Document:

SUBSCRIPTION
AGREEMENT FOR SHARES OF COMMON STOCK OF

    BAY
PEAK 5 ACQUISITION CORP.

     

    SUBSCRIPTION
AGREEMENT (this “Agreement”) made as
of this ___ day of February, 2010 by and among Bay Peak 5 Acquisition Corp., a
Nevada corporation (the “Company”), and the
subscribers identified on the signature page hereto (each a “Subscriber,” and
collectively “Subscribers”).

     

    WHEREAS,
the Company and the Subscribers are executing and delivering this Agreement in
reliance upon an exemption from securities registration afforded by the
provisions of Section 4(2), Section 4(6), Regulation D (“Regulation D”) and/or
Regulation S (“Reg
S”) as promulgated by the United States Securities and Exchange
Commission (the “Commission”) under
the Securities Act of 1933, as amended (the “1933
Act”);

     

    WHEREAS,
the Company desires to sell 10,000,000 shares of common stock of the Company,
(”Shares”), at a per Share purchase price of $2.00; and

     

    WHEREAS,
the aggregate proceeds of the sale of the Shares contemplated hereby shall be
held in escrow pursuant to the terms of an escrow agreement to be executed by
the escrow agent identified therein (“Escrow Agent”) and
the parties substantially in the form attached as an Exhibit to the Confidential
Private Placement Memorandum delivered to the Subscriber along with this
Subscription Agreement (the “Escrow
Agreement”).

     

    NOW,
THEREFORE, for and in consideration of the premises and the mutual covenants
hereinafter set forth, the parties hereto do hereby agree as
follows:

     

    
      	
              1.

            	
              Purchase And Sale Of
      The Shares

            

    

     

    1.1           Purchase of
Shares.  Subject to the terms and conditions hereinafter set
forth, the Subscriber hereby irrevocably subscribes for and agrees to purchase
from the Company, at a price of $2.00 per Share, that number of Shares as set
forth on the signature page hereto (or such lesser number as the Company in its
sole discretion may accept), for an aggregate purchase price as set forth on the
signature page, payable to the order of “Bay Peak 5 Acquisition Corp.” by wire
transfer of immediately available funds.  The funds will be held in
escrow subject to the terms of the Escrow Agreement.

     

    1.2.          The
consummation of the transactions contemplated herein (the “Closing”) shall take
place at the offices of Pillsbury Winthrop Shaw Pittman LLP in San Francisco, CA
, upon the satisfaction or waiver of all conditions to closing set forth in this
Agreement (“Closing
Date”).  The obligation of the Company to sell the Shares to
the Subscribers is subject to the satisfaction, at or before the Closing Date,
of each of the following conditions:

     

    (i)           Subscribers
committing to purchase the aggregate number of Shares being offered by the
Company and shall have executed and delivered this Agreement to the
Company;

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    (ii)           the
Subscribers shall have paid, in the aggregate, no less than $20,000,000 in cash
to the Company;

     

    (iii)           the
Escrow Agent shall have executed and delivered to the Company the Escrow
Agreement;

     

    (iv)           certain
holders of warrant of Bay Peak shall have deposited into a separate escrow
account, an aggregate amount equal to $5,000,000 in connection with their
exercise of 2,500,000 warrants of the Company at a per share exercise price of
$2.00; and

     

    (v)           the
conditions to the consummation of the transactions contemplated by the Share
Exchange Agreement dated January 27, 2010 among Bay Peak, Trunkbow have been
satisfied.

     

    
      	
              2.

            	
              Representations By And
      Covenants Of Subscriber

            

    

     

    INSTRUCTIONS:  If
you are a resident of a jurisdiction other than the United States and a
non-“U.S. Person” (as such term is defined in Rule 902(k) of Reg S (which
definition for your convenience is included in Exhibit A attached hereto), then
you do not need to respond to Section 2.1 below, but you must respond to Section
2.2 below.  All representations and covenants in this Article 2 (other
than Section 2.2 [applicable to “U.S. Persons) and Section 2. (applicable to
non-“U.S. Persons) shall be made by and of the Subscriber, regardless of whether
the Subscriber is a U.S. Person or not.

     

    2.1.              This Section does
not need to be completed by Subscribers who are residents of a jurisdiction
other than the United States and who are not “U.S.
Persons.” The Subscriber represents that it is an “accredited
investor” as such term is defined in Rule 501 of Reg D by virtue of the fact
that Subscriber comes within any one or more of the following categories (please
initial below all as applicable).

     

    
      	
              
              

            	
              _____

            	
              (a)      
      Any natural person whose individual net worth or joint net worth with that
      person’s spouse, at the time of his purchase, exceeds U.S.
      $1,000,000;

            

    

     

    
      	
              
              

            	
              _____

            	
              (b)     
      Any natural person who had an individual income in excess of U.S. $200,000
      in each of the two most recent years or joint income with that person’s
      spouse is in excess of U.S. $300,000 in each of those years and has a
      reasonable expectation of reaching the same income in the current year,
      or

            

    

     

    
      	
              
              

            	
              _____

            	
              (c)     
      Any entity in which all of the equity owners are accredited
      investors.

            

    

     

    The
Subscriber acknowledges that the Company has the right to require evidence of
the Subscriber’s status as an accredited investor.

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    2.2.            To be completed
by residents of a jurisdiction other than ther United States who are not “U.S.
Persons”.  Notwithstanding anything contained in Section 2.2,
by initializing _____  this line the Subscriber represents, warrants
and acknowledges that:

     

    a)                   it
is not a “U.S.
Person,” as defined in Rule 902(k) of Reg. S (which definition is
included in Exhibit
A attached hereto) and is not acquiring the Shares for the account or
benefit of any U.S. person; d

     

    b)                   the
offering and sale of the Shares to the Subscriber is intended to be exempt under
the Act by virtue of Reg. S;

     

    c)                   the
purchase of the Shares by the Subscriber is not taking place within the “United
States,” as defined in Rule 902(l) of Reg. S, but rather in an “offshore
transaction,” as defined in Rule 902 (h) of Reg. S;

     

    d)              the
Shares have not been registered under the Act and as such the Subscriber agrees
to resell the Shares only in accordance with (and the Company will only register
transfers in accordance with) the provisions of Reg. S (subject to the other
provisions hereof), pursuant to registration under the Act or pursuant to an
exemption from the registration requirements of the Act; and

     

    e)              the
Shares have not been registered under the laws of any other country or
jurisdiction, and the Company takes no responsibility for complying with such
laws.

     

    
      	
            	
              2.3.

            	
              The
      Subscriber acknowledges that it has read all of the documents furnished or
      made available by the Company, and Subscriber represents that it
      understands the nature of this investment, which may result in the loss of
      the total amount of such
investment.

            

    

     

    2.4.    
The Subscriber recognizes that an investment in the Company involves risk for
many reasons, including without limitation, that (i) only investors who can
afford the loss of their entire investment of money should consider purchasing
the Shares; (ii) no viable public market may develop for the Shares and an
investor may not be able to liquidate its investment and (iii) transferability
of the Shares is extremely limited. The Subscriber has adequate means of
providing for his current needs and possible personal contingencies, and the
Subscriber has no need, and anticipates no need in the foreseeable future, for
liquidity in his investment in the Shares.  The Subscriber is able to
bear the economic risks of this investment and, consequently, without limiting
the generality of the foregoing, the Subscriber is able to hold the Shares for
an indefinite period of time and has a sufficient net worth to sustain a loss of
the entire investment in the event such loss should occur.

     

    2.5.     The
Subscriber has not made an overall commitment to investments which are not
readily marketable that are disproportionate to his net worth, and his
investment in the Shares will not cause such overall commitment to become
excessive.

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    2.6.      The
Subscriber acknowledges and hereby represents that during the course of this
transaction it has been furnished by the Company with all information regarding
the Company which it requested or desired to know; and that it has been afforded
the opportunity to ask questions of and receive answers from duly authorized
officers or other representatives of the Company concerning the terms and
conditions of this offering.

     

    2.7.      The
offer to sell the Shares was directly communicated to such Subscriber by the
Company.  At no time was such Subscriber presented with or solicited
by any leaflet, newspaper or magazine article, radio or television
advertisement, or any other form of general advertising or solicited or invited
to attend a promotional meeting otherwise than in connection and concurrently
with such communicated offer.

     

    2.8.      The
Subscriber acknowledges and agrees that it has been advised to consult with its
own attorney regarding all legal and tax matters concerning an investment in
Shares, including the execution of the documents related thereto, has had
adequate opportunity to do so, and has done so the extent the Subscriber
considers necessary or advisable.  The Subscriber further acknowledges
and agrees that neither the Company  nor any of its affiliates is
making any representation or warranty about any legal or tax matter concerning
an investment in the Shares, and that the Subscriber has not received or relied
on any legal or tax advice from the Company or any of its
affiliates.

     

    2.9.      The
Subscriber acknowledges that this offering of Shares has not been reviewed by
the United States Securities and Exchange Commission (“SEC”) because of the
Company’s representations that this is intended to be a non-public offering
pursuant to Section 3(b) and/or Section 4(2) of the Act and Rule 506 under Reg.
D and/or Rule 903 under Reg S.  The Subscriber is purchasing the
Shares solely for investment purposes, for the Subscriber's own account, and not
with a view towards the distribution or dissemination thereof and the Subscriber
has no present arrangement to sell the Shares to or through any person or
entity.

     

    2.10.    The
Subscriber understands and consents to the placement of a legend on any
certificate or other document evidencing the Shares stating that they have not
been registered under the Act and setting forth or referring to the restrictions
on transferability and sale thereof.  Each certificate evidencing the
Shares shall bear the legends set forth below, or legends substantially
equivalent thereto, together with any other legends that may be required by
federal or state securities laws at the time of the issuance of the
Shares:

     

    THE
ISSUANCE AND SALE OF THE SHARES OF BAY PEAK 5 ACQUISITION CORP. REPRESENTED
HEREBY HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933,
AS AMENDED (THE “SECURITIES ACT”), THE SECURITIES LAWS OF ANY STATE OF THE
UNITED STATES OR ANY OTHER APPLICABLE SECURITIES LAWS IN RELIANCE UPON
EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND SUCH
LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED
IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL
REASONABLY SATISFACTORY TO THE ISSUER HEREOF THAT REGISTRATION IS NOT REQUIRED
UNDER SAID ACT.

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

      If
the Subscriber is not a “U.S. Person” as
defined in Rule 902(k) of Reg. S (which definition is included in Exhibit A attached
hereto), then any certificate representing the Shares shall also contain the
following legend:

     

    THE
SHARES REPRESENTED HEREBY MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED,
PLEDGED OR HYPOTHECATED IN THE UNITED STATES OR TO OR FOR THE ACCOUNT OR BENEFIT
OF U.S. PERSONS, UNLESS AND UNTIL REGISTERED UNDER THE ACT OR THE ISSUER OF THE
SHARES (THE “ISSUER”) HAS RECEIVED
AN OPINION OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER THAT SUCH
OFFER, SALE OR TRANSFER, PLEDGE OR HYPOTHECATION IS IN COMPLIANCE WITH THE
ACT.  ACCORDINGLY, THE SHARES ARE BEING OFFERED AND SOLD ONLY OUTSIDE
OF THE UNITED STATES IN COMPLIANCE WITH REGULATION S OF THE ACT.

     

    2.11.              The
Subscriber understands that there is no market for any of the Company’s
securities.  In addition, Rule 144 (the “Rule”) promulgated
under the Act requires, among other conditions, a one year holding period prior
to the resale (in limited amounts) of securities acquired in a non-public
offering without having to satisfy the registration requirements under the
Act.  The Subscriber understands that the Company makes no
representation or warranty regarding its fulfillment in the future of any
reporting requirements under the Securities Exchange Act of 1934, as amended, or
its dissemination to the public of any current financial or other information
concerning the Company, as is required by the Rule as one of the conditions of
its availability.  The Subscriber consents that the Company may permit
the transfer of the Shares out of its name only when its request for transfer is
accompanied by an opinion of counsel reasonably satisfactory to the Company that
neither the sale nor the proposed transfer results in a violation of the Act or
any applicable foreign securities or U.S. state “blue sky” laws (collectively
“Securities
Laws”).  The Subscriber agrees to hold the Company and its
successors and assigns harmless and to indemnify them against all liabilities,
costs and expenses incurred by them as a result of any misrepresentation made by
it contained herein or any sale or distribution by the undersigned Subscriber in
violation of any Securities Laws.

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    2.12.              The
Subscriber hereby represents that no representations or warranties have been
made to the Subscriber by the Company or any agent, employee or affiliate of the
Company except as set forth herein and in the Private Placement
Memorandum.

     

    2.13.              The
Subscriber represents and warrants that it has not retained any finder, broker,
agent, or other intermediary in connection with the transactions contemplated by
this Agreement and agrees to indemnify and hold harmless the Company from any
liability for any compensation to any such intermediary retained by Subscriber
and the fees and expenses of defending against such liability or alleged
liability.

     

    2.14.              The
Subscriber acknowledges that it understands that the Company may need to raise
additional capital in the future through private financings in order to develop
its business, which may include the sale of equity securities.  The
issuance of these equity securities could result in dilution to the
Subscriber.  The Subscriber acknowledges that it understands that if
the Company is unable to raise capital when needed, the Company may not be able
to operate its business as planned, and even if the Company is able to operate
its business, its inability to raise capital in the future could adversely
affect its ability to operate effectively.

     

    2.15.              The
Subscriber has the requisite power and authority to enter into and perform this
Agreement and any other transaction document and to purchase the Shares being
issued to it hereunder.  The execution, delivery and performance of
this Agreement and the consummation by it of the transactions contemplated
hereby have been duly authorized by all necessary corporate or partnership
actions, and no further consent or authorization of such Subscriber or its board
of directors, stockholders, partners, or members, as the case may be, is
required.  This Agreement has been duly authorized, executed and
delivered by such Subscriber and constitutes a valid and binding obligation of
such Subscriber enforceable against such Subscriber in accordance with the terms
hereof and thereof, as the case may be.

     

    2.16.              The
execution, delivery and performance of this Agreement and the consummation by
such Subscriber of the transactions contemplated hereby or relating hereto do
not and will not (i) result in a violation of such Subscriber’s charter
documents or bylaws or other organizational documents or (ii) conflict with, or
constitute a default (or an event which with notice or lapse of time or both
would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of any agreement, indenture or
instrument or obligation to which such Subscriber is a party or by which its
properties or assets are bound, or result in a violation of any law, rule, or
regulation, or any order, judgment or decree of any court or governmental agency
applicable to such Subscriber or its properties (except for such conflicts,
defaults and violations as would not, individually or in the aggregate, have a
material adverse effect on such Subscriber).  Such Subscriber is not
required to obtain any consent, authorization or order of, or make any filing or
registration with, any court or governmental agency in order for it to execute,
deliver or perform any of its obligations under this Agreement or to purchase
the Shares in accordance with the terms hereof, provided that for purposes of
the representation made in this sentence, such Subscriber is assuming and
relying upon the accuracy of the relevant representations and agreements of the
Company herein..

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    
      	
              3.

            	
              Representations By The
      Company

            

    

     

    The
Company represents and warrants to the Subscriber that as of the date of this
Agreement, upon acceptance of this subscription by the Company:

     

    3.1.          Organization, Qualifications
and Corporate Power.  The Company is a corporation or other
entity duly incorporated or organized, validly existing and in good standing
under the laws of the jurisdiction of its incorporation or organization and has
the requisite corporate power to own its properties and to carry on its business
as presently conducted. The Company has the corporate power and authority to own
and hold its properties and to carry on its business as now conducted and as
proposed to be conducted, to execute, deliver and perform this
Agreement.

     

    3.2.           Authorization of Agreement,
Etc.  The execution and delivery by the Company of this
Agreement, the performance by the Company of its obligations hereunder, and the
issuance, sale and delivery of the Shares have been duly authorized by all
requisite corporate action and do not violate or conflict with any law, any
order, judgment, decree, rule or regulation of any court or other agency of
government, the Articles of Incorporation of the Company, as currently effective
or any provision of any indenture, agreement or other instrument to which the
Company or any of its properties or assets is bound, or violate or conflict
with, result in a breach of or constitute (with due notice or lapse of time or
both) a default, or give rise to any right of termination or acceleration under
any such indenture, agreement or other instrument, or result in the creation or
imposition of any lien, charge, restriction, claim or encumbrance of any nature
whatsoever upon any such indenture, agreement or other instrument, or result in
the creation or imposition of any lien, charge, restriction, claim or
encumbrance of any nature whatsoever upon any of the properties or assets of the
Company.

     

    3.3.           Validity.  This
Agreement has been duly executed and delivered by the Company and constitutes
the legal, valid and binding obligation of the Company, enforceable in
accordance with its terms.

     

    
      	
              4.

            	
              Miscellaneous

            

    

     

    4.1.           Indemnity. The Subscriber agrees
to indemnify and hold harmless the Company and each person, if any, who controls
the Company, within the meaning of Section 15 of the Act against any and all
loss, liability, claim, damage and expense whatsoever (including, but not
limited to, any and all expenses whatsoever reasonably incurred in
investigating, preparing or defending against any litigation commenced or
threatened or any claim whatsoever) arising out of or based upon any false
representation or warranty or breach or failure by the Subscriber to comply with
any covenant or agreement made by the Subscriber herein.

     

    4.2.           Notice.  Any
notice or other communication given hereunder shall be deemed sufficient if in
writing and sent by registered or certified mail, return receipt requested,
addressed to the Company at the address set forth above (Attention: Cory
Roberts), and to the Subscriber at its address indicated on the last page of
this Agreement.  Notices shall be deemed to have been given on the
date of mailing, except notices of change of address, which shall be deemed to
have been given when received.

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    

     

    4.3.           No
Amendments.  This Agreement shall not be changed, modified or
amended except by a writing signed by the parties to be charged.

     

    4.4.           Right of Company to Reduce
Subscriptions.  The Subscriber understands that notwithstanding
the number of Shares subscribed for herein, in the event that the subscriptions
received from all Subscribers exceed the maximum offering amount of $20,000,000
in the aggregate, the Company shall determine, in its sole discretion, the
number of Shares to be issued to each Subscriber so that the total amount of the
Offering does not exceed $20,000,000.  In such an event, the Company
may choose to reject the Subscriber’s subscription or accept the Subscriber’s
subscription for an amount of Shares that is less than the full amount of Shares
subscribed for herein.  If a subscription is accepted for less than
the full amount, or rejected, all funds on deposit with respect to such
subscription which are not accepted, will be returned to the Subscriber, without
interest and without deduction

     

    4.5.           Binding Upon
Successors.  This Agreement shall be binding upon and inure to
the benefit of the parties hereto and to their respective heirs, legal
representatives, successors and assigns.  This Subscription Agreement
sets forth the entire agreement and understanding between the parties as to the
subject matter thereof and merges and supersedes all prior discussions,
agreements and understandings of any and every nature among them.

     

    4.6.           Governing
Law.  Notwithstanding the place where this Agreement may be
executed by any of the parties hereto, the parties expressly agree that all the
terms and provisions hereof shall be construed in accordance with and governed
by the internal laws of the State of New York.

     

    4.7.           Execution in
Counterparts.  This Agreement may be executed in
counterparts.  Upon the execution and delivery of this Agreement by
the Subscriber, this Agreement shall become a binding obligation of the
Subscriber with respect to the purchase of Shares as herein provided; subject,
however, to the right hereby reserved to the Company to reject this
subscription.

     

    4.8.           Waiver Not Deemed
Consent.  It is agreed that a waiver by either party of a
breach of any provision of this Agreement shall not operate, or be construed, as
a waiver of any subsequent breach by that same party.

     

    4.9.           Further
Assurances.  The parties agree to execute and deliver all such
further documents, agreements and instruments and take such other and further
action as may be necessary or appropriate to carry out the purposes and intent
of this Agreement.

     

    [REMAINDER
OF THIS PAGE INTENTIONALLY LEFT BLANK]

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    IN
WITNESS WHEREOF, Subscriber has executed this Subscription Agreement as of the
day and year first written above.

    

    SUBSCRIBER:

    

    IF
CORPORATION OR OTHER BUSINESS ENTITY:

    ______________________________

    [Insert
Name or Entity]

    

    By:___________________________

    Name:_________________________

    Its:_________________________                                                

    

    ______________________________

    

    ______________________________

    Address
of Subscriber

    

    ____________________________

    Email
Address of Subscriber

    

    ____________________________

    Fax
Number of Subscriber

    

    ______________________________

    Identification
Number of Subscriber

    

    Number of
Shares Being Subscribed For: ________:  Aggregate Purchase
Price:  $______

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    IF
INDIVIDUAL:

    

    ______________________________

    Signature
of Subscriber

    

    ______________________________

    [Print
Name]

    

    ______________________________

    

    ______________________________

    Address
of Subscriber

    

    ____________________________

    Email
Address of Subscriber

    

    ____________________________

    Fax
Number of Subscriber

    

    ______________________________

    Identification
Number of Subscriber

    

    Number of
Shares Being Subscribed For: _________:  Aggregate Purchase
Price:  $______

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    Bay Peak
5 Acquisition Corp. hereby accepts the subscription of _____________ attached
hereto for ______________ Shares and ____________ at a price per share of $2.00,
for an aggregate purchase price of $______.

    

    
      
        
          
            
              
                	 
      	BAY
      PEAK 5 ACQUISITION CORP.
	 
      	 	 
      	 
      
	 
      	 	
                        By:

                      	 
      
	 
      	 	 
      	
                        Name:

                      
	 
      	 	 
      	
                        Title:

                      
	
                        _____________, 2010

                      	 	 
      	 
      

              

            

          

        

      

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    EXHIBIT
A TO SUBSCRIPTION AGREEMENT

     

    Please
note the following definitions as set forth in Rule 902(k) of Regulation S
promulgated under the Securities Exchange Act of 1933, as amended (the “Act”).

     

    
      	
              1.

            	
              “U.S. person”
      means:

            

    

     

    Any
natural person resident in the United States;

    

    
      	
               
      

            	
              i.

            	
              Any
      partnership or corporation organized or incorporated under the laws of the
      United States;

            

    

    

    
      	
               
      

            	
              ii.

            	
              Any
      estate of which any executor or administrator is a U.S.
      person;

            

    

    

    
      	
               
      

            	
              iii.

            	
              Any
      trust of which any trustee is a U.S.
person;

            

    

    

    
      	
               
      

            	
              iv.

            	
              Any
      agency or branch of a foreign entity located in the United
      States;

            

    

    

    
      	
               
      

            	
              v.

            	
              Any
      non-discretionary account or similar account (other than an estate or
      trust) held by a dealer or other fiduciary for the benefit or account of a
      U.S. person;

            

    

    

    
      	
               
      

            	
              vi.

            	
              Any
      discretionary account or similar account (other than an estate or trust)
      held by a dealer or other fiduciary organized, incorporated, or (if an
      individual) resident in the United States;
and

            

    

    

    
      	
               
      

            	
              vii.

            	
              Any
      partnership or corporation if:

            

    

    

    
      	
               
      

            	
              A.

            	
              Organized
      or incorporated under the laws of any foreign jurisdiction;
      and

            

    

    
      
        	 	 	 
	
                 
      

              	
                B.

              	
                Formed
      by a U.S. person principally for the purpose of investing in securities
      not registered under the Act, unless it is organized or incorporated, and
      owned, by accredited investors (as defined in Rule 501(a) of Regulation D)
      who are not natural persons, estates or
trusts.

              

      

    

    
      
        	 	 
	
                2.

              	
                The
      following are not “U.S.
      persons”:

              

      

    

    

    
      	
               
      

            	
              i.

            	
              Any
      discretionary account or similar account (other than an estate or trust)
      held for the benefit or account of a non-U.S. person by a dealer or other
      professional fiduciary organized, incorporated, or (if an individual)
      resident in the United States;

            

    

    

    
      	
               
      

            	
              ii.

            	
              Any
      estate of which any professional fiduciary acting as executor or
      administrator is a U.S. person if:

            

    

    

    
      	
               
      

            	
              A.

            	
              An
      executor or administrator of the estate who is not a U.S. person has sole
      or shared investment discretion with respect to the assets of the estate;
      and

            

    

    

    
      	
               
      

            	
              B.

            	
              The
      estate is governed by foreign law;

            

    

    

    
      	
               
      

            	
              iii.

            	
              Any
      trust of which any professional fiduciary acting as trustee is a U.S.
      person, if a trustee who is not a U.S. person has sole or shared
      investment discretion with respect to the trust assets, and no beneficiary
      of the trust (and no settlor if the trust is revocable) is a U.S.
      person;

            

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    
      	
               
      

            	
              iv.

            	
              An
      employee benefit plan established and administered in accordance with the
      law of a country other than the United States and customary practices and
      documentation of such country;

            

    

    

    
      	
               
      

            	
              v.

            	
              Any
      agency or branch of a U.S. person located outside the United States
      if:

            

    

    
      
        	 	 	 
	
                 
      

              	
                A.

              	
                The
      agency or branch operates for valid business reasons;
  and

              

      

    

    
      
        	 	 	 
	
                 
      

              	
                B.

              	
                The
      agency or branch is engaged in the business of insurance or banking and is
      subject to substantive insurance or banking regulation, respectively, in
      the jurisdiction where located;
and

              

      

    

    

    
      	
               
      

            	
              vi.

            	
              The
      International Monetary Fund, the International Bank for Reconstruction and
      Development, the Inter-American Development Bank, the Asian Development
      Bank, the African Development Bank, the United Nations, and their
      agencies, affiliates and pension plans, and any other similar
      international organizations, their agencies, affiliates and pension
      plans.Unassociated Document

Exhibit 4.2

FOR NEGOTIATION AND

DISCUSSION PURPOSES ONLY

NOT AN OFFER OR SALE OF SECURITIES

 

Tri-Valley Corporation

 

Series B Warrant To Purchase Common Stock

 

Series B Warrant No.: B-___

Date of Issuance: _______, 2010 (“Issuance Date”)

 

Tri-Valley Corporation, a Delaware corporation (the “Company”), hereby certifies that, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, [______________], the registered holder hereof or its permitted assigns (the “Holder”), is entitled, subject to the terms set forth below, to purchase from the Company, at the Exercise Price (as defined below) then in effect, upon exercise of this Warrant to Purchase Common Stock (including any Warrants to Purchase Common Stock issued in exchange, transfer or replacement hereof, the “Warrant”), at any time or times on or after the  Issuance Date, but not after 11:59 p.m., New York time, on the Expiration Date (as defined below), [______________] (subject to adjustment as provided herein) fully paid and nonassessable shares of Common Stock (as defined below) (the “Warrant Shares”). This Warrant is one of the Warrants to Purchase Common Stock (the “Registered Warrants”) issued in accordance with (i) that certain Securities Purchase Agreement, dated as of April 6, 2010 (the “Subscription Date”), by and among the Company and the investors (the “Buyers”) referred to therein (the “Securities Purchase Agreement”) and (ii) that certain Warrant Agent Agreement, dated as of the Subscription Date (the “Warrant Agreement”), by and between the Company and Registrar and Transfer Company, as warrant agent (the “Warrant Agent”).  This certificate is a warrant certificate issued pursuant to the Warrant Agreement.  Except as otherwise defined herein, capitalized terms in this Warrant shall have the meanings set forth in Section 16.

 

1.           EXERCISE OF WARRANT.

 

(a)           Mechanics of Exercise. Subject to the terms and conditions hereof (including, without limitation, the limitations set forth in Section 1(f)), this Warrant may be exercised by the Holder on any day on or after the  Issuance Date, in whole or in part, by delivery (whether via facsimile or otherwise) of a written notice, in the form attached hereto as Exhibit A (the “Exercise Notice”), of the Holder’s election to exercise this Warrant. Within one (1) Trading Day following an exercise of this Warrant as aforesaid, the Holder shall deliver payment to the Company of an amount equal to the Exercise Price in effect on the date of such exercise multiplied by the number of Warrant Shares as to which this Warrant was so exercised (the “Aggregate Exercise Price”) in cash or via wire transfer of immediately available funds if the Holder did not notify the Company in such Exercise Notice that such exercise was made pursuant to a Cashless Exercise (as defined in Section 1(d)). The Holder shall not be required to deliver the original of this Warrant in order to effect an exercise hereunder. Execution and

 

  

  

  

delivery of an Exercise Notice with respect to less than all of the Warrant Shares shall have the same effect as cancellation of the original of this Warrant and issuance of a new Warrant evidencing the right to purchase the remaining number of Warrant Shares. Execution and delivery of an Exercise Notice for all of the then-remaining Warrant Shares shall have the same effect as cancellation of the original of this Warrant after delivery of the Warrant Shares in accordance with the terms hereof. On or before the first (1st) Trading Day following the date on which the Company has received an Exercise Notice, the Company shall transmit by facsimile an acknowledgment of confirmation of receipt of such Exercise Notice to the Holder, the Warrant Agent and the Company’s transfer agent (the “Transfer Agent”). On or before the third (3rd) Trading Day following the date on which the Company has received such Exercise Notice, the Company shall (X) provided that the Transfer Agent is participating in The Depository Trust Company (“DTC”) Fast Automated Securities Transfer Program, upon the request of the Holder, credit such aggregate number of shares of Common Stock to which the Holder is entitled pursuant to such exercise to the Holder’s or its designee’s balance account with DTC through its Deposit/ Withdrawal at Custodian system, or (Y) if the Transfer Agent is not participating in the DTC Fast Automated Securities Transfer Program, issue and deliver to the Holder or, at the Holder’s instruction pursuant to the Exercise Notice, the Holder’s agent or designee, in each case, sent by reputable overnight courier to the address as specified in the applicable Exercise Notice, a certificate, registered in the Company’s share register in the name of the Holder or its designee (as indicated in the applicable Exercise Notice), for the number of shares of Common Stock to which the Holder is entitled pursuant to such exercise. Upon delivery of an Exercise Notice, the Holder shall be deemed for all corporate purposes to have become the holder of record of the Warrant Shares with respect to which this Warrant has been exercised, irrespective of the date such Warrant Shares are credited to the Holder’s DTC account or the date of delivery of the certificates evidencing such Warrant Shares (as the case may be). If this Warrant is submitted in connection with any exercise pursuant to this Section 1(a) and the number of Warrant Shares represented by this Warrant submitted for exercise is greater than the number of Warrant Shares being acquired upon an exercise, then, at the request of the Holder, the Company shall as soon as practicable and in no event later than three (3) Business Days after any exercise and at its own expense, issue and deliver to the Holder (or its designee) a new Warrant (in accordance with Section 7(d)) representing the right to purchase the number of Warrant Shares purchasable immediately prior to such exercise under this Warrant, less the number of Warrant Shares with respect to which this Warrant is exercised. No fractional shares of Common Stock are to be issued upon the exercise of this Warrant, but rather the number of shares of Common Stock to be issued shall be rounded up to the nearest whole number. The Company shall pay any and all taxes which may be payable with respect to the issuance and delivery of Warrant Shares upon exercise of this Warrant.

 

(b)           Exercise Price. For purposes of this Warrant, “Exercise Price” means $2.14, subject to adjustment as provided herein.

 

(c)           Company’s Failure to Timely Deliver Securities. If the Company shall fail, for any reason or for no reason, to issue to the Holder within three (3) Trading Days after receipt of the applicable Exercise Notice, a certificate for the number of shares of Common Stock to which the Holder is entitled and register such shares of Common Stock on the Company’s share register or to credit the Holder’s balance account with DTC for such number of shares of Common Stock to which the Holder is entitled upon the Holder’s exercise of this Warrant (as the case may be) (a

 

2  

  

  

“Delivery Failure”), then, in addition to all other remedies available to the Holder, the Company shall pay in cash to the Holder on each day after such third (3rd) Trading Day that the issuance of such shares of Common Stock is not timely effected an amount equal to 1.5% of the product of (A) the aggregate number of shares of Common Stock not issued to the Holder on a timely basis and to which the Holder is entitled and (B) the Closing Sale Price of the Common Stock on the Trading Day immediately preceding the last possible date on which the Company could have issued such shares of Common Stock to the Holder without violating Section1(a). In addition to the foregoing, if within three (3) Trading Days after the Company’s receipt of the applicable Exercise Notice, the Company shall fail to issue and deliver a certificate to the Holder and register such shares of Common Stock on the Company’s share register or credit the Holder’s balance account with DTC for the number of shares of Common Stock to which the Holder is entitled upon the Holder’s exercise hereunder (as the case may be), and if on or after such third (3rd) Trading Day the Holder purchases (in an open market transaction or otherwise) shares of Common Stock to deliver in satisfaction of a sale by the Holder of shares of Common Stock issuable upon such exercise that the Holder anticipated receiving from the Company, then, in addition to all other remedies available to the Holder, the Company shall, within three (3) Business Days after the Holder’s request and in the Holder’s discretion, either (i) pay cash to the Holder in an amount equal to the Holder’s total purchase price (including brokerage commissions, if any) for the shares of Common Stock so purchased (the “Buy-In Price”), at which point the Company’s obligation to deliver such certificate or credit the Holder’s balance account with DTC for the number of shares of Common Stock to which the Holder is entitled upon the Holder’s exercise hereunder (as the case may be) (and to issue such shares of Common Stock) shall terminate, or (ii) promptly honor its obligation to deliver to the Holder a certificate or certificates representing such shares of Common Stock or credit the Holder’s balance account with DTC for the number of shares of Common Stock to which the Holder is entitled upon the Holder’s exercise hereunder (as the case may be) and pay cash to the Holder in an amount equal to the excess (if any) of the Buy-In Price over the product of (A) such number of shares of Common Stock times (B) the Closing Sale Price of the Common Stock on the Trading Day immediately preceding the date of the applicable Exercise Notice.

 

(d)           Cashless Exercise. Notwithstanding anything contained herein to the contrary (other than Section 1(f) below), if at the time of exercise hereof the Registration Statement (as defined in the Securities Purchase Agreement) is not effective (or the prospectus contained therein is not available for use) for the issuance by the Company to the Holder of all of the Warrant Shares, then the Holder may, in its sole discretion, exercise this Warrant in whole or in part and, in lieu of making the cash payment otherwise contemplated to be made to the Company upon such exercise in payment of the Aggregate Exercise Price, elect instead to receive upon such exercise the “Net Number” of shares of Common Stock determined according to the following formula (a “Cashless Exercise”):

 

Net Number = (A x B) - (A x C)

 

B

 

For purposes of the foregoing formula:

 

3  

  

  

A= the total number of shares with respect to which this Warrant is then being exercised.

 

B= as applicable: (i) the Closing Sale Price of the Common Stock on the Trading Day immediately preceding the date of the applicable Exercise Notice if such Exercise Notice is (1) both executed and delivered pursuant to Section 1(a) hereof on a day that is not a Trading Day or (2) both executed and delivered pursuant to Section 1(a) hereof on a Trading Day prior to the opening of “regular trading hours” (as defined in Rule 600(b)(64) of Regulation NMS promulgated under the federal securities laws) on such Trading Day, (ii) the Bid Price of the Common Stock as of the time of the Holder’s execution of the applicable Exercise Notice if such Exercise Notice is executed during “regular trading hours” on a Trading Day and is delivered within two (2) hours thereafter pursuant to Section 1(a) hereof and (iii) the Closing Sale Price of the Common Stock on the date of the applicable Exercise Notice if the date of such Exercise Notice is a Trading Day and such Exercise Notice is both executed and delivered pursuant to Section 1(a) hereof after the close of “regular trading hours” on such Trading Day.

 

	
  

	
C= the Exercise Price then in effect for the applicable Warrant Shares at the time of such exercise.

 

(e)           Disputes.  In the case of a dispute as to the determination of the Exercise Price or the arithmetic calculation of the number of Warrant Shares to be issued pursuant to the terms hereof, the Company shall promptly issue to the Holder the number of Warrant Shares that are not disputed and resolve such dispute in accordance with Section 13.

 

(f)           Limitations on Exercises.

 

(i)           Beneficial Ownership. Notwithstanding anything to the contrary contained in this Warrant, this Warrant shall not be exercisable by the Holder hereof to the extent (but only to the extent) that after giving effect to such exercise the Holder (together with its affiliates and joint actors) would beneficially own in excess of 4.99% (the “Maximum Percentage”) of the Common Stock. To the extent the above limitation applies, the determination of whether this Warrant shall be exercisable (vis-à-vis other convertible, exercisable or exchangeable securities owned by the Holder or any of its affiliates or any joint actors) and of which such securities this Warrant shall be exercisable (as among all such securities owned by the Holder) shall, subject to such Maximum Percentage limitation, be made on the basis of the first submission to the Company for conversion, exercise or exchange (as the case may be).  For purposes of the first sentence of this paragraph, the aggregate number of shares of Common Stock beneficially owned by such Person and its affiliates and joint actors shall include the number of shares of Common Stock issuable upon exercise of this Warrant with respect to which the determination of such sentence is being made, but shall exclude shares of Common Stock which would be issuable upon (i) exercise of the remaining, unexercised portion of this Warrant beneficially owned by such Person and its affiliates or joint actors and (ii) exercise or conversion of the unexercised or unconverted portion of any other securities of the Company beneficially owned by such Person and its affiliates or joint actors (including,

 

4  

  

  

without limitation, any convertible notes or convertible preferred shares or warrants), which in each case is subject to a limitation on conversion or exercise analogous to the limitation contained herein.  For the purposes of this paragraph, beneficial ownership and all determinations and calculations (including, without limitation, with respect to calculations of percentage ownership) shall be determined in accordance with Section 13(d) of the 1934 Act (as defined in the Securities Purchase Agreement) and the rules and regulations promulgated thereunder except as set forth in the preceding sentence. No prior inability to exercise this Warrant pursuant to this paragraph shall have any effect on the applicability of the provisions of this paragraph with respect to any subsequent determination of exercisability. The provisions of this paragraph shall be implemented in a manner otherwise than in strict conformity with the terms of this paragraph to correct this paragraph (or any portion hereof) which may be defective or inconsistent with the intended Maximum Percentage beneficial ownership limitation herein contained or to make changes or supplements necessary or desirable to properly give effect to such Maximum Percentage limitation. The limitations contained in this paragraph shall apply to a successor Holder of this Warrant. The holders of Common Stock shall be third party beneficiaries of this paragraph and the Company may not waive this paragraph without the consent of holders of a majority of its Common Stock. For any reason at any time, upon the written or oral request of the Holder, the Company shall within one (1) Business Day confirm orally and in writing to the Holder the number of shares of Common Stock then outstanding, including by virtue of any prior conversion or exercise of convertible or exercisable securities into Common Stock, including, without limitation, pursuant to this Warrant or securities issued pursuant to the Securities Purchase Agreement.  By written notice to the Company, any Holder may increase or decrease the Maximum Percentage to any other percentage not in excess of 9.99% specified in such notice; provided that (i) any such increase will not be effective until the 61st day after such notice is delivered to the Company, and (ii) any such increase or decrease will apply only to the Holder sending such notice and not to any other holder of Registered Warrants.

 

(ii)           Principal Market Regulation. The Company shall not issue any shares of Common Stock upon exercise of this Warrant if the issuance of such shares of Common Stock (together with any Common Shares (as defined in the Securities Purchase Agreement) issued pursuant to the Securities Purchase Agreement and any shares of Common Stock previously issued pursuant to any Registered Warrant) would exceed the aggregate number of shares of Common Stock which the Company may issue upon exercise of the Registered Warrants without breaching the Company’s obligations under the rules or regulations of the Principal Market (the number of shares which may be issued without violating such rules and regulations, the “Exchange Cap”), except that such limitation shall not apply in the event that the Company (A) obtains the approval of its stockholders as required by the applicable rules of the Principal Market for issuances of shares of Common Stock in excess of such amount or (B) obtains a written opinion from outside counsel to the Company that such approval is not required, which opinion shall be reasonably satisfactory to the Holder. Until such approval or such written opinion is obtained, the Company shall not issue to any Buyer in the aggregate, upon exercise of any Registered Warrants, shares of Common Stock (together with Common Shares issued to such Buyer pursuant to the Securities Purchase Agreement and any shares of Common Stock previously issued to such Buyer pursuant to any Registered Warrants) in an amount

 

5  

  

  

greater than the product of (i) the Exchange Cap as of the Issuance Date multiplied by (ii) the quotient of (1) the Purchase Price paid by such Buyer pursuant to the Securities Purchase Agreement divided by (2) the Purchase Price (as defined in the Securities Purchase Agreement) paid by all Buyers pursuant to the Securities Purchase Agreement (with respect to each Buyer, the “Exchange Cap Allocation”). In the event that any Buyer shall sell or otherwise transfer any of such Buyer’s Registered Warrants, the transferee shall be allocated a pro rata portion of such Buyer’s Exchange Cap Allocation with respect to such portion of such Registered Warrants so transferred, and the restrictions of the prior sentence shall apply to such transferee with respect to the portion of the Exchange Cap Allocation so allocated to such transferee. Upon exercise in full of a holder’s Registered Warrants, the difference (if any) between such holder’s Exchange Cap Allocation and the number of shares of Common Stock actually issued to such holder upon such holder's exercise in full of such Registered Warrants shall be allocated to the respective Exchange Cap Allocations of the remaining holders of Registered Warrants on a pro rata basis in proportion to the shares of Common Stock underlying the Registered Warrants then held by each such holder.

 

(g)           Insufficient Authorized Shares. The Company shall at all times keep reserved for issuance under this Warrant a number of shares of Common Stock at least equal to 150% of the maximum number of shares of Common Stock as shall be necessary to satisfy the Company’s obligation to issue shares of Common Stock hereunder (without regard to any limitation otherwise contained herein with respect to the number of shares of Common Stock that may be acquirable upon exercise of this Warrant). If, notwithstanding the foregoing, and not in limitation thereof, at any time while any of the Registered Warrants remain outstanding the Company does not have a sufficient number of authorized and unreserved shares of Common Stock to satisfy its obligation to reserve for issuance upon exercise of the Registered Warrants at least a number of shares of Common Stock (the “Required Reserve Amount”) equal to the number of shares of Common Stock as shall from time to time be necessary to effect the exercise of all of the Registered Warrants then outstanding (any such failure by the Company to reserve the Required Reserve Amount of Common Stock being an “Authorized Share Failure”), then the Company shall immediately take all action necessary to increase the Company’s authorized shares of Common Stock to an amount sufficient to allow the Company to reserve the Required Reserve Amount for all the Registered Warrants then outstanding. Without limiting the generality of the foregoing sentence, as soon as practicable after the date of the occurrence of an Authorized Share Failure, but in no event later than sixty (60) days after the occurrence of such Authorized Share Failure, the Company shall hold a meeting of its stockholders for the approval of an increase in the number of authorized shares of Common Stock. In connection with such meeting, the Company shall provide each stockholder with a proxy statement and shall use its best efforts to solicit its stockholders’ approval of such increase in authorized shares of Common Stock and to cause its board of directors to recommend to the stockholders that they approve such proposal.

 

2.           ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF WARRANT SHARES. The Exercise Price and number of Warrant Shares issuable upon exercise of this Warrant are subject to adjustment from time to time as set forth in this Section 2.

 

(a)           Stock Dividends and Splits. Without limiting any provision of Section 4, if the Company, at any time on or after the date of the Securities Purchase Agreement, (i) pays a stock

 

6  

  

  

dividend on one or more classes of its then outstanding shares of Common Stock or otherwise makes a distribution on any class of capital stock that is payable in shares of Common Stock, (ii) subdivides (by any stock split, stock dividend, recapitalization or otherwise) one or more classes of its then outstanding shares of Common Stock into a larger number of shares or (iii) combines (by combination, reverse stock split or otherwise) one or more classes of its then outstanding shares of Common Stock into a smaller number of shares, then in each such case the Exercise Price shall be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock outstanding immediately before such event and of which the denominator shall be the number of shares of Common Stock outstanding immediately after such event.  Any adjustment made pursuant to clause (i) of this paragraph shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution, and any adjustment pursuant to clause (ii) or (iii) of this paragraph shall become effective immediately after the effective date of such subdivision or combination. If any event requiring an adjustment under this paragraph occurs during the period that an Exercise Price is calculated hereunder, then the calculation of such Exercise Price shall be adjusted appropriately to reflect such event.

 

           (b)           Adjustment Upon Issuance of Shares of Common Stock. If and whenever on or after the date of the Securities Purchase Agreement, the Company issues or sells, or in accordance with this Section 2 is deemed to have issued or sold, any shares of Common Stock (including the issuance or sale of shares of Common Stock owned or held by or for the account of the Company, but excluding any Excluded Securities (as defined in the Securities Purchase Agreement) issued or sold or deemed to have been issued or sold) for a consideration per share (the “New Issuance Price”) less than a price equal to the Exercise Price in effect immediately prior to such issue or sale or deemed issuance or sale (such Exercise Price then in effect is referred to as the “Applicable Price”) (any such issuance or sale (or deemed issuance or sale in accordance with this Section 2) being a “Dilutive Issuance”), then immediately after such Dilutive Issuance, the Exercise Price then in effect shall be reduced to an amount equal to the New Issuance Price. For purposes of determining the adjusted Exercise Price under this Section 2(b), the following shall be applicable:

 

(i)           Issuance of Options.  If the Company in any manner grants or sells any Options and the lowest price per share for which one share of Common Stock is issuable upon the exercise of any such Option or upon conversion, exercise or exchange of any Convertible Securities issuable upon exercise of any such Option is less than the Applicable Price, then such share of Common Stock shall be deemed to be outstanding and to have been issued and sold by the Company at the time of the granting or sale of such Option for such price per share. For purposes of this Section 2(b)(i), the “lowest price per share for which one share of Common Stock is issuable upon the exercise of any such Options or upon conversion, exercise or exchange of any Convertible Securities issuable upon exercise of any such Option” shall be equal to the lower of (x) the exercise price set forth in such Option for which one share of Common Stock is issuable upon the exercise of any such Options or upon conversion, exercise or exchange of any Convertible Securities issuable upon exercise of any such Option and (y) the sum of the lowest amounts of consideration (if any) received or receivable by the Company with respect to any one share of Common Stock upon the granting or sale of such Option, upon exercise of such Option and upon conversion, exercise or exchange of any

 

7  

  

  

Convertible Security issuable upon exercise of such Option. Except as contemplated below, no further adjustment of the Exercise Price shall be made upon the actual issuance of such shares of Common Stock or of such Convertible Securities upon the exercise of any such Option or upon the actual issuance of such shares of Common Stock upon conversion, exercise or exchange of such Convertible Securities.  For clarification purposes and without limiting the foregoing, in calculating the “lowest price per share for which one share of Common Stock is issuable upon the exercise of any such Options or upon conversion, exercise or exchange of any Convertible Securities issuable upon exercise of any such Option” paid or payable to the Company pursuant to this Section 2(b), any amounts paid or payable to the holder of such Option (or any other Person) upon such conversion, exercise or exchange of such Option shall reduce the value of the consideration paid or payable to the Company in such conversion, exercise or exchange and/or, as the case may be, the value of any other consideration or benefit conferred.

 

          (ii)           Issuance of Convertible Securities.  If the Company in any manner issues or sells any Convertible Securities and the lowest price per share for which one share of Common Stock is issuable upon the conversion, exercise or exchange thereof is less than the Applicable Price, then such share of Common Stock shall be deemed to be outstanding and to have been issued and sold by the Company at the time of the issuance or sale of such Convertible Securities for such price per share.  For the purposes of this Section 2(b)(ii), the “lowest price per share for which one share of Common Stock is issuable upon the conversion, exercise or exchange thereof” shall be equal to the lower of (x) the conversion price set forth in such Convertible Security for which one share of Common Stock is issuable upon the conversion, exercise or exchange thereof and (y) the sum of the lowest amounts of consideration (if any) received or receivable by the Company with respect to one share of Common Stock upon the issuance or sale of such Convertible Security and upon conversion, exercise or exchange of such Convertible Security. Except as contemplated below, no further adjustment of the Exercise Price shall be made upon the actual issuance of such shares of Common Stock upon conversion, exercise or exchange of such Convertible Securities, and if any such issue or sale of such Convertible Securities is made upon exercise of any Options for which adjustment of this Warrant has been or is to be made pursuant to other provisions of this Section 2(b), except as contemplated below, no further adjustment of the Exercise Price shall be made by reason of such issue or sale.  For clarification purposes and without limiting the foregoing, in calculating the “lowest price per share for which one share of Common Stock is issuable upon the conversion, exercise or exchange thereof” paid or payable to the Company pursuant to this Section 2(b), any amounts paid or payable to the holder of such Convertible Security (or any other Person) upon conversion or exercise (as applicable) of such Convertible Security shall reduce the value of the consideration paid or payable to the Company in such conversion, exercise or exchange and/or, as the case may be, the value of any other consideration or benefit conferred.

 

             (iii)           Change in Option Price or Rate of Conversion. If the purchase or exercise price provided for in any Options, the additional consideration, if any, payable upon the issue, conversion, exercise or exchange of any Convertible Securities, or the rate at which any Convertible Securities are convertible into or exercisable or exchangeable for shares

 

8  

  

  

of Common Stock increases or decreases at any time, the Exercise Price in effect at the time of such increase or decrease shall be adjusted to the Exercise Price which would have been in effect at such time had such Options or Convertible Securities provided for such increased or decreased purchase price, additional consideration or increased or decreased conversion rate, as the case may be, at the time initially granted, issued or sold. For purposes of this Section 2(b)(iii), if the terms of any Option or Convertible Security that was outstanding as of the date of issuance of this Warrant are increased or decreased in the manner described in the immediately preceding sentence, then such Option or Convertible Security and the shares of Common Stock deemed issuable upon exercise, conversion or exchange thereof shall be deemed to have been issued as of the date of such increase or decrease. No adjustment pursuant to this Section 2(b) shall be made if such adjustment would result in an increase of the Exercise Price then in effect.

 

(iv)           Calculation of Consideration Received. If any Option or Convertible Security or Adjustment Right is issued in connection with the issuance or sale or deemed issuance or sale of any other securities of the Company, together comprising one integrated transaction, (x) such Option or Convertible Security (as applicable) or Adjustment Right (as applicable) will be deemed to have been issued for consideration equal to the Black Scholes Consideration Value thereof and (y) the other securities issued or sold or deemed to have been issued or sold in such integrated transaction shall be deemed to have been issued for consideration equal to the difference of (I) the aggregate consideration received or receivable by the Company minus (II) the Black Scholes Consideration Value of each such Option or Convertible Security (as applicable) or Adjustment Right (as applicable).  If any shares of Common Stock, Options or Convertible Securities are issued or sold or deemed to have been issued or sold for cash, the consideration received therefor will be deemed to be the net amount of consideration received by the Company therefor. If any shares of Common Stock, Options or Convertible Securities are issued or sold for a consideration other than cash, the amount of such consideration received by the Company will be the fair value of such consideration, except where such consideration consists of publicly traded securities, in which case the amount of consideration received by the Company and consisting of such securities will be, with respect to each such security, the arithmetic average of the VWAPs of such security for each of the five (5) Trading Days immediately preceding the date of receipt. If any shares of Common Stock, Options or Convertible Securities are issued to the owners of the non-surviving entity in connection with any merger in which the Company is the surviving entity, the amount of consideration therefor will be deemed to be the fair value of such portion of the net assets and business of the non-surviving entity as is attributable to such shares of Common Stock, Options or Convertible Securities, as the case may be. The fair value of any consideration other than cash or publicly traded securities will be determined jointly by the Company and the Holder. If such parties are unable to reach agreement within ten (10) days after the occurrence of an event requiring valuation through any such joint determination (the “Valuation Event”), the fair value of such consideration will be determined within five (5) Trading Days after the tenth (10th) day following such Valuation Event by an independent, reputable appraiser jointly selected by the Company and the Holder. The determination of such appraiser shall be final and binding upon all parties absent manifest error and the fees and expenses of such appraiser shall be borne by the Company.

 

9  

  

  

(v)           Record Date. If the Company takes a record of the holders of shares of Common Stock for the purpose of entitling them (A) to receive a dividend or other distribution payable in shares of Common Stock, Options or in Convertible Securities or (B) to subscribe for or purchase shares of Common Stock, Options or Convertible Securities, then such record date will be deemed to be the date of the issue or sale of the shares of Common Stock deemed to have been issued or sold upon the declaration of such dividend or the making of such other distribution or the date of the granting of such right of subscription or purchase (as the case may be).

 

(c)           Number of Warrant Shares. Simultaneously with any adjustment to the Exercise Price pursuant to  paragraphs (a), (b) or (d) of this Section 2, the number of Warrant Shares that may be purchased upon exercise of this Warrant shall be increased or decreased proportionately, so that after such adjustment the aggregate Exercise Price payable hereunder for the adjusted number of Warrant Shares shall be the same as the aggregate Exercise Price in effect immediately prior to such adjustment (without regard to any limitations on exercise contained herein).

 

           (d)           Holder's Right of Alternative Exercise Price Following Issuance of Certain Options or Convertible Securities.  Subject to Section 4(n) of the Securities Purchase Agreement, in addition to and not in limitation of the other provisions of this Section 2, if the Company in any manner issues or sells any Options or Convertible Securities (any such securities, "Variable Price Securities") after the Subscription Date that are convertible into or exchangeable or exercisable for shares of Common Stock at a price which varies or may vary with the market price of the Common Shares, including by way of one or more reset(s) to a fixed price, but exclusive of such formulations reflecting customary anti-dilution provisions (such as share splits, share combinations, share dividends and similar transactions) (each of the formulations for such variable price being herein referred to as, the "Variable Price"), the Company shall provide written notice thereof via facsimile and overnight courier to the Holder on the date of issuance of such Convertible Securities or Options.  Subject to Section 4(n) of the Securities Purchase Agreement, from and after the date the Company issues any such Convertible Securities or Options with a Variable Price, the Holder shall have the right, but not the obligation, in its sole discretion to substitute the Variable Price for the Exercise Price upon Exercise of this Warrant by designating in the Exercise Notice delivered upon any Exercise of this Warrant that solely for purposes of such Exercise the Holder is relying on the Variable Price rather than the Exercise Price then in effect.  The Holder's election to rely on a Variable Price for a particular Exercise of this Warrant shall not obligate the Holder to rely on a Variable Price for any future Exercises of this Warrant.

 

(e)           Other Events. In the event that the Company (or any Subsidiary thereof) shall take any action to which the provisions hereof are not strictly applicable, or, if applicable, would not operate to protect the Holder from dilution or if any event occurs of the type contemplated by the provisions of this Section 2 but not expressly provided for by such provisions (including, without limitation, the granting of stock appreciation rights, phantom stock rights or other rights with equity features), then the Company’s board of directors shall in good faith determine and implement an appropriate adjustment in the Exercise Price and the number of Warrant Shares (if applicable) so as to protect the rights of the Holder, provided that no such adjustment pursuant to this Section 2(d) will increase the Exercise Price or decrease the number of Warrant Shares as

 

10  

  

  

otherwise determined pursuant to this Section 2, provided further that if the Holder does not accept such adjustments as appropriately protecting its interests hereunder against such dilution, then the Company’s board of directors and the Holder shall agree, in good faith, upon an independent investment bank of nationally recognized standing to make such appropriate adjustments, whose determination shall be final and binding and whose fees and expenses shall be borne by the Company.

 

(f)           Calculations. All calculations under this Section 2 shall be made by rounding to the nearest cent or the nearest 1/100th of a share, as applicable. The number of shares of Common Stock outstanding at any given time shall not include shares owned or held by or for the account of the Company, and the disposition of any such shares shall be considered an issue or sale of Common Stock.

 

3.           RIGHTS UPON DISTRIBUTION OF ASSETS. In addition to any adjustments pursuant to Section 2 above, if the Company shall declare or make any dividend or other distribution of its assets (or rights to acquire its assets) to holders of shares of Common Stock, by way of return of capital or otherwise (including, without limitation, any distribution of cash, stock or other securities, property or options by way of a dividend, spin off, reclassification, corporate rearrangement, scheme of arrangement or other similar transaction) (a “Distribution”), at any time after the issuance of this Warrant, then, in each such case, the Holder shall be entitled to participate in such Distribution to the same extent that the Holder would have participated therein if the Holder had held the number of shares of Common Stock acquirable upon complete exercise of this Warrant (without regard to any limitations on exercise hereof, including without limitation, the Maximum Percentage) immediately before the date on which a record is taken for such Distribution, or, if no such record is taken, the date as of which the record holders of shares of Common Stock are to be determined for the participation in such Distribution (provided, however, to the extent that the Holder’s right to participate in any such Distributions would result in the Holder exceeding the Maximum Percentage, then the Holder shall not be entitled to participate in such Distribution to such extent (or in the beneficial ownership of any such shares of Common Stock as a result of such Distribution to such extent) and such Distribution to such extent shall be held in abeyance for the benefit of the Holder until such time, if ever, as its right thereto would not result in the Holder exceeding the Maximum Percentage).

 

4.           PURCHASE RIGHTS; FUNDAMENTAL TRANSACTIONS.

 

(a)                 Purchase Rights.  In addition to any adjustments pursuant to Section 2 above, if at any time the Company grants, issues or sells any Options, Convertible Securities or rights to purchase stock, warrants, securities or other property pro rata to the record holders of any class of shares of Common Stock (the “Purchase Rights”), then the Holder will be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which the Holder could have acquired if the Holder had held the number of shares of Common Stock acquirable upon complete exercise of this Warrant (without regard to any limitations on exercise hereof, including without limitation, the Maximum Percentage) immediately before the date on which a record is taken for the grant, issuance or sale of such Purchase Rights, or, if no such record is taken, the date as of which the record holders of shares of Common Stock are to be determined for the grant, issue or sale of such Purchase Rights (provided, however, that to the extent that the Holder’s right to participate in any such Purchase Right would result in the Holder

 

11  

  

  

exceeding the Maximum Percentage, then the Holder shall not be entitled to participate in such Purchase Right to such extent (or beneficial ownership of such shares of Common Stock as a result of such Purchase Right to such extent) and such Purchase Right to such extent shall be held in abeyance for the Holder until such time, if ever, as its right thereto would not result in the Holder exceeding the Maximum Percentage).

 

(b)                 Fundamental Transactions.  The Company shall not enter into or be party to a Fundamental Transaction unless (i)  the Successor Entity assumes in writing all of the obligations of the Company under this Warrant and the other Transaction Documents (as defined in the Securities Purchase Agreement) in accordance with the provisions of this Section 4(b) pursuant to written agreements in form and substance satisfactory to the Holder and approved by the Holder prior to such Fundamental Transaction, including agreements to deliver to the Holder in exchange for this Warrant a security of the Successor Entity evidenced by a written instrument substantially similar in form and substance to this Warrant, including, without limitation, which is exercisable for a corresponding number of shares of capital stock equivalent to the shares of Common Stock acquirable and receivable upon exercise of this Warrant (without regard to any limitations on the exercise of this Warrant) prior to such Fundamental Transaction, and with an exercise price which applies the exercise price hereunder to such shares of capital stock (but taking into account the relative value of the shares of Common Stock pursuant to such Fundamental Transaction and the value of such shares of capital stock, such adjustments to the number of shares of capital stock and such exercise price being for the purpose of protecting the economic value of this Warrant immediately prior to the consummation of such Fundamental Transaction) and (ii) the Successor Entity (including its Parent Entity) is a publicly traded corporation whose common stock is quoted on or listed for trading on an Eligible Market. Upon the consummation of each Fundamental Transaction, the Successor Entity shall succeed to, and be substituted for (so that from and after the date of the applicable Fundamental Transaction, the provisions of this Warrant and the other Transaction Documents referring to the “Company” shall refer instead to the Successor Entity), and may exercise every right and power of the Company and shall assume all of the obligations of the Company under this Warrant and the other Transaction Documents with the same effect as if such Successor Entity had been named as the Company herein. Upon consummation of each Fundamental Transaction, the Successor Entity shall deliver to the Holder confirmation that there shall be issued upon exercise of this Warrant at any time after the consummation of the applicable Fundamental Transaction, in lieu of the shares of Common Stock (or other securities, cash, assets or other property (except such items still issuable under Sections 3 and 4(a) above, which shall continue to be receivable thereafter)) issuable upon the exercise of this Warrant prior to the applicable Fundamental Transaction, such shares of publicly traded common stock (or its equivalent) of the Successor Entity (including its Parent Entity) which the Holder would have been entitled to receive upon the happening of the applicable Fundamental Transaction had this Warrant been exercised immediately prior to the applicable Fundamental Transaction (without regard to any limitations on the exercise of this Warrant), as adjusted in accordance with the provisions of this Warrant. Notwithstanding the foregoing, and without limiting Section 9 hereof, the Holder may elect, at its sole option, by delivery of written notice to the Company to waive this Section 4(b) to permit the Fundamental Transaction without the assumption of this Warrant.  In addition to and not in substitution for any other rights hereunder, prior to the consummation of each Fundamental Transaction pursuant to which holders of shares of Common Stock are entitled to receive securities or other assets with respect to or in exchange for shares of Common Stock (a

 

12  

  

  

“Corporate Event”), the Company shall make appropriate provision to insure that the Holder will thereafter have the right to receive upon an exercise of this Warrant at any time after the consummation of the applicable Fundamental Transaction but prior to the Expiration Date, in lieu of the shares of the Common Stock (or other securities, cash, assets or other property (except such items still issuable under Sections 3 and 4(a) above, which shall continue to be receivable thereafter)) issuable upon the exercise of the Warrant prior to such Fundamental Transaction, such shares of stock, securities, cash, assets or any other property whatsoever (including warrants or other purchase or subscription rights) which the Holder would have been entitled to receive upon the happening of the applicable Fundamental Transaction had this Warrant been exercised immediately prior to the applicable Fundamental Transaction (without regard to any limitations on the exercise of this Warrant). Provision made pursuant to the preceding sentence shall be in a form and substance reasonably satisfactory to the Holder.

 

(c)           Black Scholes Value. Notwithstanding the foregoing and the provisions of Section 4(b) above, in the event of a Fundamental Transaction , if the Holder has not exercised this Warrant in full prior to the consummation of such Fundamental Transaction, at the request of the Holder delivered before the ninetieth (90th) day after the consummation of such Fundamental Transaction, the Company or the Successor Entity (as the case may be) shall purchase this Warrant from the Holder on the date of such request by paying to the Holder cash in an amount equal to the Black Scholes Value of the unexercised portion of this Warrant that remained on the date of the consummation of such Fundamental Transaction.

 

(d)           Application. The provisions of this Section 4 shall apply similarly and equally to successive Fundamental Transactions and Corporate Events and shall be applied as if this Warrant (and any such subsequent warrants) were fully exercisable and without regard to any limitations on the exercise of this Warrant (provided that the Holder shall continue to be entitled to the benefit of the Maximum Percentage, applied however with respect to shares of capital stock registered under the 1934 Act and thereafter receivable upon exercise of this Warrant (or any such other warrant)).

 

5.           NONCIRCUMVENTION. The Company hereby covenants and agrees that the Company will not, by amendment of its Articles of Incorporation (as defined in the Securities Purchase Agreement), Bylaws (as defined in the Securities Purchase Agreement) or through any reorganization, transfer of assets, consolidation, merger, scheme of arrangement, dissolution, issue or sale of securities, or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, and will at all times in good faith carry out all the provisions of this Warrant and take all action as may be required to protect the rights of the Holder. Without limiting the generality of the foregoing, the Company (i) shall not increase the par value of any shares of Common Stock receivable upon the exercise of this Warrant above the Exercise Price then in effect, (ii) shall take all such actions as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable shares of Common Stock upon the exercise of this Warrant, and (iii) shall, so long as any of the Registered Warrants are outstanding, take all action necessary to reserve and keep available out of its authorized and unissued shares of Common Stock, solely for the purpose of effecting the exercise of the Registered Warrants, the maximum number of shares of Common Stock as shall from time to time be necessary to effect the exercise of the Registered Warrants then outstanding (without regard to any limitations on exercise).

 

13  

  

  

6.           WARRANT HOLDER NOT DEEMED A STOCKHOLDER. Except as otherwise specifically provided herein, the Holder, solely in its capacity as a holder of this Warrant, shall not be entitled to vote or receive dividends or be deemed the holder of share capital of the Company for any purpose, nor shall anything contained in this Warrant be construed to confer upon the Holder, solely in its capacity as the Holder of this Warrant, any of the rights of a stockholder of the Company or any right to vote, give or withhold consent to any corporate action (whether any reorganization, issue of stock, reclassification of stock, consolidation, merger, conveyance or otherwise), receive notice of meetings, receive dividends or subscription rights, or otherwise, prior to the issuance to the Holder of the Warrant Shares which it is then entitled to receive upon the due exercise of this Warrant.  In addition, nothing contained in this Warrant shall be construed as imposing any liabilities on the Holder to purchase any securities (upon exercise of this Warrant or otherwise) or as a stockholder of the Company, whether such liabilities are asserted by the Company or by creditors of the Company. Notwithstanding this Section 6, the Company shall provide the Holder with copies of the same notices and other information given to the stockholders of the Company generally, contemporaneously with the giving thereof to the stockholders.

 

7.           REISSUANCE OF WARRANTS.

 

(a)           Transfer of Warrant. If this Warrant is to be transferred, the Holder shall surrender this Warrant to the Company, whereupon the Company will forthwith issue and deliver upon the order of the Holder a new Warrant (in accordance with Section 7(d)), registered as the Holder may request, representing the right to purchase the number of Warrant Shares being transferred by the Holder and, if less than the total number of Warrant Shares then underlying this Warrant is being transferred, a new Warrant (in accordance with Section 7(d)) to the Holder representing the right to purchase the number of Warrant Shares not being transferred.

 

(b)           Lost, Stolen or Mutilated Warrant. Upon receipt by the Company of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant (as to which a written certification and the indemnification contemplated below shall suffice as such evidence), and, in the case of loss, theft or destruction, of any indemnification undertaking by the Holder to the Company in customary and reasonable form and, in the case of mutilation, upon surrender and cancellation of this Warrant, the Company shall execute and deliver to the Holder a new Warrant (in accordance with Section 7(d)) representing the right to purchase the Warrant Shares then underlying this Warrant.

 

(c)           Exchangeable for Multiple Warrants. This Warrant is exchangeable, upon the surrender hereof by the Holder at the principal office of the Company, for a new Warrant or Warrants (in accordance with Section 7(d)) representing in the aggregate the right to purchase the number of Warrant Shares then underlying this Warrant, and each such new Warrant will represent the right to purchase such portion of such Warrant Shares as is designated by the Holder at the time of such surrender; provided, however, no warrants for fractional shares of Common Stock shall be given.

 

(d)           Issuance of New Warrants. Whenever the Company is required to issue a new Warrant pursuant to the terms of this Warrant, such new Warrant (i) shall be of like tenor with this Warrant, (ii) shall represent, as indicated on the face of such new Warrant, the right to

 

14  

  

  

purchase the Warrant Shares then underlying this Warrant (or in the case of a new Warrant being issued pursuant to Section 7(a) or Section 7(c), the Warrant Shares designated by the Holder which, when added to the number of shares of Common Stock underlying the other new Warrants issued in connection with such issuance, does not exceed the number of Warrant Shares then underlying this Warrant), (iii) shall have an issuance date, as indicated on the face of such new Warrant which is the same as the Issuance Date, and (iv) shall have the same rights and conditions as this Warrant.

 

8.           NOTICES.  Whenever notice is required to be given under this Warrant, unless otherwise provided herein, such notice shall be given in accordance with Section 9(f) of the Securities Purchase Agreement. The Company shall provide the Holder with prompt written notice of all actions taken pursuant to this Warrant, including in reasonable detail a description of such action and the reason therefor. Without limiting the generality of the foregoing, the Company will give written notice to the Holder (i) immediately upon each adjustment of the Exercise Price and the number of Warrant Shares, setting forth in reasonable detail, and certifying, the calculation of such adjustment(s) and (ii) at least fifteen (15) days prior to the date on which the Company closes its books or takes a record (A) with respect to any dividend or distribution upon the shares of Common Stock, (B) with respect to any grants, issuances or sales of any Options, Convertible Securities or rights to purchase stock, warrants, securities or other property to holders of shares of Common Stock or (C) for determining rights to vote with respect to any Fundamental Transaction, dissolution or liquidation, provided in each case that such information shall be made known to the public prior to or in conjunction with such notice being provided to the Holder and (iii) at least ten (10) Trading Days prior to the consummation of any Fundamental Transaction.  To the extent that any notice provided hereunder constitutes, or contains, material, non-public information regarding the Company or any of its subsidiaries, the Company shall simultaneously file such notice with the SEC (as defined in the Securities Purchase Agreement) pursuant to a Current Report on Form 8-K. It is expressly understood and agreed that the time of execution specified by the Holder in each Exercise Notice shall be definitive and may not be disputed or challenged by the Company.

 

9.           AMENDMENT AND WAIVER.  Except as otherwise provided herein, the provisions of this Warrant (other than Section 1(f)(i)) may be amended and the Company may take any action herein prohibited, or omit to perform any act herein required to be performed by it, only if the Company has obtained the written consent of the Holder. The Holder shall be entitled, at its option, to the benefit of any amendment of (i) any other similar warrant issued under the Securities Purchase Agreement or (ii) any other similar warrant. No waiver shall be effective unless it is in writing and signed by an authorized representative of the waiving party.

 

10.           SEVERABILITY.  If any provision of this Warrant is prohibited by law or otherwise determined to be invalid or unenforceable by a court of competent jurisdiction, the provision that would otherwise be prohibited, invalid or unenforceable shall be deemed amended to apply to the broadest extent that it would be valid and enforceable, and the invalidity or unenforceability of such provision shall not affect the validity of the remaining provisions of this Warrant so long as this Warrant as so modified continues to express, without material change, the original intentions of the parties as to the subject matter hereof and the prohibited nature, invalidity or unenforceability of the provision(s) in question does not substantially impair the respective expectations or reciprocal obligations of the parties or the practical realization of the benefits that

 

15  

  

  

would otherwise be conferred upon the parties. The parties will endeavor in good faith negotiations to replace the prohibited, invalid or unenforceable provision(s) with a valid provision(s), the effect of which comes as close as possible to that of the prohibited, invalid or unenforceable provision(s).

 

11.           GOVERNING LAW. This Warrant shall be governed by and construed and enforced in accordance with, and all questions concerning the construction, validity, interpretation and performance of this Warrant shall be governed by, the internal laws of the State of New York, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of New York or any other jurisdictions) that would cause the application of the laws of any jurisdictions other than the State of New York.

 

12.           CONSTRUCTION; HEADINGS. This Warrant shall be deemed to be jointly drafted by the Company and the Holder and shall not be construed against any Person as the drafter hereof.  The headings of this Warrant are for convenience of reference and shall not form part of, or affect the interpretation of, this Warrant. Terms used in this Warrant but defined in the other Transaction Documents shall have the meanings ascribed to such terms on the Closing Date (as defined in the Securities Purchase Agreement) in such other Transaction Documents unless otherwise consented to in writing by the Holder.

 

13.           DISPUTE RESOLUTION. In the case of a dispute as to the determination of the Exercise Price, the Closing Sale Price, the Bid Price or fair market value or the arithmetic calculation of the number of Warrant Shares (as the case may be), the Company or the Holder (as the case may be) shall submit the disputed determinations or arithmetic calculations (as the case may be) via facsimile (i) within two (2) Business Days after receipt of the applicable notice giving rise to such dispute to the Company or the Holder (as the case may be) or (ii) if no notice gave rise to such dispute, at any time after the Holder learned of the circumstances giving rise to such dispute (including, without limitation, as to whether any issuance or sale or deemed issuance or sale was an issuance or sale or deemed issuance or sale of Excluded Securities). If the Holder and the Company are unable to agree upon such determination or calculation (as the case may be) of the Exercise Price, the Closing Sale Price, the Bid Price or fair market value or the number of Warrant Shares (as the case may be) within three (3) Business Days of such disputed determination or arithmetic calculation being submitted to the Company or the Holder (as the case may be), then the Company shall, within two (2) Business Days submit via facsimile (a) the disputed determination of the Exercise Price, the Closing Sale Price, the Bid Price or fair market value (as the case may be) to an independent, reputable investment bank selected by the Company and approved by the Holder or (b) the disputed arithmetic calculation of the number of Warrant Shares to the Company’s independent, outside accountant. The Company shall cause at its expense the investment bank or the accountant (as the case may be) to perform the determinations or calculations (as the case may be) and notify the Company and the Holder of the results no later than ten (10) Business Days from the time it receives such disputed determinations or calculations (as the case may be). Such investment bank’s or accountant’s determination or calculation (as the case may be) shall be binding upon all parties absent demonstrable error.

 

14.           REMEDIES, CHARACTERIZATION, OTHER OBLIGATIONS, BREACHES AND INJUNCTIVE RELIEF. The remedies provided in this Warrant shall be cumulative and in

 

16  

  

  

addition to all other remedies available under this Warrant and the other Transaction Documents, at law or in equity (including a decree of specific performance and/or other injunctive relief), and nothing herein shall limit the right of the Holder to pursue actual damages for any failure by the Company to comply with the terms of this Warrant. The Company covenants to the Holder that there shall be no characterization concerning this instrument other than as expressly provided herein. Amounts set forth or provided for herein with respect to payments, exercises and the like (and the computation thereof) shall be the amounts to be received by the Holder and shall not, except as expressly provided herein, be subject to any other obligation of the Company (or the performance thereof). The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Holder and that the remedy at law for any such breach may be inadequate. The Company therefore agrees that, in the event of any such breach or threatened breach, the holder of this Warrant shall be entitled, in addition to all other available remedies, to an injunction restraining any breach, without the necessity of showing economic loss and without any bond or other security being required. The Company shall provide all information and documentation to the Holder that is requested by the Holder to enable the Holder to confirm the Company’s compliance with the terms and conditions of this Warrant (including, without limitation, compliance with Section 2 hereof). The issuance of shares and certificates for shares as contemplated hereby upon the exercise of this Warrant shall be made without charge to the Holder or such shares for any issuance tax or other costs in respect thereof, provided that the Company shall not be required to pay any tax which may be payable in respect of any transfer involved in the issuance and delivery of any certificate in a name other than the Holder or its agent on its behalf.

 

15.           TRANSFER. This Warrant may be offered for sale, sold, transferred or assigned without the consent of the Company.

 

16.           CERTAIN DEFINITIONS.  For purposes of this Warrant, the following terms shall have the following meanings:

 

(a)           “Adjustment Right” means any right granted with respect to any securities issued in connection with, or with respect to, any issuance or sale (or deemed issuance or sale in accordance with Section 2) of shares of Common Stock (other than rights of the type described in Section 3 an 4 hereof) that could result in a decrease in the net consideration received by the Company in connection with, or with respect to, such securities (including, without limitation, any cash settlement rights, cash adjustment or other similar rights).

 

(b)           “Bid Price” means, for any security as of the particular time of determination, the bid price for such security on the Principal Market as reported by Bloomberg as of such time of determination, or, if the Principal Market is not the principal securities exchange or trading market for such security, the bid price of such security on the principal securities exchange or trading market where such security is listed or traded as reported by Bloomberg as of such time of determination, or if the foregoing does not apply, the bid price of such security in the over-the-counter market on the electronic bulletin board for such security as reported by Bloomberg as of such time of determination, or, if no bid price is reported for such security by Bloomberg as of such time of determination, the average of the bid prices of any market makers for such security as reported in the “pink sheets” by Pink Sheets LLC (formerly the National Quotation Bureau, Inc.) as of such time of determination. If the Bid Price cannot be calculated for a security as of

 

17  

  

  

the particular time of determination on any of the foregoing bases, the Bid Price of such security as of such time of determination shall be the fair market value as mutually determined by the Company and the Holder. If the Company and the Holder are unable to agree upon the fair market value of such security, then such dispute shall be resolved in accordance with the procedures in Section 13. All such determinations shall be appropriately adjusted for any stock dividend, stock split, stock combination or other similar transaction during such period.

 

           (c)           “Black Scholes Consideration Value” means the value of the applicable Option or Convertible Security (as the case may be) based on the Black Scholes Option Pricing Model obtained from the “OV” function on Bloomberg determined as of the close of business on the Trading Day immediately following the public announcement of the execution of definitive documents with respect to the issuance of such Option or Convertible Security (as the case may be) and reflecting (i) a risk-free interest rate corresponding to the U.S. Treasury rate for a period equal to the remaining term of such Option or Convertible Security (as the case may be) as of the date of issuance of such Option or Convertible Security (as the case may be), (ii) an expected volatility equal to the greater of 100% and the 100 day volatility obtained from the HVT function on Bloomberg (using 360 as the input for the annualization factor and the Rogers-Satchell volatility estimator model) and (iii) the underlying price per share used in such calculation shall be the highest Closing Bid Price for any Trading Day during the ten (10) Trading Day period ending on and including the Trading Day immediately preceding the public announcement of the execution of definitive documents with respect to the issuance of such Option or Convertible Security (as the case may be).

 

(d)           “Black Scholes Value” means the value of this Warrant based on the Black Scholes Option Pricing Model obtained from the “OV” function on Bloomberg determined as of the day of consummation of the applicable Fundamental Transaction for pricing purposes and reflecting (i) a risk-free interest rate corresponding to the U.S. Treasury rate for a period equal to the remaining term of this Warrant as of the date of the Holder’s request pursuant to Section 4(c), (ii) an expected volatility equal to the greater of 100% and the 100 day volatility obtained from the HVT function on Bloomberg as of the Trading Day immediately following the public announcement of the applicable Fundamental Transaction (using 360 as the input for the annualization factor and the Rogers-Satchell volatility estimator model) and, if applicable, (iii) the underlying price per share used in such calculation shall be the sum of the price per share being offered in cash, if any, plus the value of any non-cash consideration, if any, being offered in the applicable Fundamental Transaction.

 

(e)           “Bloomberg” means Bloomberg, L.P.

 

(f)           “Business Day” means any day other than Saturday, Sunday or other day on which commercial banks in The City of New York are authorized or required by law to remain closed.

 

(g)           “Closing Bid Price” and “Closing Sale Price” means, for any security as of any date, the last closing bid price and last closing trade price, respectively, for such security on the Principal Market on such date, as reported by Bloomberg, or, if the Principal Market begins to operate on an extended hours basis and does not designate the closing bid price or the closing trade price (as the case may be) of such security on such date then the last bid price or last trade

 

18  

  

  

price, respectively, of such security prior to 4:00:00 p.m., New York time, on such date as reported by Bloomberg, or, if the Principal Market is not the principal securities exchange or trading market for such security, the last closing bid price or last trade price, respectively, of such security on such date on the principal securities exchange or trading market where such security is listed or traded as reported by Bloomberg, or if the foregoing do not apply, the last closing bid price or last trade price, respectively, of such security on such date in the over-the-counter market on the electronic bulletin board for such security as reported by Bloomberg, or, if no closing bid price or last trade price, respectively, is reported for such security by Bloomberg on such date, the average of the bid prices, or the ask prices, respectively, of any market makers for such security as reported in the “pink sheets” by Pink Sheets LLC (formerly the National Quotation Bureau, Inc.). If the Closing Bid Price or the Closing Sale Price cannot be calculated for a security on a particular date on any of the foregoing bases, the Closing Bid Price or the Closing Sale Price (as the case may be) of such security on such date shall be the fair market value as mutually determined by the Company and the Holder.  If the Company and the Holder are unable to agree upon the fair market value of such security on any date, then such dispute shall be resolved in accordance with the procedures set forth in Section 13. All such determinations shall be appropriately adjusted for any stock dividend, stock split, stock combination or other similar transaction during such period.

 

(h)           “Common Stock” means (i) the Company’s shares of common stock, $0.001 par value per share, and (ii) any capital stock into which such common stock shall have been changed or any share capital resulting from a reclassification of such common stock.

 

(i)           “Convertible Securities” means any stock or other security (other than Options) that is at any time and under any circumstances, directly or indirectly, convertible into, exercisable or exchangeable for, or which otherwise entitles the holder thereof to acquire, any shares of Common Stock.

 

(j)           “Eligible Market” means The New York Stock Exchange, the Nasdaq Global Select Market, the Nasdaq Capital Market, Nasdaq Global Market or the Principal Market.

 

(k)           “Expiration Date” means the date that is the seventh (7th) anniversary of the Issuance Date or, if such date falls on a day other than a Business Day or on which trading does not take place on the Principal Market (a “Holiday”), the next date that is not a Holiday.

 

(l)           “Fundamental Transaction” means that (i) the Company or any of its Subsidiaries shall, directly or indirectly, in one or more related transactions, (1) consolidate or merge with or into (whether or not the Company or any of its Subsidiaries is the surviving corporation) any other Person, or (2) sell, lease, license, assign, transfer, convey or otherwise dispose of all or substantially all of its respective properties or assets to any other Person, or (3) allow any other Person to make a purchase, tender or exchange offer that is accepted by the holders of more than 50% of the outstanding shares of Voting Stock of the Company (not including any shares of Voting Stock of the Company held by the Person or Persons making or party to, or associated or affiliated with the Persons making or party to, such purchase, tender or exchange offer), or (4) consummate a stock or share purchase agreement or other business combination (including, without limitation, a reorganization, recapitalization, spin-off or scheme of arrangement) with any other Person whereby such other Person acquires more than 50% of the

 

19  

  

  

outstanding shares of Voting Stock of the Company (not including any shares of Voting Stock of the Company held by the other Person or other Persons making or party to, or associated or affiliated with the other Persons making or party to, such stock or share purchase agreement or other business combination), or (5) reorganize, recapitalize or reclassify the Common Stock, or (ii) any “person” or “group” (as these terms are used for purposes of Sections 13(d) and 14(d) of the 1934 Act and the rules and regulations promulgated thereunder) is or shall become the “beneficial owner” (as defined in Rule 13d-3 under the 1934 Act), directly or indirectly, of 50% of the aggregate ordinary voting power represented by issued and outstanding Voting Stock of the Company.

 

(m)           “Initial Holder” means the Buyer that initially purchased this Warrant pursuant to the Securities Purchase Agreement.

 

(n)           “Options” means any rights, warrants or options to subscribe for or purchase shares of Common Stock or Convertible Securities.

 

(o)           “Parent Entity” of a Person means an entity that, directly or indirectly, controls the applicable Person and whose common stock or equivalent equity security is quoted or listed on an Eligible Market, or, if there is more than one such Person or Parent Entity, the Person or Parent Entity with the largest public market capitalization as of the date of consummation of the Fundamental Transaction.

 

(p)           “Person” means an individual, a limited liability company, a partnership, a joint venture, a corporation, a trust, an unincorporated organization, any other entity or a government or any department or agency thereof.

 

(q)           “Principal Market” means the NYSE Amex LLC.

 

(r)           “Successor Entity” means the Person (or, if so elected by the Holder, the Parent Entity) formed by, resulting from or surviving any Fundamental Transaction or the Person (or, if so elected by the Holder, the Parent Entity) with which such Fundamental Transaction shall have been entered into.

 

(s)           “Trading Day” means any day on which the Common Stock is traded on the Principal Market, or, if the Principal Market is not the principal trading market for the Common Stock, then on the principal securities exchange or securities market on which the Common Stock is then traded, provided that “Trading Day” shall not include any day on which the Common Stock is scheduled to trade on such exchange or market for less than 4.5 hours or any day that the Common Stock is suspended from trading during the final hour of trading on such exchange or market (or if such exchange or market does not designate in advance the closing time of trading on such exchange or market, then during the hour ending at 4:00:00 p.m., New York time) unless such day is otherwise designated as a Trading Day in writing by the Holder.

 

(t)           “Voting Stock” of a Person means capital stock of such Person of the class or classes pursuant to which the holders thereof have the general voting power to elect, or the general power to appoint, at least a majority of the board of directors, managers or trustees of such Person (irrespective of whether or not at the time capital stock of any other class or classes shall have or might have voting power by reason of the happening of any contingency).

 

20  

  

  

(u)           “VWAP” means, for any security as of any date, the dollar volume-weighted average price for such security on the Principal Market (or, if the Principal Market is not the principal trading market for such security, then on the principal securities exchange or securities market on which such security is then traded) during the period beginning at 9:30:01 a.m., New York time, and ending at 4:00:00 p.m., New York time, as reported by Bloomberg through its “Volume at Price” function or, if the foregoing does not apply, the dollar volume-weighted average price of such security in the over-the-counter market on the electronic bulletin board for such security during the period beginning at 9:30:01 a.m., New York time, and ending at 4:00:00 p.m., New York time, as reported by Bloomberg, or, if no dollar volume-weighted average price is reported for such security by Bloomberg for such hours, the average of the highest closing bid price and the lowest closing ask price of any of the market makers for such security as reported in the “pink sheets” by Pink Sheets LLC (formerly the National Quotation Bureau, Inc.). If VWAP cannot be calculated for such security on such date on any of the foregoing bases, the VWAP of such security on such date shall be the fair market value as mutually determined by the Company and the Holder. If the Company and the Holder are unable to agree upon the fair market value of such security, then such dispute shall be resolved in accordance with the procedures in Section 13. All such determinations shall be appropriately adjusted for any stock dividend, stock split, stock combination or other similar transaction during such period.

 

[signature page follows]

 

21  

  

  

IN WITNESS WHEREOF, the Company has caused this Warrant to Purchase Common Stock to be duly executed as of the Issuance Date set out above.

 

	
  

	
Tri-Valley Corporation

 

	
  

	
By:

	 

	
  

	
Name:

	
  

	
Title:

 

 

WARRANT CERTIFICATE

 

AUTHENTICATION

 

 

REGISTRAR & TRANSFER COMPANY,

 

     AS WARRANT AGENT

 

	
By:

	 

	
  

	
Name:

	
  

	
Title:

  

  

  

EXHIBIT A

 

EXERCISE NOTICE

TO BE EXECUTED BY THE REGISTERED HOLDER TO EXERCISE THIS

WARRANT TO PURCHASE COMMON STOCK

 

TRI-VALLEY CORPORATION

 

The undersigned holder hereby exercises the right to purchase _________________ of the shares of Common Stock (“Warrant Shares”) of Tri-Valley Corporation, a Delaware corporation (the “Company”), evidenced by Series [A][B][C][D] Warrant No.  _______ (the “Warrant”). Capitalized terms used herein and not otherwise defined shall have the respective meanings set forth in the Warrant.

 

1.           Form of Exercise Price.  The Holder intends that payment of the Exercise Price shall be made as:

 

	
  

	
____________

	
a “Cash Exercise” with respect to _________________ Warrant Shares; and/or

 

	
  

	
____________

	
a “Cashless Exercise” with respect to _______________ Warrant Shares.

 

In the event that the Holder has elected a Cashless Exercise with respect to some or all of the Warrant Shares to be issued pursuant hereto, the Holder hereby represents and warrants that (i) this Exercise Notice was executed by the Holder at __________ [a.m.][p.m.] on the date set forth below and (ii) if applicable, the Bid Price as of such time of execution of this Exercise Notice was $________.

 

2.           Payment of Exercise Price. In the event that the Holder has elected a Cash Exercise with respect to some or all of the Warrant Shares to be issued pursuant hereto, the Holder shall pay the Aggregate Exercise Price in the sum of $___________________ to the Company in accordance with the terms of the Warrant.

 

3.           Delivery of Warrant Shares.  The Company shall deliver to Holder, or its designee or agent as specified below, __________ Warrant Shares in accordance with the terms of the Warrant.  Delivery shall be made to Holder, or for its benefit, to the following address:

 

_______________________

_______________________

_______________________

_______________________

 

Date: _______________ __, ______

 

   Name of Registered Holder

 

By:           

Name:

Title:

 

  

  

  

ACKNOWLEDGMENT

 

The Company hereby acknowledges this Exercise Notice and hereby directs ______________ to issue the above indicated number of shares of Common Stock in accordance with the Transfer Agent Instructions dated March __, 2010, from the Company and acknowledged and agreed to by _______________.

 

	
  

	
Tri-Valley Corporation

 

	
  

	
By:

	 

	
  

	
Name:

	
  

	
Title:

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00171-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00171-of-00352.parquet"}]]