Exhibit 4.1
CAPSTONE TURBINE CORPORATION
Warrant To Purchase Common Stock
Warrant No.:
Number of Shares of Common Stock:
Date of Issuance: May [ ], 2009 (Issuance Date)
Capstone Turbine Corporation, a Delaware corporation (the Company), hereby certifies that,
for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged,
, 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, upon surrender of this Warrant to Purchase Common Stock (including
any Warrants to Purchase Common Stock issued in exchange, transfer or replacement hereof, the
Warrant), at any time or times on or after the Issuance 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) (the Warrant Shares). Except as
otherwise defined herein, capitalized terms in this Warrant shall have the meanings set forth in
Section 15. This Warrant is the Warrant to purchase Common Stock issued pursuant to (i) Section 2
of that certain Subscription Agreement (the Subscription Agreement), dated as of May , 2009
(the Subscription Date), by and between the Company and the Holder, and (ii) the Companys
Registration Statement on Form S-3 (File number 333-156459) (the Registration Statement).
1. EXERCISE OF WARRANT.
(a) Mechanics of Exercise. Subject to the terms and conditions hereof, this Warrant
may be exercised by the Holder on any Business Day on or after the Issuance Date and on or before
the Expiration Date, in whole or in part, by (i) delivery of a written notice, in the form attached
hereto as Exhibit A (the Exercise Notice), of the Holders election to exercise this
Warrant and (ii) (A) payment to the Company of an amount equal to the applicable Exercise Price
multiplied by the number of Warrant Shares as to which this Warrant is being exercised (the
Aggregate Exercise Price) in cash or by wire transfer of immediately available funds or (B)
provided the conditions for cashless exercise set forth in Section 1(d) are satisfied, 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, but shall deliver the original Warrant within five Business Days thereafter.
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
(1st) Business Day following the date on which the Company has received each of the
Exercise Notice and the Aggregate Exercise Price (or notice of a Cashless Exercise) (the
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Insert a number of shares equal to 75% of the number of
Common Shares purchased under the Subscription Agreement. |
Exercise Delivery Documents), the Company shall transmit by facsimile an acknowledgment of
confirmation of receipt of the Exercise Delivery Documents to the Holder and the Companys transfer
agent (the Transfer Agent). On or before the third (3rd) Business Day following the
date on which the Company has received all of the Exercise Delivery Documents (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, upon the request of the Holder,
credit such aggregate number of Warrant Shares to which the Holder is entitled pursuant to such
exercise to the Holders or its designees balance account with DTC through its Deposit Withdrawal
Agent Commission 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 Companys share register in the
name of the Holder or its designee, for the number of shares of Common Stock to which the Holder is
entitled pursuant to such exercise. Upon delivery of the Exercise Delivery Documents, the Holder
shall be deemed for all corporate purposes to have become the holder of record of the Warrant
Shares with respect to which this Warrant has been exercised, irrespective of the date such Warrant
Shares are credited to the Holders DTC account or the date of delivery of the certificates
evidencing such Warrant Shares, as the case may be. If this Warrant is submitted 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
Business Days after any exercise and at its own expense, issue a new Warrant (in accordance with
Section 7(d)) representing the right to purchase the number of Warrant Shares purchasable
immediately prior to such exercise under this Warrant, less the number of Warrant Shares with
respect to which this Warrant is exercised. No fractional shares of Common Stock are to be issued
upon the exercise of this Warrant, but rather the number of shares of Common Stock to be issued
shall be rounded down to the nearest whole number; provided, however, that if any fractional share
of Common Stock would otherwise be deliverable upon such exercise, the Company, in lieu of
delivering such fractional share, shall pay to the Holder an amount in cash equal to the Market
Price of such fractional share of Common Stock on the date of exercise. The Company shall pay any
and all documentary stamp taxes attributable to the initial issuance of Warrant Shares issuable
upon the exercise of this Warrant The Holder shall be responsible for any income taxes due under
federal, state or other law, if any such tax is due.
(b) Exercise Price. For purposes of this Warrant, Exercise Price means $0.95,
subject to adjustment as provided herein.
(c) Companys Failure to Timely Deliver Securities. If the Company shall fail for any
reason or for no reason to issue to the Holder within three (3) Business Days of receipt of the
Exercise Delivery Documents in compliance with the terms of this Section 1, a certificate for the
number of shares of Common Stock to which the Holder is entitled and register such shares of Common
Stock on the Companys share register or to credit the Holders balance account with DTC for such
number of shares of Common Stock to which the Holder is entitled upon the Holders exercise of this
Warrant, and if on or after such Trading Day the Holder purchases (in an open market transaction or
otherwise) shares of Common Stock to deliver in satisfaction of a sale by the Holder of shares of
Common Stock issuable upon such exercise that the Holder anticipated receiving from the Company (a
Buy-In), then the Company shall,
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within three (3) Business Days after the Holders request and in the Holders discretion,
either (i) pay cash to the Holder in an amount equal to the Holders total purchase price
(including brokerage commissions, if any) for the shares of Common Stock so purchased (the Buy-In
Price), at which point the Companys obligation to deliver such certificate (and to issue such
Warrant Shares) shall terminate, or (ii) promptly honor its obligation to deliver to the Holder a
certificate or certificates representing such Warrant Shares 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) the Closing Bid Price on the date of exercise.
(d) Cashless Exercise. Notwithstanding anything contained herein to the contrary, if
a registration statement covering the Warrant Shares that are the subject of the Exercise Notice,
or an exemption from registration, is not available for the resale of such Warrant Shares (the
Unavailable 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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(A x B) - (A x C)
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B |
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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 shares of 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. |
(e) Rule 144. For purposes of Rule 144(d) promulgated under the Securities Act, as in
effect on the date hereof, assuming the Holder is not an affiliate of the Company, it is intended
that the Warrant Shares issued in a Cashless Exercise shall be deemed to have been acquired by the
Holder, and the holding period for the Warrant Shares shall be deemed to have commenced, on the
date this Warrant was originally issued pursuant to the Subscription Agreement.
(f) 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.
(g) Beneficial Ownership. The Holder shall not have the right to exercise this
Warrant, to the extent that after giving effect to such exercise, the Holder (together with the
Holders affiliates) would beneficially own in excess of 4.99% (the Maximum Percentage) of the
shares of Common Stock outstanding immediately after giving effect to such exercise. The
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Company shall be entitled to rely on receipt of an Exercise Notice as an indication that
Holder will not, pursuant to such exercise, exceed the Maximum Percentage. For purposes of the
foregoing sentence, the aggregate number of shares of Common Stock beneficially owned by such
Holder and its affiliates shall include 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 shares of Common Stock which would be issuable upon (i) exercise of the remaining,
unexercised portion of this Warrant beneficially owned by such Holder and its affiliates and (ii)
exercise or conversion of the unexercised or unconverted portion of any other securities of the
Company beneficially owned by such Holder and its affiliates (including, without limitation, any
convertible notes or convertible preferred stock or warrants) subject to a limitation on conversion
or exercise analogous to the limitation contained herein. Except as set forth in the preceding
sentence, for purposes of this paragraph, beneficial ownership shall be calculated in accordance
with Section 13(d) of the Securities Exchange Act of 1934, as amended (the Exchange Act), it
being acknowledged by the Holder that the Company is not representing to the Holder that such
calculation is in compliance with Section 13(d) of the Exchange Act and the Holder is solely
responsible for any schedules required to be filed in accordance therewith. For purposes of this
Warrant, in determining the number of outstanding shares of Common Stock, the Holder may rely on
the number of outstanding shares of Common Stock as reflected in the most recent of (1) the
Companys most recent Form 10-K, Form 10-Q, Current Report on Form 8-K or other public filing with
the Securities and Exchange Commission, as the case may be, (2) a public announcement by the
Company or (3) any other notice by the Company or the Transfer Agent setting forth the number of
shares of Common Stock outstanding. For any reason at any time, upon the written or oral request
of the Holder, the Company shall within two (2) Business Days confirm orally and in writing to the
Holder the number of shares of Common Stock then outstanding. In any case, the number of
outstanding shares of Common Stock shall be determined after giving effect to the conversion or
exercise of securities of the Company, including this Warrant, by the Holder and its affiliates
since the date as of which such number of outstanding shares of Common Stock was reported. By
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% specified in such notice; provided that
(i) any such increase will not be effective until the sixty-first (61st) day after such
notice is delivered to the Company, and (ii) any such increase or decrease will apply only to the
Holder. 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(h) to correct this paragraph (or any
portion hereof) which may be defective or inconsistent with the intended beneficial ownership
limitation herein contained or to make changes or supplements necessary or desirable to properly
give effect to such limitation.
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) Adjustment upon Issuance of Shares of Common Stock. If and whenever on or
after the Subscription Date, the Company issues or sells, or in accordance with this Section 2
is deemed to have issued or sold, any shares of Common Stock (including the issuance or sale
of shares of Common Stock owned or held by or for the account of the Company, but excluding
shares of Common Stock deemed to have been
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issued by the Company in connection with any Excluded Issuance) for a consideration per
share (the New Issuance Price) less than a price (the Applicable Price) equal to the
Exercise Price in effect immediately prior to such issue or sale or deemed issuance or sale
(the foregoing a Dilutive Issuance), then immediately after such Dilutive Issuance, the
Exercise Price then in effect shall be reduced to the product of (A) the Exercise Price in
effect immediately prior to such Dilutive Issuance and (B) the quotient determined by dividing
(1) the sum of (I) the product derived by multiplying the Exercise Price in effect immediately
prior to such Dilutive Issuance and the number of shares of Common Stock Deemed Outstanding
immediately prior to such Dilutive Issuance plus (II) the consideration, if any, received by
the Company upon such Dilutive Issuance, by (2) the product derived by multiplying (I) the
Exercise Price in effect immediately prior to such Dilutive Issuance by (II) the number of
shares of Common Stock Deemed Outstanding immediately after such Dilutive Issuance. For
purposes of determining the adjusted Exercise Price under this Section 2(a), the following
shall be applicable:
(i) Issuance of Options. If the Company in any manner grants any
Options and the lowest price per share for which one share of Common Stock
is issuable upon the exercise of any such Option or upon conversion,
exercise or exchange of any Convertible Securities issuable upon exercise of
any such Option is less than the Applicable Price, then such share of Common
Stock shall be deemed to be outstanding and to have been issued and sold by
the Company at the time of the granting or sale of such Option for such
price per share. For purposes of this Section 2(a)(i), the lowest price
per share for which one share of Common Stock is issuable upon exercise of
such Options or upon conversion, exercise or exchange of such Convertible
Securities issuable upon exercise of any such Option shall be equal to the
sum of the lowest amounts of consideration (if any) received or receivable
by the Company with respect to any one share of Common Stock upon the
granting or sale of the Option, upon exercise of the Option and upon
conversion, exercise or exchange of any Convertible Security issuable upon
exercise of such Option. No further adjustment of the Exercise Price or
number of Warrant Shares shall be made upon the actual issuance of such
shares of Common Stock or of such Convertible Securities upon the exercise
of such Options or upon the actual issuance of such shares of Common Stock
upon conversion, exercise or exchange of such Convertible Securities.
(ii) Issuance of Convertible Securities. If the Company in any
manner issues or sells any Convertible Securities and the lowest price per
share for which one share of Common Stock is issuable upon the conversion,
exercise or exchange thereof is less than the Applicable Price, then such
share of Common Stock shall be deemed to be outstanding and to have been
issued and sold by the Company at the time of the issuance or sale of such
Convertible Securities for such price per share. For the purposes of this
Section 2(a)(ii), the lowest price per share for which one share of Common
Stock is issuable upon the conversion, exercise or exchange thereof shall
be equal to the sum of the lowest amounts of consideration
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(if any) received or receivable by the Company with respect to one share of
Common Stock upon the issuance or sale of the Convertible Security and upon
conversion, exercise or exchange of such Convertible Security. No further
adjustment of the Exercise Price or number of Warrant Shares shall be made
upon the actual issuance of such shares of Common Stock upon conversion,
exercise or exchange of such Convertible Securities, and if any such issue
or sale of such Convertible Securities is made upon exercise of any Options
for which adjustment of this Warrant has been or is to be made pursuant to
other provisions of this Section 2(a), no further adjustment of the Exercise
Price or number of Warrant Shares shall be made by reason of such issue or
sale.
(iii) Change in Option Price or Rate of Conversion. If the purchase
price provided for in any Options, the additional consideration, if any,
payable upon the issue, conversion, exercise or exchange of any Convertible
Securities, or the rate at which any Convertible Securities are convertible
into or exercisable or exchangeable for shares of Common Stock increases or
decreases at any time, then the Exercise Price and the number of Warrant
Shares in effect at the time of such increase or decrease shall be adjusted
to the Exercise Price and the number of Warrant Shares which would have been
in effect at such time had such Options or Convertible Securities provided
for such increased or decreased purchase price, additional consideration or
increased or decreased conversion rate, as the case may be, at the time
initially granted, issued or sold. For purposes of this Section 2(a)(iii),
if the terms of any Option or Convertible Security that was outstanding as
of the date of issuance of this Warrant are increased or decreased in the
manner described in the immediately preceding sentence, then such Option or
Convertible Security and the shares of Common Stock deemed issuable upon
exercise, conversion or exchange thereof shall be deemed to have been issued
as of the date of such increase or decrease. No adjustment pursuant to this
Section 2(a) shall be made if such adjustment would result in an increase of
the Exercise Price then in effect or a decrease in the number of Warrant
Shares.
(iv) Calculation of Consideration Received. In case any Option is
issued in connection with the issue or sale of other securities of the
Company, together comprising one integrated transaction, (x) the Options
will be deemed to have been issued for a value determined by use of the
Black Scholes Option Pricing Model (the Option Value) and (y) the other
securities issued or sold in such integrated transaction shall be deemed to
have been issued for the difference of (I) the aggregate consideration
received by the Company, less (II) the Option Value. If any shares of
Common Stock, Options or Convertible Securities are issued or sold or deemed
to have been issued or sold for cash, the consideration received therefor
will be deemed to be the net amount received by the Company therefor. If
any shares of Common Stock, Options or
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Convertible Securities are issued or sold for a consideration other than
cash, the amount of such consideration received by the Company will be the
fair value of such consideration, except where such consideration consists
of securities, in which case the amount of consideration received by the
Company will be the Weighted Average Price of such security on the date of
receipt. If any shares of Common Stock, Options or Convertible Securities
are issued to the owners of the non-surviving entity in connection with any
merger in which the Company is the surviving entity, the amount of
consideration therefor will be deemed to be the fair value of such portion
of the net assets and business of the non-surviving entity as is
attributable to such shares of Common Stock, Options or Convertible
Securities, as the case may be. The fair value of any consideration other
than cash or securities will be determined jointly by the Company and the
Holder. If such parties are unable to reach agreement within ten (10) days
after the occurrence of an event requiring valuation (the Valuation
Event), the fair value of such consideration will be determined within five
(5) Business Days after the tenth (10th) day following the
Valuation Event by an independent, reputable appraiser jointly selected by
the Company and the Holder. The determination of such appraiser shall be
final and binding upon all parties absent manifest error, and the fees and
expenses of such appraiser shall be borne equally by the Company and the
Holder.
(v) Record Date. If the Company takes a record of the holders of
shares of Common Stock for the purpose of entitling them (A) to receive a
dividend or other distribution payable in shares of Common Stock, Options or
in Convertible Securities or (B) to subscribe for or purchase shares of
Common Stock, Options or Convertible Securities, then such record date will
be deemed to be the date of the issue or sale of the shares of Common Stock
deemed to have been issued or sold upon the declaration of such dividend or
the making of such other distribution or the date of the granting of such
right of subscription or purchase, as the case may be.
(vii) 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, reorganization, scheme, arrangement 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 any stock split, stock dividend, recapitalization, reorganization, scheme,
arrangement or otherwise) one or more classes of its outstanding shares
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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 Companys Board of Directors will make an appropriate adjustment in the
Exercise Price and the number of Warrant Shares 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. If 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 or options 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:
(a) any Exercise Price in effect immediately prior to the close of business on the record date
fixed for the determination of holders of shares of Common Stock entitled to receive the
Distribution shall be reduced, effective as of the close of business on such record date, to a
price determined by multiplying such Exercise Price by a fraction of which (i) the numerator shall
be the Closing Bid Price of the shares of Common Stock on the Trading Day immediately preceding
such record date minus the value of the Distribution (as determined in good faith by the Companys
Board of Directors) applicable to one share of Common Stock, and (ii) the denominator shall be the
Closing Bid Price of the shares of Common Stock on the Trading Day immediately preceding such
record date; and
(b) the number of Warrant Shares shall be increased to a number of shares equal to the number
of shares of Common Stock obtainable immediately prior to the close of business on the record date
fixed for the determination of holders of shares of Common Stock entitled to receive the
Distribution multiplied by the reciprocal of the fraction set forth in the immediately preceding
paragraph (a); provided that in the event that the Distribution is of shares of Common Stock (or
common stock) (Other Shares of Common Stock) of a company whose common shares are traded on a
national securities exchange or a national automated quotation system, then the Holder may elect to
receive a warrant to purchase Other Shares of Common Stock in lieu of an increase in the number of
Warrant Shares, the terms of which shall be identical to those of this Warrant, except that such
warrant shall be exercisable into the number of shares of Other Shares of Common Stock that would
have been payable to the Holder pursuant to the Distribution had the Holder exercised this Warrant
immediately prior to such record date and with an aggregate exercise price equal to the product of
the amount by which the exercise price of this Warrant was decreased with respect to the
Distribution pursuant to the terms of the immediately preceding paragraph (a) and the number of
Warrant Shares calculated in accordance with the first part of this paragraph (b).
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4. PURCHASE RIGHTS; FUNDAMENTAL TRANSACTIONS.
(a) Purchase Rights. In addition to any adjustments pursuant to Section 2 above, if
at any time 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 shares 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 on the exercise of this
Warrant) 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
shares of Common Stock are to be determined for the grant, issue or sale of such Purchase Rights.
(b) Fundamental Transactions. The Company shall not enter into or be party to a
Fundamental Transaction unless the Successor Entity assumes this Warrant in accordance with the
provisions of this Section (4)(b), including agreements to deliver to each holder of Warrants in
exchange for such Warrants a security of the Successor Entity evidenced by a written instrument
substantially similar in form and substance to this Warrant, including, without limitation, an
adjusted exercise price equal to the value for the shares of Common Stock reflected by the terms of
such Fundamental Transaction, and exercisable for a corresponding number of shares of capital stock
equivalent to the shares of Common Stock acquirable and receivable upon exercise of this Warrant
(without regard to any limitations on the exercise of this Warrant) prior to such Fundamental
Transaction. Upon the occurrence of any Fundamental Transaction, the Successor Entity shall
succeed to, and be substituted for (so that from and after the date of such Fundamental
Transaction, the provisions of this Warrant referring to the Company shall refer instead to the
Successor Entity), and may exercise every right and power of the Company and shall assume all of
the obligations of the Company under this Warrant with the same effect as if such Successor Entity
had been named as the Company herein. In addition to and not in substitution for any other rights
hereunder, prior to the consummation of any Fundamental Transaction pursuant to which holders of
shares of Common Stock are entitled to receive securities or other assets with respect to or in
exchange for shares of Common Stock (a Corporate Event), the Company shall make appropriate
provision to insure that the Holder will thereafter have the right to receive upon an exercise of
this Warrant at any time after the consummation of the Fundamental Transaction but prior to the
Expiration Date, in lieu of the shares of the Common Stock (or other securities, cash, assets or
other property) purchasable upon the exercise of the Warrant prior to such Fundamental Transaction,
such shares of stock, securities, cash, assets or any other property whatsoever (including warrants
or other purchase or subscription rights) which the Holder would have been entitled to receive upon
the happening of such Fundamental Transaction had the Warrant been exercised immediately prior to
such Fundamental Transaction. If holders of Common Stock are given any choice as to the
securities, cash or property to be received in a Fundamental Transaction, then the Holder shall be
given the same choice as to the consideration it receives upon any exercise of this Warrant
following such Fundamental Transaction. The provisions of this Section shall apply similarly and
equally to successive Fundamental Transactions and Corporate Events and shall be applied without
regard to any limitations on the exercise of this Warrant. Notwithstanding the foregoing, in the
event of a Fundamental Transaction, at the request of the Holder delivered before the 15th day
after
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consummation of such Fundamental Transaction, the Company (or the Successor Entity) shall
purchase this Warrant from the Holder by paying to the Holder, within five Business Days after such
request (or, if later, within two Business Days after the effective date of the Fundamental
Transaction), cash in an amount equal to the Black Scholes Value of the remaining unexercised
portion of this Warrant on the date of such Fundamental Transaction.
5. NONCIRCUMVENTION. The Company hereby covenants and agrees that the Company will
not, by amendment of its Certificate of Incorporation, Bylaws or through any reorganization,
transfer of assets, consolidation, merger, scheme of arrangement, dissolution, issue 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 the provisions
of this Warrant. 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 this Warrant
is 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 this Warrant,
100% of the number of shares of Common Stock issuable upon exercise of this Warrant 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 Persons capacity as a holder of this Warrant, shall not be
entitled to vote or receive dividends or be deemed the holder of share capital of the Company for
any purpose, nor shall anything contained in this Warrant be construed to confer upon the Holder,
solely in such Persons 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 then 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 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; provided, however, that no Warrants for fractional shares of Common Stock shall be
given.
(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 accordance with Section 6 of Annex I to
the Subscription Agreement. 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 therefore.
9. AMENDMENT AND WAIVER. Except as otherwise provided herein, the provisions of this
Warrant may be amended and the Company may take any action herein prohibited, or omit to perform
any act herein required to be performed by it, upon the written consent of the Company and the
Holder.
10. GOVERNING LAW. 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.
11. CONSTRUCTION; HEADINGS. This Warrant shall be deemed to be jointly drafted by the
Company and the Holder and shall not be construed against any person as the
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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.
12. 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 within two (2) Business Days of
receipt of the Exercise Notice 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 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 (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 Companys 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 Business Days from the time it receives the disputed determinations
or calculations. Such investment banks or accountants determination or calculation, as the case
may be, shall be binding upon all parties absent demonstrable error.
13. 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, 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.
14. TRANSFER. Subject to applicable law, this Warrant may be offered for sale, sold,
transferred or assigned without the consent of the Company.
15. CERTAIN DEFINITIONS. For purposes of this Warrant, the following terms shall have
the following meanings:
(a) Black Scholes Value means the value of this Warrant based on the Black and Scholes
Option Pricing Model obtained from the OV function on Bloomberg using (i) a price per share of
Common Stock equal to the Weighted Average Price of the Common Stock for the Trading Day
immediately preceding the date of consummation of the applicable Fundamental Transaction, (ii) 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 the date of consummation of the applicable Fundamental Transaction and
(iii) an expected volatility equal to the greater of 70% and the 30-day volatility obtained from
the HVT function on Bloomberg determined as of the Trading Day immediately following the public
announcement of the applicable Fundamental Transaction.
(b) Bloomberg means Bloomberg Financial Markets.
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(c) 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.
(d) 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 pink sheets by Pink Sheets LLC (formerly the
National Quotation Bureau, 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. All such determinations to be
appropriately adjusted for any stock dividend, stock split, stock combination or other similar
transaction during the applicable calculation period.
(e) Common Stock means (i) the Companys shares of Common Stock, par value $0.01 per share,
and (ii) any share capital into which such Common Stock shall have been changed or any share
capital resulting from a reclassification of such Common Stock.
(f) Convertible Securities means any stock or securities (other than Options) directly or
indirectly convertible into or exercisable or exchangeable for shares of Common Stock.
(g) Eligible Market means the Principal Market, The New York Stock Exchange, Inc., The
American Stock Exchange, The NASDAQ Global Select Market or The NASDAQ Capital Market.
(h) Excluded Issuance means the issuance of (A) capital stock, Options or Convertible
Securities issued to directors, officers, employees or consultants of the Company in connection
with their service as directors of the Company, their employment by the Company or their retention
as consultants by the Company pursuant to an equity compensation program approved by the Board or
the compensation committee of the Board, (B) shares of Common Stock issued upon the conversion,
exercise or exchange of Options or Convertible Securities issued prior to the Issuance Date;
provided that neither the conversion price, exercise price nor number of shares issuable under such
Options or Convertible Securities is amended, modified or changed after the Issuance Date other
than pursuant to the provisions of such Options or Convertible Securities as they exist as of the
Issuance Date, and (C) securities issued
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pursuant to the Subscription Agreement and the other similar subscription agreements entered
into by the Company and the purchasers of the other warrants issued on the Issuance Date or the
shares of Common Stock issued upon exercise of this Warrant or the other warrants issued on the
Issuance Date.
(i) Expiration Date means the date ending seven (7) years from the Issuance 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 date that is not a Holiday.
(j) Fundamental Transaction means that the Company shall, directly or indirectly, in one or
more related transactions, (i) consolidate or merge with or into (whether or not the Company is the
surviving corporation) another Person, or (ii) sell, assign, transfer, convey or otherwise dispose
of all or substantially all of the properties or assets of the Company to another Person, or (iii)
allow another Person to make a purchase, tender or exchange offer that is accepted by the holders
of more than the 50% of the outstanding shares of Common Stock (not including any shares of Common
Stock held by the Person or Persons making or party to, or associated or affiliated with the
Persons making or party to, such purchase, tender or exchange offer), or (iv) consummate a stock
purchase agreement or other business combination (including, without limitation, a reorganization,
recapitalization, spin-off or scheme of arrangement) with another Person whereby such other Person
acquires more than the 50% of the outstanding shares of Common Stock (not including any shares of
Common Stock held by the other Person or other Persons making or party to, or associated or
affiliated with the other Persons making or party to, such stock purchase agreement or other
business combination), (v) reorganize, recapitalize or reclassify its Common Stock, or (vi) any
person or group (as these terms are used for purposes of Sections 13(d) and 14(d) of the
Exchange Act) is or shall become the beneficial owner (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of 50% of the aggregate ordinary voting power represented by
issued and outstanding Common Stock.
(k) Options means any rights, warrants or options to subscribe for or purchase shares of
Common Stock or Convertible Securities.
(l) Parent Entity of a Person means an entity that, directly or indirectly, controls the
applicable Person and whose common stock or equivalent equity security is quoted or listed on an
Eligible Market, or, if there is more than one such Person or Parent Entity, the Person or Parent
Entity with the largest public market capitalization as of the date of consummation of the
Fundamental Transaction.
(m) 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.
(n) Principal Market means The NASDAQ Global Market.
(o) Successor Entity means the Person (or, if so elected by the Holder, the Parent Entity)
formed by, resulting from or surviving any Fundamental Transaction or the Person (or, if so elected
by the Holder, the Parent Entity) with which such Fundamental Transaction shall have been entered
into.
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(p) Trading Day means any day on which the Common Stock are 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 are then traded;
provided that Trading Day shall not include any day on which the Common Stock are scheduled to
trade on such exchange or market for less than 4.5 hours or any day that the Common Stock are
suspended from trading during the final hour of trading on such exchange or market (or if such
exchange or market does not designate in advance the closing time of trading on such exchange or
market, then during the hour ending at 4:00:00 p.m., New York time).
(q) 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 City time, and ending at 4:00:00 p.m., New York City time, 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 City time,
and ending at 4:00:00 p.m., New York City time, 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 pink sheets by Pink Sheets LLC (formerly the National
Quotation Bureau, Inc.). If the Weighted Average Price cannot be calculated for such security on
such 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 12 with the term Weighted Average Price being
substituted for the term Exercise Price. All such determinations shall be appropriately adjusted
for any share dividend, share split or other similar transaction during such period.
[Signature Page Follows]
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IN WITNESS WHEREOF, the Company has caused this 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
WARRANT TO PURCHASE COMMON STOCK
CAPSTONE TURBINE CORPORATION
The undersigned holder hereby exercises the right to purchase of the shares
of Common Stock (Warrant Shares) of CAPSTONE TURBINE CORPORATION, a Delaware corporation (the
Company), evidenced by the attached 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:
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a Cash Exercise with respect to Warrant Shares; |
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and/or |
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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 Mellon Investor
Services LLC to issue the above indicated number of shares of Common Stock in accordance with the
Transfer Agent Instructions dated May , 2008 from the Company and acknowledged and agreed to by
Mellon Investor Services LLC.
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CAPSTONE TURBINE CORPORATION
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