exhibit10-2.htm


    Exhibit 10.2 

     

    Execution Copy 

     

    PROTECTIVE RIGHTS AGREEMENT


     

         This Protective Rights Agreement (the
“Agreement”) is entered into as of January 18, 2010, by
and between Stratasys, Inc. (the “Company”), a
Delaware corporation, having a principal place of business at 7665 Commerce Way,
Eden Prairie, Minnesota 55344-2020, and Hewlett-Packard Company (“HP”), a Delaware
corporation, having a principal place of business at 3000 Hanover Street, Palo
Alto, California 94304.


     

    Recitals 

     

         WHEREAS, the Company and HP are parties to
that certain Master OEM Agreement of even date herewith (the “Commercial Agreement”); and 

     

         WHEREAS, as an inducement for each of the
parties to enter into the Commercial Agreement, the parties desire to provide
for certain rights as set forth herein; 

     

         NOW THEREFORE, the Company and HP
hereby agree as follows: 

     

    1. Notice. 

     

         1.1. Notice of Acquisition Offer. Each time the Board of Directors of the
Company (the “Board”) authorizes management of the Company or a
committee of the Board to engage in negotiations as a result of the Company’s
receipt of a bona fide offer for an Acquisition (as defined below) (an
“Acquisition Offer”), the Company will provide written notice
thereof to HP within five (5) business days after such authorization (the
“Acquisition Offer Notice”). Each Acquisition Offer Notice shall
include a description of the Acquisition Offer and the principal financial and
other material terms and conditions of the Acquisition Offer. 

     

         1.2. Notice of Acquisition
Decision. Each time (a)
the Board decides to investigate a potential Acquisition, or (b) decides to
engage an investment bank (or similar adviser) for any such purpose, the Company
will provide written notice thereof to HP within five (5) business days after
such decision. 

     

         1.3. Notice of Stockholder Offer. Each time Board becomes aware that any
person has made an offer to purchase equity securities of the Company that, upon
completion, would result in an Acquisition, the Company will provide written
notice to HP within five (5) business days thereafter (the “Stockholder Offer Notice”). Each Stockholder Offer Notice shall include a description of the
proposed Acquisition and the principal financial and other material terms and
conditions of the proposed Acquisition. 

     

    

    
    


         1.4. Restrictions. 

     

         1.4.1. The Company shall not enter into any agreement
with any person or entity that prohibits the Company from providing any notice
required to be provided under this Agreement. 

     

         1.4.2. Until such time as the Company enters into a
letter of intent, definitive agreement or similar understanding or agreement
with respect to an Acquisition (provided all other terms of this Agreement are
adhered to by the Company), the Company shall not enter into any agreement with
any person or entity that prohibits the Company from engaging in discussions
with HP regarding any potential Acquisition. 

     

         1.5. Subsequent Notice. If HP submits an HP Competing Offer to the
Company pursuant to Section 2.1, the Company will provide a new notice to HP (a
“Subsequent Acquisition Offer
Notice”) in the event of
each material change in terms of any Acquisition Offer described in an
Acquisition Offer Notice (including 10% or greater change in price, as
determined by the Board in good faith). 

     

    2. Right of Offer. 

     

         2.1. HP Competing Offer. HP shall have fifteen (15) business days
following receipt of any Acquisition Offer Notice, five (5) additional business
days following receipt of the first Subsequent Acquisition Offer Notice, and two
(2) additional business days following receipt of each additional Subsequent
Offer Notice (together, the “Competing Offer Period”) to respond with an offer with respect to the transaction contemplated
in the Acquisition Offer (the “HP Competing Offer”). During the Competing Offer Period, the Company shall afford HP such
access to its records and personnel as may be reasonably requested by HP to
enable HP to conduct a customary due diligence investigation of the Company in
connection with the preparation of an HP Competing Offer.

     

         2.2. Board Review. Upon receipt of an HP Competing Offer, the
Board shall review the HP Competing Offer, if any, and each other Acquisition
Offer, it being understood that the Board, in its reasonable discretion
consistent with its fiduciary duties under law and with the advice of its
investment advisors, shall have the right to accept or reject the HP Competing
Offer and any or all other Acquisition Offers; provided, however, that in the
event that the Board determines to accept an Acquisition Offer other than the HP
Competing Offer, the Board shall have determined that such other Acquisition
Offer is superior (its terms and conditions taken as a whole) to the HP
Competing Offer based upon the exercise of the Board’s fiduciary duties and
business judgment. In any such case, the Company shall notify HP of the Board’s
decision promptly thereafter.

     

         2.3. Restrictions. 

     

         2.3.1. The Company shall not convene a meeting of the
Board or solicit the written consent of the Board to approve the terms of any
Acquisition Offer (other than an HP Competing Offer), until the expiration of
the Competing Offer Period. 

     

         2.3.2. The Company shall not enter into any agreement
that could restrict the Company’s ability to enter into any agreement with HP
with respect to an Acquisition prior to the expiration of the Competing Offer
Period.

     

         2.3.3. The Company shall not execute any agreement
committing the Company to any Acquisition with any party other than HP prior to
the expiration of the Competing Offer Period. 

     

    2 

     

    

    
    


         2.4. Negotiations with a Third
Party. HP acknowledges and
agrees that regardless of whether HP exercises its Right of Offer under Section
2.1 or submits an HP Competing Offer, the Company shall have the right to
negotiate with any and all third parties that make an Acquisition Offer. In such
event, the other provisions of this Agreement, including, but not limited to,
Section 1 and this Section 2, shall be applicable. If the Company enters into a
definitive agreement with another party to complete an Acquisition, the Company
shall provide to HP written notification thereof. 

     

    3. Warrant. Concurrently with the execution of this
Agreement, the Company is issuing to HP a warrant to purchase the Company’s
securities substantially in the form of Exhibit A hereto. 

     

    4. Governing Law. This Agreement shall be governed in all
respects by the internal laws of the State of Delaware. 

     

    5. Entire Agreement. This Agreement constitutes the full and
entire understanding and agreement between the parties with regard to the
subjects hereof and it supersedes, merges and renders void every other prior
written and/or oral understanding or agreement among or between the parties
hereto. 

     

    6. Notices, etc. All notices and other communications
required or permitted hereunder shall be in writing and shall be deemed
delivered when 

     

         (a) delivered personally; or

     

         (b) one (1) business day after deposit with courier or overnight delivery,
addressed (i) if to HP, at Hewlett-Packard Company, 3000 Hanover Street, MS
1056, Palo Alto, California 94304, attn.: General Counsel, or such other address
as HP shall have furnished to the Company in writing, or (ii) if to the Company,
at Stratasys, Inc., 7665 Commerce Way, Eden Prairie, Minnesota 55344-2020,
attn.: Chief Executive Officer, with a copy to Snow Becker Krauss P.C., 605
Third Avenue, 25th Floor, New York, New York 10158-0125, Attn.:
Eric Honick, Esq., or at such other address as the Company shall have furnished
to HP in writing; or 

     

         (c) sent by telecopier, with receipt
confirmed prior to 5:00 p.m. local time at the location of delivery, to the
telecopier numbers set forth below, provided that a copy thereof is sent to the
intended recipient as provided in Section 6(b) above. Any notice received by
telecopier after 5:00 p.m. on any day shall be deemed to have been received on
the next business day. 

     

    
      	If to HP:	      	650-857-4837
	
            	
            	Attn: General Counsel
	 	
            	
            
	If to the Company:	 	952-906-2266
	
            	
            	Attn: Chief Executive Officer
	 	
            	
            
	With a copy to:	
            	212-937-9572
	
            	
            	Attn: Eric Honick, Esq.


    


    3 

     

    

    
    


    7. Severability. In case any provision of this Agreement
shall be found by a court of law to be invalid, illegal or unenforceable, the
validity, legality and enforceability of the remaining provisions of this
Agreement shall not in any way be affected or impaired thereby. 

     

    8. Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall be an original, but all of which together
shall constitute one instrument. 

     

    9. Term. This Agreement shall terminate upon the
earlier to occur of: 

     

    
      	      	(a)	      	
              the closing of
      an acquisition, following compliance with the terms of this Agreement;
      or

            
	
            	 
	
            	(b)	
            	
              three (3)
      months following the termination or expiration of the Commercial
      Agreement.

            


    

     

    10. Other Agreements. HP acknowledges and agrees that the Company
may enter into one or more other protective rights agreements or similar
agreements with third parties having terms similar to the terms of this
Agreement, provided that the rights of such third parties under such other
protective rights or similar agreements are not superior to those of HP under
this Agreement or in any way impede the Company’s performance under this
Agreement. 

     

    11. Specific Performance. The parties hereto agree that irreparable
damage to HP would occur in the event that the provisions of this Agreement were
not performed in accordance with its specific terms or were otherwise breached.
HP, without prejudice to any rights to judicial relief it may otherwise have,
shall be entitled to equitable relief, including injunction, in the event of any
breach of the provisions of this Agreement.

     

    12. Definitions. 

     

         “Acquisition” shall
mean (i) the sale or other disposition of more than fifty percent (50%) of the
equity securities of the Company, (ii) the sale, lease or other disposition of
all or substantially all of the Company’s assets, (iii) the Company’s merger
into or consolidation with any other corporation or other entity, or any other
corporate reorganization, in which the holders of the Company’s outstanding
voting stock immediately prior to such transaction own, immediately after such
transaction, securities representing less than fifty percent (50%) of the voting
power of the corporation or other entity surviving such transaction, or (iv) any
transaction or series of transactions substantially similar to those listed in
items (i) through (iii) hereof. 

     

     

     

     

     

    [Remainder of page
intentionally left blank] 

     

    4 

     

    

    
    


    PROTECTIVE RIGHTS AGREEMENT


     

    Signature Page 

     

         IN WITNESS WHEREOF, the parties hereto have
executed this Protective Rights Agreement as of the date first written above.


     

    
      	HEWLETT-PACKARD COMPANY	
            
	 	
            
	 	
            
	By:	/s/ Chris
    Robell	
            
	 	
            	
            
	Name:   	Chris Robell	
            
	 	
            	
            
	Title:	VP, Strategy and
      Corporate Development	 
	 	
            
	 	
            
	STRATASYS, INC.	
            
	 	
            
	By:	/s/ S. Scott
      Crump	
            
	 	
            	
            
	Name:	S. Scott
    Crump	
            
	 	
            	
            
	Title:	Chief Executive
      Officer and President	
            


    


    5 

     

    

    
    


    Exhibit A to
Protective Rights Agreement 

     

    Execution Copy 

     

    NEITHER THESE SECURITIES NOR THE SECURITIES
FOR WHICH THESE SECURITIES ARE EXERCISABLE HAVE BEEN REGISTERED WITH THE
SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN
RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD
EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT
OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO,
THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN COMPLIANCE WITH
APPLICABLE STATE SECURITIES OR BLUE SKY LAWS. THESE SECURITIES AND THE
SECURITIES ISSUABLE UPON EXERCISE OF THESE SECURITIES MAY BE PLEDGED IN
CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH
SECURITIES. 

     

     

     

    STRATASYS, INC.


     

    WARRANT 

     

    
    

     

    
      	Warrant No. A--1
      (2010)	      	Dated: January 18, 2010
      


    

     

         Stratasys, Inc., a Delaware corporation (the
“Company”), hereby certifies that, for value received,
Hewlett-Packard Company or its registered assigns (the “Holder”), is
entitled to purchase from the Company up to a total of Five Hundred Thousand
(500,000) shares of common stock, $0.01 par value per share (the “Common Stock”), of
the Company (each such share, a “Warrant Share” and
all such shares, the “Warrant Shares”) at
an exercise price equal to $17.78 per share (as adjusted from time to time as
provided in Section 9, the “Exercise Price”),
at any time and from time to time from and after the date hereof and through and
including the earlier of (x) the date that is seven years from the date of
issuance hereof or (y) the date of the closing of a Fundamental Transaction (as
defined in Section 9(c) below) (the “Expiration Date”),
and subject to the following terms and conditions. This Warrant (this
“Warrant”) is issued pursuant to that certain
Protective Rights Agreement, dated as of the date hereof, by and between the
Company and the Holder (the “Protective Rights Agreement”).

     

         1. Definitions. In addition to the terms defined elsewhere
in this Warrant, capitalized terms used in this Warrant shall have the meanings
ascribed to them below. 

     

         “Business Day” means
any day other than Saturday, Sunday or any other day on which commercial banks
in The City of New York are authorized or required by law to remain closed.


     

    

    
    


         “Closing Price”
means, for any date, the price determined by the first of the following clauses
that applies: (a) if the Common Stock is then listed or quoted on an Eligible
Market or any other national securities exchange, the closing sale price per
share of the Common Stock for such date (or the nearest preceding date) on the
primary Eligible Market or exchange on which the Common Stock is then listed or
quoted; (b) if prices for the Common Stock are then quoted on the OTC Bulletin
Board, the closing sale price per share of the Common Stock for such date (or
the nearest preceding date) so quoted; (c) if prices for the Common Stock are
then reported in the “Pink Sheets” published by Pink OTC Markets Inc. (or a
similar organization or agency succeeding to its functions of reporting prices),
the most recent closing sale price per share of the Common Stock so reported; or
(d) in all other cases, the fair market value of a share of Common Stock as
determined in good faith by Board of Directors of the Company. 

     

         “Eligible Market”
means any of the New York Stock Exchange, the Nasdaq Stock Market or the OTC
Bulletin Board (or any successor thereto).

     

         “Person” means any
individual or corporation, partnership, trust, incorporated or unincorporated
association, joint venture, limited liability company, joint stock company,
government (or an agency or subdivision thereof) or any court or other federal,
state, local or other governmental authority or other entity of any
kind.

     

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

     

          “Registrable Securities” means any Warrant Shares, together with any securities issued or
issuable upon any stock split, dividend or other distribution, recapitalization
or similar event with respect to the foregoing. 

     

         “Registration Statement” means a registration statement filed by the Company under the Securities
Act, including (in each case) the Prospectus, amendments and supplements to such
registration statement or Prospectus, including pre- and post-effective
amendments, all exhibits thereto, and all material incorporated by reference or
deemed to be incorporated by reference in such registration statement.


     

         “SEC” means the Unites States Securities and
Exchange Commission.

     

         “Securities Act” means the Securities Act of 1933, as amended.


     

         “Trading Day” means
any day on which the Common Stock is listed or quoted and traded on its primary
Trading Market. 

     

         “Trading Market”
means the Nasdaq Global Select Market or any other Eligible Market on which the
Common Stock is then listed or quoted. 

     

         “Transfer Agent”
means Continental Stock Transfer Company, or any other transfer agent selected
by the Company. 

     

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

     

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

     

         4. Exercise and Duration of
Warrants. 

     

              (a) This Warrant shall be exercisable by the registered Holder at any time
and from time to time on or after the date hereof to and including the
Expiration Date. At 5:00 P.M., New York City time on the Expiration Date, the
portion of this Warrant not exercised prior thereto shall be and become void and
of no value.

     

              (b) A Holder may exercise this Warrant by delivering to the Company (i) an
exercise notice, in the form attached hereto (the “Exercise Notice”),
appropriately completed and duly signed, and (ii) payment of the Exercise Price
for the number of Warrant Shares as to which this Warrant is being exercised
(which may take the form of a “cashless exercise” if so indicated in the
Exercise Notice and if a “cashless exercise” may occur at such time pursuant to
Section 10 below), and the date such items are delivered to the Company (as
determined in accordance with the notice provisions hereof) is an “Exercise Date.” The
Holder shall not be required to deliver the original Warrant in order to effect
an exercise hereunder. Execution and delivery of the Exercise Notice shall have
the same effect as cancellation of the original Warrant and issuance of a New
Warrant evidencing the right to purchase the remaining number of Warrant Shares.


     

         5. Delivery of Warrant Shares.

     

              (a) Upon exercise of this Warrant, the Company shall promptly issue or cause
to be issued and cause to be delivered to or upon the written order of the
Holder and in such name or names as the Holder may designate, a certificate for
the Warrant Shares issuable upon such exercise. The Holder, or any Person so
designated by the Holder to receive Warrant Shares, shall be deemed to have
become holder of record of such Warrant Shares as of the Exercise
Date.

     

              (b) This Warrant is exercisable, either in its entirety or, from time to
time, for a portion of the number of Warrant Shares. Upon surrender of this
Warrant following one or more partial
exercises, the Company shall issue or cause to be issued, at its expense, a New
Warrant evidencing the right to purchase the remaining number of Warrant Shares.


     

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              (c) The Company’s obligations to issue and deliver Warrant Shares in
accordance with the terms hereof are absolute and unconditional, irrespective of
any action or inaction by the Holder to enforce the same, any waiver or consent
with respect to any provision hereof, the recovery of any judgment against any
Person or any action to enforce the same, or any setoff, counterclaim,
recoupment, limitation or termination, or any breach or alleged breach by the
Holder or any other Person of any obligation to the Company or any violation or
alleged violation of law by the Holder or any other Person, and irrespective of
any other circumstance which might otherwise limit such obligation of the
Company to the Holder in connection with the issuance of Warrant Shares. Nothing
herein shall limit a Holder’s right to pursue any other remedies available to it
hereunder, at law or in equity, including, without limitation, a decree of
specific performance and/or injunctive relief with respect to the Company’s
failure to timely deliver certificates representing shares of Common Stock upon
exercise of the Warrant as required pursuant to the terms hereof. 

     

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

     

         7. Replacement of Warrant. If this Warrant is mutilated, lost, stolen
or destroyed, the Company shall issue or cause to be issued in exchange and
substitution for and upon cancellation hereof, or in lieu of and substitution
for this Warrant, a New Warrant, but only upon receipt of evidence reasonably
satisfactory to the Company of such loss, theft or destruction and customary and
reasonable bond or indemnity, if requested. Applicants for a New Warrant under
such circumstances shall also comply with such other reasonable regulations and
procedures and pay such other reasonable third-party costs as the Company may
prescribe. 

     

         8. Reservation of Warrant
Shares. The Company
covenants that it will at all times reserve and keep available out of the
aggregate of its authorized but unissued and otherwise unreserved Common Stock,
solely for the purpose of enabling it to issue Warrant Shares upon exercise of
this Warrant as herein provided, the number of Warrant Shares which are then
issuable and deliverable upon the exercise of this entire Warrant, free from
preemptive rights or any other contingent purchase rights of persons other than
the Holder (after giving effect to the adjustments and restrictions of
Section 9, if any). The Company covenants that all
Warrant Shares so issuable and deliverable shall, upon issuance and the payment
of the applicable Exercise Price in accordance with the terms hereof, be duly
and validly authorized, issued and fully paid and nonassessable. The Company
will take all such action as may be necessary to assure that such shares of
Common Stock may be issued as provided herein without violation of any applicable law or regulation, or of any
requirements of any securities exchange or automated quotation system upon which
the Common Stock may be listed. 

     

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

     

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

     

              (b) Pro Rata Distributions. If the Company, at any time while this
Warrant is outstanding, distributes to holders of Common Stock (i) evidences of
its indebtedness, (ii) any security (other than a distribution of Common Stock
covered by the preceding paragraph), (iii) rights or warrants to subscribe for
or purchase any security, or (iv) any other asset other than cash (in each case,
“Distributed Property”), then in each such case the Exercise Price
in effect immediately prior to the record date fixed for determination of
stockholders entitled to receive such distribution shall be adjusted (effective
on such record date) to equal the product of such Exercise Price times a
fraction of which the denominator shall be the average of the Closing Prices for
the five Trading Days immediately prior to (but not including) such record date
and of which the numerator shall be such average less the then fair market value
of the Distributed Property distributed in respect of one outstanding share of
Common Stock, as determined by the Company's independent certified public
accountants that regularly examine the financial statements of the Company,
which shall be definitive, absent manifest error.

     

              (c) Fundamental Transactions. If, at any time while this Warrant is
outstanding, (i) the Company effects any merger or consolidation of the Company
with or into another Person in which the holders of the Company’s securities
entitled to vote are not the holders of a majority of the securities entitled to
vote in the successor company, (ii) the Company effects any sale of all or
substantially all of its assets in one or a series of related transactions,
(iii) any tender offer or exchange offer (whether by the Company or another
Person) is completed pursuant to which holders of Common Stock are permitted to
tender or exchange their shares for other securities, cash or property, or (iv)
the Company effects any reclassification of the Common Stock or any compulsory
share exchange pursuant to which the Common Stock is effectively converted into
or exchanged for other securities, cash or property (other than as a result of a
subdivision or combination of shares of Common Stock covered by Section 9(a)
above) (in any such case, a “Fundamental Transaction”), then at the closing of such Fundamental Transaction the Holder shall
have the right to receive, upon exercise of this Warrant, the same amount and kind of
securities, cash or property as it would have been entitled to receive upon the
occurrence of such Fundamental Transaction if it had been, immediately prior to
such Fundamental Transaction, the holder of the number of Warrant Shares then
issuable upon exercise in full of this Warrant (the “Alternate Consideration”). The aggregate Exercise Price for this Warrant will not be affected by
any such Fundamental Transaction, but the Company shall apportion such aggregate
Exercise Price among the Alternate Consideration in a reasonable manner
reflecting the relative value of any different components of the Alternate
Consideration. If holders of Common Stock are given any choice as to the
securities, cash or property to be received in a Fundamental Transaction, then
the Holder shall be given the same choice as to the Alternate Consideration it
receives upon any exercise of this Warrant upon the closing of such Fundamental
Transaction.

     

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

     

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

     

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

     

              (g) Notice of Corporate Events. If the Company (i) declares a dividend or
any other distribution of cash, securities or other property in respect of its
Common Stock, including without limitation any granting of rights or warrants to
subscribe for or purchase any capital stock of the Company or any Subsidiary,
(ii) authorizes or approves, enters into any agreement contemplating or solicits
stockholder approval for any Fundamental Transaction or (iii) authorizes the
voluntary dissolution, liquidation or winding up of the affairs of the Company,
then the Company shall deliver to the Holder a notice describing the material
terms and conditions of such transaction, at least 20 calendar days prior to the
applicable record or effective date on which a Person would need to hold Common
Stock in order to participate in or vote with respect to such transaction, and
the Company will take all steps reasonably necessary in order to insure that the
Holder is given the practical opportunity to exercise this Warrant prior to such
time so as to participate in or vote with respect to such transaction; provided,
however, that the failure to deliver such notice or any defect therein shall not
affect the validity of the corporate action required to be described in such
notice.

     

    6

     

    

    
    


         10. Payment of Exercise Price. The Holder shall pay the Exercise Price in
immediately available funds; provided, however, that the Holder may satisfy its
obligation to pay the Exercise Price through a “cashless exercise,” in which
event the Company shall issue to the Holder the number of Warrant Shares
determined as follows: 

     

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

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

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

            
	
            	
            	 
	 	 	
              A = the average
      of the Closing Prices for the five Trading Days immediately prior to (but
      not including) the Exercise Date.

            
	
            	
            	 
	
            	
            	
              B = the Exercise
  Price.

            


    


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

     

         11. Limitation on Exercise. Notwithstanding anything to the contrary
contained herein, the number of shares of Common Stock that may be acquired by
the Holder upon any exercise of this Warrant (or otherwise in respect hereof)
shall be limited to the extent necessary to insure that, following such exercise
(or other issuance), the total number of shares of Common Stock then
beneficially owned by such Holder and its Affiliates and any other Persons whose
beneficial ownership of Common Stock would be aggregated with the Holder’s for
purposes of Section 13(d) of the Securities Exchange Act of 1934, as amended
(the “Exchange Act”), does not exceed 4.999% (the “Maximum Percentage”) of the total number of issued and outstanding shares of Common Stock
(including for such purpose the shares of Common Stock issuable upon such
exercise). For such purposes, beneficial ownership shall be determined in
accordance with Section 13(d) of the Exchange Act and the rules and regulations
promulgated thereunder. Each delivery of an Exercise Notice hereunder will
constitute a representation by the Holder that it has evaluated the limitation
set forth in this paragraph and determined that issuance of the full number of
Warrant Shares requested in such Exercise Notice is permitted under this
paragraph. The Company’s obligation to issue shares of Common Stock in excess of
the limitation referred to in this Section shall be suspended (and shall not
terminate or expire notwithstanding any contrary provisions hereof) until such
time, if any, as such shares of Common Stock may be issued in compliance with
such limitation, but in no event later than the Expiration Date. By written
notice to the Company, the Holder may waive the provisions of this Section or
increase or decrease the Maximum Percentage to any other percentage specified in
such notice, but (i) any such waiver or increase will not be effective until the
61st day after such notice is delivered to the Company, and (ii) any such waiver or increase or decrease will apply
only to the Holder and not to any other holder of Warrants. 

     

    7

     

    

    
    


         12. Fractional Shares. The Company shall not be required to issue
or cause to be issued fractional Warrant Shares on the exercise of this Warrant.
If any fraction of a Warrant Share would, except for the provisions of this
Section, be issuable upon exercise of this Warrant, the number of Warrant Shares
to be issued will be rounded up to the nearest whole share. 

     

         13. Registration Rights. 

     

              (a) If at any time prior to the expiration of
the Registration Period (as hereinafter defined in Section 13(d)(i)) the Company
proposes to file with the SEC a Registration Statement relating to an offering
for its own account or the account of others under the Securities Act of any of
its securities (other than on Form S-4 or Form S-8 (or their equivalents at such
time) relating to securities to be issued solely in connection with any
acquisition of any entity or business or equity securities issuable in
connection with stock option or other employee benefit plans) the Company shall
promptly send to each Holder written notice of the Company's intention to file a
Registration Statement and of such Holder's rights under this Section 13 and, if
within fifteen (15) days after receipt of such notice, such Holder shall so
request in writing, the Company shall include in such Registration Statement all
or any part of the Registrable Securities such Holder requests to be registered,
subject to the priorities set forth below in this Section 13(a). The obligations
of the Company under this Section 13(a) may be waived by Holders holding a
majority of the Registrable Securities. If an offering in connection with which
a Holder is entitled to registration under this Section 13(a) is an underwritten
offering, then each Holder whose Registrable Securities are included in such
Registration Statement shall, unless otherwise agreed to by the Company, offer
and sell such Registrable Securities in an underwritten offering using the same
underwriter or underwriters and, subject to the provisions of this Agreement, on
the same terms and conditions as other shares of Common Stock included in such
underwritten offering. If a registration pursuant to this Section 13(a) is to be
an underwritten public offering and the managing underwriter(s) advise the
Company in writing that, in their reasonable good faith opinion, marketing or
other factors dictate that a limitation on the number of shares of Common Stock
that may be included in the Registration Statement is necessary to facilitate
and not adversely affect the proposed offering, then the Company shall include
in such registration: (i) first, all securities the Company proposes to sell for
its own account, (ii) second, up to the full number of securities proposed to be
registered for the account of the holders of securities entitled to inclusion of
their securities in the Registration Statement by reason of demand registration
rights, and (iii) third, the securities requested to be registered by the
Holders and other holders of securities entitled to participate in the
registration, as of the date hereof, drawn from them pro rata based on the
number each has requested to be included in such registration. 

     

              (b) The initial number of Registrable
Securities included in any Registration Statement and each increase in the
number of Registrable Securities included therein shall be allocated pro rata
among the Holders based on the number of Registrable Securities held by each
Holder at the time the Registration Statement covering such initial number of
Registrable Securities or increase thereof is declared effective by the SEC. In
the event that a Holder sells or otherwise transfers any of such Person's
Registrable Securities, each transferee shall be allocated a pro rata portion of the then remaining
number of Registrable Securities included in such Registration Statement for
such transferor. Any shares of Common Stock included in a Registration Statement
and which remain allocated to any Person which ceases to hold any Registrable
Securities shall be allocated to the remaining Holders, pro rata based on the
number of Registrable Securities then held by such Holders. 

     

    8

     

    

    
    


              (c) Subject to Section 13(f) hereof, the
Holders holding a majority of the Registrable Securities shall have the right to
select one legal counsel to review and oversee any offering pursuant to this
Section 13 (“Legal Counsel”), which shall be reasonably acceptable to the
Company. 

     

              (d) Whenever a Holder has requested that any
Registrable Securities be registered pursuant to Section 13(a) the Company will
use its commercially reasonable efforts to effect the registration of the
Registrable Securities in accordance with the intended method of disposition
thereof and, pursuant thereto, the Company shall have the following obligations:


     

              (i) The Company shall keep such Registration Statement effective pursuant to
Rule 415 at all times until the earlier of (A) the date as of which the Holders
may sell all of the Registrable Securities covered by such Registration
Statement without restriction pursuant to Rule 144 promulgated under the
Securities Act (or successor thereto) or (B) the date on which the Holders shall
have sold all the Registrable Securities covered by such Registration Statement
(the “Registration Period”).

     

              (ii) The Company shall prepare and file with the SEC such amendments
(including post-effective amendments) and supplements to a Registration
Statement and the Prospectus used in connection with such Registration
Statement, which prospectus is to be filed pursuant to Rule 424 promulgated
under the Securities Act, as may be necessary to keep such Registration
Statement effective at all times during the Registration Period, and, during
such period, comply with the provisions of the Securities Act with respect to
the disposition of all Registrable Securities of the Company covered by such
Registration Statement until such time as all of such Registrable Securities
shall have been disposed of in accordance with the intended methods of
disposition by the seller or sellers thereof as set forth in such Registration
Statement. In the case of amendments and supplements to a Registration Statement
that are required to be filed pursuant to this Agreement (including pursuant to
this Section 13(d)(ii)) by reason of the Company filing a report on Form 10-K,
Form 10-Q or Form 8-K or any analogous report under the Exchange Act, the
Company shall file such amendments or supplements with the SEC on the same day
on which the Exchange Act report is filed which created the requirement for the
Company to amend or supplement the Registration Statement.

     

              (iii) The Company shall (A) permit Legal Counsel to review and comment upon a
Registration Statement and all amendments and supplements to all Registration
Statements within a reasonable number of days prior to the their filing with the
SEC and (B) not file any document in a form to which Legal Counsel reasonably
objects. The Company shall not submit a request for acceleration of the
effectiveness of a Registration Statement or any amendment or supplement thereto
without the prior approval of Legal Counsel, which approval shall not be
unreasonably withheld or delayed. The
Company shall furnish to Legal Counsel, without charge, (A) any correspondence
from the SEC or the staff of the SEC to the Company or its representatives
relating to any Registration Statement, (B) promptly after the same is prepared
and filed with the SEC, one copy of any Registration Statement and any
amendment(s) thereto, including financial statements and schedules, all
documents incorporated therein by reference and all exhibits and (C) upon the
effectiveness of any Registration Statement, one copy of the Prospectus included
in such Registration Statement and all amendments and supplements thereto.


     

    9

     

    

    
    


              (iv) The Company shall furnish to each Holder whose Registrable Securities are
included in any Registration Statement, without charge, (A) promptly after the
same is prepared and filed with the SEC, at least one copy of such Registration
Statement and any amendment(s) thereto, including financial statements and
schedules, all documents incorporated therein by reference, all exhibits and
each preliminary Prospectus, (B) upon the effectiveness of any Registration
Statement, ten (10) copies of the Prospectus included in such Registration
Statement and all amendments and supplements thereto (or such other number of
copies as such Holder may reasonably request) and (C) such other documents,
including copies of any preliminary or final Prospectus, as such Holder may
reasonably request from time to time in order to facilitate the disposition of
the Registrable Securities owned by such Holder. 

     

              (v) The Company shall use reasonable efforts to (A) register and qualify the
Registrable Securities covered by a Registration Statement under such other
securities or "blue sky" laws of such jurisdictions in the United States as
Legal Counsel or any Holder reasonably requests, (B) prepare and file in those
jurisdictions, such amendments (including post-effective amendments) and
supplements to such registrations and qualifications as may be necessary to
maintain the effectiveness thereof during the Registration Period, (C) take such
other actions as may be necessary to maintain such registrations and
qualifications in effect at all times during the Registration Period, and (D)
take all other actions reasonably necessary or advisable to qualify the
Registrable Securities for sale in such jurisdictions; provided, however, that
the Company shall not be required in connection therewith or as a condition
thereto to (x) qualify to do business in any jurisdiction where it would not
otherwise be required to qualify but for this Section 13(d)(v), (y) subject
itself to general taxation in any such jurisdiction, or (z) file a general
consent to service of process in any such jurisdiction. The Company shall
promptly notify Legal Counsel and each Holder who holds Registrable Securities
of the receipt by the Company of any notification with respect to the suspension
of the registration or qualification of any of the Registrable Securities for
sale under the securities or "blue sky" laws of any jurisdiction in the United
States or its receipt of actual notice of the initiation or threatening of any
proceeding for such purpose. 

     

              (vi) In the event Holders who hold a majority
of the Registrable Securities being offered in the offering select underwriters
for the offering, the Company shall enter into and perform its obligations under
an underwriting agreement, in usual and customary form, including, without
limitation, customary indemnification and contribution obligations, with the
underwriters of such offering; provided, however, that the Company shall have the right to consent to
the selection of such underwriter, which consent shall not be unreasonably
withheld. 

     

    10

     

    

    
    


              (vii) As promptly as practicable after
becoming aware of such event, the Company shall notify Legal Counsel and each
Holder in writing of the happening of any event as a result of which the
Prospectus included in a Registration Statement, as then in effect, includes an
untrue statement of a material fact or omission to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading, and
promptly prepare a supplement or amendment to such Registration Statement to
correct such untrue statement or omission, and deliver ten (10) copies of such
supplement or amendment to Legal Counsel and each Holder (or such other number
of copies as Legal Counsel or such Holder may reasonably request). The Company
shall also promptly notify Legal Counsel and each Holder in writing (A) when a
Prospectus or any Prospectus supplement or post-effective amendment has been
filed, and when a Registration Statement or any post-effective amendment has
become effective (notification of such effectiveness shall be delivered to Legal
Counsel and each Holder by facsimile on the same day of such effectiveness and
by overnight mail), (B) of any request by the SEC for amendments or supplements
to a Registration Statement or related prospectus or related information, and
(C) of the Company's reasonable determination that a post-effective amendment to
a Registration Statement would be appropriate.

     

               (viii) The Company shall use its commercially
reasonable efforts to prevent the issuance of any stop order or other suspension
of effectiveness of a Registration Statement, or the suspension of the
qualification of any of the Registrable Securities for sale in any jurisdiction
and, if such an order or suspension is issued, to obtain the withdrawal of such
order or suspension at the earliest possible moment and to notify Legal Counsel
and each Holder who holds Registrable Securities being sold (and, in the event
of an underwritten offering, the managing underwriters) of the issuance of such
order and the resolution thereof or its receipt of actual notice of the
initiation or threat of any proceeding for such purpose. 

     

               (ix) At the request of any Holder, the
Company shall furnish to such Holder, on the date of the effectiveness of the
Registration Statement and thereafter from time to time on such dates as a
Holder may reasonably request (A) if required by an underwriter, a letter, dated
such date, from the Company's independent certified public accountants in form
and substance as is customarily given by independent certified public
accountants to underwriters in an underwritten public offering, addressed to the
underwriters, and (B) an opinion, dated as of such date, of counsel representing
the Company for purposes of such Registration Statement, in form, scope and
substance as is customarily given in an underwritten public offering, addressed
to the underwriters and the Holders. 

     

    11

     

    

    
    


               (x) The Company
shall make available for inspection by (A) any Holder, (B) Legal Counsel, (C)
any underwriter participating in any disposition pursuant to a Registration
Statement, (D) one firm of accountants or other agents retained by the
Holders and (E) one firm of attorneys retained by such underwriters
(collectively, the "Inspectors") all pertinent
financial and other records, and pertinent corporate documents and properties of
the Company (collectively, the "Records"), as shall be
reasonably deemed necessary by each Holder, and cause the Company's officers,
directors and employees to supply all information that any Inspector may
reasonably request; provided, however, that each Inspector shall hold in strict
confidence and shall not make any disclosure (except to a Holder) or use of any
Record or other information which the Company determines in good faith to be
confidential, and of which determination the Inspectors are so notified, unless
(i) the disclosure of such Records is necessary to avoid or correct a
misstatement or omission in any Registration Statement or is otherwise required
under the Securities Act, (ii) the release of such Records is ordered pursuant
to a final, non-appealable subpoena or order from a court or government body of
competent jurisdiction, or (iii) the information in such Records has been made
generally available to the public other than by disclosure in violation of this
or any other agreement of which the Inspector has knowledge. Each Holder agrees
that it shall, upon learning that disclosure of such Records is sought in or by
a court or governmental body of competent jurisdiction or through other means,
give prompt notice to the Company and allow the Company, at its expense, to
undertake appropriate action to prevent disclosure of, or to obtain a protective
order for, the Records deemed confidential. 

     

               (xi) The Company shall hold in confidence and not make any disclosure of
information concerning a Holder provided to the Company unless (A) disclosure of
such information is necessary to comply with federal or state securities laws,
(B) the disclosure of such information is necessary to avoid or correct a
misstatement or omission in any Registration Statement, (C) the release of such
information is ordered pursuant to a subpoena or other final, non-appealable
order from a court or governmental body of competent jurisdiction, or (iv) such
information has been made generally available to the public other than by
disclosure in violation of this Agreement or any other agreement. The Company
agrees that it shall, upon learning that disclosure of such information
concerning a Holder is sought in or by a court or governmental body of competent
jurisdiction or through other means, give prompt written notice to such Holder
and allow such Holder, at the Holder's expense, to undertake appropriate action
to prevent disclosure of, or to obtain a protective order for, such information.


     

              (xii) The Company shall use its commercially
reasonable efforts either to (A) cause all the Registrable Securities covered by
a Registration Statement to be listed on each securities exchange on which
securities of the same class or series issued by the Company are then listed, if
any, if the listing of such Registrable Securities is then permitted under the
rules of such exchange, or (B) secure the inclusion for quotation on the
over-the-counter market on the OTC Bulletin Board for such Registrable
Securities and, without limiting the generality of the foregoing, to arrange for
at least two market makers to register with the Financial Industry Regulatory
Authority (“FINRA”) as such with respect to such Registrable
Securities. The Company shall pay all fees and expenses in connection with
satisfying its obligation under this Section 13(d)(xii). 

     

    12

     

    

    
    


              (xiii) The Company shall cooperate with the
Holders who hold Registrable Securities being offered and, to the extent
applicable, any managing underwriter or underwriters, to facilitate the timely
preparation and delivery of certificates (not bearing any restrictive legend)
representing the Registrable Securities to be offered pursuant to a Registration
Statement and enable such certificates to be in such denominations or amounts,
as the case may be, as the managing underwriter or underwriters, if any, or, if
there is no managing underwriter or underwriters, the Holders may reasonably
request and registered in such names as the managing underwriter or
underwriters, if any, or the Holders may request. 

     

              (xiv) The Company shall provide a Transfer
Agent of all such Registrable Securities not later than the effective date of
such Registration Statement.

     

              (xv) If requested by the managing underwriters
or a Holder, the Company shall (A) promptly incorporate in a Prospectus
supplement or post-effective amendment such information as the managing
underwriters and the Holders agree should be included therein relating to the
sale and distribution of Registrable Securities, including, without limitation,
information with respect to the number of Registrable Securities being sold to
such underwriters, the purchase price being paid therefor by such underwriters
and any other terms of the underwritten (or best efforts underwritten) offering
of the Registrable Securities to be sold in such offering; (B) make all required
filings of such prospectus supplement or post-effective amendment as soon as
notified of the matters to be incorporated in such prospectus supplement or
post-effective amendment; and (C) supplement or make amendments to any
Registration Statement if requested by a Holder or any underwriter of such
Registrable Securities. 

     

              (xvi) The Company shall make generally
available to its security holders as soon as practical, but not later than 90
days after the close of the period covered thereby, an earnings statement (in
form complying with the provisions of Rule 158 under the Securities Act)
covering a twelve-month period beginning not later than the first day of the
Company's fiscal quarter next following the effective date of the Registration
Statement. 

     

              (xvii) The Company shall otherwise use its
commercially reasonable efforts to comply with all applicable rules and
regulations of the SEC in connection with any registration hereunder.


     

              (xviii) Within two (2) Business Days after a
Registration Statement which covers applicable Registrable Securities is ordered
effective by the SEC, the Company shall deliver, and shall cause legal counsel
for the Company to deliver, to the Transfer Agent for such Registrable
Securities (with copies to the Holders whose Registrable Securities are included
in such Registration Statement) confirmation that such Registration Statement
has been declared effective by the SEC. 

     

    13

     

    

    
    


              (xix)
Notwithstanding anything to the contrary in Section 13(d)(vii), at any time
after the Registration Statement has been declared effective, the Company may
delay the disclosure of material, non-public information concerning the
Company the disclosure of which at the time is not, in the good faith opinion of
the Board of Directors of the Company and its counsel, in the best interest of
the Company and, in the opinion of counsel to the Company, otherwise required (a
"Grace
Period"); provided, that the
Company shall promptly (A) notify the Holders in writing of the existence of
material, non-public information giving rise to a Grace Period and the date on
which the Grace Period will begin, and (B) notify the Holders in writing of the
date on which the Grace Period ends; and, provided further, that during any
consecutive 365 day period, there shall be only three Grace Periods, each such
Grace Period not to exceed 20 days each (an "Allowable Grace
Period"). For purposes of
determining the length of a Grace Period above, the Grace Period shall begin on
and include the date the Holders receive the notice referred to in clause (A)
above and shall end on and include the date the Holders receive the notice
referred to in clause (B) above. Upon expiration of an Allowable Grace Period,
the Company shall again be bound by the first sentence of Section 13(d)(vii)
with respect to the information giving rise thereto.

     

              (e)
The Holders shall have the following obligations with respect to each
Registration Statement: 

     

              (i) At least seven (7) Business Days prior to the first anticipated filing
date of a Registration Statement, the Company shall notify each Holder in
writing of the information the Company requires from each such Holder if such
Holder elects to have any of such Holder's Registrable Securities included in
such Registration Statement. It shall be a condition precedent to the
obligations of the Company to complete the registration pursuant to this Warrant
with respect to the Registrable Securities of a particular Holder that such
Holder shall furnish to the Company such information regarding itself, the
Registrable Securities held by it and the intended method of disposition of the
Registrable Securities held by it as shall be reasonably required to effect the
registration of such Registrable Securities and shall execute such documents in
connection with such registration as the Company may reasonably request.


     

              (ii) Each Holder by such Holder's acceptance of the Registrable Securities
agrees to cooperate with the Company as reasonably requested by the Company in
connection with the preparation and filing of any Registration Statement
hereunder, unless such Holder has notified the Company in writing of such
Holder's election to exclude all of such Holder's Registrable Securities from
such Registration Statement. 

     

              (iii) In the event any Holder elects to
participate in an underwritten public offering pursuant to Section 13(a), each
such Holder agrees to enter into and perform such Holder's obligations under an
underwriting agreement, in usual and customary form, including, without
limitation, customary indemnification and contribution obligations, with the
managing underwriter of such offering and take such other actions as are
reasonably required in order to expedite or facilitate the disposition of the
Registrable Securities. 

     

              (iv) Each Holder agrees that, upon receipt of
any notice from the Company of the happening of any event of the kind described
in Section 13(d)(viii) or the first sentence of Section 13(d)(vii), such Holder will immediately discontinue
disposition of Registrable Securities pursuant to any Registration Statement(s)
covering such Registrable Securities until such Holder's receipt of the copies
of the supplemented or amended prospectus contemplated by Section 13(d)(viii) or
the first sentence of 13(d)(vii). 

     

    14

     

    

    
    


              (v) No Holder may participate in any
underwritten Registration hereunder unless such Holder (A) agrees to sell such
Holder's Registrable Securities on the basis provided in any underwriting
arrangements approved by the Holders entitled hereunder to approve such
arrangements, (B) completes and executes all questionnaires, powers of attorney,
indemnities, underwriting agreements and other documents reasonably required
under the terms of such underwriting arrangements, and (C) agrees to pay its pro
rata share of all underwriting discounts and commissions. 

     

              (vi) Each Holder agrees not to take any action
to cause such Holder to become a registered broker dealer as defined under the
1934 Act or to effect any change to such Holder's status that would preclude the
Company from using Form S-3 for the Registration Statement. 

     

              (f) All reasonable expenses, other than
expenses incurred pursuant to Section 13(d)(x)(D) and (E) and underwriting
discounts and commissions, incurred in connection with registrations, filings or
qualifications pursuant to this Sections 13, including, without limitation, all
registration, listing and qualifications fees, printers and accounting fees, and
fees and disbursements of counsel for the Company and reasonable fees and
disbursements of Legal Counsel, shall be paid by the Company.

     

     

    15

     

    

    
    

     

    
                (g) In the event any Registrable Securities
are included in a Registration Statement under this Agreement: 

       

    

              (i) To the fullest extent permitted by law,
the Company will, and hereby does, indemnify, hold harmless and defend each
Holder who holds such Registrable Securities, the directors, officers, partners,
employees, agents, representatives of, and each Person, if any, who controls any
Holder within the meaning of the Securities Act or the Exchange Act, and any
underwriter (as defined in the Securities Act) for the Holders, and the
directors and officers of, and each Person, if any, who controls, any such
underwriter within the meaning of the Securities Act or the 1934 Act (each, an
"Indemnified Person"), against any losses, claims, damages,
liabilities, judgments, fines, penalties, charges, costs, attorneys' fees,
amounts paid in settlement or expenses, joint or several, (collectively,
"Claims") incurred in investigating, preparing or
defending any action, claim, suit, inquiry, proceeding, investigation or appeal
taken from the foregoing by or before any court or governmental, administrative
or other regulatory agency or body or the SEC, whether pending or threatened,
whether or not an indemnified party is or may be a party thereto ("Indemnified Damages"), to which any of them may become subject insofar as such Claims (or
actions or proceedings, whether commenced or threatened, in respect thereof)
arise out of or are based upon: (A) any untrue statement or alleged untrue
statement of a material fact in a Registration Statement or any post-effective
amendment thereto or in any
filing made in connection with the qualification of the offering under the
securities or other "blue sky" laws of any jurisdiction in which Registrable
Securities are offered ("Blue Sky Filing"),
or the omission or alleged omission to state a material fact required to be
stated therein or necessary to make the statements therein not misleading, (B)
any untrue statement or alleged untrue statement of a material fact contained in
any preliminary prospectus if used prior to the effective date of such
Registration Statement, or contained in the final prospectus (as amended or
supplemented, if the Company files any amendment thereof or supplement thereto
with the SEC) or the omission or alleged omission to state therein any material
fact necessary to make the statements made therein, in light of the
circumstances under which the statements therein were made, not misleading, (C)
any violation or alleged violation by the Company of the Securities Act, the
Exchange Act, any other law, including, without limitation, any state securities
law, or any rule or regulation thereunder relating to the offer or sale of the
Registrable Securities pursuant to a Registration Statement or (D) any material
violation of this Agreement (the matters in the foregoing clauses (A) through
(D) being, collectively, "Violations"). The
Company shall reimburse the Holders and each such underwriter or controlling
Person, promptly as such expenses are incurred and are due and payable, for any
legal fees or other reasonable expenses incurred by them in connection with
investigating or defending any such Claim. Notwithstanding anything to the
contrary contained herein, the indemnification agreement contained in this
Section 13(g): (A) shall not apply to a Claim by an Indemnified Person arising
out of or based upon a Violation which occurs in reliance upon and in conformity
with information furnished in writing to the Company by such Indemnified Person
or underwriter for such Indemnified Person expressly for use in connection with
the preparation of the Registration Statement or any such amendment thereof or
supplement thereto, if such Prospectus was timely made available by the Company
pursuant to Section 13(d)(iv); (B) with respect to any preliminary Prospectus,
shall not inure to the benefit of any such person from whom the person asserting
any such Claim purchased the Registrable Securities that are the subject thereof
(or to the benefit of any person controlling such Person) if the untrue
statement or omission of material fact contained in the preliminary Prospectus
was corrected in the Prospectus, as then amended or supplemented, if such
prospectus was timely made available by the Company pursuant to Section
13(d)(iv), and the Indemnified Person was promptly advised in writing not to use
the incorrect prospectus prior to the use giving rise to a violation and such
Indemnified Person, notwithstanding such advice, used it; (C) shall not be
available to the extent such Claim is based on a failure of the Holder to
deliver or to cause to be delivered the Prospectus made available by the
Company, if such Prospectus was timely made available by the Company pursuant to
Section 13(d)(iv); and (D) shall not apply to amounts paid in settlement of any
Claim if such settlement is effected without the prior written consent of the
Company, which consent shall not be unreasonably withheld. Such indemnity shall
remain in full force and effect regardless of any investigation made by or on
behalf of the Indemnified Person and shall survive the transfer of the
Registrable Securities by the Holders pursuant to Section 13(j). 

     

    16

     

    

    
    


              (ii)
In connection with any Registration Statement in which a Holder is
participating, each such Holder agrees to severally and not jointly indemnify,
hold harmless and defend, to the same extent and in the same manner as is set
forth in Section 13(g)(i), the Company, each of its directors, each of
its officers who signs the Registration Statement, each Person, if any, who
controls the Company within the meaning of the Securities Act or the Exchange
Act (each, an "Indemnified Party"), against any Claim or Indemnified Damages
to which any of them may become subject, under the Securities Act, the Exchange
Act or otherwise, insofar as such Claim or Indemnified Damages arise out of or
are based upon any Violation, in each case to the extent, and only to the
extent, that such Violation occurs in reliance upon and in conformity with
written information furnished to the Company by such Holder expressly for use in
connection with such Registration Statement; and, subject to Section 13(g)(iv),
such Holder will reimburse any legal or other expenses reasonably incurred by
them in connection with investigating or defending any such Claim; provided,
however, that the indemnity agreement contained in this Section 13(g)(ii) and
the agreement with respect to contribution contained in Section 13(h) shall not
apply to amounts paid in settlement of any Claim if such settlement is effected
without the prior written consent of such Holder, which consent shall not be
unreasonably withheld; provided, further, however, that the Holder shall be
liable under this Section 13(g)(ii) for only that amount of a Claim or
Indemnified Damages as does not exceed the net proceeds to such Holder as a
result of the sale of Registrable Securities pursuant to such Registration
Statement. Such indemnity shall remain in full force and effect regardless of
any investigation made by or on behalf of such Indemnified Party and shall
survive the transfer of the Registrable Securities by the Holders pursuant to
Section 13(j). Notwithstanding anything to the contrary contained herein, the
indemnification agreement contained in this Section 13(g)(ii) with respect to
any preliminary Prospectus shall not inure to the benefit of any Indemnified
Party if the untrue statement or omission of material fact contained in the
preliminary Prospectus was corrected on a timely basis in the Prospectus and
such Prospectus was provided to Holders as required, as then amended or
supplemented. 

     

              (iii) The Company shall be entitled to receive
indemnities from underwriters, selling brokers, dealer managers and similar
securities industry professionals participating in any distribution, to the same
extent as provided above, with respect to information such persons so furnished
in writing expressly for inclusion in the Registration Statement. 

     

    17

     

    

    
    


              (iv)
Promptly after receipt by an Indemnified Person or Indemnified Party under this
Section 13(g) of notice of the commencement of any action or proceeding
(including any governmental action or proceeding) involving a Claim, such
Indemnified Person or Indemnified Party shall, if a Claim in respect thereof is
to be made against any indemnifying party under this Section 13(g), deliver to
the indemnifying party a written notice of the commencement thereof, and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume control of the defense thereof with counsel
mutually satisfactory to the indemnifying party and the Indemnified Person or
the Indemnified Party, as the case may be; provided, however, that an
Indemnified Person or Indemnified Party shall have the right to retain its own
counsel with the fees and expenses to be paid by the indemnifying party, if, in
the reasonable opinion of counsel retained by the indemnifying party, the
representation by such counsel of the Indemnified Person or Indemnified
Party and the indemnifying party would be inappropriate due to actual or
potential differing interests between such Indemnified Person or Indemnified
Party and any other party represented by such counsel in such proceeding. The
Company shall pay reasonable fees for only one separate legal counsel for the
Holders, and such legal counsel shall be selected by the Holders holding a
majority in interest of the Registrable Securities included in the Registration
Statement to which the Claim relates. The Indemnified Party or Indemnified
Person shall cooperate fully with the indemnifying party in connection with any
negotiation or defense of any such action or claim by the indemnifying party and
shall furnish to the indemnifying party all information reasonably available to
the Indemnified Party or Indemnified Person which relates to such action or
claim. The indemnifying party shall keep the Indemnified Party or Indemnified
Person fully apprised at all times as to the status of the defense or any
settlement negotiations with respect thereto. No indemnifying party shall be
liable for any settlement of any action, claim or proceeding effected without
its written consent; provided, however, that the indemnifying party shall not
unreasonably withhold, delay or condition its consent. No indemnifying party
shall, without the consent of the Indemnified Party or Indemnified Person,
consent to entry of any judgment or enter into any settlement or other
compromise which does not include as an unconditional term thereof the giving by
the claimant or plaintiff to such Indemnified Party or Indemnified Person of a
release from all liability in respect to such claim or litigation. Following
indemnification as provided for hereunder, the indemnifying party shall be
subrogated to all rights of the Indemnified Party or Indemnified Person with
respect to all third parties, firms or corporations relating to the matter for
which indemnification has been made. The failure to deliver written notice to
the indemnifying party within a reasonable time of the commencement of any such
action shall not relieve such indemnifying party of any liability to the
Indemnified Person or Indemnified Party under this Section 13(g), except to the
extent that the indemnifying party is prejudiced in its ability to defend such
action. 

     

              (v) The indemnification required by this
Section 13(g) shall be made by periodic payments of the amount thereof during
the course of the investigation or defense, as and when bills are received or
Indemnified Damages are incurred. 

     

              (vi) The indemnity agreements contained herein
shall be in addition to (A) any cause of action or similar right of the
Indemnified Party or Indemnified Person against the indemnifying party or
others, and (B) any liabilities the indemnifying party may be subject to
pursuant to the law. 

     

              (h) To the extent any indemnification by an
indemnifying party is prohibited or limited by law, the indemnifying party
agrees to make the maximum contribution with respect to any amounts for which it
would otherwise be liable under Section 13(g) to the fullest extent permitted by
law; provided, however, that: (i) no seller of Registrable Securities guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any seller of Registrable
Securities who was not guilty of fraudulent misrepresentation; and (ii)
contribution by any seller of Registrable Securities shall be limited in amount
to the net amount of proceeds received by such seller from the sale of such
Registrable Securities. 

     

    18

     

    

    
    


              (i) With a view to making available to the
Holders the benefits of Rule 144 promulgated under the Securities Act or any
other similar rule or regulation of the SEC that may at any time permit the
Holders to sell securities of the Company to the public without registration
("Rule 144"), the
Company agrees to: 

     

         (i) make and keep public information available, as those terms are
understood and defined in Rule 144; 

     

         (ii) file with the SEC in a timely manner all reports and other documents
required of the Company under the Securities Act and the Exchange Act so long as
the Company remains subject to such requirements until the Holders may sell all
Registrable Securities without restriction under Rule 144, and the filing of
such reports and other documents is required for the applicable provisions of
Rule 144; and 

     

         (iii) furnish to each Holder so long as such Holder
owns Registrable Securities, promptly upon request, (A) a written statement by
the Company that it has complied with the reporting requirements of Rule 144,
the Securities Act and the Exchange Act, (B) a copy of the most recent annual or
quarterly report of the Company and such other reports and documents so filed by
the Company, and (C) such other information as may be reasonably requested to
permit the Holders to sell such securities pursuant to Rule 144 without
registration. 

     

              (j) The rights under this Agreement shall be
automatically assignable by the Holders to any transferee of all or any portion
of Registrable Securities if: (A) the Holder agrees in writing with the
transferee or assignee to assign such rights, and a copy of such agreement is
furnished to the Company within a reasonable time after such assignment; (B) the
Company is, within a reasonable time after such transfer or assignment,
furnished with written notice of (i) the name and address of such transferee or
assignee, and (ii) the securities with respect to which such registration rights
are being transferred or assigned; (C) immediately following such transfer or
assignment the further disposition of such securities by the transferee or
assignee is restricted under the Securities Act and applicable state securities
laws; (D) at or before the time the Company receives the written notice
contemplated by clause (E) of this sentence the transferee or assignee agrees in
writing with the Company to be bound by all of the provisions contained
herein.

     

         14. Notices. Any and all notices or other communications
or deliveries hereunder (including without limitation any Exercise Notice) shall
be in writing and shall be deemed given and effective on the earliest of (i) the
date of transmission, if such notice or communication is delivered via facsimile
at the facsimile number specified as provided in this Section prior to 5:00 p.m.
(New York City time) on a Trading Day, (ii) the next Trading Day after the date
of transmission, if such notice or communication is delivered via facsimile at
the facsimile number specified as provided in this Section on a day that is not
a Trading Day or later than 5:00 p.m. (New York City time) on any Trading Day,
(iii) the Trading Day following the date of mailing, if sent by nationally
recognized overnight courier service, or (iv) upon actual receipt by the party
to whom such notice is required to be
given. The address for such notices or communications shall be as set forth in
the Protective Rights Agreement. 

     

    19

     

    

    
    


         15. Warrant Agent. The Company shall serve as warrant agent
under this Warrant. Upon 30 days' notice to the Holder, the Company may appoint
a new warrant agent. Any corporation into which the Company or any new warrant
agent may be merged or any corporation resulting from any consolidation to which
the Company or any new warrant agent shall be a party or any corporation to
which the Company or any new warrant agent transfers substantially all of its
corporate trust or stockholders services business shall be a successor warrant
agent under this Warrant without any further act. Any such successor warrant
agent shall promptly cause notice of its succession as warrant agent to be
mailed (by first class mail, postage prepaid) to the Holder at the Holder's last
address as shown on the Warrant Register. 

     

         16. Miscellaneous. 

     

              (a) Subject to the restrictions on transfer set forth on the first page
hereof, this Warrant may be assigned by the Holder. This Warrant may not be
assigned by the Company except to a successor in the event of a Fundamental
Transaction. This Warrant shall be binding on and inure to the benefit of the
parties hereto and their respective successors and assigns. Subject to the
preceding sentence, nothing in this Warrant shall be construed to give to any
Person other than the Company and the Holder any legal or equitable right,
remedy or cause of action under this Warrant. This Warrant may be amended only
in writing signed by the Company and the Holder and their successors and
assigns. 

     

              (b) The Company will not, by amendment of its governing documents or through
any reorganization, transfer of assets, consolidation, merger, dissolution,
issue or sale of securities or any other voluntary action, avoid or seek to
avoid the observance or performance of any of the terms of this Warrant, but
will at all times in good faith assist in the carrying out of all such terms and
in the taking of all such action as may be necessary or appropriate in order to
protect the rights of the Holder against impairment. Without limiting the
generality of the foregoing, the Company (i) will not increase the par value of
any Warrant Shares above the amount payable therefor on such exercise, (ii) will
take all such action as may be reasonably necessary or appropriate in order that
the Company may validly and legally issue fully paid and nonassessable Warrant
Shares on the exercise of this Warrant, and (iii) will not close its stockholder
books or records in any manner which interferes with the timely exercise of this
Warrant. 

     

              (c) All questions concerning the construction, validity, enforcement and
interpretation of this warrant shall be governed by and construed and enforced
in accordance with the laws of the State of Delaware. 

     

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

     

    20

     

    

    
    


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


     

    Signature Page Follows 

     

    21

     

    

    
    


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

     

    
      	STRATASYS, INC.
	
            	 
	
            	 
	By:	
            
	Name:   	 
	Title:	 


    


    22

     

    

    
    


    FORM OF EXERCISE
NOTICE 

     

    (To be executed by
the Holder to exercise the right to purchase shares of Common Stock under the
foregoing Warrant) 

     

    To: STRATASYS, INC.


     

    The undersigned is
the Holder of Warrant No. _______ (the “Warrant”) issued by
Stratasys, Inc., a Delaware corporation (the “Company”).
Capitalized terms used herein and not otherwise defined have the respective
meanings set forth in the Warrant. 

     

    
      	1.	      	The Warrant is currently exercisable to purchase a total of
      ______________ Warrant Shares.
	 
	2.	
            	The undersigned Holder hereby exercises its right to purchase
      _________________ Warrant Shares pursuant to the Warrant.
	 
	3.	
            	The Holder intends that payment of the Exercise Price shall be made
      as (check one):


    
 

    
      	____     
      “Cash Exercise” under Section 10
	 
	____      “Cashless Exercise” under
      Section 10


    
 

    
      	4.	      	If the holder has elected a Cash Exercise, the holder shall pay the
      sum of $____________ to the Company in accordance with the terms of the
      Warrant.
	 
	5.	
            	Pursuant to this exercise, the Company shall deliver to the holder
      _______________ Warrant Shares in accordance with the terms of the
      Warrant.
	 
	6.	
            	Following this exercise, the Warrant shall be exercisable to
      purchase a total of ______________ Warrant
Shares.


    
 

    
      	Dated: ______________, _____	      	Name of Holder:	
            
	
            	
            	
            	 	
            
	
            	
            	
              (Print) 

            	 	
            
	
            	
            	 	 	
            
	
            	
            	
              By:

            	 	 
	
            	 	
              Name:   

            	
            	
            
	
            	
            	
              Title:

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


    


    

    
    


    FORM OF ASSIGNMENT


     

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

     

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

     

     

     

    Dated:
______________, _____

     

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


    


    In the presence of:


     

    _________________________