Document:

ex10-1117.htm

Exhibit 10.11.17

[Execution]

AMENDMENT NO. 13 TO RATIFICATION AND AMENDMENT AGREEMENT AND 

AMENDMENT NO. 15 TO LOAN AND SECURITY AGREEMENT

AMENDMENT NO. 13 TO RATIFICATION AND AMENDMENT AGREEMENT AND AMENDMENT NO. 15 TO LOAN AND SECURITY AGREEMENT, dated as of December 7, 2009 (this “Thirteenth Ratification Amendment”), by and among CONGOLEUM CORPORATION, a Delaware corporation, as debtor and debtor-in-possession (“Borrower”), CONGOLEUM FISCAL, INC., a New York corporation, as debtor and debtor-in-possession (“CFI”), CONGOLEUM SALES, INC., a New York corporation, as debtor and debtor-in-possession (“CSI” and together with CFI, collectively, “Guarantors” and each individually, a “Guarantor”), and WACHOVIA BANK, NATIONAL ASSOCIATION, successor by merger to Congress Financial Corporation (“Lender”).

W I T N E S S E T H:

WHEREAS, Lender, Borrower and Guarantors have entered into financing arrangements pursuant to which Lender may make loans and advances and provide other financial accommodations to Borrower as set forth in the Loan and Security Agreement, dated December 10, 2001, between Lender and Borrower, as amended by Amendment No. 1 to Loan and Security Agreement, dated September 19, 2002, between Lender and Borrower, Amendment No. 2 to Loan and Security Agreement, dated as of February 27, 2003, among Lender, Borrower and Guarantors, and as further amended and ratified by the Ratification and Amendment Agreement, dated as of January 7, 2004 (the “Ratification Agreement”), between Lender and Borrower, as acknowledged by Guarantors, Amendment No. 1 to Ratification Agreement and Amendment No. 3 to Loan and Security Agreement, dated as of December 14, 2004, between Lender and Borrower, as acknowledged by Guarantors, Amendment No. 2 to Ratification Agreement and Amendment No. 4 to Loan and Security Agreement, dated as of January 13, 2005, between Lender and Borrower, as acknowledged by Guarantors, Amendment No. 3 to Ratification Agreement and Amendment No. 5 to Loan and Security Agreement, dated as of June 7, 2005, between Lender and Borrower, as acknowledged by Guarantors, Amendment No. 4 to Ratification Agreement and Amendment No. 6 to Loan and Security Agreement, dated as of December 19, 2005, as acknowledged by Guarantors, Amendment No. 5 to Ratification Agreement and Amendment No. 7 to Loan and Security Agreement, dated as of September 27, 2006 between Lender and Borrower, as acknowledged by Guarantors, Amendment No. 6 to Ratification Agreement and Amendment No. 8 to Loan and Security Agreement, dated as of November 27, 2006, between Lender and Borrower, as acknowledged by Guarantors, Amendment No. 7 to Ratification Agreement and Amendment No. 9 to Loan and Security Agreement, dated as of June 12, 2007 between Lender and Borrower, as acknowledged by Guarantors, Amendment No. 8 to Ratification and Amendment Agreement and Amendment No. 10 to Loan and Security Agreement, dated as of December 11, 2007, between Lender and Borrower, as acknowledged by Guarantors, Amendment No. 9 to Ratification and Amendment Agreement and Amendment No. 11 to Loan and Security Agreement, dated as of June 4, 2008, between Lender and Borrower, as acknowledged by Guarantors, Amendment No. 10 to Ratification and Amendment Agreement and Amendment No. 12 to Loan and Security

  

  

  

Agreement, dated as of October 6, 2008, between Lender and Borrower, as acknowledged by Guarantors, Amendment No. 11 to Ratification and Amendment Agreement and Amendment No. 13 to Loan and Security Agreement, dated as of March 16, 2009, and Amendment No. 12 to Ratification and Amendment Agreement and Amendment No. 14 to Loan and Security Agreement, dated as of June 9, 2009, between Lender and Borrower, as acknowledged by Guarantors, permitting debtor and debtor-in-possession financing for Borrower and Guarantors, as the same now exists or may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced (all of the foregoing, as amended hereby and as the same may hereafter be further amended, modified, supplemented, extended, renewed, restated or replaced, collectively, the “Loan Agreement”, and together with all agreements, documents and instruments at any time executed and/or delivered in connection therewith or related thereto, including the Reaffirmation and Amendment of Guarantor Documents, dated as of January 7, 2004, between Lender and Guarantors, as from time to time amended, modified, supplemented, extended, renewed, restated or replaced, collectively, the “Financing Agreements”);

WHEREAS, Borrower and each Guarantor have each commenced a case (collectively, the “Cases”) under Chapter 11 of Title 11 of the United States Code in the United States Bankruptcy Court for the District of New Jersey (the “Court”) and have each retained possession of its assets and is authorized under the Bankruptcy Code to continue the operation of its businesses as a debtor-in-possession;

WHEREAS, Borrower and Guarantors have requested that Lender make certain amendments to the Loan Agreement and the other Financing Agreements, and Lender is willing to agree to such request, subject to the terms and conditions contained herein;

WHEREAS, by this Thirteenth Ratification Amendment, Lender, Borrower and Guarantors desire and intend to evidence such amendments;

WHEREAS, this Thirteenth Ratification Amendment has been filed with the Bankruptcy Court and notice thereof has been served upon all parties that have requested notice in the Borrower’s and Guarantors’ bankruptcy cases pursuant to the Final Order (1) Authorizing Debtors’ Use of Cash Collateral, (2) Authorizing Debtors to Obtain Post-Petition Financing, (3) Granting Senior Liens and Priority Administrative Expense Status Pursuant to 11 U.S.C. §§105 and 364(c), (4) Modifying the Automatic Stay Pursuant to 11 U.S.C. §362, and (5) Authorizing Debtors to Enter Into Agreements with Congress Financial Corporation (as the same now exists or may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced, the “Final DIP Financing Order”), which was approved by the Bankruptcy Court on February 2, 2004;

WHEREAS, no objection has been filed by any interested party to the terms and conditions of this Thirteenth Ratification Amendment and Borrower and Guarantors are authorized to execute and deliver this Thirteenth Ratification Amendment in accordance with the terms of the Final DIP Financing Order; and

  

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NOW, THEREFORE, in consideration of the foregoing, the mutual covenants and agreements contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Lender, Borrower and Guarantors hereby covenant, warrant and agree as follows:

1.  Definitions.

 

1.1  Additional Definitions.  As used herein, the following terms shall have the following meanings given to them below, and the Loan Agreement and the other Financing Agreements are hereby amended to include, in addition and not in limitation, the following:

“Eligible Real Property” shall mean, collectively, (a) the Real Property of Borrower located at 1945 East State Street, Hamilton Township, New Jersey and (b) the Real Property of Borrower located at 4401 Ridge Road, Trainer, Pennsylvania.

“Fixed Asset Availability” shall mean, at any time, the amount of $5,000,000; provided, that, the Fixed Asset Availability shall be reduced by an amount equal to $69,444.44 on December 1, 2009 and on the first day of each month thereafter, and subject to other reductions based on sales or other dispositions of any of the Eligible Real Property that were included in the calculation thereof.

“Mortgages” shall mean, collectively, each of the following (as the same now exist or may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced): i)the Mortgage, Assignment of Leases and Rents, Security Agreement and Fixture Filing, dated as of the Thirteenth Ratification Amendment Effective Date, by Borrower in favor of Lender with respect to the Real Property and related assets of Borrower located at 1945 East State Street, Hamilton Township, New Jersey, and ii)the Open-End Mortgage, Assignment of Leases and Rents, Security Agreement and Fixture Filing, dated as of the Thirteenth Ratification Amendment Effective Date, by Borrower in favor of Lender with respect to the Real Property and related assets of Borrower located at 4401 Ridge Road, Trainer, Pennsylvania.

“Prime Rate Fixed Asset Loans” shall mean Prime Rate Loans outstanding from time to time based on Fixed Asset Availability.

“Thirteenth Ratification Amendment” shall mean Amendment No. 13 to Ratification and Amendment Agreement and Amendment No. 15 to Loan and Security Agreement, dated as of December 4, 2009, among Borrower, Guarantors and Lender.

“Thirteenth Ratification Amendment Effective Date” shall mean the first date on which all of the conditions precedent to the effectiveness of the Thirteenth Ratification Amendment shall have been satisfied or shall have been waived by Lender.

 

  

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1.2  Amendments to Definitions.

(a)  Borrowing Base.  The definition of “Borrowing Base” in Section 1.6 of the Loan Agreement is hereby amended by deleting the first sentence of such definition in its entirety and replacing it with the following:

“1.6  ‘Borrowing Base’ shall mean, at any time, the amount equal to:

(a)  eighty five (85%) percent of the Net Amount of Eligible Accounts, plus

(b)  the lesser of: (i) the sum of: (A) the lesser of (1) fifty (50%) percent of the Value of Eligible Inventory consisting of finished goods or (2) $20,000,000, plus (B) the lesser of (1) the sum of (aa) thirty five (35%) percent of the Value of Eligible Inventory consisting of raw materials (other than resin) for such finished goods, plus (bb) fifty (50%) percent of the Value of Eligible Inventory consisting of resin, or (2) $3,000,000; or (ii) $23,000,000, plus

(c)  the Fixed Asset Availability, less

(d)  any Reserves.”

(b)  Financing Agreements. All references to the term “Financing Agreements” in this Thirteenth Ratification Amendment and in any of the Financing Agreements shall be deemed and each such reference is hereby amended to include, in addition and not in limitation, this Thirteenth Ratification Amendment, as the same now exists or may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced.

(c)  Interest Rate.  The definition of “Interest Rate” in Section 1.41 of the Loan Agreement is hereby amended by deleting such Section in its entirety and replacing it with the following:

“1.41 ‘Interest Rate’ shall mean, (a) as to Prime Rate Loans (other than Prime Rate Fixed Asset Loans), a rate equal to one and three-quarters (13⁄4%) percent per annum in excess of the Prime Rate; and (b) as to Prime Rate Fixed Asset Loans, a rate equal to two and three-quarters (23⁄4%) percent per annum in excess of the Prime Rate; provided, that, notwithstanding anything to the contrary contained herein, the Interest Rate shall mean the rate of three and three-quarters (33⁄4%) percent per annum in excess of the Prime Rate as to Prime Rate Loans (other than Prime Rate Fixed Asset Loans) and the rate of four and three-quarters (43⁄4%) percent per annum in excess of the Prime Rate as to Prime Rate Fixed Asset Loans, at Lender’s option, without notice, (a) either (i) for the period on and after the date of termination or non-renewal hereof until such time as all Obligations are indefeasibly paid and satisfied in full in immediately available funds, or (ii) for the period from and after the date of the occurrence of any Event of Default, and for so long as such Event of Default is continuing as determined by Lender in good faith and (b) on the Revolving Loans at any time outstanding in excess of the amounts available to Borrower under Section 2 hereof (whether or not such excess(es) arise or are made with or without Lender’s knowledge or consent and whether made before or after an Event of Default).”

  

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(d)  Ratification Agreement. All references to the term “Ratification Agreement” in this Thirteenth Ratification Amendment and in any of the Financing Agreements shall be deemed and each such reference is hereby amended to mean the Ratification Agreement, as amended hereby, as the same now exists or may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced.

(e)  Reserves.  The definition of “Reserves” in Section 1.64 of the Loan Agreement is hereby amended by deleting such definition in its entirety and replacing it with the following:

“1.64     ‘Reserves’ shall mean as of any date of determination, such amounts as Lender may from time to time establish and revise in good faith reducing the amount of Revolving Loans and Letter of Credit Accommodations which would otherwise be available to Borrower under the lending formula(s) provided for herein:  (a) to reflect events, conditions, contingencies or risks which, as determined by Lender in good faith, adversely affect, or would have a reasonable likelihood of adversely affecting, either (i) the Collateral or any other property which is security for the Obligations or its value, (ii) the assets, business or prospects of Borrower or any Obligor or (iii) the security interests and other rights of Lender in the Collateral (including the enforceability, perfection and priority thereof) or (b) to reflect Lender’s good faith belief that any collateral report or financial information furnished by or on behalf of Borrower or any Obligor to Lender is or may have been incomplete, inaccurate or misleading in any material respect or (c) to reflect outstanding Letter of Credit Accommodations as provided in Section 2.2 hereof or (d) in respect of any state of facts which Lender determines in good faith constitutes a Default or an Event of Default.  Without limiting the generality of the foregoing, the term “Reserves” as used herein, shall include, in addition and not in limitation, (1) the Dilution Reserve, (2) the Bank Products Reserve, (3) a special reserve, in an amount equal to all claims for all outstanding and unpaid administrative expenses or other claims which are or may be senior or pari passu to Lender’s liens in the property of Borrower or Lender’s super priority claims pursuant to the Financing Order, including, but not limited to (A) the fees and expenses of the Clerk of the Bankruptcy Court, (B) the fees of the United States Trustee as provided in the Financing Order and (C) the Professional Fee Carve Out (as such term is defined in the Interim Financing Order), and (4) reserves established by Lender in its discretion to reflect that the fair market value of the Eligible Real Property as set forth in any appraisals received by Lender with respect thereto after the Thirteenth Ratification Amendment Effective Date (in each case net of operating expenses, liquidation expenses and commissions (without duplication) estimated to be incurred in connection with the liquidation thereof, that are acceptable to Lender for such purpose, has declined so that the Fixed Asset Availability is greater than (x) the percentages with respect to the value of the Eligible Real Property used in establishing the original amount of the Fixed Asset Availability multiplied by (y) the applicable values set forth in such subsequent appraisals.  To the extent Lender may revise the lending formulas used to determine the Borrowing Base or establish new criteria or revise existing criteria for Eligible Accounts or Eligible Inventory so as to address any circumstances, condition, event or contingency in a manner satisfactory to Lender, Lender shall not establish a Reserve for the same purpose.  The amount of any Reserve established by Lender shall have a reasonable relationship to the event, condition or other matter which is the basis for such reserve as determined by Lender in good faith..”

  

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1.3  Interpretation.  For purposes of this Thirteenth Ratification Amendment, unless otherwise defined herein, all capitalized terms used herein, including, but not limited to, those terms used and/or defined in the recitals above, shall have the respective meanings assigned to such terms in the Loan Agreement.

2.  Revolving Loans.  Section 2.1 of the Loan Agreement is hereby amended by inserting the following new Section (d) at the end of such Section:

“(d)  Notwithstanding anything to the contrary in this Section 2.1, until such time as the then outstanding principal amount of the Revolving Loans equals the amount of Fixed Asset Availability, all Revolving Loans shall be deemed to constitute Prime Rate Fixed Asset Loans, and at any time that the then outstanding principal amount of the Revolving Loans exceeds the amount of Fixed Asset Availability, all Revolving Loans in excess of the amount of Fixed Asset Availability shall be deemed to constitute Prime Rate Loans (other than Prime Rate Fixed Asset Loans).”

 

3.  Grant of Security Interest.  Section 5.1 of the Loan Agreement is hereby amended by inserting the following immediately prior to the period at the end of such Section:

“and (d) the Eligible Real Property and all fixtures related thereto.”

4.  Minimum EBITDA.  Section 9.23(c) of the Loan Agreement is hereby deleted in its entirety and replaced with the following:

“(c)  Borrower and its Subsidiaries shall not, for any period set forth below (each, a “Test Period”) permit EBITDA of Borrower and its Subsidiaries to be less than the amount set forth below opposite such Test Period; provided, that, Borrower and its Subsidiaries shall not be required to comply with this Section 9.23(c) during any Test Period (A) if Excess Availability (including any Excess Availability considered in satisfaction of Section 9.18 hereof) was equal to or greater than $5,000,000 on each Business Day during such Test Period, or (B) if (x) Excess Availability (including any Excess Availability considered in satisfaction of Section 9.18 hereof) is less than $5,000,000 on any Business Day (up to a maximum of four (4) Business Days) during the ninety (90) day period ending on the last day of any Test Period, and (y) Borrower and its Subsidiaries are in possession of at least $3,000,000 of unrestricted cash on such Business Day:

  

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Test Period

 

	
 

Minimum EBITDA

 

	
 

For the four (4) months ending July 31, 2009

 

	
 

$400,000

 

	
 

For the five (5) months ending August 31, 2009

 

	
 

$520,000

 

	
 

For the six (6) months ending September 30, 2009

 

	
 

$730,000

 

	
 

For the seven (7) months ending October 31, 2009

 

	
 

$1,000,000

 

	
 

For the eight (8) months ending November 30, 2009

 

	
 

$1,000,000

 

	
 

For the nine (9) months ending December 31, 2009

 

	
 

$700,000

 

	
 

For the ten (10) months ending January 31, 2010

 

	
 

$840,000

 

	
 

For the eleven (11) months ending February 28, 2010

 

	
 

$460,000

 

	
 

For the twelve (12) months ending March 30, 2010

 

	
 

$420,000

 

	
 

For the twelve (12) months ending April 30, 2010

 

	
 

$400,000

 

	
 

For the twelve (12) months ending May 31, 2010

 

	
 

$750,000

 

	
 

For the twelve (12) months ending June 30, 2010

 

	
 

$600,000”

 

5.  Term.

5.1  The first sentence of Section 12.1(a) of the Loan Agreement is hereby amended by deleting such sentence in its entirety and replacing it with the following:

“This Agreement and the other Financing Agreements shall become effective as of the date set forth on the first page hereof and shall continue in full force and effect for a term ending on the earlier of (i) June 30, 2010 and (ii) the date the plan of reorganization in the Borrower’s and Guarantors’ bankruptcy cases, as confirmed by the Bankruptcy Court, becomes effective (such earlier date, the “Termination Date”).”

5.2  Section 12.1(c)(iii) of the Loan Agreement is hereby amended by deleting the reference to “December 31, 2009” and replacing it with “June 30, 2010”.

6.  Amendment Fee; Extension Fee.  In addition to and not in limitation of all other fees, costs and expenses payable to Lender under the Financing Agreements, in consideration of this Thirteenth Ratification Amendment, Borrower shall pay Lender (i) an amendment fee in the amount of $60,000 which fee shall be fully earned and payable upon the entry of an order of the Bankruptcy Court approving this Thirteenth Amendment, and (ii) an extension fee in the amount of $15,000 per month, which fee shall be fully earned and payable on November 1, 2009 and on the first day of each month thereafter through and including the first day of the month in which the Termination Date shall occur.  Each of the amendment fee and the extension fee payable pursuant to this Section may be charged directly to the loan account of Borrower.

  

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7.  Additional Representations, Warranties and Covenants.  In addition to the continuing representations, warranties and covenants heretofore made in the Loan Agreement or otherwise and hereafter made by Borrower and Guarantors to Lender, whether pursuant to the Financing Agreements or otherwise, and not in limitation thereof, Borrower and Guarantors hereby represent, warrant and covenant with, to and in favor of Lender the following (which shall survive the execution and delivery of this Agreement), the truth and accuracy of which, or compliance with, to the extent such compliance does not violate the terms and provisions of the Bankruptcy Code, being a continuing condition of the making of loans by Lender:

7.1  This Thirteenth Ratification Amendment has been duly authorized, executed and delivered by Borrower and Guarantors and the agreements and obligations of Borrower and Guarantors contained herein constitute legal, valid and binding obligations of Borrower and Guarantors enforceable against Borrower and Guarantors in accordance with their respective terms.

7.2  The mortgages granted to Lender under the Mortgages constitute valid and perfected first priority mortgages on the Eligible Real Property subject thereto.

7.3  Borrower has good and marketable fee simple title to the Eligible Real Property, subject to no liens, mortgages, pledges, security interests, encumbrances or charges of any kind, nature or description.

7.4  Borrower and Guarantors shall execute and/or deliver to Lender all other Financing Agreements, and other agreements, documents and instruments, in form and substance satisfactory to Lender, which, in the good faith judgment of Lender are necessary or appropriate in connection with this Thirteenth Ratification Amendment;

7.5  Each of Borrower and Guarantors shall comply in full with the notice and other requirements of the Bankruptcy Code, the applicable Federal Rules of Bankruptcy Procedure, and the terms and conditions of the Final DIP Financing Order in a manner acceptable to Lender and its counsel;

7.6  No objection has been filed by any interested party to the terms and conditions of this Thirteenth Ratification Amendment and Borrower and Guarantors are authorized, in accordance with the terms of the Final DIP Financing Order, to execute, deliver, comply with and fully be bound by this Thirteenth Ratification Amendment; and

7.7  Except as set forth above, no Default or Event of Default exists or has occurred and is continuing as of the date hereof.

  

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8.  Conditions Precedent.  In addition to any other conditions contained herein or in the Loan Agreement, as in effect immediately prior to the date hereof, with respect to the Loans, Letter of Credit Accommodations and other financial accommodations available to Borrower (all of which conditions, except as modified or made pursuant to this Thirteenth Ratification Amendment shall remain applicable to the Loans and be applicable to Letter of Credit Accommodations and other financial accommodations available to Borrower), the following are conditions to Lender’s obligation to extend further loans, advances or other financial accommodations to Borrower pursuant to the Loan Agreement:

8.1  Lender shall have received this Thirteenth Ratification Amendment, duly authorized, executed and delivered by Borrower and each Guarantor;

8.2  Lender shall have received, in form and substance satisfactory to Lender, an order duly entered by the Bankruptcy Court approving this Thirteenth Ratification Amendment;

8.3  Lender shall have received each of the Mortgages, duly authorized, executed and delivered by Borrower;

8.4  Lender shall have received, in form and substance satisfactory to Lender, a valid and effective title insurance policy issued by a company and agent acceptable to Lender in good faith: (a) insuring the priority, amount and sufficiency of the Mortgages, (b) insuring against matters that would be disclosed by surveys and (c) containing any legally available endorsements, assurances or affirmative coverage reasonably requested by Lender for protection of its interests;

8.5  Lender shall have received, in form and substance satisfactory to Lender, a written appraisal with respect to the Eligible Real Property, in form, scope and methodology acceptable to Lender and performed by an appraiser acceptable to Lender, addressed to Lender and upon which Lender is expressly permitted to rely;

8.6  Lender shall have received, in form and substance satisfactory to Lender, a Phase I environmental audit of the Eligible Real Property conducted by an independent environmental engineering firm acceptable to Lender, and in form, scope and methodology satisfactory to Lender, the results of which shall be satisfactory to Lender, confirming that Borrower is in compliance with all material applicable Environmental Laws in all material respects and there is no material potential or actual liability of Borrower or any Guarantor for any remedial action with respect to any significant environmental condition at the Eligible Real Property;

8.7  [Lender shall have received, in form and substance satisfactory to Lender, an American Land Title Association/American Congress on Surveying and Mapping form survey for which all necessary fees (where applicable) have been paid, certified to Lender and issuer of the mortgagees’ title insurance policy in a manner satisfactory to Lender by a land surveyor duly registered and licensed in the states in which the Eligible Real Property is located;]

  

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8.8  Lender shall have received, in form and substance satisfactory to Lender, all consents, waivers, acknowledgments, agreements and approvals from other third parties which Lender may deem necessary or desirable in order to permit, protect and perfect the Mortgages;

8.9  No trustee, examiner or receiver or the like shall have been appointed or designated with respect to Borrower or any Guarantor, as debtor and debtor-in-possession, or its business, properties and assets; and

8.10  Except as set forth above, no Default or Event of Default shall exist or shall have occurred or be continuing, as of the date hereof.

9.  Miscellaneous.

9.1  Amendments and Waivers.  Neither this Thirteenth Ratification Amendment nor any other instrument or document referred to herein or therein may be changed, waived, discharged or terminated orally, but only by an instrument in writing signed by the party against whom enforcement of the change, waiver, discharge or termination is sought.

9.2  Further Assurances.  Each of Borrower and Guarantors shall, at its expense, at any time or times duly execute and deliver, or shall cause to be duly executed and delivered, such further agreements, instruments and documents, and do or cause to be done such further acts as may be necessary or proper in Lender’s opinion to evidence, perfect, maintain and enforce the security interests of Lender, and the priority thereof, in the Collateral and to otherwise effectuate the provisions or purposes of this Thirteenth Ratification Amendment, any of the other Financing Agreements or the Financing Order.

9.3  Counterparts.  This Thirteenth Ratification Amendment may be executed in any number of counterparts, each of which shall be deemed to be an original, but all of which shall together constitute one and the same agreement.  Delivery of an executed counterpart of this Thirteenth Ratification Amendment by telefacsimile or other electronic method of transmission shall have the same force and effect as the delivery of an original executed counterpart of this Thirteenth Ratification Amendment.  Any party delivering an executed counterpart of this Thirteenth Ratification Amendment by telefacsimile or other electronic method of transmission shall also deliver an original executed counterpart, but the failure to do so shall not affect the validity, enforceability or binding effect of this Thirteenth Ratification Amendment.

9.4  Additional Events of Default.  The parties hereto acknowledge, confirm and agree that the failure of Borrower or any Guarantor to comply with any of the covenants, conditions and agreements contained herein or in any other agreement, document or instrument at any time executed by Borrower or any Guarantor in connection herewith shall constitute an Event of Default under the Financing Agreements.

  

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IN WITNESS WHEREOF, the parties hereto have caused this Thirteenth Ratification Amendment to be duly executed as of the day and year first above written.

WACHOVIA BANK, NATIONAL ASSOCIATION

By:   /s/ Marc J. Breier____________________

Name:  Marc J. Breier

Title: Managing Director

CONGOLEUM CORPORATION,

as Debtor and Debtor-in-Possession

By:   /s/ Howard N. Feist___________________

Name:  Howard N. Feist

Title:  Chief Financial Officer

CONGOLEUM SALES, INC.,

as Debtor and Debtor-in-Possession

By:   /s/ Howard N. Feist___________________

Name:  Howard N. Feist

Title:  Vice President

CONGOLEUM FISCAL, INC.,

as Debtor and Debtor-in-Possession

By:   /s/ Howard N. Feist___________________

Name:  Howard N. Feist

Title:  Vice Presidentex4-1.htm

    Exhibit
4.1

     

    EXHIBIT
C-I

     

    NEITHER
THIS SECURITY NOR THE SECURITIES FOR WHICH THIS SECURITY IS EXERCISABLE HAVE
BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES
COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY,
MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM,
OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AND,
UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT, AS EVIDENCED BY A
LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF
WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY AND THE TRANSFER
AGENT.  THIS SECURITY AND THE SECURITIES ISSUABLE UPON EXERCISE OF
THIS SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR
OTHER LOAN SECURED BY SUCH SECURITIES.

    

    SERIES
I COMMON STOCK PURCHASE WARRANT

    

     BIOMODA,
INC.

     

     

    Warrant
Shares:
____________                                                                     
 Initial Exercise Date:

    Issue
Date: March 16, 2010

     

    THIS
SERIES I COMMON STOCK PURCHASE WARRANT (the “Warrant”) certifies
that, for value received, ____________________________ (the “Holder”) is entitled,
upon the terms and subject to the limitations on exercise and the conditions
hereinafter set forth, at any time on or after a date that is the later of (i)
six months after the date hereof, or (ii) ten calendar days subsequent to
BIOMODA, INC., a New Mexico corporation (the “Company”), obtaining
stockholder approval to increase the authorized Common Stock of the Company by
at least fifty million shares (the “Initial Exercise
Date”) and on or prior to the close of business on the fifth anniversary
of the Initial Exercise Date (the “Termination Date”)
but not thereafter, to subscribe for and purchase from the Company, up to
____________________________ shares (the “Warrant Shares”) of
Common Stock.  The purchase price of one share of Common Stock under
this Warrant shall be equal to the Exercise Price, as defined in Section
2(b).

     

    Section
1.                 
Definitions.  Capitalized
terms used and not otherwise defined herein shall have the meanings set forth in
that certain Securities Purchase Agreement (the “Purchase Agreement”),
dated March 16, 2010, among the Company and the purchasers signatory
thereto.

     

    
      
        
        

      

      
        1

        
          

        

      

      
        
        

      

    

     

    Section
2.                  Exercise.

     

    a) Exercise of
Warrant.  Exercise of the purchase rights represented by this
Warrant may be made, in whole or in part, at any time or times on or after the
Initial Exercise Date, and on or before the Termination Date by delivery to the
Company (or such other office or agency of the Company as it may designate by
notice in writing to the registered Holder at the address of the Holder
appearing on the books of the Company) of a duly executed facsimile copy of the
Notice of Exercise Form annexed hereto; and, within three (3) Trading Days of
the date said Notice of Exercise is delivered to the Company, the Company shall
have received  payment of the aggregate Exercise Price of the shares
thereby purchased by wire transfer or cashier’s check drawn on a United States
bank or, if available, pursuant to the cashless exercise procedure specified in
Section 2(c) below.  Notwithstanding anything herein to the contrary,
the Holder shall not be required to physically surrender this Warrant to the
Company until the Holder has purchased all of the Warrant Shares available
hereunder and the Warrant has been exercised in full, in which case, the Holder
shall surrender this Warrant to the Company for cancellation within three (3)
Trading Days of the date the final Notice of Exercise is delivered to the
Company.  Partial exercises of this Warrant resulting in purchases of
a portion of the total number of Warrant Shares available hereunder shall have
the effect of lowering the outstanding number of Warrant Shares purchasable
hereunder in an amount equal to the applicable number of Warrant Shares
purchased.  The Holder and the Company shall maintain records showing
the number of Warrant Shares purchased and the date of such
purchases.  The Company shall acknowledge receipt of a Notice of
Exercise and deliver any objections to any Notice of Exercise Form within 1
Business Days of receipt of such notice.  The Holder and any assignee, by
acceptance of this Warrant, acknowledge and agree that, by reason of the
provisions of this paragraph, following the purchase of a portion of the Warrant
Shares hereunder, the number of Warrant Shares available for purchase hereunder
at any given time may be less than the amount stated on the face
hereof.

     

    b) Exercise
Price.  The exercise price per share of the Common Stock under
this Warrant shall be $.25 per
share (the “Initial Exercise
Price”), subject to adjustment hereunder (the “Exercise
Price”).

     

    c) Cashless
Exercise.  If at any time after the Initial Exercise Date,
there is no effective Registration Statement registering the resale of the
Warrant Shares by the Holder, then this Warrant may also be exercised, in whole
or in part, by means of a “cashless exercise” in which the Holder shall be
entitled to receive a certificate (unless electronic delivery is available) for
the number of Warrant Shares equal to the quotient obtained by dividing [(A-B)
(X)] by (A), where:

     

    
      	
               
      

            	
              (A)
      = the VWAP on the Trading Day immediately preceding the date on which
      Holder elects to exercise this Warrant by means of a “cashless exercise,”
      as set forth in the applicable Notice of
  Exercise;

            

    

    

    
      	
               
      

            	
              (B)
      = the Exercise Price of this Warrant, as adjusted hereunder;
      and

            

    

    

    
      	
               
      

            	
              (X)
      = the number of Warrant Shares that would be issuable upon exercise of
      this Warrant in accordance with the terms of this Warrant if such exercise
      were by means of a cash exercise rather than a cashless
      exercise.

            

    

    

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

    

    
      	
              d)

            	
              Mechanics of
      Exercise.

            

    

     

    i. Delivery of Certificates
Upon Exercise.  Warrant Shares purchased hereunder shall be
transmitted by the Transfer Agent to the Holder by crediting the account of the
Holder’s prime broker with the Depository Trust Company through its Deposit
Withdrawal Agent Commission (“DWAC”) system if the
Company is then a participant in such system and either (A) there is an
effective Registration Statement permitting the issuance of the Warrant Shares
to or resale of the Warrant Shares by the Holder or (B) the shares are eligible
for resale by the Holder without volume or manner-of-sale limitations pursuant
to Rule 144, and otherwise by physical delivery to the address specified by the
Holder in the Notice of Exercise by the date that is three (3) Trading Days
after the latest of (A) the delivery to the Company of the Notice of Exercise
Form, (B) surrender of this Warrant (if required), and (C) payment of the
aggregate Exercise Price as set forth above (including by cashless exercise, if
permitted) (such date, the “Warrant Share Delivery
Date”).  This Warrant shall be deemed to have been exercised on
the first date on which all of the foregoing have been delivered to the
Company.  The Warrant Shares shall be deemed to have been issued, and
Holder or any other person so designated to be named therein shall be deemed to
have become a holder of record of such shares for all purposes, as of the date
the Warrant has been exercised, with payment to the Company of the Exercise
Price (or by cashless exercise, if permitted) and all taxes required to be paid
by the Holder, if any, pursuant to Section 2(d)(vi) prior to the issuance of
such shares, having been paid.

     

    ii. Delivery of New Warrants
Upon Exercise.  If this Warrant shall have been exercised in
part, the Company shall, at the request of a Holder and upon surrender of the
Warrant certificate, at the time of delivery of the certificate or certificates
representing Warrant Shares, deliver to Holder a new Warrant certificate
evidencing the rights of Holder to purchase the unpurchased Warrant Shares
called for by this Warrant, which new Warrant certificate shall in all other
respects be identical with this Warrant.

     

    iii. Rescission
Rights.  If the Company fails to cause the Transfer Agent to
transmit to the Holder a certificate or the certificates representing the
Warrant Shares pursuant to Section 2(d)(i) by the second Trading Day following
the Warrant Share Delivery Date, then, the Holder will have the right to rescind
such exercise.

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

     

    iv. Compensation for Buy-In on
Failure to Timely Deliver Certificates Upon Exercise.  In
addition to any other rights available to the Holder, if the Company fails to
cause the Transfer Agent to transmit to the Holder a certificate or the
certificates representing the Warrant Shares pursuant to an exercise on or
before the third Trading Day following the Warrant Share Delivery Date, and if
after such date the Holder is required by its broker to purchase (in an open
market transaction or otherwise) or the Holder’s brokerage firm otherwise
purchases, shares of Common Stock to deliver in satisfaction of a sale by the
Holder of the Warrant Shares which the Holder anticipated receiving upon such
exercise (a “Buy-In”), then the
Company shall , within three (3) Trading Days after the Holder's request and in
the Holder's discretion, either (i) pay cash to the Holder in an amount equal to
the Holder's total purchase price (including brokerage commissions, if any) for
the shares of Common Stock so purchased (the “Buy-In Price”), at
which point the Company's obligation to deliver such certificate (and to issue
such Warrant Shares or credit such Holder's balance account with The Depository
Trust Company (“DTC”)) shall
terminate, or (ii) promptly honor its obligation to deliver to the Holder a
certificate or certificates representing such Warrant Shares or credit such
Holder's balance account with DTC and pay cash to the Holder in an amount equal
to the excess (if any) of the Buy-In Price over the product of (A) such number
of shares of Common Stock, times (B) the VWAP on the date of
exercise.  The Holder shall provide the Company written notice
indicating the amounts payable to the Holder in respect of the Buy-In and, upon
request of the Company, evidence of the amount of such loss.  Nothing
herein shall limit a Holder’s right to pursue any other remedies available to it
hereunder, at law or in equity including, without limitation, a decree of
specific performance and/or injunctive relief with respect to the Company’s
failure to timely deliver certificates representing shares of Common Stock upon
exercise of the Warrant as required pursuant to the terms hereof.

     

    v. No Fractional Shares or
Scrip.  No fractional shares or scrip representing fractional
shares shall be issued upon the exercise of this Warrant.  As to any
fraction of a share which the Holder would otherwise be entitled to purchase
upon such exercise, the Company shall, at its election, either pay a cash
adjustment in respect of such final fraction in an amount equal to such fraction
multiplied by the Exercise Price or round up to the next whole
share.

     

    vi. Charges, Taxes and
Expenses.  Issuance of Warrant Shares shall be made without
charge to the Holder for any issue or transfer tax or other incidental expense
in respect of the issuance of such certificate, all of which taxes and expenses
shall be paid by the Company, and such certificates shall be issued in the name
of the Holder or in such name or names as may be directed by the Holder; provided, however, that in the
event certificates for Warrant Shares are to be issued in a name other than the
name of the Holder, this Warrant when surrendered for exercise shall be
accompanied by the Assignment Form attached hereto duly executed by the Holder
and the Company may require, as a condition thereto, the payment of a sum
sufficient to reimburse it for any transfer tax incidental thereto.

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

     

    e) Holder’s Exercise
Limitations.  The Company shall not effect any exercise of this
Warrant, and a Holder shall not have the right to exercise any portion of this
Warrant, pursuant to Section 2 or otherwise, to the extent that after giving
effect to such issuance after exercise as set forth on the applicable Notice of
Exercise, the Holder (together with the Holder’s Affiliates, and any other
Persons acting as a group together with the Holder or any of the Holder’s
Affiliates), would beneficially own in excess of the Beneficial Ownership
Limitation (as defined below).  For purposes of the foregoing sentence, the
number of shares of Common Stock beneficially owned by the Holder and its
Affiliates shall include the number of shares of Common Stock issuable upon
exercise of this Warrant with respect to which such determination is being made,
but shall exclude the number of shares of Common Stock which would be issuable
upon (i) exercise of the remaining, nonexercised portion of this Warrant
beneficially owned by the Holder or any of its Affiliates and (ii) exercise or
conversion of the unexercised or nonconverted portion of any other securities of
the Company (including, without limitation, any other  Common Stock
Equivalents) subject to a limitation on conversion or exercise analogous to the
limitation contained herein beneficially owned by the Holder or any of its
Affiliates.  Except as set forth in the preceding sentence, for purposes of
this Section 2(e), beneficial ownership shall be calculated in accordance with
Section 13(d) of the Exchange Act and the rules and regulations promulgated
thereunder, it being acknowledged by the Holder that the Company is not
representing to the Holder that such calculation is in compliance with Section
13(d) of the Exchange Act and the Holder is solely responsible for any schedules
required to be filed in accordance therewith.   To the extent
that the limitation contained in this Section 2(e) applies, the determination of
whether this Warrant is exercisable (in relation to other securities owned by
the Holder together with any Affiliates) and of which portion of this Warrant is
exercisable shall be in the sole discretion of the Holder, and the submission of
a Notice of Exercise shall be deemed to be the Holder’s determination of whether
this Warrant is exercisable (in relation to other securities owned by the Holder
together with any Affiliates) and of which portion of this Warrant is
exercisable, in each case subject to the Beneficial Ownership Limitation, and
the Company shall have no obligation to verify or confirm the accuracy of such
determination.   In addition, a determination as to any group
status as contemplated above shall be determined in accordance with Section
13(d) of the Exchange Act and the rules and regulations promulgated
thereunder.  For purposes of this Section 2(e), in determining the
number of outstanding shares of Common Stock, a Holder may rely on the number of
outstanding shares of Common Stock as reflected in (A) the Company’s most recent
periodic or annual report filed with the Commission, as the case may be, (B) a
more recent public announcement by the Company or (C) a more recent written
notice by the Company or the Transfer Agent setting forth the number of shares
of Common Stock outstanding.  Upon the written or oral request of a Holder,
the Company shall within two Trading Days confirm orally or in writing to the
Holder the number of shares of Common Stock then outstanding.  In any case,
the number of outstanding shares of Common Stock shall be determined after
giving effect to the conversion or exercise of securities of the Company,
including this Warrant, by the Holder or its Affiliates since the date as of
which such number of outstanding shares of Common Stock was
reported.  The “Beneficial Ownership
Limitation” shall be 4.99% of the number of shares of the Common Stock
outstanding immediately after giving effect to the issuance of shares of Common
Stock issuable upon exercise of this Warrant.  The Holder, upon not
less than 61 days’ prior notice to the Company, may increase or decrease the
Beneficial Ownership Limitation provisions of this Section 2(e), provided that
the Beneficial Ownership Limitation in no event exceeds 9.99% of the number of
shares of the Common Stock outstanding immediately after giving effect to the
issuance of shares of Common Stock upon exercise of this Warrant held by the
Holder and the provisions of this Section 2(e) shall continue to
apply.  Any such increase or decrease will not be effective until the
61st day
after such notice is delivered to the Company.  The provisions of this
paragraph shall not be construed and implemented in a manner other than in
strict conformity with the terms of this Section 2(e) except as necessary to
correct this paragraph (or any portion hereof) which may be defective or
inconsistent with the intended Beneficial Ownership Limitation herein contained
or to make changes or supplements necessary or desirable to properly give effect
to such limitation. The limitations contained in this paragraph shall apply to a
successor holder of this Warrant.

     

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

     

    Section
3.                  Certain
Adjustments.

     

    a) Stock Dividends and
Splits. If the Company, at any time while this Warrant is outstanding:
(i) pays a stock dividend or otherwise makes a distribution or distributions on
shares of its Common Stock or any other equity or equity equivalent securities
payable in shares of Common Stock (which, for avoidance of doubt, shall not
include any shares of Common Stock issued by the Company upon exercise of this
Warrant), (ii) subdivides outstanding shares of Common Stock into a larger
number of shares, (iii) combines (including by way of reverse stock split)
outstanding shares of Common Stock into a smaller number of shares or (iv)
issues by reclassification of shares of the Common Stock any shares of capital
stock of the Company, then in each case the Exercise Price shall be multiplied
by a fraction of which the numerator shall be the number of shares of Common
Stock (excluding treasury shares, if any) outstanding immediately before such
event and of which the denominator shall be the number of shares of Common Stock
outstanding immediately after such event, and the number of shares issuable upon
exercise of this Warrant shall be proportionately adjusted such that the
aggregate Exercise Price of this Warrant shall remain unchanged.  Any
adjustment made pursuant to this Section 3(a) shall become effective immediately
after the record date for the determination of stockholders entitled to receive
such dividend or distribution and shall become effective immediately after the
effective date in the case of a subdivision, combination or
re-classification.

     

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

     

    b) Subsequent Equity
Sales. If the Company or any Subsidiary thereof, as applicable, at any
time while this Warrant is outstanding, shall sell or grant any option to
purchase, or sell or grant any right to reprice, or otherwise dispose of or
issue (or announce any offer, sale, grant or any option to purchase or other
disposition) any Common Stock or Common Stock Equivalents entitling any Person
to acquire shares of Common Stock, at an effective price per share less than the
then Exercise Price (such lower price, the “Base Share Price” and
such issuances collectively, a “Dilutive Issuance”)
(if the holder of the Common Stock or Common Stock Equivalents so issued shall
at any time, whether by operation of purchase price adjustments, reset
provisions, floating conversion, exercise or exchange prices or otherwise, or
due to warrants, options or rights per share which are issued in connection with
such issuance, be entitled to receive shares of Common Stock at an effective
price per share that is less than the Exercise Price, such issuance shall be
deemed to have occurred for less than the Exercise Price on such date of the
Dilutive Issuance), then, the Exercise Price shall be reduced and only reduced
to equal the Base Share Price and the number of Warrant Shares issuable
hereunder shall be increased such that the aggregate Exercise Price payable
hereunder, after taking into account the decrease in the Exercise Price, shall
be equal to the aggregate Exercise Price prior to such adjustment, subject to
adjustment for reverse and forward stock splits, stock dividends, stock
combinations and other similar transactions of the Common Stock that occur after
the date of this Agreement.  Such adjustment shall be made whenever
such Common Stock or Common Stock Equivalents are
issued.  Notwithstanding the foregoing, no adjustments shall be made,
paid or issued under this Section 3(b) in respect of an Exempt
Issuance.  The Company shall notify the Holder, in writing, no later
than the Trading Day following the issuance of any Common Stock or Common Stock
Equivalents subject to this Section 3(b), indicating therein the applicable
issuance price, or applicable reset price, exchange price, conversion price and
other pricing terms (such notice, the “Dilutive Issuance
Notice”).  For purposes of clarification, whether or not the
Company provides a Dilutive Issuance Notice pursuant to this Section 3(b), upon
the occurrence of any Dilutive Issuance, after the date of such Dilutive
Issuance the Holder is entitled to receive a number of Warrant Shares based upon
the Base Share Price regardless of whether the Holder accurately refers to the
Base Share Price in the Notice of Exercise.

     

    c) Subsequent Rights
Offerings.  If the Company, at any time while the Warrant is
outstanding, shall issue rights, options or warrants to all holders of Common
Stock (and not to the Holders) entitling them to subscribe for or purchase
shares of Common Stock at a price per share less than the VWAP on the record
date mentioned below, then, the Exercise Price shall be multiplied by a
fraction, of which the denominator shall be the number of shares of the Common
Stock outstanding on the date of issuance of such rights, options or warrants
plus the number of additional shares of Common Stock offered for subscription or
purchase, and of which the numerator shall be the number of shares of the Common
Stock outstanding on the date of issuance of such rights, options or warrants
plus the number of shares which the aggregate offering price of the total number
of shares so offered (assuming receipt by the Company in full of all
consideration payable upon exercise of such rights, options or warrants) would
purchase at such VWAP.  Such adjustment shall be made whenever such
rights, options or warrants are issued, and shall become effective immediately
after the record date for the determination of stockholders entitled to receive
such rights, options or warrants.

     

    d) Pro Rata
Distributions.  If the Company, at any time while this Warrant
is outstanding, shall distribute to all holders of Common Stock (and not to the
Holders) evidences of its indebtedness or assets (including cash and cash
dividends) or rights or warrants to subscribe for or purchase any security other
than the Common Stock (which shall be subject to Section 3(b)), then in each
such case the Exercise Price shall be adjusted by multiplying the Exercise Price
in effect immediately prior to the record date fixed for determination of
stockholders entitled to receive such distribution by a fraction of which the
denominator shall be the VWAP determined as of the record date mentioned above,
and of which the numerator shall be such VWAP on such record date less the then
per share fair market value at such record date of the portion of such assets or
evidence of indebtedness or rights or warrants so distributed applicable to one
outstanding share of the Common Stock as determined by the Board of Directors in
good faith.  In either case the adjustments shall be described in a
statement provided to the Holder of the portion of assets or evidences of
indebtedness so distributed or such subscription rights applicable to one share
of Common Stock.  Such adjustment shall be made whenever any such
distribution is made and shall become effective immediately after the record
date mentioned above.

     

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

     

    e) Fundamental Transaction. If, at any
time while this Warrant is outstanding, in one or more related transactions (i)
the Company or any of its Subsidiaries, directly or indirectly, in one or more
related transactions effects any merger or consolidation of the Company or any
of its Subsidiaries with or into another Person, (ii) the Company, directly or
indirectly, effects any sale, lease, license, assignment, transfer, conveyance
or other disposition of all or substantially all of its assets in one or a
series of related transactions, (iii) any, direct or indirect, purchase offer,
tender offer or exchange offer (whether by the Company or another Person) is
completed pursuant to which holders of Common Stock are permitted to sell,
tender or exchange their shares for other securities, cash or property and has
been accepted by the holders of 50% or more of the outstanding Common Stock,
(iv) the Company, directly or indirectly, in one or more related transactions
effects any reclassification, reorganization or recapitalization of the Common
Stock or any compulsory share exchange pursuant to which the Common Stock is
effectively converted into or exchanged for other securities, cash or property
or (v) any "person" or "group" (as these terms are used for purposes of Sections
13(d) and 14(d) of the Exchange Act), to become the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of 50% of
the aggregate ordinary voting power represented by issued and outstanding Common
Stock (each a “Fundamental
Transaction”), then, upon any subsequent exercise of this Warrant, the
Holder shall have the right to receive, for each Warrant Share that would have
been issuable upon such exercise immediately prior to the occurrence of such
Fundamental Transaction, at the option of the Holder (without regard to any
limitation in Section 2(e) on the exercise of this Warrant), the number of
shares of Common Stock of the successor or acquiring corporation or of the
Company, if it is the surviving corporation, and any additional consideration
(the “Alternate Consideration”)
receivable as a result of such Fundamental Transaction by a holder of the number
of shares of Common Stock for which this Warrant is exercisable immediately
prior to such Fundamental Transaction (without regard to any limitation in
Section 2(e) on the exercise of this Warrant).  For purposes of any
such exercise, the determination of the Exercise Price shall be appropriately
adjusted to apply to such Alternate Consideration based on the amount of
Alternate Consideration issuable in respect of one share of Common Stock in such
Fundamental Transaction, and the Company shall apportion the Exercise Price
among the Alternate Consideration in a reasonable manner reflecting the relative
value of any different components of the Alternate Consideration.  If
holders of Common Stock are given any choice as to the securities, cash or
property to be received in a Fundamental Transaction, then the Holder shall be
given the same choice as to the Alternate Consideration it receives upon any
exercise of this Warrant following such Fundamental
Transaction.  Notwithstanding anything to the contrary, in the event
of a Fundamental Transaction, other than one in which a Successor Entity (as
defined below) that is a publicly traded corporation whose stock is quoted or
listed for trading on an Eligible Market assumes this Warrant such that the
Warrant shall be exercisable for the publicly traded Common Stock of such
Successor Entity, the Company or any Successor Entity  shall, at the
Holder’s option, exercisable at any time concurrently with, or within 30 days
after, the consummation of the Fundamental Transaction purchase this Warrant
from the Holder by paying to the Holder an amount of cash equal to the Black
Scholes Value of the remaining unexercised portion of this Warrant on the date
of the consummation of such Fundamental Transaction.  As used herein
(w) “Black Scholes Value” means
the value of this Warrant based on the Black and Scholes Option Pricing Model
obtained from the “OV” function on Bloomberg, L.P. (“Bloomberg”) determined as of the day
of consummation of the applicable Fundamental Transaction for pricing purposes
and reflecting (A) a risk-free interest rate corresponding to the U.S. Treasury
rate for a period equal to the time between the date of the public announcement
of the applicable Fundamental Transaction and the Termination Date, (B) an
expected volatility equal to the greater of 100% and the 100 day volatility
obtained from the HVT function on Bloomberg as of the Trading Day immediately
following the public announcement of the applicable Fundamental Transaction, (C)
the underlying price per share used in such calculation shall be the sum of the
price per share being offered in cash, if any, plus the value of any non-cash
consideration, if any, being offered in such Fundamental Transaction and (D) a
remaining option time equal to the time between the date of the public
announcement of the applicable Fundamental Transaction and the Termination Date,
(x) “Successor Entity" means the Person (as defined in the Purchase Agreement)
(or, if so elected by the Holder, the Parent Entity (as defined below)) formed
by, resulting from or surviving any Fundamental Transaction or the Person (or,
if so elected by the Holder, the Parent Entity) with which such Fundamental
Transaction shall have been entered into, (y) "Eligible Market" means the NYSE
Amex, The NASDAQ Capital Market, The NASDAQ Global Market, The NASDAQ Global
Select Market or the New York Stock Exchange (or any successors to any of the
foregoing) and (z) "Parent Entity" of a Person means an entity that,
directly or indirectly, controls the applicable Person and whose common stock or
equivalent equity security is quoted or listed on an Eligible Market, or, if
there is more than one such Person or Parent Entity, the Person or Parent Entity
with the largest public market capitalization as of the date of consummation of
the Fundamental Transaction.  The Company shall cause any Successor
Entity to assume in writing all of the obligations of the Company under this
Warrant and the other Transaction Documents in accordance with the provisions of
this Section 3(e) pursuant to written agreements in similar form and substance
and shall, at the option of the holder of this Warrant, deliver to the Holder in
exchange for this Warrant a security of the Successor Entity evidenced by a
written instrument substantially similar in form and substance to this Warrant
which is exercisable for a corresponding number of shares of capital stock of
such Successor Entity (or its parent entity) equivalent to the shares of Common
Stock acquirable and receivable upon exercise of this Warrant (without regard to
any limitations on the exercise of this Warrant) prior to such Fundamental
Transaction, and with an exercise price which applies the exercise price
hereunder to such shares of capital stock (but taking into account the relative
value of the shares of Common Stock pursuant to such Fundamental Transaction and
the value of such shares of capital stock, such number of shares of capital
stock and such exercise price being for the purpose of protecting the economic
value of this Warrant immediately prior to the consummation of such Fundamental
Transaction), and which is reasonably satisfactory in form and substance to the
Holder. Upon the occurrence of any such Fundamental Transaction, the Successor
Entity shall succeed to, and be substituted for (so that from and after the date
of such Fundamental Transaction, the provisions of this Warrant and the other
Transaction Documents referring to the “Company” shall refer instead to the
Successor Entity), and may exercise every right and power of the Company and
shall assume all of the obligations of the Company under this Warrant and the
other Transaction Documents with the same effect as if such Successor Entity had
been named as the Company herein.

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

     

    f) Calculations. All
calculations under this Section 3 shall be made to the nearest cent or the
nearest 1/100th of a share, as the case may be. For purposes of this Section 3,
the number of shares of Common Stock deemed to be issued and outstanding as of a
given date shall be the sum of the number of shares of Common Stock (excluding
treasury shares, if any) issued and outstanding. Upon each such adjustment of
the Exercise Price hereunder, the number of Warrant Shares shall be adjusted to
the number of shares of Common Stock determined by multiplying the Exercise
Price in effect immediately prior to such adjustment by the number of Warrant
Shares acquirable upon exercise of this Warrant immediately prior to such
adjustment and dividing the product thereof by the Exercise Price resulting from
such adjustment. No adjustment pursuant to this Section 3 will increase the
Exercise Price or decrease the number of Warrant Shares.

     

    g) Notice to
Holder.

     

    i. Adjustment to Exercise
Price. Whenever the Exercise Price is adjusted pursuant to any provision
of this Section 3, the Company shall promptly mail to the Holder a notice
setting forth the Exercise Price after such adjustment and setting forth a brief
statement of the facts requiring such adjustment.

     

    ii. Notice to Allow Exercise by
Holder. If (A) the Company shall declare a dividend (or any other
distribution in whatever form) on the Common Stock, (B) the Company shall
declare a special nonrecurring cash dividend on or a redemption of the Common
Stock, (C) the Company shall authorize the granting to all holders of the Common
Stock rights or warrants to subscribe for or purchase any shares of capital
stock of any class or of any rights, (D) the approval of any stockholders of the
Company shall be required in connection with any reclassification of the Common
Stock, any consolidation or merger to which the Company is a party, any sale or
transfer of all or substantially all of the assets of the Company, or any
compulsory share exchange whereby the Common Stock is converted into other
securities, cash or property, or (E) the Company shall authorize the voluntary
or involuntary dissolution, liquidation or winding up of the affairs of the
Company, then, in each case, the Company shall cause to be mailed to the Holder
at its last address as it shall appear upon the Warrant Register of the Company,
at least 5 calendar days prior to the applicable record or effective date
hereinafter specified, a notice stating (x) the date on which a record is to be
taken for the purpose of such dividend, distribution, redemption, rights or
warrants, or if a record is not to be taken, the date as of which the holders of
the Common Stock of record to be entitled to such dividend, distributions,
redemption, rights or warrants are to be determined or (y) the date on which
such reclassification, consolidation, merger, sale, transfer or share exchange
is expected to become effective or close, and the date as of which it is
expected that holders of the Common Stock of record shall be entitled to
exchange their shares of the Common Stock for securities, cash or other property
deliverable upon such reclassification, consolidation, merger, sale, transfer or
share exchange; provided that the failure to mail such notice or any defect
therein or in the mailing thereof shall not affect the validity of the corporate
action required to be specified in such notice.  To the extent that
any notice provided hereunder constitutes, or contains, material, non-public
information regarding the Company or any of the Subsidiaries, the Company shall
simultaneously file such notice with the Commission pursuant to a Current Report
on Form 8-K.  The Holder shall remain entitled to exercise this
Warrant during the period commencing on the date of such notice to the effective
date of the event triggering such notice  except as may otherwise be
expressly set forth herein.

     

    
      
        
        

      

      
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    Section
4.                  Transfer of
Warrant.

     

    a) Transferability.  Subject
to compliance with any applicable securities laws and the conditions set forth
in Section 4(d) hereof and to the provisions of Section 4.1 of the Purchase
Agreement, this Warrant and all rights hereunder (including, without limitation,
any registration rights) are transferable, in whole or in part, upon surrender
of this Warrant at the principal office of the Company or its designated agent,
together with a written assignment of this Warrant substantially in the form
attached hereto duly executed by the Holder or its agent or attorney and funds
sufficient to pay any transfer taxes payable upon the making of such
transfer.  Upon such surrender and, if required, such payment, the
Company shall execute and deliver a new Warrant or Warrants in the name of the
assignee or assignees, as applicable, and in the denomination or denominations
specified in such instrument of assignment, and shall issue to the assignor a
new Warrant evidencing the portion of this Warrant not so assigned, and this
Warrant shall promptly be cancelled.  The Warrant, if properly
assigned in accordance herewith, may be exercised by a new holder for the
purchase of Warrant Shares without having a new Warrant issued.

     

    b) New Warrants. This
Warrant may be divided or combined with other Warrants upon presentation hereof
at the aforesaid office of the Company, together with a written notice
specifying the names and denominations in which new Warrants are to be issued,
signed by the Holder or its agent or attorney.  Subject to compliance
with Section 4(a), as to any transfer which may be involved in such division or
combination, the Company shall execute and deliver a new Warrant or Warrants in
exchange for the Warrant or Warrants to be divided or combined in accordance
with such notice. All Warrants issued on transfers or exchanges shall be dated
the original Issue Date and shall be identical with this Warrant except as to
the number of Warrant Shares issuable pursuant thereto.

     

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

     

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

     

    d) Transfer Restrictions. If, at the time
of the surrender of this Warrant in connection with any transfer of this
Warrant, the transfer of this Warrant shall not be either (i) registered
pursuant to an effective registration statement under the Securities Act and
under applicable state securities or blue sky laws or (ii) eligible for resale
without volume or manner-of-sale restrictions or current public information
requirements pursuant to Rule 144, the Company may require, as a condition of
allowing such transfer, that the Holder or transferee of this Warrant, as the
case may be, comply with the provisions of Section 5.7 of the Purchase
Agreement.

     

    e) Representation by the
Holder.  The Holder, by the acceptance hereof, represents and
warrants that it is acquiring this Warrant and, upon any exercise hereof, will
acquire the Warrant Shares issuable upon such exercise, for its own account and
not with a view to or for distributing or reselling such Warrant Shares or any
part thereof in violation of the Securities Act or any applicable state
securities law, except pursuant to sales registered or exempted under the
Securities Act.

     

    Section
5.                  Miscellaneous.

     

    a) No Rights as Stockholder
Until Exercise.  This Warrant does not entitle the Holder to
any voting rights, dividends or other rights as a stockholder of the Company
prior to the exercise hereof as set forth in Section 2(d)(i).

     

    b) Loss, Theft, Destruction or
Mutilation of Warrant. The Company covenants that upon receipt by the
Company of evidence reasonably satisfactory to it of the loss, theft,
destruction or mutilation of this Warrant or any stock certificate relating to
the Warrant Shares, and in case of loss, theft or destruction, of indemnity or
security reasonably satisfactory to it (which, in the case of the Warrant, shall
not include the posting of any bond), and upon surrender and cancellation of
such Warrant or stock certificate, if mutilated, the Company will make and
deliver a new Warrant or stock certificate of like tenor and dated as of such
cancellation, in lieu of such Warrant or stock certificate.

     

    c) Saturdays, Sundays,
Holidays, etc.  If the last or appointed day for the taking of
any action or the expiration of any right required or granted herein shall not
be a Business Day, then, such action may be taken or such right may be exercised
on the next succeeding Business Day.

     

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

     

    d) Authorized
Shares.

     

    The
Company covenants that commencing on the Initial Exercise Date and during the
period the Warrant is outstanding, it will reserve from its authorized and
unissued Common Stock a sufficient number of shares to provide for the issuance
of the Warrant Shares upon the exercise of any purchase rights under this
Warrant.  The Company further covenants that it will seek stockholder
approval to increase the authorized Common Stock of the Company by at least
fifty million shares on a prompt basis but in no event later than 90 calendar
days from the date hereof.  The Company further covenants that its
issuance of this Warrant shall constitute full authority to its officers who are
charged with the duty of executing stock certificates to execute and issue the
necessary certificates for the Warrant Shares upon the exercise of the purchase
rights under this Warrant.  The Company will take all such reasonable
action as may be necessary to assure that such Warrant Shares may be issued as
provided herein without violation of any applicable law or regulation, or of any
requirements of the Trading Market upon which the Common Stock may be
listed.  The Company covenants that all Warrant Shares which may be
issued upon the exercise of the purchase rights represented by this Warrant
will, upon exercise of the purchase rights represented by this Warrant and
payment for such Warrant Shares in accordance herewith, be duly authorized,
validly issued, fully paid and nonassessable and free from all taxes, liens and
charges created by the Company in respect of the issue thereof (other than taxes
in respect of any transfer occurring contemporaneously with such
issue).

     

    Except
and to the extent as waived or consented to by the Holder, the Company shall not
by any action, including, without limitation, amending its certificate of
incorporation or through any reorganization, transfer of assets, consolidation,
merger, dissolution, issue or sale of securities or any other voluntary action,
avoid or seek to avoid the observance or performance of any of the terms of this
Warrant, but will at all times in good faith assist in the carrying out of all
such terms and in the taking of all such actions as may be necessary or
appropriate to protect the rights of Holder as set forth in this Warrant against
impairment.  Without limiting the generality of the foregoing, the
Company will (i) not increase the par value of any Warrant Shares above the
amount payable therefor upon such exercise immediately prior to such increase in
par value, (ii) take all such action as may be necessary or appropriate in order
that the Company may validly and legally issue fully paid and nonassessable
Warrant Shares upon the exercise of this Warrant and (iii) use commercially
reasonable efforts to obtain all such authorizations, exemptions or consents
from any public regulatory body having jurisdiction thereof, as may be,
necessary to enable the Company to perform its obligations under this
Warrant.

     

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

     

    Before
taking any action which would result in an adjustment in the number of Warrant
Shares for which this Warrant is exercisable or in the Exercise Price, the
Company shall obtain all such authorizations or exemptions thereof, or consents
thereto, as may be necessary from any public regulatory body or bodies having
jurisdiction thereof.

     

    e) Jurisdiction. All
questions concerning the construction, validity, enforcement and interpretation
of this Warrant shall be determined in accordance with the provisions of the
Purchase Agreement.

     

    f) Restrictions.  The
Holder acknowledges that the Warrant Shares acquired upon the exercise of this
Warrant, if not registered and the Holder does not utilize cashless exercise,
will have restrictions upon resale imposed by state and federal securities
laws.

     

    g) Nonwaiver and
Expenses.  No course of dealing or any delay or failure to
exercise any right hereunder on the part of Holder shall operate as a waiver of
such right or otherwise prejudice Holder’s rights, powers or remedies,
notwithstanding the fact that all rights hereunder terminate on the Termination
Date.  If the Company willfully and knowingly fails to comply with any
provision of this Warrant, which results in any material damages to the Holder,
the Company shall pay to Holder such amounts as shall be sufficient to cover any
costs and expenses including, but not limited to, reasonable attorneys’ fees,
including those of appellate proceedings, incurred by Holder in collecting any
amounts due pursuant hereto or in otherwise enforcing any of its rights, powers
or remedies hereunder.

     

    h) Notices.  Any
notice, request or other document required or permitted to be given or delivered
to the Holder by the Company shall be delivered in accordance with the notice
provisions of the Purchase Agreement.

     

    i) Limitation of
Liability.  No provision hereof, in the absence of any
affirmative action by Holder to exercise this Warrant to purchase Warrant
Shares, and no enumeration herein of the rights or privileges of Holder, shall
give rise to any liability of Holder for the purchase price of any Common Stock
or as a stockholder of the Company, whether such liability is asserted by the
Company or by creditors of the Company.

     

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

    

     

    j) Remedies.  The
Holder, in addition to being entitled to exercise all rights granted by law,
including recovery of damages, will be entitled to specific performance of its
rights under this Warrant.  The Company agrees that monetary damages
would not be adequate compensation for any loss incurred by reason of a breach
by it of the provisions of this Warrant and hereby agrees to waive and not to
assert the defense in any action for specific performance that a remedy at law
would be adequate.

     

    k) Successors and
Assigns.  Subject to applicable securities laws, this Warrant
and the rights and obligations evidenced hereby shall inure to the benefit of
and be binding upon the successors and permitted assigns of the Company and the
successors and permitted assigns of Holder.  The provisions of this
Warrant are intended to be for the benefit of any Holder from time to time of
this Warrant and shall be enforceable by the Holder or holder of Warrant
Shares.

     

    l) Amendment.  This
Warrant may be modified or amended or the provisions hereof waived with the
written consent of the Company and the Holder.

     

    m) Severability.  Wherever
possible, each provision of this Warrant shall be interpreted in such manner as
to be effective and valid under applicable law, but if any provision of this
Warrant shall be prohibited by or invalid under applicable law, such provision
shall be ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provisions or the remaining provisions of
this Warrant.

     

    n) Headings.  The
headings used in this Warrant are for the convenience of reference only and
shall not, for any purpose, be deemed a part of this Warrant.

     

    

    ********************

     

    (Signature
Pages Follow)

     

    
      
        
        

      

      
        14

        
          

        

      

      
        
        

      

    

    

    

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

     
 

    
      	
              BIOMODA,
      INC.

               

               

            
	
              By:__________________________________________

                   Name:

                   Title:

               

            

    

    

    

    
      
        
        

      

      
        15

        
          

        

      

      
        
        

      

    

    

    NOTICE
OF EXERCISE

    

    TO:           BIOMODA,
INC.

    

    (1) The
undersigned hereby elects to purchase ________ Warrant Shares of the Company
pursuant to the terms of the attached Warrant (only if exercised in full), and
tenders herewith payment of the exercise price in full, together with all
applicable transfer taxes, if any.

     

    (2) Payment
shall take the form of (check applicable box):

     

    o in lawful money of
the United States; or

     

    o [if permitted] the
cancellation of such number of Warrant Shares as is necessary, in accordance
with the formula set forth in subsection 2(c), to exercise this Warrant with
respect to the maximum number of Warrant Shares purchasable pursuant to the
cashless exercise procedure set forth in subsection 2(c).

     

    (3) Please
issue a certificate or certificates representing said Warrant Shares in the name
of the undersigned or in such other name as is specified below:

     

    _______________________________

    
 

    The
Warrant Shares shall be delivered to the following DWAC Account Number or by
physical delivery of a certificate to:

    

    _______________________________

    

    _______________________________

    

    _______________________________

    

    (4)  Accredited
Investor.  The undersigned is an “accredited investor” as
defined in Regulation D promulgated under the Securities Act of 1933, as
amended.

    

    [SIGNATURE
OF HOLDER]

    

    Name of
Investing Entity:
_______________________________________________________________________

    Signature of Authorized Signatory of
Investing Entity:
_________________________________________________

    Name of
Authorized Signatory:
___________________________________________________________________

    Title of
Authorized Signatory:
____________________________________________________________________

    Date:
_______________________________________________________________________________________

     

    
      
        
        

      

      
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    ASSIGNMENT
FORM

    

    (To
assign the foregoing warrant, execute

    this form
and supply required information.

    Do not
use this form to exercise the warrant.)

    

     

    FOR VALUE
RECEIVED, [____] all of or [_______] shares of the foregoing Warrant and all
rights evidenced thereby are hereby assigned to

     

    

    _______________________________________________
whose address is

     

    _______________________________________________________________.

     

    _______________________________________________________________

    

    Dated:  ______________,
_______

    

    

    Holder’s
Signature:                                _____________________________

    

    Holder’s
Address:                      
           _____________________________

    

                    
  _____________________________

     

    

    Signature
Guaranteed:  ___________________________________________

    

    

    NOTE:  The
signature to this Assignment Form must correspond with the name as it appears on
the face of the Warrant, without alteration or enlargement or any change
whatsoever, and must be guaranteed by a bank or trust
company.  Officers of corporations and those acting in a fiduciary or
other representative capacity should file proper evidence of authority to assign
the foregoing Warrant.

     

    
      
        
        

      

      
        17

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