Placement Warrant


    Exhibit
      4.6

     

    NEITHER
      THESE SECURITIES NOR THE SECURITIES ISSUABLE UPON EXERCISE OF THESE SECURITIES
      HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE
      SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
      REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES
      ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
      EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
      AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
      REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE
      SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION (TO THE EXTENT REQUESTED BY
      COUNSEL OF THE COMPANY) OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE
      SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY. THESE
      SECURITIES AND THE SECURITIES ISSUABLE UPON EXERCISE OF THESE SECURITIES MAY
      BE
      PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT SECURED BY SUCH
      SECURITIES.

     

    STRASBAUGH

     

    PLACEMENT
      WARRANT

     

    
      	Warrant No. PW-__	
              Original
                Issue Date: May 24,
                2007

            


    

     

    Strasbaugh,
      a California corporation (the “Company”),
      hereby certifies that, for value received and pursuant to the terms of the
      Engagement Agreement, Holder is entitled to purchase from the Company up to
      a
      total of _______ shares of Common Stock (each such share, a “Warrant
      Share”
and
      all
      such shares, the “Warrant
      Shares”),
      at
      any time and from time to time from and after the Original Issue Date and
      through and including May 24, 2012 (the “Expiration
      Date”),
      and
      subject to the following terms and conditions:

     

    1.    Definitions.
      As used
      in this Warrant, the following terms shall have the respective definitions
      set
      forth in this Section
      1.
      

     

    “Alternate
      Consideration”
shall
      have the meaning set forth in Section 9(b).

     

    “Business
      Day”
shall
      mean any day other than Saturday, Sunday or other day on which commercial banks
      in the State of California are authorized or required by law to remain
      closed.

     

    “Buy-In”
shall
      have the meaning set forth in Section
      5(c).

     

    “Common
      Stock”
shall
      mean the Company’s common stock, no par value per share.

     

    “Date
      of Exercise”
shall
      have the meaning set forth in Section 5(a).

     

    “Engagement
      Agreement”
shall
      mean that certain letter agreement dated October 18, 2006 by and
      between the Company’s Subsidiary, R. H. Strasbaugh (formerly, Strasbaugh),
      and B. Riley & Co., and which obligations of
      R. H. Strasbaugh pursuant to the terms of the Engagement Agreement
      have been assigned to and assumed by the Company pursuant to a certain
      Assignment Agreement by and between the Company and the Company's Subsidiary
      R.
      H. Strasbaugh dated May 24, 2007.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    “Exchange
      Act”
shall
      mean the Securities Exchange Act of 1934, as amended, or any successor law,
      and
      regulations and rules issued pursuant to that Act or any successor
      law.

     

    “Exercise
      Price”
shall
      mean $2.42, subject to adjustment in accordance with Section 9.

     

    “Fundamental
      Transaction”
shall
      mean any of the following: (i) the Company effects any merger or consolidation
      of the Company with or into another Person pursuant to which the Common Stock
      is
      converted into a right to receive other securities or property (other than
      a
      migratory merger conducted solely for the purpose of changing the Company’s
      state of incorporation), (ii) the Company effects any sale of all or
      substantially all of its assets in one or a series of related transactions,
      (iii) any tender offer or exchange offer (whether by the Company or another
      Person) is completed pursuant to which holders of Common Stock are permitted
      to
      tender or exchange their shares for other securities, cash or property, or
      (iv)
      the Company effects any reclassification of the Common Stock or any compulsory
      share exchange pursuant to which the Common Stock is effectively converted
      into
      or exchanged for other securities, cash or property. 

     

    “Holder”
or
      “Holders”
shall
      mean the holder or holders, as the case may be, from time to time, whether
      direct or beneficially, of Registrable Securities pursuant to this Warrant,
      including, without limitation, ___________ and any of its permitted
      transferees.

     

    “Indemnified
      Party”
shall
      have the meaning set forth in Section 12(c)(iii).

     

    “Indemnifying
      Party”
shall
      have the meaning set forth in Section 12(c)(iii).

     

    “Losses”
shall
      have the meaning set forth in Section 12(c)(i).

     

    “Person”
shall
      mean an individual or a corporation, partnership, trust, incorporated or
      unincorporated association, joint venture, limited liability company, joint
      stock company, government (or an agency or political subdivision thereof) or
      other entity of any kind.

     

    “New
      Warrant”
shall
      have the meaning set forth in Section 3.

     

    “Original
      Issue Date”
shall
      mean the Original Issue Date first set forth on the first page of this
      Warrant.

     

    “Proceeding”
shall
      mean an action, claim, suit, investigation or proceeding (including, without
      limitation, an investigation or partial proceeding, such as a deposition),
      whether commenced or threatened.

     

    “Prospectus”
shall
      mean the final prospectus filed with respect to the Registration Statement
      (including, without limitation, a prospectus that includes any information
      previously omitted from a prospectus filed as part of an effective registration
      statement in reliance upon Rule 430A promulgated under the Securities Act),
      as
      amended or supplemented by any prospectus supplement, with respect to the terms
      of the offering of any portion of the Registrable Securities covered by the
      Registration Statement, and all other amendments and supplements to the
      Prospectus, including one or more other final prospectuses filed with respect
      to
      post-effective amendments, and all material incorporated by reference in such
      Prospectus.

     

    
      
        
        

      

      
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    “Registrable
      Securities”
shall
      mean: (i) the Warrant Shares; and (ii) any securities issued or
      issuable with respect to such Warrant Shares by way of a stock dividend or
      stock
      split or in connection with a combination of shares, recapitalization, merger,
      consolidation or other reorganization with respect to any of the securities
      referenced above.

     

    “Registration
      Statement”
shall
      mean the registration statements contemplated by Section 12,
      including the Prospectus, amendments and supplements to such registration
      statement or Prospectus, including pre- and post-effective amendments, all
      exhibits thereto, and all material incorporated by reference in such
      registration statement.

     

    “Rule
      144”
shall
      mean Rule 144 promulgated by the SEC pursuant to the Securities Act, as such
      Rule may be amended from time to time, or any similar rule or regulation
      hereafter adopted by the SEC having substantially the same effect as such
      Rule.

     

    “SEC”
shall
      mean the United States Securities and Exchange Commission.

     

    “Securities
      Act”
shall
      mean the Securities Act of 1933, as amended, or any successor law, and
      regulations and rules issued pursuant to that Act or any successor
      law.

     

    “Subsidiary”
shall
      mean any direct or indirect subsidiary of the Company.

     

    “Trading
      Day”
means
      a
      day on which the Common Stock is traded on a Trading Market; provided, that
      in
      the event that the Common Stock is not listed or quoted on a Trading Market,
      then Trading Day shall mean a Business Day.

     

    “Trading
      Market”
means
      whichever of the New York Stock Exchange, the American Stock Exchange, the
      NASDAQ Global Market, the NASDAQ Capital Market, the OTC Bulletin Board or
      the
      Pink Sheets, LLC on which the Common Stock is listed or quoted for trading
      on
      the date in question.

     

    “Warrant
      Register”
shall
      have the meaning set forth in Section 2.

     

    2.    Registration
      of Warrant.
      The
      Company shall register this Warrant upon records to be maintained by the Company
      for that purpose (the “Warrant
      Register”),
      in
      the name of the record Holder hereof from time to time. The Company may deem
      and
      treat the registered Holder of this Warrant as the absolute owner hereof for
      the
      purpose of any exercise hereof or any distribution to the Holder, and for all
      other purposes, absent actual notice to the contrary.

     

    3.    Registration
      of Transfers.
      The
      Company shall register the transfer of any portion of this Warrant in the
      Warrant Register, upon surrender of this Warrant, with the Form of Assignment
      attached hereto duly completed and signed, to the Company at its address
      specified herein. Upon any such registration or transfer, a new Warrant to
      purchase Common Stock, in substantially the form of this Warrant (any such
      new
      Warrant, a “New
      Warrant”),
      evidencing the portion of this Warrant so transferred shall be issued to the
      transferee and a New Warrant evidencing the remaining portion of this Warrant
      not so transferred, if any, shall be issued to the transferring Holder. The
      acceptance of the New Warrant by the transferee thereof shall be deemed the
      acceptance by such transferee of all of the rights and obligations of a holder
      of a Warrant. 

     

    
      
        
        

      

      
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    4.    Exercise
      and Duration of Warrants.
      This
      Warrant shall be exercisable by the registered Holder at any time and from
      time
      to time on or after the Original Issue Date through and including the Expiration
      Date. At 5:00 p.m., California time on the Expiration Date, the portion of
      this
      Warrant not exercised prior thereto shall be and become void and of no value.
      The Company may not call or redeem any portion of this Warrant without the
      prior
      written consent of the affected Holder. 

     

    5.    Delivery
      of Warrant Shares.

     

    (a)    To
      effect
      exercises hereunder, the Holder shall not be required to physically surrender
      this Warrant unless the aggregate Warrant Shares represented by this Warrant
      is
      being exercised. Upon delivery of the Exercise Notice (in the form attached
      hereto) to the Company (with the attached Warrant Shares Exercise Log) at its
      address for notice set forth herein and upon payment of the Exercise Price
      multiplied by the number of Warrant Shares that the Holder intends to purchase
      hereunder, the Company shall promptly (but in no event later than three (3)
      Business Days after the Date of Exercise) issue and deliver to the Holder,
      a
      certificate for the Warrant Shares issuable upon such exercise, which, shall
      contain the following restrictive securities legend: 

     

    THESE
      SECURITIES HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION
      OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
      REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES
      ACT”),
      OR
      ANY APPLICABLE STATE SECURITIES LAWS AND, ACCORDINGLY, MAY NOT BE OFFERED OR
      SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES
      ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT
      TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN COMPLIANCE WITH
      APPLICABLE STATE SECURITIES LAWS OR BLUE SKY LAWS. 

     

    The
      Company shall, upon request of the Holder and subsequent to the date on which
      the Registration Statement covering the resale of the Warrant Shares has been
      declared effective by the SEC, use its reasonable best efforts to deliver
      Warrant Shares hereunder electronically through the Depository Trust Corporation
      or another established clearing corporation performing similar functions, if
      available, provided, that, the Company may, but will not be required to change
      its transfer agent if its current transfer agent cannot deliver Warrant Shares
      electronically through the Depository Trust Corporation. A “Date
      of Exercise”
means
      the date on which the Holder shall have delivered to the Company: (i) the
      Exercise Notice (with the Warrant Exercise Log attached to it), appropriately
      completed and duly signed and (ii) if the Holder is not utilizing the cashless
      exercise provisions set forth in Section 10(b),
      payment
      of the Exercise Price for the number of Warrant Shares so indicated by the
      Holder to be purchased.

     

    
      
        
        

      

      
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    (b)    If
      by the
      third (3rd)
      Business Day after a Date of Exercise the Company fails to deliver the required
      number of Warrant Shares in the manner required pursuant to Section 5(a),
      then
      the Holder will have the right to rescind such exercise.

     

    (c)    If
      by the
      third (3rd)
      Business Day after a Date of Exercise the Company fails to deliver the required
      number of Warrant Shares in the manner required pursuant to Section 5(a),
      and if
      after such third (3rd)
      Business Day and prior to the receipt of such Warrant Shares, the Holder
      purchases (in an open market transaction or otherwise) shares of Common Stock
      to
      deliver in satisfaction of a sale by the Holder of the Warrant Shares which
      the
      Holder anticipated receiving 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 Warrant Shares that the Company was required
      to
      deliver to the Holder in connection with the exercise at issue by (B) the
      closing sale price of the Common Stock at the time of the obligation giving
      rise
      to such purchase obligation and (2) at the option of the Holder, either
      reinstate the portion of the Warrant and equivalent number of Warrant 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 hereunder. The Holder shall
      provide the Company written notice and supporting documentation indicating
      the
      amounts payable to the Holder in respect of the Buy-In.

     

    (d)    The
      Company’s obligations to issue and deliver Warrant Shares in accordance with the
      terms hereof are absolute and unconditional, irrespective of any action or
      inaction by the Holder to enforce the same, any waiver or consent with respect
      to any provision hereof, the recovery of any judgment against any Person or
      any
      action to enforce the same, or any setoff, counterclaim, recoupment, limitation
      or termination, or any breach or alleged breach by the Holder or any other
      Person of any obligation to the Company or any violation or alleged violation
      of
      law by the Holder or any other Person, and irrespective of any other
      circumstance which might otherwise limit such obligation of the Company to
      the
      Holder in connection with the issuance of Warrant Shares. 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 Warrant Shares upon exercise of the
      Warrant as required pursuant to the terms hereof.

     

    6.    Charges,
      Taxes and Expenses.
      Issuance and delivery of Warrant Shares upon exercise of this Warrant shall
      be
      made without charge to the Holder for any issue or transfer tax, withholding
      tax, transfer agent fee or other incidental tax or expense in respect of the
      issuance of such certificates, all of which taxes and expenses shall be paid
      by
      the Company; provided,
      however,
      that
      the Company shall not be required to pay any tax which may be payable in respect
      of any transfer involved in the registration of any certificates for Warrant
      Shares or Warrants in a name other than that of the Holder. The Holder shall
      be
      responsible for all other tax liability that may arise as a result of holding
      or
      transferring this Warrant or receiving Warrant Shares upon exercise
      hereof.

     

    
      
        
        

      

      
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    7.    Replacement
      of Warrant.
      If this
      Warrant is mutilated, lost, stolen or destroyed, the Company shall issue or
      cause to be issued in exchange and substitution for and upon cancellation
      hereof, or in lieu of and substitution for this Warrant, a New Warrant, but
      only
      upon receipt of evidence reasonably satisfactory to the Company of such loss,
      theft or destruction and customary and reasonable indemnity (which shall not
      include a surety bond), if requested. Applicants for a New Warrant under such
      circumstances shall also comply with such other reasonable regulations and
      procedures and pay such other reasonable third-party costs as the Company may
      prescribe. If a New Warrant is requested as a result of a mutilation of this
      Warrant, then the Holder shall deliver such mutilated Warrant to the Company
      as
      a condition precedent to the Company’s obligation to issue the New
      Warrant.

     

    8.    Reservation
      of Warrant Shares.
      The
      Company covenants that it will at all times reserve and keep available out
      of
      the aggregate of its authorized but unissued and otherwise unreserved Common
      Stock, solely for the purpose of enabling it to issue Warrant Shares upon
      exercise of this Warrant as herein provided, the number of Warrant Shares which
      are then issuable and deliverable upon the exercise of this entire Warrant,
      free
      from preemptive rights or any other contingent purchase rights of Persons other
      than the Holder (taking into account the adjustments and restrictions of
Section
      9).
      The
      Company covenants that all Warrant Shares so issuable and deliverable shall,
      upon issuance and the payment of the applicable Exercise Price in accordance
      with the terms hereof, be duly and validly authorized, issued and fully paid
      and
      nonassessable.

     

    9.    Certain
      Adjustments.
      The
      Exercise Price and number of Warrant Shares issuable upon exercise of this
      Warrant are subject to adjustment from time to time as set forth in this
Section
      9.

     

    (a)    Stock
      Dividends and Splits.
      If the
      Company, at any time while this Warrant is outstanding, (i) pays a stock
      dividend on its Common Stock or otherwise makes a distribution on any class
      of
      capital stock that is payable in shares of Common Stock, (ii) subdivides
      outstanding shares of Common Stock into a larger number of shares, or (iii)
      combines outstanding shares of Common Stock into a smaller number of shares,
      then in each such case the Exercise Price shall be multiplied by a fraction
      of
      which the numerator shall be the number of shares of Common Stock outstanding
      immediately before such event and of which the denominator shall be the number
      of shares of Common Stock outstanding immediately after such event. Any
      adjustment made pursuant to clause (i) of this paragraph shall become effective
      immediately after the payment of the dividend or the making of the distribution,
      and any adjustment pursuant to clause (ii) or (iii) of this paragraph shall
      become effective immediately after the effective date of such subdivision or
      combination.

     

    
      
        
        

      

      
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    (b)    Fundamental
      Transactions.
      If, at
      any time while this Warrant is outstanding there is a Fundamental Transaction,
      then the Holder shall have the right thereafter to receive, upon exercise of
      this Warrant, the same amount and kind of securities, cash or property as it
      would have been entitled to receive upon the occurrence of such Fundamental
      Transaction if it had been, immediately prior to such Fundamental Transaction,
      the holder of the number of Warrant Shares then issuable upon exercise in full
      of this Warrant (the “Alternate
      Consideration”).
      For
      purposes of any such exercise, the determination of the Exercise Price shall
      be
      appropriately adjusted to apply to such Alternate Consideration based on the
      amount of Alternate Consideration issuable in respect of one share of Common
      Stock in such Fundamental Transaction, and the Company shall apportion the
      Exercise Price among the Alternate Consideration in a reasonable manner
      reflecting the relative value of any different components of the Alternate
      Consideration. If holders of Common Stock are given any choice as to the
      securities, cash or property to be received in a Fundamental Transaction, then
      the Holder shall be given the same choice as to the Alternate Consideration
      it
      receives upon any exercise of this Warrant following such Fundamental
      Transaction. At the Holder’s option and request, any successor to the Company or
      surviving entity in such Fundamental Transaction shall issue to the Holder
      a new
      warrant substantially in the form of this Warrant and consistent with the
      foregoing provisions and evidencing the Holder’s right to purchase the Alternate
      Consideration for the aggregate Exercise Price upon exercise thereof. The terms
      of any agreement pursuant to which a Fundamental Transaction is effected shall
      include terms requiring any such successor or surviving entity to comply with
      the provisions of this paragraph (b) and insuring that the Warrant (or any
      such
      replacement security) will be similarly adjusted upon any subsequent transaction
      analogous to a Fundamental Transaction. 

     

    (c)    Number
      of Warrant Shares.
      Simultaneously with any adjustment to the Exercise Price pursuant to this
Section
      9,
      the
      number of Warrant Shares that may be purchased upon exercise of this Warrant
      shall be increased or decreased proportionately, so that after such adjustment
      the aggregate Exercise Price payable hereunder for the adjusted number of
      Warrant Shares shall be the same as the aggregate Exercise Price in effect
      immediately prior to such adjustment.

     

    (d)    Calculations.
      All
      calculations under this Section
      9
      shall be
      made to the nearest cent or the nearest 1/100th of a share, as applicable.
      The
      number of shares of Common Stock outstanding at any given time shall not include
      shares owned or held by or for the account of the Company, and the disposition
      of any such shares shall be considered an issue or sale of Common
      Stock.

     

    (e)    Notice
      of Adjustments.
      Upon
      the occurrence of each adjustment pursuant to this Section
      9,
      the
      Company at its expense will promptly compute such adjustment in accordance
      with
      the terms of this Warrant and prepare a certificate setting forth such
      adjustment, including a statement of the adjusted Exercise Price and adjusted
      number or type of Warrant Shares or other securities issuable upon exercise
      of
      this Warrant (as applicable), describing the transactions giving rise to such
      adjustments and showing in detail the facts upon which such adjustment is based.
      Upon written request, the Company will promptly deliver a copy of each such
      certificate to the Holder and to the Company’s transfer agent.

     

    
      
        
        

      

      
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    (f)    Notice
      of Corporate Events.
      If the
      Company (i) declares a dividend or any other distribution of cash, securities
      or
      other property in respect of its Common Stock, including without limitation
      any
      granting of rights or warrants to subscribe for or purchase any capital stock
      of
      the Company or any Subsidiary, (ii) authorizes or approves, enters into any
      agreement contemplating or solicits shareholder approval for any Fundamental
      Transaction or (iii) authorizes the voluntary dissolution, liquidation or
      winding up of the affairs of the Company, then the Company shall deliver to
      the
      Holder a notice describing the material terms and conditions of such transaction
      (but only to the extent such disclosure would not result in the dissemination
      of
      material, non-public information to the Holder) at least ten (10) calendar
      days
      prior to the applicable record or effective date on which a Person would need
      to
      hold Common Stock in order to participate in or vote with respect to such
      transaction, and the Company will take all steps reasonably necessary in order
      to insure that the Holder is given the practical opportunity to exercise this
      Warrant prior to such time so as to participate in or vote with respect to
      such
      transaction; provided, however, that the failure to deliver such notice or
      any
      defect therein shall not affect the validity of the corporate action required
      to
      be described in such notice.

     

    10.    Payment
      of Exercise Price.
      The
      Holder may pay the Exercise Price in one of the following manners:

     

    (a)    the
      Holder may deliver immediately available funds; or

     

    (b)    if
      the
      Company’s Common Stock is traded on a Trading Market, the Holder may notify the
      Company in an Exercise Notice of its election to utilize cashless exercise,
      in
      which event the Company shall issue to the Holder the number of Warrant Shares
      determined as follows:

     

    X
      = Y
      [(A-B)/A]

     

    where:

     

    X
      = the
      number of Warrant Shares to be issued to the Holder.

     

    Y
      = the
      number of Warrant Shares with respect to which this Warrant is being
      exercised.

     

    A
      = the
      average of the closing sale prices for the five (5) Trading Days immediately
      prior to (but not including) the Exercise Date.

     

    B
      = the
      Exercise Price.

     

    For
      purposes of Rule 144, it is intended, understood and acknowledged that the
      Warrant Shares issued in a cashless exercise transaction shall be deemed to
      have
      been acquired by the Holder, and the holding period for the Warrant Shares
      shall
      be deemed to have commenced, on the date this Warrant was originally
      issued.

     

    11.    No
      Fractional Shares.
      No
      fractional shares of Warrant Shares will be issued in connection with any
      exercise of this Warrant. In lieu of any fractional shares which would,
      otherwise be issuable, the Company shall pay cash equal to the product of such
      fraction multiplied by the closing sale price of one Warrant Share as reported
      by the applicable Trading Market on the date of exercise.

     

    
      
        
        

      

      
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    12.    Registration
      Rights.
      

     

    (a)    Incidental
      Registration.

     

    (i)    If
      at any
      time prior to the Expiration Date the Company shall determine to prepare and
      file with the SEC a registration statement relating to an offering for its
      own
      account or the account of others under the Securities Act of any of its equity
      securities, other than on Form S-4 or Form S-8 (each as promulgated
      under the Securities Act) or their then equivalents relating to equity
      securities to be issued solely in connection with any acquisition of any entity
      or business or equity securities issuable in connection with the stock option
      or
      other employee benefit plans (the “Registration
      Statement”),
      then
      the Company shall send to each Holder written notice of such determination
      and,
      if within fifteen (15) days after receipt of such notice, any such Holder shall
      so request in writing, the Company shall include in such Registration Statement
      all or any part of such Registrable Securities such holder requests to be
      registered.

     

    (ii)    If
      a
      registration pursuant to this Section 12
      involves
      an underwritten offering and the managing underwriter advises the Company in
      writing that, in its opinion, the number of securities which the Company, the
      Holder and any other persons intend to include in such registration exceeds
      the
      number which would have an adverse effect on such offering, including the price
      at which such securities can be sold, the Company will include in such
      registration (i) first, all the securities the Company proposes to sell for
      its own account, and (ii) second, a number of such securities equal to the
      number, in the opinion of such underwriters, which can be sold without having
      the adverse effect referred to above.

     

    (b)    Registration
      Expenses.
      All
      fees and expenses incident to the performance of or compliance with Section 12
      this
      Agreement by the Company, except as and to the extent specified in this
Section 12(b),
      shall
      be borne by the Company whether or not the Registration Statement is filed
      or
      becomes effective and whether or not any Registrable Securities are sold
      pursuant to the Registration Statement. The fees and expenses referred to in
      the
      foregoing sentence shall include, without limitation: (A) all registration
      and
      filing fees; (B) printing expenses (including, without limitation, expenses
      of printing certificates for Registrable Securities and of printing prospectuses
      if the printing of prospectuses is requested by the holders of a majority of
      the
      Registrable Securities included in the Registration Statement);
      (C) messenger, telephone and delivery expenses; (D) fees and
      disbursements of counsel for the Company; (E) Securities Act liability
      insurance, if the Company so desires such insurance; and (F) fees and
      expenses of all other Persons retained by the Company in connection with the
      consummation of the transactions contemplated by this Section
      12,
      including, without limitation, the Company’s independent public accountants
      (including the expenses of any comfort letters or costs associated with the
      delivery by independent public accountants of a comfort letter or comfort
      letters). Except as otherwise expressly provided in this Agreement, any fees
      or
      expenses incurred by Holder or its legal counsel or Holder’s other advisors or
      consultants in connection with any review of the Registration Statement or
      with
      respect to any other matters related to this Agreement shall be borne solely
      by
      Holder.

     

    
      
        
        

      

      
        -9-

        
          

        

      

      
        
        

      

    

     

    (c)    Indemnification.

     

    (i)    Indemnification
      by the Company.
      The
      Company shall, notwithstanding any termination of this Warrant, indemnify and
      hold harmless the Holder, the officers, directors, agents, brokers (including
      brokers who offer and sell Registrable Securities as principal as a result
      of a
      pledge or any failure to perform under a margin call of Common Stock),
      investment advisors and employees of each of them, each Person who controls
      the
      Holder (within the meaning of Section 15 of the Securities Act or
      Section 20 of the Exchange Act) and the officers, directors, agents and
      employees of each such controlling Person, to the fullest extent permitted
      by
      applicable law, from and against any and all losses, claims, damages,
      liabilities, costs (including, without limitation, costs of preparation and
      attorneys’ fees) and expenses (collectively, “Losses”)
      (as
      determined by a court of competent jurisdiction in a final judgment not subject
      to appeal or review), as incurred, arising out of or based upon any untrue
      or
      alleged untrue statement of a material fact contained in the Registration
      Statement, any related Prospectus or any form of prospectus or in any amendment
      or supplement thereto or in any preliminary prospectus, or arising solely out
      of
      or based upon any omission or alleged omission of a material fact required
      to be
      stated therein or necessary to make the statements therein (in the case of
      any
      related Prospectus or form of prospectus or supplement thereto, in the light
      of
      the circumstances under which they were made) not misleading, except to the
      extent, but only to the extent, that such untrue statements or omissions are
      based upon information regarding the Holder furnished in writing to the Company
      by the Holder expressly for use therein. The Company shall notify the Holder
      promptly of the institution, threat or assertion of any Proceeding
      of which the Company is aware in connection with the transactions contemplated
      by this Agreement.

     

    (ii)    Indemnification
      by Holder.
      The
      Holder shall indemnify and hold harmless the Company, the directors, officers,
      agents and employees, each Person who controls the Company (within the meaning
      of Section 15 of the Securities Act and Section 20 of the Exchange
      Act), and the directors, officers, agents or employees of such controlling
      Persons, to the fullest extent permitted by applicable law, from and against
      all
      Losses (as determined by a court of competent jurisdiction in a final judgment
      not subject to appeal or review), as incurred, arising solely out of or based
      solely upon any untrue statement or alleged untrue statement of a material
      fact
      contained in the Registration Statement, any related Prospectus, or any form
      of
      prospectus or form of prospectus or in any amendment or supplement thereto
      or in
      any preliminary prospectus, or arising solely out of or based solely upon any
      omission of a material fact required to be stated therein or necessary to make
      the statements therein (in the case of any related Prospectus or supplement
      thereto, in the light of the circumstances under which they were made) not
      misleading, to the extent, but only to the extent, that such untrue statement
      or
      omission or alleged untrue statement or omission is contained in information
      so
      furnished by the Holder in writing to the Company expressly for inclusion in
      the
      Registration Statement or such related Prospectus. In no event shall the
      liability of the Holder hereunder be greater in amount than the dollar amount
      of
      the net proceeds received by the Holder upon the sale of the Registrable
      Securities giving rise to such indemnification obligation.

     

    
      
        
        

      

      
        -10-

        
          

        

      

      
        
        

      

    

     

    (iii)    Conduct
      of Indemnification Proceedings.
      If any
      Proceeding shall be brought or asserted against any Person entitled to indemnity
      hereunder (an “Indemnified
      Party”),
      such
      Indemnified Party promptly shall notify the Person from whom indemnity is sought
      (the “Indemnifying
      Party”)
      in
      writing, and the Indemnifying Party shall assume the defense thereof, including
      the employment of counsel reasonably satisfactory to the Indemnified Party
      and
      the payment of all fees and expenses incurred in connection with defense
      thereof; provided,
      however,
      that
      the failure of any Indemnified Party to give such notice shall not relieve
      the
      Indemnifying Party of its obligations or liabilities pursuant to this Agreement,
      except to the extent that such failure shall have proximately and materially
      adversely prejudiced the Indemnifying Party.

     

    An
      Indemnified Party shall have the right to employ separate counsel in any such
      Proceeding and to participate in the defense thereof, but the fees and expenses
      of such counsel shall be at the expense of such Indemnified Party or Parties
      unless: (x) the Indemnifying Party has agreed in writing to pay such fees and
      expenses; or (y) the Indemnifying Party shall have failed promptly to assume
      the
      defense of such Proceeding and to employ counsel reasonably satisfactory to
      such
      Indemnified Party in any such Proceeding; or (z) the named parties to any such
      Proceeding (including any impleaded parties) include both such Indemnified
      Party
      and the Indemnifying Party, and such Indemnified Party shall have been advised
      by counsel that a conflict of interest is likely to exist if the same counsel
      were to represent such Indemnified Party and the Indemnifying Party (in which
      case, if such Indemnified Party notifies the Indemnifying Party in writing
      that
      it elects to employ separate counsel at the expense of the Indemnifying Party,
      the Indemnifying Party shall not have the right to assume the defense thereof
      and such counsel shall be at the expense of the Indemnifying Party). The
      Indemnifying Party shall not be liable for any settlement of any such Proceeding
      effected without its written consent, which consent shall not be unreasonably
      withheld or delayed. No Indemnifying Party shall, without the prior written
      consent of the Indemnified Party, effect any settlement of any pending
      Proceeding in respect of which any Indemnified Party is a party, unless such
      settlement includes an unconditional release of such Indemnified Party from
      all
      liability on claims that are the subject matter of such Proceeding.

     

    All
      fees
      and expenses of the Indemnified Party (including reasonable fees and expenses
      to
      the extent incurred in connection with investigating or preparing to defend
      such
      Proceeding in a manner not inconsistent with this Section 12(c))
      shall
      be paid to the Indemnified Party, as incurred, within ten (10) Business Days
      of
      written notice thereof to the Indemnifying Party (regardless of whether it
      is
      ultimately determined that an Indemnified Party is not entitled to
      indemnification hereunder; provided,
      however,
      that
      the Indemnifying Party may require such Indemnified Party to undertake to
      reimburse all such fees and expenses to the extent it is finally judicially
      determined that such Indemnified Party is not entitled to indemnification
      hereunder).

     

    
      
        
        

      

      
        -11-

        
          

        

      

      
        
        

      

    

     

    (iv)    Contribution.
      If a
      claim for indemnification under Section 12(c)(i)
      or
Section 12(c)(ii)
      is
      unavailable to an Indemnified Party (by reason of public policy or otherwise),
      then each Indemnifying Party, in lieu of indemnifying such Indemnified Party,
      shall contribute to the amount paid or payable by such Indemnified Party as
      a
      result of such Losses, in such proportion as is appropriate to reflect the
      relative fault of the Indemnifying Party and Indemnified Party in connection
      with the actions, statements or omissions that resulted in such Losses as well
      as any other relevant equitable considerations. The relative fault of such
      Indemnifying Party and Indemnified Party shall be determined by reference to,
      among other things, whether any action in question, including any untrue or
      alleged untrue statement of a material fact or omission or alleged omission
      of a
      material fact, has been taken or made by, or relates to information supplied
      by,
      such Indemnifying, Party or Indemnified Party, and the parties’ relative intent,
      knowledge, access to information and opportunity to correct or prevent such
      action, statement or omission. The amount paid or payable by a party as a result
      of any Losses shall be deemed to include, subject to the limitations set forth
      in Section 12(c)(iii),
      any
      reasonable attorneys’ or other reasonable fees or expenses incurred by such
      party in connection with any Proceeding to the extent such party would have
      been
      indemnified for such fees or expenses if the indemnification provided for in
      this Section was available to such party in accordance with its
      terms.

     

    The
      parties hereto agree that it would not be just and equitable if contribution
      pursuant to this Section 12(c)(iv)
      were
      determined by pro rata allocation or by any other method of allocation that
      does
      not take into account the equitable considerations referred to in the
      immediately preceding paragraph. Notwithstanding
      the provisions of this Section 12(c)(iv),
      no
      Holder shall be required to contribute, in the aggregate, any amount in excess
      of the amount of the proceeds actually received by such Holder from the sale
      of
      the Registrable Securities subject to the proceeding. No
      Person
      guilty of fraudulent misrepresentation (within the meaning of Section 11(f)
      of the Securities Act) shall be entitled to contribution from any Person who
      was
      not guilty of such fraudulent misrepresentation.

     

    The
      indemnity and contribution agreements contained in this Section are in addition
      to any liability that the Indemnifying Parties may have to the Indemnified
      Parties. Notwithstanding the foregoing, the obligations of the Holders herein
      shall be the several, and not joint, obligation of each Holder as to itself
      and
      not as to any other Holder.

     

    
      
        
        

      

      
        -12-

        
          

        

      

      
        
        

      

    

     

    13.    Notices.
      Any and
      all notices or other communications or deliveries hereunder (including, without
      limitation, any Exercise Notice) shall be in writing and shall be deemed given
      and effective on the earliest of (i) the date of transmission, if such notice
      or
      communication is delivered via facsimile at the facsimile number specified
      in
      this Section prior to 5:00 p.m. (California time) on a Business Day, (ii) the
      next Business Day after the date of transmission, if such notice or
      communication is delivered via facsimile at the facsimile number specified
      in
      this Section on a day that is not a Business Day or later than 5:00 p.m.
      (California time) on any Business Day, (iii) the Business Day following the
      date
      of mailing, if sent by nationally recognized overnight courier service, or
      (iv)
      upon actual receipt by the party to whom such notice is required to be given.
      The addresses for such communications shall be: (i) if to the Company, to
      Strasbaugh, 825 Buckley Road, San Luis Obispo, California 93401, Attn:
      President, or to Facsimile No.: (805) 541-6425 (or such other address as the
      Company shall indicate in writing in accordance with this Section), or (ii)
      if
      to the Holder, to the address or facsimile number appearing on the Warrant
      Register or such other address or facsimile number as the Holder may provide
      to
      the Company in accordance with this Section.

     

    14.    Warrant
      Agent.
      The
      Company shall serve as warrant agent under this Warrant. Upon ten (10) days’
notice to the Holder, the Company may appoint a new warrant agent. Any
      corporation into which the Company or any new warrant agent may be merged or
      any
      corporation resulting from any consolidation to which the Company or any new
      warrant agent shall be a party or any corporation to which the Company or any
      new warrant agent transfers substantially all of its corporate trust or
      shareholders services business shall be a successor warrant agent under this
      Warrant without any further act. Any such successor warrant agent shall promptly
      cause notice of its succession as warrant agent to be mailed (by first class
      mail, postage prepaid) to the Holder at the Holder’s last address as shown on
      the Warrant Register.

     

    15.    Holder
      Status.
      The
      Holder is an “accredited investor” as defined in Rule 501(a) under the
      Securities Act or a “qualified institutional buyer” as defined in Rule 144A(a)
      under the Securities Act.

     

    16.    Miscellaneous.

     

    (a)    This
      Warrant shall be binding on and inure to the benefit of the parties hereto
      and
      their respective successors and assigns. Subject to the preceding sentence,
      nothing in this Warrant shall be construed to give to any Person other than
      the
      Company and the Holder any legal or equitable right, remedy or cause of action
      under this Warrant. This Warrant may be amended only in writing signed by the
      Company and the Holder and their successors and assigns.

     

    
      
        
        

      

      
        -13-

        
          

        

      

      
        
        

      

    

     

    (b)    THE
      CORPORATE LAWS OF THE STATE OF CALIFORNIA SHALL GOVERN ALL ISSUES CONCERNING
      THE
      RELATIVE RIGHTS OF THE COMPANY AND ITS SHAREHOLDERS. ALL QUESTIONS CONCERNING
      THE CONSTRUCTION, VALIDITY, ENFORCEMENT AND INTERPRETATION OF THIS AGREEMENT
      SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE
      OF
      CALIFORNIA. THE COMPANY AND HOLDER HEREBY IRREVOCABLY SUBMIT TO THE
      NON-EXCLUSIVE JURISDICTION OF THE STATE AND FEDERAL COURTS SITTING IN THE COUNTY
      OF ORANGE, STATE OF CALIFORNIA, FOR THE ADJUDICATION OF ANY DISPUTE BROUGHT
      BY
      THE COMPANY OR HOLDER HEREUNDER, IN CONNECTION HEREWITH OR WITH ANY TRANSACTION
      CONTEMPLATED HEREBY OR DISCUSSED HEREIN (INCLUDING WITH RESPECT TO THE
      ENFORCEMENT OF THIS WARRANT, AND HEREBY IRREVOCABLY WAIVE, AND AGREE NOT TO
      ASSERT IN ANY SUIT, ACTION OR PROCEEDING BROUGHT BY THE COMPANY OR ANY HOLDER,
      ANY CLAIM THAT IT IS NOT PERSONALLY SUBJECT TO THE JURISDICTION OF ANY SUCH
      COURT, OR THAT SUCH SUIT, ACTION OR PROCEEDING IS IMPROPER. EACH PARTY HEREBY
      IRREVOCABLY WAIVES PERSONAL SERVICE OF PROCESS AND CONSENTS TO PROCESS BEING
      SERVED IN ANY SUCH SUIT, ACTION OR PROCEEDING BY MAILING A COPY THEREOF 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 MANNER PERMITTED BY LAW.  THE
      COMPANY AND HOLDER HEREBY WAIVE ALL RIGHTS TO A TRIAL BY JURY.

     

    (c)    The
      headings herein are for convenience only, do not constitute a part of this
      Warrant and shall not be deemed to limit or affect any of the provisions
      hereof.

     

    (d)    In
      case
      any one or more of the provisions of this Warrant shall be invalid or
      unenforceable in any respect, the validity and enforceability of the remaining
      terms and provisions of this Warrant shall not in any way be affected or
      impaired thereby and the parties will attempt in good faith to agree upon a
      valid and enforceable provision which shall be a commercially reasonable
      substitute therefor, and upon so agreeing, shall incorporate such substitute
      provision in this Warrant.

     

    (e)    Prior
      to
      exercise of this Warrant, the Holder hereof shall not, by reason of by being
      a
      Holder, be entitled to any rights of a shareholder with respect to the Warrant
      Shares.

     

    (f)    This
      Warrant may be transferred by the original Holder to any other Person provided
      such Person is an “accredited investor” as defined in Rule 501(a) under the
      Securities Act or a “qualified institutional buyer” as defined in Rule 144A(a)
      under the Securities Act.

     

    
      
        
        

      

      
        -14-

        
          

        

      

      
        
        

      

    

     

    IN
      WITNESS WHEREOF, each of the Company and Holder has caused this Warrant to
      be
      duly executed by its authorized officer as of the date first indicated
      above.

     

     

    
      	 	
              STRASBAUGH

            
	 	 
	 	
              By: /s/ Richard
                Nance                                                            

              
                Richard
                  Nance, Chief Financial Officer

              

            
	 	 
	 	
               

              
                
                  [___________]

                   

                  By:________________________________________

                  
                    ____________________,
                      ______________________

                  

                

              

            


    

     

    
      
        
        

      

      
        -15-

        
          

        

      

      
        
        

      

    

     

    EXERCISE
      NOTICE

     

    STRASBAUGH

     

    WARRANT
      DATED MAY 24, 2007

    


     

    The
      undersigned Holder hereby irrevocably elects to purchase _____________ shares
      of
      Common Stock pursuant to the above referenced Warrant. Capitalized terms used
      herein and not otherwise defined have the respective meanings set forth in
      the
      Warrant.

     

    
      	
              (1)

            	
              The
                undersigned Holder hereby exercises its right to purchase
                _________________ Warrant Shares pursuant to the
                Warrant.

            


    

     

    
      	
              (2)

            	
              The
                Holder intends that payment of the Exercise Price shall be made as
                (check
                one):

            


    

     

    
      	 	
              ____

            	
              “Cash
                Exercise” under Section
                10(a).

            


    

     

    
      	 	
              ____

            	
              “Cashless
                Exercise” under Section
                10(b).

            


    

     

    
      	
              (3)

            	
              If
                the Holder has elected a Cash Exercise, the Holder shall pay the
                sum of
                $____________ to the Company in accordance with the terms of the
                Warrant.
                Payment shall take the form of lawful money of the United States
                in
                immediately available funds.

            


    

     

    
      	
              (4)

            	
              Pursuant
                to this Exercise Notice, the Company shall deliver to the Holder
                _______________ Warrant Shares in accordance with the terms of the
                Warrant.

            


    

     

    
      	
              (5)

            	
              The
                undersigned represents that it has and will comply with the prospectus
                delivery requirements, if any, of the Securities
                Act.

            


    

    


    
      	
              Dated:________________________,
                ____

            	
              Name
                of Holder:

            
	 	________________________________________________
	 	
              (Print)
                

            
	 	 
	 	 
	 	
              By:____________________________________________________

            
	 	
              Name:__________________________________________________

            
	 	
              Title:___________________________________________________

            
	 	 
	 	
              (Signature
                must conform in all respects to name of holder

              as
                specified on the face of the
                Warrant)

            


    

     

    
      
        
        

      

      
        -16-

        
          

        

      

      
        
        

      

    

     

    Warrant
      Shares Exercise Log

    


    
      	
              Date

            	
              Number
                of Warrant Shares

              Available
                to be Exercised

            	
              Number
                of Warrant

              Shares
                Exercised

            	
              Number
                of Warrant Shares Remaining to be Exercised

            
	 	 	 	 
	 	 	 	 
	 	 	 	 
	 	 	 	 
	 	 	 	 
	 	 	 	 
	 	 	 	 
	 	 	 	 
	 	 	 	 
	 	 	 	 


    

     

    
      
        
        

      

      
        -17-

        
          

        

      

      
        
        

      

    

     

    STRASBAUGH

     

    PLACEMENT
      WARRANT ORIGINALLY ISSUED MAY 24, 2007

     

    WARRANT
      NO. PW-__

     

    FORM
      OF
      ASSIGNMENT

     

    [To
      be
      completed and signed only upon transfer of Warrant]

     

    FOR
      VALUE
      RECEIVED, the undersigned hereby sells, assigns and transfers unto
      ________________________________ the right represented by the above-captioned
      Warrant to purchase ____________ shares of Common Stock to which such Warrant
      relates and appoints ________________ attorney to transfer said right on the
      books of the Company with full power of substitution in the
      premises.

     

    Dated: _______________,
      ____

     

     

    
      	 	
              __________________________________________

              
                (Signature
                  must conform in all respects to name of holder

                as
                  specified on the face of the Warrant)

              

            
	 	 
	 	
              __________________________________________

              Address of Transferee

            
	 	 
	 	__________________________________________
	 	__________________________________________
	 	 
	 	 
	
              In the presence of:

              ____________________________

              
                ____________________________

              

            	
            


    

     

     

    -18-