|
|
|
|
|
Net Number
|
|
=
|
|
(A × B) (A × C)
D
|
For
purposes of the foregoing formula:
|
|
|
A=
|
|
the total number of shares with respect to which this Warrant is then being exercised.
|
B=
|
|
the arithmetic average of the Closing Sale Prices of the Common Stock for the five (5) consecutive Trading Days ending on the date immediately preceding the date of the Exercise Notice.
|
C=
|
|
the Exercise Price then in effect for the applicable Warrant Shares at the time of such exercise.
|
D=
|
|
as applicable: (i) the Closing Sale Price of the Common Stock on the Trading Day immediately preceding the date of the applicable Exercise Notice if such Exercise Notice is (1) both executed and delivered
pursuant to Section 1(d) hereof on a day that is not a Trading Day or (2) both executed and delivered pursuant to Section 1(d) hereof on a Trading Day prior to the opening of "regular trading hours" (as defined in Rule 600(b)(64)
of Regulation NMS promulgated under the federal securities laws) on such Trading Day, (ii) the Bid Price of the Common Stock as of the time of the Holder's execution of the applicable Exercise Notice if such Exercise Notice is executed during
"regular trading hours" on a Trading Day and is delivered within two (2) hours thereafter pursuant to Section 1(d) hereof, or (iii) the Closing Sale Price of the Common Stock on the date of the applicable Exercise Notice if the date of
such Exercise Notice is a Trading Day and such Exercise Notice is both executed and delivered pursuant to Section 1(d) hereof after the close of "regular trading hours" on such Trading Day.
|
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If
Warrant Shares are issued in such a cashless exercise, the Company acknowledges and agrees that in accordance with Section 3(a)(9) of the Securities Act of 1933, as amended, the Warrant
Shares shall take on the registered characteristics of the Warrants being exercised, and the holding period of the Warrants being exercised may be tacked on to the holding period of the Warrant
Shares. The Company agrees not to take any position contrary to this Section 1(d).
(e)
Disputes.
In the case of a dispute as to the determination of the Exercise Price or the arithmetic calculation of the
Warrant Shares, the Company shall promptly issue to the Holder the number of Warrant Shares that are not disputed and resolve such dispute in accordance with Section 11.
(f)
Beneficial Ownership.
Notwithstanding anything to the contrary contained herein, the Company shall not effect the exercise
of any portion of this Warrant, and the Holder shall not have the right to exercise any portion of this Warrant, pursuant to the terms and conditions of this Warrant and any such exercise shall be
null and void and treated as if never made, to the extent that after giving effect to such exercise, the Holder together with the other Attribution Parties collectively would beneficially own in
excess of 4.99% (the "
Maximum Percentage
") of the number of shares of Common Stock outstanding immediately after giving effect to such exercise. For
purposes of the foregoing sentence, the aggregate number of shares of Common Stock beneficially owned by the Holder and the other Attribution Parties shall include the number of shares of Common Stock
held by the Holder and all other Attribution Parties plus the number of shares of Common Stock issuable upon exercise of this Warrant with respect to which the determination of such sentence is being
made, but shall exclude the number of shares of Common Stock which would be issuable upon (A) exercise of the remaining, unexercised portion of this Warrant beneficially owned by the Holder or
any of the other Attribution Parties and (B) exercise or conversion of the unexercised or unconverted portion of any other securities of the Company (including, without limitation, any
convertible notes or convertible preferred stock or warrants, including the other Warrants) beneficially owned by the Holder or any other Attribution Party subject to a limitation on conversion or
exercise analogous to the limitation contained in this Section 1(f). For purposes of this Section 1(f), beneficial ownership shall be calculated in accordance with Section 13(d)
of the Securities Exchange Act of 1934, as amended (the "
1934 Act
"). For purposes of this Warrant, in determining the number of outstanding shares of
Common Stock the Holder may acquire upon the exercise of this Warrant without exceeding the Maximum Percentage, the Holder may rely on the number of outstanding shares of Common Stock as reflected in
(x) the Company's most recent Annual Report on Form 10-K, Quarterly Report on Form 10-Q and Current Reports on Form 8-K or other public filing with the Securities and
Exchange Commission (the "
SEC
"), as the case may be, (y) a more recent public announcement by the Company or (z) any other written notice
by the Company or the Transfer Agent setting forth the number of shares of Common Stock outstanding (the "
Reported Outstanding Share Number
"). If the
Company receives an Exercise Notice from the Holder at a time when the actual number of outstanding shares of Common Stock is less than the Reported Outstanding Share Number, the Company shall
(i) notify the Holder in writing of the number of shares of Common Stock then outstanding and, to the extent that such Exercise Notice would otherwise cause the Holder's beneficial ownership,
as determined pursuant to this Section 1(f), to exceed the Maximum Percentage, the Holder must notify the Company of a reduced number of Warrant Shares to be purchased pursuant to such Exercise
Notice (the number of shares by which such purchase is reduced, the "
Reduction Shares
") and (ii) as soon as reasonably practicable, the Company
shall return to the Holder any exercise price paid by the Holder for the Reduction Shares. For any reason at any time, upon the written or oral request of the Holder, the Company shall within
one (1) Business Day confirm orally and in writing or by electronic mail 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
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the
Company, including this Warrant, by the Holder and any other Attribution Party since the date as of which the Reported Outstanding Share Number was reported. In the event that the issuance of
Common Stock to the Holder upon exercise of this Warrant results in the Holder and the other Attribution Parties being deemed to beneficially own, in the aggregate, more than the Maximum Percentage of
the number of outstanding shares of Common Stock (as determined under Section 13(d) of the 1934 Act), the number of shares so issued by which the Holder's and the other Attribution Parties'
aggregate beneficial ownership exceeds the Maximum Percentage (the "
Excess Shares
") shall be deemed null and void and shall be cancelled ab initio, and
the Holder shall not have the power to vote or to transfer the Excess Shares. As soon as reasonably practicable after the issuance of the Excess Shares has been deemed null and void, the Company shall
return to the Holder the exercise price paid by the Holder for the Excess Shares. Upon delivery of a written notice to the Company, the Holder may from time to time increase or decrease the Maximum
Percentage to any other percentage not in excess of 9.99% as specified in such notice; provided that (i) any such increase in the Maximum Percentage will not be effective until the sixty-first
(61
st
) day after such notice is delivered to the Company and (ii) any such increase or decrease will apply only to the Holder and the other Attribution Parties and not to any
other holder of Warrants that is not an Attribution Party of the Holder. For purposes of clarity, the shares of Common Stock issuable pursuant to the terms of this Warrant in excess of the Maximum
Percentage shall not be deemed to be beneficially owned by the Holder for any purpose including for purposes of Section 13(d) or Rule 16a-1(a)(1) of the 1934 Act. No prior inability to
exercise this Warrant pursuant to this paragraph shall have any effect on the applicability of the provisions of this paragraph with respect to any subsequent determination of exercisability. The
provisions of this paragraph shall be construed and implemented in a manner otherwise than in strict conformity with the terms of this Section 1(f) to the extent necessary to correct this
paragraph or any portion of this paragraph which may be defective or inconsistent with the intended beneficial ownership limitation contained in this Section 1(f) or to make changes or
supplements necessary or desirable to properly give effect to such limitation. The limitation contained in this paragraph may not be waived and shall apply to a successor holder of this Warrant.
(g)
Required Reserve Amount.
So long as this Warrant remains outstanding, the Company shall at all times keep reserved for
issuance under this Warrant a number of shares of Common Stock at least equal to 100% of the maximum number of shares of Common Stock as shall be necessary to satisfy the Company's obligation to issue
shares of Common Stock under the Warrants then outstanding (without regard to any limitations on exercise) (the "
Required Reserve Amount
");
provided
that
at no time shall the number of shares of Common Stock reserved pursuant to this Section 1(g) be reduced other than in connection
with any exercise of Warrants or such other event covered by Section 2(c) below. The Required Reserve Amount (including, without limitation, each increase in the number of shares so reserved)
shall be allocated pro rata among the holders of the Warrants based on the number of shares of Common Stock issuable upon exercise of Warrants held by each holder thereof on the Issuance Date (without
regard to any limitations on exercise) (the "
Authorized Share Allocation
"). In the event that a holder shall sell or otherwise transfer any of such
holder's Warrants, each transferee shall be allocated a pro rata portion of such holder's Authorized Share Allocation. Any shares of Common Stock reserved and allocated to any Person which ceases to
hold any Warrants shall be allocated to the remaining holders of Warrants, pro rata based on the number of shares of Common Stock issuable
upon exercise of the Warrants then held by such holders thereof (without regard to any limitations on exercise).
(h)
Insufficient Authorized Shares.
If at any time while this Warrant remains outstanding the Company does not have a
sufficient number of authorized and unreserved shares of Common Stock to satisfy its obligation to reserve for issuance the Required Reserve Amount (an "
Authorized Share
Failure
"), then the Company shall immediately take all action necessary to increase the Company's
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authorized
shares of Common Stock to an amount sufficient to allow the Company to reserve the Required Reserve Amount for this Warrant then outstanding. Without limiting the generality of the
foregoing sentence, as soon as practicable after the date of the occurrence of an Authorized Share Failure, but in no event later than one hundred-eighty (180) days after the occurrence of such
Authorized Share Failure and the Authorized Share Failure still exists, the Company shall hold a meeting of its stockholders for the approval of an increase in the number of authorized shares of
Common Stock. In connection with such meeting, the Company shall provide each stockholder with a proxy statement and shall use its best efforts to solicit its stockholders' approval of such increase
in authorized shares of Common Stock and to cause its board of directors to recommend to the stockholders that they approve such proposal. Notwithstanding the foregoing, if any such time of an
Authorized Share Failure, the Company is able to obtain the written consent of a majority of the shares of its issued and outstanding shares of Common Stock to approve the increase in the number of
authorized shares of Common Stock, the Company may satisfy this obligation by obtaining such consent and submitting for filing with the SEC an Information Statement on Schedule 14C.
2.
ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF WARRANT SHARES.
The Exercise Price and the number of Warrant Shares shall be
adjusted from time to time as follows:
(a)
Voluntary Adjustment By Company.
The Company may at any time during the term of this Warrant reduce the then current
Exercise Price to any amount and for any period of time deemed appropriate by the Board of Directors of the Company.
(b)
Adjustment Upon Subdivision or Combination of Common Stock.
If the Company at any time on or after the Subscription Date
subdivides (by any stock split, stock dividend, recapitalization or otherwise) one or more classes of its outstanding shares of Common Stock into a greater number of shares, the Exercise Price in
effect immediately prior to such subdivision will be proportionately reduced and the
number of Warrant Shares will be proportionately increased. If the Company at any time on or after the Subscription Date combines (by combination, reverse stock split or otherwise) one or more classes
of its outstanding shares of Common Stock into a smaller number of shares, the Exercise Price in effect immediately prior to such combination will be proportionately increased and the number of
Warrant Shares will be proportionately decreased. Any adjustment under this Section 2(b) shall become effective at the close of business on the date the subdivision or combination becomes
effective.
(c)
Other Events.
If any event occurs of the type contemplated by the provisions of this Section 2 but not expressly
provided for by such provisions (including, without limitation, the granting of stock appreciation rights, phantom stock rights or other rights with equity features), then the Company's Board of
Directors will make an appropriate adjustment in the Exercise Price and the number of Warrant Shares, as mutually determined by the Company's Board of Directors and the Required Holders, so as to
protect the rights of the Holder;
provided
that no such adjustment pursuant to this Section 2(c) will increase the Exercise Price or decrease the
number of Warrant Shares as otherwise determined pursuant to this Section 2.
3.
RIGHTS UPON DISTRIBUTION OF ASSETS.
In addition to any adjustments pursuant to Section 2 above, if, on or after the
Subscription Date and on or prior to the Expiration Date, the Company shall declare or make any dividend or other distribution of its assets (or rights to acquire its assets) to holders of shares of
Common Stock, by way of return of capital or otherwise (including, without limitation, any distribution of cash, stock or other securities, property, options, evidence of indebtedness or any other
assets by way of a dividend, spin off, reclassification, corporate rearrangement, scheme of arrangement or other similar transaction) (a
"
Distribution
"), at any time after the issuance of this Warrant, then, in each such case, the Holder shall be entitled to participate in such
Distribution to the same extent that the Holder would have participated therein if the Holder had
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held
the number of shares of Common Stock acquirable upon complete exercise of this Warrant (without regard to any limitations or restrictions on exercise of this Warrant, including without
limitation, the Maximum Percentage) immediately before the date of which a record is taken for such Distribution, or, if no such record is taken, the date as of which the record holders of shares of
Common Stock are to be determined for the participation in such Distribution (
provided
,
however
, that to
the extent that the Holder's right to participate in any such Distribution would result in the Holder and the other Attribution Parties exceeding the Maximum Percentage, then the Holder shall not be
entitled to participate in such Distribution to such extent (and shall not be entitled to beneficial ownership of such shares of Common Stock as a result of such Distribution (and beneficial
ownership) to such extent) and the portion of such Distribution shall be held in abeyance for the benefit of the Holder until such time or times as its right thereto would not result in the Holder and
the other Attribution Parties exceeding the Maximum Percentage, at which time or times the Holder shall be granted such Distribution (and any Distributions declared or made on such initial
Distribution or on any subsequent Distribution held similarly in abeyance) to the same extent as if there had been no such limitation).
4.
PURCHASE RIGHTS; FUNDAMENTAL TRANSACTIONS
.
(a)
Purchase Rights.
In addition to any adjustments pursuant to Section 2 above, if at any time on or after the
Subscription Date and on or prior to the Expiration Date the Company grants, issues or sells any Options, Convertible Securities or rights to purchase stock, warrants, securities or other property pro
rata to the record holders of any class of Common Stock (the "
Purchase Rights
"), then the Holder will be entitled to acquire, upon the terms applicable
to such Purchase Rights, the aggregate Purchase Rights which the Holder could have acquired if the Holder had held the number of shares of Common Stock acquirable upon complete exercise of this
Warrant (without regard to any limitations or restrictions on exercise of this Warrant, including without limitation, the Maximum Percentage) immediately before the date on which a record is taken for
the grant, issuance or sale of such Purchase Rights, or, if no such record is taken, the date as of which the record holders of Common Stock are to be determined for the grant, issuance or sale of
such Purchase Rights (
provided
,
however
, that to the extent that the Holder's right to participate in
any such Purchase Right would result in the Holder and the other Attribution Parties exceeding the Maximum Percentage, then the Holder shall not be entitled to participate in such Purchase Right to
such extent (and shall not be entitled to beneficial ownership of such Common Stock as a result of such Purchase Right (and beneficial ownership) to such extent) and such Purchase Right to such extent
shall be held in abeyance for the benefit of the Holder until such time or times as its right thereto would not result in the Holder and the other Attribution Parties exceeding the Maximum Percentage,
at which time or times the Holder shall be granted such right (and any Purchase Right granted, issued or sold on such initial Purchase Right or on any subsequent Purchase Right to be held similarly in
abeyance) to the same extent as if there had been no such limitation).
(b)
Fundamental Transactions.
The Company shall not enter into or be party to a Fundamental Transaction unless (i) the
Company (or the Successor Entity) purchases this Warrant from the Holder by paying to the Holder on the effective date of the Fundamental Transaction, cash, or shares at the Company's option, in an
amount equal to the Black Scholes Value of the remaining unexercised portion of this Warrant on the date of such Fundamental Transaction; or (ii) the Successor Entity assumes all of the
obligations of the Company under this Warrant.
5.
NONCIRCUMVENTION.
The Company hereby covenants and agrees that the Company will not, by amendment of its Certificate of
Incorporation or Bylaws, or through any reorganization, transfer of assets, consolidation, merger, scheme of arrangement, dissolution, issuance or sale of securities, or any other voluntary action,
avoid or seek to avoid the observance or performance of any of the terms of this Warrant, and will at all times in good faith carry out all of the provisions of this Warrant and take
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all
action as may be required to protect the rights of the Holder. Without limiting the generality of the foregoing, the Company (i) shall not increase the par value of any shares of Common
Stock receivable
upon the exercise of this Warrant above the Exercise Price then in effect, (ii) shall take all such actions as may be necessary or appropriate in order that the Company may validly and legally
issue fully paid and nonassessable shares of Common Stock upon the exercise of this Warrant, and (iii) shall, so long as any of the Warrants are outstanding, take all action necessary to
reserve and keep available out of its authorized and unissued shares of Common Stock, solely for the purpose of effecting the exercise of the Warrants, the number of shares of Common Stock as shall
from time to time be necessary to effect the exercise of the Warrants then outstanding (without regard to any limitations on exercise).
6.
WARRANT HOLDER NOT DEEMED A STOCKHOLDER.
Except as otherwise specifically provided herein, the Holder, solely in such
Person's capacity as a holder of this Warrant, shall not be entitled to vote or receive dividends or be deemed the holder of capital stock of the Company for any purpose, nor shall anything contained
in this Warrant be construed to confer upon the Holder, solely in such Person's capacity as the Holder of this Warrant, any of the rights of a stockholder of the Company or any right to vote, give or
withhold consent to any corporate action (whether any reorganization, issue of stock, reclassification of stock, consolidation, merger, conveyance or otherwise), receive notice of meetings, receive
dividends or subscription rights, or otherwise, prior to the issuance to the Holder of the Warrant Shares which such Person is then entitled to receive upon the due exercise of this Warrant. In
addition, nothing contained in this Warrant shall be construed as imposing any liabilities on the Holder to purchase any securities (upon exercise of this Warrant or otherwise) or as a stockholder of
the Company, whether such liabilities are asserted by the Company or by creditors of the Company.
7.
REISSUANCE OF WARRANTS
.
(a)
Transfer of Warrant
. If this Warrant is to be transferred, the Holder shall surrender this Warrant to the Company,
whereupon the Company will forthwith issue and deliver upon the order of the Holder a new Warrant (in accordance with Section 7(d)), registered as the Holder may request, representing the right
to purchase the number of Warrant Shares being transferred by the Holder and, if less than the total number of Warrant Shares then underlying this Warrant is being transferred, a new Warrant (in
accordance with Section 7(d)) to the Holder representing the right to purchase the number of Warrant Shares not being transferred.
(b)
Lost, Stolen or Mutilated Warrant
. Upon receipt by the Company of evidence reasonably satisfactory to the Company of the
loss, theft, destruction or mutilation of this Warrant, and, in the case of loss, theft or destruction, of any indemnification undertaking by the Holder to the Company in customary form (but without
the obligation to post a bond) and, in the case of mutilation, upon surrender and cancellation of this Warrant, the Company shall execute and deliver to the Holder a new Warrant (in accordance with
Section 7(d)) representing the right to purchase the Warrant Shares then underlying this Warrant.
(c)
Exchangeable for Multiple Warrants
. This Warrant is exchangeable, upon the surrender hereof by the Holder at the principal
office of the Company, for a new Warrant or Warrants (in accordance with Section 7(d)) representing in the aggregate the right to purchase the number of Warrant Shares then underlying this
Warrant, and each such new Warrant will represent the right to purchase such portion of such Warrant Shares as is designated by the Holder at the time of such surrender.
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(d)
Issuance of New Warrants
. Whenever the Company is required to issue a new Warrant pursuant to the
terms of this Warrant, such new Warrant (i) shall be of like tenor with this Warrant, (ii) shall represent, as indicated on the face of such new Warrant, the right to purchase the
Warrant Shares then underlying this Warrant (or in the case of a new Warrant being issued pursuant to Section 7(a) or Section 7(c), the Warrant Shares designated by the Holder which,
when added to the number of shares of Common Stock underlying the other new Warrants issued in connection with such issuance, does not exceed the number of Warrant Shares then underlying this
Warrant), (iii) shall have an issuance date, as indicated on the face of such new Warrant which is the same as the Issuance Date, and (iv) shall have the same rights and conditions as
this Warrant.
8.
NOTICES
. Whenever notice is required to be given under this Warrant, unless otherwise provided herein, such notice shall be
given in writing, (i) if delivered (a) from within the domestic United States, by first-class registered or certified airmail, or nationally recognized overnight express courier, postage
prepaid, or facsimile or (b) from outside the United States, by International Federal Express, or facsimile, and (ii) will be deemed given (A) if delivered by first-class
registered or certified mail domestic, three (3) Business Days after so mailed, (B) if delivered by nationally recognized overnight carrier, one (1) Business Day after so
mailed, (C) if delivered by International Federal Express, two (2) Business Days after so mailed and (D) if delivered by facsimile, upon electronic confirmation of receipt
of such facsimile, and will be delivered and addressed as follows:
(i) if
to the Company, to:
Capstone
Turbine Corporation
21211 Nordhoff Street
Chatsworth, California 91311
Attention: Corporate Counsel
Facsimile: 818.734.5321
(ii) if
to the Holder, at such address or other contact information delivered by the Holder to Company or as is on the books and records of the Company.
The
Company shall provide the Holder with prompt written notice of all actions taken pursuant to this Warrant, including in reasonable detail a description of such action and the reason therefor.
Without limiting the generality of the foregoing, the Company will give written notice to the Holder (i) immediately upon any adjustment of the Exercise Price, setting forth in reasonable
detail, and certifying, the calculation of such adjustment and (ii) at least fifteen (15) days prior to the date on which the Company closes its books or takes a record (A) with
respect to any dividend or distribution upon the shares of Common Stock, (B) with respect to any grants, issuances or sales of any Options, Convertible Securities or rights to purchase stock,
warrants, securities or other property to holders of shares of Common Stock or (C) for determining rights to vote with respect to any Fundamental Transaction, dissolution or liquidation;
provided
in each case that such information shall be made known to the public prior to or in conjunction with such notice being provided to the Holder.
It is expressly understood and agreed that the time of exercise specified by the Holder in each Exercise Notice shall be definitive and may not be disputed or challenged by the Company.
9.
AMENDMENT AND WAIVER
. Except as otherwise provided herein, the provisions of this Warrant may be amended or waived and the
Company may take any action herein prohibited, or omit to perform any act herein required to be performed by it, only if the Company has obtained the written consent of the Holder.
10.
GOVERNING LAW; JURISDICTION; JURY TRIAL
. This Warrant shall be governed by and construed and enforced in accordance with,
and all questions concerning the construction, validity, interpretation and performance of this Warrant shall be governed by, the internal laws of the State of
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New
York, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of New York or any other jurisdictions) that would cause the application of the laws of
any jurisdictions other than the State of New York. The Company hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in The City of New York, Borough of
Manhattan, for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein, and hereby irrevocably waives, and agrees not to
assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is brought in an inconvenient forum or
that the venue of such suit, action or proceeding is improper. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. Nothing contained
herein shall be deemed or operate to preclude the Holder from bringing suit or taking other legal action against the Company in any other jurisdiction to collect on the Company's obligations to the
Holder, to realize on any collateral or any other security for such obligations, or to enforce a judgment or other court ruling in favor of the Holder.
THE COMPANY HEREBY
IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF THIS WARRANT OR ANY TRANSACTION
CONTEMPLATED HEREBY.
11.
DISPUTE RESOLUTION
. In the case of a dispute as to the determination of the Exercise Price or the arithmetic calculation
of the Warrant Shares, the Company shall submit the disputed determinations or arithmetic calculations via facsimile or electronic mail within two (2) Business Days of receipt of the
Exercise Notice or other event giving rise to such dispute, as the case may be, to the Holder. If the Holder and the Company are unable to agree upon such determination or calculation of the Exercise
Price or the Warrant Shares within three (3) Business Days of such disputed determination or arithmetic calculation being submitted to the Holder, then the Company shall, within
two (2) Business Days submit via facsimile or electronic mail (a) the disputed determination of the Exercise Price to an independent, reputable investment bank selected by the
Company and approved by the Holder or (b) the disputed arithmetic calculation of the Warrant Shares to the Company's independent, outside accountant. The Company shall cause at its expense the
investment bank or the accountant, as the case may be, to perform the determinations or calculations and notify the Company and the Holder of the results no later than ten (10) Business Days
from the time it receives the disputed determinations or calculations. Such investment bank's or accountant's determination or calculation, as the case may be, shall be binding upon all parties absent
demonstrable error.
12.
REMEDIES, OTHER OBLIGATIONS, BREACHES AND INJUNCTIVE RELIEF
. The remedies provided in this Warrant shall be cumulative and
in addition to all other remedies available under this Warrant and any other Transaction Documents, at law or in equity (including a decree of specific performance and/or other injunctive relief), and
nothing herein shall limit the right of the Holder to pursue actual damages for any failure by the Company to comply with the terms of this Warrant. The Company acknowledges that a breach by it of its
obligations hereunder will cause irreparable harm to the Holder and that the remedy at law for any such breach may be inadequate. The Company
therefore agrees that, in the event of any such breach or threatened breach, the holder of this Warrant shall be entitled, in addition to all other available remedies, to an injunction restraining any
breach, without the necessity of showing economic loss and without any bond or other security being required.
13.
TRANSFER
. This Warrant and the Warrant Shares may be offered for sale, sold, transferred, pledged or assigned without the
consent of the Company in accordance with Section 7(a) hereof.
14.
SEVERABILITY; CONSTRUCTION; HEADINGS
. If any provision of this Warrant is prohibited by law or otherwise determined to be
invalid or unenforceable by a court of competent jurisdiction, the provision that would otherwise be prohibited, invalid or unenforceable shall be deemed amended to apply to the broadest extent that
it would be valid and enforceable, and the invalidity or
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unenforceability
of such provision shall not affect the validity of the remaining provisions of this Warrant so long as this Warrant as so modified continues to express, without material change, the
original intentions of the parties as to the subject matter hereof and the prohibited nature, invalidity or unenforceability of the provision(s) in question does not substantially impair the
respective expectations or reciprocal obligations of the parties or the practical realization of the benefits that would otherwise be conferred upon the parties. The parties will endeavor in good
faith negotiations to replace the prohibited, invalid or unenforceable provision(s) with a valid provision(s), the effect of which comes as close as possible to that of the prohibited, invalid or
unenforceable provision(s). This Warrant shall be deemed to be jointly drafted by the Company and all the Buyers and shall not be construed against any Person as the drafter hereof. The headings of
this Warrant are for convenience of reference and shall not form part of, or affect the interpretation of, this Warrant.
15.
DISCLOSURE
. Upon receipt or delivery by the Company of any notice in accordance with the terms of this Warrant, unless the
Company has in good faith determined that the matters relating to such notice do not constitute material, nonpublic information relating to the Company or its subsidiaries, the Company shall
contemporaneously with any such receipt or delivery publicly disclose such material, nonpublic information on a Current Report on Form 8-K or otherwise. In the event that the Company believes
that a notice contains material, nonpublic information relating to the Company or its subsidiaries, the Company so shall indicate to such Holder contemporaneously with delivery of such notice, and in
the absence of any such indication, the Holder shall be allowed to presume that all matters relating to such notice do not constitute material, nonpublic information relating to the Company or its
subsidiaries.
16.
CERTAIN DEFINITIONS
. For purposes of this Warrant, the following terms shall have the following meanings:
(a) "
Affiliate
" means, with respect to any Person, any other Person that directly or indirectly controls, is controlled by, or is under
common control with, such Person, it being understood for purposes of this definition that "control" of a Person means the power directly or indirectly either to vote 10% or more of the stock having
ordinary voting power for the election of directors of such Person or direct or cause the direction of the management and policies of such Person whether by contract or otherwise.
(b) "
Approved Stock Plan
" means any employee benefit plan which has been approved by a majority of the disinterested members of the Board
of Directors of the Company, pursuant to which the Company's securities may be issued to any employee, officer or director for services provided to the Company.
(c) "
Attribution Parties
" means, collectively, the following Persons and entities: (i) any investment vehicle, including, any funds,
feeder funds or managed accounts, currently, or from time to time after the Subscription Date, directly or indirectly managed or advised by the Holder's investment manager or any of its Affiliates or
principals, (ii) any direct or indirect Affiliates of the Holder or any of the foregoing, (iii) any Person acting or who could be deemed to be acting as a Group together with the Holder
or any of the foregoing and (iv) any other Persons whose beneficial ownership of the Company's Common Stock would or could be aggregated with the Holder's and the other Attribution Parties for
purposes of Section 13(d) of the 1934 Act. For clarity, the purpose of the foregoing is to subject collectively the Holder and all other Attribution Parties to the Maximum Percentage.
(d) "
Bid Price
" means, for any security as of the particular time of determination, the bid price for such security on the Principal Market
as reported by Bloomberg as of such time of determination, or, if the Principal Market is not the principal securities exchange or trading market for such security, the bid price of such security on
the principal securities exchange or trading market where such security is listed or traded as reported by Bloomberg as of such time of determination, or if the
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foregoing
does not apply, the bid price of such security in the over-the-counter market on the electronic bulletin board for such security as reported by Bloomberg as of such time of determination,
or, if no bid price is reported for such security by Bloomberg as of such time of determination, the average of the bid prices of any market makers for such security as reported in the "pink sheets"
by OTC Markets Group Inc. (formerly Pink Sheets LLC) as of such time of determination. If the Bid Price cannot be calculated for a security as of the particular time of determination on
any of the foregoing bases, the Bid Price of such security as of such time of determination shall be the fair market value as mutually determined by the Company and the Holder. If the Company and the
Holder are unable to
agree upon the fair market value of such security, then such dispute shall be resolved in accordance with the procedures in Section 11. All such determinations shall be appropriately adjusted
for any stock dividend, stock split, stock combination or other similar transaction during such period.
(e) "
Black Scholes Value
" means the value of this Warrant based on the Black-Scholes Option Pricing Model obtained from the "OV" function
on Bloomberg determined as of the day immediately following the first public announcement of the applicable Fundamental Transaction, or, if the Fundamental Transaction is not publicly announced, the
date the Fundamental Transaction is consummated, for pricing purposes and reflecting (i) a risk-free interest rate corresponding to the U.S. Treasury rate for a period equal to the remaining
term of this Warrant as of such date of request, (ii) an expected volatility equal to the lesser of 100% and the 100-day volatility obtained from the HVT function on Bloomberg as of the day
immediately following the public announcement of the applicable Fundamental Transaction, or, if the Fundamental Transaction is not publicly announced, the date the Fundamental Transaction is
consummated, (iii) the underlying price per share used in such calculation shall be the highest Weighted Average Price during the five (5) Trading Days prior to the closing of the
Fundamental Transaction, (iv) a zero cost of borrow and (v) a 360 day annualization factor.
(f) "
Bloomberg
" means Bloomberg Financial Markets.
(g) "
Business Day
" means any day other than Saturday, Sunday or other day on which commercial banks in The City of New York are authorized
or required by law to remain closed.
(h) "
Closing Bid Price
" and "
Closing Sale Price
" means, for any security as of any date,
the last closing bid price and last closing trade price, respectively, for such security on the Principal Market, as reported by Bloomberg, or, if the Principal Market begins to operate on an extended
hours basis and does not designate the closing bid price or the closing trade price, as the case may be, then the last bid price or the last trade price, respectively, of such security prior to
4:00:00 p.m., New York time, as reported by Bloomberg, or, if the Principal Market is not the principal securities exchange or trading market for such security, the last closing bid price or
last trade price, respectively, of such security on the principal securities exchange or trading market where such security is listed or traded as reported by Bloomberg, or if the foregoing do not
apply, the last closing bid price or last trade price, respectively, of such security in the over-the-counter market on the electronic bulletin board for such security as reported by Bloomberg, or, if
no closing bid price or last trade price, respectively, is reported for such security by Bloomberg, the average of the bid prices, or the ask prices, respectively, of any market makers for such
security as reported in the OTC Link or "pink sheets" by OTC Markets Group Inc. (formerly Pink OTC Markets Inc.). If the Closing Bid Price or the Closing Sale Price cannot be calculated
for a security on a particular date on any of the foregoing bases, the Closing Bid Price or the Closing Sale Price, as the case may be, of such security on such date shall be the fair market value as
mutually determined by the Company and the Holder. If the Company and the Holder are unable to agree upon the fair market value of such security, then such dispute shall be resolved pursuant to
Section 11. All such determinations to be appropriately adjusted for any stock dividend, stock split, stock combination, reclassification or other similar transaction during the applicable
calculation period.
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(i) "
Common Stock
" means (i) the Company's Common Stock, par value $0.001 per share, and (ii) any capital stock into which
such Common Stock shall have been changed or any capital stock resulting from a reclassification of such Common Stock.
(j) "
Convertible Securities
" means any stock or securities (other than Options) directly or indirectly convertible into or exercisable or
exchangeable for shares of Common Stock.
(k) "
Eligible Market
" means The NASDAQ Capital Market, the NYSE MKT LLC, The NASDAQ Global Select Market, The NASDAQ Global Market
or The New York Stock Exchange, Inc.
(l) "
Expiration Date
" means the date sixty (60) months after the Initial Exercisability Date or, if such date falls on a day
other than a Business Day or on which trading does not take place on the Principal Market (a "
Holiday
"), the next day that is not a Holiday.
(m) "
Fundamental Transaction
" means (A) that the Company shall, directly or indirectly, including through subsidiaries, Affiliates
or otherwise, in one or more related transactions, (i) consolidate or merge with or into (whether or not the Company is the surviving corporation) another Subject Entity, or (ii) sell,
assign, transfer, convey or otherwise dispose of all or substantially all of the properties or assets of the Company or any of its "significant subsidiaries" (as defined in Rule 1-02 of
Regulation S-X) to one or more Subject Entities, or (iii) make, or allow one or more Subject Entities to make, or allow the Company to be subject to or have its shares of Common Stock be
subject to or party to one or more Subject Entities making, a purchase, tender or exchange offer that is accepted by the holders of at least either (x) 50% of the outstanding shares of Common
Stock, (y) 50% of the outstanding shares of Common Stock calculated as if any shares of Common Stock held by all Subject Entities making or party to, or Affiliated with any Subject Entities
making or party to, such purchase, tender or exchange offer were not outstanding; or (z) such number of shares of Common Stock such that all Subject Entities making or party to, or Affiliated
with any Subject Entity making or party to, such purchase, tender or exchange offer, become collectively the beneficial owners (as defined in Rule 13d-3 under the 1934 Act) of at least 50% of
the outstanding shares of Common Stock, or (iv) consummate a stock purchase agreement or other business combination (including, without limitation, a reorganization, recapitalization, spin-off
or scheme of arrangement) with one or more Subject Entities whereby all such Subject Entities, individually or in the aggregate, acquire, either (x) at least 50% of the outstanding shares of
Common Stock, (y) at least 50% of the outstanding shares of Common Stock calculated as if any shares of Common Stock held by all the Subject Entities making or party to, or Affiliated with any
Subject Entity making or party to, such stock purchase agreement or other business combination were not outstanding; or (z) such number of shares of Common Stock such that the Subject Entities
become collectively the beneficial owners (as defined in Rule 13d-3 under the 1934 Act) of at least 50% of the
outstanding shares of Common Stock, or (v) reorganize, recapitalize or reclassify its shares of Common Stock, (B) that the Company shall, directly or indirectly, including through
subsidiaries, Affiliates or otherwise, in one or more related transactions, allow any Subject Entity individually or the Subject Entities in the aggregate to be or become the "beneficial owner" (as
defined in Rule 13d-3 under the 1934 Act), directly or indirectly, whether through acquisition, purchase, assignment, conveyance, tender, tender offer, exchange, reduction in outstanding shares
of Common Stock, merger, consolidation, business combination, reorganization, recapitalization, spin-off, scheme of arrangement, reorganization, recapitalization or reclassification or otherwise in
any manner whatsoever, of either (x) at least 50% of the aggregate ordinary voting power represented by issued and outstanding shares of Common Stock, (y) at least 50% of the aggregate
ordinary voting power represented by issued and outstanding shares of Common Stock not held by all such Subject Entities as of the Subscription Date calculated as if any shares of Common Stock held by
all such Subject Entities were not outstanding, or (z) a percentage of the aggregate ordinary voting power represented by issued and outstanding shares of Common Stock or other equity
securities of the Company sufficient to allow such Subject Entities to
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effect
a statutory short form merger or other transaction requiring other stockholders of the Company to surrender their Common Stock without approval of the stockholders of the Company or
(C) directly or indirectly, including through subsidiaries, Affiliates or otherwise, in one or more related transactions, the issuance of or the entering into any other instrument or
transaction structured in a manner to circumvent, or that circumvents, the intent of this definition in which case this definition shall be construed and implemented in a manner otherwise than in
strict conformity with the terms of this definition to the extent necessary to correct this definition or any portion of this definition which may be defective or inconsistent with the intended
treatment of such instrument or transaction.
(n) "
Group
" means a "group" as that term is used in Section 13(d) of the 1934 Act and as defined in Rule 13d-5 thereunder.
(o) "
Options
" means any rights, warrants or options to subscribe for or purchase shares of Common Stock or Convertible Securities.
(p) "
Parent Entity
" of a Person means an entity that, directly or indirectly, controls the applicable Person, including such entity whose
common stock or equivalent equity security is quoted or listed on an Eligible Market (or, if so elected by the Holder, any other market, exchange or quotation system), or, if there is more than one
such Person or such entity, the Person or such entity designated by the Holder or in the absence of such designation, such Person or entity with the largest public market capitalization as of the date
of consummation of the Fundamental Transaction.
(q) "
Person
" means an individual, a limited liability company, a partnership, a joint venture, a corporation, a trust, an unincorporated
organization, any other entity and a government or any department or agency thereof.
(r) "
Principal Market
" means The NASDAQ Capital Market.
(s) "
Required Holders
" means the holders of the Warrants representing at least a majority of the shares of Common Stock underlying the
Warrants then outstanding.
(t) "
Subject Entity
" means any Person, Persons or Group or any Affiliate or associate of any such Person, Persons or Group.
(u) "
Successor Entity
" means one or more Person or Persons (or, if so elected by the Holder, the Company or Parent Entity) formed by,
resulting from or surviving any Fundamental Transaction or one or more Person or Persons (or, if so elected by the Holder, the Company or the Parent Entity) with which such Fundamental Transaction
shall have been entered into.
(v) "
Trading Day
" means any day on which the Common Stock is traded on the Principal Market, or, if the Principal Market is not the
principal trading market for the Common Stock, then on the principal securities exchange or securities market on which the Common Stock is then traded.
(w) "
Transaction Documents
" means any agreement entered into by and between the Company and the Holder, as applicable.
(x) "
Weighted Average Price
" means, for any security as of any date, the dollar volume-weighted average price for such security on the
Principal Market during the period beginning at 9:30:01 a.m., New York time (or such other time as the Principal Market publicly announces is the official open of trading), and ending at
4:00:00 p.m., New York time (or such other time as the Principal Market publicly announces is the official close of trading), as reported by Bloomberg through its "Volume at Price" function or,
if the foregoing does not apply, the dollar volume-weighted average price of such security in the over-the-counter market on the electronic bulletin board for such security during the period beginning
at 9:30:01 a.m., New York time (or such other time as such market publicly
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announces
is the official open of trading), and ending at 4:00:00 p.m., New York time (or such other time as such market publicly announces is the official close of trading), as reported by
Bloomberg, or, if no dollar volume-weighted average price is reported for such security by Bloomberg for such hours, the average of the highest Closing Bid Price and the lowest closing ask price of
any of the market makers for such security as reported in the OTC Link or "pink sheets" by OTC Markets Group Inc. (formerly Pink OTC Markets Inc.). If the Weighted Average Price cannot
be calculated for a security on a particular date on any of the foregoing bases, the Weighted Average Price of such security on such date shall be the fair market value as mutually determined by the
Company and the Holder. If the Company and the Holder are unable to agree upon the fair market value of such security, then such dispute shall be resolved pursuant to Section 11 with the term
"Weighted Average Price" being substituted for the term "Exercise Price." All such determinations shall be appropriately adjusted for any stock dividend, stock split, stock combination,
reclassification or other similar transaction during the applicable calculation period.
[Signature Page Follows]
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IN WITNESS WHEREOF,
the Company has caused this Series A Warrant to Purchase Common Stock to be duly executed as of the
Issuance Date set out above.
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CAPSTONE TURBINE CORPORATION
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EXHIBIT A
EXERCISE NOTICE
TO BE EXECUTED BY THE REGISTERED HOLDER TO EXERCISE THIS
SERIES A WARRANT TO PURCHASE COMMON STOCK
CAPSTONE TURBINE CORPORATION
The undersigned holder (the "
Holder
") hereby exercises the right to purchase
of the shares of Common Stock ("
Warrant Shares
") of
Capstone Turbine Corporation, a
company organized under the laws of Delaware (the "
Company
"), evidenced by the attached Series A Warrant to Purchase Common Stock (the
"
Warrant
"). Capitalized terms used herein and not otherwise defined shall have the respective meanings set forth in the Warrant.
1. Form
of Exercise Price. The Holder intends that payment of the Exercise Price shall be made as:
a
"
Cash Exercise
" with respect to Warrant Shares; and/or
a
"
Cashless Exercise
" with respect to Warrant Shares.
2. Payment
of Exercise Price. In the event that the Holder has elected a Cash Exercise with respect to some or all of the Warrant Shares to be issued pursuant hereto, the
Holder shall pay the Aggregate Exercise Price in the sum of $ to the Company in accordance with the terms of the Warrant.
3. Delivery
of Warrant Shares. The Company shall deliver to the Holder Warrant Shares in
accordance with the terms of the Warrant.
Date: ,
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Name of Registered Holder
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ACKNOWLEDGMENT
The Company hereby acknowledges this Exercise Notice and hereby directs Computershare Inc. to issue the above indicated number
of shares of Common Stock on or prior to the applicable Share Delivery Date.
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CAPSTONE TURBINE CORPORATION
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Annex B
Form of Pre-Funded Series B Warrant to Purchase Common Stock
CAPSTONE TURBINE CORPORATION
PRE-FUNDED SERIES B WARRANT TO PURCHASE COMMON STOCK
Warrant
No.:
Number of Shares of Common Stock:
Date of Issuance: April [
·
], 2016 ("
Issuance
Date
")
Capstone
Turbine Corporation, a company organized under the laws of Delaware (the "
Company
"), hereby certifies that, for good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, [HOLDER], the registered holder hereof or its permitted assigns (the
"
Holder
"), is entitled, subject to the terms set forth below, to purchase from the Company, at the Exercise Price (as defined below) then in effect, at
any time or times on or after [ ] (the "
Initial Exercisability Date
"), but not after 11:59 p.m., New York
time, on the Expiration Date, (as defined below),
( )
(1)
fully paid nonassessable shares of Common Stock (as defined
below), subject to adjustment as
provided herein (the "
Warrant Shares
"). Except as otherwise defined herein, capitalized terms in this Pre-funded Series B Warrant to Purchase
Common Stock (including any Warrants to Purchase Common Stock issued in exchange, transfer or replacement hereof, this "
Warrant
"), shall have the
meanings set forth in Section 16. This Warrant is one of the Warrants to purchase Common Stock (the "
Warrants
") issued pursuant to
(i) that certain Underwriting Agreement, dated as of April [
·
], 2016
(the "
Subscription Date
") by and between the Company and Oppenheimer & Co. Inc., (ii) the Company's Registration Statement
on Form S-3 (File number 333-203431) (the "
Registration Statement
") and (iii) the Company's prospectus supplement dated as of
April [
·
], 2016.
The Aggregate Exercise Price (as defined below) of this Warrant, except for a nominal exercise price of $0.01 per Warrant Share, was pre-funded to the Company on or prior to
the initial Issuance Date and, consequently, no additional consideration (other than the nominal exercise price of $0.01 per Warrant Share) shall be required to be paid by the Holder to any Person to
effect any exercise of this Warrant. The Holder shall not be entitled to the return or refund of all, or any portion, of such pre-paid Aggregate Exercise Price under any circumstance or for any reason
whatsoever, including in the event this Warrant shall not have been exercised prior to the Expiration Date.
1.
EXERCISE OF WARRANT.
(a)
Mechanics of Exercise.
Subject to the terms and conditions hereof (including, without limitation, the limitations set
forth in Section 1(f)), this Warrant may be exercised by the Holder at any time or times on or after the Initial Exercisability Date, in whole or in part, by (i) delivery (whether via
facsimile, electronic mail or otherwise) of a written notice, in the form attached hereto as
Exhibit A
(the "
Exercise
Notice
"), of the Holder's election to exercise this Warrant and (ii) (A) payment to the Company of an amount equal to the Exercise Price in effect on the date of
such exercise multiplied by the number of Warrant Shares as to which this Warrant is being exercised (the "
Aggregate Exercise Price
") in cash by wire
transfer of immediately available funds or (B) if the provisions of Section 1(d) are applicable, by notifying the Company that this Warrant is being exercised pursuant to a Cashless
Exercise (as defined in Section 1(d)). The Holder shall not be required to deliver the original Warrant in order to effect an exercise hereunder, nor shall any
-
(1)
-
Insert [ ]% of the number of shares of Common Stock purchased pursuant to the
Underwriting Agreement.
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ink-original
signature or medallion guarantee (or other type of guarantee or notarization) with respect to any Exercise Notice be required. Execution and delivery of the Exercise Notice with respect
to less than all of the Warrant Shares shall have the same effect as cancellation of the original Warrant and issuance of a new Warrant evidencing the right to purchase the remaining number of Warrant
Shares. On or before the first (1
st
) Trading Day following the date on which the Company has received the applicable Exercise Notice, the Company shall transmit by facsimile or
electronic mail an acknowledgment of confirmation of receipt of the Exercise Notice, in the form attached to the Exercise Notice, to the Holder and the Company's transfer agent (the
"
Transfer Agent
"). So long as the Holder delivers the Aggregate Exercise Price (or notice of a Cashless Exercise) on or prior to the
second (2
nd
) Trading Day following the date on which the Exercise Notice has been delivered to the Company, then on or prior to the third (3
rd
) Trading Day following
the date on which the Exercise Notice has been delivered to the Company, or, if the Holder does not deliver the Aggregate Exercise Price (or notice of a Cashless Exercise) on or prior to the
second (2
nd
) Trading Day following the date on which the Exercise Notice has been delivered to the Company, then on or prior to the second (2
nd
) Trading Day
following the date on which the Aggregate Exercise Price (or notice of a Cashless Exercise) is delivered (the "
Share Delivery Date
"), the Company shall
(X) provided that the Transfer Agent is participating in The Depository Trust Company ("
DTC
") Fast Automated Securities Transfer Program, credit
such aggregate number of Warrant Shares to which the Holder is entitled pursuant to such exercise to the Holder's or its designee's balance account with DTC through its Deposit / Withdrawal At
Custodian system, or (Y) if the Transfer Agent is not participating in the DTC Fast Automated Securities Transfer Program, issue and dispatch by overnight courier to the address as specified in
the Exercise Notice, a certificate, registered in the Company's share register in the name of the Holder or its designee, for the number of Warrant Shares to which the Holder is entitled pursuant to
such exercise. The Company shall be responsible for all fees and expenses of the Transfer Agent and all fees and expenses with respect to the issuance of Warrant Shares via DTC, if any, including
without limitation for same day processing. Upon delivery of the Exercise Notice, the Holder shall be deemed for all corporate purposes to have become the holder of record and beneficial owner of the
Warrant Shares with respect to which this Warrant has been exercised, irrespective of the date such Warrant Shares are credited to the Holder's DTC account or the date of delivery of the certificates
evidencing such Warrant Shares, as the case may be. If this Warrant is physically delivered to the Company in connection with any exercise pursuant to this Section 1(a) and the number of
Warrant Shares represented by this Warrant submitted for exercise is greater than the number of Warrant Shares being acquired upon an exercise, then the Company shall as soon as practicable and in no
event later than three (3) Trading Days after any exercise and at its own expense, issue and deliver to the Holder (or its designee) a new Warrant (in accordance with Section 7(d))
representing the right to purchase the number of Warrant Shares issuable immediately prior to such exercise under this Warrant, less the number of Warrant Shares with respect to which this Warrant is
exercised. No fractional Warrant Shares are to be issued upon the exercise of this Warrant, but rather the number of Warrant Shares to be issued shall be rounded to the nearest whole number. The
Company shall pay any and all transfer, stamp, issuance and similar taxes, costs and expenses (including, without limitation, fees and expenses of the Transfer Agent) which may be payable with respect
to the issuance and delivery of Warrant Shares upon exercise of this Warrant. The Company's obligations to issue and deliver Warrant Shares in accordance with the terms and subject to the conditions
hereof are absolute and unconditional, irrespective of any action or inaction by the Holder to enforce the same, any waiver or consent with respect to any provision hereof (except consents and waiver
provided under Section 9 hereof), the recovery of any judgment against any Person
or any action to enforce the same, or any setoff, counterclaim, recoupment, limitation or termination;
provided
,
however
, that the Company shall not be
required to deliver Warrant Shares with respect to an exercise prior to the Holder's delivery of the Aggregate
Exercise Price (or notice of a Cashless
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Exercise)
with respect to such exercise. The Company may request a certificate from the Holder upon receipt of an Exercise Notice to the effect that the Holder does not beneficially own in excess of
the Maximum Percentage (as defined below), and the Company shall have the right to rely on such certificate.
(b)
Exercise Price.
For purposes of this Warrant, "
Exercise Price
" means
$[ ], subject to adjustment as provided herein.
(c)
Company's Failure to Timely Deliver Securities.
If either (I) the Company shall fail for any reason or for no
reason to issue to the Holder on or prior to the applicable Share Delivery Date, if (x) the Transfer Agent is not participating in the DTC Fast Automated Securities Transfer Program, a
certificate for the number of shares of Common Stock to which the Holder is entitled and register such Common Stock on the Company's share register or (y) the Transfer Agent is participating in
the DTC Fast Automated Securities Transfer Program, to credit the Holder's balance account with DTC, for such number of shares of Common Stock to which the Holder is entitled upon the Holder's
exercise of this Warrant or (II) a registration statement (which may be the Registration Statement) covering the issuance or resale of the Warrant Shares that are the subject of the Exercise
Notice (the "
Exercise Notice Warrant Shares
") is not available for the issuance or resale, as applicable, of such Exercise Notice Warrant Shares and
(x) the Company fails to promptly, but in no event later than one (1) Business Day after such registration statement becomes unavailable, to so notify the Holder and (y) the
Company is unable to deliver the Exercise Notice Warrant Shares electronically without any restrictive legend by crediting such aggregate number of Exercise Notice Warrant Shares to the Holder's or
its designee's balance account with DTC through its Deposit / Withdrawal At Custodian system (the event described in the immediately foregoing clause (II) is hereinafter referred as a
"
Notice Failure
" and together with the event described in clause (I) above, an "
Exercise
Failure
"), then, in addition to all other remedies available to the Holder, if on or prior to the applicable Share Delivery Date either (I) if the Transfer Agent is not
participating in the DTC Fast Automated Securities Transfer Program, the Company shall fail to issue and deliver a certificate to the Holder and register such shares of Common Stock on the Company's
share register or, if the Transfer Agent is participating in the DTC Fast Automated Securities Transfer Program, credit the Holder's balance account with DTC for the number of shares of Common Stock
to which the Holder is entitled upon the Holder's exercise hereunder or pursuant to the Company's obligation pursuant to clause (ii) below or (II) a Notice Failure occurs, and if on or
after such Trading Day the Holder purchases (in an open market transaction or otherwise) Common Stock to deliver in satisfaction of a sale by the Holder of shares of Common Stock issuable upon such
exercise that the Holder anticipated receiving from the Company (a "
Buy-In
"), then the Company shall, within three (3) Trading Days after the
Holder's request and in the Holder's discretion, either (i) pay cash to the Holder in an amount equal to the Holder's total purchase price (including brokerage commissions and other
out-of-pocket expenses, if any) for the shares of Common Stock so purchased (the "
Buy-In Price
"), at which point the Company's obligation to deliver
such certificate (and to issue such shares of Common Stock) or credit such Holder's balance account with DTC for such shares of Common Stock shall terminate, or (ii) promptly honor its
obligation to deliver to the Holder a certificate or certificates representing such shares of Common Stock or credit such Holder's balance account with DTC, 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 shares of Common Stock, times (B) any trading price of the Common Stock selected by
the Holder in writing as in effect at any time during the period beginning on the applicable Exercise Date and ending on the applicable Share Delivery Date. Nothing 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 deliver certificates representing Warrant Shares (or to electronically deliver such Warrant Shares) upon the exercise of this Warrant as required pursuant to the terms
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hereof.
While this Warrant is outstanding, the Company shall cause its transfer agent to participate in the DTC Fast Automated Securities Transfer Program. In addition to the foregoing rights,
(i) if the Company fails to deliver the applicable number of Warrant Shares upon an exercise pursuant to Section 1 by the applicable Share Delivery Date, then the Holder shall have the
right to rescind such exercise in whole or in part and retain and/or have the Company return, as the case may be, any portion of this Warrant that has not been exercised pursuant to such Exercise
Notice; provided that the rescission of an exercise shall not affect the Company's obligation to make any payments that have accrued prior to the date of such notice pursuant to this
Section 1(c) or otherwise, and (ii) if a registration statement (which may be the Registration Statement) covering the issuance or resale of the Warrant Shares that are subject to an
Exercise Notice is not available for the issuance or resale, as applicable, of such Exercise Notice Warrant Shares and the Holder has submitted an Exercise Notice prior to receiving notice of the
non-availability of such registration statement and the Company has not already delivered the Warrant Shares underlying such Exercise Notice electronically without any restrictive legend by crediting
such aggregate number of Warrant Shares to which the Holder is entitled pursuant to such exercise to the Holder's or its designee's balance account with DTC through its Deposit / Withdrawal At
Custodian system, the Holder shall have the option, by delivery of notice to the Company, to (x) rescind such Exercise Notice in whole or in part and retain or have returned, as the case may
be, any portion of this Warrant that has not been exercised pursuant to such Exercise Notice; provided that the rescission of an Exercise Notice shall not affect the Company's obligation to make any
payments that have accrued prior to the date of such notice pursuant to this Section 1(c) or otherwise, and/or (y) switch some or all of such Exercise Notice from a cash exercise to a
Cashless Exercise.
(d)
Cashless Exercise.
Notwithstanding anything contained herein to the contrary, if a registration statement (which may be
the Registration Statement) covering the issuance or resale of the Exercise Notice Warrant Shares is not available for the issuance or resale, as applicable, of such Exercise Notice Warrant Shares,
the Holder may, in its sole discretion, exercise this Warrant in whole or in part and, in lieu of making the cash payment otherwise contemplated to be made to the Company upon such exercise in payment
of the Aggregate Exercise Price, elect instead to receive upon such exercise the "Net Number" of shares of Common Stock determined according to the following formula (a
"
Cashless Exercise
"):
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Net Number
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D
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For
purposes of the foregoing formula:
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A=
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the total number of shares with respect to which this Warrant is then being exercised.
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B=
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the arithmetic average of the Closing Sale Prices of the Common Stock for the five (5) consecutive Trading Days ending on the date immediately preceding the date of the Exercise Notice.
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C=
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the Exercise Price then in effect for the applicable Warrant Shares at the time of such exercise.
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D=
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as applicable: (i) the Closing Sale Price of the Common Stock on the Trading Day immediately preceding the date of the applicable Exercise Notice if such Exercise Notice is (1) both executed and delivered
pursuant to Section 1(d) hereof on a day that is not a Trading Day or (2) both executed and delivered pursuant to Section 1(d) hereof on a Trading Day prior to the opening of "regular trading hours" (as defined in Rule 600(b)(64)
of Regulation NMS promulgated under the federal securities laws) on such Trading Day, (ii) the Bid Price of the Common Stock as of the time of the Holder's execution of the applicable Exercise Notice if such Exercise Notice is executed during
"regular trading hours" on a Trading Day and is delivered within two (2) hours thereafter pursuant to Section 1(d) hereof, or (iii) the Closing Sale Price of the Common Stock on the date of the applicable Exercise Notice if the date of
such Exercise Notice is a Trading Day and such Exercise Notice is both executed and delivered pursuant to Section 1(d) hereof after the close of "regular trading hours" on such Trading Day.
|
If
Warrant Shares are issued in such a cashless exercise, the Company acknowledges and agrees that in accordance with Section 3(a)(9) of the Securities Act of 1933, as amended, the Warrant
Shares shall take on the registered characteristics of the Warrants being exercised, and the holding period of the Warrants being exercised may be tacked on to the holding period of the Warrant
Shares. The Company agrees not to take any position contrary to this Section 1(d).
(e)
Disputes.
In the case of a dispute as to the determination of the Exercise Price or the arithmetic calculation of the
Warrant Shares, the Company shall promptly issue to the Holder the number of Warrant Shares that are not disputed and resolve such dispute in accordance with Section 11.
(f)
Beneficial Ownership.
Notwithstanding anything to the contrary contained herein, the Company shall not effect the exercise
of any portion of this Warrant, and the Holder shall not have the right to exercise any portion of this Warrant, pursuant to the terms and conditions of this Warrant and any such exercise shall be
null and void and treated as if never made, to the extent that after giving effect to such exercise, the Holder together with the other Attribution Parties collectively would beneficially own in
excess of 4.99% (the "
Maximum Percentage
") of the number of shares of Common Stock outstanding immediately after giving effect to such exercise. For
purposes of the foregoing sentence, the aggregate number of shares of Common Stock beneficially owned by the Holder and the other Attribution Parties shall include the number of shares of Common Stock
held by the Holder and all other Attribution Parties plus the number of shares of Common Stock issuable upon exercise of this Warrant with respect to which the determination of such sentence is being
made, but shall exclude the number of shares of Common Stock which would be issuable upon (A) exercise of the remaining, unexercised portion of this Warrant beneficially owned by the Holder or
any of the other Attribution Parties and (B) exercise or conversion of the unexercised or unconverted portion of any other securities of the Company (including, without limitation, any
convertible notes or convertible preferred stock or warrants, including the other Warrants) beneficially owned by the Holder or any other Attribution Party subject to a limitation on conversion or
exercise analogous to the limitation contained in this Section 1(f). For purposes of this Section 1(f), beneficial ownership shall be calculated in accordance with Section 13(d)
of the Securities Exchange Act of 1934, as amended (the "
1934 Act
"). For purposes of this Warrant, in determining the number of outstanding shares of
Common Stock the Holder may acquire upon the exercise of this Warrant without exceeding the Maximum Percentage, the Holder may rely on the number of outstanding shares of Common Stock as reflected in
(x) the Company's most recent Annual Report on Form 10-K, Quarterly Report on Form 10-Q and Current Reports on Form 8-K or other public filing with the Securities and
Exchange Commission (the "
SEC
"), as the case may be, (y) a more recent public announcement by the Company or (z) any other written notice
by the Company or the Transfer Agent setting forth the
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number
of shares of Common Stock outstanding (the "
Reported Outstanding Share Number
"). If the Company receives an Exercise Notice from the Holder at a
time when the actual number of outstanding shares of Common Stock is less than the Reported Outstanding Share Number, the Company shall (i) notify the Holder in writing of the number of shares
of Common Stock then outstanding and, to the extent that such Exercise Notice would otherwise cause the Holder's beneficial ownership, as determined pursuant to this Section 1(f), to exceed the
Maximum Percentage, the Holder must notify the Company of a reduced number of Warrant Shares to be purchased pursuant to such Exercise Notice (the number of shares by which such purchase is reduced,
the "
Reduction Shares
") and (ii) as soon as reasonably practicable, the Company shall return to the Holder any exercise price paid by the Holder
for the Reduction Shares. For any reason at any time, upon the written or oral request of the Holder, the Company shall within one (1) Business Day confirm orally and in writing or by
electronic mail 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 and any other Attribution Party since the date as of which the Reported Outstanding Share Number was
reported. In the event that the issuance of Common Stock to the Holder upon exercise of this Warrant results in the Holder and the other Attribution Parties being deemed to beneficially own, in the
aggregate, more than the Maximum Percentage of the number of outstanding shares of Common Stock (as determined under Section 13(d) of the 1934 Act), the number of shares so issued by which the
Holder's and the other Attribution Parties' aggregate beneficial ownership exceeds the Maximum Percentage (the "
Excess Shares
") shall be deemed null and
void and shall be cancelled ab initio, and the Holder shall not have the power to vote or to transfer the Excess Shares. As soon as reasonably practicable after the issuance of the Excess Shares has
been deemed null and void, the Company shall return to the Holder the exercise price paid by the Holder for the Excess Shares. Upon delivery of a written notice to the Company, the Holder may from
time to time increase or decrease the Maximum Percentage to any other percentage not in excess of 9.99% as specified in such notice; provided that (i) any such increase in the Maximum
Percentage will not be effective until the sixty-first (61
st
) day after such notice is delivered to the Company and (ii) any such increase or decrease will apply only to the
Holder and the other Attribution Parties and not to any other holder of Warrants that is not an Attribution Party of the Holder. For purposes of clarity, the shares of Common Stock issuable pursuant
to the terms of this Warrant in excess of the Maximum Percentage shall not be deemed to be beneficially owned by the Holder for any purpose including for purposes of Section 13(d) or
Rule 16a-1(a)(1) of the 1934 Act. No prior inability to exercise this Warrant pursuant to this paragraph shall have any effect on the applicability of the provisions of this paragraph with
respect to any subsequent determination of exercisability. The provisions of this paragraph shall be construed and implemented in a manner otherwise than in strict conformity with the terms of this
Section 1(f) to the extent necessary to correct this paragraph or any portion of this paragraph which may be defective or inconsistent with the intended beneficial ownership limitation
contained in this Section 1(f) or to make changes or supplements necessary or desirable to properly give effect to such limitation. The limitation contained in this paragraph may not be waived
and shall apply to a successor holder of this Warrant.
(g)
Required Reserve Amount.
So long as this Warrant remains outstanding, the Company shall at all times keep reserved for
issuance under this Warrant a number of shares of Common Stock at least
equal to 100% of the maximum number of shares of Common Stock as shall be necessary to satisfy the Company's obligation to issue shares of Common Stock under the Warrants then outstanding (without
regard to any limitations on exercise) (the "
Required Reserve Amount
");
provided
that at no time shall
the number of shares of Common Stock reserved pursuant to this Section 1(g) be reduced other than in connection with any exercise of Warrants or such other event covered by Section 2(c)
below. The Required Reserve Amount (including, without limitation, each
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increase
in the number of shares so reserved) shall be allocated pro rata among the holders of the Warrants based on the number of shares of Common Stock issuable upon exercise of Warrants held by
each holder thereof on the Issuance Date (without regard to any limitations on exercise) (the "
Authorized Share Allocation
"). In the event that a holder
shall sell or otherwise transfer any of such holder's Warrants, each transferee shall be allocated a pro rata portion of such holder's Authorized Share Allocation. Any shares of Common Stock reserved
and allocated to any Person which ceases to hold any Warrants shall be allocated to the remaining holders of Warrants, pro rata based on the number of shares of Common Stock issuable upon exercise of
the Warrants then held by such holders thereof (without regard to any limitations on exercise).
(h)
Insufficient Authorized Shares.
If at any time while this Warrant remains outstanding the Company does not have a
sufficient number of authorized and unreserved shares of Common Stock to satisfy its obligation to reserve for issuance the Required Reserve Amount (an "
Authorized Share
Failure
"), then the Company shall immediately take all action necessary to increase the Company's authorized shares of Common Stock to an amount sufficient to allow the Company
to reserve the Required Reserve Amount for this Warrant then outstanding. Without limiting the generality of the foregoing sentence, as soon as practicable after the date of the occurrence of an
Authorized Share Failure, but in no event later than one hundred-eighty (180) days after the occurrence of such Authorized Share Failure and the Authorized Share Failure still exists, the
Company shall hold a meeting of its stockholders for the approval of an increase in the number of authorized shares of Common Stock. In connection with such meeting, the Company shall provide each
stockholder with a proxy statement and shall use its best efforts to solicit its stockholders' approval of such increase in authorized shares of Common Stock and to cause its board of directors to
recommend to the stockholders that they approve such proposal. Notwithstanding the foregoing, if any such time of an Authorized Share Failure, the Company is able to obtain the written consent of a
majority of the shares of its issued and outstanding shares of Common Stock to approve the increase in the number of authorized shares of Common Stock, the Company may satisfy this obligation by
obtaining such consent and submitting for filing with the SEC an Information Statement on Schedule 14C.
2.
ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF WARRANT SHARES.
The Exercise Price and the number of Warrant Shares shall be
adjusted from time to time as follows:
(a)
Voluntary Adjustment By Company.
The Company may at any time during the term of this Warrant reduce the then current
Exercise Price to any amount and for any period of time deemed appropriate by the Board of Directors of the Company.
(b)
Adjustment Upon Subdivision or Combination of Common Stock.
If the Company at any time on or after the Subscription Date
subdivides (by any stock split, stock dividend, recapitalization or otherwise) one or more classes of its outstanding shares of Common Stock into a greater number of shares, the Exercise Price in
effect immediately prior to such subdivision will be proportionately reduced and the number of Warrant Shares will be proportionately increased. If the Company at any time on or after the Subscription
Date combines (by combination, reverse stock split or otherwise) one or more classes of its outstanding shares of Common Stock into a smaller number of shares, the Exercise Price in effect immediately
prior to such combination will be proportionately increased and the number of Warrant Shares will be proportionately decreased. Any adjustment under this Section 2(b) shall become effective at
the close of business on the date the subdivision or combination becomes effective.
(c)
Other Events.
If any event occurs of the type contemplated by the provisions of this Section 2 but not expressly
provided for by such provisions (including, without limitation, the granting of stock appreciation rights, phantom stock rights or other rights with equity features), then the Company's Board of
Directors will make an appropriate adjustment in the Exercise Price and the number of
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Warrant
Shares, as mutually determined by the Company's Board of Directors and the Required Holders, so as to protect the rights of the Holder;
provided
that no such adjustment pursuant to this Section 2(c) will increase the Exercise Price or decrease the number of Warrant Shares as otherwise determined pursuant to this Section 2.
3.
RIGHTS UPON DISTRIBUTION OF ASSETS.
In addition to any adjustments pursuant to Section 2 above, if, on or after the
Subscription Date and on or prior to the Expiration Date, the Company shall declare or make any dividend or other distribution of its assets (or rights to acquire its assets) to holders of shares of
Common Stock, by way of return of capital or otherwise (including, without limitation, any distribution of cash, stock or other securities, property, options, evidence of indebtedness or any other
assets by way of a dividend, spin off, reclassification, corporate rearrangement, scheme of arrangement or other similar transaction) (a
"
Distribution
"), at any time after the issuance of this Warrant, then, in each such case, the Holder shall be entitled to participate in such
Distribution to the same extent that the Holder would have participated therein if the Holder had held the number of
shares of Common Stock acquirable upon complete exercise of this Warrant (without regard to any limitations or restrictions on exercise of this Warrant, including without limitation, the Maximum
Percentage) immediately before the date of which a record is taken for such Distribution, or, if no such record is taken, the date as of which the record holders of shares of Common Stock are to be
determined for the participation in such Distribution (
provided
,
however
, that to the extent that the
Holder's right to participate in any such Distribution would result in the Holder and the other Attribution Parties exceeding the Maximum Percentage, then the Holder shall not be entitled to
participate in such Distribution to such extent (and shall not be entitled to beneficial ownership of such shares of Common Stock as a result of such Distribution (and beneficial ownership) to such
extent) and the portion of such Distribution shall be held in abeyance for the benefit of the Holder until such time or times as its right thereto would not result in the Holder and the other
Attribution Parties exceeding the Maximum Percentage, at which time or times the Holder shall be granted such Distribution (and any Distributions declared or made on such initial Distribution or on
any subsequent Distribution held similarly in abeyance) to the same extent as if there had been no such limitation).
4.
PURCHASE RIGHTS; FUNDAMENTAL TRANSACTIONS
.
(a)
Purchase Rights.
In addition to any adjustments pursuant to Section 2 above, if at any time on or after the
Subscription Date and on or prior to the Expiration Date the Company grants, issues or sells any Options, Convertible Securities or rights to purchase stock, warrants, securities or other property pro
rata to the record holders of any class of Common Stock (the "
Purchase Rights
"), then the Holder will be entitled to acquire, upon the terms applicable
to such Purchase Rights, the aggregate Purchase Rights which the Holder could have acquired if the Holder had held the number of shares of Common Stock acquirable upon complete exercise of this
Warrant (without regard to any limitations or restrictions on exercise of this Warrant, including without limitation, the Maximum Percentage) immediately before the date on which a record is taken for
the grant, issuance or sale of such Purchase Rights, or, if no such record is taken, the date as of which the record holders of Common Stock are to be determined for the grant, issuance or sale of
such Purchase Rights (
provided
,
however
, that to the extent that the Holder's right to participate in
any such Purchase Right would result in the Holder and the other Attribution Parties exceeding the Maximum Percentage, then the Holder shall not be entitled to participate in such Purchase Right to
such extent (and shall not be entitled to beneficial ownership of such Common Stock as a result of such Purchase Right (and beneficial ownership) to such extent) and such Purchase Right to such extent
shall be held in abeyance for the benefit of the Holder until such time or times as its right thereto would not result in the Holder and the other Attribution Parties exceeding the Maximum Percentage,
at which time or times the Holder shall be granted such right (and any Purchase Right granted, issued or sold
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on
such initial Purchase Right or on any subsequent Purchase Right to be held similarly in abeyance) to the same extent as if there had been no such limitation).
(b)
Fundamental Transactions.
The Company shall not enter into or be party to a Fundamental Transaction unless (i) the
Company (or the Successor Entity) purchases this Warrant from the Holder by paying to the Holder on the effective date of the Fundamental Transaction, cash, or shares at the Company's option, in an
amount equal to the Black Scholes Value of the remaining unexercised portion of this Warrant on the date of such Fundamental Transaction; or (ii) the Successor Entity assumes all of the
obligations of the Company under this Warrant.
5.
NONCIRCUMVENTION.
The Company hereby covenants and agrees that the Company will not, by amendment of its Certificate of
Incorporation or Bylaws, or through any reorganization, transfer of assets, consolidation, merger, scheme of arrangement, dissolution, issuance or sale of securities, or any other voluntary action,
avoid or seek to avoid the observance or performance of any of the terms of this Warrant, and will at all times in good faith carry out all of the provisions of this Warrant and take all action as may
be required to protect the rights of the Holder. Without limiting the generality of the foregoing, the Company (i) shall not increase the par value of any shares of Common Stock receivable upon
the exercise of this Warrant above the Exercise Price then in effect, (ii) shall take all such actions as may be necessary or appropriate in order that the Company may validly and legally issue
fully paid and nonassessable shares of Common Stock upon the exercise of this Warrant, and (iii) shall, so long as any of the Warrants are outstanding, take all action necessary to reserve and
keep available out of its authorized and unissued shares of Common Stock, solely for the purpose of effecting the exercise of the Warrants, the number of shares of Common Stock as shall from time to
time be necessary to effect the exercise of the Warrants then outstanding (without regard to any limitations on exercise).
6.
WARRANT HOLDER NOT DEEMED A STOCKHOLDER.
Except as otherwise specifically provided herein, the Holder, solely in such
Person's capacity as a holder of this Warrant, shall not be entitled to vote or receive dividends or be deemed the holder of capital stock of the Company for any purpose, nor shall anything contained
in this Warrant be construed to confer upon the Holder, solely in such Person's capacity as the Holder of this Warrant, any of the rights of a stockholder of the Company or any right to vote, give or
withhold consent to any corporate action (whether any reorganization, issue of stock, reclassification of stock, consolidation, merger, conveyance or otherwise), receive notice of meetings, receive
dividends or subscription rights, or otherwise, prior to the issuance to the Holder of the Warrant Shares which such Person is then entitled to receive upon the due exercise of this Warrant. In
addition, nothing contained in this Warrant shall be construed as imposing any liabilities on the Holder to purchase any securities (upon exercise of this Warrant or otherwise) or as a stockholder of
the Company, whether such liabilities are asserted by the Company or by creditors of the Company.
7.
REISSUANCE OF WARRANTS
.
(a)
Transfer of Warrant.
If this Warrant is to be transferred, the Holder shall surrender this Warrant to the Company,
whereupon the Company will forthwith issue and deliver upon the order of the Holder a new Warrant (in accordance with Section 7(d)), registered as the Holder may request, representing the right
to purchase the number of Warrant Shares being transferred by the Holder and, if less than the total number of Warrant Shares then underlying this Warrant is being transferred, a new Warrant (in
accordance with Section 7(d)) to the Holder representing the right to purchase the number of Warrant Shares not being transferred.
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(b)
Lost, Stolen or Mutilated Warrant.
Upon receipt by the Company of evidence reasonably satisfactory
to the Company of the loss, theft, destruction or mutilation of this Warrant, and, in the case of loss, theft or destruction, of any indemnification undertaking by the Holder to the Company in
customary form (but without the obligation to post a bond) and, in the case of mutilation, upon surrender and cancellation of this Warrant, the Company shall execute and deliver to the Holder a new
Warrant (in accordance with Section 7(d)) representing the right to purchase the Warrant Shares then underlying this Warrant.
(c)
Exchangeable for Multiple Warrants.
This Warrant is exchangeable, upon the surrender hereof by the Holder at the principal
office of the Company, for a new Warrant or Warrants (in accordance with Section 7(d)) representing in the aggregate the right to purchase the number of Warrant Shares then underlying this
Warrant, and each such new Warrant will represent the right to purchase such portion of such Warrant Shares as is designated by the Holder at the time of such surrender.
(d)
Issuance of New Warrants.
Whenever the Company is required to issue a new Warrant pursuant to the terms of this Warrant,
such new Warrant (i) shall be of like tenor with this Warrant, (ii) shall represent, as indicated on the face of such new Warrant, the right to purchase the Warrant Shares then
underlying
this Warrant (or in the case of a new Warrant being issued pursuant to Section 7(a) or Section 7(c), the Warrant Shares designated by the Holder which, when added to the number of shares
of Common Stock underlying the other new Warrants issued in connection with such issuance, does not exceed the number of Warrant Shares then underlying this Warrant), (iii) shall have an
issuance date, as indicated on the face of such new Warrant which is the same as the Issuance Date, and (iv) shall have the same rights and conditions as this Warrant.
8.
NOTICES.
Whenever notice is required to be given under this Warrant, unless otherwise provided herein, such notice shall be
given in writing, (i) if delivered (a) from within the domestic United States, by first-class registered or certified airmail, or nationally recognized overnight express courier, postage
prepaid, or facsimile or (b) from outside the United States, by International Federal Express, or facsimile, and (ii) will be deemed given (A) if delivered by first-class
registered or certified mail domestic, three (3) Business Days after so mailed, (B) if delivered by nationally recognized overnight carrier, one (1) Business Day after so mailed,
(C) if delivered by International Federal Express, two (2) Business Days after so mailed and (D) if delivered by facsimile, upon electronic confirmation of receipt of such
facsimile, and will be delivered and addressed as follows:
(i) if
to the Company, to:
Capstone
Turbine Corporation
21211 Nordhoff Street
Chatsworth, California 91311
Attention: Corporate Counsel
Facsimile: 818.734.5321
(ii) if
to the Holder, at such address or other contact information delivered by the Holder to Company or as is on the books and records of the Company.
The
Company shall provide the Holder with prompt written notice of all actions taken pursuant to this Warrant, including in reasonable detail a description of such action and the reason therefor.
Without limiting the generality of the foregoing, the Company will give written notice to the Holder (i) immediately upon any adjustment of the Exercise Price, setting forth in reasonable
detail, and certifying, the calculation of such adjustment and (ii) at least fifteen (15) days prior to the date on which the Company closes its books or takes a record (A) with
respect to any dividend or distribution upon the shares of Common Stock, (B) with respect to any grants, issuances or sales of any Options, Convertible Securities or rights to purchase stock,
warrants, securities or other property to holders of
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shares
of Common Stock or (C) for determining rights to vote with respect to any Fundamental Transaction, dissolution or liquidation;
provided
in
each case that such information shall be made known to the public prior to or in conjunction with such notice being provided to the Holder. It is expressly understood and agreed that the time of
exercise specified by the Holder in each Exercise Notice shall be definitive and may not be disputed or challenged by the Company.
9.
AMENDMENT AND WAIVER
. Except as otherwise provided herein, the provisions of this Warrant may be amended or waived and the
Company may take any action herein prohibited, or omit to perform any act herein required to be performed by it, only if the Company has obtained the written consent of the Holder.
10.
GOVERNING LAW; JURISDICTION; JURY TRIAL
. This Warrant shall be governed by and construed and enforced in accordance with,
and all questions concerning the construction, validity, interpretation and performance of this Warrant shall be governed by, the internal laws of the State of New York, without giving effect to any
choice of law or conflict of law provision or rule (whether of the State of New York or any other jurisdictions) that would cause the application of the laws of any jurisdictions other than the State
of New York. The Company hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in The City of New York, Borough of Manhattan, for the adjudication of any
dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein, and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding,
any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is brought in an inconvenient forum or that the venue of such suit, action or
proceeding is improper. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. Nothing contained herein shall be deemed or operate to
preclude the Holder from bringing suit or taking other legal action against the Company in any other jurisdiction to collect on the Company's obligations to the Holder, to realize on any collateral or
any other security for such obligations, or to enforce a judgment or other court ruling in favor of the Holder.
THE COMPANY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND
AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF THIS WARRANT OR ANY TRANSACTION CONTEMPLATED HEREBY.
11.
DISPUTE RESOLUTION
. In the case of a dispute as to the determination of the Exercise Price or the arithmetic calculation
of the Warrant Shares, the Company shall submit the disputed determinations or arithmetic calculations via facsimile or electronic mail within two (2) Business Days of receipt of the Exercise
Notice or other event giving rise to such dispute, as the case may be, to the Holder. If the Holder and the Company are unable to agree upon such determination or calculation of the Exercise Price or
the Warrant Shares within three (3) Business Days of such disputed determination or arithmetic calculation being submitted to the Holder, then the Company shall, within
two (2) Business Days submit via facsimile or electronic mail (a) the disputed determination of the Exercise Price to an independent, reputable investment bank selected by the
Company and approved by the Holder or (b) the disputed arithmetic calculation of the Warrant Shares to the Company's independent, outside accountant. The Company shall cause at its expense the
investment bank or the accountant, as the case may be, to
perform the determinations or calculations and notify the Company and the Holder of the results no later than ten (10) Business Days from the time it receives the disputed determinations or
calculations. Such investment bank's or accountant's determination or calculation, as the case may be, shall be binding upon all parties absent demonstrable error.
12.
REMEDIES, OTHER OBLIGATIONS, BREACHES AND INJUNCTIVE RELIEF
. The remedies provided in this Warrant shall be cumulative and
in addition to all other remedies available under this Warrant and any other Transaction Documents, at law or in equity (including a decree of specific performance and/or other injunctive relief), and
nothing herein shall limit the right of the Holder to
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pursue
actual damages for any failure by the Company to comply with the terms of this Warrant. The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to
the Holder and that the remedy at law for any such breach may be inadequate. The Company therefore agrees that, in the event of any such breach or threatened breach, the holder of this Warrant shall
be entitled, in addition to all other available remedies, to an injunction restraining any breach, without the necessity of showing economic loss and without any bond or other security being required.
13.
TRANSFER
. This Warrant and the Warrant Shares may be offered for sale, sold, transferred, pledged or assigned without the
consent of the Company in accordance with Section 7(a) hereof.
14.
SEVERABILITY; CONSTRUCTION; HEADINGS
. If any provision of this Warrant is prohibited by law or otherwise determined to be
invalid or unenforceable by a court of competent jurisdiction, the provision that would otherwise be prohibited, invalid or unenforceable shall be deemed amended to apply to the broadest extent that
it would be valid and enforceable, and the invalidity or unenforceability of such provision shall not affect the validity of the remaining provisions of this Warrant so long as this Warrant as so
modified continues to express, without material change, the original intentions of the parties as to the subject matter hereof and the prohibited nature, invalidity or unenforceability of the
provision(s) in question does not substantially impair the respective expectations or reciprocal obligations of the parties or the practical realization of the benefits that would otherwise be
conferred upon the parties. The parties will endeavor in good faith negotiations to replace the prohibited, invalid or unenforceable provision(s) with a valid provision(s), the effect of which comes
as close as possible to that of the prohibited, invalid or unenforceable provision(s). This Warrant shall be deemed to be jointly drafted by the Company and all the Buyers and shall not be construed
against any Person as the drafter hereof. The headings of this Warrant are for convenience of reference and shall not form part of, or affect the interpretation of, this Warrant.
15.
DISCLOSURE
. Upon receipt or delivery by the Company of any notice in accordance with the terms of this Warrant, unless the
Company has in good faith determined that the matters relating to such
notice do not constitute material, nonpublic information relating to the Company or its subsidiaries, the Company shall contemporaneously with any such receipt or delivery publicly disclose such
material, nonpublic information on a Current Report on Form 8-K or otherwise. In the event that the Company believes that a notice contains material, nonpublic information relating to the
Company or its subsidiaries, the Company so shall indicate to such Holder contemporaneously with delivery of such notice, and in the absence of any such indication, the Holder shall be allowed to
presume that all matters relating to such notice do not constitute material, nonpublic information relating to the Company or its subsidiaries.
16.
CERTAIN DEFINITIONS
. For purposes of this Warrant, the following terms shall have the following meanings:
(a) "
Affiliate
" means, with respect to any Person, any other Person that directly or indirectly controls, is controlled by, or is under
common control with, such Person, it being understood for purposes of this definition that "control" of a Person means the power directly or indirectly either to vote 10% or more of the stock having
ordinary voting power for the election of directors of such Person or direct or cause the direction of the management and policies of such Person whether by contract or otherwise.
(b) "
Approved Stock Plan
" means any employee benefit plan which has been approved by a majority of the disinterested members of the Board
of Directors of the Company, pursuant to which the Company's securities may be issued to any employee, officer or director for services provided to the Company.
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(c) "
Attribution Parties
" means, collectively, the following Persons and entities: (i) any investment vehicle, including, any funds,
feeder funds or managed accounts, currently, or from time to time after the Subscription Date, directly or indirectly managed or advised by the Holder's investment manager or any of its Affiliates or
principals, (ii) any direct or indirect Affiliates of the Holder or any of the foregoing, (iii) any Person acting or who could be deemed to be acting as a Group together with the Holder
or any of the foregoing and (iv) any other Persons whose beneficial ownership of the Company's Common Stock would or could be aggregated with the Holder's and the other Attribution Parties for
purposes of Section 13(d) of the 1934 Act. For clarity, the purpose of the foregoing is to subject collectively the Holder and all other Attribution Parties to the Maximum Percentage.
(d) "
Bid Price
" means, for any security as of the particular time of determination, the bid price for such security on the Principal Market
as reported by Bloomberg as of such time of determination, or, if the Principal Market is not the principal securities exchange or trading market for such security, the bid price of such security on
the principal securities exchange or trading market where such security is
listed or traded as reported by Bloomberg as of such time of determination, or if the foregoing does not apply, the bid price of such security in the over-the-counter market on the electronic bulletin
board for such security as reported by Bloomberg as of such time of determination, or, if no bid price is reported for such security by Bloomberg as of such time of determination, the average of the
bid prices of any market makers for such security as reported in the "pink sheets" by OTC Markets Group Inc. (formerly Pink Sheets LLC) as of such time of determination. If the Bid Price
cannot be calculated for a security as of the particular time of determination on any of the foregoing bases, the Bid Price of such security as of such time of determination shall be the fair market
value as mutually determined by the Company and the Holder. If the Company and the Holder are unable to agree upon the fair market value of such security, then such dispute shall be resolved in
accordance with the procedures in Section 11. All such determinations shall be appropriately adjusted for any stock dividend, stock split, stock combination or other similar transaction during
such period.
(e) "
Black Scholes Value
" means the value of this Warrant based on the Black-Scholes Option Pricing Model obtained from the "OV" function
on Bloomberg determined as of the day immediately following the first public announcement of the applicable Fundamental Transaction, or, if the Fundamental Transaction is not publicly announced, the
date the Fundamental Transaction is consummated, for pricing purposes and reflecting (i) a risk-free interest rate corresponding to the U.S. Treasury rate for a period equal to the remaining
term of this Warrant as of such date of request, (ii) an expected volatility equal to the lesser of 100% and the 100-day volatility obtained from the HVT function on Bloomberg as of the day
immediately following the public announcement of the applicable Fundamental Transaction, or, if the Fundamental Transaction is not publicly announced, the date the Fundamental Transaction is
consummated, (iii) the underlying price per share used in such calculation shall be the highest Weighted Average Price during the five (5) Trading Days prior to the closing of the
Fundamental Transaction, (iv) a zero cost of borrow and (v) a 360 day annualization factor.
(f) "
Bloomberg
" means Bloomberg Financial Markets.
(g) "
Business Day
" means any day other than Saturday, Sunday or other day on which commercial banks in The City of New York are authorized
or required by law to remain closed.
(h) "
Closing Bid Price
" and "
Closing Sale Price
" means, for any security as of any date,
the last closing bid price and last closing trade price, respectively, for such security on the Principal Market, as reported by Bloomberg, or, if the Principal Market begins to operate on an extended
hours basis and does not designate the closing bid price or the closing trade price, as the case may be, then the last bid price or the last trade price, respectively, of such security prior to
4:00:00 p.m., New York
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time,
as reported by Bloomberg, or, if the Principal Market is not the principal securities exchange or trading market for such security, the last closing bid price or last trade price, respectively,
of such security on the principal securities exchange or trading market where such security is listed or traded as reported by Bloomberg, or if the foregoing do not apply, the last closing bid price
or last trade price, respectively, of such security in the over-the-counter market on the electronic bulletin board for such security as reported by Bloomberg, or, if no closing bid price or last
trade price, respectively, is reported for such security by Bloomberg, the average of the bid prices, or the ask prices, respectively, of any market makers for such security as reported in the OTC
Link or "pink sheets" by OTC Markets Group Inc. (formerly Pink OTC Markets Inc.). If the Closing Bid Price or the Closing Sale Price cannot be calculated for a security on a particular
date on any of the foregoing bases, the Closing Bid Price or the Closing Sale Price, as the case may be, of such security on such date shall be the fair market value as mutually determined by the
Company and the Holder. If the Company and the Holder are unable to agree upon the fair market value of such security, then such dispute shall be resolved pursuant to Section 11. All such
determinations to be appropriately adjusted for any stock dividend, stock split, stock combination, reclassification or other similar transaction during the applicable calculation period.
(i) "
Common Stock
" means (i) the Company's Common Stock, par value $0.001 per share, and (ii) any capital stock into which
such Common Stock shall have been changed or any capital stock resulting from a reclassification of such Common Stock.
(j) "
Convertible Securities
" means any stock or securities (other than Options) directly or indirectly convertible into or exercisable or
exchangeable for shares of Common Stock.
(k) "
Eligible Market
" means The NASDAQ Capital Market, the NYSE MKT LLC, The NASDAQ Global Select Market, The NASDAQ Global Market
or The New York Stock Exchange, Inc.
(l) "
Expiration Date
" means the date nine (9) months after the Initial Exercisability Date or, if such date falls on a day other
than a Business Day or on which trading does not take place on the Principal Market (a "
Holiday
"), the next day that is not a Holiday.
(m) "
Fundamental Transaction
" means (A) that the Company shall, directly or indirectly, including through subsidiaries, Affiliates
or otherwise, in one or more related transactions, (i) consolidate or merge with or into (whether or not the Company is the surviving corporation) another Subject Entity, or (ii) sell,
assign, transfer, convey or otherwise dispose of all or substantially all of the properties or assets of the Company or any of its "significant subsidiaries" (as defined in Rule 1-02 of
Regulation S-X)
to one or more Subject Entities, or (iii) make, or allow one or more Subject Entities to make, or allow the Company to be subject to or have its shares of Common Stock be subject to or party to
one or more Subject Entities making, a purchase, tender or exchange offer that is accepted by the holders of at least either (x) 50% of the outstanding shares of Common Stock, (y) 50% of
the outstanding shares of Common Stock calculated as if any shares of Common Stock held by all Subject Entities making or party to, or Affiliated with any Subject Entities making or party to, such
purchase, tender or exchange offer were not outstanding; or (z) such number of shares of Common Stock such that all Subject Entities making or party to, or Affiliated with any Subject Entity
making or party to, such purchase, tender or exchange offer, become collectively the beneficial owners (as defined in Rule 13d-3 under the 1934 Act) of at least 50% of the outstanding shares of
Common Stock, or (iv) consummate a stock purchase agreement or other business combination (including, without limitation, a reorganization, recapitalization, spin-off or scheme of arrangement)
with one or more Subject Entities whereby all such Subject Entities, individually or in the aggregate, acquire, either (x) at least 50% of the outstanding shares of Common Stock, (y) at
least 50% of the outstanding shares of Common Stock calculated as if any shares of Common Stock held by all the Subject Entities making or party to, or Affiliated with any Subject Entity making or
party to, such
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stock
purchase agreement or other business combination were not outstanding; or (z) such number of shares of Common Stock such that the Subject Entities become collectively the beneficial
owners (as defined in Rule 13d-3 under the 1934 Act) of at least 50% of the outstanding shares of Common Stock, or (v) reorganize, recapitalize or reclassify its shares of Common Stock,
(B) that the Company shall, directly or indirectly, including through subsidiaries, Affiliates or otherwise, in one or more related transactions, allow any Subject Entity individually or the
Subject Entities in the aggregate to be or become the "beneficial owner" (as defined in Rule 13d-3 under the 1934 Act), directly or indirectly, whether through acquisition, purchase,
assignment, conveyance, tender, tender offer, exchange, reduction in outstanding shares of Common Stock, merger, consolidation, business combination, reorganization, recapitalization, spin-off, scheme
of arrangement, reorganization, recapitalization or reclassification or otherwise in any manner whatsoever, of either (x) at least 50% of the aggregate ordinary voting power represented by
issued and outstanding shares of Common Stock, (y) at least 50% of the aggregate ordinary voting power represented by issued and outstanding shares of Common Stock not held by all such Subject
Entities as of the Subscription Date calculated as if any shares of Common Stock held by all such Subject Entities were not outstanding, or (z) a percentage of the aggregate ordinary voting
power represented by issued and outstanding shares of Common Stock or other equity securities of the Company sufficient to allow such Subject Entities to effect a statutory short form merger or other
transaction requiring other stockholders of the Company to surrender their Common Stock without approval of the stockholders of the Company or (C) directly or indirectly, including through
subsidiaries, Affiliates or otherwise, in one or more related transactions, the issuance of or the entering into any other instrument or transaction structured in a manner to circumvent, or that
circumvents, the intent of this definition in which case this definition shall be construed and implemented in a manner otherwise than in strict conformity with the terms of this definition to the
extent necessary to correct this definition or any portion of this definition which may be defective or inconsistent with the intended treatment of such instrument or transaction.
(n) "
Group
" means a "group" as that term is used in Section 13(d) of the 1934 Act and as defined in Rule 13d-5 thereunder.
(o) "
Options
" means any rights, warrants or options to subscribe for or purchase shares of Common Stock or Convertible Securities.
(p) "
Parent Entity
" of a Person means an entity that, directly or indirectly, controls the applicable Person, including such entity whose
common stock or equivalent equity security is quoted or listed on an Eligible Market (or, if so elected by the Holder, any other market, exchange or quotation system), or, if there is more than one
such Person or such entity, the Person or such entity designated by the Holder or in the absence of such designation, such Person or entity with the largest public market capitalization as of the date
of consummation of the Fundamental Transaction.
(q) "
Person
" means an individual, a limited liability company, a partnership, a joint venture, a corporation, a trust, an unincorporated
organization, any other entity and a government or any department or agency thereof.
(r) "
Principal Market
" means The NASDAQ Capital Market.
(s) "
Required Holders
" means the holders of the Warrants representing at least a majority of the shares of Common Stock underlying the
Warrants then outstanding.
(t) "
Subject Entity
" means any Person, Persons or Group or any Affiliate or associate of any such Person, Persons or Group.
(u) "
Successor Entity
" means one or more Person or Persons (or, if so elected by the Holder, the Company or Parent Entity) formed by,
resulting from or surviving any Fundamental Transaction or
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one
or more Person or Persons (or, if so elected by the Holder, the Company or the Parent Entity) with which such Fundamental Transaction shall have been entered into.
(v) "
Trading Day
" means any day on which the Common Stock is traded on the Principal Market, or, if the Principal Market is not the
principal trading market for the Common Stock, then on the principal securities exchange or securities market on which the Common Stock is then traded.
(w) "
Transaction Documents
" means any agreement entered into by and between the Company and the Holder, as applicable.
(x) "
Weighted Average Price
" means, for any security as of any date, the dollar volume-weighted average price for such security on the
Principal Market during the period beginning at 9:30:01 a.m., New York time (or such other time as the Principal Market publicly announces is the official open of trading), and ending at
4:00:00 p.m., New York time (or such other time as the Principal Market publicly announces is the official close of trading), as reported by Bloomberg through its "Volume at Price" function or,
if the foregoing does not apply, the dollar volume-weighted average price of such security in the over-the-counter market on the electronic bulletin board for such security during the period beginning
at 9:30:01 a.m., New York time (or such other time as such market publicly announces is the official open of trading), and ending at 4:00:00 p.m., New York time (or such other time as
such market publicly announces is the official close of trading), as reported by Bloomberg, or, if no dollar volume-weighted average price is reported for such security by Bloomberg for such hours,
the average of the highest Closing Bid Price and the lowest closing ask price of any of the market makers for such security as reported in the OTC Link or "pink sheets" by OTC Markets
Group Inc. (formerly Pink OTC Markets Inc.). If the Weighted Average Price cannot be calculated for a security on a particular date on any of the foregoing bases, the Weighted Average
Price of such security on such date shall be the fair market value as mutually determined by the Company and the Holder. If the Company and the Holder are unable to agree upon the fair market value of
such security, then such dispute shall be resolved pursuant to Section 11 with the term "Weighted Average Price" being substituted for the term "Exercise Price." All such determinations shall
be appropriately adjusted for any stock dividend, stock split, stock combination, reclassification or other similar transaction during the applicable calculation period.
[Signature Page Follows]
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IN WITNESS WHEREOF,
the Company has caused this Pre-funded Series B Warrant to Purchase Common Stock to be duly executed
as of the Issuance Date set out above.
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CAPSTONE TURBINE CORPORATION
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Title:
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EXHIBIT A
EXERCISE NOTICE
TO BE EXECUTED BY THE REGISTERED HOLDER TO EXERCISE THIS
PRE-FUNDED SERIES B WARRANT TO PURCHASE COMMON STOCK
CAPSTONE TURBINE CORPORATION
The undersigned holder (the "
Holder
") hereby exercises the right to purchase
of the shares of Common Stock ("
Warrant Shares
") of
Capstone Turbine Corporation, a
company organized under the laws of Delaware (the "
Company
"), evidenced by the attached Pre-funded Series B Warrant to Purchase Common Stock (the
"
Warrant
"). Capitalized terms used herein and not otherwise defined shall have the respective meanings set forth in the Warrant.
1. Form
of Exercise Price. The Holder intends that payment of the Exercise Price shall be made as:
a
"
Cash Exercise
" with respect to Warrant Shares; and/or
a
"
Cashless Exercise
" with respect to Warrant Shares.
2. Payment
of Exercise Price. In the event that the Holder has elected a Cash Exercise with respect to some or all of the Warrant Shares to be issued pursuant hereto, the
Holder shall pay the Aggregate Exercise Price in the sum of $ to the Company in accordance with the terms of the Warrant.
3. Delivery
of Warrant Shares. The Company shall deliver to the Holder Warrant Shares in
accordance with the terms of the Warrant.
Date: ,
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Name of Registered Holder
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ACKNOWLEDGMENT
The Company hereby acknowledges this Exercise Notice and hereby directs Computershare Inc. to issue the above indicated number
of shares of Common Stock on or prior to the applicable Share Delivery Date.
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CAPSTONE TURBINE CORPORATION
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B-19
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PROSPECTUS
Capstone Turbine Corporation
$100,000,000
Common Stock
Common Stock Warrants
Preferred Stock
Debt Securities
We may from time to time offer, issue and sell, in one or more series, together or separately, the following:
-
-
shares of our Common Stock;
-
-
warrants to purchase shares of our Common Stock;
-
-
shares of our Preferred Stock;
-
-
debt securities, which may be either senior debt securities or subordinated debt securities, in each case consisting of notes or other
evidence of indebtedness;
-
-
rights to purchase the foregoing securities (see "Plan of Distribution"); or
-
-
any combination of these securities.
We
will offer such securities at an aggregate public offering price of up to $100,000,000, or an equivalent amount in U.S. dollars if any securities are denominated in a currency other
than U.S. dollars, on terms determined at the time we offer such securities. We may offer such securities separately or together, in separate classes or series, in amounts, at prices and on terms set
forth in an applicable supplement to this prospectus. The applicable prospectus supplement will also contain information about any listing on a securities exchange of the securities covered by such
prospectus supplement.
We
may sell the securities to one or more underwriters for public offering and sale by them, through agents or dealers, directly to purchasers or through a combination of any of these
methods of sale. We reserve the sole right to accept, and together with our agents, dealers and underwriters reserve the right to reject, in whole or in part, any proposed purchase of securities to be
made directly or through agents, dealers or underwriters. If any agents, dealers or underwriters are involved in the sale of any of the securities, their names, and any applicable purchase price, fee,
commission or discount arrangement between or among them, will be set forth, or will be calculable from the information set forth, in the applicable prospectus supplement. See "Plan of Distribution."
Our estimated net proceeds from the sale of securities also will be set forth in the relevant prospectus supplement. No securities may be sold without delivery of the applicable prospectus supplement
describing the method and terms of the offering of such securities.
Our
Common Stock is listed on the Nasdaq Global Market under the symbol "CPST."
Investing in these securities involves risks. You should carefully review the discussion under the heading "Risk Factors" on page 4
regarding information included and incorporated by reference in the prospectus and the applicable prospectus supplement.
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these
securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
The
date of this prospectus is June 23, 2015.
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ABOUT THIS PROSPECTUS
This prospectus is part of a registration statement on Form S-3 that we filed with the Securities and Exchange Commission
("SEC") using a "shelf" registration process. Under this shelf process, we may, from time to time, sell the securities described in this prospectus in one or more offerings up to an aggregate offering
price of $100,000,000. This prospectus provides you with a general description of the securities we may offer. Each time we sell securities, we will provide a prospectus supplement that will contain
specific information about the terms of that offering. The prospectus supplement may also add, update or change information contained in this prospectus. You should read both the prospectus and any
prospectus supplement together with the additional information described under the heading "Where You Can Find More Information" and "Incorporation of Certain Documents by Reference."
You
should rely only on the information contained or incorporated by reference in this prospectus. We have not authorized any person to provide you with information different from or in
addition to that
contained in this prospectus. If anyone provides you with different or inconsistent information, you should not rely on it. We are not making an offer to sell these securities in any jurisdiction
where their offer or sale is not permitted. You should assume that the information appearing in this prospectus or any other documents incorporated by reference is accurate only as of the date on the
front cover of the applicable document. Our business, financial condition, results of operations and prospects may have changed since that date.
References
in this prospectus to "Capstone," "the Company," "we," "us" and "our" refer to Capstone Turbine Corporation, a Delaware corporation, unless the context otherwise requires.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus (including the information incorporated by reference) contains "forward-looking statements" within the meaning of
Section 27A of the Securities Act and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements include statements concerning, among other things, our future results
of operations, research and development activities, sales expectations, our ability to develop markets for our products and to produce products at a pace commensurate with demand, sources for parts,
federal, state and local regulations and general business, industry and economic conditions applicable to us. When used in this prospectus, the words "estimates," "expects," "anticipates," "projects,"
"plans," "intends," "believes," "should," "could," "may" and variations of such words or similar expressions are intended to identify forward-looking statements. All forward-looking statements,
including, without limitation, our examination of historical operation trends, are based upon our current expectations and various assumptions.
There
are a number of risks and uncertainties that could cause our actual results to differ materially from the forward-looking statements contained in this prospectus. Factors that
could cause our actual results to differ materially from the forward-looking statements include:
-
-
Our operating history is characterized by net losses. We anticipate further losses and we may never become profitable;
-
-
We may be unable to fund our future operating requirements, which could force us to curtail our operations;
-
-
If we are unable to either substantially improve our operating results or obtain additional financing, we may be unable to continue as
a going concern;
-
-
Impairment charges on our long-lived assets, including intangible assets with finite lives, would adversely affect our financial
position and results of operations;
-
-
A sustainable market for microturbines may never develop or may take longer to develop than we anticipate which would adversely affect
our results of operations;
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-
-
Our operating results are dependent, in large part, upon the successful commercialization of our products. Failure to produce our
products as scheduled and budgeted would materially and adversely affect our business and financial condition;
-
-
We may not be able to produce our products on a timely basis if we fail to correctly anticipate product supply requirements or if we
suffer delays in production resulting from issues with our suppliers. Our suppliers may not supply us with a sufficient amount of components or components of adequate quality, or they may provide
components at significantly increased prices;
-
-
We may not be able to effectively manage our growth, expand our production capabilities or improve our operational, financial and
management information systems, which would impair our results of operations;
-
-
Adverse economic conditions may have an impact on our business and financial condition, including some effects we may not be able to
predict;
-
-
Product quality expectations may not be met, causing slower market acceptance or warranty cost exposure;
-
-
We operate in a highly competitive market among competitors who have significantly greater resources than we have and we may not be
able to compete effectively;
-
-
If we do not effectively implement our sales, marketing and service plans, our sales will not grow and our results of operations will
suffer;
-
-
Our sales and results of operations could be materially and adversely impacted by risks inherent in international markets;
-
-
The current geopolitical instability in Russia and Ukraine and related sanctions by the U.S. government against certain companies and
individuals may hinder our ability to conduct business with potential or existing customers and vendors in these countries;
-
-
We cannot be certain of the future effectiveness of our internal controls over financial reporting. If we are unable to maintain
effective internal controls over our financial reporting, investors may lose confidence in our ability to provide reliable and timely reports and the value of our common stock may decline;
-
-
We may not be able to retain or develop relationships with original equipment manufacturers or distributors in our targeted markets,
in which case our sales would not increase as expected;
-
-
Activities necessary to integrate any future acquisitions may result in costs in excess of current expectations or be less successful
than anticipated;
-
-
We have substantial accounts receivable, and increased bad debt expense or delays in collecting accounts receivable could have a
material adverse effect on our cash flows and results of operations;
-
-
Loss of a significant customer could have a material adverse effect on our results of operations;
-
-
We may not be able to develop sufficiently trained applications engineering, installation and service support to serve our targeted
markets;
-
-
Changes in our product components may require us to replace parts held at distributors;
-
-
We operate in a highly regulated business environment, and changes in regulation could impose significant costs on us or make our
products less economical, thereby affecting demand for our microturbines;
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-
-
Utility companies or governmental entities could place barriers to our entry into the marketplace, and we may not be able to
effectively sell our products;
-
-
We depend upon the development of new products and enhancements of existing products;
-
-
Operational restructuring may result in asset impairment or other unanticipated charges;
-
-
We may not achieve production cost reductions necessary to competitively price our products, which would adversely affect our sales;
-
-
Commodity market factors impact our costs and availability of materials;
-
-
Our products involve a lengthy sales cycle and we may not anticipate sales levels appropriately, which could impair our results of
operations;
-
-
Potential litigation may adversely impact our business;
-
-
Our business could be negatively impacted if we fail to adequately protect our intellectual property rights or if third parties claim
that we are in violation of their intellectual property rights;
-
-
Our results of operations could be materially and adversely affected by risks related to cyber security threats;
-
-
We may incur costs and liabilities as a result of product liability claims;
-
-
We have significant tax assets, usage of which may be subject to limitations in the future;
-
-
Our success depends in significant part upon the continuing service of management and key employees;
-
-
Our operations are vulnerable to interruption by fire, earthquake and other events beyond our control;
-
-
If we continue to fail to meet all applicable Nasdaq Global Market requirements and Nasdaq determines to delist our Common Stock, the
delisting could adversely affect the market liquidity of our Common Stock, impair the value of your investment and adversely affect our ability to raise needed funds;
-
-
The market price of our Common Stock has been and may continue to be highly volatile and you could lose all or part of your investment
in our securities; and
-
-
Provisions in our certificate of incorporation, bylaws and our stockholder rights plan, as well as Delaware law, may discourage, delay
or prevent a merger or acquisition at a premium price.
We
caution you that these factors, as well as the risk factors included or incorporated by reference in this prospectus or any prospectus supplement, may not be exhaustive. Our actual
results, performance or achievements could differ materially from the results expressed in, or implied by, these forward-looking statements. We operate in a continually changing business environment,
and new risk factors emerge from time to time. We cannot predict such new risk factors, nor can we assess the impact, if any, of such new risk factors on our businesses or the extent to which any
factor or combination of factors may cause actual results to differ materially from those expressed or implied by any forward-looking statements. You should review any further disclosures we make on
related subjects in reports we file with the SEC. All forward-looking statements attributable to us or persons acting on our behalf apply only as of the date of this prospectus and are expressly
qualified in their entirety by the cautionary statements included in this prospectus. We undertake no obligation to update publicly or revise forward-looking statements, which may be made to reflect
events or circumstances after the date made or to reflect the occurrence of unanticipated events, except as required by applicable securities laws.
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