fractional share of Common Stock or a
right to acquire a fractional share of Common Stock, such fractional share shall
be disregarded and the number of shares of Common Stock issuable upon Exercise
shall be the next higher number of shares.
7. Reservation of Shares.
From and after the date hereof, the Company shall at all times reserve for
issuance such number of authorized and unissued shares of Common Stock (or other
securities substituted therefor as herein above provided) as shall be sufficient
for the Exercise of this Warrant and payment of the Exercise Price. If at any
time the number of shares of Common Stock authorized and reserved for issuance
is below the number of shares sufficient for the Exercise of this Warrant (a
“Share Authorization Failure”) (based on the Exercise Price in effect from time
to time), the Company will promptly take all corporate action necessary to
authorize and reserve a sufficient number of shares, including, without
limitation, calling a special meeting of stockholders to authorize additional
shares to meet the Company’s obligations under this Section 7, in the case of an
insufficient number of authorized shares, and using its best efforts to obtain
stockholder approval of an increase in such authorized number of shares. The
Company covenants and agrees that upon the Exercise of this Warrant, all shares
of Common Stock issuable upon such Exercise shall be duly and validly issued,
fully paid and nonassessable and not subject to preemptive rights, rights of
first refusal or similar rights granted or provided by the Company to any person
or entity.
8. Restrictions on Transfer.
(a) Registration or Exemption Required. Subject to the representations and
warranties of the Holder set forth in Section ___of the Facility Agreement, this
Warrant has been issued in a transaction exempt from the registration
requirements of the Securities Act by virtue of Regulation D and exempt from
state registration under applicable state laws. The Warrant and the Common Stock
issuable upon the Exercise of this Warrant may not be pledged, transferred, sold
or assigned except pursuant to an effective registration statement or an
exemption to the registration requirements of the Securities Act and applicable
state laws including, without limitation, a so-called “4(1) and a half”
transaction.
(b) Assignment. Subject to Section 8(a), the Holder may sell, transfer, assign,
pledge or otherwise dispose of this Warrant, in whole or in part. Holder shall
deliver a written notice to Company, substantially in the form of the Assignment
attached hereto as Exhibit B, indicating the person or persons to whom the
Warrant shall be assigned and the respective number of warrants to be assigned
to each assignee. The Company shall effect the assignment within three
(3) business days (the “Transfer Delivery Period”), and shall deliver to the
assignee(s) designated by Holder a Warrant or Warrants of like tenor and terms
for the appropriate number of shares. This Warrant and the rights evidenced
hereby shall inure to the benefit of and be binding upon the successors and
assigns of the Holder. The provisions of this Warrant are intended to be for the
benefit of all Holders from time to time of this Warrant, and shall be
enforceable by any such Holder. For avoidance of doubt, in the event Holder
notifies the Company that such sale or transfer is a so called “4(1) and half”
transaction, the parties hereto agree that a legal opinion from outside counsel
for the Holder delivered to counsel for the Company substantially in the form
attached hereto as Exhibit C shall be the only requirement to satisfy an
exemption from registration under the Securities Act to effectuate such “4(1)
and half” transaction.

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9. Noncircumvention. The Company hereby covenants and agrees that the Company
will not, by amendment of its certificate of incorporation, bylaws or through
any reorganization, transfer of assets, consolidation, merger, scheme of
arrangement, dissolution, issue or sale of securities, or any other voluntary
action, avoid or seek to avoid the observance or performance of any of the terms
of this Warrant, and will at all times in good faith carry out all the
provisions of this Warrant and take all action as may be reasonably required to
protect the rights of the Holder. Without limiting the generality of the
foregoing, the Company (i) shall not increase the par value of any shares of
Common Stock receivable upon the exercise of this Warrant above the Exercise
Price then in effect, and (ii) shall take all such actions as may be necessary
or appropriate in order that the Company may validly and legally issue fully
paid and nonassessable shares of Common Stock upon the exercise of this Warrant.
10. Events of Failure; Definition of Black Scholes Value.
(a) Definition.
The occurrence of each of the following shall be considered to be an “Event of
Failure.”

    (i) A Delivery Failure occurs, where a “Delivery Failure” shall be deemed to
have occurred if the Company fails to use its best efforts to deliver Exercise
Shares to the Holder within any applicable Delivery Period;       (ii) A Legend
Removal Failure occurs, where a “Legend Removal Failure” shall be deemed to have
occurred if the Company fails to use its best efforts to issue this Warrant
and/or Exercise Shares without a restrictive legend, or fails to use its best
efforts to remove a restrictive legend, when and as required under Section 2(e)
hereof;       (iii) a Transfer Delivery Failure occurs, where a “Transfer
Delivery Failure” shall be deemed to have occurred if the Company fails to use
its best efforts to deliver a Warrant within any applicable Transfer Delivery
Period; and       (iv) a Registration Failure (as defined below).

For purpose hereof, “Registration Failure” means that (A) the Company fails to
file with the SEC on or before the Filing Deadline (as defined in the
Registration Rights Agreement) any Registration Statement required to be filed
pursuant to Section 2(a) of the Registration Rights Agreement, or (B) the
Company fails to use its best efforts to obtain effectiveness with the SEC,
prior to the Registration Deadline (as defined in the Registration Rights
Agreement), and, if such Registration Statement is not so filed prior to the
Registration Deadline, as soon as possible thereafter, of any Registration
Statement (as defined in the Registration Rights Agreement) that is required to
be filed pursuant to Section 2(a) of the Registration Rights Agreement, or fails
to use best efforts to keep such Registration Statement current and effective as
required in Section 3 of the Registration Rights Agreement, (C) the Company
fails to file any amendment to the Registration Statement, or any additional
Registration Statement required to be filed pursuant to Section 3(b) of the
Registration Rights Agreement within twenty (20) days of the applicable
Registration Trigger Date (as defined in the Registration Rights Agreement), or
fails to use its best efforts to cause such amendment and/or new Registration
Statement to become effective as soon as practicable thereafter, or (iv) any
Registration Statement required to be filed under the Registration Rights
Agreement, after its initial effectiveness and during the Registration Period
(as defined in the Registration Rights Agreement), lapses in effect or sales of
all of the Registrable Securities (as defined in the Registration Rights
Agreement) cannot otherwise be made thereunder (whether by reason of the
Company’s failure to amend or supplement the prospectus included therein in
accordance with the Registration Rights Agreement, the Company’s failure to file
and use best efforts to obtain effectiveness with the SEC of an additional
Registration Statement or amended Registration Statement required pursuant to
Section 3 of the Registration Rights Agreement or otherwise), or (D) the Company
fails to provide a commercially reasonable written response to any comments to
any Registration Statement submitted by the SEC within twenty (20) days of the
date that such SEC comments are received by the Company.
(b) Failure Payments; Black-Scholes Determination. The Company understands that
any Event of Failure (as defined above) could result in economic loss to the
Holder. In the event that any Event of Failure occurs, as compensation to the
Holder for such loss, the Company agrees to pay (as liquidated damages and not
as a penalty) to the Holder an amount payable (i) in cash, if the Senior Notes
are no longer outstanding, or (ii) if any of the Senior Notes are outstanding,
in shares of Common Stock that are valued for these purposes at 95% of the
Volume Weighted Average Price on the date of such calculation (“Failure
Payments”), in each case, equal to 18% per annum (or the maximum rate permitted
by applicable law, whichever is less) of the Black-Scholes value (as determined
below) of the remaining unexercised portion of this Warrant on the date of such
Event of Failure (as recalculated on the first business day of each month
thereafter for as long as Failure Payments shall continue to accrue), which
shall accrue daily from the date of such Event of Failure until the Event of
Failure is cured, accruing daily and compounded monthly, provided, however, in
the event the Failure Payments are paid in shares of Common Stock, the Holder
shall receive up to such amount of shares of Common Stock such that Holder and
its Affiliates and any other persons or entities whose beneficial ownership of
Common Stock would be aggregated with the Holder’s for purposes of Section 13(d)
of the Exchange Act (including shares held by any “group” of which the Holder is
a member, but excluding shares beneficially owned by virtue of the ownership of
securities or rights to acquire securities that have limitations on the right to
convert, exercise or purchase similar to the limitation set forth herein) shall
not collectively beneficially own greater than 9.98% of the total number of
shares of the Common Stock then issued and outstanding. For purposes of
clarification, it is agreed and understood that Failure Payments shall continue
to accrue following any Event of Default until the applicable Default Amount is
paid in full.

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Notwithstanding the above, in the event that the Company (i) has, by the Filing
Deadline (as defined the Registration Rights Agreement) filed a Registration
Statement (as defined in the Registration Rights Agreement) covering the number
of shares required by the Registration Rights Agreement, and (ii) has responded
in writing to any comments to the Registration Statement that the Company has
received from the SEC, within seven (7) Business Days of such receipt, and
nevertheless the SEC has not declared effective a Registration Statement
covering the full number of Warrant Shares issuable upon exercise of the
Warrants by the Registration Deadline (as defined in the Registration Rights
Agreement) then, the Failure Payments attributable to such late Registration
Effectiveness (if any, recognizing that no such Failure Payments shall be due if
the Company used its best efforts to obtain effectiveness with the SEC prior to
the Registration Deadline) shall be reduced from 18% to 15% (calculated as set
forth above). The Company shall pay any payments incurred under this Section in
cash or cash equivalent upon demand or, if not demanded sooner, within five
business (5) days of the end of each calendar month. Failure Payments are in
addition to any Shares that the Holder is entitled to receive upon Exercise of
this Warrant.
For purposes hereof, the “Black-Scholes” value of a Warrant shall be determined
by use of the Black Scholes Option Pricing Model using the criteria set forth on
Schedule 1 hereto.
(c) Payment of Accrued Failure Payments. The accrued Failure Payments for each
Event of Failure shall be paid in immediately available funds on or before the
fifth (5th) day of each month following a month in which Failure Payments
accrued. Except as provided in Section 11 hereof, Failure Payments shall be the
Company’s sole and exclusive liability and the Holder’s sole and exclusive
remedy, with respect to such Event of Failure. Notwithstanding the above, if a
particular Event of Failure results in an Event of Default pursuant to
Section 11 hereof, then the Failure Payment, for that Event of Failure only,
shall be considered to have been satisfied upon payment to the Holder of an
amount equal to the greater of (i) the Failure Payment, or (ii) the Default
Amount, payable in accordance with Section 11, and, except as provided in
Section 11 hereof, the payment by the Company of such greater amount shall
constitute the Holder’s sole and exclusive remedy, and the Company’s sole and
exclusive liability, with respect to such Event of Failure.
(d) Maximum Interest Rate. Nothing contained herein or in any document referred
to herein or delivered in connection herewith shall be deemed to establish or
require the payment of a rate of interest or other charges in excess of the
maximum permitted by applicable law. In the event that the rate of interest
required to be paid or other charges hereunder exceed the maximum permitted by
such law, any payments in excess of such maximum shall be credited against
amounts owed by the Company to the Holder and thus refunded to the Company.
11. Default and Redemption.
(a) Events Of Default. Each of the following events shall be considered to be an
“Event of Default,” unless waived by the Holder:
(i) Registration Failure. A Registration Failure occurs and remains uncured for
a period of more than forty five (45) days;
(ii) Delivery Failure. A Delivery Failure (as defined above) occurs and remains
uncured for a period of more than twenty (20) days; or at any time, the Company
announces or states in writing that it will not honor its obligations to issue
shares of Common Stock to the Holder upon Exercise by the Holder of the Exercise
rights of the Holder in accordance with the terms of this Warrant;
(iii) Legend Removal Failure. A Legend Removal Failure (as defined above) occurs
and remains uncured for a period of twenty (20) days; and
(iv) Corporate Existence; Major Transaction. The Company has effected a Major
Transaction without paying the Major Transaction Warrant Redemption Price to the
Holder pursuant to Section 5(c)(iii) or, if the Holder did not elect a
Redemption Upon Major Transaction, the Company has failed to meet the Assumption
requirements of Section 5(c)(iii) prior to effecting a Major Transaction.
(b) Mandatory Redemption.
(i) Mandatory Redemption Amount. If any Events of Default shall occur then,
unless waived by the Holder, upon the occurrence and during the continuation of
any Event of Default, at the option of the Holder, such option exercisable
through the delivery of written notice to the Company by such Holder (the
“Default Notice”), the outstanding amount of this Warrant shall be immediately
redeemed by the Company and the Company shall pay to the Holder (a “Mandatory
Redemption”), in full satisfaction of its obligations hereunder, an amount
(A) in cash, if the Senior Notes are no longer outstanding, or (B) if any of the
Senior Notes are outstanding, in shares of Common Stock (the “Mandatory
Redemption Amount” or the “Default Amount”), in each case, equal to the greater
of (1) the Black-Scholes value (as determined in accordance with Section 10(b))
of the remaining unexercised portion of this Warrant on the date of such Default
Notice and (2) the Black-Scholes value (also as determined in accordance with
Section 10(b)) of the remaining unexercised portion of this Warrant on the
Trading Day immediately preceding the date that the Mandatory Redemption Amount
is paid to the Holder, provided, however, in the event the Mandatory Redemption
Amount is paid in shares of Common Stock, Holder shall receive up to such amount
of shares of Common Stock such that Holder and its Affiliates and any other
persons or entities whose beneficial ownership of Common Stock would be
aggregated with the Holder’s for purposes of Section 13(d) of the Exchange Act
(including shares held by any “group” of which the Holder is a member, but
excluding shares beneficially owned by virtue of ownership of securities or
rights to acquire securities that have limitations on the right to convert,
exercise or purchase

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similar to the limitation set forth herein) shall not collectively beneficially
own greater than 9.98% of the total number of shares of Common Stock then issued
and outstanding.
The Mandatory Redemption Amount shall be payable, in cash or cash equivalent,
within five (5) business days of the Date of the applicable Default Notice.
(ii) Liquidated Damages. The parties hereto acknowledge and agree that the sums
payable as Failure Payments or pursuant to a Mandatory Redemption shall give
rise to liquidated damages and not penalties. The parties further acknowledge
that (i) the amount of loss or damages likely to be incurred by the Holder is
incapable or is difficult to precisely estimate, (ii) the amounts specified bear
a reasonable proportion and are not plainly or grossly disproportionate to the
probable loss likely to be incurred by the Holder, and (iii) the parties are
sophisticated business parties and have been represented by sophisticated and
able legal and financial counsel and negotiated this Agreement at arm’s length.
The Default Amount, together with all other amounts payable hereunder, shall
immediately become due and payable, all without demand, presentment or notice,
all of which hereby are expressly waived, together with all costs, including,
without limitation, legal fees and expenses, of collection, and the Holder shall
be entitled to exercise all other rights and remedies available at law or in
equity.
(c) Posting Of Bond. In the event that any Event of Default occurs hereunder,
the Company may not raise as a legal defense (in any Lawsuit, as defined below,
or otherwise) or justification to such Event of Default any claim that such
Holder or any one associated or affiliated with such Holder has been engaged in
any violation of law, unless the Company has posted a surety bond (a “Surety
Bond”) for the benefit of such Holder in the amount of 130% of the aggregate
Surety Bond Value (as defined below) of all of the Holder’s Warrants (the “Bond
Amount”), which Surety Bond shall remain in effect until the completion of
litigation of the dispute and the proceeds of which shall be payable to such
Holder to the extent Holder obtains judgment.
For purposes hereof, a “Lawsuit” shall mean any lawsuit, arbitration or other
dispute resolution filed by either party herein pertaining to any of this
Warrant, the Facility Agreement and the Registration Rights Agreement.
“Surety Bond Value,” for the Warrants shall mean 130% of the of the
Black-Scholes value of the remaining unexercised portion of this Warrant on the
Trading Day immediately preceding the date that such bond goes into effect).
(d) Injunction And Posting Of Bond. In the event that the Event of Default
referred to in subsection (c) above pertains to the Company’s failure to deliver
unlegended shares of Common Stock to the Holder pursuant to a Warrant Exercise,
legend removal request, or otherwise, the Company may not refuse such unlegended
share delivery based on any claim that such Holder or any one associated or
affiliated with such Holder has been engaged in any violation of law, unless an
injunction from a court, on prior notice to Holder, restraining and or enjoining
Exercise of all or part of said Warrant shall have been sought and obtained by
the Company and the Company has posted a Surety Bond for the benefit of such
Holder in the amount of the Bond Amount, which Surety Bond shall remain in
effect until the completion of litigation of the dispute and the proceeds of
which shall be payable to such Holder to the extent Holder obtains judgment.
(e) Remedies, Other Obligations, Breaches And Injunctive Relief. The remedies
provided in this Warrant shall be cumulative and in addition to all other
remedies available under this Warrant, the Facility Agreement and the
Registration Rights Agreement, at law or in equity (including a decree of
specific performance and/or other injunctive relief). The Company acknowledges
that a breach by it of its obligations hereunder will cause irreparable harm to
the Holder and that the remedy at law for any such breach may be inadequate. The
Company therefore agrees that, in the event of any such breach or threatened
breach, the Holder of this Warrant shall be entitled, in addition to all other
available remedies, to an injunction restraining any breach, without the
necessity of showing economic loss and without any bond or other security being
required.
(f) Limitation on Issuance of Common Stock. Notwithstanding anything herein to
the contrary, in no event shall the number of shares of Common Stock issuable
pursuant to this Warrant exceed 20% of the total number of shares of Common
Stock issued and outstanding on the Date of Issuance. The restriction contained
in the immediately preceding sentence shall be appropriately adjusted to reflect
any stock splits, reclassifications, recapitalizations or like events.
Section 12. Holder’s Redemptions.
(a) Mechanics of Holder’s Redemptions. In the event that the Holder has sent a
Default Notice or a Major Transaction Redemption Notice to the Company pursuant
to Section 5(c) or a Default Notice pursuant to Section 11(b)(i), respectively
(each, a “Redemption Notice”), the Holder shall promptly submit this Warrant to
the Company. If the Holder has submitted a Major Transaction Redemption Notice
in accordance with Section 5(c)(iii), the Company shall deliver the applicable
Major Transaction Redemption Price to the Holder concurrently with the
consummation of such Major Transaction. In the event that the Company does not
pay the applicable Major Transaction Warrant Redemption Price to the Holder
within the time period required, at any time thereafter and until the Company
pays such unpaid Major Transaction Warrant Redemption Price in full, the Holder
shall have the option, in lieu of redemption, to require the Company to promptly
return to the Holder all or any portion of this Warrant that was submitted for
redemption and for which the applicable Major Transaction Warrant Redemption
Price (together with any late charges thereon) has not been paid. Upon the
Company’s receipt of such notice, (x) the applicable Redemption Notice shall be
null and void with respect to

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such Redemption Principal Amount, (y) the Company shall immediately return this
Warrant, or issue a new Warrant to the Holder representing the portion of this
Warrant that was submitted for redemption and (z) the Exercise Price of this
Warrant or such new Warrant shall be adjusted to the lesser of (A) the Exercise
Price as in effect on the date on which the applicable Redemption Notice is
voided and (B) subject to the limitations contained in Section 5(d) hereof, the
lowest closing price for the Common Stock on NASDAQ, or, if NASDAQ is not the
principal trading market for the Common Stock, the principal securities exchange
or other securities market on which the Common Stock is then being traded,
during the period beginning on and including the date on which the applicable
Redemption Notice is delivered to the Company and ending on and including the
date on which the applicable Redemption Notice is voided. The Holder’s delivery
of a notice voiding a Redemption Notice and exercise of its rights following
such notice shall not affect the Company’s obligations to make any payments of
Failure Payments which have accrued prior to the date of such notice with
respect to the Warrant subject to such notice.
13. Benefits of this Warrant.
Nothing in this Warrant shall be construed to confer upon any person other than
the Company and Holder any legal or equitable right, remedy or claim under this
Warrant and this Warrant shall be for the sole and exclusive benefit of the
Company and Holder.
14. Governing Law.
All questions concerning the construction, validity, enforcement and
interpretation of this Agreement shall be governed by and construed and enforced
in accordance with the internal laws of the State of New York, without regard to
the principles of conflicts of law thereof. Each party agrees that all legal
proceedings concerning the interpretations, enforcement and defense of the
transactions contemplated by this Agreement (whether brought against a party
hereto or its respective affiliates, directors, officers, shareholders,
employees or agents) shall be commenced exclusively in the state and federal
courts sitting in the City 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 improper
or is an inconvenient venue for such proceeding. 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 via registered or
certified mail or overnight delivery (with evidence of delivery) to such party
at the address in effect for 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 way any right
to serve process in any other manner permitted by law. The parties hereby waive
all rights to a trial by jury. If either party shall commence an action or
proceeding to enforce any provisions of this Agreement, then the prevailing
party in such action or proceeding shall be reimbursed by the other party for
its reasonable attorneys’ fees and other costs and expenses incurred with the
investigation, preparation and prosecution of such action or proceeding.
15. Loss of Warrant.
Upon receipt by the Company of evidence of the loss, theft, destruction or
mutilation of this Warrant, and (in the case of loss, theft or destruction) of
indemnity or security reasonably satisfactory to the Company, and upon surrender
and cancellation of this Warrant, if mutilated, the Company shall execute and
deliver a new Warrant of like tenor and date.
16. Notice or Demands.
Notices or demands pursuant to this Warrant to be given or made by Holder to or
on the Company shall be sufficiently given or made if sent by certified or
registered mail, return receipt requested, postage prepaid, and addressed, until
another address is designated in writing by the Company, to the address set
forth in Section 2(a) above. Notices or demands pursuant to this Warrant to be
given or made by the Company to or on Holder shall be sufficiently given or made
if sent by certified or registered mail, return receipt requested, postage
prepaid, and addressed, to the address of Holder set forth in the Company’s
records, until another address is designated in writing by Holder.
IN WITNESS WHEREOF, the undersigned has executed this Warrant as of the 10th day
of December, 2007.

      THIRD WAVE TECHNOLOGIES, INC.
 
   
By:
  /s/ Kevin Conroy
 
   
Print Name:
  Kevin Conroy
Title:
  President and CEO

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EXHIBIT A
EXERCISE FORM FOR WARRANT
TO: THIRD WAVE TECHNOLOGIES, INC.
The undersigned hereby irrevocably Exercises the right to purchase            of
the shares of Common Stock (the “Common Stock”) of THIRD WAVE TECHNOLOGIES,
INC., a Delaware corporation (the “Company”), evidenced by the attached warrant
(the “Warrant”), and herewith makes payment of the Exercise Price with respect
to such shares in full, all in accordance with the conditions and provisions of
said Warrant.
1. The undersigned agrees not to offer, sell, transfer or otherwise dispose of
any of the Common Stock obtained on Exercise of the Warrant, except in
accordance with the provisions of Section 8(a) of the Warrant.
2. The undersigned requests that any stock certificates for such shares be
issued free of any restrictive legend, if appropriate, and a warrant
representing any unexercised portion hereof be issued, pursuant to the Warrant
in the name of the undersigned and delivered to the undersigned at the address
set forth below.
3. The undersigned is exercising the attached Warrant pursuant to:
¨ Cash Exercise      ¨ Cashless Exercise
Dated:                               
 
Signature
 
Print Name
 
Address
NOTICE
The signature to the foregoing Exercise Form must correspond to the name as
written upon the face of the attached Warrant in every particular, without
alteration or enlargement or any change whatsoever.

 

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EXHIBIT B
ASSIGNMENT
(To be executed by the registered holder
desiring to transfer the Warrant)
FOR VALUE RECEIVED, the undersigned holder of the attached warrant (the
“Warrant”) hereby sells, assigns and transfers unto the person or persons below
named the right to purchase              shares of the Common Stock of THIRD
WAVE TECHNOLOGIES, INC., a Delaware corporation, evidenced by the attached
Warrant and does hereby irrevocably constitute and appoint attorney to transfer
the said Warrant on the books of the Company, with full power of substitution in
the premises.

         
Dated:
                 
 
      Signature
 
        Fill in for new registration of Warrant:    
 
              Name    
 
              Address    
 
              Please print name and address of assignee
(including zip code number)    

NOTICE
The signature to the foregoing Assignment must correspond to the name as written
upon the face of the attached Warrant in every particular, without alteration or
enlargement or any change whatsoever.

 

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EXHIBIT C
FORM OF OPINION
______, 20__
[___________]
Re: Third Wave Technologies, Inc. (the “Company”)
Dear Sir:
[______] (“[______]”) intends to transfer ______ Warrants (the “Warrants”) of
the Company to ______ (“______”) without registration under the Securities Act
of 1933, as amended (the “Securities Act”). In connection therewith, we have
examined and relied upon the truth of representations contained in an Investor
Representation Letter attached hereto and have examined such other documents and
issues of law as we have deemed relevant.
Based on and subject to the foregoing, we are of the opinion that the transfer
of the Warrants by ______ to ______ may be effected without registration under
the Securities Act, provided, however, that the Warrants to be transferred to
______ contain a legend restricting its transferability pursuant to the
Securities Act and that transfer of the Warrants is subject to a stop order.
The foregoing opinion is furnished only to ______ and may not be used,
circulated, quoted or otherwise referred to or relied upon by you for any
purposes other than the purpose for which furnished or by any other person for
any purpose, without our prior written consent.
Very truly yours,

 

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[FORM OF INVESTOR REPRESENTATION LETTER]
_____, 20__
[_________________]
Gentlemen:
______ (“______”) has agreed to purchase ______ Warrants (the “Warrants”) of
Third Wave Technologies, Inc. (the “Company”) from [______] (“[______]”). We
understand that the Warrants are “restricted securities.” We represent and
warrant that ______ is a sophisticated institutional investor that would qualify
as an “Accredited Investor” as defined in Rule 501 of Regulation D under the
Securities Act of 1933, as amended (the “Securities Act”).
______ represents and warrants as of the date hereof as follows:

    1. That it is acquiring the Warrants and the shares of common stock, $0.001
par value per share underlying such Warrants (the “Exercise Shares”) solely for
its account for investment and not with a view to or for sale or distribution of
said Warrants or Exercise Shares or any part thereof. ______ also represents
that the entire legal and beneficial interests of the Warrants and Exercise
Shares ______ is acquiring is being acquired for, and will be held for, its
account only;       2. That the Warrants and the Exercise Shares have not been
registered under the Securities Act on the basis that no distribution or public
offering of the stock of the Company is to be effected. ______ realizes that the
basis for the exemption may not be present if, notwithstanding its
representations, ______ has a present intention of acquiring the securities for
a fixed or determinable period in the future, selling (in connection with a
distribution or otherwise), granting any participation in, or otherwise
distributing the securities. ______ has no such present intention;       3. That
the Warrants and the Exercise Shares must be held indefinitely unless they are
subsequently registered under the Securities Act or an exemption from such
registration is available. ______ recognizes that the Company has no obligation
to register the Warrants, or to comply with any exemption from such
registration;       4. That neither the Warrants nor the Exercise Shares may be
sold pursuant to Rule 144 adopted under the Securities Act unless certain
conditions are met, including, among other things, the existence of a public
market for the shares, the availability of certain current public information
about Company, the resale following the required holding period under Rule 144
and the number of shares being sold during any three month period not exceeding
specified limitations;       5. That it will not make any disposition of all or
any part of the Warrants or Exercise Shares in any event unless and until:

(i)   The Company shall have received a letter secured by ______ from the
Securities and Exchange Commission stating that no action will be recommended to
the Securities and Exchange Commission with respect to the proposed disposition;

(ii)   There is then in effect a registration statement under the Securities Act
covering such proposed disposition and such disposition is made in accordance
with said registration statement; or

(iii)   ______ shall have notified the Company of the proposed disposition and,
in the case of a sale or transfer in a so called “4(1) and a half” transaction,
shall have furnished counsel to the Company with an opinion of counsel,
reasonably satisfactory to counsel to the Company.

We acknowledge that the Company will place stop orders with respect to the
Warrants and the Warrants, and if a registration statement is not effective, the
Exercise Shares shall bear the following restrictive legend:

    “THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES
LAWS. THE SECURITIES MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF
AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER SAID ACT, OR
PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER SAID ACT INCLUDING, WITHOUT
LIMITATION, PURSUANT TO RULES 144 OR

 

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    144A UNDER SAID ACT OR PURSUANT TO A PRIVATE SALE EFFECTED UNDER APPLICABLE
FORMAL OR INFORMAL SEC INTERPRETATION OR GUIDANCE, SUCH AS A SO-CALLED “4(1) AND
A HALF” SALE.”       “THE SALE, TRANSFER OR ASSIGNMENT OF THE SECURITIES
REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE TERMS AND CONDITIONS OF A
CERTAIN REGISTRATION RIGHTS AGREEMENT DATED AS OF DECEMBER ___, 2007, AS AMENDED
FROM TIME TO TIME, AMONG THE COMPANY AND CERTAIN HOLDERS OF ITS OUTSTANDING
SECURITIES. COPIES OF SUCH AGREEMENT MAY BE OBTAINED AT NO COST BY WRITTEN
REQUEST MADE BY THE HOLDER OF RECORD OF THIS CERTIFICATE TO THE SECRETARY OF THE
COMPANY.”

At any time and from time to time after the date hereof, ______ shall, without
further consideration, execute and deliver to [______] or the Company such other
instruments or documents and shall take such other actions as they may
reasonably request to carry out the transactions contemplated hereby.
Very truly yours,

 

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Schedule 1
Calculation of Intrinsic Value and Black-Scholes Value

                  Calculation of Intrinsic Value       Calculation of
Black-Scholes     Under Section 5(c)(iii)       Under Section 10(b) or 11(b)
 
           
Intrinsic Value
  The excess of the Stock Price minus the then Exercise Price at the time of
calculation. For avoidance of doubt, the Intrinsic Value shall never be less
than zero.   Remaining Term   Number of calendar days from date of the Event of
Failure until the last date on which the Warrant may be exercised.
 
           
Stock Price
  The greater of (1) the closing price of the Common Stock on NASDAQ, or, if
that is not the principal trading market for the Common Stock, such principal
market on which the Common Stock is traded or listed (the “Closing Market
Price”) on the trading day immediately preceding the date on which a Major
Transaction is consummated, (2) the first Closing Market Price following the
first public announcement of a Major Transaction, (3) the Volume Weighted
Average Price as of the date immediately preceding the first public announcement
of the Major Transaction or (4) the per share value of the consideration to be
received by the Company and/or stockholders in a Major Transaction.   Interest
Rate

Volatility

Stock Price

Dividends   A risk-free interest rate corresponding to the US$ LIBOR/Swap rate
for a period equal to the Remaining Term.

42%

The volume Weighted Average Price on the date of such calculation.

Zero.