CAPSTONE TURBINE
CORPORATION
WARRANT TO PURCHASE ________
SHARES OF
COMMON STOCK
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Warrant No.
___
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Original Issue Date: September ___,
2008
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FOR VALUE
RECEIVED, ____________ (“ Holder ”) is entitled
to purchase, subject to the provisions of this Warrant, from
CAPSTONE TURBINE CORPORATION, a Delaware corporation (“
Company ”), at any time prior to 5:00 P.M., New York
City time, on September ___, 2013 (the “ Expiration
Time ”), at an exercise price per share equal to $1.92
(the “ Exercise Price ”), _________ shares
(“ Warrant Shares ”) of the Company’s
common stock, par value $0.001 per share (“ Common
Stock ”). The number of Warrant Shares purchasable upon
exercise of this Warrant and the Exercise Price shall be subject to
adjustment from time to time as described herein.
This Warrant is
being issued pursuant to that certain Subscription Agreement, dated
September 17, 2008, by and between the Company and the purchaser
identified therein (the “ Subscription Agreement
”). The original issuance of this Warrant by the Company
pursuant to the Subscription Agreement has been registered pursuant
to a registration statement on Form S-3, File No. 333-128164
and, if applicable, any related registration statement filed by the
Company pursuant to Rule 462(b) of the Securities Act of 1933, as
amended (the “ Securities Act ”), in connection
with the offering of this Warrant (collectively with any successor
registration statement covering the Warrant Shares that the Company
may file with the Securities Exchange Commission (the “
Commission ”) under the Securities Act and that shall
have become effective under the Securities Act, the “
Registration Statement ”). This Warrant was originally
issued on September ___, 2008 (the “ Original Issue
Date ”), and is one of a series of Warrants of like tenor
issued by the Company on the Original Issue Date covering an
aggregate of 6,445,698 shares of Common Stock (collectively, and
including, without limitation, this Warrant, the “ Company
Warrants ”).
Section 1.
Registration . The Company shall maintain books for the
transfer and registration of this Warrant. Upon the initial
issuance of this Warrant, the Company shall issue and register this
Warrant in the name of the Holder. The Company may deem and treat
the registered Holder as the absolute owner hereof for the purpose
of any exercise hereof or any distribution to the Holder, and for
all other purposes, absent actual notice to the
contrary.
Section 2.
Transfers . The Company shall transfer this Warrant from
time to time upon the books to be maintained by the Company for
that purpose, upon surrender hereof for transfer, properly endorsed
or accompanied by appropriate instructions for transfer and such
other documents as may be reasonably required by the Company. Upon
any such transfer, a new Warrant in substantially the form of this
Warrant, evidencing the portion of this Warrant so transferred
shall be issued to the transferee and a new Warrant evidencing the
remaining portion of this Warrant not so transferred, if any, shall
be issued to the transferring Holder.
Section 3.
Exercise of Warrant .
(a) The
Holder may exercise this Warrant in whole or in part at any time
and from time to time prior to the earlier of the Expiration Time
and any cancellation of this Warrant in whole pursuant to
Section 4 as follows:
(i)
Subject to the provisions of Section 3(a)(ii) , this
Warrant may be exercised by delivery of a Notice of Exercise in the
form attached hereto as Appendix A and payment by cash,
certified check or wire transfer for the aggregate Exercise Price
for that number of Warrant Shares then being purchased, to the
Company during normal business hours on any day other than a
Saturday or Sunday on which banks are open for business in New York
City (a “ Business Day ”) at the Company’s
principal executive offices (or such other office or agency of the
Company as the Company may designate by notice to the
Holder).
(ii)
At any time when a Restrictive Legend Event (as defined below) has
occurred and is continuing, the Holder may only exercise this
Warrant if the Market Price (as defined below) of one Warrant Share
is greater than the Exercise Price. In such event, the Holder may
exercise this Warrant by delivery of a Notice of Exercise in the
form attached hereto as Appendix B to the Company
during normal business hours on any Business Day at the
Company’s principal executive offices (or such other office
or agency of the Company as the Company may designate by notice to
the Holder), without the payment by the Holder of the aggregate
Exercise Price in respect of the Warrant Shares to be acquired
hereunder in cash, but instead by surrendering to the Company a
portion of the Warrant Shares that would otherwise have been
issuable upon exercise of this Warrant or the portion hereof so
exercised, as the case may be, determined as provided below.
Thereupon, the Company shall issue to the Holder such number of
fully paid, validly issued and nonassessable shares of Common Stock
as is computed using the following formula:
X
= the number of shares of Common Stock to be issued to the
Holder;
Y
= the number of Warrant Shares covered by this Warrant that the
Holder is surrendering at such time for cashless exercise
(including both shares to be issued to the Holder and shares to be
canceled as payment therefor);
A
= the Market Price of one share of Common Stock as of the exercise
date; and
B
= the Exercise Price in effect under this Warrant as of the
exercise date.
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“ Market
Price ” as of a particular date (the “ Valuation
Date ”) means the following: (i) if the Common Stock is
then listed on a Trading Market (as defined below), the closing
sale price of one share of Common Stock on such Trading Market on
the last Trading Day (as defined below) prior to the Valuation
Date; (ii) if the Common Stock is not then listed on a Trading
Market, the closing sale price of one share of Common Stock on the
OTC Bulletin Board (the “ Bulletin Board ”) on
the last Trading Day prior to the Valuation Date or, if no such
closing sale price is available, the average of the high bid and
the low asked price quoted thereon on the last Trading Day prior to
the Valuation Date; (iii) if the Common Stock is not then
listed on a Trading Market or quoted on the Bulletin Board, the
closing sale price of one share of Common Stock as reported in the
Pink Sheets published by Pink Sheets LLC (or any similar
organization or agency succeeding to its functions of reporting
prices) on the last Trading Day prior to the Valuation Date or, if
no such closing sale price is available, the average of the high
bid and the low asked price reported by Pink Sheets LLC on the last
Trading Day prior to the Valuation Date; or (iv) if the Common
Stock is not then listed on a Trading Market, quoted on the
Bulletin Board or reported in Pink Sheets LLC (or any similar
organization or agency succeeding to its functions of reporting
prices), the fair market value of one share of Common Stock as of
the Valuation Date shall be determined in good faith by the Board
of Directors of the Company (the “ Board ”). If
the Common Stock is not then listed on a Trading Market, quoted on
the Bulletin Board or reported in Pink Sheets LLC (or any similar
organization or agency succeeding to its functions of reporting
prices), the Board shall respond promptly, in writing, to an
inquiry by the Holder prior to the exercise hereunder as to the
fair market value of a share of Common Stock as determined by the
Board.
For purposes of
this Warrant (i) a “ Trading Day ” means
(A) a day on which the Common Stock is traded on a Trading
Market (as defined below), or (B) if the Common Stock is not
listed on a Trading Market, a day on which the Common Stock is
traded on the Bulletin Board, or (C) if the Common Stock is
not listed on a Trading Market or quoted on the Bulletin Board, a
day on which prices for the Common Stock are reported in the Pink
Sheets published by Pink Sheets LLC (or any similar organization or
agency succeeding to its functions of reporting prices); provided,
that in the event that the Common Stock is not listed, quoted or
reported as set forth in (A), (B) and (C) hereof, then
Trading Day shall mean a Business Day and (ii) “ Trading
Market ” means the following markets or exchanges on
which the Common Stock is listed or quoted for trading on the date
in question: the Nasdaq Global Select Market, the Nasdaq Global
Market, The Nasdaq Capital Market, the American Stock Exchange or
the New York Stock Exchange.
The Company shall
provide to the Holder prompt written notice of any time the Company
is unable to issue the Warrant Shares via DWAC (as defined below)
transfer or otherwise without restrictive legend because
(i) the Commission has issued a stop order with respect to the
Registration Statement, (ii) the Commission otherwise has
suspended or withdrawn the effectiveness of the Registration
Statement, either temporarily or permanently, (iii) the
Company has suspended or withdrawn the effectiveness of the
Registration Statement, either temporarily or permanently or
(iv) otherwise (each a “ Restrictive Legend Event
”); provided that nothing in the foregoing clause
(iii) shall permit the Company to suspend or withdraw the
effectiveness of the Registration Statement, either temporarily or
permanently. If a Restrictive Legend Event occurs after the Holder
has exercised this Warrant in accordance with
Section 3(a)(i) but prior to the delivery of the
Warrant Shares issuable upon such exercise, then (i) the
Company shall
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not issue such
Warrant Shares to the Holder, (ii) the Company shall return to
the Holder all consideration paid to the Company in connection with
the Holder’s attempted exercise of this Warrant and
(iii) if the Market Price of one Warrant Share is greater than
the Exercise Price as of the applicable exercise date, the Holder
may, by written notice to the Company, elect to convert its
exercise of this Warrant to an exercise in accordance with this
Section 3(a)(ii) . The Company will use its reasonable
best efforts to prevent the occurrence of any Restrictive Legend
Event and, if a Restrictive Legend Event shall occur, shall use its
reasonable best efforts to terminate or cause the termination
thereof. The Company shall give prompt written notice to the Holder
of the cessation of a Restrictive Legend Event. Notwithstanding
anything to the contrary contained herein, if the Expiration Time
occurs after a Restrictive Legend Event occurs but before the
cessation of the Restrictive Legend Event, then the Expiration Time
will be extended until 5:00 P.M., New York City time on the fifth
Trading Day after the Company gives notice to the Holder of the
cessation of the Restrictive Legend Event.
Notwithstanding
the foregoing provisions of this Section 3(a)(ii) , if
a Restrictive Legend Event has occurred and is continuing and no
exemption from the registration requirements of the Securities Act
is available for the issuance of the Warrant Shares upon an
exercise of this Warrant, including, without limitation under
Section 3(a)(9) of the Securities Act by virtue of a cashless
exercise under this Section 3(a)(ii) , then this
Warrant shall not be exercisable until such Restrictive Legend
Event shall have ceased or there shall be an available exemption
from the registration requirements under the Securities
Act.
For purposes of
Rule 144 promulgated under the Securities Act, it is intended
that the Warrant Shares issued in a cashless exercise under this
Section 3(a)(ii) shall be deemed to have been acquired
by the Holder, and the holding period for the Warrant Shares shall
be deemed to have commenced, on the Original Issue Date.
Anything herein to
the contrary notwithstanding (including, without limitation, the
foregoing provisions of this Section 3(a)(ii) ), the
Company shall maintain the effectiveness under the Securities Act
of the Registration Statement covering all of the Warrants Shares
(and any other securities which may from time to time be issuable
upon exercise of this Warrant) and the availability of a current
prospectus relating thereto at all times prior to, and, without
limitation of the foregoing, shall not suspend or withdraw the
effectiveness of the Registration Statement, either temporarily or
permanently, until after the earliest of (i) the Expiration
Time (or if as of the Expiration Time, any portion of this Warrant
shall have been exercised but the Warrant Shares (or any other
securities which may from time to time be issuable upon exercise of
this Warrant) issuable upon such exercise shall not have been
delivered to the Holder or its designee, the date after the
Expiration Time that such Warrant Shares (or such other securities)
have been so delivered), (ii) any cancellation of this Warrant
in whole pursuant to Section 4 or (iii) the
exercise in full of this Warrant.
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(b) The
Warrant Shares purchased hereunder shall be deemed to be issued to
the Holder or the Holder’s designee, as the record owner of
such shares, as of 5:00 P.M. New York City time on the date on
which the completed and signed Notice of Exercise shall have been
delivered and, in the case of an exercise pursuant to
Section 3(a)(i) , the aggregate Exercise Price for the
Warrant Shares purchased shall have been paid. Certificates for the
Warrant Shares so purchased, representing the aggregate number of
shares specified in the Notice of Exercise, shall be transmitted by
the Company’s transfer agent by crediting the account of the
Holder’s prime broker with The Depository Trust Company
(“ DTC ”) through its Deposit / Withdrawal At
Custodian (“ DWAC ”) system if the Company is a
participant in such system, and otherwise by physical delivery of
certificates to the address specified by the Holder in the Notice
of Exercise, within a reasonable time, not exceeding three Trading
Days after this Warrant shall have been so exercised, including the
delivery of a completed Notice of Exercise and, in the case of an
exercise pursuant to Section 3(a)(i) , delivery of the
aggregate Exercise Price for the Warrant Shares purchased (the
“ Warrant Share Delivery Date ”). The Warrant
Shares so delivered shall be in such denominations as may be
requested by the Holder and shall be registered in the name of the
Holder or such other name as shall be designated by the Holder in
the Notice of Exercise.
(c) In
addition to any other rights available to the Holder, if the
Company fails to deliver to the Holder the applicable Warrant
Shares pursuant to an exercise on or before the Warrant Share
Delivery Date, and if after such date the Holder is required by its
broker to purchase (in an open market transaction or otherwise)
shares of Common Stock to deliver in satisfaction of a sale by the
Holder of the Warrant Shares which the Holder anticipated receiving
upon such exercise (a “ Buy-In ”), then the
Company shall either (i) pay cash to the Holder in an amount
equal to the Holder’s total purchase price (including
brokerage commissions, if any) for the shares of Common Stock so
purchased (the “ Buy-In Price ”), at which point
the Company’s obligation to issue and deliver such Warrant
Shares to the Holder shall terminate, or (ii) promptly issue
and deliver such Warrant Shares by crediting such Holder’s
account with DTC or issuing physical certificates for such Warrant
Shares, as applicable, and pay cash to the Holder in an amount
equal to the excess (if any) of the Buy-In Price over the product
of (A) such number of Warrant Shares times (B) the Market
Price on the date of exercise. The Holder shall provide the Company
written notice indicating the amounts payable to the Holder in
respect to the Buy-In, together with applicable confirmations and
other evidence reasonably requested by the Company. Nothing herein
shall limit the Holder’s right to pursue any other remedies
available to it hereunder, at law or in equity including, without
limitation, a decree of specific performance and/or injunctive
relief with respect to the Company’s failure to timely credit
the Holder’s account with DTC or to issue physical
certificates, as applicable, upon exercise of this Warrant as
required pursuant to the terms hereof. Anything herein to the
contrary notwithstanding, if a Restrictive Legend Event occurs and
if the Holder shall not have received actual notice of such
Restrictive Legend Event from the Company prior to any date on
which such Holder or its designee shall have delivered a completed
and signed Notice of Exercise and, in the case of an exercise
pursuant to Section 3(a)(i) , the aggregate Exercise
Price payable in connection with such exercise, then, for purposes
of this Section 3(c) , such exercise shall be deemed a valid
exercise of this Warrant, and, for purposes of clarity, the Company
hereby acknowledges and agrees that this Section 3(c)
shall be applicable to any failure by the Company to deliver the
Warrant Shares that would have been deliverable upon such exercise
to the Holder on or before the applicable Warrant Share Delivery
Date, notwithstanding the fact that, pursuant to
Section 3(a)(ii) , this Warrant may not be exercisable
as a result of such Restrictive Legend Event.
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(d) Notwithstanding
anything herein to the contrary, except as provided in
Section 4 , the Holder shall not be required to
physically surrender this Warrant to the Company until the Holder
has purchased all of the Warrant Shares available hereunder and
this Warrant has been exercised in full, in which case the Holder
shall surrender this Warrant to the Company for cancellation within
three Trading Days of the date the final Notice of Exercise is
delivered to the Company. Partial exercises of this Warrant
resulting in purchases of a portion of the total number of Warrant
Shares available hereunder shall have the effect of lowering the
outstanding number of Warrant Shares purchasable hereunder in an
amount equal to the applicable number of Warrant Shares purchased.
The Holder and the Company shall maintain records showing the
number of Warrant Shares purchased and the date of such purchases.
The Company shall deliver any objection to any Notice of Exercise
within two Trading Days of receipt of such notice. In the event of
any dispute or discrepancy, the records of the Company’s
transfer agent for the Common Stock shall be controlling and
determinative in the absence of manifest error. The Holder and any
assignee, by acceptance of this Warrant, acknowledge and agree
that, by reason of the provisions of this Section 3(d)
, following the purchase of a portion of the Warrant Shares
hereunder, the number of Warrant Shares available for purchase
hereunder at any given time may be less than the amount stated on
the face hereof.
(e) In
addition to any other rights available to the Holder, if
(i) the Company fails for any reason other than the occurrence
of a Restrictive Legend Event to deliver to the Holder the Warrant
Shares pursuant to an exercise on or before the Warrant Share
Delivery Date by transfer pursuant to the DWAC system or by
delivery of physical certificates, as applicable (a “
Delivery Failure ”), or (ii) a Restrictive Legend
Event occurs, then (x) with respect to a Delivery Failure, the
Company shall be liable to the Holder for liquidated damages in an
amount equal to 1.5% of the aggregate Exercise Price of the Warrant
Shares issuable pursuant to such exercise for each 30-day period
(or pro rata portion thereof) beginning on the day immediately
after the Warrant Share Delivery Date to but excluding the date on
which such Warrant Shares are delivered to the Holder and
(y) with respect to a Restrictive Legend Event, the Company
shall be liable to the Holder for liquidated damages in an amount
equal to 1.5% of the aggregate Exercise Price of all of the Warrant
Shares issuable upon exercise of this Warrant for each 30-day
period (or pro rata portion thereof) beginning on the day that such
Restrictive Legend Event first occurs to but excluding the date on
which the Holder shall have received written notice of the
cessation of such Restrictive Event Legend from the Company. Such
liquidated damages shall be payable in cash by wire transfer to the
Holder (if the Holder shall have provided wire transfer
instructions to the Company) or by check mailed to the address of
the Holder as shown on the Company’s transfer books for this
Warrant, and shall be payable on the Business Day immediately
following the last day of each such 30-day period and, if
applicable, on the day that such Warrant Shares are delivered to
the Holder or the Business Day immediately following the cessation
of such Restrictive Legend Event, as the case may be.
Notwithstanding the foregoing, in no event will the aggregate
liquidated damages payable under this Section 3(e)
exceed 10% of the aggregate Exercise Price for all of the Warrant
Shares issuable hereunder.
(f) Notwithstanding
anything to the contrary herein, the Holder shall not have the
right to exercise any portion of this Warrant, pursuant to this
Section 3 or otherwise, to the extent that after giving
effect to such issuance after exercise, the Holder would
beneficially own in excess of 9.999% of the number of shares of the
Common Stock outstanding immediately after giving effect to such
issuance. For purposes of the immediately preceding sentence, the
number of shares of Common Stock beneficially owned by the Holder
shall include the number of shares of Common Stock issuable upon
the exercise of this Warrant with respect to which the
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determination
pursuant to the immediately preceding sentence is being made, but
shall exclude the number of shares of Common Stock which would be
issuable upon (A) exercise of the remaining, nonexercised
portion of this Warrant beneficially owned by the Holder and
(B) exercise or conversion of the unexercised or nonconverted
portion of any other securities of the Company (including, without
limitation, any other warrants) subject to a limitation on
conversion or exercise analogous to the limitation contained herein
beneficially owned by the Holder. Except as set forth in the
preceding sentence, for purposes of this Section 3(f) ,
beneficial ownership shall be calculated in accordance with Section
13(d) of the Securities Exchange Act of 1934, as amended (the
“ Exchange Act ”), it being acknowledged by the
Holder that the Company is not representing to the Holder that such
calculation is in compliance with Section 13(d) of the Exchange Act
and the Holder is solely responsible for any schedules required to
be filed in accordance therewith. For purposes of this
Section 3(f) , in determining the number of outstanding
shares of Common Stock, the Holder may rely on the number of
outstanding shares of Common Stock as reflected in the latest of
(x) the Company’s most recent Form 10-Q or Form 10-K, as
the case may be, (y) a more recent public announcement by the
Company or (z) any other more recent notice by the Company or
the Company’s transfer agent for the Common Stock setting
forth the number of shares of Common Stock outstanding. Following
the written or oral request of the Holder, the Company shall, or
shall cause its transfer agent to, within two Trading Days confirm
orally and in writing to the Holder the number of shares of Common
Stock then outstanding. In any case, the number of outstanding
shares of Common Stock shall be determined after giving effect to
the conversion or exercise of securities of the Company, including
this Warrant, by the Holder since the date as of which such number
of outstanding shares of Common Stock was reported.
(a) If
(i) the Registration Statement covering all of the shares of
Common Stock (the “ Company Shares ”) issuable
upon exercise of all of the Company Warrants is effective and a
current prospectus relating to the Company Shares issuable upon
exercise of all of the Company Warrants is available, in each case
at all times from and including the date that the applicable Call
Notice (as defined below) is sent by the Company through and
including the fourth Trading Day after the applicable Call Date (as
defined below), or, if the Holder shall have duly exercised all or
any portion of this Warrant by 5:00 p.m., New York City time, on
such Call Date, through and including the date of delivery to the
Holder of the Warrant Shares issuable upon such exercise,
(ii) the two-year anniversary of the Original Issue Date has
occurred (iii) the average of the Market Price of the Common
Stock for any 20 Trading Days within a 30-Trading Day period ending
no more than three Trading Days prior to the date on which the Call
Notice is delivered to the Holder (such 30-Trading Day period
hereinafter called the “ Measurement Period ”)
equals or exceeds $3.84 (the " Threshold Price ”)
(subject to adjustment for reverse and forward stock splits, stock
dividends, stock combinations and other similar transactions of the
Common Stock that occur after the Original Issue Date),
(iv) no Restrictive Legend Event has occurred and is
continuing and (v) the Common Stock is then listed on a
Trading Market, then the Company may, no more than three Trading
Days after the last day of such Measurement Period, call for
cancellation all or any portion of the outstanding Company Warrants
(including, without limitation, this Warrant) for which a Notice of
Exercise has not yet been delivered (such right, a “
Call ”). Any Call by the Company of only a portion of
the Company Warrants (including, without limitation, this Warrant)
shall be exercised on a pro rata basis among all the outstanding
Company Warrants (including, without limitation, this Warrant)
based upon the number of shares of Common Stock issuable upon
exercise of all of the Company Warrants for which a Notice of
Exercise has not yet been delivered.
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(b) To
exercise a Call, the Company must deliver to each registered holder
of a Company Warrant (including, without limitation, the Holder of
this Warrant) an irrevocable written notice (a “ Call
Notice ”), indicating therein the unexercised portion of
the Company Warrants registered in the name of such holder to which
such Call Notice applies and the time and date by which such
portion of such Company Warrants must be exercised to avoid
cancellation thereof as described below. Deposit of such Call
Notice with a recognized overnight delivery service or with the
U.S. Postal Service within the above three Trading Day period shall
be considered a timely Call. If the conditions set forth above for
such Call are satisfied (including, without limitation, the
condition set forth in clause (i) of Section 4(a)
), then any portion of this Warrant subject to such Call Notice for
which a Notice of Exercise and (unless the exercise is to be by
cashless exercise pursuant to Section 3(a)(ii) ) the
applicable aggregate Exercise Price shall not have been received by
5:00 p.m., New York City time, on the 60th calendar day after the
date the Call Notice is sent to the Holder or, if such day is not a
Business Day, the next succeeding Business Day (such date, the
“ Call Date ”) will be cancelled automatically
immediately after 5:00 p.m., New York City time, on such Call Date.
Any unexercised portion of this Warrant to which the Call Notice
does not pertain will be unaffected by such Call Notice. In
furtherance thereof, the Company covenants and agrees that it will
honor all Notices of Exercise with respect to Warrant Shares
subject to a Call Notice that are tendered, with (unless the
exercise is to be by cashless exercise pursuant to
Section 3(a)(ii) ) the applicable aggregate Exercise
Price through 5:00 p.m., New York City time, on the Call Date. Any
Notice of Exercise delivered following a Call Notice shall first
reduce to zero the number of Warrant Shares subject to such Call
Notice prior to reducing the remaining Warrant Shares available for
purchase under this Warrant. For example, if (x) this Warrant
then permits the Holder to acquire 100 Warrant Shares, (y) a
Call Notice pertains to 75 of such Warran
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