Document:

Exhibit 4.2

REGISTRATION

RIGHTS AGREEMENT

This Registration

Rights Agreement (this “Agreement”) is made and entered into as of

December 2, 2002, by and among SureBeam Corporation, a Delaware corporation

(the “Company”), and the investors signatory hereto (each a “Purchaser”

and collectively, the “Purchasers”).

This Agreement is

made pursuant to the Securities Purchase Agreement, dated as of the date hereof

among the Company and the Purchasers (the “Purchase Agreement”).

The Company and

the Purchasers hereby agree as follows:

1.             Definitions.  Capitalized terms used and not otherwise

defined herein that are defined in the Purchase Agreement shall have the

meanings given such terms in the Purchase Agreement.  As used in this Agreement, the following terms shall have the

following meanings:

 

“Effectiveness Date” means, with respect to the

initial Registration Statement required to be filed hereunder, the earlier of

(a) the 90th day following the Closing Date, provided, that such date

shall be extended by one day for each day that the Commission takes, beyond ten

(10) calendar days from the date of delivery by the Company, to respond to any

correspondence from the Company during the period that the Registration

Statement is subject to review by the Commission, provided, however,

that in no event will such date be extended later than the 120th day following

the Closing Date and (b) the fifth Trading Day following the date on

which the Company is notified by the Commission that such Registration

Statement will not be reviewed or is no longer subject to further review and

comments, and, with respect to any additional Registration Statements that may

be required pursuant to Section 2(c), the 90th day following the date on which

the Company first knows, or reasonably should have known, that such additional

Registration Statement is required under such Section.

 

“Effectiveness Period” shall have the meaning

set forth in Section 2(a).

 

“Filing Date”

means, with respect to the initial Registration Statement required to be filed

hereunder, the 30th day following the Closing Date, and, with respect to any

additional Registration Statements that may be required pursuant to Section

2(c), the 30th day following the date on which the Company first knows, or

reasonably should have known that such additional Registration Statement is

required under such Section.

“Holder” or

“Holders” means the holder or holders, as the case may be, from time to

time of Registrable Securities.

“Indemnified

Party” shall have the meaning set forth in Section 5(c).

“Indemnifying

Party” shall have the meaning set forth in Section 5(c).

“Losses”

shall have the meaning set forth in Section 5(a).

“New Warrants”  shall have the meaning set forth in the

Warrants.

 

 

“Proceeding”

means an action, claim, suit, investigation or proceeding (including, without

limitation, an investigation or partial proceeding, such as a deposition),

whether commenced or threatened.

“Prospectus”

means the prospectus included in a Registration Statement (including, without

limitation, a prospectus that includes any information previously omitted from

a prospectus filed as part of an effective registration statement in reliance

upon Rule 430A promulgated under the Securities Act), as amended or

supplemented by any prospectus supplement, with respect to the terms of the

offering of any portion of the Registrable Securities covered by the

Registration Statement, and all other amendments and supplements to the

Prospectus, including post–effective amendments, and all material

incorporated by reference or deemed to be incorporated by reference in such

Prospectus.

“Registrable

Securities” means (i) the Shares, and (ii) the shares of Common Stock

issuable upon exercise of the Warrants.

“Registration Statement” means the initial

registration statement required to be filed hereunder and any additional

registration statements contemplated by Section 2(c), including (in each

case) the Prospectus, amendments and supplements to such registration statement

or Prospectus, including pre– and post–effective amendments, all

exhibits thereto, and all material incorporated by reference or deemed to be

incorporated by reference in such registration statement.

 

“Rule 144” means Rule 144 promulgated by the

Commission pursuant to the Securities Act, as such Rule may be amended from

time to time, or any similar rule or regulation hereafter adopted by the

Commission having substantially the same effect as such Rule.

 

“Rule 415”

means Rule 415 promulgated by the Commission pursuant to the Securities Act, as

such Rule may be amended from time to time, or any similar rule or regulation

hereafter adopted by the Commission having substantially the same effect as

such Rule.

“Rule 424”

means Rule 424 promulgated by the Commission pursuant to the Securities Act, as

such Rule may be amended from time to time, or any similar rule or regulation

hereafter adopted by the Commission having substantially the same effect as

such Rule.

“Shares”

means the shares of Common Stock issued to the Purchasers pursuant to the

Purchase Agreement.

“Special

Counsel” means Purchaser Counsel who will be reimbursed by the Company

pursuant to Section 4.

“Warrants”

means (i) the Warrants issued under the Purchase Agreement, and (ii) the New

Warrants issued under the Warrants.

2.             Registration.

(a)           On or prior to each Filing Date, the

Company shall prepare and file with the Commission a Registration Statement

covering the resale of all Registrable Securities for an

 

 

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offering to be made on a continuous basis pursuant to Rule 415.  Each Registration Statement shall be on Form

S–3 (except if the Company is not then eligible to register for resale

the Registrable Securities on Form S–3, in which case such

registration shall be on another appropriate form in accordance herewith) and

shall contain (except if otherwise directed by the Holders) the “Plan of

Distribution” attached hereto as Annex A.  The Company shall cause such Registration Statement to remain

effective as provided herein. The Company shall use its best efforts to cause

each Registration Statement to be declared effective under the Securities Act

on or before the Effectiveness Date, and shall use its best efforts to keep

each Registration Statement continuously effective under the Securities Act

until the date which is two years after the date that such Registration

Statement is declared effective by the Commission or such earlier date when all

Registrable Securities covered by such Registration Statement have been sold or

may be sold without volume restrictions pursuant to Rule 144(k) as determined

by the counsel to the Company pursuant to a written opinion letter to such

effect, addressed and acceptable to the Company’s transfer agent and the

affected Holders (the “Effectiveness Period”).

 

(b)           If:

(a) any Registration Statement is not filed on or prior to the Filing Date (if

the Company files such Registration Statement without affording the Holder the

opportunity to review and comment on the same as required by Section 3(a)

hereof, the Company shall not be deemed to have satisfied this clause (a)), or

(b) the Company fails to file with the Commission a request for acceleration in

accordance with Rule 461 promulgated under the Securities Act, within five

Trading Day of the date that the Company is notified (orally or in writing,

whichever is earlier) by the Commission that a Registration Statement will not

be “reviewed,” or not subject to further review, or (c) the Company fails to

respond to any comments made by the Commission within fifteen Trading Days

after the receipt of such comments, or (d) after a Registration Statement is

filed with and declared effective by the Commission, such Registration

Statement ceases to be effective as to all Registrable Securities to which it

is required to relate (whether upon the delivery of an Advice pursuant to

Section 6(d) or otherwise) at any time prior to the expiration of the

Effectiveness Period without being succeeded within fifteen Trading Days by an

amendment to such Registration Statement or by a subsequent  Registration Statement filed with and

declared effective by the Commission, or (e) an amendment to a Registration

Statement is not filed by the Company with the Commission within fifteen

Trading Days of the Commission’s notifying the Company that such amendment is

required in order for such Registration Statement to be declared effective, or

(f) the Common Stock is not listed or quoted, or is suspended from trading on

the Nasdaq National Market for a period of three Trading Days (which need not

be consecutive Trading Days), or (g) the exercise rights of the Holders

pursuant to the Warrants are suspended for any reason , or (h) any Registration

Statement shall not be declared effective by the Commission on or prior to the

applicable Effectiveness Date (any such failure or breach being referred to as

an “Event,” and for purposes of clause (a), (g) or (h) the date on which

such Event occurs, or for purposes of clause (b) the date on which such five

Trading Day period is exceeded, or for purposes of clauses (c) (d) or (e) the

date which such fifteen Trading Day-period is exceeded or for purposes of

clause (g) the date on which such three Trading Day period is exceeded, being

referred to as “Event Date”), then, in addition to any other rights

available to the Holders: (x) on each such Event Date the Company shall pay to

each Holder an amount in cash, as liquidated damages and not as a penalty,

equal to 1% of the aggregate purchase price paid by such Holder pursuant to the

Purchase Agreement; and (y) on each monthly anniversary of each such Event Date

thereof (if the applicable Event shall not have been cured by such date) until

the applicable Event is cured, the Company shall pay to each 

 

 

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Holder an amount in cash, as liquidated damages and not as a penalty,

equal to 2% of the aggregate purchase price paid by such Holder pursuant to the

Purchase Agreement.  If the Company

fails to pay any liquidated damages pursuant to this Section in full within

seven days after the date payable, the Company will pay interest thereon at a

rate of 18% per annum (or such lesser maximum amount that is permitted to be

paid by applicable law) to the Holder, accruing daily from the date such

liquidated damages are due until such amounts, plus all such interest thereon,

are paid in full.  The liquidated

damages pursuant to the terms hereof shall apply on a pro-rata basis for any

portion of a month prior to the cure of an Event.

 

(c)           If the number of Registrable

Securities at any time exceeds 85% of the number of shares of Common Stock then

registered in a Registration Statement, then the Company shall file an

additional Registration Statement covering the resale of such additional shares

or Registrable Securities (as applicable) in accordance with this Agreement.

(d)           Notwithstanding anything herein to

the contrary, the Company shall prepare and file a Registration Statement

covering the resale of shares of Common Stock issuable upon exercise of the New

Warrants within 15 Trading Days following the issuance of such New Warrants.

3.             Registration Procedures

In connection with

the Company’s registration obligations hereunder, the Company shall:

(a)           Not less than two Trading Days prior

to the filing of the Registration Statement or any related Prospectus or any

amendment or supplement thereto, the Company shall, (i) furnish to the Holders

and their Special Counsel copies of all such documents proposed to be filed

(including documents incorporated or deemed incorporated by reference) which documents

will be subject to the review of such Holders and their Special Counsel, and

(ii) cause its officers and directors, counsel and independent certified public

accountants to respond to such inquiries as shall be necessary, in the

reasonable opinion of respective counsel to conduct a reasonable investigation

within the meaning of the Securities Act. 

The Company shall not file the Registration Statement or any such

Prospectus or any amendments or supplements thereto to which the Holders of a

majority of the Registrable Securities and their Special Counsel shall

reasonably object in good faith.

(b)           (i)  Prepare and file with the Commission such

amendments, including post–effective amendments, to the Registration

Statement and the Prospectus used in connection therewith as may be necessary

to keep the Registration Statement continuously effective as to the applicable

Registrable Securities for the Effectiveness Period and prepare and file with

the Commission such additional Registration Statements in order to register for

resale under the Securities Act all of the Registrable Securities; (ii) cause

the related Prospectus to be amended or supplemented by any required Prospectus

supplement, and as so supplemented or amended to be filed pursuant to Rule 424;

(iii) respond as promptly as reasonably possible, and in any event within ten

days, to any comments received from the Commission with respect to the

Registration Statement or any amendment thereto and, as promptly as reasonably

possible provide the Holders true and complete copies of all correspondence

from and to the Commission relating to 

 

 

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the Registration Statement; and (iv) comply in all material respects

with the provisions of the Securities Act and the Exchange Act with respect to

the disposition of all Registrable Securities covered by the Registration

Statement during the applicable period in accordance with the intended methods

of disposition by the Holders thereof set forth in the Registration Statement

as so amended or in such Prospectus as so supplemented.

 

(c)           Notify the Holders of Registrable

Securities to be sold and their Special Counsel as promptly as reasonably

possible (and, in the case of (i)(A) below, not less than three Trading Days prior

to such filing) and (if requested by any such Person) confirm such notice in

writing no later than one Trading Day following the day (i)(A) when a

Prospectus or any Prospectus supplement or post–effective amendment to

the Registration Statement is proposed to be filed; (B) when the Commission

notifies the Company whether there will be a “review” of such Registration

Statement and whenever the Commission comments in writing on such Registration

Statement (the Company shall provide true and complete copies thereof and all

written responses thereto to each of the Holders); and (C) with respect to the

Registration Statement or any post–effective amendment, when the same has

become effective; (ii) of any request by the Commission or any other Federal or

state governmental authority for amendments or supplements to the Registration

Statement or Prospectus or for additional information; (iii) of the issuance by

the Commission of any stop order suspending the effectiveness of the

Registration Statement covering any or all of the Registrable Securities or the

initiation of any Proceedings for that purpose; (iv) of the receipt by the

Company of any notification with respect to the suspension of the qualification

or exemption from qualification of any of the Registrable Securities for sale

in any jurisdiction, or the initiation or threatening of any Proceeding for

such purpose; and (v) of the occurrence of any event or passage of time that

makes the financial statements included in the Registration Statement ineligible

for inclusion therein or any statement made in the Registration Statement or

Prospectus or any document incorporated or deemed to be incorporated therein by

reference untrue in any material respect or that requires any revisions to the

Registration Statement, Prospectus or other documents so that, in the case of

the Registration Statement or the Prospectus, as the case may be, it will not

contain any untrue statement of a material fact or omit to state any material

fact required to be stated therein or necessary to make the statements therein,

in light of the circumstances under which they were made, not misleading.

(d)           Use its best efforts to avoid the

issuance of, or, if issued, obtain the withdrawal of (i) any order suspending

the effectiveness of the Registration Statement, or (ii) any suspension of the

qualification (or exemption from qualification) of any of the Registrable

Securities for sale in any jurisdiction, at the earliest practicable moment.

(e)           Furnish

to each Holder and their Special Counsel, without charge, at least one

conformed copy of each Registration Statement and each amendment thereto,

including financial statements and schedules, all documents incorporated or

deemed to be incorporated therein by reference, and all exhibits to the extent

requested by such Person (including those previously furnished or incorporated

by reference) promptly after the filing of such documents with the Commission.

 

(f)            Promptly

deliver to each Holder and their Special Counsel, without charge, as many copies

of the Prospectus or Prospectuses (including each form of prospectus) 

 

 

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and each amendment or supplement thereto as such Persons may reasonably

request.  The Company hereby consents to

the use of such Prospectus and each amendment or supplement thereto by each of

the selling Holders in connection with the offering and sale of the Registrable

Securities covered by such Prospectus and any amendment or supplement thereto.

 

 

(g)           Prior

to any public offering of Registrable Securities, use its best efforts to

register or qualify or cooperate with the selling Holders and their Special

Counsel in connection with the registration or qualification (or exemption from

such registration or qualification) of such Registrable Securities for offer

and sale under the securities or Blue Sky laws of such jurisdictions within the

United States as any Holder requests in writing, to keep each such registration

or qualification (or exemption therefrom) effective during the Effectiveness

Period and to do any and all other acts or things necessary or advisable to

enable the disposition in such jurisdictions of the Registrable Securities

covered by a Registration Statement; provided, that the Company shall

not be required to qualify generally to do business in any jurisdiction where

it is not then so qualified or subject the Company to any material tax in any

such jurisdiction where it is not then so subject.

 

(h)           Cooperate with the Holders to

facilitate the timely preparation and delivery of certificates representing

Registrable Securities to be delivered to a transferee pursuant to a

Registration Statement, which certificates shall be free, to the extent

permitted by the Purchase Agreement, of all restrictive legends, and to enable

such Registrable Securities to be in such denominations and registered in such

names as any such Holders may request.

(i)            Upon the occurrence of any event

contemplated by Section 3(c)(v), as promptly as reasonably possible, prepare a

supplement or amendment, including a post–effective amendment, to the

Registration Statement or a supplement to the related Prospectus or any

document incorporated or deemed to be incorporated therein by reference, and

file any other required document so that, as thereafter delivered, neither the

Registration Statement nor such Prospectus will contain an untrue statement of

a material fact or omit to state a material fact required to be stated therein

or necessary to make the statements therein, in light of the circumstances under

which they were made, not misleading.

(j)            Comply with all applicable rules and

regulations of the Commission.

(k)           The Company may require each selling

Holder to furnish to the Company a certified statement as to the number of

shares of Common Stock beneficially owned by such Holder and, if requested by

the Commission, the controlling person thereof.

4.             Registration

Expenses.  All fees and expenses

incident to the performance of or compliance with this Agreement by the Company

shall be borne by the Company whether or not any Registrable Securities are

sold pursuant to the Registration Statement. 

The fees and expenses referred to in the foregoing sentence shall

include, without limitation, (i) all registration and filing fees (including,

without limitation, fees and expenses (A) with respect to filings required to

be made with the Nasdaq National Market on which the Common Stock is then

listed for trading, and (B) in compliance with applicable state securities or

Blue Sky laws), (ii) printing expenses (including, without limitation, expenses

of printing certificates for Registrable Securities and of printing

prospectuses if the printing of prospectuses is reasonably requested by 

 

 

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the holders of a majority of the Registrable Securities included in the

Registration Statement), (iii) messenger, telephone and delivery expenses, (iv)

fees and disbursements of counsel for the Company and up to $10,000 of the fees

and disbursements of Special Counsel, (v) Securities Act liability insurance,

if the Company so desires such insurance, and (vi) fees and expenses of all

other Persons retained by the Company in connection with the consummation of

the transactions contemplated by this Agreement.  In addition, the Company shall be responsible for all of its

internal expenses incurred in connection with the consummation of the

transactions contemplated by this Agreement (including, without limitation, all

salaries and expenses of its officers and employees performing legal or

accounting duties), the expense of any annual audit and the fees and expenses

incurred in connection with the listing of the Registrable Securities on any

securities exchange as required hereunder.

 

5.             Indemnification

(a)           Indemnification by the Company.  The Company shall, notwithstanding any

termination of this Agreement, indemnify and hold harmless each Holder, the

officers, directors, agents, brokers (including brokers who offer and sell

Registrable Securities as principal as a result of a pledge or any failure to

perform under a margin call of Common Stock), investment advisors and employees

of each of them, each Person who controls any such Holder (within the meaning

of Section 15 of the Securities Act or Section 20 of the Exchange Act) and the officers,

directors, agents and employees of each such controlling Person, to the fullest

extent permitted by applicable law, from and against any and all losses,

claims, damages, liabilities, costs (including, without limitation, reasonable

costs of preparation and reasonable attorneys’ fees) and expenses

(collectively, “Losses”), as incurred, arising out of or relating to any

untrue or alleged untrue statement of a material fact contained in the

Registration Statement, any Prospectus or any form of prospectus or in any

amendment or supplement thereto or in any preliminary prospectus, or arising

out of or relating to any omission or alleged omission of a material fact

required to be stated therein or necessary to make the statements therein (in

the case of any Prospectus or form of prospectus or supplement thereto, in

light of the circumstances under which they were made) not misleading, except

to the extent, but only to the extent, that (1) such untrue statements or

omissions are based solely upon information regarding such Holder furnished in

writing to the Company by such Holder expressly for use therein, or to the

extent that such information relates to such Holder or such Holder’s proposed

method of distribution of Registrable Securities and was reviewed and expressly

approved in writing by such Holder expressly for use in the Registration

Statement, such Prospectus or such form of Prospectus or in any amendment or

supplement thereto (it being understood that the Holder has approved Annex A

hereto for this purpose) or (2) in the case of an occurrence of an event of the

type specified in Section 3(c)(ii)-(v), the use by such Holder of an outdated

or defective Prospectus after the Company has notified such Holder in writing

that the Prospectus is outdated or defective and prior to the receipt by such

Holder of the Advice contemplated in Section 5(e).  The Company shall notify the Holders promptly of the institution,

threat or assertion of any Proceeding of which the Company is aware in

connection with the transactions contemplated by this Agreement.

(b)           Indemnification

by Holders. Each Holder shall, severally and not jointly, indemnify and

hold harmless the Company, its directors, officers, agents and employees, each

Person who controls the Company (within the meaning of Section 15 of the

Securities Act and 

 

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Section 20 of the Exchange Act), and the directors, officers, agents or

employees of such controlling Persons, to the fullest extent permitted by

applicable law, from and against all Losses, as incurred, arising solely out of

or based solely upon: (x) such Holder’s failure to comply with the prospectus

delivery requirements of the Securities Act or (y) any untrue statement of a

material fact contained in any Registration Statement, any Prospectus, or any

form of prospectus, or in any amendment or supplement thereto, or arising

solely out of or based solely upon any omission of a material fact required to

be stated therein or necessary to make the statements therein not misleading to

the extent, but only to the extent, that such untrue statement or omission is

contained in any information so furnished in writing by such Holder to the

Company specifically for inclusion in such Registration Statement or such Prospectus

or to the extent that (1) such untrue statements or omissions are based solely

upon information regarding such Holder furnished in writing to the Company by

such Holder expressly for use therein, or to the extent that such information

relates to such Holder or such Holder’s proposed method of distribution of

Registrable Securities and was reviewed and expressly approved in writing by

such Holder expressly for use in the Registration Statement (it being

understood that the Holder has approved Annex A hereto for this purpose), such

Prospectus or such form of Prospectus or in any amendment or supplement thereto

or (2) in the case of an occurrence of an event of the type specified in

Section 3(c)(ii)-(v), the use by such Holder of an outdated or defective

Prospectus after the Company has notified such Holder in writing that the

Prospectus is outdated or  defective and

prior to the receipt by such Holder of the Advice contemplated in Section 6(d).  In no event shall the liability of any

selling Holder hereunder be greater in amount than the dollar amount of the net

proceeds received by such Holder upon the sale of the Registrable Securities

giving rise to such indemnification obligation.

 

(c)           Conduct of Indemnification

Proceedings. If any Proceeding shall be brought or asserted against any

Person entitled to indemnity hereunder (an “Indemnified Party”), such

Indemnified Party shall promptly notify the Person from whom indemnity is

sought (the “Indemnifying Party”) in writing, and the Indemnifying Party

shall assume the defense thereof, including the employment of counsel

reasonably satisfactory to the Indemnified Party and the payment of all fees

and expenses incurred in connection with defense thereof; provided, that the

failure of any Indemnified Party to give such notice shall not relieve the

Indemnifying Party of its obligations or liabilities pursuant to this

Agreement, except (and only) to the extent that it shall be finally determined

by a court of competent jurisdiction (which determination is not subject to

appeal or further review) that such failure shall have proximately and

materially adversely prejudiced the Indemnifying Party.

An Indemnified Party shall have the right to employ

separate counsel in any such Proceeding and to participate in the defense

thereof, but the fees and expenses of such counsel shall be at the expense of

such Indemnified Party or Parties unless: 

(1) the Indemnifying Party has agreed in writing to pay such fees and

expenses; (2) the Indemnifying Party shall have failed promptly to assume the

defense of such Proceeding and to employ counsel reasonably satisfactory to

such Indemnified Party in any such Proceeding; or (3) the named parties to any

such Proceeding (including any impleaded parties) include both such Indemnified

Party and the Indemnifying Party, and such Indemnified Party shall have been

advised by counsel that a conflict of interest is likely to exist if the same

counsel were to represent such Indemnified Party and the Indemnifying Party (in

which case, if such Indemnified Party notifies the Indemnifying Party in

writing that it elects to employ separate counsel at the expense of the

Indemnifying 

 

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Party, the Indemnifying Party shall not have the right to assume the

defense thereof and such counsel shall be at the expense of the Indemnifying

Party).  The Indemnifying Party shall

not be liable for any settlement of any such Proceeding effected without its

written consent, which consent shall not be unreasonably withheld.  No Indemnifying Party shall, without the

prior written consent of the Indemnified Party, effect any settlement of any

pending Proceeding in respect of which any Indemnified Party is a party, unless

such settlement includes an unconditional release of such Indemnified Party

from all liability on claims that are the subject matter of such Proceeding.

 

All fees and

expenses of the Indemnified Party (including reasonable fees and expenses to

the extent incurred in connection with investigating or preparing to defend

such Proceeding in a manner not inconsistent with this Section) shall be paid

to the Indemnified Party, as incurred, within ten Trading Days of written

notice thereof to the Indemnifying Party (regardless of whether it is

ultimately determined that an Indemnified Party is not entitled to

indemnification hereunder; provided, that the Indemnifying Party may

require such Indemnified Party to undertake to reimburse all such fees and

expenses to the extent it is finally judicially determined that such

Indemnified Party is not entitled to indemnification hereunder).

(d)           Contribution.  If a claim for indemnification under Section

5(a) or 5(b) is unavailable to an Indemnified Party (by reason of public policy

or otherwise), then each Indemnifying Party, in lieu of indemnifying such

Indemnified Party, shall contribute to the amount paid or payable by such

Indemnified Party as a result of such Losses, in such proportion as is

appropriate to reflect the relative fault of the Indemnifying Party and

Indemnified Party in connection with the actions, statements or omissions that

resulted in such Losses as well as any other relevant equitable

considerations.  The relative fault of

such Indemnifying Party and Indemnified Party shall be determined by reference

to, among other things, whether any action in question, including any untrue or

alleged untrue statement of a material fact or omission or alleged omission of

a material fact, has been taken or made by, or relates to information supplied

by, such Indemnifying Party or Indemnified Party, and the parties’ relative

intent, knowledge, access to information and opportunity to correct or prevent

such action, statement or omission.  The

amount paid or payable by a party as a result of any Losses shall be deemed to

include, subject to the limitations set forth in Section 5(c), any reasonable

attorneys’ or other reasonable fees or expenses incurred by such party in

connection with any Proceeding to the extent such party would have been

indemnified for such fees or expenses if the indemnification provided for in

this Section was available to such party in accordance with its terms.

The parties hereto agree that it would not be just and

equitable if contribution pursuant to this Section 5(d) were determined by pro

rata allocation or by any other method of allocation that does not take into

account the equitable considerations referred to in the immediately preceding

paragraph.  Notwithstanding the

provisions of this Section 5(d), no Holder shall be required to contribute, in

the aggregate, any amount in excess of the amount by which the proceeds

actually received by such Holder from the sale of the Registrable Securities

subject to the Proceeding exceeds the amount of any damages that such Holder

has otherwise been required to pay by reason of such untrue or alleged untrue

statement or omission or alleged omission.

 

 

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The indemnity and

contribution agreements contained in this Section are in addition to any

liability that the Indemnifying Parties may have to the Indemnified Parties.

6.             Miscellaneous

(a)           Remedies.  In the event of a breach by the Company or

by a Holder, of any of their obligations under this Agreement, each Holder or

the Company, as the case may be, in addition to being entitled to exercise all

rights granted by law and under this Agreement, including recovery of damages,

will be entitled to specific performance of its rights under this

Agreement.  The Company and each Holder

agree that monetary damages would not provide adequate compensation for any

losses incurred by reason of a breach by it of any of the provisions of this

Agreement and hereby further agrees that, in the event of any action for

specific performance in respect of such breach, it shall waive the defense that

a remedy at law would be adequate.

(b)           No Piggyback on Registrations.  Neither the Company nor any of its security

holders (other than the Holders in such capacity pursuant hereto) may include

securities of the Company in the Registration Statement other than the

Registrable Securities, and the Company shall not after the date hereof enter

into any agreement providing any such right to any of its security

holders.  The Company has not previously

entered into any agreement granting any registration rights with respect to any

of its securities to any Person which have not been fully satisfied.

(c)           Compliance.  Each Holder covenants and agrees that it

will comply with the prospectus delivery requirements of the Securities Act as

applicable to it in connection with sales of Registrable Securities pursuant to

the Registration Statement.

(d)           Discontinued Disposition.  Each Holder agrees by its acquisition of

such Registrable Securities that, upon receipt of a notice from the Company of

the occurrence of any event of the kind described in Section 3(c), such Holder

will forthwith discontinue disposition of such Registrable Securities under the

Registration Statement until such Holder’s receipt of the copies of the

supplemented Prospectus and/or amended Registration Statement or until it is

advised in writing (the “Advice”) by the Company that the use of the

applicable Prospectus may be resumed, and, in either case, has received copies

of any additional or supplemental filings that are incorporated or deemed to be

incorporated by reference in such Prospectus or Registration Statement.  The Company may provide appropriate stop

orders to enforce the provisions of this paragraph.

(e)           Piggy-Back

Registrations.  If at any time

during the Effectiveness Period  there

is not an effective Registration Statement covering all of the Registrable

Securities and the Company shall determine to prepare and file with the

Commission a registration statement relating to an offering for its own account

or the account of others under the Securities Act of any of its equity

securities, other than on Form S-4 or Form S-8 (each as promulgated under the

Securities Act) or their then equivalents relating to equity securities to be

issued solely in connection with any acquisition of any entity or business or

equity securities issuable in connection with stock option or other employee

benefit plans, then the Company shall send to each Holder written notice of

such determination and, if within fifteen days after receipt of such 

 

 

10

 

 

notice, any such Holder shall so request in writing, the Company shall

include in such registration statement all or any part of such Registrable

Securities such holder requests to be registered, subject to customary

underwriter cutbacks applicable to all holders of registration rights.

 

(f)            Amendments and Waivers. The

provisions of this Agreement, including the provisions of this sentence, may

not be amended, modified or supplemented, and waivers or consents to departures

from the provisions hereof may not be given, unless the same shall be in

writing and signed by the Company and the Holders of all of the then

outstanding Registrable Securities. 

Notwithstanding the foregoing, a waiver or consent to depart from the

provisions hereof with respect to a matter that relates exclusively to the

rights of certain Holders and that does not directly or indirectly affect the

rights of other Holders may be given by Holders of at least a majority of the

Registrable Securities to which such waiver or consent relates, provided,

that the provisions of this sentence may not be amended, modified, or

supplemented except in accordance with the provisions of the immediately

preceding sentence.

(g)           Notices.  Any and all notices or other communications

or deliveries required or permitted to be provided hereunder shall be in

writing and shall be deemed given and effective on the earliest of (i) the date

of transmission, if such notice or communication is delivered via facsimile at

the facsimile telephone number specified in this Section prior to 6:30 p.m.

(New York City time) on a Trading Day, (ii) the Trading Day after the date of

transmission, if such notice or communication is delivered via facsimile at the

facsimile telephone number specified in this Agreement later than 6:30 p.m.

(New York City time) on any date and earlier than 11:59 p.m. (New York City

time) on such date, (iii) the Trading Day following the date of mailing, if

sent by nationally recognized overnight courier service, or (iv) upon actual

receipt by the party to whom such notice is required to be given.  The address for such notices and

communications shall be as follows:

	

  If to the

  Company:

  	

  SureBeam

  Corporation

  
	

   

  	

  9276 Scranton Road, Suite 600

  
	

   

  	

  San Diego, CA 92121

  
	

   

  	

  Attn: Chief

  Financial Officer

  
	

   

  	

  Fax No.: [ ]

  
	

   

  	

   

  
	

  If to a

  Purchaser:

  	

  To the address

  set forth under such Purchaser’s name on the signature pages hereto.

  
	

   

  	

   

  
	

  With a copy to:

  	

  Bryan Cave LLP.

  
	

   

  	

  1290 Avenue of

  the Americas

  
	

   

  	

  New York, NY

  10104

  
	

   

  	

  Attn: Eric L.

  Cohen, Esq.

  
	

   

  	

  Fax No.:

  212-541-1432 and 212-541-4630

  
	

   

  	

   

  
	

  If to any other

  Person who is then the registered Holder:

  
	

   

  	

   

  
	

   

  	

  To the address

  of such Holder as it appears in the stock transfer books of the Company

  

 

11

 

or such other address as

may be designated in writing hereafter, in the same manner, by such Person.

(h)           Successors and Assigns.  This Agreement shall inure to the benefit of

and be binding upon the successors and permitted assigns of each of the parties

and shall inure to the benefit of each Holder. 

The Company may not assign its rights or obligations hereunder without

the prior written consent of each Holder. 

Each Holder may assign their respective rights hereunder in the manner

and to the Persons as permitted under the Purchase Agreement.

(i)            Execution and Counterparts.  This Agreement may be executed in any number

of counterparts, each of which when so executed shall be deemed to be an

original and, all of which taken together shall constitute one and the same

Agreement.  In the event that any

signature is delivered by facsimile transmission, such signature shall create a

valid binding obligation of the party executing (or on whose behalf such

signature is executed) the same with the same force and effect as if such

facsimile signature were the original thereof.

(j)            Governing Law.  All questions concerning the construction,

validity, enforcement and interpretation of this Agreement shall be governed by

and construed and enforced in accordance with the internal laws of the State of

New York, without regard to the principles of conflicts of law thereof.  Each party agrees that all legal proceedings

concerning the interpretations, enforcement and defense of the transactions

contemplated by this Agreement (whether brought against a party hereto or its

respective affiliates, directors, officers, shareholders, employees or agents)

shall be commenced in the state and federal courts sitting in the City of New

York, Borough of Manhattan.  Each party

hereto 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 (including with respect to

the enforcement of this Agreement), 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 improper. Each party hereto (including its affiliates,

agents, officers, directors and employees) hereby irrevocably waives, to the

fullest extent permitted by applicable law, any and all right to trial by jury

in any legal proceeding arising out of or relating to this Agreement or the

transactions contemplated hereby. If either party shall commence an action or

proceeding to enforce any provisions of this Agreement, then the prevailing

party in such action or proceeding shall be reimbursed by the other party for

its attorneys fees and other costs and expenses incurred with the

investigation, preparation and prosecution of such action or proceeding.

(k)           Cumulative Remedies.  The remedies provided herein are cumulative

and not exclusive of any remedies provided by law.

(l)            Severability.

If any term, provision, covenant or restriction of this Agreement is held by a

court of competent jurisdiction to be invalid, illegal, void or unenforceable,

the remainder of the terms, provisions, covenants and restrictions set forth

herein shall remain in full force and effect and shall in no way be affected,

impaired or invalidated, and the parties hereto shall use their reasonable

efforts to find and employ an alternative means to achieve the same or

substantially the same result as that contemplated by such term, provision, 

 

12

 

 

covenant or restriction.  It is

hereby stipulated and declared to be the intention of the parties that they would

have executed the remaining terms, provisions, covenants and restrictions

without including any of such that may be hereafter declared invalid, illegal,

void or unenforceable.

 

(m)          Headings.  The headings in this Agreement are for

convenience of reference only and shall not limit or otherwise affect the

meaning hereof.

(n)           Independent Nature of Purchasers’

Obligations and Rights.  The

obligations of each Purchaser hereunder is several and not joint with the

obligations of any other Purchaser hereunder, and no Purchaser shall be

responsible in any way for the performance of the obligations of any other

Purchaser hereunder.  Nothing contained

herein or in any other agreement or document delivered at any closing, and no

action taken by any Purchaser pursuant hereto or thereto, shall be deemed to

constitute the Purchasers as a partnership, an association, a joint venture or

any other kind of entity, or create a presumption that the Purchasers are in

any way acting in concert with respect to such obligations or the transactions

contemplated by this Agreement.  Each

Purchaser shall be entitled to protect and enforce its rights, including

without limitation the rights arising out of this Agreement, and it shall not

be necessary for any other Purchaser to be joined as an additional party in any

proceeding for such purpose.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK

SIGNATURE PAGES TO FOLLOW]

 

 

13

 

IN WITNESS WHEREOF, the parties have executed this

Registration Rights Agreement as of the date first written above.

 

	

  SUREBEAM CORPORATION

  
	

   

  
	

  By:

  	

   

  
	

  Name:

  
	

  Title:

  

[REMAINDER OF PAGE

INTENTIONALLY LEFT BLANK

SIGNATURE PAGES OF PURCHASER TO FOLLOW]

14

 

IN WITNESS WHEREOF, the parties have executed this

Registration Rights Agreement as of the date first written above.

 

	

  PURCHASER:

  
	

   

  
	

  By:

  	

   

  
	

   

  	

  Name:

  
	

   

  	

  Title:

  

 

 

15

 

Annex A

Plan of Distribution

The Selling Stockholders

and any of their pledgees, assignees and successors-in-interest may, from time

to time, sell any or all of their shares of Common Stock on any stock exchange,

market or trading facility on which the shares are traded or in private

transactions.  These sales may be at

fixed or negotiated prices.  The Selling

Stockholders may use any one or more of the following methods when selling

shares:

•                                          ordinary brokerage transactions and

transactions in which the broker–dealer solicits purchasers;

•                                          block trades in which the broker–dealer

will attempt to sell the shares as agent but may position and resell a portion

of the block as principal to facilitate the transaction;

•                                          purchases by a broker–dealer as

principal and resale by the broker–dealer for its account;

•                                          an exchange distribution in accordance

with the rules of the applicable exchange;

•                                          privately negotiated transactions;

•                                          short sales

•                                          broker–dealers may agree with the

Selling Stockholders to sell a specified number of such shares at a stipulated

price per share;

•                                          a combination of any such methods of

sale; and

•                                          any other method permitted pursuant to

applicable law.

The Selling Stockholders

may also sell shares under Rule 144 under the Securities Act, if available,

rather than under this prospectus.

Broker–dealers

engaged by the Selling Stockholders may arrange for other brokers–dealers

to participate in sales.  Broker–dealers

may receive commissions or discounts from the Selling Stockholders (or, if any

broker–dealer acts as agent for the purchaser of shares, from the purchaser)

in amounts to be negotiated.  The

Selling Stockholders do not expect these commissions and discounts to exceed

what is customary in the types of transactions involved.

The selling stockholder

may from time to time pledge or grant a security interest in some or all of the

Shares or common stock or Warrant owned by them and, if they default in the

performance of their secured obligations, the pledgees or secured parties may

offer and sell the shares of common stock from time to time under this

prospectus, or under an amendment to this prospectus under Rule 424(b)(3) or

other applicable provision of the Securities Act of 1933 amending the list of

selling stockholders to include the pledgee, transferee or other successors in

interest as selling stockholders under this prospectus.

 

16

 

The selling stockholders

also may transfer the shares of common stock in other circumstances, in which

case the transferees, pledgees or other successors in interest will be the selling

beneficial owners for purposes of this prospectus.

The Selling Stockholders

and any broker–dealers or agents that are involved in selling the shares

may be deemed to be “underwriters” within the meaning of the Securities Act in

connection with such sales.  In such

event, any commissions received by such broker–dealers or agents and any

profit on the resale of the shares purchased by them may be deemed to be

underwriting commissions or discounts under the Securities Act.  The Selling Stockholders have informed the

Company that it does not have any agreement or understanding, directly or

indirectly, with any person to distribute the Common Stock.

The Company is required

to pay all fees and expenses incident to the registration of the shares.  The Company has agreed to indemnify the

Selling Stockholders against certain losses, claims, damages and liabilities,

including liabilities under the Securities Act.

 

17Exhibit

4.3

 

NEITHER THESE SECURITIES

NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE EXERCISABLE HAVE BEEN

REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES

COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER

THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND,

ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE

EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION

REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE

SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO

SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE

COMPANY.  THESE SECURITIES AND THE

SECURITIES ISSUABLE UPON EXERCISE OF THESE SECURITIES MAY BE PLEDGED IN

CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH

SECURITIES.

SUREBEAM CORPORATION

 

WARRANT

 

	

  Warrant No. [ ]

  	

   

  	

  Date of Original

  Issuance: December 2, 2002

  

 

SureBeam Corporation, a

Delaware corporation (the “Company”), hereby certifies that, for value

received, [Name of Holder] or its registered assigns (the “Holder”), is

entitled to purchase from the Company up to a total of [ ] (1) shares of Class A common stock, $.001

par value (the “Common Stock”), of the Company (each such share, a

“Warrant Share” and all such shares, the “Warrant Shares”) at an

exercise price equal to $6.00 per share (as adjusted from time to time as

provided in Section 9, the “Exercise Price”), at any time

and from time to time from and after the date hereof and through and including

December 2, 2007 (the “Expiration Date”), and subject to the

following terms and conditions.

(1)           Number of shares equal to 25% of the

shares of Common Stock to be issued to the original Holder at the Closing under

the Purchase Agreement.

1.             Definitions.  In addition to the terms defined elsewhere

in this Warrant, capitalized terms that are not otherwise defined herein shall

have the meanings given to such terms in the Securities Purchase Agreement, of

even date herewith to which the Company and the original Holder are parties

(the “Purchase Agreement”).

2.             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 Holder

hereof from time to time.  The Company

may deem and treat the registered Holder of this Warrant as the absolute owner

hereof for the purpose of any exercise hereof or any distribution to the

Holder, and for all other purposes, absent actual notice to the contrary.

 

 

 

3.             Registration of Transfers.  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 its address specified herein.  Upon any such registration or transfer, a new Warrant to purchase

Common Stock, in substantially the form of this Warrant (any such new Warrant,

a “New Warrant”), evidencing the portion of this Warrant so transferred

shall be issued to the transferee and a New Warrant evidencing the remaining

portion of this Warrant not so transferred, if any, shall be issued to the

transferring Holder.  The acceptance of

the New Warrant by the transferee thereof shall be deemed the acceptance by

such transferee of all of the rights and obligations of a holder of a Warrant.

4.             Exercise and Duration of

Warrants.  This Warrant shall be

exercisable by the registered Holder at any time and from time to time on or

after the date hereof to and including the Expiration Date.  At 6:30 p.m., New York City time on the

Expiration Date, the portion of this Warrant not exercised prior thereto shall

be and become void and of no value.

5.             Delivery of Warrant Shares.

(a)           To effect conversions hereunder, the

Holder shall not be required to physically surrender this Warrant unless the

aggregate Warrant Shares represented by this Warrant is being exercised.  Upon delivery of the Form of Election to

Purchase to the Company (with the attached Warrant Shares Exercise Log) at its

address for notice set forth in Section 13 and upon payment of the Exercise

Price multiplied by the number of Warrant Shares that the Holder intends to

purchase hereunder, the Company shall promptly (but in no event later than

three Trading Days after the Date of Exercise (as defined herein)) issue and

deliver to the Holder, a certificate for the Warrant Shares issuable upon such

exercise, which, unless otherwise required by the Purchase Agreement, shall be

free of restrictive legends.  The

Company shall, upon request of the Holder and subsequent to the date on which a

registration statement covering the resale of the Warrant Shares has been

declared effective by the Securities and Exchange Commission, use its best

efforts to deliver Warrant Shares hereunder electronically through the

Depository Trust Corporation or another established clearing corporation

performing similar functions,  if

available, provided, that, the Company may, but will not be required to change

its transfer agent if its current transfer agent cannot deliver Warrant Shares

electronically through the Depository Trust Corporation.  A “Date of Exercise” means the date

on which the Company shall have received (or be deemed to have received

pursuant to the terms hereof) from the Holder: (i) the Form of Election to

Purchase attached hereto (with the Warrant Exercise Log attached to it),

appropriately completed and duly signed and (ii) payment of the Exercise

Price for the number of Warrant Shares so indicated by the Holder to be

purchased.

(b)           If by the third Trading Day after a

Date of Exercise the Company fails to deliver the required number of Warrant Shares

in the manner required pursuant to Section 5(a), then the Holder will have

the right to rescind such exercise.

(c)           If

by the third Trading Day after a Date of Exercise the Company fails to deliver

the required number of Warrant Shares in the manner required pursuant to

Section 5(a), and if 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 the 

 

 

2

 

Warrant Shares which the

Holder anticipated receiving upon such exercise (a “Buy-In”), then the

Company shall (1) pay in cash to the Holder the amount by which

(x) the Holder’s total purchase price (including brokerage commissions, if

any) for the shares of Common Stock so purchased exceeds (y) the amount

obtained by multiplying (A) the number of Warrant Shares that the Company was

required to deliver to the Holder in connection with the exercise at issue by

(B) the closing bid price of the Common Stock at the time of the obligation

giving rise to such purchase obligation and (2) at the option of the

Holder, either reinstate the portion of the Warrant and equivalent number of

Warrant Shares for which such exercise was not honored or deliver to the Holder

the number of shares of Common Stock that would have been issued had the

Company timely complied with its exercise and delivery obligations

hereunder.  The Holder shall provide the

Company written notice indicating the amounts payable to the Holder in respect

of the Buy-In.

(d)           The Company’s obligations to issue

and deliver Warrant Shares in accordance with the terms hereof are absolute and

unconditional, irrespective of any action or inaction by the Holder to enforce

the same, any waiver or consent with respect to any provision hereof, the

recovery of any judgment against any Person or any action to enforce the same,

or any setoff, counterclaim, recoupment, limitation or termination, or any

breach or alleged breach by the Holder or any other Person of any obligation to

the Company or any violation or alleged violation of law by the Holder or any

other Person, and irrespective of any other circumstance which might otherwise

limit such obligation of the Company to the Holder in connection with the

issuance of Warrant Shares.  Nothing

herein shall limit a Holder’s right to pursue any other remedies available to

it hereunder, at law or in equity including, without limitation, a decree of

specific performance and/or injunctive relief with respect to the Company’s

failure to timely deliver certificates representing shares of Common Stock upon

exercise of the Warrant  as required

pursuant to the terms hereof.

6.             Charges, Taxes and Expenses.  Issuance and delivery of certificates for

shares of Common Stock upon exercise of this Warrant shall be made without

charge to the Holder for any issue or transfer tax, withholding tax, transfer

agent fee or other incidental tax or expense in respect of the issuance of such

certificates, all of which taxes and expenses shall be paid by the Company;

provided, however, that the Company shall not be required to pay any tax which

may be payable in respect of any transfer involved in the registration of any

certificates for Warrant Shares or Warrants in a name other than that of the

Holder.  The Holder shall be responsible

for all other tax liability that may arise as a result of holding or

transferring this Warrant or receiving Warrant Shares upon exercise hereof.

7.             Replacement

of Warrant.  If this Warrant is

mutilated, lost, stolen or destroyed, the Company shall issue or cause to be

issued in exchange and substitution for and upon cancellation hereof, or in

lieu of and substitution for this Warrant, a New Warrant, but only upon receipt

of evidence reasonably satisfactory to the Company of such loss, theft or

destruction and customary and reasonable indemnity (which shall not include a

surety bond), if requested.  Applicants

for a New Warrant under such circumstances shall also comply with such other

reasonable regulations and procedures and pay such other reasonable third-party

costs as the Company may prescribe.

 

 

3

 

8.             Reservation of Warrant Shares.  The Company covenants that it will at all

times reserve and keep available out of the aggregate of its authorized but

unissued and otherwise unreserved Common Stock, solely for the purpose of

enabling it to issue Warrant Shares upon exercise of this Warrant as herein

provided, the number of Warrant Shares which are then issuable and deliverable

upon the exercise of this entire Warrant, free from preemptive rights or any

other contingent purchase rights of persons other than the Holder (taking into

account the adjustments and restrictions of Section 9). The Company

covenants that all Warrant Shares so issuable and deliverable shall, upon

issuance and the payment of the applicable Exercise Price in accordance with

the terms hereof, be duly and validly authorized, issued and fully paid and

nonassessable.

9.             Certain Adjustments.  The Exercise Price and number of Warrant

Shares issuable upon exercise of this Warrant are subject to adjustment from

time to time as set forth in this Section 9.

(a)           Stock Dividends and Splits.  If the Company, at any time while this

Warrant is outstanding, (i) pays a stock dividend on its Common Stock or

otherwise makes a distribution on any class of capital stock that is payable in

shares of Common Stock, (ii) subdivides outstanding shares of Common Stock

into a larger number of shares, or (iii) combines outstanding shares of

Common Stock into a smaller number of shares, then in each such case the

Exercise Price shall be multiplied by a fraction of which the numerator shall

be the number of shares of Common Stock outstanding immediately before such

event and of which the denominator shall be the number of shares of Common

Stock outstanding immediately after such event.  Any adjustment made pursuant to clause (i) of this

paragraph shall become effective immediately after the record date for the

determination of stockholders entitled to receive such dividend or

distribution, and any adjustment pursuant to clause (ii) or (iii) of

this paragraph shall become effective immediately after the effective date

of such subdivision or combination. If any event requiring an adjustment under

this paragraph occurs during the period that an Exercise Price is

calculated hereunder, then the calculation of such Exercise Price shall be

adjusted appropriately to reflect such event.

(b)           Pro

Rata Distributions.  If the Company,

at any time while this Warrant is outstanding, distributes to all holders of

Common Stock (i) evidences of its indebtedness, (ii) any security

(other than a distribution of Common Stock covered by the preceding paragraph),

(iii) rights or warrants to subscribe for or purchase any security, or

(iv) any other asset (in each case, “Distributed Property”),  then, at the request of any Holder delivered

before the 90th day after the record date fixed for determination of

stockholders entitled to receive such distribution, the Company will deliver to

such Holder, within five Trading Days after such request (or, if later, on the

effective date of such distribution), the Distributed Property that such Holder

would have been entitled to receive in respect of the Warrant Shares for which

such Holder’s Warrant could have been exercised immediately prior to such

record date.  If such Distributed

Property is not delivered to a Holder pursuant to the preceding sentence, then

upon any exercise of the Warrant that occurs after such record date, such

Holder shall be entitled to receive, in addition to the Warrant Shares

otherwise issuable upon such conversion, the Distributed Property that such

Holder would have been entitled to receive in respect of such number of Warrant

Shares had the Holder been the record holder of such Warrant Shares immediately

prior to such record date.

 

 

4

 

(c)           Fundamental Transactions.  If, at any time while this Warrant is

outstanding, (1) the Company effects any merger or consolidation of the

Company with or into another Person, (2) the Company effects any sale of

all or substantially all of its assets in one or a series of related

transactions, (3) any tender offer or exchange offer (whether by the

Company or another Person) is completed pursuant to which holders of Common

Stock are permitted to tender or exchange their shares for other securities,

cash or property, or (4) the Company effects any reclassification of the

Common Stock or any compulsory share exchange pursuant to which the Common

Stock is effectively converted into or exchanged for other securities, cash or

property (in any such case, a “Fundamental Transaction”), then the

Holder shall have the right thereafter to receive, upon exercise of this

Warrant, the same amount and kind of securities, cash or property as it would

have been entitled to receive upon the occurrence of such Fundamental

Transaction if it had been, immediately prior to such Fundamental Transaction,

the holder of the number of Warrant Shares then issuable upon exercise in full

of this Warrant (the “Alternate Consideration”).  For purposes of any such exercise, the

determination of the Exercise Price shall be appropriately adjusted to apply to

such Alternate Consideration based on the amount of Alternate Consideration

issuable in respect of one share of Common Stock in such Fundamental

Transaction, and the Company shall apportion the Exercise Price among the

Alternate Consideration in a reasonable manner reflecting the relative value of

any different components of the Alternate Consideration.  If holders of Common Stock are given any

choice as to the securities, cash or property to be received in a Fundamental

Transaction, then the Holder shall be given the same choice as to the Alternate

Consideration it receives upon any exercise of this Warrant following such

Fundamental Transaction.  At the

Holder’s option and request, any successor to the Company or surviving entity

in such Fundamental Transaction shall, either (1) issue to the Holder a

new warrant substantially in the form of this Warrant and consistent with the

foregoing provisions and evidencing the Holder’s right to purchase the

Alternate Consideration for the aggregate Exercise Price upon exercise thereof,

or (2) purchase the Warrant from the Holder for a purchase price, payable

in cash within five Trading Days after such request (or, if later, on the

effective date of the Fundamental Transaction), equal to the Black Scholes

value of the remaining unexercised portion of this Warrant on the date of such

request. The terms of any agreement pursuant to which a Fundamental Transaction

is effected shall include terms requiring any such successor or surviving

entity to comply with the provisions of this paragraph (c) and

insuring that the Warrant (or any such replacement security) will be similarly

adjusted upon any subsequent transaction analogous to a Fundamental

Transaction.

(d)           Future Issuances.

(1)           If

the Company or any subsidiary thereof, as applicable with respect to Common Stock

Equivalents (as defined below), at any time while this Warrant is outstanding,

shall issue shares of Common Stock or rights, warrants, options or other

securities or debt that are convertible into or exchangeable for shares of

Common Stock (“Common Stock Equivalents”), entitling any Person to

acquire shares of Common Stock at a price per share less than the Per Unit

Purchase Price (subject to equitable adjustment for stock splits,

recombinations and similar transactions) (if the holder of the Common Stock or

Common Stock Equivalent so issued shall at any time, whether by operation of

purchase price adjustments, reset provisions, floating conversion, exercise or

exchange prices or otherwise, or due to warrants, options or rights issued in

connection with such issuance, be entitled to receive shares of Common Stock at

 

 

5

 

a price less than the Per

Unit Purchase Price, such issuance shall be deemed to have occurred for less

than the Per Unit Purchase Price), then, at the option of the Holder: (A) if

such issuance shall take place during the period between the Closing Date and

the 180th day following the Record Date, for such exercises as the Holder shall

indicate, the Exercise Price shall be adjusted to mirror the conversion,

exchange or purchase price for such Common Stock or Common Stock Equivalents

(including any reset provisions thereof) at issue, or (B) if such issuance

shall occur at any time following the 180th day following the Record

Date, the Exercise Price shall be multiplied by a fraction, the numerator of

which shall be the number of shares of Common Stock outstanding immediately

prior to the issuance of such shares of Common Stock or such Common Stock

Equivalents plus the number of shares of Common Stock which the offering price

for such shares of Common Stock or Common Stock Equivalents would purchase at

the Exercise Price, and the denominator of which shall be the sum of the number

of shares of Common Stock outstanding immediately prior to such issuance plus

the number of  shares of Common Stock so

issued or issuable.  For purposes

hereof, all shares of Common Stock that are issuable upon conversion, exercise

or exchange of Common Stock Equivalents shall be deemed outstanding immediately

after the issuance of such Common Stock Equivalents.  Such adjustment shall be made whenever such shares of Common

Stock or Common Stock Equivalents are issued. 

However, upon not less than 20 days’ prior written notice delivered by

the Company to the Holder, indicating the future expiration of any Common Stock

Equivalents the issuance of which resulted in an adjustment in the Exercise

Price pursuant to this Section, if any such Common Stock Equivalents shall

expire and shall not have been exercised, the Exercise Price shall immediately

upon such expiration be recomputed and effective immediately upon such

expiration be increased to the price which it would have been (but reflecting

any other adjustments in the Exercise Price made pursuant to the provisions of

this Section after the issuance of such Common Stock Equivalents) had the

adjustment of the Exercise Price made upon the issuance of such Common Stock

Equivalents been made on the basis of offering for subscription or purchase

only that number of shares of Common Stock actually purchased upon the exercise

of such Common Stock Equivalents actually exercised.  The Company shall notify the Holder in writing, no later than the

Trading Day following the issuance of any Common Stock or Common Stock

Equivalent subject to this section, indicating therein the applicable issuance

price, or of applicable reset price, exchange price, conversion price and other

pricing terms.

(2)           The

foregoing shall not apply to: (i) the issuance of securities upon the

exercise or conversion of the Company’s options, warrants or other convertible

securities outstanding as of the date hereof, (ii) the grant of options or

warrants, or the issuance of additional securities, under any duly authorized

Company stock option, restricted stock plan or stock purchase plan currently in

existence, (iii) Common Stock Equivalents issued in connection with the

Company’s acquisition of a business or assets, (iv) Common Stock

Equivalents issued in connection with capital equipment leasing transactions,

(v) Common Stock Equivalents issued to bona fide consultants to the

Company, (vi) Common Stock Equivalents issued in one or more instances for

any purpose so long as such issuance or the aggregate of such issuances does

not result in issuance by the Company of more than an aggregate of 100,000

shares of Common Stock on a fully diluted basis, while this Warrant is

outstanding, or (vii) the issuance of Common Stock Equivalents based on

an  aggregate market value of up to $5,000,000

pursuant to one or more Strategic Transactions, while this Warrant is

outstanding.

 

 

6

 

(e)           Number of Warrant Shares.  Simultaneously with any adjustment to the

Exercise Price pursuant to paragraphs (a), (b) or (d) of this

Section, the number of Warrant Shares that may be purchased upon exercise of

this Warrant shall be increased or decreased proportionately, so that after

such adjustment the aggregate Exercise Price payable hereunder for the adjusted

number of Warrant Shares shall be the same as the aggregate Exercise Price in

effect immediately prior to such adjustment.

(f)            Calculations.  All calculations under this Section 9

shall be made to the nearest cent or the nearest 1/100th of a share,

as applicable.  The number of shares of

Common Stock outstanding at any given time shall not include shares owned or

held by or for the account of the Company, and the disposition of any such

shares shall be considered an issue or sale of Common Stock.

(g)           Notice of Adjustments.  Upon the occurrence of each adjustment

pursuant to this Section 9, the Company at its expense will

promptly compute such adjustment in accordance with the terms of this Warrant

and prepare a certificate setting forth such adjustment, including a statement

of the adjusted Exercise Price and adjusted number or type of Warrant Shares or

other securities issuable upon exercise of this Warrant (as applicable),

describing the transactions giving rise to such adjustments and showing in

detail the facts upon which such adjustment is based.  Upon written request, the Company will promptly deliver a copy of

each such certificate to the Holder and to the Company’s Transfer Agent.

(h)           Notice of Corporate Events.  If the Company (i) declares a dividend

or any other distribution of cash, securities or other property in respect of

its Common Stock, including without limitation any granting of rights or

warrants to subscribe for or purchase any capital stock of the Company or any

Subsidiary, (ii) authorizes or approves, enters into any agreement contemplating

or solicits stockholder approval for any Fundamental Transaction or

(iii) authorizes the voluntary dissolution, liquidation or winding up of

the affairs of the Company, then the Company shall deliver to the Holder a

notice describing the material terms and conditions of such transaction, at

least 20 calendar days prior to the applicable record or effective date on

which a Person would need to hold Common Stock in order to participate in or

vote with respect to such transaction, and the Company will take all steps

reasonably necessary in order to insure that the Holder is given the practical

opportunity to exercise this Warrant prior to such time so as to participate in

or vote with respect to such transaction; provided, however, that the failure to

deliver such notice or any defect therein shall not affect the validity of the

corporate action required to be described in such notice.

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

of the following manners:

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

funds; or

(b)           Cashless

Exercise.  At any time after the

earlier to occur of: (x) the date the 

registration statement covering the resale of the Warrant Shares and

filed pursuant to the Registration Rights Agreement is declared effective by

the Commission and (y) the Effectiveness Date (as defined in the Registration

Rights Agreement) related to such registration statement, when a registration

statement covering the resale of the Warrant Shares and naming the Holder 

 

 

7

 

as a selling stockholder

thereunder is not then effective, the Holder may surrender this Warrant to the

Company together with a notice of cashless exercise, in which event the Company

shall issue to the Holder the number of Warrant Shares determined as follows:

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

 

where:

 

X = the number of

Warrant Shares to be issued to the Holder.

 

Y = the number of

Warrant Shares with respect to which this Warrant is being exercised.

 

A = the average of

the closing prices for the five Trading Days immediately prior to (but not

including) the Exercise Date.

 

B = the Exercise

Price.

 

For purposes of Rule 144

promulgated under the Securities Act, it is intended, understood and

acknowledged that the Warrant Shares issued in a cashless exercise transaction

shall be deemed to have been acquired by the Holder, and the holding period for

the Warrant Shares shall be deemed to have commenced, on the date this Warrant

was originally issued pursuant to the Purchase Agreement.

11.           Limitation on Exercise.

(a)           Notwithstanding anything to the

contrary contained herein, the number of shares of Common Stock that may be

acquired by the Holder upon any exercise of this Warrant (or otherwise in

respect hereof) shall be limited to the extent necessary to insure that,

following such exercise (or other issuance), the total number of shares of

Common Stock then beneficially owned by such Holder and its Affiliates and any

other Persons whose beneficial ownership of Common Stock would be aggregated

with the Holder’s for purposes of Section 13(d) of the Exchange Act,

does not exceed 4.999% of the total number of issued and outstanding shares of

Common Stock (including for such purpose the shares of Common Stock issuable

upon such exercise).  For such purposes,

beneficial ownership shall be determined in accordance with

Section 13(d) of the Exchange Act and the rules and regulations

promulgated thereunder.  Each delivery

of an Exercise Notice hereunder will constitute a representation by the Holder

that it has evaluated the limitation set forth in this paragraph and

determined that issuance of the full number of Warrant Shares requested in such

Exercise Notice is permitted under this paragraph.  By written notice to the Company, the Holder may waive the

provisions of this Section but (i) any such waiver will not be

effective until the 61st day after such notice is delivered to the Company, and

(ii) any such waiver will apply only to the Holder and not to any other

holder of Warrants.

(b)           Notwithstanding

anything to the contrary contained herein, the number of shares of Common Stock

that may be acquired by the Holder upon any exercise of this Warrant (or

otherwise in respect hereof) shall be limited to the extent necessary to insure

that, following 

 

 

8

 

such exercise (or other

issuance), the total number of shares of Common Stock then beneficially owned

by such Holder and its Affiliates and any other Persons whose beneficial

ownership of Common Stock would be aggregated with the Holder’s for purposes of

Section 13(d) of the Exchange Act, does not exceed 9.999% of the

total number of issued and outstanding shares of Common Stock (including for

such purpose the shares of Common Stock issuable upon such exercise).  For such purposes, beneficial ownership

shall be determined in accordance with Section 13(d) of the Exchange

Act and the rules and regulations promulgated thereunder.  Each delivery of an Exercise Notice

hereunder will constitute a representation by the Holder that it has evaluated

the limitation set forth in this paragraph and determined that issuance of

the full number of Warrant Shares requested in such Exercise Notice is

permitted under this paragraph.    This

provision shall not restrict the number of shares of Common Stock which a

Holder may receive or beneficially own in order to determine the amount of

securities or other consideration that such Holder may receive in the event of

a merger or other business combination or reclassification involving the

Company as contemplated in Section 9 of this Warrant.

(c)           If the Company has not obtained the

Shareholder Approval (as defined below), then the Company may not issue in

excess of 8,402,632 shares of Common Stock upon exercise of the Warrants (as

defined in the Purchase Agreement) (such number of shares of Common Stock, the

“Issuable Maximum”).  Each holder

of Warrants shall be entitled to a portion of the Issuable Maximum equal to the

quotient obtained by dividing: (x) the purchase price paid by it pursuant

to the Purchase Agreement by (y) the purchase price paid by all holder pursuant

to the Purchase Agreement.  If a holder

of Warrants shall no longer hold its Warrant due to exercise or cancellation of

its Warrant, then such holder’s remaining portion of the Issuable Maximum shall

be allocated pro-rata among the remaining holders of the Warrants.  If on any Date of Exercise: (A) the

aggregate number of shares of Common Stock that would then be issuable upon

exercise in full of this Warrant would exceed the Issuable Maximum, and (B) the

Company shall not have previously obtained the vote of shareholders (the “Shareholder

Approval”), if any, as may be required by the applicable rules and

regulations of the Nasdaq National Market (or any successor entity) applicable

to approve the issuance of shares of Common Stock in excess of the Issuable

Maximum pursuant to the terms hereof, then the Company shall issue to the

Holder a number of shares of Common Stock equal to the Issuable Maximum and,

with respect to the remainder of the Warrant Shares then issuable under the

Warrant for which an exercise in accordance with the applicable exercise price

would result in an issuance of shares of Common Stock in excess of the Issuable

Maximum (the “Excess Warrant Shares”), the Holder shall have the option

to require the Company to use its best efforts to obtain the Shareholder

Approval applicable to such issuance as soon as is possible, but in any event

not later than the 90th day after such request. The Company and the Holder

understand and agree that shares of Common Stock issued to and then held by the

Holder as a result of exercise of this Warrant shall not be entitled to cast

votes on any resolution to obtain Shareholder Approval pursuant hereto. If the

Company shall succeed in obtaining the Shareholder Approval, the Excess Warrant

Shares shall again become fully exercisable by the Holder.

12.           No

Fractional Shares.  No fractional

shares of Warrant Shares will be issued in connection with any exercise of this

Warrant.  In lieu of any fractional

shares which would, otherwise be issuable, the Company shall pay cash equal to

the product of such fraction multiplied by the closing price of one Warrant

Share as reported on the Nasdaq National Market on the date of exercise.

 

 

9

 

13.           Notices.  Any and all notices or other communications

or deliveries hereunder (including without limitation any Exercise Notice)

shall be in writing and shall be deemed given and effective on the earliest of

(i) the date of transmission, if such notice or communication is delivered

via facsimile at the facsimile number specified in this Section prior to

6:30 p.m. (New York City time) on a Trading Day, (ii) the next

Trading Day after the date of transmission, if such notice or communication is

delivered via facsimile at the facsimile number specified in this

Section on a day that is not a Trading Day or later than 6:30 p.m.

(New York City time) on any Trading Day, (iii) the Trading Day

following the date of mailing, if sent by nationally recognized overnight

courier service, or (iv) upon actual receipt by the party to whom such

notice is required to be given.  The

addresses for such communications shall be: 

(i) if to the Company, to SureBeam Corporation, Facsimile No.:

(858) 795–6231, Attn: Chief Financial Officer, or (ii) if to

the Holder, to the address or facsimile number appearing on the Warrant

Register or such other address or facsimile number as the Holder may provide to

the Company in accordance with this Section.

14.           Warrant Agent.  The Company shall serve as warrant agent

under this Warrant.  Upon 30 days’

notice to the Holder, the Company may appoint a new warrant agent.  Any corporation into which the Company or

any new warrant agent may be merged or any corporation resulting from any

consolidation to which the Company or any new warrant agent shall be a party or

any corporation to which the Company or any new warrant agent transfers

substantially all of its corporate trust or shareholders services business

shall be a successor warrant agent under this Warrant without any further

act.  Any such successor warrant agent

shall promptly cause notice of its succession as warrant agent to be mailed (by

first class mail, postage prepaid) to the Holder at the Holder’s last address

as shown on the Warrant Register.

15.           Miscellaneous.

(a)           This Warrant shall be binding on and

inure to the benefit of the parties hereto and their respective successors and

assigns.  Subject to the preceding

sentence, nothing in this Warrant shall be construed to give to any Person

other than the Company and the Holder any legal or equitable right, remedy or

cause of action under this Warrant. 

This Warrant may be amended only in writing signed by the Company and

the Holder and their successors and assigns.

(b)           All

questions concerning the construction, validity, enforcement and interpretation

of this Warrant shall be governed by and construed and enforced in accordance

with the internal laws of the State of New York, without regard to the

principles of conflicts of law thereof. 

Each party agrees that all legal proceedings concerning the

interpretations, enforcement and defense of the transactions contemplated by this

Warrant (whether brought against a party hereto or its respective affiliates,

directors, officers, shareholders, employees or agents) shall be commenced in

the state and federal courts sitting in the City of New York, Borough of

Manhattan. Each party hereto 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 (including with respect to the enforcement of this

Warrant), 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 

 

 

10

 

such suit, action or

proceeding is improper.  Each party

hereto 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 via registered or certified mail or overnight delivery (with evidence

of delivery) to such party at the address in effect for notices to it under

this Warrant and agrees that such service shall constitute good and sufficient

service of process and notice thereof. 

Nothing contained herein shall be deemed to limit in any way any right

to serve process in any manner permitted by law. Each party hereto (including

its affiliates, agents, officers, directors and employees) hereby irrevocably

waives, to the fullest extent permitted by applicable law, any and all right to

trial by jury in any legal proceeding arising out of or relating to this

Warrant or the transactions contemplated hereby. If either party shall commence

an action or proceeding to enforce any provisions of this Warrant, then the

prevailing party in such action or proceeding shall be reimbursed by the other

party for its attorneys fees and other costs and expenses incurred with the

investigation, preparation and prosecution of such action or proceeding.

(c)           The headings herein are for

convenience only, do not constitute a part of this Warrant and shall not be

deemed to limit or affect any of the provisions hereof.

(d)           In case any one or more of the

provisions of this Warrant shall be invalid or unenforceable in any respect,

the validity and enforceability of the remaining terms and provisions of this

Warrant shall not in any way be affected or impaired thereby and the parties

will attempt in good faith to agree upon a valid and enforceable provision

which shall be a commercially reasonable substitute therefor, and upon so

agreeing, shall incorporate such substitute provision in this Warrant.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK,

SIGNATURE PAGE FOLLOWS]

 

 

11

 

IN WITNESS WHEREOF, the

Company has caused this Warrant to be duly executed by its authorized officer

as of the date first indicated above.

	

  SUREBEAM

  CORPORATION

  
	

   

  
	

  By:

  	

   

  
	

  Name:

  
	

  Title:

  

 

 

12

 

FORM OF ELECTION TO PURCHASE

 

 

To SUREBEAM CORPORATION:

 

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”), $0.001 par value per share, of

SureBeam Corporation and, if such Holder is not utilizing the cashless exercise

provisions set forth in this Warrant, encloses herewith

$                   

in cash, certified or official bank check or checks or other immediately

available funds, which sum represents the aggregate Exercise Price (as defined

in the Warrant) for the number of shares of Common Stock to which this Form of

Election to Purchase relates, together with any applicable taxes payable by the

undersigned pursuant to the Warrant.

By its delivery of this

Form of Election To Purchase, the Holder represents and warrants to the Company

that in giving effect to the exercise evidenced hereby the Holder will not

beneficially own in excess of the number of shares of Common Stock (determined

in accordance with Section 13(d) of the Securities Exchange Act of

1934) permitted to be owned under Section 11 of this Warrant to which this

notice relates.

The undersigned requests

that certificates for the shares of Common Stock issuable upon this exercise be

issued in the name of

PLEASE INSERT SOCIAL SECURITY OR

TAX IDENTIFICATION NUMBER

 

 

(Please print name and address)

 

 

 

Warrant Shares Exercise Log

 

	

  Date

  	

   

  	

  Number of

  Warrant

  Shares Available to be

  Exercised

  	

   

  	

  Number of

  Warrant

  Shares Exercised

  	

   

  	

  Number of

  Warrant

  Shares Remaining to

  be Exercised

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  

 

 

 

FORM OF ASSIGNMENT

 

 

[To be completed and

signed only upon transfer of Warrant]

FOR VALUE RECEIVED, the

undersigned hereby sells, assigns and transfers unto                                          

the right represented by the within Warrant to purchase

                           shares

of Common Stock of SureBeam Corporation to which the within Warrant relates and

appoints

                           attorney

to transfer said right on the books of SureBeam Corporation with full power of

substitution in the premises.

Dated: 

                            ,

     

 

	

   

  
	

  (Signature must

  conform in all respects to name 

  of holder as specified on the face of the Warrant)

  
	

   

  
	

   

  
	

  Address of

  Transferee

  
	

   

  
	

   

  
	

   

  
	

   

  

 

In the presence of:

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