Document:

WARRANT

THIS WARRANT AND THE COMMON STOCK OR OTHER SECURITIES ISSUABLE UPON THE EXERCISE OF THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR ANY STATE SECURITIES LAWS AND NEITHER THIS WARRANT NOR THE COMMON STOCK OR OTHER SECURITIES ISSUABLE UPON THE EXERCISE OF THIS WARRANT MAY BE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER THE ACT AND THE RULES AND REGULATIONS THEREUNDER. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.

PROLIANCE INTERNATIONAL, INC.

COMMON STOCK PURCHASE WARRANT

 

	
                        No. A-__
 	
                        Dated: March 26, 2008
 
	
                         
 	
                         
 
	
                         
 	
                        Warrant to Purchase ______
 shares of Common Stock
 

PROLIANCE INTERNATIONAL, INC., a Delaware corporation (the “Company”), for value received, hereby certifies that __________, a Delaware limited liability company, or its registered assigns (the “Holder”), is entitled to purchase from the Company _________ duly authorized, validly issued, fully paid and nonassessable shares of common stock (the “Initial Warrant Quantity”), par value US$.01 per share, of the Company (“Common Stock”), at an exercise price per share equal to the Exercise Price (as defined below), at any time or from time to time on or after the date hereof, but not after 11:59:59 p.m., New
York time, on March 26, 2015 (the “Expiration Date”), all subject to the terms, conditions and adjustments set forth below in this Warrant. 

This Warrant is a Common Stock Purchase Warrant (the “Warrant”, such term to include any such warrants issued in substitution therefor (collectively with the Warrant, the “Warrants”)) originally issued pursuant to the terms of the Warrantholder Rights Agreement and the Second Amendment to Credit Agreement (as defined below) (each Warrant or any portion of a Warrant subsequently assigned or transferred, each an “Issued Warrant”, and collectively, the “Issued Warrants”, and each holder of an Issued Warrant, a “Warrantholder”). 

1. DEFINITIONS. As used herein, the following terms shall have the meanings indicated:

“Additional Shares of Common Stock” shall mean all shares of Common Stock (including treasury shares) issued or sold (or, pursuant to Section 3(c) or 3(d), deemed to be issued) by the Company on or after the date hereof, whether or not subsequently reacquired or retired by the Company, other than the Excluded Securities.

“Affiliate” shall mean, with respect to any Person, any other Person that directly or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with, such Person. For purposes of this definition, “control” of a Person means the power, directly or indirectly, either to (a) vote 5% or more of the Capital Stock having ordinary voting power for the election of directors of such Person or (b) direct or cause the direction of the management and policies of such Person whether by contract or otherwise. Notwithstanding anything to the contrary herein, for purposes hereof in no event shall the Holder be considered an Affiliate of the Company.

 

 

“Aggregate Exercise Price” shall have the meaning assigned to it in Section 2(a)(i).

“Amendment Effective Date” shall mean March 12, 2008.

“Applicable Securities” shall have the meaning assigned to it in Section 10.

“Authorized Share Failure” shall have the meaning assigned to it in Section 2(g).

“Business Day” shall mean any day other than a Saturday or a Sunday or a day on which commercial banking institutions in the City of New York are authorized or required by law to be closed. Any reference to “days” (unless Business Days are specified) shall mean calendar days.

“Buy-In” shall have the meaning assigned to it in Section 2(e).

“Buy-In Price” shall have the meaning assigned to it in Section 2(e).

“Capital Raise” shall mean a Capital Raise (as defined in the Second Amendment to Credit Agreement) consummated on or prior to May 31, 2008 pursuant to which the Company shall have (A) received at least US$30,000,000 in cash proceeds from a capital contribution to, or the issuance of Capital Stock (solely for purposes of this paragraph, as defined in the Credit Agreement) of the Company in the United States or from the incurrence of unsecured subordinated Indebtedness (as defined in the Credit Agreement) in the United States, in each case on terms and conditions satisfactory to Administrative Agent (as defined in the Credit Agreement), pursuant to documents in form and substance satisfactory to Administrative Agent, and (B) applied such cash proceeds in accordance with the Second Amendment
to Credit Agreement, provided that such Capital Raise does not involve or permit the exchange or conversion of any shares of Common Stock for or into any Convertible Securities.

“Capital Stock” shall mean (a) with respect to any Person that is a corporation, any and all shares, interests, participations or other equivalents (however designated and whether or not voting) of corporate stock, and (b) with respect to any Person that is not a corporation, any and all partnership, membership or other equity interests of such Person.

“Commission” shall mean the Securities and Exchange Commission or any successor agency having jurisdiction to enforce the Securities Act.

“Common Stock” shall have the meaning assigned to it in the introduction to this Warrant, such term to include any stock into which such Common Stock shall have been converted or changed or any stock resulting from any reclassification of such Common Stock, and all other stock of any class or classes (however designated) of the Company the holders of which have the right, without limitation as to amount, either to all or to a share of the balance of current dividends and liquidating dividends after the payment of dividends and distributions on any shares entitled to preference.

“Company” shall have the meaning assigned to it in the introduction to this Warrant, such term to include any corporation or other entity which shall succeed to or assume the obligations of the Company hereunder in compliance with Section 4.

 

 

“Convertible Securities” shall mean any evidences of indebtedness, shares of stock (other than Common Stock) or other securities directly or indirectly convertible into, exercisable for, or exchangeable for Additional Shares of Common Stock.

“Corporate Event” shall have the meaning assigned to it in Section 4(a).

“Credit Agreement” shall mean that certain Credit and Guaranty Agreement, dated as of July 19, 2007, as amended or otherwise modified or supplemented from time to time, among the Company, certain of the Company’s Subsidiaries, the lenders party thereto, and Silver Point Finance, LLC, as administrative agent and collateral agent

“Current Market Price” shall mean, on any date specified herein, the average of the daily VWAP during the 10 consecutive Trading Days commencing 13 Trading Days before such date, except that, if on any such date the shares of Common Stock are not listed or admitted for trading on any national securities exchange or quoted in the over-the-counter market, the Current Market Price shall be the Market Price on such date.

“DTC” shall have the meaning assigned to it in Section 2(c)(ii).

“Eligible Market” shall mean the Principal Market, The New York Stock Exchange, Inc., The NASDAQ Global Market, The NASDAQ Capital Market, The NASDAQ Global Select Market or any successors thereto.

“Exchange Act” shall mean the Securities Exchange Act of 1934, as amended from time to time, and the rules and regulations thereunder, or any successor statute.

“Excluded Securities” shall mean any: (i) shares of Common Stock issued or issuable upon exercise of the Warrants or Other Warrants; (ii) shares of Common Stock issued or issuable upon exercise of any Options or Convertible Securities which are outstanding on the day immediately preceding the date hereof, provided that the terms of such Options or Convertible Securities are not amended, modified or changed on or after the date hereof (A) to increase the number of such Options or Convertible Securities or the number of Additional Shares of Common Stock or Convertible Securities into or for which such Options or Convertible Securities are convertible, exercisable or exchangeable or (B) to decrease the exercise,
exchange or conversion price of such Options or Convertible Securities; (iii) shares of Common Stock (not to exceed 50,000 shares of Common Stock in the aggregate, as adjusted for stock splits, stock combinations, stock dividends, reverse stock splits or other similar transactions) issued or issuable upon exercise of warrants (other than the Issued Warrants or the Other Warrants), having an exercise price of $0.01 per share, issued by the Company to lenders in connection with bona fide, arm’s length financings, and (iv) shares of Common Stock (not to exceed 1,596,400 shares of Common Stock in the aggregate, as adjusted for stock splits, stock combinations, stock dividends, reverse stock splits or other similar transactions) issued or issuable to directors, officers or employees of the Company pursuant to stock awards or options granted or to be granted under the Proliance International, Inc. Equity Incentive Plan or any substantially similar stock-based compensation plan of the
Company duly adopted by a majority of the non-employee members of the Board of Directors of the Company or a majority of the members of a committee of non-employee directors of the Company established for such purpose (with respect to options, solely at per share exercise prices at or above the fair market value of a share of Common Stock on the date of the grant).

 

 

“Exercise Delivery Documents” shall have the meaning assigned to it in Section 2(b).

“Exchange Notice” shall have the meaning assigned to it in Section 2(a)(i).

“Exercise Price” shall mean, as calculated from time to time, the lower of (a) the product (such product, the “VWAP Price”) obtained by multiplying (i) the lowest of the average VWAP of a share of Common Stock for any 30 consecutive Trading Days occurring (A) prior to the applicable date of exercise of this Warrant (or for purposes of determining any adjustment of the Exercise Price or of the Warrant Quantity pursuant to Sections 3, 4 or 5, prior to the applicable date of such determination) and (B) during the period of time commencing 90 Trading Days prior to the Amendment Effective Date and ending 180 Trading Days after the Amendment Effective Date by (ii) 85%, subject to adjustment and readjustment
from time to time as provided in Sections 3, 4 and 5, and (b) the VWAP Price.

“Expiration Date” shall have the meaning assigned to it in the introduction to this Warrant.

“Fair Value” shall mean, on any date specified herein (i) in the case of cash, the dollar amount or equivalent thereof, (ii) in the case of a security, the Current Market Price, and (iii) in all other cases, the fair value thereof (as of a date which is within 20 days of the date as of which the determination is to be made) determined jointly and in good faith by the Company and the Holder; provided, however, that if such parties are unable to reach agreement within a reasonable period of time (not to exceed twenty (20) Business Days), the Fair Value shall be determined in good faith, by an independent investment banking firm selected
jointly by the Company and the Holder or, if that selection cannot be made within ten days, by an independent investment banking firm selected by the American Arbitration Association in accordance with its rules, and provided further, that all of the fees and expenses of any third parties incurred in connection with determining the Fair Value will be paid by the Company. If required by any such investment banking firm or arbitrator, the Company shall execute a retainer and engagement letter containing reasonable terms and conditions, including without limitation, customary provisions concerning the rights of indemnification and contribution by the Company in favor of such investment banking firm or arbitrator and its officers, directors, partners, employees, agents and Affiliates.

“Fully Diluted Basis” shall mean, without duplication, the sum of (a) all shares of Common Stock issued and outstanding at the date of determination, (b) all shares of Common Stock issuable, as of the date of determination, upon the exercise of this Warrant and any other Option, warrant or similar right outstanding at the time of determination, whether or not presently exercisable, and (c) all shares of Common Stock issuable, as of the date of determination, upon the exercise of any conversion or exchange right contained in any security outstanding at the time of determination and convertible into or exchangeable for shares of Common Stock, whether or not presently convertible or exchangeable.

“Fundamental Transaction” shall mean that the Company shall directly or indirectly, in one or more related transactions, (i) consolidate or merge with or into any other Person and shall not be the continuing or surviving corporation of such consolidation or merger, or (ii) permit any other Person to consolidate with or merge into the Company and the Company shall be the continuing or surviving Person but, in connection with such consolidation or merger, the Common Stock or Other Securities shall be changed into or exchanged for stock or other securities of any other Person or cash or any other property, or (iii) sell, assign, transfer, convey 

 

 

or otherwise dispose of all or substantially all of the properties or assets of the Company to another Person, or (iv) allow another Person to make a purchase, tender or exchange offer that is accepted by the holders of more than 50% of the outstanding shares of Common Stock (not including any shares of Common Stock 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 (v) consummate a stock purchase agreement or other business combination (including, without limitation, a reorganization, recapitalization, spin-off or scheme of arrangement) with another Person whereby such other Person acquires more than the 50% of the outstanding shares of Common Stock (not including any shares of Common Stock 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 purchase agreement or other business combination), or (vi) reorganize, recapitalize or reclassify its Common Stock, or (vii) allow any “person” or “group” (as these terms are used for purposes of Sections 13(d) and 14(d) of the Exchange Act) to become the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of 50% of the aggregate ordinary voting power represented by issued and outstanding Common Stock.

“Holder” shall have the meaning assigned to it in the introduction to this Warrant.

“Initial Warrant Quantity” shall have the meaning assigned to it in the introduction to this Warrant.

“Issued Warrant” shall have the meaning assigned to it in the introduction to this Warrant.

“Market Price” shall mean for any security as of any date, the last closing sale for such security on the Principal Market, as reported by Bloomberg, or, if the Principal Market begins to operate on an extended hours basis and does not designate the closing sale price, then the last trade price, respectively, of such security prior to 4:00:00 p.m., New York Time, as reported by Bloomberg, or, if the Principal Market is not the principal securities exchange or trading market for such security, the last closing sale price of such security 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 sale price of such security in the over-the-counter market on the electronic bulletin
board for such security as reported by Bloomberg, or, if no closing sale price is reported for such security by Bloomberg, the average of the sale prices 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 Market Price cannot be calculated for a security on a particular date on any of the foregoing bases, the Market Price of such security on such date shall be the Fair Value (as set forth in subsection (iii) of the definition of Fair Value).

“Maximum Percentage” shall have the meaning assigned to it in Section 2(f)(i).

“Options” shall mean any rights, options or warrants to subscribe for, purchase or otherwise acquire either Additional Shares of Common Stock or Convertible Securities.

“Other Securities” shall mean any stock (other than Common Stock) and other securities of the Company or any other Person (corporate or otherwise) which the holders of the Warrants at any time shall be entitled to receive, or shall have received, upon the exercise of the Warrants, in lieu of or in addition to Common Stock, or which at any time shall be issuable or shall have been issued in exchange for or in replacement of Common Stock or Other Securities pursuant to Section 4 or otherwise.

 

 

“Other Warrants” shall mean any other warrants issued by the Company to the Holder or any of its Affiliates on the date hereof, such term to include, without limitation (x) any portion of such warrants subsequently assigned or transferred and (y) any warrants issued by the Company to the Holder, any of its Affiliates or any of their respective assignees or transferees in substitution therefor.

“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.

“Person” shall mean any individual, firm, partnership, corporation, trust, joint venture, association, joint stock company, limited liability company, unincorporated organization or any other entity or organization, including a government or agency or political subdivision thereof, and shall include any successor (by merger or otherwise) of such entity.

“Principal Market” shall mean the American Stock Exchange.

“Registration Rights Agreement” shall mean the Registration Rights Agreement dated as of the date hereof, as the same may be amended or otherwise modified or supplemented from time to time, among the Holder, the Company and the other party thereto.

“Required Holders” shall mean the holders of the Issued Warrants and Other Warrants representing at least a majority of shares of Common Stock underlying the Issued Warrants and Other Warrants then outstanding.

“Required Reserve Amount” shall have the meaning assigned to it in Section 2(g).

“Restricted Securities” shall mean (i) any Warrants bearing the applicable legend set forth in Section 7, (ii) any Common Stock (or Other Securities) issued or issuable upon the exercise of Warrants which are (or, upon issuance, will be) evidenced by a certificate or certificates bearing the applicable legend set forth in such Section, and (iii) any Common Stock (or Other Securities) issued subsequent to the exercise of any of the Warrants as a dividend or other distribution with respect to, or resulting from a subdivision of the outstanding Common Stock (or Other Securities) into a greater number of shares of Common Stock by reclassification, stock splits or otherwise, or in exchange for or in replacement of the Common Stock (or Other Securities) issued upon such exercise, which are
evidenced by a certificate or certificates bearing the applicable legend set forth in such Section.

“Second Amendment to Credit Agreement” shall mean the Second Amendment to Credit Agreement dated as of the Amendment Effective Date, as the same may be amended or otherwise modified or supplemented from time to time, among the Company, certain of the Company’s subsidiaries, the lenders from time party thereto, and Silver Point Finance, LLC, as administrative agent and collateral agent.

“Second Capital Raise” shall mean a capital contribution to, or the issuance of Capital Stock (solely for purposes of this paragraph, as defined in the Credit Agreement) of the Company in the United States or the incurrence of unsecured subordinated Indebtedness (as defined in the Credit Agreement) in the United States consummated after May 31, 2008 and on or prior to December 31, 2008, in each case (i) on terms and conditions satisfactory to 

 

 

Administrative Agent (as defined in the Credit Agreement), pursuant to documents in form and substance satisfactory to Administrative Agent, (ii) solely for cash proceeds received and used by the Company to repay in full the indebtedness owed by the Company under the Credit Agreement, and (iii) not involving and not permitting the exchange or conversion of any shares of Common Stock for or into any Convertible Securities.

“Securities Act” shall mean the Securities Act of 1933, as amended from time to time, and the rules and regulations thereunder, or any successor statute.

“Share Delivery Date” shall have the meaning assigned to it in Section 2(c)(ii).

“Subsidiary” shall mean, with respect to any Person at any time, any partnership (general or limited), joint venture, corporation, trust, estate, limited liability company, association, joint-stock company, unincorporated organization or other entity of which (or in which) more than 50% of (a) the issued and outstanding shares of capital stock having ordinary voting power to elect a majority of the board of directors of such corporation (irrespective of whether at the time shares of capital stock of any other class or classes of such corporation shall or might have voting power upon the occurrence of any contingency), (b) the interest in the capital or profits of such partnership, joint venture, association, joint stock company, unincorporated organization, limited liability company or
other entity, or (c) the beneficial interest in such trust or estate, is, at such time, directly or indirectly owned or controlled by such Person, by such Person and one or more of its other Subsidiaries or by one or more of such Person’s other Subsidiaries.

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

“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).

“Transfer Agent” shall have the meaning assigned to it in Section 2(c)(i).

“Transaction Documents” shall mean the Issued Warrants, the Other Warrants, the Warrantholder Rights Agreement and the Registration Rights Agreement.

“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 securities exchange or trading market for such security, the principal securities exchange or trading market where such security is listed or traded) during the period beginning at 9:30:01 a.m., New York City time (or such other time as the Principal Market (or such other principal securities exchange or trading market, as the case may be) publicly announces is the official open of trading), and ending at 4:00:00 p.m., New York City time (or such other time as 

 

 

the Principal Market (or such other principal securities exchange or trading market, as the case may be) publicly announces is the official close of trading) as reported by Bloomberg through its “Volume at Price” functions, 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 City time (or such other time as such market publicly announces is the official open of trading), and ending at 4:00:00 p.m., New York City time (or such other time as such market publicly announces is the official close of trading) 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 the weighted average price cannot be calculated for a security on a particular date on any of the foregoing bases, the weighted average price of such security on such date shall be the Fair Value (as set forth in subsection (iii) of the definition of Fair Value). All such determinations are to be appropriately adjusted for any stock dividend, stock split, stock combination, reverse stock split or other similar transaction during the applicable calculation period.

“Warrantholder” shall have the meaning assigned to it in the introduction to this Warrant.

“Warrantholder Rights Agreement” shall mean the Warrantholder Rights Agreement dated as of the date hereof, as the same may be amended or otherwise modified or supplemented from time to time, among the Holder, the Company and the other party thereto.

“Warrant Quantity” shall mean initially the Initial Warrant Quantity, which amount shall be subject to adjustment and readjustment from time to time as provided in Sections 3, 4 and 5, and, as so adjusted or readjusted, shall remain in effect until a further adjustment or readjustment is required by Sections 3, 4 or 5.

“Warrant Register” shall have the meaning assigned to it in Section 11(a).

“Warrants” shall have the meaning assigned to it in the introduction to this Warrant.

“Warrant Shares” shall mean the shares of Common Stock issued or issuable upon exercise of the Warrants.

2. EXERCISE OF WARRANT.

(a) Manner of Exercise; Payment of the Exercise Price; Certain Adjustments Upon Exercise.

(i) This Warrant may be exercised by the Holder hereof, in whole or in part, at any time or from time to time on or after the date hereof, but prior to the Expiration Date, by (i) delivery of a written notice to the Company, in the form attached hereto Exhibit A (the “Exercise Notice”), of the Holder’s election to exercise this Warrant and accompanied by payment of the Exercise Price then in effect for the number of shares of Common Stock (the “Aggregate Exercise Price”) specified in such form.

 

 

(ii) Payment of the Aggregate Exercise Price may be made as follows (or by any combination of the following): 

 (A) in United States currency by cash or delivery of a certified check or bank draft payable to the order of the Company or by wire transfer to the Company (each, a “Cash Exercise”);

 (B) by surrender to the Company for cancellation certificates representing Common Stock owned by the Holder (properly endorsed for transfer in blank) having a Market Price on the date of Warrant exercise equal to the Exercise Price then in effect; and

 (C) 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, the Holder may elect (a “Cashless Exercise”) instead to receive upon such exercise the “Net Number” of shares of Common Stock determined according to the following formula:

 

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

For purposes of the foregoing formula:

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

B= the Market Price of the shares of Common Stock on the date immediately preceding the date of the Exercise Notice.

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

(iii) 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 with respect to less than all of the Common Stock issuable under this Warrant 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 shares of Common Stock exersicable under this Warrant. 

(b) When Exercise Effective. Each exercise of this Warrant shall be deemed to have been effected immediately prior to the close of business on the Business Day on which the Exercise Notice and the payment of the Aggregate Exercise Price (or notice of a cashless exercise) (the “Exercise Delivery Documents”) shall have been provided to the Company as set forth in Section 2(a), and at such time the Person or Persons in whose name or names any certificate or certificates for Common Stock (or Other Securities) shall be issuable (or in whose name or names any Common Stock (or Other Securities) shall be required to be credited to its DTC account) upon such exercise as provided in Section 2(c) shall be deemed to have
become the holder or holders of record thereof for all purposes.

(c) Delivery of Share Certificates, etc.; Charges, Taxes and Expenses. 

(i) On or before the first Business Day following the date on which the exercise of this Warrant shall be deemed to have been effected, the Company shall transmit by facsimile an acknowledgment of confirmation of receipt of the Exercise Delivery Documents to the Holder and the Company’s transfer agent (the “Transfer Agent”). 

 

 

(ii) On or before the third Trading Day following the date on which the Company has received all of the Exercise Delivery Documents (the “Share Delivery Date”), 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 Agent Commission system, or (Y) if the Transfer Agent
is not participating in the DTC Fast Automated Securities Transfer Program, issue and dispatch by overnight courier to the address as specified in the Exercise Notice, a certificate, registered in the Company’s share register in the name of the Holder or its designee, for the number of shares of Common Stock to which the Holder is entitled pursuant to such exercise. 

(iii) Upon delivery of the Exercise Delivery Documents, the Holder shall be deemed for all corporate purposes to have become the holder of record of the shares of Common Stock with respect to which this Warrant has been exercised, irrespective of the date such shares of Common Stock are credited to the Holder’s DTC account or the date of delivery of the certificates evidencing such shares of Common Stock, as the case may be. If this original Warrant is submitted in connection with any exercise pursuant to Section 2(a) and the number of shares of Common Stock represented by this Warrant submitted for exercise is greater than the number of shares of Common Stock being acquired upon an exercise, then 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 a new Warrant
representing the right to purchase the number of shares of Common Stock purchasable immediately prior to such exercise under this Warrant, less the number of shares of Common Stock with respect to which this Warrant is exercised. 

(iv) 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. 

(v) All shares of Common Stock issuable upon exercise of this Warrant pursuant to the terms hereof shall be validly issued, fully paid and nonassessable, issued without violation of any preemptive right or similar rights of any stock of the Company and free and clear of all taxes, liens, security interests and encumbrances. The Company shall pay all expenses in connection with, and all taxes and other governmental charges which may be payable with respect to, the issuance and delivery of Warrant Shares upon exercise of this Warrant. The Company shall not, however, be required to pay any tax which may be payable in respect of any transfer involved in the issue and delivery of shares in any name other than that of the then holder of this Warrant, and the Company shall not be required to issue or deliver any such stock certificate to such designee unless and until
the person or persons requesting the issue thereof shall have paid to the Company the amount of such tax or shall have established to the reasonable satisfaction of the Company that such tax has been paid.

(vi) In the case of any dispute with respect to the number of shares of Common Stock to be issued upon exercise of this Warrant, the Company shall promptly issue to the Holder such number of shares of Common Stock that is not 

 

 

disputed and shall submit the disputed determinations or arithmetic calculations to the Holder via facsimile within five (5) Business Days after each exercise of this Warrant. If the Holder and the Company are unable to agree as to the determination of the number of shares of Common Stock to be issued within three (3) Business Days of such disputed determination or arithmetic calculation being submitted to the Holder, then the dispute with respect to the number of shares of Common Stock to be issued upon exercise of this Warrant shall be determined in good faith by any firm of independent public accountants of national standing, selected jointly by the Company and the Holder or, if that selection cannot be made within ten days, by any firm of independent public accountants of national standing selected by the American Arbitration Association in accordance with its rules, and
provided further, that all of the fees and expenses of any third parties incurred in connection with resolving such dispute will be paid by the Company. The Company shall then, on the next Business Day, issue certificate(s) representing the appropriate number of shares of Common Stock upon exercise of the Warrant in accordance with such accounting firm’s determination under this Section 2(c)(vi).

(vii) The Company and the Holder shall mutually agree as to the tax basis of this Warrant for purposes of the Internal Revenue Code of 1986, as amended, in accordance with U.S. GAAP and the treatment of this Warrant under such Code by each of the Company and the Holder shall be consistent with such agreement.

(d) Company to Reaffirm Obligations. The Company shall, at the time of each exercise of this Warrant, upon the request of the Holder hereof, acknowledge in writing its continuing obligation to afford to such Holder all rights to which such Holder shall continue to be entitled after such exercise in accordance with the terms of this Warrant, provided that if the Holder of this Warrant shall fail to make any such request, such failure shall not affect the continuing obligation of the Company to afford such rights to the Holder.

(e) Company’s Failure to Timely Deliver Securities. If the Company shall fail for any reason or for no reason to issue to the Holder or its designee within three (3) Trading Days after the Company’s receipt of the Exercise Delivery Documents, a certificate for the number of shares of Common Stock to which the Holder or its designee is entitled and register such shares of Common Stock on the Company’s share register or to credit the Holder’s or its designee’s balance account with DTC for such number of shares of Common Stock to which the Holder or its designee is entitled upon the Holder’s exercise of this Warrant, 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 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 sum of the number of shares of Common Stock not issued to the Holder (or not issued to the Holder’s designee, as applicable) on a timely basis and to which the Holder (or such designee) is entitled and (B) the Market Price of the shares of Common Stock on the Trading Day immediately preceding the last possible date which the Company could have issued such shares of Common Stock to the Holder (or to the Holder’s designee, as applicable) without violating Section 2(c). In addition to the foregoing, if within three (3) Trading Days after the Company’s receipt of the Exercise Delivery Documents the Company shall fail to issue and deliver a certificate to the Holder or its designee and register such shares of Common Stock on the Company’s share register or credit the
Holder’s or its designee’s balance account with DTC for the number of shares of Common Stock to which the Holder or its designee is entitled upon the Holder’s exercise hereunder, and if on or after such third 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 (a “Buy-In”), then 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 (and to issue such shares of Common Stock) or to so credit such Holder’s balance account with DTC 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 such Holder’s
balance account with DTC and pay cash to the Holder in an amount equal to the excess (if any) of the Buy-In Price over the product of (A) such number of shares of Common Stock, times (B) the Market Price on the date of exercise.

(f) Limitations on Exercises.

(i) The Company shall not effect the exercise of this Warrant, and the Holder shall not have the right to exercise this Warrant, to the extent that after giving effect to such exercise, such Holder (together with such Holder’s affiliates) would beneficially own in excess of 4.99% (the “Maximum Percentage”) of the shares of Common Stock outstanding immediately after giving effect to such exercise. For purposes of the foregoing sentence, the aggregate number of shares of Common Stock beneficially owned by such Holder and its affiliates 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 (A) exercise of the
remaining, unexercised portion of this Warrant beneficially owned by such Holder and its affiliates and (B) exercise or conversion of the unexercised or unconverted portion of any other securities of the Company beneficially owned by such Holder and its affiliates (including, without limitation, any convertible notes or convertible preferred stock or warrants) subject to a limitation on conversion or exercise analogous to the limitation contained herein. Except as set forth in the preceding sentence, for purposes of this paragraph, beneficial ownership shall be calculated in accordance with Section 13(d) of the Exchange Act. For purposes of this Warrant, in determining the number of outstanding shares of Common Stock, the Holder may rely on the number of outstanding shares of Common Stock as reflected in (1) the Company’s most recent Form 10-K, Form 10-KSB, Form 10-Q, Form 10-QSB, Current Report on Form 8-K or other public filing with the Commission, as the case may be, (2) a
more recent public announcement by the Company or (3) any other notice by the Company or the Transfer Agent setting forth the number of shares of Common Stock outstanding. For any reason at any time, upon the written 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. In any case, the number of outstanding shares of Common Stock shall be determined after giving effect to the exercise of securities of the Company by the Holder and its affiliates since the date as of which such number of outstanding shares of Common Stock was reported. By written notice to the Company, the Holder may from time to time 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 sixty-first (61st) day after such notice is delivered to the Company, and (ii)
any such increase or decrease will apply only to the Holder and not to any other holder of the Warrants.

(ii) Principal Market Regulation. The Company shall not be obligated to issue any shares of Common Stock upon exercise of this Warrant and no holder of any Issued Warrant or Other Warrant shall be entitled to receive any shares of Common Stock if the issuance of such shares of Common Stock would exceed that number of shares of Common Stock which the Company may issue upon exercise of the Issued Warrants and the Other 

 

 

Warrants or otherwise without breaching the Company’s obligations under the rules or regulations of any applicable Eligible Market (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 Eligible 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 holders of the Issued Warrants and the Other Warrants representing at least a majority of shares of Common Stock underlying the Issued Warrants and the Other Warrants then outstanding. Until such approval or written opinion is obtained, no holder of any
Issued Warrant or Other Warrant shall be issued in the aggregate, upon exercise of any Issued Warrants or Other Warrants, shares of Common Stock in an amount greater than the product of the Exchange Cap multiplied by a fraction, the numerator of which is the total number of shares of Common Stock underlying the Issued Warrants and Other Warrants issued to such holder and the denominator of which is the aggregate number of shares of Common Stock underlying the Issued Warrants and Other Warrants issued to all of the holders of the Issued Warrants and Other Warrants (with respect to each holder of any Issued Warrant or Other Warrant, the “Exchange Cap Allocation”). In the event that any holder of an Issued Warrant or Other Warrant shall sell or otherwise transfer any of such holder’s Issued Warrants or Other Warrants, the transferee shall be allocated a pro rata portion of such holder’s
Exchange Cap Allocation, and the restrictions of the prior sentence shall apply to such transferee with respect to the portion of the Exchange Cap Allocation allocated to such transferee. In the event that any holder of Issued Warrants or Other Warrants shall exercise all of such holder’s Issued Warrants and Other Warrants into a number of shares of Common Stock which, in the aggregate, is less than such holder’s Exchange Cap Allocation, then the difference between such holder’s Exchange Cap Allocation and the number of shares of Common Stock actually issued to such holder shall be allocated to the respective Exchange Cap Allocations of the remaining holders of Issued Warrants and Other Warrants on a pro rata basis in proportion to the shares of Common Stock underlying the Issued Warrants and Other Warrants then held by each such holder. In the event that the Company is prohibited from issuing any shares of Common Stock issuable upon exercise of any of the Issued
Warrants or Other Warrants for which an Exercise Notice has been received as a result of the operation of this Section 2(f)(ii), the Company shall pay the Holder cash in exchange for cancellation of the right to purchase such Common Stock, at a price per share of Common Stock equal to the amount by which the Market Price exceeds the Exercise Price as of the date of the attempted exercise.

(g) Insufficient Authorized Shares. If at any time while this Warrant remains 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 this Warrant at least a number of shares of Common Stock equal to 130% (the “Required Reserve Amount”) of the number of shares of Common Stock as shall from time to time be necessary to effect the exercise of all of the Issued Warrants then outstanding (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 the Issued 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 ninety (90) 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 reasonable 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.

 

 

(h) Issuance to Person other than Holder. Subject to Section 11(b), notwithstanding anything in this Warrant to the contrary, the Company shall have no obligation to issue shares of Common Stock and shall have no liability (including pursuant to Section 2(e)) with respect to any failure to issue shares of Common Stock upon exercise of this Warrant to any designee of the Holder (other than the Holder), if the Company reasonably believes that issuance to such designee of the Holder would violate the Securities Act or other applicable securities law.

3. ADJUSTMENT OF COMMON STOCK ISSUABLE UPON EXERCISE.

(a) Adjustment of Number of Shares. Upon each adjustment of the Exercise Price as a result of the calculations made in this Section 3 or in Sections 4 or 5, this Warrant shall thereafter evidence the right to receive, at the Exercise Price as adjusted, that number of shares of Common Stock (calculated to the nearest one-hundredth) obtained by dividing (i) the product of the aggregate number of shares covered by this Warrant immediately prior to such adjustment and the Exercise Price in effect immediately prior to such adjustment of the Exercise Price by (ii) the Exercise Price in effect immediately after such adjustment of the Exercise Price. 

(b) Adjustment of Exercise Price.

(i) Issuance of Additional Shares of Common Stock. In case the Company at any time or from time to time on or after the date hereof shall issue or sell any Additional Shares of Common Stock (including, without limitation, any Additional Shares of Common Stock deemed to be issued pursuant to Section 3(c) or 3(d)) without consideration or for consideration per share (the “New Issuance Price”) less than the Exercise Price in effect immediately prior to such issuance or sale, then, and in each such case, subject to Section 3(h), the Exercise Price shall be reduced, concurrently with such issuance or sale, to the New Issuance Price.

(ii) Dividends and Distributions. In case the Company at any time or from time to time on or after the date hereof shall declare, order, pay or make a dividend or other distribution (including, without limitation, any distribution of other or additional stock or other securities or property or Options by way of dividend or spin-off, reclassification, recapitalization or similar corporate rearrangement) on the Common Stock (other than a pro-rata dividend or other such distribution payable in the form of Common Stock), then, in each such case, the Exercise Price shall be reduced, effective as of the close of business on the record date fixed for the determination of holders of any class of securities entitled to receive such dividend or distribution, to a price determined by multiplying
the Exercise Price in effect immediately prior to the close of business on such record date by a fraction

(A) the numerator of which shall be the Current Market Price in effect on such record date or, if the Common Stock trades on an ex-dividend basis, on the date prior to the commencement of ex-dividend trading, less the Fair Value of such dividend or distribution applicable to one share of Common Stock, and
(B) the denominator of which shall be such Current Market Price,

 

 

provided that, (x) at the election of the Holder, in lieu of the foregoing adjustment, adequate provision shall be made so that the Holder shall receive, at the time such dividend or distribution is paid to the holders of the Common Stock, a pro rata share of such dividend or distribution based upon the maximum number of shares of Common Stock at the time issuable to the Holder (determined without regard to whether the Warrant is exercisable at such time), and (y) in the event that such dividend or distribution described in the first part of this Section 3(b)(ii) is of shares of Common Stock (or common stock) (“Other Shares of Common Stock”) of a company (other than the Company) whose shares of Common Stock (or common stock) are traded on a national securities exchange or a national automated quotation system, then the Holder may elect to receive a warrant to purchase Other Shares of Common Stock in lieu of an increase in the amount of the Warrant Quantity, the terms of which shall be identical to those of this Warrant, except that such warrant shall be exercisable into the number of shares of Other Shares of Common Stock that would have been payable to the Holder pursuant to such dividend or distribution had the Holder exercised this Warrant immediately prior to such record date and with an aggregate exercise price equal to the product of the amount by which the exercise price of this Warrant was decreased with respect to such dividend or distribution pursuant to the terms of the first part of this Section 3(b)(ii) and the Warrant Quantity in effect immediately prior to such record
date.

(c) Treatment of Options and Convertible Securities. In case the Company at any time or from time to time on or after the date hereof shall issue, sell, grant or assume, or shall fix a record date for the determination of holders of any class of securities of the Company entitled to receive, any Options or Convertible Securities (whether or not the rights thereunder are immediately exercisable), then, and in each such case, the maximum number of Additional Shares of Common Stock (as set forth in the instrument relating thereto, without regard to any provisions contained therein for a subsequent adjustment of such number) issuable upon the exercise of such Options or, in the case of Convertible Securities and Options therefor, the conversion or exchange of such Convertible Securities, shall be deemed
to be Additional Shares of Common Stock issued as of the time of such issue, sale, grant or assumption or, in case such a record date shall have been fixed, as of the close of business on such record date (or, if the Common Stock trades on an ex-dividend basis, on the date prior to the commencement of ex-dividend trading), provided that such Additional Shares of Common Stock shall not be deemed to have been issued unless the consideration per share (determined pursuant to Section 3(e)) of any such shares would be less than the Exercise Price in effect on the date of and immediately prior to such issue, sale, grant or assumption or immediately prior to the close of business on such record date (or, if the Common Stock trades on an ex-dividend basis, on the date prior to the commencement of ex-dividend trading), as the case may be, and provided, further, that in any such case in which Additional Shares of Common Stock are deemed to be issued:

(i) whether or not the Additional Shares of Common Stock underlying such Options or Convertible Securities are deemed to be issued, no further adjustment of the Exercise Price shall be made under this Section 3 upon the subsequent issue or sale of Convertible Securities or shares of Common Stock upon the exercise of such Options or the conversion or exchange of such Convertible Securities, except in the event of an adjustment pursuant to the terms of any such Options or Convertible Securities, subsequent to the date of the issue or sale thereof, of the number of Additional Shares of Common Stock issuable upon the exercise of such Options or the conversion or exchange of such Convertible Securities by reason of (x) a change of control of the Company (without duplication of the effect of any other
adjustment hereunder), (y) the acquisition by any Person or group of Persons of any specified 

 

 

number or percentage of the voting securities of the Company or (z) any other event or occurrence, such as a reset of pricing with respect to the conversion of convertible securities, each such case to be deemed hereunder to involve a separate issuance of Additional Shares of Common Stock, Options or Convertible Securities, as the case may be;

(ii) if such Options or Convertible Securities by their terms provide, with the passage of time or otherwise, for any increase in the consideration payable to the Company, or decrease in the number of Additional Shares of Common Stock issuable, upon the exercise, conversion or exchange thereof (by change of rate or otherwise), the adjustment of the Exercise Price under this Section 3 computed upon the original issue, sale, grant or assumption thereof (or upon the occurrence of the record date, or date prior to the commencement of ex-dividend trading, as the case may be, with respect thereto), and any subsequent adjustments based thereon, shall, upon any such increase or decrease becoming effective, be recomputed to reflect such increase or decrease insofar as it affects such Options, or the rights of conversion or exchange under such Convertible Securities, which are
outstanding at such time;

(iii) upon the expiration (or purchase by the Company and cancellation or retirement) of any such Options which shall not have been exercised or the expiration of any rights of conversion or exchange under any such Convertible Securities which (or purchase by the Company and cancellation or retirement of any such Convertible Securities the rights of conversion or exchange under which) shall not have been exercised, the adjustment of the Exercise Price under this Section 3 computed upon the original issue, sale, grant or assumption thereof (or upon the occurrence of the record date, or date prior to the commencement of ex-dividend trading, as the case may be, with respect thereto), and any subsequent adjustments based thereon, shall, upon such expiration (or such cancellation or retirement, as the case may be), be recomputed as if:

(A) in the case of Options for Common Stock or Convertible Securities, the only Additional Shares of Common Stock issued or sold were the Additional Shares of Common Stock, if any, actually issued or sold upon the exercise of such Options or the conversion or exchange of such Convertible Securities and the consideration received therefor was the consideration actually received by the Company for the issue, sale, grant or assumption of all such Options, whether or not exercised, plus the consideration actually received by the Company upon such exercise, or for the issue or sale of all such Convertible Securities which were actually converted or exchanged, plus the additional consideration, if any, actually received by the Company upon such conversion or exchange, and

(B) in the case of Options for Convertible Securities, only the Convertible Securities, if any, actually issued or sold upon the exercise of such Options were issued at the time of the issue or sale, grant or assumption of such Options, and the consideration received by the Company for the Additional Shares of Common Stock deemed to have then been issued was the consideration actually received by the Company for the issue, sale, grant or assumption of all such Options, whether or not exercised, plus the consideration deemed to have been received by the Company (pursuant to Section 3(e)) upon the issue or sale of such Convertible Securities with respect to which such Options were actually exercised;
(iv) no readjustment pursuant to subdivision (ii) or (iii) above shall have the effect of increasing the Exercise Price or decreasing the Warrant Quantity by an

 

 

 amount in excess of the amount of the adjustment thereof originally made in respect of the issue, sale, grant or assumption of such Options or Convertible Securities; and

(v) in the case of any such Options which expire by their terms not more than 30 days after the date of issuance, sale, grant or assumption thereof, no adjustment of the Exercise Price shall be made under this Section 3 in respect of such Options until the expiration or exercise of all such Options, whereupon such adjustment shall be made in the manner provided in subdivision (iii) above.

(d) Treatment of Stock Dividends, Stock Splits, etc. In case the Company at any time or from time to time on or after the date hereof shall declare or pay any dividend on the Common Stock payable in Common Stock, or shall effect a subdivision of the outstanding shares of Common Stock into a greater number of shares of Common Stock (by reclassification or otherwise than by payment of a dividend in Common Stock), then, and in each such case, the Exercise Price will be proportionately decreased, and the number of shares of Common Stock issuable under this Warrant will be proportionately increased, effective (i) in the case of any such dividend, immediately after the close of business on the record date for the determination of holders of any class of securities entitled to receive such dividend, or (ii)
in the case of any such subdivision, at the close of business on the day immediately prior to the day upon which such corporate action becomes effective.

(e) Computation of Consideration. For the purposes of this Section 3,

(i) the consideration for the issuance or sale of any Additional Shares of Common Stock shall, irrespective of the accounting treatment of such consideration,

 (A) insofar as it consists of cash, be computed at the net amount of cash received by the Company, without deducting any expenses paid or incurred by the Company or any commissions or compensations paid or concessions or discounts allowed to underwriters, dealers or others performing similar services in connection with such issue or sale,

 (B) insofar as it consists of property (including securities) other than cash, be computed at the Fair Value thereof at the time of such issuance or sale, and

 (C) in case Additional Shares of Common Stock are issued or sold together with other stock or securities or other assets of the Company for a consideration which covers both, be the portion of such consideration so received, computed as provided in clauses (A) and (B) above, allocable to such Additional Shares of Common Stock, such allocation to be determined in the same manner that the Fair Value of property not consisting of cash or securities is to be determined as provided in the definition of “Fair Value” herein; and

(ii) Additional Shares of Common Stock deemed to have been issued pursuant to Section 3(c), relating to Options and Convertible Securities, shall be deemed to have been issued for a consideration per share determined by dividing:

 (A) the total amount, if any, received and receivable by the Company as consideration for the issue, sale, grant or assumption of the Options or Convertible Securities in question, plus the minimum aggregate amount of additional 

 

 

consideration (as set forth in the instruments relating thereto, without regard to any provision contained therein for a subsequent adjustment of such consideration to protect against dilution) payable to the Company upon the exercise in full of such Options or the conversion or exchange of such Convertible Securities or, in the case of Options for Convertible Securities, the exercise of such Options for Convertible Securities and the conversion or exchange of such Convertible Securities, in each case computing such consideration as provided in the foregoing subdivision (i),

by

(B) the maximum number of Additional Shares of Common Stock (as set forth in the instruments relating thereto, without regard to any provision contained therein for a subsequent adjustment of such number to protect against dilution) issuable upon the exercise of such Options or the conversion or exchange of such Convertible Securities.

(f) Adjustments for Combinations, etc. If the Company at any time after the date hereof combines (by combination, reverse stock split or otherwise) one or more classes of its outstanding shares of Common Stock into a smaller number of shares, the Exercise Price will be proportionately increased effective at the close of business on the date the combination becomes effective, without duplication of any other increase in the Exercise Price resulting from such combination.

(g) Dilution in Case of Other Securities. In case any Other Securities shall be issued or sold or shall become subject to issue or sale upon the conversion or exchange of any stock (or Other Securities) of the Company (or any issuer of Other Securities or any other Person referred to in Section 4) or to subscription, purchase or other acquisition pursuant to any Options issued or granted by the Company (or any such other issuer or Person) for a consideration such as to dilute, on a basis consistent with the standards established in the other provisions of this Section 3, the purchase rights granted by this Warrant, then, and in each such case, the computations, adjustments and readjustments provided for in this Section 3 with respect to the Exercise Price and the number of shares purchasable upon
Warrant exercise shall be made as nearly as possible in the manner so provided and applied to determine the amount of Other Securities from time to time receivable upon the exercise of the Warrants (without duplication of the effect of any other adjustment hereunder), so as to protect the holders of the Warrants against the effect of such dilution.

(h) De Minimis Adjustments. If the amount of any adjustment of the Exercise Price per share required pursuant to this Section 3 would be less than one tenth (1/10) of one percent (1%) of the Exercise Price then in effect, such amount shall be carried forward and adjustment with respect thereto made at the time of and together with any subsequent adjustment which, together with such amount and any other amount or amounts so carried forward, shall aggregate a change in the Exercise Price then in effect of at least one tenth (1/10) of one percent (1%) of such Exercise Price. All calculations under this Warrant shall be made to the nearest .001 of a cent or to the nearest one-hundredth of a share, as the case may be.

(i) Abandoned Dividend or Distribution. If the Company shall take a record of the holders of its Common Stock for the purpose of entitling them to receive a dividend or other distribution (which results in an adjustment to the Exercise Price under the terms of this Warrant) and shall, thereafter, and before such dividend or distribution is paid or delivered to shareholders entitled thereto, legally abandon its plan to pay or deliver such dividend or 

 

 

distribution, then any adjustment made to the Exercise Price and the number of shares of Common Stock purchasable upon Warrant exercise by reason of the taking of such record shall be reversed, and any subsequent adjustments, based thereon, shall be recomputed. 

4. CONSOLIDATION, MERGER, ETC.

(a) 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 in accordance with the provisions of this Section 4(a) pursuant to written agreements in form and substance reasonably satisfactory to the Required Holders and approved by the Required Holders prior to such Fundamental Transaction, which approval shall not be unreasonably withheld, including, if applicable, agreements to deliver to each holder of Issued Warrants in exchange for such Issued Warrants a security of the Successor Entity evidenced by a written instrument substantially similar in form and substance to this Warrant, including, without limitation, an adjusted exercise price equal to the value for the shares of Common Stock reflected by the terms of
such Fundamental Transaction, and exercisable for a corresponding number of shares of capital stock equivalent to the shares of Common Stock or Other Securities 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 reasonably satisfactory to the Required Holders 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 occurrence of any Fundamental Transaction, the Successor Entity shall succeed to, and be substituted for (so that from and after the date of such Fundamental Transaction, the provisions of this Warrant 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 with the same effect as if such
Successor Entity had been named as the Company herein. Upon consummation of the 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 Fundamental Transaction, in lieu of the shares of the Common Stock (or Other Securities, cash, assets or other property) purchasable upon the exercise of the Warrant prior to such Fundamental Transaction, such shares of the publicly traded common stock (or its equivalent) of the Successor Entity (including its Parent Entity), as adjusted in accordance with the provisions of this Warrant. In addition to and not in substitution for any other rights hereunder, prior to the consummation of any Fundamental Transaction pursuant to which holders of shares of Common Stock are entitled to receive Other Securities or other assets with respect to or in exchange for shares of Common Stock (a “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 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) purchasable 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 such Fundamental Transaction had the Warrant been exercised immediately prior to such Fundamental Transaction. Provision made pursuant to the preceding sentence shall be in a form and substance reasonably satisfactory to the Required Holders. The provisions of this
Section shall apply similarly and equally to successive Fundamental Transactions and Corporate Events and shall be applied without regard to any limitations on the exercise of this Warrant.

 

 

(b) Notwithstanding the foregoing and the provisions of Section 4(a) above, in the event of a Fundamental Transaction, the Company may, at its option, redeem the Warrant by delivering a written notice thereof via facsimile and overnight courier to the Holder (a “Fundamental Transaction Redemption Notice”) no sooner than sixty (60) days but not later than fifteen (15) days prior to the consummation of a Fundamental Transaction, together with a cash payment (the “Redemption Payment”) to the Holder in an amount determined by taking the product obtained by multiplying (i) the greater of (A) the sum of (x) the average of the daily VWAP during the 7 consecutive Trading Days preceding March 26, 2008 (as
adjusted for stock dividends, stock splits, stock combinations, reverse stock splits or other similar transactions), and (y) an amount constituting a 30% annualized rate of return (assuming daily compounding) on the average of the daily VWAP during the 7 consecutive Trading Days preceding March 26, 2008 (as adjusted for stock dividends, stock splits, stock combinations, reverse stock splits or other similar transactions), (B) the average of the daily VWAP during the 7 consecutive Trading Days preceding the date of facsimile delivery or other delivery of such Fundamental Transaction Redemption Notice by the Company to the Holder (as adjusted for stock dividends, stock splits, stock combinations, reverse stock splits or other similar transactions), and (C) the highest amount of consideration per share of Common Stock to be received by any shareholder of the Company upon consummation of such Fundamental Transaction, by (ii) the aggregate number of shares of Common Stock into which this
Warrant is exercisable (without regard to any limitations on the exercise of this Warrant) and subtracting from such product an amount equal to the product obtained by multiplying the Exercise Price in effect at 11:59:59 p.m. on the date immediately prior to the date of such delivery of such Fundamental Transaction Redemption Notice by the aggregate number of shares of Common Stock into which this Warrant is then exercisable (without regard to any limitations on the exercise of this Warrant). Upon redemption of the Warrant and payment by the Company to the Holder of the Redemption Payment in accordance with this Section 4(b), immediately thereafter this Warrant shall be cancelled, terminated and of no further force and effect.

(c) Notwithstanding the foregoing and the provisions of Section 4(a) above and subject to Section 4(b) above, in the event of a Fundamental Transaction other than one in which a Successor Entity that is a publicly traded corporation whose stock is quoted or listed for trading on an Eligible Market assumes this Warrant such that the Warrant shall be exercisable for the publicly traded Common Stock of such Successor Entity, 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) shall purchase this Warrant from the Holder by paying to the Holder, within five (5) Business Days of such request (or, if later, on the effective date of the Fundamental Transaction), cash in an amount equal to the higher of (I) the amount determined by taking the product obtained by multiplying
(i) the greater of (A) the highest amount of consideration per share of Common Stock to be received by any shareholder of the Company upon consummation of such Fundamental Transaction and (B) the average of the daily VWAP during the 7 consecutive Trading Days preceding the date on which such Fundamental Transaction was first publicly announced (as adjusted for stock dividends, stock splits, stock combinations, reverse stock splits or other similar transactions) by (ii) the aggregate number of shares of Common Stock into which this Warrant was exercisable immediately prior to such consummation (without regard to any limitations on the exercise of this Warrant) and subtracting from such product an amount equal to the product obtained by multiplying the Exercise Price then in effect by the aggregate number of shares of Common Stock into which this Warrant is then exercisable (without regard to any limitations on the exercise of this Warrant), and (II) at the election of the Holder, the
fair market value of the remaining unexercised portion of this Warrant (with no discount for illiquidity, private company, or 

 

 

minority status) on the date of such election by the Holder, as determined jointly and in good faith by the Company and the Holder; provided, however, that if such parties are unable to reach agreement within a reasonable period of time (not to exceed twenty (20) Business Days), such fair market value shall be determined in good faith, by an independent, nationally recognized investment banking or valuation firm selected jointly by the Company and the Holder or, if that selection cannot be made within ten days, by an independent, nationally-recognized investment banking firm selected by the American Arbitration Association in accordance with its rules, and provided further, that all of the fees and expenses of any third parties incurred in connection with determining such fair market value will be paid by the Company. If required by any such investment banking firm or arbitrator, the Company shall execute a retainer and engagement letter containing reasonable terms and conditions, including without limitation, customary provisions concerning the rights of indemnification and contribution by the Company in favor of such investment banking firm or arbitrator and its officers, directors, partners, employees, agents and Affiliates.

5. OTHER DILUTIVE EVENTS. In case any event shall occur as to which the provisions of Section 3 or Section 4 or the other anti-dilution provisions herein are not strictly applicable or if strictly applicable would not fairly protect the purchase rights represented by this Warrant in accordance with the essential intent and principles of such provisions, then, in each such case, the Company shall at its own expense appoint a firm of independent certified public accountants of recognized national standing (which may be the regular auditors of the Company), which shall give their opinion on the adjustment, if any, on a basis consistent with the essential intent and principles established in such provisions, necessary to preserve, without dilution (consistent with the essential intent and principles
established in such provisions), the purchase rights represented by this Warrant. Upon receipt of such opinion, the Company shall promptly mail a copy thereof to the Holder and shall make the adjustments described therein; provided that no such adjustment pursuant to this Section 5 will decrease the Warrant Quantity or increase the Exercise Price except as otherwise determined pursuant to Section 3 or Section 4.

6. NONCIRCUMVENTION. The Company hereby covenants and agrees that the Company will not, by amendment of its certificate of incorporation, bylaws 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, free from all taxes, liens, security interests, encumbrances, preemptive rights and charges, (iii) shall, so long as any of the Issued 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 Issued Warrants, 130% of the number of shares of Common Stock as shall from time to time be necessary to effect the exercise of the Issued Warrants then outstanding (without regard to any limitations on exercise, except as provided in Section 2(f)(ii)), and (iv) except for shares of preferred stock of the Company that are convertible into shares of Common Stock or that are issued and outstanding as of the date hereof or issued pursuant to a Capital Raise or Second Capital Raise, the
Company shall not, and shall not permit any of its Subsidiaries to, issue any 

 

 

security of any class which is preferred as to dividends or as to the distribution of assets upon voluntary or involuntary dissolution, liquidation or winding-up.

7. LEGENDS. 

(a) Restrictive Legends. Except as otherwise permitted by this Section 7, each Warrant (including each Warrant issued upon the transfer of any Warrant) shall be stamped or otherwise imprinted with a legend in substantially the following form:

“THIS WARRANT AND COMMON STOCK OR OTHER SECURITIES ISSUABLE UPON THE EXERCISE OF THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR ANY STATE SECURITIES LAWS AND NEITHER THIS WARRANT NOR THE COMMON STOCK OR OTHER SECURITIES ISSUABLE UPON THE EXERCISE OF THIS WARRANT MAY BE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER THE ACT AND THE RULES AND REGULATIONS THEREUNDER. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.”

Except as otherwise permitted by this Section 7, each certificate for Common Stock (or Other Securities) issued upon the exercise of any Warrant, and each certificate issued upon the transfer of any such Common Stock (or Other Securities), shall be stamped or otherwise imprinted with a legend in substantially the following form:

“THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR ANY STATE SECURITIES LAWS AND MAY NOT BE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER THE ACT AND THE RULES AND REGULATIONS THEREUNDER. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.”

(b) Termination of Restrictions. The restrictions imposed on the transferability of Restricted Securities set forth in the legend of this Warrant shall cease and terminate as to any particular Restricted Securities (i) when a registration statement with respect to the sale of such securities shall have been declared effective under the Securities Act and such securities shall have been disposed of in accordance with such registration statement, (ii) when such securities are sold pursuant to Rule 144 or Rule 144A (or any similar provision then in force) under the Securities Act, or (iii) when such restrictions are no longer required or necessary in order to protect the Company against a violation of the Securities Act upon any sale or other disposition of such securities without registration thereof.
Whenever such restrictions shall cease and terminate as to any Restricted Securities, the Holder shall be entitled to receive from the Company, without expense, new securities of like tenor not bearing the legend set forth in this Warrant. If the Company shall fail for any reason or for no reason to issue to the holder of the Securities within three (3) Trading Days shares of Common Stock to deliver in satisfaction of a sale by the holder of such Securities that the holder anticipated receiving without legend from the Company, then 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 Buy-In Price, at which point the Company’s obligation to deliver such unlegended Securities shall terminate, or (ii) promptly honor its obligation to deliver to the holder such unlegended Securities as provided above 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 Market Price on the date of exercise.

8. NOTICES OF CORPORATE ACTION. In the event of:

(a) any taking by the Company of a record of the holders of any class of securities for the purpose of determining the holders thereof who are entitled to receive any dividend or other distribution, or any right to subscribe for, purchase or otherwise acquire any Common Stock or any other securities or property, or to receive any other right, or

(b) any capital reorganization of the Company, any reclassification or recapitalization of the securities of the Company, any consolidation or merger involving the Company and any other Person, any transaction or series of transactions in which more than 50% of the voting securities of the Company are transferred to another Person, or any transfer, sale or other disposition of all or substantially all the assets of the Company to any other Person, or

(c) any voluntary or involuntary dissolution, liquidation or winding-up of the Company, the Company shall mail or otherwise deliver to each Holder of a Warrant a written notice specifying (i) the date or expected date on which any such record is to be taken for the purpose of such dividend, distribution or right, and the amount and character of such dividend, distribution or right, and (ii) the date or expected date on which any such reorganization, reclassification, recapitalization, consolidation, merger, transfer, sale, disposition, dissolution, liquidation or winding-up is to take place and the time, if any such time is to be fixed, as of which the holders of Common Stock (or Other Securities) shall be entitled to exchange their Common Stock (or Other Securities) for the securities or other property deliverable upon such reorganization, reclassification, recapitalization, consolidation, merger, transfer, dissolution, liquidation or winding-up. Such notice shall be mailed at
least 15 days prior to the date therein specified. 

9. REGISTRATION OF COMMON STOCK. If any shares of Common Stock required to be reserved for purposes of exercise of this Warrant require registration with or approval of any governmental authority under any federal or state law (other than the Securities Act) before such shares may be issued upon exercise, the Company shall, at its expense and as expeditiously as possible, use its best efforts to cause such shares to be duly registered or approved, as the case may be. At any such time as Common Stock is listed on any national securities exchange, the Company shall, at its expense, obtain promptly and maintain the approval for listing on each such exchange, upon official notice of issuance, the shares of Common Stock issuable upon exercise of the then outstanding Warrants and maintain the listing of
such shares after their issuance; and the Company shall also list on such national securities exchange, shall register under the Exchange Act and shall maintain such listing of, any Other Securities that at any time are issuable upon exercise of the Warrants, if and at the time that any securities of the same class shall be listed on such national securities exchange by the Company.
10. AVAILABILITY OF INFORMATION. Unless the Company is subject to and in material compliance with the reporting requirements under the Exchange Act, the

 

 

 Company shall, at any time and from time to time, upon the request of any holder of any of the Warrants, any Common Stock (or Other Securities) issued or issuable upon the exercise of any of the Warrants or any Common Stock (or Other Securities) issued subsequent to the exercise of any of the Warrants as a dividend or other distribution with respect to, or resulting from a subdivision of the outstanding Common Stock (or Other Securities) into a greater number of Common Stock by reclassification, stock splits or otherwise, or in exchange for or in replacement of the Common Stock (or Other Securities) issued upon such exercise (such Warrants, Common Stock and Other Securities collectively, the “Applicable Securities”) and upon the request of any Person designated by such holder as a prospective purchaser of
any Applicable Securities, furnish in writing to such holder or such prospective purchaser, as the case may be, a statement as of a date not earlier than twelve (12) months prior to the date of such request of the nature of the business of the Company and the products and services it offers and copies of the Company’s most recent balance sheet and profit and loss and retained earnings statements, together with similar financial statements for such part of the two preceding fiscal years as the Company shall have been in operation, all such financial statements to be audited to the extent audited statements are reasonably available; provided, that in any event the most recent financial statements so furnished shall include a balance sheet as of a date less than 16 months prior to the date of such request, statements of profit and loss and retained earnings for the 12 months preceding the date of such
balance sheet, and, if such balance sheet is not as of a date less than six months prior to the date of such request, additional statements of profit and loss and retained earnings for the period from the date of such balance sheet to a date less than six months prior to the date of such request. If the Company shall have filed a registration statement pursuant to the requirements of Section 12 of the Exchange Act or a registration statement pursuant to the requirements of the Securities Act, the Company shall timely file the reports required to be filed by it under the Securities Act and the Exchange Act (including but not limited to the reports under Sections 13 and 15(d) of the Exchange Act referred to in subparagraph (c) of Rule 144 adopted by the Commission under the Securities Act)) and will take such further action as any holder of Applicable Securities may reasonably request, all to the extent required from time to time to enable such holder to sell Applicable Securities
without registration under the Securities Act within the limitation of the exemptions provided by (a) Rule 144 and Rule 144A under the Securities Act, as such rules may be amended from time to time, or (b) any other rule or regulation now existing or hereafter adopted by the Commission. Upon the request of any holder of Applicable Securities, the Company will deliver to such holder a written statement as to whether it has complied with such requirements. This Section 10 shall not apply to any holder of Warrant Shares that are not Restricted Securities if such holder no longer holds any Issued Warrant or any Warrant Shares that are Restricted Securities.

11.REGISTRATION AND TRANSFER OF WARRANTS, ETC.

(a) Warrant Register; Ownership of Warrants. Each Warrant issued by the Company shall be numbered and shall be registered in a warrant register (the “Warrant Register”) as it is issued and transferred, which Warrant Register shall be maintained by the Company at its principal office or, at the Company’s election and expense, by a Warrant Agent or the Transfer Agent. The Company shall be entitled to treat the registered Holder of any Warrant on the Warrant Register as the owner in fact thereof for all purposes and shall not be bound to recognize any equitable or other claim to or interest in such Warrant on the part of any other Person, and shall not be affected by any notice to the contrary, except that, if
and when any Warrant is properly assigned in blank, the Company may (but shall not be obligated to) treat the bearer thereof as the owner of such Warrant for all purposes. 

 

 

(b) Transfer of Warrants. 

(i) Transfer. If applicable, this Warrant and all rights hereunder are transferable in whole or in part, without charge to the Holder hereof, upon surrender of this Warrant with a properly executed Form of Assignment attached hereto as Exhibit B at the principal office of the Company; provided, that (A) any transfer shall comply with the Securities Act and other applicable securities laws and regulations and (B) if such transfer is not effected pursuant to an effective registration statement filed under the Securities Act, if requested by the Company the Holder shall provide a legal opinion to the Company, in form and substance reasonably satisfactory to the Company, to the effect that such transfer may be made without
registration under the Securities Act, provided that such legal opinion shall not be required if (I) the Holder has provided to the Company and any transfer agent of the Company reasonable assurances that such transfer may be made under Rule 144 under the Securities Act, (II) the Holder has provided to the Company reasonably satisfactory evidence that such transfer is being made to an Affiliate of the Holder (which evidence may consist of a representation letter of the transferee to such effect), or (III) such transfer may be made without restriction pursuant to Rule 144 under the Securities Act. Upon any partial transfer, the Company shall at its expense issue and deliver to the Holder a new Warrant of like tenor, in the name of the Holder, which shall be exercisable for such number of shares of Common Stock with respect to which rights under this Warrant were not so transferred.

(ii) Number of Warrants. By accepting this Warrant, any transferee of the Holder acknowledges and agrees that (A) the actual number of shares of Common Stock issuable upon exercise of this Warrant may be more or less than that reflected herein, either as a result of adjustments pursuant to the terms hereof or as a result of prior exercises of a portion of this Warrant by a prior holder and (B) the Company shall not be liable for any failure of such transferee to determine the actual number of Warrant Shares issuable pursuant hereto or the then-effective Exercise Price prior to such transferee’s acquisition of this Warrant.

(c) Replacement of Warrants. On receipt by the Company of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant and, in the case of any such loss, theft or destruction of this Warrant, on delivery of an indemnity agreement reasonably satisfactory in form, substance and amount to the Company or, in the case of any such mutilation, on surrender of such Warrant to the Company at its principal office and cancellation thereof, the Company at its expense shall execute and deliver, in lieu thereof, a new Warrant of like tenor.

(d) Adjustments To Exercise Price and Number of Common Stock. Notwithstanding any adjustment in the Exercise Price or in the number or kind of shares of Common Stock purchasable upon exercise of this Warrant, any Warrant theretofore or thereafter issued may continue to express the same number and kind of shares of Common Stock as are stated in this Warrant, as initially issued. 

12. REMEDIES; SPECIFIC PERFORMANCE. The Company stipulates that there would be no adequate remedy at law to the Holder of this Warrant in the event of any default or threatened default by the Company in the performance of or compliance with any of the terms of this Warrant and accordingly, the Company agrees that, in addition to any other remedy to which the Holder may be entitled at law or in equity, the Holder shall be entitled to seek to compel specific performance of the obligations of the Company under this Warrant, without the posting of any bond, in accordance with the terms and conditions of this Warrant in any court specified in Section 17, and if any action should be brought in equity to enforce any of the provisions of this Warrant, the Company shall not raise the defense that there is an adequate 

 

 

remedy at law. A delay or omission by the Holder hereto in exercising any right or remedy accruing upon any such breach shall not impair the right or remedy or constitute a waiver of or acquiescence in any such breach. No remedy shall be exclusive of any other remedy. All available remedies shall be cumulative.

13. NO RIGHTS OR LIABILITIES AS STOCKHOLDER. Nothing contained in this Warrant shall be construed as (a) conferring upon the Holder hereof any rights as a stockholder of the Company, including without limitation, the right to vote or to consent to any action of the stockholders, to receive dividends or other distributions, to exercise any preemptive right or to receive any notice of any meeting of stockholders or any proceedings of the Company, in each case except as otherwise provided in this Warrant (including, without limitation, Section 3 hereof) or in any of the other Transaction Documents, (b) imposing any obligation on the Holder to purchase any securities or (c) imposing any liabilities on the Holder as a stockholder of the Company, whether such obligation or liabilities are asserted by the
Company or by creditors of the Company.

14. NOTICES. All notices and other communications (and deliveries) provided for or permitted hereunder shall be made in writing by hand delivery, facsimile, any courier guaranteeing overnight delivery or first class registered or certified mail, return receipt requested, postage prepaid, addressed as follows:

If to the Company:

Proliance International, Inc.

100 Gando Drive

New Haven, Connecticut 06513

Attention: Richard A. Wisot

Facsimile: 203-401-6470

If to the Holder:

______________

Two Greenwich Plaza

Greenwich, Connecticut 06830

Attention: Portfolio Manager - Proliance

Facsimile: 203-542-4550

or such other address as may hereafter be designated in writing by the recipient party to the sending party in accordance with the provisions of this Section.

All such notices and communications (and deliveries) shall be deemed to have been duly given: at the time delivered by hand, if personally delivered; when transmitted with a receipt of successful transmission, if by facsimile; on the next Business Day, if timely delivered to a courier guaranteeing overnight delivery; and five days after being deposited in the mail, if sent first class or certified mail, return receipt requested, postage prepaid; provided, that the exercise of any Warrant shall be effective in the manner provided in Section 2.

15. AMENDMENTS. Except as set forth below, this Warrant and any term hereof may not be amended, modified, supplemented or terminated, and waivers or consents to departures from the provisions hereof may not be established, without the written consent of the Company and the Holder of this Warrant. All Issued Warrants and Other Warrants may be 

 

 

amended, modified, supplemented or terminated, and waivers or consents to departures from the provisions thereof may be established, by the written consent of the Company and Required Holders; provided however, that with respect to any amendment, modification, supplement, termination or waiver of any provisions of this Warrant that would disproportionately adversely affect the rights of any Warrantholder, the Company shall seek from each Warrantholder disproportionately adversely affected, a consent in writing to such amendment, modification, supplement, termination or waiver of such provisions of this Warrant, which consent may be withheld by such Warrantholder in its sole discretion. If the Company is unable to obtain a consent from each
Warrantholder whose rights would be disproportionately adversely affected by the proposed amendment, modification, supplement, termination or waiver of provisions of this Warrant, then such amendment, modification, supplement, termination or waiver of provisions of this Warrant shall not be adopted by the Company.

16. DESCRIPTIVE HEADINGS, ETC. The headings in this Warrant are for convenience of reference only and shall not limit or otherwise affect the meaning of terms contained herein. Unless the context of this Warrant otherwise requires: (a) words of any gender shall be deemed to include each other gender; (b) words using the singular or plural number shall also include the plural or singular number, respectively; (c) the words “hereof”, “herein” and “hereunder” and words of similar import when used in this Warrant shall refer to this Warrant as a whole and not to any particular provision of this Warrant, and Section and paragraph references are to the Sections and paragraphs of this Warrant unless otherwise specified; (d) the word “including” and words of similar
import when used in this Warrant shall mean “including, without limitation,” unless otherwise specified; (e) “or” is not exclusive; and (f) provisions apply to successive events and transactions.

17. GOVERNING LAW; JURISDICTION; WAIVER OF JURY TRIAL. 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. The Company and the Holder hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in The City of New York, Borough of Manhattan, 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 suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is brought in an inconvenient forum or that the venue of such suit, action or proceeding is improper. The Company and the Holder hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof to such party at the address for such notices to it under this 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. THE COMPANY AND THE HOLDER HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE
HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY. 

18. COSTS AND ATTORNEYS’ FEES. If any action, suit or other proceeding is instituted concerning or arising out of this Warrant, the Company and the Holder 

 

 

agree that the prevailing party shall be entitled to recover from the other party all of the prevailing party’s costs and reasonable attorneys’ fees incurred in each and every such action, suit or other proceeding in which it is the prevailing party, including any and all appeals or petitions therefrom. 

19. SUCCESSORS AND ASSIGNS. This Warrant shall inure to the benefit of and be binding upon the parties hereto and their respective heirs, successors and permitted assigns. For purposes of this Warrant, “successor” for any entity other than a natural person shall mean a successor to such entity as a result of such entity’s merger, consolidation, sale of substantially all of its assets or similar transaction.

20. SEVERABILITY. In the event that any one or more of the provisions, paragraphs, words, clauses, phrases or sentences contained herein, or the application thereof in any circumstances, is held invalid, illegal or unenforceable in any respect for any reason, the validity, legality and enforceability of any such provision, paragraph, word, clause, phrase or sentence in every other respect and of the other remaining provisions, paragraphs, words, clauses, phrases or sentences hereof shall not be in any way impaired, it being intended that all rights, powers and privileges of the parties hereto shall be enforceable to the fullest extent permitted by law; provided that this Section 20 shall not cause this Warrant to differ materially from the intent of the parties as herein expressed.

21. ENTIRE AGREEMENT. This Warrant, the Other Warrants, the Warrantholder Rights Agreement, the Registration Rights Agreement, the Credit Agreement and the Second Amendment to Credit Agreement (collectively, the “Other Agreements”) are intended by the parties as a final expression of their agreement and intended to be a complete and exclusive statement of the agreement and understanding of the parties hereto in respect of the subject matter contained herein. There are no restrictions, promises, representations, warranties, covenants or undertakings relating to the subject matter contained herein, other than those set forth or referred to herein or in the Other Agreements. This Agreement and the Other Agreements
supersede all prior agreements and understandings between the parties to this Warrant, both written and oral, with respect to the subject matter contained herein.

22. CONSTRUCTION. The parties hereto acknowledge that each of them has had the benefit of legal counsel of its own choice and has been afforded an opportunity to review this Warrant with its legal counsel and that this Warrant shall be construed as if jointly drafted by the parties.

[Signature Page Follows]

 

 

IN WITNESS WHEREOF, the undersigned has executed and delivered this Warrant as of the date first written above.

 

	
                         
 	
                         
 	
                        PROLIANCE INTERNATIONAL, INC.
 
	 	 	 	 
	
                          
 	
                         
 	
                        By: 
 	
                          
 
	
                         
 	
                         
 	
                         
 	
                        Name:
 
	
                         
 	
                         
 	
                         
 	
                        Title:
 

 

 

 

	
                         
 	
                        EXHIBIT A to Common Stock
 
	
                         
 	
                        Purchase Warrant
 

EXERCISE NOTICE

TO BE EXECUTED BY THE REGISTERED HOLDER TO EXERCISE THIS

WARRANT TO PURCHASE COMMON STOCK

PROLIANCE INTERNATIONAL, INC.

 

The undersigned holder hereby exercises the right to purchase _________________ of the shares of Common Stock of Proliance International, Inc., a Delaware corporation (the “Company”), evidenced by the attached Warrant, No. __________, to Purchase Common Stock (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” pursuant to Section 2(a)(ii)(A) with respect to _________________ shares of Common Stock; and/or
 

	
                         
 	
                        ____________
 	
                        by surrender to the Company for cancellation pursuant to Section 2(a)(ii)(B) certificates representing [         ]  shares of Common Stock owned by the Holder (properly endorsed for transfer in blank) having a Current Market Price on the date of Warrant exercise equal to the Exercise Price; and/or
 

	
                         
 	
                        ____________
 	
                         a “Cashless Exercise” pursuant to Section 2(a)(ii)(C) with respect to _______________ shares of Common Stock.
 

2. Notwithstanding anything to the contrary contained herein, (a) this Exercise Notice shall constitute a representation by the Holder of the Warrant submitting this Exercise Notice that after giving effect to the exercise provided for in this Exercise Notice, such Holder (together with its affiliates) will not have beneficial ownership (together with the beneficial ownership of such Holder’s affiliates) of a number of shares of Common Stock which exceeds the maximum percentage of the total outstanding shares of Common Stock as determined pursuant to the provisions of Section 2(f)(i) of the Warrant, and (b) in the case of any Cash Exercise, this Exercise Notice shall constitute a representation by the Holder of the Warrant submitting this Exercise Notice that (i) such Holder is an “accredited investor” as that term is defined in Rule 501(a) of Regulation D
promulgated under the Securities Act, and (ii) such Holder is a sophisticated investor with such knowledge and experience in financial and business matters so as to be capable of evaluating the merits and risks of the Warrant and the Warrant Shares issuable thereunder and is capable of bearing the economic risks of such Warrant and Warrant Shares.

3. Payment of Exercise Price. In the event that the holder has elected a Cash Exercise with respect to some or all of the shares of Common Stock 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.

 

 

4. Delivery of Warrant Shares. The Company shall deliver to the holder __________ Warrant Shares in accordance with the terms of the Warrant.

Date: _______________ __, ______

 

	
                        
  
 	
                         
 	
                         
 
	
                        Name of Registered Holder
 	
                         
 	
                         
 
	 	 	 	 	 
	
                        By: 
 	
                          
 	
                         
 	
                         
 	
                          
 
	
                         
 	
                        Name:
 Title:
 	
                         
 	
                         
 	
                         
 

 

 

 

	
                         
 	
                        EXHIBIT B to Common Stock 
 Purchase Warrant
 

FORM OF ASSIGNMENT

FOR VALUE RECEIVED, the undersigned hereby sells, assigns, and transfers unto the Assignee named below all of the rights of the undersigned to purchase shares of common stock, par value US$.01 per share (“Common Stock”), of Proliance International, Inc. (the “Company”) represented by the Warrant, with respect to the number of shares of Common Stock set forth below:

 

	
                        Name of Assignee
 	
                         
 	
                        Address
 	
                         
 	
                        No. of Common Stock
 	
                         
 
	
                         
 	
                         
 	
                         
 	
                         
 	
                         
 	
                         
 
	
                         
 	
                         
 	
                         
 	
                         
 	
                         
 	
                         
 
	
                         
 	
                         
 	
                         
 	
                         
 	
                         
 	
                         
 
	
                         
 	
                         
 	
                         
 	
                         
 	
                         
 	
                         
 

and does hereby irrevocably constitute and appoint ________ Attorney to make such transfer on the books of Proliance International, Inc. maintained for that purpose, with full power of substitution in the premises.

 

	
                        Dated: _______________, 200_
 	
                         
 	
                        [NAME OF HOLDER]
 
	 	 	 	 
	
                          
 	
                         
 	
                        By: 
 	
                          
 
	
                         
 	
                         
 	
                         
 	
                        Name: 
 Title:WARRANT

THIS WARRANT AND THE COMMON STOCK OR OTHER SECURITIES ISSUABLE UPON THE EXERCISE OF THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR ANY STATE SECURITIES LAWS AND NEITHER THIS WARRANT NOR THE COMMON STOCK OR OTHER SECURITIES ISSUABLE UPON THE EXERCISE OF THIS WARRANT MAY BE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER THE ACT AND THE RULES AND REGULATIONS THEREUNDER. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.

PROLIANCE INTERNATIONAL, INC.

COMMON STOCK PURCHASE WARRANT

 

	
                        No. B-__
 	
                        Dated: March 26, 2008
 
	
                         
 	
                        Warrant to Purchase ______ 
 shares of Common Stock
 

PROLIANCE INTERNATIONAL, INC., a Delaware corporation (the “Company”), for value received, hereby certifies that ____________, a Delaware limited liability company, or its registered assigns (the “Holder”), is entitled to purchase from the Company ________ duly authorized, validly issued, fully paid and nonassessable shares of common stock (the “Initial Warrant Quantity”), par value US$.01 per share, of the Company (“Common Stock”), at an exercise price per share equal to the Exercise Price (as defined below), at any time or
from time to time on or after June 1, 2008, but not after 11:59:59 p.m., New York time, on the Expiration Date (as defined below), all subject to the terms, conditions and adjustments set forth below in this Warrant. 

This Warrant is a Common Stock Purchase Warrant (the “Warrant”, such term to include any such warrants issued in substitution therefor (collectively with the Warrant, the “Warrants”)) originally issued pursuant to the terms of the Warrantholder Rights Agreement and the Second Amendment to Credit Agreement (as defined below) (each Warrant or any portion of a Warrant subsequently assigned or transferred, each an “Issued Warrant”, and collectively, the “Issued Warrants”, and each holder of an Issued Warrant, a “Warrantholder”). 

1. DEFINITIONS . As used herein, the following terms shall have the meanings indicated:

“Additional Shares of Common Stock” shall mean all shares of Common Stock (including treasury shares) issued or sold (or, pursuant to Section 3(c) or 3(d), deemed to be issued) by the Company on or after the date hereof, whether or not subsequently reacquired or retired by the Company, other than the Excluded Securities.

“Affiliate” shall mean, with respect to any Person, any other Person that directly or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with, such Person. For purposes of this definition, “control” of a Person means the power, directly or indirectly, either to (a) vote 5% or more of the Capital Stock having ordinary voting power for the election of directors of such Person or (b) direct or cause the direction of the 

 

 

management and policies of such Person whether by contract or otherwise. Notwithstanding anything to the contrary herein, for purposes hereof in no event shall the Holder be considered an Affiliate of the Company.

“Aggregate Exercise Price” shall have the meaning assigned to it in Section 2(a)(i).

“Amendment Effective Date” shall mean March 12, 2008.

“Applicable Securities” shall have the meaning assigned to it in Section 10.

“Authorized Share Failure” shall have the meaning assigned to it in Section 2(g).

“Business Day” shall mean any day other than a Saturday or a Sunday or a day on which commercial banking institutions in the City of New York are authorized or required by law to be closed. Any reference to “days” (unless Business Days are specified) shall mean calendar days.

“Buy-In” shall have the meaning assigned to it in Section 2(e).

“Buy-In Price” shall have the meaning assigned to it in Section 2(e).

“Capital Raise” shall mean a Capital Raise (as defined in the Second Amendment to Credit Agreement) consummated on or prior to May 31, 2008 pursuant to which the Company shall have (A) received at least US$30,000,000 in cash proceeds from a capital contribution to, or the issuance of Capital Stock (solely for purposes of this paragraph, as defined in the Credit Agreement) of the Company in the United States or from the incurrence of unsecured subordinated Indebtedness (as defined in the Credit Agreement) in the United States, in each case on terms and conditions satisfactory to Administrative Agent (as defined in the Credit Agreement), pursuant to documents in form and substance satisfactory to Administrative Agent, and (B) applied such cash proceeds in accordance with the Second Amendment
to Credit Agreement, provided that such Capital Raise does not involve or permit the exchange or conversion of any shares of Common Stock for or into any Convertible Securities.

“Capital Stock” shall mean (a) with respect to any Person that is a corporation, any and all shares, interests, participations or other equivalents (however designated and whether or not voting) of corporate stock, and (b) with respect to any Person that is not a corporation, any and all partnership, membership or other equity interests of such Person.

“Commission” shall mean the Securities and Exchange Commission or any successor agency having jurisdiction to enforce the Securities Act.

“Common Stock” shall have the meaning assigned to it in the introduction to this Warrant, such term to include any stock into which such Common Stock shall have been converted or changed or any stock resulting from any reclassification of such Common Stock, and all other stock of any class or classes (however designated) of the Company the holders of which have the right, without limitation as to amount, either to all or to a share of the balance of current dividends and liquidating dividends after the payment of dividends and distributions on any shares entitled to preference.

 

 

“Company” shall have the meaning assigned to it in the introduction to this Warrant, such term to include any corporation or other entity which shall succeed to or assume the obligations of the Company hereunder in compliance with Section 4.

“Convertible Securities” shall mean any evidences of indebtedness, shares of stock (other than Common Stock) or other securities directly or indirectly convertible into, exercisable for, or exchangeable for Additional Shares of Common Stock.

“Corporate Event” shall have the meaning assigned to it in Section 4(a).

“Credit Agreement” shall mean that certain Credit and Guaranty Agreement, dated as of July 19, 2007, as amended or otherwise modified or supplemented from time to time, among the Company, certain of the Company’s Subsidiaries, the lenders party thereto, and Silver Point Finance, LLC, as administrative agent and collateral agent.

“Current Market Price” shall mean, on any date specified herein, the average of the daily VWAP during the 10 consecutive Trading Days commencing 13 Trading Days before such date, except that, if on any such date the shares of Common Stock are not listed or admitted for trading on any national securities exchange or quoted in the over-the-counter market, the Current Market Price shall be the Market Price on such date.

“DTC” shall have the meaning assigned to it in Section 2(c)(ii).

“Eligible Market” shall mean the Principal Market, The New York Stock Exchange, Inc., The NASDAQ Global Market, The NASDAQ Capital Market, The NASDAQ Global Select Market or any successors thereto.

“Exchange Act” shall mean the Securities Exchange Act of 1934, as amended from time to time, and the rules and regulations thereunder, or any successor statute.

“Excluded Securities” shall mean any: (i) shares of Common Stock issued or issuable upon exercise of the Warrants or Other Warrants; (ii) shares of Common Stock issued or issuable upon exercise of any Options or Convertible Securities which are outstanding on the day immediately preceding the date hereof, provided that the terms of such Options or Convertible Securities are not amended, modified or changed on or after the date hereof (A) to increase the number of such Options or Convertible Securities or the number of Additional Shares of Common Stock or Convertible Securities into or for which such Options or Convertible Securities are convertible, exercisable or exchangeable or (B) to decrease the exercise,
exchange or conversion price of such Options or Convertible Securities; (iii) shares of Common Stock (not to exceed 50,000 shares of Common Stock in the aggregate, as adjusted for stock splits, stock combinations, stock dividends, reverse stock splits or other similar transactions) issued or issuable upon exercise of warrants (other than the Issued Warrants or the Other Warrants), having an exercise price of $0.01 per share, issued by the Company to lenders in connection with bona fide, arm’s length financings, and (iv) shares of Common Stock (not to exceed 1,596,400 shares of Common Stock in the aggregate, as adjusted for stock splits, stock combinations, stock dividends, reverse stock splits or other similar transactions) issued or issuable to directors, officers or employees of the Company pursuant to stock awards or options granted or to be granted under the Proliance International, Inc. Equity Incentive Plan or any substantially similar stock-based compensation plan of the
Company duly adopted by a majority of the non-employee members of the Board of Directors of the Company or a majority of the members of a committee of non-employee directors of the Company established for such purpose (with respect to options, solely at per share exercise prices at or above the fair market value of a share of Common Stock on the date of the grant).

 

 

“Exercise Delivery Documents” shall have the meaning assigned to it in Section 2(b).

“Exchange Notice” shall have the meaning assigned to it in Section 2(a)(i).

“Exercise Price” shall mean, as calculated from time to time, the lower of (a) the product (such product, the “VWAP Price”) obtained by multiplying (i) the lowest of the average VWAP of a share of Common Stock for any 30 consecutive Trading Days occurring (A) prior to the applicable date of exercise of this Warrant (or for purposes of determining any adjustment of the Exercise Price or of the Warrant Quantity pursuant to Sections 3, 4 or 5, prior to the applicable date of such determination) and (B) during the period of time commencing 90 Trading Days prior to the Amendment Effective Date and ending 180 Trading Days after the Amendment Effective Date by (ii) 85%, subject to adjustment and readjustment
from time to time as provided in Sections 3, 4 and 5, and (b) the VWAP Price.

“Expiration Date” shall mean the earlier of (i) March 26, 2015 and (ii) if on or prior to May 31, 2008 the Company shall have (A) received at least US$30,000,000 in cash proceeds from a capital contribution to, or the issuance of Capital Stock (solely for purposes of this paragraph, as defined in the Credit Agreement) of the Company in the United States or from the incurrence of unsecured subordinated Indebtedness (as defined in the Credit Agreement) in the United States, in each case on terms and conditions satisfactory to Administrative Agent (as defined in the Credit Agreement), pursuant to documents, in form and substance satisfactory to Administrative Agent, and (B) applied such cash proceeds in accordance with the Second Amendment to Credit Agreement, (if applicable, the date on or
prior to May 31, 2008 on which all such US$30,000,000 in cash proceeds shall have been received and applied by the Company in accordance with the foregoing clauses (A) and (B), the “Proceeds Date”), the Proceeds Date.

“Fair Value” shall mean, on any date specified herein (i) in the case of cash, the dollar amount or equivalent thereof, (ii) in the case of a security, the Current Market Price, and (iii) in all other cases, the fair value thereof (as of a date which is within 20 days of the date as of which the determination is to be made) determined jointly and in good faith by the Company and the Holder; provided, however, that if such parties are unable to reach agreement within a reasonable period of time (not to exceed twenty (20) Business Days), the Fair Value shall be determined in good faith, by an independent investment banking firm selected
jointly by the Company and the Holder or, if that selection cannot be made within ten days, by an independent investment banking firm selected by the American Arbitration Association in accordance with its rules, and provided further, that all of the fees and expenses of any third parties incurred in connection with determining the Fair Value will be paid by the Company. If required by any such investment banking firm or arbitrator, the Company shall execute a retainer and engagement letter containing reasonable terms and conditions, including without limitation, customary provisions concerning the rights of indemnification and contribution by the Company in favor of such investment banking firm or arbitrator and its officers, directors, partners, employees, agents and Affiliates.

“Fully Diluted Basis” shall mean, without duplication, the sum of (a) all shares of Common Stock issued and outstanding at the date of determination, (b) all shares of Common Stock issuable, as of the date of determination, upon the exercise of this Warrant and any other Option, warrant or similar right outstanding at the time of determination, whether or not 

 

 

presently exercisable, and (c) all shares of Common Stock issuable, as of the date of determination, upon the exercise of any conversion or exchange right contained in any security outstanding at the time of determination and convertible into or exchangeable for shares of Common Stock, whether or not presently convertible or exchangeable.

“Fundamental Transaction” shall mean that the Company shall directly or indirectly, in one or more related transactions, (i) consolidate or merge with or into any other Person and shall not be the continuing or surviving corporation of such consolidation or merger, or (ii) permit any other Person to consolidate with or merge into the Company and the Company shall be the continuing or surviving Person but, in connection with such consolidation or merger, the Common Stock or Other Securities shall be changed into or exchanged for stock or other securities of any other Person or cash or any other property, or (iii) sell, assign, transfer, convey or otherwise dispose of all or substantially all of the properties or assets of the Company to another Person, or (iv) allow another Person to make a
purchase, tender or exchange offer that is accepted by the holders of more than 50% of the outstanding shares of Common Stock (not including any shares of Common Stock 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 (v) consummate a stock purchase agreement or other business combination (including, without limitation, a reorganization, recapitalization, spin-off or scheme of arrangement) with another Person whereby such other Person acquires more than the 50% of the outstanding shares of Common Stock (not including any shares of Common Stock 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 purchase agreement or other business combination), or (vi) reorganize, recapitalize or reclassify its Common Stock, or (vii) allow any “person” or “group” (as these terms are
used for purposes of Sections 13(d) and 14(d) of the Exchange Act) to become the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of 50% of the aggregate ordinary voting power represented by issued and outstanding Common Stock.

“Holder” shall have the meaning assigned to it in the introduction to this Warrant.

“Initial Warrant Quantity” shall have the meaning assigned to it in the introduction to this Warrant.

“Issued Warrant” shall have the meaning assigned to it in the introduction to this Warrant.

“Market Price” shall mean for any security as of any date, the last closing sale for such security on the Principal Market, as reported by Bloomberg, or, if the Principal Market begins to operate on an extended hours basis and does not designate the closing sale price, then the last trade price, respectively, of such security prior to 4:00:00 p.m., New York Time, as reported by Bloomberg, or, if the Principal Market is not the principal securities exchange or trading market for such security, the last closing sale price of such security 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 sale price of such security in the over-the-counter market on the electronic bulletin
board for such security as reported by Bloomberg, or, if no closing sale price is reported for such security by Bloomberg, the average of the sale prices 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 Market Price cannot be calculated for a security on a particular date on any of the foregoing bases, the Market Price of such security on such date shall be the Fair Value (as set forth in subsection (iii) of the definition of Fair Value).

 

 

“Maximum Percentage” shall have the meaning assigned to it in Section 2(f)(i).

“Options” shall mean any rights, options or warrants to subscribe for, purchase or otherwise acquire either Additional Shares of Common Stock or Convertible Securities.

“Other Securities” shall mean any stock (other than Common Stock) and other securities of the Company or any other Person (corporate or otherwise) which the holders of the Warrants at any time shall be entitled to receive, or shall have received, upon the exercise of the Warrants, in lieu of or in addition to Common Stock, or which at any time shall be issuable or shall have been issued in exchange for or in replacement of Common Stock or Other Securities pursuant to Section 4 or otherwise.

“Other Warrants” shall mean any other warrants issued by the Company to the Holder or any of its Affiliates on the date hereof, such term to include, without limitation (x) any portion of such warrants subsequently assigned or transferred and (y) any warrants issued by the Company to the Holder, any of its Affiliates or any of their respective assignees or transferees in substitution therefor.

“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.

“Person” shall mean any individual, firm, partnership, corporation, trust, joint venture, association, joint stock company, limited liability company, unincorporated organization or any other entity or organization, including a government or agency or political subdivision thereof, and shall include any successor (by merger or otherwise) of such entity.

“Principal Market” shall mean the American Stock Exchange.

“Registration Rights Agreement” shall mean the Registration Rights Agreement dated as of the date hereof, as the same may be amended or otherwise modified or supplemented from time to time, among the Holder, the Company and the other party thereto.

“Required Holders” shall mean the holders of the Issued Warrants and Other Warrants representing at least a majority of shares of Common Stock underlying the Issued Warrants and Other Warrants then outstanding.

“Required Reserve Amount” shall have the meaning assigned to it in Section 2(g).

“Restricted Securities” shall mean (i) any Warrants bearing the applicable legend set forth in Section 7, (ii) any Common Stock (or Other Securities) issued or issuable upon the exercise of Warrants which are (or, upon issuance, will be) evidenced by a certificate or certificates bearing the applicable legend set forth in such Section, and (iii) any Common Stock (or Other Securities) issued subsequent to the exercise of any of the Warrants as a dividend or other distribution with respect to, or resulting from a subdivision of the outstanding Common Stock (or Other Securities) into a greater number of shares of Common Stock by reclassification, stock splits or otherwise, or in exchange for or in replacement of the Common Stock (or Other Securities) issued upon such exercise, which are
evidenced by a certificate or certificates bearing the applicable legend set forth in such Section.

 

 

“Second Amendment to Credit Agreement” shall mean the Second Amendment to Credit Agreement dated as of the Amendment Effective Date, as the same may be amended or otherwise modified or supplemented from time to time, among the Company, certain of the Company’s subsidiaries, the lenders from time party thereto, and Silver Point Finance, LLC, as administrative agent and collateral agent.

“Second Capital Raise” shall mean a capital contribution to, or the issuance of Capital Stock (solely for purposes of this paragraph, as defined in the Credit Agreement) of the Company in the United States or the incurrence of unsecured subordinated Indebtedness (as defined in the Credit Agreement) in the United States consummated after May 31, 2008 and on or prior to December 31, 2008, in each case (i) on terms and conditions satisfactory to Administrative Agent (as defined in the Credit Agreement), pursuant to documents in form and substance satisfactory to Administrative Agent, (ii) solely for cash proceeds received and used by the Company to repay in full the indebtedness owed by the Company under the Credit Agreement, and (iii) not involving and not permitting the exchange or
conversion of any shares of Common Stock for or into any Convertible Securities.

“Securities Act” shall mean the Securities Act of 1933, as amended from time to time, and the rules and regulations thereunder, or any successor statute.

“Share Delivery Date” shall have the meaning assigned to it in Section 2(c)(ii).

“Subsidiary” shall mean, with respect to any Person at any time, any partnership (general or limited), joint venture, corporation, trust, estate, limited liability company, association, joint-stock company, unincorporated organization or other entity of which (or in which) more than 50% of (a) the issued and outstanding shares of capital stock having ordinary voting power to elect a majority of the board of directors of such corporation (irrespective of whether at the time shares of capital stock of any other class or classes of such corporation shall or might have voting power upon the occurrence of any contingency), (b) the interest in the capital or profits of such partnership, joint venture, association, joint stock company, unincorporated organization, limited liability company or
other entity, or (c) the beneficial interest in such trust or estate, is, at such time, directly or indirectly owned or controlled by such Person, by such Person and one or more of its other Subsidiaries or by one or more of such Person’s other Subsidiaries.

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

“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).

“Transfer Agent” shall have the meaning assigned to it in Section 2(c)(i).

 

 

“Transaction Documents” shall mean the Issued Warrants, the Other Warrants, the Warrantholder Rights Agreement and the Registration Rights Agreement.

“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 securities exchange or trading market for such security, the principal securities exchange or trading market where such security is listed or traded) during the period beginning at 9:30:01 a.m., New York City time (or such other time as the Principal Market (or such other principal securities exchange or trading market, as the case may be) publicly announces is the official open of trading), and ending at 4:00:00 p.m., New York City time (or such other time as the Principal Market (or such other principal securities exchange or trading market, as the case may be) publicly announces is the official close of
trading) as reported by Bloomberg through its “Volume at Price” functions, 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 City time (or such other time as such market publicly announces is the official open of trading), and ending at 4:00:00 p.m., New York City time (or such other time as such market publicly announces is the official close of trading) 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 the weighted average price cannot be calculated for a security on a particular
date on any of the foregoing bases, the weighted average price of such security on such date shall be the Fair Value (as set forth in subsection (iii) of the definition of Fair Value). All such determinations are to be appropriately adjusted for any stock dividend, stock split, stock combination, reverse stock split or other similar transaction during the applicable calculation period.

“Warrantholder” shall have the meaning assigned to it in the introduction to this Warrant.

“Warrantholder Rights Agreement” shall mean the Warrantholder Rights Agreement dated as of the date hereof, as the same may be amended or otherwise modified or supplemented from time to time, among the Holder, the Company and the other party thereto.

“Warrant Quantity” shall mean initially the Initial Warrant Quantity, which amount shall be subject to adjustment and readjustment from time to time as provided in Sections 3, 4 and 5, and, as so adjusted or readjusted, shall remain in effect until a further adjustment or readjustment is required by Sections 3, 4 or 5.

“Warrant Register” shall have the meaning assigned to it in Section 11(a).

“Warrants” shall have the meaning assigned to it in the introduction to this Warrant.

“Warrant Shares” shall mean the shares of Common Stock issued or issuable upon exercise of the Warrants.

2. EXERCISE OF WARRANT.

(a) Manner of Exercise; Payment of the Exercise Price; Certain Adjustments Upon Exercise. 

 

 

(i) This Warrant may be exercised by the Holder hereof, in whole or in part, at any time or from time to time on or after June 1, 2008, but prior to the Expiration Date, by (i) delivery of a written notice to the Company, in the form attached hereto Exhibit A (the “Exercise Notice”), of the Holder’s election to exercise this Warrant and accompanied by payment of the Exercise Price then in effect for the number of shares of Common Stock (the “Aggregate Exercise Price”) specified in such form.

(ii) Payment of the Aggregate Exercise Price may be made as follows (or by any combination of the following):

(A) in United States currency by cash or delivery of a certified check or bank draft payable to the order of the Company or by wire transfer to the Company (each, a “Cash Exercise”);

(B) by surrender to the Company for cancellation certificates representing Common Stock owned by the Holder (properly endorsed for transfer in blank) having a Market Price on the date of Warrant exercise equal to the Exercise Price then in effect; and

(C) 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, the Holder may elect (a “Cashless Exercise”) instead to receive upon such exercise the “Net Number” of shares of Common Stock determined according to the following formula:

 

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

For purposes of the foregoing formula:

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

B= the Market Price of the shares of Common Stock on the date immediately preceding the date of the Exercise Notice.

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

(iii) 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 with respect to less than all of the Common Stock issuable under this Warrant 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 shares of Common Stock exersicable under this Warrant. 

(b) When Exercise Effective. Each exercise of this Warrant shall be deemed to have been effected immediately prior to the close of business on the Business Day on which the Exercise Notice and the payment of the Aggregate Exercise Price (or notice of a cashless exercise) (the “Exercise Delivery Documents”) shall have been provided to the 

 

 

Company as set forth in Section 2(a), and at such time the Person or Persons in whose name or names any certificate or certificates for Common Stock (or Other Securities) shall be issuable (or in whose name or names any Common Stock (or Other Securities) shall be required to be credited to its DTC account) upon such exercise as provided in Section 2(c) shall be deemed to have become the holder or holders of record thereof for all purposes.

(c) Delivery of Share Certificates, etc.; Charges, Taxes and Expenses. 

(i) On or before the first Business Day following the date on which the exercise of this Warrant shall be deemed to have been effected, the Company shall transmit by facsimile an acknowledgment of confirmation of receipt of the Exercise Delivery Documents to the Holder and the Company’s transfer agent (the “Transfer Agent”). 

(ii) On or before the third Trading Day following the date on which the Company has received all of the Exercise Delivery Documents (the “Share Delivery Date”), 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 Agent Commission system, or (Y) if the Transfer Agent
is not participating in the DTC Fast Automated Securities Transfer Program, issue and dispatch by overnight courier to the address as specified in the Exercise Notice, a certificate, registered in the Company’s share register in the name of the Holder or its designee, for the number of shares of Common Stock to which the Holder is entitled pursuant to such exercise. 

(iii) Upon delivery of the Exercise Delivery Documents, the Holder shall be deemed for all corporate purposes to have become the holder of record of the shares of Common Stock with respect to which this Warrant has been exercised, irrespective of the date such shares of Common Stock are credited to the Holder’s DTC account or the date of delivery of the certificates evidencing such shares of Common Stock, as the case may be. If this original Warrant is submitted in connection with any exercise pursuant to Section 2(a) and the number of shares of Common Stock represented by this Warrant submitted for exercise is greater than the number of shares of Common Stock being acquired upon an exercise, then 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 a new Warrant
representing the right to purchase the number of shares of Common Stock purchasable immediately prior to such exercise under this Warrant, less the number of shares of Common Stock with respect to which this Warrant is exercised. 

(iv) 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. 

(v) All shares of Common Stock issuable upon exercise of this Warrant pursuant to the terms hereof shall be validly issued, fully paid and nonassessable, issued without violation of any preemptive right or similar rights of any stock of the Company and free and clear of all taxes, liens, security interests and encumbrances. The Company shall pay all expenses in connection with, and all taxes and other governmental charges which may be payable with respect to, the issuance and 

 

 

delivery of Warrant Shares upon exercise of this Warrant. The Company shall not, however, be required to pay any tax which may be payable in respect of any transfer involved in the issue and delivery of shares in any name other than that of the then holder of this Warrant, and the Company shall not be required to issue or deliver any such stock certificate to such designee unless and until the person or persons requesting the issue thereof shall have paid to the Company the amount of such tax or shall have established to the reasonable satisfaction of the Company that such tax has been paid. 

(vi) In the case of any dispute with respect to the number of shares of Common Stock to be issued upon exercise of this Warrant, the Company shall promptly issue to the Holder such number of shares of Common Stock that is not disputed and shall submit the disputed determinations or arithmetic calculations to the Holder via facsimile within five (5) Business Days after each exercise of this Warrant. If the Holder and the Company are unable to agree as to the determination of the number of shares of Common Stock to be issued within three (3) Business Days of such disputed determination or arithmetic calculation being submitted to the Holder, then the dispute with respect to the number of shares of Common Stock to be issued upon exercise of this Warrant shall be determined in good faith by any firm of independent public accountants of national standing, selected
jointly by the Company and the Holder or, if that selection cannot be made within ten days, by any firm of independent public accountants of national standing selected by the American Arbitration Association in accordance with its rules, and provided further, that all of the fees and expenses of any third parties incurred in connection with resolving such dispute will be paid by the Company. The Company shall then, on the next Business Day, issue certificate(s) representing the appropriate number of shares of Common Stock upon exercise of the Warrant in accordance with such accounting firm’s determination under this Section 2(c)(vi).

(vii) The Company and the Holder shall mutually agree as to the tax basis of this Warrant for purposes of the Internal Revenue Code of 1986, as amended, in accordance with U.S. GAAP and the treatment of this Warrant under such Code by each of the Company and the Holder shall be consistent with such agreement.

(d) Company to Reaffirm Obligations. The Company shall, at the time of each exercise of this Warrant, upon the request of the Holder hereof, acknowledge in writing its continuing obligation to afford to such Holder all rights to which such Holder shall continue to be entitled after such exercise in accordance with the terms of this Warrant, provided that if the Holder of this Warrant shall fail to make any such request, such failure shall not affect the continuing obligation of the Company to afford such rights to the Holder.

(e) Company’s Failure to Timely Deliver Securities. If the Company shall fail for any reason or for no reason to issue to the Holder or its designee within three (3) Trading Days after the Company’s receipt of the Exercise Delivery Documents, a certificate for the number of shares of Common Stock to which the Holder or its designee is entitled and register such shares of Common Stock on the Company’s share register or to credit the Holder’s or its designee’s balance account with DTC for such number of shares of Common Stock to which the Holder or its designee is entitled upon the Holder’s exercise of this Warrant, 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 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 sum of the number of shares of Common Stock not issued to the Holder (or not issued to the Holder’s designee, as applicable) on a timely basis and to which the Holder (or such designee) is entitled 

 

 

and (B) the Market Price of the shares of Common Stock on the Trading Day immediately preceding the last possible date which the Company could have issued such shares of Common Stock to the Holder (or to the Holder’s designee, as applicable) without violating Section 2(c). In addition to the foregoing, if within three (3) Trading Days after the Company’s receipt of the Exercise Delivery Documents the Company shall fail to issue and deliver a certificate to the Holder or its designee and register such shares of Common Stock on the Company’s share register or credit the Holder’s or its designee’s balance account with DTC for the number of shares of Common Stock to which the Holder or its designee is entitled upon the Holder’s exercise hereunder, and if on or after such third 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 (a “Buy-In”), then 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 (and to issue such shares of Common Stock) or to so credit such Holder’s balance account with DTC 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 such Holder’s balance account with DTC and pay cash to the Holder in an amount equal to the excess (if any) of the Buy-In Price over the product of (A) such number of shares of Common Stock, times (B) the Market Price on the date of exercise.

(f) Limitations on Exercises. 

 (i) The Company shall not effect the exercise of this Warrant, and the Holder shall not have the right to exercise this Warrant, to the extent that after giving effect to such exercise, such Holder (together with such Holder’s affiliates) would beneficially own in excess of 4.99% (the “Maximum Percentage”) of the shares of Common Stock outstanding immediately after giving effect to such exercise. For purposes of the foregoing sentence, the aggregate number of shares of Common Stock beneficially owned by such Holder and its affiliates 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 (A) exercise of the
remaining, unexercised portion of this Warrant beneficially owned by such Holder and its affiliates and (B) exercise or conversion of the unexercised or unconverted portion of any other securities of the Company beneficially owned by such Holder and its affiliates (including, without limitation, any convertible notes or convertible preferred stock or warrants) subject to a limitation on conversion or exercise analogous to the limitation contained herein. Except as set forth in the preceding sentence, for purposes of this paragraph, beneficial ownership shall be calculated in accordance with Section 13(d) of the Exchange Act. For purposes of this Warrant, in determining the number of outstanding shares of Common Stock, the Holder may rely on the number of outstanding shares of Common Stock as reflected in (1) the Company’s most recent Form 10-K, Form 10-KSB, Form 10-Q, Form 10-QSB, Current Report on Form 8-K or other public filing with the Commission, as the case may be, (2) a
more recent public announcement by the Company or (3) any other notice by the Company or the Transfer Agent setting forth the number of shares of Common Stock outstanding. For any reason at any time, upon the written 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. In any case, the number of outstanding shares of Common Stock shall be determined after giving effect to the exercise of securities of the Company by the Holder and its affiliates since the date as of which such number of outstanding shares of Common Stock was reported. By written notice to the Company, the 

 

 

Holder may from time to time 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 sixty-first (61st) day after such notice is delivered to the Company, and (ii) any such increase or decrease will apply only to the Holder and not to any other holder of the Warrants.

 (ii) Principal Market Regulation. The Company shall not be obligated to issue any shares of Common Stock upon exercise of this Warrant and no holder of any Issued Warrant or Other Warrant shall be entitled to receive any shares of Common Stock if the issuance of such shares of Common Stock would exceed that number of shares of Common Stock which the Company may issue upon exercise of the Issued Warrants and the Other Warrants or otherwise without breaching the Company’s obligations under the rules or regulations of any applicable Eligible Market (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 Eligible 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 holders of the Issued Warrants and the Other Warrants representing at least a majority of shares of Common Stock underlying the Issued Warrants and the Other Warrants then outstanding. Until such approval or written opinion is obtained, no holder of any Issued Warrant or Other Warrant shall be issued in the aggregate, upon exercise of any Issued Warrants or Other Warrants, shares of Common Stock in an amount greater than the product of the Exchange Cap multiplied by a fraction, the numerator of which is the total number of shares of Common Stock underlying the Issued Warrants and Other Warrants issued to such holder and the denominator of which is the aggregate number of shares of Common Stock underlying the Issued Warrants
and Other Warrants issued to all of the holders of the Issued Warrants and Other Warrants (with respect to each holder of any Issued Warrant or Other Warrant, the “Exchange Cap Allocation”). In the event that any holder of an Issued Warrant or Other Warrant shall sell or otherwise transfer any of such holder’s Issued Warrants or Other Warrants, the transferee shall be allocated a pro rata portion of such holder’s Exchange Cap Allocation, and the restrictions of the prior sentence shall apply to such transferee with respect to the portion of the Exchange Cap Allocation allocated to such transferee. In the event that any holder of Issued Warrants or Other Warrants shall exercise all of such holder’s Issued Warrants and Other Warrants into a number of shares of Common Stock which, in the aggregate, is less than such holder’s Exchange Cap Allocation, then the difference between
such holder’s Exchange Cap Allocation and the number of shares of Common Stock actually issued to such holder shall be allocated to the respective Exchange Cap Allocations of the remaining holders of Issued Warrants and Other Warrants on a pro rata basis in proportion to the shares of Common Stock underlying the Issued Warrants and Other Warrants then held by each such holder. In the event that the Company is prohibited from issuing any shares of Common Stock issuable upon exercise of any of the Issued Warrants or Other Warrants for which an Exercise Notice has been received as a result of the operation of this Section 2(f)(ii), the Company shall pay the Holder cash in exchange for cancellation of the right to purchase such Common Stock, at a price per share of Common Stock equal to the amount by which the Market Price exceeds the Exercise Price as of the date of the attempted exercise.

(g) Insufficient Authorized Shares. If at any time while this Warrant remains 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 this Warrant at least a number of shares of Common Stock equal to 130% (the “Required Reserve Amount”) of the number of shares of Common Stock as shall from time to time be necessary to effect the exercise of all of the Issued Warrants then outstanding (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 the Issued 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 ninety (90) 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 reasonable 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.

(h) Issuance to Person other than Holder. Subject to Section 11(b), notwithstanding anything in this Warrant to the contrary, the Company shall have no obligation to issue shares of Common Stock and shall have no liability (including pursuant to Section 2(e)) with respect to any failure to issue shares of Common Stock upon exercise of this Warrant to any designee of the Holder (other than the Holder), if the Company reasonably believes that issuance to such designee of the Holder would violate the Securities Act or other applicable securities law.

3. ADJUSTMENT OF COMMON STOCK ISSUABLE UPON EXERCISE.

(a) Adjustment of Number of Shares. Upon each adjustment of the Exercise Price as a result of the calculations made in this Section 3 or in Sections 4 or 5, this Warrant shall thereafter evidence the right to receive, at the Exercise Price as adjusted, that number of shares of Common Stock (calculated to the nearest one-hundredth) obtained by dividing (i) the product of the aggregate number of shares covered by this Warrant immediately prior to such adjustment and the Exercise Price in effect immediately prior to such adjustment of the Exercise Price by (ii) the Exercise Price in effect immediately after such adjustment of the Exercise Price. 

(b) Adjustment of Exercise Price.

(i) Issuance of Additional Shares of Common Stock. In case the Company at any time or from time to time on or after the date hereof shall issue or sell any Additional Shares of Common Stock (including, without limitation, any Additional Shares of Common Stock deemed to be issued pursuant to Section 3(c) or 3(d)) without consideration or for consideration per share (the “New Issuance Price”) less than the Exercise Price in effect immediately prior to such issuance or sale, then, and in each such case, subject to Section 3(h), the Exercise Price shall be reduced, concurrently with such issuance or sale, to the New Issuance Price.

(ii) Dividends and Distributions. In case the Company at any time or from time to time on or after the date hereof shall declare, order, pay or make a dividend or other distribution (including, without limitation, any distribution of other or additional stock or other securities or property or Options by way of dividend or spin-off, reclassification, recapitalization or similar corporate rearrangement) on the Common Stock (other than a pro-rata dividend or other such distribution payable in the form of Common Stock), then, in each such case, the Exercise Price shall be reduced, effective as of the close of business on the record date fixed for the determination of holders of any class of securities entitled to receive such dividend or distribution, to a price determined by multiplying
the Exercise Price in effect immediately prior to the close of business on such record date by a fraction

 

 

(A) the numerator of which shall be the Current Market Price in effect on such record date or, if the Common Stock trades on an ex-dividend basis, on the date prior to the commencement of ex-dividend trading, less the Fair Value of such dividend or distribution applicable to one share of Common Stock, and

(B) the denominator of which shall be such Current Market Price,

provided that, (x) at the election of the Holder, in lieu of the foregoing adjustment, adequate provision shall be made so that the Holder shall receive, at the time such dividend or distribution is paid to the holders of the Common Stock, a pro rata share of such dividend or distribution based upon the maximum number of shares of Common Stock at the time issuable to the Holder (determined without regard to whether the Warrant is exercisable at such time), and (y) in the event that such dividend or distribution described in the first part of this Section 3(b)(ii) is of shares of Common Stock (or common stock) (“Other Shares of Common Stock”) of a company (other than the Company) whose shares of Common Stock (or common stock) are traded on a national
securities exchange or a national automated quotation system, then the Holder may elect to receive a warrant to purchase Other Shares of Common Stock in lieu of an increase in the amount of the Warrant Quantity, the terms of which shall be identical to those of this Warrant, except that such warrant shall be exercisable into the number of shares of Other Shares of Common Stock that would have been payable to the Holder pursuant to such dividend or distribution had the Holder exercised this Warrant immediately prior to such record date and with an aggregate exercise price equal to the product of the amount by which the exercise price of this Warrant was decreased with respect to such dividend or distribution pursuant to the terms of the first part of this Section 3(b)(ii) and the Warrant Quantity in effect immediately prior to such record date.

(c) Treatment of Options and Convertible Securities. In case the Company at any time or from time to time on or after the date hereof shall issue, sell, grant or assume, or shall fix a record date for the determination of holders of any class of securities of the Company entitled to receive, any Options or Convertible Securities (whether or not the rights thereunder are immediately exercisable), then, and in each such case, the maximum number of Additional Shares of Common Stock (as set forth in the instrument relating thereto, without regard to any provisions contained therein for a subsequent adjustment of such number) issuable upon the exercise of such Options or, in the case of Convertible Securities and Options therefor, the conversion or exchange of such Convertible Securities, shall be deemed
to be Additional Shares of Common Stock issued as of the time of such issue, sale, grant or assumption or, in case such a record date shall have been fixed, as of the close of business on such record date (or, if the Common Stock trades on an ex-dividend basis, on the date prior to the commencement of ex-dividend trading), provided that such Additional Shares of Common Stock shall not be deemed to have been issued unless the consideration per share (determined pursuant to Section 3(e)) of any such shares would be less than the Exercise Price in effect on the date of and immediately prior to such issue, sale, grant or assumption or immediately prior to the close of business on such record date (or, if the Common Stock trades on an ex-dividend basis, on the date prior to the commencement of ex-dividend trading), as the case may be, and provided, further, that in any such case in which Additional Shares of Common Stock are deemed to be issued:

 

 

(i) whether or not the Additional Shares of Common Stock underlying such Options or Convertible Securities are deemed to be issued, no further adjustment of the Exercise Price shall be made under this Section 3 upon the subsequent issue or sale of Convertible Securities or shares of Common Stock upon the exercise of such Options or the conversion or exchange of such Convertible Securities, except in the event of an adjustment pursuant to the terms of any such Options or Convertible Securities, subsequent to the date of the issue or sale thereof, of the number of Additional Shares of Common Stock issuable upon the exercise of such Options or the conversion or exchange of such
Convertible Securities by reason of (x) a change of control of the Company (without duplication of the effect of any other adjustment hereunder), (y) the acquisition by any Person or group of Persons of any specified number or percentage of the voting securities of the Company or (z) any other event or occurrence, such as a reset of pricing with respect to the conversion of convertible securities, each such case to be deemed hereunder to involve a separate issuance of Additional Shares of Common Stock, Options or Convertible Securities, as the case may be;

(ii) if such Options or Convertible Securities by their terms provide, with the passage of time or otherwise, for any increase in the consideration payable to the Company, or decrease in the number of Additional Shares of Common Stock issuable, upon the exercise, conversion or exchange thereof (by change of rate or otherwise), the adjustment of the Exercise Price under this Section 3 computed upon the original issue, sale, grant or assumption thereof (or upon the occurrence of the record date, or date prior to the commencement of ex-dividend trading, as the case may be, with respect thereto), and any subsequent adjustments based thereon, shall, upon any such increase or decrease becoming effective, be recomputed to reflect such increase or decrease insofar as it affects such Options, or the rights of conversion or exchange under such Convertible Securities, which are
outstanding at such time;

(iii) upon the expiration (or purchase by the Company and cancellation or retirement) of any such Options which shall not have been exercised or the expiration of any rights of conversion or exchange under any such Convertible Securities which (or purchase by the Company and cancellation or retirement of any such Convertible Securities the rights of conversion or exchange under which) shall not have been exercised, the adjustment of the Exercise Price under this Section 3 computed upon the original issue, sale, grant or assumption thereof (or upon the occurrence of the record date, or date prior to the commencement of ex-dividend trading, as the case may be, with respect thereto), and any subsequent adjustments based thereon, shall, upon such expiration (or such cancellation or retirement, as the case may be), be recomputed as if:

(A) in the case of Options for Common Stock or Convertible Securities, the only Additional Shares of Common Stock issued or sold were the Additional Shares of Common Stock, if any, actually issued or sold upon the exercise of such Options or the conversion or exchange of such Convertible Securities and the consideration received therefor was the consideration actually received by the Company for the issue, sale, grant or assumption of all such Options, whether or not exercised, plus the consideration actually received by the Company upon such exercise, or for the issue or sale of all such Convertible Securities which were actually converted or exchanged, plus the additional consideration, if any, actually received by the Company upon such conversion or exchange, and
(B) in the case of Options for Convertible Securities, only the Convertible Securities, if any, actually issued or sold upon the exercise of such 

 

 

Options were issued at the time of the issue or sale, grant or assumption of such Options, and the consideration received by the Company for the Additional Shares of Common Stock deemed to have then been issued was the consideration actually received by the Company for the issue, sale, grant or assumption of all such Options, whether or not exercised, plus the consideration deemed to have been received by the Company (pursuant to Section 3(e)) upon the issue or sale of such Convertible Securities with respect to which such Options were actually exercised;

(iv) no readjustment pursuant to subdivision (ii) or (iii) above shall have the effect of increasing the Exercise Price or decreasing the Warrant Quantity by an amount in excess of the amount of the adjustment thereof originally made in respect of the issue, sale, grant or assumption of such Options or Convertible Securities; and

(v) in the case of any such Options which expire by their terms not more than 30 days after the date of issuance, sale, grant or assumption thereof, no adjustment of the Exercise Price shall be made under this Section 3 in respect of such Options until the expiration or exercise of all such Options, whereupon such adjustment shall be made in the manner provided in subdivision (iii) above.

(d) Treatment of Stock Dividends, Stock Splits, etc. In case the Company at any time or from time to time on or after the date hereof shall declare or pay any dividend on the Common Stock payable in Common Stock, or shall effect a subdivision of the outstanding shares of Common Stock into a greater number of shares of Common Stock (by reclassification or otherwise than by payment of a dividend in Common Stock), then, and in each such case, the Exercise Price will be proportionately decreased, and the number of shares of Common Stock issuable under this Warrant will be proportionately increased, effective (i) in the case of any such dividend, immediately after the close of business on the record date for the determination of holders of any class of securities entitled to receive such dividend, or (ii)
in the case of any such subdivision, at the close of business on the day immediately prior to the day upon which such corporate action becomes effective.

(e) Computation of Consideration. For the purposes of this Section 3,

(i) the consideration for the issuance or sale of any Additional Shares of Common Stock shall, irrespective of the accounting treatment of such consideration,

(A) insofar as it consists of cash, be computed at the net amount of cash received by the Company, without deducting any expenses paid or incurred by the Company or any commissions or compensations paid or concessions or discounts allowed to underwriters, dealers or others performing similar services in connection with such issue or sale,

(B) insofar as it consists of property (including securities) other than cash, be computed at the Fair Value thereof at the time of such issuance or sale, and

(C) in case Additional Shares of Common Stock are issued or sold together with other stock or securities or other assets of the Company for a consideration which covers both, be the portion of such consideration so received, computed as provided in clauses (A) and (B) above, allocable to such Additional Shares of Common Stock, such allocation to be determined in the same manner that the Fair Value of property not consisting of cash or securities is to be determined as provided in the definition of “Fair Value” herein; and

 

 

(ii) Additional Shares of Common Stock deemed to have been issued pursuant to Section 3(c), relating to Options and Convertible Securities, shall be deemed to have been issued for a consideration per share determined by dividing:

(A) the total amount, if any, received and receivable by the Company as consideration for the issue, sale, grant or assumption of the Options or Convertible Securities in question, plus the minimum aggregate amount of additional consideration (as set forth in the instruments relating thereto, without regard to any provision contained therein for a subsequent adjustment of such consideration to protect against dilution) payable to the Company upon the exercise in full of such Options or the conversion or exchange of such Convertible Securities or, in the case of Options for Convertible Securities, the exercise of such Options for Convertible Securities and the conversion or exchange of such Convertible Securities, in each case computing such consideration as provided in the foregoing subdivision (i),

by

(B) the maximum number of Additional Shares of Common Stock (as set forth in the instruments relating thereto, without regard to any provision contained therein for a subsequent adjustment of such number to protect against dilution) issuable upon the exercise of such Options or the conversion or exchange of such Convertible Securities.

(f) Adjustments for Combinations, etc. If the Company at any time after the date hereof combines (by combination, reverse stock split or otherwise) one or more classes of its outstanding shares of Common Stock into a smaller number of shares, the Exercise Price will be proportionately increased effective at the close of business on the date the combination becomes effective, without duplication of any other increase in the Exercise Price resulting from such combination.

(g) Dilution in Case of Other Securities. In case any Other Securities shall be issued or sold or shall become subject to issue or sale upon the conversion or exchange of any stock (or Other Securities) of the Company (or any issuer of Other Securities or any other Person referred to in Section 4) or to subscription, purchase or other acquisition pursuant to any Options issued or granted by the Company (or any such other issuer or Person) for a consideration such as to dilute, on a basis consistent with the standards established in the other provisions of this Section 3, the purchase rights granted by this Warrant, then, and in each such case, the computations, adjustments and readjustments provided for in this Section 3 with respect to the Exercise Price and the number of shares purchasable upon
Warrant exercise shall be made as nearly as possible in the manner so provided and applied to determine the amount of Other Securities from time to time receivable upon the exercise of the Warrants (without duplication of the effect of any other adjustment hereunder), so as to protect the holders of the Warrants against the effect of such dilution.

(h) De Minimis Adjustments. If the amount of any adjustment of the Exercise Price per share required pursuant to this Section 3 would be less than one tenth (1/10) of one percent (1%) of the Exercise Price then in effect, such amount shall be carried forward and adjustment with respect thereto made at the time of and together with any subsequent 

 

 

adjustment which, together with such amount and any other amount or amounts so carried forward, shall aggregate a change in the Exercise Price then in effect of at least one tenth (1/10) of one percent (1%) of such Exercise Price. All calculations under this Warrant shall be made to the nearest .001 of a cent or to the nearest one-hundredth of a share, as the case may be.

(i) Abandoned Dividend or Distribution. If the Company shall take a record of the holders of its Common Stock for the purpose of entitling them to receive a dividend or other distribution (which results in an adjustment to the Exercise Price under the terms of this Warrant) and shall, thereafter, and before such dividend or distribution is paid or delivered to shareholders entitled thereto, legally abandon its plan to pay or deliver such dividend or distribution, then any adjustment made to the Exercise Price and the number of shares of Common Stock purchasable upon Warrant exercise by reason of the taking of such record shall be reversed, and any subsequent adjustments, based thereon, shall be recomputed.

4. CONSOLIDATION, MERGER, ETC.

(a) 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 in accordance with the provisions of this Section 4(a) pursuant to written agreements in form and substance reasonably satisfactory to the Required Holders and approved by the Required Holders prior to such Fundamental Transaction, which approval shall not be unreasonably withheld, including, if applicable, agreements to deliver to each holder of Issued Warrants in exchange for such Issued Warrants a security of the Successor Entity evidenced by a written instrument substantially similar in form and substance to this Warrant,
including, without limitation, an adjusted exercise price equal to the value for the shares of Common Stock reflected by the terms of such Fundamental Transaction, and exercisable for a corresponding number of shares of capital stock equivalent to the shares of Common Stock or Other Securities 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 reasonably satisfactory to the Required Holders 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 occurrence of any Fundamental Transaction, the Successor Entity shall succeed to, and be substituted for (so that from and after the date of such Fundamental Transaction, the provisions of this Warrant 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 with the same effect as if such Successor Entity had been named as the Company herein. Upon consummation of the 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 Fundamental Transaction, in lieu of the shares of the Common Stock (or Other Securities, cash, assets or other property) purchasable upon the exercise of the Warrant prior to such Fundamental Transaction, such shares of the publicly traded common stock (or its equivalent) of the Successor Entity (including its Parent Entity), as adjusted in accordance with the provisions of this Warrant. In addition to and not in substitution for any other rights hereunder, prior to the consummation of any Fundamental Transaction pursuant to which holders of shares of Common Stock are entitled to receive
Other Securities or other assets with respect to or in exchange for shares of Common Stock (a “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 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) purchasable 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 such Fundamental Transaction had the Warrant been exercised immediately prior to such Fundamental Transaction. Provision made pursuant to the preceding sentence shall be in a form and substance reasonably satisfactory to the Required Holders. The provisions of this Section shall apply similarly and equally to successive Fundamental Transactions and
Corporate Events and shall be applied without regard to any limitations on the exercise of this Warrant.

(b) Notwithstanding the foregoing and the provisions of Section 4(a) above, in the event of a Fundamental Transaction, the Company may, at its option, redeem the Warrant by delivering a written notice thereof via facsimile and overnight courier to the Holder (a “Fundamental Transaction Redemption Notice”) no sooner than sixty (60) days but not later than fifteen (15) days prior to the consummation of a Fundamental Transaction, together with a cash payment (the “Redemption Payment”) to the Holder in an amount determined by taking the product obtained by multiplying (i) the greater of (A) the sum of (x) the average of the daily VWAP during the 7 consecutive Trading Days preceding March 26, 2008 (as
adjusted for stock dividends, stock splits, stock combinations, reverse stock splits or other similar transactions), and (y) an amount constituting a 30% annualized rate of return (assuming daily compounding) on the average of the daily VWAP during the 7 consecutive Trading Days preceding March 26, 2008 (as adjusted for stock dividends, stock splits, stock combinations, reverse stock splits or other similar transactions), (B) the average of the daily VWAP during the 7 consecutive Trading Days preceding the date of facsimile delivery or other delivery of such Fundamental Transaction Redemption Notice by the Company to the Holder (as adjusted for stock dividends, stock splits, stock combinations, reverse stock splits or other similar transactions), and (C) the highest amount of consideration per share of Common Stock to be received by any shareholder of the Company upon consummation of such Fundamental Transaction, by (ii) the aggregate number of shares of Common Stock into which this
Warrant is exercisable (without regard to any limitations on the exercise of this Warrant) and subtracting from such product an amount equal to the product obtained by multiplying the Exercise Price in effect at 11:59:59 p.m. on the date immediately prior to the date of such delivery of such Fundamental Transaction Redemption Notice by the aggregate number of shares of Common Stock into which this Warrant is then exercisable (without regard to any limitations on the exercise of this Warrant). Upon redemption of the Warrant and payment by the Company to the Holder of the Redemption Payment in accordance with this Section 4(b), immediately thereafter this Warrant shall be cancelled, terminated and of no further force and effect.

(c) Notwithstanding the foregoing and the provisions of Section 4(a) above and subject to Section 4(b) above, in the event of a Fundamental Transaction other than one in which a Successor Entity that is a publicly traded corporation whose stock is quoted or listed for trading on an Eligible Market assumes this Warrant such that the Warrant shall be exercisable for the publicly traded Common Stock of such Successor Entity, 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) shall purchase this Warrant from the Holder by paying to the Holder, within five (5) Business Days of such request (or, if later, on the effective date of the Fundamental Transaction), cash in an amount equal to the higher of (I) the amount determined by taking the product obtained by multiplying
(i) the greater of (A) the highest amount of consideration per share of Common Stock to be received by any shareholder of the Company upon consummation of such Fundamental Transaction and (B) the average of 

 

 

the daily VWAP during the 7 consecutive Trading Days preceding the date on which such Fundamental Transaction was first publicly announced (as adjusted for stock dividends, stock splits, stock combinations, reverse stock splits or other similar transactions) by (ii) the aggregate number of shares of Common Stock into which this Warrant was exercisable immediately prior to such consummation (without regard to any limitations on the exercise of this Warrant) and subtracting from such product an amount equal to the product obtained by multiplying the Exercise Price then in effect by the aggregate number of shares of Common Stock into which this Warrant is then exercisable (without regard to any limitations on the exercise of this Warrant), and (II) at the election of the
Holder, the fair market value of the remaining unexercised portion of this Warrant (with no discount for illiquidity, private company, or minority status) on the date of such election by the Holder, as determined jointly and in good faith by the Company and the Holder; provided, however, that if such parties are unable to reach agreement within a reasonable period of time (not to exceed twenty (20) Business Days), such fair market value shall be determined in good faith, by an independent, nationally recognized investment banking or valuation firm selected jointly by the Company and the Holder or, if that selection cannot be made within ten days, by an independent, nationally-recognized investment banking firm selected by the American Arbitration Association in accordance with its rules, and provided further, that all of the fees and expenses of any third parties incurred in connection with determining such fair market value will be paid by the Company. If required by any such
investment banking firm or arbitrator, the Company shall execute a retainer and engagement letter containing reasonable terms and conditions, including without limitation, customary provisions concerning the rights of indemnification and contribution by the Company in favor of such investment banking firm or arbitrator and its officers, directors, partners, employees, agents and Affiliates.

5. OTHER DILUTIVE EVENTS. In case any event shall occur as to which the provisions of Section 3 or Section 4 or the other anti-dilution provisions herein are not strictly applicable or if strictly applicable would not fairly protect the purchase rights represented by this Warrant in accordance with the essential intent and principles of such provisions, then, in each such case, the Company shall at its own expense appoint a firm of independent certified public accountants of recognized national standing (which may be the regular auditors of the Company), which shall give their opinion on the adjustment, if any, on a basis consistent with the essential intent and principles established in such provisions, necessary to preserve, without dilution (consistent with the essential intent and principles
established in such provisions), the purchase rights represented by this Warrant. Upon receipt of such opinion, the Company shall promptly mail a copy thereof to the Holder and shall make the adjustments described therein; provided that no such adjustment pursuant to this Section 5 will decrease the Warrant Quantity or increase the Exercise Price except as otherwise determined pursuant to Section 3 or Section 4.

6. NONCIRCUMVENTION. The Company hereby covenants and agrees that the Company will not, by amendment of its certificate of incorporation, bylaws 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, free from all taxes, liens, security interests, encumbrances, preemptive rights and charges, (iii) shall, so long as any of the Issued 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 Issued Warrants, 130% of the number of shares of Common Stock as shall from time to time be necessary to effect the exercise of the Issued Warrants then outstanding (without regard to any limitations on exercise, except as provided in Section 2(f)(ii)), and (iv) except for shares of preferred stock of the Company that are convertible into shares of Common Stock or that are issued and outstanding as of the date hereof or issued pursuant to a Capital Raise or Second Capital Raise, the Company shall not, and shall not permit any of its Subsidiaries to, issue any security of any class which is preferred as to dividends or as to the distribution of assets upon voluntary or involuntary dissolution, liquidation or
winding-up.

7. LEGENDS.

(a) Restrictive Legends. Except as otherwise permitted by this Section 7, each Warrant (including each Warrant issued upon the transfer of any Warrant) shall be stamped or otherwise imprinted with a legend in substantially the following form:

“THIS WARRANT AND COMMON STOCK OR OTHER SECURITIES ISSUABLE UPON THE EXERCISE OF THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR ANY STATE SECURITIES LAWS AND NEITHER THIS WARRANT NOR THE COMMON STOCK OR OTHER SECURITIES ISSUABLE UPON THE EXERCISE OF THIS WARRANT MAY BE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER THE ACT AND THE RULES AND REGULATIONS THEREUNDER. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.”

Except as otherwise permitted by this Section 7, each certificate for Common Stock (or Other Securities) issued upon the exercise of any Warrant, and each certificate issued upon the transfer of any such Common Stock (or Other Securities), shall be stamped or otherwise imprinted with a legend in substantially the following form:

“THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR ANY STATE SECURITIES LAWS AND MAY NOT BE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER THE ACT AND THE RULES AND REGULATIONS THEREUNDER. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.”

(b) Termination of Restrictions. The restrictions imposed on the transferability of Restricted Securities set forth in the legend of this Warrant shall cease and terminate as to any particular Restricted Securities (i) when a registration statement with respect to the sale of such securities shall have been declared effective under the Securities Act and such securities shall have been disposed of in accordance with such registration statement, (ii) when such securities are sold pursuant to Rule 144 or Rule 144A (or any similar provision then in force) under the Securities Act, or (iii) when such restrictions are no longer required or necessary 

 

 

in order to protect the Company against a violation of the Securities Act upon any sale or other disposition of such securities without registration thereof. Whenever such restrictions shall cease and terminate as to any Restricted Securities, the Holder shall be entitled to receive from the Company, without expense, new securities of like tenor not bearing the legend set forth in this Warrant. If the Company shall fail for any reason or for no reason to issue to the holder of the Securities within three (3) Trading Days shares of Common Stock to deliver in satisfaction of a sale by the holder of such Securities that the holder anticipated receiving without legend from the Company, then 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 Buy-In Price, at which point the
Company’s obligation to deliver such unlegended Securities shall terminate, or (ii) promptly honor its obligation to deliver to the holder such unlegended Securities as provided above 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 Market Price on the date of exercise.

8. NOTICES OF CORPORATE ACTION. In the event of:

(a) any taking by the Company of a record of the holders of any class of securities for the purpose of determining the holders thereof who are entitled to receive any dividend or other distribution, or any right to subscribe for, purchase or otherwise acquire any Common Stock or any other securities or property, or to receive any other right, or

(b) any capital reorganization of the Company, any reclassification or recapitalization of the securities of the Company, any consolidation or merger involving the Company and any other Person, any transaction or series of transactions in which more than 50% of the voting securities of the Company are transferred to another Person, or any transfer, sale or other disposition of all or substantially all the assets of the Company to any other Person, or

(c) any voluntary or involuntary dissolution, liquidation or winding-up of the Company,

the Company shall mail or otherwise deliver to each Holder of a Warrant a written notice specifying (i) the date or expected date on which any such record is to be taken for the purpose of such dividend, distribution or right, and the amount and character of such dividend, distribution or right, and (ii) the date or expected date on which any such reorganization, reclassification, recapitalization, consolidation, merger, transfer, sale, disposition, dissolution, liquidation or winding-up is to take place and the time, if any such time is to be fixed, as of which the holders of Common Stock (or Other Securities) shall be entitled to exchange their Common Stock (or Other Securities) for the securities or other property deliverable upon such reorganization, reclassification, recapitalization, consolidation, merger, transfer, dissolution, liquidation or winding-up. Such notice shall be mailed at
least 15 days prior to the date therein specified.  

9. REGISTRATION OF COMMON STOCK. If any shares of Common Stock required to be reserved for purposes of exercise of this Warrant require registration with or approval of any governmental authority under any federal or state law (other than the Securities Act) before such shares may be issued upon exercise, the Company shall, at its expense and as expeditiously as possible, use its best efforts to cause such shares to be duly registered or approved, as the case may be. At any such time as Common Stock is listed on any national securities exchange, the Company shall, at its expense, obtain promptly and maintain the approval for listing on each such
exchange, upon official notice of issuance, the shares of 

 

 

Common Stock issuable upon exercise of the then outstanding Warrants and maintain the listing of such shares after their issuance; and the Company shall also list on such national securities exchange, shall register under the Exchange Act and shall maintain such listing of, any Other Securities that at any time are issuable upon exercise of the Warrants, if and at the time that any securities of the same class shall be listed on such national securities exchange by the Company.

10. AVAILABILITY OF INFORMATION. Unless the Company is subject to and in material compliance with the reporting requirements under the Exchange Act, the Company shall, at any time and from time to time, upon the request of any holder of any of the Warrants, any Common Stock (or Other Securities) issued or issuable upon the exercise of any of the Warrants or any Common Stock (or Other Securities) issued subsequent to the exercise of any of the Warrants as a dividend or other distribution with respect to, or resulting from a subdivision of the outstanding Common Stock (or Other Securities) into a greater number of Common Stock by reclassification, stock splits or otherwise, or in exchange for or in replacement of the Common Stock (or Other Securities) issued upon such exercise (such Warrants, Common
Stock and Other Securities collectively, the “Applicable Securities”) and upon the request of any Person designated by such holder as a prospective purchaser of any Applicable Securities, furnish in writing to such holder or such prospective purchaser, as the case may be, a statement as of a date not earlier than twelve (12) months prior to the date of such request of the nature of the business of the Company and the products and  services it offers and copies of the Company’s most recent balance sheet and profit and loss and retained earnings statements, together with similar financial statements for such part of the two preceding fiscal years as the Company shall have been in operation, all such financial statements to be audited to the extent audited statements are reasonably available; provided, that in any
event the most recent financial statements so furnished shall include a balance sheet as of a date less than 16 months prior to the date of such request, statements of profit and loss and retained earnings for the 12 months preceding the date of such balance sheet, and, if such balance sheet is not as of a date less than six months prior to the date of such request, additional statements of profit and loss and retained earnings for the period from the date of such balance sheet to a date less than six months prior to the date of such request. If the Company shall have filed a registration statement pursuant to the requirements of Section 12 of the Exchange Act or a registration statement pursuant to the requirements of the Securities Act, the Company shall timely file the reports required to be filed by it under the Securities Act and the Exchange Act (including but not limited to the reports under Sections 13 and 15(d) of the Exchange Act referred to in subparagraph (c) of Rule 144
adopted by the Commission under the Securities Act)) and will take such further action as any holder of Applicable Securities may  reasonably request, all to the extent required from time to time to enable such holder to sell Applicable Securities without registration under the Securities Act within the limitation of the exemptions provided by (a) Rule 144 and Rule 144A under the Securities Act, as such rules may be amended from time to time, or (b) any other rule or regulation now existing or hereafter adopted by the Commission. Upon the request of any holder of Applicable Securities, the Company will deliver to such holder a written statement as to whether it has complied with such requirements. This Section 10 shall not apply to any holder of Warrant Shares that are not Restricted Securities if such holder no longer holds any Issued Warrant or any Warrant Shares that are Restricted Securities.

11.REGISTRATION AND TRANSFER OF WARRANTS, ETC.

(a) Warrant Register; Ownership of Warrants. Each Warrant issued by the Company shall be numbered and shall be registered in a warrant register (the “Warrant Register”) as it is issued and transferred, which Warrant Register shall be maintained by the Company at its principal office or, at the Company’s election and expense, by a Warrant Agent 

 

 

or the Transfer Agent. The  Company shall be entitled to treat the registered Holder of any Warrant on the Warrant Register as the owner in fact thereof for all purposes and shall not be bound to recognize any equitable or other claim to or interest in such Warrant on the part of any other Person, and shall not be affected by any notice to the contrary, except that, if and when any Warrant is properly assigned in blank, the Company may (but shall not be obligated to) treat the bearer thereof as the owner of such Warrant for all purposes. 

(b) Transfer of Warrants. 

(i) Transfer. If applicable, this Warrant and all rights hereunder are transferable in whole or in part, without charge to the Holder hereof, upon surrender of this Warrant with a properly executed Form of Assignment attached hereto as Exhibit B at the principal office of the Company; provided, that (A) any transfer shall comply with the Securities Act and other applicable securities laws and regulations and (B) if such transfer is not effected pursuant to an effective registration statement filed under the Securities Act, if requested by the Company the Holder shall provide a legal opinion to the Company, in form and substance reasonably satisfactory to the Company, to the effect that such transfer may be made without
registration under the Securities Act, provided that such legal opinion shall not be required if (I) the Holder has provided to the Company and any transfer agent of the Company reasonable assurances that such transfer may be made under Rule 144 under the Securities Act, (II) the Holder has provided to the Company reasonably satisfactory evidence that such transfer is being made to an Affiliate of the Holder (which evidence may consist of a representation letter of the transferee to such effect), or (III) such transfer may be made without restriction pursuant to Rule 144 under the Securities Act. Upon any partial transfer, the Company shall at its expense issue and deliver to the Holder a new Warrant of like tenor, in the name of the Holder, which shall be exercisable for such number of shares of Common Stock with respect to which rights under this Warrant were not so transferred. 

(ii) Number of Warrants. By accepting this Warrant, any transferee of the Holder acknowledges and agrees that (A) the actual number of shares of Common Stock issuable upon exercise of this Warrant may be more or less than that reflected herein, either as a result of adjustments pursuant to the terms hereof or as a result of prior exercises of a portion of this Warrant by a prior holder and (B) the Company shall not be liable for any failure of such transferee to determine the actual number of Warrant Shares issuable pursuant hereto or the then-effective Exercise Price prior to such transferee’s acquisition of this Warrant.

(c) Replacement of Warrants. On receipt by the Company of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant and, in the case of any such loss, theft or destruction of this Warrant, on delivery of an indemnity agreement reasonably satisfactory in form, substance and amount to the Company or, in the case of any such mutilation, on surrender of such Warrant to the Company at its principal office and cancellation thereof, the Company at its expense shall execute and deliver, in lieu thereof, a new Warrant of like tenor.

(d) Adjustments To Exercise Price and Number of Common Stock. Notwithstanding any adjustment in the Exercise Price or in the number or kind of shares of Common Stock purchasable upon exercise of this Warrant, any Warrant theretofore or thereafter issued may continue to express the same number and kind of shares of Common Stock as are stated in this Warrant, as initially issued. 

 

 

12. REMEDIES; SPECIFIC PERFORMANCE. The Company stipulates that there would be no adequate remedy at law to the Holder of this Warrant in the event of any default or threatened default by the Company in the performance of or compliance with any of the terms of this Warrant and accordingly, the Company agrees that, in addition to any other remedy to which the Holder may be entitled at law or in equity, the Holder shall be entitled to seek to compel specific performance of the obligations of the Company under this Warrant, without the posting of any bond, in accordance with the terms and conditions of this Warrant in any court specified in Section 17, and if any action should
be brought in equity to enforce any of the provisions of this Warrant, the Company shall not raise the defense that there is an adequate remedy at law. A delay or omission by the Holder hereto in exercising any right or remedy accruing upon any such breach shall not impair the right or remedy or constitute a waiver of or acquiescence in any such breach. No remedy shall be exclusive of any other remedy. All available remedies shall be cumulative.

13. NO RIGHTS OR LIABILITIES AS STOCKHOLDER. Nothing contained in this Warrant shall be construed as (a) conferring upon the Holder hereof any rights as a stockholder of the Company, including without limitation, the right to vote or to consent to any action of the stockholders, to receive dividends or other distributions, to exercise any preemptive right or to receive any notice of any meeting of stockholders or any proceedings of the Company, in each case except as otherwise provided in this Warrant (including, without limitation, Section 3 hereof) or in any of the other Transaction Documents, (b) imposing any obligation on the Holder to purchase any securities or (c)
imposing any liabilities on the Holder as a stockholder of the Company, whether such obligation or liabilities are asserted by the Company or by creditors of the Company.

14. NOTICES. All notices and other communications (and deliveries) provided for or permitted hereunder shall be made in writing by hand delivery, facsimile, any courier guaranteeing overnight delivery or first class registered or certified mail, return receipt requested, postage prepaid, addressed as follows:

If to the Company:

Proliance International, Inc.

100 Gando Drive

New Haven, Connecticut 06513

Attention:  Richard A. Wisot

Facsimile:  203-401-6470

If to the Holder:

_____________

Two Greenwich Plaza

Greenwich, Connecticut  06830

Attention:  Portfolio Manager - Proliance

Facsimile: 203-542-4550

or such other address as may hereafter be designated in writing by the recipient party to the sending party in accordance with the provisions of this Section.

All such notices and communications (and deliveries) shall be deemed to have been duly given:  at the time delivered by hand, if personally delivered; when transmitted with a 

 

 

receipt of successful transmission, if by facsimile; on the next Business Day, if timely delivered to a courier guaranteeing overnight delivery; and five days after being deposited in the mail, if sent first class or certified mail, return receipt requested, postage prepaid; provided, that the exercise of any Warrant shall be effective in the manner provided in Section 2.

15. AMENDMENTS. Except as set forth below, this Warrant and any term hereof may not be amended, modified, supplemented or terminated, and waivers or consents to departures from the provisions hereof may not be established, without the written consent of the Company and the Holder of this Warrant. All Issued Warrants and Other Warrants may be amended, modified, supplemented or terminated, and waivers or consents to departures from the provisions thereof may be established, by the written consent of the Company and Required Holders; provided however, that with respect to any amendment, modification, supplement, termination or waiver of any
provisions of this Warrant that would disproportionately adversely affect the rights of any Warrantholder, the Company shall seek from each Warrantholder disproportionately adversely affected, a consent in writing to such amendment, modification, supplement, termination or waiver of such provisions of this Warrant, which consent may be withheld by such Warrantholder in its sole discretion. If the Company is unable to obtain a consent from each Warrantholder whose rights would be disproportionately adversely affected by the proposed amendment, modification, supplement, termination or waiver of provisions of this Warrant, then such amendment, modification, supplement, termination or waiver of provisions of this Warrant shall not be adopted by the Company.

16. DESCRIPTIVE HEADINGS, ETC. The headings in this Warrant are for convenience of reference only and shall not limit or otherwise affect the meaning of terms contained herein. Unless the context of this Warrant otherwise requires:  (a) words of any gender shall be deemed to include each other gender; (b) words using the singular or plural number shall also include the plural or singular number, respectively; (c) the words “hereof”, “herein” and “hereunder” and words of similar import when used in this Warrant shall refer to this Warrant as a whole and not to any particular provision of this Warrant, and Section and paragraph references are to the Sections and paragraphs of this Warrant unless otherwise specified; (d) the word “including” and words of similar
import when used in this Warrant shall mean “including, without limitation,” unless otherwise specified; (e) “or” is not exclusive; and (f) provisions apply to successive events and transactions.

17. GOVERNING LAW; JURISDICTION; WAIVER OF JURY TRIAL. 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. The Company and the Holder hereby irrevocably submits to the exclusive
jurisdiction of the state and federal courts sitting in The City of New York, Borough of Manhattan, 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 suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is brought in an inconvenient forum or that the venue of such suit, action or proceeding is improper. The Company and the Holder hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof to such party at the address for such notices to it under this 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. THE COMPANY AND THE HOLDER HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY. 

18. COSTS AND ATTORNEYS’ FEES.  If any action, suit or other proceeding is instituted concerning or arising out of this Warrant, the Company and the Holder agree that the prevailing party shall be entitled to recover from the other party all of the prevailing party’s costs and reasonable attorneys’ fees incurred in each and every such action, suit or other proceeding in which it is the prevailing party, including any and all appeals or petitions therefrom. 

19. SUCCESSORS AND ASSIGNS.  This Warrant shall inure to the benefit of and be binding upon the parties hereto and their respective heirs, successors and permitted assigns. For purposes of this Warrant, “successor” for any entity other than a natural person shall mean a successor to such entity as a result of such entity’s merger, consolidation, sale of substantially all of its assets or similar transaction.

20. SEVERABILITY.  In the event that any one or more of the provisions, paragraphs, words, clauses, phrases or sentences contained herein, or the application thereof in any circumstances, is held invalid, illegal or unenforceable in any respect for any reason, the validity, legality and enforceability of any such provision, paragraph, word, clause, phrase or sentence in every other respect and of the other remaining provisions, paragraphs, words, clauses, phrases or sentences hereof shall not be in any way impaired, it being intended that all rights, powers and privileges of the parties hereto shall be enforceable to the fullest extent permitted by law; provided that this Section 20 shall not cause this Warrant to differ materially from the intent of the parties as herein expressed.

21. ENTIRE AGREEMENT.  This Warrant, the Other Warrants, the Warrantholder Rights Agreement, the Registration Rights Agreement, the Credit Agreement and the Second Amendment to Credit Agreement (collectively, the “Other Agreements”) are intended by the parties as a final expression of their agreement and intended to be a complete and exclusive statement of the agreement and understanding of the parties hereto in respect of the subject matter contained herein. There are no restrictions, promises, representations, warranties, covenants or undertakings relating to the subject matter contained herein, other than those set forth or referred to herein or in the Other Agreements. This Agreement and the Other Agreements
supersede all prior agreements and understandings between the parties to this Warrant, both written and oral, with respect to the subject matter contained herein.

22. CONSTRUCTION.  The parties hereto acknowledge that each of them has had the benefit of legal counsel of its own choice and has been afforded an opportunity to review this Warrant with its legal counsel and that this Warrant shall be construed as if jointly drafted by the parties.

[Signature Page Follows]

 

 

IN WITNESS WHEREOF, the undersigned has executed and delivered this Warrant as of the date first written above.

 

	
                         
 	
                         
 	
                        PROLIANCE INTERNATIONAL, INC.
 
	
                          
 	
                         
 	
                        

                        By: 
 	
                          
 
	
                         
 	
                         
 	
                         
 	
                        Name:
 
	
                         
 	
                         
 	
                         
 	
                        Title:
 

 

 

 

	
                         
 	
                         
 	
                        EXHIBIT A to Common Stock 
 Purchase Warrant
 

 

EXERCISE NOTICE

TO BE EXECUTED BY THE REGISTERED HOLDER TO EXERCISE THIS

WARRANT TO PURCHASE COMMON STOCK

PROLIANCE INTERNATIONAL, INC.

 

The undersigned holder hereby exercises the right to purchase _________________ of the shares of Common Stock of Proliance International, Inc., a Delaware corporation (the “Company”), evidenced by the attached Warrant, No. ____________, to Purchase Common Stock (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” pursuant to Section 2(a)(ii)(A) with respect to _________________ shares of Common Stock; and/or
 

	
                         
 	
                        ____________
 	
                        by surrender to the Company for cancellation pursuant to Section 2(a)(ii)(B) certificates representing [    ] shares of Common Stock owned by the Holder (properly endorsed for transfer in blank) having a Current Market Price on the date of Warrant exercise equal to the Exercise Price; and/or
 

	
                         
 	
      ____________
 	
                        a “Cashless Exercise” pursuant to Section 2(a)(ii)(C) with respect to _______________ shares of Common Stock.
 

2. Notwithstanding anything to the contrary contained herein, (a) this Exercise Notice shall constitute a representation by the Holder of the Warrant submitting this Exercise Notice that after giving effect to the exercise provided for in this Exercise Notice, such Holder (together with its affiliates) will not have beneficial ownership (together with the beneficial ownership of such Holder’s affiliates) of a number of shares of Common Stock which exceeds the maximum percentage of the total outstanding shares of Common Stock as determined pursuant to the provisions of Section 2(f)(i) of the Warrant, and (b) in the case of any Cash Exercise, this Exercise Notice shall constitute a representation by the Holder of the Warrant submitting this Exercise Notice that (i) such Holder is an “accredited investor” as that term is defined in Rule 501(a) of Regulation D
promulgated under the Securities Act, and (ii) such Holder is a sophisticated investor with such knowledge and experience in financial and business matters so as to be capable of evaluating the merits and risks of the Warrant and the Warrant Shares issuable thereunder and is capable of bearing the economic risks of such Warrant and Warrant Shares.

3. Payment of Exercise Price. In the event that the holder has elected a Cash Exercise with respect to some or all of the shares of Common Stock 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.

4. Delivery of Warrant Shares. The Company shall deliver to the holder __________ Warrant Shares in accordance with the terms of the Warrant.

Date: _______________ __, ______

 

	
                         
 	
                         
 	
                         
 
	
                             Name of Registered Holder
 	
                         
 	
                         
 
	
                        

                        By: 
 	
                          
 	
                         
 	
                         
 	
                         
 
	
                         
 	
                        Name:
 Title:
 	
                         
 	
                         
 	
                         
 

 

 

 

 

	
                         
 	
                         
 	
                        EXHIBIT B to Common Stock
 Purchase Warrant
 

 

FORM OF ASSIGNMENT

FOR VALUE RECEIVED, the undersigned hereby sells, assigns, and transfers unto the Assignee named below all of the rights of the undersigned to purchase shares of common stock, par value US$.01 per share (“Common Stock”), of Proliance International, Inc. (the “Company”) represented by the Warrant, with respect to the number of shares of Common Stock set forth below:

 

	
      Name of Assignee
 	
       
 	
      Address
 	
       
 	
      No. of Common Stock
 
	
                         
 	
                         
 	
                         
 	
                         
 	
                         
 

 

and does hereby irrevocably constitute and appoint ________ Attorney to make such transfer on the books of Proliance International, Inc. maintained for that purpose, with full power of substitution in the premises.

 

	
                        Dated:  _______________, 200_
 	
                         
 	
                        [NAME OF HOLDER]
 
	
                         
 	
                         
 	
                         
 

 

	
                         
 	
                         
 	
                         
 
	
                          
 	
                         
 	
                        By: 
 	
                          
 
	
                         
 	
                         
 	
                         
 	
                        Name:
 Title:

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