Document:

exv10w5

 

EAGLE TEST SYSTEMS, INC.

2007 MANAGEMENT BONUS PLAN

	I.	 	PURPOSE

     The purpose of the Eagle Test Systems, Inc. 2007 Management Bonus Plan (the “Plan”) is to
provide to executive officers and other key employees of Eagle Test Systems, Inc. (the “Company”)
competitive compensation opportunities that are aligned with and promote the overall financial
objectives of the Company and its stockholders. In addition to base salary and long-term equity
awards, this will be accomplished through incentives payable in the form of cash bonuses designed
to reward executive officers and other key employees of the Company for the financial and
operational success of the Company.

	II.	 	AGGREGATE BONUS POOL

     The aggregate bonus pool allocable to executive officers and other key employees of the
Company is based the achievement of certain levels of fiscal 2007 operating income. At various
levels of operating income a specified percentage of operating income is allocated to the bonus
pool. The table below illustrates the amount allocable to the bonus pool at specific levels of
operating income. At levels of operating income between those specified below, the amount
allocated to the bonus pool shall be calculated by multiplying the level of operating income by a
specified percentage at each level.

	 	 	 
	Post-Bonus Operating Income
	 	Amount of Bonus Pool
	Less than $19,200,000
	 	-0-
	$20,300,000
	 	$790,000
	$22,600,000
	 	$1,180,000
	$33,900,000
	 	$1,610,000
	$45,200,000
	 	$1,900,000
	$56,500,000
	 	$2,170,000

	III.	 	BONUS POOL PARTICIPANTS

     The following table sets forth the executive officers of the Company that are eligible to
participate in the Plan, along with the percentage of the bonus pool that the participant is
eligible to receive upon the achievement of the financial performance goals of the Company and the
individual performance goals of the participant. Additional executive officers and key employees
shall be eligible to participate in the Plan upon the recommendation of the Chief Executive Officer
and the approval of the Compensation Committee, and shall share in the remaining percentage of the
bonus pool.

 

 

	 	 	 
	Participant
	 	Percentage of Bonus Pool
	Chief Executive Officer 

Chief Operating Officer 

Chief Financial Officer 

Chief Technical Officer 

Other Key Employees
	 	30%

21%

7%

6%

36%

	IV.	 	PERFORMANCE MEASUREMENT AND WEIGHTING

     For all participants in the Plan, bonus awards under the plan shall be tied to the
financial performance goals of the Company (50% of bonus weighting) and the individual performance
goals of the executive officers or other key employees of the Company (50% of bonus weighting).
The portion of the bonus tied to the individual performance goals shall be based on the evaluation
and recommendation of the Chief Executive Officer and approval of the Compensation Committee. The
Compensation Committee shall evaluate and approve the portion of the bonus tied to the individual
performance goals of the Chief Executive Officer.

	V.	 	MISCELLANEOUS

     The Compensation Committee and/or Board of Directors retain the right to amend, alter, or
terminate this Plan at any time. All decisions made by the Compensation Committee and/or Board of
Directors regarding administration and interpretation of the Plan shall be final and binding on all
persons, including the Company and the participants.exv10w1

 

Exhibit 10.1

2007 Executive

Annual Incentive Plan

The performance goals for 2007 are based on the 2007 business plan approved by the Board of
Directors. These goals reflect the Board of Directors’ and CEO’s expectations for performance and
accountability of the leadership team.

For 2007, the weighting of the financial measures is:

	 	•	 	EPS: 40%
	 
	 	 	 	The definition of Earnings Per Share (“EPS”) is net income divided by the number of shares
outstanding. EPS is the most common way that public companies are measured.
	 
	 	•	 	EBITDA: 20%
	 
	 	 	 	Earnings before interest, taxes, depreciation, and amortization (“EBITDA”) is a commonly
used measure of cash flow from operations. Cash flow is critical to our Company in order
for us to meet our debt covenants, make capital investments, and pay the interest on and
pay down our debt. Depreciation and amortization are expenses of the business that relate
to past investments (i.e., the purchase of barges). Therefore, to determine how much cash
is available, we add these expenses back to our operating earnings.
	 
	 	•	 	EBITDA Stretch Goal: 10%
	 
	 	 	 	Same as above except the EBITDA stretch goal must be achieved to receive any payout for the
measure. Any achievement above target will paid at the same level achieved by the other two
(EPS and EBITDA) financial measures.

For 2007, the weighting of the Business Goals is:

	 	•	 	Safety: 10%
	 
	 	 	 	It is critical that we continue to provide a safe environment for all employees. Safety
will be measured by the incident rate which is defined as the number of recordable Injuries
× 200,000 divided by the number of employee hours worked.
	 
	 	•	 	Stationary Days Reduction: 10%
	 
	 	 	 	The organization as a whole must focus on the reduction of stationary days. The reduction
of these days will provide significant financial gain for the Company.
	 
	 	•	 	SG&A % to Revenue: 5%
	 
	 	 	 	This expense category is disclosed in the Company financial statements and will be measured
as a percent of total revenue. It represents our need to be more efficient and to improve
our profit margins.

American Commercial Lines Inc.

 

 

	 	•	 	Working Capital: 5%
	 
	 	 	 	By managing our working capital, we generate cash to help pay down debt and pay for
investments. Working capital is measured by adding accounts receivable and inventory, minus
accounts payable, and then divided by revenue.

Plan Administration

Eligibility Criteria

	 	•	 	Full-time salaried executive employees in grades 16 – 20 approved by the Compensation
Committee.
	 
	 	•	 	Hire date on or before September 30, 2007.
	 
	 	•	 	Employed by ACL or one of its subsidiaries at time the incentive awards are paid.
	 
	 	•	 	Individual performance rated at a satisfactory level or higher.

Award Opportunities

Each performance measure has a corresponding percentage of the target award opportunity. Some
incentive can still be earned if you are close to, but fall short of the goals. Also, higher
incentives may be earned if goals are exceeded. Therefore, if actual performance falls between any
of the defined levels, the award opportunities will be calculated proportionately.

	 	•	 	Minimum performance (80% attainment) pays 50% of the target opportunity.
	 
	 	•	 	Target performance (100% attainment) pays 100% of target opportunity.
	 
	 	•	 	Superior performance (120% attainment) pays 150% of the target opportunity.

Award Calculations

The awards will be calculated based on the following formula:

2007 Base Salary Earnings × Target Award Opportunity × Performance Score for Each Goal

Actual base salary earnings are defined as only the base compensation earned from January 1 through
December 31. In other words, your AIP payout will be prorated based on your actual salary earnings
for the year. The overall performance score is determined by taking the achievement levels of the
financial and business objectives multiplied by their weighting and added together.

Timing of Payment

Earned disbursement of the 2007 bonus amounts will occur after the 2007 financial results have been
tabulated, Ernst &Young LLP has finished their audit and the Audit Committee has signed-off on the
results of the audit; estimated to be early February, 2008. Also, all payments must be approved in
advance by the Compensation Committee of the Board of Directors. In all events, bonus amounts will
be paid no later than December 31, 2008 with respect to the 2007 bonus program.

American Commercial Lines Inc.

 

 

Administration

The Compensation Committee of the Board of Directors has the full power, authority and discretion
to construe, interpret and administer this bonus program. The Compensation Committee may delegate
this authority to any appropriate person or persons and such delegates shall have all the powers
the Compensation Committee would have if it had acted itself. As a condition of eligibility to
participate in this bonus program, a participant must accept that all determinations of the
Compensation Committee or any of its delegates will be final, conclusive and binding.

Amendment

The Compensation Committee, in its sole discretion, may, at any time with or without notice, amend,
modify, suspend or terminate this bonus program, including the right to suspend or eliminate some
or all payments under this bonus program at any time.

Assignment

Payments under this bonus program may not be assigned or alienated.

Applicable Law

This document shall be governed by the laws of the State of Indiana.

No Employment Rights

Nothing contained in this bonus program shall be construed as a contract of employment between ACL
or its subsidiaries and a participant or as a right of any participant to be continued in the
employment of ACL or its subsidiaries, or as a limitation of the right of ACL or its subsidiaries
to discharge any of its employees with or without cause.

American Commercial Lines Inc.Ex-4.1

 

EXHIBIT
4.1

CAPSTONE TURBINE CORPORATION

WARRANT

	 	 	 
	Warrant No. ___

	 	Original Issue Date: January 24, 2007

CAPSTONE TURBINE CORPORATION, a Delaware corporation (the “Company”), hereby certifies
that, for value received, ___ or its permitted registered assigns (the “Holder”),
is entitled to purchase from the Company up to a total of
___ shares of common stock, $0.001 par
value (the “Common Stock”), of the Company (each such share, a “Warrant Share” and
all such shares, the “Warrant
Shares”) at an exercise price equal to $1.30 per share (as
adjusted from time to time as provided herein, the “Exercise Price”), at any time and from
time to time on or after the date hereof (the “Original Issue Date”) and through and
including January 23, 2012 (the “Expiration Date”), and subject to the following terms and
conditions:

     This
Warrant is being issued pursuant to that certain Subscription Agreement, dated January 18, 2007, by and between the Company and the Purchaser identified therein (the “Purchase
Agreement”). The original issuance of the Warrant by the Company pursuant to the Purchase
Agreement has been registered pursuant to a Registration Statement on Form S-3 (File No.
333-128164) (the “Registration Statement”).

     1. Definitions. In addition to the terms defined elsewhere in this Warrant,
capitalized terms that are not otherwise defined herein have the meanings given to such terms in
the Purchase Agreement.

     2. List of Warrant Holders. The Company shall register this Warrant, upon records to
be maintained by the Company for that purpose (the “Warrant Register”), in the name of the
record Holder (which shall include the initial Holder or, as the case may be, any registered
assignee to which this Warrant is permissibly assigned hereunder from time to time). The Company
may deem and treat the registered Holder of this Warrant as the absolute owner hereof for the
purpose of any exercise hereof or any distribution to the Holder, and for all other purposes,
absent actual notice to the contrary.

     3. List of Transfers; Restrictions on Transfer. The Company shall register any such
transfer of all or any portion of this Warrant in the Warrant Register, upon surrender of this
Warrant, with the Form of Assignment attached hereto duly completed and signed, to the Company at
its address specified herein.

 

 

Upon any such
registration or transfer, a new Warrant to purchase Common Stock, in substantially the form of this Warrant (any such new
Warrant, a “New Warrant”), evidencing the portion of this Warrant so transferred shall be
issued to the transferee and a New Warrant evidencing the remaining portion of this Warrant not so
transferred, if any, shall be issued to the transferring Holder. The acceptance of the New Warrant
by the transferee thereof shall be deemed the acceptance by such transferee of all of the rights
and obligations in respect of the New Warrant that the Holder has in respect of this Warrant.

     4. Exercise and Duration of Warrant.

     (a) All or any part of this Warrant shall be exercisable by the registered Holder in any
manner permitted by Section 10 of this Warrant at any time and from time to time on or after the
Original Issue Date and through and including the Expiration Date. Subject to Section 11 hereof, at
5:00 p.m., New York City time, on the Expiration Date, the portion of this Warrant not exercised
prior thereto shall be and become void and of no value and this Warrant shall be terminated and no
longer outstanding. In addition, if cashless exercise would be permitted under Section 10(b) of
this Warrant, then all or part of this Warrant may be exercised by the registered Holder utilizing
such cashless exercise provisions at any time, or from time to time, on or after the Original Issue
Date and through and including the Expiration Date.

     (b) The Holder may exercise this Warrant by delivering to the Company (i) an exercise notice,
in the form attached hereto (the “Exercise Notice”), completed and duly signed, and (ii) if
such Holder is not utilizing the cashless exercise provisions set forth in this Warrant, payment of
the Exercise Price for the number of Warrant Shares as to which this Warrant is being exercised.
The date such items are delivered to the Company (as determined in accordance with the notice
provisions hereof) is an “Exercise Date.” The Holder shall not be required to deliver the original
Warrant in order to effect an exercise hereunder. Execution and delivery of the Exercise Notice
shall have the same effect as cancellation of the original Warrant and issuance of a New Warrant
evidencing the right to purchase the remaining number of Warrant Shares.

     5. Delivery of Warrant Shares.

     (a) Upon exercise of this Warrant, the Company shall promptly (but in no event later than
three Trading Days after the Exercise Date) issue or cause to be issued and cause to be delivered
to or upon the written order of the Holder and in such name or names
as the Holder may designate, a certificate for the Warrant Shares
issuable upon such exercise, free of restrictive legends.

 

 

The Holder, or any Person permissibly so designated by the Holder
to receive Warrant Shares, shall be deemed to have become the holder of record of such Warrant
Shares as of the Exercise Date. The Company shall, upon the written request of the Holder, use its best efforts to deliver, or
cause to be delivered, Warrant Shares hereunder electronically through the Depository Trust and
Clearing Corporation or another established clearing corporation performing similar functions, if
available; provided, that, the Company may, but will not be required to, change its transfer agent
if its current transfer agent cannot deliver Warrant Shares electronically through the Depository
Trust and Clearing Corporation.

     (b) If by the close of the third Trading Day after delivery of an Exercise Notice and the
payment of the aggregate exercise price, the Company fails to deliver to the Holder a certificate
representing the required number of Warrant Shares in the manner required pursuant to Section 5(a),
and if after such third Trading Day and prior to the receipt of such Warrant Shares, 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 the Warrant Shares which the Holder anticipated receiving
upon such exercise (a “Buy-In”), then the Company shall, within three Trading Days after
the Holder’s request and in the Holder’s sole discretion, either (i) pay in cash to the Holder an
amount equal to the Holder’s total purchase price (including brokerage commissions, if any) for the
shares of Common Stock so purchased (the “Buy-In Price”), at which point the Company’s
obligation to deliver such certificate (and to issue such Warrant Shares) shall terminate or (ii)
promptly honor its obligation to deliver to the Holder a certificate or certificates representing
such Warrant Shares 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 Warrant Shares, times (B) the closing bid price
on the date of the event giving rise to the Company’s obligation to deliver such certificate.

     (c) To the extent permitted by law, the Company’s obligations to issue and deliver Warrant
Shares in accordance with the terms hereof are absolute and unconditional, irrespective of any
action or inaction by the Holder to enforce the same, any waiver or consent with respect to any
provision hereof, the recovery of any judgment against any Person or any action to enforce the
same, or any setoff, counterclaim, recoupment, limitation or termination, or any breach or alleged
breach by the Holder or any other Person of any obligation to the Company or any violation or
alleged violation of law by the Holder or any other Person, and irrespective of any other
circumstance that might otherwise limit such obligation of the Company to the Holder in connection
with the issuance of Warrant Shares. Nothing herein shall limit a Holder’s right to pursue any

 

 

other remedies available to it hereunder, at law or in equity including, without limitation,
a decree of specific performance and/or injunctive relief with respect to the Company’s
failure to timely deliver certificates representing shares of Common Stock upon exercise of the
Warrant as required pursuant to the terms hereof.

     6. Charges, Taxes and Expenses. Issuance and delivery of certificates for shares of
Common Stock upon exercise of this Warrant shall be made without charge to the Holder for any issue
or transfer tax, withholding tax, transfer agent fee or other incidental tax or expense in respect
of the issuance of such certificates, all of which taxes and expenses shall be paid by the Company;
provided, however, that the Company shall not be required to pay any tax that may be payable in
respect of any transfer involved in the registration of any certificates for Warrant Shares or the
Warrants in a name other than that of the Holder. The Holder shall be responsible for all other tax
liability that may arise as a result of holding or transferring this Warrant or receiving Warrant
Shares upon exercise hereof.

     7. Replacement of Warrant. If this Warrant is mutilated, lost, stolen or destroyed,
the Company shall issue or cause to be issued in exchange and substitution for and upon
cancellation hereof, or in lieu of and substitution for this Warrant, a New Warrant, but only upon
receipt of evidence reasonably satisfactory to the Company of such loss, theft or destruction and
customary and reasonable indemnity (which shall not include a surety bond), if requested.
Applicants for a New Warrant under such circumstances shall also comply with such other reasonable
regulations and procedures and pay such other reasonable third-party costs as the Company may
prescribe. If a New Warrant is requested as a result of a mutilation of this Warrant, then the
Holder shall deliver such mutilated Warrant to the Company as a condition precedent to the
Company’s obligation to issue the New Warrant.

     8. Reservation of Warrant Shares. The Company covenants that it will at all times
reserve and keep available out of the aggregate of its authorized but unissued and otherwise
unreserved Common Stock, solely for the purpose of enabling it to issue Warrant Shares upon
exercise of this Warrant as herein provided, the number of Warrant Shares that are then issuable
and deliverable upon the exercise of this entire Warrant, free from preemptive rights or any other
contingent purchase rights of persons other than the Holder (taking into account the adjustments
and restrictions of Section 9). The Company covenants that all Warrant Shares so issuable and
deliverable shall, upon issuance and the payment of the applicable Exercise Price in accordance
with the terms hereof, be duly and validly authorized, issued and fully paid and nonassessable.

     9. Certain Adjustments. 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
9.

     (a) Stock Dividends and Splits. If the Company, at any time while this Warrant is
outstanding, (i) pays a stock dividend on its Common Stock or otherwise makes a distribution on any
class of capital stock that is payable in shares of Common Stock, (ii) subdivides outstanding
shares of Common Stock into a larger number of

 

 

shares, or (iii) combines 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.

     (b) Pro Rata Distributions. If the Company, at any time while this Warrant is
outstanding, distributes to all holders of Common Stock for no consideration (i) evidences of its
indebtedness, (ii) any security (other than a distribution of Common Stock covered by the preceding
paragraph), (iii) rights or warrants to subscribe for or purchase any security, or (iv) any other
asset (in each case, “Distributed Property”), then, upon any exercise of this Warrant that
occurs after the record date fixed for determination of stockholders entitled to receive such
distribution, the Holder shall be entitled to receive, in addition to the Warrant Shares otherwise
issuable upon such exercise (if applicable), the Distributed Property that such Holder would have
been entitled to receive in respect of such number of Warrant Shares had the Holder been the record
holder of such Warrant Shares immediately prior to such record date.

     (c) Fundamental Transactions. If, at any time while this Warrant is outstanding (i)
the Company effects any merger or consolidation of the Company with or into another Person, in
which the shareholders of the Company immediately prior to the transaction own less than a majority
of the outstanding stock of the surviving entity, (ii) the Company effects any sale of all or
substantially all of its assets in one or a series of related transactions, (iii) any tender offer
or exchange offer approved or authorized by our Board of Directors is completed pursuant to which
holders of Common Stock are permitted to tender or exchange their shares for other securities, cash
or property, or (iv) the Company effects any reclassification of the Common Stock or any compulsory
share exchange pursuant to which the Common Stock is effectively converted into or exchanged for
other securities, cash or property (each, a “Fundamental Transaction”), then the Holder
shall have the right thereafter to receive, upon exercise of this Warrant, the same amount and kind
of securities, cash or property as it would have been entitled to receive upon the occurrence of
such Fundamental Transaction if it had been, immediately prior to such Fundamental Transaction, the
holder of the number of Warrant Shares then issuable upon exercise in full of this Warrant (the
“Alternate Consideration”). The Company shall not effect any such Fundamental Transaction
unless prior to or simultaneously with the consummation thereof, any successor to the Company,
surviving entity or the corporation purchasing or otherwise acquiring such assets or other
appropriate corporation or entity shall assume the obligation to deliver to the Holder, such
Alternate Consideration as, in accordance with the foregoing provisions, the Holder may be entitled
to purchase, and the other obligations under this Warrant. The provisions of this paragraph (c)
shall similarly apply to subsequent transactions analogous to a Fundamental Transaction.

 

 

     (d) Number of Warrant Shares. Simultaneously with any adjustment to the Exercise Price
pursuant to paragraph (a) of this Section 9, 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.

     (e) Subsequent Equity Sales.

     (i) Except as provided in subsection (e)(iii) hereof, if and whenever the Company shall issue
or sell, or is, in accordance with any of subsections (e)(ii)(l) through (e)(ii)(4) hereof, deemed
to have issued or sold, any shares of Common Stock for no consideration or for a consideration per
share less than the Exercise Price in effect immediately prior to the time of such issue or sale,
then and in each such case (a “Trigger Issuance”) the then-existing Exercise Price shall be
reduced, as of the close of business on the effective date of the Trigger Issuance, to a price
determined as follows:

     Adjusted Exercise Price = (A x B) + D

A+C

where

     “A” equals the number of shares of Common Stock outstanding, including Additional Shares of
Common Stock (as defined below) deemed to be issued hereunder, immediately preceding such Trigger
Issuance;

     “B” equals the Exercise Price in effect immediately preceding such Trigger Issuance;

     “C” equals the number of Additional Shares of Common Stock issued or deemed issued hereunder
as a result of the Trigger Issuance; and

     “D” equals the aggregate consideration, if any, received or deemed to be received by the
Company upon such Trigger Issuance;

provided, however, that in no event shall the Exercise Price after giving effect to such Trigger
Issuance be greater than the Exercise Price immediately prior to such Trigger Issuance.

For purposes of this subsection (e), “Additional Shares of Common Stock” shall mean all
shares of Common Stock issued by the Company or deemed to be issued pursuant to this subsection
(e), other than Excluded Issuances (as defined in subsection (e)(iii) hereof).

     (ii) For purposes of this subsection 9(e), the following subsections (e)(ii)(l) to (e)(ii)(4)
shall also be applicable:

 

 

     (1) Issuance of Rights or Options. In case at any time the Company shall in any manner
grant (directly and not by assumption in a merger or otherwise) any warrants or other rights to
subscribe for or to purchase, or any options for the purchase of, Common Stock or any stock or
security convertible into or exchangeable for Common Stock (such warrants, rights or options being
called “Options” and such convertible or exchangeable stock or securities being called
“Convertible Securities”), whether or not such Options or the right to convert or exchange
any such Convertible Securities are immediately exercisable, and the price per share for which
Common Stock is issuable upon the exercise of such Options or upon the conversion or exchange of
such Convertible Securities (determined by dividing (i) the sum (which sum shall constitute the
applicable consideration) of (x) the total amount, if any, received or receivable by the Company as
consideration for the granting of such Options, plus (y) the aggregate amount of additional
consideration payable to the Company upon the exercise of all such Options, plus (z), in the case
of such Options that relate to Convertible Securities, the aggregate amount of additional
consideration, if any, payable upon the issue or sale of such Convertible Securities and upon the
conversion or exchange thereof, by (ii) the total maximum number of shares of Common Stock issuable
upon the exercise of such Options or upon the conversion or exchange of all such Convertible
Securities issuable upon the exercise of such Options) shall be less than the Exercise Price in
effect immediately prior to the time of the granting of such Options, then the total number of
shares of Common Stock issuable upon the exercise of such Options or upon conversion or exchange of
the total amount of such Convertible Securities issuable upon the exercise of such Options shall be
deemed to have been issued for such price per share as of the date of granting of such Options or
the issuance of such Convertible Securities and thereafter shall be deemed to be outstanding for
purposes of adjusting the Exercise Price. Except as otherwise provided in subsection 9(e)(ii)(3),
no adjustment of the Exercise Price shall be made upon the actual issue of such Common Stock or of
such Convertible Securities upon exercise of such Options or upon the actual issue of such Common
Stock upon conversion or exchange of such Convertible Securities.

     (2) Issuance of Convertible Securities. In case the Company shall in any manner issue
(directly and not by assumption in a merger or otherwise) or sell any Convertible Securities,
whether or not the rights to exchange or convert any such Convertible Securities are immediately
exercisable, and the price per share for which Common Stock is issuable upon such conversion or
exchange (determined by dividing (i) the sum (which sum shall constitute the applicable
consideration) of (x) the total amount received or receivable by the Company as consideration for
the issue or sale of such Convertible Securities, plus (y) the aggregate amount of additional
consideration, if any, payable to the Company upon the conversion or exchange thereof, by (ii) the
total number of shares of Common Stock issuable upon the conversion or exchange of all such
Convertible Securities) shall be less than the Exercise Price in effect immediately prior to the
time of such issue or sale, then the total maximum number of shares of Common Stock issuable upon
conversion or exchange of all such Convertible Securities shall be deemed to have been issued for
such price per share as of the date of the issue or sale of such Convertible Securities and
thereafter shall be deemed to be outstanding for purposes of adjusting the Exercise Price, provided
that

 

 

(a) except as otherwise provided in subsection 9(e)(ii)(3), no adjustment of the Exercise
Price shall be made upon the actual issuance of such Common Stock upon conversion or exchange of
such Convertible Securities and (b) no further adjustment of the Exercise Price shall be made by
reason of the issue or sale of Convertible Securities upon exercise of any Options to purchase any
such Convertible Securities for which adjustments of the Exercise Price have been made pursuant to
the other provisions of subsection 9(e).

     (3) Change in Option Price or Conversion Rate. Upon the happening of any of the
following events, namely, if the purchase price provided for in any Option referred to in
subsection 9(e)(ii)(l) hereof, the additional consideration, if any, payable upon the conversion or
exchange of any Convertible Securities referred to in subsections 9(e)(ii)(l) or 9(e)(ii)(2), or
the rate at which Convertible Securities referred to in subsections 9(e)(ii)(l) or 9(e)(ii)(2) are
convertible into or exchangeable for Common Stock shall change at any time (including, but not
limited to, changes under or by reason of provisions designed to protect against dilution), the
Exercise Price in effect at the time of such event shall forthwith be readjusted to the Exercise
Price that would have been in effect at such time had such Options or Convertible Securities still
outstanding provided for such changed purchase price, additional consideration or conversion rate,
as the case may be, at the time initially granted, issued or sold. On the termination of any Option
for which any adjustment was made pursuant to this subsection 9(e) or any right to convert or
exchange Convertible Securities for which any adjustment was made pursuant to this subsection 9(e)
(including without limitation upon the redemption or purchase for consideration of such Convertible
Securities by the Company), the Exercise Price then in effect hereunder shall forthwith be changed
to the Exercise Price that would have been in effect at the time of such termination had such
Option or Convertible Securities, to the extent outstanding immediately prior to such termination,
never been issued.

     (4) Consideration for Stock. In case any shares of Common Stock, Options or
Convertible Securities shall be issued or sold for cash, the consideration received therefor shall
be deemed to be the gross amount received by the Company therefor. In case any shares of Common
Stock, Options or Convertible Securities shall be issued or sold for a consideration other than
cash, the amount of the consideration other than cash received by the Company shall be deemed to be
the fair value of such consideration as determined in good faith by the Board of Directors of the
Company. In case any Options shall be issued in connection with the issue and sale of other
securities of the Company, together comprising one integral transaction in which no specific
consideration is allocated to such Options by the parties thereto, such Options shall be deemed to
have been issued for such consideration as determined in good faith by the Board of Directors of
the Company. If Common Stock, Options or Convertible Securities shall be issued or sold by the
Company and, in connection therewith, other Options or Convertible Securities (the “Additional
Rights”) are issued, then the consideration received or deemed to be received by the Company
shall be reduced by the fair market value of the Additional Rights (as determined using the
Black-Scholes option pricing model or another method mutually agreed to by the Company and the
Holder). The Board of Directors of the Company shall respond promptly, in writing, to an inquiry by
the Holders as to the fair market value of the Additional Rights. In the event that the

 

 

Board of Directors of the Company and the Holder are unable to agree upon the fair market
value of the Additional Rights, the Company and the Holder shall jointly select an appraiser, who
is experienced in such matters. The decision of such appraiser shall be final and conclusive, and
the cost of such appraiser shall be borne evenly by the Company and the Holder.

     (iii) Notwithstanding the foregoing, no adjustment will be made under this paragraph (e) in
respect of: (i) the issuance of securities upon the exercise or conversion of any Common Stock or
Common Stock Equivalents issued by the Company prior to the date hereof, (ii) the grant of options,
warrants, Common Stock or other Common Stock Equivalents (but not
including any amendments to such instruments) under any duly authorized Company stock
option, restricted stock plan or stock purchase plan, whether now existing or hereafter approved by
the Company and its stockholders, and the issuance of Common Stock in respect thereof, (iii) the
issuance of securities in connection with a Strategic Transaction, (iv) the issuance of securities
to vendors, or (v) the issuance of securities in a transaction described in Section 9(a) or 9(b).
For purposes of this paragraph, a “Strategic Transaction” means a transaction or
relationship in which (1) the Company issues shares of Common Stock to a Person that the Board of
Directors of the Company determined in good faith is, itself or through its Subsidiaries, an
operating company in a business synergistic with the business of the Company (or a shareholder
thereof) and (2) the Company expects to receive benefits in addition to the investment of funds,
but shall not include (x) a transaction in which the Company is issuing securities primarily for
the purpose of raising capital or to a Person whose primary business is investing in securities or
(y) issuances to lenders. 

     (iv) Upon any adjustment to the Exercise Price pursuant to Section 9(e)(i) above, the number
of Warrant Shares purchasable hereunder shall be adjusted by multiplying such number by a fraction,
the numerator of which shall be the Exercise Price in effect immediately prior to such adjustment
and the denominator of which shall be the Exercise Price in effect immediately thereafter. This
provision shall not restrict the number of shares of Common Stock that a Holder may receive or
beneficially own in order to determine the amount of securities or other consideration that such
Holder may receive in the event of a transaction contemplated by Section 9 of this Warrant.
Notwithstanding any other provisions in this Section 9 to the contrary, if a reduction in the
Exercise Price pursuant to Section 9(e)(i) would require the Company to obtain stockholder approval
of the transactions contemplated by the Purchase Agreement pursuant to Nasdaq Marketplace Rule
4350(i) and such stockholder approval has not been obtained, (i) the Exercise Price shall be
reduced to the maximum extent that would not require stockholder approval under such Rule, and (ii)
the Company shall use its commercially reasonable efforts to obtain such stockholder approval as
soon as reasonably practicable, including by calling a special meeting of stockholders to vote on
such Exercise Price adjustment.

     (f) Calculations. All calculations under this Section 9 shall be made 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.

     (g) Notice of Adjustments. Upon the occurrence of each adjustment pursuant to this
Section 9, the Company at its expense will, at the written request of the Holder, promptly compute
such adjustment in accordance with the terms of this Warrant and prepare a certificate setting
forth such adjustment, including a statement of the adjusted Exercise Price and adjusted number or
type of Warrant Shares or other securities issuable upon exercise of this Warrant (as applicable),
describing the transactions giving rise to such adjustments and showing in detail the facts upon
which such adjustment is based. Upon written request, the Company will promptly deliver a copy of
each such certificate to the Holder and to the Company’s Transfer Agent.

     (h) Notice of Corporate Events. If, while this Warrant is outstanding, the Company (i)
declares a dividend or any other distribution of cash, securities or other property in respect of
its Common Stock, including without limitation any granting of rights or warrants to subscribe for
or purchase any capital stock of the Company or any Subsidiary, (ii) authorizes or approves, enters
into any agreement contemplating or solicits stockholder approval for any Fundamental Transaction
or (iii) authorizes the voluntary dissolution, liquidation or winding up of the affairs of the
Company, then, except if such notice and the contents thereof shall be deemed to constitute
material non-public information, the Company shall deliver to the Holder a notice describing the
material terms and conditions of such transaction at least 10 Trading Days prior to the applicable
record or effective date on which a Person would need to hold Common Stock in order to participate
in or vote with respect to such transaction, and the Company will take all reasonable steps to give
Holder the practical opportunity to exercise this Warrant prior to such time; provided, however,
that the failure to deliver such notice or any defect therein shall not affect the validity of the
corporate action required to be described in such notice.

     10. Payment of Exercise Price. The Holder may pay the Exercise Price in one of the
following manners:

     (a) Cash Exercise. The Holder may deliver immediately available funds; or

     (b) Cashless Exercise. If an Exercise Notice is delivered at a time when the
Registration Statement is not then effective, then the Holder shall notify the Company in
an Exercise Notice of its election to utilize cashless exercise, in which event the Company shall
issue to the Holder the number of Warrant Shares determined as follows:

     X = Y [(A-B)/A]

     where:

 

 

     X = the number of Warrant Shares to be issued to the Holder.

     Y = the number of Warrant Shares with respect to which this Warrant is being
exercised.

     A = the Closing Price on the Trading Day immediately prior to the Exercise Date.

     B = the Exercise Price.

     11. Limitations on Exercise. Notwithstanding anything to the contrary contained
herein, the number of Warrant Shares that may be acquired by the Holder upon any exercise of this
Warrant (or otherwise in respect hereof) shall be limited to the extent necessary to insure that,
following such exercise (or other issuance), the total number of shares of Common Stock then
beneficially owned by such Holder and its Affiliates and any other Persons whose beneficial
ownership of Common Stock would be aggregated with the Holder’s for purposes of Section 13(d) of
the Exchange Act, does not exceed 9.999% (the “Maximum Percentage”) of the total number of
issued and outstanding shares of Common Stock (including for such purpose the shares of Common
Stock issuable upon such exercise). For such purposes, beneficial ownership shall be determined in
accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated
thereunder. Each delivery of an Exercise Notice hereunder will constitute a representation by the
Holder that it has evaluated the limitation set forth in this Section and determined that issuance
of the full number of Warrant Shares requested in such Exercise Notice is permitted under this
Section. The Company’s obligation to issue shares of Common Stock in excess of the limitation
referred to in this Section shall be suspended (and, except as provided below, shall not terminate
or expire notwithstanding any contrary provisions hereof) until such time, if any, as such shares
of Common Stock may be issued in compliance with such limitation; provided, that, if, as of 5:00
p.m., New York City time, on the Expiration Date, the Company has not received written notice that
the shares of Common Stock may be issued in compliance with such limitation, the Company’s
obligation to issue such shares shall terminate. This provision shall not restrict the number of
shares of Common Stock that a Holder may receive or beneficially own in order to determine the
amount of securities or other consideration that such Holder may receive in the event of a
Fundamental Transaction as contemplated in Section 9 of this
Warrant. This restriction may not be waived.

     12. No Fractional Shares. No fractional Warrant Shares will be issued in connection
with any exercise of this Warrant. In lieu of any fractional shares that would

 

 

otherwise be issuable, the Company shall pay cash equal to the product of such fraction
multiplied by the closing price of one Warrant Share as reported by the applicable Trading Market
on the Exercise Date.

     13. Notices. Any and all notices or other communications or deliveries hereunder
(including, without limitation, any Exercise Notice) shall be in writing and shall be deemed given
and effective on the earliest of (i) the date of transmission, if such notice or communication is
delivered via facsimile at the facsimile number specified in this Section at or prior to 5:00 p.m.
(New York City time) on a Trading Day, (ii) the next Trading Day after the date of transmission, if
such notice or communication is delivered via facsimile at the facsimile number specified in this
Section on a day that is not a Trading Day or later than 5:00 p.m. (New York City time) on any
Trading Day, (iii) the Trading Day following the date of mailing, if sent by nationally recognized
overnight courier service, or (iv) upon actual receipt by the party to whom such notice is required
to be given. The addresses for such notices or communications shall be: if to the Company, to
Capstone Turbine Corporation, 21211 Nordhoff Street, Chatsworth, California 91311, Attention:
Chief Financial Officer, facsimile number (818) 734-5321 (or such other address as the Company
shall indicate in writing in accordance with this Section) or (ii) if to the Holder, to the address
or facsimile number appearing on the Warrant Register (or such other address as the Company shall
indicate in writing in accordance with this Section).

     14. Warrant Agent. The Company shall serve as warrant agent under this Warrant. Upon
30 days’ notice to the Holder, the Company may appoint a new warrant agent. Any corporation into
which the Company or any new warrant agent may be merged or any corporation resulting from any
consolidation to which the Company or any new warrant agent shall be a party or any corporation to
which the Company or any new warrant agent transfers substantially all of its corporate trust or
shareholders services business shall be a successor warrant agent under this Warrant without any
further act. Any such successor warrant agent shall promptly cause notice of its succession as
warrant agent to be mailed (by first class mail, postage prepaid) to the Holder at the Holder’s
last address as shown on the Warrant Register.

     15. Miscellaneous.

     (a) This Warrant shall be binding on and inure to the benefit of the parties hereto and their
respective successors and assigns. Subject to the preceding sentence, nothing in this Warrant shall
be construed to give to any Person other than the Company and the Holder any legal or equitable
right, remedy or cause of action under this Warrant. This Warrant may be amended only in writing
signed by the Company and the Holder, or their successors and assigns.

     (b) All questions concerning the construction, validity, enforcement and interpretation of
this Warrant shall be governed by and construed and enforced in accordance with the internal laws
of the State of New York, without regard to the principles of conflicts of law thereof. Each party
agrees that all legal proceedings concerning the interpretations, enforcement and defense of this
Warrant and the

 

 

transactions herein contemplated (“Proceedings”) (whether brought against a party
hereto or its respective Affiliates, employees or agents) shall be commenced exclusively in the New
York Courts. Each party hereto hereby irrevocably submits to the exclusive jurisdiction of the New
York Courts for the adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein, and hereby irrevocably waives, and agrees not
to assert in any Proceeding, any claim that it is not personally subject to the jurisdiction of any
New York Court, or that such Proceeding has been commenced in an improper or inconvenient forum.
Each party hereto hereby irrevocably waives personal service of process and consents to process
being served in any such Proceeding by mailing a copy thereof via registered or certified mail or
overnight delivery (with evidence of delivery) to such party at the address in effect for notices
to it under this Warrant and agrees that such service shall constitute good and sufficient service
of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any
right to serve process in any manner permitted by law. Each party hereto hereby irrevocably waives,
to the fullest extent permitted by applicable law, any and all right to trial by jury in any legal
proceeding arising out of or relating to this Warrant or the transactions contemplated hereby. If
either party shall commence a Proceeding to enforce any provisions of this Warrant, then the
prevailing party in such Proceeding shall be reimbursed by the other party for its attorney’s fees
and other costs and expenses incurred with the investigation, preparation and prosecution of such
Proceeding.

     (c) The headings herein are for convenience only, do not constitute a part of this Warrant and
shall not be deemed to limit or affect any of the provisions hereof.

     (d) In case any one or more of the provisions of this Warrant shall be invalid or
unenforceable in any respect, the validity and enforceability of the remaining terms and provisions
of this Warrant shall not in any way be affected or impaired thereby and the parties will attempt
in good faith to agree upon a valid and enforceable provision which shall be a commercially
reasonable substitute therefore, and upon so agreeing, shall incorporate such substitute provision
in this Warrant.

     (e) Prior to exercise of this Warrant, the Holder hereof shall not, by reason of by being a
Holder, be entitled to any rights of a stockholder with respect to
the Warrant Shares.

 

 

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

	 	 	 	 	 
	 	CAPSTONE TURBINE CORPORATION

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 

 

 

	 	 	 	 	 

EXERCISE NOTICE

CAPSTONE TURBINE CORPORATION

WARRANT
NO. ____ DATED JANUARY 24, 2007

Ladies and Gentlemen:

(1) The undersigned hereby elects to exercise the above-referenced Warrant with respect to
___ shares of Common Stock. Capitalized terms used herein and not otherwise defined herein
have the respective meanings set forth in the Warrant.

(2) The Holder intends that payment of the Exercise Price shall be made as (check one):

o Cash Exercise under Section 10(a)

o Cashless Exercise under Section 10(b)

(3) If
the Holder has elected a Cash Exercise, the holder shall pay the sum of $___ to the
Company in accordance with the terms of the Warrant.

(4) Pursuant to this Exercise Notice, the Company shall deliver to the Holder the number of Warrant
Shares determined in accordance with the terms of the Warrant.

(5) By its delivery of this Exercise Notice, the undersigned represents and warrants to the Company
that in giving effect to the exercise evidenced hereby the Holder will not beneficially own in
excess of the number of shares of Common Stock (as determined in accordance with Section 13(d) of
the Securities Exchange Act of 1934) permitted to be owned under Section 11 of this Warrant to
which this notice relates.

	 	 	 	 	 
	 	HOLDER:

 	 
	 	 	 	 
	 	 	(Print name) 	 

	 	 	 	 	 
	 	 	 
	 	By:  	
 	 

	 	 	 	 	 
	 	 	 
	 	Title:  	
 	 
	 	 	 	 
	 	 	 	 

 

 

	 	 	 	 	 

WARRANT
ORIGINALLY ISSUED JANUARY 24, 2007

WARRANT NO. _____

FORM OF ASSIGNMENT

To be completed and signed only upon transfer of Warrant

FOR VALUE
RECEIVED, the undersigned hereby sells, assigns and transfers unto
____________ the right represented by the within Warrant to purchase
____________
shares of Common Stock to which the within Warrant relates and
appoints ________ attorney to transfer said right on the books of the Company with full power of
substitution in the premises.

	 	 	 	 	 
	Dated: _________________________ 	TRANSFEROR:

 	 
	 		 	 
	 	 	(Print Name) 	 

	 	 	 	 	 
	 	 	 
	 	By:  	
 	 

	 	 	 	 	 
	 	 	 
	 	Title:  	
 	 
	 	 	 	 
	 	 	 	 
	 

	 	 	 	 	 
	 	TRANSFEREE:

 	 
	 		 	 
	 	 	(Print Name) 	 

	 	 	 	 	 
	 	 	 
	 		
 	 
	 	 	(Address of Transferee) 	 

	 	 	 	 	 
	 	 	 
	 		
 	 

	 	 	 	 	 
	 	 	 
	 		
 	 
	 	 	 	 
	 	 	 	 
	 

In the presence of:

———————————————

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