Document:

Evergreen Solar, Inc. Restructuring Proposal

 Exhibit 10.2 
 EVERGREEN SOLAR, INC. 
 RESTRUCTURING PROPOSAL 

The following is an outline of a proposed restructuring (the “Proposal”) in respect of Evergreen Solar, Inc. (the
“Company”). This Proposal does not contain all of the terms, conditions, and other provisions of the transactions contemplated hereby. This Proposal is subject to the execution of definitive documents acceptable to the Company and
certain unaffiliated holders (the “Supporting Noteholders”) of the Company’s 13% Convertible Senior Secured Notes due 2015 (“13% Notes”), in each case in its sole discretion. This Proposal does not constitute
an offer of securities and is not an offer or solicitation for any chapter 11 plan. 
  

	I.	Certain Defined Terms 

 As used in this
Proposal: 
 “Core Assets” means all assets (other than the Non-Core Assets) necessary for the development and pursuit of the
Company’s business plan based on the Wafer Business, including the building and assets in Midland, MI, and including $12.884 million of cash, as such amount may be adjusted upward or downward as provided in Schedule B, but excluding certain
assets usable in the Company’s business plan based on the Wafer Business that the Supporting Noteholders and the Company agree should constitute Non-Core Assets. 
 “Devens Assets” means the manufacturing facility and equipment located in Devens Massachusetts, the lease agreement between the Company and the Massachusetts Development Finance Agency
dated November 20, 2007, as amended, and other assets associated with the operation of the facility, including vendor lists, agreements with vendors, operations documentation, and a license to operate the Company’s non-ISSR wafer
manufacturing equipment, but excluding (x) accounts receivable and inventory and any assets constituting part of the Wafer Business and (y) certain other assets located at the facility that the Supporting Noteholders and the Company agree
should constitute Non-Core Assets. 
 “LBIE Claim” means the Company’s claims against Lehman Brothers International Europe
(“LBIE”) and Lehman Brothers Holdings Inc. (“LBHI”) arising out of the share lending agreement entered into by the Company with LBIE and the related guarantee of LBIE’s obligations provided by LBHI. 

“Non-Core Assets” means all cash (other than (i) the $12.884 million included in the Core Assets (as such
amount may be adjusted upward or downward as provided in Schedule B), (ii) the $10.7 million (subject to increase with respect to winddown costs as described below) (the “Advisor/Winddown Reserve”) reserved for (a) Company
advisor fees and (b) costs of winding up the Bankruptcy Case, (iii) an amount equal to the Budget (as defined herein), (iv) $50,000 reserved for advisors to the official committee of unsecured creditors (“UCC”), if
any, (v) fees for the advisors to the Supporting Noteholders and Indenture Trustee, (vi) cash otherwise permitted to be used by the Cash Collateral Order and (vii) cash otherwise agreed by the Supporting Noteholders to be used
hereunder, pursuant to the Stalking Horse Bid Asset Purchase Agreement (including expenses to be satisfied by the Company thereunder), or otherwise (all of the foregoing, the “Reserved Cash”)), account receivables, causes of action
(including avoidance actions1), existing
inventory and all other assets of the Company that are not (or are excluded from) Core Assets, the Devens Assets or the LBIE Claim. 
  

 

	1 	Avoidance actions would not be sold to a third party purchaser (i.e., a party other than the holders of 13% Notes) unless the Company and the Supporting Noteholders
agree otherwise. 

 “Sale Assets” means the Core Assets, the LBIE Claim, the Devens Assets
and the Non-Core Assets.2 

“Wafer Business” means the Company’s proposed business based on industry standard sized String Ribbon wafers for the photovoltaic
solar industry. The Company’s goal is to complete the commercialization of the technology for the Wafer Business, with a view to enabling a commercialization plan (which may be in one or more forms such as licensing or manufacturing) that
better positions the business enterprise for significant new financings or sales. 
 Proposal 

 

	 	•	 	 On or before August 12, 2011, the Company informed all employees who will be terminated as part of this restructuring. From August 15
forward, certain employees critical to the transaction will be paid from the transition budget and be separated from the Company as their transition roles wind down and allowing the Company to meet the budgetary levels outlined in the June 2011
Investor Presentation provided to the Supporting Noteholders (the “June 2011 Presentation”). 

  

	 	•	 	 The Company shall continue or immediately undertake a process to market the Sale Assets (the “Sale Process”). The Sale Process will
permit parties to bid on all of the Sale Assets as a group or separately on any of the following group of assets (the “Asset Groups”): (i) the Devens Assets; (ii) the LBIE Claim; (iii) the Core Assets and
(iv) the Non-Core Assets (provided that separate bidding on individual assets that comprise Non-Core Assets may be permitted with the consent of the Supporting Noteholders, such consent not to be unreasonably withheld). The Sale Process shall
be completed in a bankruptcy case (the “Bankruptcy Case”) filed under chapter 11 of title 11 of the United States Code (the “Bankruptcy Code”) in the District of Delaware on terms and conditions reasonably
acceptable to the Supporting Noteholders. 

  

	 	•	 	 The Sale Process shall be effectuated either through or subsequent to one or more auctions pursuant to Section 363 of the Bankruptcy Code, in
which holders of 13% Notes provide a “credit-bid” pursuant to Section 363(k) of the Bankruptcy Code for the Sale Assets (the “Stalking Horse Bid”).3 The Stalking Horse Bid will (i) contain a release price of $30 million4 in cash or, if the Supporting Noteholders consent in its sole
discretion, in other consideration for the sale of the Core Assets such that the holders of the 13% Notes consent to the sale of the Core Assets to a third party in an amount above the release price and (ii) otherwise allow the holders of 13%
Notes to allocate, in their discretion, the Stalking Horse Bid among the Asset Groups if one or more bids are received on any of the individual Asset Groups. None of the Sale Assets, other than existing inventory sold in the ordinary course of
business, shall be sold or disposed of outside of the Sale Process without the consent of the Supporting Noteholders. Subject to Bankruptcy Court approval, all proceeds from the Sale Assets (net of costs and other amounts required to be paid in
connection with sales including without limitation, cure costs, taxes, broker fees, required payments to third parties under the sales agreements and other transaction costs), whether pursuant to the Sale Process, the Stalking Horse Bid or
otherwise, will go directly to pay down 

  

 

	2 	For clarity, regarding any postpetition asset, a credit bid may apply to the extent that there is a lien on such asset in favor of the 13% Notes.

	3 	The Stalking Horse Bid will provide that the purchaser has the option to include or exclude assets from the sale, including, but not limited to, the stock of each of
the foreign subsidiaries of the Company and contracts related to the Company’s operations in China, provided that the Advisor/Winddown Reserve will be increased by an agreed upon estimate of additional winddown costs related to any such
excluded assets, provided, further, that such additional costs that remain after deducting such costs from the proceeds of dispositions of excluded assets shall not exceed $7.5 million in the aggregate (i.e., in addition to the value of any
excluded assets). 

	4	The Supporting Noteholders may reduce this amount in its sole discretion. 

  
 2 

	 	 
the claims of the holders of 13% Notes until such holders are paid in full in cash (including, but not limited to, post-petition interest at the contract rate), to the extent that after such
paydown the Company will retain sufficient cash to cover Reserved Cash. 

  

	 	•	 	 During the Sale Process, the Company will operate pursuant to a budget (the “Budget”), which Budget is outlined on Schedule A hereto.
The Sale Process is anticipated to be conducted over a period of approximately three months. The Company will also be permitted to use Reserved Cash for the contemplated purposes, including, without limitation, up to $10.7 million to cover any
(a) Company advisor fees and (b) costs of winding up the Bankruptcy Case (exclusive of Severance/PTO Benefits Payments otherwise addressed herein), including a plan of reorganization to the extent the Company so chooses, and, subject to
approval of the Bankruptcy Court, an amount not to exceed $50,000 for the fees of the UCC (if any). If the Company decides to pursue confirmation of a plan of reorganization, the Supporting Noteholders agree to support such a plan solely on the
terms and conditions set forth in the Restructuring Support Agreement (as defined below), including that such plan not require payments in excess of amounts specified in the Restructuring Support Agreement (including payments of no more than
$200,000 to holders of general unsecured claims, unless the holders of the 13% Notes are paid in full). 

  

	 	•	 	 The Supporting Noteholders will support the Company’s restructuring with consent to cash collateral and/or accounts receivable usage, pursuant to
the Budget and agreed upon protections. The cash collateral order will provide (i) that all proceeds of the Sale Process (net of costs and other amounts required to be paid in connection with sales including, without limitation, cure costs,
taxes, broker fees, required payments to third parties under the sales agreements and other transaction costs) will go directly to pay down the claims of the holders of 13% Notes until such holders are paid in full in cash (including, but not
limited to, post-petition interest at the contract rate), to the extent that after such paydown the Company will retain sufficient cash to cover Reserved Cash and (ii) subject to the approval by the Bankruptcy Court (and subject to any
requirements of the Bankruptcy Court), $12.5 million of cash will immediately be used to pay down the claims of the holders of 13% Notes. If the Bankruptcy Court does not permit all or a portion of the net sale proceeds to be immediately paid to the
holders of 13% Notes, then such proceeds shall be held in a segregated account by the Company subject to the first priority perfected liens of the holders of 13% Notes pending further order of the Bankruptcy Court. The Supporting Noteholders will
also support court approval of a management incentive plan that provides for an amount equal to 5% of gross cash sale proceeds from a third party (i.e. not pursuant to the Stalking Horse Bid or an acquisition vehicle in which management has
an equity interest of more than 20% or management has committed to invest more than $1 million) for the Core Assets; provided, however, the amount provided in the management incentive plan shall not be less than $1 million.5 

 

	 	•	 	 If the Stalking Horse Bid is the highest and best bid for either all of the Sale Assets or a subset of the Sale Assets that includes the Core Assets
and the sale is consummated: 

  

	 	•	 	 the company (“NewCo”) that purchases the assets pursuant the Stalking Horse Bid would, subject to agreed corporate governance
provisions, support development of the Wafer Business with working capital as outlined on Schedule B hereto, and pursuant to mechanisms to be described in the Asset Purchase Agreement and would offer to hire existing employees, with the same salary
or wages, comparable severance and other benefits comparable in the aggregate (“Comparable Terms”), sufficient to support the development of the Wafer Business; and 

 
  

	5 	If the Bankruptcy Court does not approve the management incentive plan, the parties will negotiate in good faith to obtain court approval of a revised management
incentive plan on similar economic terms. 

  
 3 

	 	•	 	 The board of directors of NewCo will establish a management incentive plan as soon as practicable after consummation of the sale to provide designated
members of senior management of NewCo with stock, options and/or other instruments representing, in the aggregate, up to 10% of the equity value of NewCo relating to the Core Assets, and Newco will offer short term transition contracts for certain
members of existing management who are required for a transition period on terms to be agreed upon between such members of management and the Supporting Noteholders prior to filing the Bankruptcy Case, with any such costs reducing the budget set
forth on Schedule B on a dollar for dollar basis. The transition contracts for the current general counsel and chief financial officer will (i) require such consultants to be available on a full time basis and (ii) contain non-compete
clauses for the duration of the transition contracts. 

  

	 	•	 	 The Company and the Supporting Noteholders shall set forth their agreements and undertakings contemplated by this Proposal in a restructuring support
agreement to be executed prior to the filing of the Bankruptcy Case which shall include, among other things, milestones to achieve the restructuring and agreement to provide mutual releases upon consummation of the Sale Process (the
“Restructuring Support Agreement”). 

  

	 	•	 	 On or before August 15, 2011, the Company shall have commenced the Bankruptcy Case in the District of Delaware. 

  
 4 

 Schedule A – Budget (in $000s) 

 

					
	 Operating Activities
	  	$	5,841	  
		
	 Other Transition Charges
	  	 	2,120	  
		
	 Severance/PTO/Benefits Payments
	  	 	2,200	6 
		  	  
	  
	 
		
	 Total Budget
	  	$	10,161	  

 Note: Budget items are defined as presented in the June 2011 Presentation. The Severance/PTO/Benefits Payments are based
on a defined list of personnel that the Company expects it will terminate prior to the end of the Sale Process. When the employment of all of these people has terminated, if the Company’s total commitments for Severance/PTO/Benefits Payments
for these people are less than the $2.2 million budgeted, the difference between the budgeted amount and the actual amount spent will be added to the Operating Activities budgeted amount on Schedule B. For purposes of clarity, employees that are
offered employment with NewCo or the third party purchaser of the Core Assets on Comparable Terms and who do not accept these employment terms will not be entitled to severance from the estate and (ii) any employee who accepts an offer of
employment from NewCo or a third party purchaser (whether or not on Comparable Terms) would not be entitled to severance from the estate. 
 The
Budget contemplates a sales process commencing August 15, 2011 and consummating on or prior to November 15, 2011. To the extent that such period is extended with the consent of the Supporting Noteholders, which consent shall be in its sole
discretion, this Budget shall be increased and extended in an amount to be reasonably agreed and shall not reduce amounts on Schedule B. In addition, to the extent that the Sale Process is extended by the Company without the consent of the
Supporting Noteholders past November 15, 2011, the timetable for the Sale Process will be extended, but not past November 30, 2011 except such period may be extended until December 31, 2011 solely to the extent required for the
purchaser to obtain necessary regulatory approvals. In the event of such an extension without the consent of the Supporting Noteholders, the budget set forth above for Operating Activities will be increased by an amount to fund the Company’s
operating activities during such period, and such amount shall be deducted on a dollar for dollar basis from the Operating Activities budget set forth on Schedule B and the amount of cash to be transferred to NewCo or third parties as part of the
sale of the Core Assets. 
  

	6	 This represents all Severance/PTO/Benefits payments required through the completion of the Sales
Process, based on the employees the Company intends to terminate prior to the end of the Sale Process. If the Company decides to terminate additional employees prior to the end of the Sale Process, these employees would be entitled to severance to
be paid out of the additional $1.9 million reserved for potential additional severance and the Budget will be increased by this amount. If every employee is terminated as a result of the Sale Process (for example, Newco or the third party
purchaser of the Core Assets does not offer comparable employment terms to any current employee of the Company), the Company would pay a total of an additional $1.9 million in additional severance and the Budget will be increased by this amount.

  
 5 

 Schedule B – Wafer Business Working Capital (in $000s) 

 

					
	 Operating Activities
	  	$	9,884	  
		
	 Capex for Wide Wafer Development
	  	 	3,000	  
		  	  
	  
	 
		
	 Total
	  	$	12,884	  

 Note: Budget items are defined as presented in the June 2011 Presentation. The budget for Operating Activities will
be increased by an amount equal to (i) 25% of the sum of the following items in excess of $4.5 million (as included in Working Capital and Other in the June 2011 Presentation) collected post-petition: (a) Accounts Receivable,
(b) Inventory, and (c) Sovello royalty payments, plus (ii) the $2.2 million budgeted for Severance/PTO/Benefits payments on Schedule A for those people expected to be terminated prior to the end of the Sale Process minus the amount of
actual Severance/PTO/Benefits payments actually paid to those persons; provided, however, that the budget will be increased by the amounts referred to in clause (i) above only to the extent that the Company receives at least $4 million in
proceeds of avoidance (including turnover) actions in the Bankruptcy Case and such proceeds are subject to the liens of the 13% Notes. 

  
 6Unassociated Document

 

THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "1933 ACT"), OR ANY STATE SECURITIES LAWS AND NEITHER SUCH SHARES NOR ANY INTEREST THEREIN MAY BE OFFERED, SOLD, PLEDGED, ASSIGNED OR OTHERWISE TRANSFERRED UNLESS (1) A REGISTRATION STATEMENT WITH RESPECT THERETO IS EFFECTIVE UNDER THE 1933 ACT AND ANY APPLICABLE STATE SECURITIES LAWS, OR (2) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE 1933 ACT.

IN ADDITION, A COMMON STOCK  PURCHASE AGREEMENT DATED AS OF JULY 29,  2011 (THE “PURCHASE AGREEMENT”), A COPY OF WHICH MAY BE OBTAINED FROM THE COMPANY AT ITS PRINCIPAL EXECUTIVE OFFICE, CONTAINS CERTAIN ADDITIONAL AGREEMENTS BETWEEN THE PARTIES WITH RESPECT TO THIS WARRANT.  CAPITALIZED TERMS HEREIN NOT OTHERWISE DEFINED SHALL HAVE THE MEANINGS ASCRIBED TO THEM IN THE PURCHASE AGREEMENT.

______________________

BRS GROUP, INC.

COMMON STOCK PURCHASE WARRANT “A”

	
Number of Shares:

	  	
Holder:

	  	  	  
	
Original Issue Date:

	
July 29, 2011

	
Attn:

	  	  	
Title:

	
Expiration Date:

	
Two Years Post Date of Initial Public Offering

	  
	  	  	  
	
Exercise Price per Share:

	
$11.15

	  

 

BRS Group, Inc., a company organized and existing under the laws of the State of Delaware (the “Company”), hereby certifies that, for value received, [Warrant Holder]., or its registered assigns (the “Warrant Holder”), is entitled, subject to the terms set forth below, to purchase from the Company up to  ___________ shares (as adjusted from time to time as provided in Section 7, the “Warrant Shares”) of common stock, $.001 par value (the “Common Stock”), of the Company at a price of Eleven  Dollars and Fifteen Cents ($11.15) per Warrant Share (as adjusted from time to time as provided in Section 7, the “Exercise Price”), at any time from two years after the effective date of an Initial Public Offering, (or twenty-four  months post effectiveness of a Registration Statement) subsequent to the issuance hereof (such twenty-four months to be extended by one month for each month or portion of a month during which a Registration Statement’s effectiveness has lapsed or been suspended), whichever is longer (the “Expiration Date”) and subject to the following terms and conditions:

 

BRS GROUP, INC. WARRANT AGREEMENT

  

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1.           Registration of Warrant.  The Company shall register this Warrant upon records to be maintained by the Company for that purpose (the “Warrant Register”), in the name of the record Warrant Holder hereof from time to time.  The Company may deem and treat the registered Warrant Holder of this Warrant as the absolute owner hereof for the purpose of any exercise hereof or any distribution to the Warrant Holder, and for all other purposes, and the Company shall not be affected by notice to the contrary.

 

2.           Investment Representation.  The Warrant Holder by accepting this Warrant represents that the Warrant Holder is acquiring this Warrant for its own account or the account of an affiliate for investment purposes and not with the view to any offering or distribution and that the Warrant Holder will not sell or otherwise dispose of this Warrant or the underlying Warrant Shares in violation of applicable securities laws.  The Warrant Holder acknowledges that the certificates representing any Warrant Shares will bear a legend indicating that they have not been registered under the United States Securities Act of 1933, as amended (the “1933 Act”) and may not be sold by the Warrant Holder except pursuant to an effective registration statement or pursuant to an exemption from registration requirements of the 1933 Act and in accordance with federal and state securities laws.  If this Warrant was acquired by the Warrant Holder pursuant to the exemption from the registration requirements of the 1933 Act afforded by Regulation S thereunder, the Warrant Holder acknowledges and covenants that this Warrant may not be exercised by or on behalf of a Person during the one year distribution compliance period (as defined in Regulation S) following the date hereof.  “Person” means an individual, partnership, firm, limited liability company, trust, joint venture, association, corporation, or any other legal entity.

 

3.           Validity of Warrant and Issue of Shares.  The Company represents and warrants that this Warrant has been duly authorized and validly issued and warrants and agrees that all of Common Stock that may be issued upon the exercise of the rights represented by this Warrant will, when issued upon such exercise, be duly authorized, validly issued, fully paid and nonassessable and free from all taxes, liens and charges with respect to the issue thereof.  The Company further warrants and agrees that during the period within which the rights represented by this Warrant may be exercised, the Company will at all times have authorized and reserved a sufficient number of Common Stock to provide for the exercise of the rights represented by this Warrant.

 

4.           Registration of Transfers and Exchange of Warrants.

 

a.           Subject to compliance with the legend set forth on the face of this Warrant, the Company shall register the transfer of any portion of this Warrant in the Warrant Register, upon surrender of this Warrant with the Form of Assignment attached hereto duly completed and signed, to the Company at the office specified in or pursuant to Section 12.  Upon any such registration or transfer, a new warrant to purchase Common Stock, in substantially the form of this Warrant (any such new warrant, a “New Warrant”), evidencing the portion of this Warrant so transferred shall be issued to the transferee and a New Warrant evidencing the remaining portion of this Warrant not so transferred, if any, shall be issued to the transferring Warrant Holder.  The acceptance of the New Warrant by the transferee thereof shall be deemed the acceptance of such transferee of all of the rights and obligations of a Warrant Holder of a Warrant.

 

BRS GROUP, INC. WARRANT AGREEMENT

  

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b.           This Warrant is exchangeable, upon the surrender hereof by the Warrant Holder to the office of the Company specified in or pursuant to Section 9 for one or more New Warrants, evidencing in the aggregate the right to purchase the number of Warrant Shares which may then be purchased hereunder.  Any such New Warrant will be dated the date of such exchange.

 

	
  

	
5.

	
Exercise of Warrants.

 

a.           Upon surrender of this Warrant with the Form of Election to Purchase attached hereto duly completed and signed to the Company, at its address set forth in Section 12, and upon payment and delivery of the Exercise Price per Warrant Share multiplied by the number of Warrant Shares that the Warrant Holder intends to purchase hereunder, in lawful money of the United States of America, in cash or by certified or official bank check or checks, to the Company, all as specified by the Warrant Holder in the Form of Election to Purchase, the Company shall promptly (but in no event later than 7 business days after the Date of Exercise (as defined herein)) issue or cause to be issued  and cause to be delivered to or upon the written order of the Warrant Holder and in such name or names as the Warrant Holder may designate (subject to the restrictions on transfer described in the legend set forth on the face of this Warrant), a certificate for the Warrant Shares issuable upon such exercise, with such restrictive legend as required by the 1933 Act.  Any person so designated by the Warrant Holder to receive Warrant Shares shall be deemed to have become holder of record of such Warrant Shares as of the Date of Exercise of this Warrant.

 

b.           A “Date of Exercise” means the date on which the Company shall have received (i) this Warrant (or any New Warrant, as applicable), with the Form of Election to Purchase attached hereto (or attached to such New Warrant) appropriately completed and duly signed, and (ii) payment of the Exercise Price for the number of Warrant Shares so indicated by the Warrant Holder to be purchased.

 

c.           This Warrant shall be exercisable at any time and from time to time for such number of Warrant Shares as is indicated in the attached Form of Election To Purchase.  If less than all of the Warrant Shares which may be purchased under this Warrant are exercised at any time, the Company shall issue or cause to be issued, at its expense, a New Warrant evidencing the right to purchase the remaining number of Warrant Shares for which no exercise has been evidenced by this Warrant.

 

d.           (i) Notwithstanding anything contained herein to the contrary but subject to Section 6, if the shares underlying the Warrant are not registered pursuant to a Registration Statement as described in the Registration Rights Agreement within 12 months post Closing, the holder of this Warrant may, at its election exercised in its sole discretion, exercise this Warrant in whole or in part and, in lieu of making the cash payment otherwise contemplated to be made to the Company upon such exercise in payment of the Aggregate Exercise Price, elect instead to receive upon such exercise the “Net Number” of shares of Common Stock determined according to the following formula (a “Cashless Exercise”):

 

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

 

BRS GROUP, INC. WARRANT AGREEMENT

  

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(ii)           For purposes of the foregoing formula:

 

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

 

B= the last reported sale price (as reported by Bloomberg) of the Common Stock on the trading day immediately preceding the date of the Exercise Notice.

 

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

 

e.           The holder of this Warrant agrees not to elect a Cashless Exercise for a period of twelve (12) months from the Initial Public Offering. The holder of this Warrant also agrees not to elect a Cashless Exercise so long as there is an effective registration statement for the Warrant Shares.

 

6.           Maximum Exercise.  The Warrant Holder shall not be entitled to exercise this Warrant on a Date of Exercise in connection with that number of shares of Common Stock which would be in excess of the sum of (i) the number of shares of Common Stock beneficially owned by the Warrant Holder and its affiliates on an exercise date, and (ii) the number of shares of Common Stock issuable upon the exercise of this Warrant with respect to which the determination of this limitation is being made on an exercise date, which would result in beneficial ownership by the Warrant Holder and its affiliates of more than 9.99% of the outstanding shares of Common Stock on such date.

 

7.           Adjustment of Exercise Price and Number of Shares.  The character of the shares of stock or other securities at the time issuable upon exercise of this Warrant and the Exercise Price therefore, are subject to adjustment upon the occurrence of the following events, and all such adjustments shall be cumulative:

 

a.           Adjustment for Stock Splits, Stock Dividends, Recapitalizations, Etc.  The Exercise Price of this Warrant and the number of shares of Common Stock or other securities at the time issuable upon exercise of this Warrant shall be appropriately adjusted to reflect any stock dividend, stock split, combination of shares, reclassification, recapitalization or other similar event affecting the number of outstanding shares of stock or securities.

 

b.           Adjustment for Reorganization, Consolidation, Merger, Etc.  In case of any consolidation or merger of the Company with or into any other corporation, entity or person, or any other corporate reorganization, in which the Company shall not be the continuing or surviving entity of such consolidation, merger or reorganization (any such transaction being hereinafter referred to as a "Reorganization"), then, in each case, the holder of this Warrant, on exercise hereof at any time after the consummation or effective date of such Reorganization (the "Effective Date"), shall receive, in lieu of the shares of stock or other securities at any time issuable upon the exercise of the Warrant issuable on such exercise prior to the Effective Date, the stock and other securities and property (including cash) to which such holder would have been entitled upon the Effective Date if such holder had exercised this Warrant immediately prior thereto (all subject to further adjustment as provided in this Warrant).

 

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c.           Certificate as to Adjustments.  In case of any adjustment or readjustment in the price or kind of securities issuable on the exercise of this Warrant, the Company will promptly give written notice thereof to the holder of this Warrant in the form of a certificate, certified and confirmed by the Board of Directors of the Company, setting forth such adjustment or readjustment and showing in reasonable detail the facts upon which such adjustment or readjustment is based.

 

d.           The Company sells, grants or issues any shares, options, warrants, or any instrument convertible into shares or equity in any form at a price (in the case of stock) or with an exercise or conversion price (in the case of warrants, options or other convertible securities) below the then current Exercise Price of this warrant. In the event the Company sells, grants or issues any shares, options, warrants, or any instrument convertible into shares or equity in any form below the current Exercise Price then the Exercise Price shall be reduced to such lower price per share. Such reduction shall be made at the time such transaction is executed.

 

The full ratchet and anti-dilution protection provided for in Section 7(d) of the Warrants Agreements for subsequent lower price issuance shall be null and void and shall have no further force or effect if ASC 815-40-25 (formerly EITF 07-5), as such may amended, supplemented or modified by any accounting guidance and/or announcement(s) issued by the Financial Accounting Standards Board, the Emerging Issues Task Force or any other regulatory authority, will adversely affect the Company’s financial condition as a result of such provision.  As such, if this Section 7(d) becomes null and void, then the Company will require the consent from T Squared Investments LLC prior to issuing any shares, warrants, or any other security convertible into shares, at a price lower than the Exercise Price.

 

8.           Fractional Shares.  The Company shall not be required to issue or cause there to be issued fractional Warrant Shares on the exercise of this Warrant.  The number of full Warrant Shares that shall be issuable upon the exercise of this Warrant shall be computed on the basis of the aggregate number of Warrant Shares purchasable on exercise of this Warrant so presented.  If any fraction of a Warrant Share would, except for the provisions of this Section 8, be issuable on the exercise of this Warrant, the Company shall, at its option, (i) pay an amount in cash equal to the Exercise Price multiplied by such fraction or (ii) round the number of Warrant Shares issuable, up to the next whole number.

 

9.           Sale or Merger of the Company.  Upon a Change in Control, the restriction contained in Section 6 shall immediately be released and the Warrant Holder will have the right to exercise this Warrant concurrently with such Change in Control event.  For purposes of this Warrant, the term “Change in Control” shall mean a consolidation or merger of the Company with or into another company or entity in which the Company is not the surviving entity or the sale of all or substantially all of the assets of the Company to another company or entity not controlled by the then existing stockholders of the Company in a transaction or series of transactions.

 

10.           Notice of Intent to Sell or Merge the Company.  The Company will give Warrant Holder ten (10) business days notice before the event of a sale of all or substantially all of the assets of the Company or the merger or consolidation of the Company in a transaction in which the Company is not the surviving entity.

 

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11.           Issuance of Substitute Warrant. In the event of a merger, consolidation, recapitalization or reorganization of the Company or a reclassification of Company shares of stock, which results in an adjustment to the number of shares subject to this Warrant and/or the Exercise Price hereunder, the Company agrees to issue to the Warrant Holder a substitute Warrant reflecting the adjusted number of shares and/or Exercise Price upon the surrender of this Warrant to the Company.

 

12.           Right To Include (“Piggy-Back”) Registrable Securities. Provided that the Common Stock underlying the Warrants have not been registered, if at any time after the date hereof the Company proposes to register any of its securities under the 1933 Act (other than by a registration in connection with an acquisition in a manner which would not permit registration of the securities for sale to the public, or a registration on Form S-8, or any successor form thereto, or a registration on Form S-4, or any successor form thereto) then the Company will at such time give prompt written notice to the Investors of its intention to do so. Upon the written request or request via electronic mail of the Investors, made within ten (10) days after the receipt of such notice, choose to include any of the Common Stock underlying the Warrants, the Company will, subject to the terms of this Agreement, use its commercially reasonable best efforts to effect the registration under the 1933 Act of the Common Stock underlying the Warrants.  If at any time post Closing, the Company closes on any other financing that grants to such investors “demand” registration rights, the Investors shall be entitled to the same “demand” rights granted to such investors.

 

13.           Notice.  All notices and other communications hereunder shall be in writing and shall be deemed to have been given (i) on the date they are delivered if delivered in person; (ii) on the date initially received if delivered by facsimile transmission followed by registered or certified mail confirmation; (iii) on the date delivered by an overnight courier service; or (iv) on the third business day after it is mailed by registered or certified mail, return receipt requested with postage and other fees prepaid as follows:

 

If to the Company:

 

See Common Stock Purchase Agreement

If to the Warrant Holder:

See Common Stock Purchase Agreement

	
  

	
14.

	
Miscellaneous.

 

a.           This Warrant shall be binding on and inure to the benefit of the parties hereto and their respective successors and permitted assigns.  This Warrant may be amended only by a writing signed by the Company and the Warrant Holder.

 

b.           Nothing in this Warrant shall be construed to give to any person or corporation other than the Company and the Warrant Holder any legal or equitable right, remedy or cause of action under this Warrant; this Warrant shall be for the sole and exclusive benefit of the Company and the Warrant Holder.

 

BRS GROUP, INC. WARRANT AGREEMENT

  

PAGE 6 OF 9

  

 

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

 

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

 

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

 

f.           The Warrant Holder shall not, by virtue hereof, be entitled to any voting or other rights of a shareholder of the Company, either at law or equity, and the rights of the Warrant Holder are limited to those expressed in this Warrant.

 

[SIGNATURES ON FOLLOWING PAGE]

 

BRS GROUP, INC. WARRANT AGREEMENT

  

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

BRS Group, Inc., a Delaware corporation

By: 

Name:  ______________________________

Its:   President and Chief Executive Officer

 

BRS GROUP, INC. WARRANT AGREEMENT

  

PAGE 8 OF 9

  

 

FORM OF ELECTION TO PURCHASE

(To be executed by the Warrant Holder to exercise the right to purchase shares of Common Stock under the foregoing Warrant)

 

To:  BRS Group, Inc. .:

In accordance with the Warrant enclosed with this Form of Election to Purchase, the undersigned hereby irrevocably elects to purchase ______________ shares of Common Stock (“Common Stock”), $.001 par value, of BRS Group, Inc. and encloses the warrant and $____ for each Warrant Share being purchased or an aggregate of $________________ in cash or certified or official bank check or checks, which sum represents the aggregate Exercise Price (as defined in the Warrant) together with any applicable taxes payable by the undersigned pursuant to the Warrant.

 

The undersigned requests that certificates for the shares of Common Stock issuable upon this exercise be issued in the name of:

_______________________________________________

_______________________________________________

_______________________________________________

(Please print name and address)

 

 

_______________________________________________

(Please insert Social Security or Tax Identification Number)

If the number of shares of Common Stock issuable upon this exercise shall not be all of the shares of Common Stock which the undersigned is entitled to purchase in accordance with the enclosed Warrant, the undersigned requests that a New Warrant (as defined in the Warrant) evidencing the right to purchase the shares of Common Stock not issuable pursuant to the exercise evidenced hereby be issued in the name of and delivered to:

_______________________________________________

 

_______________________________________________

 

_______________________________________________

(Please print name and address)

 

Dated: _____________________

Name of Warrant Holder:

(Print) _______________________________________

(By:) ________________________________________                                                            

 (Name:)______________________________________

 (Title:)  ______________________________________

Signature must conform in all respects to name of Warrant Holder as specified on the face of the Warrant

 

 

BRS GROUP, INC. WARRANT AGREEMENT

PAGE 9 OF 9

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