Document:

Exhibit 4.3

 

	
  NUMBER

  	
   

  	
   

  	
   

  	
  WARRANTS

  	
   

  

 

THIS WARRANT WILL BE VOID IF NOT EXERCISED
PRIOR TO

5:00 P.M. NEW YORK CITY TIME, NOVEMBER 14, 2012

 

PROSPECT ACQUISITION CORP.
 Incorporated Under
the Laws of the State of Delaware

 

CUSIP 74347T 111

 

WARRANT CERTIFICATE

 

This Warrant
Certificate certifies that                           ,  or registered
assigns, is the registered holder of                   
warrants (the “Warrants”)  to purchase
shares of Common Stock, $.0001 par value (the “Common Stock”), of Prospect Acquisition
Corp., a Delaware corporation (the “Company”). Each Warrant entitles the holder,
upon exercise during the period set forth in the Warrant Agreement referred to
below, to purchase from the Company that number of fully paid and
non-assessable shares of Common Stock (each, a “Warrant Share”) as set forth below at the exercise
price (the “Exercise
Price”) as determined pursuant to the Warrant Agreement payable in
lawful money of the United States of America upon surrender of this Warrant
Certificate and payment of the Exercise Price at the office or agency of the
Warrant Agent, but only subject to the conditions set forth herein and in the
Warrant Agreement. Defined terms used in this Warrant Certificate but not
defined herein shall have the meanings given to them in the Warrant Agreement.

 

Each Warrant is initially exercisable for one fully paid and
non-assessable share of Common Stock. The number of Warrant Shares issuable
upon exercise of the Warrants is subject to adjustment upon the occurrence of
certain events set forth in the Warrant Agreement.

 

The initial Exercise Price per share of Common Stock for any Warrant is
equal to $7.50 per share. The Exercise Price is subject to adjustment upon the
occurrence of certain events set forth in the Warrant Agreement.

 

Warrants may be exercised only during the Warrant Exercise Period
subject to the conditions set forth in the Warrant Agreement and to the extent
not exercised by the end of such Warrant Exercise Period such Warrants shall
become void.

 

Reference is hereby made to the further provisions of this Warrant
Certificate set forth on the reverse hereof and such further provisions shall
for all purposes have the same effect as though fully set forth at this place.

 

This Warrant Certificate shall not be valid unless countersigned by the
Warrant Agent, as such term is used in the Warrant Agreement.

 

This Warrant Certificate shall be governed and construed in accordance
with the internal laws of the State of New York, without regard to conflicts of
laws principles thereof.

 

	
  Dated as of

  	
   

  	
   

  	
  PROSPECT
  ACQUISITION CORP.

  
	
   

  	
   

  	 

	
  [Corporate
  Seal]

  	
   

  	
  By:

  	
  /s/ James J.
  Cahill

  	 

	
  Delaware

  	
  Secretary

  	 

	
   

  	
   

  	 

	
   

  	
  By:

  	
  /s/ Patrick
  J. Landers

  	 

	
   

  	
  President

  	 

							

 

Countersigned:

CONTINENTAL STOCK TRANSFER & TRUST COMPANY, 

as Warrant Agent

 

	
  By:

  	
   

  	
   

  
	
           Authorized
  Officer

  

 

 

[Form of Warrant Certificate]

[Reverse]

 

The Warrants evidenced by this Warrant Certificate are part of a duly
authorized issue of Warrants entitling the holder on exercise to receive shares
of Common Stock, par value $0.0001 per share, of the Company (the “Common Stock”), and are
issued or to be issued pursuant to a Warrant Agreement dated as of November 14,
2007 (the “Warrant
Agreement”),  duly
executed and delivered by the Company to Continental Stock Transfer &
Trust Company, a New York corporation, as warrant agent (the “Warrant Agent”),  which Warrant
Agreement is hereby incorporated by reference in and made a part of this
instrument and is hereby referred to for a description of the rights,
limitation of rights, obligations, duties and immunities thereunder of the
Warrant Agent, the Company and the holders (the words “holders” or “holder”
meaning the registered holders or registered holder) of the Warrants. A copy of
the Warrant Agreement may be obtained by the holder hereof upon written request
to the Company. Defined terms used in this Warrant Certificate but not defined
herein shall have the meanings given to them in the Warrant Agreement.

 

Warrants may be exercised at any time during the Warrant Exercise
Period set forth in the Warrant Agreement. The holder of Warrants evidenced by
this Warrant Certificate may exercise them by surrendering this Warrant
Certificate, with the form of election to purchase set forth hereon properly
completed and executed, together with payment of the Exercise Price as
specified in the Warrant Agreement, at the principal corporate trust office of
the Warrant Agent. In the event that upon any exercise of Warrants evidenced
hereby the number of Warrants exercised shall be less than the total number of
Warrants evidenced hereby, there shall be issued to the holder hereof or his
assignee a new Warrant Certificate evidencing the number of Warrants not
exercised. No adjustment shall be made for any dividends on any Common Stock
issuable upon exercise of this Warrant.

 

Notwithstanding anything else in this Warrant Certificate or the
Warrant Agreement, no Warrant may be exercised unless at the time of exercise (i) a
registration statement covering the Warrant Shares to be issued upon exercise
is effective under the Act and (ii) a prospectus thereunder relating to
the Warrant Shares is current. In no event shall the Warrants be settled on a
net cash basis during the Warrant Exercise Period nor shall the Company be
required to issue unregistered shares upon the exercise of any Warrant.

 

Once the Warrants become exercisable and there is an effective
registration statement covering the shares of Common Stock issuable upon
exercise of the Warrants available and current throughout the 30-day redemption
period defined below, the Company may redeem the outstanding Warrants (except
with respect to the sponsors’ Warrants held by a sponsor or its permitted
transferee) in whole and not in part at a price of $0.01 per Warrant upon a
minimum of 30 days’ prior written notice of redemption (the “30-day redemption period’’)
and if, and only if, the last sale price of the Company’s Common Stock equals
or exceeds $14.50 per share for any 20 trading days within a 30-trading day
period ending three business days before the notice of redemption is sent. If
the Company calls the Warrants for redemption, it will have the option to
require all holders that wish to exercise Warrants to do so on a “cashless
basis.” In such event, each holder would pay the exercise price by surrendering
the Warrants for that number of shares of Common Stock equal to the quotient
obtained by dividing (x) the product of the number of shares of Common
Stock underlying the Warrants, multiplied by the difference between the
exercise price of the Warrants and the “fair market value” (defined below) by (y) the
fair market value. The “fair market
value” shall mean the average reported last sale price of
the Common Stock for the ten trading days ending on the third trading day prior
to the date on which the notice of redemption is sent to the holders of
Warrants.

 

The Warrant Agreement provides that upon the occurrence of certain
events the number of Warrant Shares set forth on the face hereof may, subject
to certain conditions, be adjusted. No fractions of a share of Common Stock
will be issued upon the exercise of any Warrant, but the Company will pay the
cash value thereof determined as provided in the Warrant Agreement.

 

Warrant Certificates, when surrendered at the principal corporate trust
office of the Warrant Agent by the registered holder thereof in person or by
legal representative or attorney duly authorized in writing, may be exchanged,
in the manner and subject to the limitations provided in the Warrant Agreement,
but without payment of any service charge, for another Warrant Certificate or
Warrant Certificates of like tenor evidencing in the aggregate a like number of
Warrants.

 

Upon due presentation for registration of transfer of this Warrant
Certificate at the office of the Warrant Agent a new Warrant Certificate or
Warrant Certificates of like tenor and evidencing in the aggregate a like
number of Warrants 

 

2

 

shall be issued to the transferee(s) in
exchange for this Warrant Certificate, subject to the limitations provided in
the Warrant Agreement, without charge except for any tax or other governmental
charge imposed in connection therewith.

 

The Company and the Warrant Agent may deem and treat the registered
holder(s) thereof as the absolute owner(s) of this Warrant
Certificate (notwithstanding any notation of ownership or other writing hereon
made by anyone), for the purpose of any exercise hereof, of any distribution to
the holder(s) hereof, and for all other purposes, and neither the Company
nor the Warrant Agent shall be affected by any notice to the contrary. Neither
the Warrants nor this Warrant Certificate entitles any holder hereof to any
rights of a stockholder of the Company.

 

3

 

Election to Purchase

 

(To Be Executed Upon Exercise Of Warrant)

 

The undersigned hereby irrevocably elects to exercise the right,
represented by this Warrant Certificate, to receive
                   
shares of Common Stock and herewith tenders payment for such shares to the
order of Prospect Acquisition Corp. in the amount of

$
              
in accordance with the terms hereof. The undersigned requests that a
certificate for such shares be registered in the name of                           ,
whose address is                                                 
and that such shares be delivered to                                           
whose address is                                                        .

 

If said number of shares is less than all of the shares of Common Stock
purchasable hereunder, the undersigned requests that a new Warrant Certificate
representing the remaining balance of such shares be registered in the name of                            ,
whose address is                                                    ,
and that such Warrant Certificate be delivered to                                                              ,
whose address is                                                                 .

 

In the event that the Warrant has been called for redemption by the
Company pursuant to Section 6(b) of the Warrant Agreement and the
Company has required cashless exercise pursuant to Section 6(d) of
the Warrant Agreement, the number of shares that a Warrant is exercisable for
shall be determined in accordance with Section 6(d) of the Warrant
Agreement.

 

In the event that the Warrant is a Sponsors’ Warrant (as such term is
defined in the Warrant Agreement), such Warrant may be exercised, to the extent
allowed by the Warrant Agreement, through cashless exercise pursuant to Section 6(d) of
the Warrant Agreement, in which case, (i) the number of shares that a
Sponsors’ Warrant is exercisable for would be determined in accordance with Section 6(d) of
the Warrant Agreement and (ii) the holder of the Sponsors’ Warrant will
complete the following:

 

The undersigned hereby irrevocably elects to
exercise the right, represented by its Sponsors’ Warrant Certificate, through
the cashless exercise provision of Section 6(d) of the Warrant
Agreement, to receive                   
shares of Common Stock. If said number of shares is less than all of the shares
of Common Stock purchasable hereunder (after giving effect to the cashless
exercise), the undersigned requires that a new Sponsors’ Warrant Certificate
representing the balance of such shares be registered in the name of                             
, whose address is                                  ,
and that such Sponsors’ Warrant Certificate be delivered to                       
, whose address is                                               
..

 

	
  Dated:

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  (SIGNATURE)

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  (ADDRESS)

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  (TAX IDENTIFICATION NUMBER)

  

 

Signatures(s) Guaranteed:

 

THE SIGNATURE(S) MUST BE GUARANTEED BY AN ELIGIBLE GUARANTOR
INSTITUTION (BANKS, STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND CREDIT
UNIONS WITH MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM,
PURSUANT TO S.E.C. RULE 17Ad-15).

 

4Exhibit 4.4

 

EXECUTION COPY

 

PROSPECT ACQUISITION CORP.

 

and

 

CONTINENTAL STOCK TRANSFER & TRUST
COMPANY, as Warrant Agent

 

 

WARRANT AGREEMENT

 

Dated as of November 14,
2007

 

 

WARRANT AGREEMENT

TABLE OF CONTENTS

 

 

	
  Section 1.

  	
   

  	
  Appointment of Warrant Agent

  
	
  Section 2.

  	
   

  	
  Warrant Certificates

  
	
  Section 3.

  	
   

  	
  Execution of Warrant Certificates

  
	
  Section 4.

  	
   

  	
  Registration and Countersignature

  
	
  Section 5.

  	
   

  	
  Registration of Transfers and Exchanges; Transfer Restrictions

  
	
  Section 6.

  	
   

  	
  Terms of Warrants

  
	
  (a)

  	
   

  	
  Exercise Price and Exercise Period

  
	
  (b)

  	
   

  	
  Redemption of Warrants

  
	
  (c)

  	
   

  	
  Exercise Procedure

  
	
  (d)

  	
   

  	
  Registration Requirement

  
	
  (e)

  	
   

  	
  Expiry Upon Liquidation of Trust Account

  
	
  Section 7.

  	
   

  	
  Payment of Taxes

  
	
  Section 8.

  	
   

  	
  Mutilated or Missing Warrant Certificates

  
	
  Section 9.

  	
   

  	
  Reservation of Warrant Shares

  
	
  Section 10.

  	
   

  	
  Obtaining Stock Exchange Listings

  
	
  Section 11.

  	
   

  	
  Adjustment of Number of Warrant Shares

  
	
  (a)

  	
   

  	
  Adjustment for Change in Capital Stock

  
	
  (b)

  	
   

  	
  Adjustment for Rights Issue

  
	
  (c)

  	
   

  	
  Adjustment for Other Distributions

  
	
  (d)

  	
   

  	
  Adjustment for Common Stock Issue

  
	
  (e)

  	
   

  	
  Adjustment for Convertible Securities Issue

  
	
  (f)

  	
   

  	
  Adjustment for Tender or Exchange Offer

  
	
  (g)

  	
   

  	
  Consideration Received

  
	
  (h)

  	
   

  	
  Defined Terms; When De Minimis Adjustment May Be Deferred

  
	
  (i)

  	
   

  	
  When No Adjustment Required

  
	
  (j)

  	
   

  	
  Notice of Adjustment

  
	
  (k)

  	
   

  	
  Notice of Certain Transactions

  
	
  (l)

  	
   

  	
  Reorganization of Company

  
	
  (m)

  	
   

  	
  Warrant Agent’s Disclaimer

  
	
  (n)

  	
   

  	
  When Issuance or Payment May Be Deferred

  
	
  (o)

  	
   

  	
  Adjustment in Exercise Price

  
	
  (p)

  	
   

  	
  Form of Warrants

  

 

i

 

	
  (q)

  	
   

  	
   

  	
  Other Dilutive Events

  
	
  Section 12.

  	
   

  	
  Fractional Interests

  
	
  Section 13.

  	
   

  	
  Notices to Warrant Holders

  
	
  Section 14.

  	
   

  	
  Merger, Consolidation or Change of Name of Warrant
  Agent

  
	
  Section 15.

  	
   

  	
  Warrant Agent

  
	
  Section 16.

  	
   

  	
  Change of Warrant Agent

  
	
  Section 17.

  	
   

  	
  Notices to Company and Warrant Agent

  
	
  Section 18.

  	
   

  	
  Supplements and Amendments

  
	
  Section 19.

  	
   

  	
  Successors

  
	
  Section 20.

  	
   

  	
  Termination

  
	
  Section 21.

  	
   

  	
  Governing Law

  
	
  Section 22.

  	
   

  	
  Benefits of This Agreement

  
	
  Section 23.

  	
   

  	
  Counterparts

  
	
  Section 24.

  	
   

  	
  Force Majeure

  
	
  EXHIBIT A

  	
   

  	
  Form of Warrant

  
	
  EXHIBIT B

  	
   

  	
  LEGEND

  

 

ii

 

WARRANT AGREEMENT dated as
of November 14, 2007, between Prospect Acquisition Corp., a Delaware
corporation (the “Company”), and Continental
Stock Transfer & Trust Company, a New York corporation, as Warrant
Agent (the “Warrant Agent”).

 

WHEREAS, the Company
proposes to issue (i) 5,250,000 warrants to be offered in a private
placement bearing the legend set forth in Exhibit B hereto (the “Sponsors’ Warrants”), and (ii) up
to 28,750,000 warrants to be offered pursuant to a registration statement filed
with the Securities and Exchange Commission (the “Public
Warrants” and together with the Sponsors’ Warrants, the “Warrants”), which in each case
entitle the holders thereof to purchase shares of common stock of the Company,
$0.0001 par value per share (“Common Stock,”
and the Common Stock issuable on exercise of the Warrants, the “Warrant Shares”);

 

WHEREAS, the Company desires
the Warrant Agent to act on behalf of the Company, and the Warrant Agent is
willing so to act, in connection with the issuance, transfer, exchange and
exercise of Warrants and other matters as provided herein;

 

NOW, THEREFORE, in
consideration of the premises and the mutual agreements herein set forth, the
parties hereto agree as follows:

 

SECTION 1.  Appointment of Warrant Agent. The
Company hereby appoints the Warrant Agent to act as agent for the Company in
accordance with the instructions set forth hereinafter in this Agreement, and
the Warrant Agent hereby accepts such appointment.

 

SECTION 2.  Warrant Certificates. The certificates
evidencing the Warrants (the “Warrant Certificates”)
to be delivered pursuant to this Agreement shall be in registered form only and
shall be substantially in the form set forth in Exhibit A attached hereto.

 

SECTION 3.  Execution of Warrant Certificates.
Warrant Certificates shall be signed on behalf of the Company by its Chairman
of the Board or its President or Chief Executive Officer or a Vice President
and by its Secretary or an Assistant Secretary. Each such signature upon the
Warrant Certificates may be in the form of a facsimile signature of the present
or any future Chairman of the Board, President, Chief Executive Officer, Vice
President, Secretary or Assistant Secretary and may be imprinted or otherwise
reproduced on the Warrant Certificates and for that purpose the Company may
adopt and use the facsimile signature of any person who shall have been
Chairman of the Board, President, Chief Executive Officer, Vice President,
Secretary or Assistant Secretary, notwithstanding the fact that at the time the
Warrant Certificates shall be countersigned and delivered or disposed of he or
she shall have ceased to hold such office.

 

In case any officer of the
Company who shall have signed any of the Warrant Certificates shall cease to be
such officer before the Warrant Certificates so signed shall have been
countersigned by the Warrant Agent, or disposed of by the Company, such Warrant
Certificates nevertheless may be countersigned and delivered or disposed of as
though such person had not ceased to be such officer of the Company; and any
Warrant Certificate may be signed on behalf of the Company by any person who,
at the actual date of the execution of such Warrant Certificate, shall be a
proper officer of the Company to sign such Warrant Certificate, although at the
date of the execution of this Warrant Agreement any such person was not such
officer.

 

 

Warrant Certificates shall
be dated the date of countersignature by the Warrant Agent.

 

SECTION 4.  Registration and Countersignature.
Warrant Certificates shall be countersigned by the Warrant Agent and shall not
be valid for any purpose unless so countersigned. The Warrant Agent shall, upon
written instructions of the Chairman of the Board, the President or Chief
Executive Officer, a Vice President, the Treasurer or the Chief Financial
Officer of the Company, countersign, issue and deliver Warrants as provided in
this Agreement.

 

The Company and the Warrant
Agent may deem and treat the registered holder(s) of the Warrant
Certificates as the absolute owner(s) thereof (notwithstanding any
notation of ownership or other writing thereon made by anyone), for all
purposes, and neither the Company nor the Warrant Agent shall be affected by
any notice to the contrary.

 

SECTION 5.  Registration of Transfers and Exchanges;
Transfer Restrictions. The Warrant Agent shall from time to time, subject
to the limitations of this Section 5, register the transfer of any
outstanding Warrant Certificates upon the records to be maintained by it for
that purpose, upon surrender thereof duly endorsed or accompanied (if so
required by the Warrant Agent) by a written instrument or instruments of
transfer in form satisfactory to the Warrant Agent, duly executed by the
registered holder or holders thereof or by the duly appointed legal
representative thereof or by a duly authorized attorney. Upon any such
registration of transfer, a new Warrant Certificate shall be issued to the
transferee(s) and the surrendered Warrant Certificate shall be cancelled
by the Warrant Agent. Cancelled Warrant Certificates shall thereafter be
disposed of by the Warrant Agent in its customary manner.

 

The Sponsors’ Warrants may
not be sold or transferred prior to the date that is 30 days after the date
upon which the Company completes an acquisition, through a merger, capital
stock exchange, asset acquisition, stock purchase, reorganization or other
similar business combination, of one or more businesses or assets (its “Initial Business Combination”) (such
date, the “Transfer Restriction Termination Date”)
except to a Permitted Transferee who agrees in writing with the Company (i) to
be subject to such transfer restrictions and (ii) that such Sponsors’
Warrants will be held in an escrow account established pursuant to the Escrow
Agreement referred to below until the Transfer Restriction Termination Date. As
used herein, “Permitted Transferee” means a
transfer (i) to any officer or director of the Company, any affiliates or
family members of any officer or director of the Company or any affiliates of
any Sponsor (as defined herein), (ii) in the case of a natural person, by
gift to a member of such person’s immediate family or to a trust, the beneficiary
of which is a member of such person’s immediate family, an affiliate of such
person or to a charitable organization, (iii) in the case of a natural
person, by virtue of the laws of descent and distribution upon death of such
person, (iv) with respect to any Sponsor, by virtue of the laws of
Delaware or such Sponsor’s organizational documents upon dissolution of such
Sponsor, (v) in the case of a natural person, pursuant to a qualified
domestic relations order, (vi) in the event of the Company’s liquidation
prior to completion of an Initial Business Combination or (vii) in the
event the Company’s consummation of a liquidation, merger, stock exchange or
other similar transaction which results in all of the Company’s stockholders
having the right to exchange their shares of common stock for cash, securities
or other property subsequent to the Company’s consummation of its Initial
Business Combination.  Upon issuance, the
Sponsors’ Warrants will be deposited with the Continental Stock Transfer &
Trust Company, as escrow agent (the “Escrow Agent”)
pursuant to 

 

2

 

the
terms of the Escrow Agreement dated November 14, 2007 between the Company
and the Escrow Agent, (the “Escrow Agreement”),
where they will remain until the Transfer Restriction Termination Date.

 

The holders of any Sponsors’
Warrants or Warrant Shares issued upon exercise of any Sponsors’ Warrants
further agree prior to any transfer of such securities, to give written notice
to the Company expressing its desire to effect such transfer and describing
briefly the proposed transfer. Upon receiving such notice, the Company shall
present copies thereof to its counsel and the holder agrees not to make any
disposition of all or any portion of such securities unless and until:

 

(a)  there is
then in effect a registration statement under the Securities Act covering such
proposed disposition and such disposition is made in accordance with such
registration statement, in which case the legends set forth in Exhibit B
or Section 6(c) hereof, as the case may be (collectively the “Legends”)
with respect to such securities sold pursuant to such registration statement
shall be removed; or

 

(b)  if
reasonably requested by the Company, (A) the holder shall have furnished
the Company with an opinion of counsel, reasonably satisfactory to the Company,
that such disposition will not require registration of such Securities under
the Securities Act, (B) the Company shall have received customary
representations and warranties regarding the transferee that are reasonably
satisfactory to the Company signed by the proposed transferee and (C) the
Company shall have received an agreement by such transferee to the restrictions
contained in the Legends.

 

Each Public Warrant shall
initially be issued together with one share of Common Stock as a unit (a “Unit”). The shares of Common Stock
and Public Warrants comprising a Unit shall not be separately transferable
before the 45th day following the date of the final prospectus
relating to the issuance of the Public Warrants unless Citigroup Global Markets
Inc. informs the Company of its decision to allow earlier separate trading, in
which case, the Company will notify the Warrant Agent as to the effective date
of separation, provided that in no event may separate trading of the Common
Stock and Public Warrants comprising a unit to begin prior to the date on which
the Company has filed a Form 8-K with the Securities and Exchange
Commission containing an audited balance sheet reflecting the Company’s receipt
of the gross proceeds of the offering of the Units and has issued a press
release announcing when such separate trading will begin (the later of such
dates, the “Detachment Date”). Prior to
the Detachment Date, Public Warrants may be transferred or exchanged only
together with the Unit in which such Public Warrant is included, and only for
the purpose of effecting, or in conjunction with, a transfer or exchange of
such Unit. Furthermore, prior to the Detachment Date, each transfer of a Public
Unit on the register relating to such Units shall operate also to transfer the
Public Warrant included in such Unit.

 

Subject to the terms of this
Agreement, Warrant Certificates may be exchanged at the option of the holder(s) thereof,
when surrendered to the Warrant Agent at its principal corporate trust office,
which is currently located at the address listed in Section 17 hereof, for
another Warrant Certificate or other Warrant Certificates of like tenor and
representing in the aggregate a like number of Warrants. Any holder desiring to
exchange a Warrant Certificate shall deliver a 

 

3

 

written
request to the Warrant Agent, and shall surrender, duly endorsed or accompanied
(if so required by the Warrant Agent) by a written instrument or instruments of
transfer in form satisfactory to the Warrant Agent, the Warrant Certificate or
Certificates to be so exchanged. Warrant Certificates surrendered for exchange
shall be cancelled by the Warrant Agent. Such cancelled Warrant Certificates
shall then be disposed of by such Warrant Agent in its customary manner.

 

The Warrant Agent is hereby
authorized to countersign, in accordance with the provisions of this Section 5
and of Section 4 hereof, the new Warrant Certificates required pursuant to
the provisions of this Section 5.

 

SECTION 6.  Terms of
Warrants.

 

(a)  Exercise
Price and Exercise Period.

 

The initial exercise price
per share at which Warrant Shares shall be purchasable upon the exercise of
Warrants (the “Exercise Price”) shall be
$7.50 per share, and each Warrant shall be initially exercisable to purchase
one share of common stock of the Company, $0.0001 par value per share (“Common Stock”).  The Sponsors’ Warrants shall be exercisable
on a cashless basis as set forth in Section 6(d) at the option of any
Sponsor (as defined herein) or a Permitted Transferee.

 

Subject to the terms of this
Agreement (including without limitation Section 6(e) below), each
Warrant holder shall have the right, which may be exercised commencing at the
opening of business on the first day of the applicable Warrant Exercise Period
set forth below and until 5:00 p.m., New York City time, on the last day
of such Warrant Exercise Period, to receive from the Company the number of
fully paid and nonassessable Warrant Shares which the holder may at the time be
entitled to receive on exercise of such Warrants and payment of the Exercise
Price then in effect for such Warrant Shares. No adjustments as to dividends
will be made upon exercise of the Warrants.

 

The “Warrant
Exercise Period” shall commence (subject to Section 6(d) below),
on the later of:

 

(A) the date that is 15
months after the date of the final prospectus for the offering of the Public
Warrants and

 

(B) the date on which
the Company completes its Initial Business Combination and shall end on the
earlier of:

 

(i)  the date that
is five years from the date of the final prospectus for the offering of the
Public Warrants; and

 

(ii)  the Business
Day preceding the date on which such Warrants are redeemed pursuant to Section 6(b) below
or expire pursuant to Section 6(f) below;

 

provided that the
Sponsors’ Warrants may not be exercised prior to the Transfer Restriction
Termination Date (as defined in the Escrow Agreement).

 

4

 

The “Closing
Price” of the Common Stock on any date of determination means;

 

(i)  the closing
sale price for the regular trading session (without considering after hours or
other trading outside regular trading session hours) of the Common Stock
(regular way) on the American Stock Exchange on that date (or, if no closing
price is reported, the last reported sale price during that regular trading
session),

 

(ii)  if the Common
Stock is not listed for trading on the American Stock Exchange on that date, as
reported in the composite transactions for the principal United States
securities exchange on which the Common Stock is so listed,

 

(iii)  if the Common
Stock is not so reported, the last quoted bid price for the Common Stock in the
over-the-counter market as reported by the OTC Bulletin Board, the National
Quotation Bureau or similar organization, or

 

(iv)  if the Common
Stock is not so quoted, the average of the mid-point of the last bid and ask
prices for the Common Stock from at least three nationally recognized
investment banking firms that the Company selects for this purpose.

 

Each Warrant not exercised
or redeemed prior to 5:00 p.m., New York City time, on the last day of the
Warrant Exercise Period shall become void and all rights thereunder and all
rights in respect thereof under this Agreement shall cease as of such time.

 

(b)  Redemption
of Warrants.

 

The Company may call the
Warrants for redemption, in whole and not in part, at a price of $.01 per
Warrant, upon not less than 30 days’ prior written notice of redemption to each
Warrant holder, at any time after such Warrants have become exercisable
pursuant to Section 6(a), if, and only if, (i) the Closing Price has
equaled or exceeded $14.50 per share for any 20 trading days within a
30-trading-day period ending on the third Business Day prior to the notice of
redemption to Warrant holders and (ii) at all times between the date of
such notice of redemption and the redemption date a registration statement is
in effect covering the Warrant Shares issuable upon exercise of the Warrants
and a current prospectus relating to those Warrant Shares is available.

 

Upon a call for redemption
of Warrants by the Company, the Company shall have the right to require all
holders of Warrants subject to redemption who exercise such Warrants after the
Company’s call for redemption to do so on a cashless basis in accordance with
the procedures set forth in Section 6(d).

 

Notwithstanding the
foregoing, no Sponsors’ Warrants shall be redeemable so long as they are held
by the purchasers set forth in Schedule I hereto (the “Sponsors”) or a
Permitted Transferee; provided that the fact that one or more Sponsors’
Warrants are non-redeemable because they are held by a Sponsor or a Permitted
Transferee shall not affect the Company’s right to redeem the Public Warrants
and all Sponsors’ Warrants that are not held by a Sponsor or a Permitted
Transferee pursuant to the preceding paragraph.

 

5

 

(c)  Exercise
Procedure.

 

A Warrant may be exercised
upon surrender to the Company at the principal stock transfer office of the
Warrant Agent, which is currently located at the address listed in Section 17
hereof, of the certificate or certificates evidencing the Warrants to be
exercised with the form of election to purchase on the reverse thereof duly
filled in and signed and such other documentation as the Warrant Agent may
reasonably request, and upon payment to the Warrant Agent for the account of
the Company of the Exercise Price (adjusted as herein provided if applicable)
for the number of Warrant Shares in respect of which such Warrants are then
exercised. Subject to any Sponsor or Permitted Transferee’s election to
exercise its Sponsors’ Warrants on a cashless basis as set forth in Section 6(d),
payment of the aggregate Exercise Price shall be made in cash or by certified
or official bank check payable to the order of the Company in New York Clearing
House Funds, or the equivalent thereof. In no event will any Warrants be
settled on a net cash basis.

 

Subject to the provisions of
Sections 6(e) and 7 hereof, upon such surrender of Warrants and payment of
the Exercise Price, the Company shall issue and cause to be delivered with all
reasonable dispatch to and in such name or names as the Warrant holder may
designate, a certificate or certificates for the number of full Warrant Shares
issuable upon the exercise of such Warrants together with cash as provided in Section 12
hereof. Such certificate or certificates shall be deemed to have been issued
and any person so designated to be named therein shall be deemed to have become
a holder of record of such Warrant Shares as of the date of the surrender of
such Warrants and payment of the Exercise Price.

 

The Warrants shall be
exercisable, at the election of the holders thereof, either in full or from
time to time in part and, in the event that a certificate evidencing Warrants
is exercised in respect of fewer than all of the Warrant Shares issuable on
such exercise at any time prior to the date of expiration of the Warrants, a
new certificate evidencing the remaining Warrant or Warrants will be issued,
and the Warrant Agent is hereby irrevocably authorized to countersign and to
deliver the required new Warrant Certificate or Certificates pursuant to the
provisions of this Section 6 and of Section 4 hereof, and the
Company, whenever required by the Warrant Agent, shall supply the Warrant Agent
with Warrant Certificates duly executed on behalf of the Company for such
purpose. The Warrant Agent may assume that any Warrant presented for exercise
is permitted to be so exercised under applicable law and shall have no
liability for acting in reliance on such assumption.

 

All Warrant Certificates
surrendered upon exercise of Warrants shall be canceled by the Warrant Agent.
Such canceled Warrant Certificates shall then be disposed of by the Warrant
Agent in its customary manner. The Warrant Agent shall account promptly to the
Company with respect to Warrants exercised and concurrently pay to the Company
all monies received by the Warrant Agent for the purchase of the Warrant Shares
through the exercise of such Warrants.

 

The Warrant Agent shall keep
copies of this Agreement and any notices given or received hereunder available
for inspection by the holders with reasonable prior written notice during
normal business hours at its office. The Company shall supply the Warrant Agent
from time to time with such numbers of copies of this Agreement as the Warrant
Agent may request.

 

Certificates evidencing
Warrant Shares issued upon exercise of a Sponsors’ Warrants shall contain the
following legend:

 

6

 

THE SECURITIES REPRESENTED
HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR ANY STATE SECURITIES LAW, AND MAY NOT BE OFFERED, SOLD, TRANSFERRED OR
OTHERWISE DISPOSED OF UNLESS REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, AND ANY APPLICABLE STATE SECURITIES LAWS OR AN EXEMPTION FROM SUCH
REGISTRATION IS AVAILABLE.

 

SECURITIES EVIDENCED BY THIS
CERTIFICATE WILL BE ENTITLED TO REGISTRATION RIGHTS UNDER A REGISTRATION RIGHTS
AGREEMENT TO BE EXECUTED BY THE COMPANY.

 

(d)  Cashless
Exercise.  The Sponsors’ Warrants may
be exercised on a cashless basis by any Sponsor or Permitted Transferee, at
such Sponsor or Permitted Transferee’s election (the “Cashless
Exercise Election”).  If
any Sponsor or Permitted Transferee makes a Cashless Exercise Election with
respect to any Sponsors’ Warrants, then upon surrender of such Sponsors’
Warrants in accordance with Section 6(c), the Company shall issue and
cause to be delivered with all reasonable dispatch to and in such name or names
as the Sponsors’ Warrant holder may designate, a certificate or certificates
for the number of full Warrant Shares issuable upon the exercise of such
Sponsor Warrants computed by using the following formula:

 

	
  

  

 

	
   

  	
   

  	
  X
  =

  	
   

  	
  The
  number of Shares of common stock to be issued in connection with such
  exercise to the holder of the Sponsors’ Warrants being exercised.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Y=

  	
   

  	
  The
  number of shares of Common Stock purchasable under the Sponsor Warrant upon
  such exercise.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  A=

  	
   

  	
  The
  value of one Sponsors’ Warrant as of the date of the exercise, which shall be
  determined by using the following formula:

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  A
  = B - the Exercise Price

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  B=

  	
   

  	
  The
  Fair market Value of a share of Common Stock.

  
						

 

For purposes of this Section 6(d),
the “Fair Market Value” of a share of Common Stock shall mean the average of
the closing price of the Company’s Common stock quoted on the American Stock
Exchange for the ten (10) trading days ending on the trading day prior to
the date of exercise.  If the shares of
Common Stock are traded on a securities exchange other than the American Stock
Exchange, the Fair Market Value of a share of Common Stock shall mean the
average of the closing prices of the Company’s Common Stock quoted on such
exchange for the ten (10) trading days ending on the trading day prior to
the date of exercise.  If the shares of
Common Stock are not traded on the American Stock Exchange or any other
exchange, the Fair Market Value shall be the price per share that the Company
could obtain from a willing buyer for 

 

7

 

shares
of Common Stock sold by the Company from authorized but unissued shares of
Common Stock, as such prices shall be determined in good faith by the Company’s
Board of Directors.

 

(e)  Registration
Requirement. Notwithstanding anything else in this Section 6, no
Warrant may be exercised unless at the time of exercise (i) a registration
statement covering the Warrant Shares to be issued upon exercise is effective
under the Act and (ii) a prospectus thereunder relating to the Warrant
Shares is current. The Company shall use its best efforts to have a
registration statement in effect covering Warrant Shares issuable upon exercise
of the Warrants from the date the Warrants become exercisable and to maintain a
current prospectus relating to those Warrant Shares until the Warrants expire
or are redeemed. In the event that, at the end of the Warrant Exercise Period,
a registration statement covering the Warrant Shares to be issued upon exercise
is not effective under the Act, all the rights of holders hereunder shall
terminate and all of the Warrants shall expire unexercised and worthless, and
as a result purchasers of the Units will have paid the full Unit purchase price
solely for the share of Common Stock included in each Unit. In no event shall
the Warrants be settled on a net cash basis nor shall the Company be required
to issue unregistered shares upon the exercise of any Warrant.

 

(f)  Expiry
Upon Liquidation of Trust Account. If the Company is dissolved because it
fails to effect an Initial Business Combination, all of the rights of holders
hereunder shall terminate and all of the Warrants shall expire unexercised and
worthless, and as a result purchasers of the Units will have paid the full Unit
purchase price solely for the share of Common Stock included in each Unit.

 

SECTION 7.  Payment of Taxes. The Company will pay
all documentary stamp taxes attributable to the initial issuance of Warrant
Shares upon the exercise of Warrants; provided, however, that the Company shall
not be required to pay any tax or taxes which may be payable in respect of any
transfer involved in the issue of any Warrant Certificates or any certificates
for Warrant Shares in a name other than that of the registered holder of a
Warrant Certificate surrendered upon the exercise of a Warrant, and the Company
shall not be required to issue or deliver such Warrant Certificates unless or
until the person or persons requesting the issuance thereof shall have paid to
the Company the amount of such tax or shall have established to the
satisfaction of the Company that such tax has been paid.

 

SECTION 8.  Mutilated or Missing Warrant Certificates.
In case any of the Warrant Certificates shall be mutilated, lost, stolen or
destroyed, the Company shall issue and the Warrant Agent shall countersign, in
exchange and substitution for and upon cancellation of the mutilated Warrant
Certificate, or in lieu of and substitution for the Warrant Certificate lost,
stolen or destroyed, a new Warrant Certificate of like tenor and representing
an equivalent number of Warrants, but only upon receipt of evidence
satisfactory to the Company and the Warrant Agent of such loss, theft or
destruction of such Warrant Certificate and indemnity, also satisfactory to the
Company and the Warrant Agent. Applicants for such new Warrant Certificates
must pay such reasonable charges as the Company may prescribe.

 

SECTION 9.  Reservation of Warrant Shares. The
Company will at all times reserve and keep available, free from preemptive
rights, out of the aggregate of its authorized but unissued Common Stock or its
authorized and issued Common Stock held in its treasury, for the purpose 

 

8

 

of enabling it to satisfy
any obligation to issue Warrant Shares upon exercise of Warrants, the maximum
number of shares of Common Stock which may then be deliverable upon the
exercise of all outstanding Warrants. The Warrant Agent shall have no duty to
verify availability of such shares set aside by the Company.

 

The Company or, if
appointed, the transfer agent for the Common Stock (the “Transfer
Agent”) and every subsequent transfer agent for any shares of
the Company’s Common Stock issuable upon the exercise of any of the Warrants
will be irrevocably authorized and directed at all times to reserve such number
of authorized shares as shall be required for such purpose. The Company will
keep a copy of this Agreement on file with the Transfer Agent and with every
subsequent transfer agent for any shares of the Company’s Common Stock issuable
upon the exercise of the Warrants. The Warrant Agent is hereby irrevocably
authorized to requisition from time to time from such Transfer Agent the stock
certificates required to honor outstanding Warrants upon exercise thereof in
accordance with the terms of this Agreement. The Company will supply such
Transfer Agent with duly executed certificates for such purposes and will
provide or otherwise make available any cash which may be payable as provided
in Section 12 hereof. The Company will furnish such Transfer Agent a copy
of all notices of adjustments and certificates related thereto, transmitted to
each holder pursuant to Section 13 hereof.

 

Before taking any action
which would cause an adjustment pursuant to Section 11 hereof to reduce
the Exercise Price below the then par value (if any) of the Warrant Shares, the
Company will take any commercially reasonable corporate action which may, in
the opinion of its counsel (which may be counsel employed by the Company), be
necessary in order that the Company may validly and legally issue fully paid
and nonassessable Warrant Shares at the Exercise Price as so adjusted.

 

The Company covenants that
all Warrant Shares which may be issued upon exercise of Warrants will, upon
payment of the Exercise Price therefor and issue, be fully paid, nonassessable,
free of preemptive rights and free from all taxes, liens, charges and security
interests with respect to the issue thereof.

 

SECTION 10.  Obtaining Stock Exchange Listings. The
Company will from time to time take all commercially reasonable actions which
may be necessary so that the Warrant Shares, immediately upon their issuance
upon the exercise of Warrants, will be listed on the principal securities
exchanges and markets within the United States of America, if any, on which
other shares of Common Stock are then listed.

 

SECTION 11.  Adjustment of Number of Warrant Shares.

 

The number of Warrant Shares
issuable upon the exercise of each Warrant is subject to adjustment from time
to time upon the occurrence of the events enumerated in this Section 11.
For purposes of this Section 11, “Common Stock”
means shares now or hereafter authorized of any class of common stock of the
Company and any other stock of the Company, however designated, that has the
right (subject to any prior rights of any class or series of preferred stock)
to participate in any distribution of the assets or earnings of the Company
without limit as to per share amount.

 

9

 

 

(a)  Adjustment for Change in Capital Stock.

 

If the Company:

 

(1)  pays a dividend or
makes a distribution on its Common Stock in either case in shares of its Common
Stock;

 

(2)  subdivides its
outstanding shares of Common Stock into a greater number of shares;

 

(3)  combines its
outstanding shares of Common Stock into a smaller number of shares;

 

(4)  makes a
distribution on its Common Stock in shares of its capital stock other than
Common Stock; or

 

(5)  issues by
reclassification of its Common Stock any shares of its capital stock,

 

then the number of shares of Common Stock
issuable upon exercise of each Warrant immediately prior to such action shall
be proportionately adjusted so that the holder of any Warrant thereafter
exercised shall receive the aggregate number and kind of shares of capital
stock of the Company which he would have owned immediately following such
action if such Warrant had been exercised immediately prior to such action.

 

The adjustment shall become
effective immediately after the record date in the case of a dividend or
distribution and immediately after the effective date in the case of a
subdivision, combination or reclassification.

 

Such adjustment shall be
made successively whenever any event listed above shall occur.

 

(b)  Adjustment for Rights Issue.

 

If the Company distributes
any rights, options or warrants to all holders of its Common Stock entitling
them to purchase shares of Common Stock at a price per share less than the
Closing Price per share on the Business Day immediately preceding the
ex-dividend date for such distribution of rights, options or warrants, the
number of shares of Common Stock issuable upon exercise of each Warrant shall
be adjusted in accordance with the formula:

where:

 

N’ = the adjusted number of
shares of Common Stock issuable upon exercise of each Warrant.

 

N = the current number of
shares of Common Stock issuable upon exercise of each Warrant.

 

10

 

O = the number of shares of
Common Stock outstanding on the record date for such distribution.

 

A = the number of additional
shares of Common Stock issuable pursuant to such rights or warrants.

 

P = the purchase price per
share of the additional shares.

 

M = the Closing Price per
share of Common Stock on the record date.

 

The adjustment shall be made
successively whenever any such rights, options or warrants are issued and shall
become effective immediately after the record date for the determination of
stockholders entitled to receive the rights, options or warrants. If at the end
of the period during which such rights, options or warrants are exercisable,
not all rights, options or warrants shall have been exercised, the number of
shares of Common Stock issuable upon exercise of each Warrant shall be immediately
readjusted to what it would have been if “N” in the above formula had been the
number of shares actually issued.

 

(c)  Adjustment for Other Distributions.

 

If the Company distributes
to all holders of its Common Stock any of its assets (including cash) or debt
securities or any rights, options or warrants to purchase debt securities,
assets or other securities of the Company (other than Common Stock), the number
of shares of Common Stock issuable upon exercise of each Warrant shall be
adjusted in accordance with the formula:

 

where:

 

N’ = the adjusted number of
shares of Common Stock issuable upon exercise of each Warrant.

 

N = the current number of
shares of Common Stock issuable upon exercise of each Warrant.

 

M = the Closing Price per
share of Common Stock on the Business Day immediately preceding the ex-dividend
date for such distribution.

 

F = the fair market value on
the ex-dividend date for such distribution of the assets, securities, rights or
warrants distributable to one share of Common Stock after taking into account,
in the case of any rights, options or warrants, the consideration required to
be paid upon exercise thereof. The Board of Directors shall reasonably
determine the fair market value in good faith.

 

The adjustment shall be made
successively whenever any such distribution is made and shall become effective
immediately after the record date for the determination of stockholders
entitled to receive such distribution.

 

11

 

This subsection (c) does
not apply to regular quarterly cash dividends including increases thereof or
rights, options or warrants referred to in subsection (b) of this Section 11.
If any adjustment is made pursuant to this subsection (c) as a result of
the issuance of rights, options or warrants and at the end of the period during
which any such rights, options or warrants are exercisable, not all such
rights, options or warrants shall have been exercised, the Warrant shall be
immediately readjusted as if “F” in the above formula was the fair market value
on the ex-dividend date for such distribution of the indebtedness or assets
actually distributed upon exercise of such rights, options or warrants divided
by the number of shares of Common Stock outstanding on the ex-dividend date for
such distribution. Notwithstanding anything to the contrary contained in this
subsection (c), if “M-F” in the above formula is less than $1.00, the Company
may elect to, and if “M-F” or is a negative number, the Company shall, in lieu
of the adjustment otherwise required by this subsection (c), distribute to the
holders of the Warrants, upon exercise thereof, the evidences of indebtedness,
assets, rights, options or warrants (or the proceeds thereof) which would have
been distributed to such holders had such Warrants been exercised immediately
prior to the record date for such distribution.

 

(d)  Adjustment for Common Stock Issue.

 

If the Company issues shares
of Common Stock for a consideration per share less than the Closing Price per
share on the date the Company fixes the offering price of such additional
shares, the number of shares of Common Stock issuable upon exercise of each
Warrant shall be adjusted in accordance with the formula:

 

 

where:

 

N’ = the adjusted number of
shares of Common Stock issuable upon exercise of each Warrant.

 

N = the current number of
shares of Common Stock issuable upon exercise of each Warrant.

 

O = the number of shares
outstanding immediately prior to the issuance of such additional shares.

 

P = the aggregate
consideration received for the issuance of such additional shares.

 

M = the Closing Price per
share on the date of issuance of such additional shares.

 

A = the number of shares
outstanding immediately after the issuance of such additional shares.

 

The adjustment shall be made
successively whenever any such issuance is made, and shall become effective
immediately after such issuance.

 

12

 

This subsection (d) does
not apply to:

 

(1) any of the transactions described in
subsections (b) and (c) of this Section 11,

 

(2) the exercise of Warrants, or the
conversion or exchange of other securities convertible or exchangeable for
Common Stock, or the issuance of Common Stock upon the exercise of rights or
warrants issued to the holders of Common Stock,

 

(3) Common Stock (and options
exercisable therefor) issued to the Company’s employees, officers, directors,
consultants or advisors (whether or not still in such capacity on the date of
exercise) under bona fide employee benefit plans or stock option plans adopted
by the Board of Directors of the Company and approved by the holders of Common
Stock when required by law, if such Common Stock would otherwise be covered by
this subsection (d),

 

(4) Common Stock issued in a bona fide
public offering for cash,

 

(5) Common Stock issued in a bona fide
private placement in which at least one non-affiliate of the Company
participates, including without limitation the issuance of equity as
consideration or partial consideration for acquisitions from persons that are
not affiliates of the Company.

 

(e)  Adjustment for Convertible Securities
Issue.

 

If the Company issues any
securities convertible into or exchangeable for Common Stock (other than
securities issued in transactions described in subsections (b) and (c) of
this Section 11) for a consideration per share of Common Stock initially
deliverable upon conversion or exchange of such securities less than the
Closing Price per share on the date of issuance of such securities, the number
of shares of Common Stock issuable upon exercise of each Warrant shall be
adjusted in accordance with this formula:

 

 

where:

 

N’ = the adjusted number of
shares of Common Stock issuable upon exercise of each Warrant.

 

N = the current number of
shares of Common Stock issuable upon exercise of each Warrant.

 

O = the number of shares
outstanding immediately prior to the issuance of such securities.

 

P = the aggregate
consideration received for the issuance of such securities.

 

13

 

M = the Closing Price per
share on the date of issuance of such securities.

 

D = the maximum number of
shares deliverable upon conversion or in exchange for such securities at the
initial conversion or exchange rate.

 

The adjustment shall be made
successively whenever any such issuance is made, and shall become effective
immediately after such issuance.

 

If all of the Common Stock
deliverable upon conversion or exchange of such securities have not been issued
when such securities are no longer outstanding, then the number of shares of
Common Stock issuable upon exercise of each Warrant shall promptly be
readjusted to what it would have been had the adjustment upon the issuance of
such securities been made on the basis of the actual number of shares of Common
Stock issued upon conversion or exchange of such securities.

 

This subsection (e) does
not apply to:

 

(1) convertible securities issued in a
bona fide public offering for cash; or

 

(2) convertible securities issued in a
bona fide private placement in which at least one non-affiliate of the Company
participates, including the issuance of convertible securities as consideration
or partial consideration for acquisitions from persons that are not affiliates
of the Company.

 

(f)  Adjustment for Tender or Exchange Offer.
If the Company or any of its subsidiaries makes a payment in respect of a
tender offer or exchange offer for the Common Stock, if the cash and value of
any other consideration included in the payment per share of the Common Stock
exceeds the Closing Price of the Common Stock on the trading day next
succeeding the last date on which tenders or exchanges may be made pursuant to
such tender or exchange offer, the number of shares of Common Stock issuable
upon exercise of each Warrant will be increased based on the following formula:

 

 

where,

 

N’ = the adjusted number of
shares of Common Stock issuable upon exercise of each Warrant;

 

No = the current number of
shares of Common Stock issuable upon exercise of each warrant;

 

14

 

AC = the aggregate value of
all cash and any other consideration (as determined by the Board of Directors
of the Company) paid or payable for shares purchased in such tender or exchange
offer;

 

Oso = the number of shares of Common
Stock outstanding immediately prior to the date such tender or exchange offer
expires;

 

OS’ = the number of shares
of Common Stock outstanding immediately after the date such tender or exchange
offer expires; and

 

SP’ = the Closing Price of
the Common Stock on the trading day next succeeding the date such tender or
exchange offer expires.

 

The adjustment shall be made
successively and shall become effective immediately following the date such
tender or exchange offer expires.

 

(g)  Consideration Received.

 

For purposes of any
computation respecting consideration received pursuant to subsections (d), (e) and
(f) of this Section 11, the following shall apply:

 

(1) in the case of the
issuance of shares of Common Stock for cash, the consideration shall be the
amount of such cash, provided that in no case shall any deduction be made for
any commissions, discounts or other expenses incurred by the Company for any
underwriting or other sale or disposition of the issue or otherwise in connection
therewith;

 

(2) in the case of the
issuance of shares of Common Stock for a consideration in whole or in part
other than cash, the consideration other than cash shall be deemed to be the
fair market value thereof as reasonably determined by the Board of Directors of
the Company (irrespective of the accounting treatment thereof) and described in
a Board resolution which shall be filed with the Warrant Agent; and

 

(3) in the case of the
issuance of securities convertible into or exchangeable for shares, the
aggregate consideration received therefor shall be deemed to be the
consideration received by the Company for the issuance of such securities plus
the additional minimum consideration, if any, to be received by the Company
upon the conversion or exchange thereof for the maximum number of shares used
to calculate the adjustment (the consideration in each case to be determined in
the same manner as provided in clauses (1) and (2) of this
subsection).

 

(h)  Defined Terms; When De Minimis Adjustment
May Be Deferred.

 

As used in this section 11:

 

(1) “ex-dividend date”
means the first date on which the shares of Common Stock trade on the
applicable exchange or in the applicable market, regular way, without the right
to receive the issuance or distribution in question;

 

15

 

(2) “trading day”
means, with respect to the Common Stock or any other security, a day during
which (i) trading in the Common Stock or such other security generally
occurs, (ii) there is no market disruption event (as defined below) and (iii) a
Closing Price for the Common Stock or such other security (other than a Closing
Price referred to in the next to last clause of such definition) is available
for such day; provided that if the Common Stock or such other security is not
admitted for trading or quotation on or by any exchange, bureau or other
organization, “trading day” will mean any Business Day;

 

(3) “market disruption
event” means, with respect to the Common Stock or any other security, the
occurrence or existence of more than one-half hour period in the aggregate or
any scheduled trading day for the Common Stock or such other security of any
suspension or limitation imposed on trading (by reason of movements in price
exceeding limits permitted by the stock exchange or otherwise) in the Common
Stock or such other security or in any options, contract, or future contracts
relating to the Common Stock or such other security, and such suspension or
limitation occurs or exists at any time before 1:00 p.m. (New York time)
on such day; and

 

(4) “Business Day”
means, any day on which the American Stock Exchange is open for trading and
which is not a Saturday, a Sunday or any other day on which banks in the City
of New York, New York, are authorized or required by law to close.

 

No adjustment in the number
of shares of Common Stock issuable upon exercise of each Warrant need be made
unless the adjustment would require an increase or decrease of at least 1% in
such number. Any adjustments that are not made shall be carried forward and
taken into account in any subsequent adjustment.

 

All calculations under this Section 11
shall be made to the nearest cent or to the nearest 1/100th of a share, as the
case may be.

 

(i)  When No Adjustment Required.

 

No adjustment need be made
for a transaction referred to in subsections (b), (c), (d), (e) or (f) of
this Section 11 if Warrant holders are to participate, without requiring
the Warrants to be exercised, in the transaction on a basis and with notice
that the Board of Directors of the Company reasonably determines to be fair and
appropriate in light of the basis and notice on which holders of Common Stock
participate in the transaction.

 

No adjustment need be made
for a change in the par value or no par value of the Common Stock.

 

To the extent the Warrants
become convertible into cash, no adjustment need be made thereafter as to the
amount of cash into which such Warrants are exercisable. Interest will not
accrue on the cash.

 

(j)  Notice of Adjustment.

 

Whenever the number of
shares of Common Stock issuable upon exercise of each Warrant is adjusted, the
Company shall provide the notices required by Section 13 hereof.

 

16

 

(k)  Notice of Certain Transactions.

 

If:

 

(1) the Company takes
any action that would require an adjustment in the Exercise Price pursuant to
subsections (a), (b), (c), (d), (e) or (f) of this Section 11
and if the Company does not arrange for Warrant holders to participate pursuant
to subsection (i) of this Section 11;

 

(2) the Company takes
any action that would require a supplemental Warrant Agreement pursuant to
subsection (l) of this Section 11; or

 

(3) there is a
liquidation or dissolution of the Company,

 

the Company shall mail to Warrant holders a
notice stating the proposed record date for a dividend or distribution or the
proposed effective date of a subdivision, combination, reclassification,
consolidation, merger, transfer, lease, liquidation or dissolution. The Company
shall mail the notice at least 15 days before such date. Failure to mail the
notice or any defect in it shall not affect the validity of the transaction.

 

(l)  Reorganization of Company.

 

If the Company consolidates
or merges with or into, or transfers or leases all or substantially all its
assets to, any person, upon consummation of such transaction the Warrants shall
automatically become exercisable for the kind and amount of securities, cash or
other assets which the holder of a Warrant would have owned immediately after
the consolidation, merger, transfer or lease if such holder had exercised the
Warrant immediately before the effective date of the transaction; provided that
(i) if the holders of Common Stock were entitled to exercise a right of
election as to the kind or amount of securities, cash or other assets
receivable upon such consolidation or merger, then the kind and amount of
securities, cash or other assets for which each Warrant shall become
exercisable shall be deemed to be the weighted average of the kind and amount
received per share by the holders of Common Stock in such consolidation or
merger that affirmatively make such election or (ii) if a tender or
exchange offer shall have been made to and accepted by the holders of Common
Stock under circumstances in which, upon completion of such tender or exchange
offer, the maker thereof, together with members of any group (within the
meaning of Rule 13d-5(b)(1) under the Exchange Act) of which such
maker is a part, and together with any affiliate or associate of such maker
(within the meaning of Rule 12b-2 under the Exchange Act) and any members
of any such group of which any such affiliate or associate is a part, own
beneficially (within the meaning of Rule 13d-3 under the Exchange Act)
more than 50% of the outstanding shares of Common Stock, the holder of a
Warrant shall be entitled to receive the highest amount of cash, securities or
other property to which such holder would actually have been entitled as a
shareholder if such Warrant holder had exercised the Warrant prior to the
expiration of such tender or exchange offer, accepted such offer and all of the
Common Stock held by such holder had been purchased pursuant to such tender or
exchange offer, subject to adjustments (from and after the consummation of such
tender or exchange offer) as nearly equivalent as possible to the adjustments
provided for in this Section 11. Concurrently with the consummation of any
such transaction, the corporation or other entity formed by or surviving any
such consolidation or merger if other than the Company, or the person to which 

 

17

 

such
sale or conveyance shall have been made, shall enter into a supplemental
Warrant Agreement so providing and further providing for adjustments which
shall be as nearly equivalent as may be practical to the adjustments provided
for in this Section. The successor Company shall mail to Warrant holders a
notice describing the supplemental Warrant Agreement.

 

If the issuer of securities
deliverable upon exercise of Warrants under the supplemental Warrant Agreement
is an affiliate of the formed, surviving, transferee or lessee corporation,
that issuer shall join in the supplemental Warrant Agreement.

 

If this subsection (l) applies,
subsections (a), (b), (c), (d), (e) and (f) of this Section 11
do not apply.

 

(m)  Warrant Agent’s Disclaimer.

 

The Warrant Agent has no
duty to determine when an adjustment under this Section 11 should be made,
how it should be made or what it should be. The Warrant Agent has no duty to
determine whether any provisions of a supplemental Warrant Agreement under
subsection (l) of this Section 11 are correct. The Warrant Agent
makes no representation as to the validity or value of any securities or assets
issued upon exercise of Warrants. The Warrant Agent shall not be responsible
for the Company’s failure to comply with this Section.

 

(n)  When Issuance or Payment May Be
Deferred.

 

In any case in which this Section 11
shall require that an adjustment in the number of shares of Common Stock
issuable upon exercise of each Warrant be made effective as of a record date
for a specified event, the Company may elect to defer until the occurrence of
such event (i) issuing to the holder of any Warrant exercised after such
record date the Warrant Shares and other capital stock of the Company, if any,
issuable upon such exercise over and above the Warrant Shares and other capital
stock of the Company, if any, issuable upon such exercise on the basis of the
number of shares of Common Stock issuable upon exercise of each Warrant and (ii) paying
to such holder any amount in cash in lieu of a fractional share pursuant to Section 12
hereof; provided, however, that the Company shall deliver to such holder a due
bill or other appropriate instrument evidencing such holder’s right to receive
such additional Warrant Shares, other capital stock and cash upon the
occurrence of the event requiring such adjustment.

 

(o)  Adjustment in Exercise Price.

 

Upon each event that
provides for an adjustment of the number of shares of Common Stock issuable
upon exercise of each Warrant pursuant to this Section 11, each Warrant
outstanding prior to the making of the adjustment shall thereafter have an
adjusted Exercise Price (calculated to the nearest ten millionth) obtained from
the following formula:

 

 

where:

 

18

 

E’ = the adjusted Exercise
Price.

 

E = the Exercise Price prior
to adjustment.

 

N’ = the adjusted number of
Warrant Shares issuable upon exercise of a Warrant by payment of the adjusted
Exercise Price.

 

N = the number of Warrant
Shares previously issuable upon exercise of a Warrant by payment of the
Exercise Price prior to adjustment.

 

Following any adjustment to
the Exercise Price pursuant to this Section 11, the amount payable, when
adjusted and together with any consideration allocated to the issuance of the
Warrants, shall never be less than the par value per Warrant Share at the time
of such adjustment. Such adjustment shall be made successively whenever any
event listed above shall occur.

 

(p)  Form of Warrants.

 

Irrespective of any
adjustments in the number or kind of shares issuable upon the exercise of the
Warrants or the Exercise Price, Warrants theretofore or thereafter issued may
continue to express the same number and kind of shares and Exercise Price as
are stated in the Warrants initially issuable pursuant to this Agreement.

 

(q)  Other Dilutive Events.

 

In case any event shall
occur affecting the Company, as to which the provisions of this Section 11
are not strictly applicable, but would impact the holders of Warrants adversely
as compared to holders of Common Stock, and the failure to make any adjustment
would not fairly protect the purchase rights represented by the Warrants in
accordance with the essential intent and principles of this Section then,
in each such case, the Company shall appoint a firm of independent public
accountants, investment banking or other appraisal firm of recognized national
standing which shall give their opinion upon the adjustment, if any, on a basis
consistent with the essential intent and principles established in this Section 11,
necessary to preserve, without dilution, the purchase rights represented by the
Warrants.

 

SECTION 12.  Fractional Interests. The Company
shall not be required to issue fractional Warrant Shares on the exercise of
Warrants. If more than one Warrant shall be presented for exercise in full at
the same time by the same holder, the number of full Warrant Shares which shall
be issuable upon the exercise thereof shall be computed on the basis of the
aggregate number of Warrant Shares purchasable on exercise of the Warrants so
presented. If any fraction of a Warrant Share would, except for the provisions
of this Section 12, be issuable on the exercise of any Warrants (or
specified portion thereof), the Company shall pay an amount in cash equal to
the fair market value on the day immediately preceding the date the Warrant is
presented for exercise, multiplied by such fraction.

 

SECTION 13.  Notices to Warrant Holders. Upon any
adjustment of the Exercise Price pursuant to Section 11, the Company shall
promptly thereafter, and in any event within five days, (i) cause to be
filed with the Warrant Agent a certificate executed by the Chief Financial
Officer of the Company setting forth the number of Warrant Shares issuable upon
exercise of each 

 

19

 

Warrant after such
adjustment and setting forth in reasonable detail the method of calculation and
the facts upon which such calculations are based, and () cause to be given to
each of the registered holders of the Warrant Certificates at his address
appearing on the Warrant register written notice of such adjustments by
first-class mail, postage prepaid. Where appropriate, such notice may be given
in advance and included as a part of the notice required to be mailed under the
other provisions of this Section 13. The Warrant Agent shall be fully
protected in relying on any such certificate and on any adjustment therein
contained and shall not be deemed to have knowledge of such adjustment unless
and until it shall have received such certificate.

 

In case:

 

(a)  the Company shall
authorize the issuance to all holders of shares of Common Stock of rights,
options or warrants to subscribe for or purchase shares of Common Stock or of
any other subscription rights or warrants; or

 

(b)  the Company shall
authorize the distribution to all holders of shares of Common Stock of
evidences of its indebtedness or assets (other than regular cash dividends or
dividends payable in shares of Common Stock or distributions referred to in
subsection (b) of Section 11 hereof); or

 

(c)  of any
consolidation or merger to which the Company is a party and for which approval
of any shareholders of the Company is required, or of the conveyance or
transfer of the properties and assets of the Company substantially as an
entirety, or of any reclassification or change of Common Stock issuable upon
exercise of the Warrants (other than a change in par value, or from par value
to no par value, or from no par value to par value, or as a result of a
subdivision or combination), or a tender offer or exchange offer for shares of
Common Stock; or

 

(d)  of the voluntary
or involuntary dissolution, liquidation or winding up of the Company; or

 

(e)  the Company
proposes to take any action not specified above which would require an
adjustment of the Exercise Price pursuant to Section 11 hereof;

 

then the Company shall cause
to be filed with the Warrant Agent and shall cause to be given to each of the
registered holders of the Warrant Certificates at his address appearing on the
Warrant register, at least 10 calendar days prior to the applicable record date
hereinafter specified, or as promptly as practicable under the circumstances in
the case of events for which there is no record date, by first-class mail,
postage prepaid, a written notice stating (i) the date as of which the
holders of record of shares of Common Stock to be entitled to receive any such
rights, options, warrants or distribution are to be determined, or (ii) the
initial expiration date set forth in any tender offer or exchange offer for
shares of Common Stock, or (iii) the date on which any such consolidation,
merger, conveyance, transfer, dissolution, liquidation or winding up is
expected to become effective or consummated, and the date as of which it is
expected that holders of record of shares of Common Stock shall be entitled to
exchange such shares for securities or other property, if any, deliverable upon
such reclassification, consolidation, merger, conveyance, transfer,
dissolution, liquidation or winding up. The failure to give the notice required
by this Section 13 or any defect therein shall not affect the legality or
validity of any 

 

20

 

distribution,
right, option, warrant, consolidation, merger, conveyance, transfer,
dissolution, liquidation or winding up, or the vote upon any action.

 

Nothing contained in this
Agreement or in any of the Warrant Certificates shall be construed as
conferring upon the holders thereof the right to vote or to consent or to
receive notice as shareholders in respect of the meetings of shareholders or
the election of Directors of the Company or any other matter, or any rights
whatsoever as shareholders of the Company.

 

SECTION 14.  Merger, Consolidation or Change of Name of
Warrant Agent. Any corporation into which the Warrant Agent may be merged
or with which it may be consolidated, or any corporation resulting from any
merger or consolidation to which the Warrant Agent shall be a party, or any
corporation succeeding to all or substantially all the corporate trust or
agency business of the Warrant Agent, shall be the successor to the Warrant
Agent hereunder without the execution or filing of any paper or any further act
on the part of any of the parties hereto, provided that such corporation would
be eligible for appointment as a successor warrant agent under the provisions
of Section 16. In case at the time such successor to the Warrant Agent
shall succeed to the agency created by this Agreement, and in case at that time
any of the Warrant Certificates shall have been countersigned but not
delivered, any such successor to the Warrant Agent may adopt the countersignature
of the original Warrant Agent; and in case at that time any of the Warrant
Certificates shall not have been countersigned, any successor to the Warrant
Agent may countersign such Warrant Certificates either in the name of the
predecessor Warrant Agent or in the name of the successor to the Warrant Agent;
and in all such cases such Warrant Certificates shall have the full force and
effect provided in the Warrant Certificates and in this Agreement.

 

In case at any time the name
of the Warrant Agent shall be changed and at such time any of the Warrant
Certificates shall have been countersigned but not delivered, the Warrant Agent
whose name has been changed may adopt the countersignature under its prior
name, and in case at that time any of the Warrant Certificates shall not have
been countersigned, the Warrant Agent may countersign such Warrant Certificates
either in its prior name or in its changed name, and in all such cases such
Warrant Certificates shall have the full force and effect provided in the Warrant
Certificates and in this Agreement.

 

SECTION 15.  Warrant Agent. The Warrant Agent
undertakes the duties and obligations imposed by this Agreement (and no implied
duties or obligations shall be read into this Agreement against the Warrant
Agent) upon the following terms and conditions, by all of which the Company and
the holders of Warrants, by their acceptance thereof, shall be bound:

 

(a)  The statements contained herein and in the
Warrant Certificates shall be taken as statements of the Company and the
Warrant Agent assumes no responsibility for the correctness of any of the same
except such as describe the Warrant Agent or action taken or to be taken by it.
The Warrant Agent assumes no responsibility with respect to the distribution of
the Warrant Certificates except as herein otherwise provided.

 

(b)  The Warrant Agent shall not be responsible
for any failure of the Company to comply with any of the covenants contained in
this Agreement or in the Warrant Certificates to be complied with by the Company.

 

21

 

 

(c)  The
Warrant Agent may consult at any time with counsel of its own selection (who
may be counsel for the Company) and the Warrant Agent shall incur no liability
or responsibility to the Company or to any holder of any Warrant Certificate in
respect of any action taken, suffered or omitted by it hereunder in good faith
and in accordance with the opinion or the advice of such counsel. The Warrant
Agent may execute any of the trusts or powers hereunder or perform any duties
hereunder either directly or through agents or attorneys and the Warrant Agent
shall not be responsible for any misconduct or negligence on the part of any
agent or attorney appointed with due care by it hereunder.

 

(d)  The
Warrant Agent may conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon certificates or opinions
furnished to the Warrant Agent and conforming to the requirements of this
Agreement. The Warrant Agent shall incur no liability or responsibility to the
Company or to any holder of any Warrant Certificate for any action taken in
reliance on any Warrant Certificate, certificate of shares, notice, resolution,
waiver, consent, order, certificate, or other paper, document or instrument
(whether in its original or facsimile form) believed by it to be genuine and to
have been signed, sent or presented by the proper party or parties.

 

(e)  The
Company agrees to pay to the Warrant Agent such compensation for all services
rendered by the Warrant Agent in the administration and execution of this
Agreement as the Company and the Warrant Agent shall agree in writing to
reimburse the Warrant Agent for all expenses, taxes and governmental charges
and other charges of any kind and nature incurred by the Warrant Agent in the
execution of this Agreement (including fees and expenses of its counsel) and to
indemnify the Warrant Agent (and any predecessor Warrant Agent) and save it
harmless against any and all claims (whether asserted by the Company, a holder
or any other person), damages, losses, expenses (including taxes other than
taxes based on the income of the Warrant Agent), liabilities, including
judgments, costs and counsel fees and expenses, for anything done or omitted by
the Warrant Agent in the execution of this Agreement except as a result of its
negligence or willful misconduct. The provisions of this Section 15(e) shall
survive the expiration of the Warrants and the termination of this Agreement.

 

(f)  The
Warrant Agent shall be under no obligation to institute any action, suit or
legal proceeding or to take any other action likely to involve expense unless
the Company or one or more registered holders of Warrant Certificates shall
furnish the Warrant Agent with security and indemnity satisfactory to it for
any costs and expenses which may be incurred, but this provision shall not
affect the power of the Warrant Agent to take such action as it may consider
proper, whether with or without any such security or indemnity. All rights of
action under this Agreement or under any of the Warrants may be enforced by the
Warrant Agent without the possession of any of the Warrant Certificates or the
production thereof at any trial or other proceeding relative thereto, and any
such action, suit or proceeding instituted by the Warrant Agent shall be
brought in its name as Warrant Agent and any recovery of judgment shall be for
the ratable benefit of the registered holders of the Warrants, as their
respective rights or interests may appear.

 

(g)  The
Warrant Agent, and any stockholder, director, officer or employee of it, may
buy, sell or deal in any of the Warrants or other securities of the Company or
become pecuniarily interested in any transaction in which the Company may be
interested, or contract with or lend 

 

22

 

money to the Company or
otherwise act as fully and freely as though it were not Warrant Agent under
this Agreement. Nothing herein shall preclude the Warrant Agent from acting in
any other capacity for the Company or for any other legal entity.

 

(h)  The
Warrant Agent shall act hereunder solely as agent for the Company, and its
duties shall be determined solely by the provisions hereof. The Warrant Agent
shall not be liable for anything which it may do or refrain from doing in
connection with this Agreement except for its own negligence or willful
misconduct. The Warrant Agent shall not be liable for any error of judgment
made in good faith by it, unless it shall be proved that the Warrant Agent was
negligent in ascertaining the pertinent facts. Notwithstanding anything in this
Agreement to the contrary, in no event shall the Warrant Agent be liable for
special, indirect, punitive or consequential loss or damage of any kind
whatsoever (including but not limited to lost profits), even if the Warrant
Agent has been advised of the likelihood of the loss or damage and regardless
of the form of the action.

 

(i)  The
Warrant Agent shall not at any time be under any duty or responsibility to any
holder of any Warrant Certificate to make or cause to be made any adjustment of
the Exercise Price or number of the Warrant Shares or other securities or
property deliverable as provided in this Agreement, or to determine whether any
facts exist which may require any of such adjustments, or with respect to the
nature or extent of any such adjustments, when made, or with respect to the
method employed in making the same. The Warrant Agent shall not be accountable
with respect to the validity or value or the kind or amount of any Warrant
Shares or of any securities or property which may at any time be issued or
delivered upon the exercise of any Warrant or with respect to whether any such
Warrant Shares or other securities will when issued be validly issued and fully
paid and nonassessable, and makes no representation with respect thereto.

 

(j) 
Notwithstanding anything in this Agreement to the contrary, neither the Company
nor the Warrant Agent shall have any liability to any holder of a Warrant
Certificate or other Person as a result of its inability to perform any of its
obligations under this Agreement by reason of any preliminary or permanent
injunction or other order, decree or ruling issued by a court of competent
jurisdiction or by a governmental, regulatory or administrative agency or
commission, or any statute, rule, regulation or executive order promulgated or
enacted by any governmental authority prohibiting or otherwise restraining
performance of such obligation; provided that (i) the Company must use its
reasonable best efforts to have any such order, decree or ruling lifted or
otherwise overturned as soon as possible and (ii) nothing in this Section 15(j) shall
affect the Company’s obligation under Section 6(d) to use its best
efforts to have a registration statement in effect covering the Warrant Shares
issuable upon exercise of the Warrants and to maintain a current prospectus
relating to those Warrant Shares.

 

(k)  Any
application by the Warrant Agent for written instructions from the Company may,
at the option of the Warrant Agent, set forth in writing any action proposed to
be taken or omitted by the Warrant Agent under this Agreement and the date on
and/or after which such action shall be taken or such omission shall be
effective. The Warrant Agent shall not be liable for any action taken by, or
omission of, the Warrant Agent in accordance with a proposal included in such
application on or after the date specified in such application (which date
shall not be less than three Business Days after the date any officer of the
Company actually receives 

 

23

 

such application, unless
any such officer shall have consented in writing to any earlier date) unless
prior to taking any such action (or the effective date in the case of an
omission), the Warrant Agent shall have received written instructions in
response to such application specifying the action to be taken or omitted.

 

(l)  No
provision of this Agreement shall require the Warrant Agent to expend or risk
its own funds or otherwise incur any financial liability in the performance of
any of its duties hereunder or in the exercise of its rights.

 

(m)  In
addition to the foregoing, the Warrant Agent shall be protected and shall incur
no liability for, or in respect of, any action taken or omitted by it in
connection with its administration of this Agreement if such acts or omissions
are not the result of the Warrant Agent’s reckless disregard of its duty, gross
negligence or willful misconduct and are in reliance upon (i) the proper
execution of the certification concerning beneficial ownership appended to the
form of assignment and the form of the election attached hereto unless the
Warrant Agent shall have actual knowledge that, as executed, such certification
is untrue, or (ii) the non-execution of such certification including,
without limitation, any refusal to honor any otherwise permissible assignment
or election by reason of such non-execution.

 

SECTION 16.  Change of Warrant Agent. The Warrant
Agent may at any time resign as Warrant Agent upon written notice to the
Company. If the Warrant Agent shall become incapable of acting as Warrant
Agent, the Company shall appoint a successor to such Warrant Agent. If the
Company shall fail to make such appointment within a period of 30 days after it
has been notified in writing of such resignation or of such incapacity by the
Warrant Agent or by the registered holder of a Warrant Certificate, then the
registered holder of any Warrant Certificate or the Warrant Agent may apply, at
the expense of the Company, to any court of competent jurisdiction for the
appointment of a successor to the Warrant Agent. Pending appointment of a
successor to such Warrant Agent, either by the Company or by such a court, the
duties of the Warrant Agent shall be carried out by the Company. The holders of
a majority of the unexercised Warrants shall be entitled at any time to remove
the Warrant Agent and appoint a successor to such Warrant Agent. If a Successor
Warrant Agent shall not have been appointed within 30 days of such removal, the
Warrant Agent may apply, at the expense of the Company, to any court of
competent jurisdiction for the appointment of a successor to the Warrant Agent.
Such successor to the Warrant Agent need not be approved by the Company or the
former Warrant Agent. After appointment the successor to the Warrant Agent
shall be vested with the same powers, rights, duties and responsibilities as if
it had been originally named as Warrant Agent without further act or deed; but
the former Warrant Agent upon payment of all fees and expenses due it and its
agents and counsel shall deliver and transfer to the successor to the Warrant
Agent any property at the time held by it hereunder and execute and deliver any
further assurance, conveyance, act or deed necessary for the purpose. Failure
to give any notice provided for in this Section 16, however, or any defect
therein, shall not affect the legality or validity of the appointment of a
successor to the Warrant Agent.

 

SECTION 17.  Notices to Company and Warrant Agent.
Any notice or demand authorized by this Agreement to be given or made by the
Warrant Agent or by the registered holder of any Warrant Certificate to or on
the Company shall be sufficiently given or made when 

 

24

 

and if deposited in the
mail, first class or registered, postage prepaid, addressed (until another
address is filed in writing by the Company with the Warrant Agent), as follows:

 

Prospect Acquisition Corp.

695 East Main Street

Stamford, CT 06910

Fax No.: (203) 656-0051

Attention: Chief Executive Officer

 

In case the Company shall
fail to maintain such office or agency or shall fail to give such notice of the
location or of any change in the location thereof, presentations may be made
and notices and demands may be served at the principal corporate trust office
of the Warrant Agent.

 

Any notice pursuant to this
Agreement to be given by the Company or by the registered holder(s) of any
Warrant Certificate to the Warrant Agent shall be sufficiently given when and
if deposited in the mail, first-class or registered, postage prepaid, addressed
(until another address is filed in writing by the Warrant Agent with the
Company) to the Warrant Agent as follows:

 

Continental Stock Transfer & Trust
Company

17 Battery Place

New York, NY 10004

Fax No.: (212) 509-5150

Attention: Compliance Department

 

SECTION 18.  Supplements and Amendments. The
Company and the Warrant Agent may from time to time supplement or amend this
Agreement without the approval of any holders of Warrant Certificates in order
to cure any ambiguity or to correct or supplement any provision contained
herein which may be defective or inconsistent with any other provision herein,
or to make any other provisions in regard to matters or questions arising
hereunder which the Company and the Warrant Agent may deem necessary or
desirable and which shall not in any way adversely affect the interests of the
holders of Warrant Certificates theretofore issued. Upon the delivery of a
certificate from an appropriate officer of the Company which states that the
proposed supplement or amendment is in compliance with the terms of this Section 18,
the Warrant Agent shall execute such supplement or amendment. Notwithstanding
anything in this Agreement to the contrary, the prior written consent of the
Warrant Agent must be obtained in connection with any supplement or amendment
which alters the rights or duties of the Warrant Agent. The Company and the
Warrant Agent may amend any provision herein with the consent of the holders of
Warrants exercisable for a majority of the Warrant Shares issuable on exercise
of all outstanding Warrants that would be affected by such amendment.

 

SECTION 19.  Successors. All the covenants and
provisions of this Agreement by or for the benefit of the Company or the
Warrant Agent shall bind and inure to the benefit of their respective
successors and assigns hereunder.

 

SECTION 20.  Termination. This Agreement will
terminate on any earlier date if all Warrants have been exercised or expired without
exercise. The provisions of Section 15 hereof shall survive such
termination.

 

25

 

SECTION 21.  Governing Law. This Agreement and each
Warrant Certificate issued hereunder shall be deemed to be a contract made
under the laws of the State of New York and for all purposes shall be construed
in accordance with the internal laws of said State. The parties agree that, all
actions and proceedings arising out of this Agreement or any of the
transactions contemplated hereby, shall be brought in the United States
District Court for the Southern District of New York or in a New York State
Court in the County of New York and that, in connection with any such action or
proceeding, submit to the jurisdiction of, and venue in, such court. Each of
the parties hereto also irrevocably waives all right to trial by jury in any
action, proceeding or counterclaim arising out of this Agreement or the
transactions contemplated hereby.

 

SECTION 22.  Benefits of This Agreement. Nothing in
this Agreement shall be construed to give to any person or corporation other
than the Company, the Warrant Agent and the registered holders of the Warrant
Certificates any legal or equitable right, remedy or claim under this
Agreement, and this Agreement shall be for the sole and exclusive benefit of
the Company, the Warrant Agent and the registered holders of the Warrant
Certificates.

 

SECTION 23.  Counterparts. This Agreement may be
executed in any number of counterparts and each of such counterparts shall for
all purposes be deemed to be an original, and all such counterparts shall
together constitute but one and the same instrument.

 

SECTION 24.  Force Majeure. In no event shall the
Warrant Agent be responsible or liable for any failure or delay in the
performance of its obligations under this Agreement arising out of or caused
by, directly or indirectly, forces beyond its reasonable control, including
without limitation strikes, work stoppages, accidents, acts of war or
terrorism, civil or military disturbances, nuclear or natural catastrophes or
acts of God, and interruptions, loss or malfunctions of utilities,
communications or computer (software or hardware) services.

 

26

 

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

 

	
   

  	
  PROSPECT ACQUISITION CORP.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ David A. Minella

  
	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
  David A. Minella

  
	
   

  	
  Title:

  	
  Chief Executive Officer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  CONTINENTAL STOCK TRANSFER & TRUST

  
	
   

  	
  COMPANY, as Warrant Agent

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ John W. Comer, Jr.

  
	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
  John W. Comer, Jr.

  
	
   

  	
  Title:

  	
  Vice President

  
				

 

 

Schedule I

 

	
  Sponsor

  	
   

  	
  Sponsor Warrants

  	
   

  
	
  Flat Ridge Investments LLC

  	
   

  	
  3,150,000

  	
   

  
	
  LLM Structured Equity Fund L.P.

  	
   

  	
  1,646,400

  	
   

  
	
  LLM Investors L.P.

  	
   

  	
  33,600

  	
   

  
	
  Capital Management Systems, Inc.

  	
   

  	
  420,000

  	
   

  

 

 

EXHIBIT A

 

[Form of Warrant Certificate]

 

[Face]

 

	
  NUMBER

  	
   

  	
  WARRANTS

  
	
   

  	
   

  	
   

  

 

THIS WARRANT
WILL BE VOID IF NOT EXERCISED PRIOR TO

5:00 P.M. NEW YORK CITY TIME,           , 2012

 

PROSPECT ACQUISITION CORP.
 Incorporated Under
the Laws of the State of Delaware

 

CUSIP               

WARRANT CERTIFICATE

 

This Warrant Certificate certifies that                       
or registered assigns, is the registered holder of                     
warrants (the “Warrants”)  to purchase
shares of Common Stock, $.0001 par value (the “Common Stock”), of Prospect Acquisition
Corp., a Delaware corporation (the “Company”). Each Warrant entitles the holder,
upon exercise during the period set forth in the Warrant Agreement referred to
below, to purchase from the Company that number of fully paid and
non-assessable shares of Common Stock (each, a “Warrant Share”) as set forth below at the exercise
price (the “Exercise
Price”) as determined pursuant to the Warrant Agreement payable in
lawful money of the United States of America upon surrender of this Warrant
Certificate and payment of the Exercise Price at the office or agency of the
Warrant Agent, but only subject to the conditions set forth herein and in the
Warrant Agreement. Defined terms used in this Warrant Certificate but not
defined herein shall have the meanings given to them in the Warrant Agreement.

 

Each Warrant is initially
exercisable for one fully paid and non-assessable share of Common Stock. The
number of Warrant Shares issuable upon exercise of the Warrants is subject to
adjustment upon the occurrence of certain events set forth in the Warrant
Agreement.

 

The initial Exercise Price
per share of Common Stock for any Warrant is equal to $7.50 per share. The
Exercise Price is subject to adjustment upon the occurrence of certain events
set forth in the Warrant Agreement.

 

Warrants may be exercised
only during the Warrant Exercise Period subject to the conditions set forth in
the Warrant Agreement and to the extent not exercised by the end of such
Warrant Exercise Period such Warrants shall become void.

 

 

Reference is hereby made to
the further provisions of this Warrant Certificate set forth on the reverse
hereof and such further provisions shall for all purposes have the same effect
as though fully set forth at this place.

 

This Warrant Certificate
shall not be valid unless countersigned by the Warrant Agent, as such term is
used in the Warrant Agreement.

 

This Warrant Certificate
shall be governed and construed in accordance with the internal laws of the
State of New York, without regard to conflicts of laws principles thereof.

 

	
   

  	
  PROSPECT ACQUISITION CORP.

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Patrick J. Landers

  
	
   

  	
   

  	
  President

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  James Cahill

  
	
   

  	
   

  	
  Secretary

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Countersigned:

  	
   

  	
   

  
	
  Dated:                      ,
  20      

  	
   

  	
   

  
	
  CONTINENTAL STOCK TRANSFER & TRUST
  COMPANY,

  	
   

  	
   

  
	
  as Warrant Agent

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Authorized Signatory

  	
   

  	
   

  
					

 

2

 

[Form of Warrant Certificate]

[Reverse]

 

The Warrants evidenced by
this Warrant Certificate are part of a duly authorized issue of Warrants
entitling the holder on exercise to receive shares of Common Stock, par value
$0.0001 per share, of the Company (the “Common Stock”), and are issued or to be issued
pursuant to a Warrant Agreement dated as of [              ], 2007 (the “Warrant Agreement”),  duly executed
and delivered by the Company to Continental Stock Transfer & Trust
Company, a New York corporation, as warrant agent (the “Warrant Agent”),  which Warrant
Agreement is hereby incorporated by reference in and made a part of this
instrument and is hereby referred to for a description of the rights,
limitation of rights, obligations, duties and immunities thereunder of the
Warrant Agent, the Company and the holders (the words “holders” or “holder”
meaning the registered holders or registered holder) of the Warrants. A copy of
the Warrant Agreement may be obtained by the holder hereof upon written request
to the Company. Defined terms used in this Warrant Certificate but not defined
herein shall have the meanings given to them in the Warrant Agreement.

 

Warrants may be exercised at
any time during the Warrant Exercise Period set forth in the Warrant Agreement.
The holder of Warrants evidenced by this Warrant Certificate may exercise them
by surrendering this Warrant Certificate, with the form of election to purchase
set forth hereon properly completed and executed, together with payment of the
Exercise Price as specified in the Warrant Agreement, at the principal
corporate trust office of the Warrant Agent. In the event that upon any
exercise of Warrants evidenced hereby the number of Warrants exercised shall be
less than the total number of Warrants evidenced hereby, there shall be issued
to the holder hereof or his assignee a new Warrant Certificate evidencing the
number of Warrants not exercised. No adjustment shall be made for any dividends
on any Common Stock issuable upon exercise of this Warrant.

 

Notwithstanding anything
else in this Warrant Certificate or the Warrant Agreement, no Warrant may be
exercised unless at the time of exercise (i) a registration statement
covering the Warrant Shares to be issued upon exercise is effective under the
Act and (ii) a prospectus thereunder relating to the Warrant Shares is
current. In no event shall the Warrants be settled on a net cash basis during
the Warrant Exercise Period nor shall the Company be required to issue
unregistered shares upon the exercise of any Warrant.

 

Once the Warrants become
exercisable and there is an effective registration statement covering the
shares of Common Stock issuable upon exercise of the Warrants available and
current throughout the 30-day redemption period defined below, the Company may
redeem the outstanding Warrants (except with respect to the sponsors’ Warrants
held by a sponsor or its permitted transferee) in whole and not in part at a
price of $0.01 per Warrant upon a minimum of 30 days’ prior written notice of
redemption (the ‘‘30-day redemption period’’)
and if, and only if, the last sale price of the Company’s Common Stock equals
or exceeds $14.50 per share for any 20 trading days within a 30-trading day
period ending three business days before the notice of redemption is sent. If
the Company calls the Warrants for redemption, it will have the option to
require all holders that wish to exercise Warrants to do so on a ‘‘cashless
basis.’’ In such event, each holder would pay the exercise price by
surrendering the Warrants for that number of shares of Common Stock equal to
the quotient obtained by dividing (x) the product of the 

 

3

 

number
of shares of Common Stock underlying the Warrants, multiplied by the difference
between the exercise price of the Warrants and the “fair market value” (defined
below) by (y) the fair market value. The ‘‘fair
market value’’ shall mean the average reported last sale price
of the Common Stock for the ten trading days ending on the third trading day
prior to the date on which the notice of redemption is sent to the holders of
Warrants.

 

The Warrant Agreement
provides that upon the occurrence of certain events the number of Warrant
Shares set forth on the face hereof may, subject to certain conditions, be
adjusted. No fractions of a share of Common Stock will be issued upon the
exercise of any Warrant, but the Company will pay the cash value thereof
determined as provided in the Warrant Agreement.

 

Warrant Certificates, when
surrendered at the principal corporate trust office of the Warrant Agent by the
registered holder thereof in person or by legal representative or attorney duly
authorized in writing, may be exchanged, in the manner and subject to the
limitations provided in the Warrant Agreement, but without payment of any
service charge, for another Warrant Certificate or Warrant Certificates of like
tenor evidencing in the aggregate a like number of Warrants.

 

Upon due presentation for
registration of transfer of this Warrant Certificate at the office of the
Warrant Agent a new Warrant Certificate or Warrant Certificates of like tenor
and evidencing in the aggregate a like number of Warrants shall be issued to
the transferee(s) in exchange for this Warrant Certificate, subject to the
limitations provided in the Warrant Agreement, without charge except for any
tax or other governmental charge imposed in connection therewith.

 

The Company and the Warrant
Agent may deem and treat the registered holder(s) thereof as the absolute
owner(s) of this Warrant Certificate (notwithstanding any notation of
ownership or other writing hereon made by anyone), for the purpose of any
exercise hereof, of any distribution to the holder(s) hereof, and for all
other purposes, and neither the Company nor the Warrant Agent shall be affected
by any notice to the contrary. Neither the Warrants nor this Warrant
Certificate entitles any holder hereof to any rights of a stockholder of the
Company.

 

4

 

Election to Purchase

 

(To Be Executed Upon Exercise Of Warrant)

 

The undersigned hereby irrevocably elects to
exercise the right, represented by this Warrant Certificate, to receive                 
shares of Common Stock and herewith tenders payment for such shares to the
order of Prospect Acquisition Corp. in the amount of $                    
in accordance with the terms hereof. The undersigned requests that a
certificate for such shares be registered in the name of                     ,
whose address is                                                                                  
and that such shares be delivered to                                        
whose address is                                                .
If said number of shares is less than all of the shares of Common Stock
purchasable hereunder, the undersigned requests that a new Warrant Certificate
representing the remaining balance of such shares be registered in the name of                                                ,
whose address is                                            ,
and that such Warrant Certificate be delivered to                                       ,
whose address is                                           .

 

In the event that the Warrant has been called
for redemption by the Company pursuant to Section 6(b) of the Warrant
Agreement and the Company has required cashless exercise pursuant to Section 6(d) of
the Warrant Agreement, the number of shares that a Warrant is exercisable for
shall be determined in accordance with Section 6(d) of the Warrant
Agreement.

 

In the event that the Warrant is a Sponsors’
Warrant (as such term is defined in the Warrant Agreement), such Warrant may be
exercised, to the extent allowed by the Warrant Agreement, through cashless
exercise pursuant to Section 6(d) of the Warrant Agreement, in which
case, (i) the number of shares that a Sponsors’ Warrant is exercisable for
would be determined in accordance with Section 6(d) of the Warrant
Agreement and (ii) the holder of the Sponsors’ Warrant will complete the
following:

 

The undersigned hereby
irrevocably elects to exercise the right, represented by its Sponsors’ Warrant
Certificate, through the cashless exercise provision of Section 6(d) of
the Warrant Agreement, to receive          
shares of Common Stock.  If said
number of shares is less than all of the shares of Common Stock purchasable
hereunder (after giving effect to the cashless exercise), the undersigned
requires that a new Sponsors’ Warrant Certificate representing the balance of
such shares be registered in the name of     
                           , whose address is                                , and that such
Sponsors’ Warrant Certificate be delivered to                         , whose address is

 

 

	
  Dated:

  	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  (SIGNATURE)

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  (ADDRESS)

  

 

5

 

	
   

  	
   

  
	
   

  	
  (TAX IDENTIFICATION NUMBER)

  
	
  Signatures(s) Guaranteed:

  
	
   

  
	
   

  	
   

  
	
  THE SIGNATURE(S) SHOULD BE GUARANTEED
  BY AN ELIGIBLE GUARANTOR INSTITUTION (BANKS, STOCKBROKERS, SAVINGS AND LOAN
  ASSOCIATIONS AND CREDIT UNIONS WITH MEMBERSHIP IN AN APPROVED SIGNATURE
  GUARANTEE MEDALLION PROGRAM, PURSUANT TO S.E.C. RULE 17Ad-15).

  
			

 

6

 

EXHIBIT B 

LEGEND

 

THE SECURITIES REPRESENTED BY THIS
CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED OR ANY STATE SECURITIES LAWS, AND MAY NOT BE OFFERED, SOLD,
TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, AND ANY APPLICABLE STATE SECURITIES LAWS OR AN EXEMPTION
FROM REGISTRATION IS AVAILABLE. IN ADDITION, THE SECURITIES REPRESENTED BY THIS
CERTIFICATE MAY NOT BE SOLD OR TRANSFERRED PRIOR TO THE DATE THAT IS 30
DAYS AFTER THE DATE UPON WHICH PROSPECT ACQUISITION CORP. (THE “COMPANY”)
COMPLETES ITS INITIAL BUSINESS COMBINATION (AS DEFINED IN SECTION 5 OF THE
WARRANT AGREEMENT REFERRED TO HEREIN) EXCEPT TO A PERMITTED TRANSFEREE (AS
DEFINED IN THE WARRANT AGREEMENT) WHO AGREES IN WRITING WITH THE COMPANY TO BE
SUBJECT TO SUCH TRANSFER PROVISIONS AND MAY NOT BE EXERCISED DURING SUCH
PERIOD. FOR SO LONG AS THE SECURITIES ARE SUBJECT TO SUCH TRANSFER
RESTRICTIONS, THEY WILL BE HELD IN AN ESCROW ACCOUNT MAINTAINED BY CONTINENTAL
STOCK TRANSFER & TRUST COMPANY AS ESCROW AGENT UNDER THE ESCROW
AGREEMENT (AS DEFINED IN SECTION 5 OF THE WARRANT AGREEMENT).

 

SECURITIES EVIDENCED BY THIS CERTIFICATE AND
SHARES OF COMMON STOCK OF THE COMPANY ISSUED UPON EXERCISE OF SUCH SECURITIES
WILL BE ENTITLED TO REGISTRATION RIGHTS UNDER A REGISTRATION RIGHTS AGREEMENT
TO BE EXECUTED BY THE COMPANY.

 

	
  No. 

  	
   

  	
  Warrants

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