Document:

PROQUEST COMPANY

 

OCTOBER 5, 2005 MULTI-YEAR STOCK OPTION GRANT

 

THIS STOCK OPTION is granted by PROQUEST COMPANY (the “Company”) to David Prichard, (the “Optionee”) under the Company’s 2003 Strategic Performance Plan, as amended (the “Plan”) effective as of the 5th day of October, 2005 (the “Grant Date”).

 

WHEREAS, the Board desires to deliver sustainable shareholder value and achieve consistent returns at or above market value;

 

WHEREAS, the Board has determined that it is in the best interests of the Company to retain and motivate the senior executive team and to reward value creation based on their achievement of sustained stock performance; and

 

WHEREAS, the Optionee is employed by the Company or one of its Subsidiaries as an officer.

 

NOW, THEREFORE, in consideration of the premises and of the services performed and to be performed by the Optionee, the Company hereby grants this Stock Option to the Optionee on the terms and conditions hereinafter expressed.

 

	
             
 	
            1.
 	
            OPTION GRANT
 

 

The Optionee, subject to approval of the Company’s stockholders, shall have the right to purchase a total of 100,000 shares of Common Stock at an exercise price of $36.52 per share.  The exercise price is not less than one hundred percent of the Fair Market Value of a share of Common Stock on the date hereof.  The term of this Stock Option shall extend until the tenth anniversary of the Grant Date (the “Expiration Date”), subject to earlier termination as set forth below.  The Optionee may only exercise this Stock Option to the extent that it is vested under Section 2 below and is exercisable under Sections 3 and 4 below.  The permitted methods to exercise this Stock Option are set forth in Section 5 below.  Stock acquired on exercise of this Stock Option is subject to the transfer and sale restrictions set forth in Sections 6
and 7 below.  This Stock Option is being granted under the Plan and is subject to all the Plan’s terms and provisions.  Capitalized terms not otherwise defined herein shall have the meanings set forth for such terms in the Plan unless indicated to the contrary herein.  This Stock Option is not intended to qualify as an Incentive Stock Option.

 

	
             
 	
            2.
 	
            VESTING
 

 

No portion of this Stock Option shall be vested on the Grant Date.  The Optionee may vest in this Stock Option, in whole or in part, based on achieving the vesting requirements set forth in this Section.  Vesting or becoming vested under this Section 2 shall only entitle the Optionee to exercise the vested portion of this Stock Option at the times provided for in Sections 

 

 

3, 4 and 10 below.  The unvested portion of this Stock Option shall be forfeited immediately upon termination of employment with the Company and its Subsidiaries for any reason.

 

(a)          This Stock Option shall vest under this Section 2(a) only to the extent that the Company achieves its Stock Price Target during a Performance Period as set forth in the table below, provided that the Optionee remains employed by the Company or its Subsidiaries when the Company achieves such Stock Price Target:

 

	
             

 

Stock Price Target
 	
             

 

Performance Period
 	
            Vested Portion

of Stock Option

(in shares)
 
	
            $39.81 to $42.76
 	
            Grant Date to on or before April 1, 2008
 	
            33,333
 
	
            $42.77 to $46.87
 	
            Grant Date to on or before April 1, 2009
 	
            66,667
 
	
            $46.88 and above
 	
            Grant Date to on or before April 1, 2009
 	
            100,000
 

 

 

The portion of this Stock Option that vests based on attaining a Stock Price Target under this Section 2(a) is referred to as “Performance Vested Options.”  For purposes of this Section 2(a), the following rules shall apply:

 

(1)          Whether the Company achieves a Stock Price Target is determined on the basis of the rolling average of the Fair Market Value of a share of Common Stock for a period of ninety (90) consecutive trading days during a Performance Period.  Any day that is not a trading day on the New York Stock Exchange shall be disregarded when determining the Stock Price Target.

 

(2)         If there is a Qualifying Change in Control of the Company or a Qualifying Loss of Employment on or after Acquisition of at Least 30% of the Company’s Outstanding Voting Stock, achievement of the Stock Price Target is determined on the basis of the aggregate value of the consideration paid with respect to a share of Common Stock upon or in connection with such event as set forth in Sections 8A and 8C below.

 

(3)         The table sets forth the vested portion of this Stock Option for each Performance Period on a cumulative basis.  If the Company meets the Stock Price Target during two or more Performance Periods, the vested portion of this Stock Option equals the number of shares for the Performance Period that ends on the latest date.

 

(4)         The Company’s failure to meet the Stock Price Target for a Performance Period does not disqualify the Optionee from vesting under this Section 2(a) if the Company meets the Stock Price Target for a later Performance Period.

 

	
             
 	
            (5)
 	
            No portion of this Stock Option may vest before the Grant Date.
 

 

 

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(6)         Any portion of the Stock Option that vests under this Section 2(a) shall remain vested regardless of the Company’s subsequent stock price performance.

 

(b)          If the Optionee is continuously employed by the Company and its Subsidiaries at all times from the Grant Date through the seventh anniversary of the Grant Date, the portion of this Stock Option that did not previously vest under Section 2(a) above shall become fully vested.  The portion of this Stock Option that vests based on remaining continuously employed with the Company or its Subsidiaries for at least seven years are referred to as “Service Vested Options.”

 

	
             
 	
            3.
 	
            OPTION EXERCISE DURING EMPLOYMENT
 

 

The Optionee may exercise the vested portion of this Stock Option while employed by the Company or its Subsidiaries prior to the Expiration Date as follows:

 

(a)          Performance Vested Options may be exercised in whole or in part up to the number of option shares that corresponds to the date set forth in the table below, provided that the Optionee remains employed by the Company or its Subsidiaries on such date:

 

	
            Date
 	
            Number of Total Option Shares

 
 
	
            December 31, 2007 
 	
            33,333
 
	
            December 31, 2008
 	
            66,667
 
	
            December 31, 2009
 	
            100,000
 

 

The continuous employment requirement shall be deemed to have been met solely for purposes of allowing an Optionee to exercise Performance Vested Options on and after termination of employment under Section 4 below unless the Optionee terminates employment with the Company and its Subsidiaries due to death, Disability (as defined in Section 4(a) below), Cause (as defined in Section 4(d) below) or Retirement (as defined in Section 4(e) below)

 

(b)          Service Vested Options shall be fully exercisable on and after January 1, 2013.

 

(c)          If there is a Qualifying Change in Control Event (as defined in Section 8 below) while the Optionee is employed by the Company or its Subsidiaries, the Optionee may exercise Performance Vested Options in full immediately upon such event, subject to Section 11 below.

 

	
             
 	
            4.
 	
            OPTION EXERCISE AFTER EMPLOYMENT TERMINATION
 

 

The Optionee may exercise Performance Vested Options and Service Vested Options that were exercisable (or deemed exercisable) under Section 3 (collectively, the “Exercisable Options”) on and after termination of employment with the Company and its Subsidiaries for three months.  An extended post-termination exercise period is provided for 

 

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Exercisable Options depending upon the reason for the Optionee’s termination of employment as provided below.

 

(a)          If the Optionee’s employment termination is due to death or “Disability” (as defined below), the Exercisable Options shall remain exercisable for twelve months after such employment termination.  “Disability” for purposes of this Stock Option shall mean a mental or physical condition which, in the Compensation Committee of the Board opinion (1) renders the Optionee unable or incompetent to carry out the material job responsibilities which such Optionee held or the material duties to which Optionee was assigned at the time the disability was incurred, and (2) is expected to be permanent or to last for an indefinite duration or a duration in excess of six months, or results in the Optionee receiving benefits under any long term disability plan offered by the Company.

 

(b)          If the Optionee’s employment termination is by the Company or a Subsidiary without “Cause” (as defined in Section 4(d) below) before a Qualifying Change in Control Event, then the Exercisable Options shall remain exercisable for twelve months after such employment termination.

 

(c)          If the Optionee’s employment with the Company and its Subsidiaries is terminated for any reason on or after a Qualifying Change in Control Event (other than as account of Disability as described in Section 4(a) or Cause as described in Section 4(d) below), then the Exercisable Options shall remain exercisable for two years after such employment termination.

 

(d)          “Cause” for purposes of this Stock Option shall mean the termination of Optionee’s employment with the Company or one of its Subsidiaries by reason of (1) an act of fraud, embezzlement or theft in connection with the Optionee’s duties or in the course of the Optionee’s employment; (2) unreasonable neglect or refusal by the Optionee to perform his material duties (other than as a result of illness, accident or other physical or mental incapacity), provided that (A) a demand for performance of services has been delivered to the Optionee by the CEO at least sixty days prior to such termination identifying the manner in which the CEO believes that the Optionee has failed to
performed and (B) the Optionee has thereafter failed to remedy such failure to perform; (3) the engaging by the Optionee in willful, reckless, or grossly negligent misconduct which is or may be materially injurious to the Company or its affiliates; or (4) the Optionee’s conviction of or plea of guilty or nolo contendere to a felony. 

(d)          If the Optionee’s employment termination occurs under circumstances that constitute “Retirement” under Section 2.9 of the Plan, the Exercisable Options shall remain exercisable for three years after such employment termination in lieu of any post employment termination provision otherwise provided under this Section 4.

 

This Stock Option shall forever lapse and be forfeited after the expiration of the applicable post-employment termination exercise period under this Section 4.  Under no circumstances shall this Stock Option be exercisable after the Expiration Date.

 

 

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5.       METHOD OF EXERCISE

 

(a)          The Exercisable Options may be exercised (to the extent not previously exercised) in whole or in part, at any time and from time to time prior to the expiration of this Stock Option, by delivery of appropriate notice in writing to the Secretary of the Company and accompanied by: (1) a check payable to the order of the Company for the full purchase price of the shares purchased, and (2) such other documents or representations as the Company may reasonably request in order to comply with securities, tax or other laws then applicable to the exercise of the option.

 

(b)          Payment of the purchase price may be made in whole or in part by the delivery of shares of Common Stock owned by the Optionee (or by certification of the Optionee’s ownership of such shares), valued at Fair Market Value on the date of exercise.  Shares may not be used for this purpose until the shares have been held by the Optionee for six months; provided that this holding period shall not apply if such shares were not acquired either directly or indirectly from the Company.  In addition, in the event shares of Common Stock of the Company are registered under the Securities Exchange Act of 1934, and subject to Section 3 hereof, payment of the option exercise price hereunder may, in the sole discretion of the Company, also be made by delivering a properly executed exercise notice to
the Company together with a copy of irrevocable instructions to an authorized broker to promptly deliver to the Company the amount required to pay the exercise price.

 

(c)          The exercise of this Stock Option is conditioned upon, and the Company shall have no obligation to issue or deliver any shares hereunder prior to, the Optionee making arrangements satisfactory to the Company relating to any required federal, state, local and foreign withholding taxes attributable to such exercise.  Further, the Company and its Subsidiaries shall, to the extent permitted by law, have the right, but not the obligation, to deduct any such taxes from any payment of any kind, whether or not under the Plan, otherwise due to Optionee, and/or deduct from the shares issuable upon the exercise of this Stock Option, or receive from the Optionee shares having a Fair Market Value (determined at the time of such withholding) in an amount equal to all or any part of the federal, state,
local and/or foreign withholding taxes then due.  The Fair Market Value of any shares withheld or tendered to satisfy any such tax withholding obligation shall not exceed the amount due as determined by the applicable minimum statutory withholding rates.

 

	
             
 	
            6.
 	
            RESTRICTIONS ON SALE
 

 

The Optionee agrees not to, directly or indirectly, by operation of law or otherwise, Transfer (as defined in Section 2.12 of the Plan) more than fifty percent of the “Gain Shares” (as defined below) while employed by the Company or its Subsidiaries.  “Gain Shares” shall mean (1) the total number of shares of Common Stock to be exercised under this Stock Option as designated by the Optionee, less (2) the sum of the number of shares of Common Stock under this Stock Option that either (i) may be used to meet minimum tax withholding obligations for federal and state income and employment taxes on the gain attributable to the exercise, or (ii) are attributable to the exercise price of this Stock Option, each as determined in the sole discretion of the Committee.  Notwithstanding the foregoing, Section 6 shall not 

 

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prohibit the Optionee’s Transfer of Gain Shares to a Permitted Transfer (as described in Section 7(a) below), the Transfer of Gain Shares to exercise the remaining portion or portions of this Stock Option, or a Transfer of Gain Shares pursuant to or following a Qualifying Change in Control Event.

	
             
 	
            7.
 	
            TRANSFER LIMITATIONS
 

 

(a)           The Optionee shall be allowed to Transfer any of the shares of Common Stock that may be purchased hereunder without regard to the limitations set forth in Section 6 hereof to the extent such Transfer is to a Permitted Transferee, but only to the extent the Permitted Transferee shall have agreed in writing to be bound by the limitations on Transfers set out in Section 6 hereof.  For purposes of this Stock Option, a “Permitted Transferee” means members of the Optionee’s immediate family or trusts or family partnerships for the benefit of such persons.

 

(b)          This Stock Option is not transferable by the Optionee otherwise than by will or the laws of descent and distribution and is exercisable during the Optionee’s lifetime only by the Optionee.  If the Optionee dies while this Stock Option remains exercisable, this Stock Option may be exercised in whole or in part and from time to time, in the manner described in Section 5 above, by the Optionee’s estate or the person to whom this Stock Option passes by will or the laws of descent and distribution, but only with in the period specified in Section 4 hereof.  Any shares of Common Stock so acquired following the Optionee’s death will be subject to all of the terms and conditions hereunder.  Notwithstanding the foregoing, this Stock Option may be transferred, in whole or in part, at
any time while it remains outstanding, to a Permitted Transferee, subject to all of the terms and conditions set forth in this Stock Option (including but not limited to the restrictions in Section 6 above while the Optionee is employed by the Company or its Subsidiaries).

 

	
             
 	
            8.
 	
            QUALIFYING CHANGE IN CONTROL EVENT AND ITS TREATMENT UNDER THIS STOCK OPTION
 

 

	
             
 	
            (a)
 	
            A “Qualifying Change in Control Event” shall occur if there is either:
 

 

(1)         a “Change in Control of the Company” (as defined in Section 8A below);

 

(2)         a “Change in Control of a Subsidiary” (as defined in Section 8B below), but only with respect to an Optionee who is employed by a Subsidiary and not by the Company immediately after a transaction described in Section 8B; or

 

(3)         a “Qualifying Loss of Employment” (as defined in Section 8C below) on or after an “Acquisition of at Least 30% of the Company’s Outstanding Voting Stock” (as defined in Section 8C below).

 

(b)         The Optionee is entitled to the following rights under this Stock Option in connection with any Qualifying Change in Control Event:

 

 

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(1)         the right to exercise the Performance Vested Options in full on or after a Qualifying Change in Control Event at any time before 2009 while still employed by the Company or its Subsidiaries pursuant to Section 3(c) above;

 

(2)         the right to exercise the Exercisable Options for up to two years after the Optionee’s  termination of employment with the Company for any reason on or after a Qualifying Change in Control Event (other than on account of Disability as described in Section 4(a) or Cause as described in Section 4(d) above) under Section 4(c) above; and 

 

(3) a waiver of the sale restrictions under Section 6 with respect to a Transfer of Gain Shares on or after a Qualifying Change in Control Event.

 

	
             
 	
            8A.
 	
            Change in Control of the Company.
 

 

A “Change in Control of the Company” shall occur upon the earliest to occur of the following events:

 

(a)           a consummation of (1) any consolidation or merger of the Company pursuant to which shares of Common Stock would be converted into or exchanged for cash, securities or other property, other than a merger of the Company in which the holders of Common Stock immediately prior to the merger have, directly or indirectly, at least a 50% ownership interest in the outstanding common stock of the surviving corporation immediately after the merger, or (2) any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all, or substantially all, of the assets of the Company other than any such transaction with entities in which the holders of the Company Common Stock, directly or indirectly, have at least a 50% ownership interest;

 

(b)           approval by the stockholders of the Company any plan or proposal for the liquidation or dissolution of the Company; or

 

(c)           as the result of, or in connection with, any cash tender offer, exchange offer, merger or other business combination, sale of assets, proxy or consent solicitation (other than by the Board), contested election or substantial stock accumulation (“Control Transaction”), the members of the Board immediately prior to the first public announcement relating to such Control Transaction shall thereafter cease to constitute a majority of the Board.

 

If there is a Change of Control of the Company, a special stock valuation rule shall apply in order to determine the vested amount of this Stock Option under Section 2(a) above.  If the aggregate value of the consideration paid with respect to a share of the Common Stock upon or in connection with a Change in Control of the Company (the “Company Change in Control Stock Value”) exceeds the highest 90 day rolling average of the Fair Market Value of a share of Common Stock that occurs during a Performance Period in which the Change in Control of the Company occurs, then the Company Change in Control Stock Value shall be used in lieu of such 90 day rolling average to determine if the Stock Price Target has been met for such Performance Period.

 

 

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            8B.
 	
            Change in Control of a Subsidiary.
 

 

A Change in Control of a Subsidiary shall be deemed to occur upon the earliest to occur of the following events:

 

(a)          any person or group becomes the beneficial owner, directly or indirectly of securities of the Subsidiary representing more than 50% of the combined voting power of the Subsidiary’s then outstanding securities; 

 

(b)          the Subsidiary is combined by merger, share exchange, consolidation or otherwise with another corporation and as a result of such combination, less than 50% of the outstanding securities of the surviving or resulting corporation are owned by the Company; or 

 

(c)          the Subsidiary sells, leases, or otherwise transfers all or substantially all of its properties or assets to an entity less than 50% of the outstanding securities of which are owned in aggregate by the Company.

 

8C.         Qualifying Loss of Employment After Acquisition of at Least 30% of the Company’s Outstanding Voting Stock 

 

Whether a “Qualifying Loss of Employment” has occurred on or after an “Acquisition of at Least 30% of the Company’s Outstanding Voting Stock” shall be determined using the following definitions:

 

(a)          For purposes of the Stock Option, an “Acquisition of at Least 30% of the Company’s Outstanding Voting Stock” means a transaction in which any “person” or “group” (as such terms are used in Section 13(d) and 14(d) of the Exchange Act) is or becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 30% or more of the combined voting power of the Company’s then outstanding securities (other than the Company or any employee benefit plan of the Company and, for purposes of the Plan and this Stock Option, no Change in Control shall be deemed to have occurred as a result of the “beneficial ownership,” or changes therein, of the Company’s
securities by either of the foregoing).

 

(b)          For purposes of this Stock Option, a “Qualifying Loss of Employment”, means termination of the Optionee’s employment by the Company without Cause (as defined in Section 4(d) above) or by the Optionee for Good Reason (as defined in Section 8C(c) below) on or after an Acquisition of at Least 30% of the Company’s Outstanding Voting Stock.

 

(c)          For purposes of this Stock Option, “Good Reason” shall mean the occurrence of any of the following events, without the Optionee’s written consent, during the period beginning on an Acquisition of at Least 30% of the Company’s Outstanding Voting Stock and ending on April 1, 2009: (1) the Optionee is no longer either a direct report to the CEO for the Company or President of a major division of the Company; (2) the assignment to the Optionee of any duties inconsistent in any material respect with the Optionee’s position, authority, duties or responsibilities, or any other action by the Company which results in a 

 

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significant diminution in such position, authority, duties or responsibilities, each as in effect at the Grant Date (or such later date to the extent of any actions by the Company are consented to in writing by the Optionee), unless the action is remedied by the Company within ten days after receipt of notice thereof given by the Optionee; (3) an assignment longer than six months of the Optionee to a location in excess of fifty miles from the Optionee’s then current office; or (4) a reduction of the Optionee’s salary or bonus target or material failure to pay the Optionee’s salary, bonus, compensation or benefits, unless any such action under this paragraph (4) is remedied by the Company within ten days after receipt of notice thereof given by the Optionee. A termination of employment by the Optionee for Good Reason shall be effected by giving the Company written notice of the termination,
setting forth in reasonable detail the specific conduct of the Company that constitutes Good Reason.  An event shall not be deemed to constitute Good Reason if the Optionee fails to deliver notice of termination for Good Reason within six months of the Optionee’s actual knowledge of such event. 

 

If there is a Qualifying Event under this Section 8C, a special stock valuation rule shall also apply in order to determine the vested amount of this Stock Option under Section 2(a) above.  If the aggregate value of the consideration paid with respect to a share of the Common Stock upon or in connection with an Acquisition of at Least 30% of the Company’s Outstanding Voting Stock (the “30% Trigger Stock Value”), as reasonably determined by the Committee exceeds the highest 90 day rolling average of the Fair Market Value of a share of Common Stock that occurs during a Performance Period in which such Acquisition occurs, then the 30% Trigger Stock Value shall be used in lieu of such 90 day rolling average to determine if the Stock Price Target has been met for such Performance Period.

 

	
             
 	
            9.
 	
            LOCKUP PROVISION
 

 

The Optionee agrees, if requested by the Company and any underwriter engaged by the Company, not to sell or otherwise transfer or dispose of any securities of the Company (including, without limitation pursuant to Rule 144 under the Act) for such period following the effective date of any registration statement of the Company filed under the Act as the Company or such underwriter shall specify reasonably and in good faith, not to exceed one hundred and eighty days in the case of any public offering of the Company’s common stock.

 

	
             
 	
            10.
 	
            EMPLOYMENT
 

 

For purposes of this Stock Option, “employment” shall mean the performance of services for the Company or a Subsidiary as an employee for federal income tax purposes.  The Optionee shall be deemed to have terminated employment either upon an actual termination of service with the Company and its Subsidiaries, or at the time that the Subsidiary for which the Optionee is employed by ceases to be a Subsidiary under the terms of the Plan, provided that the Optionee is not employed immediately thereafter by the Company.  The Optionee’s employment with the Company or one of its Subsidiaries shall not be deemed to have terminated if the Optionee takes any military leave, sick leave, or other bona fide leave of absence approved by the Company or the Subsidiary, as applicable, regardless of whether pay is suspended during such leave.

 

 

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            11.
 	
            ADJUSTMENT
 

 

This Stock Option shall be subject to adjustment by the Committee pursuant to Section 9 of the Plan on account of any transaction described therein.  The Optionee specifically acknowledges that the Committee in its sole discretion may, among other things, unilaterally cancel this Stock Option in connection with a Change in Control of the Company or a Subsidiary by providing the Optionee a cash payment (less applicable withholding taxes) in an amount equal to the excess, if any, of the value of the acquisition consideration payable with respect to a share of Common Stock over the exercise price per share as provided in Section 1 above, multiplied by the number of vested shares remaining exercisable hereunder (determined after taking into account any acceleration of vesting as a result of a Qualifying Change in Control Event under this Stock Option).

 

	
             
 	
            12.
 	
            EXCISE TAX
 

If any payments or benefits, whether pursuant to the terms of this Stock Option or any other plan, arrangement or agreement of the Optionee with the Company or any person affiliated with the Company (collectively, the “Payments”), received or to be received by the Optionee will be subject to the tax (the “Excise Tax”) imposed by Section 4999 of the Code (or any similar tax that may hereafter be imposed), then the Company shall pay to the Optionee an additional amount (the “Gross-Up Payment”).  The Gross Up Payment shall be an amount which, when combined with the net amount of the Payments retained by the Optionee (after giving effect to the application of the Excise Tax and all other applicable taxes on the Payments) will result in the net amount received by the Optionee equaling the net amount of the Payments the Optionee would have received absent
application of the Excise Tax.  The process for calculating the Excise Tax, determining the amount of any Gross-Up Payment and other procedures relating to this Section 12 are set forth in the attached Appendix.

 

	
             
 	
            13.
 	
            Miscellaneous Provisions
 

(a)          Coordination with Plan.  Notwithstanding anything in this Stock Option to the contrary, to the extent of any conflict between the terms of the Plan and this Stock Option, the terms of the Plan shall control; provided, however, that any capitalized terms that are defined in this Stock Option Agreement, including but not limited to the definition of Disability, Retirement, Qualifying Change in Control Event and Gross-Up Payment, shall not be considered to be in conflict with the Plan for purposes of this Section 13(a).

(b)          Integrated Agreement.  This Stock Option and the Plan constitute the entire understanding and agreement between the Optionee and the Company with respect to the subject matter contained herein and supersedes any prior agreements, understandings, restrictions, representations, or warranties between the Optionee and the Company with respect to such subject matter other than those as set forth or provided for herein.  To the extent contemplated herein, the provisions of this Stock Option shall survive any exercise of this option and shall remain in full force and effect.

 

(c)          Governing Law.  This Stock Option shall be governed by and construed in accordance with the laws of the State of Delaware without regard to conflict of law principles.

(d)          Headings.  The headings are intended only for convenience in finding the subject matter and do not constitute part of the text of this Stock Option and shall not be considered in the interpretation of this option.

(e)          Saving Clause.  If any provision(s) of this Stock Option shall be determined to be illegal or unenforceable, such determination shall in no manner affect the legality or enforceability of any other provision hereof.

(f)           Notices.  All notices, requests, consents and other communications shall be in writing and be deemed given when delivered personally, by telex or facsimile transmission or when received if mailed by first class registered or certified mail, postage prepaid.  Notices to the Company or the Optionee shall be addressed to such address or addresses as may have been furnished by such party in writing to the other.

(g)          Benefit and Binding Effect.  This Stock Option shall be binding upon and shall inure to the benefit of the parties hereto, their respective successors, permitted assigns, and legal representatives.  The Company has the right to assign this Stock Option, and such assignee shall become entitled to all the rights of the Company hereunder to the extent of such assignment.

(h)          Counterparts.  For the convenience of the parties and to facilitate execution, this Stock Option may be executed in two or more counterparts, each of which shall be deemed an original, but all of which shall constitute one and the same document.

 

IN WITNESS WHEREOF, the Company has caused the execution hereof by its duly authorized officer and Optionee has agreed to the terms and conditions of this option, all effective as of the date first above written.

 

PROQUEST COMPANY

 

 

	
             
 	
            By /s/ Alan W. Aldworth____________________
 	
             

	
             
 	
            Alan W. Aldworth
 	
             

	
             
 	
            Its: Chairman, President and Chief Executive Officer
 
					

 

 

 

	
             
 	
            By /s/ David Prichard_______________________
 
	
             
 	
            David Prichard
 	
             

				

 

 

 

APPENDIX

 

GROSS-UP PAYMENT RULES AND PROCEDURES

 

1.            Subject to Paragraph 3 below, all determinations required to be made under Section 12 of this Stock Option, including whether a Gross-Up Payment is required and the amount of such Gross-Up Payment, shall be made by the Auditor selected in accordance with Paragraph 2 below.  The Auditor shall provide detailed supporting calculations both to the Company and the Optionee within thirty (30) business days after the Qualifying Change in Control or such earlier time as is requested by the Company.  The initial Gross-Up Payment, if any, as determined pursuant to this Paragraph 1, shall be paid to the Optionee within fifteen (15) days of the receipt of the Auditor’s determination.  If the Auditor determines that no Excise Tax is payable to the Optionee, it shall furnish the Optionee with a written
report indicating that he has substantial authority not to report any Excise Tax on his federal income tax return.  Any determination by the Auditor shall be binding upon the Company and the Optionee.  As a result of the uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Auditor hereunder, it is possible that Gross-Up Payments which will not have been made by the Company should have been made (“Underpayment”), consistent with the calculations required to be made hereunder.  In the event that the Company exhausts its remedies pursuant to Paragraph 3 below and the Optionee thereafter is required to make a payment or additional payment of any Excise Tax, the Auditor shall determine the amount of the Underpayment that has occurred and any such Underpayment shall be promptly paid by the Company to or for the benefit of the Optionee, but in no event later than thirty (30) days after a demand for payment by the Internal
Revenue Service to the Optionee.  For purposes of determining the amount of the Gross-Up Payment, the Optionee shall be deemed to pay federal income tax at the highest marginal rate of federal income taxation in the calendar year in which the Gross-Up Payment is to be made and state and local income taxes on earned income at the highest marginal rate of taxation in the state and locality of the Optionee’s residence on the date on which the Gross-Up Payment is being calculated, net of the maximum reduction in federal income taxes which could be obtained from deduction of such state and local taxes.

 

2.            The Auditor shall be a public accounting firm mutually agreed upon by the Company and the Optionee.  If the Optionee and the Company cannot agree on the firm to serve as the Auditor, then the Optionee and the Company shall each select one accounting firm and those two firms shall jointly select the accounting firm to serve as the Auditor.  The Company shall pay the Auditor’s fee.

 

3.            The Optionee shall notify the Company in writing of any claim by the Internal Revenue Service that, if successful, would require the payment by the Company of the Gross-Up Payment.  Such notification shall be given as soon as practicable but no later than fifteen (15) business days after the Optionee knows of such claim and shall apprise the Company of the nature of such claim and the date on which such claim is requested to be paid.  The Optionee shall not pay such claim prior to the expiration of the period ending on the date that any payment of taxes with respect to such claim is due or the thirty day period following the date on which the Optionee gives such notice to the Company, whichever period is shorter.  If the Company notifies the Optionee in writing prior to the expiration of such
period that it desires to contest such claim, the Optionee shall (i) give the Company any information reasonably requested by the Company relating to such claim, (ii) take such action in connection with contesting such claim as the Company shall reasonably request in writing from time to time, including, without limitation, accepting legal representation with respect to such claim by an attorney reasonably selected by the Company, (iii) cooperate with the Company in good faith in order effectively to contest such claim, and (iv)  permit the Company to participate in any proceedings relating to such claim; provided, however, that the Company shall bear and pay directly all costs and expenses (including attorneys fees and any additional interest and penalties) incurred in connection with such contest and shall indemnify and hold the Optionee harmless, on an after-tax basis, for any Excise Tax or other related tax, including interest and penalties with respect thereto, imposed as a
result of such representation and payment of costs and expenses or reimburse the Optionee on an after tax basis for tax preparation expenses associated with the preparing; refiling; extensions; or other actions taken by the Optionee’s tax preparer to comply with these instructions or the Company’s subsequent instructions.  Without limitation on the foregoing provisions of this Paragraph 3, the Company shall control all proceedings taken in connection with such contest and, at its sole option, may pursue or forego any and all administrative appeals, proceedings, hearings and conferences with the taxing authority in respect to such claim and may, at its sole option, either direct the Optionee to pay the tax claimed and sue for a refund or contest the claim in any permissible manner, and the Optionee agrees to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as the Company shall
determine; provided, however, that if the Company directs the Optionee to pay such claim and sue for a refund, the Company shall immediately distribute the amount of such payment to the Optionee and shall indemnify and hold the Optionee harmless, on an after-tax basis, from any Excise Tax and other related tax, including interest or penalties with respect thereto, imposed with respect to such distribution or with respect to any imputed income with respect to such distribution; and further provided that any extension of the statute of limitations relating to payment of taxes for the taxable year of the Optionee with respect to which such contested amount is claimed to be due is limited solely to such contested amount.  Furthermore, the Company’s control of the contest shall be limited to issues with respect to which a Gross-Up Payment would be payable hereunder and the Optionee shall be entitled to settle or contest, as the case may be, any other issue raised by the Internal
Revenue Service or any other authority.

 

4.            If, after the receipt by the Optionee of a Gross-Up Payment for any reason, including but not limited to a distribution by the Company pursuant to Paragraph 3 above, the Optionee becomes entitled to receive any refund with respect to any such payment, the Optionee shall (subject to the Company’s complying with its obligations under Paragraph 3), promptly pay to the Company the amount of such refund (together with any interest paid or credited thereon after taxes applicable thereto).

 

 

 

 

-10-sec document

                                                                     EXHIBIT 4.1

THIS WARRANT (THIS  "WARRANT") HAS NOT BEEN REGISTERED  UNDER THE SECURITIES ACT
OF 1933,  AS AMENDED  (THE "ACT"),  OR ANY STATE  SECURITIES  LAW.  NEITHER THIS
WARRANT NOR ANY WARRANT SHARES ISSUABLE UPON EXERCISE HEREOF NOR ANY INTEREST OR
PARTICIPATION  HEREIN OR  THEREIN  MAY BE SOLD,  ASSIGNED,  MORTGAGED,  PLEDGED,
HYPOTHECATED,  ENCUMBERED OR OTHERWISE TRANSFERRED EXCEPT IN COMPLIANCE WITH THE
ACT AND APPLICABLE STATE SECURITIES LAWS.

                               CEPTOR CORPORATION

                          COMMON STOCK PURCHASE WARRANT

377,359 SHARES                              ORIGINAL ISSUE DATE: OCTOBER 7, 2005

      This  Warrant is issued in  connection  with and  pursuant to that certain
Common Stock Purchase  Agreement (the "PURCHASE  AGREEMENT") dated as of October
7,  2005,  by and  between  CEPTOR  CORPORATION,  a  Delaware  corporation  (the
"COMPANY") and FUSION CAPITAL FUND II, LLC (the "BUYER").

      FOR VALUE  RECEIVED,  the Buyer,  the  registered  holder  hereof,  or its
permitted  assigns  (the  "HOLDER"),  is entitled to purchase  from the Company,
during  the  period   specified  in  this   Warrant,   377,359  fully  paid  and
non-assessable  shares (subject to adjustment as hereinafter provided) of Common
Stock (the  "WARRANT  SHARES"),  of the Company at the purchase  price per share
provided in Section 1.2 of this  Warrant (the  "WARRANT  EXERCISE  Price"),  all
subject to the terms and  conditions  set forth in this  Warrant.  All terms not
otherwise defined herein shall have the meaning ascribed to them in the Purchase
Agreement.

SECTION 1.  PERIOD FOR EXERCISE AND EXERCISE PRICE.

      1.1   PERIOD FOR EXERCISE.  The right to purchase shares of Warrant Shares
represented by this Warrant shall be immediately  exercisable,  and shall expire
at 5:00 p.m.,  Chicago local time,  December 31, 2010 (the  "EXPIRATION  DATE").
From and after the Expiration Date this Warrant shall be null and void and of no
further force or effect whatsoever.

     1.2    WARRANT  EXERCISE  PRICE.  The Warrant  Exercise  Price per share of
Warrant  Shares shall be $0.01 per share  (subject to adjustment as  hereinafter
provided).

SECTION 2.  EXERCISE OF WARRANT.

     2.1    MANNER OF EXERCISE.  The Holder may exercise this Warrant,  in whole
or in part,  immediately,  but not  after the  Expiration  Date,  during  normal
business hours on any Trading Day by surrendering this Warrant to the Company at
the principal  office of the Company,  accompanied by a Warrant Exercise Form in
substantially  the form annexed hereto duly executed by the Buyer and by payment
of the  Warrant  Exercise  Price for the number of shares of Warrant  Shares for
which this  Warrant is then  exercisable,  either (i) in  immediately  available
funds, (ii) by delivery of an instrument  evidencing  indebtedness  owing by the
Company  to the  Holder in the  appropriate  amount,  (iii) by  authorizing  the
Company to retain shares of Common Stock which would  otherwise be issuable upon
exercise of this  Warrant (in  accordance  with Section 2.4 hereof) or (iv) in a
combination  of (i), (ii) or (iii) above,  provided,  however,  that in no event
shall the Holder be entitled to  exercise  this  Warrant for a number of Warrant
Shares in excess of that number of Warrant  Shares which,  upon giving effect to
such  exercise,  would  cause the  aggregate  number  of shares of Common  Stock
beneficially owned by the Holder to exceed 9.9% of the outstanding shares of the
Common Stock following such exercise. For purposes of the foregoing proviso, the
aggregate  number of shares of Common  Stock  beneficially  owned by the  Holder
shall  include the number of shares of Common Stock  issuable  upon  exercise of
this Warrant with respect to which  determination of such proviso is being made,
but shall  exclude the shares of Common  Stock which would be issuable  upon (i)
exercise of the remaining, unexercised Warrants beneficially owned by the Holder
and (ii) exercise or conversion of the unexercised or unconverted portion of any
other  securities of the Company  beneficially  owned by the Holder subject to a
limitation  on  conversion  or exercise  analogous to the  limitation  contained
herein.  Except as set forth in the  preceding  sentence,  for  purposes of this
paragraph,  beneficial  ownership shall be calculated in accordance with Section
13(d) of the Securities  Exchange Act of 1934, as amended.  The Holder may waive
the foregoing  limitation by written notice to the Company upon not less than 61
days  prior  written  notice  (with  such  waiver  taking  effect  only upon the
expiration of such 61 day notice period).

     2.2    WHEN  EXERCISE  EFFECTIVE.  Each  exercise of this Warrant  shall be
deemed to have been effected on the day on which all requirements of Section 2.1
shall have been met with  respect to such  exercise.  At such time the person in
whose name any  certificate  for shares of Warrant Shares shall be issuable upon
such  exercise  shall be deemed for all  corporate  purposes  to have become the
Holder  of  record  of  such  shares,  regardless  of  the  actual  delivery  of
certificates evidencing such shares.

     2.3    DELIVERY OF STOCK  CERTIFICATES.  As soon as practicable  after each
exercise  of this  Warrant,  and in any event no later  than 2 days  after  such
exercise, the Company at its expense will issue Warrant Shares via credit to the
Buyer's account with DTC for the number of Warrant Shares to which such Buyer is
entitled upon such Buyer's  submission of the applicable  Warrant  Exercise Form
or,  if the  Transfer  Agent  is not  participating  in The DTC  Fast  Automated
Securities Transfer Program and DWAC system,  issue and surrender to the address
as specified in the Warrant Exercise Form, a certificate, registered in the name
of the Buyer or its designee,  for the number of shares of Common Stock to which
the Buyer shall be entitled to upon such exercise.

                                       2

     2.4    CASHLESS  EXERCISE.  The Holder may, by providing  notice thereof to
the Company along with the Warrant  Exercise Form, elect to exercise the Warrant
for a number of Warrant  Shares  determined  in  accordance  with the  following
formula:

                        X = Y(A-B)
                            ------
                               A

                        Where:

                        X = The  number  of  Warrant  Shares to be issued to the
                            Holder.
                        Y = The number of Warrant Shares  purchasable under this
                            Warrant (at the date of such exercise).
                        A = The fair market  value of one share of Common  Stock
                            (or other  security  for which the  Warrant  is then
                            exercisable  at the  date  of  such  exercise).
                        B = Exercise  Price  (as  adjusted  to the  date of such
                            exercise).

For purposes of this Section 2.4, the "fair market value" per share shall be the
closing sale price of the Common Stock for the one Trading Day immediately prior
to the notice of exercise of the Warrant.

     SECTION 3.  ADJUSTMENT OF PURCHASE PRICE AND NUMBER OF SHARES.  The Warrant
Exercise Price and the kind of securities  issuable upon exercise of the Warrant
shall be adjusted from time to time as follows:

     3.1    SUBDIVISION OR COMBINATION OF SHARES (STOCK SPLITS).  If the Company
at any time effects a subdivision or combination of the outstanding Common Stock
(through a stock  split or  otherwise),  the number of shares of Warrant  Shares
shall be  increased,  in the case of a  subdivision,  or the number of shares of
Warrant  Shares shall be decreased,  in the case of a  combination,  in the same
proportions  as the  Common  Stock  is  subdivided  or  combined,  in each  case
effective  automatically upon, and simultaneously with, the effectiveness of the
subdivision or combination which gives rise to the adjustment.

     3.2    STOCK  DIVIDENDS.  If the  Company at any time pays a  dividend,  or
makes any other  distribution,  to holders of Common Stock  payable in shares of
Common Stock, or fixes a record date for the  determination of holders of Common
Stock entitled to receive a dividend or other distribution  payable in shares of
Common Stock, then the number of shares of Warrant Shares in effect  immediately
prior to such  action  shall be  proportionately  increased  so that the  Holder
hereof may receive upon exercise of the Warrant the  aggregate  number of shares
of Common  Stock  which he or it would have  owned  immediately  following  such
action if the Warrant had been exercised  immediately prior to such action.  The
adjustment shall become  effective  immediately as of the date the Company shall
take a record of the holders of its Common  Stock for the  purpose of  receiving
such  dividend  or  distribution  (or if no  such  record  is  taken,  as of the
effectiveness of such dividend or distribution).

     3.3 RECLASSIFICATION,  CONSOLIDATION OR MERGER. If at any time, as a result
of:

     (a)    a  capital   reorganization  or   reclassification   (other  than  a
subdivision,  combination or dividend provided for elsewhere in this Section 3),
or

     (b)    a merger or  consolidation  of the Company with another  corporation
(whether  or not the Company is the  surviving  corporation),  the Common  Stock
issuable  upon  exercise of the Warrants  shall be changed into or exchanged for
the same or a different number of shares of any class or classes of stock of the

                                       3

Company or any other  corporation,  or other  securities  convertible  into such
shares,  then,  as a part of such  reorganization,  reclassification,  merger or
consolidation,  appropriate  adjustments  shall  be  made  in the  terms  of the
Warrants (or of any  securities  into which the  Warrants  are  exercised or for
which the Warrants are exchanged), so that:

     (y)    the  Holders of  Warrants  or of such  substitute  securities  shall
            thereafter be entitled to receive,  upon exercise of the Warrants or
            of such  substitute  securities,  the kind and  amount  of shares of
            stock, other securities, money and property which such Holders would
            have   received  at  the  time  of  such   capital   reorganization,
            reclassification,  merger,  or  consolidation,  if such  Holders had
            exercised   their  Warrants   immediately   prior  to  such  capital
            reorganization, reclassification, merger, or consolidation, and

     (z)    the  Warrants or such  substitute  securities  shall  thereafter  be
            adjusted on terms as nearly  equivalent as may be practicable to the
            adjustments theretofore provided in this Section 3.3.

     3.4    OTHER  ACTION  AFFECTING  COMMON  STOCK.  If at any time the Company
takes any action  affecting its Common Stock,  other than an action described in
any of Sections 3.1 - 3.3 which, in the opinion of the Board of Directors of the
Company (the "BOARD"),  would have an adverse effect upon the exercise rights of
the Warrants, the Warrant Exercise Price or the kind of securities issuable upon
exercise of the Warrants,  or both, shall be adjusted in such manner and at such
time  as  the  Board  may  in  good  faith  determine  to be  equitable  in  the
circumstances; provided, however, that the purpose of this Section is to prevent
the Company  from taking any action  which has the effect of diluting the number
of shares of Warrant Shares issuable upon exercise of this Warrant.

     3.5    NOTICE OF ADJUSTMENT EVENTS.  Whenever the Company  contemplates the
occurrence of an event which would give rise to  adjustments  under this Section
3, the Company shall mail to each Warrant Holder,  at least 20 days prior to the
record  date  with  respect  to such  event  or,  if no  record  date  shall  be
established,  at least 20 days prior to such event, a notice  specifying (i) the
nature of the contemplated  event, and (ii) the date on which any such record is
to be taken for the  purpose  of such  event,  and (iii) the date on which  such
event is expected to become effective, and (iv) the time, if any is to be fixed,
when the  holders  of  record of Common  Stock  (or other  securities)  shall be
entitled to exchange  their  shares of Common  Stock (or other  securities)  for
securities or other property deliverable in connection with such event.

     3.6    NOTICE OF  ADJUSTMENTS.  Whenever  the kind or number of  securities
issuable upon exercise of the Warrants,  or both, shall be adjusted  pursuant to
Section 3, the Company shall deliver a certificate signed by its Chief Executive
Officer and by its Chief Financial Officer, setting forth, in reasonable detail,
the event requiring the adjustment,  the amount of the adjustment, the method by
which such  adjustment was  calculated  (including a description of the basis on
which the Board made any  determination  hereunder),  and the  Warrant  Exercise
Price and the kind of securities  issuable  upon exercise of the Warrants  after
giving effect to such adjustment,  and shall cause copies of such certificate to
be mailed (by first class mail postage  prepaid) to each Warrant Holder promptly
after each adjustment.

     SECTION 4. RESERVATION OF STOCK, ETC. The Company covenants and agrees that
it will at all times have  authorized,  reserve and keep  available,  solely for
issuance and delivery upon the exercise of this Warrant, the number of shares of
Warrant Shares from time to time issuable upon the exercise of this Warrant. The
Company  further  covenants  and agrees that this  Warrant is, and any  Warrants
issued in  substitution  for or  replacement  of this  Warrant  and all  Warrant
Shares,  will upon issuance be duly  authorized  and validly  issued and, in the
case of Warrant Shares,  upon issuance will be fully paid and non-assessable and

                                       4

free from all preemptive  rights of any stockholder,  and from all taxes,  liens
and charges with respect to the issue thereof  (other than transfer  taxes) and,
if the Common  Stock of the  Company is then listed on any  national  securities
exchanges  (as defined in the  Exchange Act of 1934,  as amended (the  "EXCHANGE
ACT")) or quoted on NASDAQ,  shall be, subject to the  restrictions set forth in
Section 5, duly listed or quoted thereon,  as the case may be. In the event that
the number of authorized  but unissued  shares of such Common Stock shall not be
sufficient  to effect the exercise of this entire  Warrant into Warrant  Shares,
then in addition to such other  remedies as shall be  available to the Holder of
this Warrant,  the Company shall promptly take such  corporate  action as may be
necessary to increase its authorized but unissued shares of such Common Stock to
such number of shares as shall be sufficient for such purpose.

SECTION 5.  OWNERSHIP, TRANSFER AND SUBSTITUTION OF WARRANTS.

     5.1    OWNERSHIP  OF  WARRANTS.  The  Company may treat the person in whose
name any Warrant is registered  on the register kept at the principal  office of
the Company as the owner and Holder  thereof for all  purposes,  notwithstanding
any notice to the contrary,  but in all events recognizing any transfers made in
accordance with the terms of this Warrant.

     5.2    TRANSFER  AND  EXCHANGE  OF  WARRANTS.  Upon  the  surrender  of any
Warrant,  properly endorsed, for registration of transfer or for exchange at the
principal  office of the  Company,  the Company at its expense  will execute and
deliver to the Holder thereof,  upon the order of such Holder,  a new Warrant or
Warrants of like tenor, in the name of such Holder or as such Holder may direct,
for such  number of shares  with  respect to each such  Warrant,  the  aggregate
number of shares in any event not to exceed  the  number of shares for which the
Warrant so surrendered had not been exercised.

     5.3    REGISTRATION  RIGHTS.  THE  HOLDER OF THIS  WARRANT IS  ENTITLED  TO
CERTAIN  REGISTRATION  RIGHTS WITH RESPECT TO THE WARRANT  SHARES  ISSUABLE UPON
EXERCISE  THEREOF.  SAID  REGISTRATION  RIGHTS  ARE SET FORTH IN A  REGISTRATION
RIGHTS  AGREEMENT BY AND BETWEEN THE BUYER AND THE COMPANY.  If the registration
statement  contemplated in the registration rights agreement is not effective at
the time of any issuance and the shares are not exempt from  registration  under
Rule 144, the Warrant Shares shall be issued in certificated form and shall bear
the following restrictive legend:

            THE SECURITIES  REPRESENTED BY THIS  CERTIFICATE  HAVE NOT
            BEEN  REGISTERED  UNDER  THE  SECURITIES  ACT OF 1933,  AS
            AMENDED,   OR  APPLICABLE   STATE   SECURITIES  LAWS.  THE
            SECURITIES  HAVE BEEN ACQUIRED FOR  INVESTMENT AND MAY NOT
            BE OFFERED FOR SALE, SOLD,  TRANSFERRED OR ASSIGNED IN THE
            ABSENCE OF AN  EFFECTIVE  REGISTRATION  STATEMENT  FOR THE
            SECURITIES  UNDER THE  SECURITIES ACT OF 1933, AS AMENDED,
            OR  APPLICABLE  STATE  SECURITIES  LAWS,  OR AN OPINION OF
            HOLDER'S  COUNSEL,  IN A CUSTOMARY FORM, THAT REGISTRATION
            IS  NOT  REQUIRED  UNDER  SAID  ACT  OR  APPLICABLE  STATE
            SECURITIES  LAWS OR UNLESS SOLD PURSUANT TO RULE 144 UNDER
            SAID ACT.

     5.4    EXEMPTION  FROM  REGISTRATION.  If an  opinion  of  Buyer's  counsel
provides that registration is not required for the proposed exercise or transfer
of this  Warrant or the  proposed  transfer of the  Warrant  Shares and that the
proposed  exercise or transfer in the absence of registration  would require the
Company  to take  any  action  including  executing  and  filing  forms or other
documents with the Securities and Exchange  Commission  (the "SEC") or any state
securities agency, or delivering to the Holder any form or document in order to

                                  5

establish  the right of the  Holder  to  effectuate  the  proposed  exercise  or
transfer,  the Company agrees promptly, at its expense, to take any such action;
and provided,  further,  that the Company will  reimburse the Holder in full for
any expenses  (including but not limited to the fees and  disbursements  of such
counsel, but excluding brokers'  commissions) incurred by the Holder or owner of
Warrant  Shares on his, her or its behalf in  connection  with such  exercise or
transfer of the Warrant or transfer of Warrant Shares.

SECTION 6.  NO RIGHTS OR LIABILITIES AS SHAREHOLDER.  Nothing  contained in this
Warrant shall be construed as conferring  upon the Holder hereof any rights as a
shareholder  of the Company or as  imposing  any  liabilities  on such holder to
purchase  any  securities  or as a  shareholder  of the  Company,  whether  such
liabilities are asserted by the Company or by creditors of the Company.

SECTION 7.  RULE 144 SALES.  At the  request of any Holder who  proposes to sell
securities  in  compliance  with  Rule  144 of the  SEC,  the  Company  will (i)
forthwith  furnish to such Holder a written  statement  of  compliance  with the
filing  requirements  of the SEC as set forth in Rule 144,  as such rules may be
amended from time to time and (ii) make  available to the public and such Holder
such information as will enable the Holder to make sales pursuant to Rule 144.

SECTION 8.  MISCELLANEOUS.

     8.1    AMENDMENT  AND WAIVER.  This Warrant may be amended  with,  and only
with, the written consent of the Company and the Holder. Any waiver of any term,
covenant, agreement or condition contained in this Warrant shall not be deemed a
waiver of any other term,  covenant,  agreement or condition,  and any waiver of
any default in any such term,  covenant,  agreement  or  condition  shall not be
deemed a waiver of any later  default  thereof  or of any  default  of any other
term, covenant, agreement or condition.

     8.2    REPRESENTATIONS    AND   WARRANTIES   TO   SURVIVE   CLOSING.    All
representations,  warranties  and covenants  contained  herein shall survive the
execution  and delivery of this  Warrant and the issuance of any Warrant  Shares
upon the exercise hereof.

     8.3    SEVERABILITY.  In the  event  that  any  court  or any  governmental
authority  or agency  declares all or any part of any Section of this Warrant to
be unlawful or  invalid,  such  unlawfulness  or  invalidity  shall not serve to
invalidate  any other  Section  of this  Warrant,  and in the event  that only a
portion  of  any  Section  is  so  declared  to be  unlawful  or  invalid,  such
unlawfulness  or invalidity  shall not serve to  invalidate  the balance of such
Section.

     8.4    BINDING EFFECT; NO THIRD PARTY BENEFICIARIES. All provisions of this
Warrant  shall be binding upon and inure to the benefit of the parties and their
respective heirs, legatees,  executors,  administrators,  legal representatives,
successors,  and  permitted  transferees  and assigns.  No person other than the
holder of this Warrant and the Company shall have any legal or equitable  right,
remedy or claim under or in respect of, this Warrant.

     8.5    NOTICES.  Any  notices,  consents,  waivers or other  communications
required or  permitted  to be given under the terms of this  Warrant  must be in
writing  and will be deemed  to have  been  delivered:  (i) upon  receipt,  when
delivered  personally;  (ii)  upon  receipt,  when sent by  facsimile  (provided
confirmation of transmission  is  mechanically or  electronically  generated and
kept on file by the sending party);  or (iii) one Trading 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:

                                       6

     If to the Company:
            CepTor Corporation
            200 International Circle, Suite 5100
            Hunt Valley, Maryland 21030
            Telephone:  410-527-9998
            Facsimile:  410-527-9867
            Attention:  William H. Pursley

     With a copy to:
            Olshan Grundman Frome
            Rosenzweig & Wolosky LLP
            Park Avenue Tower
            65 East 55th Street
            New York, NY  10022
            Telephone:  212-451-2259
            Facsimile:  212-451-2222
            Attention:  Harvey J. Kesner Esq.

     If to the Buyer:
            Fusion Capital Fund II, LLC
            222 Merchandise Mart Plaza, Suite 9-112
            Chicago, IL 60654
            Telephone:  312-644-6644
            Facsimile:  312-644-6244
            Attention:  Steven G. Martin

     If to the Transfer Agent:
            American Stock Transfer
            & Trust Company
            6201 15th Avenue
            Brooklyn, NY  11219
            Telephone:  718-921-8381
            Facsimile:  718-765-8718
            Attention:  Craig Leibell

or at such other address and/or facsimile number and/or to the attention of such
other person as the  recipient  party has  specified by written  notice given to
each other  party  three (3)  Trading  Days prior to the  effectiveness  of such
change.  Written  confirmation  of receipt  (A) given by the  recipient  of such
notice,   consent,   waiver  or  other   communication,   (B)   mechanically  or
electronically  generated by the sender's facsimile machine containing the time,
date, and recipient facsimile number or (C) provided by a nationally  recognized
overnight  delivery service,  shall be rebuttable  evidence of personal service,
receipt by facsimile or receipt from a nationally  recognized overnight delivery
service in accordance with clause (i), (ii) or (iii) above, respectively.

     8.6    TAXES, COSTS AND EXPENSES.  The Company covenants and agrees that it
will pay when due and payable any and all federal,  state and local taxes (other
than  income  taxes) and any other  costs and  expenses  which may be payable in
respect of the preparation,  issuance, delivery, exercise, surrender or transfer
of this  Warrant  pursuant to the terms of this  Warrant or the  issuance of any
shares  of  Warrant  Shares  as a  result  thereof.  If any  suit or  action  is
instituted  or attorneys  employed to enforce this Warrant or any part  thereof,
the  Company  promises  and  agrees  to pay all costs  and  expenses  associated
therewith,  including reasonable  attorneys' fees and court costs.

                                       7

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

     8.8    LOSS OF WARRANT.  Upon receipt by the Company of evidence reasonably
satisfactory  to it of the  loss,  theft,  destruction  or  mutilation  of  this
Warrant,  and (in the case of loss, theft or destruction) of  indemnification in
form and substance acceptable to the Company in its reasonable  discretion,  and
upon surrender and cancellation of this Warrant, if mutilated, the Company shall
execute and deliver a new Warrant of like tenor and date.

     8.9    ENTIRE  AGREEMENT.  This  Warrant,  the Purchase  Agreement  and the
Registration  Rights  Agreement  of even  date  herewith  represent  the  entire
agreement and  understanding  between the parties  concerning the subject matter
hereof and supercede all prior and contemporaneous  agreements,  understandings,
representations and warranties with respect thereto.

     8.10   HEADINGS. The headings used herein are used for convenience only and
are not to be considered in construing or interpreting this Warrant.

                                        COMPANY:

                                        CEPTOR CORPORATION

                                        BY:_______________________
                                        NAME: ____________________
                                        TITLE: _____________________

                                       8

                              WARRANT EXERCISE FORM
                              ---------------------

Date:______________

CepTor Corporation
200 International Circle, Suite 5100
Hunt Valley, Maryland 21030
Telephone:  410-527-9998
Facsimile:  410-527-9867
Attention:  William H. Pursley

Ladies  and  Gentlemen:The  undersigned,  being  the  registered  holder of your
Warrant for the purchase of _______________  Warrant Shares issued ____________,
accompanying  this  letter,   hereby  irrevocably  exercises  such  Warrant  for
____________ shares of Warrant Shares (as defined in said Warrant), and herewith
makes  payment  therefor  [via  "cash-less  exercise"]  in  accordance  with the
Warrant,  and requests that such shares of Warrant  Shares be issued in the name
of, and delivered to FUSION CAPITAL FUND II, LLC, at the address shown below the
signature line hereof.

If said number of shares shall not be all the shares  issuable  upon exercise of
the  attached  Warrant,  a new  Warrant  is to be  issued  in  the  name  of the
undersigned  for the balance  remaining  of such  shares less any  fraction of a
share paid in cash.

FUSION CAPITAL FUND II, LLC
BY: FUSION CAPITAL PARTNERS, LLC

By:_________________________
Name:
Title:

Fusion Capital Fund II, LLC
222 Merchandise Mart Plaza, Suite 9-112
Chicago, IL 60654

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