Warrant


    Exhibit
      4.5

    
 

    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

     

    WARRANT

     

    
      	Warrant No. W-_	
              Original
                Issue Date: May 24,
                2007

            


    

     

    Strasbaugh,
      a California corporation (the “Company”),
      hereby certifies that, for value received, [_______] or its registered assigns
      (the “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 180 days after the Original Issue
      Date (the “Initial
      Exercise 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.
      Capitalized terms that are used and not defined in this Warrant that are defined
      in the Purchase Agreement (as defined below) shall have the respective
      definitions set forth in the Purchase Agreement.

     

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

     

    “Anti-Dilution
      Excluded Securities”
shall
      mean any of the following securities: (1) securities issued to employees,
      consultants, officers or directors of the Company or Options granted by the
      Company to employees, consultants, officers or directors of the Company pursuant
      to any option plan, agreement or other arrangement duly adopted by the Company
      and the grant of which is approved by the compensation committee of the Board
      of
      Directors; (2) the Series A Preferred Stock and any Common Stock issued upon
      conversion of the Series A Preferred Stock; (3) for the avoidance of doubt,
      securities issued on the conversion of any Convertible Securities or the
      exercise of any Options, in each case, outstanding on the Original Issue Date;
      and (4) for the avoidance of doubt, securities issued in connection with a
      stock
      split, stock dividend, combination, reorganization, recapitalization or other
      similar event for which adjustment is made in accordance with the provisions
      of
      this Warrant.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

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

     

    “Common
      Stock Equivalents”
shall
      mean Options and Convertible Securities.

     

    “Convertible
      Securities”
shall
      mean any stock or securities (other than Options) convertible into or
      exchangeable for Common Stock.

     

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

     

    “Dilutive
      Issuance”
shall
      have the meaning set forth in Section
      9(g).

     

    “Dilutive
      Issuance Notice”
shall
      have the meaning set forth in Section
      9(g).

     

    “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
      of
      the Company 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. 

     

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

     

    “Options”
shall
      mean any outstanding rights, warrants or options to subscribe for or purchase
      Common Stock or Convertible Securities

     

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

     

    “Purchase
      Agreement”
shall
      mean the Securities Purchase Agreement dated as of May 24, 2007 (as amended
      or
      modified from time to time), to which the Company and the original Holder are
      parties.

     

    “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.

     

    
      
        
        

      

      
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    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. 

     

    4.    Exercise
      and Duration of Warrants.
      

     

    (a)    This
      Warrant shall be exercisable by the registered Holder at any time and from
      time
      to time on or after the Initial Exercise 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.

     

    (b)    If
      at any
      time after the Initial Exercise Date there
      is
      no effective Registration Statement registering, or no current prospectus
      available for, the resale of the Warrant Shares by the Holder, then this Warrant
      may also be exercised at such time by means of a “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 Business Days immediately prior
      to (but not including) the Exercise Date.

     

    B
      = the
      Exercise Price. 

     

    
      
        
        

      

      
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    (c)    The
      Holder shall not have the right to exercise any portion of this Warrant,
      pursuant to Section
      4(a)
      or
      otherwise, to the extent that after giving effect to such issuance after
      exercise, the Holder (together with the Holder’s Affiliates), as set forth on
      the applicable Exercise Notice, would beneficially own in excess of 4.99% of
      the
      number of shares of the Common Stock outstanding immediately after giving effect
      to such issuance. For purposes of the foregoing sentence, the number of shares
      of Common Stock beneficially owned by the Holder and its Affiliates shall
      include the number of shares of Common Stock issuable upon exercise of this
      Warrant with respect to which the determination of such sentence is being made,
      but shall exclude the number of shares of Common Stock which would be issuable
      upon (A) exercise of the remaining, nonexercised portion of this Warrant
      beneficially owned by the Holder or any of its Affiliates and (B) exercise
      or
      conversion of the unexercised or nonconverted portion of any other securities
      of
      the Company (including, without limitation, any other Warrants or Preferred
      Stock) subject to a limitation on conversion or exercise analogous to the
      limitation contained herein beneficially owned by the Holder or any of its
      Affiliates. Except as set forth in the preceding sentence, for purposes of
      this
Section
      4(c),
      beneficial ownership shall be calculated in accordance with Section 13(d) of
      the
      Exchange Act, it being acknowledged by Holder that the Company is not
      representing to Holder that such calculation is in compliance with Section
      13(d)
      of the Exchange Act and Holder is solely responsible for any schedules required
      to be filed in accordance therewith. To the extent that the limitation contained
      in this Section
      4(c)
      applies,
      the determination of whether this Warrant is exercisable (in relation to other
      securities owned by the Holder) and of which a portion of this Warrant is
      exercisable shall be in the sole discretion of such Holder, and the submission
      of a Exercise Notice shall be deemed to be such Holder’s determination of
      whether this Warrant is exercisable (in relation to other securities owned
      by
      such Holder) and of which portion of this Warrant is exercisable, in each case
      subject to such aggregate percentage limitation, and the Company shall have
      no
      obligation to verify or confirm the accuracy of such determination. For purposes
      of this Section
      4(c),
      in
      determining the number of outstanding shares of Common Stock, the Holder may
      rely on the number of outstanding shares of Common Stock as reflected in (x)
      the
      Company’s most recent Form 10-QSB or Form 10-KSB, as the case may be, (y) a more
      recent public announcement by the Company or (z) any other notice by the Company
      or the Company’s Transfer Agent setting forth the number of shares of Common
      Stock outstanding. Upon the written or oral request of the Holder, the Company
      shall within two (2) Business Days confirm orally and in writing to the Holder
      the number of shares of Common Stock then outstanding. In any case, the number
      of outstanding shares of Common Stock shall be determined after giving effect
      to
      the conversion or exercise of securities of the Company, including this Warrant,
      by the Holder or its Affiliates since the date as of which such number of
      outstanding shares of Common Stock was reported. The provisions of this
Section
      4(c)
      may be
      waived by the Holder, at the election of the Holder, upon not less than 61
      days’
prior notice to the Company, and the provisions of this Section
      4(c)
      shall
      continue to apply until such 61st day (or such later date, as determined by
      the
      Holder, as may be specified in such notice of waiver).

     

    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 (as defined herein)) issue and deliver
      to the Holder, a certificate for the Warrant Shares issuable upon such exercise,
      which, unless otherwise required by the Purchase Agreement, shall be free of
      restrictive legends. The Company shall, upon request of the Holder and
      subsequent to the date on which a 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) 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.

     

    
      
        
        

      

      
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    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.

     

    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) Business
      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.

     

    (g)    Subsequent
      Equity Sales.
      If the
      Company at any time while this Warrant is outstanding, shall offer, sell, grant
      any option to purchase or offer, sell or grant any right to reprice its
      securities, or otherwise dispose of or issue (or announce any offer, sale,
      grant
      or any option to purchase or other disposition) any Common Stock or Common
      Stock
      Equivalents entitling any Person to acquire shares of Common Stock, at an
      effective price per share less than the then Exercise Price (each such issuance,
      a “Dilutive
      Issuance”),
      as
      adjusted hereunder (if the holder of the Common Stock or Common Stock
      Equivalents so issued shall at any time, whether by operation of purchase price
      adjustments, reset provisions, floating conversion, exercise or exchange prices
      or otherwise, or due to warrants, options or rights per share which is issued
      in
      connection with such issuance, be entitled to receive shares of Common Stock
      at
      an effective price per share which is less than the Exercise Price, such
      issuance shall be deemed to have occurred for less than the Exercise
      Price), then
      the
      Exercise Price shall be reduced to the price determined by dividing (x) an
      amount equal to the sum of (a) the number of shares of Common Stock outstanding
      immediately prior to such issue or sale multiplied by the then existing Exercise
      Price and (b) the consideration, if any, received by the Company upon such
      issue
      or sale, by (y) the total number of shares of Common Stock outstanding
      immediately after such issue or sale and, in each case, the number of Warrant
      Shares issuable hereunder shall be increased such that the aggregate Exercise
      Price payable hereunder, after taking into account the decrease in the Exercise
      Price, shall be equal to the aggregate Exercise Price prior to such adjustment.
      For purposes of determining the number of shares of Common Stock outstanding
      as
      provided in clauses (x) and (y) above, the number of shares of Common Stock
      issuable upon conversion of all outstanding Convertible Securities and exercise
      of all outstanding Options shall be deemed to be outstanding. Anything herein
      to
      the contrary notwithstanding, the Company shall not be required to make any
      adjustment of the Exercise Price in the case of the issuance or sale from and
      after the Original Issue Date of Anti-Dilution Excluded Securities. The Company
      shall notify the Holder in writing, no later than the Business Day following
      the
      issuance of any Common Stock or Common Stock Equivalents subject to this
      section, indicating therein the applicable issuance price, or of applicable
      reset price, exchange price, conversion price and other pricing terms (such
      notice the “Dilutive
      Issuance Notice”).

     

    
      
        
        

      

      
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    10.    Payment
      of Exercise Price.
      Except
      in connection with a cashless exercise as set forth in Section
      4(b),
      the
      Holder shall pay the Exercise Price by delivering to the Company immediately
      available funds.

     

    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.

     

    12.    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.

     

    13.    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.

     

    
      
        
        

      

      
        -9-

        
          

        

      

      
        
        

      

    

     

    14.    Voluntary
      Adjustment By Company.
      The
      Company may at any time during the term of this Warrant reduce the then current
      Exercise Price to any amount and for any period of time deemed appropriate
      by
      the Board of Directors of the Company.

     

    15.    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.

     

    (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 AGREEMENT, 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.

     

    
      
        
        

      

      
        -10-

        
          

        

      

      
        
        

      

    

     

    (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.

     

    IN
      WITNESS WHEREOF, the Company 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

              

            


    

     

    
      
        
        

      

      
        -11-

        
          

        

      

      
        
        

      

    

     

    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 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.

            


    

     

    
      	
              (3)

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

            


    

     

    
      	
              (4)

            	
              The
                undersigned represents that it has and will comply with the prospectus
                delivery requirements 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)

            


    

     

    
      
        
        

      

      
        -12-

        
          

        

      

      
        
        

      

    

     

    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

               

            
	 	 	 	 
	 	 	 	 
	 	 	 	 
	 	 	 	 
	 	 	 	 
	 	 	 	 
	 	 	 	 
	 	 	 	 
	 	 	 	 
	 	 	 	 


    

     

    
      
        
        

      

      
        -13-

        
          

        

      

      
        
        

      

    

     

    STRASBAUGH

     

    WARRANT
      ORIGINALLY ISSUED MAY 24, 2007

     

    WARRANT
      NO. ___

     

    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:

     

    __________________________

     

     

     

    -14-