Document:

Exhibit 10.2

REGISTRATION RIGHTS AGREEMENT

Registration Rights Agreement (the “Agreement”), dated as of December 18, 2009, by and between San West, Inc., a corporation organized under the laws of California, USA with its principal executive office at  10350 Mission Gorge Road, Santee, CA 92071 (the “Company”), and Dutchess Opportunity Fund, II, LP, a Delaware Limited Partnership, with its principal office at 50 Commonwealth Avenue, Suite 2, Boston, MA 02116 (the “Investor”).

Whereas, in connection with the Investment Agreement by and between the Company and the Investor of this date (the “Investment Agreement”), the Company has agreed to issue and sell to the Investor up to 50,000,000 shares of the Company’s Common Stock, no par value per share (the “Common Stock”), to be purchased pursuant to the terms and subject to the conditions set forth in the Investment Agreement; and 

Whereas, the Company currently has on file a registration statement with the SEC, File Number 333-156706, which has been declared effective on January 30, 2009, and desires to use that registration statement for this Investment Agreement.

Whereas, to induce the Investor to execute and deliver the Investment Agreement, the Company has 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, with respect to the shares of Common Stock issuable pursuant to the Investment Agreement.

Now therefore, in consideration of the foregoing promises and the mutual covenants contained hereinafter and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company and the Investor hereby agree as follows: 

Section 1.  DEFINITIONS.

As used in this Agreement, the following terms shall have the following meanings:

“Execution Date” means the date of this Agreement set forth above.

“Investor” means Dutchess Opportunity Fund, II, LP, a Delaware Limited Partnership.

“Person” means a corporation, a limited liability company, an association, a partnership, an organization, a business, an individual, a governmental or political subdivision thereof or a governmental agency. 

“Principal Market” shall mean Nasdaq Capital Market, the NYSE Amex, the New York Stock Exchange, the Nasdaq Global Market, the Nasdaq Global Select Market or the OTC Bulletin Board, whichever is the principal market on which the Common Stock of the Company is listed. 

 

“Register,” “Registered,” and “Registration” refer to either 1) the current Registration on file, 333-156706; or, 2) and subsequent Registration effected by preparing and filing one (1) or more Registration Statements in compliance with the 1933 Act and pursuant to Rule 415 under the 1933 Act or any successor rule providing for offering securities on a continuous basis (“Rule 415”), and the declaration or ordering of effectiveness of such Registration Statement(s) by the United States Securities and Exchange Commission (the “SEC”).

“Registrable Securities” means (i) the shares of Common Stock issued or issuable pursuant to the Investment Agreement, and (ii) any shares of capital stock issued or issuable with respect to such shares of Common Stock, if any, as a result of any stock split, stock dividend, recapitalization, exchange or similar event or otherwise, which have not been (x) included in the Registration Statement that has been declared effective by the SEC, or (y) sold under circumstances meeting all of the applicable conditions of Rule 144 (or any similar provision then in force) under the 1933 Act.

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“Registration Statement” means either 1) 1) the current Registration on file, 333-156706; or, 2) the registration statement of the Company filed under the 1933 Act covering the Registrable Securities.

All capitalized terms used in this Agreement and not otherwise defined herein shall have the same meaning ascribed to them as in the Investment Agreement. 

Section 2.  REGISTRATION.

(a)  The Company shall, within twenty-one (21) days of the date of this Agreement, file with the SEC the Registration Statement or Registration Statements (as is necessary) on Form S-1 (or, if such form is unavailable for such a registration, on such other form as is available for such registration including any post-effective amendments to current Registration Statement), covering the resale of all of the Registrable Securities, which Registration Statement(s) shall state that, in accordance with Rule 416 promulgated under the 1933 Act, such Registration Statement also covers such indeterminate number of additional shares of Common Stock as may become issuable upon stock splits, stock dividends or similar transactions.  The Company shall initially register for resale 50,000,000 shares of Common Stock, except to the extent that the SEC requires the share amount to be reduced as a condition of effectiveness.

(b)  The Company shall use all commercially reasonable efforts to have the Registration Statement(s) declared effective by the SEC within ninety (90) calendar days after the date that the Registration Statement is filed. 

(c)  The Company shall include the Commitment Fee in the Registration Statement.  Further, the Company agrees not to include any other securities in the Registration Statement covering the Registrable Securities without Investor’s prior written consent which Investor may withhold in its sole discretion. Furthermore, the Company agrees that it will not file any other Registration Statement for other securities, until thirty calendar days after the Registration Statement for the Registrable Securities is declared effective by the SEC.

Section 3.  RELATED OBLIGATIONS.

At such time as the Company is obligated to prepare and file the Registration Statement with the SEC pursuant to Section 2(a), the Company shall have the following obligations with respect to the Registration Statement:

(a)  The Company shall use all commercially reasonable efforts to cause such Registration Statement relating to the Registrable Securities to become effective within ninety (90) days after the date that the Registration Statement is filed and shall keep such Registration Statement effective until the earlier to occur of  the date on which (A) the Investor shall have sold all the Registrable Securities; or (B) the Company has no right to sell any additional shares of Common Stock under the Investment Agreement (the “Registration Period”).  The 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 light of the circumstances in which they were made, not misleading. The Company shall use all commercially reasonable efforts to respond to all SEC comments within ten (10) business days from receipt of such comments by the Company. The Company shall use all commercially reasonable efforts to cause the Registration Statement relating to the Registrable Securities to become effective no later than five  (5)  business days after notice from the SEC that the Registration Statement may be declared effective.  The Investor agrees to provide all information which it is required by law to provide to the Company, including the intended method of disposition of the Registrable Securities, and the Company’s obligations set forth above shall be conditioned on the receipt of such information.

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(b)  The Company shall prepare and file with the SEC such amendments (including post-effective amendments) and supplements to the 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 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 Investor thereof as set forth in such Registration Statement.  In the event the number of shares of Common Stock covered by the Registration Statement filed pursuant to this Agreement is at any time insufficient to cover all of the Registrable Securities, the Company shall amend such Registration Statement, or file a new Registration Statement (on the short form available therefor, if applicable), or both, so as to cover all of the Registrable Securities, in each case, as soon as practicable, but in any event within thirty (30) calendar days after the necessity therefor arises (based on the then Purchase Price of the Common Stock and other relevant factors on which the Company reasonably elects to rely), assuming the Company has sufficient authorized shares at that time, and if it does not, within thirty (30) calendar days after such shares are authorized.  The Company shall use commercially reasonable efforts to cause such amendment and/or new Registration Statement to become effective as soon as practicable following the filing thereof. 

(c)  The Company shall make available to the Investor whose Registrable Securities are included in any Registration Statement and its legal counsel without charge (i) if requested by the Investor, promptly after the same is prepared and filed with the SEC at least one (1) copy of such Registration Statement and any amendment(s) thereto, including financial statements and schedules, all documents incorporated therein by reference and all exhibits, the prospectus included in such Registration Statement (including each preliminary prospectus) and, with regards to such Registration Statement(s), any correspondence by or on behalf of the Company to the SEC or the staff of the SEC and any correspondence from the SEC or the staff of the SEC to the Company or its representatives; (ii) upon the effectiveness of any Registration Statement, the Company shall make available copies of the prospectus, via EDGAR, included in such Registration Statement and all amendments and supplements thereto; and (iii) such other documents, including copies of any preliminary or final prospectus, as the Investor may reasonably request from time to time in order to facilitate the disposition of the Registrable Securities.

 

(d)  The Company shall use commercially reasonable efforts to (i) register and qualify the Registrable Securities covered by the Registration Statement under such other securities or “blue sky” laws of such states in the United States as the Investor reasonably requests; (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(d), or (y) subject itself to general taxation in any such jurisdiction.  The Company shall promptly notify the 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.

 

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(e)  As promptly as practicable after becoming aware of such event, the Company shall notify Investor in writing of the happening of any event as a result of which the prospectus included in the Registration Statement, as then in effect, includes an untrue statement of a material fact or omission to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading (“Registration Default”) and use all diligent efforts to promptly prepare a supplement or amendment to such Registration Statement and takeany other necessary steps to cure the Registration Default (which, if such Registration Statement is on Form S-3, may consist of a document to be filed by the Company with the SEC pursuant to Section 13(a), 13(c), 14 or 15(d) of the 1934 Act (as defined below) and to be incorporated by reference in the prospectus) to correct such untrue statement or omission, and make available copies of such supplement or amendment to the Investor. The Company shall also promptly notify the Investor (i) when a prospectus or any prospectus supplement or post-effective amendment has been filed, and when the Registration Statement or any post-effective amendment has become effective; (ii) of any request by the SEC for amendments or supplements to the Registration Statement or related prospectus or related information, (iii) of the Company’s reasonable determination that a post-effective amendment to the Registration Statement would be appropriate, (iv) in the event the Registration Statement is no longer effective, or (v) if the Registration Statement is stale as a result of the Company’s failure to timely file its financials or otherwise.  

If a Registration Default occurs during the period commencing on the Put Notice Date and ending on the Closing Date, the Company acknowledges that its failure to cure such a Registration Default within ten (10) business days will cause the Investor to suffer damages in an amount that will be difficult to ascertain.

(f)  The Company shall use all commercially reasonable efforts to prevent the issuance of any stop order or other  suspension of effectiveness of the 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 the Investor holding 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 concerning the effectiveness of the Registration Statement.

(g)  The Company shall permit the Investor and one (1) legal counsel, designated by the Investor, to review and comment upon the Registration Statement and all amendments and supplements thereto at least one (1) calendar day prior to their filing with the SEC.  However, any postponement of a filing of a Registration Statement or any postponement of a request for acceleration or any postponement of the effective date or effectiveness of a Registration Statement by written request of the Investor (collectively, the "Investor's Delay") shall not act to trigger any penalty of any kind, or any cash amount due or any in-kind amount due the Investor from the Company under any and all agreements of any nature or kind between the Company and the Investor.  The event(s) of an Investor's Delay shall act to suspend all obligations of any kind or nature of the Company under any and all agreements of any nature or kind between the Company and the Investor.   

(h)  Intentionally Omitted.

(i)  The Company shall hold in confidence and not make any disclosure of information concerning the Investor 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, (iv) such information has been made generally available to the public other than by disclosure in violation of this Agreement or any other agreement, or (v) the Investor has consented to such disclosure.  The Company agrees that it shall, upon learning that disclosure of such information concerning the Investor is sought in or by a court or governmental body of competent jurisdiction or through other means, give prompt written notice to the Investor and allow the Investor, at the Investor’s expense, to undertake appropriate action to prevent disclosure of, or to obtain a protective order covering such information.

(j)  The Company shall use all commercially reasonable efforts to maintain designation and quotation of all the Registrable Securities covered by any Registration Statement on the Principal Market.  The Company shall pay all fees and expenses in connection with satisfying its obligation under this Section 3(j).

(k)  The Company shall cooperate with the Investor to facilitate the prompt preparation and delivery of certificates representing the Registrable Securities to be offered pursuant to the Registration Statement and enable such certificates to be in such denominations or amounts, as the case may be, as the Investor may reasonably request (and after any sales of such Registrable Securities by the Investor, such certificates not bearing any restrictive legend).

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(l)  The Company shall provide a transfer agent for all the Registrable Securities not later than the effective date of the first Registration Statement filed pursuant hereto.

(m)  If requested by the Investor, the Company shall (i) as soon as reasonably practical incorporate in a prospectus supplement or post-effective amendment such information as the Investor reasonably determines should be included therein relating to the sale and distribution of Registrable Securities, including, without limitation, information with respect to 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 as soon as reasonably possible 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 the Investor.

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

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

(p)  Within one (1) business day after the Registration Statement which includes Registrable Securities is declared effective by the SEC, the Company shall deliver to the transfer agent for such Registrable Securities, with copies to the Investor, a written notification that such Registration Statement has been declared effective by the SEC.

Section 4.  OBLIGATIONS OF THE INVESTOR.

(a)  At least five (5) calendar days prior to the first anticipated filing date of the Registration Statement  the Company shall notify the Investor in writing of the information the Company requires from the Investor for the Registration Statement.  It shall be a condition precedent to the obligations of the Company to complete the registration pursuant to this Agreement with respect to the Registrable Securities and the Investor agrees to furnish to the Company that information regarding itself, the Registrable Securities and the intended method of disposition of the Registrable Securities as shall reasonably be required to effect the registration of such Registrable Securities and the Investor shall execute such documents in connection with such registration as the Company may reasonably request.  The Investor covenants and agrees that, in connection with any sale of Registrable Securities by it pursuant to the Registration Statement, it shall comply with the “Plan of Distribution” section of the then current prospectus relating to such Registration Statement.

(b)  The Investor, by its 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. 

(c)  The Investor agrees that, upon receipt of written notice from the Company of the happening of any event of the kind described in Section 3(f) or the first sentence of 3(e), the Investor will immediately discontinue disposition of Registrable Securities pursuant to any Registration Statement(s) covering such Registrable Securities until the Investor’s receipt of the copies of the supplemented or amended prospectus contemplated by Section 3(f) or the first sentence of Section 3(e).

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Section 5.  EXPENSES OF REGISTRATION.

All expenses, other than underwriting discounts and commissions and other than as set forth in the Investment Agreement, incurred in connection with registrations including comments, filings or qualifications pursuant to Sections 2 and 3, including, without limitation, all registration, listing and qualifications fees, printing and accounting fees, and fees and disbursements of counsel for the Company shall be paid by the Company.

Section 6.  INDEMNIFICATION.

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

(a)  To the fullest extent permitted by law, the Company, under this Agreement, will, and hereby does, indemnify, hold harmless and defend the Investor who holds Registrable Securities, the directors, officers, partners, employees, counsel, agents, representatives of, and each Person, if any, who controls, any Investor within the meaning of the 1933 Act or the Securities Exchange Act of 1934, as amended (the “1934 Act”) (each, an “Indemnified Person”), against any losses, claims, damages, liabilities, judgments, fines, penalties, charges, costs, attorneys’ fees, amounts paid in settlement or expenses, joint or several (collectively, “Claims”), incurred in investigating, preparing or defending any action, claim, suit, inquiry, proceeding, investigation or appeal taken from the foregoing by or before any court or governmental, administrative or other regulatory agency, 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 the 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 the Investor has requested in writing that the Company register or qualify the Shares (“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, in light of the circumstances under which the statements therein were made, not misleading, (ii) any untrue statement or alleged untrue statement of a material fact contained in the final prospectus (as amended or supplemented, if the Company files any amendment thereof or supplement thereto with the SEC) or the omission or alleged omission to state therein any material fact necessary to make the statements made therein, in light of the circumstances under which the statements therein were made, not misleading, or (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 the Registration Statement (the matters in the foregoing clauses (i) through (iii) being, collectively, “Violations”).  Subject to the restrictions set forth in Section 6(c) the Company shall reimburse the Investor and each such controlling person, promptly as such expenses are incurred and are due and payable, for any reasonable 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 arising out of or based upon a Violation which is due to the inclusion in the Registration Statement of the information furnished to the Company by any Indemnified Person expressly for use in connection with the preparation of the Registration Statement or any such amendment thereof or supplement thereto; (ii) shall not be available to the extent such Claim is based on (a) a failure of the Investor to deliver or to cause to be delivered the prospectus made available by the Company or (b) the Indemnified Person’s use of an incorrect prospectus despite being promptly advised in advance by the Company in writing not to use such incorrect prospectus;  (iii) any claims based on the manner of sale of the Registrable Securities by the Investor or of the Investor’s failure to register as a dealer under applicable securities laws; (iv) any omission of the Investor to notify the Company of any material fact that should be stated in the Registration Statement or prospectus relating to the Investor or the manner of sale; and (v) any amounts paid in settlement of any Claim if such settlement is effected without the prior written consent of the Company, which consent shall not be unreasonably withheld.  Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of the Indemnified Person and  shall survive the resale of the Registrable Securities by the Investor pursuant to the Registration Statement. 

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(b)  In connection with any Registration Statement in which Investor is participating, the Investor agrees to severally and 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, each Person, if any, who controls the Company within the meaning of the 1933 Act or the 1934 Act and the Company’s agents (collectively and together with an Indemnified Person, 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 is due to (i) the inclusion in the Registration Statement of the written information furnished to the Company by the Investor expressly for use in connection with such Registration Statement, (ii) a failure of the Investor to deliver or to cause to be delivered the prospectus made available by the Company or the Investor’s use of an incorrect prospectus despite being timely advised by the Company in writing not to use such incorrect prospectus; (iii) the Investor’s failure to register as a dealer under applicable securities laws; or (iv) any omission of the Investor to notify the Company of any material fact that should be stated in the Registration Statement or prospectus relating to the Investor or the manner of sale; and, subject to Section 6(c), the Investor will reimburse any legal or other expenses reasonably incurred by them in connection with investigating or defending any such Claim; provided, however, that the indemnity agreement contained in this Section 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 the Investor, which consent shall not be unreasonably withheld; provided, further, however, that the Investor shall only be liable under this Section 6(b) for  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 resale of the Registrable Securities by the Investor pursuant to the Registration Statement. 

(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 to be paid by the indemnifying party, if, in the reasonable opinion of counsel retained by the Indemnified Person or Indemnified Party, the representation by counsel of the Indemnified Person or Indemnified Party and the indemnifying party would be inappropriate due to actual or potential differing interests between such Indemnified Person or Indemnified Party and any other party represented by such counsel in such proceeding.  The indemnifying party shall pay for only one (1) separate legal counsel for the Indemnified Persons or the Indemnified Parties, as applicable, and such counsel shall be selected by the Investor, if the Investor is entitled to indemnification hereunder, or the Company, if the Company is entitled to indemnification hereunder, as applicable.  The Indemnified Party or Indemnified Person shall cooperate fully with the indemnifying party in connection with any negotiation or defense of any such action or Claim by the indemnifying party and shall furnish to the indemnifying party all information reasonably available to the Indemnified Party or Indemnified Person which relates to such action or Claim.  The indemnifying party shall keep the Indemnified Party or Indemnified Person fully apprised at all times as to the status of the defense or any settlement negotiations with respect thereto.  No indemnifying party shall be liable for any settlement of any action, claim or proceeding affected without its written consent, provided, however, that the indemnifying party shall not unreasonably withhold, delay or condition its consent. No indemnifying party shall, without the consent of the Indemnified Party or Indemnified Person, consent to entry of any judgment or enter into any settlement or other compromise which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such Indemnified Party or Indemnified Person of a release from all liability in respect to such Claim. 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.

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(d)  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.

Section 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 contribution shall be made under circumstances where the maker would not have been liable for indemnification under the fault standards set forth in Section 6; (ii) no seller of Registrable Securities guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the 1933 Act) shall be entitled to contribution from any seller of Registrable Securities who was not guilty of fraudulent misrepresentation; and (iii) contribution by any seller of Registrable Securities shall be limited in amount to the net amount of proceeds received by such seller from the sale of such Registrable Securities.

Section 8.

REPORTS UNDER THE 1934 ACT.

With a view to making available to the Investor 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 Investor to sell securities of the Company to the public without registration (“Rule 144”), provided that the Investor holds any Registrable Securities are eligible for resale under Rule 144 and such information is necessary in order for the Investor to sell such Securities pursuant to 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 (it being understood that nothing herein shall limit the Company’s obligations under Section 5(c) of the Investment Agreement) and the filing of such reports and other documents is required for the applicable provisions of Rule 144; and

(c)

furnish to the Investor, promptly upon request, (i) a written statement by the Company that it has complied with the reporting requirements of Rule 144, the 1933 Act and the 1934 Act, (ii) a copy of the most recent annual or quarterly report of the Company and such other reports and documents so filed by the Company, and (iii) such other information as may be reasonably requested to permit the Investor to sell such securities pursuant to Rule 144 without registration.

Section 9.  NO ASSIGNMENT OF REGISTRATION RIGHTS.

The rights and obligations under this Agreement shall not be assignable.

Section 10.  AMENDMENT OF REGISTRATION RIGHTS.

The provisions of this Agreement may be amended only with the written consent of the Company and Investor.  

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Section 11.  MISCELLANEOUS.

(a)  Any notices or other communications required or permitted to be given under the terms of this Agreement that must be in writing will be deemed to have been delivered (i) upon receipt, when delivered personally; (ii) upon receipt, when sent by facsimile or email with the signed document attached in PDF format (provided a confirmation of transmission is mechanically or electronically generated and kept on file by the sending party); or (iii) one (1) 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:

If to the Company:

             

San West Inc.

10350 Mission Gorge Road

Santee, CA 92071 

Phone 619 258-0887

Fax 619 449 9064

Email frank@buggyworld.net

If to the Investor:

Dutchess Opportunity Fund, II, LP

50 Commonwealth Ave, Suite 2

Boston, MA 02116

Telephone: (617) 301-4700

Facsimile:  (617) 249-0947

E-mail: dleighton@dpef.com

Each party shall provide five (5) business days prior notice to the other party of any change in address, phone number, facsimile number ore-mail address.

(b)  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.

(c)   This Agreement and the Investment Agreement constitute the entire agreement among the parties hereto with respect to the subject matter hereof and thereof.  There are no restrictions, promises, warranties or undertakings, other than those set forth or referred to herein and therein.

(d)  This Agreement and the Investment Agreement supersede all prior agreements and understandings among the parties hereto with respect to the subject matter hereof and thereof.

(e)  The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof.  Whenever required by the context of this Agreement, the singular shall include the plural and masculine shall include the feminine.  This Agreement shall not be construed as if it had been prepared by one of the parties, but rather as if all the parties had prepared the same.

(f)  This Agreement may be executed in two or more 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 or by e-mail delivery of a PDF format  of a copy of this Agreement bearing the signature of the party so delivering this Agreement.

(g)  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 the 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.

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(h) In case any provision of this Agreement is held by a court of competent jurisdiction to be excessive in scope or otherwise invalid or unenforceable, such provision shall be adjusted rather than voided, if possible, so that it is enforceable to the maximum extent possible, and the validity and enforceability of the remaining provisions of this Agreement will not in any way be affected or impaired thereby.

Section 12.  DISPUTES SUBJECT TO ARBITRATION GOVERNED BY MASSACHUSETTS LAW

All disputes arising under this agreement shall be governed by and interpreted in accordance with the laws of the Commonwealth of Massachusetts, without regard to principles of conflict of laws.  The parties to this agreement will submit all disputes arising under this agreement to arbitration in Boston, Massachusetts before a single arbitrator of the American Arbitration Association (“AAA”).  The arbitrator shall be selected by application of the rules of the AAA, or by mutual agreement of the parties, except that such arbitrator shall be an attorney admitted to practice law in the Commonwealth of Massachusetts.  No party to this agreement will challenge the jurisdiction or venue provisions as provided in this section.  Nothing contained herein shall prevent the party from obtaining an injunction.

*.*.*

10

 

SIGNATURE PAGE OF REGISTRATION RIGHTS AGREEMENT

Your signature on this Signature Page evidences your agreement to be bound by the terms and conditions of the Investment Agreement and the Registration Rights Agreement as of the date first written above. 

The undersigned signatory hereby certifies that he has read and understands the Registration Rights Agreement, and the representations made by the undersigned in this Registration Rights Agreement are true and accurate, and agrees to be bound by its terms. 

DUTCHESS OPPORTUNITY FUND, II, LP,

By: _________________________________

Douglas H. Leighton

Managing Member of:

Dutchess Capital Management, II, LLC

General Partner to:

Dutchess Opportunity Fund, II, LP

SAN WEST, INC.

By: __________________________________ 

       Frank Drechsler, CEO

 

11Exhibit 4.1

 

THE OFFER AND SALE OF THE WARRANT
REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED PURSUANT TO THE
SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAW.  NEITHER THIS WARRANT NOR THE UNDERLYING STOCK,
NOR ANY PORTION THEREOF OR INTEREST THEREIN, MAY BE SOLD, TRANSFERRED OR
OTHERWISE DISPOSED OF UNLESS THE SAME IS REGISTERED AND QUALIFIED IN ACCORDANCE
WITH SAID ACT AND ANY APPLICABLE STATE SECURITIES LAW, OR, IN THE OPINION OF
COUNSEL REASONABLY SATISFACTORY TO THE COMPANY, SUCH REGISTRATION AND
QUALIFICATION ARE NOT REQUIRED.

 

	
  Warrant No. W-22

  	
  May 1, 2006

  

 

WARRANT

to Purchase the Common Stock of

Hawaiian Holdings, Inc.

 

THIS
CERTIFIES THAT, for value received, RC Aviation
Management, LLC, having an address at 12730 High Bluff Drive, Suite 180,
San Diego, California 92130, or registered assigns, is entitled to purchase
from Hawaiian Holdings, Inc., a Delaware corporation, or any successor
(the “Company”), in whole or in part, at a purchase price of $7.20 per
share (subject to adjustment as provided herein), at any time, from and after
the date hereof to and including June 1, 2010, 758,158 shares of the fully
paid and nonassessable Common Stock (as herein defined) (as such number may be
adjusted as provided herein).

 

The shares of Common
Stock which may be purchased pursuant to this Warrant are referred to herein as
the “Aggregate Number”.  Certain
terms used in this Warrant are defined in Section 6.

 

This Warrant certificate
is being issued to consummate the distribution of Warrant No. W-3 by RC
Aviation LLC to its members.

 

The number of shares of
Common Stock purchasable hereunder (“Warrant Shares”) is subject to
adjustment as hereinafter set forth. 
This Warrant is subject to the following provisions, terms and
conditions:

 

1.                                      (a) Exercise
of Warrant.  The rights represented
by this Warrant may be exercised by the Holder hereof, in whole or in part (but
not as to a fractional share of Common Stock), by (A) the delivery of this
Warrant, together with a properly completed Subscription Form in the form
attached hereto, to the principal office of the Company at 3375 Koapaka Street,
Suite G350, Honolulu, HI 96819 (or to such other address as it may
designate by notice in writing to the Holder) and (B) payment to the
Company of the Warrant Purchase Price for the Warrant Shares being purchased (i) by
cash or by certified check or bank draft, (ii) as provided in Section 1(b) or
(iii) any combination thereof.  In
the case of payment of all or a portion of the Warrant Purchase Price pursuant
to Section 1(b), the direction of the Holder to make a “cashless exercise”
shall serve as accompanying payment for that potion of the Warrant Purchase
Price.  The Company agrees that the

 

 

shares so purchased shall
be deemed to be issued to the Holder as the record owner of such shares as of
the close of business on the date on which this Warrant shall have been
delivered to the Company and payment made for such shares as aforesaid.  Certificates for the shares so purchased
shall be delivered to the Holder within ten (10) Business Days after the
rights represented by this Warrant shall have been so exercised, and, unless
this Warrant has expired, a new Warrant representing, and with an Aggregate
Number equal to, the number of Warrant Shares, if any, with respect to which
this Warrant shall not then have been exercised, in all other respects
identical with this Warrant, shall also be issued and delivered to the Holder
within such time, or, at the request of such Holder, appropriate notation may
be made on this Warrant and signed by the Company and the same returned to such
Holder.

 

(b)                                Cashless
Exercise.  If the sale of the Warrant
Shares is not covered by a registration statement under the Securities Act, the
Holder shall have the right to pay all or a portion of the Warrant Purchase
Price by making a “Cashless Exercise” pursuant to this Section 1(b), in
which case (i) shares of the Company’s Common Stock other than the Warrant
Shares or (ii) at any time after June 1, 2006, the Warrant Shares to
be acquired upon the exercise of this Warrant may be applied to pay the
exercise price in connection with the exercise of this Warrant in whole or in
part. Any shares of Common Stock or Warrant Shares transferred to the Company
as payment of the exercise price under this Warrant shall be valued at the Fair
Market Value of such shares of Common Stock or Warrant Shares.

 

(c)                                 Transfer
Restriction Legend.  Each certificate
for Warrant Shares issued upon exercise of this Warrant, unless at the time of
exercise the offer and sale of such Warrant Shares are registered under the
Securities Act, shall bear the following legend (and any additional legend
required by applicable law or rule) on the face thereof:

 

The offer and sale of the
shares of stock represented hereby have not been registered pursuant to the
Securities Act of 1933, as amended, or any state securities law.  Neither these shares, nor any portion thereof
or interest therein, may be sold, transferred or otherwise disposed of unless
the same are registered and qualified in accordance with said Act and any
applicable state securities law, or, in the opinion of counsel reasonably
satisfactory to the Company, such registration and qualification are not
required.

 

The provisions of Section 2
shall be binding upon all holders of certificates for Warrant Shares bearing
the above legend and shall also be applicable to all holders of this Warrant.

 

(d)                                Expenses
and Taxes on Exercise.  The Company
shall pay all expenses, taxes and other charges payable in connection with the
preparation, execution and delivery of any stock certificates and substitute
Warrants pursuant to this Section 1, except that, in case such stock
certificates or Warrants shall be registered in a name or names other than the
name of the holder of this Warrant, funds sufficient to pay all stock transfer
taxes which shall be payable upon the execution and delivery of such stock
certificates or Warrants shall be paid by the Holder to the Company at the time
the Company delivers such stock certificates or Warrants to the Company for
exercise.

 

2

 

(e)                                 Limitation
on Exercise.  Notwithstanding any
provision of this Warrant to the contrary, the number of shares of Common Stock
that may be acquired by the Holder upon any exercise of this Warrant shall be
limited to the extent necessary to ensure that, following such exercise, the
total number of shares of Common Stock then beneficially owned by Holder, its
affiliates, any investment manager having discretionary investment authority
over the accounts or assets of the Holder, or any other Persons whose
beneficial ownership of Common Stock would be aggregated with the Holder’s for
purposes of Section 13(d) and Section 16 of the Securities
Exchange Act of 1934 (the “Exchange Act”) does not exceed 9.999% of the total
number of issued and outstanding shares of Common Stock (including for such
purpose the shares of Common Stock issuable upon exercise of this
Warrant).  For such purposes, beneficial
ownership shall be determined in accordance with Section 13(d) of the
Exchange Act and the rules and regulations promulgated thereunder.  The Company’s obligation to issue shares of
Common Stock in excess of the limitation referred to in this Section 1(e) shall
be suspended (and shall not terminate or expire notwithstanding any contrary
provisions hereof) until such time, if any, as such shares of Common Stock may
be issued in compliance with such limitation. 
By written notice to the Company at any time on or after the date
hereof, the Holder may waive the provisions of this Section 1(e), or
increase or decrease such limitation percentage to any other percentage
specified in such notice, not to exceed 9.999%. 
Any such waiver, or increase or decrease, will not be effective until
the sixty-fifth day after such notice is delivered to the Company.

 

2.                                      (a) Warrants
Not Registered; Transferee Restrictions. 
Each Holder, by acceptance thereof, represents and acknowledges that the
offer and sale of this Warrant are not being registered under the Securities
Act, that the issuance of this Warrant is being made in reliance on the
exemption from registration under Section 4(2) of the Securities Act
as not involving any public offering and that the Company’s reliance on such
exemption is predicated in part on the representations made by the initial
Holder of this Warrant to the Company that such Holder (i) is acquiring
this Warrant for investment purposes for its own account, with no present
intention of reselling or otherwise distributing the same in violation of the
Securities Act, subject, nevertheless, to any requirement of law that the
disposition of its property shall at all times be within its control, (ii) is
an “accredited investor” as defined in Regulation D under the Securities
Act and (iii) has such knowledge and experience in financial and business
matters that it is capable of evaluating the merits and risks of the
investments made or to be made in connection with the acquisition and exercise
of this Warrant. Neither this Warrant nor the related Warrant Shares may be
transferred except pursuant to an effective registration statement under the
Securities Act or upon the conditions specified in Section 2(b).

 

(b)                                Notice
of Transfer, Opinion of Counsel. 
Each Holder, by acceptance hereof, agrees that prior to the disposition
of this Warrant or of any Warrant Shares, other than pursuant to an effective
registration under the Securities Act, such Holder will give written notice to
the Company expressing such Holder’s intention to effect such disposition and
describing briefly such Holder’s intention as to the manner in which this
Warrant or the Warrant Shares theretofore issued or thereafter issuable upon
exercise hereof, are to be disposed together with an opinion of counsel as may
be designated by such Holder and reasonably satisfactory to the Company as to
the necessity or non-necessity of registration under the Securities Act.  If in the opinion of such counsel, the
proposed disposition does not require registration under the Securities Act of
the disposition of this Warrant and/or the Warrant Shares issuable or issued
upon the exercise of this Warrant, such Holder

 

3

 

shall be entitled to
dispose of this Warrant and/or the Warrant Shares theretofore issued upon the
exercise hereof, all in accordance with the terms of the notice delivered by
such Holder to the Company.  The Company
is entitled to rely on the most recent written notice from the Holder with respect
to the ownership of the Warrant.

 

3.                                      Representations,
Warranties and Covenants of the Company.

 

(a)                                 The
Company hereby represents and warrants that:

 

(A)                             The
Company has full corporate power and authority to execute and deliver this
Warrant.

 

(B)                               The
execution and delivery of this Warrant and the consummation by the Company of
the transactions contemplated hereby have been duly and validly approved by all
necessary corporate action on the part of the Company.

 

(C)                               This
Warrant has been duly executed and delivered by the Company and constitutes the
legal, valid and binding obligation of the Company, enforceable in accordance
with its terms.

 

(D)                              The
Holder of this Warrant, when such Warrant is issued by the Company to such
Holder, shall have good title thereto free from all taxes, liens and charges
with respect to the issuance thereof.

 

(b)                                The
Company covenants and agrees that:

 

(A)                             Reservation
of Shares.  During the period within
which the rights represented by this Warrant may be exercised, the Company will
have at all times authorized, and reserved for the purpose of issue or transfer
upon exercise of the rights evidenced by this Warrant, a sufficient number of
shares of the Common Stock to provide therefore.

 

(B)                               Issuance
of Shares.  The Warrant Shares issued
pursuant to the exercise of this Warrant will, upon issuance, be duly and
validly issued, fully paid and nonassessable and the holder of such Warrant
Shares shall have good title to such Warrant Shares free from all taxes, liens
and charges with respect to the issuance thereof.

 

(C)                               Listing
on Securities Exchanges.  The Company
promptly will procure at its sole expense the listing of all Warrant Shares
then registered for public sale (subject to issuance or notice of issuance) on
all stock exchanges on which the shares of Common Stock are then listed.

 

4.                                      Participation
in Distributions of Common Stock and Certain Adjustments.  Under certain conditions, the Aggregate
Number is subject to adjustment as set forth in this Section 4.  No adjustments shall be made under this Section 4
as a result of the issuance by the Company of the Warrant Shares upon exercise
of this Warrant.

 

4

 

(a)                                 Adjustments.  The Aggregate Number, after taking into
consideration any prior adjustments pursuant to this Section 4, shall be
subject to adjustment from time to time as follows and, thereafter, as
adjusted, shall be deemed to be the Aggregate Number hereunder.  No adjustment shall be made under this Section 4(a) upon
the issuance of Convertible Securities or Common Stock issuable upon exercise
or conversion of such Convertible Securities if an adjustment shall previously
have been made upon the issuance of such Convertible Securities pursuant to Section 4(c).

 

(i)                      Stock
Dividends; Subdivisions and Combinations. 
In case at any time or from time to time the Company shall:

 

(A)                             issue
to the holders of the Common Stock a dividend payable in, or other distribution
of, Common Stock (a “Stock Dividend”),

 

(B)                               subdivide
its outstanding shares of Common Stock into a larger number of shares of Common
Stock, including without limitation by means of a stock split (a “Stock
Subdivision”), or

 

(C)                               combine
its outstanding shares of Common Stock into a smaller number of shares of
Common Stock (a “Stock Combination”),

 

then the Aggregate Number
in effect immediately prior thereto shall be (1) proportionately increased
in the case of a Stock Dividend or a Stock Subdivision and (2) proportionately
decreased in the case of a Stock Combination. 
In the event the Company shall declare or pay, without consideration,
any dividend on the Common Stock payable in any right to acquire Common Stock
for no consideration, then the Company shall be deemed to have made a Stock
Dividend in an amount of shares equal to the maximum number of shares issuable
upon exercise of such rights to acquire Common Stock.

 

(ii)                   Other
Distributions.  In case at any time
or from time to time the Company shall take a record of the holders of the
Common Stock for the purpose of entitling them to receive any dividend or other
distribution, other than a distribution of Common Stock, Convertible Securities
or options, warrants or other rights to subscribe for or purchase any
Convertible Securities (collectively, a “Distribution”), of:

 

(A)                             Cash
(other than regular quarterly dividends payable out of current consolidated
earnings);

 

(B)                               any
evidences of its indebtedness, any shares of its Capital Stock (other than
Common Stock) or any other securities or property of any nature whatsoever
(other than cash); or

 

5

 

(C)                               any
options, warrants or other rights to subscribe for or purchase any of the
following: any evidences of its indebtedness, any shares of its Capital Stock
(other than Common Stock) or any other securities or property of any nature
whatsoever (other than cash), then the Holder shall be entitled to receive such
Distribution as if the Holder had fully exercised this Warrant upon the
exercise of this Warrant at any time on or after the taking of such record, the
number of Warrant Shares to be received upon exercise of this Warrant
determined as stated herein and, in addition and without further payment, the
cash, evidences of indebtedness, stock, securities, other property, options,
warrants and/or other rights (or any portion thereof) to which the Holder would
have been entitled by way of such Distribution and subsequent dividends and
distributions through the date of exercise as if such Holder (x) had fully
exercised this Warrant immediately prior to such Distribution and (y) had
retained the Distribution in respect of the Common Stock and all subsequent
dividends and distributions of any nature whatsoever in respect of any stock or
securities paid as dividends and distributions and originating directly or
indirectly from such Common Stock.

 

A reclassification of the
Common Stock into shares of Common Stock and shares of any other class of stock
shall be deemed a Distribution by the Company to the holders of the Common
Stock of such shares of such other class of stock and, if the outstanding
shares of Common Stock shall be changed into a larger or smaller number of
shares of Common Stock as a part of such reclassification, such event shall be
deemed a Stock Subdivision or Stock Combination, as the case may be, of the
outstanding shares of Common Stock within the meaning of Section 4(a)(i) hereof.

 

(iii)                Issuance of
Common Stock.  If at any time or from
time to time the Company shall (except as hereinafter provided in this Section 4(a)(iii))
issue or sell any additional shares of Common Stock for a consideration per
share less than the Fair Market Value, then, effective on the date specified
below, the Aggregate Number shall be adjusted by multiplying (A) the Aggregate
Number immediately prior thereto by (B) a fraction, the numerator of which
shall be the sum of the number of shares of Common Stock outstanding
immediately prior to the issuance of such additional shares of Common Stock
(calculated on a Fully Diluted basis) and the number of such additional shares
of Common Stock so issued and the denominator of which shall be the sum of the
number of shares of Common Stock outstanding immediately prior to the issuance
of such additional shares of Common Stock (calculated on a Fully Diluted basis)
and the number of shares of Common Stock which the aggregate consideration for
the total number of such additional shares of Common Stock so issued would
purchase at the Fair Market Value. The date as of which the Fair Market Value
shall be computed shall be the earlier of the date on which the Company shall
enter into a firm contract or commitment for the issuance of such additional
shares of Common Stock or the date of actual issuance of such additional shares
of Common Stock.

 

The provisions of this Section 4(a)(iii) shall
not apply to any issuance of additional shares of Common Stock for which an
adjustment is otherwise provided under Section 4(a)(i) hereof.  No adjustment of the Aggregate Number shall
be made under this Section 4(a)(iii) upon:

 

(A)                             the
issuance of any additional shares of Common Stock which are issued pursuant to (x) the
exercise of other subscription or purchase rights or (y) the exercise of
any conversion or exchange rights in any Convertible Securities, provided that
for purposes of clauses (x) or (y) an adjustment shall previously
have been made upon the issuance of such other rights or upon the issuance of
such Convertible Securities pursuant to Section 4(a)(iv) or (v) hereof
or no such adjustment shall have been required upon the issuance of such other
rights or Convertible Securities;

 

6

 

(B)                               the
issuance of Common Stock in any merger or other acquisition of a business or
Person approved by the Board of Directors of the Company;

 

(C)                               the
issuance of Common Stock in a Qualified Public Offering;

 

(D)                              the
issuance of Common Stock upon the exercise of rights issued in connection with
the contemplated rights offering by the Company for the purpose of the
redemption of the Series A Subordinated Convertible Notes and Series B
Subordinated Convertible Notes issued by the Corporation (collectively, the “Subordinated
Convertible Notes”), prior to the first anniversary of the issuance of the
Subordinated Convertible Notes;

 

(E)                                the
issuance of up to 1,500,000 shares of Common Stock issuable to unions of
Hawaiian Airlines, Inc., in transactions approved by the Board of
Directors of the Company;

 

(F)                                the
issuance of shares of Common Stock upon the exercise of stock options or other
awards made or denominated in shares of Common Stock under the Company’s 2005
Stock Incentive Plan or any of the Company’s other stock plans including any
stock option, stock purchase, restricted stock or similar plan hereafter
adopted by the Board of Directors of the Company and, if required by applicable
law or stock exchange requirement, approved by the stockholders of the Company;

 

(G)                               the
issuance of Common Stock on exercise or conversion of Convertible Securities
outstanding on the Closing Date; or

 

(H)                              the
issuance of Common Stock pursuant to Convertible Securities to financial
institutions or similar entities in transactions approved by the Board of
Directors of the Company, the principal purpose of which is not raising capital
through the sale of equity securities.

 

(iv)               Warrants and
Options.  If at any time or from time
to time the Company shall take a record of the holders of the Common Stock for
the purpose of entitling them to receive a distribution of, or shall in any
manner (whether directly, by assumption in a merger in which the Company is the
surviving corporation and in which the shareholders of the Company immediately
prior to the merger continue to own more than fifty percent (50%) of the
outstanding Common Stock immediately after the merger and for a period of one
hundred eighty (180) days thereafter, or otherwise) issue or sell any warrants,
options or other rights to subscribe for or purchase, directly or indirectly,
any Convertible Securities, whether or not the rights to subscribe, purchase,
exchange or convert thereunder are immediately exercisable, and the
consideration per share for which additional shares of Common Stock may at any
time thereafter be issuable pursuant to such warrants, options or other rights
or pursuant to the terms of such Convertible Securities shall be less than the
Fair Market Value, then the Aggregate Number shall be adjusted as provided in Section 4(a)(iii) hereof
on the basis that (A) the maximum number of additional shares of Common
Stock issuable pursuant to all such warrants, options or other rights or necessary
to effect the conversion or exchange of all such Convertible Securities shall
be deemed to have been issued as of the date of the determination of the Fair
Market Value as hereinafter provided and (B) the aggregate

 

7

 

consideration for such
maximum number of additional shares of Common Stock shall be deemed to be the
minimum consideration received and receivable by the Company for the issuance
of such additional shares of Common Stock pursuant to the terms of such
warrants, options or other rights or such Convertible Securities.  For purposes of this Section 4(a)(iv),
the effective date of such adjustment and the date as of which the Fair Market
Value shall be computed shall be the earliest of (x) the date on which the
Company shall take a record of the holders of the Common Stock for the purpose
of entitling them to receive any such warrants, options or other rights, (y) the
date on which the Company shall enter into a firm contract or commitment for
the issuance of such warrants, options or other rights and (z) the date of
actual issuance of such warrants, options or other rights.

 

No adjustment of the
Aggregate Number shall be made under this Section 4(a)(iv) upon:

 

(A)                             the
issuance of any warrants, options or other rights which are issued pursuant to
the exercise of any warrants, options or other rights if an adjustment shall
have been made or is contemporaneously made or if no such adjustment shall have
been required upon the issuance of such warrants, options or other rights,
pursuant to this Section 4(a)(iv);

 

(B)                               the
issuance of warrants, options or other rights to subscribe for or purchase
Convertible Securities in any merger or other acquisition of a business or
Person approved by the Board of Directors of the Company;

 

(C)                               the
issuance of warrants, options or other rights to subscribe for or purchase
shares of Common Stock or other awards made or denominated in shares of Common
Stock under the Company’s 2005 Stock Incentive Plan or any of the Company’s
other stock plans including any stock option, stock purchase, restricted stock
or similar plan hereafter adopted by the Board of Directors of the Company and,
if required by applicable law or stock exchange requirement, approved by the
stockholders of the Company;

 

(D)                              the
issuance of rights to purchase Common Stock issued in connection with the
contemplated rights offering by the Company for the purpose of the redemption
of the Subordinated Convertible Notes, prior to the first anniversary of the
issuance of the Subordinated Convertible Notes; or

 

(E)                                the
issuance of options, warrants or other rights to subscribe for or purchase
Convertible Securities to financial institutions or similar entities in
transactions approved by the Board of Directors of the Company, the principal
purpose of which is not raising capital through the sale of equity securities.

 

(v)                  Convertible
Securities.  If at any time or from
time to time the Company shall take a record of the holders of the Common Stock
for the purpose of entitling them to receive a distribution of or shall in any
manner (whether directly, by assumption in a merger in which the Company is the
surviving corporation and in which the shareholders of the Company immediately
prior to the merger continue to own more than fifty percent (50%) of the
outstanding Common Stock immediately after the merger and for a period of one
hundred eighty (180) days thereafter, or otherwise) issue or sell Convertible
Securities, whether or not the rights to exchange or convert thereunder are
immediately exercisable, and the consideration per share for the additional

 

8

 

shares of Common Stock
which may at any time thereafter be issuable pursuant to the terms of such
Convertible Securities shall be less than the Fair Market Value, then the
Aggregate Number shall be adjusted as provided in Section 4(a)(iii) hereof
on the basis that (A) the maximum number of additional shares of Common Stock
necessary to effect the conversion or exchange of all such Convertible
Securities shall be deemed to have been issued as of the date of the
determination of the Fair Market Value as herein provided and (B) the
aggregate consideration for such maximum number of additional shares of Common
Stock shall be deemed to be the minimum consideration received and receivable
by the Company for the issuance of such additional shares of Common Stock
pursuant to the terms of such Convertible Securities.  For purposes of this Section 4(a)(v),
the effective date of such adjustment and the date as of which the Fair Market
Value shall be computed shall be the earliest of (x) the date on which the
Company shall take a record of the holders of the Common Stock for the purpose
of entitling them to receive any such Convertible Securities, (y) the date
on which the Company shall enter into a film contract or commitment for the
issuance of such Convertible Securities and (z) the date of actual
issuance of such Convertible Securities.

 

No adjustment of the
Aggregate Number shall be made under this Section 4(a)(v) upon:

 

(A)                             the
issuance of any Convertible Securities which are issued pursuant to the
exercise of any warrants, options or other subscription or purchase rights if
an adjustment shall previously have been made or is contemporaneously made or
if no such adjustment shall have been required upon the issuance of such
warrants, options or other rights pursuant to Section 4(a)(iv) hereof;

 

(B)                               the
issuance of Convertible Securities in any merger or other acquisition of a
business or Person approved by the Board of Directors of the Company;

 

(C)                               the
issuance of Convertible Securities upon the exercise, conversion or the
extension of the term of Convertible Securities outstanding on the Closing Date
or the cancellation and reissuance with identical terms and conditions except
for a longer term of any such Convertible Securities outstanding on the Closing
Date; or

 

(D)                              the
issuance of Convertible Securities to financial institutions or similar
entities in transactions approved by the Board of Directors of the Company, the
principal purpose of which is not raising capital through the sale of equity
securities.

 

(vi)               Subsequent
Adjustments.  If at any time after
any adjustment of the Aggregate Number shall have been made pursuant to Section 4(a) (iv) or
(v) hereof on the basis of the issuance of warrants, options or other
rights or the issuance of Convertible Securities, or after any new adjustments
of the Aggregate Number shall have been made pursuant to this Section 4(a)(vi),
then:

 

(A)                             such
warrants, options or rights or the right of conversion or exchange in such
Convertible Securities shall expire, and all or a portion of such warrants,
options or rights, or the right of conversion or exchange in respect of all or
a portion of such Convertible Securities, as the case may be, shall not have
been exercised prior to such expiration, then

 

9

 

(B)                               such
previous adjustment shall be rescinded and annulled and the additional shares
of Common Stock which were deemed to have been issued by virtue of the
computation made in connection with such adjustment shall no longer be deemed
to have been issued by virtue of such computation;

 

(C)                               simultaneously
therewith, a recomputation shall be made of the effect of such warrants,
options or rights or Convertible Securities on the determination of the
Aggregate Number, which shall be made on the basis of treating the number of
additional shares of Common Stock, if any, theretofore actually issued pursuant
to any previous exercise of such warrants, options or rights or such right of
conversion or exchange as having been issued on the date or dates of such
exercise and, in the case of a recomputation of a calculation originally made
pursuant to Section 4(a)(iv) or (v), for the consideration actually
received and receivable therefor;

 

and, if and to the extent
called for by the foregoing provisions of Section 4(a)(vi) on the
basis aforesaid, a new adjustment of the Aggregate Number shall be made, such
new adjustment shall supersede the previous adjustment so rescinded and
annulled.

 

(vii)            Miscellaneous.  The following provisions shall be applicable
to the making of adjustments of the Aggregate Number provided above in this Section 4(a):

 

(A)                             Whenever
the Aggregate Number is adjusted pursuant to this Section 4(a), the
Warrant Purchase Price per Warrant Share payable upon exercise of this Warrant
shall be adjusted by multiplying the Warrant Purchase Price immediately prior
to such adjustment by a fraction, the numerator of which shall be the Aggregate
Number prior to such adjustment, and the denominator of which shall be the
Aggregate Number following such adjustment.

 

(B)                               The
sale or other disposition of any issued shares of Common Stock owned or held by
or for the account of the Company or any of its Subsidiaries shall be deemed an
issuance thereof for the purposes of this Section 4(a).

 

(C)                               To
the extent that any additional shares of Common Stock or any Convertible
Securities or any warrants, options or other rights to subscribe for or
purchase any Convertible Securities (1) are issued solely for cash
consideration, the consideration received by the Company therefor shall be
deemed to be the amount of the cash received by the Company therefor or (2) are
offered by the Company for subscription, the consideration received by the
Company shall be deemed to be the subscription price, in any such case
excluding any amounts paid or receivable for accrued interest or accrued or
accumulated dividends.  To the extent
that such issuance shall be for a consideration other than cash, or partially
for cash and partially for other consideration, then the amount of such
consideration shall be deemed to be the fair market value of such other
consideration plus, if applicable, the amount of such cash at the time of such
issuance, determined in the manner set forth in Section 4(d)(ii).  In case any additional shares of Common Stock
or any Convertible Securities or any warrants, options or other rights to
subscribe for or purchase any Convertible Securities shall be issued in
connection with any merger in which the Company is the survivor and issues any
securities, the amount of consideration therefor shall be deemed to be the fair
market value of such additional shares of Common Stock, Convertible Securities,
warrants, options or other rights, as the case may be, determined in the manner
set forth in Section 4(d)(ii).

 

10

 

The consideration for any
shares of Common Stock issuable pursuant to the terms of any Convertible
Securities shall be equal to (x) the consideration received by the Company
for issuing any warrants, options or other rights to subscribe for or purchase
such Convertible Securities, plus (y) the consideration paid or payable to
the Company in respect of the subscription for or purchase of such Convertible
Securities, plus (z) the consideration, if any, payable to the Company
upon the exercise of the right of conversion or exchange of such Convertible
Securities.

 

In case of the issuance
at any time of any additional shares of Common Stock or Convertible Securities
in payment or satisfaction of any dividends upon any class of stock other than
Common Stock, the Company shall be deemed to have received for such additional
shares of Common Stock or Convertible Securities a consideration equal to the
amount of such dividend so paid or satisfied.

 

(D)                              The
adjustments required by the preceding paragraphs of this Section 4(a) shall
be made whenever and as often as any specified event requiring an adjustment
shall occur, except that no adjustment of the Aggregate Number that would
otherwise be required shall be made if the amount of such adjustment shall be
less than one percent (1%) of the number of Warrant Shares issuable upon
exercise of the Warrants immediately prior to such adjustment.  Any adjustment representing a change of less
than such minimum amount (except as aforesaid) shall be carried forward and
made as soon as such adjustment, together with other adjustments required by
this Section 4(a) and not previously made, would result in a minimum
adjustment.  For the purpose of any
adjustment, any specified event shall be deemed to have occurred at the close
of business on the date of its occurrence.

 

(E)                                In
computing adjustments under this Section 4(a), fractional interests in
Common Stock shall be taken into account to the nearest one-thousandth of a
share.

 

(F)                                If
the Company shall take a record of the holders of the Common Stock for the
purpose of entitling them to receive a dividend or distribution or subscription
or purchase rights and shall, thereafter and before the distribution to
shareholders thereof, legally abandon its plan to pay or deliver such dividend,
distribution, subscription or purchase rights, then no adjustment shall be
required by reason of the taking of such record and any such adjustment
previously made in respect thereof shall be rescinded and annulled.

 

(b)                                Changes
in Common Stock.  In case at any time
the Company shall initiate any transaction or be a party to any transaction
(including, without limitation, a merger, consolidation, share exchange, sale,
lease or other disposition of all or substantially all of the Company’s assets,
liquidation, recapitalization or reclassification of the Common Stock) in
connection with which the previous outstanding Common Stock shall be changed
into or exchanged for different securities of the Company or Capital Stock or
other securities of another corporation or interests in a non-corporate entity
or other property (including cash) or any combination of the foregoing (each
such transaction being herein called a “Transaction”), then, as a
condition of the consummation of the Transaction and without duplication of any
adjustment made pursuant to Section 4(a)(i), lawful, enforceable and
adequate provision shall be made so that the Holder shall be entitled to
receive upon exercise of this Warrant at any time on or after the consummation
of the Transaction, in lieu of the Warrant Shares issuable upon such exercise
prior to such consummation, the securities or other property (including cash)
to which such Holder would have been entitled upon

 

11

 

consummation of the
Transaction if such Holder had exercised this Warrant immediately prior thereto
(subject to adjustments from and after the consummation date as nearly
equivalent as possible to the adjustments provided for in this Section 4).  The foregoing provisions of this Section 4(b) shall
similarly apply to successive Transactions.

 

(c)                                 Other
Action Affecting Capital Stock.  In
case at any time or from time to time the Company shall take any action of the
type contemplated in Section 4(a) or (b) hereof but not expressly
provided for by such provisions (other than the granting of stock appreciation
rights, phantom stock rights or other rights with equity features) other than
cash bonuses, then, unless in the opinion of the Company’s Board of Directors
such action will not have a material adverse effect upon the rights of the
Holder (taking into consideration, if necessary, any prior actions which the
Company’s Board of Directors deemed not to materially adversely affect the
rights of the Holder), the Aggregate Number shall be adjusted in such manner
and at such time as the Company’s Board of Directors may in good faith
determine to be equitable in the circumstances.

 

(d)                                Notices.

 

(i)                      Notice of
Proposed Actions.  In case the
Company shall propose (A) to pay any dividend payable in stock of any
class to the holders of the Common Stock or to make any other distribution to
the holders of the Common Stock, (B) to offer to the holders of the Common
Stock rights to subscribe for or to purchase any Convertible Securities or additional
shares of Common Stock or shares of stock of any class or any other securities,
warrants, rights or options, (other than the exercise of preemptive rights by
such a holder) (C) to effect any reclassification of the Common Stock, (D) to
effect any recapitalization, stock subdivision, stock combination or other
capital reorganization, (E) to effect any consolidation or merger, share
exchange, or sale, lease or other disposition of all or substantially all of
its property, assets or business, (F) to effect the liquidation,
dissolution or winding up of the Company, or (G) to effect any other
action which would require an adjustment under this Section 4, then in
each such case the Company shall give to the Holder written notice of such
proposed action, which shall specify the date on which a record is to be taken
for the purposes of such stock dividend, stock subdivision, stock combination,
distribution or rights, or the date on which such reclassification,
recapitalization, reorganization, consolidation, merger, share exchange, sale,
lease, transfer, disposition, liquidation, dissolution, winding up or other
transaction is to take place and the date of participation therein by the
holders of Common Stock, if any such date is to be fixed, or the date on which
the transfer of Common Stock is to occur, and shall also set forth such facts
with respect thereto as shall be reasonably necessary to indicate the effect of
such action on the Common Stock and on the Aggregate Number after giving effect
to any adjustment which will be required as a result of such action. Such
notice shall be so given in the case of any action covered by clause (A) or
(B) above at least ten (10) days prior to the record date for
determining holders of the Common Stock for purposes of such action and, in the
case of any other such action, at least ten (10) days prior to the earlier
of the date of the taking of such proposed action or the date of participation
therein by the holders of Common Stock.

 

(ii)                   Adjustment
Notice.  Whenever the Aggregate
Number is to be adjusted pursuant to this Section 4, unless otherwise
agreed by the Holder, the Company shall promptly (and in any event within
twenty (20) Business Days after the event requiring the adjustment) prepare a
certificate signed by the Chief Financial Officer of the Company, setting
forth,

 

12

 

in reasonable detail, the
event requiring the adjustment and the method by which such adjustment is to be
calculated.  The Company shall keep at its
principal office copies of all such certificates and cause the same to be
available for inspection at said office during normal business hours by the
Holder or any prospective purchaser of the Warrant (in whole or in part) if so
designated by the Holder.

 

5.                                      No
Dilution or Impairment.  The Company
will not, by amendment of its Certificate of Incorporation or through any
reorganization, recapitalization, transfer of assets, consolidation, merger,
share exchange, dissolution or any other voluntary action, avoid or seek to
avoid the observance or performance of any of the terms of this Warrant,
including, without limitation, the adjustments required under Section 4
hereof, and will at all times in good faith assist in the carrying out of all
such terms and in taking of all such action as may be necessary or appropriate
to protect the rights of the Holder against dilution or other impairment.
Without limiting the generality of the foregoing and notwithstanding any other
provision of this Warrant to the contrary (including by way of implication),
the Company (a) will not increase the par value of any shares of Common
Stock receivable on the exercise of this Warrant above the amount payable
therefor on such exercise or (b) will take all such action as may be necessary
or appropriate so that the Company may validly and legally issue fully paid and
nonassessable shares of Common Stock on the exercise of this Warrant.

 

6.                                      Definitions.  The terms defined in this Section 6,
whenever used in this Warrant, shall, unless the context otherwise requires,
have the respective meanings hereinafter specified:

 

(a)                                 “Aggregate
Number” shall have the meaning set forth in the recitals hereto.

 

(b)                                “Business
Day” shall mean any day other than a Saturday, Sunday or other day on which
commercial banks in The City of New York are authorized or required by law or
executive order to close.

 

(c)                                 “Capital
Stock” shall mean (a) with respect to any Person that is a
corporation, any and all shares, interests or equivalents in capital stock
(whether voting or nonvoting, and whether common or preferred) of such
corporation, and (b) with respect to any Person that is not a corporation,
any and all partnership, membership, limited liability company or other equity
interests of such Person that confer on a Person the right to receive a share
of the profits and losses of, or the distribution of assets of, the issuing
Person; and in each case, any and all warrants, rights or options to purchase,
and all conversion or exchange rights, voting rights, calls or rights of any
character with respect to, any of the foregoing, including, without limitation,
any rights in respect of any change in the value of any of the foregoing,
including stock appreciation rights and similar interests.

 

(d)                                “Cashless
Exercise” shall have the meaning set forth in Section 1(b).

 

(e)                                 “Closing
Date” shall mean June 1, 2005.

 

(f)                                   “Common
Stock” shall mean the Common Stock, par value $.01 per share, of the
Company or any other Capital Stock of the Company into which such stock is reclassified
or reconstituted.

 

13

 

(g)                                “Company”
shall have the meaning set forth in the introductory paragraph hereto.

 

(h)                                “Convertible
Securities” shall mean evidences of indebtedness, shares of stock or other
securities (including, without limitation, options and warrants) which are
directly or indirectly convertible, exercisable or exchangeable, with or
without payment of additional consideration in cash or property, for shares of
Common Stock, either immediately or upon the onset of a specified date or the
happening of a specified event.

 

(i)                                    “Distribution”
shall have the meaning set forth in Section 4(a)( ii).

 

(j)                                    “Fair
Market Value” shall mean, with respect to a share of Common Stock on any
date: (i) the fair market value of the outstanding Common Stock over then
ten (10) trading days prior to the date of calculation based upon (a) if
the Common Stock is listed on a national securities exchange, the closing price
per share of Common Stock on each such day published in The Wall Street Journal
(National Edition) or, if no such closing price on each such day is published
in The Wall Street Journal (National Edition), the average of the closing bid
and asked prices on each such day, as officially reported on the principal
national securities exchange on which the Common Stock is then listed or
admitted to trading; (b) if the Common Stock is not then listed or
admitted to trading on any national securities exchange, but is designated as a
national market system security, the last trading price of the Common Stock on
each such day; and (c) if there shall have been no trading on any such day
or if the Common Stock is not so designated, the average of the reported
closing bid and asked price of the Common Stock, on each such day as shown by
NASDAQ and reported by any member firm of the NYSE selected by the Company; or (ii) if
none of (i)(a), (b) or (c) is applicable, a market price per share
determined in good faith by the Board of Directors of the Company, which shall
be deemed to be “Fair Market Value”.

 

(k)                                 “Fully
Diluted” shall mean, with respect to the Common Stock as of a particular
time, the total number of outstanding shares of Common Stock as of such time as
determined by treating (i) the shares issuable under the Warrants as
having been issued and (ii) all outstanding and “in-the-money” and then
exercisable Convertible Securities, as having been converted, exercised or
exchanged and the shares issuable thereunder as having been issued.

 

(l)                                    “Holder”
shall mean any holder of an interest in the Warrant or the outstanding Warrant
Shares who becomes a holder in compliance with Section 2 hereof.

 

(m)                              “Person”
shall mean any individual, firm, corporation, limited liability company,
partnership, trust, incorporated or unincorporated association, joint venture,
joint stock company, Governmental Authority or other entity of any kind, and
shall include any successor (by merger or otherwise) of such entity.

 

(n)                                “Qualified
Public Offering” shall mean the consummation of a firm commitment public
offering of the Common Stock of the Company by a nationally recognized
investment banking firm pursuant to an effective registration statement under
the Securities Act covering the offer and sale of such securities for cash for
the account of the Company.

 

14

 

(o)                                “Required
Holders” shall mean the holders of a majority of the Total Warrant Shares.

 

(p)                                “Securities
Act” shall mean the Securities Act of 1933, as amended, or any similar federal
statute, and the rules and regulations thereunder as the same shall be in
effect at the time.

 

(q)                                “Stock
Combination” shall have the meaning set forth in Section 4(a)(i).

 

(r)                                   “Stock
Dividend” shall have the meaning set forth in Section 4(a)(i).

 

(s)                                 “Stock
Subdivision” shall have the meaning set forth in Section 4(a)(i).

 

(t)                                   “Total
Warrants” shall mean this Warrant, together with any portions thereof
assigned or transferred.

 

(u)                                “Total
Warrant Shares” shall mean the shares of Common Stock issuable upon
exercise of the Total Warrants and which have not been so exercised.

 

(v)                                “Transaction”
shall have the meaning set forth in Section 4(b).

 

(w)                              “Warrant
Purchase Price” shall mean the purchase price of $7.20 per share of Common
Stock payable upon exercise of this Warrant, as adjusted as provided herein.

 

(x)                                  “Warrants”
shall mean this Warrant and all Warrants issued in exchange, transfer or
replacement thereof.

 

(y)                                “Warrant
Shares” shall have the meaning set forth in the fourth paragraph hereto.

 

(z)                                  As
used herein, any reference to a specified percentage of Warrants or Warrant
Shares shall exclude any Warrants or Warrant Shares held by the Company or a
subsidiary thereof.

 

7.                                      Exchange,
Replacement and Assignability.  This
Warrant is exchangeable, upon the surrender hereof by the Holder at the office
or agency of the Company described in Section 1, for new Warrants of like
tenor and date representing in the aggregate the right to purchase the number
of shares which may be purchased hereunder, each of such new Warrants to
represent the right to purchase such number of shares as shall be designated by
such Holder at the time of such surrender. 
Upon receipt of evidence satisfactory to the Company of the loss, theft,
destruction or mutilation of Warrants and, in the case of any such loss, theft
or destruction, of an indemnity letter (reasonably satisfactory to the Company)
of an institutional holder of such Warrants, or in other cases, of a bond of
indemnity or other security satisfactory to the Company, or, in the case of any
such mutilation, upon surrender or cancellation of Warrants, the Company will
issue to the Holder a new Warrant of like tenor and date, in lieu of this
Warrant or such new Warrants, representing the right to purchase the number of
shares which may be purchased hereunder. 
Subject to compliance with Section 2, this Warrant and all rights
hereunder are transferable in whole or in part upon the books of the Company

 

15

 

by the registered holder
hereof in person or by duly authorized attorney, and new Warrants shall be made
and delivered by the Company, of the same tenor and date as this Warrant but
registered in the name of the transferees, upon surrender of this Warrant, duly
endorsed, to the appropriate office or agency of the Company.  All expenses, taxes (other than stock
transfer taxes) and other charges payable in connection with the preparation,
execution and delivery of Warrants pursuant to this Section 7 shall be
paid by the Company.

 

8.                                      Transfer
Books, No Rights as Stockholder, Survival of Rights.  The Company will at no time close its
transfer books against the transfer of this Warrant or any Warrant Shares in
any manner which interferes with the timely exercise of this Warrant.  This Warrant shall not entitle the Holder to
any voting rights or any rights as a stockholder of the Company.  The rights and obligations of the Company, of
the Holder of this Warrant and of any Holder of Warrant Shares issued upon
exercise of this Warrant pursuant to the terms of this Warrant shall survive
the exercise of this Warrant.

 

9.                                      Omissions
and Indulgences; Amendment and Waiver.

 

(a)                                 It
is agreed that any waiver, permit, consent or approval of any kind or character
on the Holder’s part of any breach or default under this Warrant, or any waiver
on the Holder’s part of any provisions or conditions of this Warrant must be in
writing.

 

(b)                                Any
amendment, supplement or modification of or to any provision of this Warrant,
any waiver of any provision of this Warrant and any consent to any departure by
any party from the terms of any provision of this Warrant shall be effective
only if it is made or given in writing and signed by the Company and the
Required Holders; provided, however, that no such amendment, supplement
or modification may be made without the written consent of the Holder if such
amendment, supplement or modification changes the Aggregate Number, the Warrant
Purchase Price or the expiration date of this Warrant.

 

(c)                                 Any
amendment or waiver consented to as provided in this Section 9 is binding
upon each future holder of this Warrant and upon the Company without regard to
whether this Warrant has been marked to indicate such amendment or waiver.

 

10.                                Rights
of Transferees.  Subject to
compliance with Section 2, the rights granted to the Holder hereunder of
this Warrant shall pass to and inure to the benefit of all subsequent
transferees of all or any portion of the Warrant (provided that the Holder and
any transferee shall hold such rights in proportion to their respective
ownership of the Warrant and Warrant Shares) until extinguished pursuant to the
terms hereof.

 

11.                                Captions.  The titles and captions of the
Sections and other provisions of this Warrant are for convenience of
reference only and are not to be considered in construing this Warrant.

 

12.                                Notices.  All notices, demands and other communications
provided for or permitted hereunder shall be made in writing and shall be by
registered or certified first-class mail, return receipt requested, telecopy,
overnight courier service or personal delivery:

 

16

 

(a)                                 if
to the Company:

 

Hawaiian Holdings, Inc.

3375 Koapaka Street

Suite G-350

Honolulu, Hawaii 96819

 

Attention: Chief
Executive Officer

Facsimile: (808) 835-3690

 

with copies to:

 

Dechert LLP

30 Rockefeller Plaza

New York, New York 10112

 

Attention: Charles I.
Weissman, Esq.

Facsimile: (212) 698-3599

 

(b)                                if
to the Holder:

 

RC Aviation Management,
LLC

12730 High Bluff Drive

Suite 180

San Diego, California
92130

 

Facsimile: (858) 523-1899

 

with copies to:

 

Foley & Lardner
LLP

402 West Broadway

Suite 2300

San Diego, California
92101

 

Attention: Kenneth Polin, Esq.

Facsimile: (619) 234-3510

 

All such notices and
communications shall be deemed to have been duly given: when delivered by hand,
if personally delivered; when delivered by courier, if delivered by commercial
overnight courier service; five (5) Business Days after being deposited in
the mail, postage prepaid, if mailed; and when receipt is acknowledged, if
telecopied.

 

13.                                Successors
and Assigns.  This Warrant shall be
binding upon and inure to the benefit of the parties hereto and their
respective successors or heirs and personal representatives and permitted
assigns; provided, that the Company shall have no right to assign its
rights, or to delegate its obligations, hereunder without the prior written
consent of the Holder.

 

17

 

14.                                Governing
Law.  THIS WARRANT IS TO BE CONSTRUED
AND ENFORCED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF
DELAWARE AND WITHOUT REGARD TO THE PRINCIPLES OF CONFLICTS OF LAW OF SUCH
STATE.

 

15.                                Severability.  If any one or more of the provisions
contained herein, or the application thereof in any circumstance, is held
invalid, illegal or unenforceable in any respect for any reason, the validity,
legality and enforceability of any such provision in every other respect and of
the remaining provisions hereof shall not be in any way impaired, unless the
provisions held invalid, illegal or unenforceable shall substantially impair
the benefits of the remaining provisions hereof.  The parties hereto further agree to replace
such invalid, illegal or unenforceable provision of this Warrant with a valid,
legal and enforceable provision that will achieve, to the extent possible, the
economic, business and other purposes of such invalid, illegal or unenforceable
provision.

 

16.                                Entire
Agreement.  This Warrant contains the
entire agreement among the parties with respect to the subject matter hereof
and thereby supercedes all prior and contemporaneous agreements or
understandings with respect thereto.

 

17.                                No
Strict Construction.  The Company and
the Holder each acknowledge that they have been represented by counsel in connection
with this Warrant.  The Company and the
Holder have participated jointly in the negotiation and drafting of this
Warrant.  In the event an ambiguity or
question of intent or interpretation arises under any provision of this
Warrant, this Warrant shall be construed as if drafted jointly by the parties
thereto, and no presumption or burden of proof shall arise favoring or
disfavoring any party by virtue of the authorship of any of the provisions of
this Warrant.

 

[REMAINDER OF PAGE
INTENTIONALLY LEFT BLANK]

 

18

 

IN WITNESS WHEREOF,
Hawaiian Holdings, Inc. has caused this Warrant to be signed by its duly
authorized officer and dated as of May 1, 2006.

 

 

	
   

  	
  HAWAIIAN HOLDINGS, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/ Peter R. Ingram

  
	
   

  	
   

  	
  Name: Peter R.
  Ingram

  
	
   

  	
   

  	
  Title: Chief
  Financial Office and Treasurer

  

 

[Signature Page to Warrant (RC
Aviation Management, LLC)]

 

 

SUBSCRIPTION FORM

 

	
  To:

  	
  Hawaiian
  Holdings, Inc.

  
	
   

  	
  3375 Koapaka Street

  
	
   

  	
  Suite G-350

  
	
   

  	
  Honolulu, HI 96819

  
	
   

  	
  Attention: Chief
  Executive Officer

  
	
   

  	
  Facsimile: (808)
  835-3690

  

 

1.                                      The
undersigned, pursuant to the provisions of the attached Warrant, hereby elects
to exercise this Warrant with respect to
                        
shares of Common Stock (the “Exercise Amount”).  Capitalized terms used but not otherwise
defined herein have the meanings ascribed thereto in the attached Warrant.

 

2.                                      The
undersigned herewith tenders payment for such shares in the following manner
(please check type, or types, of payment and indicate the portion of the
Exercise Price to be paid by each type of payment):

 

	
   

  	
  o

  	
  Exercise for Cash

  	
   

  	
   

  
	
   

  	
  o

  	
  Cashless Exercise

  	
   

  	
   

  

 

3.                                      Please
issue a certificate or certificates representing the shares issuable in respect
hereof under the terms of the attached Warrant, as follows:

 

	
   

  	
   

  
	
   

  	
  (Name
  of Record Holder/Transferee)

  

 

and deliver such
certificate or certificates to the following address:

 

	
   

  	
   

  
	
   

  	
  (Address
  of Record Holder/Transferee)

  

 

4.                                      The
undersigned represents that the aforesaid shares are being acquired for the
account of the undersigned for investment and not with a view to, or for resale
in connection with, the distribution thereof and that the undersigned has no
present intention of distributing or reselling such shares.

 

5.                                      If
the Exercise Amount is less than all of the shares of Common Stock purchasable
hereunder, please issue a new warrant representing the remaining balance of
such shares, as follows:

 

	
   

  	
   

  
	
   

  	
  (Name
  of Record Holder/Transferee

  

 

and deliver such warrant
to the following address:

 

	
   

  	
   

  
	
   

  	
  (Address
  of Record Holder/Transferee)

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  (Signature)

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  (Date)

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