Document:

EMPLOYMENT AGREEMENT

Exhibit 10.3

SCHEDULE OF FORM FOR EMPLOYMENT AGREEMENT

					
	

Name

	

Position

	

Salary

	Working Time 

Devoted to Company

	

Vacation

Time

	Christian R. Larsen

	President

	$ 96,000

	100%

	4 weeks

	Kenneth W. Bell

	CEO

	$ 120,000

	80%

	4 weeks

	R. Brett Bell

	Vice-President of Finance

	$ 85,000

	100%

	3 weeks

EMPLOYMENT AGREEMENT

THIS EMPLOYMENT AGREEMENT (“Agreement”) is entered into as the 1st day of January 2008, by and between Pacific WebWorks, Inc. a Nevada corporation (“Employer”), and Christian R. Larsen (“Executive”).

For and in consideration of the mutual covenants contained herein and of the mutual benefits to be derived hereunder, the parties agree as follows:

1.  Employment. Employer hereby employs Executive to perform those duties generally described in this Agreement, and Executive hereby accepts and agrees to such employment on the terms and conditions hereinafter set forth.

2.  Term.  The term of this Agreement shall commence on January 1, 2008, and end on December 31, 2009.

3.  Duties.  During the term of this Agreement, Executive shall be employed by Employer and shall initially occupy the office of President of Employer.  Executive agrees to serve in such offices or positions with Employer, or any subsidiary of Employer, of substantially consistent rank and authority as shall, from time to time, be determined by Employer’s board of directors. Executive shall devote approximately one hundred (100%) of his working time and efforts to the business of Employer and its subsidiaries and shall not during the term of this Agreement be engaged in any other substantial business activities which will significantly interfere or conflict with the reasonable performance of his duties hereunder.

4.  Compensation.  For all services rendered by Executive, Employer shall pay to Executive a salary of $96,000.00 per year, in equal bi-monthly installments of $4,000.00 each.  All salary payments shall be subject to withholding and other applicable taxes.  To compensate for cost of living increases, the rate of salary shall be increased annually effective December 31, 2008 and on each anniversary thereafter, as the board of directors, on the recommendation of its compensation committee, may determine or, in the absence of such determination, in the amount of 6% over the applicable salary rate during the preceding 12-month period.  In the event Executive resigns from his position with Employer and not otherwise under the circumstances set forth at paragraphs 14 or 15 herein, compensation payments to Executive shall be limited to compensation for services rendered by Executive.

5.  Incentive Compensation.  Employer shall provide Executive with incentive compensation in the form of cash bonuses not less often than once each year during the term of this Agreement.  The amount of such bonuses shall be determined by the board of directors of Employer or a compensation committee thereof taking into consideration the relative contribution by Executive to the business of Employer, the economy in general, and such other factors as the board of directors or compensation committee deems relevant.

6.  Employment Benefits.  Employer shall provide health and medical insurance for Executive in a form and program to be chosen by Employer for its full-time employees.  Executive shall be entitled to participate in any retirement, pension, profit sharing, or other plan approved by the board of directors.

7.  Working Facilities.  Employer shall provide to Executive at Employer’s principal executive offices suitable executive offices and facilities appropriate for his position and suitable for the performance of his responsibilities.

8.  Vacations.  Executive shall be entitled each year to paid vacation of 4 weeks.  Vacation shall be taken by Executive at a time and with starting and ending dates mutually convenient to Employer and Executive.  Vacation or portions of vacations not used in one employment year shall expire if not used within such year.

9.  Expenses.  Employer will reimburse Executive for expenses incurred in connection  with Employer’s business, including expenses for travel, lodging, meals, beverages, entertainment, and other items upon Executive’s periodic presentation of an account of such expenses as required by Employer’s policies and procedures.

10.  Covenant not to disclose proprietary information.  For a period of two years after termination of executive’s employment, executive agrees that he will not directly or indirectly use, employ, publish or otherwise disclose any procedures, policies, practices, trade secrets, computer software, formulas, client opportunities or other information of a proprietary nature in the establishment, opening or operation of a business, or in connection with engaging in business with, serving as an officer, director, employee or agent of, or owning any equity interest (other than ownership of ten percent or less of the outstanding stock of any corporation listed on the New York or American Stock Exchange or included in the National Association of Security Dealers Automated Quotation System) in any person, firm, corporation or business entity, that engages in any activity in the United States or around the world that is the same as, similar to or competitive with development, implementation, or operation of an Internet software company.  The parties intend that this covenant not disclose proprietary information shall be construed as a series of separate covenants.  If in any judicial proceeding a court shall refuse to enforce any of the separate covenants deemed included in this paragraph, then the unenforceable covenants shall be deemed eliminated from these provisions for the purpose of those proceedings to the extent necessary to permit the remaining separate covenants to be enforced.  This covenant not to disclose proprietary information shall not be construed as restricting the executive’s right to own shares in any company or limited partnership or business entity or from participating in any way in the management of a business entity which competes in the manner outlined above, but rather it shall restrict the use of confidential information covered by this Agreement in the performance of these activities.

 

This covenant shall survive the termination of this Agreement.

11.  Nondisclosure of Information.  In further consideration of employment and the continuation of employment by Employer, Executive will not, directly or indirectly, during or after the term of employment disclose to any person not authorized by Employer to receive or use such information, except for the sole benefit of Employer, any of Employer’s confidential or proprietary data, information, or techniques, or give to any person not authorized by Employer to receive it any information that is not generally known to anyone other than Employer or that is designated by Employer as “Limited,” “Private,” or “Confidential,” or similarly designated.

12.  Disability.  If Executive is unable to perform his services by reason of illness or incapacity for a period of more than 9 consecutive months, the compensation thereafter payable to him during the second consecutive 9-month period shall be one-half of the compensation provided for in paragraph 4 hereof.  Notwithstanding the foregoing, if such illness or incapacity does not cease to exist within such 18-consecutive-month period, Executive shall not be entitled to receive any further compensation nor any payments set forth in paragraph 14 herein from Employer and Employer may thereupon terminate this Agreement.

13.  Termination for Cause.  Except as set forth in the foregoing paragraph, Employer may not terminate this Agreement during its term without cause (“Cause”). Employer, however, may terminate this Agreement for Cause by showing that Executive has materially breached its terms; that Executive, in the determination of the board has been grossly negligent in the performance of his duties; that he has substantially failed to meet written standards established by Employer for the performance of his duties; or that he has engaged in material willful or gross misconduct in the performance of his duties hereunder.  If Employer terminates this Agreement for Cause, all of Employer’s obligations hereunder shall terminate.

14.  Payments for Termination Without Cause.  In the event that Employer terminates this Agreement without Cause Executive shall be compensated by Employer in the same manner as described under Section 15 Termination Payment for Change in Control.  

In addition, Executive’s coverage under the Employer’s insured employee benefit plan, as provided in paragraph 6, shall continue through the term of this Agreement.

15.  Termination Payment for Change in Control.  If Executive resigns or is discharged by Employer (or is deemed to be discharged pursuant to paragraph 17 below) as the direct and sole result of a change in control, or in reasonable anticipation of a change in control, then, in lieu of any payment otherwise payable to Executive under paragraph 14 hereof, Employer shall pay to Executive an amount equal to 3.0 times the average of the sum of amounts paid to Executive for salary, bonus and profit sharing for the three fiscal years immediately preceding the date of the change in control or for such fewer fiscal years if Executive has been employed by Employer for less than five fiscal years.  Any amounts paid to Executive pursuant to this paragraph 15, shall be subject to 

any applicable federal, state and local tax withholdings and shall be payable in a lump

sum to Executive as soon as practicable after Executive’s resignation or discharge, but subject to the terms of paragraph 16 herein.

16.  Tax Limitation.  If Employer reasonably determines that the payment provided for in paragraph 15 hereof (the “Termination Payment”) will likely result in a loss of a deduction to Employer as provided under Section 180G of the Internal Revenue code of 1986, or any successor provision thereto, and the imposition of the excise tax payable by Executive as provided under Section 4999 of the Internal Revenue Code of 1986, or any successor provision thereto, such Termination Payment shall be reduced by the least amount required to avoid such loss of deduction and imposition of excise tax (collectively referred to hereinafter as the “Tax Penalties”).  Employer shall make no Termination Payment to Executive prior to determining whether the Tax Penalties will apply to the Termination Payment.  Employer shall make such determination within a reasonable time after Executive’s resignation or discharge, but not to exceed 90 days thereafter.

17.  Deemed Termination of Employment.  For purposes of paragraph 15 hereof, Executive shall be deemed to have been discharged by Employer if Executive voluntarily resigns before the end of the term of this Agreement, but after a change in control has occurred, provided that Executive could not be discharged by Employer for Cause, has given Employer at least 30 days prior written notice of such resignation, and such resignation occurs after any of the following:

Executive is removed or released from any of his titles, positions, or offices in effect immediately prior to the occurrence of a change in control, or Executive’s duties and responsibilities in such titles, positions or offices are materially changed; Executive’s base salary in effect immediately before the change in control is reduced; Executive is removed from participation in any of Employer’s bonus or profit sharing programs, or any such bonus of profit sharing programs in which Executive was or was entitled to participate in immediately prior to the change in control are discontinued; Executive’s office is based more than 50 miles from the location of the principle office at which Executive was based immediately prior to the occurrence of the change in control; or Employer deprives Executive of or otherwise reduces any material fringe benefit, including perquisites, provided to Executive by Employer immediately prior to the occurrence of a change in control.

18. Definition of Change in Control.  For purposes of this Agreement, a “change in control” will be deemed to have occurred on the first to occur of the following events:

As a result of a cash tender offer, stock exchange offer or other takeover device, any person, as that term is used in Section 13(d) and 14(b)(2) of the Securities Exchange Act of 1934, is or becomes a beneficial owner, directly or indirectly, of stock of Employer representing thirty percent (30%) or more of the total voting power of Employer’s then outstanding securities; 

Any material realignment of the Board of Directors of Employer or change in officers of Employer resulting from a concerted shareholder action, including without limitation a proxy fight, voting trusts or pooling arrangements;

Any sale of Employer of thirty percent (30%) or more of its assets to a single purchaser or to a group of associated purchasers; or

Any merger, consolidation or other reorganization of Employer with any entity, other than its affiliates, whereby Employer is not the surviving entity or the shareholders of Employer otherwise fail to retain substantially the same direct or indirect ownership in Employer or its affiliates immediately after any such merger, consolidation or reorganization.

19. Death During Employment.  If Executive dies during the term of this Agreement, Employer shall pay to the estate, trustee or other legally constituted third party designated by Executive in six equal monthly installments commencing on the first  day of the month immediately following the month in which Executive dies, an amount equal to one year'’ salary provided for in paragraph 4 of this Agreement, and payment of incentive compensation in the same proportion as Executive'’ incentive compensation to his annual salary set forth in paragraph 4 paid to Executive for the fiscal year last preceding the year in which Executive dies, but prorated for the number of full months of his employment during the year of his death.

 

20. Stock Registration Provisions.  During the term of this Agreement, Executive shall have the following rights and obligations with respect to registration under the Securities Act of 1933 and applicable blue sky laws of shares of common stock (“Shares”) of Employer owned of record by Executive:

Company Registration.  Employer shall notify Executive, at least thirty (30) days prior to the filing of any Registration Statement on forms S-1, S-2, S-3, S-8 or any successor forms under the Securities Act of 1933 covering any class of stock of the Employer and will upon the written request of Executive delivered at least fifteen (15) days prior to such filing, include in any such Registration Statement such information as may be required to register such number of Executive'’ Shares as Executive may request.  Executive and Employer shall each include customary representations, warranties, indemnification, and contribution provisions in any underwriting agreement entered into in connection with such registration.

If the managing underwriters for such registration advise Employer in writing that in their opinion the total amount of securities to be included in such registration statement exceeds the amount which should reasonably be included in that offering to achieve the Employer’s financing goals, Employer may limit the amount of stock to be included as follows:  (i) first, all securities Employer proposes to sell may be included, (ii) second, the Shares of common stock requested to be included in such registration by all executives and employees pursuant to registration by all executives and employees pursuant to registration rights may be reduced and adjusted among participating 

executives and employees on the basis of the amount of shares owned of record by each employee, and (iii) third, if applicable, other stock requested to be included in such registration may be similarly and ratably adjusted with all executives’ and employees’ on the basis of the amount of shares owned of record by each employee, and (iii) third, if applicable, other stock requested to be included in such registration may be similarly and ratably adjusted with all executives’ and employees’ stock pro rata according to the amount of stock owned of record by any proposed seller.  All incremental expenses of such registration will be allocated pro rata according to the number of shares included for Executive.  There shall be no limit on the number of registrations so requested, but each such request shall cover an amount of Shares having a proposed offering price of not less than one hundred thousand dollars ($100,000).

21.  Nontransferability.  Neither Executive, his spouse, his designated contingent beneficiary, nor their estates shall have any right to anticipate, encumber, or dispose of any payment due under the Agreement.  Such payments and other rights are expressly declared nonassignable and nontransferable except as specifically provided herein.

22.  Indemnification. Employer shall indemnify Executive and hold him harmless from liability for acts or decisions made by him while performing services for Employer to the greatest extent permitted by applicable law.  Employer shall use its best efforts to obtain coverage for Executive under any insurance policy now in force or hereafter obtained during the term of this Agreement insuring officers and directors of Employer against such liability.

23.  Assignment.  This Agreement may not be assigned by either party without the prior written consent of the other party.

 

24.  Entire Agreement.  This Agreement is and shall be considered to be the only agreement or understanding between the parties hereto and supersedes and is controlling over any and all other prior existing agreements between the parties with respect to the employment of Executive by Employer.  All negotiations, commitments, and understandings acceptable to both parties have been incorporated herein.  No letter, telegram, or communication passing between the parties hereto covering any matter during this contract period, or any plans or periods thereafter, shall be deemed a part of this Agreement; nor shall it have the effect of modifying or adding to this Agreement unless it is distinctly stated in such letter, telegram, or communication that it is to constitute a part of this Agreement and is to be attached as a rider to this Agreement and is signed by the parties to this Agreement.

25. Enforcement.  Executive acknowledges that any remedy at law for breach of paragraphs 10 and 11 would be inadequate, acknowledges that Employer would be irreparably damaged by an actual or threatened breach thereof, and agrees that Employer shall be entitled to an injunction restraining Executive from any actual or threatened breach of paragraphs 10 and 11 as well as any further appropriate equitable relief without any bond or other security being required.  In addition to the foregoing, each of the 

parties hereto shall be entitled to any remedies available in equity or by statute with respect to the breach of the terms of this Agreement by the other party.

26.  Governing Law.  This Agreement shall be governed by and interpreted in accordance with the laws of the State of Utah.

27.  Severability.  If and to the extent that any court of competent jurisdiction holds any provision or any part thereof of this Agreement to be invalid or unenforceable, such holding shall in no way affect the validity of the remainder of this Agreement.

28.  Waiver.  No failure by any party to insist upon the strict performance of any covenant, duty, agreement, or condition of this Agreement or to exercise any right or remedy consequent to a breach hereof shall constitute a waiver of any such breach or of any other covenant, agreement, term, or condition.

29. Litigation Expenses.  In the event that it shall be necessary or desirable for the Executive to retain legal counsel and/or incur other costs and expenses in connection with the enforcement of any and all of his rights under this Agreement, he shall be entitled to recover from the Employer reasonable attorney’s fees, costs and expenses incurred by him in connection with the enforcement of said rights.  Payment shall be made to the Executive by the Employer at the time these attorney’s fees, costs, and expenses are incurred by the Executive.  If, however, the Executive does not prevail in such enforcement actions, he shall repay any such payments to the Employer.

AGREED AND ENTERED INTO as of the date first above written.

PACIFIC WEBWORKS, INC. (“EMPLOYER”)

           

 By:

            

     /s/ Kenneth W. Bell         

 Chief Executive Officer 

  

EXECUTIVE:

 

/s/ Christian R. Larsen

Christian R. Larsenexv4w11

 

Exhibit 4.11

THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUED

UPON ITS EXERCISE ARE SUBJECT TO THE RESTRICTIONS ON

TRANSFER SET FORTH IN SECTION 5 OF THIS WARRANT 

			
	 	 	 
	Warrant No. R-2
	 	Number of Shares: 150,000
	 
	 	(subject to adjustment)

Date of Issuance: August 20, 2007

Original Issue Date (as defined in subsection

2(a)(I)(B)): August 20, 2007

WESTMORELAND COAL COMPANY

Common Stock Purchase Warrant

(Void after August 20, 2010)

     Westmoreland Coal Company, a Delaware corporation (the “Company”), for value received, hereby
certifies that SOF Investments, L.P., or its registered assigns (the “Registered Holder”), is
entitled, subject to the terms and conditions set forth below, to purchase from the Company, at any
time or from time to time on or after the date of issuance and on or before 5:00 p.m. (New York
City time) on August 20, 2010, 150,000 shares of common stock, $2.50 par value per share, of the
Company (“Common Stock”), at a purchase price of $25.00 per share. The shares purchasable upon
exercise of this Warrant, and the purchase price per share, each as adjusted from time to time
pursuant to the provisions of this Warrant, are hereinafter referred to as the “Warrant Shares” and
the “Purchase Price,” respectively.

     1. Exercise.

          (a) Exercise for Cash. The Registered Holder may, at its option, elect to exercise
this Warrant, in whole or in part and at any time or from time to time, by surrendering this
Warrant, with the purchase form appended hereto as Exhibit I duly executed by or on behalf
of the Registered Holder, at the principal office of the Company, or at such other office or agency
as the Company may designate, accompanied by payment in full, in lawful money of the United States,
of the Purchase Price payable in respect of the number of Warrant Shares purchased upon such
exercise.

          (b) Cashless Exercise.

               (i) The Registered Holder may, at its option, elect to exercise this Warrant, in whole or in
part and at any time or from time to time, on a cashless basis, by
surrendering this Warrant, with the purchase form appended hereto as Exhibit I duly
executed by or on behalf of the Registered Holder, at the principal office of the Company, or at
such other office or agency as the Company may designate, by canceling a portion of this Warrant in
payment of the Purchase Price payable in respect of the number of Warrant Shares purchased upon
such exercise. In the event of an exercise pursuant to this subsection 1(b), the number of

 

 

Warrant Shares issued to the Registered Holder shall be determined according to the following formula:

	 	 	 	 	 	 	 
	X

	 	=
	 	Y(A-B)
 

A
	 	 

	 	 	 	 	 	 	 
	Where:

	 	X
	 	=
	 	the number of Warrant Shares that shall be issued to the
Registered Holder;
	 
	 	 	 	 	 	 
	 

	 	Y
	 	=
	 	the number of Warrant Shares for which this Warrant is being exercised
(which shall include both the number of Warrant Shares issued to the Registered Holder
and the number of Warrant Shares subject to the portion of the Warrant being cancelled
in payment of the Purchase Price);
	 
	 	 	 	 	 	 
	 

	 	A
	 	=
	 	the Fair Market Value (as defined below) of one share of Common Stock; and
	 
	 	 	 	 	 	 
	 

	 	B
	 	=
	 	the Purchase Price then in effect.

               (ii) The Fair Market Value per share of Common Stock shall be determined as follows:

                    (A) If the Common Stock is listed on a national securities exchange, the Nasdaq National
Market or another nationally recognized trading system as of the Exercise Date, the Fair Market
Value per share of Common Stock shall be deemed to be the average (weighted by daily trading
volume) of the Daily Prices per share of the Common Stock for the 20 consecutive trading days
ending on the trading day immediately preceding the Exercise Date. “Daily Price” means (1) if the
shares of Common Stock then are listed and traded on the New York Stock Exchange, Inc. (“NYSE”),
the closing price on such day as reported on the NYSE Composite Transactions Tape, (2) if the
shares of Common Stock then are not listed and traded on the NYSE, the closing price on such day as
reported by the principal national securities exchange on which the shares are listed and traded,
(3) if the shares of Common Stock then are not listed and traded on any such securities exchange,
the last reported sale price on such day on the National Market of the National Association of
Securities Dealers, Inc. Automated Quotation System (“NASDAQ National Market”), (4) if the shares
of Common Stock then are not listed and traded on any such securities exchange and not traded on
the NASDAQ National Market, the average of the highest reported bid and lowest reported asked price
on such day as reported by NASDAQ or (5) if such shares are not listed and traded on any such
securities exchange, not traded on the NASDAQ National Market and bid and asked prices are not
reported by NASDAQ, the average of the closing bid and asked prices, as reported by The Wall Street
Journal for the over-the-counter market.

                    (B) If on any determination date the shares of Common Stock
are not quoted by any such organization, then the Daily Price shall be the fair market value
of such shares on such determination date as determined in good faith by the Company’s Board of
Directors (the “Board”), subject to the objection of the Registered Holder pursuant to Section
2(j).

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          (c) Exercise Date. Each exercise of this Warrant shall be deemed to have been
effected immediately prior to the close of business on the day on which this Warrant shall have
been surrendered to the Company as provided in subsection 1(a) or 1(b) above (the “Exercise Date”).
At such time, the person or persons in whose name or names any certificates for Warrant Shares
shall be issuable upon such exercise as provided in subsection 1(d) below shall be deemed to have
become the holder or holders of record of the Warrant Shares represented by such certificates.

          (d) Issuance of Certificates. As soon as practicable after the exercise of this
Warrant in whole or in part, and in any event within 10 days thereafter, the Company, at its
expense, will cause to be issued in the name of, and delivered to, the Registered Holder, or as the
Registered Holder (upon payment by the Registered Holder of any applicable transfer taxes) may
direct:

               (i) a certificate or certificates for the number of full Warrant Shares to which the
Registered Holder shall be entitled upon such exercise plus, in lieu of any fractional share to
which the Registered Holder would otherwise be entitled, cash in an amount determined pursuant to
Section 3 hereof; and

               (ii) in case such exercise is in part only, a new warrant or warrants (dated the date hereof)
of like tenor, calling in the aggregate on the face or faces thereof for the number of Warrant
Shares equal (without giving effect to any adjustment therein) to the number of such shares called
for on the face of this Warrant, less the percentage of Warrant Shares for which this Warrant was
so exercised (which, in the case of an exercise pursuant to subsection 1(b), shall include both the
Warrant Shares issued to the Registered Holder pursuant to such partial exercise and the Warrant
Shares subject to the portion of the Warrant being cancelled in payment of the Purchase Price).

          (e) Stamp Taxes. The Company shall pay any and all stamp taxes attributable to the
issuance of Warrant Shares or other securities issuable upon the exercise of this Warrant or
issuable pursuant to Section 2 of this Warrant.

     2. Adjustments.

          (a) Adjustments to Purchase Price for Diluting Issues.

               (i) Special Definitions. For purposes of this Section 2, the following definitions
shall apply:

                    (A) “Option” shall mean rights (including stock appreciation rights), options or
warrants to subscribe for, purchase or otherwise acquire Common Stock or Convertible Securities.

                    (B) “Original Issue Date” shall mean the date on which this
Warrant was first issued (or, if this Warrant was issued upon partial exercise of, or in
replacement of, another warrant of like tenor, then the date on which such original warrant was
first issued).

-3-

 

                    (C) “Convertible Securities” shall mean any evidences of indebtedness, shares or other
securities directly or indirectly convertible into or exchangeable for Common Stock, but excluding
Options. For the avoidance of doubt, and without limiting the generality of securities that are
Convertible Securities, the Company’s Series A Convertible Exchangeable Preferred Stock, and the
Depositary Shares representing the Series A Convertible Exchangeable Preferred Stock, are
Convertible Securities

                    (D) “Additional Shares of Common Stock” shall mean all shares of Common Stock issued
(or, pursuant to subsection 2(a)(iii) below, deemed to be issued) by the Company after the Original
Issue Date (including any shares of Common Stock owned or held by or for the account of the Company
or any of its Subsidiaries prior to such issuance or deemed issuance), other than:

	 	(I)	 	shares of Common
Stock issued or issuable upon conversion or exchange of
any Convertible Securities or exercise or settlement of
any Options outstanding on the Original Issue Date
pursuant to the terms in place on the Original Issue
Date, without giving effect to any amendments on or
after the Original Issue Date;
	 
	 	(II)	 	shares of Common
Stock issued or issuable by reason of a dividend, stock
split, split-up or other distribution on shares of
Common Stock that is covered by subsection 2(b) or 2(c)
below; or
	 
	 	(III)	 	shares of Common
Stock (or Options with respect thereto) issued or
issuable to employees or directors of, or consultants
to, the Company or any of its subsidiaries pursuant to a
plan, agreement or arrangement approved by the Board and
the stockholders of the Company.

               (ii) No Adjustment of Purchase Price. No adjustment to the Purchase Price shall be
made as the result of the issuance of Additional Shares of Common Stock if the consideration per
share (determined pursuant to subsection 2(a)(v)) for such Additional Shares of Common Stock issued
or deemed to be issued by the Company is equal to or greater than the greater of (A) the Purchase
Price in effect immediately prior to the issuance or deemed issuance of such Additional Shares of
Common Stock or (B) the Fair Market Value of the Common Stock in effect immediately prior to the
issuance or deemed issuance of such Additional Shares of Common Stock.

               (iii)  Issue of Securities Deemed Issue of Additional Shares of Common Stock.

                    (A) If the Company at any time or from time to time after the Original Issue Date shall issue
any Options or Convertible Securities (excluding Options or Convertible Securities which, upon
exercise, settlement, conversion or exchange thereof, would

-4-

 

entitle the holder thereof to receive shares of Common Stock that are specifically excepted
from the definition of Additional Shares of Common Stock by subsection 2(a)(i)(D) above) or shall
fix a record date for the determination of holders of any class of securities entitled to receive
any such Options or Convertible Securities, then the maximum number of shares of Common Stock (as
set forth in the instrument relating thereto without regard to any provision contained therein for
a subsequent adjustment of such number) issuable upon the exercise or settlement of such Options
or, in the case of Convertible Securities and Options therefor, the conversion or exchange of such
Convertible Securities, shall be deemed to be Additional Shares of Common Stock issued as of the
time of such issue or, in case such a record date shall have been fixed, as of the close of
business on such record date.

                    (B) If the terms of any Option or Convertible Security, the issuance of which resulted in an
adjustment to the Purchase Price pursuant to the terms of subsection 2(a)(iv) below, are revised
(either automatically pursuant to the provisions contained therein or as a result of an amendment
to such terms) to provide for either (1) any increase or decrease in the number of shares of Common
Stock issuable upon the exercise, settlement, conversion or exchange of any such Option or
Convertible Security or (2) any increase or decrease in the consideration payable to the Company
upon such exercise, settlement, conversion or exchange, then, effective upon such increase or
decrease becoming effective, the Purchase Price computed upon the original issue of such Option or
Convertible Security (or upon the occurrence of a record date with respect thereto) shall be
readjusted to such Purchase Price as would have obtained had such revised terms been in effect upon
the original date of issuance of such Option or Convertible Security. Notwithstanding the
foregoing, no adjustment pursuant to this clause (B) shall have the effect of increasing the
Purchase Price to an amount which exceeds the lower of (i) the Purchase Price on the original
adjustment date, or (ii) the Purchase Price that would have resulted from any issuances of
Additional Shares of Common Stock between the original adjustment date and such readjustment date.

                    (C) If the terms of any Option or Convertible Security issued after the Original Issue Date
(excluding Options or Convertible Securities which, upon exercise, settlement, conversion or
exchange thereof, would entitle the holder thereof to receive shares of Common Stock that are
specifically excepted from the definition of Additional Shares of Common Stock by subsection
2(a)(i)(D) above), the issuance of which did not result in an adjustment to the Purchase Price
pursuant to the terms of subsection 2(a)(iv) below because the consideration per share (determined
pursuant to subsection 2(a)(v) hereof) of the Additional Shares of Common Stock subject thereto was
equal to or greater than the greater of (I) the Purchase Price or (II) the Fair Market Value then
in effect, are revised after the Original Issue Date (either automatically pursuant the provisions
contained therein or as a result of an amendment to such terms) to provide for either (1) any
increase or decrease in the number of shares of Common Stock issuable upon the exercise,
settlement, conversion or exchange of any such Option or Convertible Security or (2) any increase
or decrease in the consideration payable to the Company upon such exercise, settlement, conversion
or exchange, then such Option or Convertible Security, as so amended, and the Additional Shares of
Common Stock subject thereto (determined in the manner provided in subsection 2(a)(iii)(A) above)
shall be deemed to have been issued effective upon such increase or decrease becoming effective.

                    (D) Upon the expiration or termination of any unexercised or expired Option or unconverted or
unexchanged (as applicable) Convertible Security which

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resulted (either upon its original issuance or upon a revision of its terms) in an adjustment
to the Purchase Price pursuant to the terms of subsection 2(a)(iv) below then, to the extent such
Option or Convertible Security has not been exercised,, the Purchase Price shall be readjusted to
such Purchase Price as would have obtained had such Option or Convertible Security never been
issued.

                    (E) No adjustment in the Purchase Price shall be made upon the issue of shares of Common Stock
or Convertible Securities upon the exercise or settlement of Options or the issue of shares of
Common Stock upon the conversion or exchange of Convertible Securities.

               (iv) Adjustment of Purchase Price Upon Issuance of Additional Shares of Common Stock.
In the event the Company shall at any time after the Original Issue Date issue Additional Shares of
Common Stock (including Additional Shares of Common Stock deemed to be issued pursuant to
subsection 2(a)(iii)), without consideration or for a consideration per share less than the greater
of (A) the Purchase Price or (B) the Fair Market Value in effect immediately prior to such issue,
then the Purchase Price shall be reduced, concurrently with such issue, to a price (calculated to
the nearest cent) determined by multiplying such Purchase Price by a fraction, (A) the numerator of
which shall be (1) the number of shares of Common Stock outstanding immediately prior to such issue
plus (2) the number of shares of Common Stock which the aggregate consideration received or to be
received by the Company for the total number of Additional Shares of Common Stock so issued would
purchase at such Fair Market Value; and (B) the denominator of which shall be (1) the number of
shares of Common Stock outstanding immediately prior to such issue plus (2) the number of such
Additional Shares of Common Stock so issued; provided that, (i) for the purpose of this
subsection 2(a)(iv), all shares of Common Stock issuable upon exercise of incentive stock options
and non-qualified stock options and all shares of Common Stock issuable upon conversion or exchange
of Convertible Securities outstanding immediately prior to such issue shall be deemed to be
outstanding, and (ii) the number of shares of Common Stock deemed issuable upon conversion or
exchange of such outstanding Convertible Securities shall be determined after giving effect to any
adjustments to the conversion or exchange price or conversion or exchange rate of such Convertible
Securities resulting from the issuance of Additional Shares of Common Stock that is the subject of
this calculation.

               (v) Determination of Consideration. For purposes of this subsection 2(a), the
consideration received by the Company for the issue of any Additional Shares of Common Stock shall
be computed as follows:

                    (A) Cash and Property: Such consideration shall:

	 	(I)	 	insofar as it
consists of cash, be computed at the aggregate of cash
received by the Company, excluding amounts paid or
payable for accrued interest; and
	 
	 	(II)	 	insofar as it
consists of property other than cash (“Non-Cash
Consideration”), be computed at the

-6-

 

	 	 	 	fair market value thereof at the time of such issue;
and
	 
	 	(III)	 	in the event
Additional Shares of Common Stock are issued together
with other shares or securities or other assets of the
Company for consideration which covers both, be the
proportion of such consideration so received, computed
as provided in clauses (I) and (II) above.

                    (B) Options and Convertible Securities. The consideration per share received by the
Company for Additional Shares of Common Stock deemed to have been issued pursuant to subsection
2(a)(iii), relating to Options and Convertible Securities, shall be determined by dividing

	 	(I)	 	the total amount,
if any, received or receivable by the Company as
consideration for the issue of such Options or
Convertible Securities, plus the minimum aggregate
amount of additional consideration (as set forth in the
instruments relating thereto, without regard to any
provision contained therein for a subsequent adjustment
of such consideration) payable to the Company upon the
exercise or settlement of such Options or the conversion
or exchange of such Convertible Securities, or in the
case of Options for Convertible Securities, the exercise
or settlement of such Options for Convertible Securities
and the conversion or exchange of such Convertible
Securities, by
	 
	 	(II)	 	the maximum
number of shares of Common Stock (as set forth in the
instruments relating thereto, without regard to any
provision contained therein for a subsequent adjustment
of such number) issuable upon the exercise or settlement
of such Options or the conversion or exchange of such
Convertible Securities.

               (vi) Multiple Closing Dates. In the event the Company shall issue on more than one
date Additional Shares of Common Stock that are comprised of shares of the same series or class of
Preferred Stock, and such issuance dates occur within a period of no more than 120 days, then, upon
the final such issuance, the Purchase Price shall be readjusted to give effect to all such
issuances as if they occurred on the date of the final such issuance (and without giving effect to
any adjustments as a result of such prior issuances within such period).

          (b) Adjustment for Stock Splits and Combinations. If the Company shall at any time or
from time to time after the Original Issue Date effect a subdivision of the outstanding

-7-

 

Common Stock, the Purchase Price then in effect immediately before that subdivision shall be
proportionately decreased. If the Company shall at any time or from time to time after the
Original Issue Date combine the outstanding shares of Common Stock, the Purchase Price then in
effect immediately before the combination shall be proportionately increased. Any adjustment under
this paragraph shall become effective at the close of business on the date the subdivision or
combination becomes effective.

          (c) Adjustment for Certain Dividends and Distributions. In the event the Company at
any time, or from time to time after the Original Issue Date shall make or issue, or fix a record
date for the determination of holders of Common Stock entitled to receive, a dividend or other
distribution payable in additional shares of Common Stock, then and in each such event the Purchase
Price then in effect immediately before such event shall be decreased as of the time of such
issuance or, in the event such a record date shall have been fixed, as of the close of business on
such record date, by multiplying the Purchase Price then in effect by a fraction:

                    (A) the numerator of which shall be the total number of shares of Common Stock issued and
outstanding immediately prior to the time of such issuance or the close of business on such record
date, and

                    (B) the denominator of which shall be the total number of shares of Common Stock issued and
outstanding immediately prior to the time of such issuance or the close of business on such record
date plus the number of shares of Common Stock issuable in payment of such dividend or
distribution;

provided, however, that if such record date shall have been fixed and such dividend
is not fully paid or if such distribution is not fully made on the date fixed therefor, the
Purchase Price shall be recomputed accordingly as of the close of business on such record date and
thereafter the Purchase Price shall be adjusted pursuant to this paragraph as of the time of actual
payment of such dividends or distributions.

          (d) Adjustment in Number of Warrant Shares. When any adjustment is required to be
made in the Purchase Price pursuant to subsections 2(a), 2(b), 2(c) or 2(e), the number of Warrant
Shares purchasable upon the exercise of this Warrant shall be changed to the number determined by
dividing (i) an amount equal to the number of shares issuable upon the exercise of this Warrant
immediately prior to such adjustment, multiplied by the Purchase Price in effect immediately prior
to such adjustment, by (ii) the Purchase Price in effect immediately after such adjustment.

          (e) Adjustment for Repurchases of Common Stock, Convertible Securities, Warrants and
Options. If at any time or from time to time the Company shall repurchase, redeem, retire or
otherwise acquire Common Stock (a “Redemption”) for a consideration per share for such outstanding
share of Common Stock greater than the Fair Market Value per share as of the date of such
Redemption, then the Purchase Price in effect immediately prior to such Redemption shall be
adjusted by multiplying (A) the Purchase Price in effect immediately prior to such Redemption by
(B) a fraction, the numerator of which shall be the number obtained by subtracting (x) the
aggregate consideration paid by the Company in connection with such Redemption from (y) the product
of the Fair Market Value per share effective on the date of the

-8-

 

Redemption and the number of outstanding shares of Common Stock immediately prior to the
Redemption, and the denominator of which shall be the product of the Fair Market Value per share
effective on the date of the Redemption and number of outstanding shares of Common Stock
immediately after such Redemption.

          (f) Adjustments for Other Dividends and Distributions. In the event the Company at
any time or from time to time after the Original Issue Date shall make or issue, or fix a record
date for the determination of holders of Common Stock entitled to receive, a dividend or other
distribution payable in securities of the Company (other than shares of Common Stock) or in cash or
other property (other than regular cash dividends paid out of earnings or earned surplus,
determined in accordance with generally accepted accounting principles, and specifically excluding
any special dividends or cash dividends in an annualized amount in excess of five percent of the
Fair Market Value of a share of Common Stock), then and in each such event provision shall be made
so that the Registered Holder shall receive upon exercise hereof, in addition to the number of
shares of Common Stock issuable hereunder, the kind and amount of securities of the Company, cash
or other property which the Registered Holder would have been entitled to receive had this Warrant
been exercised on the date of such event and had the Registered Holder thereafter, during the
period from the date of such event to and including the Exercise Date, retained any such securities
receivable during such period, giving application to all adjustments called for during such period
under this Section 2 with respect to the rights of the Registered Holder.

          (g) Adjustment for Reorganization. If there shall occur any reorganization,
recapitalization, reclassification, consolidation or merger involving the Company in which the
Common Stock is converted into or exchanged for securities, cash or other property (other than a
transaction covered by subsections 2(b), 2(c) or 2(e)) (collectively, a “Reorganization”), then,
following such Reorganization, the Registered Holder shall receive upon exercise hereof the kind
and amount of securities, cash or other property which the Registered Holder would have been
entitled to receive pursuant to such Reorganization if such exercise had taken place immediately
prior to such Reorganization. In any such case, appropriate adjustment (as determined in good
faith by the Board acting reasonably) shall be made in the application of the provisions set forth
herein with respect to the rights and interests thereafter of the Registered Holder, to the end
that the provisions set forth in this Section 2 (including provisions with respect to changes in
and other adjustments of the Purchase Price) shall thereafter be applicable, as nearly as
reasonably may be, in relation to any securities, cash or other property thereafter deliverable
upon the exercise of this Warrant.

          (h) Other Action Affecting Common Stock. In case at any time or from time to time the
Company shall take any action affecting or relating to its Common Stock of the type contemplated by
Section 2 hereof or otherwise similar to the type of events contemplated by Section 2 hereof, but
not expressly provided for by such Section, then, unless in the good faith opinion of the Board,
such action will not have an adverse effect upon the rights of the Registered Holder (taking into
account the cumulative or other effect of any prior actions which the Board deemed not to adversely
affect the rights of the Registered Holder), the Purchase Price and the number of Warrant Shares
purchasable upon the exercise of this Warrant shall be adjusted in such manner and at such time as
the Board may in good faith determine to be equitable under the circumstances.

-9-

 

          (i) Certificate as to Adjustments. Upon the occurrence of each adjustment or
readjustment of the Purchase Price pursuant to this Section 2, the Company at its expense shall, as
promptly as reasonably practicable but in any event not later than 10 days thereafter, compute such
adjustment or readjustment in accordance with the terms hereof and furnish to the Registered Holder
a certificate setting forth such adjustment or readjustment (including the kind and amount of
securities, cash or other property for which this Warrant shall be exercisable and the Purchase
Price) and showing in detail the facts upon which such adjustment or readjustment is based. The
Company shall, as promptly as reasonably practicable after the written request at any time of the
Registered Holder (but in any event not later than 10 days thereafter), furnish or cause to be
furnished to the Registered Holder a certificate setting forth (i) the Purchase Price then in
effect and (ii) the number of shares of Common Stock and the amount, if any, of other securities,
cash or property which then would be received upon the exercise of this Warrant.

          (j) Notice of Proposed Transaction, Fair Marker Value per Share and Fair Market Value of
Non-Cash Consideration. At least twenty (20) Business Days, but not more than sixty (60)
Business Days, before taking any binding action that would require that the Purchase Price be
adjusted under this Section 2 hereof, the Company shall give the Registered Holder written notice
of the proposed transaction, the amount of the Fair Market Value per share and the amount of the
fair market value of any Non-Cash Consideration involved in the transaction as determined by the
Board of Directors of the Company (including the basis therefor), which Fair Market Value per share
and/or fair market value of Non-Cash Consideration shall be binding on the Registered Holder unless
it objects thereto within fifteen (15) Business Days of receipt of the Company’s notice. In the
event the Company and the Registered Holder cannot agree to the amount of the Fair Market Value per
share or the fair market value of the Non-Cash Consideration within fifteen (15) Business Days of
the date of the Registered Holder’s objection, the disputed amount shall be determined by a
national or regional investment bank or a national accounting firm mutually selected by the
Registered Holder and the Company, the fees and expenses of which shall be borne equally by the
Company and the Registered Holder. Notwithstanding anything to the contrary set forth in this
paragraph, the Company shall not be required to give the notice described in the first sentence of
this paragraph unless the Registered Holder signs a customary confidentiality agreement pursuant to
which it agrees to maintain the confidentiality of material, non-public information until such time
as the Company publicly discloses such information.

     3. Fractional Shares. The Company shall not be required upon the exercise of this
Warrant to issue any fractional shares, but shall pay the value thereof to the Registered Holder in
cash on the basis of the Fair Market Value per share of Common Stock, as determined pursuant to
subsection 1(b)(ii) above. Fractional shares will, however, be taken into account for purposes of
adjustments.

     4. Investment Representations. The initial Registered Holder represents and warrants
to the Company as follows:

          (a) Investment. It is acquiring the Warrant, and (if and when it exercises this
Warrant) it will acquire the Warrant Shares, for its own account for investment and not with a view
to, or for sale in connection with, any distribution thereof, nor with any present intention of
distributing or selling the same; and the Registered Holder has no present or contemplated

-10-

 

agreement, undertaking, arrangement, obligation, indebtedness or commitment providing for the
disposition thereof.

          (b) Accredited Investor. The Registered Holder is an “accredited investor” as defined
in Rule 501(a) under the Securities Act of 1933, as amended (the “Act”).

          (c) Experience. The Registered Holder has made such inquiry concerning the Company
and its business and personnel as it has deemed appropriate; and the Registered Holder has
sufficient knowledge and experience in finance and business that it is capable of evaluating the
risks and merits of its investment in the Company.

     5. Transfers, etc.

          (a) This Warrant and the Warrant Shares shall not be sold or transferred unless either (i)
they first shall have been registered under the Act, or (ii) the Company first shall have been
furnished with an opinion of legal counsel, reasonably satisfactory to the Company, to the effect
that such sale or transfer is exempt from the registration requirements of the Act.
Notwithstanding the foregoing, no registration or opinion of counsel shall be required for (i) any
transfer by a Registered Holder which is an entity to any other entity controlling, controlled by
or under common control with such entity (as used in this sentence, the term “control,” including
the correlative terms “controlling,” “controlled by” and “under common control with,” means the
possession, directly or indirectly, of the power to direct or cause the direction of the management
or policies of an entity, whether through ownership of voting securities, by contract or otherwise)
a transfer by a Registered Holder which is a partnership to a partner of such partnership or a
retired partner of such partnership or to the estate of any such partner or retired partner, or a
transfer by a Registered Holder which is a limited liability company to a member of such limited
liability company or a retired member or to the estate of any such member or retired member,
provided that the transferee in each case agrees in writing to be subject to the terms of
this Section 5, or (ii) a transfer made in accordance with Rule 144 under the Act.

          (b) Each certificate representing Warrant Shares shall bear a legend substantially in the
following form:

“The securities represented by this certificate have not
been registered under the Securities Act of 1933, as
amended, and may not be offered, sold or otherwise
transferred, pledged or hypothecated unless and until such
securities are registered under such Act or an opinion of
counsel satisfactory to the Company is obtained to the
effect that such registration is not required.”

The foregoing legend shall be removed from the certificates representing any Warrant Shares, at the
request of the holder thereof, at such time as they become eligible for resale pursuant to Rule
144(k) under the Act.

          (c) The Company will maintain a register containing the name and address of the Registered
Holder of this Warrant. The Registered Holder may change its address as shown on the warrant
register by written notice to the Company requesting such change.

-11-

 

          (d) Subject to the provisions of Section 5 hereof, this Warrant and all rights hereunder are
transferable, in whole or in part, upon surrender of this Warrant with a properly executed
assignment (in the form of Exhibit II hereto) at the principal office of the Company (or,
if another office or agency has been designated by the Company for such purpose, then at such other
office or agency).

     6. Affirmative Actions to Permit Exercise and Realization of Benefits. If any Warrant
Shares reserved or to be reserved for the purpose of the exercise of this Warrant, or any other
securities reserved or to be reserved for the purpose of issuance pursuant to Section 2 hereof,
require registration with or approval of any governmental authority under any federal or state law
before such Warrant Shares or other securities may be validly delivered upon exercise of this
Warrant, then in such case, the Company covenants that it will to such extent, at its sole expense,
use its best efforts to secure such registration or approval, as the case may be (including but not
limited to approvals or expirations of waiting periods required under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended and registration under the Securities Act of 1933).

     7. Listing of Company Securities. The Company covenants that from and after such time
as the Common Stock or any other Company securities (or any securities of any successor to the
Company) are listed on any national securities exchange or automated quotation system and for so
long as the Common Stock or such other Company securities (or any securities of any successor to
the Company) shall remain so listed, the Company (or its successor) will, if permitted by the rules
of such exchange or such system, list and keep listed on each such exchange or system, upon
official notice of issuance, all Warrant Shares (or other securities) issuable upon exercise of
this Warrant and all other securities issuable pursuant to Section 7 hereof.

     8. Validly Issued Shares of Common Stock. The Company covenants that all Warrant
Shares (or other securities) that may be delivered upon exercise of this Warrant (including those
issued pursuant to Section 2 hereof) shall upon delivery by the Company, and payment of the
Purchase Price therefor by the Registered Holder, be duly authorized and validly issued, fully paid
and nonassessable, free from all taxes, liens and charges with respect to the issue or delivery
thereof and otherwise free of all other security interests, encumbrances and claims of any nature
whatsoever other than liens created by the Registered Holder.

     9. Financial Information. The Company shall provide or cause to be provided to the
Registered Holder (i) copies of all notices, financial statements, reports and information which it
provides to its shareholders (concurrently with the transmission to its shareholders), and (ii)
upon the execution of a confidentiality agreement in form and substance reasonably satisfactory to
the Company, promptly, such additional financial and other information as the Registered Holder may
from time to time reasonably request.

     10. No Impairment. The Company will not, by amendment of its charter 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 Registered Holder against impairment.

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     11. Notice of Proposed Fundamental Changes. In case the Company shall propose (A) to
make any distributions payable in Common Stock to the holders of its Common Stock or to make any
other distribution to the holders of its Common Stock, (B) to offer to the holders of its Common
Stock rights to subscribe for or to purchase any Convertible Securities or additional Common Stock
or any other securities, warrants, rights or options, (C) to effect any reclassification of its
Common Stock, (D) to effect any capital reorganization, (E) to effect any consolidation or merger,
exchange of securities (other than exchanges of Common Stock for the Company’s Series A Convertible
Exchangeable Preferred Stock on terms that the Board has determined are fair to the holders of
Common Stock), or sale, lease or other disposition of all or substantially all of its property,
assets or business, (F) to effect the liquidation, dissolution or winding up of the Common Stock,
or (G) to transfer at least fifty percent (50%) of its Common Stock on its books and records in
connection with a sale of the Common Stock, then in each such case the Company shall give to the
Registered Holder advance written notice of such proposed action, which shall specify the record
date for the purposes of such distribution or rights, or the date on which such reclassification,
reorganization, consolidation, merger, exchange of securities, sale, transfer, disposition,
liquidation, dissolution or winding up is to take place and the date of participation therein by
the holders of Common Stock, if any such date is to be fixed, or the date on which the transfer of
Common Stock is to occur, and shall also set forth such facts with respect thereto as shall be
reasonably necessary to indicate the effect of such action on the Common Stock and on the Purchase
Price after giving effect to any adjustment which will be required as a result of such action. Such
notice shall be so given in the case of any action covered by clause (A) or (B) above at least
twenty (20) days prior to the record date for determining holders of the Common Stock for purposes
of such action and, in the case of any other such action, at least twenty (20) days prior to the
earlier of the date of the taking of such proposed action or the date of participation therein by
the holders of Common Stock.

     12. No Dilution or Impairment. The Company shall not, by amendment of its Certificate
of Incorporation or Bylaws or through any reorganization, recapitalization, transfer of assets,
consolidation, merger, exchange of securities, dissolution or any other voluntary action, avoid or
seek to avoid the observance or performance of any of the terms of this Warrant, including without
limitation the adjustments required under Section 2 hereof, and shall 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 to protect the rights of the Registered Holder against dilution or other
impairment in the manner contemplated by this Warrant but not specifically provided for herein.
Without limiting the generality of the foregoing and notwithstanding any other provision of this
Warrant to the contrary (including by way of implication), the Company shall take all such action
as may be necessary or appropriate so that the Company may validly and legally issue fully paid and
nonassessable shares of Common Stock (or other securities) upon the exercise of this Warrant.

     13. Reservation of Stock. The Company will at all times reserve and keep available,
solely for issuance and delivery upon the exercise of this Warrant, such number of Warrant Shares
and other securities, cash and/or property, as from time to time shall be issuable upon the
exercise of this Warrant.

-13-

 

     14. Exchange or Replacement of Warrants.

          (a) Upon the surrender by the Registered Holder, properly endorsed, to the Company at the
principal office of the Company, the Company will, subject to the provisions of Section 5 hereof,
issue and deliver to or upon the order of the Registered Holder, at the Company’s expense, a new
Warrant or Warrants of like tenor, in the name of the Registered Holder or as the Registered Holder
(upon payment by the Registered Holder of any applicable transfer taxes) may direct, calling in the
aggregate on the face or faces thereof for the number of shares of Common Stock (or other
securities, cash and/or property) then issuable upon exercise of this Warrant.

          (b) Upon receipt of evidence reasonably satisfactory to the Company of the loss, theft,
destruction or mutilation of this Warrant and (in the case of loss, theft or destruction) upon
delivery of an indemnity agreement (with surety if reasonably required) in an amount reasonably
satisfactory to the Company, or (in the case of mutilation) upon surrender and cancellation of this
Warrant, the Company will issue, in lieu thereof, a new Warrant of like tenor.

     15. Remedies. In addition to all other remedies for the Company’s breach of its
obligations under this Warrant that the Registered Holder may have under law or in equity, the
Registered Holder may (i) at the Company’s expense, elect to have the number of Warrant Shares and
Purchase Price fully and completely recomputed in order to remove and remedy any prejudice which
has been or might have been caused to it by such breach, including, without limitation, rescinding
and annulling any or all exercises of the Warrant and waivers or agreements made subsequent to such
breach, and (ii) bring any action for injunctive relief or specific performance of any term or
covenant contained herein, the Company hereby acknowledging that an action for money damages may
not be adequate to protect the interests of the Registered Holder hereunder.

     16. Notices. All notices and other communications from the Company to the Registered
Holder in connection herewith shall be mailed by certified or registered mail, postage prepaid, or
sent via a reputable nationwide overnight courier service guaranteeing next business day delivery,
to the address last furnished to the Company in writing by the Registered Holder. All notices and
other communications from the Registered Holder to the Company in connection herewith shall be
mailed by certified or registered mail, postage prepaid, or sent via a reputable nationwide
overnight courier service guaranteeing next business day delivery, to the Company at its principal
office set forth below. If the Company should at any time change the location of its principal
office to a place other than as set forth below, it shall give prompt written notice to the
Registered Holder and thereafter all references in this Warrant to the location of its principal
office at the particular time shall be as so specified in such notice. All such notices and
communications shall be deemed delivered (i) two business days after being sent by certified or
registered mail, return receipt requested, postage prepaid, or (ii) one business day after being
sent via a reputable nationwide overnight courier service guaranteeing next business day delivery.

     17. No Rights as Stockholder. Until the exercise of this Warrant, the Registered
Holder shall not have or exercise any rights by virtue hereof as a stockholder of the Company.
Notwithstanding the foregoing, in the event (i) the Company effects a split of the Common Stock by
means of a stock dividend and the Purchase Price of and the number of Warrant Shares are adjusted
as of the date of the distribution of the dividend (rather than as of the record date for

-14-

 

such dividend), and (ii) the Registered Holder exercises this Warrant between the record date
and the distribution date for such stock dividend, the Registered Holder shall be entitled to
receive, on the distribution date, the stock dividend with respect to the shares of Common Stock
acquired upon such exercise, notwithstanding the fact that such shares were not outstanding as of
the close of business on the record date for such stock dividend.

     18. Amendment or Waiver. Any term of this Warrant may be amended or waived only by an
instrument in writing signed by the party against which enforcement of the change or waiver is
sought. No waivers of any term, condition or provision of this Warrant, in any one or more
instances, shall be deemed to be, or construed as, a further or continuing waiver of any such term,
condition or provision.

     19. Section Headings. The section headings in this Warrant are for the convenience of
the parties and in no way alter, modify, amend, limit or restrict the contractual obligations of
the parties.

     20. Governing Law. This Warrant will be governed by and construed in accordance with
the internal laws of the State of New York (without reference to the conflicts of law provisions
thereof).

     21. Waiver of Jury Trial. THE COMPANY HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY
WAIVES ANY RIGHTS IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR
ARISING OUT OF, UNDER OR IN CONNECTION WITH, THIS WARRANT.

     22. Facsimile Signatures. This Warrant may be executed by facsimile signature.

[The remainder of this page is intentionally left blank]

-15-

 

EXECUTED as of the Date of Issuance indicated above.

	 	 	 	 	 
	 	WESTMORELAND COAL COMPANY

 	 
	 	By:  	/s/ David J. Blair
 	 
	 	 	Name:  	David J. Blair 	 
	 	 	Title:  	Chief Financial Officer 	 
	 

	 	 	 	 	 
	ATTEST:

 	 	 
	/s/ Morris W. Kegley
 	 	 
	Name:  	Morris W. Kegley 	 	 
	Title:  	General Counsel and
Assistant Secretary 	 	 
	 

	 	 	 	 	 
	 	Notice Address of the Company:

Westmoreland Coal Company

2 North Cascade Avenue, 14th Floor

Colorado Springs, CO 80903

Attention: General Counsel

 	 
	 	 	 
	 	 	 
	 	 	 

-16-

 

	 	 	 	 	 

EXHIBIT I

EXERCISE NOTICE AND LETTER OF REPRESENTATIONS

Dated:                     

Westmoreland Coal Company

2 North Cascade Avenue, 14th Floor

Colorado Springs, CO 80903

Attention: General Counsel

Ladies and Gentlemen:

1. Purchase

     The undersigned, the registered holder of the attached Warrant (No. ___) (the “Warrant”, and
the registered holder the “Purchaser”), hereby elects to purchase (check applicable box):

	 	•	 	                     shares of the common stock, par value $2.50 per share (the Common Stock”), of
Westmoreland Coal Company (the “Company”) covered by such Warrant; or
	 
	 	•	 	the maximum number of shares of Common Stock covered by such Warrant pursuant to the
cashless exercise procedure set forth in subsection 1(b).

     The Purchaser herewith makes payment of the full purchase price for such shares at the price
per share provided for in such Warrant. Such payment takes the form of (check applicable box or
boxes):

	 	•	 	$                      in lawful money of the United States; and/or
	 
	 	•	 	the cancellation of such portion of the attached Warrant as is exercisable for
a total of                      Warrant Shares (using a Fair Market Value of $                      per share
for purposes of this calculation); and/or
	 
	 	•	 	the cancellation of such number of Warrant Shares as is necessary, in
accordance with the formula set forth in subsection 1(b), to exercise this Warrant with
respect to the maximum number of Warrant Shares purchasable pursuant to the cashless
exercise procedure set forth in subsection 1(b).

2. Representations [Note: These representations shall only be required if the shares of
Common Stock purchased pursuant to this Exercise Notice are not registered under the Securities Act
of 1933 on the date of this Exercise Notice.]

     The Purchaser hereby represents and warrants to the Company, in connection with the purchase
of shares of Common Stock pursuant to the attached Warrant, that:

     (a) The Purchaser is acquiring the shares of Common Stock for its own account for investment
and not with a view to, or for sale in connection with, any distribution thereof, nor with any
present intention of distributing or selling the same; and the Purchaser has no present or

-17-

 

contemplated agreement, undertaking, arrangement, obligation, indebtedness or commitment
providing for the disposition thereof.

     (b) The Purchaser is an “accredited investor” as defined in Rule 501(a) under the Securities
Act of 1933, as amended (the “Act”).

     (c) The Purchaser has made such inquiry concerning the Company and its business and personnel
as it has deemed appropriate; and the Purchaser has sufficient knowledge and experience in finance
and business that it is capable of evaluating the risks and merits of its investment in the
Company.

     IN WITNESS WHEREOF, the Purchaser has caused this Exercise Notice and Letter of
Representations to be executed and delivered by the undersigned, thereunto duly authorized, as of
the date first written above.

	 	 	 	 	 
	 	[PURCHASER NAME]

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 	 	  	 	 
	 	 	Address:  	 	 
	 	 	  	 	 
	 	 	  	 	 

-18-

 

	 	 	 	 	 

EXHIBIT II

ASSIGNMENT FORM

     FOR VALUE RECEIVED,                                                              hereby sells, assigns and transfers all of the rights
of the undersigned under the attached Warrant (No. ___) with respect to the number of shares of
Common Stock of Westmoreland Coal Company covered thereby set forth below, unto:

	 	 	 	 	 
	Name of Assignee	 	Address	 	No. of Shares
	 
	 	 	 	 

	 	 	 	 	 	 	 	 	 	 	 
	Dated:

	 	 	 	 	 	Signature:	 	 	 	 
	 

	 	 

	 	 
	 	 	 	 

	 	 

Signature Guaranteed:

	 	 	 	 	 	 	 	 	 	 	 
	By:

	 	 	 	 	 	 	 	 	 	 
	 

	 	 

	 	 
	 	 	 	 

	 	 

The signature should be guaranteed by an eligible guarantor institution (banks, stockbrokers,
savings and loan associations and credit unions with membership in an approved signature guarantee
medallion program) pursuant to Rule 17Ad-15 under the Securities Exchange Act of 1934.

-19-

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