WARRANT TO PURCHASE SHARES OF COMMON STOCK OF FLOW INTERNATIONAL CORPORATION

Exhibit 4.4

 

T HIS W ARRANT AND THE C OMMON S TOCK ISSUABLE UPON EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE S ECURITIES A CT OF 1933, AS AMENDED , OR ANY STATE SECURITIES ACT , AND MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR QUALIFICATION OR AN EXEMPTION THEREFROM UNDER SAID ACT OR ANY SUCH S TATE SECURITIES LAWS WHICH MAY BE APPLICABLE .

 

 

W ARRANT TO P URCHASE

 

S HARES OF C OMMON S TOCK

 

OF

 

F LOW I NTERNATIONAL C ORPORATION

 

 

T ABLE OF C ONTENTS

 

 

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W ARRANT TO P URCHASE

 

S HARES OF C OMMON S TOCK

 

OF

 

F LOW I NTERNATIONAL C ORPORATION

 

T HIS IS TO C ERTIFY that, for value received and subject to the provisions hereinafter set forth,

 

 

or assigns,

 

is entitled to purchase from Flow International Corporation, a Washington corporation (the “Company”), at any time on or before 5:00 P.M. (Kent, Washington time) April 30, 2008 (the “Expiration Date”),                              shares of Common Stock, $0.01 par value, of the Company, subject to the terms, provisions and conditions hereinafter set forth at a price equal to $0.01 per share.

 

The aggregate price of the Common Stock shall be equal to the price per share multiplied by the number of shares initially purchasable hereunder. The aggregate price is herein sometimes referred to as the “Aggregate Warrant Price” and is not subject to adjustment. The price per share is, however, subject to adjustment as hereinafter provided (such price, or such price as last adjusted, as the case may be, being herein referred to as the “per share Warrant Price “). The said number of shares purchasable hereunder is likewise subject to adjustment as hereinafter provided.

 

The terms which are capitalized herein shall have the meanings specified in Section 13 hereof, unless the context shall otherwise require.

 

S ECTION  I.

E XERCISE OF W ARRANT .

 

Subject to the conditions hereinafter set forth, this Warrant may be exercised in whole at any time and in part from time to time prior to the Expiration Date. Any exercise of this Warrant, whether in whole or in part, shall be made by the surrender of this Warrant (with the subscription form at the end hereof duly completed and executed) at the principal office of the Company in Kent, Washington and upon payment of the Aggregate Warrant Price (or, if exercised in part, upon payment of a proportionate part thereof) for the shares so purchased,

 

which payment shall be made by the wire transfer or other delivery to the Company of one or more types of Permitted Consideration.

 

In the event that Notes shall be delivered to the Company as payment of all or any portion of the Warrant Price, the amount of the Warrant Price to be paid by means of such delivery shall equal the principal amount of Notes so delivered (or such lesser principal amount as shall be designated by the Holder hereof).

 

In the event that Notes shall be delivered to the Company as payment of all or any portion of the Warrant Price and the principal amount of said Notes shall be in excess of the amount of principal sought to be applied by the Holder of this Warrant in respect of the Warrant Price, said Holder shall provide the Company with notice to such effect and the Company shall issue to said Holder a new Note or Notes in an aggregate principal amount equal to such excess and dated as provided in Section 14.2 of the Note Purchase Agreement.

 

In the event that Warrants shall be delivered to the Company as payment of all or any portion of the Warrant Price, the amount of the Warrant Price deemed to be paid by means of such delivery shall equal (a) the aggregate number of shares of Underlying Common Stock related to any Warrants so delivered as payment of all or a portion of the purchase price, multiplied by (b) the result, not less than zero, equal to (i) the Current Market Price then in effect (with the date of the exercise of the Warrant being deemed to be the “Issuance Date” for purposes of making determinations under the definition of “Current Market Price”) minus (ii) the per share Warrant Price then in effect.

 

If this Warrant is exercised in respect of less than all of the shares of Common Stock at the time purchasable hereunder, the Holder hereof shall be entitled to receive a new Warrant covering the number of shares in respect of which this Warrant shall not have been exercised and setting forth the Aggregate Warrant Price applicable to such shares.

 

This Warrant and all rights and options hereunder shall expire on the Expiration Date, and shall be wholly null and void to the extent this Warrant is not exercised before it expires.

 

The Company shall pay all reasonable expenses, taxes and other charges payable in connection with the preparation, execution and delivery of stock certificates pursuant to this Section, regardless of the name or names in which such stock certificates shall be registered.

 

S ECTION  2.

R ESERVATION .

 

The Company will at all times prior to the Expiration Date reserve and keep available such number of authorized shares of its Common Stock, solely for the purpose of delivery upon the exercise of the rights represented by this Warrant, as may at any time be deliverable (based upon the number of shares of Common Stock outstanding at any such time) upon the exercise of this Warrant and such shares issuable upon the exercise of this Warrant shall at no time have an aggregate par value which is in excess of the Aggregate Warrant Price.

 

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S ECTION  3.

P ROTECTION AGAINST D ILUTION .

 

The per share Warrant Price and the number of shares deliverable hereunder shall be adjusted from time to time as hereinafter set forth:

 

Section 3.1 . Stock Dividends, Subdivisions and Combinations . In case after the date hereof the Company shall:

 

(a) take a record of the Holders of its Common Stock for the purpose of entitling them to receive a dividend declared to be payable in, or other declared distribution of, Common Stock, or

 

(b) subdivide its outstanding shares of Common Stock into a larger number of shares of Common Stock, or

 

(c) combine its outstanding shares of Common Stock into a smaller number of shares of Common Stock,

 

then the per share Warrant Price shall be adjusted to that price determined by multiplying the per share Warrant Price in effect immediately prior to such event by a fraction (i) the numerator of which shall be the total number of outstanding shares of Common Stock of the Company immediately prior to such event, and (ii) the denominator of which shall be the total number of outstanding shares of Common Stock of the Company immediately after such event.

 

Section 3.2. Issuance of Additional Shares of Common Stock. In case after the date hereof the Company shall (except as hereinafter provided) issue any Additional Shares of Common Stock for a consideration less than (a) the then effective per share Warrant Price or (b) the Current Market Price per share, then the per share Warrant Price upon each such issuance shall be adjusted to that price determined by multiplying the per share Warrant Price in effect immediately prior to such event by a fraction:

 

(i) if issued for a consideration per share less than the then effective per share Warrant Price:

 

(1) the numerator of which shall be the number of shares of Common Stock outstanding immediately prior to the issuance of such Additional Shares of Common Stock plus the number of shares of Common Stock which the aggregate consideration for the total number of such Additional Shares of Common Stock so issued would purchase at the then effective per share Warrant Price, and

 

(2) the denominator of which shall be the number of shares of Common Stock outstanding immediately prior to the issuance of such Additional Shares of Common Stock plus the number of such Additional Shares of Common Stock so issued.

 

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(ii) if issued for a consideration per share less than the Current Market Price per share of Common Stock:

 

(1) the numerator of which shall be the number of shares of Common Stock outstanding immediately prior to the issuance of such Additional Shares of Common Stock plus the number of full shares of Common Stock which the aggregate consideration for the total number of such Additional Shares of Common Stock so issued would purchase at the Current Market Price per share, and

 

(2) the denominator of which shall be the number of shares of Common Stock outstanding immediately prior to the issuance of such Additional Shares of Common Stock plus the number of such Additional Shares of Common Stock so issued.

 

If such Additional Shares of Common Stock shall be issued at a price per share less than both the then effective per share Warrant Price and the Current Market Price per share of Common Stock, the per share Warrant Price shall be adjusted in the manner which will result in the greatest reduction of the per share Warrant Price. The provisions of this Section 3.2 shall not apply to any Additional Shares of Common Stock which are distributed to holders of Common Stock as a stock dividend or subdivision, for which an adjustment is provided for under Section 3.1 . No adjustment of the per share Warrant Price shall be made under this Section 3.2 upon the issuance of any Additional Shares of Common Stock which are issued pursuant to the exercise of any warrants or other subscription or purchase rights or pursuant to the exercise of any conversion or exchange rights in any Convertible Securities, if any such adjustment shall previously have been made upon the issuance of such warrants or other rights or upon the issuance of such Convertible Securities (or upon the issuance of any warrants or other rights therefor) pursuant to Section 3.3 .

 

Section 3.3. Issuance of Warrants or Other Rights, Convertible Securities. In case the Company shall issue any warrants or other rights to subscribe for or purchase any Additional Shares of Common Stock or issue Convertible Securities and the consideration per share for which Additional Shares of Common Stock may at any time thereafter be issuable pursuant to such warrants or other rights or pursuant to the terms of such Convertible Securities shall be less than the Current Market Price per share and/or the effective per share Warrant Price, then the per share Warrant Price shall be adjusted as provided in Section 3.2 above on the basis that:

 

(a) the maximum number of Additional Shares of Common Stock issuable pursuant to all such warrants or other rights or necessary to effect the conversion or exchange of all such Convertible Securities shall be deemed to have been issued as of the earlier of: (i) the date on which the Company shall enter a firm contract or commitment for the issuance of such warrants, other rights or Convertible Securities or (ii) the date of actual issuance of such warrants, other rights or Convertible Securities, and

 

(b) the aggregate consideration for such maximum number of Additional Shares of Common Stock shall be deemed to be the minimum consideration received and

 

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receivable by the Company for the issuance of such Additional Shares of Common Stock pursuant to such warrants or other rights or pursuant to the terms of such Convertible Securities.

 

No adjustment of the per share Warrant Price shall be made under this Section 3.3 upon the issuance of any Convertible Securities which are issued pursuant to the exercise of any warrants or other subscription or purchase rights therefor, to the extent such adjustment shall previously have been made upon the issuance of such warrants or other rights pursuant to this Section 3.3.

 

Section 3.4. Other Provisions Applicable to Adjustments. The following provisions shall be applicable to the making of adjustments in the per share Warrant Price hereinbefore provided in this Section 3:

 

(a) Computation of Consideration. To the extent that any Additional Shares of Common Stock or any Convertible Securities or any warrants or other rights to subscribe for or purchase any Additional Shares of Common Stock or any Convertible Securities shall be issued for a cash consideration, the consideration received by the Company therefor shall be deemed to be the amount of the cash received by the Company therefor, or, if such Additional Shares of Common Stock or Convertible Securities or warrants or other rights are offered by the Company for subscription, the subscription price, or, if such Additional Shares of Common Stock or Convertible Securities or warrants or other rights are sold to underwriters or dealers for public offering without a subscription offering, the offering price, in any such case excluding any amounts paid or receivable for accrued interest or accrued dividends and without deduction of any compensation, discounts or expenses paid or incurred by the Company for and in the underwriting thereof, or otherwise in connection with the issue thereof. To the extent that such issuance shall be for a consideration other than cash, then, except as herein otherwise expressly provided, the amount of such consideration shall be deemed to be the fair value of such consideration at the time of such issuance as determined in good faith by the Board of Directors of the Company. The consideration for any Additional Shares of Common Stock issuable pursuant to any warrants or other rights to subscribe for or purchase the same shall be the consideration received by the Company for issuing such warrants or other rights plus the additional consideration payable to the Company upon the exercise of such warrants or other rights. The consideration for any Additional Shares of Common Stock issuable pursuant to the terms of any Convertible Securities shall be the consideration received by the Company for issuing any warrants or other rights to subscribe for or purchase such Convertible Securities plus the consideration paid or payable to the Company in respect of the subscription for or purchase of such Convertible Securities plus the additional consideration, if any, payable to the Company upon the exercise of the right of conversion or exchange of such Convertible Securities. In case of the issuance at any time of any Additional Shares of Common Stock or Convertible Securities in payment or satisfaction of any dividend upon any class of equity securities other than Common Stock, the Company shall be deemed to have received for such Additional Shares of Common Stock or Convertible Securities a consideration equal to the amount of such dividend so paid or satisfied.

 

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(b) Readjustment of Per Share Warrant Price. Upon expiration of the right of exercise, conversion or exchange of any Convertible Securities, or upon the expiration of any rights, options or warrants, or upon the termination of any firm contract or commitment for the issuance of such rights, options, warrants or Convertible Securities, or upon any increase in the minimum consideration receivable by the Company for the issuance of Additional Shares of Common Stock pursuant to such Convertible Securities, rights, options or warrants, if any such Convertible Securities shall not have been exercised, converted or exchanged, or if any such rights, options or warrants shall not have been exercised, the number of shares of Common Stock deemed to be issued and outstanding by reason of the fact that they were issuable upon exercise, conversion or exchange of any such Convertible Securities or upon exercise of any such rights, options or warrants shall no longer be computed as set forth above, and the per share Warrant Price shall forthwith be readjusted and thereafter be the price which it would have been (but reflecting any other adjustments in the per share Warrant Price made pursuant to the provisions of this Section 3 after the issuance of such Convertible Securities, rights, options or warrants) had the adjustment of the per share Warrant Price made upon the issuance or sale of such Convertible Securities or the issuance of such rights, options or warrants been made on the basis of the issuance only of the number of Additional Shares of Common Stock actually issued upon exercise, conversion or exchange of such Convertible Securities or upon the exercise of such rights, options or warrants, or upon the basis of such increased minimum consideration, as the case may be, and thereupon only the number of Additional Shares of Common Stock actually so issued plus the number thereof then issuable upon the basis of such increased minimum consideration shall be deemed to have been issued and only the consideration actually received plus such increased minimum consideration receivable by the Company (computed in accordance with Section 3.4(a) ) shall be deemed to have been received by the Company.

 

(c) No Rounding Per Share Warrant Price. Any determination of per share Warrant Price hereunder shall be expressed in United States Dollars, cents and portions of cents and shall not be subject to rounding.

 

Section 3.5. Extraordinary Dividends. If the Company declares or pays a dividend upon the Common Stock payable otherwise than in cash out of earnings or earned surplus (determined in accordance with GAAP consistently applied) except for a stock dividend payable in shares of Common Stock (a “Liquidating Dividend”) then the Company shall pay to the holder of this Warrant at the time of payment thereof the Liquidating Dividend or other dividend which would have been paid to the holder on the Underlying Shares had this Warrant been fully exercised immediately prior to the date on which a record is taken for such Liquidating Dividend or other dividend, or, if no record is taken, the date as of which the record holders of Common Stock entitled to such dividends arc to be determined.

 

Section 3.6. Adjustment of Number of Shares Purchasable. Upon each adjustment of the per share Warrant Price, the number of shares of Common Stock purchasable hereunder shall be adjusted by multiplying the number of shares of Common Stock purchasable hereunder immediately prior to such adjustment of the per share Warrant Price by a fraction, the numerator of which shall be the per share Warrant Price in effect immediately prior to such adjustment and

 

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the denominator of which shall be the per share Warrant Price in effect immediately following such adjustment.

 

Section 3.7 . Minimum Adjustment. Except as hereinafter provided, no adjustment of the per share Warrant Price hereunder shall be made if such adjustment results in a change of the per share Warrant Price then in effect of less than 1.00%. Any adjustment of less than 1.00% shall be carried forward and shall be made at the time of and together with any subsequent adjustment which, together with the adjustment or adjustments so carried forward, amounts to 1.00% or more of the per share Warrant Price then in effect. However, upon the exercise of this Warrant, the Company shall make all necessary adjustments not theretofore made to the per share Warrant Price up to and including the date upon which this Warrant is exercised.

 

Section 3.8. Notice of Adjustments. (a) Whenever the per share Warrant Price or number of shares deliverable upon exercise of this Warrant shall be adjusted pursuant to this Section 3, the Company shall promptly prepare a certificate signed by the President or a Vice President and by the Treasurer of the Company setting forth, in reasonable detail, the event requiring the adjustment, the amount of the adjustment, the method by which such adjustment was calculated (including a description of the basis on which the Board of Directors of the Company made any determination hereunder), and shall promptly cause copies of such certificate to be mailed in the manner provided in Section 17 hereof to the Holder of this Warrant.

 

(b) The adjustment set forth in the certificate furnished pursuant to Section 3.8(a) shall be final and binding unless, within 45 days after receipt thereof, the Majority Holders of the Warrants deliver to the Company a written notice stating that such adjustment may be subject to objection and, within 60 days after original receipt of such notice of adjustment, if the Majority Holders determine that such adjustment is objectionable, a written statement of objection which shall set forth a proposed alternative adjustment.

 

(i) In the event of any such statement of objection by said Majority Holders, the Company’s accountants and a firm of independent public accountants selected by said Majority Holders shall attempt to prepare a computation in which both accountants concur. Any such joint computation shall be set forth in a joint certificate to each Holder of the Warrants and the Company and shall be final and binding.

 

(ii) If the Company’s accountants and said Majority Holders’ accountants are unable to resolve their differences within 30 days after the receipt by the Company of said Majority Holders’ statement of objection, they shall submit the matter to a third firm of independent certified public accountants of nationally recognized standing agreed upon by said Holder and the Company or, if said Majority Holders and the Company are unable to agree within 10 days after the expiration of said 30 day period, to such firm designated by the then president of the state society of certified public accountants for the state in which the Company maintains its principal place of business. Such third firm of accountants shall thereupon compute the amount of the adjustment and, upon completion of such computation, shall transmit its certificate to each Holder of the Warrants and the Company setting forth such computations, which shall be final and binding.

 

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(iii) The fees and expenses of all accountants referred to in this Section 3.8(b) shall be borne by the Company in the event that the Holders’ proposed adjustment is closer to the final and binding adjustment under this Section 3.8 than the Company’s proposed adjustment, otherwise such fees and expenses shall be borne by the objecting Holders.

 

S ECTION  4.

M ERGERS , C ONSOLIDATIONS , S ALES .

 

Section 4.1. Mergers, Consolidations, Sales. In the case of any consolidation or merger of the Company with another entity (regardless of whether the Company is a surviving entity), or the sale of all or substantially all of its assets to another entity, or any reorganization, recapitalization or reclassification of the Common Stock or other equity securities of the Company, then, as a condition of such consolidation, merger, sale, reorganization, recapitalization or reclassification, lawful and adequate provision shall be made whereby the Holder of this Warrant shall thereafter have the right to receive upon the basis and upon the terms and conditions specified herein and in lieu of the shares of Common Stock immediately theretofore purchasable hereunder, such shares of stock, securities or assets (including, without limitation, cash) as may (by virtue of such consolidation, merger, sale, reorganization, recapitalization or reclassification) be issued or payable with respect to or in exchange for a number of outstanding shares of Common Stock equal to the number of shares of Common Stock immediately theretofore so purchasable hereunder had such consolidation, merger, sale, reorganization, recapitalization or reclassification not taken place, and in any such case, appropriate provisions shall be made with respect to the rights and interests of the Holder of this Warrant to the end that the provisions hereof (including, without limitation, provisions for adjustment of the per share Warrant Price) shall thereafter be applicable, as nearly as may be, in relation to any shares of stock, securities or assets thereafter deliverable upon exercise of this Warrant. The Company shall not effect any such consolidation, merger, sale, reorganization or reclassification, unless prior to or simultaneously with the consummation thereof, the successor entity (if other than the Company) resulting from such consolidation, merger, reorganization or reclassification or the entity purchasing such assets shall assume by written instrument executed and mailed or delivered to the Holder of this Warrant, the obligation to deliver to such Holder such shares of stock, securities or assets as, in accordance with the foregoing provisions, such Holder may be entitled to receive.

 

Section 4.2. Change of Control. (a) The provisions of Section 4.1 shall not apply to any consolidation, merger, sale, reorganization, recapitalization or reclassification, if all of the following conditions are met:

 

(i) the Company shall have complied with the terms of this Section 4.2;

 

(ii) following the consummation thereof, a Change of Control (as hereinafter defined) shall have occurred;

 

(iii) in connection with any such transaction, the holders of the Company’s Common Stock shall receive stock or other securities in the successor entity resulting

 

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from such transaction (the “Successor”), cash or other liquid assets (excluding stock or securities in any entity other than the Successor) in exchange for their Common Stock;

 

(iv) in any transaction in which the holders of the Company’s Common Stock receive stock or securities in the Successor in exchange for the Common Stock, either (A) such Successor is a corporation whose common stock is traded on a national exchange and the holders of the Company’s Common Stock receive fully registered shares of such common stock or (B) such Successor enters into a written agreement reasonably satisfactory to the Majority Holders simultaneously with the consummation of such transaction, whereby the Successor agrees to afford the Holders registration rights substantially identical to those set forth in Section 10 hereof with respect to the securities received by the Holders in exchange for the Company’s Common Stock issued upon exercise of the Warrants in connection with such transaction.

 

(b) The Company will give written notice (the “Company Notice”) of any proposed Change of Control in the manner provided in Section 17 hereof to each of the Holders. The Company Notice shall be delivered at least 30 days prior to the occurrence of any Change of Control. The Company Notice shall (1) describe the facts and circumstances of such Change of Control in reasonable detail, (2) make reference to this Section 4.2 and the fact that Section 4.1 will not apply in connection with such transaction and that the Holders have the option to exercise their Warrants prior to or simultaneously with the consummation of such transaction, and (3) describe in detail the terms and the value of the consideration proposed to be paid in connection with such transaction, including the consideration payable to the holders of the Common Stock.

 

For purposes of this Section 4.2:

 

“Acquiring Person” means a “person” or “group of persons” within the meaning of Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended.

 

“Change of Control” means the earliest to occur of: (a) the date a tender offer or exchange offer results in an Acquiring Person, directly or indirectly, beneficially owning more than 50% of the Voting Stock of the Company then outstanding, or (b) the date an Acquiring Person becomes, directly or indirectly, the beneficial owner of more than 50% of the Voting Stock of the Company then outstanding, or (c) the date of a merger between the Company and any other Person, a consolidation of the Company with any other Person or an acquisition of any other Person by the Company, if immediately after such event, the Acquiring Person shall hold more than 50% of the Voting Stock of the Company outstanding immediately after giving effect to such merger, consolidation or acquisition.

 

“Voting Stock” means securities of any class or classes, the holders of which are ordinarily, in the absence of contingencies, entitled to elect a majority of the corporate directors (or Persons performing similar functions).

 

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S ECTION  5.

D ISSOLUTION OR L IQUIDATION .

 

In the event of any proposed distribution of the assets of the Company in dissolution or liquidation except under circumstances when the foregoing Section 3.5 or Section 4 shall be applicable, the Company shall mail notice thereof in the manner provided in Section 17 hereof to the Holder of this Warrant and shall make no distribution to shareholders until the expiration of 30 days from the date of mailing of the aforesaid notice and, in any such case, the Holder of this Warrant may exercise the purchase rights with respect to this Warrant within 30 days from the date of mailing such notice and all rights herein granted not so exercised within such 30-day period shall thereafter become null and void.

 

S ECTION  6.

N OTICE OF E XTRAORDINARY D IVIDENDS .

 

If the Board of Directors of the Company shall declare any dividend or other distribution on its Common Stock except out of earnings or surplus or by way of a stock dividend payable on its Common Stock, the Company shall mail notice thereof in the manner provided in Section 17 hereof to the Holder of this Warrant not less than 30 days prior to the record date fixed for determining shareholders entitled to participate in such dividend or other distribution and the Holder of this Warrant shall not participate in such dividend or other distribution or be entitled to any rights on account or as a result thereof (except adjustments in the per share Warrant Price as provided in Section 3.5 ), unless and to the extent that this Warrant is exercised prior to such record date. The provisions of this paragraph shall not apply to distributions made in connection with transactions covered by Section 4 hereof.

 

S ECTION  7.

F RACTIONAL S HARES .

 

Fractional shares shall not be issued upon the exercise of this Warrant, but in any case where the Holder hereof would, except for the provisions of this paragraph, be entitled to receive a fractional share upon the complete exercise of this Warrant, the Company shall, upon the exercise of this Warrant for the largest number of whole shares then called for, pay to the Holder of this Warrant a sum in cash in an amount equal to the proportional part of the Current Market Price represented by such fractional share.

 

S ECTION  8.

F ULLY P AID S TOCK ; T AXES .

 

The Company covenants and agrees that the shares of stock represented by each and every certificate for its Common Stock to be delivered on the exercise of the purchase rights and the payment of the applicable purchase price herein provided for shall, at the time of such delivery, be validly issued and outstanding and be fully paid and nonassessable. The Company further covenants and agrees that it will pay when due and payable any and all Federal, State and local taxes (other than taxes in respect of income) which may be payable in respect of the delivery of this Warrant or any Common Stock or certificates therefor upon the exercise of the purchase rights herein provided for pursuant to the provisions hereof. The Company shall not, however, be required to pay any tax which may be payable solely in respect of any transfer and

 

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delivery of stock certificates in a name other than that of the Holder exercising this Warrant, and any such tax shall be paid by such holder at the time of presentation.

 

S ECTION  9.

R ESTRICTIONS ON T RANSFERABILITY .

 

Section 9.1. In General. This Warrant and the Common Stock issued upon the exercise hereof shall not be transferable except upon the conditions hereinafter specified, which conditions are intended to insure compliance with the provisions of the Securities Act (or any similar Federal statute at the time in effect) and any applicable State securities laws in respect of the transfer of this Warrant or any such Common Stock.

 

The Holder of each Warrant or any Restricted Stock, by its acceptance thereof, agrees to sell or otherwise transfer such Warrant or Restricted Stock, as the case may be, in compliance with and so as not to result upon consummation of such sale or transfer in any violation of applicable law. Further to the foregoing, upon the request of the Company and at the Company’s expense, the Holder of this Warrant shall provide a legal opinion of counsel to such Holder in form reasonably satisfactory to the Company to the effect that such sale or other transfer does not violate applicable law.

 

Section 9.2. Restrictive Legends. Each Warrant shall bear on the face thereof a legend substantially in the form of the notice endorsed on the first page of this Warrant.

 

Each certificate for shares of Common Stock initially issued upon the exercise of any Warrant and each certificate for shares of Common Stock issued to a subsequent transferee of such certificate shall, unless otherwise permitted by the provisions of this Section 9.2 , bear on the face thereof a legend reading substantially as follows:

 

“The shares represented by this certificate have not been registered under the Securities Act of 1933, as amended, or any State securities laws and may not be sold or transferred in the absence of such registration or an exemption therefrom under said Act and any such Slate laws which may be applicable and are transferable only upon the conditions specified in the Warrant pursuant to which such shares were issued.”

 

In the event that a registration statement covering the Underlying Shares or the Restricted Stock shall become effective under the Securities Act and under any applicable State securities laws or in the event that the Company shall receive an opinion reasonably acceptable to the Company of counsel to the Holder of this Warrant (which may be internal counsel to such Holder) that, in the opinion of such counsel, such legend is not, or is no longer, necessary or required (including, without limitation, because of the availability of the exemption afforded by Rule 144 or Rule 144A of the General Rules and Regulations of the Commission), the Company shall, or shall instruct its transfer agents and registrars to, remove such legend from the certificates evidencing the Restricted Stock or issue new certificates without such legend in lieu thereof.

 

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S ECTION  10.

R EGISTRATION R IGHTS .

 

Anything contained in this Warrant to the contrary notwithstanding, the terms and provisions of Section 10 of this Warrant shall remain in full force and effect at all times up to and including the Expiration Date.

 

Section 10.1. Demand Registration. (a) The Majority Holders (or their transferees) may, at any time, demand registration (a “Demand Registration”) under the Securities Act of any Underlying Shares or Restricted Stock of the Company obtained pursuant to the exercise of the Warrants, or otherwise, on Form S-1 or any similar long-form registration (“Long-Form Registration”) or Form S-2 or S-3 or any similar short-form registration (“Short-Form Registration ”). The Company shall have discretion whether to use a Short-Form Registration or a Long-Form Registration to the extent Short-Form Registration is available to the Company. Upon receipt of such written request, the Company shall promptly give written notice to all Holders of Warrants and Restricted Shares of a proposed registration or qualification, and shall, subject to the conditions of Section 10.4 hereof, as expeditiously as possible, use its commercially reasonable best efforts to effect any such registration or qualification of:

 

(i) such Underlying Shares and/or Restricted Stock, or any combination thereof; or

 

(ii) all other Underlying Shares and Restricted Stock of Holders which shall have advised the Company in writing within 60 days after the giving of such written notice by the Company of their desire to have their Underlying Shares and/or Restricted Stock registered or qualified or exempted,

 

with, or notification to or approval of, any governmental authority under any Federal or state securities laws, or listing with any securities exchange, which may be required to permit the sale or other disposition of any such Underlying Shares or Restricted Stock which the Holders thereof propose to make, and the Company will keep effective such registration, qualification, exemption, notification or approval for such period as may be necessary to effect such sales or dispositions up co a maximum period of six months after initial effectiveness.

 

(b) Number of Registrations. The Majority Holders shall be entitled to demand 6 registrations, not more than one (l) of which may be a Long-Form Registration and the remainder of which shall be Short-Form Registrations. A registration will count as a Demand Registration when it has become effective, unless the Holders are unable to register and sell 100% of any Underlying Shares relating thereto and/or Restricted Stock, demanded to be included in such registration or the related registration statement is withdrawn prior to effectiveness at the request of the Majority Holders (or by the underwriter selected pursuant to Section 10.1(e) ); provided, that in any event, the Company will pay all registration expenses in connection with any registration initiated as a Demand Registration as provided in Section 10.5 hereof.

 

(c) Priority on Demand Registrations. Either the Company or the Majority Holders shall have the right to determine whether a Demand Registration shall be an underwritten

 

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offering; provided that, if the Demand Registration is an underwritten offering, all Holders participating in the Demand Registration shall agree to participate in the underwritten offering. If a Demand Registration is an underwritten offering, and the managing underwriters advise the Company and the Holders in writing that in their opinion the number of shares of Underlying Shares or shares of Restricted Stock requested to be included exceeds the number of shares of Underlying Shares or shares of Restricted Stock which, under then current market conditions, can be sold in such offering at the price expected to be obtained for such shares by the Holders in a commercially reasonable sale, the Company will include in such registration prior to the inclusion of any securities which are not Underlying Shares or shares of Restricted Stock owned by the Holders the number of shares of Holders’ Underlying Shares or shares of Restricted Stock requested to be included which in the opinion of such underwriters can be sold, pro rated among the Holders based upon the number of Underlying Shares or shares of Restricted Stock owned by them, and the balance of the Underlying Shares or shares of Restricted Stock which the Holders requested to be included in such offering shall be withheld from sale for such period of time as shall be mutually acceptable to the Holders and requested by the underwriters (but not to exceed one hundred twenty (120) days from the effective date of the registration statement); provided that nothing herein contained shall be deemed or construed to require any Holder which owns securities of the Company acquired other than by reason of the exercise of any Warrant, in whole or in part, to withhold such securities from sale during any such period of time, nor shall any Holder be required during such period of time to refrain from selling its Warrant, Underlying Shares or shares of Restricted Stock, in whole or in part, if any such sale shall be pursuant to a private placement to an Institutional Holder within the provisions of an exemption from the registration requirements under the Securities Act or is consummated within the limitations or Rule 144 promulgated under the Securities Act. No securities of any Person, other than a Holder, may be included in any registration pursuant to Section 10.1 hereof without the written consent of the Majority Holders.

 

(d) Restrictions on