Posted tagged ‘Warrant Agreement’

Carrington Laboratories Inc Promissory Note and Warrant Agreement from RealDealDocs.com

June 4, 2008

Another double header for you today: both a Promissory Note and a Warrant Agreement from Amlaw pro bono honored law firm Patterson, Belk Webb & Tyler. This copy is complimentary from my friends at RealDealDocs.com – the online leader in legal documents. To search millions of legal docs for free, please visit www.RealDealDocs.com!

 

                                                                EXHIBIT 10.1

                PROMISSORY NOTE AND WARRANT PURCHASE AGREEMENT

                                 by and among

                        CARRINGTON LABORATORIES, INC.

                                     and

            THE PARTIES NAMED HEREIN ON SCHEDULE 1, AS PURCHASERS

                              November 18, 2005

                PROMISSORY NOTE AND WARRANT PURCHASE AGREEMENT

      THIS PROMISSORY NOTE AND WARRANT PURCHASE AGREEMENT (this  “Agreement”)

 is dated as  of November 18,  2005, among Carrington  Laboratories, Inc.,  a

 Texas corporation (the “Company”), and the purchasers identified on Schedule

 1 hereto (each a “Purchaser” and collectively the “Purchasers”).

 

      WHEREAS, subject  to  the  terms  and  conditions  set  forth  in  this

 Agreement and pursuant  to Section 4(2)  of the Securities  Act (as  defined

 below), and Rule 506  promulgated thereunder, the  Company desires to  issue

 and sell to the Purchasers, and  the Purchasers, severally and not  jointly,

 desire to purchase from the Company  in the aggregate, $5,000,000  principal

 amount of the Company’s 6.0% Subordinated  Promissory Notes and Warrants  to

 purchase 5,000,000 shares of Common Stock.

 

      NOW, THEREFORE, in consideration of  the mutual covenants contained  in

 this Agreement, and for  other good and  valuable consideration the  receipt

 and adequacy  of  which  are  hereby  acknowledged,  the  Company  and  each

 Purchaser agree as follows:

 

                                  ARTICLE I

                                 DEFINITIONS

 

     1.1 Definitions.   In  addition to the  terms defined  elsewhere in this

 Agreement, for all purposes of this Agreement, the following terms have  the

 meanings indicated in this Section 1.1:

 

           “Affiliate” means any Person that, directly or indirectly  through

 one or more intermediaries, controls or is controlled by or is under  common

 control with a Person, as  such terms are used  in and construed under  Rule

 144. With respect  to a Purchaser,  any investment fund  or managed  account

 that is managed on a discretionary  basis by the same investment manager  as

 such Purchaser will be deemed to be an Affiliate of such Purchaser.

 

           “Agreement” shall have the  meaning ascribed to  such term in  the

 Preamble.

 

           “Applicable Law” means any statute, law, rule or regulation or any

 judgment, order, writ, injunction  or decree of  any Governmental Entity  to

 which a specified Person or property is subject.

 

           “Business Day” means any day except  Saturday, Sunday and any  day

 which  shall  be  a  federal  legal  holiday  or  a  day  on  which  banking

 institutions in the  State of  Texas are authorized  or required  by law  or

 other governmental action to close.

 

           “Closing” shall have the meaning ascribed to such term in  Section

 2.1(a).

 

           “Closing Date” shall  have the meaning  ascribed to  such term  in

 Section 2.1(a).

 

           “Commission” means  the  United  States  Securities  and  Exchange

 Commission.

 

           “Common Stock” means  the common stock  of the  Company, $.01  par

 value per  share,  and any  securities  into  which such  common  stock  may

 hereafter be reclassified.

 

           “Company” shall  have the  meaning ascribed  to such  term in  the

 Preamble.

 

           “Damages” shall have the meaning ascribed to such term in  Section

 6.2.

 

           “Disclosure Schedules” means the Disclosure Schedules concurrently

 delivered herewith.

 

           “Exchange Act”  means  the Securities  Exchange  Act of  1934,  as

 amended.

 

           “Final Memorandum”  means  that certain  final  Private  Placement

 Memorandum dated November 14, 2005 provided by the Company to the Purchasers

 relating to the private offering of the Securities.

 

           “Governmental  Entity”  means  any   court  or  tribunal  in   any

 jurisdiction (domestic or foreign) or any public, governmental or regulatory

 body, agency, department,  commission, board, bureau  or other authority  or

 instrumentality (domestic or foreign).

 

           “Person” means an individual  or corporation, partnership,  trust,

 incorporated or unincorporated association, joint venture, limited liability

 company, joint  stock  company,  government (or  an  agency  or  subdivision

 thereof) or other entity of any kind.

 

           “PPM Draft” means that certain draft Private Placement  Memorandum

 dated November 14, 2005 provided by  the Company to the Purchasers  relating

 to the private offering of the Securities.

 

           “Proceedings”   means    all    proceedings,    actions,    suits,

 investigations, and inquiries  by or before  any arbitrator or  Governmental

 Entity.

 

           “Promissory Notes” means the 6.0% Subordinated Promissory Notes of

 the Seller, which shall be in the form attached as Exhibit A hereto.

 

           “Purchaser” shall have the  meaning ascribed to  such term in  the

 Preamble.

 

           “Registrable Securities” means  (a) the Warrant  Shares  or  other

 securities issued  or  issuable  to each  Purchaser  or  its  transferee  or

 designee (i) upon exercise  of the Warrants, or  (ii) upon any  distribution

 with respect to,  any exchange for  or any replacement  of such Warrants  or

 (iii) upon any conversion, exercise or exchange of any securities issued  in

 connection  with  any  such  distribution,  exchange  or  replacement;   (b)

 securities  issued  or  issuable  upon  any  stock  split,  stock  dividend,

 recapitalization or similar event with respect to the foregoing; and (c) any

 other security issued as a dividend  or other distribution with respect  to,

 in exchange for, or in replacement  or redemption of, any of the  securities

 referred  to  in  the  preceding  clauses;  provided,  however,  that   such

 securities shall cease  to be  Registrable Securities  when such  securities

 have been sold  to or through  a broker dealer  or underwriter  in a  public

 distribution or a public securities transaction or when such securities  may

 be sold without  any restriction pursuant  to Rule 144(k)  as determined  by

 counsel to the Company.

 

           “Registration Statement” shall have  the meaning ascribed to  such

 term in Section 4.4(b).

 

           “Required Minimum” means the maximum aggregate number of shares of

 Common Stock then issued or issuable pursuant to the Transaction Documents.

 

           “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.

 

           “SEC Filings”  shall have  the meaning  ascribed to  such term  in

 Section 3.1(h).

 

           “Securities” means  the Promissory  Notes,  the Warrants  and  the

 Warrant Shares.

 

           “Securities Act” means the Securities Act of 1933, as amended.

 

           “Series A  Warrants”  means the  Series  A Common  Stock  Purchase

 Warrants, in the form of Exhibit B hereto.

 

           “Series B  Warrants”  means the  Series  B Common  Stock  Purchase

 Warrants, in the form of Exhibit C hereto.

 

           “Subordination Agreement” means the Subordination Agreement, dated

 as of the date hereof, by and among the Purchasers, the Company and Comerica

 Bank, in the form of Exhibit D hereto.

 

           “Subscription Amount” means, as to each Purchaser, the amount  set

 forth beside such Purchaser’s  name on Schedule 1  hereto, in United  States

 dollars and in immediately available funds.

 

           “Transaction  Documents”  means  this  Agreement,  the  Promissory

 Notes, the  Warrants  and any  other  documents or  agreements  executed  in

 connection with the transactions contemplated hereunder.

 

           “Warrants” means the Series A Warrants and the Series B Warrants.

 

           “Warrant Shares” means  the shares of  Common Stock issuable  upon

 exercise of the Warrants.

 

                                 ARTICLE II

                              PURCHASE AND SALE

     2.1 Closing.

 

           (a) The  closing  of  the  transactions  contemplated  under  this

 Agreement (the “Closing”) will take place as promptly as practicable, but no

 later than five (5)  Business Days following satisfaction  or waiver of  the

 conditions set forth in  Sections 2.2 and 2.3  (other than those  conditions

 which by their terms are not to  be satisfied or waived until the  Closing),

 at the offices of the Company at 2001 Walnut Hill Lane, Irving, Texas  75038

 (or remotely via  exchange of  documents and  signatures) or  at such  other

 place or  day  as may  be  mutually acceptable  to  the Purchasers  and  the

 Company. The date on which the Closing occurs is the “Closing Date”.

 

           (b) At the Closing, the Purchasers  shall purchase, severally  and

 not jointly,  and  the Company  shall  issue  and sell,  in  the  aggregate,

 $5,000,000 principal  amount  of  Promissory Notes,  Series  A  Warrants  to

 purchase 2,500,000 shares of Common Stock and Series B Warrants to  purchase

 2,500,000 shares of Common Stock on  the Closing Date. Each Purchaser  shall

 purchase severally, and not jointly, from the Company, and the Company shall

 issue and sell to  each Purchaser, a Promissory  Note in a principal  amount

 equal to such Purchaser’s Subscription Amount  and Warrants to purchase  the

 number of  shares  of Common  Stock  as indicated  on  Schedule 1  for  such

 Purchaser.

 

      2.2 Conditions to Obligations of Purchasers to Effect the Closing.  The

 obligations of each  Purchaser to effect  the Closing  and the  transactions

 contemplated by this Agreement  shall be subject to  the satisfaction at  or

 prior to the Closing of each of  the following conditions, any of which  may

 be waived, in writing, by such Purchaser:

 

           (a) At the  Closing (unless otherwise specified below) the Company

 shall deliver or cause to be delivered to each Purchaser the following:

 

                (i)  this Agreement, duly executed by the Company;

 

                (ii) a Promissory  Note in the principal amount equal to such

 Purchaser’s  Subscription  Amount  as  set  forth  on  Schedule  1   hereto,

 registered in the name of such Purchaser;

 

                (iii) a  Series A  Warrant,  registered in  the name  of such

 Purchaser, pursuant to which such Purchaser shall have the right to  acquire

 up to  the number  of shares  of Common  Stock as  set forth  on Schedule  1

 hereto; and

 

                (iv) a  Series  B Warrant,  registered  in the  name  of such

 Purchaser, pursuant to which such Purchaser shall have the right to  acquire

 up to  the number  of shares  of Common  Stock as  set forth  on Schedule  1

 hereto.

 

           (b) All  representations and  warranties of  the Company contained

 herein shall remain true and correct as  of the Closing Date as though  such

 representations  and  warranties  were  made  on  such  date  (except  those

 representations and warranties that address matters only as of a  particular

 date will remain true and correct as  of such date) and the Purchaser  shall

 have received a certificate signed by the Company’s chief executive  officer

 and chief financial officer to such effect.

 

           (c) The  Company  shall  sell  Promissory  Notes  with  a  minimum

 aggregate principal amount of $2,500,000.

 

           (d) No  Proceeding   shall,  on the  Closing  Date, be  pending or

 threatened seeking to restrain, prohibit, or obtain damages or other  relief

 in connection  with any  Transaction Document  or  the consummation  of  the

 transactions contemplated thereby.

 

     2.3 Conditions to Obligations of the Company to Effect the Closing.  The

 obligations of  the  Company to  effect  the Closing  and  the  transactions

 contemplated by this Agreement  shall be subject to  the satisfaction at  or

 prior to the  Closing of each  of the following  conditions with respect  to

 such Purchaser, any of which may be waived, in writing, by the Company:

 

           (a) At  the Closing, such  Purchaser shall deliver  or cause to be

 delivered to the Company the following:

 

                (i)  this Agreement, duly executed by such Purchaser;

 

                (ii) a Subordination Agreement; and

 

                (iii) such Purchaser’s Subscription Amount, by wire transfer

 of immediately available funds.

 

           (b) All  representations  and  warranties of  each  such Purchaser

 contained herein shall  remain true and  correct as of  the Closing Date  as

 though such representations and warranties were made on such date.

 

           (c) No  Proceeding   shall,  on the  Closing  Date, be  pending or

 threatened seeking to restrain, prohibit, or obtain damages or other  relief

 in connection  with any  Transaction Document  or  the consummation  of  the

 transactions contemplated thereby.

 

           (d) The  Company  shall  sell  Promissory  Notes  with  a  minimum

 aggregate principal amount of $2,500,000.

 

                                 ARTICLE III

                        REPRESENTATIONS AND WARRANTIES

 

     3.1 Representations and Warranties of the  Company. Except as set  forth

 under the  corresponding  section  of  the  Disclosure  Schedules  delivered

 concurrently   herewith,   the   Company   hereby   makes   the    following

 representations and warranties as of the  date hereof and as of the  Closing

 Date to each Purchaser:

 

           (a) Corporate  Organization.   The Company  is a  corporation duly

 organized, validly existing,  and in  good standing  under the  laws of  the

 State of Texas and has all requisite corporate power and corporate authority

 to own, lease, and operate  its properties and to  carry on its business  as

 now being conducted.

 

           (b) Qualification.   The Company is  duly qualified or licensed to

 do business  and is  in good  standing  in each  jurisdiction in  which  the

 property owned, leased,  or operated by  it or the  conduct of its  business

 requires such qualification or licensing, except jurisdictions in which  the

 failure to be  so qualified or  licensed would not,  individually or in  the

 aggregate, have a material adverse effect  on the business, assets,  results

 of operations, or financial condition of the Company.

 

           (c) Capitalization of the Company.

 

                (i) The  authorized capital stock of  the Company consists of

 (i) 30,000,000 shares of  Common Stock, of which,  as of November 14,  2005,

 10,790,230 shares were outstanding, and  (ii) 1,000,000 shares of  Preferred

 Stock, par value $100 per share, of which, as of November 14, 2005, none  of

 which were outstanding.   All  outstanding shares  of capital  stock of  the

 Company have been validly issued and  are fully paid and nonassessable,  and

 no shares of capital stock of the Company are subject to, nor have any  been

 issued in violation of,  preemptive or similar rights.   As of November  14,

 2005, (A) an aggregate of 1,444,881 shares of Common Stock are issuable upon

 the exercise of outstanding options granted  under the Company’s 1995  Stock

 Option Plan, (B) an aggregate of 500,000 shares of Common Stock are reserved

 for issuance  under  the Company’s  2004  Stock  Option Plan,  of  which  an

 aggregate of 170,500 shares of Common  Stock are issuable upon the  exercise

 of outstanding  options granted  thereunder, (C) an  aggregate of  1,250,000

 shares of  Common  Stock  are reserved  for  issuance  under  the  Company’s

 Employee Stock Purchase  Plan, of which  an aggregate of  960,112 shares  of

 Common Stock have been  issued thereunder, and (D)  an aggregate of  300,000

 shares of a series of the  Company’s Preferred Stock designated as Series  D

 Preferred Stock  are reserved  for issuance  upon  the exercise  of  certain

 preferred share  purchase rights  associated with  the Common  Stock,  which

 rights become  exercisable by  the holders  thereof upon  the occurrence  of

 certain events, including  the acquisition of,  or the  announcement of  the

 intention to acquire, more than 15%  of the outstanding Common Stock by  any

 Person or group.

 

                (ii) Except as set forth  above in this  Section 3(c) and  as

 contemplated  by  this  Agreement,  as  of  November  14,  2005,  there  are

 outstanding (A) no shares of capital stock or other voting securities of the

 Company, (B) no securities of the  Company convertible into or  exchangeable

 for shares of capital stock or  other voting securities of the Company,  (C)

 no options or other rights to acquire from the Company, and no obligation of

 the Company to issue or  sell, any shares of  capital stock or other  voting

 securities of the Company or any securities of the Company convertible  into

 or exchangeable for  such capital  stock or  voting securities,  and (D)  no

 equity equivalents, interests in the ownership or earnings, or other similar

 rights of or with respect to the Company.

 

           (d) Authority  Relative to this  Agreement.  The  Company has full

 corporate power and corporate authority to execute, deliver, and perform the

 Transaction  Documents  and  to  consummate  the  transactions  contemplated

 thereby.  The  execution, delivery, and  performance by the  Company of  the

 Transaction Documents,  and  the  consummation by  it  of  the  transactions

 contemplated thereby, have been duly  authorized by all necessary  corporate

 action of the Company.   The Transaction Documents  have been duly  executed

 and delivered  by  the Company  and  constitute valid  and  legally  binding

 obligations of the  Company, enforceable against  the Company in  accordance

 with their respective terms, except that such enforceability may be  limited

 by  (i)  applicable  bankruptcy,  insolvency,  reorganization,   moratorium,

 and similar  laws  affecting  creditors’  rights  generally, (ii)  equitable

 principles which may  limit the availability  of certain equitable  remedies

 (such  as  specific  performance)  in  certain  instances,  and (iii) public

 policy considerations  with  respect  to  the  enforceability  of rights  of

 indemnification.

 

           (e) Noncontravention.  The execution, delivery, and performance by

 the Company of the Transaction Documents  and the consummation by it of  the

 transactions contemplated thereby do not and  will not (i) conflict with  or

 result in  a  violation  of  any  provision  of  the  Restated  Articles  of

 Incorporation or Bylaws of  the Company, (ii) conflict  with or result in  a

 violation of any provision of, or constitute (with or without the giving  of

 notice or the passage of time or both)  a default under, or give rise  (with

 or without the giving of notice or the passage of time or both) to any right

 of termination, cancellation,  or acceleration under,  any bond,  debenture,

 note,  mortgage,  indenture,  lease,  agreement,  or  other  instrument   or

 obligation to which the Company is a party or by which the Company or any of

 its properties may be bound, (iii)  result in the creation or imposition  of

 any lien or encumbrance upon the properties of the Company, or (iv) assuming

 compliance with  the matters  referred to  in  Section 3.1(f),  violate  any

 Applicable Law (as hereinafter defined) binding upon the Company, except, in

 the case of  clauses (ii), (iii),  and (iv) above,  for any such  conflicts,

 violations, defaults, terminations, cancellations, accelerations, liens,  or

 encumbrances which  would not,  individually or  in  the aggregate,  have  a

 material adverse effect on the business,  assets, results of operations,  or

 financial condition  of the  Company or  on the  ability of  the Company  to

 consummate the transactions contemplated hereby.

 

           (f) Governmental  Approvals.    No  consent,  approval,  order, or

 authorization  of,  or  declaration,  filing,  or  registration  with,   any

 Governmental Entity (as hereinafter defined) is  required to be obtained  or

 made  by  the  Company  in  connection  with  the  execution,  delivery,  or

 performance by the Company of the Transaction Documents or the  consummation

 by it of  the transactions contemplated  thereby, other than  (i) compliance

 with any applicable requirements of the Securities Act; (ii) compliance with

 any applicable requirements of the  Exchange Act; (iii) compliance with  any

 applicable state securities laws; and (iv) such consents, approvals, orders,

 or authorizations which, if not obtained, and such declarations, filings, or

 registrations which,  if  not  made,  would  not,  individually  or  in  the

 aggregate, have a material adverse effect  on the business, assets,  results

 of operations, or financial  condition of the Company  or on the ability  of

 the  Company  to  consummate  the  transactions  contemplated  hereby.   The

 representations and  warranties of  the Company  contained in  this  Section

 3.1(f), insofar as such representations and warranties pertain to compliance

 by the Company with  the requirements of the  Securities Act and  applicable

 state securities laws, are  based on the  representations and warranties  of

 the Purchasers contained in Section 3.2.

 

           (g) Authorization  of  Issuance.   The  Securities have  been duly

 authorized for issuance  and, when issued  and delivered by  the Company  in

 accordance with the provisions of the applicable Transaction Documents, will

 be validly issued, fully paid, and nonassessable.  The Warrant Shares,  when

 issued in accordance with  the terms of the  Transaction Documents, will  be

 validly issued, fully paid and nonassessable.  The Company has reserved from

 its duly authorized  capital stock a  number of shares  of Common Stock  for

 issuance of the Warrant Shares at least equal to the Required Minimum on the

 date hereof.  The issuance of the  Securities and the Warrant Shares is  not

 subject to any preemptive or similar rights.

 

           (h) Private Placement Memorandum; SEC Filings.

 

                (i) None   of   the  information   contained  in   the  Final

 Memorandum, as of such date  or as of the  date hereof, contains any  untrue

 statement of a material fact or omits to state any material fact required to

 be stated therein  or necessary in  order to make  the statements  contained

 therein, in  light of  the  circumstances under  which  they are  made,  not

 misleading.

 

                (ii) The Company has delivered to each Purchaser accurate and

 complete copies of (A) the Company’s Annual Report on Form 10-K for the year

 ended December 31, 2004, (B) the Company’s Annual Report to Shareholders for

 the fiscal year ended December 31,  2004, (C) the Company’s Proxy  Statement

 dated April 14, 2005,  relating to the 2005  Annual Meeting of  Shareholders

 and (D) the Company’s  Quarterly Report on Form  10-Q for the quarter  ended

 September 30, 2005, in each case in the  form filed by the Company with  the

 Commission (collectively,  the “SEC  Filings”).   None of  the SEC  Filings,

 including,  without  limitation,  any  financial  statements  or   schedules

 included therein, as  of the date  of filing thereof,  contained any  untrue

 statement of a material fact or omitted to state any material fact  required

 to be stated therein or necessary in order to make the statements  contained

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

 misleading.  The  financial statements of  the Company included  in the  SEC

 Filings present  fairly, in  conformity with  generally accepted  accounting

 principles applied on a consistent basis (except as may be indicated in  the

 notes thereto), the consolidated financial position of the Company as of the

 dates thereof and its consolidated results of operations and cash flows  for

 the periods then ended (subject to normal year-end audit adjustments in  the

 case of any unaudited interim financial statements).

 

           (i) Absence  of Undisclosed  Liabilities.   Except  as and  to the

 extent disclosed in the  Private Placement Memorandum  and the SEC  Filings,

 (a) as of September 30, 2005, the Company had no liabilities or  obligations

 (whether accrued, absolute, contingent, unliquidated, or otherwise) material

 to the  Company, and  (b) since  September  30, 2005,  the Company  has  not

 incurred any  such material  liabilities or  obligations, other  than  those

 incurred in the ordinary course of business.

 

           (j) Absence  of  Certain  Changes.   Except  as  disclosed  in the

 Private Placement Memorandum and the SEC Filings, since September 30,  2005,

 there has not  been any  material adverse  change in  the business,  assets,

 results of operations, or financial condition of the Company.

 

           (k) Scope of  Representations and Warranties.  Except as set forth

 in this Agreement, the Company makes no representations or warranties to the

 Purchasers and hereby  disclaims all  liability and  responsibility for  any

 representation, warranty,  statement, or  information made  or  communicated

 (orally or in writing)  to any Purchaser (including  but not limited to  any

 opinion, information, projection, or advice that  may have been provided  to

 the Purchasers  by any  officer, director,  employee, agent,  consultant  or

 representative of the Company).

 

     3.2 Representations  And  Warranties Of The Purchasers.  Each  Purchaser

 hereby, for itself and for no other Purchaser, represents and warrants as of

 the date hereof and as of the Closing Date to the Company as follows:

 

           (a) Organization.  Such Purchaser  (other than  individuals) is an

 entity duly organized, validly existing and in good standing under the  laws

 of the jurisdiction of its organization.

 

           (b) Authority Relative to this Agreement.  Such Purchaser has full

 power and  authority  to  execute,  deliver,  and  perform  the  Transaction

 Documents and to consummate the transactions contemplated thereby.  If  such

 Purchaser is an  entity, the execution,  delivery, and  performance by  such

 Purchaser of  the Transaction  Documents to  which it  is a  party, and  the

 consummation by it of the transactions contemplated thereby, have been  duly

 authorized by all necessary corporate, or similar action on the part of such

 Purchaser.  Each of the Transaction  Documents to which such Purchaser is  a

 party has been duly executed and delivered by such Purchaser and constitutes

 a valid  and  legally  binding obligation  of  such  Purchaser,  enforceable

 against such  Purchaser  in accordance  with  its terms,  except  that  such

 enforceability may  be limited  by  (i) applicable  bankruptcy,  insolvency,

 reorganization, moratorium,  and similar  laws affecting  creditors’  rights

 generally, (ii) equitable  principles which  may limit  the availability  of

 certain  equitable  remedies  (such  as  specific  performance)  in  certain

 instances, and  (iii)  public  policy considerations  with  respect  to  the

 enforceability of rights of indemnification.

 

           (c) Noncontravention.  The execution, delivery, and performance by

 such Purchaser of the Transaction Documents to  which it is a party and  the

 consummation by it of the transactions contemplated thereby do not and  will

 not (i) if  such  Purchaser is  an  entity, conflict  with  or result  in  a

 violation of any provision of the charter, bylaws, or similar organizational

 documents of such Purchaser or (ii) violate any Applicable Law binding  upon

 such Purchaser, except for any such violations which would not, individually

 or in the aggregate affect the  ability of such Purchaser to consummate  the

 transactions contemplated hereby.

 

           (d) Governmental  Approvals.    No  consent,  approval,  order, or

 authorization  of,  or  declaration,  filing,  or  registration  with,   any

 Governmental Entity is required to be obtained or made by such Purchaser  in

 connection with the execution, delivery, or performance by such Purchaser of

 the Transaction Documents to which it is  a party or the consummation by  it

 of the transactions contemplated thereby.

 

           (e) General  Solicitation.  Such Purchaser  is not  purchasing the

 Securities as  a  result of  any  advertisement, article,  notice  or  other

 communication regarding the Securities published in any newspaper,  magazine

 or similar media or broadcast over  television or radio or presented at  any

 seminar or any other general solicitation or general advertisement.

 

           (f) No  Public   Sale  or  Distribution.  Such  Purchaser  is  (i)

 acquiring the Promissory Notes  and Warrants and (ii)  upon exercise of  the

 Warrants will acquire the Warrant Shares, for its own account and not with a

 view towards,  or  for  resale  in  connection  with,  the  public  sale  or

 distribution thereof; provided, however, that by making the  representations

 herein, such Purchaser does not agree to hold any of the Securities for  any

 minimum or other  specific term  and reserves the  right to  dispose of  the

 Securities at any  time in  accordance with  or pursuant  to a  registration

 statement or an exemption under the Securities Act.  Such Purchaser does not

 have any agreement or understanding, directly or indirectly, with any Person

 to distribute any of the Securities.

 

           (g) Purchaser  Status. At the time  such Purchaser was offered the

 Securities, it was, and at the date hereof it is, and on each date on  which

 it exercises any Warrants, it will  be either: (i) an “accredited  investor”

 as defined  in  Rule 501  under  the Securities  Act  or (ii)  a  “qualified

 institutional buyer” as defined in Rule 144A under the Securities Act.  Such

 Purchaser is a resident of the jurisdiction set forth below such Purchaser’s

 name  on Schedule  1 attached hereto.  Such Purchaser  is not acquiring  the

 Securities as  part  of a  “group”  as  such term  is  generally  understood

 pursuant to Section 13(d) of Regulation 13D-G of the Exchange Act or if such

 Purchaser is a member  of a group, the group  will beneficially own,  within

 the meaning of Section 13(d) of  Regulation 13D-G of the Exchange Act,  less

 than 15%  of  the Common  Stock  after  giving effect  to  the  transactions

 contemplated hereby.

 

           (h) Reliance  on  Exemptions.  Such  Purchaser  understands   that

 the  Promissory  Notes and Warrants  are  being  offered  and  sold  to  the

 Purchasers   in  reliance  on  specific  exemptions  from  the  registration

 requirements  of United States federal  and state  securities laws  and that

 the Company is relying in part upon the  truth  and  accuracy of,  and  such

 Purchaser’s compliance  with,  the representations,  warranties, agreements,

 acknowledgments and understandings  of such  Purchaser set  forth herein  in

 order to determine the availability of  such exemptions and the  eligibility

 of such Purchaser to acquire the Promissory Notes and Warrants.

 

           (i) Information.  Such Purchaser  and its  advisors, if  any, have

 been furnished  with  all  publicly  available  materials  relating  to  the

 business, finances and  operations of the  Company and  such other  publicly

 available materials relating to the offer  and sale of the Promissory  Notes

 and Warrants as have  been requested by such  Purchaser. Such Purchaser  has

 received a copy of  the Final Memorandum, and  acknowledges and agrees  that

 (a) the Final Memorandum supersedes the PPM Draft and (b) such Purchaser  is

 not  relying  on  the  PPM  Draft  in  making  the  investment  contemplated

 hereunder.  Such Purchaser and its advisors, if any, have been afforded  the

 opportunity to ask questions of the Company. Neither such inquiries nor  any

 other due  diligence  investigations  conducted by  such  Purchaser  or  its

 advisors, if any, or its representatives shall modify, amend or affect  such

 Purchaser’s right to  rely on the  Company’s representations and  warranties

 contained herein.  Such Purchaser  understands that  its investment  in  the

 Promissory Notes and Warrants involves a high degree of risk. Other than  to

 other  Persons  party  to  this  Agreement,  Purchaser  has  maintained  the

 confidentiality of  all  disclosures made  to  it in  connection  with  this

 transaction (including the existence and terms of this transaction).

 

           (j) Experience of  Such Purchaser. Such Purchaser, either alone or

 together with its  representatives, has such  knowledge, sophistication  and

 experience  in  business  and  financial  matters,  including  investing  in

 companies engaged in the business in which the Company is engaged, so as  to

 be capable of evaluating the merits and risks of the prospective  investment

 in the Promissory Notes  and Warrants, and has  so evaluated the merits  and

 risks of such investment. Such Purchaser  is able to bear the economic  risk

 of an investment in the Promissory Notes and Warrants and is able to  afford

 a complete loss of such investment.

 

           (k) No  Governmental  Review. Such  Purchaser understands  that no

 United  States  federal  or  state  agency   or  any  other  government   or

 governmental agency has passed on or made any recommendation or  endorsement

 of the Promissory Notes and Warrants  or the fairness or suitability of  the

 investment in the Promissory Notes and  Warrants, nor have such  authorities

 passed upon or endorsed the merits  of the offering of the Promissory  Notes

 and Warrants.

                                 ARTICLE IV

                       OTHER AGREEMENTS OF THE PARTIES

 

     4.1 Transfer Restrictions.

 

           (a) The  Securities may  only  be disposed  of in  compliance with

 state and  federal  securities laws.  In  connection with  any  transfer  of

 Securities other than  pursuant to an  effective registration statement,  to

 the Company or to an Affiliate of a Purchaser (who is an accredited investor

 and executes a customary representation letter), the Company may require the

 transferor thereof to provide to the Company an opinion of counsel  selected

 by the  transferor,  the  form  and substance  of  which  opinion  shall  be

 reasonably satisfactory to  the Company, to  the effect  that such  transfer

 does not  require  registration of  such  transferred Securities  under  the

 Securities Act.

 

           (b) As  a condition  to such  transfer, any  such transferee shall

 agree in writing to be bound by the  terms of this Agreement and shall  have

 the rights of a Purchaser under this Agreement.

 

           (c) While  any  Warrants  of  such  Purchaser  are  outstanding, a

 Purchaser may  not  transfer  its  Promissory  Note  unless  such  Purchaser

 simultaneously  transfers   (in  compliance   with  this   Agreement)   such

 Purchaser’s Warrants, and  while any Promissory  Note of  such Purchaser  is

 outstanding, a Purchaser may  not transfer any of  its Warrants unless  such

 Purchaser simultaneously transfers (in compliance with this Agreement)  such

 Purchaser’s Promissory Note.

 

     4.2 Legends.   It is agreed and understood  by each  Purchaser that  the

 form of Promissory Note, form of Warrants and any certificates  representing

 the Securities  to be  purchased by  it or  into which  such Securities  are

 convertible shall each conspicuously set forth on the face or back  thereof,

 in addition to any other legends required by agreement or Applicable Law,  a

 legend in substantially the following form:

 

           THE  SECURITIES   REPRESENTED  HEREBY   HAVE  NOT   BEEN

           REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,

           AND MAY NOT BE  OFFERED, SOLD, ASSIGNED OR  TRANSFERRED,

           IN THE ABSENCE  OF AN  EFFECTIVE REGISTRATION  STATEMENT

           UNDER SAID ACT  OR UNLESS  THE COMPANY  HAS RECEIVED  AN

           OPINION  OF  COUNSEL  REASONABLY  SATISFACTORY  TO   THE

           COMPANY  THAT  REGISTRATION  UNDER   SAID  ACT  IS   NOT

           REQUIRED.

 

           THE SECURITIES REPRESENTED HEREBY ARE SUBJECT TO CERTAIN

           RESTRICTIONS ON TRANSFER CONTAINED IN A PROMISSORY  NOTE

           AND WARRANT  PURCHASE AGREEMENT  AMONG THE  COMPANY  AND

           CERTAIN OTHER PARTIES THERETO. A COPY OF SUCH  AGREEMENT

           AND ALL APPLICABLE AMENDMENTS THERETO WILL BE  FURNISHED

           BY THE COMPANY TO THE HOLDER HEREOF WITHOUT CHARGE  UPON

           WRITTEN REQUEST TO THE COMPANY AT ITS PRINCIPAL PLACE OF

           BUSINESS OR REGISTERED OFFICE.

 

     4.3 Public  Announcements.   No  Purchaser  or any  of  their respective

 Affiliates shall  issue  any press  release  or otherwise  make  any  public

 statement with  respect to  the Transaction  Documents or  the  transactions

 contemplated thereby without the prior written consent of the Company.

 

     4.4 Registration Rights.

 

           (a) Registration  of  Registrable  Securities.    Subject  to  the

 occurrence of the Closing  and the terms and  provisions of this  Agreement,

 the Company shall use  its commercially reasonable  efforts to register  the

 Registrable Securities with the Commission under  the Securities Act  to the

 extent requisite to  permit the  sale or  other disposition  thereof by  the

 Purchasers.

 

           (b) Registration  Procedures.  The commercially reasonable efforts

 of the  Company under  Section  4.4(a) shall  mean  that the  Company  will,

 subject  to  the  terms  and  provisions  of  this  Section  4.4,  use   its

 commercially reasonable efforts to:

 

                (i)  prepare  and  file with the  Commission within  90  days

 following  the   Closing  a   registration  statement   (the   “Registration

 Statement”) covering the Registrable  Securities and cause the  Registration

 Statement to  become  effective  and to  keep  such  Registration  Statement

 continuously effective under the  Securities Act until such  date as is  the

 earlier of (A)  the date  when all  Registrable Securities  covered by  such

 Registration  Statement  have  been   sold  pursuant  to  the   Registration

 Statement, and (B) with respect to any holder, such time as all  Registrable

 Securities held by such holder may be sold without any restriction  pursuant

 to Rule 144;

 

                (ii) prepare and file with the Commission such amendments and

 supplements to  the  Registration  Statement and  the  prospectus  contained

 therein as may be  necessary to keep  the Registration Statement  effective,

 and comply with the  provisions of the Securities  Act, with respect to  the

 sale or  other  disposition  of  the  Registrable  Securities  whenever  the

 Purchasers shall desire to sell or  otherwise dispose of the same, but  only

 to the extent provided in this Section 4.4;

 

                (iii) furnish to each Purchaser such numbers of copies of the

 Registration Statement,  the prospectus  contained therein  (including  each

 preliminary  prospectus),  and   each  amendment  and   supplement  to   the

 Registration  Statement  and  such   prospectus,  in  conformity  with   the

 requirements of the Securities Act, as such Purchaser may reasonably request

 in order to  facilitate the  sale or  other disposition  of the  Registrable

 Securities;

 

                (iv) register or qualify the Registrable Securities for  sale

 under the securities or blue sky laws  of such states as the Purchasers  may

 reasonably request (except to the  extent exemptions from such  registration

 or qualification are available),  and do any and  all other acts and  things

 that may reasonably be necessary under  such securities or blue sky laws  to

 enable the Purchasers  to consummate the  sale or other  disposition of  the

 Registrable Securities in such states,  provided, however, that the  Company

 shall not  in  any  event be  required  to  keep any  such  registration  or

 qualification in effect after the expiration of the period during which  the

 Company maintains the effectiveness of the Registration Statement and  shall

 not for any such purpose be required to qualify to do business as a  foreign

 corporation in any state wherein it is not so qualified or to subject itself

 to taxation in any such state; and

 

                (v) before  filing the Registration Statement, any prospectus

 to be used in connection with the  offering to be conducted pursuant to  the

 Registration Statement, or any amendments or supplements to the Registration

 Statement or such prospectus  with the Commission,  furnish counsel to  each

 Purchaser with copies of all such documents proposed to be filed.

 

           (c) Required  Information.  The  Company shall not  be required to

 use its  commercially  reasonable  efforts  to  register,  or  maintain  the

 effectiveness of any registration of, Registrable Securities of a  Purchaser

 under the Securities Act or  the securities or blue  sky laws of any  states

 unless and until such  Purchaser furnishes to  the Company such  information

 regarding such Purchaser  and its  Registrable Securities  and the  intended

 method of  disposition of  such Registrable  Securities as  the Company  may

 reasonably request in order to satisfy  the requirements applicable to  such

 registration.

 

           (d) Limitations  on Registration.   The  rights of  the Purchasers

 pursuant to this Section 4.4 shall be subject to the following limitations:

 

                (i) If  at   any  time  or  from  time  to  time  during  the

 effectiveness of the Registration  Statement, the Company  is engaged in  or

 proposes to engage  in a  registered public  offering of  securities of  the

 Company or  any other  transaction  or activity  which,  in the  good  faith

 determination of the Board of Directors  of the Company, would be  adversely

 affected by offers or  sales of the Registrable  Securities pursuant to  the

 Registration Statement to the detriment of the Company, then the  Purchasers

 shall, upon the  written request  by the  Company, cease  making offers  and

 sales of the Registrable Securities  pursuant to the Registration  Statement

 (including sales pursuant  to Rule  144 under  the Securities  Act) for  the

 period of time specified by the  Company, which period shall not (i) in  the

 case of a registered public offering,  exceed the period beginning ten  days

 prior to the effective date of  the registration statement relating to  such

 offering and ending 120 days after such effective date, and (ii) in the case

 of any other transaction or activity,  exceed the period beginning ten  days

 prior to, and ending 120 days after, the date of commencement of such  other

 activity or date of consummation of such other transaction.  Each  Purchaser

 agrees to  enter  into such  further  agreements  with the  Company  or  any

 underwriter of securities of the Company deemed necessary by the Company  or

 any such underwriter to carry out the purposes  of this subsection (i).  The

 period of time that the Company  is obligated to maintain the  effectiveness

 of the Registration Statement  hereunder shall be  tolled during the  period

 the Purchasers  must  cease  making offers  and  sales  of  the  Registrable

 Securities pursuant to the Company’s request under this subsection (i).

 

                (ii) The  obligations  of  the Company  pursuant  to Sections

 4.4(a) and  (b)  shall  cease  (i) as  to  Registrable  Securities  sold  or

 otherwise disposed of pursuant to the Registration Statement or Section 4(1)

 of the Securities Act, or sold or otherwise  disposed of in any manner to  a

 person which, by virtue of this Section  4.4, is not entitled to the  rights

 provided by this Section 4.4, and (ii) as to Registrable Securities eligible

 for sale  pursuant to  Rule 144  promulgated under  the Securities  Act,  as

 amended from  time  to time,  or  any similar  rule  that may  hereafter  be

 adopted.

 

                (iii) In no event shall the Company be obligated to have more

 than  one  Registration  Statement  with  respect  to  the  registration  of

 Registrable Securities under the  Securities Act be  effective at any  given

 time, however if the conditions in (A)  or (B) of Section 4.4(b)(i) are  not

 satisfied and  the resale  of the  Registrable  Securities pursuant  to  the

 Registration Statement will no longer be allowed  as a result of the 3  year

 limitation of Rule 415  (effective December 1,  2005) promulgated under  the

 Securities Act  (or any  other similar  provision), the  Company shall  file

 additional Registration  Statements  and  use  its  commercially  reasonable

 efforts to  fully  satisfy  the intent  of  this  Section 4.4  to  have  the

 Registrable covered by an effective  Registration Statement until such  time

 as the he conditions in (A) or (B) of Section 4.4(b)(i) are satisfied.

 

                (iv) The rights and obligations of the Purchasers under  this

 Section 4.4 may  not be assigned  or transferred to  any person without  the

 prior written consent of the Company except with respect to the Transfer  of

 the Warrants (in which case such rights and obligations are transferred with

 such Warrants).

 

           (e) Expenses of Registration.  In connection with any registration

 of the Registrable  Securities pursuant to  the provisions  of this  Section

 4.4, each Purchaser shall pay any  brokerage and underwriting discounts  and

 commissions payable in respect  of the Registrable  Securities sold on  such

 Purchaser’s behalf, all fees and expenses  of any attorneys and  accountants

 employed by such Purchaser,  and any other costs  directly incurred by  such

 Purchaser, and the Company shall pay or cause to be paid and shall indemnify

 and hold harmless the  Purchasers from and against  any and all other  costs

 and expenses incurred in connection with such registration and related  blue

 sky registrations and qualifications.

 

           (f) Indemnification.   In connection with  any registration of the

 Registrable Securities pursuant to the provisions  of this Section 4.4,  the

 Company shall, to the extent permitted by Applicable Law, indemnify and hold

 harmless each Purchaser to the extent that companies generally indemnify and

 hold harmless underwriters  in connection  with public  offerings under  the

 Securities Act, and  each Purchaser shall  indemnify and  hold harmless  the

 Company, each  director and  officer of  the Company,  and each  person  who

 controls the Company within the meaning of the Securities Act to the  extent

 that selling shareholders generally indemnify  and hold harmless issuers  of

 securities in connection with public offerings under the Securities Act with

 respect to the information provided by such Purchaser for use by the Company

 in the preparation of the Registration Statement.

 

           (g) Inclusion  of Other  Securities.   Each Purchaser acknowledges

 that the Registration Statement, and any prospectus used in connection  with

 the offering  conducted pursuant  thereto, may  cover,  in addition  to  the

 Registrable Securities, other shares of Common Stock or other securities  of

 the Company to be sold by the Company or other persons.

 

     4.5 Fees  and Expenses.  Except as  otherwise expressly provided in this

 Agreement, all fees and expenses incurred in connection with the Transaction

 Documents and the  transactions contemplated thereby  shall be  paid by  the

 party incurring such fee or expense.

 

     4.6 Indemnification for Brokerage Fees.  The parties hereto  acknowledge

 and agree  that,  except  for  fees payable  by  the  Company  to  Stonewall

 Securities, Inc., no brokerage or finder’s  fees or commissions are or  will

 be  payable  in  connection  with  the  transactions  contemplated  by  this

 Agreement.  Each of the parties hereto agrees to indemnify and hold harmless

 each other  party  from  and against  any  other  claims or  demands  for  a

 commission or other  compensation by  any other  financial advisor,  broker,

 agent, finder, or similar intermediary claiming to have been employed by  or

 on behalf of such indemnifying party and to bear the cost of legal fees  and

 expenses incurred in defending against any such claim or demand.

 

     4.7 Allocation  of Partial  Prepayments.   In the  case of  each partial

 prepayments of the Promissory Notes, the  Company shall cause the  principal

 amounts of the Promissory Notes to be paid to be allocated among all of  the

 Promissory Notes  outstanding  at such  time  in proportion,  as  nearly  as

 practicable,  to  the  respective  unpaid  principal  amount  thereof.   Any

 Purchaser may waive this requirement with respect to its Promissory Note.

 

     4.8 Reservation  of  Warrant  Shares.   So  long  as  any  Warrants  are

 outstanding,  the  Company  shall  reserve  and  set  aside  from  its  duly

 authorized capital stock a number of shares of Common Stock for issuance  of

 the Warrant Shares  at least equal  to the maximum  number of shares  Common

 Stock that may be issued upon the exercise of all then outstanding Warrants.

 

     4.9   Consent  of  Purchasers.    By  executing  this  Agreement,   each

 Purchaser hereby  consents and  agrees that  one of  the Purchasers  may  be

 purchasing a  Promissory  Note  through  a  profit  sharing  trust  (Related

 Purchasing Trust) or similar entity and purchasing the Warrants accompanying

 such Promissory  Note  in  such  Purchaser’s  individual  capacity  (Related

 Purchasing  Individual).  If the foregoing  occurs,  the Related  Purchasing

 Trust and Related Purchasing  Individual will each executed  a copy of  this

 Agreement and will each hereby agree that all of the terms of this Agreement

 and the  Transaction Documents  shall apply  to  them as  if they  were  one

 Purchaser.

                                  ARTICLE V

                      TERMINATION, AMENDMENT, AND WAIVER

 

     5.1 Termination.   This Agreement may be terminated and the transactions

 contemplated hereby  abandoned at  any  time prior  to  the Closing  in  the

 following manner:

 

           (a) by  mutual written consent of  the Company and the Purchasers;

 or

 

           (b) by the Company, if, on the Closing Date, any of the conditions

 set forth in Section 2.3  shall not have been  satisfied and shall not  have

 been waived by the Company; or

 

           (c) by  the  Purchasers,  if,  on the  Closing  Date,  any  of the

 conditions set forth in Section 2.2 shall not have been satisfied and  shall

 not have been waived by the Purchasers.

 

     5.2 Effect  of Termination.   In  the event  of the  termination of this

 Agreement pursuant to Section 5.1  by the Company, on  the one hand, or  the

 Purchasers, on the other, written notice thereof shall forthwith be given to

 the other  party specifying  the provision  hereof  pursuant to  which  such

 termination is  made, and  this  Agreement shall  become  void and  have  no

 effect, except that the agreements contained in this Section and in Sections

 4.3, 4.5,  and 4.6  and Article  VI shall  survive the  termination  hereof.

 Nothing contained in this Section shall relieve any party from liability for

 any breach of this Agreement.

 

     5.3 Amendment.    This  Agreement  may  not  be  amended  except  by  an

 instrument in writing signed by or on behalf of all the parties hereto.

 

     5.4 Waiver.   No failure  or delay by  a party hereto  in exercising any

 right, power, or privilege hereunder shall  operate as a waiver thereof  nor

 shall any single or partial exercise  thereof preclude any other or  further

 exercise thereof or the  exercise of any other  right, power, or  privilege.

 The provisions of this Agreement may  not be waived except by an  instrument

 in writing signed by or on behalf of  the party against whom such waiver  is

 sought to be enforced.

                                 ARTICLE VI

                         SURVIVAL OF REPRESENTATIONS;

                               INDEMNIFICATION

     6.1 Survival.   The representations and warranties of the parties hereto

 contained in this Agreement or in  any certificate, instrument, or  document

 delivered pursuant  hereto  shall survive  the  Closing, regardless  of  any

 investigation made by or on behalf of any party.

 

     6.2 Indemnification  by Company.   The Company  shall indemnify, defend,

 and hold  harmless the  Purchasers  from and  against  any and  all  claims,

 actions, causes of action, demands, losses, damages, liabilities, costs, and

 expenses (including reasonable attorneys’ fees and expenses)  (collectively,

 “Damages”), asserted against, resulting to, imposed upon, or incurred by the

 Purchasers, directly  or indirectly,  by reason  of  or resulting  from  any

 breach by the Company of any of its representations, warranties,  covenants,

 or agreements contained in any Transaction Documents.

 

     6.3 Indemnification  by the Purchasers.   Each  Purchaser severally (but

 not jointly) shall indemnify, defend, and hold harmless the Company from and

 against any and all Damages asserted against, resulting to, imposed upon, or

 incurred by the Company, directly or  indirectly, by reason of or  resulting

 from any breach by such Purchaser of any of its representations, warranties,

 covenants, or agreements contained in any Transaction Document.

 

     6.4 Procedure  for  Indemnification.    Promptly  after  receipt  by  an

 indemnified party under Section 6.2 or 6.3 of notice of the commencement  of

 any action, such indemnified party shall,  if a claim in respect thereof  is

 to be made against  an indemnifying party under  such Section, give  written

 notice to  the  indemnifying party  of  the commencement  thereof,  but  the

 failure so to  notify the  indemnifying party shall  not relieve  it of  any

 liability that it may have to any indemnified party except to the extent the

 indemnifying  party  demonstrates  that  the  defense  of  such  action   is

 prejudiced thereby.   In case any  such action shall  be brought against  an

 indemnified party and it shall give written notice to the indemnifying party

 of the commencement  thereof, the indemnifying  party shall  be entitled  to

 participate therein  and, to  the extent  that it  may wish,  to assume  the

 defense thereof  with counsel  reasonably satisfactory  to such  indemnified

 party.   If the  indemnifying party  elects to  assume the  defense of  such

 action, the  indemnified  party shall  have  the right  to  employ  separate

 counsel at its own expense  and to participate in  the defense thereof.   If

 the indemnifying party elects not to assume (or fails to assume) the defense

 of such  action, the  indemnified  party shall  be  entitled to  assume  the

 defense of such action with counsel of its own choice, at the expense of the

 indemnifying party.  If the action is asserted against both the indemnifying

 party and the indemnified party and  there is a conflict of interests  which

 renders it  inappropriate  for  the  same  counsel  to  represent  both  the

 indemnifying party and the indemnified  party, the indemnifying party  shall

 be responsible for paying  for separate counsel  for the indemnified  party;

 provided, however, that  if there is  more than one  indemnified party,  the

 indemnifying party shall  not be responsible  for paying for  more than  one

 separate firm of attorneys to represent the indemnified parties,  regardless

 of the number of indemnified parties.  The indemnifying party shall have  no

 liability with  respect  to  any compromise  or  settlement  of  any  action

 effected without  its  written  consent (which  shall  not  be  unreasonably

 withheld).

                                 ARTICLE VII

                                MISCELLANEOUS

     7.1 Notices.   All notices, requests,  demands, and other communications

 required or permitted  to be  given or made  hereunder by  any party  hereto

 shall be in writing and shall be deemed to  have been duly given or made  if

 delivered personally or transmitted by  first class registered or  certified

 mail, postage  prepaid, return  receipt requested,  to  the parties  at  the

 addresses set forth opposite  their names on the  signature page hereof  (in

 the case  of the  Company) and  on Schedule  1 hereto  (in the  case of  the

 Purchasers) (or at such other addresses as shall be specified by the parties

 by like notice).

 

     7.2 Entire  Agreement.  This Agreement  constitutes the entire agreement

 between the parties  hereto with respect  to the subject  matter hereof  and

 supersedes all prior agreements and  understandings, both written and  oral,

 between the parties with respect to the subject matter hereof.

 

     7.3 Binding Effect;  Assignment; No Third Party Benefit.  This Agreement

 shall be binding upon  and inure to  the benefit of  the parties hereto  and

 their respective  heirs, legal  representatives, successors,  and  permitted

 assigns.  Except as  otherwise provided  in  this  Agreement,  neither  this

 Agreement nor any of the rights,  interests, or obligations hereunder  shall

 be assigned  by any  of the  parties  hereto.  Nothing  in  this  Agreement,

 express or implied,  is intended to  or shall confer  upon any person  other

 than the parties hereto, and their respective heirs, legal  representatives,

 successors, and permitted assigns, any rights, benefits, or remedies of  any

 nature whatsoever under or by reason of this Agreement.

 

     7.4 Severability.   If  any provision  of this  Agreement is  held to be

 unenforceable,  this  Agreement  shall  be  considered  divisible  and  such

 provision  shall  be  deemed  inoperative  to   the  extent  it  is   deemed

 unenforceable, and in all other respects this Agreement shall remain in full

 force and effect; provided however, that  if any such provision may be  made

 enforceable by limitation thereof, then such provision shall be deemed to be

 so limited  and shall  be enforceable  to the  maximum extent  permitted  by

 applicable law.

 

     7.5 Governing  Law.  THIS  AGREEMENT SHALL BE  GOVERNED BY AND CONSTRUED

 AND ENFORCED IN  ACCORDANCE WITH  THE LAWS OF  THE STATE  OF TEXAS,  WITHOUT

 REGARD TO THE PRINCIPLES OF CONFLICTS OF LAWS THEREOF.

 

     7.6 Counterparts.   This Agreement may be executed by the parties hereto

 in any number of  counterparts, each of which  shall be deemed an  original,

 but all  of  which  shall constitute  one  and  the same  agreement.    Each

 counterpart may consist  of a number  of copies hereof  each signed by  less

 than all, but together signed by all, the parties hereto.

 

 

      IN WITNESS WHEREOF, the parties hereto have executed this Agreement  as

 of the date first above written.

 

                                         COMPANY:

 

 Address for Notice:                     CARRINGTON LABORATORIES, INC.

 2001 Walnut Hill Lane

 Irving, Texas 75038

 Attn:  Dr. Carlton E. Turner

 

                                         By:

                                         —————————–

 With a Copy to:                         Name: Carlton E. Turner

 Patterson, Belknap, Webb & Tyler LLP    Title: President and CEO

 1133 Avenue of the Americas

 New York, New York  10036

 Attention:  Peter J. Schaeffer

 

                                    PURCHASER:

                                    [Print Exact Name]

                                         By:  —————————–

                                         Name: —————————–

                                         Title: —————————–

 SSN/EIN: —————————–

 Subscription Amount: $ —————-

 

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Victory Acquisition Corporation Warrant Agreement from RealDealDocs.com

June 3, 2008

We had such a good response from the last Warrant Agreement I released so I figured I could release another one. This one was drafted by (yup) another Amlaw noted law firm: Akin Gump. Thanks to my friends at RealDealDocs.com for letting me release a full copy of the agreement for free. To search millions of legal docs for free, please visit www.RealDealDocs.com!

Exhibit 4.4

WARRANT AGREEMENT

Agreement made as of                     , 2007 between Victory Acquisition Corp., a Delaware corporation, with offices at 7 Times Square, 17th Floor, New York, New York 10036 (“Company”), and Continental Stock Transfer & Trust Company, a New York corporation, with offices at 17 Battery Place, New York, New York 10004 (“Warrant Agent”).

WHEREAS, the Company has received binding commitments from Eric J. Watson and Jonathan J. Ledecky (collectively, the “Insiders”) to purchase an aggregate of 5,000,000 warrants to purchase one share of the Company’s common stock, par value $.0001 per share (“Common Stock”) for $7.50, subject to adjustment as described herein (“Insider Warrants”); and

WHEREAS, the Company is engaged in a public offering (“Public Offering”) of Units and, in connection therewith, has determined to issue and deliver up to 28,750,000 Warrants (“Public Warrants” and together with the Insider Warrants, the “Warrants”) to the public investors, each Warrant evidencing the right of the holder thereof to purchase one share of Common Stock for $7.50, subject to adjustment as described herein; and

WHEREAS, the Company has filed with the Securities and Exchange Commission a Registration Statement on Form S-1, No. 333-             (“Registration Statement”), for the registration, under the Securities Act of 1933, as amended (“Act”) of, among other securities, the Warrants and the Common Stock issuable upon exercise of the Warrants; and

WHEREAS, the Company desires the Warrant Agent to act on behalf of the Company, and the Warrant Agent is willing to so act, in connection with the issuance, registration, transfer, exchange, redemption and exercise of the Warrants; and

WHEREAS, the Company desires to provide for the form and provisions of the Warrants, the terms upon which they shall be issued and exercised, and the respective rights, limitation of rights, and immunities of the Company, the Warrant Agent, and the holders of the Warrants; and

WHEREAS, all acts and things have been done and performed which are necessary to make the Warrants, when executed on behalf of the Company and countersigned by or on behalf of the Warrant Agent, as provided herein, the valid, binding and legal obligations of the Company, and to authorize the execution and delivery of this Agreement.

NOW, THEREFORE, in consideration of the mutual agreements herein contained, the parties hereto agree as follows:

1. Appointment of Warrant Agent. The Company hereby appoints the Warrant Agent to act as agent for the Company for the Warrants, and the Warrant Agent hereby accepts such appointment and agrees to perform the same in accordance with the terms and conditions set forth in this Agreement.

2. Warrants.

2.1. Form of Warrant. Each Warrant shall be issued in registered form only, shall be in substantially the form of Exhibit A hereto, the provisions of which are incorporated herein and shall be signed by, or bear the facsimile signature of, the Chairman of the Board or President and Treasurer, Secretary or Assistant Secretary of the Company and shall bear a facsimile of the Company’s seal. In the event the person whose facsimile signature has been placed upon any Warrant shall have ceased to serve in the capacity in which such person signed the Warrant before such Warrant is issued, it may be issued with the same effect as if he or she had not ceased to be such at the date of issuance.

2.2. Effect of Countersignature. Unless and until countersigned by the Warrant Agent pursuant to this Agreement, a Warrant shall be invalid and of no effect and may not be exercised by the holder thereof.

2.3. Registration.

2.3.1. Warrant Register. The Warrant Agent shall maintain books (“Warrant Register”), for the registration of original issuance and the registration of transfer of the Warrants. Upon the initial issuance of the Warrants, the Warrant Agent shall issue and register the Warrants in the names of the respective holders thereof in such denominations and otherwise in accordance with instructions delivered to the Warrant Agent by the Company.

2.3.2. Registered Holder. Prior to due presentment for registration of transfer of any Warrant, the Company and the Warrant Agent may deem and treat the person in whose name such Warrant shall be registered upon the Warrant Register (“registered holder”), as the absolute owner of such Warrant and of each Warrant represented thereby (notwithstanding any notation of ownership or other writing on the Warrant Certificate made by anyone other than the Company or the Warrant Agent), for the purpose of any exercise thereof, and for all other purposes, and neither the Company nor the Warrant Agent shall be affected by any notice to the contrary.

 

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2.4. Detachability of Warrants. The securities comprising the Units will not be separately transferable until 5 business days (or as soon as practicable thereafter) following the earlier to occur of the expiration of the Underwriters’ over-allotment option in the Public Offering or its exercise in full, subject to the Company filing a Current Report on Form 8-K which includes an audited balance sheet reflecting the receipt by the Company of the gross proceeds of the Public Offering including the proceeds received by the Company from the exercise of the Underwriter’s over-allotment option and having issued a press release announcing when such separate trading will begin.

2.5 Insider Warrants. The Insider Warrants will be issued in the same form as the Public Warrants but they (i) will not be transferable or salable until the Company completes a business combination, (ii) will be non-redeemable by the Company so long as they are held by the Insiders or their affiliates and (iii) may be exercised for unregistered shares if a registration statement relating to the common stock issuable upon exercise of the warrants is not effective and current.

3. Terms and Exercise of Warrants

3.1. Warrant Price. Each Warrant shall, when countersigned by the Warrant Agent, entitle the registered holder thereof, subject to the provisions of such Warrant and of this Warrant Agreement, to purchase from the Company the number of shares of Common Stock stated therein, at the price of $7.50 per whole share, subject to the adjustments provided in Section 4 hereof and in the last sentence of this Section 3.1. The term “Warrant Price” as used in this Warrant Agreement refers to the price per share at which Common Stock may be purchased at the time a Warrant is exercised. The Company in its sole discretion may lower the Warrant Price at any time prior to the Expiration Date for a period of not less than 10 business days; provided, however, that any such reduction shall be identical in percentage terms among all of the Warrants.

3.2. Duration of Warrants. A Warrant may be exercised only during the period (“Exercise Period”) commencing on the later of (i) the consummation by the Company of a merger, capital stock exchange, asset acquisition or other similar business combination (“Business Combination”) (as described more fully in the Company’s Registration Statement) and (ii)                     , 2008, and terminating at 5:00 p.m., New York City time on the earlier to occur of (i)                     , 2011 or (ii) the date fixed for redemption of the Warrants as provided in Section 6 of this Agreement (“Expiration Date”). Except with respect to the

 

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right to receive the Redemption Price (as set forth in Section 6 hereunder), each Warrant not exercised on or before the Expiration Date shall become void, and all rights thereunder and all rights in respect thereof under this Agreement shall cease at the close of business on the Expiration Date. The Company in its sole discretion may extend the duration of the Warrants by delaying the Expiration Date; provided, however, that the Company will provide notice to registered holders of the Warrants of such extension of not less than 20 days.

3.3. Exercise of Warrants.

3.3.1. Payment. Subject to the provisions of the Warrant and this Warrant Agreement, a Warrant, when countersigned by the Warrant Agent, may be exercised by the registered holder thereof by surrendering it, at the office of the Warrant Agent, or at the office of its successor as Warrant Agent, in the Borough of Manhattan, City and State of New York, with the subscription form, as set forth in the Warrant, duly executed, and by paying in full the Warrant Price for each full share of Common Stock as to which the Warrant is exercised and any and all applicable taxes due in connection with the exercise of the Warrant, the exchange of the Warrant for Common Stock and the issuance of the Common Stock, in cash, good certified check or good bank draft payable to the order of the Company (or as otherwise agreed to by the Company);

3.3.2. Issuance of Certificates. As soon as practicable after the exercise of any Warrant and the clearance of the funds in payment of the Warrant Price, the Company shall issue to the registered holder of such Warrant a certificate or certificates for the number of full shares of Common Stock to which he is entitled, registered in such name or names as may be directed by him, her or it, and if such Warrant shall not have been exercised in full, a new countersigned Warrant for the number of shares as to which such Warrant shall not have been exercised. Subject to Section 7.4 and notwithstanding the foregoing, the Company shall not be obligated to deliver any securities pursuant to the exercise of a Public Warrant and shall have no obligation to settle such Public Warrant exercise unless a registration statement under the Act with respect to the Common Stock is effective, or in the opinion of counsel to the Company, the exercise of the Warrants is exempt from the registration requirements of the Act and such securities are qualified for sale or exempt from qualification under applicable securities laws of the states or other jurisdictions in which the registered holders reside. In the event that a registration statement with respect to the Common Stock underlying a Public Warrant is not effective under the Act, the holder of such Public Warrant shall not be entitled to exercise such Public Warrant and such Public Warrant may have no value and expire

 

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worthless. In no event will the Company be required to net cash settle the warrant exercise. Public Warrants may not be exercised by, or securities issued to, any registered holder in any state in which such exercise would be unlawful. The shares of common stock issuable upon exercise of Insider Warrants shall be unregistered shares. In the event that a registration statement is not effective for the exercised Public Warrants, the purchaser of a unit containing such Public Warrant, will have paid the full purchase price for the unit solely for the shares included in such unit.

3.3.3. Valid Issuance. All shares of Common Stock issued upon the proper exercise of a Warrant in conformity with this Agreement shall be validly issued, fully paid and nonassessable.

3.3.4. Date of Issuance. Each person in whose name any such certificate for shares of Common Stock is issued shall for all purposes be deemed to have become the holder of record of such shares on the date on which the Warrant was surrendered and payment of the Warrant Price was made, irrespective of the date of delivery of such certificate, except that, if the date of such surrender and payment is a date when the stock transfer books of the Company are closed, such person shall be deemed to have become the holder of such shares at the close of business on the next succeeding date on which the stock transfer books are open.

3.3.5. Intentionally Omitted.

4. Adjustments.

4.1. Stock Dividends – Split-Ups. If after the date hereof, and subject to the provisions of Section 4.6 below, the number of outstanding shares of Common Stock is increased by a stock dividend payable in shares of Common Stock, or by a split-up of shares of Common Stock, or other similar event, then, on the effective date of such stock dividend, split-up or similar event, the number of shares of Common Stock issuable on exercise of each Warrant shall be increased in proportion to such increase in outstanding shares of Common Stock.

4.2. Aggregation of Shares. If after the date hereof, and subject to the provisions of Section 4.6, the number of outstanding shares of Common Stock is decreased by a consolidation, combination, reverse stock split or reclassification of shares of Common Stock or other similar event, then, on the effective date of such consolidation, combination, reverse stock split, reclassification or similar event, the number of shares of Common Stock issuable on exercise of each Warrant shall be decreased in proportion to such decrease in outstanding shares of Common Stock.

 

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4.3 Adjustments in Exercise Price. Whenever the number of shares of Common Stock purchasable upon the exercise of the Warrants is adjusted, as provided in Section 4.1 and 4.2 above, the Warrant Price shall be adjusted (to the nearest cent) by multiplying such Warrant Price immediately prior to such adjustment by a fraction (x) the numerator of which shall be the number of shares of Common Stock purchasable upon the exercise of the Warrants immediately prior to such adjustment, and (y) the denominator of which shall be the number of shares of Common Stock so purchasable immediately thereafter.

4.4. Replacement of Securities upon Reorganization, etc. In case of any reclassification or reorganization of the outstanding shares of Common Stock (other than a change covered by Section 4.1 or 4.2 hereof or that solely affects the par value of such shares of Common Stock), or in the case of any merger or consolidation of the Company with or into another corporation (other than a consolidation or merger in which the Company is the continuing corporation and that does not result in any reclassification or reorganization of the outstanding shares of Common Stock), or in the case of any sale or conveyance to another corporation or entity of the assets or other property of the Company as an entirety or substantially as an entirety in connection with which the Company is dissolved, the Warrant holders shall thereafter have the right to purchase and receive, upon the basis and upon the terms and conditions specified in the Warrants and in lieu of the shares of Common Stock of the Company immediately theretofore purchasable and receivable upon the exercise of the rights represented thereby, the kind and amount of shares of stock or other securities or property (including cash) receivable upon such reclassification, reorganization, merger or consolidation, or upon a dissolution following any such sale or transfer, that the Warrant holder would have received if such Warrant holder had exercised his, her or its Warrant(s) immediately prior to such event; and if any reclassification also results in a change in shares of Common Stock covered by Section 4.1 or 4.2, then such adjustment shall be made pursuant to Sections 4.1, 4.2, 4.3 and this Section 4.4. The provisions of this Section 4.4 shall similarly apply to successive reclassifications, reorganizations, mergers or consolidations, sales or other transfers.

4.5. Notices of Changes in Warrant. Upon every adjustment of the Warrant Price or the number of shares issuable upon exercise of a Warrant, the Company shall give written notice thereof to the Warrant Agent, which notice shall state the Warrant Price resulting from such adjustment and the increase or decrease, if any, in the number of shares purchasable at such price upon the exercise of a Warrant, setting forth in reasonable detail the method of calculation and the facts upon which such calculation is based. Upon the occurrence of any event specified in Sections 4.1, 4.2, 4.3 or 4.4, then, in any such event, the Company shall give written notice to each Warrant holder, at the last address set forth for such holder in the warrant register, of the record date or the effective date of the event. Failure to give such notice, or any defect therein, shall not affect the legality or validity of such event.

 

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4.6. No Fractional Shares. Notwithstanding any provision contained in this Warrant Agreement to the contrary, the Company shall not issue fractional shares upon exercise of Warrants. If, by reason of any adjustment made pursuant to this Section 4, the holder of any Warrant would be entitled, upon the exercise of such Warrant, to receive a fractional interest in a share, the Company shall, upon such exercise, round up or down to the nearest whole number the number of the shares of Common Stock to be issued to the Warrant holder.

4.7. Form of Warrant. The form of Warrant need not be changed because of any adjustment pursuant to this Section 4, and Warrants issued after such adjustment may state the same Warrant Price and the same number of shares as is stated in the Warrants initially issued pursuant to this Agreement. However, the Company may at any time in its sole discretion make any change in the form of Warrant that the Company may deem appropriate and that does not affect the substance thereof, and any Warrant thereafter issued or countersigned, whether in exchange or substitution for an outstanding Warrant or otherwise, may be in the form as so changed.

4.8 Notice of Certain Transactions. In the event that the Company shall propose to (a) offer the holders of its Common Stock rights to subscribe for or to purchase any securities convertible into shares of Common Stock or shares of stock of any class or any other securities, rights or options, (b) issue any rights, options or warrants entitling the holders of Common Stock to subscribe for shares of Common Stock or (c) make a tender offer, redemption offer or exchange offer with respect to the Common Stock, the Company shall send to the Warrant holders a notice of such proposed action or offer. Such notice shall be mailed to the registered holders at their addresses as they appear in the Warrant Register, which shall specify the record date for the purposes of such dividend, distribution or rights, or the date such issuance or event is to take place and the date of participation therein by the holders of Common Stock, if any such date is to be fixed, and shall briefly indicate the effect of such action on the Common Stock and on the number and kind of any other shares of stock and on other property, if any, and the number of shares of Common Stock and other property, if any, issuable upon exercise of each Warrant and the Warrant Price after giving effect to any adjustment pursuant to this Article 4 which would be required as a result of such action. Such notice shall be given as promptly as practicable after the Board has determined to take any such action and (x) in the case of any action covered by clause

 

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(a) or (b) above at least 10 days prior to the record date for determining the holders of the Common Stock for purposes of such action or (y) in the case of any other such action at least 20 days prior to the date of the taking of such proposed action or the date of participation therein by the holders of Common Stock, whichever shall be the earlier.

4.9 Other Events. If any event occurs as to which the foregoing provisions of this Article 4 are not strictly applicable or, if strictly applicable, would not, in the good faith judgment of the Board, fairly and adequately protect the purchase rights of the registered holders of the Warrants in accordance with the essential intent and principles of such provisions, then the Board shall make such adjustments in the application of such provisions, in accordance with such essential intent and principles, as shall be reasonably necessary, in the good faith opinion of the Board, to protect such purchase rights as aforesaid.

5. Transfer and Exchange of Warrants.

5.1. Registration of Transfer. The Warrant Agent shall register the transfer, from time to time, of any outstanding Warrant upon the Warrant Register, upon surrender of such Warrant for transfer, properly endorsed with signatures properly guaranteed and accompanied by appropriate instructions for transfer. Upon any such transfer, a new Warrant representing an equal aggregate number of Warrants shall be issued and the old Warrant shall be cancelled by the Warrant Agent. The Warrants so cancelled shall be delivered by the Warrant Agent to the Company from time to time upon request.

5.2. Procedure for Surrender of Warrants. Warrants may be surrendered to the Warrant Agent, together with a written request for exchange or transfer, and thereupon the Warrant Agent shall issue in exchange therefor one or more new Warrants as requested by the registered holder of the Warrants so surrendered, representing an equal aggregate number of Warrants; provided, however, that in the event that a Warrant surrendered for transfer bears a restrictive legend, the Warrant Agent shall not cancel such Warrant and issue new Warrants in exchange therefor until the Warrant Agent has received an opinion of counsel for the Company stating that such transfer may be made and indicating whether the new Warrants must also bear a restrictive legend.

5.3. Fractional Warrants. The Warrant Agent shall not be required to effect any registration of transfer or exchange which will result in the issuance of a warrant certificate for a fraction of a warrant.

5.4. Service Charges. No service charge shall be made for any exchange or registration of transfer of Warrants.

 

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5.5. Warrant Execution and Countersignature. The Warrant Agent is hereby authorized to countersign and to deliver, in accordance with the terms of this Agreement, the Warrants required to be issued pursuant to the provisions of this Section 5, and the Company, whenever required by the Warrant Agent, will supply the Warrant Agent with Warrants duly executed on behalf of the Company for such purpose.

6. Redemption.

6.1. Redemption. Subject to Section 6.4 hereof, not less than all of the outstanding Warrants may be redeemed, at the option of the Company, at any time while they are exercisable and prior to their expiration, at the office of the Warrant Agent, upon the notice referred to in Section 6.2, at the price of $.01 per Warrant (“Redemption Price”), provided that the last sales price of the Common Stock has been at least $14.25 per share (subject to adjustment in accordance with Section 4 hereof), on each of twenty (20) trading days within any thirty (30) trading day period ending on the third business day prior to the date on which notice of redemption is given.

6.2. Date Fixed for, and Notice of, Redemption. In the event the Company shall elect to redeem all of the Warrants, the Company shall fix a date for the redemption. Notice of redemption shall be mailed by first class mail, postage prepaid, by the Company not less than 30 days prior to the date fixed for redemption to the registered holders of the Warrants to be redeemed at their last addresses as they shall appear on the registration books. Any notice mailed in the manner herein provided shall be conclusively presumed to have been duly given whether or not the registered holder received such notice.

6.3. Exercise After Notice of Redemption. The Warrants may be exercised for cash (or on a “cashless basis” in accordance with Section 3.3.1 of this Agreement) at any time after notice of redemption shall have been given by the Company pursuant to Section 6.2 hereof and prior to the time and date fixed for redemption. On and after the redemption date, the record holder of the Warrants shall have no further rights except to receive, upon surrender of the Warrants, the Redemption Price.

6.4 Exclusion of Certain Warrants. Any of the Insider Warrants shall not be redeemable by the Company as long as such Insider Warrants continue to be held by Eric J. Watson or Jonathan J. Ledecky or their affiliates. However, once such individuals or their affiliates transfer such Insider Warrants, such Insider Warrants shall then be redeemable by the Company pursuant to Section 6 hereof.

 

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7. Other Provisions Relating to Rights of Holders of Warrants.

7.1. No Rights as Stockholder. A Warrant does not entitle the registered holder thereof to any of the rights of a stockholder of the Company, including, without limitation, the right to receive dividends, or other distributions, exercise any preemptive rights to vote or to consent or to receive notice as stockholders in respect of the meetings of stockholders or the election of directors of the Company or any other matter.

7.2. Lost, Stolen, Mutilated, or Destroyed Warrants. If any Warrant is lost, stolen, mutilated, or destroyed, the Company and the Warrant Agent may on such terms as to indemnity or otherwise as they may in their discretion impose (which shall, in the case of a mutilated Warrant, include the surrender thereof), issue a new Warrant of like denomination, tenor, and date as the Warrant so lost, stolen, mutilated, or destroyed. Any such new Warrant shall constitute a substitute contractual obligation of the Company, whether or not the allegedly lost, stolen, mutilated, or destroyed Warrant shall be at any time enforceable by anyone.

7.3. Reservation of Common Stock. The Company shall at all times reserve and keep available a number of its authorized but unissued shares of Common Stock that will be sufficient to permit the exercise in full of all outstanding Warrants issued pursuant to this Agreement.

7.4. Registration of Common Stock. The Company agrees that prior to the commencement of the Exercise Period, it shall use its best efforts to file with the Securities and Exchange Commission a post-effective amendment to the Registration Statement, or a new registration statement, for the registration, under the Act, of, and it shall use its best efforts to take such action as is necessary to qualify for sale, in those states in which the Warrants were initially offered by the Company, the Common Stock issuable upon exercise of the Warrants. In either case, the Company will use its best efforts to cause the same to become effective and to maintain the effectiveness of such registration statement until the expiration of the Warrants in accordance with the provisions of this Agreement. The Warrants shall not be exercisable and the Company shall not be obligated to issue Common Stock unless, at the time a holder seeks to exercise the Warrants, a prospectus relating to Common Stock issuable upon exercise of the Warrants is current and the Common Stock has been registered or qualified or deemed to be exempt under the securities laws of the state of residence of the holder of the Warrants.The provisions of this Section 7.4 may not be modified, amended or deleted without the prior written consent of Citigroup.

 

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8. Concerning the Warrant Agent and Other Matters.

8.1. Payment of Taxes. The Company will from time to time promptly pay all taxes and charges that may be imposed upon the Company or the Warrant Agent in respect of the issuance or delivery of shares of Common Stock upon the exercise of Warrants, but the Company shall not be obligated to pay any transfer taxes in respect of the Warrants or such shares.

8.2. Resignation, Consolidation, or Merger of Warrant Agent.

8.2.1. Appointment of Successor Warrant Agent. The Warrant Agent, or any successor to it hereafter appointed, may resign its duties and be discharged from all further duties and liabilities hereunder after giving sixty (60) days’ notice in writing to the Company. If the office of the Warrant Agent becomes vacant by resignation or incapacity to act or otherwise, the Company shall appoint in writing a successor Warrant Agent in place of the Warrant Agent. If the Company shall fail to make such appointment within a period of 30 days after it has been notified in writing of such resignation or incapacity by the Warrant Agent or by the holder of the Warrant (who shall, with such notice, submit his Warrant for inspection by the Company), then the holder of any Warrant may apply to the Supreme Court of the State of New York for the County of New York for the appointment of a successor Warrant Agent at the Company’s cost. Any successor Warrant Agent, whether appointed by the Company or by such court, shall be a corporation organized and existing under the laws of the State of New York, in good standing and having its principal office in the Borough of Manhattan, City and State of New York, and authorized under such laws to exercise corporate trust powers and subject to supervision or examination by federal or state authority. After appointment, any successor Warrant Agent shall be vested with all the authority, powers, rights, immunities, duties, and obligations of its predecessor Warrant Agent with like effect as if originally named as Warrant Agent hereunder, without any further act or deed; but if for any reason it becomes necessary or appropriate, the predecessor Warrant Agent shall execute and deliver, at the expense of the Company, an instrument transferring to such successor Warrant Agent all the authority, powers, and rights of such predecessor Warrant Agent hereunder; and upon request of any successor Warrant Agent the Company shall make, execute, acknowledge, and deliver any and all instruments in writing for more fully and effectually vesting in and confirming to such successor Warrant Agent all such authority, powers, rights, immunities, duties, and obligations.

8.2.2. Notice of Successor Warrant Agent. In the event a successor Warrant Agent shall be appointed, the Company shall give notice thereof to the predecessor Warrant Agent and the transfer agent for the Common Stock not later than the effective date of any such appointment.

 

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8.2.3. Merger or Consolidation of Warrant Agent. Any corporation into which the Warrant Agent may be merged or with which it may be consolidated or any corporation resulting from any merger or consolidation to which the Warrant Agent shall be a party shall be the successor Warrant Agent under this Agreement without any further act.

8.3. Fees and Expenses of Warrant Agent.

8.3.1. Remuneration. The Company agrees to pay the Warrant Agent reasonable remuneration for its services as such Warrant Agent hereunder and will reimburse the Warrant Agent upon demand for all expenditures that the Warrant Agent may reasonably incur in the execution of its duties hereunder.

8.3.2. Further Assurances. The Company agrees to perform, execute, acknowledge, and deliver or cause to be performed, executed, acknowledged, and delivered all such further and other acts, instruments, and assurances as may reasonably be required by the Warrant Agent for the carrying out or performing of the provisions of this Agreement.

8.4. Liability of Warrant Agent.

8.4.1. Reliance on Company Statement. Whenever in the performance of its duties under this Warrant Agreement, the Warrant Agent shall deem it necessary or desirable that any fact or matter be proved or established by the Company prior to taking or suffering any action hereunder, such fact or matter (unless other evidence in respect thereof be herein specifically prescribed) may be deemed to be conclusively proved and established by a statement signed by the President or Chairman of the Board of the Company and delivered to the Warrant Agent. The Warrant Agent may rely upon such statement for any action taken or suffered in good faith by it pursuant to the provisions of this Agreement.

8.4.2. Indemnity. The Warrant Agent shall be liable hereunder only for its own negligence, willful misconduct or bad faith. The Company agrees to indemnify the Warrant Agent and save it harmless against any and all liabilities, including judgments, costs and reasonable counsel fees, for anything done or omitted by the Warrant Agent in the execution of this Agreement except as a result of the Warrant Agent’s negligence, willful misconduct, or bad faith.

 

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8.4.3. Exclusions. The Warrant Agent shall have no responsibility with respect to the validity of this Agreement or with respect to the validity or execution of any Warrant (except its countersignature thereof); nor shall it be responsible for any breach by the Company of any covenant or condition contained in this Agreement or in any Warrant; nor shall it be responsible to make any adjustments required under the provisions of Section 4 hereof or responsible for the manner, method, or amount of any such adjustment or the ascertaining of the existence of facts that would require any such adjustment; nor shall it by any act hereunder be deemed to make any representation or warranty as to the authorization or reservation of any shares of Common Stock to be issued pursuant to this Agreement or any Warrant or as to whether any shares of Common Stock will when issued be valid and fully paid and nonassessable.

8.5. Acceptance of Agency. The Warrant Agent hereby accepts the agency established by this Agreement and agrees to perform the same upon the terms and conditions herein set forth and among other things, shall account promptly to the Company with respect to Warrants exercised and concurrently account for, and pay to the Company, all moneys received by the Warrant Agent for the purchase of shares of Common Stock through the exercise of Warrants.

9. Miscellaneous Provisions.

9.1. Successors. All the covenants and provisions of this Agreement by or for the benefit of the Company or the Warrant Agent shall bind and inure to the benefit of their respective successors and assigns.

9.2. Notices. Any notice, statement or demand authorized by this Warrant Agreement to be given or made by the Warrant Agent or by the holder of any Warrant to or on the Company shall be sufficiently given when so delivered if by hand or overnight delivery or if sent by certified mail or private courier service within five days after deposit of such notice, postage prepaid, addressed (until another address is filed in writing by the Company with the Warrant Agent), as follows:

Victory Acquisition Corp.

7 Times Square, 17th Floor

New York, New York 10036

Attn: President

Any notice, statement or demand authorized by this Agreement to be given or made by the holder of any Warrant or by the Company to or on the Warrant Agent shall be sufficiently given when so delivered if by hand or overnight delivery or if sent by certified mail or private courier service within five days after deposit of such notice, postage prepaid, addressed (until another address is filed in writing by the Warrant Agent

 

13

with the Company), as follows:

Continental Stock Transfer & Trust Company

17 Battery Place

New York, New York 10004

Attn: Compliance Department

with a copy in each case to:

Graubard Miller

The Chrysler Building

405 Lexington Avenue

New York, New York 10174

Attn: David Alan Miller, Esq.

Facsimile: (212) 818-8881

and

Akin Gump Strauss Hauer & Feld LLP

590 Madison Avenue

New York, New York 10022

Attn: Bruce Mendelsohn, Esq.

Facsimile: (212) 872-1002

and

Citigroup Global Markets Inc.

388 Greenwich Street

New York, New York 10013

Attn: David Spivak

Facsimile: (212) 723-8871

9.3. Applicable law. The validity, interpretation, and performance of this Agreement and of the Warrants shall be governed in all respects by the laws of the State of New York, without giving effect to conflicts of law principles that would result in the application of the substantive laws of another jurisdiction. The Company hereby agrees that any action, proceeding or claim against it arising out of or relating in any way to this Agreement shall be brought and enforced in the courts of the State of New York or the United States District Court for the Southern District of New York, and irrevocably submits to such jurisdiction, which jurisdiction shall be exclusive. The Company hereby waives any objection to such exclusive jurisdiction and that such courts represent an inconvenience forum. Any such process or summons to be served upon the Company may be served by transmitting a copy thereof by registered or certified mail, return receipt requested, postage prepaid, addressed to it at the address set forth in Section 9.2 hereof. Such mailing shall be deemed personal service and shall be legal and binding upon the Company in any action, proceeding or claim.

 

14

9.4. Persons Having Rights under this Agreement. Nothing in this Agreement expressed and nothing that may be implied from any of the provisions hereof is intended, or shall be construed, to confer upon, or give to, any person or corporation other than the parties hereto and the registered holders of the Warrants and, for the purposes of Sections 2.5, 6.1, 6.4, 7.4, 9.2 and 9.8 hereof, Citigroup, any right, remedy, or claim under or by reason of this Warrant Agreement or of any covenant, condition, stipulation, promise, or agreement hereof. Citigroup shall be deemed to be a third-party beneficiary of this Agreement with respect to Sections 2.5, 6.1, 6.4, 7.4, 9.2 and 9.8 hereof. All covenants, conditions, stipulations, promises, and agreements contained in this Warrant Agreement shall be for the sole and exclusive benefit of the parties hereto (and Citigroup with respect to the Sections 2.5, 6.1, 6.4, 7.4, 9.2 and 9.8 hereof) and their successors and assigns and of the registered holders of the Warrants.

9.5. Examination of the Warrant Agreement. A copy of this Agreement shall be available at all reasonable times at the office of the Warrant Agent in the Borough of Manhattan, City and State of New York, for inspection by the registered holder of any Warrant. The Warrant Agent may require any such holder to submit his Warrant for inspection by it.

9.6. Counterparts. This Agreement may be executed in any number of original or facsimile counterparts and each of such counterparts shall for all purposes be deemed to be an original, and all such counterparts shall together constitute but one and the same instrument.

9.7. Effect of Headings. The Section headings herein are for convenience only and are not part of this Warrant Agreement and shall not affect the interpretation thereof.

9.8 Amendments. This Agreement may be amended by the parties hereto without the consent of any registered holder for the purpose of curing any ambiguity, or of curing, correcting or supplementing any defective provision contained herein or adding or changing any other provisions with respect to matters or questions arising under this Agreement as the parties may deem necessary or desirable and that the parties deem shall not adversely affect the interest of the registered holders. All other modifications or amendments, including any amendment to increase the Warrant Price or shorten the Exercise Period, shall require the written consent of the registered holders of a majority of the then outstanding Warrants. Notwithstanding the foregoing, the Company may lower the Warrant Price or extend the duration of the Exercise Period pursuant to Sections 3.1 and 3.2, respectively, without the consent of the registered holders.

 

15

9.9 Severability. This Agreement shall be deemed severable, and the invalidity or unenforceability of any term or provision hereof shall not affect the validity or enforceability of this Agreement or of any other term or provision hereof. Furthermore, in lieu of any such invalid or unenforceable term or provision, the parties hereto intend that there shall be added as a part of this Agreement a provision as similar in terms to such invalid or unenforceable provision as may be possible and be valid and enforceable.

 

16

IN WITNESS WHEREOF, this Agreement has been duly executed by the parties hereto as of the day and year first above written.

 

 

 

 

VICTORY ACQUISITION CORP.

   

By:

 

  

Name:

 

 

Title:

 

 

 

CONTINENTAL STOCK TRANSFER
& TRUST COMPANY

   

By:

 

  

Name:

 

 

Title:

 

 

 

17

 

 

HSBC Bank USA Warrant Agreement from RealDealDocs.com

May 27, 2008

Hello again, I hope you all enjoyed your long weekend. To kick off this work week I’ve got something new for you! A warrant agreement for HSBC Bank USA. And you guessed it – brought to you courtesy of RealDealDocs.com. To search millions of legal docs for free, please visit www.RealDealDocs.com!

Exhibit 4.1

WARRANT AGREEMENT

Dated as of May 25, 2007

by and between

RCN CORPORATION

and

HSBC Bank USA, National Association,

as Warrant Agent

 


     WARRANT AGREEMENT (this “Warrant Agreement”) dated as of May 25, 2007, between RCN CORPORATION, a Delaware corporation (the “Company”), and HSBC Bank USA, National Association, a national banking association, as Warrant Agent (the “Warrant Agent”).

     WHEREAS, pursuant to the terms and conditions of the Offer to Purchase and Consent Solicitation Statement, dated April 27, 2007, the Company is offering to purchase any and all of its $125,000,000 outstanding 7.375% Convertible Second Lien Notes due 2012 (the “Notes”) at a purchase price for each $1,000 of principal amount of Notes so tendered equal to (i) $1,133.00 in cash, (ii) an additional amount in cash equal to the accrued unpaid interest on the Notes to, but excluding, the date on which the Notes are purchased, and (iii) 42.63 warrants (the “Warrants”);

     WHEREAS, each Warrant represents the right to purchase one share of common stock, par value $0.01 per share, of the Company (the “Common Stock”);

     WHEREAS, the Company desires HSBC Bank USA, National Association to act as the Warrant Agent on behalf of the Company, and the Warrant Agent is willing so to act, in connection with the issuance of Warrant certificates and other matters as provided herein; and

     NOW, THEREFORE, in consideration of the premises and the mutual agreements herein set forth, the parties hereto agree as follows:

     SECTION 1. Appointment of Warrant Agent. The Company hereby appoints the Warrant Agent to act as warrant agent for the Company in accordance with the express (and no implied) instructions set forth hereinafter in this Warrant Agreement, and the Warrant Agent hereby accepts such appointment.

     SECTION 2. Warrant Certificates. The certificates evidencing the Warrants to be delivered pursuant to this Warrant Agreement shall be in registered form only and shall be substantially in the form set forth in Exhibit A attached hereto (“Warrant Certificates”) and may have such letters, numbers, or other marks of identification or designation and such legends or endorsements printed, lithographed or engraved thereon as the officers of the Company executing the same may approve (with execution thereof to be conclusive evidence of such approval) and as are not inconsistent with the provisions of this Warrant Agreement, or as may be required to comply with any applicable law or with any rule or regulation made pursuant thereto or with any rule or regulation of any exchange, inter-dealer quotation system or regulated quotation service on which the Warrants may be listed or quoted, as the case may be.

     SECTION 3. Issuance of Warrants. Upon issuance in accordance with Section 5, each Warrant Certificate shall evidence one or more Warrants. Each Warrant evidenced thereby entitles the holder, upon proper exercise, to receive from the Company, as adjusted as provided herein, one share of the Common Stock at the Exercise Price (as defined in Section 7).

     SECTION 4. Execution of Warrant Certificates. Warrant Certificates shall be signed on behalf of the Company by its Chairman of the Board, Chief Executive Officer, President or any Vice President and by the Secretary or any Assistant Secretary under its corporate seal. The seal of the Company may be in the form of a facsimile thereof and may be impressed, affixed, imprinted or otherwise reproduced on the Warrant Certificates. Each such signature upon any

 


 

Warrant Certificate may be in the form of a facsimile signature of the present or any future Chairman of the Board, Chief Executive Officer, President, Vice President, Secretary or Assistant Secretary and may be imprinted or otherwise reproduced on the Warrant Certificates and for that purpose the Company may adopt and use the facsimile signature of any person who shall have been Chairman of the Board, Chief Executive Officer, President, Vice President, Secretary or Assistant Secretary at the time of entering into this Warrant Agreement, notwithstanding the fact that at the time any Warrant Certificate shall be countersigned by the Warrant Agent and delivered or disposed of by the Company he shall have ceased to hold such office, so long as, and the Company hereby represents that, under the Company’s charter and by-laws, any Warrants or shares of the Common Stock so issued would be validly issued. Any Warrant Certificate may be signed on behalf of the Company by any person who, at the actual date of the execution of such Warrant Certificate, shall be a proper officer of the Company to sign such Warrant Certificate, although at the date of the execution of this Warrant Agreement any such person was not such officer, so long as, and the Company hereby represents that, under the Company’s charter and by-laws, any Warrants or shares of the Common Stock so issued would be validly issued. For purposes hereof, “person” shall be interpreted broadly to include an individual, corporation, partnership, joint venture, association, joint stock company, limited liability company, limited liability partnership, national banking association, trust, trustee, estate, unincorporated organization, government, governmental unit, agency, or political subdivision thereof, or other entity.

     Warrant Certificates shall be dated the date of countersignature by the Warrant Agent and shall represent one or more whole Warrants.

     SECTION 5. Registration and Countersignature. The Warrant Agent, on behalf of the Company, shall number and register the Warrant Certificates in a Warrant register as they are issued by the Company. The Warrant register will show the names and addresses of the respective holders of the Warrants, the numbers of Warrants evidenced on the face of each Warrant Certificate and the date of each Warrant Certificate.

     Warrant Certificates shall be manually countersigned by the Warrant Agent upon written instructions of the Chairman of the Board, Chief Executive Officer, President, Vice President, Secretary or Assistant Secretary of the Company and shall not be valid for any purpose unless so countersigned. The Warrant Agent shall, upon written instructions of the Chairman of the Board, Chief Executive Officer, President, Vice President, Secretary or Assistant Secretary of the Company, initially countersign and deliver Warrant Certificates entitling the holders thereof to purchase one share of Common Stock per Warrant (but subject to adjustment as hereinafter provided) and shall countersign and deliver Warrant Certificates as otherwise provided in this Warrant Agreement.

     The Company and the Warrant Agent may deem and treat the registered holder(s) of the Warrant Certificates as the absolute owner(s) thereof (notwithstanding any notation of ownership or other writing thereon made by anyone), for all purposes, and neither the Company nor the Warrant Agent shall be affected by any notice to the contrary.

     SECTION 6. Registration of Transfers and Exchanges. The Warrant Agent shall from time to time register the transfer of any outstanding Warrant Certificates upon the records to be

2


 

maintained by it for that purpose, upon surrender thereof accompanied by a written instrument or instruments of transfer in form satisfactory to the Warrant Agent and the Company, duly executed by the registered holder or holders thereof or by the duly appointed legal representative thereof or by a duly authorized attorney. Upon any such registration of transfer, a new Warrant Certificate shall be issued to the transferee(s) and the surrendered Warrant Certificate shall be cancelled by the Warrant Agent. Cancelled Warrant Certificates shall thereafter be disposed of by or at the direction of the Company in accordance with applicable law.

     Warrant Certificates may be exchanged at the option of the registered holder(s) thereof, when surrendered to the Warrant Agent at the Warrant Agent Office (as defined in Section 7) during normal business hours for another Warrant Certificate or other Warrant Certificates of like tenor and representing in the aggregate a like number of Warrants. Warrant Certificates surrendered for exchange shall be cancelled by the Warrant Agent. Such cancelled Warrant Certificates shall then be disposed of by or at the direction of the Company in accordance with applicable law.

     The Warrant Agent is hereby directed and authorized to countersign, in accordance with the provisions of this Section 6, the new Warrant Certificates issued pursuant to the provisions of this Section 6.

     SECTION 7. Terms of Warrants; Exercise of Warrants. Subject to the terms of this Warrant Agreement, each Warrant holder shall have the right, which may be exercised from the date of the original issuance of the Warrant Certificates and prior to 5:00 p.m. New York City Time, on June 21, 2012 (the “Expiration Date”), to exercise each Warrant and receive from the Company the number of fully paid and nonassessable shares of the Common Stock which the holder may at the time be entitled to receive on exercise of such Warrants and payment of the aggregate Exercise Price then in effect for such shares of the Common Stock. In addition, prior to the delivery of any shares of the Common Stock that the Company shall be obligated to deliver upon proper exercise of the Warrants, the Company shall comply with all applicable federal and state laws, rules and regulations which require action to be taken by the Company. Each Warrant, when exercised, will entitle the holder thereof to purchase one share of the Common Stock at the Exercise Price, in each case as adjusted from time to time as herein provided. Each Warrant not exercised prior to the Expiration Date shall become void and all rights thereunder and all rights in respect thereof under this Warrant Agreement shall cease as of such time.

     NO WARRANT OR ANY SHARES OF COMMON STOCK RECEIVED ON EXERCISE OF A WARRANT MAY BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED EXCEPT (A)(1) TO A PERSON WHO THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A UNDER THE SECURITIES ACT PURCHASING FOR ITS OWN ACCOUNT OF FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (2) TO AN INSTITUTION THAT IS AN ACCREDITED INVESTOR WITHIN THE MEANING OF RULE 501(a)(1), (2), (3) OR (7) OF REGULATION D UNDER THE SECURITIES ACT, (3) IN A TRANSACTION EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT PURSUANT TO RULE 144 THEREUNDER (IF AVAILABLE) OR (4) PURSUANT TO AN EFFECTIVE

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REGISTRATION STATEMENT UNDER THE SECURITIES ACT, AND (B) IN ACCORDANCE WITH ALL APPLICABLE STATE SECURITIES LAWS OR AN EXEMPTION THEREFROM. WARRANTS AND THE SHARES OF COMMON STOCK RECEIVED ON EXERCISE OF A WARRANT MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED THEREBY.

     A Warrant may be exercised upon surrender to the Company at the Warrant Agent Office referred to in Section 20 (the “Warrant Agent Office”) of the Warrant Certificate or Warrant Certificates evidencing the Warrants to be exercised with the form of election to purchase on the reverse thereof (the “Exercise Notice”) duly and properly completed and signed, which signature shall be guaranteed by an “Eligible Guarantor Institution” as defined in Rule 17Ad-15(2) promulgated under the Securities and Exchange Act of 1934, as amended (the “Exchange Act”), and upon payment to the Warrant Agent for the account of the Company of the exercise price of $25.16 (the “Exercise Price”), as adjusted from time to time as herein provided, for each Warrant then exercised. Payment of the aggregate Exercise Price for all shares of the Common Stock being exercised in respect of a Warrant Certificate shall be made (a) in United States Dollars or (b) by certified or official bank check for United States Dollars made payable to the order of “RCN Corporation”. In lieu of payment of the aggregate Exercise Price as aforesaid and subject to applicable law, the holder of a Warrant may elect to receive from the Company a number of shares of the Common Stock equal to the “Spread” by indicating such election in the Exercise Notice delivered by such Warrant holder. The “Spread” shall, subject to Section 14, be paid by the Company by delivering to such Warrant holder a number of shares of the Common Stock equal to (a)(i) the product of (x) the current market price per share of the Common Stock (as of the date of receipt of the Exercise Notice by the Company) multiplied by (y) the number of shares of the Common Stock underlying the Warrants being exercised, minus (ii) the product of (x) the Exercise Price, multiplied by (y) the number of shares of the Common Stock underlying the Warrants being exercised, divided by (b) the current market price per share of the Common Stock (as of the date of receipt of the Exercise Notice by the Company).

     Subject to the provisions of Section 8, upon such exercise of Warrants and payment of the aggregate Exercise Price, the Company shall issue and cause to be delivered promptly to or upon the written order of the Warrant holder and in such name or names, as the Warrant holder may designate, a certificate or certificates for the number of full shares of the Common Stock issuable upon the exercise of such Warrants together with cash as provided in Section 14; provided, however, that if any Fundamental Transaction (as defined in Section 12(f)) is proposed to be effected by the Company or there is pending any tender offer or an exchange offer for shares of the Common Stock, upon such exercise of Warrants and payment of the Exercise Price as aforesaid, the Company shall, as soon as possible, but in any event not later than two business days thereafter, issue and cause to be delivered the full number of shares of the Common Stock issuable upon the exercise of such Warrants in the manner described in this sentence together with any cash as provided in Section 14. For purposes of this Warrant Agreement, a “business day” means any day other than a Saturday, Sunday or a day on which banking institutions in New York City are authorized or obligated by law, regulation or executive order to close or remain closed. Such certificate or certificates shall be deemed to have been issued and any person so designated to be named therein shall be deemed to have become a holder of record of such shares of the Common Stock as of the close of business on the date of the exercise of such

4


 

Warrants and payment of the aggregate Exercise Price. No fractional shares shall be issued upon exercise of any Warrants in accordance with Section 14.

     The Warrants shall be exercisable, at the election of the holders thereof, either in full or from time to time in part (in whole shares of the Common Stock) and, in the event that a Warrant Certificate evidencing Warrants is exercised in respect of fewer than all of the shares of the Common Stock issuable on such exercise at any time prior to the Expiration Date, a new Certificate evidencing the remaining Warrant or Warrants will be promptly issued, and the Warrant Agent is hereby irrevocably authorized and directed to countersign and to deliver the required new Warrant Certificate or Certificates pursuant to the provisions of this Section 7 and of Section 5, and the Company, whenever required by the Warrant Agent or under this Warrant Agreement, will supply the Warrant Agent with Warrant Certificates duly executed on behalf of the Company for such purpose.

     All Warrant Certificates surrendered upon exercise of Warrants shall be cancelled by the Warrant Agent. Such cancelled Warrant Certificates shall then be disposed of by or at the direction of the Company in accordance with applicable law. The Warrant Agent shall (x) advise an authorized representative of the Company as directed by the Company by the end of each day on which Warrants were exercised (i) the number of shares of Common Stock issued upon exercise of a Warrant and the number of Warrants exercised, (ii) delivery of Warrant Certificates evidencing the balance, if any, of the Warrants after such exercise of the Warrants represented by each Warrant Certificate and (iii) such other information as the Company shall reasonably require and (y) concurrently pay to the Company all funds received by it in payment of the aggregate Exercise Price. The Warrant Agent shall promptly confirm such information to the Company in writing.

     The Warrant Agent shall keep copies of this Warrant Agreement and any notices given or received hereunder available for inspection by the holders of the Warrants during normal business hours at the Warrant Agent Office. The Company shall supply the Warrant Agent from time to time with such numbers of copies of this Warrant Agreement as the Warrant Agent may request.

     SECTION 8. Payment of Taxes. No service charge shall be made to any holder of a Warrant for any exercise, exchange or registration of transfer of Warrant Certificates, and the Company will pay all documentary stamp taxes attributable to the initial issuance of shares of the Common Stock upon the exercise of Warrants; provided, however, that neither the Company nor the Warrant Agent shall be required to pay any tax or taxes which may be payable in respect of any transfer involved in the issue of any Warrant Certificates or any certificates for shares of the Common Stock in a name other than that of the registered holder of a Warrant Certificate surrendered upon the exercise of a Warrant, and the Company shall not be required to issue or deliver such Warrant Certificates or the certificates representing the shares of the Common Stock unless or until the person or persons requesting the issuance thereof shall have paid to the Company the amount of such tax or shall have established to the satisfaction of the Company that such tax has been paid.

     SECTION 9. Mutilated or Missing Warrant Certificates. If any of the Warrant Certificates shall be mutilated, lost, stolen or destroyed, the Company shall issue and the Warrant

5


 

Agent shall countersign, in exchange and substitution for and upon cancellation of the mutilated Warrant Certificate, or in lieu of and substitution for the Warrant Certificate lost, stolen or destroyed, a new Warrant Certificate of like date and tenor and representing an equivalent number of Warrants, but only upon receipt of evidence satisfactory to the Company and the Warrant Agent of such loss, theft or destruction of such Warrant Certificate and such indemnity and security therefor as is customary and reasonably satisfactory to the Company and the Warrant Agent. Applicants for such substitute Warrant Certificate shall also comply with such other reasonable regulations and pay such other reasonable charges as the Company or the Warrant Agent may prescribe.

     SECTION 10. Reservation of Shares of the Common Stock. The Company will at all times reserve and keep available, free from preemptive rights, out of the aggregate of its authorized but unissued shares of the Common Stock, for the purpose of enabling it to satisfy any obligation to issue shares of the Common Stock upon exercise of Warrants, the maximum number of shares of the Common Stock which may then be deliverable upon the exercise of all outstanding Warrants.

     The Company or the transfer agent for the Common Stock and every subsequent transfer agent for any shares of the Company’s capital stock issuable upon the exercise of any of the rights of purchase represented by the Warrants as aforesaid (the “Transfer Agent”) will be irrevocably authorized and directed at all times to reserve such number of authorized shares as shall be required for such purpose. The Company will keep a copy of this Warrant Agreement on file with the Transfer Agent for any shares of the Company’s capital stock issuable upon the exercise of the rights of purchase represented by the Warrants. The Warrant Agent is hereby irrevocably authorized and directed to requisition from time to time from such Transfer Agent the stock certificates required to honor outstanding Warrants upon exercise thereof in accordance with the terms of this Warrant Agreement. The Company will supply such Transfer Agent with duly executed certificates for such purposes and will, upon request, provide or otherwise make available any cash which may be payable as provided in Section 14. The Company will furnish such Transfer Agent a copy of all notices of adjustments and certificates related thereto, transmitted to the Warrant Agent and each holder pursuant to Section 15.

     Before taking any action which would cause an adjustment pursuant to Section 12 to reduce the Exercise Price below the then par value per share (if any) of a share of the Common Stock, the Company will take all corporate action necessary, in the opinion of its counsel (which may be counsel employed by the Company), in order that the Company may validly and legally issue fully paid and nonassessable shares of the Common Stock at the Exercise Price as so adjusted.

     The Company covenants that all shares of the Common Stock which may be issued upon exercise of Warrants will be, upon payment of the aggregate Exercise Price and issuance thereof, fully paid, nonassessable, free of preemptive rights and free from all taxes, liens, charges and security interests with respect to the issue thereof (other than any liens, charges and security interests created by the Warrant holder or the person to which the shares of the Common Stock are to be issued).

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     SECTION 11. Registration; Obtaining Stock Exchange Listings. The Warrants and the shares of Common Stock to be issued upon exercise of the Warrants shall be registered under the Securities Act in accordance with the Registration Rights Agreement, dated as of the date hereof, between the Company and the holders named therein, a form of which is attached hereto as Exhibit B. The Company shall use its best efforts to promptly secure the listing of the shares of Common Stock issuable upon exercise of the Warrants upon each national securities exchange and automated quotation system, as the case may be, upon which shares of Common Stock are then listed (subject to official notice of issuance upon exercise of such Warrant) and shall use its best efforts to maintain, so long as any other shares of Common Stock shall be so listed, such listing of all shares of Common Stock from time to time issuable upon the exercise of all then outstanding Warrants; and the Company shall use its best efforts to list on each national securities exchange or automated quotation system, as the case may be, and shall maintain such listing of, any other shares of capital stock of the Company issuable upon exercise of the Warrants if and so long as any shares of the same class shall be listed on such national securities exchange or automated quotation system. The Company shall pay all fees and expenses in connection with satisfying its obligations under this Section 11.

     SECTION 12. Adjustment of Exercise Price and the Number of Shares of Common Stock Issuable. The Exercise Price and the number of shares of Common Stock issuable upon the exercise of each Warrant are subject to adjustment from time to time upon the occurrence of the events enumerated in this Section 12. For purposes of this Section 12, “the Common Stock” means the Common Stock and any other capital stock of the Company, however designated, for which the Warrants may be exercisable from time to time.

 

(a)

 

Adjustment of Exercise Price: The Exercise Price shall be adjusted from time to time by the Company as follows:

 

(i)

 

In case the Company shall hereafter pay a dividend or make a distribution to all holders of the outstanding Common Stock in shares of Common Stock, the Exercise Price in effect at the opening of business on the date following the date fixed for the determination of shareholders entitled to receive such dividend or other distribution shall be reduced by multiplying such Exercise Price by a fraction of which (A) the numerator shall be the number of shares of Common Stock outstanding at the close of business on the Record Date (as defined in Section 12(a)(vi)(5)) fixed for such determination and (B) the denominator shall be the sum of such number of             shares and the total number of shares constituting such dividend or other distribution, such reduction in the Exercise Price to become effective immediately after the opening of business on the day following the Record Date. If any dividend or distribution of the type described herein is declared but not so paid or made, the Exercise Price shall again be adjusted to the Exercise Price which would then be in effect if such dividend or distribution had not been declared.

 

 

 

 

 

(ii)

 

In case the outstanding shares of Common Stock shall be subdivided into a greater number of shares of Common Stock, the Exercise Price in effect at the opening of business on the day following the day upon which such

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subdivision becomes effective shall be proportionately reduced, and conversely, in case outstanding shares of Common Stock shall be combined into a smaller number of shares of Common Stock, the Exercise Price in effect at the opening of business on the day following the day upon which such combination becomes effective shall be proportionately increased, such reduction or increase, as the case may be, to become effective immediately after the opening of business on the day following the day upon which such subdivision or combination becomes effective.

 

 

 

 

 

(iii)

 

In case the Company shall issue rights or warrants to all holders of its outstanding shares of Common Stock entitling them to subscribe for or purchase shares of Common Stock at a price per share less than the Current Market Price (as defined Section 12(a)(vi)(3)) on the “ex” date fixed for the distribution, the Exercise Price shall be adjusted so that the same shall equal the price determined by multiplying the Exercise Price in effect at the opening of business on the date after such “ex” date by a fraction of which (A) the numerator shall be the sum of the number of shares of Common Stock outstanding at the close of business on the “ex” date plus the number of shares that the aggregate offering price of the total number of shares so offered for subscription or purchase would purchase at such Current Market Price, and of which (B) the denominator shall be the sum of the number of shares of Common Stock outstanding at the close of business on the “ex” date plus the total number of additional shares of Common Stock so offered for subscription or purchase. Such adjustment shall become effective immediately after the opening of business on the day following the “ex” date fixed for the distribution. To the extent that shares of Common Stock are not delivered pursuant to such rights or warrants, upon the expiration or termination of such rights or warrants the Exercise Price shall be readjusted to the Exercise Price that would then be in effect had the adjustments made upon the issuance of such rights or warrants been made on the basis of delivery of only the number of shares of Common Stock actually delivered. In the event that such rights or warrants are not so issued, the Exercise Price shall again be adjusted to be the Exercise Price that would then be in effect if such date fixed for the distribution had not been fixed. In determining whether any rights or warrants entitle the holders to subscribe for or purchase shares of Common Stock at less than such Current Market Price, and in determining the aggregate offering price of such shares of Common Stock, there shall be taken into account any consideration received for such rights or warrants, the value of such consideration, if other than cash, to be determined in good faith by the Company’s Board of Directors.

 

 

 

 

 

(iv)

 

In case the Company shall, by dividend or otherwise, distribute to all holders of its Common Stock shares of any class of capital stock of the Company (other than any dividends or distributions to which Section 12(a)(i) applies) or evidences of its indebtedness or other assets (including securities, but excluding (1) any rights or warrants referred to in Section

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12(a)(iii) and (2) dividends and distributions paid exclusively in cash (except as set forth in Section 12(a)(v)) (the foregoing hereinafter in this Section 12(a)(iv) called the “Additional Securities”), unless the Company elects to reserve such Additional Securities for distribution to the Warrant holders upon exercise of the Warrants so that any such Warrant holder exercising Warrants will receive upon such exercise, in addition to the shares of Common Stock to which such Warrant holder is entitled, the amount and kind of such Additional Securities which such Warrant holder would have received if such Warrant holder had exercised its Warrants immediately prior to the “ex” date for such distribution of the Additional Securities then, in each such case, the Exercise Price shall be reduced so that the same shall be equal to the price determined by multiplying the Exercise Price in effect immediately prior to the close of business on the “ex” date with respect to such distribution by a fraction of which (i) the numerator shall be the Current Market Price (determined as provided in Section 12(a)(v)) on such date less the fair market value (as determined in good faith by the Company’s Board of Directors, whose determination shall be conclusive and described in a Board Resolution) on such date of the portion of the Additional Securities so distributed applicable to one share of Common Stock and (ii) the denominator shall be such Current Market Price, such reduction to become effective immediately prior to the opening of business on the day following the “ex” date; provided, however, that in the event the then fair market value (as so determined) of the portion of the Additional Securities so distributed applicable to one share of Common Stock is equal to or greater than the Current Market Price on the “ex” date, in lieu of the foregoing adjustment, adequate provision shall be made so that each Warrant holder shall have the right to receive upon exercise of a Warrant (or any portion thereof) the amount of Common Stock such Warrant holder would have received had such Warrant holder exercised such Warrant (or portion thereof) immediately prior to such “ex” date. In the event that such dividend or distribution is not so paid or made, the Exercise Price shall again be adjusted to be the Exercise Price which would then be in effect if such dividend or distribution had not been declared. If the Company’s Board of Directors determines the fair market value of any distribution for purposes of this Section 12(a)(iv) by reference to the actual or when issued trading market for any securities comprising all or part of such distribution, it must in doing so consider the prices in such market over the same period (the “Reference Period”) used in computing the Current Market Price pursuant to Section 12(a)(v) to the extent possible, unless the Company’s Board of Directors in a Board Resolution determines in good faith that determining the fair market value during the Reference Period would not be in the best interest of the Warrant holder.

 

 

 

 

 

 

 

In the event that the Company implements a new shareholder rights plan, such rights plan shall provide that upon exercise of the Warrants the Warrant holders will receive, in addition to the Common Stock issuable

9


 

 

 

 

upon such exercise, the rights issued under such rights plan as if the Warrant holders had exercised the Warrants prior to implementing the rights plan and notwithstanding the occurrence of an event causing such rights to separate from the Common Stock at or prior to the time of exercise. Any distribution of rights or warrants pursuant to a shareholder rights plan complying with the requirements set forth in the immediately preceding sentence of this paragraph shall not constitute a distribution of rights or warrants for the purposes of this Section 12(a)(iv).

 

 

 

 

 

 

 

Rights or warrants distributed by the Company to all holders of Common Stock entitling the holders thereof to subscribe for or purchase shares of the Company’s capital stock (either initially or under certain circumstances), which rights or warrants, until the occurrence of a specified event or events (“Trigger Event”): (A) are deemed to be transferred with such shares of Common Stock; (B) are not exercisable; and (C) are also issued in respect of future issuances of Common Stock, shall be deemed not to have been distributed for purposes of this Section 12(a)(iv) (and no adjustment to the Exercise Price under this Section 12(a)(iv) will be required) until the occurrence of the earliest Trigger Event. If such right or warrant is subject to subsequent events, upon the occurrence of which such right or warrant shall become exercisable to purchase different securities, evidences of indebtedness or other assets or entitles the Warrant holder to purchase a different number or amount of the foregoing or to purchase any of the foregoing at a different purchase price, then the occurrence of each such event shall be deemed to be the date of issuance and record date with respect to a new right or warrant (and a termination or expiration of the existing right or warrant without exercise by the holder thereof). In addition, in the event of any distribution (or deemed distribution) of rights or warrants, or any Trigger Event or other event (of the type described in the preceding sentence) with respect thereto, that resulted in an adjustment to the Exercise Price under this Section 12(a)(iv), (1) in the case of any such rights or warrants that shall all have been redeemed or repurchased without exercise by any holders thereof, the Exercise Price shall be readjusted upon such final redemption or repurchase to give effect to such distribution or Trigger Event, as the case may be, as though it were a cash distribution, equal to the per share redemption or repurchase price received by a holder of Common Stock with respect to such rights or warrants (assuming such holder had retained such rights or warrants), made to all holders of Common Stock as of the date of such redemption or repurchase, and (2) in the case of such rights or warrants all of which shall have expired or been terminated without exercise, the Exercise Price shall be readjusted as if such rights and warrants had never been issued.

 

 

 

 

 

 

 

For purposes of this Section 12(a)(iv) and Sections 12(a)(i) and (iii), any dividend or distribution to which this Section 12(a)(iv) is applicable that also includes shares of Common Stock, or rights or warrants to subscribe

10


 

 

 

 

for or purchase shares of Common Stock to which Section 12(a)(i) or 12(a)(iii) applies (or both), shall be deemed instead to be (1) a dividend or distribution of the evidences of indebtedness, assets, shares of capital stock, rights or warrants other than such shares of Common Stock or rights or warrants to which Section 12(a)(iii) applies (and any Exercise Price reduction required by this Section 12(a)(iv) with respect to such dividend or distribution shall then be made) immediately followed by (2) a dividend or distribution of such shares of Common Stock or such rights or warrants (and any further Exercise Price reduction required by Sections 12(a)(i) and (iii) with respect to such dividend or distribution shall then be made, except (A) the Record Date of such dividend or distribution shall be substituted as “the date fixed for the determination of shareholders entitled to receive such dividend or other distribution”, “Record Date fixed for such determination” and “Record Date” within the meaning of Section 12(a)(i) and as “the Record Date fixed for the determination of the shareholders entitled to receive such rights or warrants” and “such Record Date” within the meaning of Section 12(a)(iii) and (B) any shares of Common Stock included in such dividend or distribution shall not be deemed “outstanding at the close of business on the Record Date fixed for such determination” within the meaning of Section 12(a)(i)).

 

 

 

 

 

(v)

 

In case the Company shall, by dividend or otherwise, distribute to all holders of its Common Stock cash (excluding any cash that is distributed upon a merger or consolidation to which Section 12(f) applies or as part of a distribution referred to in any other paragraph of this Section 12(a)), then immediately after the close of business on the “ex” date for the distribution, the Exercise Price shall be reduced so that the same shall equal the price determined by multiplying the Exercise Price in effect immediately prior to the close of business on such “ex” date by a fraction (A) the numerator of which shall be equal to the Current Market Price on the “ex” date less an amount equal to the quotient of (x) the aggregate amount of cash so distributed and (y) the number of shares of Common Stock outstanding on the “ex” date and (B) the denominator of which shall be equal to the Current Market Price on the “ex” date; provided, however, that in the event the portion of the cash so distributed applicable to one share of Common Stock is equal to or greater than the Current Market Price of the Common Stock on the “ex” date, in lieu of the foregoing adjustment, adequate provision shall be made so that each Warrant holder shall have the right to receive upon exercise of a Warrant (or any portion thereof) the amount of cash such Warrant holder would have received had such holder exercised such Warrant (or portion thereof) immediately prior to such Record Date. In the event that such dividend or distribution is not so paid or made, the Exercise Price shall again be adjusted to be the Exercise Price that would then be in effect if such dividend or distribution had not been declared.

11


 

 

 

 

The Company may make such reductions in the Exercise Price, in addition to those required by Sections 12(a)(i), (ii), (iii) or (iv) as the Company’s Board of Directors considers to be advisable to avoid or diminish any income tax to holders of Common Stock or rights to purchase Common Stock resulting from any dividend or distribution of stock (or rights to acquire stock) or from any event treated as such for income tax purposes.

 

 

 

 

 

(vi)

 

For purposes of Section 12, the following terms shall have the meaning indicated:

 

(1)

 

Board Resolution” shall mean a copy of the resolution certified by Secretary or Assistant Secretary of the Company to have been duly adopted by the Board of Directors of the Company, and to be in full force and effect on the date of such certification and delivered to the Warrant Agent.

 

 

 

 

 

(2)

 

Closing Price” with respect to any securities on any day shall mean the closing sale price regular way on such day or, in case no such sale takes place on such day, the average of the reported closing bid and asked prices, regular way, in each case on the NASDAQ Global Select Market or New York Stock Exchange, as applicable, or, if such security is not listed or admitted to trading on such National Market or Exchange, on the principal national security exchange or quotation system on which such security is quoted or listed or admitted to trading, or, if not quoted or listed or admitted to trading on any national securities exchange or quotation system, the average of the closing bid and asked prices of such security on the over-the-counter market on the day in question as reported by the National Quotation Bureau Incorporated, or a similar generally accepted reporting service, or if not so available, in such manner as furnished by any NASDAQ Global Select Market member firm selected from time to time by the Company’s Board of Directors for that purpose, or a price determined in good faith by the Company’s Board of Directors, whose determination shall be conclusive and described in a Board Resolution.

 

 

 

 

 

(3)

 

Current Market Price” shall mean the average of the daily Closing Prices per share of Common Stock for the 10 consecutive Trading Days immediately prior to the date in question; provided, however, that (1) if the “ex” date (as hereinafter defined) for any event (other than the issuance or distribution requiring such computation) that also requires an adjustment to the Exercise Price pursuant to Section 12(a)(i), (ii), (iii) or (iv) occurs during such 10 consecutive Trading Days, the Closing Price for each Trading Day prior to the “ex” date for such other event shall be adjusted by multiplying such Closing Price by the same fraction by which the Exercise

12


 

 

 

 

Price is so required to be adjusted as a result of such other event, (2) if the “ex” date for any event (other than the issuance or distribution requiring such computation) that also requires an adjustment to the Exercise Price pursuant to Section 12(a)(i), (ii), (iii) or (iv) occurs on or after the “ex” date for the issuance or distribution for which such computation is being made and prior to the day in question, the Closing Price for each Trading Day on and after the “ex” date for such other event shall be adjusted by multiplying such Closing Price by the reciprocal of the fraction by which the Exercise Price is so required to be adjusted as a result of such other event, and (3) if the “ex” date for the issuance or distribution requiring such computation is prior to the day in question, after taking into account any adjustment required pursuant to clause (1) or (2) of this proviso, the Closing Price for each Trading Day on or after such “ex” date shall be adjusted by adding thereto the amount of any cash and the fair market value (as determined in good faith by the Company’s Board of Directors in a manner consistent with any determination of such value for purposes of Section 12(a)(iv), whose determination shall be conclusive and described in a Board Resolution) of the evidences of indebtedness, shares of capital stock or assets being distributed applicable to one share of Common Stock as of the close of business on the day before such “ex” date. For purposes of this section, the term “ex” date, (1) when used with respect to any issuance or distribution, means the first date on which the Common Stock trades regular way on the relevant exchange or in the relevant market from which the Closing Price was obtained without the right to receive such issuance or distribution and (2) when used with respect to any subdivision or combination of shares of Common Stock, means the first date on which the Common Stock trades regular way on such exchange or in such market after the time at which such subdivision or combination becomes effective.

 

 

 

 

 

 

 

Notwithstanding the foregoing, whenever successive adjustments to the Exercise Price are called for pursuant to this Section 12(a), such adjustments shall be made to the Current Market Price as may be necessary or appropriate to effectuate the intent of this Section 12(a) and to avoid unjust or inequitable results as determined in good faith by the Company’s Board of Directors.

 

 

 

 

 

(4)

 

fair market value” shall mean the amount which a willing buyer would pay a willing seller in an arm’s length transaction.

 

 

 

 

 

(5)

 

Record Date” shall mean, with respect to any dividend, distribution or other transaction or event in which the holders of Common Stock have the right to receive any cash, securities or

13


 

 

 

 

other property or in which the Common Stock (or other applicable security) is exchanged for or converted into any combination of cash, securities or other property, the date fixed for determination of shareholders entitled to receive such cash, securities or other property (whether such date is fixed by the Company’s Board of Directors or by statute, contract or otherwise).

 

 

 

 

 

(6)

 

Trading Day” shall mean (x) if the applicable security is listed or admitted for trading on the NASDAQ Global Select Market or another national security market or exchange, a day on which the NASDAQ Global Select Market or such other national security market or exchange, as applicable, is open for business or (y) if the applicable security is quoted on the NASDAQ Global Select Market, a day on which trades may be made thereon or (z) if the applicable security is not so listed, admitted for trading or quoted, a Business Day.

 

(b)

 

Exercise Price Reductions. To the extent permitted by applicable law, the Company from time to time may reduce the Exercise Price by any amount for any period of time if the period is at least 20 days, the reduction is irrevocable during the period and the Company’s Board of Directors shall have made a determination that such reduction would be in the best interests of the Company, which determination shall be conclusive and described in a Board Resolution. Whenever the Exercise Price is reduced pursuant to the preceding sentence, the Company shall mail to each Warrant holder at its last address appearing on the Warrant register a notice of the reduction at least five days prior to the date the reduced Exercise Price takes effect, and such notice shall state the reduced Exercise Price and the period during which it will be in effect.

 

 

(c)

 

De Minimus Exception. No adjustment in the Exercise Price shall be required under this Section 12 unless such adjustment would require an increase or decrease of at least 1% in such price; provided, however, that any adjustments which by reason of this Section 12(c) are not required to be made shall be carried forward and taken into account in any subsequent adjustment. All calculations under this Section 12 shall be made by the Company and shall be made to the nearest cent or to the nearest one hundredth of a share, as the case may be.

 

 

 

 

 

 

 

No adjustment need be made for a change in the par value or no par value of the Common Stock.

 

 

 

 

 

 

 

No adjustment need be made under this Section 12 if all Warrant holders participate in such transaction on a basis and with notice that the Company’s Board of Directors determines to be fair and appropriate in light of the basis and notice on which holders of the Common Stock participate in the transaction.

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No adjustment need be made for rights to purchase the Common Stock purchased at the fair market value thereof (determined by the Company’s Board of Directors) pursuant to any of the Company’s plans for reinvestment of dividends or interest.

 

 

 

 

 

 

 

Notwithstanding any other provision of this Section 12, no adjustment to the Exercise Price shall result in zero or in a negative number or shall reduce the Exercise Price below the then par value per share of the Common Stock, and any such purported adjustment shall instead reduce the Exercise Price to such par value (unless the Common Stock then has no par value in which case such purported adjustment shall instead reduce the Exercise Price to $0.001 per share).

 

 

 

 

 

 

 

To the extent the Warrants become exercisable for cash, no adjustment need be made thereafter as to the cash. Interest will not accrue on the cash.

 

 

 

 

 

(d)

 

Deferral of Issuable Common Stock or Cash in Lieu of any Fraction. In any case in which this Section 12 provides that an adjustment shall become effective immediately after a Record Date for an event, the Company may defer until the occurrence of such event (i) issuing to the holder of any Warrant exercised after such Record Date and before the occurrence of such event the additional shares of Common Stock issuable upon such exercise by reason of the adjustment required by such event over and above the Common Stock issuable upon such exercise before giving effect to such adjustment and (ii) paying to such holder any amount in cash in lieu of any fraction pursuant to Section 14.

 

 

 

 

 

(e)

 

Shares Held in Treasury. For purposes of this Section 12, the number of shares of Common Stock at any time outstanding shall not include shares held in the treasury of the Company but shall include shares issuable in respect of scrip certificates issued in lieu of fractions of shares of Common Stock. The Company will not pay any dividend or make any distribution on shares of Common Stock held in the treasury of the Company.

 

 

 

 

 

(f)

 

Effect of Reclassification, Consolidation, Merger or Sale of the Company. If any of the following events occur, namely (i) any reclassification or change of the outstanding shares of Common Stock (other than a change in par value, or from par value to no par value, or from no par value to par value, or as a result of a subdivision or combination), (ii) any consolidation, merger or combination of the Company with another person as a result of which holders of Common Stock shall be entitled to receive stock, securities or other property or assets (including cash) with respect to or in exchange for such Common Stock (other than as a result of a change in name, a change in par value or a change in the jurisdiction of incorporation), (iii) any statutory exchange as a result of which holders of Common Stock generally shall be entitled to receive stock, securities or other property or assets (including cash) with respect to or in exchange for such Common Stock (such transaction, a “Statutory Exchange”), or (iv) any sale or conveyance of the properties and assets of the Company as, or substantially as, an entirety to any other person as a result of which holders of Common Stock shall be entitled to receive stock, securities or other property or assets (including cash)

15


 

 

 

 

with respect to or in exchange for such Common Stock (each a “Fundamental Transaction”), then the Company or the successor or purchasing person, as the case may be, shall execute with the Warrant Agent (acting at the Company’s written request and upon receipt of an officers, certificate of the Company certifying that such supplemental warrant agreement is authorized by and complies with the terms of this Warrant Agreement) a supplemental warrant agreement providing that such Warrant shall be exercisable for the kind and amount of shares of stock and other securities or property or assets (including cash) receivable upon such Fundamental Transaction by a holder of a number of shares of Common Stock issuable upon exercise of such Warrants (assuming, for such purposes, a sufficient number of authorized shares of Common Stock available to exercise all such Warrants) immediately prior to such Fundamental Transaction, provided that, such holder of Common Stock did not exercise its rights of election, if any, that holders of Common Stock who were entitled to vote or consent to such transaction had as to the kind or amount of securities, cash or other property receivable upon such Fundamental Transaction (provided that, if the kind or amount of securities, cash or other property receivable upon such Fundamental Transaction is not the same for each share of Common Stock in respect of which such rights of election shall not have been exercised (“non-electing share”), then for the purposes of this Section 12(f) the kind and amount of securities, cash or other property receivable upon such Fundamental Transaction for each non-electing share shall be deemed to be the kind and amount so receivable per share by a plurality of the non-electing shares). Such supplemental warrant agreement shall provide for adjustments which shall be as nearly equivalent as may be practicable to the adjustments provided in this Section 12.

 

 

 

 

 

 

 

If, in the case of any such Fundamental Transaction, the stock or other securities and assets receivable thereupon by a holder of shares of Common Stock include shares of stock or other securities and assets of a person other than the successor or purchasing person, as the case may be, in Fundamental Transaction, then such supplemental warrant agreement shall also be executed by such other person and shall contain such additional provisions to protect the interests of the holders of the Warrants as the Company’s Board of Directors shall reasonably consider necessary by reason of the foregoing.

 

 

 

 

 

 

 

The Company shall cause notice of the execution of such supplemental warrant agreement to be mailed to each Warrant holder, at its address appearing on the Warrant register, within 20 days after execution thereof. Failure to deliver such notice shall not affect the legality or validity of such supplemental warrant agreement.

 

 

 

 

 

 

 

The above provisions of this Section 12(f) shall similarly apply to successive Fundamental Transactions.

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(g)

 

Notice of Adjustment.

 

 

 

 

 

 

 

Whenever the Exercise Price is adjusted, the Company shall provide the notices required by Section 15.

 

 

 

 

 

(h)

 

The Company Determination Final; Warrant Agent Disclaimer.

 

 

 

 

 

 

 

Any determination that the Company or the Company’s Board of Directors must make pursuant to this Section 12 is (absent manifest error) conclusive if such determination is made in good faith.

 

 

 

 

 

 

 

The Warrant Agent has no duty to determine when an adjustment under this Section 12 should be made (if at all), how it should be made or what it should be. The Warrant Agent has no duty to determine whether any provisions of a supplemental warrant agreement under Section 12(f) are correct. The Warrant Agent makes no representation as to the validity or value of any securities or assets issued upon exercise of Warrants. The Warrant Agent shall not be responsible for the Company’s failure to comply with this Section 12. The Warrant Agent shall not be deemed to have knowledge of any adjustment under this Section 12 until it has received notice thereof pursuant to Section 15.

 

 

 

 

 

(i)

 

When Issuance or Payment May Be Deferred.

 

 

 

 

 

 

 

In any case in which this Section 12 shall require that an adjustment in the Exercise Price be made effective as of a Record Date for a specified event, the Company may elect to defer until the occurrence of such event (i) issuing to the holder of any Warrant exercised after such Record Date the shares of the Common Stock and other capital stock of the Company, if any, issuable upon such exercise over and above the shares of the Common Stock and other capital stock of the Company, if any, issuable upon such exercise on the basis of the Exercise Price and (ii) paying to such holder any amount in cash in lieu of a fractional share pursuant to Section 14; provided, however, that the Company shall deliver to such holder a due bill or other appropriate instrument evidencing such holder’s right to receive such additional shares of the Common Stock, other capital stock and cash (if any) upon the occurrence of the event requiring such adjustment.

 

 

 

 

 

(j)

 

Adjustment in Number of Shares.

 

 

 

 

 

 

 

Upon each adjustment of the Exercise Price pursuant to this Section 12, each Warrant outstanding prior to the making of the adjustment in the Exercise Price shall thereafter evidence the right to receive upon payment of the adjusted aggregate Exercise Price that number of shares of the Common Stock (calculated to the nearest hundredth) obtained from the following formula:

17


 

 

 

 

 

 

 where:

 

N’ =

 

the adjusted number of shares of the Common Stock issuable upon exercise of a Warrant by payment of the adjusted aggregate Exercise Price.

 

 

 

 

 

N =

 

the number of shares of the Common Stock previously issuable upon exercise of a Warrant by payment of the aggregate Exercise Price prior to adjustment.

 

 

 

 

 

E’ =

 

the adjusted Exercise Price.

 

 

 

 

 

E  =

 

the Exercise Price prior to adjustment.

 

 

(k)

 

Form of Warrant Certificate.

 

 

 

 

 

 

 

The Company may, but shall not be required to, issue new certificates or make a notation on any outstanding certificates to reflect any adjustment under this Section 12. Irrespective of any adjustments in the Exercise Price or the number or kind of shares purchasable upon the exercise of the Warrants, Warrants theretofore or thereafter issued may continue to express the same price and number and kind of shares as are stated in the Warrants initially issuable pursuant to this Warrant Agreement

 

 

 

 

 

(l)

 

Mandatory Exercise of Warrants.

 

 

 

 

 

 

 

If and only if the Common Stock has a Closing Price of at least 150% of the Exercise Price (as adjusted from time to time) for 30 consecutive Trading Days ending on the Trading Day on or after December 21, 2007, the Company shall have the right, at its option, to cause all of the Warrants to be exercised in accordance with Section 7 by delivering to the holders of Warrants a written notice of its election to cause all of the Warrants to be exercised pursuant to this Section 12(l), which notice shall be not less than thirty (30) days nor more than sixty (60) days prior to the effectiveness of the date upon which such exercise shall become effective (the “Forced Exercise Date”). On the Forced Exercise Date, the Company shall deliver to the holders of Warrants a number of shares of Common Stock equal to the “Spread” as determined on the Forced Exercise Date; provided, however, that the Company may not cause such exercise of the Warrants if at the time of such exercise the Closing Price is not at least 150% of the Exercise Price (as adjusted from time to time) for 30 consecutive Trading Days. Notwithstanding anything contained herein to the contrary, the Company may not cause any or all of the Warrants to be exercised pursuant to the provisions of this Section 12(l) at any time that the registration statement to be filed pursuant to the Registration Rights Agreement is not effective.

     SECTION 13. Priority Adjustments, Further Actions. (a) If any single action would require adjustment of the Exercise Price pursuant to more than one subsection of Section 12,

18


 

only one adjustment shall be made and such adjustment shall be the amount of adjustment that has the highest absolute value.

 

(b)

 

The Company will not, by amendment of its charter or through any Fundamental Transaction or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of the Warrants, but will at all times in good faith assist in the carrying out of all such terms. Without limiting the generality of the foregoing, the Company (i) will take all such action as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable shares of the Common Stock on the exercise of the Warrants from time to time outstanding and (ii) will not take any action which results in any adjustment of the Exercise Price if the total number of shares of the Common Stock issuable after the action upon the exercise of all of the Warrants would exceed the total number of shares of the Common Stock then authorized by the Company’s charter and available for the purposes of issue upon such exercise. A Fundamental Transaction involving the Company covered by Section 12(f) shall not be prohibited by or require any adjustment under this Section 13.

     SECTION 14. Fractional Interests. The Company shall not be required to issue fractional shares of the Common Stock on the exercise of Warrants. If more than one Warrant shall be presented for exercise in full at the same time by the same holder, the number of full shares of the Common Stock which shall be issuable upon the exercise thereof shall be computed on the basis of the aggregate number of shares of the Common Stock purchasable on exercise of all of the Warrants so presented. If any fraction of a share of the Common Stock would, except for the provisions of this Section 14, be issuable on the exercise of any Warrants (or specified portion thereof), the Company shall notify the Warrant Agent in writing of the amount to be paid in lieu of the fraction of a share of the Common Stock and concurrently pay or provide to the Warrant Agent for repayment to the Warrant holder an amount in cash equal to the product of (i) such fraction of a Warrant Share and (ii) the excess of the current market price of a share of the Common Stock for the day the Warrant was presented for exercise over the Exercise Price.

     SECTION 15. Notices to Warrant Holders. Upon any adjustment of the Exercise Price pursuant to Section 12, the Company shall within 25 days thereafter (i) cause to be delivered to the Warrant Agent a certificate of a firm of independent public accountants selected by the Company’s Board of Directors or other knowledgeable expert selected by the Company’s Board of Directors setting forth the Exercise Price after such adjustment and setting forth in reasonable detail the method of calculation and the facts upon which such calculations are based and setting forth the number of shares of the Common Stock (or portion thereof) issuable after such adjustment in the Exercise Price, upon exercise of a Warrant and payment of the adjusted aggregate Exercise Price, which certificate shall be conclusive evidence of the correctness of the matters set forth therein and (ii) cause to be given to each of the registered holders of the Warrant Certificates at such registered holder’s address appearing on the Warrant register written notice of such adjustments by first-class mail, postage prepaid. Where appropriate, such notice may be given in advance and included as a part of the notice required to be mailed under the other provisions of this Section 15.

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     In case:

 

(a)

 

the Company shall authorize the issuance to all holders of shares of the Common Stock of options, warrants or other rights (howsoever classified) to subscribe for or purchase shares of the Common Stock or of any other subscription rights or warrants; or

 

 

 

 

 

(b)

 

the Company shall authorize the distribution to all holders of shares of the Common Stock of evidences of its indebtedness or assets (other than cash dividends or cash distributions payable out of consolidated earnings or earned surplus or dividends payable in shares of the Common Stock or distributions referred to in Section 12(a)); or

 

 

 

 

 

(c)

 

of any Fundamental Transaction or a tender offer or exchange offer for shares of the Common Stock; or

 

 

 

 

 

(d)

 

of the voluntary or involuntary dissolution, liquidation or winding up of the Company; or

 

 

 

 

 

(e)

 

the Company proposes to take any action (other than actions of the character described in Section 12(a)) which would require an adjustment of the Exercise Price pursuant to Section 12;

 

 

 

 

 

 

 

then, in each case, the Company shall cause to be delivered to the Warrant Agent and shall cause to be given to each of the registered holders of the Warrant Certificates at its address appearing on the Warrant register, at least 20 days (or 10 days in any case specified in clauses (a) or (b) above) prior to the applicable record date hereinafter specified, or promptly in the case of events for which there is no record date, by first-class mail, postage prepaid, a written notice stating (i) the date as of which the holders of record of shares of the Common Stock to be entitled to receive any such rights, options, warrants or distribution are to be determined or (ii) the initial expiration date set forth in any tender offer or exchange offer for shares of the Common Stock or (iii) the date on which any such consolidation, merger, conveyance, transfer, dissolution, liquidation or winding up is expected to become effective or consummated, and the date as of which it is expected that holders of record of shares of the Common Stock shall be entitled to exchange such shares for securities or other property, if any, deliverable upon such reclassification, consolidation, merger, conveyance, transfer, dissolution, liquidation or winding up. The failure to give the notice required by this Section 15 or any defect therein shall not affect the legality or validity of any distribution, right, option, warrant, consolidation, merger, conveyance, transfer, lease, dissolution, liquidation or winding up, or the vote upon any action.

     Nothing contained in this Warrant Agreement or in any of the Warrant Certificates shall be construed as conferring upon the holders thereof the right to vote or to consent or to receive

20


 

notice as stockholders in respect of the meetings of stockholders or the election of Directors of the Company or any other matter, or any rights whatsoever as stockholders of the Company.

     SECTION 16. Merger, Consolidation or Change of Name of Warrant Agent. Any person into which the Warrant Agent may be merged or converted or with which it may be consolidated, or any person resulting from any merger, conversion or consolidation to which the Warrant Agent shall be a party, or any person succeeding to all or substantially all of the corporate trust or agency business of the Warrant Agent, shall be the successor to the Warrant Agent hereunder without the execution or filing of any paper or any further act on the part of any of the parties hereto. If, at the time such successor to the Warrant Agent by merger or consolidation succeeds to the agency created by this Warrant Agreement, any of the Warrant Certificates shall have been countersigned but not delivered, any such successor to the Warrant Agent may adopt the countersignature of the original Warrant Agent; and if, at that time any of the Warrant Certificates shall not have been countersigned, any such successor to the Warrant Agent may countersign such Warrant Certificates either in the name of the predecessor Warrant Agent or in the name of the successor to the Warrant Agent; and in all such cases such Warrant Certificates shall have the full force and effect provided in the Warrant Certificates in this Warrant Agreement.

     SECTION 17. Warrant Agent. The Warrant Agent undertakes only the duties and obligations imposed by this Warrant Agreement upon the following terms and conditions, by all of which the Company and the holders of Warrants, by their acceptance thereof, shall be bound:

 

(a)

 

The statements contained herein and in the Warrant Certificates shall be taken as statements of the Company. The Warrant Agent assumes no responsibility for the correctness of any of the same except such as describe the Warrant Agent or action taken or to be taken by it. The Warrant Agent assumes no responsibility with respect to the distribution of the Warrant Certificates except as herein otherwise provided.

 

 

 

 

 

(b)

 

Whenever in the performance of its duties under this Warrant Agreement the Warrant Agent deems it necessary or desirable that any fact or matter be proved or established by the Company prior to taking, suffering or omitting to take any action hereunder, such fact or matter may be deemed to be conclusively proved and established by a certificate signed by the Company’s Chairman of the Board, Chief Executive Officer, President or any Vice President and delivered to the Warrant Agent; and in reliance upon such certificate, the Warrant Agent shall take any action or omit to take any action authorized under the provisions of this Warrant Agreement. In the event the Warrant Agent reasonably believes any ambiguity or uncertainty exists hereunder or in any notice, instruction, direction, request or other communication, paper or document received by the Warrant Agent hereunder, or is uncertain of any action to take hereunder, the Warrant Agent, may, following prior written notice to the Company, refrain from taking any action, and shall be fully protected and shall not be liable in any way to the Company or any other person or entity for refraining from taking such action, unless the Warrant Agent receives written instructions signed by the Company

21


 

 

 

 

which eliminates such ambiguity or uncertainty to the reasonable satisfaction of the Warrant Agent.

 

 

 

 

 

(c)

 

The Warrant Agent shall not be responsible for any failure of the Company to comply with any of the covenants contained in this Warrant Agreement (including, without limitation, any adjustment of Exercise Price pursuant to Section 12, the authorization or reservation of shares of Common Stock pursuant to Section 10 or the due execution and delivery by the Company of this Warrant Agreement or any Warrant Certificate) or in the Warrant Certificates to be complied with by the Company.

 

 

 

 

 

(d)

 

The Warrant Agent may consult at any time with counsel satisfactory to it (who may be counsel for the Company or an employee of the Warrant Agent) and the Warrant Agent shall incur no liability or responsibility to the Company or to any holder of any Warrant Certificate in respect of any action taken, suffered or omitted by it hereunder in good faith and in accordance with the opinion or the advice of such counsel.

 

 

 

 

 

(e)

 

The Warrant Agent shall incur no liability or responsibility to the Company or to any holder of any Warrant Certificate for any action taken in reliance on any Warrant Certificate, certificate of shares, notice, resolution, waiver, consent, order, certificate, or other paper, document or instrument believed by it to be genuine and to have been signed, sent or presented by the proper party or parties. The Warrant Agent shall not be bound by any notice or demand, or any waiver, modification, termination or revision of this Warrant Agreement or any of the terms hereof, unless evidenced by a writing between the Company and the Warrant Agent. The Warrant Agent shall not be required to take instructions or directions except those given in accordance with this Warrant Agreement.

 

 

 

 

 

(f)

 

The Warrant Agent may execute and exercise any of the rights or powers hereby vested in it or perform any duty hereunder either itself or by or through its attorneys, accountants, agents or other experts, and the Warrant Agent will not be answerable or accountable for any act, default, neglect or unintentional misconduct of any such attorneys or agents or for any loss to the Company or the holders of the Warrants resulting from any such act, default, neglect or unintentional misconduct, absent gross negligence, willful misconduct or bad faith (as each is determined by a final non-appealable order of a court of competent jurisdiction) in the selection and continued employment thereof.

 

 

 

 

 

(g)

 

The Warrant Agent will not be under any duty or responsibility to ensure compliance with any applicable federal or state securities laws in connection with the issuance, transfer or exchange of the Warrants and/or Warrant Certificates.

 

 

 

 

 

(h)

 

The Warrant Agent shall not incur any liability for not performing any act, duty, obligation or responsibility by reason of any occurrence beyond the control of the Warrant Agent (including without limitation any act or provision of any present or

22


 

 

 

 

future law or regulation or governmental authority, any act of God, war, civil disorder or failure of any means of communication).

 

 

 

 

 

(i)

 

The Company agrees to pay to the Warrant Agent reasonable compensation for all services rendered by the Warrant Agent in the execution of this Warrant Agreement, to reimburse the Warrant Agent for all expenses (including reasonable counsel fees), taxes (including withholding taxes) and governmental charges and other charges of any kind and nature actually incurred by the Warrant Agent in the execution, delivery and performance of its responsibilities under this Warrant Agreement and to indemnify the Warrant Agent and save it harmless against any and all liabilities, including judgments, costs and counsel fees, for anything done or omitted by the Warrant Agent in the execution, delivery and performance of its responsibilities under this Warrant Agreement except as a result of its gross negligence, bad faith or willful misconduct (as each is determined by a final non-appealable order of a court of competent jurisdiction).

 

 

 

 

 

(j)

 

The Warrant Agent shall be under no obligation to institute any action, suit or legal proceeding or to take any other action likely to involve expense unless the Company or one or more registered holders of Warrant Certificates shall furnish the Warrant Agent with reasonable security and indemnity for any costs and expenses which may be incurred.

 

 

 

 

 

(k)

 

Except as otherwise prohibited by applicable law, the Warrant Agent, and any stockholder, director, officer or employee of the Warrant Agent, may buy, sell or deal in any of the Warrants or other securities of the Company or become pecuniarily interested in any transaction in which the Company may be interested, or contract with or lend money to the Company or otherwise act as fully and freely as though it were not Warrant Agent under this Warrant Agreement. Nothing herein shall preclude the Warrant Agent from acting in any other capacity for the Company or for any other legal entity.

 

 

 

 

 

(l)

 

The Warrant Agent shall act hereunder solely as agent for the Company, and its duties shall be determined solely by the express provisions hereof. The Warrant Agent shall not be liable for anything which it may do or refrain from doing in connection with this Warrant Agreement, except for its own gross negligence, bad faith or willful misconduct (as each is determined by a final non-appealable order of a court of competent jurisdiction); provided that in no event shall the Warrant Agent be liable for special, indirect or consequential loss or damage of any kind whatsoever (including but not limited to lost profits), even if the Warrant Agent has been advised of the likelihood of such loss or damage and regardless of the form of action. This Warrant Agreement shall not be deemed to create a fiduciary relationship between the parties hereto or between the Warrant Agent and the holders of the Warrants under state or federal law.

 

 

 

 

 

(m)

 

The Warrant Agent shall not at any time be under any duty or responsibility to any holder of any Warrant Certificate to make or cause to be made any adjustment of the Exercise Price or the number of the shares of Common Stock or other

23


 

 

 

 

securities or property deliverable as provided in this Warrant Agreement, or to determine whether any facts exist which may require any of such adjustments, or with respect to the nature or extent of any such adjustments, when made, or with respect to the method employed in making the same. The Warrant Agent shall not be accountable with respect to the validity or value or the kind or amount of any shares of the Common Stock or of any securities or property which may at any time be issued or delivered upon the exercise of any Warrant or with respect to whether any such shares of the Common Stock or other securities will when issued be validly issued and fully paid and nonassessable, and makes no representation with respect thereto. The Warrant Agent shall not be accountable with respect to the calculation of the “Spread” pursuant to Section 7.

 

 

 

 

 

(n)

 

All rights and obligations contained in this Section 17 and Section 18 shall survive the termination of this Warrant Agreement and the resignation or removal of the Warrant Agent.

 

 

 

 

 

(o)

 

The Warrant Agent shall never be required to use or advance its own funds or otherwise incur personal liability in the performance of any of its duties or the exercise of any of its rights and powers hereunder.

     SECTION 18. Expenses. All expenses incident to the Company’s performance of or compliance with this Warrant Agreement will be borne by the Company, including without limitation: (i) all expenses of printing Warrant Certificates; (ii) messenger and delivery services and telephone calls; (iii) all fees and disbursements of counsel for the Company; (iv) all fees and disbursements of independent certified public accountants or knowledgeable experts selected by the Company; and (v) the Company’s internal expenses (including, without limitation, all salaries and expenses of their officers and employees performing legal or accounting duties).

     SECTION 19. Change of Warrant Agent. If the Warrant Agent shall become incapable of acting as Warrant Agent or shall resign as provided below, the Company shall appoint a successor to such Warrant Agent. If the Company shall fail to make such appointment within a period of 30 days after it has been notified in writing of such resignation or incapacity by the Warrant Agent, then the registered holder of any Warrant Certificate may apply to any court of competent jurisdiction for the appointment of a successor to the Warrant Agent. Pending appointment of a successor to such Warrant Agent, either by the Company or by such a court, the duties of the Warrant Agent shall be carried out by the Company. The registered holders of a majority of the unexercised Warrants shall be entitled at any time to remove the Warrant Agent for cause and appoint a successor to such Warrant Agent; provided that the Warrant Agent so appointed shall be acceptable to the Company. After appointment, the successor to the Warrant Agent shall be vested with the same powers, rights, duties and responsibilities as if it had been originally named as Warrant Agent without further act or deed; but the former Warrant Agent shall deliver and transfer to the successor to the Warrant Agent any property at the time held by it hereunder and execute and deliver any further assurance, conveyance, act or deed necessary for the purpose. Failure to give any notice provided for in this Section 19, however, or any defect therein, shall not affect the legality or validity of the appointment of a successor to the Warrant Agent.

24


 

     The Warrant Agent may resign at any time and be discharged from the obligations hereby created by so notifying the Company in writing at least 30 days in advance of the proposed effective date of its resignation. If no successor Warrant Agent accepts the engagement hereunder by such time, the Company shall act as Warrant Agent.

     SECTION 20. Notices to the Company and Warrant Agent. Any notice or demand authorized or permitted by this Warrant Agreement to be given or made by the Warrant Agent or by the registered holder of any Warrant Certificate to or on the Company shall be sufficiently given or made when and if deposited in the mail, first class or registered, postage prepaid, addressed (until another address is filed in writing by the Company with the Warrant Agent), as follows:

RCN Corporation
196 Van Buren Street
Herndon, VA 20170
Facsimile No.: (703) 434-8461
Attention: Benjamin Preston, General Counsel

with a copy to (which shall not constitute notice to the Company):

Milbank, Tweed, Hadley & McCloy LLP
1 Chase Manhattan Plaza
New York, NY 10005
Facsimile: (212) 822-5899
Attention: Thomas Janson

Any notice pursuant to this Warrant Agreement to be given by the Company or by the registered holder(s) of any Warrant Certificate to the Warrant Agent shall be sufficiently given when and if deposited in the mail, first-class or registered, postage prepaid, addressed (until another address is filed in writing by the Warrant Agent with the Company) to the Warrant Agent at the Warrant Agent Office as follows:

HSBC Bank USA, National Association, as Warrant Agent
452 Fifth Avenue
New York, NY 10018
Facsimile: (212) 525-1300
Attention: Corporate Trust and Loan Agency

     SECTION 21. Supplements and Amendments. The Company and the Warrant Agent (acting at the Company’s written request and upon receipt of an officers, certificate of the Company certifying that such supplemental warrant agreement is authorized by and complies with the terms of this Warrant Agreement) may from time to time supplement or amend this Warrant Agreement without the approval of any holders of Warrant Certificates in order to cure any ambiguity or to correct or supplement any provision contained herein which may be defective or inconsistent with any other provision herein, or to make any other provisions in regard to matters or questions arising hereunder which the Company and the Warrant Agent may deem necessary or desirable and which shall not in any way adversely affect the interests of the

25


 

holders of Warrant Certificates. Any amendment or supplement to this Warrant Agreement that has an adverse effect on the interests of holders of the Warrants shall require the written consent of registered holders of a majority of the then outstanding Warrants (excluding Warrants held by the Company or any of its controlled affiliates). The consent of each holder of a Warrant affected shall be required for any amendment of this Warrant Agreement pursuant to which the Exercise Price would be increased or the number of shares of the Common Stock purchasable upon exercise of the Warrants would be decreased. The Warrant Agent shall have no duty to determine whether any such amendment would have an adverse effect on the interests of the holders of the Warrants, and may rely conclusively on the certificate of the Company delivered pursuant to this Section 21 as to whether or not the consent of the holders is required and whether or not any amendment would have an adverse effect. The Warrant Agent may, but shall not be obligated to, execute any amendment or supplement which adversely affects the rights or increases the duties or obligations of the Warrant Agent.

     SECTION 22. Successors. All the covenants and provisions of this Warrant Agreement by or for the benefit of the Company or the Warrant Agent shall bind and inure to the benefit of their respective successors and assigns hereunder.

     SECTION 23. Termination. This Warrant Agreement shall terminate at 5:00 p.m., New York City time, on the Expiration Date. Notwithstanding the foregoing, this Warrant Agreement will terminate on such earlier date on which all outstanding Warrants have been exercised. The provisions of Section 11 and 17 shall survive such termination.

     SECTION 24. Governing Law; Jurisdiction. This Warrant Agreement and each Warrant Certificate issued hereunder shall be deemed to be a contract made under the laws of the State of New York and for all purposes shall be governed by and construed in accordance with the internal laws of said State. The parties hereto irrevocably consent to the jurisdiction of the state and federal courts sitting in the City of New York in connection with any action, suit or proceeding arising out of or relating to this Warrant Agreement.

     SECTION 25. Benefits of this Warrant Agreement. Nothing in this Warrant Agreement shall be construed to give to any person other than the Company, the Warrant Agent and the registered holders of the Warrant Certificates any legal or equitable right, remedy or claim under this Warrant Agreement; but this Warrant Agreement shall be for the sole and exclusive benefit of the Company, the Warrant Agent and the registered holders of the Warrant Certificates.

     SECTION 26. Counterparts. This Warrant Agreement may be executed in any number of counterparts and each of such counterparts shall for all purposes be deemed to be an original, and all such counterparts shall together constitute but one and the same instrument.

     SECTION 27. Further Assurances. From time to time on and after the date hereof, the Company shall deliver or cause to be delivered to the Warrant Agent such further documents and instruments and shall do and cause to be done such further acts as the Warrant Agent shall reasonably request (it being understood that the Warrant Agent shall have no obligation to make such request) to carry out more effectively the provisions and purposes of this Warrant Agreement, to evidence compliance herewith or to assure itself that it is protected hereunder.

26


 

     SECTION 28. Entire Agreement. This Warrant Agreement and the Warrant Certificates constitute the entire agreement of the Company, the Warrant Agent and the registered holders of the Warrant Certificates with respect to the subject matter hereof and supersedes all prior agreements and undertakings, both written and oral, among the Company, the Warrant Agent and the registered holders of the Warrant Certificates with respect to the subject matter hereof.

27


 

     IN WITNESS WHEREOF, the parties hereto have caused this Warrant Agreement to be duly executed, as of the day and year first above written.

 

 

 

 

 

 

 

 

 

RCN CORPORATION

 

 

 

 

 

 

 

 

 

By:

 

 

 

 

 

 

 

 

 

 

 

 

 

Name:

 

 

 

 

 

 

 

 

 

 

 

 

 

Title:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

HSBC BANK USA, NATIONAL ASSOCIATION,

 

 

 

 

as Warrant Agent

 

 

 

 

 

 

 

 

 

 

 

By:

 

 

 

 

 

 

 

 

 

 

 

 

 

Name:

 

 

 

 

 

 

 

 

 

 

 

 

 

Title:

 

 

 

 

 

 

 

 

 

 

 

[Signature Page – Warrant Agreement]

 


 

Exhibit A

Form of Warrant Certificate

THIS WARRANT AND ANY SHARES OF COMMON STOCK ACQUIRED UPON THE EXERCISE OF THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAW. NEITHER THIS WARRANT, SUCH SECURITIES NOR ANY INTEREST THEREIN MAY BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED EXCEPT (A)(1) TO A PERSON WHO THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A UNDER THE SECURITIES ACT PURCHASING FOR ITS OWN ACCOUNT OF FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (2) TO AN INSTITUTION THAT IS AN ACCREDITED INVESTOR WITHIN THE MEANING OF RULE 501(a)(1), (2), (3) OR (7) OF REGULATION D UNDER THE SECURITIES ACT, (3) IN A TRANSACTION EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT PURSUANT TO RULE 144 THEREUNDER (IF AVAILABLE) OR (4) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, AND (B) IN ACCORDANCE WITH ALL APPLICABLE STATE SECURITIES LAWS OR AN EXEMPTION THEREFROM. WARRANTS AND THE SHARES OF COMMON STOCK RECEIVED ON EXERCISE OF A WARRANT MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED THEREBY.

[Face of Warrant Certificate]

EXERCISABLE ON OR AFTER THE DATE OF THIS WARRANT CERTIFICATE
AND PRIOR TO 5:00 P.M., NEW YORK CITY TIME, ON JUNE 21, 2012 AND ONLY IF
COUNTERSIGNED BY THE WARRANT AGENT

RCN CORPORATION
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE

No. NIW _____ CUSIP No. [ ]                      Warrants

WARRANTS

     This certifies that                                                             , or registered assigns, is the registered holder of                      warrants (the “Warrants”), to purchase shares of common stock, par value $0.01 per share (the “Common Stock”), of RCN Corporation, a Delaware corporation (the “Company”). Each Warrant entitles the holder upon exercise at any time on or after the date of this Warrant Certificate and prior to 5:00 p.m., New York City Time, on June 21, 2012 to receive from the Company its pro rata portion, as determined pursuant to the Warrant Agreement (as defined below), of fully paid and nonassessable shares of Common Stock for each Warrant at the initial exercise price (the “Exercise Price”) of $25.16 per share payable (i) in United States dollars or (ii) by certified or official bank check for United States Dollars made payable to the

A-1


 

order of “RCN Corporation.” In lieu of payment of the aggregate Exercise Price as aforesaid and subject to applicable law, the holder of a Warrant may request the payment by the Company of the “Spread”, which shall, subject to Section 14 of the Warrant Agreement, dated as of May 25,2007, by and between the Company and HSBC Bank USA, National Association, as Warrant Agent (the “Warrant Agreement”), be delivered by the Company by delivering to such Warrant holder a number of shares of Common Stock equal to (a)(i) the product of (x) the current market price per share of Common Stock (as of the date of receipt of the request by the Company), multiplied by (y) the number of shares of Common Stock underlying the Warrants being exercised, minus (ii) the product of (x) the Exercise Price, multiplied by (y) the number of shares of Common Stock underlying the Warrants being exercised, divided by (b) the current market price per share of Common Stock (as of the date of receipt of the request by the Company). The Exercise Price and number of shares of Common Stock issuable upon exercise of the Warrants are subject to adjustment upon the occurrence of certain events set forth in the Warrant Agreement. No Warrant may be exercised after 5:00 p.m., New York City Time, on June 21, 2012, and to the extent not exercised by such time such Warrants shall become void. This Warrant Certificate shall not be valid unless countersigned by the Warrant Agent, as such term is used in the Warrant Agreement. Reference is made to the further provisions of this Warrant Certificate set forth on the reverse hereof, which further provisions shall for all purposes have the same effect as though fully set forth at this place. This Warrant Certificate shall be governed and construed in accordance with the internal laws of the State of New York.

[Signature page follows]

A-2


 

     IN WITNESS WHEREOF, RCN Corporation has caused this Warrant Certificate to be signed by the undersigned President and the undersigned Secretary of the Company and has caused its corporate seal to be imprinted hereon.

Dated:

 

 

 

 

 

 

 

 

 

RCN CORPORATION

 

 

 

 

 

 

 

 

 

By:

 

 

 

 

 

 

 

 

 

 

 

 

 

Name:

 

 

 

 

 

 

Title:

 

 

 

 

 

 

 

 

 

 

 

 

 

By:

 

 

 

 

 

 

 

 

 

 

 

 

 

Name:

 

 

 

 

 

 

Title:

 

Secretary

 

 

 

 

 

 

 

 

Countersigned:            (seal)

 

 

 

 

 

HSBC Bank USA, National Association,

 

 

 

 

 

as Warrant Agent

 

 

 

 

 

By:

 

 

 

 

 

 

 

 

 

Name:

 

 

 

 

Title:

 

Secretary

 

 

A-3


 

[Reverse of Warrant Certificate]
RCN CORPORATION (WARRANT)

     By accepting a Warrant Certificate, each holder shall be bound by all of the terms and provisions of the Warrant Agreement (a copy of which is available on request to the Secretary of the Company) and any amendments thereto as fully and effectively as if such holder had signed the same.

     The Warrants evidenced by this Warrant Certificate are part of a duly authorized issue of Warrants by the Company expiring at 5:00 p.m., New York City Time, on June 21, 2012, entitling the holder upon proper exercise to receive shares of Common Stock and are issued or to be issued pursuant to the Warrant Agreement, which Warrant Agreement is hereby incorporated by reference in and made a part of this instrument and is hereby referred to for a description of the rights, limitation of rights, obligations, duties and immunities thereunder of the Warrant Agent, the Company and the holders (the words “holders” or “holder” meaning the registered holders or registered holder) of the Warrants.

     The holder of the Warrants evidenced by this Warrant Certificate may exercise them by surrendering this Warrant Certificate, with the form of election to purchase set forth below on this Warrant Certificate properly completed and executed, together with payment of the aggregate Exercise Price in accordance with the provisions set forth on the face of this Warrant Certificate. In the event that upon any exercise of Warrants evidenced hereby the number of Warrants exercised shall be less than the total number of Warrants evidenced hereby, there shall be issued to the holder hereof or its assignee a new Warrant Certificate evidencing the number of Warrants not exercised.

     The Warrant Agreement provides that upon the occurrence of certain events the Exercise Price and the number of shares of Common Stock issuable upon exercise of the Warrants evidenced by this Warrant Certificate, in each case, set forth on the face hereof may, subject to certain conditions, be adjusted. If the Exercise Price is adjusted, the Warrant Agreement provides that the number of shares of Common Stock issuable upon the exercise of each Warrant may be adjusted. No fractions of a share of Common Stock will be issued upon the exercise of any Warrant, but the Company will pay the cash value in lieu thereof determined as provided in the Warrant Agreement.

     Warrant Certificates, when surrendered at the Warrant Agent Office by the registered holder thereof in person or by legal representative or attorney duly authorized in writing, may be exchanged, in the manner and subject to the limitations provided in the Warrant Agreement, but without payment of any service charge, for another Warrant Certificate or Warrant Certificates of like tenor evidencing in the aggregate a like number of Warrants.

     Upon due presentation for registration of transfer of this Warrant Certificate at the Warrant Agent Office, a new Warrant Certificate or Warrant Certificates of like tenor and evidencing in the aggregate a like number of Warrants shall be issued to the transferee(s) in exchange for this Warrant Certificate, subject to the limitations provided in the Warrant Agreement, without charge except for any tax or other governmental charge imposed in connection therewith.

A-4


 

     The Company and the Warrant Agent may deem and treat the registered holder(s) hereof as the absolute owner(s) of this Warrant Certificate (notwithstanding any notation of ownership or other writing hereon made by anyone), for the purpose of any exercise hereof, of any distribution to the holder(s) hereof, and for all other purposes, and neither the Company nor the Warrant Agent shall be affected by any notice to the contrary. Neither the Warrants nor this Warrant Certificate entitles any holder hereof to any rights of a stockholder of the Company.

     The Warrant Agreement permits, with certain exceptions therein provided, the supplementing or amendment thereof at any time by the Company and the Warrant Agent with the written consent of registered holders of a majority of the then outstanding unexercised Warrants (excluding Warrants held by the Company or any of its controlled affiliates). Any such consent by or on behalf of a holder of a Warrant shall be conclusive and binding upon such holder and upon all future holders of this Warrant Certificate and any Warrant Certificate issued upon the registration of transfer thereof or in exchange thereof whether or not notation of such consent is made upon such Warrant Certificate or any other Warrant Certificate.

A-5


 

Form of Assignment

[Form of Assignment to be Executed if Holder Desires to Transfer Warrants Evidenced Hereby]

ASSIGNMENT

(To Be Executed by the Registered Holder in Order to Assign Warrants)

FOR VALUE RECEIVED the undersigned hereby sell(s), assign(s) and transfer(s) unto

 

PLEASE INSERT SOCIAL SECURITY
OR OTHER IDENTIFYING NUMBER OF ASSIGNEE

 

(PLEASE PRINT OR TYPE NAME AND ADDRESS,
INCLUDING POSTAL ZIP CODE OF ASSIGNEE)

of the Warrants represented by this Warrant Certificate, and hereby irrevocably constitutes and appoints

 

Attorney to transfer this Warrant Certificate on the books of the Company, with full power of substitution in the premises.

Dated                     ,                                                                   
     Signature(s)*

                                                                                                    
                                                                                                    

Security or Taxpayer Identification Number)

                                        
Signature(s) Guaranteed*

A-6


 

Form of Election to Purchase
[To Be Executed Upon Exercise Of Warrant]

NOTICE OF EXERCISE
(To Be Executed by the Registered Holder in Order to Exercise Warrants)

The undersigned hereby irrevocably elects to exercise the right, represented by this Warrant Certificate, to receive shares of the Common Stock and herewith tenders payment for such shares to the order of RCN Corporation in the amount of $25.16 per share of the Common Stock (subject to adjustment) in accordance with the terms of the Warrant Agreement, in cash or by certified or official bank check made payable to the order of the Company.

 

REQUEST FOR PAYMENT OF SPREAD

 

Please check if the undersigned, in lieu of tendering the cash payment, as aforesaid, hereby requests the payment of the “Spread” within the meaning of Section 7 of the Warrant Agreement.

 

 

The undersigned requests that a certificate for such shares be registered in the name of:

 

PLEASE INSERT SOCIAL SECURITY
OR OTHER IDENTIFYING NUMBER

and be delivered to:                                                                                 (PLEASE PRINT OR TYPE NAME AND ADDRESS, INCLUDING POSTAL ZIP CODE)

and, if such number of Warrants shall not be all the Warrants evidenced by this Warrant Certificate, that a new Warrant Certificate for the balance of such Warrants be registered in the name of, and delivered to, the Registered Holder at the address stated below:

 

(PLEASE PRINT OR TYPE ADDRESS)

Dated                     ,                                                                   
     Signature(s)*

 

 

Security or Taxpayer Identification Number)

                                        
Signature(s) Guaranteed*

A-7


 

 

*

 

THE SIGNATURE TO THE ASSIGNMENT OR THE SUBSCRIPTION FORM MUST CORRESPOND TO THE NAME AS WRITTEN UPON THE FACE OF THIS WARRANT CERTIFICATE IN EVERY PARTICULAR, WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATSOEVER, AND MUST BEAR A SIGNATURE GUARANTEED BY AN “ELIGIBLE GUARANTOR INSTITUTION” AS DEFINED IN RULE 17Ad-15(2) PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.