Document:

WARRANTHOLDER RIGHTS AGREEMENT

WARRANTHOLDER RIGHTS AGREEMENT, dated as of March 26, 2008 (this “Agreement”), by and among PROLIANCE INTERNATIONAL, INC., a Delaware corporation (the “Company”), SPCP Group, LLC, a Delaware limited liability company (“SPCP Group”), and SPCP Group III, LLC, a Delaware limited liability company (“SPCP III”; each of SPCP Group and SPCP III, a “Warrantholder”, such definition to include any and all of its permitted assignees and transferees,
and collectively, the “Warrantholders”). 

WHEREAS, in accordance with a requirement set forth in the Second Amendment to Credit Agreement (as defined in the Warrants), the Company (a) is issuing and delivering to the Warrantholders or their nominees or assigns warrants (each as amended or otherwise modified from time to time, a “Warrant”, and together with any warrants issued in substitution therefor or replacement thereof in accordance with the terms thereof, the “Warrants”) to purchase shares of common stock, par value US$.01 per share, of the Company (the “Common Stock”; the shares of Common Stock issued or issuable upon exercise of the Warrants are
hereinafter referred to as the “Warrant Shares”) equal to the applicable Warrant Quantity (as defined in the Warrants) as of the date or dates such Warrants are exercised, subject to the terms, conditions and adjustments set forth in such Warrants, and (b) entering into this Agreement and the Registration Rights Agreement (as defined in the Warrants).

NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and agreements contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and intending to be legally bound hereby, the parties hereto hereby agree as follows:

ARTICLE I

ISSUANCE AND FORM OF WARRANTS.

SECTION 1.01 Issuance of Warrant. The Company, for good and valuable consideration, hereby agrees to issue to the Warrantholders on the date hereof Warrants in the form attached hereto as Exhibit A, entitling such Warrantholders to purchase from the Company shares of Common Stock of the Company in accordance with the terms of such Warrants. 

ARTICLE II

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

The Company hereby represents and warrants to the Warrantholders as follows:

SECTION 2.01 Organization and Qualification. The Company is duly organized and validly existing in good standing under the laws of the State of Delaware, and has the requisite power and authority to own its properties and to carry on its business as now being conducted. The Company is duly qualified as a foreign entity to do business and is in good standing in every jurisdiction in which its ownership of property or the nature of the business 

 

 

conducted by it makes such qualification necessary, except to the extent that the failure to be so qualified or be in good standing would not reasonably be expected to have a material adverse effect on the Company. 

SECTION 2.02 Authority Relative to This Agreement. The Company has all necessary power and authority to execute and deliver this Agreement, the Warrants and the Registration Rights Agreement, to perform its obligations hereunder and thereunder and to consummate the transactions contemplated hereby and thereby. Each of this Agreement, the Warrants and the Registration Rights Agreement has been duly executed and delivered by the Company and constitutes a legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, except as such enforceability may be limited by general principles of equity or applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or other laws relating to, or affecting generally, the enforcement of creditors’
rights and remedies.

SECTION 2.03 No Conflict. 

(a) The execution and delivery of this Agreement, the Warrants and the Registration Rights Agreement by the Company do not, and the performance of this Agreement, the Warrants and the Registration Rights Agreement by the Company does not and shall not, (i) conflict with or violate any federal, state, local or foreign law, statute, ordinance, rule, regulation, order, judgment or decree applicable to the Company or any of its Subsidiaries (as defined in the Warrants), (ii) conflict with, or constitute a default (or an event which with notice or lapse of time or both would become a default) in any respect under, or give to others any rights of termination, amendment, acceleration or cancellation of, any agreement, indenture or instrument to which the Company or any of its Subsidiaries is a party, or (iii) result in a violation of any law, rule, regulation, order, judgment or
decree (including foreign, federal and state securities laws and regulations and the rules and regulations of the American Stock Exchange (the “Principal Market”)) applicable to the Company or any of its Subsidiaries or by which any property or asset of the Company or any of its Subsidiaries is bound or affected.

(b) The execution and delivery of this Agreement, the Warrants and the Registration Rights Agreement by the Company do not, and the performance of this Agreement, the Warrants and the Registration Rights Agreement by the Company does not and shall not, require any consent, approval, authorization or permit of, or filing with or notification to, any governmental or regulatory entity, self-regulatory agency or third party.

SECTION 2.04 Capitalization. 

(a) As of the date of this Agreement, the authorized capital stock of the Company consists of (i) 47,500,000 shares of Common Stock, of which as of the date hereof, 15,794,281 shares are issued and outstanding, and (ii) 2,500,000 shares of preferred stock, par value $.01 per share, including 200,000 authorized shares of Series A junior participating preferred stock and 30,000 authorized shares of Series B convertible preferred stock (“Series B Preferred Stock”), of which only 9,913 shares of Series B Preferred Stock are issued and outstanding. All of such outstanding shares have been validly issued and are fully paid and nonassessable. Annex A hereto sets forth a complete and accurate list of the Subsidiaries of the 

 

 

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Company. All of the outstanding shares of capital stock or other equity interests of each of the Company’s Subsidiaries are owned, of record and beneficially, by the Company, or directly or indirectly beneficially, by either the Company or one or more of its Subsidiaries, in each case free from all taxes, liens and charges other than liens in favor of, or subordinated to those of, the agents and lenders under the Credit Agreement. No shares of capital stock of, or ownership interests in, any of the Company’s Subsidiaries are reserved for issuance.

(b) Except as set forth in Annex B hereto, (i) none of the capital stock of the Company or any of its Subsidiaries is subject to preemptive rights or any other similar rights or any liens or encumbrances suffered or permitted by the Company or any of its Subsidiaries; (ii) there are no outstanding options, warrants, scrip, rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities or rights convertible into, or exercisable or exchangeable for, any capital stock of the Company or any of its Subsidiaries, or contracts, commitments, understandings or arrangements by which the Company or any of its Subsidiaries is or may become bound to issue additional capital stock of the Company or any of its Subsidiaries or options, warrants, scrip, rights to subscribe to,
calls or commitments of any character whatsoever relating to, or securities or rights convertible into, or exercisable or exchangeable for, any capital stock of the Company or any of its Subsidiaries other than those set forth in Section 2.04(a); (iii) except as disclosed in the Company’s United States Securities and Exchange Commission (the “SEC”) filings, there are no outstanding debt securities, notes, credit agreements, credit facilities or other agreements, documents or instruments evidencing indebtedness of the Company or any of its Subsidiaries or by which the Company or any of its Subsidiaries is or may become bound; (iv) there are no outstanding securities or instruments of the Company or any of its Subsidiaries which contain any redemption or similar provisions, and there are no contracts, commitments, understandings or arrangements by which the Company or any of its Subsidiaries is
or may become bound to redeem a security of the Company or any of its Subsidiaries; (v) there are no securities or instruments containing anti-dilution or similar provisions that will be triggered by the issuance of the Warrants; and (vi) neither the Company nor any of its Subsidiaries has any stock appreciation rights or “phantom stock” plans or agreements or any similar plan or agreement. All stock and securities of the Company heretofore issued and sold by the Company were, and all securities of the Company issued and sold by the Company on and after the date hereof are or will be issued and sold in accordance with, or are or will be exempt from, the registration and prospectus delivery requirements of the Securities Act of 1933, as amended (the “Securities Act”).

SECTION 2.05 Sarbanes-Oxley Act. The Company is in compliance in all material respects with any and all applicable requirements of the Sarbanes-Oxley Act of 2002 that are effective as of the date hereof, and any and all applicable rules and regulations promulgated by the SEC thereunder that are effective as of the date hereof.

SECTION 2.06 Internal Accounting and Disclosure Controls. The Company and each of its Subsidiaries maintains a system of internal accounting controls sufficient to provide reasonable assurance that (i) transactions are executed in accordance with management’s general or specific authorizations, (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting principles and to maintain asset and liability accountability, (iii) access to assets or incurrence of liabilities is permitted only in accordance with management’s general or specific authorization 

 

 

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and (iv) the recorded accountability for assets and liabilities is compared with the existing assets and liabilities at reasonable intervals and appropriate action is taken with respect to any difference. The Company maintains disclosure controls and procedures (as such term is defined in Rule 13a-15 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) that are effective in ensuring that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the rules and forms of the SEC, including, without limitation, controls and procedures designed to ensure that information required to be disclosed by the Company in the reports that it files or submits
under the Exchange Act is accumulated and communicated to the Company’s management, including its principal executive officer or officers and its principal financial officer or officers, as appropriate, to allow timely decisions regarding required disclosure. During the twelve months prior to the date hereof neither the Company nor any of its Subsidiaries has received any notice or correspondence from any accountant relating to any potential material weakness in any part of the system of internal accounting controls of the Company or any of its Subsidiaries.

SECTION 2.07 SEC Documents; Financial Statements. During the 12 months prior to the date hereof, the Company has filed all reports, schedules, forms, statements and other documents required to be filed by it with the SEC pursuant to the reporting requirements of the Exchange Act (all of the foregoing filed prior to the date hereof and all exhibits included therein and financial statements, notes and schedules thereto and documents incorporated by reference therein being hereinafter referred to as the “SEC Documents”). As of their respective filing dates, the SEC Documents complied in all material respects with the requirements of the Exchange Act and the rules and regulations of the SEC promulgated thereunder
applicable to the SEC Documents, and none of the SEC Documents, at the time they were filed with the SEC, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. 

SECTION 2.08 Acknowledgement Regarding Warrantholder’s Trading Activity. Anything in this Agreement or elsewhere herein to the contrary notwithstanding, but subject to compliance by the Warrantholders with applicable law, it is understood and acknowledged by the Company (i) that the Warrantholders have not agreed with the Company or its Subsidiaries, to desist from purchasing or selling, long and/or short, securities of the Company, or “derivative” securities based on securities issued by the Company or to hold any Warrant for any specified term; (ii) that past or future open market or other transactions by the Warrantholders, including, without limitation, short sales or “derivative” transactions, before or after the closing of this or future private placement transactions,
may negatively impact the market price of the Company’s publicly-traded securities; (iii) that each Warrantholder, and counter parties in “derivative” transactions to which such Warrantholder is a party, directly or indirectly, presently may have a “short” position in the Common Stock, and (iv) that no Warrantholder shall be deemed to have any affiliation with or control over any arm’s length counter party in any “derivative” transaction solely as a result of such transaction. The Company further understands and acknowledges that, subject to compliance by the Warrantholders with applicable law (a) the Warrantholders may engage in hedging and/or trading activities at various times during the period that the Warrants are outstanding, including, without limitation, during the periods that the value of the Warrant Shares deliverable with respect to Warrants are being 

 

 

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determined and (b) such hedging and/or trading activities (if any) could reduce the value of the existing stockholders’ equity interests in the Company at and after the time that the hedging and/or trading activities are being conducted. 

SECTION 2.09 Dilutive Effect. The Company understands and acknowledges that the number of Warrant Shares issuable upon exercise of the Warrants will increase in certain circumstances. The Company further acknowledges that its obligation to issue the Warrant Shares upon exercise of the Warrants in accordance with this Agreement and the Warrants is, in each case, absolute and unconditional regardless of the dilutive effect that such issuance may have on the ownership interests of other stockholders of the Company.

SECTION 2.10 Issuance of Warrant and Warrant Shares. The Warrants are duly authorized and validly issued, free from all taxes, liens and charges with respect to the issue thereof (except for any liens created by the Warrantholders), and shall not be subject to preemptive rights or other similar rights of any holders of Common Stock or other interests of the Company. The Warrant Shares have been duly authorized and reserved for issuance upon exercise of the Warrants, and upon such exercise in accordance with the terms of the Warrants, will be validly issued, fully paid and non-assessable, free from all taxes, liens and charges (except for any liens created by the Warrantholders), and will not be subject to preemptive rights or other similar rights of any holders of Common Stock or other interests of
the Company.  Assuming the accuracy of the representations and warranties set forth in Article III, the offer and issuance by the Company of the Warrants to the Warrantholders and the issuance of the Warrant Shares to the Warrantholders pursuant to the Warrants are exempt from the registration and prospectus delivery requirements of the Securities Act. The Warrants, if exercised in full as of the date hereof, would be exercisable, in the aggregate and subject to the limitations set forth therein, for 9.99% of the shares of Common Stock of the Company on a Fully Diluted Basis (as defined in the Warrants) as of the date hereof. The Company agrees that neither it nor any Person (as defined in the Warrants) acting on its behalf has offered or will offer the Warrants or Warrant Shares or any part thereof or any similar securities for issue or sale to, or has solicited or will solicit any offer to acquire any of the same from, any Person so as to bring the issuance and sale of the Warrants
or Warrant Shares within the provisions of the registration and prospectus delivery requirements of the Securities Act.

SECTION 2.11 Investment Company Status. The Company is not and, upon issuance of the Warrants or the Warrant Shares, will not be an “investment company,” a company controlled by an “investment company” or an “affiliated person” of, or “promoter” or “principal underwriter” for, an “investment company” as such terms are defined in the Investment Company Act of 1940, as amended.

SECTION 2.12 U.S. Real Property Holding Corporation. Neither the Company nor any of its Subsidiaries is, nor has the Company or any of its Subsidiaries ever been, a U.S. real property holding corporation within the meaning of Section 897 of the Internal Revenue Code of 1986, as amended, and the Company shall so certify upon any Warrantholder’s request.

SECTION 2.13 Bank Holding Company Act. Neither the Company nor any of its Subsidiaries is subject to the Bank Holding Company Act of 1956, as amended (the

 

 

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 “BHCA”) and to regulation by the Board of Governors of the Federal Reserve System (the “Federal Reserve”). Neither the Company nor any of its Subsidiaries or affiliates owns or controls, directly or indirectly, five percent (5%) or more of the outstanding shares of any class of voting securities or twenty-five (25%) or more of the total equity of a bank or any equity that is subject to the BHCA and to regulation by the Federal Reserve. Neither the Company nor any of its Subsidiaries or affiliates exercises a controlling influence over the management or policies of a bank or any entity that is subject to the BHCA and to regulation by the Federal Reserve. 

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF THE WARRANTHOLDERS

Each Warrantholder hereby represents and warrants to the Company as to itself, as follows: 

SECTION 3.01 Authority Relative to This Agreement and the Registration Rights Agreement. Such Warrantholder has all necessary power and authority to execute and deliver this Agreement and the Registration Rights Agreement, to perform its obligations hereunder and thereunder and to consummate the transactions contemplated hereby and thereby. Each of this Agreement and the Registration Rights Agreement has been duly executed and delivered by such Warrantholder and constitutes a legal, valid and binding obligation of such Warrantholder, enforceable against such Warrantholder in accordance with its terms, except as such enforceability may be limited by general principles of equity or applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or other laws relating to, or affecting
generally, the enforcement of creditors’ rights and remedies.

SECTION 3.02 No Conflict. 

(a) The execution and delivery of this Agreement by such Warrantholder do not, and the performance of this Agreement by such Warrantholder does not and shall not, (i) conflict with or violate any federal, state, local or foreign law, statute, ordinance, rule, regulation, order, judgment or decree applicable to such Warrantholder, (ii) conflict with, or constitute a default (or an event which with notice or lapse of time or both would become a default) in any respect under, or give to others any rights of termination, amendment, acceleration or cancellation of, any agreement, indenture or instrument to which such Warrantholder is a party, or (iii) result in a violation of any law, rule, regulation, order, judgment or decree applicable to such Warrantholder.

(b) The execution and delivery of this Agreement by such Warrantholder do not, and the performance of this Agreement by such Warrantholder does not and shall not, require any consent, approval, authorization or permit of, or filing with or notification to, any governmental or regulatory entity, self-regulatory agency or third party.

SECTION 3.03 Accredited Investor. Such Warrantholder is an “accredited investor” as that term is defined in Rule 501(a) of Regulation D promulgated under the Securities Act. Such Warrantholder is a sophisticated investor with such knowledge and experience in financial and business matters so as to be capable of evaluating the merits and risks of the 

 

 

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Warrants issued to it hereunder and the Warrant Shares issuable thereunder and is capable of bearing the economic risks of such Warrants and Warrant Shares. 

SECTION 3.04 Investment. Such Warrantholder is acquiring the Warrants issued to it hereunder for its own account and not with a view towards, or for resale in connection with, the public sale or distribution thereof; provided, however, that by making the representation herein, such Warrantholder does not agree to hold any of the Warrants or Warrant Shares for any minimum or other specific term and reserves the right to dispose of the Warrants or the Warrant Shares at any time in accordance with or pursuant to a registration statement or an exemption under the Securities Act. Such Warrantholder is aware that none of Warrants or Warrant Shares have been registered under the Securities Act or under applicable state securities or blue sky laws as of the date hereof.

SECTION 3.05 Reliance on Exemptions. Such Warrantholder understands (a) that the Warrants are being issued to such Warrantholder in reliance upon specific exemptions from the registration requirements of United States federal and state securities laws and (b) that the Company is relying in part upon the truth and accuracy of, and such Warrantholder’s compliance with, the representations, warranties, agreements, acknowledgments and understandings of such Warrantholder set forth herein in order to determine the availability of such exemptions and the eligibility of such Warrantholder to acquire the Warrants.

ARTICLE IV 

MISCELLANEOUS

SECTION 4.01 Further Assurances. The Company and each Warrantholder will execute and deliver all such further documents and instruments and take all such further action as may be reasonably necessary in order to consummate the transactions contemplated hereby.

SECTION 4.02 Disclosure of Transactions. On or before the fourth Business Day following the date hereof, the Company shall file a Current Report on Form 8-K describing the terms of the transactions contemplated by the Transaction Documents in the form required by the Exchange Act and attaching the material Transaction Documents (including, without limitation, this Agreement, the form of Warrant and the form of the Registration Rights Agreement) as exhibits to such filing (including all attachments, the “8-K Filing”); provided that such Current Report will be subject to reasonable approval from the Warrantholders. Subject to the foregoing, neither the Company, its Subsidiaries nor the Warrantholders shall issue
any press releases or any other public statements with respect to the transactions contemplated hereby; provided, however, that the Company shall be entitled, without the prior approval of any Warrantholder, to make any press release or other public disclosure with respect to such transactions (i) in substantial conformity with the 8-K Filing and contemporaneously therewith and (ii) as is required by applicable law and regulations (provided that in the case of clause (i) the Warrantholders shall be consulted by the Company in connection with any such press release or other public disclosure prior to its release). 

 

 

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SECTION 4.03 Dilutive Issuances. For so long as any Warrants remain outstanding, the Company shall not, in any manner, enter into or effect any issuance, sale or other transaction if the effect of such issuance, sale or transaction is to cause the Company to be required to issue upon exercise of any Warrant any shares of Common Stock in excess of that number of shares of Common Stock which the Company may issue upon exercise of the Warrants without breaching the Company’s obligations under the rules or regulations of the Principal Market. 

SECTION 4.04 Additional Issuances of Securities. From the date hereof through and including December 31, 2008, the Company will not, directly or indirectly, offer, sell, grant any option to purchase, or otherwise dispose of (or announce any offer, sale, grant or any option to purchase or other disposition of) any equity securities or equity equivalent securities of the Company which is preferred as to dividends or as to the distribution of assets upon voluntary or involuntary dissolution, liquidation or winding-up of the Company and which is not convertible into or exercisable or exchangeable for shares of Common Stock (any such equity securities or equity equivalent securities being referred to as “Non-Convertible Preferred Stock”, and any such offer, sale, grant, disposition or announcement being referred to as a “Subsequent Placement”) unless the Company shall have first complied with this Section 4.04. 

 (a) The Company shall deliver to each Warrantholder an irrevocable written notice (the “Offer Notice”) of any proposed or intended issuance or sale or exchange (the “Offer”) of the Non-Convertible Preferred Stock being offered (the “Offered Securities”) in a Subsequent Placement, which Offer Notice shall (w) identify and describe the Offered Securities, (x) describe the price and other terms upon which they are to be issued, sold or exchanged, and the number or amount of the Offered Securities to be issued, sold or exchanged, (y) identify the persons or entities (if known) to which or with which the Offered
Securities are to be offered, issued, sold or exchanged and (z) offer to issue and sell to or exchange with such Warrantholders all of the Offered Securities, allocated among such Warrantholders (a) based on each such Warrantholder’s pro rata portion of the Warrant Shares issuable to all Warrantholders under the Warrants as of the date hereof without regard to any limitations on exercise of the Warrants (the “Basic Amount”) and (b) with respect to each Warrantholder that elects to purchase its Basic Amount, any additional portion of the Offered Securities attributable to the Basic Amounts of other Warrantholders as such Warrantholder shall indicate it will purchase or acquire should the other Warrantholders subscribe for less than their Basic Amounts (the “Undersubscription Amount”), which process shall
be repeated until the Warrantholders shall have an opportunity to subscribe for any remaining Undersubscription Amount.

 (b) To accept an Offer, in whole or in part, such Warrantholder must deliver a written notice to the Company prior to the end of the tenth (10th) Business Day after such Warrantholder’s receipt of the Offer Notice (the “Offer Period”) setting forth the portion of such Warrantholder’s Basic Amount that such Warrantholder elects to purchase and, if such Warrantholder shall elect to purchase all of its Basic Amount, the Undersubscription Amount, if any, that such Warrantholder elects to purchase (in either case, the “Notice of Acceptance”). If the Basic Amounts subscribed for by all Warrantholders are less than the total of all of the Basic Amounts, then each Warrantholder who has set
forth an Undersubscription Amount in its Notice of Acceptance shall be entitled to purchase, in addition to the Basic 

 

 

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Amounts subscribed for, the Undersubscription Amount it has subscribed for; provided, however, that if the Undersubscription Amounts subscribed for exceed the difference between the total of all the Basic Amounts and the Basic Amounts subscribed for (the “Available Undersubscription Amount”), each Warrantholder who has subscribed for any Undersubscription Amount shall be entitled to purchase only that portion of the Available Undersubscription Amount as the Basic Amount of such Warrantholder bears to the total Basic Amounts of all Warrantholders that have subscribed for Undersubscription Amounts, subject to rounding by the Company to the extent its
deems reasonably necessary. Notwithstanding anything to the contrary contained herein, if the Company desires to modify or amend the terms and conditions of the Offer prior to the expiration of the Offer Period, the Company may deliver to the Warrantholders a new Offer Notice and the Offer Period shall expire on the tenth (10th) Business Day after each such Warrantholder’s receipt of such new Offer Notice.

 (c) The Company shall have five (5) Business Days from the expiration of the Offer Period above to offer, issue, sell or exchange all or any part of such Offered Securities as to which a Notice of Acceptance has not been given by the Warrantholders (the “Refused Securities”), but only to the offerees described in the Offer Notice (if so described therein) and only upon terms and conditions (including, without limitation, unit prices and interest rates) that are not more favorable to the acquiring person or persons or less favorable to the Company than those set forth in the Offer Notice and (ii) to publicly announce (a) the execution of such Subsequent Placement Agreement (as defined below), and (b) either (x) the consummation of the transactions contemplated by such Subsequent Placement
Agreement or (y) the termination of such Subsequent Placement Agreement, which shall be filed with the SEC on a Current Report on Form 8-K with such Subsequent Placement Agreement and any documents contemplated therein filed as exhibits thereto.

 (d) In the event the Company shall propose to sell less than all the Refused Securities (any such sale to be in the manner and on the terms specified in Section 4.04(c) above), then each Warrantholder may, at its sole option and in its sole discretion, reduce the number or amount of the Offered Securities specified in its Notice of Acceptance to an amount that shall be not less than the number or amount of the Offered Securities that such Warrantholder elected to purchase pursuant to Section 4.04(b) above multiplied by a fraction, (i) the numerator of which shall be the number or amount of Offered Securities the Company actually proposes to issue, sell or exchange (including Offered Securities to be issued or sold to Warrantholders pursuant to Section 4.04(c) above prior to such reduction) and (ii) the denominator of which shall be the original amount of the Offered
Securities. In the event that any Warrantholder so elects to reduce the number or amount of Offered Securities specified in its Notice of Acceptance, the Company may not issue, sell or exchange more than the reduced number or amount of the Offered Securities unless and until such securities have again been offered to the Warrantholders in accordance with Section 4.04(a) above.

 (e) Upon the closing of the issuance, sale or exchange of all or less than all of the Refused Securities, the Warrantholders shall acquire from the Company, and the Company shall issue to the Warrantholders, the number or amount of Offered Securities specified in the Notices of Acceptance, as reduced pursuant to Section 4.04(d) above if the Warrantholders have so elected, upon the terms and conditions specified in the Offer. The purchase by the Warrantholders of any Offered Securities is subject in all cases to the 

 

 

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preparation, execution and delivery by the Company and the Warrantholders of a purchase agreement relating to such Offered Securities reasonably satisfactory in form and substance to the Warrantholders and their respective counsel.

 (f) Any Offered Securities not acquired by the Warrantholders or other persons in accordance with Section 4.04(c) above may not be issued, sold or exchanged until they are again offered to the Warrantholders under the procedures specified in this Agreement.

 (g) The Company and the Warrantholders agree that if any Warrantholder elects to participate in the Offer, (x) neither the agreement regarding the Subsequent Placement (the “Subsequent Placement Agreement”) with respect to such Offer nor any other transaction documents related thereto (collectively, the “Subsequent Placement Documents”) shall include any term or provisions whereby any Warrantholder shall be required to agree to any restrictions in trading as to any securities of the Company owned by such Warrantholder prior to such Subsequent Placement, and (y) any registration rights set forth in such Subsequent Placement Documents shall be similar in all material respects to the registration rights
contained in the Registration Rights Agreement.

 (h) Notwithstanding anything to the contrary in this Section 4.04 and unless otherwise agreed to by the Warrantholders, the Company shall either confirm in writing to the Warrantholders that the transaction with respect to the Subsequent Placement has been abandoned or shall publicly disclose its intention to issue the Offered Securities, in either case in such a manner such that the Warrantholders will not be in possession of material non-public information with respect to the Company’s Subsequent Placement, by the fifteenth (15th) Business Day following delivery of the Offer Notice. If by the fifteenth (15th) Business Day following delivery of the Offer Notice no public disclosure regarding a transaction with respect to the Offered Securities has been made, and no notice regarding the abandonment of such transaction has been received by the
Warrantholders, such transaction shall be deemed to have been abandoned and the Warrantholders shall not be deemed to be in possession of any material, non-public information with respect to the Company’s Subsequent Placement. Should the Company decide to pursue such transaction with respect to the Offered Securities, the Company shall provide each Warrantholder with another Offer Notice and each Warrantholder will again have the right of participation set forth in this Section 4.04(a). The Company shall not be permitted to deliver more than one such Offer Notice to the Warrantholders in any 60 day period.

SECTION 4.05 Trading Windows. For so long as any Warrants or Warrant Shares are held by any Warrantholder, the Company agrees to provide each such Warrantholder advance written notice of, promptly and in any event prior to, the commencement of any period of time under the Company’s then existing trading policy applicable to its directors and officers during which such directors and officers are permitted to sell, purchase or otherwise trade securities of the Company without being subject to any applicable “blackout periods” or other similar trading restrictions, except for periods of time during which trading is permitted as a result of being carried out pursuant to a pre-existing contract, instruction or plan under Rule 10b5-1 under the Exchange Act.

 

 

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SECTION 4.06 Specific Performance. The parties hereto agree that irreparable damage would occur in the event any provision of this Agreement was not performed in accordance with the terms hereof and that the parties shall be entitled to specific performance of the terms hereof, in addition to any other remedy at law or in equity. Each Warrantholder, on the one hand, and the Company, on the other hand, shall be entitled to recover from the other party all of such party’s costs and reasonable attorneys’ fees in any action brought to enforce this Agreement in which it is the prevailing party against such other party.

SECTION 4.07 Certain Taxes. The Company shall pay all taxes levied by any jurisdiction within the United States of America (other than Federal, state or local income taxes) which may be payable in connection with the execution and delivery of this Agreement or the issuance of the Warrants or Warrant Shares or in connection with any modification of this Agreement or the Warrants and shall hold the Warrantholders and their respective Affiliates (as defined in the Warrants) harmless without limitation as to time against any and all liabilities with respect to all such taxes. The obligations of the Company under this Section 4.07 shall survive any redemption, repurchase or acquisition of Warrants or Warrant Shares by the Company, any termination of this Agreement, and any cancellation or termination of
the Warrants. The parties hereto agree that for income tax purposes, the purchase price to be attributed to the Warrants issued to the Warrantholders hereunder on the date hereof is $2,425,448, and the parties hereto shall not take any position contrary to the foregoing on any tax return or in connection with any audit or other administrative or judicial proceeding unless required as a result of a final determination by a court of competent jurisdiction; provided, however, that in the event that the number of shares of Common Stock issuable upon exercise of the Warrants is reduced as a result of the expiration of the Warrants numbered B-1 and B-2 upon the occurrence of a Proceeds Date (as defined in such Warrants) the purchase price attributed to the Warrants issued to the Warrantholders hereunder shall be reduced to
$1,213,938.

SECTION 4.08 Entire Agreement. This Agreement, the Warrants, the Registration Rights Agreement, the Credit Agreement (as defined in the Warrants) and the Second Amendment to Credit Agreement (collectively, the “Other Agreements”) are intended by the parties as a final expression of their agreement and intended to be a complete and exclusive statement of the agreement and understanding of the parties hereto in respect of the subject matter contained herein. There are no restrictions, promises, representations, warranties, covenants or undertakings relating to the subject matter contained herein, other than those set forth or referred to herein or in the Other Agreements. This Agreement and the Other Agreements
supersede all prior agreements and understandings between the parties to this Agreement, both written and oral, with respect to the subject matter contained herein.

SECTION 4.09 Amendments and Waivers. This Agreement and any term hereof may not be amended, modified, supplemented or terminated, and waivers or consents to departure from the provisions hereof may not be given, except by written instrument duly executed by the party against which enforcement of such amendment, modification, supplement, termination, waiver or consent to departure is sought. Except as expressly provided herein, no delay or omission to exercise any right, power or remedy accruing to any party, upon any breach or default of another party under this Agreement, shall impair any such right, power or remedy of such party nor shall it be construed to be a waiver of any such breach or default, or an acquiescence therein, or of or in any similar breach or default thereafter occurring; nor
shall any waiver of any single breach or default be deemed a waiver of any other breach or default theretofore or thereafter occurring.

 

 

11

 

SECTION 4.10 Severability. In the event that any one or more of the provisions, paragraphs, words, clauses, phrases or sentences contained herein, or the application thereof in any circumstances, is held invalid, illegal or unenforceable in any respect for any reason, the validity, legality and enforceability of any such provision, paragraph, word, clause, phrase or sentence in every other respect and of the other remaining provisions, paragraphs, words, clauses, phrases or sentences hereof shall not be in any way impaired, it being intended that all rights, powers and privileges of the parties hereto shall be enforceable to the fullest extent permitted by law; provided that this Section 4.10 shall not cause this Agreement to differ materially from the intent of the parties as herein expressed.

SECTION 4.11 Governing Law; Jurisdiction; Jury Trial. All questions concerning the construction, validity, enforcement and interpretation of this Agreement shall be governed by the internal laws of the State of New York, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of New York or any other jurisdictions) that would cause the application of the laws of any jurisdictions other than the State of New York. Each party hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in The City of New York, Borough of Manhattan, for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein, and hereby irrevocably waives, and agrees not to assert
in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is brought in an inconvenient forum or that the venue of such suit, action or proceeding is improper. Each party hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof to such party at the address for such notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY. 

SECTION 4.12 Successors and Assigns. This Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective heirs, successors and permitted assigns (including any permitted transferee of Warrants or Warrant Shares). Any holder of the Warrants or Warrant Shares may assign to any permitted (as determined under the Warrant) transferee of its Warrants or Warrant Shares, its rights and obligations under this Agreement if such transferee executes and delivers to the Company a written agreement pursuant to which it agrees, for the benefit of the Company, to be bound by and to perform all of the terms and provisions of this Agreement as if it were a party hereto (and shall, for all purposes, be deemed a holder of Warrants or Warrant Shares under this Agreement). If the
Company shall so request any heir, successor or permitted assign (including any permitted transferee) wishing to avail itself of the benefits of this Agreement shall agree in writing to acquire and hold the Warrants or Warrant Shares subject to all of the terms hereof. For purposes of this Agreement, 

 

 

12

 

“successor” for any entity other than a natural person shall mean a successor to such entity as a result of such entity’s merger, consolidation, sale of substantially all of its assets, or similar transaction. Except as provided above or otherwise permitted by this Agreement, neither this Agreement nor any right, remedy, obligation or liability arising hereunder or by reason hereof shall be assignable by the Company without the consent of the other parties hereto.

SECTION 4.13 Counterparts. This Agreement may be executed in counterparts, each of which, when so executed and delivered, shall be deemed to be an original and enforceable, but all of which, taken together, shall constitute one and the same instrument.

SECTION 4.14 Descriptive Headings, Etc. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning of terms contained herein. Unless the context of this Agreement otherwise requires: (i) words of any gender shall be deemed to include each other gender; (ii) words using the singular or plural number shall also include the plural or singular number, respectively; (iii) the words “hereof”, “herein” and “hereunder” and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement, and Section and paragraph references are to the Sections and paragraphs of this Agreement unless otherwise specified; (iv) the word
“including” and words of similar import when used in this Agreement shall mean “including, without limitation,” unless otherwise specified; (v) “or” is not exclusive; and (vi) provisions apply to successive events and transactions.

SECTION 4.15 Survival. The covenants and agreements of the parties hereto contained in this Agreement shall survive the date hereof indefinitely or for the shorter period explicitly specified herein. The representations and warranties of the parties hereto contained in Sections 2.01-2.04, 2.08-2.13 and 3.01-3.05 shall survive the date hereof indefinitely, and the representations and warranties of the Company contained in Sections 2.05-2.07 shall survive the date hereof until the five (5) year anniversary of the date hereof.

SECTION 4.16 Notices. All notices and other communications (and deliveries) provided for or permitted hereunder shall be made in writing by hand delivery, facsimile, any courier guaranteeing overnight delivery or first class registered or certified mail, return receipt requested, postage prepaid, addressed as follows:

 

	
      If to the Company:
 	
      c/o Proliance International, Inc.

        100 Gando Drive
 New Haven, Connecticut 06513

      Attention: Richard A. Wisot
 Facsimile: 203-401-6470
 
	
                        If to SPCP Group: 
 	
                        SPCP Group, LLC
 Two Greenwich Plaza
 Greenwich, Connecticut 06830
 Attention: Portfolio Manager - Proliance
 Facsimile: 203-542-4550
 

 

 

13

 

 

	
      with a copy to: 
 	
      Schulte Roth & Zabel LLP 
 919 Third Avenue
 New York, New York 10022

      Facsimile: 212-593-5955
 Attention: Frederic L. Ragucci, Esq.
 
	
                        If to SPCP III: 
 	
                        SPCP GROUP III, LLC 
 Two Greenwich Plaza
 Greenwich, Connecticut 06830
 Attention: Portfolio Manager - Proliance
 Facsimile: 203-542-4550
 
	
                        with a copy to: 
 	
                        Schulte Roth & Zabel LLP
 919 Third Avenue
 New York, New York 10022
 Facsimile: 212-593-5955
 Attention: Frederic L. Ragucci, Esq.
 

All such notices and communications (and deliveries) shall be deemed to have been duly given: at the time delivered by hand, if personally delivered; when transmitted with a receipt of successful transmission, if by facsimile; on the next Business Day, if timely delivered to a courier guaranteeing overnight delivery; and five days after being deposited in the mail, if sent first class or certified mail, return receipt requested, postage prepaid.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

 

 

14

 

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

 

	
                         
 	
                         
 	
                        PROLIANCE INTERNATIONAL, INC.
 
	
                          
 	
                         
 	
                        By: 
 	
                        
 /s/ Arlen F. Henock
 
	
                         
 	
                         
 	
                         
 	
                        Name: Arlen F. Henock
 Title: Executive Vice President, Chief Financial Officer
 

 

	
                         
 	
                         
 	
                        SPCP GROUP, LLC
 
	
                          
 	
                         
 	
                        By: 
 	
                        
 /s/ Zachary M. Zeitlin
 
	
                         
 	
                         
 	
                         
 	
                        Name: Zachary M. Zeitlin
 Title: Authorized Signatory 
 

 

	
                         
 	
                         
 	
                        SPCP GROUP III, LLC
 
	
                          
 	
                         
 	
                        By: 
 	
                        
 /s/ Zachary M. Zeitlin
 
	
                         
 	
                         
 	
                         
 	
                        Name: Zachary M. Zeitlin
 Title: Authorized Signatory
 

 

 

15

 

ANNEX A

SUBSIDIARIES

OF PROLIANCE INTERNATIONAL, INC.

The following sets forth a list of all the direct and indirect subsidiaries as of December 31, 2007 of Proliance International, Inc., a Delaware corporation (the “Company”), and the State or other jurisdiction of incorporation or organization of each.

 

	
                        Name
 	
                         
 	
                        Jurisdiction of 
 Incorporation or Organization
 	
                         
 
	
                        Aftermarket Delaware Corporation(a)
 	
                         
 	
                        Delaware
 	
                         
 
	
                        Aftermarket LLC(a)
 	
                         
 	
                        Delaware
 	
                         
 
	
                        Proliance Int’l Holding Company(a)
 	
                         
 	
                        Delaware
 	
                         
 
	
                        Proliance International de Mexico, S.A. de C.V.
 	
                         
 	
                        Mexico
 	
                         
 
	
                        Radiadores GDI, S.A. de C.V.(b)
 	
                         
 	
                        Mexico
 	
                         
 
	
                        Manufacturera Mexicana de Partes de Automoviles, S.A.de C.V.
 	
                         
 	
                        Mexico
 	
                         
 
	
                        Nederlandse Radiateuren Fabriek B.V.
 	
                         
 	
                        The Netherlands
 	
                         
 
	
                        Proliance International Sales, Ltd.
 	
                         
 	
                        Canada
 	
                         
 

	
                        (a) 
 	
                        Holding company.
 

	
                        (b)
 	
                        Currently an inactive subsidiary.
 

 

 

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ANNEX B

EQUITY SECURITIES, WARRANTS, ETC.

 

	
                        Name of Plan
 	
                         
 	
                        Number of Shares Authorized and Issued 

                        Under Each Plan
 	
                         
 
	
                        Proliance International, Inc. Equity Incentive Plan
 	
                         
 	
                        1,456,400 shares of Common Stock 

                        authorized

          (options to acquire 386,635 shares of 

          Common Stock are currently outstanding)
 	
                         
 
	
                        1995 Stock Plan
 	
                         
 	
          339,777 shares of Common Stock authorized
 (options to acquire all 339,777 shares of 

          Common Stock are currently outstanding)
 	
                         
 
	
                        1995 Director’s Plan
 	
                         
 	
          30,800
 (options to acquire all 30,800 shares of 

          Common Stock are currently outstanding)
 	
                         
 

 

 

17

 

EXHIBIT A

See Attached Warrants

 

 

18REGISTRATION RIGHTS AGREEMENT

REGISTRATION RIGHTS AGREEMENT (this “Agreement”), dated as of March 26, 2008, by and among Proliance International, Inc., a Delaware corporation, with headquarters located at 100 Gando Drive, New Haven, Connecticut 06513 (the “Company”), and the warrantholders listed on the Schedule of Warrantholders attached hereto (each, a “Warrantholder” and collectively, the “Warrantholders”).

WHEREAS:

The Company is issuing and delivering to each Warrantholder warrants (each a “Warrant”, and collectively, together with any warrants issued in substitution therefor or replacement thereof in accordance with the terms thereof, the “Warrants”) to purchase shares of the Company’s common stock, par value $0.01 per share (the “Common Stock”) (as exercised, the “Warrant Shares”), and the Company has further agreed to provide certain registration rights under the Securities Act of 1933, as amended, and the rules and regulations
thereunder, or any similar successor statute (collectively, the “1933 Act”), and applicable state securities laws in respect of the Registrable Securities (as defined below) on the terms and subject to the conditions set forth herein.

NOW, THEREFORE, in consideration of the premises and the mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company and each of the Warrantholders hereby agree as follows:

	
                         
 	
                        1.
 	
                        Definitions. 
 

Capitalized terms used herein and not otherwise defined herein shall have the respective meanings set forth in the Warrantholder Rights Agreement, dated as of March 26, 2008 (the “Warrantholder Rights Agreement”), among the Company and the Warrantholders. As used in this Agreement, the following terms shall have the following meanings:

(a) “Additional Effective Date” means the date the Additional Registration Statement is declared effective by the SEC.

(b) “Additional Effectiveness Deadline” means the earlier of (I) the date which is sixty (60) calendar days after the earlier of the Additional Filing Date and the Additional Filing Deadline (or, in the event of a review by the SEC, ninety (90) calendar days after the earlier of the Additional Filing Date and the Additional Filing Deadline) and (II) the date which is five (5) Business Days after the Company learns that no review of the Additional Registration Statement will be made by the staff of the SEC or that the staff of the SEC has no further comments on the Additional Registration Statement.

 (c) “Additional Filing Date” means the date on which the Additional Registration Statement is filed with the SEC.

 

 

(d) “Additional Filing Deadline” means if Cutback Shares are required to be included in any Additional Registration Statement, the later of (i) the date sixty (60) days after the date substantially all of the Registrable Securities registered under the immediately preceding Registration Statement are sold and (ii) the date six (6) months from the Initial Effective Date or the last Additional Effective Date, as applicable.

(e) “Additional Registrable Securities” means, (i) any Cutback Shares not previously included on a Registration Statement and (ii) any capital stock of the Company issued or issuable with respect to the Cutback Shares as a result of any stock split, stock dividend, recapitalization, exchange or similar event or otherwise, without regard to any limitations on exercise of the Warrants.

(f) “Additional Registration Statement” means a registration statement or registration statements of the Company filed under the 1933 Act covering any Additional Registrable Securities.

(g) “Additional Required Registration Amount” means (I) (i) any Cutback Shares not previously included on a Registration Statement or (II) such other amount as may be required by the staff of the SEC pursuant to Rule 415 with any cutback applied pro rata to all Registrable Securities. 

(h) “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.

(i) “Closing Date” means March 26, 2008.

(j) “Cutback Shares” means any of the Initial Required Registration Amount or the Additional Required Registration Amount (without regard to clause (II) in the definition thereof) of Registrable Securities not included in all Registration Statements previously declared effective hereunder as a result of a limitation on the maximum number of shares of Common Stock of the Company permitted to be registered by the staff of the SEC pursuant to Rule 415.

(k) “Effective Date” means the Initial Effective Date and the Additional Effective Date, as applicable.

(l) “Effectiveness Deadline” means the Initial Effectiveness Deadline and the Additional Effectiveness Deadline, as applicable.

(m) “Filing Deadline” means the Initial Filing Deadline and the Additional Filing Deadline, as applicable.

(n) “Initial Effective Date” means the date that the Initial Registration Statement has been declared effective by the SEC.

(o) “Initial Effectiveness Deadline” means the earlier of (I) the date which is sixty (60) calendar days after the Closing Date (or, in the event of a review by the SEC, 

 

 

2

 

ninety (90) calendar days after the Closing Date) and (II) the date which is five (5) Business Days after the Company learns that no review of the Registration Statement will be made by the staff of the SEC or that the staff of the SEC has no further comments on the Registration Statement.

 (p) “Initial Filing Deadline” means thirty (30) calendar days after the Closing Date.

(q) “Initial Registrable Securities” means (i) the Warrant Shares issued or issuable upon exercise of the Warrants and (ii) any capital stock of the Company issued or issuable, with respect to the Warrant Shares and the Warrants as a result of any stock split, stock dividend, recapitalization, exchange or similar event or otherwise, without regard to any limitations on exercise of the Warrants.

(r) “Initial Registration Statement” means a registration statement or registration statements of the Company filed under the 1933 Act covering the Initial Registrable Securities.

(s) “Initial Required Registration Amount” means (i) 130% of the number of Warrant Shares issued and issuable pursuant to the Warrants as of the trading day immediately preceding the applicable date of determination, all subject to adjustment as provided in Section 2(g) (without regard to any limitations on exercise of the Warrants) or (ii) such other amount as may be required by the staff of the SEC pursuant to Rule 415 with any cutback applied pro rata to all Registrable Securities.

(t) “Investor” means any Warrantholder, any transferee or assignee thereof to whom a Warrantholder assigns its rights under this Agreement and who agrees to become bound by the provisions of this Agreement in accordance with Section 9 and any transferee or assignee thereof to whom a transferee or assignee assigns its rights under this Agreement and who agrees to become bound by the provisions of this Agreement in accordance with Section 9.

(u) “Person” means any individual, firm, partnership, corporation, trust, joint venture, association, joint stock company, limited liability company, unincorporated organization or any other entity or organization, including a government or agency or political subdivision thereof, and shall include any successor (by merger or otherwise) of such entity.

(v) “register,” “registered,” and “registration” refer to a registration effected by preparing and filing one or more Registration Statements (as defined below) in compliance with the 1933 Act and pursuant to Rule 415, and the declaration or ordering of effectiveness of such Registration Statement(s) by the SEC.

(w) “Registrable Securities” means the Initial Registrable Securities and the Additional Registrable Securities.

(x) “Registration Statement” means a registration statement or registration statements of the Company filed under the 1933 Act covering the Registrable Securities.

 

 

3

 

(y) “Required Holders” means the holders of at least a majority of the Registrable Securities.

(z) “Required Registration Amount” means either the Initial Required Registration Amount or the Additional Required Registration Amount, as applicable.

(aa) “Rule 415” means Rule 415 under the 1933 Act or any successor rule providing for offering securities on a continuous or delayed basis.

(bb) “SEC” means the United States Securities and Exchange Commission.

(cc) “Underwriters” shall mean the underwriters, if any, of the offering being registered under the 1933 Act.

(dd) “Underwritten Offering” shall mean a sale of securities of the Company to an Underwriter or Underwriters for reoffering to the public.

	
                         
 	
                        2.
 	
                        Registration.
 

(a) Initial Mandatory Registration. The Company shall prepare, and, as soon as practicable but in no event later than the Initial Filing Deadline, file with the SEC the Initial Registration Statement on Form S-3 covering the resale of all of the Initial Registrable Securities. In the event that Form S-3 is unavailable for such a registration, the Company shall use such other form as is available for such a registration on another appropriate form reasonably acceptable to the Required Holders, subject to the provisions of Section 2(f). The Initial Registration Statement prepared pursuant hereto shall register for resale at least the number of shares of Common Stock equal to the Initial Required Registration Amount determined as of the date the Initial Registration Statement is initially filed with the
SEC, subject to adjustment as provided in Section 2(g). The Initial Registration Statement shall contain (except if otherwise directly by the Required Holders) the “Selling Stockholders” and “Plan of Distribution” sections in substantially the form attached hereto as Annex I. The Company shall use its reasonable best efforts to have the Initial Registration Statement declared effective by the SEC as soon as practicable, but in no event later than the Initial Effectiveness Deadline. Promptly and in no event later than by 9:30 a.m. New York time on the first Business Day following the Initial Effective Date, the Company shall file with the SEC in accordance with Rule 424 under the 1933 Act the final prospectus to be used in connection with sales pursuant to such Initial Registration Statement.

(b) Additional Mandatory Registrations. The Company shall prepare, and, as soon as practicable but in no event later than the Additional Filing Deadline, file with the SEC an Additional Registration Statement on Form S-3 covering the resale of all of the Additional Registrable Securities not previously registered on an Additional Registration Statement hereunder. To the extent the staff of the SEC does not permit the Additional Required Registration Amount to be registered on an Additional Registration Statement, the Company shall file Additional Registration Statements successively trying to register on each such Additional Registration Statement the maximum number of remaining Additional Registrable Securities until the Additional Required Registration Amount has been registered with the SEC, 

 

 

4

 

provided that the Company shall not be required to file successive Additional Registration Statements at any time during which the SEC’s staff has prohibited the Company from making such a filing so long as the Company uses its reasonable best efforts to resolve the issue that has resulted in such prohibition as soon as possible. In the event that Form S-3 is unavailable for such a registration, the Company shall use such other form as is available for such a registration on another appropriate form reasonably acceptable to the Required Holders, subject to the provisions of Section 2(f). Each Additional Registration Statement prepared pursuant hereto shall register for resale at least that number of shares of Common Stock equal to the Additional Required Registration Amount as of the date the Additional Registration Statement is initially filed
with the SEC. Each Additional Registration Statement shall contain (except if otherwise directed by the Required Holders) the “Selling Stockholders” and “Plan of Distribution” sections in substantially the form attached hereto as Annex I. The Company shall use its reasonable best efforts to have each Additional Registration Statement declared effective by the SEC as soon as practicable, but in no event later than the Additional Effectiveness Deadline. Promptly and in no event later than by 9:30 a.m. New York time on the first Business Day following the Additional Effective Date, the Company shall file with the SEC in accordance with Rule 424 under the 1933 Act the final prospectus to be used in connection with sales pursuant to such Additional Registration Statement.

(c) Piggyback Registration. 

(i) Piggyback Rights. If any time prior to termination of this Agreement, the Company proposes to file a registration statement with the SEC with respect to an offering of equity securities, or securities or other obligations exercisable or exchangeable for, on convertible into, equity securities, for its own account or for the account of any stockholder of the Company (other than a registration statement on Form S-4 or Form S-8 or their successors or any other form for a limited similar purpose or any registration statement covering only securities proposed to be issued in exchange for securities or assets of another Person), the Company shall, at least thirty (30) days prior to such filing, give written notice to all Investors of its intention to do so and, upon the written request of any Investor
or Investors given within twenty (20) days of the receipt of such notice (which request shall state the intended method of disposition of such Registrable Securities), the Company shall use its reasonable best efforts to cause the Registrable Securities that such Investor or Investors request the Company to register to be included in such registration and shall use its reasonable best efforts to cause the managing Underwriter or Underwriters (if any) of a proposed Underwritten Offering to permit such Registrable Securities to be included in such registration on the same terms and conditions as any similar securities of the Company, in each case to the extent necessary to permit their sale or other disposition in accordance with the intended methods of distribution specified in the request of the Investors; provided that the Company shall have the right to postpone or withdraw any registration effected pursuant to this Section 2(c) without obligation to the Investors (any such
registration statement which includes Registrable Securities, a “Piggy-Back Registration Statement”).

(ii) Underwritten Offerings. In connection with any Underwritten Offering under this Section 2(c), the notice to the Investors shall state whether such offering is an Underwritten Offering and the Company shall not be required to include any Registrable Securities in such Underwritten Offering unless the Investors requesting inclusion of such 

 

 

5

 

Registrable Securities accept the terms of the underwriting as reasonably agreed upon between the Company and the managing Underwriter or Underwriters, selected by the Company. Each Investor that has requested that Registrable Securities held by it be included in such Registration Statement shall (together with the Company and the other Investors distributing the securities through such underwriting) enter into such underwriting agreement as reasonably agreed upon between the Company and the managing Underwriter or Underwriters. In connection with any Underwritten Offering under this Section 2(c), if in the reasonable and good faith opinion of the managing Underwriter or Underwriters, the registration of all, or part of, the Registrable Securities requested to be included in such registration and any other securities to be included in such registration adversely affect the marketing of the
securities offered by the Company or the holders of securities initiating such registration (the “Demanding Holders”), then: (i) in the case of an Underwritten Offering by the Company, (A) the Company shall not be cutback and (B) the Registrable Securities requested for inclusion and any other securities requested for inclusion pursuant to similar piggyback rights shall be reduced first pro rata (on an as-converted, fully-diluted basis and without giving effect to any exercise limitations contained in the Warrants) in accordance with the number of securities that each such Person has requested be included in the registration, regardless of the number of securities held by each such Person, and (ii) in the case of an Underwritten Offering by a
Demanding Holder, (A) the Demanding Holder (and other parties that are subject to the same registration rights agreement with such Demanding Holder) shall not be cutback and (B) the Registrable Securities requested for inclusion and any other securities requested for inclusion pursuant to similar piggyback rights shall be reduced first pro rata (on an as-converted, fully-diluted basis and without giving effect to any exercise limitations contained in the Warrants) in accordance with the number of securities that each such Person has requested be included in the registration, regardless of the number of securities held by each such Person. If any Investor disapproves of the terms of any such underwriting, it may elect to withdraw therefrom by written notice to the Company and the managing Underwriter.

(d) Allocation of Registrable Securities. The initial number of Registrable Securities included in any Registration Statement and each increase or decrease in the number of Registrable Securities included therein shall be allocated pro rata among the Investors based on the number of Registrable Securities held by each Investor at the time the Registration Statement covering such initial number of Registrable Securities or increase or decrease thereof is declared effective by the SEC. In the event that an Investor sells or otherwise transfers any of such Investor’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 covered by such Registration Statement shall be allocated to the remaining Investors, pro rata based on the number of Registrable Securities then held by such Investors which are covered by such Registration Statement. In no event shall the Company include any securities other than Registrable Securities on any Registration Statement without the prior written consent of the Required Holders.

(e) Legal Counsel. Subject to Section 5 hereof, the Required Holders shall have the right to select one legal counsel to review and oversee any registration pursuant to this Section 2 (“Legal Counsel”), which shall be Schulte Roth & Zabel LLP or such other counsel as thereafter designated by the Required Holders. The Company and Legal Counsel shall reasonably cooperate with each other in performing the Company’s obligations under this Agreement.

 

 

6

 

(f) Ineligibility for Form S-3. In the event that Form S-3 is not available for the registration of the resale of Registrable Securities hereunder, the Company shall (i) register the resale of the Registrable Securities on another appropriate form reasonably acceptable to the Required Holders and (ii) undertake to register the Registrable Securities on Form S-3 as soon as such form is available, provided that the Company shall maintain the effectiveness of the Registration Statement then in effect until such time as a Registration Statement on Form S-3 covering the Registrable Securities has been declared effective by the SEC.

(g) Sufficient Number of Shares Registered. In the event the number of shares available under a Registration Statement filed pursuant to Section 2(a) or Section 2(b) is insufficient to cover all of the Registrable Securities required to be covered by such Registration Statement or an Investor’s allocated portion of the Registrable Securities pursuant to Section 2(d), the Company shall amend the applicable Registration Statement, or file a new Registration Statement (on the short form available therefor, if applicable), or both, so as to cover at least the Required Registration Amount as of the trading day immediately preceding the date of the filing of such amendment or new Registration Statement, in each case, as soon as practicable, but in any event not later than fifteen (15) days after the
necessity therefor arises. The Company shall use its reasonable best efforts to cause such amendment and/or new Registration Statement to become effective as soon as practicable following the filing thereof. For purposes of the foregoing provision, the number of shares available under a Registration Statement shall be deemed “insufficient to cover all of the Registrable Securities” if at any time the number of shares of Common Stock available for resale under such Registration Statement is less than the number of Registrable Securities. The calculation set forth in the foregoing sentence shall be made without regard to any limitations on the exercise of the Warrants and such calculation shall assume that the Warrants are then exercisable into shares of Common Stock.

(h) Effect of Failure to File and Obtain and Maintain Effectiveness of Registration Statement. If (i) a Registration Statement covering all the Registrable Securities required to be covered thereby and required to be filed by the Company pursuant to this Agreement is (A) not filed with the SEC on or before the respective Filing Deadline (a “Filing Failure”) or (B) not declared effective by the SEC on or before the respective Effectiveness Deadline (an “Effectiveness Failure”) or (ii) on any day after the respective Effective Date sales of all the Registrable Securities included on such Registration Statement cannot be made
(other than during an Allowable Grace Period (as defined in Section 3(r)) pursuant to such Registration Statement or otherwise (including, without limitation, because of a failure to keep such Registration Statement effective, to disclose such information as is necessary for sales to be made pursuant to such Registration Statement, to register a sufficient number of shares of Common Stock or to maintain the listing of the Common Stock) (a “Maintenance Failure”) then, as partial relief for the damages to any holder by reason of any such delay in or reduction of its ability to sell the underlying shares of Common Stock (which remedy shall not be exclusive of any other remedies available at law or in equity), (A) the Company shall pay to each holder of Registrable Securities relating to such Registration Statement an amount in cash equal to one and 

 

 

7

 

one-half percent (1.5%) of the product of (x) the Market Price (as such term is defined in the Warrant) of such Investor’s Registrable Securities whether or not included in such Registration Statement and (y) the number of such Investor’s Registrable Securities whether or not included in such Registration Statement, on each of the following dates: (i) the day of a Filing Failure and on every thirtieth day (pro rated for periods totaling less than thirty (30) days) thereafter until such Filing Failure is cured; (ii) the day of an Effectiveness Failure and on every thirtieth day (pro rated for periods totaling less than thirty (30) days) thereafter until such Effectiveness Failure is cured; and (iii) the initial day of a Maintenance Failure and on every thirtieth day (pro rated for periods totaling less than thirty (30) days) thereafter until such Maintenance Failure is cured. The
payments to which a holder shall be entitled pursuant to this Section 2(h) are referred to herein as “Registration Delay Payments.”  Registration Delay Payments shall be paid on the earlier of (I) the dates set forth above and (II) the third Business Day after the event or failure giving rise to the Registration Delay Payments is cured. In the event the Company fails to make Registration Delay Payments in a timely manner, such Registration Delay Payments shall bear interest at the rate of one and one-half percent (1.5%) per month (prorated for partial months) until paid in full.

 (i) Public Information. At any time during the period commencing on the six (6) month anniversary of the Closing Date and ending at such time that all of the Registrable Securities can be sold without the requirement to be in compliance with Rule 144(c)(1) and otherwise without restriction or limitation pursuant to Rule 144, if the Company shall fail for any reason to satisfy the current public information requirement under Rule 144 (a “Public Information Failure”) then, as partial relief for the damages to any Investor by reason of any such delay in or reduction of its ability to sell the Registrable Securities (which remedy shall not be exclusive of any other remedies available at law or in equity), the
Company shall pay to each such Investor an amount in cash equal to one and one-half percent (1.5%) of the product of (x) the Market Price of such Investor’s Registrable Securities and (y) the number of such Investor’s Registrable Securities, on the day of a Public Information Failure and on every thirtieth day (pro rated for periods totaling less than thirty days) thereafter until the earlier of (i) the date such Public Information Failure is cured and (ii) such time that such public information is no longer required pursuant to Rule 144. The payments to which an Investor shall be entitled pursuant to this Section 2(i) are referred to herein as “Public Information Failure Payments.”  Public Information Failure Payments shall be paid on the earlier of (I) the last day of the calendar month during which such Public Information Failure Payments are incurred and (II) the third Business Day
after the event or failure giving rise to the Public Information Failure Payments is cured. In the event the Company fails to make Public Information Failure Payments in a timely manner, such Public Information Failure Payments shall bear interest at the rate of 1.5% per month (prorated for partial months) until paid in full. 

(j) Failure Payments Non-Cumulative. Notwithstanding the provisions of Section 2(h) and 2(i), in the event that more than one of a Filing Failure, Effectiveness Failure, Maintenance Failure and/or Public Information Failure occur simultaneously, the Company shall not be required to pay and the Holders shall not be entitled to receive either Registration Delay Payments or Public Information Failure Payments (as the case may be) with respect to more than one such failure during any particular time period.

 

 

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                        3.
 	
                        Related Obligations.
 

At such time as the Company is obligated to file a Registration Statement with the SEC pursuant to Section 2(a), 2(b), 2(c), 2(f) or 2(g), the Company will use its reasonable best 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:

(a) The Company shall promptly prepare and file with the SEC a Registration Statement with respect to the Registrable Securities and use its reasonable best efforts to cause such Registration Statement relating to the Registrable Securities to become effective as soon as practicable after such filing (but in no event later than the Effectiveness Deadline). The Company shall submit to the SEC, within two (2) Business Days after the Company learns that no review of a particular Registration Statement will be made by the staff of the SEC or that the staff of the SEC has no further comments on a particular Registration Statement, as the case may be, a request for acceleration of effectiveness of such Registration Statement to a time and date not later than 48 hours after the submission of such request. The Company shall keep each Registration Statement effective pursuant to Rule
415 at all times until the date on which the Investors shall have sold all the Registrable Securities covered by such Registration Statement pursuant to such Registration Statement or pursuant to Rule 144 under the Securities Act (the “Registration Period”). The Company shall ensure that each Registration Statement (including any amendments or supplements thereto and prospectuses contained therein) shall not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein, or necessary to make the statements therein (in the case of prospectuses, in the light of the circumstances in which they were made) not misleading. The Company shall respond in writing to comments made by the SEC in respect of a Registration Statement as soon as practicable, but in no event later than fifteen (15) days after the receipt of comments by or notice from the SEC that an
amendment is required in order for a Registration Statement to be declared effective.

(b) 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 1933 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 1933 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
which are required to be filed pursuant to this Agreement (including pursuant to this Section 3(b)) 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 Securities Exchange Act of 1934, as amended (the “1934 Act”), the Company shall have incorporated such report by reference into such Registration Statement, if applicable, or shall file such amendments or supplements with the SEC on the same day on which the 1934 Act report is filed which created the requirement for the Company to amend or supplement such Registration Statement.

 

 

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(c) The Company shall (A) permit Legal Counsel to review and comment upon (i) a Registration Statement at least five (5) Business Days prior to its filing with the SEC and (ii) all amendments and supplements to all Registration Statements (except for Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and any similar or successor reports) within a reasonable number of days prior to their filing with the SEC, and (B) not file any Registration Statement or amendment or supplement thereto 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 consent shall not be unreasonably withheld. The Company shall furnish to Legal Counsel, without charge, (i) copies
of any correspondence from the SEC or the staff of the SEC to the Company or its representatives relating to any Registration Statement, (ii) 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, if requested by an Investor, and all exhibits and (iii) upon the effectiveness of any Registration Statement, one copy of the prospectus included in such Registration Statement and all amendments and supplements thereto. The Company shall reasonably cooperate with Legal Counsel in performing the Company’s obligations pursuant to this Section 3.

(d) The Company shall furnish to each Investor whose Registrable Securities are included in any Registration Statement, without charge,  (i) 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, if requested by an Investor and not otherwise available on the EDGAR system, all exhibits and each preliminary prospectus, (ii) 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 Investor may reasonably request) and (iii) such other documents, including copies of any preliminary or final prospectus, as such Investor may reasonably request from time to
time in order to facilitate the disposition of the Registrable Securities owned by such Investor.

(e) The Company shall use its reasonable best efforts to (i) register and qualify, unless an exemption from registration and qualification applies, the resale by Investors of the Registrable Securities covered by a Registration Statement under such other securities or “blue sky” laws of all applicable jurisdictions in the United States, (ii) 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, (iii) take such other actions as may be necessary to maintain such registrations and qualifications in effect at all times during the Registration Period, and (iv) 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 3(e), (y) subject itself to general taxation in any such jurisdiction, or (z) file a general 

 

 

10

 

consent to service of process in any such jurisdiction. The Company shall promptly notify Legal Counsel and each Investor 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.

(f) The Company shall notify Legal Counsel and each Investor in writing of the happening of any event, as promptly as practicable after becoming aware of such 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 the light of the circumstances under which they were made, not misleading (provided that in no event shall such notice contain any material, nonpublic information), and, subject to Section 3(r), 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 Investor (or such other number of copies as Legal Counsel or such
Investor may reasonably request). The Company shall also promptly notify Legal Counsel and each Investor in writing (i) 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 Investor by facsimile on the same day of such effectiveness and by overnight mail), (ii) of any request by the SEC for amendments or supplements to a Registration Statement or related prospectus or related information, and (iii) of the Company’s reasonable determination that a post-effective amendment to a Registration Statement would be appropriate. Promptly and in no event later than by 9:30 a.m. New York City time on the first Business Day following the date any post-effective amendment has become effective, the Company shall file with the SEC in accordance with Rule 424 under the 1933 Act the final
prospectus to be used in connection with sales pursuant to such Registration Statement.

(g) The Company shall use its reasonable best 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 Investor who holds Registrable Securities being sold 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.

(h) If any Investor is required under applicable securities laws to be described in the Registration Statement as an underwriter or an Investor believes that it could reasonably be deemed to be an underwriter of Registrable Securities, at the reasonable request of such Investor, the Company shall furnish to such Investor, on the date of the effectiveness of the Registration Statement and thereafter from time to time on such dates as an Investor may reasonably request (i) 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 Investors, and (ii) 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 Investors.

 

 

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(i) If any Investor is required under applicable securities laws to be described in the Registration Statement as an underwriter or an Investor believes that it could reasonably be deemed to be an underwriter of Registrable Securities, the Company shall make available for inspection by (i) such Investor, (ii) Legal Counsel and (iii) one firm of accountants or other agents retained by the Investors (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 Inspector, and cause the Company’s officers, directors and employees to supply all
information which any Inspector may reasonably request; provided, however, that each Inspector shall agree to hold in strict confidence and shall not make any disclosure (except to an Investor) 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 (a) 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 1933 Act, (b) 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 (c) the information in such Records has been made generally available to the public other than by disclosure in violation of this Agreement. Each Investor 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. Nothing herein (or in any other confidentiality agreement between the Company and any Investor) shall be deemed to limit the Investors’ ability to sell Registrable Securities in a manner which is otherwise consistent with applicable laws and regulations.

(j) The Company shall hold in confidence and not make any disclosure of information concerning an Investor provided to the Company unless (i) disclosure of such information is necessary to comply with federal or state securities laws, (ii) the disclosure of such information is necessary to avoid or correct a misstatement or omission in any Registration Statement, (iii) 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 an Investor is sought in or by a court or governmental body of competent jurisdiction or through other
means, give prompt written notice to such Investor and allow such Investor, at the Investor’s expense, to undertake appropriate action to prevent disclosure of, or to obtain a protective order for, such information.

(k) The Company shall use its reasonable best efforts either to (i) 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 (ii) secure the inclusion for quotation of all of the Registrable Securities on the American Stock Exchange, and, without limiting the generality of the foregoing, to use its 

 

 

12

 

reasonable best efforts to arrange for at least two market makers to register with the National Association of Securities Dealers, Inc. (“NASD”) 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 3(k).

(l) The Company shall cooperate with the Investors who hold Registrable Securities being offered and, to the extent applicable, 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 Investors may reasonably request and registered in such names as the Investors may request.

(m) If requested by an Investor, the Company shall as soon as practicable (i) incorporate in a prospectus supplement or post-effective amendment such information as an Investor reasonably requests to 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 offered or sold, the purchase price being paid therefor and any other terms of the offering of the Registrable Securities to be sold in such offering; (ii) make all required filings of such prospectus supplement or post-effective amendment after being notified of the matters to be incorporated in such prospectus supplement or post-effective amendment; and (iii) supplement or make amendments to any Registration Statement if reasonably requested by an Investor holding any Registrable Securities.

(n) The Company shall use its reasonable best efforts to cause the Registrable Securities covered by a Registration Statement to be registered with or approved by such other governmental agencies or authorities as may be necessary to consummate the disposition of such Registrable Securities.

(o) The Company shall make generally available to its security holders as soon as practical, but not later than ninety (90) days after the close of the period covered thereby, an earnings statement (in form complying with, and in the manner provided by, the provisions of Rule 158 under the 1933 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 a Registration Statement.

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

(q) Within two (2) Business Days after a Registration Statement which covers 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 Investors whose Registrable Securities are included in such Registration Statement) confirmation that such Registration Statement has been declared effective by the SEC in the form attached hereto as Exhibit A.

 

 

13

 

(r) Notwithstanding anything to the contrary herein, at any time after the Effective Date, 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 (i) notify the Investors in writing of the existence of material, non-public information giving rise to a Grace Period in conformity with the provisions of this Section 3(r) (provided that in each notice the Company will not disclose the content of such material, non-public information to the Investors) and the date on
which the Grace Period will begin, and (ii) notify the Investors in writing of the date on which the Grace Period ends; and, provided further, that no Grace Period shall exceed twenty (20) consecutive days and during any three hundred sixty five (365) day period such Grace Periods shall not exceed an aggregate of forty-five (45) days and the first day of any Grace Period must be at least two (2) trading days after the last day of any prior Grace Period (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 Investors receive the notice referred to in clause (i) and shall end on and include the later of the date the Investors receive the notice referred to in clause (ii) and the date referred to in such notice. The provisions of Section 3(g) hereof shall not be applicable during the period of any
Allowable Grace Period. Upon expiration of the Grace Period, the Company shall again be bound by the first sentence of Section 3(f) with respect to the information giving rise thereto unless such material, non-public information is no longer applicable. Notwithstanding anything to the contrary, the Company shall cause its transfer agent to deliver unlegended shares of Common Stock to a transferee of an Investor in accordance with the terms of the Warrant and the Warrantholder Rights Agreement in connection with any sale of Registrable Securities with respect to which an Investor has entered into a contract for sale prior to the Investor’s receipt of the notice of a Grace Period and for which the Investor has not yet settled. 

(s) Neither the Company nor any subsidiary or affiliate thereof shall identify any Investor as an underwriter in any public disclosure or filing with the SEC or any Principal Market (as defined in the Warrant) or Eligible Market (as defined in the Warrant) and any Investor being deemed an underwriter by the SEC shall not relieve the Company of any obligations it has under this Agreement or any other Transaction Document (as defined in the Warrant); provided, however, that the foregoing shall not prohibit the Company from including the disclosure found in the “Plan of Distribution” section attached hereto as Annex I in the Registration Statement. 

	
                         
 	
                        4.
 	
                        Obligations of the Investors.
 

(a) At least five (5) Business Days prior to the first anticipated filing date of a Registration Statement, the Company shall notify each Investor in writing of the information the Company requires from each such Investor if such Investor elects to have any of such Investor’s Registrable Securities included in such Registration Statement. It shall be a condition precedent to the obligations of the Company to complete any registration pursuant to this Agreement with respect to the Registrable Securities of a particular Investor that such Investor 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 effectiveness of the registration of such Registrable Securities and shall execute such documents in
connection with such registration as the Company may reasonably request. 

 

 

14

 

(b) Each Investor, by such Investor’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 Investor has notified the Company in writing of such Investor’s election to exclude all of such Investor’s Registrable Securities from such Registration Statement.

(c) Each Investor agrees that, upon receipt of any notice from the Company of the happening of any event of the kind described in Section 3(g) or the first sentence of 3(f), such Investor will immediately discontinue disposition of Registrable Securities pursuant to any Registration Statement(s) covering such Registrable Securities until such Investor’s receipt of copies of the supplemented or amended prospectus as contemplated by Section 3(g) or the first sentence of 3(f) or receipt of notice that no supplement or amendment is required. Notwithstanding anything to the contrary, the Company shall cause its transfer agent to deliver unlegended shares of Common Stock to a transferee of an Investor in accordance with the terms of the Warrant and the Warrantholder Rights Agreement in connection with any sale of Registrable Securities with respect to which an Investor has
entered into a contract for sale prior to the Investor’s receipt of a notice from the Company of the happening of any event of the kind described in Section 3(g) or the first sentence of 3(f) and for which the Investor has not yet settled.

(d) Each Investor covenants and agrees that it will comply with the prospectus delivery requirements of the 1933 Act as applicable to it or an exemption therefrom in connection with sales of Registrable Securities pursuant to the Registration Statement.

	
                         
 	
                        5.
 	
                        Expenses of Registration.
 

All reasonable expenses, other than underwriting discounts and commissions, incurred in connection with any registrations, filings or qualifications pursuant to Section 2 or Section 3, including, without limitation, all registration, listing and qualifications fees, printers and accounting fees, and fees and disbursements of counsel for the Company shall be paid by the Company. The Company shall also reimburse the Investors for all of the reasonable and documented fees and disbursements of Legal Counsel in connection with any registrations, filings or qualifications pursuant to Section 2 or Section 3 of this Agreement which amount shall be limited to $25,000 for each such registration, filing or qualification.

	
                         
 	
                        6.
 	
                        Indemnification.
 

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

(a) To the fullest extent permitted by law, the Company will, and hereby does, indemnify, hold harmless and defend each Investor, the directors, officers, managers, partners, members, employees, agents, representatives of, and each Person, if any, who controls any Investor within the meaning of the 1933 Act or the 1934 Act (each, an “Indemnified Person”), against any losses, claims, damages, liabilities, judgments, fines,

 

 

15

 

penalties, charges, costs, reasonable 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, 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:  (i) 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, (ii) 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
the light of the circumstances under which the statements therein were made, not misleading, (iii) any violation or alleged violation by the Company of the 1933 Act, the 1934 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 (iv) any violation of this Agreement (the matters in the foregoing clauses (i) through (iv) being, collectively, “Violations”). Subject to Section 6(c), the Company shall reimburse the Indemnified Persons, 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 6(a):
(i) 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 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 3(d); and (ii) 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 or delayed. 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 Investors pursuant to Section 9.

(b) In connection with any Registration Statement in which an Investor is participating, each such Investor 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 6(a), the Company, each of its directors, each of its officers who signs the Registration Statement and each Person, if any, who controls the Company within the meaning of the 1933 Act or the 1934 Act (each, an “Indemnified Party”), against any Claim or Indemnified Damages to which any of them may become subject, under the 1933 Act, the 1934 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 

 

 

16

 

information furnished to the Company by such Investor expressly for use in connection with such Registration Statement; and, subject to Section 6(c), such Investor will reimburse any legal or other expenses reasonably incurred by an Indemnified Party in connection with investigating or defending any such Claim; provided, however, that the indemnity agreement contained in this Section 6(b) and the agreement with respect to contribution contained in Section 7 shall not apply to amounts paid in settlement of any Claim if such settlement is effected without the prior written consent of such Investor, which consent shall not be unreasonably withheld or delayed; provided, further, however, that an Investor shall be liable under this Section 6(b) for only that amount of a Claim or Indemnified Damages as does not exceed the net proceeds to such Investor 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 Investors pursuant to Section 9. 

(c) Promptly after receipt by an Indemnified Person or Indemnified Party under this Section 6 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 6, 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 of not more than one counsel for all such Indemnified Person or Indemnified Party to be paid by the indemnifying party, if, in the reasonable opinion of the Indemnified Person or the Indemnified Party, as the case may be, 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. In the case of an Indemnified Person, legal counsel referred to in the immediately preceding sentence shall be selected by the Investors holding at least 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 reasonably 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 prior written consent, provided, however, that the indemnifying party shall not unreasonably withhold, delay or condition its consent. No indemnifying party shall, without the prior written 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 and such settlement shall not include any admission as to fault on the part of the Indemnified Party. 

 

 

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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 6, except to the extent that the indemnifying party is prejudiced in its ability to defend such action.

(d) The indemnification required by this Section 6 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.

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

	
                         
 	
                        7.
 	
                        Contribution.
 

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 6 to the fullest extent permitted by law; provided, however, that:  (i) no Person involved in the sale of Registrable Securities which Person is guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the 1933 Act) in connection with such sale shall be entitled to contribution from any Person involved in such sale 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 amount of net proceeds received by such seller from the sale of such Registrable Securities pursuant to such Registration Statement.

	
                         
 	
                        8.
 	
                        Reports Under the 1934 Act. 
 

With a view to making available to the Investors the benefits of Rule 144 promulgated under the 1933 Act or any other similar rule or regulation of the SEC that may at any time permit the Investors to sell securities of the Company to the public without registration (“Rule 144”), the Company agrees to:

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

(b) file with the SEC in a timely manner all reports and other documents required of the Company under the 1933 Act and the 1934 Act so long as the Company remains subject to such requirements and the filing of such reports and other documents is required for the applicable provisions of Rule 144; and

(c) furnish to each Investor so long as such Investor owns Registrable Securities, promptly upon request, (i) a written statement by the Company, if true, that it has complied with the reporting requirements of Rule 144, the 1933 Act and the 1934 Act, (ii) a copy

 

 

18

 

of the most recent annual or quarterly report of the Company and such other reports and documents so filed by the Company, and (iii) such other information as may be reasonably requested to permit the Investors to sell such securities pursuant to Rule 144 without registration.

	
                         
 	
                        9.
 	
                        Assignment of Registration Rights. 
 

The rights under this Agreement shall be automatically assignable by the Investors to any transferee of all or any portion of such Investor’s Registrable Securities if:  (i) the Investor 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; (ii) the Company is, within a reasonable time after such transfer or assignment, furnished with written notice of (a) the name and address of such transferee or assignee, and (b) the securities with respect to which such registration rights are being transferred or assigned; (iii) immediately following such transfer or assignment the further disposition of such securities by the transferee or assignee is restricted under the 1933 Act or applicable state securities laws; (iv) at or before the time the Company
receives the written notice contemplated by clause (ii) of this sentence the transferee or assignee agrees in writing with the Company to be bound by all of the provisions contained herein; and (v) such transfer shall have been made in accordance with the applicable requirements of the Warrantholder Rights Agreement.

	
                         
 	
                        10.
 	
                        Amendment of Registration Rights.
 

Provisions of this Agreement may be amended and the observance thereof may be waived (either generally or in a particular instance and either retroactively or prospectively), only with the written consent of the Company and the Required Holders. Any amendment or waiver effected in accordance with this Section 10 shall be binding upon each Investor and the Company. No such amendment shall be effective to the extent that it applies to less than all of the holders of the Registrable Securities. No consideration shall be offered or paid to any Person to amend or consent to a waiver or modification of any provision of this Agreement unless the same consideration also is offered to all of the parties to this Agreement.

	
                         
 	
                        11.
 	
                        Miscellaneous.
 

(a) A Person is deemed to be a holder of Registrable Securities whenever such Person owns or is deemed to own of record such Registrable Securities. If the Company receives conflicting instructions, notices or elections from two or more Persons with respect to the same Registrable Securities, the Company shall act upon the basis of instructions, notice or election received from the record owner of such Registrable Securities.

(b) Any notices, consents, waivers or other communications required or permitted to be given under the terms of this Agreement must be in writing and will be deemed to have been delivered:  (i) upon receipt, when delivered personally; (ii) upon receipt, when sent by facsimile (provided confirmation of transmission is mechanically or electronically generated and kept on file by the sending party); or (iii) one Business Day after deposit with a nationally recognized overnight delivery service, in each case properly addressed to the party to receive the same. The addresses and facsimile numbers for such communications shall be:

 

 

19

 

If to the Company:  

c/o Proliance International, Inc.

100 Gando Drive

New Haven, Connecticut 06513

Attention: Richard A. Wisot

Facsimile: 203-401-6470

If to Legal Counsel:

Schulte Roth & Zabel LLP

919 Third Avenue

New York, New York  10022

Attention: Frederic L. Ragucci, Esq.

Telecopier: (212) 593-5955

If to a Warrantholder, to its address and facsimile number set forth on the Schedule of Warrantholders attached hereto, with copies to such Warrantholder’s representatives as set forth on the Schedule of Warrantholders, or to such other address and/or facsimile number and/or to the attention of such other Person as the recipient party has specified by written notice given to each other party five (5) days prior to the effectiveness of such change. Written confirmation of receipt (A) given by the recipient of such notice, consent, waiver or other communication, (B) mechanically or electronically generated by the sender’s facsimile machine containing the time, date, recipient facsimile number and an image of the first page of such transmission or (C) provided by a courier or overnight courier service shall be rebuttable evidence of personal service, receipt by facsimile or receipt from
a nationally recognized overnight delivery service in accordance with clause (i), (ii) or (iii) above, respectively.

(c) Failure of any party to exercise any right or remedy under this Agreement or otherwise, or delay by a party in exercising such right or remedy, shall not operate as a waiver thereof.

(d) All questions concerning the construction, validity, enforcement and interpretation of this Agreement shall be governed by the internal laws of the State of New York, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of New York or any other jurisdictions) that would cause the application of the laws of any jurisdictions other than the State of New York. Each party hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in The City of New York, Borough of Manhattan, for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein, and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such
suit, action or proceeding is brought in an inconvenient forum or that the venue of such suit, action or proceeding is improper. Each party hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof to such party at the address for such notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any

 

 

20

 

way any right to serve process in any manner permitted by law. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION HEREWITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.

(e) This Agreement, the Warrant, the Warrantholder Rights Agreement, the Credit Agreement (as defined in the Warrant) and the Second Amendment to Credit Agreement (as defined in the Warrant) (collectively, the “Other Agreements”) and the instruments referenced herein and therein constitute the entire agreement among the parties hereto with respect to the subject matter hereof. There are no restrictions, promises, warranties or undertakings with respect to the subject matter hereof, other than those set forth or referred to herein and in the Other Agreements. This Agreement, the Other Agreements and the instruments referenced herein and therein supersede all prior agreements and understandings among the parties hereto with respect to the subject matter hereof.

(f) Subject to the requirements of Section 9, this Agreement shall inure to the benefit of and be binding upon the permitted successors and permitted assigns of each of the parties hereto.

(g) The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof.

(h) This Agreement may be executed in identical counterparts, each of which shall be deemed an original but all of which shall constitute one and the same agreement. This Agreement, once executed by a party, may be delivered to the other party hereto by facsimile transmission of a copy of this Agreement bearing the signature of the party so delivering this Agreement.

(i) Each party shall do and perform, or cause to be done and performed, all such further acts and things, and shall execute and deliver all such other agreements, certificates, instruments and documents, as any other party may reasonably request in order to carry out the intent and accomplish the purposes of this Agreement and the consummation of the transactions contemplated hereby.

(j) All consents and other determinations required to be made by the Investors pursuant to this Agreement shall be made, unless otherwise specified in this Agreement, by the Required Holders, determined as if all of the Warrants held by Investors then outstanding have been exercised for Registrable Securities without regard to any limitations on exercise of the Warrants. 

(k) The language used in this Agreement will be deemed to be the language chosen by the parties to express their mutual intent and no rules of strict construction will be applied against any party. 

(l) This Agreement is intended for the benefit of the parties hereto and their respective permitted successors and permitted assigns, and is not for the benefit of, nor may any provision hereof be enforced by, any other Person.

 

 

21

 

(m) If any provision of this Agreement is prohibited by law or otherwise determined to be invalid or unenforceable by a court of competent jurisdiction, the provision that would otherwise be prohibited, invalid or unenforceable shall be deemed amended to apply to the broadest extent that it would be valid and enforceable, and the invalidity or unenforceability of such provision shall not affect the validity of the remaining provisions of this Agreement so long as this Agreement as so modified continues to express, without material change, the original intentions of the parties as to the subject matter hereof and the prohibited nature, invalidity or unenforceability of the provision(s) in question does not substantially impair the respective expectations or reciprocal obligations of the parties or the practical realization of the benefits that would otherwise be conferred upon
the parties. The parties will endeavor in good faith negotiations to replace the prohibited, invalid or unenforceable provision(s) with a valid provision(s), the effect of which comes as close as possible to that of the prohibited, invalid or unenforceable provision(s).

(n) The obligations of each Warrantholder hereunder are several and not joint with the obligations of any other Warrantholder, and no provision of this Agreement is intended to confer any obligations on any Warrantholder vis-à-vis any other Warrantholder. Nothing contained herein, and no action taken by any Warrantholder pursuant hereto, shall be deemed to constitute the Warrantholders as a partnership, an association, a joint venture or any other kind of entity, or create a presumption that the Warrantholders are in any way acting in concert or as a group with respect to such obligations or the transactions contemplated herein.

* * * * * *

 

 

22

 

IN WITNESS WHEREOF, each Warrantholder and the Company have caused their respective signature page to this Registration Rights Agreement to be duly executed as of the date first written above.

 

	
                         
 	
                         
 	
                        COMPANY:
 
	
                         
 	
                         
 	
                        
 PROLIANCE INTERNATIONAL, INC.
 
	
                          
 	
                         
 	
                        By: 
 	
                        
 /s/ Arlen F. Henock
 
	
                         
 	
                         
 	
                         
 	
                        Name: Arlen F. Henock
 
	
                         
 	
                         
 	
                         
 	
                        Title: Executive Vice President, Chief Financial Officer
 

 

IN WITNESS WHEREOF, each Warrantholder and the Company have caused their respective signature page to this Registration Rights Agreement to be duly executed as of the date first written above.

 

	
                         
 	
                         
 	
                        WARRANTHOLDERS:
 
	
                         
 	
                         
 	
                        
 SPCP Group, LLC
 
	
                          
 	
                         
 	
                        By: 
 	
                        
 /s/ Zachary M. Zeitlin
 
	
                         
 	
                         
 	
                         
 	
                        Name: Zachary M. Zeitlin
 
	
                         
 	
                         
 	
                         
 	
                        Title: Authorized Signatory
 

 

	
                         
 	
                         
 	
                        
 SPCP Group III, LLC
 
	 	 	 	 
	
                          
 	
                         
 	
                        By:
 	
                        /s/ Zachary M. Zeitlin
 
	
                         
 	
                         
 	
                         
 	
                        Name: Zachary M. Zeitlin
 
	
                         
 	
                         
 	
                         
 	
                        Title: Authorized Signatory
 

 

SCHEDULE OF WARRANTHOLDERS

 

	
      Warrantholder
 	
       
 	
                        Warrantholder Address

        and Facsimile Number
 	
       
 	
                        Warrantholder’s Representative’s 

                          Address 

      and Facsimile Number
 
	
                        SPCP Group, LLC

             
 	
                         
 	
                        SPCP Group, LLC
 Two Greenwich Plaza
 Greenwich, Connecticut 06830
 Attention: Portfolio Manager - Proliance
 Facsimile: 203-542-4550
 	
                         
 	
                        Schulte Roth & Zabel LLP
 919 Third Avenue
 New York, New York 10022
 Attention: Frederic L. Ragucci, Esq.
 Facsimile: (212) 593-5955
 Telephone: (212) 756-2000
 
	
                        SPCP Group III, LLC
 	
                         
 	
                        SPCP Group III, LLC
 Two Greenwich Plaza
 Greenwich, Connecticut 06830
 Attention: Portfolio Manager - Proliance
 Facsimile: 203-542-4550
 	
                         
 	
                        Schulte Roth & Zabel LLP
 919 Third Avenue
 New York, New York 10022
 Attention: Frederic L. Ragucci, Esq.
 Facsimile: (212) 593-5955
 Telephone: (212) 756-2000
 

 

EXHIBIT A

FORM OF NOTICE OF EFFECTIVENESS

OF REGISTRATION STATEMENT

[Transfer Agent]

[Address]

Attention:

	
                        Re:
 	
                        Proliance International, Inc.
 

Ladies and Gentlemen:

We are counsel to Proliance International, Inc., a Delaware corporation (the “Company”), and have represented the Company in connection with that certain Warrantholder Rights Agreement, dated as of March 26, 2008 (the “Agreement”), entered into by and among SPCP Group, LLC, SPCP Group III, LLC (each a “Holder” and collectively the “Holders”; the Holders collectively with their successors and assigns, the “Warrantholders”), and the Company pursuant to which the Company issued to each Holder warrants (the “Warrants”) exercisable for shares of the Company’s Common Stock, par value $0.01 per share (the “Common Stock”). Pursuant to the Agreement, the Company also has entered into a Registration Rights Agreement with the Holders (the “Registration Rights Agreement”) pursuant to which the Company agreed, among other things, to register the resale of the Registrable Securities (as defined in the Registration Rights Agreement), including the shares of Common Stock issuable upon exercise of the Warrants under the Securities Act of 1933, as amended (the “1933 Act”). In connection with the Company’s obligations under the Registration Rights Agreement, on ____________ ___, 2008, the Company filed a Registration Statement on Form S-3 (File No. 333-_____________) (the “Registration Statement”) with the Securities and Exchange Commission (the “SEC”) relating to the Registrable Securities which names each of the Warrantholders as a selling stockholder thereunder. 

In connection with the foregoing, we advise you that a member of the SEC’s staff has advised us by telephone that the SEC has entered an order declaring the Registration Statement effective under the 1933 Act at [ENTER TIME OF EFFECTIVENESS] on [ENTER DATE OF EFFECTIVENESS] and we have no knowledge, after telephonic inquiry of a member of the SEC’s staff, that any stop order suspending its effectiveness has been issued or that any proceedings for that purpose are pending before, or threatened by, the SEC, and the Registrable Securities are available for resale under the 1933 Act pursuant to the Registration Statement.

This letter shall serve as our standing instruction to you that the shares of Common Stock are freely transferable by the Warrantholders pursuant to the Registration Statement. You need not require further letters from us to effect any future legend-free issuance or reissuance of shares of Common Stock to the Warrantholders. 

 

	
                         
 	
                         
 	
                         
 	
                        Very truly yours,
 
 [ISSUER’S COUNSEL]
 
	
                          
 	
                         
 	
                         
 	
                        
 By: 
 	
                         
 
	
                         
 	
                         
 	
                         
 	
                         
 

 

CC: [LIST NAMES OF HOLDERS]

 

 

A-1

 

ANNEX I

SELLING STOCKHOLDERS

The shares of common stock being offered by the selling stockholders are those issuable to the selling stockholders upon exercise of the warrants. For additional information regarding the issuance of the warrants, see “Private Placement of Warrants” above. We are registering the shares of common stock in order to permit the selling stockholders to offer the shares for resale from time to time. Except for the credit agreement, the credit documents related thereto and ownership of the warrants, the selling stockholders have not had any material relationship with us within the past three years.

The table below lists the selling stockholders and other information regarding the beneficial ownership of the shares of common stock by each of the selling stockholders. The second column lists the number of shares of common stock beneficially owned by each selling stockholder, based on its ownership of the warrants, as of [________], 2008, assuming exercise of the warrants held by the selling stockholders on that date, without regard to any limitations on exercise.

The third column lists the shares of common stock being offered by this prospectus by the selling stockholders.

In accordance with the terms of a registration rights agreement with the selling stockholders, this prospectus generally covers the resale of at least 130% of the number of shares of common stock issuable upon exercise of the related warrants, determined as if the outstanding warrants were exercised, as applicable, in full, as of the trading day immediately preceding the date this registration statement was initially filed with the SEC. The fourth column assumes the sale of all of the shares offered by the selling stockholders pursuant to this prospectus.

Under the terms of the warrants, a selling stockholder may not exercise the warrants, to the extent such exercise would cause such selling stockholder, together with its affiliates, to beneficially own a number of shares of common stock which would exceed 4.99% of our then outstanding shares of common stock following such exercise, excluding for purposes of such determination shares of common stock issuable upon exercise of the warrants which have not been exercised. The number of shares in the second column does not reflect this limitation. The selling stockholders may sell all, some or none of their shares in this offering. See “Plan of Distribution.”

 

 

I-1

 

 

	
      Name of Selling Stockholder
 	
       
 	
                        Number of Shares of

                        Common Stock Owned Prior 

      to Offering
 	
       
 	
                        Maximum Number of Shares of

                          Common Stock to be Sold

      Pursuant to this Prospectus
 	
       
 	
                        Number of Shares of 

                          Common Stock Owned 

      After Offering
 
	
                        SPCP Group, LLC (1)
 	
                         
 	
                         
 	
                         
 	
                         
 	
                         
 	
                         
 
	
                        SPCP Group III, LLC (1)
 	
                         
 	
                         
 	
                         
 	
                         
 	
                         
 	
                        0
 

 

	
                        (1)
 	
                        SPCP Group, LLC is owned by Silver Point Capital Fund, L.P. (the “Fund”) and Silver Point Capital Offshore Fund (the “Offshore Fund”). Silver Point Capital, L.P. (“Silver Point”) is the investment manager of the Fund and the Offshore Fund. Silver Point is controlled by Edward A. Mulé and Robert J. O’Shea. SPCP Group III, LLC is an affiliate of Silver Point (via common ownership) and is controlled by Messrs. Mulé and O’Shea.
 

 

 

I-2

 

PLAN OF DISTRIBUTION

We are registering the shares of common stock issuable upon exercise of the warrants to permit the resale of these shares of common stock by the holders of the warrants from time to time after the date of this prospectus. We will not receive any of the proceeds from the sale by the selling stockholders of the shares of common stock. We will bear all fees and expenses incident to our obligation to register the shares of common stock.

The selling stockholders may sell all or a portion of the shares of common stock beneficially owned by them and offered hereby from time to time directly or through one or more underwriters, broker-dealers or agents. If the shares of common stock are sold through underwriters or broker-dealers, the selling stockholders will be responsible for underwriting discounts or commissions or agent’s commissions. The shares of common stock may be sold in one or more transactions at fixed prices, at prevailing market prices at the time of the sale, at varying prices determined at the time of sale, or at negotiated prices. These sales may be effected in transactions, which may involve crosses or block transactions, through 

	
                         
 	
                        •
 	
                        any national securities exchange or quotation service on which the securities may be listed or quoted at the time of sale;
 

	
                         
 	
                        •
 	
                        the over-the-counter market;
 

	
                         
 	
                        •
 	
                        transactions otherwise than on these exchanges or systems or in the over-the-counter market;
 

	
                         
 	
                        •
 	
                        the writing of options, whether such options are listed on an options exchange or otherwise;
 

	
                         
 	
                        •
 	
                        ordinary brokerage transactions and transactions in which the broker-dealer solicits purchasers;
 

	
                         
 	
                        •
 	
                        block trades in which the broker-dealer will attempt to sell the shares as agent but may position and resell a portion of the block as principal to facilitate the transaction;
 

	
                         
 	
                        •
 	
                        purchases by a broker-dealer as principal and resale by the broker-dealer for its account;
 

	
                         
 	
                        •
 	
                        an exchange distribution in accordance with the rules of the applicable exchange;
 

	
                         
 	
                        •
 	
                        privately negotiated transactions;
 

	
                         
 	
                        •
 	
                        short sales;
 

	
                         
 	
                        •
 	
                        sales pursuant to Rule 144;
 

	
                         
 	
                        •
 	
                        transactions in which broker-dealers may agree with the selling securityholders to sell a specified number of such shares at a stipulated price per share;
 

 

 

I-3

 

	
                         
 	
                        •
 	
                        a combination of any such methods of sale; and
 

	
                         
 	
                        •
 	
                        any other method permitted pursuant to applicable law.
 

If the selling stockholders effect such transactions by selling shares of common stock to or through underwriters, broker-dealers or agents, such underwriters, broker-dealers or agents may receive commissions in the form of discounts, concessions or commissions from the selling stockholders or commissions from purchasers of the shares of common stock for whom they may act as agent or to whom they may sell as principal (which discounts, concessions or commissions as to particular underwriters, broker-dealers or agents may be in excess of those customary in the types of transactions involved). In connection with sales of the shares of common stock or otherwise, the selling stockholders may enter into hedging transactions with broker-dealers, which may in turn engage in short sales of the shares of common stock in the course of hedging in positions they assume. The selling
stockholders may also sell shares of common stock short and deliver shares of common stock covered by this prospectus to close out short positions and to return borrowed shares in connection with such short sales. The selling stockholders may also loan or pledge shares of common stock to broker-dealers that in turn may sell such shares.

The selling stockholders may pledge or grant a security interest in some or all of the warrants or shares of common stock owned by them and, if they default in the performance of their secured obligations, the pledgees or secured parties may offer and sell the shares of common stock from time to time pursuant to this prospectus or any amendment to this prospectus under Rule 424(b)(3) or other applicable provision of the Securities Act of 1933, as amended, amending, if necessary, the list of selling stockholders to include the pledgee, transferee or other successors in interest as selling stockholders under this prospectus. The selling stockholders also may transfer and donate the shares of common stock in other circumstances in which case the transferees, donees, pledgees or other successors in interest will be the selling beneficial owners for purposes of this prospectus.

The selling stockholders and any broker-dealer participating in the distribution of the shares of common stock may be deemed to be “underwriters” within the meaning of the Securities Act, and any commission paid, or any discounts or concessions allowed to, any such broker-dealer may be deemed to be underwriting commissions or discounts under the Securities Act. At the time a particular offering of the shares of common stock is made, a prospectus supplement, if required, will be distributed which will set forth the aggregate amount of shares of common stock being offered and the terms of the offering, including the name or names of any broker-dealers or agents, any discounts, commissions and other terms constituting compensation from the selling stockholders and any discounts, commissions or concessions allowed or reallowed or paid to broker-dealers.

Under the securities laws of some states, the shares of common stock may be sold in such states only through registered or licensed brokers or dealers. In addition, in some states the shares of common stock may not be sold unless such shares have been registered or qualified for sale in such state or an exemption from registration or qualification is available and is complied with.

 

 

I-4

 

There can be no assurance that any selling stockholder will sell any or all of the shares of common stock registered pursuant to the registration statement of which this prospectus forms a part.

The selling stockholders and any other person participating in such distribution will be subject to applicable provisions of the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder, including, without limitation, Regulation M of the Exchange Act, which may limit the timing of purchases and sales of any of the shares of common stock by the selling stockholders and any other participating person. Regulation M may also restrict the ability of any person engaged in the distribution of the shares of common stock to engage in market-making activities with respect to the shares of common stock. All of the foregoing may affect the marketability of the shares of common stock and the ability of any person or entity to engage in market-making activities with respect to the shares of common stock.

We will pay all expenses of the registration of the shares of common stock pursuant to the registration rights agreement, estimated to be $[____] in total, including, without limitation, Securities and Exchange Commission filing fees and expenses of compliance with state securities or “blue sky” laws; provided, however, that a selling stockholder will pay all underwriting discounts and selling commissions, if any. We will indemnify the selling stockholders against liabilities, including some liabilities under the Securities Act, in accordance with the registration rights agreement, or the selling stockholders will be entitled to contribution. We may be indemnified by the selling stockholders against civil liabilities, including liabilities under the Securities Act, that may arise from any written information furnished to us by the selling stockholder specifically for
use in this prospectus, in accordance with the related registration rights agreement, or we may be entitled to contribution.

Once sold under the registration statement of which this prospectus forms a part, the shares of common stock will be freely tradable in the hands of persons other than our affiliates.

 

 

I-5

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