Exhibit
4.2


 


Heartland Payment
Systems Letterhead


 


January 8, 2004


 


 


VIA FACSIMILE


 


	
  BHC Interim Funding,
  L.P.

  	
   

  	
   

  
	
  444 Madison Avenue, 25th Floor

  	
   

  	
   

  
	
  New York, NY 10022

  	
   

  	
   

  
	
  Attention:

  	
  Gerald H. Houghton,
  Managing Partner

  
	
   

  	
  Steven H. Brooks,
  Managing Partner

  
				



 


Re:
Heartland Payment Systems Warrant


 


Dear
Gerald and Steven:


 


This letter agreement is
written in connection with your request to exercise your right to put a portion
of the Warrant dated July 26, 2001 (the “Warrant”) between you, BHC
Interim Funding, L.P. (the “Holder”), and us, Heartland Payment Systems, Inc.,
a Delaware corporation (the “Company”), to the Company pursuant to
Section 3.1(d) thereof. All capitalized terms used but not defined herein
shall have the meanings given to them in the Warrant. We ask you to confirm our
letter agreement, by your signature below, that:


 


1.                                       The
portion of the Warrant you wish to Put pursuant to Section 3.1(d) thereof
represents 84,453 Warrant Shares and the balance of the Warrant remaining upon
this exercise represents 84,452 Warrant Shares.


 


2.                                       The
Fair Market Value is $12.50 per Warrant Share, and the Exercise Price is $0.01;
therefore, the aggregate net Put Price for the 84,453 Warrant Shares being Put
is $1,054,817.97.


 


3.                                       The
Holder hereby represents, warrants and covenants that:


 


a)                                      it
is the legal and beneficial owner of the Warrant entitling it to purchase a
total of 168,905 Warrant Shares, prior to the exercise of the Put which is the
subject hereof, and its ownership thereof is free and clear of all liens and
encumbrances and the exercise of the Put will not violate the terms of any
agreement to which it is a party or violate any law or regulation to which it
is subject; and


 


b)                                     it
will not contest or dispute, now or any time in the future, the determination of
the $12.50 Fair Market Value of the 84,453 Warrant Shares being put to the
Company hereunder.


 


4.                                       The
Holder agrees to indemnify the Company and hold it harmless against any legal
proceeding, governmental order, complaint, claim, demand, damage, deficiency,
penalty, fine, cost, amount paid in settlement, liability, obligation, tax,
encumbrance, loss, expense or fee, including court costs and attorneys’ fees
and expenses arising from, relating to or constituting any breach or inaccuracy
in any of the Holder’s representations, warranties or covenants contained in
Section 3 of this confirmation letter.


 

















 


5.                                       This
agreement between the parties is in lieu of the procedures for exercising the
Put, determining the Fair Market Value and contesting and appraising the
Company Determination set forth in Sections 3.1, 3.2 and 3.3 of the Warrant,
and both parties hereby waive their respective rights under such Sections of
the Warrant as such rights relate to the 84,453 Warrant Shares being put to the
Company hereunder.


 


6.                                       At
the closing, the net Put Price of $1,054,817.97 shall be paid to the Holder by
the Company in cash, by certified check or by wire transfer, against delivery
of the Warrant to the Company. The Company shall then affix this confirmation
letter to the Warrant in order to indicate that rights with respect to 84,452
Warrant Shares are remaining under the Warrant and deliver it back to the
Holder.


 


This confirmation letter
supplements the Warrant and, except as expressly set forth herein, this
confirmation letter is not intended to modify or amend any of the provisions of
the Warrant.


 


If the Holder has not
received the net Put Price of $1,054,817.97 from the Company by
January 23, 2004, this letter agreement shall be null and void.


 


If the foregoing accurately
reflects the terms of our agreement, please so indicate by signing where
indicated below, and return one counterpart of this confirmation letter to us.


 


	
   

  	
  Sincerely,

  
	
   

  	
   

  
	
   

  	
  HEARTLAND
  PAYMENT SYSTEMS, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Robert H.B.
  Baldwin

  	
   

  
	
   

  	
   

  	
  Name: Robert
  H.B. Baldwin

  
	
   

  	
   

  	
  Title: Chief
  Financial Officer

  
	
   

  	
   

  
	
  AGREED ND ACCEPTED THIS
  12th  

  DAY OF JANUARY 2004

  	
   

  
	
   

  	
   

  
	
  BHC INTERIM FUNDING,
  L.P.

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/ Gerald Houghton

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
						



 

















 


THIS WARRANT HAS BEEN
AMENDED BY A LETTER AGREEMENT DATED JANUARY 8, 2004 AND AGREED AND
ACCEPTED ON JANUARY 12, 2004 BETWEEN HEARTLAND PAYMENT SYSTEMS, INC. AND
BHC INTERIM FUNDING, L.P., A COPY OF WHICH IS ATTACHED HERETO (THE “LETTER
AGREEMENT”). THE BALANCE OF THE WARRANT REMAINING AFTER BHC INTERIM FUNDING,
L.P.’S EXERCISE OF THE PUT, WHICH IS THE SUBJECT OF THE LETTER AGREEMENT IS
84,452 WARRANT SHARES.


 


Execution Copy


 


THIS WARRANT AND THE
SHARES OF COMMON STOCK ISSUABLE UPON THE EXERCISE HEREOF HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 OR ANY STATE SECURITIES LAWS AND
MAY NOT BE SOLD OR OFFERED FOR SALE UNLESS REGISTERED OR QUALIFIED UNDER SAID
ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR UNLESS THE COMPANY RECEIVES AN
OPINION REASONABLY ACCEPTABLE IN FORM AND SUBSTANCE TO THE COMPANY OF COUNSEL
REASONABLY SATISFACTORY TO THE COMPANY THAT REGISTRATION, QUALIFICATION OR
OTHER SUCH ACTIONS ARE NOT REQUIRED UNDER ANY SUCH LAWS OR THAT AN EXEMPTION
FROM SUCH REGISTRATION IS AVAILABLE. THE OFFERING OF THIS WARRANT AND THE
COMMON STOCK ISSUABLE UPON THE EXERCISE THEREOF HAVE NOT BEEN REVIEWED OR
APPROVED BY THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION, OR BY ANY
STATE’S SECURITIES ADMINISTRATOR. THIS WARRANT AND THE COMMON STOCK ISSUED UPON
LTHE EXERCISE THEREOF IS ALSO SUBJECT TO CERTAIN ADDITIONAL TRANSFER
RESTRICTIONS PROVIDED FOR HEREIN.


 


	
  Warrant No. 1

  	
   

  	
  Dated:
  July 26, 2001

  



 


WARRANT


 


THIS
IS TO CERTIFY THAT, for value received, BHC INTERIM FUNDING, L.P. or its
registered assigns (the “Holder”), is entitled to purchase from HEARTLAND PAYMENT
SYSTEMS, INC., a Delaware corporation (the “Company”), at any time on or after
the date hereof and before 5:00 p.m. (New York time) on July 25, 2006,
such number of shares of the Company’s Common Stock, $0.001 par value per share
(the “Common Stock”), as the Holder shall be entitled to exercise on such date
pursuant to the vesting schedule set forth below, at a price (the
“Exercise Price”) equal to $.01 per share, payable as provided below. The
Common Stock issuable upon exercise of this Warrant are herein called the
“Warrant Shares”.


 


Certain
terms used in this Warrant are defined in Article VI.


 


The
number of Warrant Shares that the Holder shall have the right to purchase upon
exercise of this Warrant shall be in accordance with the following vesting schedule and
shall be deemed to have vested without further action by the Holder as follows;
and, subject to adjustment as provided in Article IV of this Warrant:


 


(i)                                     On
the date hereof and at all times hereafter if the Loan is repaid in full on or
prior to January 24, 2002, the Holder shall have the right to purchase
168,905 Warrant Shares.


 


(ii)                                  If
the Loan is not paid in full on or prior to January 24, 2002, then from
and after such date the Holder shall have the right to purchase an additional
175,545 Warrant Shares, totaling 344,450 Warrant Shares.


 


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(iii)                               If
the Loan is not paid in full on or prior to April 24, 2002, then from and
after such date the Holder shall have the right to purchase an additional
136,359 Warrant Shares, totaling 480,809 Warrant Shares.


 


(iv)                              If
the Loan is not paid in full on or prior to May 24, 2002, then from and after
such date the Holder shall have the right to purchase an additional 46,328
Warrant Shares, totaling 527,137 Warrant Shares.


 


(v)                                 If
the Loan is not paid in full on or prior to June 24, 2002, then from and
after such date the Holder shall have the right to purchase an additional
46,873 Warrant Shares, totaling 574,010 Warrant Shares.


 


(vi)                              If
the Loan is not paid in full on or prior to the Maturity Date, then from and
after such date the number of Warrant Shares the Holder shall have the right to
purchase shall increase at a rate of 93,697 Warrant Shares per month for each
month thereafter (or portion thereof) that the Loan is not paid in full.


 


The
number of Warrant Shares exercisable by the Holder shall be as provided in (i)
through (v) above assuming the Loan is outstanding in its entirety by the
above-referenced dates. Notwithstanding the vesting schedule set forth
above, to the extent the Loan is repaid in part at any time prior to the
Maturity Date, the incremental amount by which the number of Warrant Shares
exercisable by the Holder increases shall be adjusted pro rata for any partial
payment of principal made after Closing subject to a $500,000 minimum
prepayment. By way of example, if the Loan is prepaid by $2,380,000 (which
reduces the Loan by 50%) by March 2, 2002, then the number of Warrant
Shares exercisable by the Holder on April 24, 2002 would be 412,630
(because the incremental 136,359 increase in the number of Warrant Shares
exercisable by the Holder would be reduced by 50% to 68,180).


 


The
Holder is an “accredited investor” as such term is defined in Rule 501(a) of
the Securities Act and has such knowledge and experience in financial and
business matters that it is capable of evaluating the merits and risks of
investing in the Company and is able to bear the economic risk of its
investment in the Company (including a complete loss of its investment).


 


The
Holder is acquiring this Warrant and the Warrant Shares issuable upon exercise
of the Warrant solely for its own account for investment and not with a view
toward the resale, transfer, or distribution thereof, nor with any present
intention of distributing such securities. No other person has any right with
respect to or interest in this Warrant or the Warrant Shares to be purchased by
the Holder, nor has the Holder agreed to give any person any such interest or
right in the future.


 


ARTICLE I                                     EXERCISE OF
WARRANT


 


1.1
Method of Exercise. To exercise this Warrant in whole or in part, the Holder
shall deliver on any Business Day to the Company at its principal place of
business (a) this Warrant, (b) a written notice, in substantially the form of
the Subscription Notice attached hereto, of the Holder’s election to exercise
this Warrant, which notice shall specify the number of shares of Common Stock
to be purchased (which shall be a whole number of shares if for less than all
the shares then issuable hereunder), and (c) payment of the Exercise Price with
respect to such shares. Such payment may be made, at the option of the Holder,
either (a) by cash, certified or bank cashier’s check or wire transfer in an
amount equal to the product of (i) the Exercise Price times (ii) the number of
Warrant Shares as to which this Warrant is being exercised or (b) by a
“cashless exercise” of this Warrant, in which event the Holder shall receive
from the Company the number of Warrant Shares equal to (i) the number of Warrant
Shares as to which this Warrant is being exercised minus (ii) the number of
Warrant Shares having an aggregate value (determined by reference to


 


2

















 


the Fair Market Value of a share of Common Stock on the Business Day
immediately prior to the date of such exercise), equal to the product of (x)
the Exercise Price times (y) the number of Warrant Shares as to which this
Warrant is being exercised.


 


The
Company shall, as promptly as practicable and in any event within seven Days
after receipt of such notice and payment, execute and deliver or cause to be
executed and delivered, in accordance with such notice, a certificate or
certificates representing the aggregate number of shares of Common Stock
specified in said notice together with cash in lieu of any fractions of a share
as provided in Section 1.3. The share certificate or certificates so
delivered shall be in such denominations as may be specified in such notice,
and shall be issued in the name of the Holder or such other name or names as
shall be designated in such notice. This Warrant shall be deemed to have been
exercised and such certificate or certificates shall be deemed to have been
issued, and such Holder or any other Person so designated to be named therein
shall be deemed for all purposes to have become a holder of record of Warrant
Shares, as of the date the aforementioned notice and payment is received by the
Company. If this Warrant shall have been exercised only in part, the Company
shall, at the time of delivery of such certificate or certificates, deliver to
the Holder a new Warrant evidencing the right to purchase the remaining shares
of Common Stock called for by this Warrant, which new Warrant shall, in all
other respects, be identical with this Warrant, or, at the request of the
Holder, appropriate notation may be made on this Warrant which shall then be
returned to the Holder. The Company shall pay all expenses, stamp, documentary
and similar taxes and other charges payable in connection with the preparation,
issuance and delivery of Warrant Share certificates and new Warrants under this
provision.


 


1.2
Shares to Be Fully Paid And Nonassessable. All shares of Common Stock issued
upon the exercise of this Warrant shall be validly issued, fully paid and
nonassessable and, if such Common Stock is then quoted on NASDAQ or listed on
any national securities exchange (as defined in the Exchange Act), such Common
Stock shall, to the extent permitted under the applicable rules of such
exchange or NASDAQ and subject to any securities registration requirements, be
duly quoted or listed thereon, as the case may be.


 


1.3 No
Fractional Shares Required to Be Issued. The Company shall not be required to
issue fractions of shares of Common Stock upon exercise of this Warrant. If any
fraction of a share would, but for this Section 1.3, be issuable upon
final exercise of this Warrant, in lieu of such fractional share, the Company
shall pay to the Holder in cash an amount equal to the same fraction of the Fair
Market Value of the Company per share of Common Stock outstanding on the
Business Day immediately prior to the date of such exercise.


 


1.4
Legend. Each Warrant Share certificate issued upon exercise of this Warrant,
unless at the time of exercise such shares are registered under the Securities
Act, shall bear the following legend:


 


“This security has not
been registered under the Securities Act of 1933 and may not be sold or offered
for sale unless registered or qualified under said Act and any applicable state
securities laws or unless the Company receives an opinion reasonably acceptable
in form and scope to the Company of counsel reasonably satisfactory to the
Company that registration, qualification or other such actions are not required
under any such laws or that an exemption from such registration is available.
The offering of this security has not been reviewed or approved by the United
States Securities and Exchange Commission or by any state’s securities
administrator. This security is also subject to certain additional transfer
restrictions provided for in the Warrant the exercise of which resulted in the
original issuance of this security, a copy of which restrictions shall be
finished to the holder hereof by the Company upon written request and without
charge.”


 


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Any
certificate issued at any time in exchange or substitution for any certificate
bearing such legend (except a new certificate issued upon completion of a
public offering pursuant to a registration statement under the Securities Act)
shall also bear such legend unless, in the opinion of counsel selected by the
Holder of such certificate (who may be an employee of such Holder) and
reasonably acceptable to the Company, the securities represented thereby need
no longer be subject to restrictions on resale under the Securities Act.


 


1.5
Reservation; Authorization; Capitalization. The Company has duly reserved, and
will keep available for issuance upon exercise of the Warrant, the total number
of Warrant Shares deliverable from time to time upon exercise of this Warrant
in its entirety. The Company will not, for as long as this Warrant has not been
exercised, change the par value of its Common Stock. The issuance of the
Warrant Shares has been duly and validly authorized and, when issued and sold
in accordance with the Warrants, the Warrant Shares will be duly and validly
issued, fully paid and non-assessable. As of the date of issuance of this
Warrant (the “Issuance Date”), the Company had outstanding (i) 1,318,667 shares
of Common Stock, (ii) 7,212,500 shares of Preferred Stock, (iii) has issued
620,054 options pursuant to the Company’s 2000 Stock Option Plan, and (iv) no
other shares of Capital Stock or any securities exercisable for, convertible into
or exchangeable for shares of capital stock or any rights, options or warrants
to purchase any shares of Capital Stock or any securities exercisable for,
convertible into or exchangeable for shares of Capital Stock. Neither the
issuance of this Warrant nor the issuance of Warrant Shares upon exercise of
this Warrant violates or conflicts with the Company’s certificate of
incorporation or bylaws or any agreement to which the Company is a party.


 


ARTICLE II                                 TRANSFER, EXCHANGE AND
REPLACEMENT OF WARRANTS


 


2.1
Ownership of Warrant. The Company shall deem and treat the person in whose name
this Warrant is registered as the holder and owner hereof (notwithstanding any
notations of ownership or writing hereon made by any person other than the
Company) for all purposes and shall not be affected by any notice to the
contrary, until due presentment of this Warrant for registration of transfer as
provided in this Article II.


 


2.2
Transfer of Warrant. The Company agrees to maintain at its principal office the
books for the registration of transfers of the Warrants, and transfer of this
Warrant and all rights hereunder shall be registered, in whole or in part, on
such books, upon surrender of this Warrant at the Company, together with (i) a
written assignment of this Warrant duly executed by the Holder or its duly
authorized agent or attorney, with (if the Holder is a natural person)
signatures guaranteed by a bank or trust company or a broker or dealer
registered with the NASD, and (ii) funds sufficient to pay any transfer taxes
payable upon such transfer. Upon surrender and, if required, such payment, the
Company shall execute and deliver a new Warrant or Warrants in the name of the
assignee or assignees and in the denominations specified in the instrument of
assignment (which shall be whole numbers of shares only) and shall issue to the
assignor a new Warrant evidencing the portion of this Warrant not so assigned,
and this Warrant shall promptly be canceled. The Company shall permit the
Warrant Securityholders to inspect the warrant registration books from time to
time during normal business hours at the Company. Holder shall pay all fees
(including reasonable attorney’s fees), costs and expenses associated with any
transfer of this Warrant requested by Holder.


 


2.3
Division or Combination of Warrants. This Warrant may be divided or combined
with other Warrants upon presentment to the Company of this Warrant and of any
Warrant or Warrants with which this Warrant is, to be combined, together with a
written notice specifying the names and denominations (which shall be whole
numbers of shares only) in which the new Warrant or Warrants are to be issued,
signed by the holders hereof and thereof or their respective duly authorized
agents or attorneys. Subject to compliance with Section 2.2 as to any
transfer or assignment which may be involved in the division or


 


4

















 


combination, the Company
shall execute and deliver a new Warrant or Warrants in exchange for the Warrant
or Warrants to be divided or combined in accordance with such notice.


 


2.4
Expenses of Delivery of Warrants. The Company shall pay all expenses, stamp,
documentary and similar taxes (other than transfer taxes) and other charges
payable in connection with the preparation, issuance and delivery of the
Warrants.


 


ARTICLE III                             CERTAIN RIGHTS


 


3.1
Put Rights; Company Option.


 


(a) Put Rights. Subject to the Company’s rights under
Section 3.1(f) below, Holder shall have the right, but not the obligation,
to put all or a portion of the Warrants to the Company (the “Put”) (i) upon the
repayment of all of the Obligations or a portion of the principal thereof
outstanding, (ii) upon the occurrence of a Capital Transaction, and (iii)
effective from the second anniversary of the Closing Date (the “Second
Anniversary”), each upon the terms and conditions and at the prices set forth
in subsections (b), (c) and (d) below (each, the “Put Price”).


 


(b) Put Rights Upon Repayment of the Obligations or Upon Maturity
Date.


 


(i)                                     If
the repayment of the Obligations or a principal payment occurs between (i) the
Closing Date and January 24, 2002, the Put Price for all of the Warrants
and Warrant Shares outstanding will be $238,000; (ii) January 25, 2002 and
April 24, 2002, the Put Price for all of the Warrants and Warrant Shares
outstanding will be $452,200; and (iii) April 25, 2002 and July 21,
2001, the Put Price for all of the Warrants and Warrant Shares outstanding will
be $690,200, and (iv) July 22, 2002 and thereafter the Put Price for all
of the Warrants and Warrant Shares outstanding will be $928,200, unless the Put
right is being exercised upon payment of the Obligations on or after the Second
Anniversary, in which event the Holder may choose to exercise its Put under
this clause or under subsection (d) below.


 


(ii)                                  Notwithstanding
the foregoing Put Prices, such Put Prices shall be adjusted pro rata if the
Holder’s exercise of the Put right described above results from a partial
repayment of principal, or if the Holder exercises its Put right for a portion
of the Warrants and Warrant Shares outstanding at the time of exercise. By way
of example, if the Company is repaying $952,000 of principal on
November 5, 2001, the Holder would have the option to exercise a Put
(during the Put Period described in 3.1(b)(iii) below) for 20% of the Warrants
and Warrant Shares outstanding for a Put Price of $47,600, or for a Put Price
of $23,800 if the Holder chose to Put only 10% of the Warrants and Warrant
Shares outstanding at such time.


 


(iii)                               The
Holder shall have 30 days from any repayment of principal by the Company during
which the Holder may exercise its Put rights (the “Put Period”). The Put rights
described above shall be exercised by written notice to the Company within such
30-day Put Period.


 


(c) Put Rights Upon Capital Transaction. Upon consummation of a Capital
Transaction, whether or not the Company has repaid any or all of the
Obligations, the Holder shall have the right, but not the obligation, to put
all or any portion of the Warrants it then holds to the Company for a Put Price
equal to cash representing the Fair Market Value of that percentage of the
Company represented by the Warrants being put to the Company (calculated on a
fully diluted basis based on the Aggregate Shares outstanding at the time of
conversion). The Company shall give the Holder written notice of any Capital
Transaction thirty (30) days prior to the consummation thereof. The Put rights
shall be exercised by


 


5

















 


written notice to the
Company within thirty (30) days after the date of consummation of the Capital
Transaction.


 


(d) Put Rights Second Anniversary. At any time and from time to
time effective from the Second Anniversary, if the Company has not previously
exercised its Company Option pursuant to Section 3.1(f) below and whether
or not the Company has repaid any or all of the Obligations, Holder shall have
the right, but not the obligation, to put all or any portion of the Warrants it
then holds to the Company for a Put Price equal to cash representing the Fair
Market Value of that percentage of the Company represented by the Warrants
being put to the Company (calculated on a fully diluted basis based on the
Aggregate Shares outstanding at the time of conversion). The Put rights shall
be exercised by written notice to the Company at any time on or after the
second anniversary of the Closing.


 


(e) Closing of the Put Exercise. The closing of the Put shall be within
15 days of the determination of Fair Market Value, or, if no such determination
needs to be made, then 15 days from the date of the written notice. On the date
scheduled for closing, the Put Price shall be payable to the Holder by the
Company in cash, by certified check or by wire transfer, against delivery of
the Warrant in exchange for a new warrant in substantially the same form as the
original Warrant reflecting a number of Warrant Shares equal to the balance of
the Warrant Shares that remain of the original Warrant.


 


(f) Company’s Option upon IPO. The Company shall have the right, but
not the obligation, once only and contemporaneous with the closing of an IPO,
to require the Holder to exercise up to 100% of the Warrants, upon the terms
contained herein, by delivery of written notice to the Holder (the “Company’s Option”)
at least 15 days in advance of the closing of the IPO.


 


3.2 Determination
of Fair Market Value. Subject to Section 3.3 hereof, each
determination of “Fair Market Value” shall be made by the Company in accordance
with the definition of the term Fair Market Value set forth in Article VI
hereof. Upon each determination of Fair Market Value, the Company shall
promptly give written notice thereof to all Warrant Securityholders, setting
forth in reasonable detail (i) the transaction giving rise to the necessity for
such determination (ii) the calculation of such Fair Market Value and the (iii)
method and basis of determination thereof (the “Company Determination”). In the
event Fair Market Value is determined with reference to subsection (i)(C)
or (ii) of the definition Fair Market Value, the Company’s Board of Directors
shall make such initial determination within thirty (30) days of the event
giving rise to the necessity for such determination.


 


3.3 Contest
And Appraisal Rights.


 


(a) If a Holder disagrees with the Company Determination (an “Objecting
Holder”) and by notice to the Company given within 20 days after receipt of
notice of the Company Determination (an “Appraisal Notice”) elects to dispute
the Company Determination, such dispute shall be resolved as set forth in
subsection (b) of this Section 3.3.


 


(b) For a period of 10 days after the Appraisal Notice, the Company and
the Objecting Holder shall negotiate in good faith to resolve their differences
as to the determination of Fair Market Value. In the absence of a mutually
satisfactory resolution within such 10 day period, the Company and the
Objecting Holder each shall within 5 days after the last day of such 10 day
period engage an investment bank or other qualified appraisal firm (an “Appraiser”)
to make an independent determination of Fair Market Value (each, an “Early
Appraiser Determination”). Each Appraiser Determination shall be made within 20
days of the engagement of such Appraiser. The average value of the resulting
two (2) valuations shall be the “Fair Market Value” unless the two (2)
valuations vary by more than twenty percent (20%) in which case “Fair Market
Value” shall be determined by a third Appraiser chosen by the two Appraisers.
If the third Appraiser’s appraisal is within the 20% spread of the Early
Appraiser


 


6

















 


Determinations, such
third Appraiser’s appraisal shall be the final and binding valuation. If the
third appraiser’s valuation is outside the 20% spread and higher than the
higher Early Appraiser Determination, then the higher Early Appraiser
Determination shall be the fair market value. If the third Appraiser’s
valuation is outside the 20% spread and lower than the lower Early Appraiser
Determination, then the lower Early Appraiser Determination shall be fair
market value. The Company shall bear the costs of conducting the appraisals;
provided; however, that if the determination of “Fair Market Value” is made by
(i) averaging the Early Appraiser Determinations and such valuation varies by
less than 15% from the Company Determination, or (ii) a third Appraiser and
such valuation varies by less than 15% from the Company Determination, then the
Company and the Objecting Holder shall share all such costs. If the
determination of “Fair Market Value” is made pursuant to any other method, the
Company and the Objecting Holder shall share such costs evenly.


 


(c) If the Company does not determine the Fair Market Value of a share
of Common Stock, within the period specified in Section 3.2, then any
Holder shall have the right to determine the Fair Market Value (the “Holder
Determination”) which determination shall be final and binding upon the Company
and the Holder(s). Upon each such determination, the Holder which has
determined the Fair Market Value shall promptly give written notice of the
Holder Determination to the Company setting forth in reasonable detail (i) the
transaction giving rise to the necessity for such determination, (ii) the
calculation of such Fair Market Value and (iii) the method and basis of
determination thereof. Upon its receipt of the Holder Determination and related
notice, the Company shall promptly send such determination and notice to all
other Holders. The costs of making the Holder Determination shall be borne
solely by the Company.


 


3.4 Financial
Statements And Other Information. Promptly upon transmission thereof, the
Company will deliver to each Warrant Securityholder copies of any and all
financial statements, proxy statements, notices and other reports as it may
send to its public stockholders and copies of all registration statements and
all reports which it files with the Commission (or any governmental body or
agency succeeding to its functions).


 


3.5                                 Right
of First Offer.


 


(a) For so long as the Obligations are outstanding and there is no
default or Event of Default that has occurred and is continuing under the Loan
Documents, if at any time, a Warrant Securityholder proposes to sell or
otherwise transfer for value any or all of its Warrants and/or Warrant Shares
to any Person (except for transfers by the Holder(s) to its Affiliates), such
Warrant Securityholder shall first offer the Company the opportunity to
purchase the Warrants and/or Warrant Shares by giving prompt notice to the
Company (a “Notice of Offer”) which notice shall state the number of Warrants
or Warrant Shares which the Warrant Securityholder wishes to sell. The date on
which the Notice Offer is received is referred to herein as the “Notice Date”.


 


(b) Within fifteen days following the Notice Date, the Company shall
notify the Warrant Securityholder in writing as to the Company’s election to
purchase all, but not less than all, of the Warrants and Warrant Shares for
sale (a “Company Acceptance”), at a proposed purchase price which must be
entirely in cash, and all other material terms and conditions of the offer. If
the Warrant Securityholder does not receive the Company acceptance within such
fifteen day period, the Company shall be deemed to have declined to purchase
such Warrant Securityholder’s Warrants or Warrant Shares. The Company
Acceptance shall be deemed to be an irrevocable commitment to purchase from the
Warrant Securityholder the Warrants and Warrant Shares referred to in such
Company Acceptance.


 


(c) The Warrant Securityholder shall, within five business days (the
“Acceptance Period”) of receipt of the Company Acceptance, accept or decline
the offer. If the offer is accepted, the


 


7

















 


Company and the Warrant
Securityholder shall be legally obligated to consummate the purchase and sale
contemplated thereby and shall use their best efforts to secure any approvals
required in connection therewith. If the Warrant Securityholder declines the
Company’s offer, the Warrant Securityholder shall be free, subject to the
provisions of this Section 3.5(c), during a period of six months following
the expiration of the last time for such exercise, to sell the Warrants and
Warrant Shares specified in such Notice of Offer (plus any additional Warrants
that are acquired by the Warrant Securityholder as a result of additional time
elapsing and additional Warrant Shares acquired upon exercise of any Warrants
during such six-month period) to any Person at a price not less than the price
set forth in such Notice of Offer. If the Warrant Securityholder does not
complete such sale within the six-month period, the provisions of this
Section 3.5 shall again apply, and no sale of Warrants or Warrant Shares
shall be made otherwise than in accordance with the terms of this
Section 3.5.


 


(d) The closing of purchases of the Warrant Securityholder’s Warrants
or Warrant Shares by the Company and the Warrant Securityholder pursuant to
this Section 3.5 shall take place within thirty business days after the
termination of the five business day Acceptance Period at 11:00 a.m. at the
principal offices of the Company, or at such other time or place as the parties
may agree. At such closing, the Warrant Security shall sell to the Company full
right, title and interest in and to the Warrants and Warrant Shares so
purchased, free and clear of all liens, security interests or adverse claims of
any kind and nature, duly endorsed for transfer or accompanies by appropriate
stock transfer powers or appropriate instruments of assignment duly endorsed;
the Company shall deliver to the Warrant Securityholder, in full payment of the
purchase price of the Warrants and Warrant Shares purchased by such person, a
certified or bank check payable to the order of the Warrant Securityholder in the
amount of the purchase price. If the Company does not exercise its rights of
first offer hereunder with respect to all of the offered Warrants and Warrant
Shares within the time specified for such exercise, or if the Company fails to
timely close for any reason (other than delays or other reasons caused by the
Warrant Securityholder), then from and after such time this Section 3.5
containing the right of first offer shall become null and void and of no
further force and effect.


 


(e) The rights of first offer granted to the Company under this
Section 3.5 must be exercised by the Company and may not be assigned to
any other Person.


 


(f) Nothing contained herein shall be deemed to preclude a Warrant
Securityholder from entering into discussions with third parties regarding the
potential sale of Warrants and Warrant Shares during the time period that the
right of first offer is being considered by the Company.


 


ARTICLE IV                             REORGANIZATION,
RECLASSIFICATION AND LIQUIDATION


 


4.1
Reorganization, Reclassification and Liquidation.


 


(a) In the case of any reorganization or reclassification of the
outstanding shares of Common Stock (other than a change in par value, or from
par value to no par value, or from no par value to par value, or as a result of
a subdivision or combination) or in the case of any consolidation of the
Company with, or merger of the Company with, another corporation, or in the
case of any sale, lease or conveyance of all, or substantially all, of the
property, assets, business and goodwill of the Company as an entity, the holder
of this Warrant shall thereafter have the right upon exercise to purchase the
kind and amount of shares of stock and other securities and property receivable
upon such reorganization, reclassification, consolidation, merger or sale by a
holder of the number of shares of Common Stock which the Holder would have
received had all Warrant Shares issuable upon exercise of this Warrant been
issued immediately prior to such reorganization, reclassification,
consolidation, merger or sale, at a price equal to the Exercise Price then in
effect pertaining to this Warrant (the kind, amount and price of such stock and
other securities to be subject to adjustment as herein provided).


 


8

















 


(b) In case the Company shall, at any time prior to the expiration of
this Warrant and prior to the exercise thereof, dissolve, liquidate or wind up
its affairs, the Holder shall be entitled, upon the exercise thereof, to
receive, in lieu of the Warrant Shares of the Company which it would have been
entitled to receive, the same kind and amount of assets as would have been
issued, distributed or paid to it upon such Warrant Shares of the Company, had
it been the holder of record of shares of Common Stock receivable upon the
exercise of this Warrant on the record date for the determination of those
entitled to receive any such liquidating distribution. After any such
dissolution, liquidation or winding up which shall result in any distribution
in excess of the Exercise Price provided for by this Warrant, the Holder may at
its option exercise the same without making payment of the aggregate Exercise
Price and in such case the Company shall upon the distribution to said Holder
consider that the aggregate Exercise Price has been paid in full to it and in
making settlement to said Holder, shall deduct from the amount payable to such
Holder an amount equal to the aggregate Exercise Price.


 


(c) In case the Company shall, at any time prior to the expiration of
this Warrant and prior to the exercise thereof make a distribution of assets
(other than cash) or securities of the Company to its stockholders (the
“Distribution”), the Holder shall be entitled, upon the exercise thereof, to
receive, in addition to the Warrant Shares it is entitled to receive, the same
kind and amount of assets or securities as would have been distributed to it in
the Distribution had it been the holder of record of shares of Common Stock
receivable upon exercise of this Warrant on the record date for determination
of those entitled to receive the Distribution.


 


(d) In case the Company shall at any time after the date hereof issue
or sell any shares of Common Stock (including shares held in the Company’s
treasury), without consideration or for a consideration per share less than the
Fair Market Value in effect immediately prior to such issuance or sale of such
shares, then, and thereafter successively upon each issuance or sale, the
number of Warrant Shares into which this Warrant is exercisable shall be
increased to represent the same percentage of the Company after the new
issuance or sale as the Warrant Shares represented prior to such new issuance
or sale.


 


(e) Irrespective of any adjustments in the kind of shares purchasable
upon exercise of this Warrant, this Warrant shall continue to express the kind
of shares as originally issued.


 


ARTICLE V                                 REGISTRATION RIGHTS


 


5.1
Registration on Request.


 


(a) Subject to Sections 3.1(b) and 5.1(g), at any time after six months
following the consummation of an IPO upon the written request of the holder or
holders of a majority of the outstanding Warrant Shares and Warrants (such
majority determined, for purposes of this Section 5.1, by calculating the
number of Warrant Shares for which such Warrants are then exercisable) (the
“Initiating Holders”), requesting that the Company effect the registration
under the Securities Act of all or part of such Initiating Holders’ Registrable
Securities and specifying the intended method of disposition thereof, the
Company will promptly give written notice of such requested registration to all
holders of Registrable Securities (who shall have the right to request that
their Registrable Securities be included in the registration statement
requested pursuant to this Section 5.1) upon written notice to the Company
made within 20 days after receipt of the Company’s written notice. Thereupon,
the Company will use its best efforts to effect the registration under the
Securities Act of the Registrable Securities which the Company has been so
requested to register for disposition in accordance with the intended method of
disposition stated in the Initiating Holder’s request; all to the extent
requisite to permit the disposition (in accordance with the intended methods
thereof as aforesaid) of the Registrable Securities to be so registered,
provided that the


 


9

















 


holders of Registrable
Securities as a class shall be entitled to not more than one registration upon
request pursuant to this Section 5.1.


 


(b) Registrations under this Section 5.1 shall be on such
appropriate registration form of the Commission (i) as shall be selected by the
Company and (ii) as shall permit the disposition of such Registrable Securities
in accordance with the intended method or methods of disposition specified in
the Initiating Holders’ request for such registration. The Company agrees to
include in any such registration statement all information which holders of
Registrable Securities being registered shall reasonably request.


 


(c) The Company will pay all Registration Expenses in connection with
the registrations requested pursuant to this Section 5.1.


 


(d) The Initiating Holders will be entitled to request one registration
pursuant to this Section 5.1 for which the Company will pay all
registration expenses. A registration requested pursuant to this
Section 5.1 shall not be deemed to have been effected (i) unless a
registration statement with respect thereto has become effective; provided that
a registration which does not become effective after being filed by the Company
pursuant to Section 5.1 solely by reason of the refusal to proceed by the
Initiating Holders (other than a refusal to proceed based upon the reasonable
advice of counsel relating to a matter with respect to the Company) shall be
deemed to have been effected by the Company at the request of the Initiating
Holders unless the Initiating Holders shall have paid all Registration Expenses
in connection with such registration, or (ii) if, after it has become effective,
such registration is subject to a stop order, injunction or other order of the
Commission or other governmental agency or court suspending the effectiveness
of such registration statement for any reason, other than by reason of
misstatements or omissions made or not made in the registration statement in
reliance upon and in conformity with written information furnished to the
Company by a Holder of Registrable Securities specifically for use in the
preparation of such registration statement. Except as the effectiveness of such
registration statement for any reason, other than by reason of misstatements or
omissions made or not made in the registration statement in reliance upon and
in conformity with written information furnished to the Company by a Holder of
Registrable Securities specifically for use in the preparation of such
registration statement. Except as provided in Section 5.1(d)(i) above,
whether or not the registration becomes effective and closes the Company will
pay all registration expenses in connection with the registration so initiated.


 


(e) If a registration requested pursuant to this Section 5.1
involves an underwritten offering, the underwriter or underwriters thereof
shall be selected by the holders of at least a majority (by a number of shares)
of the Registrable Securities as to which registration has been requested and
shall be reasonably acceptable to the Company.


 


(f) If a requested registration pursuant to this Section 5.1
involves an underwritten offering, and the managing underwriter shall advise
the Company (with a copy of any such notice to each holder of Registrable
Securities requesting registration) that, in its opinion, the number of
securities requested to be included in such registration (including securities
proposed to be sold for the account of the Company) exceeds the number which
can be sold in such offering within a price range acceptable to the Initiating
Holders, the Company will include in such registration, to the extent of the
number which the Company is so advised can be sold in such offering, (i) first,
Registrable Securities requested to be included in such registration by the
holder or holders of Registrable Securities, pro rata among such holders
requesting such registration on the basis of the number of such securities
requested to be included by such holders, (ii) second, all shares proposed to
be included by the Company in such registration and (iii) third, all shares
other than Registrable Shares (any such shares with respect to any
registration, “Other Securities”) requested to be included in such registration
by the holder or holders thereof.


 


10

















 


(g) The Company may suspend any registration requested pursuant to this
Section 5.1 one time per registration for a single period of up to 90 days
upon notice to the holders of Registrable Securities whose Securities are
covered by the registration statement requesting pursuant to this
Section 5.1 that, in the good faith determination of the Board of Directors
of the Company, the registration and sale at such time of the Registrable
Securities requested to be so registered would not be in the best interests of
the Company, provided that notwithstanding such suspension, the Company shall
continue to diligently process the preparation of the documentation required
for such registration. No registration shall be requested pursuant to this
Section 5.[during the period from the date of the notice to the Warrant
Securityholders pursuant to Section 5.1(a) of the Company’s intention to
register securities until the expiration of the lockup period specified in
Section 5.4(b),] or, if earlier, [the date of the Company’s notice
pursuant to the proviso to the second sentence of Section 5.2(a).].


 


5.2
Incidental Registration.


 


(a) If the Company at any time proposes to register any of its
securities under the Securities Act (other than (x) by a registration on Form
S-4 or S-8 or any successor or similar forms) or (y) pursuant to
Section 5.1) whether for its own account or for the account of the holder
or holders of any other Shares, it will each such time give prompt written
notice to all holders of Registrable Securities of its intention to do so and
of such holders’ rights under this Section 5.2. Upon the written request
of any such holder made within 20 days after the receipt of any such notice
(which request shall specify the Registrable Securities intended to be disposed
of by such holder and the intended method of disposition thereof), the Company
will use its best efforts to effect the registration under the Securities Act
of all Registrable Securities which the Company has been so requested to
register, by inclusion of such Registrable Securities in the registration
statement which covers the securities which the Company proposes to register;
provided that if, at any time after giving written notice of its intention to
register any securities and prior to the effective date of the registration
statement filed in connection with such registration, the Company shall determine
for any reason either not to register or to delay registration of such
securities, the Company may, at its election, give written notice of such
determination to each holder of Registrable Securities and, thereupon, (i) in
the case of a determination not to register, shall be relieved of its
obligation to register any Registrable Securities in connection with such
registration (but not from its obligation to pay the Registration Expenses in
connection therewith), without prejudice, however, to the rights of any holder
of Registrable Securities entitled to request that such registration be
effected as a registration under Section 5.1, and (ii) in the case of a
determination to delay registering, shall be permitted to delay registering any
Registrable Securities, for the same period as the delay in registering such
other securities. No registration effected under this Section 5.2 shall
relieve the Company of its obligation to effect any registration upon request
under Section 5.1, nor shall any such registration hereunder be deemed to
have been effected pursuant to Section 5.1. The Company will pay all
Registration Expenses in connection with each registration of Registrable
Securities pursuant to this Section 5.2.


 


(b) If the Company at any time proposes to register any of its
securities under the Securities Act as contemplated by Section 5.2 and
such securities are to be distributed by or through one or more underwriters,
the Company will, if requested by any holder of Registrable Securities as provided
in this Section 5.2, use its best efforts to arrange for such underwriters
to include all the Registrable Securities to be offered and sold by such holder
among the securities to be distributed by such underwriters, provided that if
the managing underwriter of such underwritten offering shall inform the Company
and holders of the Registrable Securities requesting such registration and all
other holders of any Other Securities in respect of such underwritten offering,
by letter of its belief that inclusion in such distribution of all or a
specified number of the securities proposed to be distributed by such
underwriters would interfere with the successful marketing of the securities
being distributed by such underwriters (such letter to state the basis of such
belief and the approximate number of such Registrable Securities


 


11

















 


and such Other Securities
which may be distributed without such effect), then the Company may, upon
written notice to all holders of such Registrable Securities and holders of
such Other Securities, reduce pro rata (if and to extent stated by such
managing underwriter to be necessary to eliminate such effect) first the number
of Other Securities that have been requested be included in such registration
statement and second the number of Registrable Securities that have been
requested be included in such registration statement so that the resultant
aggregate number of such Registrable Securities and Other Securities so
included in such registration, together with the number of securities to be
included in the registration for the account of the Company, shall be equal to
the number of shares stated in such managing underwriter’s letter.


 


5.3 Registration
Procedures If and when the Company is required to effect the registration
of any Registrable Securities under the Securities Act as provided in
Section 5.1 or Section 5.2, the Company shall, as expeditiously as
possible:


 


(i)                                     prepare
and (within the later of 55 days after the end of the fiscal quarter of the
Company within which requests for registration may be given to the Company or
10 days after the date the Company files its quarterly report on Form 10-Q for
such period provided that such 10-Q is filed on a timely basis taking into
account all possible extension periods, except in the case (A) where requests
for registration may be given in the Company’s fourth fiscal quarter, in which
case the filing shall be within the later of 100 days after the end of such
quarter or 10 days after the date the Company files its annual report on Form
10-K for the fiscal year then ended, provided that such 10-K is filed on a
timely basis taking into account all possible extension periods, or (B) a
registration pursuant to Section 5.1, in which case the filing shall be
made as soon as possible after the initial request of an Initiating Holder of
Registrable Securities or in any event within sixty (60) days after such
request), unless such request is made during the Company’s fourth fiscal
quarter, in which case the filing shall be within the later of 100 days after
the end of such quarter or 10 days after the date the Company timely files its
annual report on Form 10-K for the fiscal year then ended, file with the
Commission the requisite registration statement to effect such registration
(including such audited financial statements as may be required by the
Securities Act) and thereafter use its best efforts to cause such registration
statement to become and remain effective; provided further that the Company may
discontinue any registration of its securities which are not Registrable
Securities at any time prior to the effective date of the registration
statement relating thereto; and provided further that before filing such
registration statement or any amendments thereto, the Company will furnish to
the counsel selected by the holders of Registrable Securities which are to be
included in such registration copies of all such documents proposed to be
filed, which documents will be subject to the reasonable review of such
counsel;


 


(ii)                                  prepare
and file with the Commission such amendments and supplements to such
registration statement and the prospectus used in connection therewith as may
be necessary to keep such registration statement effective and to comply with
the provisions of the Securities Act with respect to the disposition of all
securities covered by such registration statement until the earlier of (x) in
the case of a registration pursuant to Section 5.1, the expiration of 180
days after such registration statement becomes effective (provided that if the
registration statement is suspended pursuant to Section 5.1(g), the
registration statement shall be effective for 180 days after suspension is
ended), or (y) in the case of a registration pursuant to Section 5.2, the
expiration of 120 days after such registration statement becomes effective;


 


(iii)                               furnish
to each seller of Registrable Securities covered by such registration statement
and each underwriter, if any, of the securities being sold by such seller such
number of conformed copies of such registration statement and of each such
amendment and of copies of the prospectus contained in such registration
statement supplement thereto (in each case including all exhibits), (including
each preliminary prospectus and any summary prospectus) and any other
prospectus


 


12

















 


filed under Rule 424
under the Securities Act, in conformity with the requirements of the Securities
Act, and such other documents, as such seller and underwriter, if any, may
reasonably request in order to facilitate the public sale or other disposition
of the Registrable Securities owned by such seller;


 


(iv)                              use
its best efforts to register or qualify all Registrable Securities and other
securities covered by such registration statement under blue sky or similar
laws of such jurisdictions as any seller thereof and any underwriter of the
securities being sold by such seller shall reasonably request, to keep such
registrations or qualifications in effect for so long as such registration
statement remains in effect, and take any other action which may be reasonably
necessary or advisable to enable such seller and underwriter to consummate the
disposition in such jurisdictions of the securities owned by such seller except
that the Company shall not for any such purpose be required to qualify
generally to do business as a foreign corporation in any jurisdiction wherein
it would not but for the requirements of this subdivision (iv) be obligated to
be so qualified, to subject itself to taxation in any such jurisdiction or to
consent to general service of process in any such jurisdiction;


 


(v)                                 use
its best efforts to cause all Registrable Securities covered by such
registration statement to be registered with or approved by such other
governmental agencies or authorities as may be necessary to enable the seller
or sellers thereof to consummate the disposition of such Registrable
Securities;


 


(vi)                              furnish
to each seller of Registrable Securities a signed counterpart, addressed to
such seller and the underwriters, if any, of


 


(A) an
opinion of counsel for the Company, dated the effective date of such
registration statement (and, if such registration is in connection with an
underwritten public offering, an opinion dated the date of the closing under
the underwriting agreement), reasonably satisfactory in form and substance to
such seller, and


 


(B) a
“cold comfort” letter, dated the effective date of such registration statement
(and, if such registration is in connection with an underwritten public
offering, a letter dated the date of the closing under the underwriting
agreement), signed by the independent public accountants who have certified the
Company’ financial statements included in such registration statement,


 


covering substantially
the same matters with respect to such registration statement (and the
prospectus included therein) and, in the case of the cold comfort letter, with
respect to events subsequent to the date of such financial statements, as are
customarily covered in opinions of issuer’s counsel and in cold comfort letters
delivered to the underwriters in underwritten public offerings of securities;


 


(vii)                           notify the holders of
Registrable Securities and the managing underwriter or underwriters, if any,
promptly and confirm such advice in writing promptly thereafter:


 


(A)
when the registration statement, the prospectus or any prospectus supplement
related thereto or post-effective amendment to the registration statement has
been filed, and, with respect to the registration statement or any
post-effective amendment thereto, when the same has become effective; of any
request by the Commission for amendments or supplements to the registration
statement or the prospectus or for additional information;


 


13

















 


(B) of
the issuance by the Commission of any stop order suspending the effectiveness
of the registration or the initiation of any proceedings by any Person for that
purpose; and


 


(C) of
the receipt by the Company of any notification with respect to the suspension
of the qualification of any Registrable Securities for sale under the
securities or blue sky laws of any jurisdiction or the initiation or threat of
any proceeding for such purpose;


 


(viii)                        notify
each seller of Registrable Securities covered by such registration statement,
at any time when a prospectus relating thereto is required to be delivered
under the Securities Act, upon the Company’s discovery that, or upon the
happening of any event as a result of which, the prospectus included in such
registration statement, as then in effect, includes an untrue statement of a
material fact or omits to state any material fact required to be stated therein
or necessary to make the statements therein not misleading in the light of the
circumstances then existing, and promptly prepare and furnish to such seller
and each underwriter, if any, a reasonable number of copies of a supplement to
or an amendment of such prospectus as may be necessary so that, as thereafter
delivered to the purchasers of such securities, such prospectus shall not
include an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading in the light of the circumstances then existing;


 


(ix)                                make
every reasonable effort to obtain the withdrawal of any order suspending the
effectiveness of the registration statement at the earliest possible moment;


 


(x)                                   otherwise
use its best efforts to comply with all applicable rules and regulations of the
Commission, and make available to its security holders, as soon as reasonably
practicable, an earnings statement covering the period of at least twelve
months, but not more than eighteen months, beginning with the first full
calendar quarter after the effective date of such registration statement, which
earnings statement shall satisfy the provisions of Section 11 (a) of the
Securities Act;


 


(xi)                                make
available for inspection by a representative of the holders of Registrable
Securities participating in the offering, any underwriter participating in any
disposition pursuant to the registration and any attorney or accountant
retained by such selling holders or underwriter (each, an “Inspector”), all
financial and other records, pertinent corporate documents and properties of
the Company (the “Records”), and cause the Company’ officers, directors and
employees to supply all information reasonably requested by any such Inspector
in connection with such registration; provided that the Company shall not be
required to comply with this subdivision (xi) if there is a reasonable
likelihood, in the judgment of the Company, that such delivery could result in
the loss of any attorney-client privilege related thereto; and provided further
that Records which the Company determines, in good faith, to be confidential
and which it notifies the Inspectors are confidential shall not be disclosed by
the Inspectors (other than to any holder of Registrable Securities
participating in the offering, and if disclosed to any such holder shall not be
disclosed by such holder) unless (x) such Records have become generally
available to the public or (y) the disclosure of such Records may be necessary
or appropriate (A) to comply with any law, rule, regulation or order applicable
to any such Inspectors or holder of Registrable Securities, (B) in response to
any subpoena or other legal process or (C) in connection with any litigation to
which such Inspectors or any holder of Registrable Securities is a party
(provided that the Company is provided with reasonable notice of such proposed
disclosure and a reasonable opportunity to seek a protective order or other
appropriate remedy with respect to such Records);


 


14

















 


(xii)                             provide
and cause to be maintained a transfer agent and registrar for all Registrable
Securities covered by such registration statement from and after a date not
later than the effective date of such Registration Statement;


 


(xiii)                          use
its best efforts to list all Registrable Securities covered by such
registration statement on any securities exchange on which any of the Common
Stock is then listed and, if not so listed, to be listed on the NASD automated
quotation system and, if listed on the NASD automated quotation system, use its
reasonable best efforts to secure designation of all such Registrable
securities covered by such registration statement as a NASDAQ “national market
system security” within the meaning of Rule 1lAa2-1 of the Securities and
Exchange Commission [or, failing that, to secure NASDAQ authorization for such
Registrable Securities] and, without limiting the generality of the foregoing,
to arrange for at least two market makers to register as such with respect to such
Registrable Securities with the NASD; and


 


(xiv)                         use
its best efforts to provide a CUSIP number for the Registrable Securities, not
later than the effective date of the registration.


 


The Company may require each seller of Registrable Securities as to which
any registration is being effected to furnish the Company with such information
regarding such seller and the distribution of such Registrable Securities as
the Company may from time to time reasonably request in writing for purposes of
preparing the relevant registration statement and amendments and supplements
thereto.


 


(b) Each holder of Registrable Securities agrees by acquisition of such
Registrable Securities that, upon receipt of any notice from the Company of the
occurrence of any event of the kind described in of Section 5.3(a) (viii),
such holder will forthwith discontinue such holder’s disposition of Registrable
Securities pursuant to the registration statement relating to such Registrable
Securities until such holder’s receipt of the copies of the supplemented or
amended prospectus contemplated by of Section 5.3(a) (viii). In the event
the Company shall give any such notice, the periods specified in of
Section 5.3(a) (ii) shall be extended by the length of the period from and
including the date when each seller of any Registrable Securities covered by
such registration statement shall have received such notice to the date on
which each such seller has received the copies of the supplemented or amended
prospectus contemplated by of Section 5.3(a) (viii) .


 


(c) If any such registration or comparable statement refers to any
holder of Registrable Securities by name or otherwise as the holder of any
securities of the Company, then such holder shall have the right to require, in
the event that such reference to such holder by name or otherwise is not
required by the Securities Act or any similar federal statute then in force,
the deletion of the reference to such holder.


 


5.4 Underwritten
Offerings


 


(a) If requested by the underwriters for any underwritten offering by
holders of Registrable Securities pursuant to a registration requested pursuant
to Section 5.1, the Company will enter into an underwriting agreement with
such underwriters for such offering, such agreement to be reasonably satisfactory
in substance and form to the Company, each such holder and the underwriters,
and to contain such representations and warranties by the Company and such
other terms as are generally prevailing in agreements of this type, including,
without limitation, indemnities to the effect and to the extent provided in
Section 5.5. The holders of the Registrable Securities will cooperate with
the Company in the negotiation of the underwriting agreement.


 


15

















 


(b) Each Holder of Registrable Securities agrees by acquisition of its
Registrable Securities not to sell, make any short sale of, loan, grant any
option for the purchase of, effect any public sale or distribution of or
otherwise dispose of any equity securities of the Company, during the ten days
prior to and the 90 days after the effective date of any registration statement
filed pursuant to Section 5.1 or Section 5.2 which involves an
underwritten offering, except as part of such registered underwritten offering,
whether or not such Holder participates in such offering, and except as
otherwise permitted by the managing underwriter of such registered underwritten
(if any). Each Holder of Registrable Securities agrees that the Company may
instruct its transfer agent to place stop transfer notations in its records to
enforce this Section 5.4(b).


 


(c) The Company agrees (x) not to sell, make any short sale of, loan,
grant any option for the purchase of, effect any public sale or distribution of
or otherwise dispose of its equity securities or securities convertible into or
exchangeable or exercisable for any of such securities during the ten days
prior to and the 90 days after the effective date of any registration statement
filed pursuant to Section 5.1 or Section 5.2 which involves an
underwritten offering, except (i) as part of such registered offering, (ii)
pursuant to registration statements on Form S-4 or S-8 or any successor or
similar forms thereto or (iii) as otherwise permitted by the managing
underwriter of such registered offering (if any), and (y) to use all reasonable
efforts to cause each holder of its equity securities or any securities
convertible into or exchangeable or exercisable for any of such securities, in
each case purchased from the Company at any time after the date of this
Agreement (other than in a public offering) to agree not to sell, make any
short sale of, loan, grant any option for the purchase of, effect any public
sale or distribution of or otherwise dispose of such securities during such period
except as part of such registered underwritten offering; provided that no
Holder of Registrable Securities included in any registered underwritten
offering shall be required to make any representations or warranties to the
Company or the underwriters other than representations and warranties regarding
such holder and such holder’s intended method of distribution.


 


(d) No Person may participate in any registered underwritten offering
hereunder unless such Person (i) agrees to sell such Person’s securities on the
basis provided in any underwriting arrangements approved, subject to the terms
and conditions hereof, by the Person or a majority of the Persons entitled to
approve such arrangements and (ii) completes and executes all agreements,
questionnaires, indemnities and other documents (other than powers of attorney)
required under the terms of such underwriting arrangements.


 


5.5 Indemnification.


 


(a) The Company agrees to indemnify and hold harmless each Holder of
Registrable Securities whose Registrable Securities are covered by any
registration statement, its directors and officers and each other Person, if
any, who controls such Holder within the meaning of the Securities Act, against
any losses, claims, damages or liabilities, joint or several, to which any such
indemnified party may become subject under the Securities Act or otherwise,
insofar as such losses, claims, damages or liabilities (or actions or
proceedings, whether commenced or threatened, in respect thereof) arise out of
or are based upon any untrue statement or alleged untrue statement of any
material fact contained in any registration statement under which such
securities were registered under the Securities Act, any preliminary
prospectus, final prospectus or summary prospectus contained therein, or any
amendment or supplement thereto, or any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, and the Company will reimburse each such
indemnified party for any legal or any other expenses reasonably incurred by
them in connection with investigating or defending any such loss, liability,
action or proceeding; provided that the Company shall not be liable in any such
case to the extent that any such loss, damage, liability (or action or
proceeding in respect thereof) or expense arises out of or is based upon an
untrue statement or alleged untrue statement or omission or alleged omission
made in such registration statement, any such


 


16

















 


preliminary prospectus,
final prospectus, summary prospectus, amendment or supplement in reliance upon
and in conformity with written information furnished to the Company by or on
behalf of such Holder specifically for use in the preparation thereof. In
addition, the Company shall indemnify any underwriter of such offering and each
other Person, if any, who controls any such underwriter within the meaning of
the Securities Act in substantially the same manner and to substantially the
same extent as the indemnity herein provided to each indemnified party. Such
indemnity shall remain in full force and effect regardless of any investigation
made by or on behalf of such holder or any such director, officer, underwriter
or controlling person and shall survive the transfer of such securities by such
holder.


 


(b) Each prospective seller of Registrable Securities hereunder shall
indemnify and hold harmless (in the same manner and to the same extent as set
forth in subdivision (a) of this Section 5.5) the Company, each director
of the Company, each officer of the Company and each other person, if any, who
controls the Company within the meaning of the Securities Act, with respect to
any statement or alleged statement in or omission or alleged omission from such
registration statement, any preliminary prospectus, final prospectus or summary
prospectus contained therein, or any amendment or supplement thereof, if such
statement or alleged statement or omission or alleged omission was made in
reliance upon and in conformity with written information furnished to the
Company by or on behalf of such seller specifically for use in the preparation
of such registration statement, preliminary prospectus, final prospectus,
summary prospectus, amendment or supplement. Any such indemnity shall remain in
full force and effect, regardless of any investigation made by or on behalf of
the Company or any such director, officer or controlling person and shall
survive the transfer of such securities by such seller. The amount payable by
any prospective seller of Registrable Securities with respect to the
indemnification set forth in this Section 5.5(b) in connection with any
offering of securities will not exceed the amount of net proceeds received by
such prospective seller pursuant to such offering.


 


(c) Promptly after receipt by an indemnified party of notice of the
commencement of any action or proceeding involving a claim referred to in this
Section 5.5, such indemnified party will, if a claim in respect thereof is
to be made against an indemnifying party, give written notice to the latter of
the commencement of such action; provided that the failure of any indemnified
party to give notice as provided herein shall not relieve the indemnifying
party of its obligations under this Section 5.5, except to the extent that
the indemnifying party is actually prejudiced by such failure to give notice.
In case any such action is brought against an indemnified party, unless in such
indemnified party’s reasonable judgment a conflict of interest between such
indemnified and indemnifying parties may exist in respect of such the
indemnifying party shall be entitled to participate in and to assume the
defense thereof, jointly with any other indemnifying party similarly notified,
to the extent that the indemnifying party may wish, with counsel reasonably
satisfactory to such indemnified party, and after notice from the indemnifying
party to such indemnified party of its election so to assume the defense
thereof, the indemnifying party shall not be liable to such indemnified party
for any legal or other expenses subsequently incurred by the latter in
connection with the defense thereof. No indemnifying party shall, without the
consent of the indemnified party, consent to entry of any judgment or enter
into any settlement of any such action which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
indemnified party of a release from all liability in respect to such claim or
litigation. No indemnified party shall consent to entry of any judgment or
enter into any settlement of any such action the defense of which has been
assumed by an indemnifying party without the consent of such indemnifying
party.


 


(d) If the indemnification provided for in this Section 5.5 is
unavailable to an indemnified party in respect of any expense, loss, damage or
liability referred to therein, 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 expense, loss, claim,
damage or liability (i) in such proportion as is appropriate to reflect the
relative benefits received by the Company on the one hand and the Holder or
underwriter, as the case may be, on the other from the distribution of the
Registrable Securities or (ii) if


 


17

















 


the allocation provided
by clause (i) above is not permitted by applicable law, in such proportion as
is appropriate to reflect not only the relative benefits referred to in clause
(i) above but also the relative fault of the Company on the one hand and of the
Holder or underwriter, as the case may be, on the other in connection with the
statements or omissions which resulted in such expense, loss, damage or
liability, as well as any other relevant equitable considerations. The relative
benefits received by the Company on the one hand and the Holder or underwriter,
as the case may be, on the other in connection with the distribution of the
Registrable Securities shall be deemed to be in the same proportion as the
total net proceeds received by the Company from the initial sale of the
Registrable Securities by the Company to the purchaser bear to the gain
realized by the selling Holder or the underwriting discounts and commissions
received by the underwriter, as the case may be. The relative fault of the
Company on the one hand and of the Holder or underwriter, as the case may be,
on the other shall be determined by reference to, among other things, whether
the untrue or alleged untrue statement of a material fact or omission to state
a material fact relates to information supplied by the Company, by the Holder
or by the underwriter and parties’ relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission;
provided that the foregoing contribution agreement shall not inure to the
benefit of any indemnified party if indemnification would be unavailable to
such indemnified party by reason of the proviso contained in the first sentence
of Section 5.5 (a), and in no event shall the obligation of any
indemnifying party to contribute under this Section 5.5 (d) exceed the
amount that such indemnifying party would have been obligated to pay by way of
indemnification if the indemnification provided for under Section 5.5 (a)
or Section 5.5 (b) had been available under the circumstances.


 


The
Company and the holders of Registrable Securities agree that it would not be
just and equitable if contribution pursuant to this Section 5.5 (d) were
determined by pro rata allocation (even if the Holders and any underwriters
were treated as one entity for such purpose) or by any other method of
allocation that does not take account of the equitable considerations referred
to in the immediately preceding paragraph and Section 5.5 (c). The amount
paid or payable by an indemnified party as a result of the losses, claims,
damages and liabilities referred to in the immediately preceding paragraph shall
be deemed to include, subject to the limitations set forth above, any legal or
other expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim.


 


Notwithstanding
the provisions of this Section 5.5 (d), no holder of Registrable
Securities or underwriter shall be required to contribute any amount in excess
of the amount by which (i) in the case of any such holder, the net proceeds
received by such holder from the sale of Registrable Securities or (ii) in the
case of an underwriter, the total price at which the Registrable Securities
purchased by it and distributed to the public were offered to the public
exceeds, in any such case, the amount of any damages that such holder or
underwriter has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission. 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.


 


5.6 Rule
144. If the Company shall have filed a registration statement pursuant to
Section 12 of the Exchange Act or a registration statement pursuant to the
Securities Act, the Company will file the reports required to be filed by it
under the Securities Act and the Exchange Act and the rules and regulations
adopted by the Conunission thereunder and will take such further action as any
Holder of Registrable Securities may reasonably request, all to the extent
required from time to time to enable such Holder to sell Registrable Securities
without registration under the Securities Act within the limitation of the
exemptions provided by (a) Rule 144 under the Securities Act, as such Rule may
be amended from time to time, or (b) any similar rule or regulation hereafter
adopted by the Commission. Upon the request of any holder of Registrable
Securities, the Company will deliver to such holder a written statement as to
whether it has complied with such requirements.


 


18

















 


5.7
“Market Stand-Off” Agreement. In consideration for the Company agreeing to its
obligations under this Warrant, the Holder hereby agrees that it shall not, to
the extent requested by or on behalf of an underwriter of securities of the
Company in connection with the Company’s first or any secondary public offering
of its securities pursuant to the Securities Act, sell, make any short sale of,
loan, grant any option for the purchase of, or otherwise dispose of or engage
in any other transaction regarding any Registrable Securities or other shares
of stock of the Company (a “Market Stand-Off”) then owned by the Holder without
prior written consent of the underwriter of the Company; provided, however,
that the terms of such request shall not be more restrictive for the Holder
than for any other holder of securities who is also subject to a Market
Stand-Off agreement with the Company or its underwriters.


 


ARTICLE VI                             DEFINITIONS


 


The
following terms, as used in this Warrant, have the following meanings:


 


“Acceptance
Period”“ has the meaning set forth in Section 3.5(c).


 


“Affiliate”
has the meaning set forth in the Loan Agreement.


 


“Appraisal
Notice” has the meaning set forth in Section 3.2(a).


 


“Appraiser”
has the meaning set forth in Section 3.2(b).


 


“Business
Day” means any day excluding Saturday, Sunday and any day on which banking
institutions located in New York are authorized by law or other governmental
action to be closed, unless there shall have been an offering of Common Stock
registered under the Securities Act, in which case “Business Day” means (a) if
Common Stock is listed or admitted to trading on a national securities
exchange, a day on which the principal national securities exchange on which
the Common Stock is listed or admitted to trading is open for business or (b)
if Common Stock is not so listed or admitted to trading, a day on which the New
York Stock Exchange is open for business.


 


“Capital
Stock” means and includes any and all shares, interests, participations or
other equivalents of or interests in (however designated) corporate stock,
including without limitation, shares of preferred or preference stock, (ii) all
partnership interests (whether general or limited) in any Person which is a
partnership, (iii) all membership interests or limited liability company
interests in any limited liability company and (iv) all equity ownership
interests in any Person of any other type.


 


“Capital
Transaction” means any transaction or series of transactions, whether
structured as a merger, consolidation, reorganization, asset sale or otherwise,
negotiated on an arms length basis, which results in a sale or transfer of a
significant portion or all of the assets of the Company to an unaffiliated bona
fide third party, in which the aggregate consideration payable to the Company
and/or the holders of the Common Stock equals at least [$40,000,000], or in
which the assets sold equal at least a majority of the assets of the Company
calculated based on Fair Market Value.


 


“Commission”
means the Securities and Exchange Commission or any other Federal agency at the
time administering the Securities Act.


 


“Common
Stock” has the meaning ascribed to such term in the first paragraph of this
Warrant.


 


“Company”
has the meaning set forth in the first paragraph of this Warrant.


 


“Company
Determination” has the meaning set forth in Section 3.1.


 


19

















 


“Early
Appraiser Determination” has the meaning set forth in Section 3.2(b).


 


“Exchange
Act” means the Securities Exchange Act of 1934, as amended, and any successor
Federal statute, and the rules and regulations of the Commission (or its
successor) thereunder, all as the same shall be in effect at the time.


 


“Expiration
Date” has the meaning set forth in the first paragraph of this Warrant.


 


“Fair
Market Value” of


 


(i)                                     a
share of common stock as of any date of determination means:


 


(A) if
the common stock is traded on an exchange or is quoted on the NASDAQ National
Market System, then the average of the closing or last sale prices,
respectively, reported for the 5 trading days ended immediately preceding the
determination date; or


 


(B) if
the common stock is not traded on an exchange or on the NASDAQ National Market
System but is traded in the over-the-counter market, then the mean of the
average of the closing bid and asked prices reported for the 5 trading days
ended immediately preceding the determination date; or


 


(C) in
all other circumstances, the fair market value per share of the common stock as
determined in good faith by the Board of Directors of the Company, or otherwise
in accordance with Section 3.3 hereof;


 


(ii) the business or property or services or rights in question as of
any date of determination, means the amount determined in good faith by the
Board of Directors of the Company or otherwise in accordance with
Section 3.3 hereof; or


 


(iii) the Company as of any date of determination shall be the Fair
Market Value of a share of Common Stock determined as provided in clause (i)
above multiplied by the number of shares of Common Stock then outstanding.


 


“Holder”
has the meaning set forth in the first paragraph of this Warrant.


 


“Holder
Determination” has the meaning set forth in Section 3.3(c).


 


“Initiating
Holder” has the meaning set forth in Section 5.1 hereof.


 


“IPO”
means an initial public offering of the Common Stock in a primary offering
pursuant to a Registration Statement on Form S-1 that yields net proceeds
(after underwriting discounts and commissions) of at least $25,000,000.


 


“Issuance
Date” has the meaning set forth in Section 1.5.


 


“Loan
Agreement” means the Loan and Security Agreement entered into as of the date
hereof by the Holder and the Company.


 


“Loan
Documents” shall mean this Warrant, the Loan Agreement, the Subordination
Agreement entered into as of the date hereof by the Holder, the Company, Robert
H.B. Baldwin, Jr., Margaret J. Sieck and Welsch Holdings, L.L.C., and all other
instruments, documents and agreements executed by or


 


20

















 


on behalf of the Company
and delivered concurrently herewith or at any time hereafter to or for the
Holder in connection with the Loan, and the other transactions contemplated by
the Loan Agreement, all as amended, restated, supplemented or modified from
time to time.


 


“NASD”
means The National Association of Securities Dealers, Inc.


 


“NASDAQ”
means The National Association of Securities Dealers, Inc. Automated Quotation
System.


 


“Objecting
Holder” has the meaning set forth in Section 3.3(a).


 


“Other
Securities” has the meaning set forth in Section 5.1.


 


“Person”
means any natural person, corporation, limited liability company, limited
partnership, general partnership, joint stock company, joint venture,
association, company, trust, bank, trust company, land trust, business trust or
other organization, whether or not a legal entity, and any government agency or
political subdivision thereof.


 


“Public
Sale” means any sale of Capital Stock to the public pursuant to an offering
registered under the Securities Act or to the public through a broker, dealer
or market maker pursuant to the provisions of Rule 144 (or any successor
provision then in effect) adopted under the Securities Act.


 


“Registrable
Securities” means any Warrants or Warrant Shares until the date (if any) on
which such Warrant Shares shall have been transferred or exchanged and new
certificates for them not bearing a legend restricting further transfer shall
have been delivered by the Company and subsequent disposition of them shall not
require registration or qualification off them under the Securities Act or any
similar state law then in force.


 


“Registration
Expenses” means all expenses incident to the Company’s performance of or
compliance with Section 5.1 through Section 5.5 hereof, including (i)
all registration, filing and NASD fees, (ii) all fees and expenses of complying
with federal and state securities or blue sky laws, (iii) all word processing,
duplicating and printing expenses, (iv) all messenger telephone and delivery
expenses, (v) the fees and disbursements of counsel for the Company and of its
independent public accountants, including the expenses of any special audits
and “cold comfort” letters required by or incident to such performance and compliance,
(vi) the fees and disbursements of any one counsel and any one accountant
retained by the holder or holders of more than 50% of the Registrable
Securities being registered, (or, in the case of any registration effected
pursuant to Section 5.1, as the Initiating Holders shall have selected to
represent all holders of the Registrable Securities being registered), (vii)
the fees and expenses of “qualified independent appraiser” participating in an
offering pursuant to Section 3 of Schedule of the By laws of the
NASD, (viii) premiums and other costs of policies of insurance (if any) against
liabilities arising out of the public offering of the Registrable Securities
being registered if the Company desires such insurance (ix) fees and expenses
of other persons retained by the Company, (x) internal expenses of the Company
(including without limitation, all salaries and expenses of officers and
employees of the Company performed legal or accounting duties), (xi) the
expense of any annual audit, (xii) the fees and expenses of listing on any
securities exchange, and (xiii) any fees and disbursements of underwriters
customarily paid by issuers or sellers of securities, but not including
underwriting discounts and commissions and transfer taxes, if any, provided that,
in any case where Registration Expenses are not to be borne by the Company,
such expenses shall not include (i) salaries of the Company personnel or
general overhead expenses of the Company, (ii) auditing fees, (iii) premiums or
other expenses relating to liability insurance required by underwriters of the
Company or (iv) other expenses for the preparation of financial statements or
other data, to the extent that any of the foregoing either is normally prepared
by


 


21

















 


the Company in the
ordinary course of its business or would have been incurred by the Company had
no public offering taken place.


 


“Securities
Act” means the Securities Act of 1933, as amended, and any successor Federal
statute and the rules and regulations of the Securities and Exchange Commission
(or its successors) thereunder, all as the same shall be in effect from time to
time.


 


“Subsidiary”
of any Person means any corporation, partnership, joint venture, association or
other business entity of which more than 50% of the total voting power of
shares of stock or other interests therein entitled to vote in the election of
members of the board of directors, partnership committee, board of managers or
trustees or other managerial body thereof is at the time owned or controlled,
directly or indirectly, by such Person or one or more of the other Subsidiaries
of such Person or a combination thereof. Unless otherwise specified,
“Subsidiary” means a Subsidiary of the Company and “Subsidiaries” means all
Subsidiaries of the Company.


 


“Warrant”
means the Warrant(s) to purchase Common Stock issued by the Company in
connection with the Loan Agreement.


 


“Warrant
Securityholder” means at any time any Warrantholder or any holder of Warrant
Shares.


 


“Warrant
Shares” means (i) any shares of Common Stock or other securities issued upon
the exercise of any Warrants and (ii) any securities issued with respect to any
of such shares or other securities referred to in clause (i) upon the
conversion thereof into other securities or by way of stock dividend or stock
split or in connection with a combination of shares, recapitalization, merger,
consolidation or other reorganization or otherwise; provided that any of such
securities shall cease to be Warrant Shares when such securities shall have (x)
been disposed of pursuant to a Public Sale or (y) ceased to be outstanding.


 


“Warrantholder”
means a holder of a Warrant.


 


All
references herein to “days” shall mean calendar days unless otherwise
specified.


 


ARTICLE VII                         MISCELLANEOUS


 


7.1
Notices. Notices and other communications provided for herein must be in
writing and may be given by mail, courier, confirmed telex or facsimile
transmission and shall, unless otherwise expressly required, be deemed given
when received or, if mailed, four Business Days after being deposited in the
United States mail with postage prepaid and properly addressed. In the case of
the Company or Finantra, such notices shall be addressed to it as follows:


 


	
   

  	
  If to the Company:

  	
  Heartland Payment Systems, Inc.

  
	
   

  	
   

  	
  130 Nassau Street Princeton, New Jersey 08542

  
	
   

  	
   

  	
  Attention: Martin J. Uhle, President

  
	
   

  	
   

  	
  Facsimile: (609) 683-3815

  
	
   

  	
   

  	
   

  
	
   

  	
  With a copy to:

  	
  Dorsey & Whitney
  LLP

  
	
   

  	
   

  	
  250 Park Avenue

  
	
   

  	
   

  	
  New York, New York
  10177

  
	
   

  	
   

  	
  Attention: Wesley C.
  Fredericks, Jr.

  
	
   

  	
   

  	
  Facsimile: (212)
  953-7201

  



 


22

















 


In the case of the
Holder, such notices and communications shall be addressed to its address as
shown on the books maintained by the Company, unless the Holder shall notify
the Company that notices and communications should be sent to a different
address (or telex or facsimile number), in which case such notices and
communications shall be sent to the address (or telex or facsimile number)
specified by the Holder.


 


7.2 Waivers;
Amendments. No failure or delay of the Holder in exercising any power or
right hereunder shall operate as a waiver thereof, nor shall any single or
partial exercise of any such right or power, or any abandonment or
discontinuance of steps to enforce such a right or power, preclude any other or
further exercise thereof or the exercise of any other right or power. No notice
or demand on the Company in any case shall entitle the Company to any other or
future notice or demand in similar or other circumstances. The rights and
remedies of the Holder are cumulative and not exclusive of any rights or
remedies which it would otherwise have. The provisions of this Warrant may be
amended, modified or waived with (and only with) the written consent of the Company
and the Holders holding Warrants entitling such holders to purchase a majority
of the Common Stock subject to purchase upon exercise of all the outstanding
Warrants (exclusive of Warrants then owned by the Company or any Subsidiary or
Affiliate of the Company); provided, however, that no such amendment,
modification or waiver shall, without the written consent of the holders of all
Warrants at the time outstanding, (a) change the number of shares of Common
Stock subject to purchase upon exercise of this Warrant, the Exercise Price or
provisions for payment thereof or (b) amend, modify or waive the provisions of
this Section 7.2 or Articles III, IV, Section 1.5 or the definition
of Fair Market Value in Article VI and (ii) no amendment, modification or
waiver shall, without the written consent of the holders of a majority of
Registrable Shares, amend, modify or waive the provisions of Article V.


 


Any
such amendment, modification or waiver effected pursuant to and in accordance
with the provisions of this Section shall be binding upon the holders of
all Warrants and Warrant Shares, upon each future holder thereof and upon the
Company. In the event of any such amendment, modification or waiver, the
Company shall give prompt notice thereof to all holders of Warrants and Warrant
Shares and, if appropriate, notation thereof shall be made on all War ants
thereafter surrendered for registration of transfer or exchange.


 


7.3
Governing Law. THIS WARRANT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED
BY THE LAWS OF THE STATE OF NEW YORK (WITHOUT REGARD TO PRINCIPLES OF CONFLICTS
OF LAW).


 


7.4
Transfer. Covenants to Bind Successor and Assigns. All covenants, stipulations,
promises and agreements in this Warrant contained by or on behalf of the
Company or the Holder shall bind its successors and assigns, whether so
expressed or not. This Warrant and all of the Holder’s rights hereunder, shall
be transferable and assignable by the Holder hereof in whole, or from time to
time in part, to any other Person, subject to the restrictions on
transferability contained herein and under the applicable securities laws, and
the provisions of this Warrant shall be binding upon and inure to the benefit
of the Holder hereof and its successors and assigns.


 


7.5
Severability. In case any one or more of the provisions contained in this
Warrant shall be invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein shall not in any way be affected or impaired thereby. The parties shall
endeavor in good faith negotiations to replace the invalid, illegal or
unenforceable provisions with valid provisions the economic effect of which
comes as close as possible to that of the invalid, illegal or unenforceable
provisions.


 


23

















 


7.6
Section Headings. The section headings used herein are for
convenience of reference only, are not part of this Warrant and are not to
affect the construction of or be taken into consideration in interpreting this
Warrant.


 


7.7
Right to Specific Performance. The Company acknowledges and agrees that in the
event of any breach of the foregoing covenants and agreements, the Holder would
be irreparably harmed and could not be made whole only by the award of monetary
damages. Accordingly, the Company agrees that the Holder, in addition to any
other remedy to which the Holder may be entitled at law or equity, will be
entitled to seek and obtain an award of specific performance of any of the
foregoing covenants and agreements.


 


7.8
CONSENT TO JURISDICTION. THE COMPANY HEREBY CONSENTS TO THE JURISDICTION OF ANY
STATE OR FEDERAL COURT LOCATED WITHIN THE COUNTY OF NEW YORK, STATE OF NEW
YORK, AND IRREVOCABLY AGREES THAT, SUBJECT TO HOLDER’S ELECTION, ALL ACTIONS OR
PROCEEDINGS ARISING OUT OF OR RELATING TO THIS WARRANT SHALL BE LITIGATED IN
SUCH COURTS. THE COMPANY ACCEPTS FOR ITSELF AND IN CONNECTION WITH ITS
PROPERTIES, GENERALLY AND UNCONDITIONALLY, THE NON-EXCLUSIVE JURISDICTION OF
THE AFORESAID COURTS AND WAIVES ANY DEFENSE OF FORUM NON CONVENIENS, AND
IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT RENDERED THEREBY IN CONNECTION
WITH THIS WARRANT.


 


7.9
WAIVER OF JURY TRIAL. THE COMPANY AND HOLDER HEREBY WAIVE THEIR RESPECTIVE
RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING
OUT OF THIS WARRANT. THE COMPANY AND HOLDER ACKNOWLEDGE THAT THIS WAIVER IS A
MATERIAL INDUCEMENT TO ENTER INTO A BUSINESS RELATIONSHIP, THAT EACH HAS RELIED
ON THE WAIVER IN ENTERING INTO THIS WARRANT AND THAT EACH WILL CONTINUE TO RELY
ON THE WAIVER IN THEIR RELATED FUTURE DEALINGS. THE COMPANY AND HOLDER FURTHER
WARRANT AND REPRESENT THAT EACH HAS REVIEWED THIS WAIVER WITH ITS LEGAL
COUNSEL, AND THAT EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS
FOLLOWING CONSULTATION WITH LEGAL COUNSEL.


 


 


(This space
intentionally left blank.)


 


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IN
WITNESS WHEREOF, the Company has caused this Warrant to be executed in its
corporate name by one of its officers thereunto duly authorized, and its
corporate seal to be hereunto affixed, attested by its Secretary or an
Assistant Secretary, all as of the day and year first above written.


 


	
   

  	
  HEARTLAND PAYMENT SYSTEMS, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Martin J. Uhle

  
	
   

  	
   

  	
  Name:

  	
  Martin J. Uhle

  
	
   

  	
   

  	
  Title:

  	
  President

  
	
   

  	
   

  
	
   

  	
   

  
	
  Accepted as of the day
  and year

  first above written:

  	
   

  
	
   

  	
   

  
	
  BHC INTERIM FUNDING L.P.

  	
   

  
	
  By: BHCGP, L.L.C., its General Partner

  	
   

  
	
  By: BHC Investors, L.L.C., its Managing Member

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/ Steven H. Brooks

  	
   

  	
   

  
	
   

  	
  Name:

  	
  Steven H. Brooks

  	
   

  
	
   

  	
  Title:

  	
  Manager

  	
   

  
	
   

  	
   

  
	
  Address:

  	
  BHC Interim Funding
  L.P.

  	
   

  
	
   

  	
  444 Madison Avenue

  	
   

  
	
   

  	
  New York, NY 10022

  	
   

  
	
   

  	
  Telephone: 212-753-1991

  	
   

  
	
   

  	
  Telecopier:
  212-753-7730

  	
   

  
								



 


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SUBSCRIPTION
FORM


 


(To Be
Executed by the Registered Holder If He Desires to Exercise the Warrant)


 


 


TO: Heartland Payment
Systems, Inc.


 


The undersigned hereby
exercises the right to
purchase                            shares
of Common Stock,                  
par value per share, covered by the attached Warrant in accordance with the
terms and conditions thereof, and herewith makes payment of the Warrant Price
for such shares in full.


 


	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Signature

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Address

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  Dated:

  	
   

  	
   

  	
   

  
					



 


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ASSIGNMENT


 


(To Be
Executed by the Registered Holder If He Desires to Exercise the Warrant)


 


 


FOR
VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto                                        the
right to purchase shares of Common Stock of Heartland Payment Systems, Inc.
evidenced by the within Warrant, and does hereby irrevocably constitute and
appoint
[                             ]
Attorney to transfer the said Warrant on the books of the Company, with full
power of substitution.


 


	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Signature

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Address

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  Dated:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  In the Presence of:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  



 


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