Exhibit 10.12.1

 

 

 

 

 

WARRANT AGREEMENT

BY AND BETWEEN

TRC COMPANIES, INC.

AND

FEDERAL PARTNERS, L.P.

Dated July 19, 2006

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Table of Contents

 

 

 

 

Page

SECTION 1.

 

Definitions

 

1

SECTION 2.

 

Representations and Warranties

 

2

SECTION 3.

 

Issuance of Warrants

 

3

SECTION 4.

 

Registration, Transfer and Exchange of Certificates

 

3

SECTION 5.

 

Mutilated or Missing Warrant Certificates

 

4

SECTION 6.

 

Duration and Exercise of Warrants

 

4

SECTION 7.

 

No Fractional Shares

 

5

SECTION 8.

 

Payment of Taxes

 

5

SECTION 9.

 

Warrant Holder Rights; Dividends and Distributions

 

6

SECTION 10.

 

Reservation and Issuance of Warrant Shares

 

6

SECTION 11.

 

Obtaining of Governmental Approvals and Stock Exchange Listings

 

6

SECTION 12.

 

Adjustment of Exercise Price and Number of Warrant Shares Purchasable

 

6

SECTION 13.

 

Notices to Warrant Holders

 

9

SECTION 14.

 

Representations of Holder

 

10

SECTION 15.

 

Amendments and Waivers

 

11

SECTION 16.

 

Specific Performance

 

11

SECTION 17.

 

Notices

 

11

SECTION 18.

 

Binding Effect

 

11

SECTION 19.

 

Termination

 

11

SECTION 20.

 

Counterparts

 

11

SECTION 21.

 

Delaware Law

 

11

SECTION 22.

 

Benefits of this Warrant Agreement

 

11

 

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WARRANT AGREEMENT, dated July 19, 2006, between TRC COMPANIES, INC., a Delaware
corporation (the “Issuer”), and FEDERAL PARTNERS, L.P., a Delaware limited
partnership (the “Holder”).

WHEREAS, the Issuer and its wholly-owned subsidiaries (together, “TRC”) and
Holder are parties to the Subordinated Loan Agreement dated as of the date
hereof (as the same may be amended, supplemented or otherwise modified from time
to time, the “Subordinated Loan Agreement”), pursuant to which Holder has agreed
to make a subordinated loan to TRC; and

WHEREAS, in order to induce Holder to make the subordinated loan to TRC pursuant
to the Subordinated Loan Agreement, the Issuer has agreed to execute and deliver
this Warrant Agreement and to issue the Warrants hereinafter described.

NOW, THEREFORE, in consideration of the premises, the parties hereto agree as
follows:

SECTION 1.           DEFINITIONS.  AS USED IN THIS WARRANT AGREEMENT, TERMS
DEFINED IN THE SUBORDINATED LOAN AGREEMENT SHALL HAVE SUCH DEFINED MEANINGS WHEN
USED HEREIN (REGARDLESS OF WHETHER THE SUBORDINATED LOAN AGREEMENT SHALL STILL
BE IN EFFECT) AND THE FOLLOWING TERMS SHALL HAVE THE FOLLOWING MEANINGS, UNLESS
THE CONTEXT OTHERWISE REQUIRES:

“Business Day” shall mean any day excluding Saturday, Sunday and any day which
shall be in the City of New York a legal holiday or a day on which banking
institutions are authorized by law or other governmental actions to close.

“Common Stock” shall have the meaning set forth in Section 3.

“Current Market Price per Share” shall have the meaning specified in Section
12(b).

“Exchange Act” shall mean the Securities Exchange Act of 1934, as amended, or
any successor Federal statute.

“Exercise Price” shall mean the exercise price of a Warrant, which shall be $.01
per Warrant Share, subject to adjustment as provided in Section 12.

“Expiration Date” shall mean 5:00 p.m., New York City time, on the tenth
anniversary of the date hereof, or, if such day is not a Business Day, the next
succeeding Business Day.

“Requirement of Law” shall mean, as to any Person, the Certificate of
Incorporation and By-laws or other organizational or governing documents of such
Person and any law, treaty, rule or regulation or determination of an arbitrator
or a court or other governmental authority, in each case applicable to or
binding upon such Person or any of its property or to which such Person or any
of its property is subject.

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“Securities Act” shall mean the Securities Act of 1933, as amended, or any
successor Federal statute.

“Warrant” shall mean the warrant issued pursuant to this Warrant Agreement
entitling the record holder thereof to purchase from the Issuer at the Warrant
Office up to 66,000 shares of Common Stock (subject to adjustment as provided in
Section 12) at the Exercise Price at any time before 5:00 p.m., local time, on
the Expiration Date.

“Warrant Certificate” shall mean a certificate evidencing one or more Warrants,
substantially in the form of Exhibit A hereto, with such changes therein as may
be required to reflect any adjustments made pursuant to Section 12.

“Warrant Office” shall mean the office or agency of the Issuer at which the
Warrant Register shall be maintained and where the Warrants may be presented for
exercise, exchange, substitution and transfer, which office or agency will be
the office of the Issuer at 21 Griffen Road North, Windsor, Connecticut 06095,
which office or agency may be changed by the Issuer pursuant to notice in
writing to the Persons named in the Warrant Register as the holders of the
Warrants.

“Warrant Register” shall mean the register, substantially in the form of Exhibit
B hereto, maintained by the Issuer at the Warrant Office.

“Warrant Shares” shall mean the shares of Common Stock issuable or issued upon
exercise of the Warrants, as the number and/or type of such shares may be
adjusted from time to time pursuant to Section 12.

SECTION 2.           REPRESENTATIONS AND WARRANTIES.  THE ISSUER HEREBY
REPRESENTS AND WARRANTS, ON THE DATE HEREOF, AS FOLLOWS:

(A)           THE ISSUER IS A CORPORATION VALIDLY EXISTING AND IN GOOD STANDING
UNDER THE LAWS OF THE STATE OF DELAWARE AND HAS THE CORPORATE POWER AND
AUTHORITY TO EXECUTE AND DELIVER THIS WARRANT AGREEMENT AND THE WARRANT
CERTIFICATES, TO ISSUE THE WARRANTS AND TO PERFORM ITS OBLIGATIONS UNDER THIS
WARRANT AGREEMENT AND THE WARRANT CERTIFICATES.

(B)           THE EXECUTION, DELIVERY AND PERFORMANCE BY THE ISSUER OF THIS
WARRANT AGREEMENT AND THE WARRANT CERTIFICATES, THE ISSUANCE OF THE WARRANTS AND
THE ISSUANCE OF THE WARRANT SHARES UPON EXERCISE OF THE WARRANTS HAVE BEEN DULY
AUTHORIZED BY ALL NECESSARY CORPORATE ACTION.

(C)           THIS WARRANT AGREEMENT HAS BEEN DULY EXECUTED AND DELIVERED BY THE
ISSUER AND CONSTITUTES A LEGAL, VALID, BINDING AND ENFORCEABLE OBLIGATION OF THE
ISSUER, EXCEPT AS SUCH ENFORCEMENT MAY BE LIMITED BY BANKRUPTCY, INSOLVENCY,
REORGANIZATION, MORATORIUM OR OTHER SIMILAR LAWS AFFECTING CREDITORS’ RIGHTS
GENERALLY AND EXCEPT AS EQUITABLE REMEDIES MAY BE LIMITED BY GENERAL PRINCIPLES
OF EQUITY (WHETHER SUCH REMEDIES ARE SOUGHT IN A PROCEEDING AT LAW OR IN
EQUITY).  WHEN THE WARRANTS AND WARRANT CERTIFICATES HAVE BEEN ISSUED AS
CONTEMPLATED HEREBY, (I) THE WARRANTS AND THE WARRANT CERTIFICATES WILL
CONSTITUTE LEGAL, VALID, BINDING AND ENFORCEABLE OBLIGATIONS OF THE ISSUER,
EXCEPT AS SUCH ENFORCEMENT MAY BE LIMITED BY BANKRUPTCY, INSOLVENCY,
REORGANIZATION,

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MORATORIUM OR OTHER SIMILAR LAWS AFFECTING CREDITORS’ RIGHTS GENERALLY AND
EXCEPT AS EQUITABLE REMEDIES MAY BE LIMITED BY GENERAL PRINCIPLES OF EQUITY
(WHETHER SUCH REMEDIES ARE SOUGHT IN A PROCEEDING AT LAW OR IN EQUITY) AND (II)
THE WARRANT SHARES, WHEN ISSUED UPON EXERCISE OF THE WARRANTS IN ACCORDANCE WITH
THE TERMS THEREOF, WILL BE DULY AUTHORIZED, VALIDLY ISSUED, FULLY PAID AND
NONASSESSABLE SHARES OF THE COMMON STOCK.

(D)           (I) THE ISSUER’S CAPITAL STOCK CONSISTS OF 30,000,000 SHARES OF
COMMON STOCK, OF WHICH 17,538,691 HAVE BEEN ISSUED AND ARE OUTSTANDING AND OF
WHICH 66,000 HAVE BEEN RESERVED FOR ISSUANCE UPON EXERCISE OF THE WARRANTS; AND
500,000 SHARES OF PREFERRED STOCK, 15,000 OF WHICH ARE DESIGNATED AS SERIES A-1
CUMULATIVE CONVERTIBLE PREFERRED STOCK, AND ALL OF WHICH ARE ISSUED AND
OUTSTANDING, AND (II) OTHER THAN (A) THE SHARES REFERRED TO ABOVE AND (B) THE
WARRANTS, AND (C) OPTIONS TO PURCHASE 3,002,770 SHARES OF COMMON STOCK UNDER THE
COMPANY’S RESTATED STOCK OPTION PLAN AND 132,493 WARRANTS TO PURCHASE COMMON
STOCK, THERE ARE NO OUTSTANDING OPTIONS, WARRANTS, CONVERSION RIGHTS OR OTHER
RIGHTS TO OBTAIN ANY SHARES OF COMMON STOCK OR PREFERRED STOCK FROM THE ISSUER
OR ANY OTHER SECURITY ISSUED BY THE ISSUER CONVERTIBLE INTO OR EXCHANGEABLE FOR
SHARES OF COMMON STOCK OR PREFERRED STOCK OF THE ISSUER.

(E)           ALL OF THE ISSUED AND OUTSTANDING SHARES OF STOCK IN THE ISSUER
ARE VALIDLY ISSUED, FULLY PAID AND NONASSESSABLE, AND HAVE BEEN ISSUED IN
COMPLIANCE WITH ALL APPLICABLE FEDERAL AND STATE SECURITIES LAWS, RULES AND
REGULATIONS.

(F)            NEITHER THE ISSUER NOR ANY AFFILIATE OF THE ISSUER IS:

(I)            INVESTMENT COMPANY ACT.  AN “INVESTMENT COMPANY”, OR A COMPANY
“CONTROLLED” BY AN “INVESTMENT COMPANY”, WITHIN THE MEANING OF THE INVESTMENT
COMPANY ACT OF 1940, AS AMENDED.

(II)           HOLDING COMPANY ACT.  A “HOLDING COMPANY”, A “SUBSIDIARY COMPANY”
OF A “HOLDING COMPANY”, OR AN “AFFILIATE” OF A “HOLDING COMPANY” OR OF A
“SUBSIDIARY COMPANY” OF A “HOLDING COMPANY”, AS SUCH TERMS ARE DEFINED IN THE
PUBLIC UTILITY HOLDING COMPANY ACT OF 1935, AS AMENDED.

(III)          REGULATIONS AS TO BORROWING.  SUBJECT TO ANY STATUTE OR
REGULATION WHICH REGULATES THE INCURRENCE OF ANY INDEBTEDNESS INCLUDING, WITHOUT
LIMITATION, STATUTES OR REGULATIONS RELATIVE TO COMMON OR INTERSTATE CARRIERS OR
TO THE SALE OF ELECTRICITY, GAS, STEAM, WATER, TELEPHONE, TELEGRAPH OR OTHER
PUBLIC UTILITY SERVICES.

SECTION 3.           ISSUANCE OF WARRANTS.  THE ISSUER HEREBY AGREES TO ISSUE
AND DELIVER TO HOLDER ON THE CLOSING DATE WARRANTS EVIDENCING RIGHTS TO PURCHASE
66,000 SHARES OF COMMON STOCK, $.01 PAR VALUE PER SHARE, OF THE ISSUER (“COMMON
STOCK”), SUBJECT TO ADJUSTMENT AS PROVIDED IN SECTION 12, AT ANY TIME ON OR
BEFORE THE EXPIRATION DATE AT A PRICE PER SHARE EQUAL TO THE EXERCISE PRICE.  ON
THE CLOSING DATE, SIMULTANEOUSLY WITH THE MAKING OF THE LOAN BY THE HOLDER TO
TRC PURSUANT TO THE SUBORDINATED LOAN AGREEMENT, THE ISSUER SHALL DELIVER TO
HOLDER ONE OR MORE WARRANT CERTIFICATES EVIDENCING THE WARRANTS.

SECTION 4.           REGISTRATION, TRANSFER AND EXCHANGE OF CERTIFICATES. 
SUBJECT TO SECTION 14, THE ISSUER SHALL MAINTAIN AT THE WARRANT OFFICE THE
WARRANT REGISTER FOR REGISTRATION

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OF THE WARRANTS AND WARRANT CERTIFICATES AND TRANSFERS THEREOF.  ON THE CLOSING
DATE THE ISSUER SHALL REGISTER THE OUTSTANDING WARRANTS AND WARRANT CERTIFICATES
IN THE NAME OF HOLDER.  THE ISSUER MAY DEEM AND TREAT THE REGISTERED HOLDER(S)
OF THE WARRANT CERTIFICATES AS THE ABSOLUTE OWNER(S) THEREOF AND THE WARRANTS
REPRESENTED THEREBY (NOTWITHSTANDING ANY NOTATION OF OWNERSHIP OR OTHER WRITING
ON THE WARRANT CERTIFICATES MADE BY ANY PERSON) FOR THE PURPOSE OF ANY EXERCISE
THEREOF OR ANY DISTRIBUTION TO THE HOLDER(S) THEREOF, AND FOR ALL OTHER
PURPOSES, AND THE ISSUER SHALL NOT BE AFFECTED BY ANY NOTICE TO THE CONTRARY.

(A)            THE ISSUER SHALL REGISTER THE TRANSFER OF ANY OUTSTANDING
WARRANTS IN THE WARRANT REGISTER UPON SURRENDER OF THE WARRANT CERTIFICATE(S)
EVIDENCING SUCH WARRANTS TO THE ISSUER AT THE WARRANT OFFICE, ACCOMPANIED (IF SO
REQUIRED BY IT) BY A WRITTEN INSTRUMENT OR INSTRUMENTS OF TRANSFER IN FORM
SATISFACTORY TO IT, DULY EXECUTED BY THE REGISTERED HOLDER OR HOLDERS THEREOF OR
BY THE DULY APPOINTED LEGAL REPRESENTATIVE THEREOF.  UPON ANY SUCH REGISTRATION
OF TRANSFER, NEW WARRANT CERTIFICATE(S) EVIDENCING SUCH TRANSFERRED WARRANTS
SHALL BE ISSUED TO THE TRANSFEREE(S) AND THE SURRENDERED WARRANT CERTIFICATE(S)
SHALL BE CANCELED.  IF LESS THAN ALL THE WARRANTS EVIDENCED BY WARRANT
CERTIFICATE(S) SURRENDERED FOR TRANSFER ARE TO BE TRANSFERRED, NEW WARRANT
CERTIFICATE(S) EVIDENCING SUCH REMAINING NUMBER OF WARRANTS SHALL BE ISSUED TO
THE HOLDER SURRENDERING SUCH WARRANT CERTIFICATE(S).

(B)           WARRANT CERTIFICATES MAY BE EXCHANGED AT THE OPTION OF THE
HOLDER(S) THEREOF, WHEN SURRENDERED TO THE ISSUER AT THE WARRANT OFFICE, FOR
ANOTHER WARRANT CERTIFICATE OR OTHER WARRANT CERTIFICATES OF LIKE TENOR AND
REPRESENTING IN THE AGGREGATE A LIKE NUMBER OF WARRANTS.  WARRANT CERTIFICATES
SURRENDERED FOR EXCHANGE SHALL BE CANCELED.

(C)            NO CHARGE SHALL BE MADE FOR ANY SUCH TRANSFER OR EXCHANGE EXCEPT
FOR ANY TAX OR OTHER GOVERNMENTAL CHARGE IMPOSED IN CONNECTION THEREWITH. 
EXCEPT AS PROVIDED IN SECTIONS 14(B) AND (C), EACH WARRANT CERTIFICATE ISSUED
UPON TRANSFER OR EXCHANGE SHALL BEAR THE LEGEND SET FORTH IN SECTION 14(B) IF
THE WARRANT CERTIFICATE PRESENTED FOR TRANSFER OR EXCHANGE BORE SUCH LEGEND.

SECTION 5.           MUTILATED OR MISSING WARRANT CERTIFICATES.  IF ANY WARRANT
CERTIFICATE SHALL BE MUTILATED, LOST, STOLEN OR DESTROYED, THE ISSUER SHALL
ISSUE, IN EXCHANGE AND SUBSTITUTION FOR AND UPON CANCELLATION OF THE MUTILATED
WARRANT CERTIFICATE, OR IN LIEU OF AND SUBSTITUTION FOR THE WARRANT CERTIFICATE
LOST, STOLEN OR DESTROYED, A NEW WARRANT CERTIFICATE OF LIKE TENOR AND
REPRESENTING AN EQUIVALENT NUMBER OF WARRANTS, BUT ONLY UPON RECEIPT OF EVIDENCE
REASONABLY SATISFACTORY TO THE ISSUER OF SUCH LOSS, THEFT OR DESTRUCTION OF SUCH
WARRANT CERTIFICATE AND, IF REQUESTED, INDEMNITY SATISFACTORY TO IT; PROVIDED
THAT SUCH INDEMNITY SHALL BE DEEMED TO CONSTITUTE REASONABLY SATISFACTORY
EVIDENCE OF SUCH LOSS, THEFT OR DESTRUCTION.  NO SERVICE CHARGE SHALL BE MADE
FOR ANY SUCH SUBSTITUTION, BUT ALL EXPENSES AND REASONABLE CHARGES ASSOCIATED
WITH PROCURING SUCH INDEMNITY AND ALL STAMP, TAX AND OTHER GOVERNMENTAL DUTIES
THAT MAY BE IMPOSED IN RELATION THERETO SHALL BE BORNE BY THE HOLDER OF SUCH
WARRANT CERTIFICATE.  EACH WARRANT CERTIFICATE ISSUED IN ANY SUCH SUBSTITUTION
SHALL BEAR THE LEGEND SET FORTH IN SECTION 14(B) IF THE WARRANT CERTIFICATE FOR
WHICH SUCH SUBSTITUTION IS MADE BORE SUCH LEGEND.

SECTION 6.           DURATION AND EXERCISE OF WARRANTS.  (A)THE WARRANTS
EVIDENCED BY A WARRANT CERTIFICATE SHALL BE EXERCISABLE IN WHOLE OR IN PART BY
THE REGISTERED HOLDER THEREOF ON ANY BUSINESS DAY AT ANY TIME ON OR AFTER THE
DATE HEREOF AND ON OR PRIOR TO THE EXPIRATION DATE.

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(B)           SUBJECT TO THE PROVISIONS OF THIS WARRANT AGREEMENT, UPON
PRESENTATION OF THE WARRANT CERTIFICATE EVIDENCING THE WARRANTS TO BE EXERCISED,
WITH THE FORM OF ELECTION TO PURCHASE ON THE REVERSE THEREOF DULY COMPLETED AND
SIGNED BY THE REGISTERED HOLDER OR HOLDERS THEREOF, TO THE ISSUER AT THE WARRANT
OFFICE, AND UPON PAYMENT OF THE AGGREGATE EXERCISE PRICE FOR THE NUMBER OF
WARRANT SHARES IN RESPECT OF WHICH SUCH WARRANTS ARE BEING EXERCISED IN LAWFUL
MONEY OF THE UNITED STATES OF AMERICA, THE ISSUER SHALL ISSUE AND CAUSE TO BE
DELIVERED WITHIN FIVE (5) BUSINESS DAYS OF SUCH EXERCISE TO OR UPON THE WRITTEN
ORDER OF THE REGISTERED HOLDER(S) OF SUCH WARRANTS AND IN SUCH NAME OR NAMES AS
SUCH REGISTERED HOLDER(S) MAY DESIGNATE, A CERTIFICATE FOR THE WARRANT SHARE OR
WARRANT SHARES ISSUED UPON SUCH EXERCISE OF SUCH WARRANTS.  ANY PERSON(S) SO
DESIGNATED TO BE NAMED THEREIN SHALL BE DEEMED TO HAVE BECOME HOLDER(S) OF
RECORD OF SUCH WARRANT SHARE OR WARRANT SHARES AS OF THE DATE OF EXERCISE OF
SUCH WARRANTS.  EXCEPT AS SET FORTH IN SECTIONS 14(B) AND (C), EACH WARRANT
SHARE SHALL BEAR THE LEGEND SET FORTH IN SECTION 14(B).  PAYMENT OF THE
AGGREGATE EXERCISE PRICE MAY BE MADE WITH RESPECT TO EACH WARRANT SHARE, AT THE
OPTION OF THE HOLDER:

(I)            BY CASH, CERTIFIED OR BANK CASHIER’S CHECK OR WIRE TRANSFER;

(II)           BY SURRENDERING TO THE ISSUER THE NUMBER OF SHARES OF COMMON
STOCK TO BE ACQUIRED UPON EXERCISE OF THE WARRANT WHICH IS EQUAL TO (A) SUCH
AGGREGATE EXERCISE PRICE DIVIDED BY (B) THE CURRENT MARKET PRICE PER SHARE OF
ONE SHARE OF COMMON STOCK DETERMINED AS OF THE LAST BUSINESS DAY PRIOR TO THE
DATE OF EXERCISE OF THIS WARRANT; OR

(III)          ANY COMBINATION OF THE FOREGOING.

(C)            IF LESS THAN ALL THE WARRANTS EVIDENCED BY A WARRANT CERTIFICATE
ARE EXERCISED AT ANY TIME, A NEW WARRANT CERTIFICATE OR CERTIFICATES SHALL BE
ISSUED FOR THE REMAINING NUMBER OF WARRANTS EVIDENCED BY SUCH WARRANT
CERTIFICATE.  EACH NEW WARRANT CERTIFICATE SO ISSUED SHALL BEAR THE LEGEND SET
FORTH IN SECTION 14(B) IF THE WARRANT CERTIFICATE PRESENTED IN CONNECTION WITH
PARTIAL EXERCISE THEREOF BORE SUCH LEGEND.  ALL WARRANT CERTIFICATES SURRENDERED
UPON EXERCISE OF WARRANTS SHALL BE CANCELED.

SECTION 7.           NO FRACTIONAL SHARES.  THE ISSUER SHALL NOT BE REQUIRED TO
ISSUE FRACTIONAL SHARES OF COMMON STOCK UPON EXERCISE OF THE WARRANTS BUT MAY
PAY FOR ANY SUCH FRACTION OF A SHARE AN AMOUNT IN CASH EQUAL TO THE CURRENT
MARKET PRICE PER SHARE (AS DEFINED IN SECTION 12(B)) OF COMMON STOCK OF SUCH
SHARE (DETERMINED IN ACCORDANCE WITH THE PROVISIONS OF SECTION 12(B)) MULTIPLIED
BY SUCH FRACTION.

SECTION 8.           PAYMENT OF TAXES.  THE ISSUER WILL PAY ALL TAXES (OTHER
THAN ANY APPLICABLE INCOME OR SIMILAR TAXES PAYABLE BY THE HOLDERS OF THE
WARRANTS OR WARRANT SHARES) ATTRIBUTABLE TO THE INITIAL ISSUANCE OF WARRANT
SHARES UPON THE EXERCISE OF THE WARRANTS;  PROVIDED THAT THE ISSUER SHALL NOT BE
REQUIRED TO PAY ANY TAX WHICH MAY BE PAYABLE IN RESPECT OF ANY TRANSFER INVOLVED
IN THE ISSUE OF ANY WARRANT CERTIFICATE OR ANY CERTIFICATE FOR WARRANT SHARES IN
A NAME OTHER THAN THAT OF THE REGISTERED HOLDER OF A WARRANT CERTIFICATE
SURRENDERED UPON THE EXERCISE OF A WARRANT, AND THE ISSUER SHALL NOT BE REQUIRED
TO ISSUE OR DELIVER SUCH CERTIFICATES UNLESS OR UNTIL THE PERSON OR PERSONS
REQUESTING THE ISSUANCE THEREOF SHALL HAVE PAID TO THE ISSUER THE AMOUNT OF SUCH
TAX OR SHALL HAVE ESTABLISHED TO THE SATISFACTION OF THE ISSUER THAT SUCH TAX
HAS BEEN PAID.

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SECTION 9.           WARRANT HOLDER RIGHTS; DIVIDENDS AND DISTRIBUTIONS.  THE
WARRANTS SHALL NOT (PRIOR TO EXERCISE THEREOF) CONFER UPON THE HOLDERS THEREOF
THE RIGHT TO VOTE AS STOCKHOLDERS OF THE ISSUER OR ANY OTHER RIGHT AS
STOCKHOLDER OF THE ISSUER, EXCEPT THAT, IN THE EVENT THE ISSUER SHALL MAKE A
DISTRIBUTION OR PAY ANY DIVIDEND TO ALL HOLDERS OF COMMON STOCK OF THE ISSUER IN
CASH, EVIDENCES OF ITS INDEBTEDNESS OR ASSETS, EACH WARRANT SHALL BE ENTITLED TO
ITS PRO RATA SHARE OF SUCH DISTRIBUTION AS IF SUCH WARRANT HAD BEEN EXERCISED
IMMEDIATELY PRIOR TO SUCH DISTRIBUTION OR RECORD DATE, AS APPLICABLE, AND SUCH
PRO RATA SHARE SHALL BE PAID OR DISTRIBUTED TO THE HOLDERS OF THE WARRANTS AS
AND WHEN PAID OR DISTRIBUTED TO THE HOLDERS OF COMMON STOCK.

SECTION 10.         RESERVATION AND ISSUANCE OF WARRANT SHARES.  (A)THE ISSUER
WILL AT ALL TIMES HAVE AUTHORIZED, AND RESERVE AND KEEP AVAILABLE, FREE FROM
PREEMPTIVE RIGHTS, FOR THE PURPOSE OF ENABLING IT TO SATISFY ANY OBLIGATION TO
ISSUE WARRANT SHARES UPON THE EXERCISE OF THE WARRANTS, THE NUMBER OF SHARES
DELIVERABLE UPON EXERCISE OF ALL OUTSTANDING WARRANTS.

(B)           BEFORE TAKING ANY ACTION WHICH WOULD CAUSE AN ADJUSTMENT PURSUANT
TO SECTION 12 HEREOF TO REDUCE THE EXERCISE PRICE BELOW THE THEN PAR VALUE (IF
ANY) OF THE WARRANT SHARES ISSUABLE UPON EXERCISE OF THE WARRANTS, THE ISSUER
WILL TAKE ANY CORPORATE ACTION WHICH MAY BE NECESSARY IN ORDER THAT THE ISSUER
MAY VALIDLY AND LEGALLY ISSUE WARRANT SHARES AT THE EXERCISE PRICE AS SO
ADJUSTED.

(C)            THE ISSUER COVENANTS THAT ALL WARRANT SHARES WILL, UPON ISSUANCE
IN ACCORDANCE WITH THE TERMS OF THIS WARRANT AGREEMENT, BE FREE FROM ALL TAXES
WITH RESPECT TO THE ISSUANCE THEREOF AND FROM ALL LIENS, CHARGES AND SECURITY
INTERESTS, EXCEPT AS PROVIDED IN SECTION 8.

SECTION 11.         OBTAINING OF GOVERNMENTAL APPROVALS AND STOCK EXCHANGE
LISTINGS.  THE ISSUER WILL, AT ITS OWN EXPENSE, (A) OBTAIN AND KEEP EFFECTIVE
ANY AND ALL PERMITS, CONSENTS AND APPROVALS OF GOVERNMENTAL AGENCIES AND
AUTHORITIES WHICH MAY FROM TIME TO TIME BE REQUIRED OF THE ISSUER IN ORDER TO
SATISFY ITS OBLIGATIONS HEREUNDER AND (B) TAKE ALL ACTION WHICH MAY BE NECESSARY
SO THAT THE WARRANT SHARES OR OTHER SECURITIES, IMMEDIATELY UPON THEIR ISSUANCE
UPON THE EXERCISE OF WARRANTS, WILL BE LISTED ON EACH SECURITIES EXCHANGE, IF
ANY, ON WHICH THE COMMON STOCK IS THEN LISTED.

SECTION 12.         ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF WARRANT SHARES
PURCHASABLE.  PRIOR TO THE EXPIRATION DATE, THE EXERCISE PRICE AND THE NUMBER OF
WARRANT SHARES PURCHASABLE UPON THE EXERCISE OF EACH WARRANT ARE SUBJECT TO
ADJUSTMENT FROM TIME TO TIME UPON THE OCCURRENCE OF ANY OF THE EVENTS ENUMERATED
IN THIS SECTION 12.

(A)            IF THE ISSUER AT ANY TIME WHILE THIS WARRANT AGREEMENT IS
OUTSTANDING SHALL (I) DECLARE A DIVIDEND ON COMMON STOCK IN SHARES OR OTHER
SECURITIES OF THE ISSUER (OTHER THAN DEBT SECURITIES COVERED BY SECTION 9), (II)
SPLIT OR SUBDIVIDE THE OUTSTANDING COMMON STOCK, (III) COMBINE THE OUTSTANDING
COMMON STOCK INTO A SMALLER NUMBER OF SHARES OR (IV) ISSUE BY RECLASSIFICATION
OF ITS COMMON STOCK ANY SHARES OF OTHER SECURITIES OF THE ISSUER (OTHER THAN
DEBT SECURITIES COVERED BY SECTION 9), THEN, IN EACH SUCH EVENT, THE NUMBER OF
WARRANT SHARES PURCHASABLE UPON EXERCISE OF EACH WARRANT IMMEDIATELY PRIOR
THERETO SHALL BE ADJUSTED SO THAT THE HOLDER SHALL BE ENTITLED TO RECEIVE THE
KIND AND NUMBER OF SHARES OR OTHER SECURITIES OF THE ISSUER WHICH THE HOLDER
WOULD HAVE OWNED OR HAVE BEEN ENTITLED TO RECEIVE AFTER THE HAPPENING OF ANY

 

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OF THE EVENTS DESCRIBED ABOVE HAD SUCH WARRANT BEEN EXERCISED IMMEDIATELY PRIOR
TO THE HAPPENING OF SUCH EVENT (OR ANY RECORD DATE WITH RESPECT THERETO).  SUCH
ADJUSTMENT SHALL BE MADE WHENEVER ANY OF THE EVENTS LISTED ABOVE SHALL OCCUR. 
AN ADJUSTMENT MADE PURSUANT TO THIS PARAGRAPH (A) SHALL BECOME EFFECTIVE
IMMEDIATELY AFTER THE EFFECTIVE DATE OF THE EVENT RETROACTIVE TO THE RECORD
DATE, IF ANY, FOR THE EVENT.

(B)           THE “CURRENT MARKET PRICE PER SHARE” OF COMMON STOCK ON ANY DATE
SHALL BE DEEMED TO BE:

(I)            THE AVERAGE OF THE DAILY CLOSING PRICES FOR THE TWENTY (20)
CONSECUTIVE TRADING DAYS IMMEDIATELY PRECEDING SUCH DATE AS REPORTED ON THE
COMPOSITE TRANSACTIONS TAPE OR, IF THE COMMON STOCK IS NOT REPORTED ON THE
COMPOSITE TRANSACTIONS TAPE, THE LAST SALE PRICE REGULAR WAY OF THE COMMON STOCK
ON THE PRINCIPAL NATIONAL SECURITIES EXCHANGE ON WHICH THE COMMON STOCK IS
LISTED OR ADMITTED TO TRADING OR, IN CASE NO SUCH SALE TAKES PLACE ON SUCH DAY,
THE AVERAGE OF THE CLOSING BID AND ASKED PRICES REGULAR WAY, IN EITHER CASE ON
SUCH SECURITIES EXCHANGE, OR, IF THE COMMON STOCK IS NOT LISTED OR ADMITTED TO
TRADING ON SUCH AN EXCHANGE, THE CLOSING SALES PRICE OR, IF THERE IS NO CLOSING
SALES PRICE, THE AVERAGE OF THE CLOSING BID AND ASKED PRICES IN THE
OVER-THE-COUNTER MARKET AS REPORTED BY THE NATIONAL ASSOCIATION OF SECURITIES
DEALERS’ AUTOMATED QUOTATION SYSTEM (“NASDAQ”), OR, IF NOT SO REPORTED, AS
REPORTED BY THE NATIONAL QUOTATION BUREAU, INCORPORATED, OR ANY SUCCESSOR
THEREOF; OR

(II)           IF NO SUCH PRICES ARE FURNISHED, THE FAIR MARKET VALUE OF A SHARE
OF COMMON STOCK AS DETERMINED IN GOOD FAITH BY THE BOARD OF DIRECTORS OF THE
ISSUER AND SET FORTH IN A WRITTEN NOTICE DELIVERED TO THE HOLDER; PROVIDED THAT
IF A VALUATION HAS BEEN MADE BY AN INDEPENDENT INVESTMENT BANKING FIRM WITHIN
SIX (6) MONTHS PRIOR TO ANY DATE AS OF WHICH THE CURRENT MARKET PRICE PER SHARE
IS TO BE DETERMINED HEREUNDER, THEN SUCH VALUATION OR DETERMINATION SHALL BE
BINDING ON THE ISSUER AND THE HOLDERS OF THE WARRANTS AND WARRANT SHARES UNLESS
ANY EVENT SHALL HAVE OCCURRED SINCE THE DATE OF SUCH VALUATION OR DETERMINATION
WHICH, IN THE REASONABLE OPINION OF THE ISSUER’S BOARD OF DIRECTORS, MATERIALLY
AFFECTS THE CONTINUED VALIDITY OF SUCH VALUATION OR DETERMINATION.

(C)            NO ADJUSTMENT IN THE NUMBER OF WARRANT SHARES SHALL BE REQUIRED
UNLESS SUCH ADJUSTMENT WOULD REQUIRE AN INCREASE OR DECREASE OF AT LEAST 1.0% IN
THE AGGREGATE NUMBER OF WARRANT SHARES PURCHASABLE UPON EXERCISE OF ALL
WARRANTS; PROVIDED THAT ANY ADJUSTMENTS WHICH BY REASON OF THIS SECTION 12(C)
ARE NOT REQUIRED TO BE MADE SHALL BE CARRIED FORWARD AND TAKEN INTO ACCOUNT IN
ANY SUBSEQUENT ADJUSTMENT; PROVIDED, HOWEVER, THAT NOTWITHSTANDING THE
FOREGOING, ALL SUCH ADJUSTMENTS SHALL BE MADE NO LATER THAN THREE (3) YEARS FROM
THE DATE OF THE FIRST EVENT THAT WOULD HAVE REQUIRED AN ADJUSTMENT BUT FOR THIS
PARAGRAPH.  ALL CALCULATIONS UNDER THIS SECTION 12 SHALL BE MADE TO THE NEAREST
CENT OR TO THE NEAREST HUNDREDTH OF A SHARE, AS THE CASE MAY BE.

(D)           IF AT ANY TIME, AS A RESULT OF AN ADJUSTMENT MADE PURSUANT TO THIS
SECTION 12, THE HOLDER OF ANY WARRANT THEREAFTER EXERCISED SHALL BECOME ENTITLED
TO RECEIVE ANY SHARES OF THE ISSUER OTHER THAN SHARES OF COMMON STOCK,
THEREAFTER THE NUMBER OF SUCH OTHER SHARES SO RECEIVABLE UPON EXERCISE OF ANY
WARRANT SHALL BE SUBJECT TO ADJUSTMENT FROM TIME TO TIME IN A MANNER AND ON
TERMS AS NEARLY EQUIVALENT AS PRACTICABLE TO THE PROVISIONS WITH RESPECT TO THE

7

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WARRANT SHARES CONTAINED IN THIS SECTION 12, AND THE PROVISIONS OF THIS
AGREEMENT WITH RESPECT TO THE WARRANT SHARES SHALL APPLY ON LIKE TERMS TO SUCH
OTHER SHARES.

(E)            WHENEVER THE NUMBER OF WARRANT SHARES PURCHASABLE UPON THE
EXERCISE OF EACH WARRANT IS ADJUSTED, THE EXERCISE PRICE PER WARRANT SHARE
PAYABLE UPON EXERCISE OF EACH WARRANT SHALL BE ADJUSTED BY MULTIPLYING SUCH
EXERCISE PRICE IMMEDIATELY PRIOR TO SUCH ADJUSTMENT BY A FRACTION, THE NUMERATOR
OF WHICH SHALL BE THE NUMBER OF WARRANT SHARES PURCHASABLE UPON THE EXERCISE OF
EACH WARRANT IMMEDIATELY PRIOR TO SUCH ADJUSTMENT, AND THE DENOMINATOR OF WHICH
SHALL BE THE NUMBER OF WARRANT SHARES PURCHASABLE IMMEDIATELY AFTER SUCH
ADJUSTMENT.

(F)            IN THE EVENT OF ANY CAPITAL REORGANIZATION OF THE ISSUER, OR OF
ANY RECLASSIFICATION OF THE COMMON STOCK (OTHER THAN A RECLASSIFICATION REFERRED
TO IN PARAGRAPH (A)(IV) ABOVE), OR IN CASE OF THE CONSOLIDATION OF THE ISSUER
WITH OR THE MERGER OF THE ISSUER WITH OR INTO ANY OTHER CORPORATION OR OF THE
SALE OF THE PROPERTIES AND ASSETS OF THE ISSUER AS, OR SUBSTANTIALLY AS, AN
ENTIRETY TO ANY OTHER CORPORATION, EACH WARRANT SHALL, AFTER SUCH CAPITAL
REORGANIZATION, RECLASSIFICATION OF COMMON STOCK, CONSOLIDATION, MERGER OR SALE,
AND IN LIEU OF BEING EXERCISABLE FOR WARRANT SHARES, BE EXERCISABLE, UPON THE
TERMS AND CONDITIONS SPECIFIED IN THIS WARRANT AGREEMENT, FOR THE NUMBER OF
SHARES OF STOCK OR OTHER SECURITIES OR ASSETS (INCLUDING CASH) TO WHICH A HOLDER
OF THE NUMBER OF WARRANT SHARES PURCHASABLE (AT THE TIME OF SUCH CAPITAL
REORGANIZATION, RECLASSIFICATION OF COMMON STOCK, CONSOLIDATION, MERGER OR SALE)
UPON EXERCISE OF SUCH WARRANT WOULD HAVE BEEN ENTITLED UPON SUCH CAPITAL
REORGANIZATION, RECLASSIFICATION OF COMMON STOCK, CONSOLIDATION, MERGER OR SALE;
AND IN ANY SUCH CASE, IF NECESSARY, THE PROVISIONS SET FORTH IN THIS SECTION 12
WITH RESPECT TO THE RIGHTS THEREAFTER OF THE HOLDERS OF THE WARRANTS SHALL BE
APPROPRIATELY ADJUSTED SO AS TO BE APPLICABLE, AS NEARLY AS THEY MAY REASONABLY
BE, TO ANY SHARES OF STOCK OR OTHER SECURITIES OR ASSETS THEREAFTER DELIVERABLE
ON THE EXERCISE OF THE WARRANTS.  THE ISSUER SHALL NOT EFFECT ANY SUCH
CONSOLIDATION, MERGER OR SALE, UNLESS PRIOR TO OR SIMULTANEOUSLY WITH THE
CONSUMMATION THEREOF, THE SUCCESSOR CORPORATION (IF OTHER THAN THE ISSUER)
RESULTING FROM SUCH CONSOLIDATION OR MERGER OR THE CORPORATION PURCHASING SUCH
ASSETS OR THE APPROPRIATE CORPORATION OR ENTITY SHALL ASSUME, BY WRITTEN
INSTRUMENT, THE OBLIGATION TO DELIVER TO THE HOLDER OF EACH WARRANT THE SHARES
OF STOCK, SECURITIES OR ASSETS TO WHICH, IN ACCORDANCE WITH THE FOREGOING
PROVISIONS, SUCH HOLDER MAY BE ENTITLED AND ALL OTHER OBLIGATIONS OF THE ISSUER
UNDER THIS WARRANT AGREEMENT (AND IF THE ISSUER SHALL SURVIVE THE CONSUMMATION
OF SUCH CONSOLIDATION OR MERGER OR PURCHASE, SUCH ASSUMPTION SHALL BE IN
ADDITION TO, AND SHALL NOT RELEASE THE ISSUER FROM, ANY CONTINUING OBLIGATIONS
OF THE ISSUER UNDER THIS WARRANT AGREEMENT).  THE PROVISIONS OF THIS PARAGRAPH
(F) SHALL APPLY TO SUCCESSIVE REORGANIZATIONS, RECLASSIFICATIONS,
CONSOLIDATIONS, MERGERS AND SALES.

(G)           IRRESPECTIVE OF ANY ADJUSTMENTS IN THE EXERCISE PRICE OR THE
NUMBER OR KIND OF SHARES PURCHASABLE UPON EXERCISE OF THE WARRANTS, WARRANT
CERTIFICATES THERETOFORE OR THEREAFTER ISSUED MAY CONTINUE TO EXPRESS THE SAME
EXERCISE PRICE PER SHARE AND NUMBER AND KIND OF SHARES AS ARE STATED ON THE
WARRANT CERTIFICATES INITIALLY ISSUABLE PURSUANT TO THIS AGREEMENT.

(H)           IF ANY QUESTION SHALL AT ANY TIME ARISE WITH RESPECT TO THE
ADJUSTED EXERCISE PRICE OR WARRANT SHARES ISSUABLE UPON EXERCISE, SUCH QUESTION
SHALL BE DETERMINED BY THE INDEPENDENT AUDITORS OF THE ISSUER AND SUCH
DETERMINATION SHALL BE BINDING UPON THE ISSUER AND THE HOLDERS OF THE WARRANTS
AND THE WARRANT SHARES.

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SECTION 13.         NOTICES TO WARRANT HOLDERS.  UPON ANY ADJUSTMENT OF THE
EXERCISE PRICE OR NUMBER OF WARRANT SHARES ISSUABLE UPON EXERCISE PURSUANT TO
SECTION 12, THE ISSUER SHALL PROMPTLY, BUT IN ANY EVENT WITHIN (10) DAYS
THEREAFTER, CAUSE TO BE GIVEN TO EACH OF THE REGISTERED HOLDERS OF THE WARRANTS,
AT ITS ADDRESS APPEARING ON THE WARRANT REGISTER BY REGISTERED MAIL, POSTAGE
PREPAID, A CERTIFICATE SIGNED BY ITS CHIEF FINANCIAL OFFICER SETTING FORTH THE
EXERCISE PRICE AS SO ADJUSTED AND/OR THE NUMBER OF SHARES OF COMMON STOCK
ISSUABLE UPON THE EXERCISE OF EACH WARRANT AS SO ADJUSTED AND DESCRIBING IN
REASONABLE DETAIL THE FACTS ACCOUNTING FOR SUCH ADJUSTMENT AND THE METHOD OF
CALCULATION USED.  WHERE APPROPRIATE, SUCH CERTIFICATE MAY BE GIVEN IN ADVANCE
AND INCLUDED AS A PART OF THE NOTICE REQUIRED TO BE MAILED UNDER THE OTHER
PROVISIONS OF THIS SECTION 13.

In the event:

(A)           THE ISSUER SHALL AUTHORIZE ISSUANCE TO ALL HOLDERS OF COMMON STOCK
OF RIGHTS OR WARRANTS TO SUBSCRIBE FOR OR PURCHASE CAPITAL STOCK OF THE ISSUER
OR OF ANY OTHER SUBSCRIPTION RIGHTS OR WARRANTS;

(B)           THE ISSUER SHALL AUTHORIZE A DIVIDEND OR OTHER DISTRIBUTION TO ALL
HOLDERS OF COMMON STOCK PAYABLE IN EVIDENCES OF ITS INDEBTEDNESS, CASH OR
ASSETS;

(C)           OF ANY CONSOLIDATION OR MERGER TO WHICH THE ISSUER IS A PARTY AND
FOR WHICH APPROVAL OF ANY STOCKHOLDERS OF THE ISSUER IS REQUIRED, OR OF THE
CONVEYANCE OR TRANSFER OF THE PROPERTIES AND ASSETS OF THE ISSUER SUBSTANTIALLY
AS AN ENTIRETY, OR OF ANY CAPITAL REORGANIZATION OR RECLASSIFICATION OR CHANGE
OF THE COMMON STOCK (OTHER THAN A CHANGE IN PAR VALUE, OR FROM PAR VALUE TO NO
PAR VALUE, OR FROM NO PAR VALUE TO PAR VALUE, OR AS A RESULT OF A SUBDIVISION OR
COMBINATION);

(D)           OF THE VOLUNTARY OR INVOLUNTARY DISSOLUTION, LIQUIDATION OR
WINDING UP OF THE ISSUER;

(E)           THE ISSUER PROPOSES TO TAKE ANY OTHER ACTION WHICH WOULD REQUIRE
AN ADJUSTMENT OF THE EXERCISE PRICE OR NUMBER OF WARRANT SHARES ISSUABLE UPON
EXERCISE PURSUANT TO SECTION 12;

then the Issuer shall cause to be given to each of the registered holders of the
Warrants at its address appearing on the Warrant Register, at least ten (10)
days prior to the applicable record date hereinafter specified (or as
expeditiously as possible after the occurrence of any involuntary dissolution,
liquidation or winding up referred to in clause (d) above), a written notice in
accordance with Section 17 stating (i) the date as of which the holders of
record of Common Stock to be entitled to receive any such rights, warrants or
distribution are to be determined, or (ii) the date on which any such
consolidation, merger, conveyance, transfer, dissolution, liquidation or winding
up is expected to become effective (or has become effective, in the case of any
involuntary dissolution, liquidation or winding up); and the date as of which it
is expected that holders of record of Common Stock shall be entitled to exchange
their shares for securities or other property, if any, deliverable upon such
reclassification, consolidation, merger, conveyance, transfer, dissolution,
liquidation or winding up.  The failure to give the notice required by this
Section 13 or any defect therein shall not affect the legality or validity of
any

9

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distribution, right, warrant, consolidation, merger, conveyance, transfer,
dissolution, liquidation or winding up, or the vote upon any action.

SECTION 14.         REPRESENTATIONS OF HOLDER.  (A) HOLDER REPRESENTS THAT (I)
IT IS ACQUIRING THE WARRANTS FOR ITS OWN ACCOUNT, FOR INVESTMENT AND NOT WITH A
VIEW TO ANY DISTRIBUTION OR PUBLIC OFFERING WITHIN THE MEANING OF THE SECURITIES
ACT BUT SUBJECT TO ANY REQUIREMENT OF LAW THAT THE DISPOSITION OF THE PROPERTY
OF THE HOLDER OF A WARRANT AND/OR WARRANT SHARE SHALL AT ALL TIMES BE WITHIN ITS
CONTROL, (II) SUCH HOLDER IS AN “ACCREDITED INVESTOR” AS DEFINED IN REGULATION D
OF THE SECURITIES ACT AND (III) SUCH HOLDER HAS SUCH KNOWLEDGE AND EXPERIENCE IN
FINANCIAL AND BUSINESS MATTERS THAT IT IS CAPABLE OF EVALUATING THE MERITS AND
RISKS OF THE INVESTMENT MADE IN CONNECTION WITH THE ACQUISITION OF THE
WARRANTS.  HOLDER ACKNOWLEDGES THAT THE WARRANTS AND THE WARRANT SHARES ISSUABLE
UPON EXERCISE THEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT AND
AGREES THAT IT WILL NOT SELL OR OTHERWISE TRANSFER ANY OF ITS WARRANTS OR
WARRANT SHARES EXCEPT UPON THE TERMS AND CONDITIONS SPECIFIED HEREIN.

(B)           EACH WARRANT CERTIFICATE ISSUED TO HOLDER OR TO A SUBSEQUENT
TRANSFEREE (UNLESS, IN THE OPINION OF HOLDER’S COUNSEL, THE FIRST PARAGRAPH OF
SUCH LEGEND IS NOT REQUIRED IN ORDER TO ENSURE COMPLIANCE WITH THE SECURITIES
ACT) SHALL INCLUDE A LEGEND IN SUBSTANTIALLY THE FOLLOWING FORM:

THE OFFER AND SALE OF THE WARRANTS AND UNDERLYING SHARES REPRESENTED BY THIS
CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AND MAY
NOT BE SOLD OR TRANSFERRED EXCEPT PURSUANT TO AN EXEMPTION FROM, OR OTHERWISE IN
A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF SUCH ACT.

IN ADDITION, THE WARRANTS AND UNDERLYING SHARES MAY BE TRANSFERRED ONLY IN
COMPLIANCE WITH THE CONDITIONS SPECIFIED IN THE WARRANT AGREEMENT DATED JULY __,
2006, BETWEEN THE ISSUER AND THE INITIAL HOLDER OF THE WARRANTS NAMED THEREIN, A
COMPLETE AND CORRECT COPY OF WHICH IS AVAILABLE FOR INSPECTION AT THE PRINCIPAL
OFFICE OF THE ISSUER AND WILL BE FURNISHED TO THE HOLDER HEREOF UPON WRITTEN
REQUEST AND WITHOUT CHARGE.

(C)            THE RESTRICTIONS SET FORTH IN SECTION 14(B) SHALL TERMINATE AND
CEASE TO BE EFFECTIVE WITH RESPECT TO ANY WARRANTS OR WARRANT SHARES REGISTERED
UNDER THE SECURITIES ACT.  WHENEVER SUCH RESTRICTIONS SHALL SO TERMINATE THE
HOLDER OF SUCH WARRANTS AND/OR WARRANT SHARES SHALL BE ENTITLED TO RECEIVE FROM
THE ISSUER, WITHOUT EXPENSE (OTHER THAN TRANSFER TAXES, IF ANY), WARRANT
CERTIFICATES OR CERTIFICATES FOR SUCH WARRANT SHARES NOT BEARING THE LEGEND SET
FORTH IN SECTION 14(B) AT WHICH TIME THE ISSUER WILL RESCIND ANY TRANSFER
RESTRICTIONS RELATING THERETO.

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SECTION 15.         AMENDMENTS AND WAIVERS.  ANY PROVISION OF THIS WARRANT
AGREEMENT MAY BE AMENDED, SUPPLEMENTED, WAIVED, DISCHARGED OR TERMINATED BY A
WRITTEN INSTRUMENT SIGNED BY THE ISSUER AND THE HOLDERS OF THE WARRANTS HOLDING
A MAJORITY OF THE WARRANT SHARES; PROVIDED, THAT THE EXERCISE PRICE MAY NOT BE
INCREASED, THE NUMBER OF WARRANT SHARES ISSUABLE UPON EXERCISE OF THE WARRANTS
MAY NOT BE REDUCED (EXCEPT PURSUANT TO SECTION 12 HEREOF), THE EXPIRATION DATE
MAY NOT BE CHANGED TO AN EARLIER DATE AND THIS SECTION MAY NOT BE AMENDED EXCEPT
WITH THE CONSENT OF THE HOLDERS OF ANY AFFECTED OUTSTANDING WARRANTS AND/OR
WARRANT SHARES, AS THE CASE MAY BE.

SECTION 16.         SPECIFIC PERFORMANCE.  THE HOLDERS OF THE WARRANTS AND/OR
WARRANT SHARES SHALL HAVE THE RIGHT TO SPECIFIC PERFORMANCE BY THE ISSUER OF THE
PROVISIONS OF THIS WARRANT AGREEMENT.  THE ISSUER HEREBY IRREVOCABLY WAIVES, TO
THE EXTENT THAT IT MAY DO SO UNDER APPLICABLE LAW, ANY DEFENSE BASED ON THE
ADEQUACY OF A REMEDY AT LAW WHICH MAY BE ASSERTED AS A BAR TO THE REMEDY OF
SPECIFIC PERFORMANCE IN ANY ACTION BROUGHT AGAINST THE ISSUER FOR SPECIFIC
PERFORMANCE OF THIS WARRANT AGREEMENT BY THE HOLDERS OF THE WARRANTS AND/OR
WARRANT SHARES.

SECTION 17.         NOTICES.  (A)ANY NOTICE OR DEMAND TO BE GIVEN OR MADE BY THE
HOLDERS TO OR ON THE ISSUER PURSUANT TO THIS WARRANT AGREEMENT SHALL BE
SUFFICIENTLY GIVEN OR MADE IF SENT BY OVERNIGHT COURIER OR MAIL, FIRST-CLASS OR
REGISTERED, POSTAGE PREPAID, ADDRESSED TO THE ISSUER AT THE WARRANT OFFICE.

(B)           ANY NOTICE TO BE GIVEN BY THE ISSUER TO THE HOLDERS OF THE
WARRANTS OR THE WARRANT SHARES SHALL BE SUFFICIENTLY GIVEN IF SENT BY OVERNIGHT
COURIER OR FIRST-CLASS MAIL, POSTAGE PREPAID, ADDRESSED TO SUCH HOLDER AS SUCH
HOLDER’S NAME AND ADDRESS SHALL APPEAR ON THE WARRANT REGISTER OR THE COMMON
STOCK REGISTRY OF THE ISSUER, AS THE CASE MAY BE.

SECTION 18.         BINDING EFFECT.  THIS WARRANT AGREEMENT SHALL BE BINDING
UPON AND INURE TO THE SOLE AND EXCLUSIVE BENEFIT OF THE ISSUER, ITS SUCCESSORS
AND ASSIGNS, HOLDER AND THE REGISTERED HOLDERS FROM TIME TO TIME OF THE WARRANTS
AND THE WARRANT SHARES.

SECTION 19.         TERMINATION.  THIS WARRANT AGREEMENT SHALL TERMINATE AND BE
OF NO FURTHER FORCE AND EFFECT AT THE EARLIER OF THE CLOSE OF BUSINESS ON THE
EXPIRATION DATE OR THE DATE ON WHICH NONE OF THE WARRANTS SHALL BE OUTSTANDING
(WHETHER BY REASON OF THE EXERCISE THEREOF OR THE REDEMPTION THEREOF BY THE
ISSUER).

SECTION 20.         COUNTERPARTS.  THIS WARRANT AGREEMENT MAY BE EXECUTED IN ONE
OR MORE SEPARATE COUNTERPARTS AND ALL OF SAID COUNTERPARTS TAKEN TOGETHER SHALL
BE DEEMED TO CONSTITUTE ONE AND THE SAME INSTRUMENT.

SECTION 21.         DELAWARE LAW.  THIS WARRANT AGREEMENT AND EACH WARRANT
CERTIFICATE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL
LAWS OF THE STATE OF DELAWARE, WITHOUT GIVING EFFECT TO THE CHOICE OR CONFLICTS
OF LAWS PROVISIONS THEREOF.

SECTION 22.         BENEFITS OF THIS WARRANT AGREEMENT.  NOTHING IN THIS WARRANT
AGREEMENT SHALL BE CONSTRUED TO GIVE TO ANY PERSON OTHER THAN THE ISSUER AND THE
REGISTERED HOLDERS OF THE WARRANTS AND THE WARRANT SHARES ANY LEGAL OR EQUITABLE
RIGHT, REMEDY OR CLAIM UNDER THIS WARRANT AGREEMENT.

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IN WITNESS WHEREOF, the parties hereto have caused this Warrant Agreement to be
duly executed and delivered by their proper and duly authorized officers, as of
the date and year first above written.

 

TRC COMPANIES, INC.

 

 

 

 

 

By:

/s/ Martin H. Dodd

 

 

Name: Martin H. Dodd

 

 

Title: Senior Vice President

 

 

 

 

 

 

 

FEDERAL PARTNERS, L.P.

 

 

 

 

 

 

 

By

NINTH FLOOR CORPORATION

 

 

its General Partner

 

 

 

 

By:

/s/ Stephen M. Duff

 

 

Name: Stephen M. Duff

 

 

Title: Treasurer

 

12

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EXHIBIT A

TO WARRANT AGREEMENT

[FORM OF WARRANT CERTIFICATE]

THE OFFER AND SALE OF THE WARRANTS AND UNDERLYING SHARES REPRESENTED BY THIS
CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AND MAY
NOT BE SOLD OR TRANSFERRED EXCEPT PURSUANT TO AN EXEMPTION FROM, OR OTHERWISE IN
A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF SUCH ACT.

IN ADDITION, THE WARRANTS AND UNDERLYING SHARES MAY BE TRANSFERRED ONLY IN
COMPLIANCE WITH THE CONDITIONS SPECIFIED IN THE WARRANT AGREEMENT DATED JULY 19,
2006, BETWEEN THE ISSUER AND THE INITIAL HOLDER OF THE WARRANTS NAMED THEREIN, A
COMPLETE AND CORRECT COPY OF WHICH IS AVAILABLE FOR INSPECTION AT THE PRINCIPAL
OFFICE OF THE ISSUER AND WILL BE FURNISHED TO THE HOLDER HEREOF UPON WRITTEN
REQUEST AND WITHOUT CHARGE.

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WARRANT CERTIFICATE

evidencing Warrants to purchase

Common Stock in

TRC Companies, Inc.

No. W-1

This Warrant Certificate certifies that Federal Partners, L.P., a Delaware
limited partnership, or registered assigns, is the registered holder of a
Warrant (the “Warrant”) to purchase Common Stock, $.01 par value, in TRC
Companies, Inc., a Delaware corporation (the “Issuer”).  The Warrant entitles
the holder, but only subject to the conditions set forth herein and in the
Warrant Agreement referred to below, to purchase from the Issuer at any time
prior to 5:00 P.M., local time of the Warrant Office, on the tenth anniversary
of the date hereof or, if such day is not a Business Day, the next succeeding
Business Day (the “Expiration Date”), 66,000 fully paid and nonassessable shares
of Common Stock of the Issuer (the “Warrant Shares”) at a price (the “Exercise
Price”) of $.01 per Warrant Share payable in lawful money of the United States
of America, upon surrender of this Warrant Certificate, execution of the annexed
Form of Election to Purchase and payment of the Exercise Price at the office of
the Issuer at 21 Griffen Road North, Windsor, Connecticut 06095 or such other
address as the Issuer may specify in writing to the registered holder of the
Warrant evidenced hereby (the “Warrant Office”).  The Exercise Price and number
of Warrant Shares purchasable upon exercise of the Warrant are subject to
adjustment upon the occurrence of certain events as set forth in the Warrant
Agreement referred to below.

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The Issuer may deem and treat the registered holder(s) of the Warrant evidenced
hereby as the absolute owner(s) thereof (notwithstanding any notation of
ownership or other writing thereon made by anyone), for the purpose of any
exercise hereof and of any distribution to the holder(s) hereof, and for all
other purposes, and the Issuer shall not be affected by any notice to the
contrary.

Warrant Certificates, when surrendered at the Warrant Office by the registered
holder hereof in person or by a legal representative duly authorized in writing,
may be exchanged, in the manner and subject to the limitations provided in the
Warrant Agreement, but without payment of any service charge, for another
Warrant Certificate or Warrant Certificates of like tenor evidencing in the
aggregate a like number of Warrants.

Upon due presentment for registration of transfer of this Warrant Certificate at
the Warrant Office, a new Warrant Certificate or Warrant Certificates of like
tenor and evidencing in the aggregate a like number of Warrants shall be issued
in exchange for this Warrant Certificate to the transferee(s) and, if less than
all the Warrants evidenced hereby are to be transferred, to the registered
holder hereof, subject to the limitations provided in the Warrant Agreement,
without charge except for any tax or other governmental charge imposed in
connection therewith.

This Warrant Certificate is one of the Warrant Certificates referred to in the
Warrant Agreement dated July 19, 2006, between the Issuer and the Holder (the
“Warrant Agreement”).  Said Warrant Agreement is hereby incorporated by
reference in and made a part of this Warrant Certificate and is hereby referred
to for a description of the rights, limitation of rights, obligations, duties
and immunities thereunder of the Issuer and the holders.

3

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IN WITNESS WHEREOF, the Issuer has caused this Warrant Certificate to be signed
by its duly authorized officers.

 

TRC COMPANIES, INC.

 

 

 

 

By: 

/s/ Martin H. Dodd

 

Name: Martin H. Dodd

 

Title: Senior Vice President

 

4

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ANNEX

TO FORM OF

WARRANT CERTIFICATE

[FORM OF ELECTION TO PURCHASE]

(To be executed upon exercise of Warrant)

The undersigned hereby irrevocably elects to exercise the right, represented by
this Warrant Certificate, to purchase __________ Warrant Shares and herewith
tenders payment for such Warrant Shares to the order of the Issuer in the amount
of $__________ in accordance with the terms hereof.  The undersigned requests
that a certificate for such Warrant Shares be registered in the name of
_________________ whose address is _________________ and that such certificate
be delivered to _________________ whose address is _________________.  If said
number of Warrant Shares is less than all of the Warrant Shares purchasable
hereunder, the undersigned requests that a new Warrant Certificate representing
the remaining balance of the Warrant Shares be registered in the name of
_________________ whose address is _________________ and that such Warrant
Certificate be delivered to _________________ whose address is
__________________________.

 

Signature:

 

 

 

 

 

 

 

 

(Signature must conform in all respects to name of holder as specified on the
face of the Warrant Certificate.)

 

 

 

 

 

 

Date:

 

 

 

 

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EXHIBIT B

TO WARRANT AGREEMENT

WARRANT REGISTER

Warrant
CertificateNo.

 

Original Number
of Warrants and
Warrant Shares

 

Names and Address
of Warrant Holders

 

 

 

 

 

W-1

 

Warrant to purchase 66,000 shares of Common Stock

 

Federal Partners, L.P.
c/o The Clark Estates, Inc.
One Rockefeller Plaza, 31st Floor
New York, NY 10020
Attention: Stephen Duff

 

 

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