CLASS C COMMON STOCK PURCHASE WARRANT AGREEMENT
AGREEMENT, dated as of May 27, 1999, by and between
EASTBROKERS INTERNATIONAL INCORPORATED, a Delaware corporation (the "Company"),
and PUNTA INVESTORS, LLC, as Warrant Holder (the "Warrant Holder").
WHEREAS, the Company has agreed to issue the Warrant Holder
40,000 Class C Common Stock Purchase Warrants (each, a "Warrant"), each to
purchase one (1) share of the Company's Common Stock.
WHEREAS, the Company desires to set forth the terms and
conditions relating to the issuance, registration, transfer, exchange and
redemption of the Warrants, the issuance of certificates representing the
Warrants, the exercise of the Warrants, and the rights of the holders thereof;
NOW, THEREFORE, in consideration of the premises and the
mutual agreements hereinafter set forth and for the purpose of defining the
terms and provisions of the Warrants and the certificates representing the
Warrants and the respective rights and obligations thereunder of the Company and
the Warrant Holder, the parties hereto agree as follows.
1. DEFINITIONS.
As used herein, the following terms shall have the following
meanings, unless the context shall otherwise require:
(a) "Common Stock" shall mean the common stock of the Company
of which at the date hereof consists of 10,000,000 authorized shares, $.05 par
value, and shall also include any capital stock of any class of the Company
thereafter authorized which shall not be limited to a fixed sum or percentage in
respect to the rights of the holders thereof to participate in dividends and in
the distribution of assets upon the voluntary liquidation, dissolution or
winding up of the Company; provided, however, that the shares issuable upon
exercise of the Warrants shall include
(i) only shares of such class designated in the
Company's Certificate of Incorporation as Common Stock on the date of
the original issue of the Warrants; or
(ii) in the case of any reclassification, change,
consolidation, merger, sale or conveyance of the character referred to
in Section 9(c) hereof, the stock, securities or property provided for
in such section; or
(iii) in the case of any reclassification or change
in the outstanding shares of Common Stock issuable upon exercise of the
Warrants as a result of a subdivision or combination or a change in par
value, or from par value to no par value, or from no par value to par
value, such shares of Common Stock as so reclassified or changed.
(b) "Corporate Office" shall mean the office of the Company at
which at any particular time its principal business shall be administered, which
office is located at the date hereof at ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇,
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇.
(c) "Exercise Date" shall mean, as to any Warrant, the date on
which the Company shall have received both
(i) the Warrant Certificate representing such
Warrant, with the exercise form thereon duly executed by the Registered
Holder (as defined below) thereof or his attorney duly authorized in
writing, and
(ii) payment in cash, or by official bank or
certified check made payable to the Company, of an amount in lawful
money of the United States of America equal to the applicable Purchase
Price (as defined below).
(d) "Initial Warrant Exercise Date" shall mean the date
hereof.
(e) "Purchase Price" shall mean the purchase price per share
to be paid upon exercise of each Warrant in accordance with the terms hereof,
which price shall be $7.00 per share of common stock, subject to adjustment from
time to time pursuant to the terms and provisions of Section 9 hereof and to
prevent dilution, for a three (3) year period commencing on the Initial Warrant
Exercise Date and terminating on the Expiration Date and subject to the
Company's right in its sole discretion upon thirty (30) days written notice to
reduce the purchase price upon notice to all Warrant Holders.
(f) "Redemption Price" shall mean the price at which the
Company may, at its option, redeem the Warrants, in accordance with the terms
hereof, which price shall be $0.10 per Warrant.
(g) "Registered Holder" shall mean as to any Warrant and as of
any particular date, the person in whose name the certificate representing the
Warrant shall be registered on that date on the books maintained by the Company
pursuant to Section 6.
(h) "Warrant Agent" shall mean American Stock Transfer & Trust
Company, as the Company's warrant agent, or its authorized successor, as such.
(i) "Warrant Expiration Date" shall mean 5:00 P.M. (New York
time) on February 20, 2002 or the Redemption Date as defined in Section 8,
whichever is earlier; provided that if such date shall in the State of New York
be a holiday or a day on which banks are authorized or required to close, then
5:00 P.M. (New York time) on the next following day which in the State of New
York is not a holiday or a day on which banks are authorized or required to
close. Upon thirty (30) days' written notice to all warrant holders, the Company
shall have the right to extend the warrant expiration date.
2
2. WARRANTS AND ISSUANCE OF WARRANT CERTIFICATES.
(a) A Class C Warrant initially shall entitle the Registered
Holder of the Warrant Certificate representing such Warrant to purchase one
share of Common Stock upon the exercise thereof, in accordance with the terms
hereof, subject to modification and adjustment as provided in Section 9.
(b) Upon execution of this Agreement, Warrant Certificates
representing the number of Warrants issued pursuant to the Securities Purchase
Agreement dated May 28, 1999 by and between the Company and the Warrant Holder
shall be executed by the Company and delivered to the Warrant Holder.
(c) From time to time, up to the Warrant Expiration Date, the
Warrant Agent shall countersign and deliver stock certificates in required whole
number denominations representing the shares of Common Stock issuable, subject
to adjustment as described herein, upon the exercise of Warrants in accordance
with this Agreement.
(d) From time to time, up to the Warrant Expiration Date, the
Company shall countersign and deliver Warrant Certificates in required whole
number denominations to the persons entitled thereto in connection with any
transfer or exchange permitted under this Agreement; provided that no Warrant
Certificates shall be issued except
(i) those initially issued hereunder;
(ii) those issued on or after the Initial Warrant
Exercise Date, upon the exercise of fewer than all Warrants represented
by Warrant Certificate, to evidence any unexercised warrants held by
the exercising Registered Holder;
(iii) those issued upon any transfer or exchange of a
Warrant Certificate pursuant to Section 6;
(iv) those issued in replacement of lost, stolen,
destroyed or mutilated Warrant Certificates pursuant to Section 7; and
(v) those issued at the option of the Company, in
such form as may be approved by the Board of Directors, to reflect any
adjustment or change in the Purchase Price, the number of shares of
Common Stock purchasable upon exercise of the Warrants or the
Redemption Price therefor made pursuant to Section 9 hereof.
3. FORM AND EXECUTION OF WARRANT CERTIFICATES.
(a) The Class C Warrant Certificates shall be substantially in
the forms annexed hereto as Exhibit A (the provisions of which are hereby
incorporated herein) and may have such letters, numbers or other marks of
identification or designation and such legends, summaries or endorsements
3
printed, lithographed or engraved thereon as the Company may deem appropriate
and as are not inconsistent with the provisions of this Agreement, or as may be
required to comply with any law or with any rule or regulation made pursuant
thereto or with any rule or regulation of any stock exchange on which the
Warrants may be listed, or to conform to usage or to the requirements of Section
2 (b). The Warrant Certificates shall be dated the date of issuance thereof
(whether upon initial issuance, transfer, exchange or in lieu of mutilated,
lost, stolen or destroyed Warrant Certificates) and issued in registered form.
Class C Warrant Certificates shall be numbered serially and designated with the
letters CCW.
(b) Warrant Certificates shall be executed on behalf of the
Company by its President, or any Vice President and by its Secretary or an
Assistant Secretary, by manual signatures or by facsimile signatures printed
thereon, and shall have imprinted thereon a facsimile of the Company's seal. In
case any officer of the Company who shall have signed any of the Warrant
Certificates shall cease to be an officer of the Company or to hold the
particular office referenced in the Warrant Certificate before the date of
issuance of the Warrant Certificates, such Warrant Certificates may nevertheless
be issued and delivered with the same force and effect as though the person who
signed such Warrant Certificates had not ceased to be an officer of the Company
or to hold such office.
4. EXERCISE.
Each Warrant may be exercised by the Registered Holder thereof
at any time on or after the Initial Warrant Exercise Date, but not after the
Warrant Expiration Date, upon the terms and subject to the conditions set forth
herein and in the applicable Warrant Certificate. A Warrant shall be deemed to
have been exercised immediately prior to the close of business on the Exercise
Date and the person entitled to receive the securities deliverable upon such
exercise shall be treated for all purposes as the holder of those securities
upon the exercise of the Warrant as of the close of business on the Exercise
Date. Promptly following, and in any event within five (5) business days after
the date of such exercise, the Company shall cause to be issued and delivered by
the Warrant Agent, to the person or persons entitled to receive the same, a
certificate or certificates for the securities deliverable upon such exercise
(plus a certificate for any remaining unexercised Warrants of the Registered
Holder).
5. RESERVATION OF SHARES; LISTING; PAYMENT OF TAXES, ETC.
(a) The Company covenants that it will at all times reserve
and keep available out of its authorized Common Stock, solely for the purpose of
issue upon exercise of Warrants, such number of shares of Common Stock as shall
then be issuable upon the exercise of all outstanding Warrants. The Company
covenants that all shares of Common Stock which shall be issuable upon exercise
of the Warrants shall, at the time of delivery, be duly and validly issued,
fully paid, nonassessable and free from all taxes, liens and charges with
respect to the issue thereof (other than those which the Company shall promptly
pay or discharge) and that upon issuance such shares shall be listed on each
national securities exchange or eligible for inclusion in each automated
quotation system, if any, on which the other shares of outstanding Common Stock
of the Company are then listed or eligible for inclusion.
4
(b) The Warrants are subject to a Registration Rights
Agreement dated May 28, 1999 by and between the Company and the Registered
Holder.
(c) The Company shall pay all documentary, stamp or similar
taxes and other governmental charges that may be imposed with respect to the
issuance of Warrants, or the issuance, or delivery of any shares upon exercise
of the Warrants; provided, however, that if the shares of Common Stock are to be
delivered in a name other than the name of the Registered Holder of the Warrant
Certificate representing any Warrant being exercised, then no such delivery
shall be made unless the person requesting the same has paid to the Company the
amount of transfer taxes or charges incident thereto, if any.
6. EXCHANGE AND REGISTRATION OF TRANSFER.
(a) Warrant Certificates may be exchanged for other Warrant
Certificates representing an equal aggregate number of Warrants of the same
class or may be transferred in whole or in part. Warrant Certificates to be
exchanged shall be surrendered to the Company at its Corporate Office, and upon
satisfaction of the terms and provisions hereof, the Company shall execute,
issue and deliver in exchange therefor the Warrant Certificate or Certificates
which the Registered Holder making the exchange shall be entitled to receive.
(b) The Company shall keep at its office books in which,
subject to such reasonable regulations as it may prescribe, it shall register
Warrant Certificates and the transfer thereof in accordance with its regular
practice. Upon due presentment for registration of transfer of any Warrant
Certificate at such office, the Company shall execute, issue and deliver to the
transferee or transferees a new Warrant Certificate or Certificates representing
an equal aggregate number of Warrants.
(c) With respect to all Warrant Certificates presented for
registration or transfer, or for exchange or exercise, the subscription form on
the reverse thereof shall be duly endorsed, or be accompanied by a written
instrument or instruments of transfer and subscription, in form satisfactory to
the Company, duly executed by the Registered Holder or his attorney-in-fact duly
authorized in writing.
(d) A service charge may be imposed by the Company for any
exchange or registration of transfer of Warrant Certificates. In addition, the
Company may require payment by such holder of a sum sufficient to cover any tax
or other governmental charge that may be imposed in connection therewith.
(e) All Warrant Certificates surrendered for exercise or for
exchange in case of mutilated Warrant Certificates shall be promptly canceled by
the Company and thereafter retained by the Company until termination of this
Agreement.
(f) Prior to due presentment for registration of transfer
thereof, the Company may deem and treat the Registered Holder of any Warrant
Certificate as the absolute owner thereof and of each Warrant represented
5
thereby (notwithstanding any notations of ownership or writing thereon made by
anyone other than a duly authorized officer of the Company) for all purposes and
shall not be affected by any notice to the contrary.
7. LOSS OR MUTILATION.
Upon receipt by the Company of evidence satisfactory to them
of the ownership of and loss, theft, destruction or mutilation of any Warrant
Certificate and (in case of loss, theft or destruction) of indemnity
satisfactory to them, and (in the case of mutilation) upon surrender and
cancellation thereof, the Company shall execute (in the absence of notice to the
Company that the Warrant Certificate has been acquired by a bona fide purchaser)
and deliver to the Registered Holder in lieu thereof a new Warrant Certificate
of like tenor representing an equal aggregate number of Warrants. Applicants for
a substitute Warrant Certificate shall comply with such other reasonable
regulations and pay such other reasonable charges as the Company may prescribe.
8. REDEMPTION.
(a) Subject to the provision of paragraph 2(e) hereof,
commencing on the Initial Warrant Exercise Date, the Warrants will be
redeemable, at the option of the Company at a redemption price of $.10 per
share, at any time after the Warrants and the Company's Common Stock underlying
the Warrants are registered for public distribution under the Securities Act and
the closing bid price of the Company's Common Stock during the twenty (20)
consecutive trading days ending within fifteen (15) days of the date of the
notice of redemption is not less than $10.00 per share (the "Class C Target
Price"). "Market Price" for the purpose of this Section 8 shall mean
(i) the average closing bid price for any twenty (20)
consecutive trading days ending within fifteen (15) days of the date of
the notice of redemption, which notice shall be mailed no later than
five (5) days thereafter, of the Common Stock as reported by the
National Association of Securities Dealers, Inc. Automatic Quotation
System or any principal securities exchange or
(ii) the last reported sale price for any twenty (20)
consecutive trading days ending within fifteen (15) days of the date of
the notice of redemption, which notice shall be mailed no later than
five (5) days thereafter, on the primary exchange on which the Common
Stock is traded, if the Common Stock is traded on a national securities
exchange.
No such notice will be given until there is a current registration statement and
prospectus on file with the Securities and Exchange Commission, registering the
Warrants and Warrant Shares for resale under the Securities Act, and at the time
such notice is given to Warrant Holders and the notice may not be mailed to
Warrant Holders prior to the Initial Warrant Exercise Date.
(b) If the conditions set forth in Section 8(a) are met, and
the Company desires to exercise its right to redeem the Warrants, it shall mail
a notice of redemption to each of the Registered Holders of the Warrants to be
6
redeemed, first class, postage prepaid, not later than the thirtieth day before
the date fixed for redemption, at their last address as shall appear on the
records maintained pursuant to Section 6(b). Any notice mailed in the manner
provided herein shall be conclusively presumed to have been duly given whether
or not the Registered Holder receives such notice.
(c) The notice of redemption shall specify:
(i) the redemption price,
(ii) the date fixed for redemption,
(iii) the place where the Warrant Certificates shall
be delivered and the redemption price paid, and
(iv) that the right to exercise the Warrant shall
terminate at 5:00 P.M. (New York time) on the business day immediately
preceding the date fixed for redemption.
The date fixed for the redemption of the Warrant shall be the Redemption Date.
No failure to mail such notice nor any defect therein or in the mailing thereof
shall affect the validity of the proceedings for such redemption except as to a
Registered Holder (a) to whom notice was not mailed or (b) whose notice was
defective and then only to the extent that the Registered Holder is prejudiced
thereby. An affidavit of the Secretary or an Assistant Secretary of the Company
that notice of redemption has been mailed shall, in the absence of fraud, be
prima facie evidence of the facts stated therein.
(d) Any right to exercise a Warrant shall terminate at 5:00
P.M. (New York time) on the business day immediately preceding the Redemption
Date. On and after the Redemption Date, Registered Holders of the Warrants shall
have no further rights except to receive, immediately upon surrender of the
Warrant, the Redemption Price.
(e) From and after the Redemption Date specified for, the
Company shall, at the place specified on the notice of redemption, upon
presentation and surrender to the Company by or on behalf of the Registered
Holder thereof of one or more Warrant Certificates evidencing Warrants to be
redeemed, immediately deliver or cause to be delivered to or upon the written
order of such Holder a sum in cash equal to the redemption price of each such
Warrant. From and after the Redemption Date and upon the deposit or setting
aside by the Company of a sum sufficient to redeem all the Warrants called for
redemption, such Warrants shall expire and become void and all rights hereunder
and under the Warrant Certificates, except the right to receive payment of the
redemption price, shall cease.
(f) If the shares of the Company's Common Stock are subdivided
or combined into a greater or smaller number of shares of Common Stock, the
Class C Target Price shall be proportionally adjusted by the ratio which the
total number of shares of Common Stock outstanding immediately prior to such
event bears to the total number of shares of Common Stock to be outstanding
immediately after such event.
7
9. ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF SHARES OF COMMON
STOCK OR WARRANTS.
(a) Subject to the exception referred to in Section 9(g)
below, in the event the Company shall, at any time or from time to time after
the date hereof, sell or issue any shares of Common Stock for a consideration
per share less than the Market Price of the Common Stock (as defined in Section
8) on the date of the sale or issue any shares of Common Stock as a stock
dividend to the holders of Common Stock, or subdivide or combine the outstanding
shares of Common Stock into a greater or lesser number of shares (any such sale,
issuance, subdivision or combination being herein called a "Change of Shares"),
then, and thereafter upon each further Change of Shares, the Purchase Price in
effect immediately prior to such Change of Shares shall be changed to a price
(including any applicable fraction of a cent) determined by multiplying the
Purchase Price in effect immediately prior thereto by a fraction, the numerator
of which shall be the sum of the number of shares of Common Stock outstanding
immediately prior to the issuance of such additional shares and the number of
shares of Common Stock which the aggregate consideration received (determined as
provided in subsection 9(f) below) for the issuance of such additional shares
would purchase at such current market price per share of Common Stock, and the
denominator of which shall be the sum of the number of shares of Common Stock
outstanding immediately after the issuance of such additional shares. Such
adjustment shall be made successively whenever such an issuance is made. Upon
each adjustment of the Purchase Price pursuant to this Section 9, the total
number of shares of Common Stock purchasable upon the exercise of each Warrant
shall (subject to the provisions contained in Section 9(b) hereof) be such
number of shares (calculated to the nearest tenth) purchasable at the Purchase
Price in effect immediately prior to such adjustment multiplied by a fraction,
the numerator of which shall be the Purchase Price in effect immediately prior
to such adjustment and the denominator of which shall be the Purchase Price in
effect immediately after such adjustment.
(b) The Company may elect, upon any adjustment of the Purchase
Price hereunder, to adjust the number of Warrants outstanding, in lieu of the
adjustment in the number of shares of Common Stock purchasable upon the exercise
of each Warrant as hereinabove provided, so that each Warrant outstanding after
such adjustment shall represent the right to purchase one share of Common Stock.
Each Warrant held of record prior to such adjustment of the number of Warrants
shall become that number of Warrants (calculated to the nearest tenth)
determined by multiplying the number one by a fraction, the numerator of which
shall be the Purchase Price in effect immediately prior to such adjustment and
the denominator of which shall be the Purchase Price in effect immediately after
such adjustment. Upon each adjustment of the number of Warrants pursuant to this
Section 9, the Company shall, as promptly as practicable, cause to be
distributed to each Registered Holder of Warrant Certificates on the date of
such adjustment Warrant Certificates evidencing, subject to Section 10 hereof,
the number of additional Warrants to which such Holder shall be entitled as a
result of such adjustment or, at the option of the Company, cause to be
distributed to such Holder in substitution and replacement for the Warrant
Certificates held by him prior to the date of adjustment (and upon surrender
thereof, if required by the Company) new Warrant Certificates evidencing the
number of Warrants to which such Holder shall be entitled after such adjustment.
8
(c) In case of any reclassification, capital reorganization or
other change of outstanding shares of Common Stock, or in case of any
consolidation or merger of the Company with or into another corporation (other
than a consolidation or merger in which the Company is the continuing
corporation and which does not result in any reclassification, capital
reorganization or other change of outstanding shares of Common Stock), or in
case of any sale or conveyance to another corporation of the property of the
Company as, or substantially as, an entirety (other than a sale/leaseback,
mortgage or other financing transaction), the Company shall cause effective
provision to be made so that each holder of a warrant then outstanding shall
have the right thereafter by exercising such Warrant, to purchase the kind and
number of shares of stock or other securities or property (including cash)
receivable upon such reclassification, capital reorganization or other change,
consolidation, merger, sale or conveyance by a holder of the number of shares of
Common Stock that might have been purchased upon exercise of such Warrant
immediately prior to such reclassification, capital reorganization or other
change, consolidation, merger, sale or conveyance. Any such provision shall
include provision for adjustments that shall be as nearly equivalent as may be
practicable to the adjustments provided for in this Section 9. The Company shall
not effect any such consolidation, merger or sale unless prior to or
simultaneously with the consummation thereof the successor (if other than the
Company) resulting from such consolidation or merger or the corporation
purchasing assets or other appropriate corporation or entity shall assume, by
written instrument executed and delivered to the Company, the obligation to
deliver to the holder of each Warrant such shares of stock, securities or assets
as, in accordance with the foregoing provisions, such holders may be entitled to
purchase and the other obligations under this Agreement. The foregoing
provisions shall similarly apply to successive reclassifications, capital
reorganizations and other changes of outstanding shares of Common Stock and to
successive consolidations, mergers, sales or conveyances.
(d) Irrespective of any adjustments or changes in the Purchase
Price or the number of shares of Common Stock purchasable upon exercise of the
Warrants, the Warrant Certificates theretofore and thereafter issued shall,
unless the Company shall exercise its option to issue new Warrant Certificates
pursuant to Section 2(d) hereof, continue to express the Purchase Price per
share, the number of shares purchasable thereunder and the Redemption Price
therefor as the Purchase Price per share, the number of shares purchasable and
the Redemption Price therefor were expressed in the Warrant Certificates when
the same were originally issued.
(e) After each adjustment of the Purchase Price pursuant to
this Section 9, the Company will promptly prepare a certificate signed by the
President or a Vice President, and by the Treasurer or an Assistant Treasurer or
the Secretary or an Assistant Secretary, of the Company setting forth:
(i) the Purchase Price as so adjusted,
(ii) the number of shares of Common Stock purchasable
upon exercise of each Warrant after such adjustment, and, if the
Company shall have elected to adjust the number of Warrants, the number
of Warrants to which the registered holder of each Warrant shall then
be entitled, and the adjustment in Redemption Price resulting
therefrom, and
9
(iii) a brief statement of the facts accounting for
such adjustment. The Company will promptly cause a brief summary
thereof to be sent by ordinary first class mail to each registered
holder of Warrants at his last address as it shall appear on the
registry books of the Company. No failure to mail such notice nor any
defect therein or in the mailing thereof shall affect the validity
thereof except as to the holder to whom the Company failed to mail such
notice, or except as to the holder whose notice was defective.
The affidavit of the Secretary or an Assistant Secretary of the Company that
such notice has been mailed shall, in the absence of fraud, be prima facie
evidence of the facts stated therein.
(f) For purposes of Section 9(a) and 9(b) hereof, the
following provisions (i) to (vii) shall also be applicable:
(i) The number of shares of Common Stock outstanding
at any given time shall include shares of Common Stock owned or held by
or for the account of the Company and the sale or issuance of such
treasury shares or the distribution of any such treasury shares shall
not be considered a Change of Shares for purposes of said sections.
(ii) No adjustment of the Purchase Price shall be
made unless such adjustment would require an increase or decrease of at
least $.l0 in such price; provided that any adjustments which by reason
of this subsection (ii) are not required to be made shall be carried
forward and shall be made at the time of and together with the next
subsequent adjustment which, together with any adjustment(s) so carried
forward, shall require an increase or decrease of at least $.10 in the
Purchase Price then in effect hereunder.
(iii) In case of (1) the sale by the Company for cash
of any rights or warrants to subscribe for or purchase, or any options
for the purchase of, Common Stock or any securities convertible into or
exchangeable for Common Stock without the payment of any further
consideration other than cash, if any (such convertible or exchangeable
securities being herein called "Convertible Securities") , or (2) the
issuance by the Company, without the receipt by the Company of any
consideration therefor, of any rights or warrants to subscribe for or
purchase, or any options for the purchase of, Common Stock or
Convertible Securities, in each case, if (and only if) the
consideration payable to the Company upon the exercise of such rights,
warrants, or options shall consist of cash, whether or not such rights,
warrants or options, or the right to convert or exchange such
Convertible Securities, are immediately exercisable, and the price per
share for which Common Stock is issuable upon the exercise of such
rights, warrants or options or upon the conversion or exchange of such
Convertible Securities (determined by dividing (x) the minimum
aggregate consideration payable to the Company upon the exercise of
such rights, warrants or options, plus the consideration received by
the Company for the issuance or sale of such rights, warrants or
options, plus, in the case of such Convertible Securities, the minimum
aggregate amount of additional consideration, if any, other than such
Convertible Securities, payable upon the conversion or exchange
thereof, by (y) the total maximum number of shares of Common Stock
issuable upon the exercise of such rights, warrants or options or upon
10
the conversion or exchange of such Convertible Securities issuable upon
the exercise of such rights, warrants or options) is less than the fair
market value of the Common Stock on the date of the issuance or sale of
such rights, warrants or options, then the total maximum number of
shares of Common Stock issuable upon the exercise of such rights,
warrants or options or upon the conversion or exchange of such
Convertible Securities (as of the date of the issuance or sale of such
rights, warrants or options) shall be deemed to be outstanding shares
of Common Stock for purposes of Sections 9(a) and 9(b) hereof and shall
be deemed to have been sold for cash in an amount equal to such price
per share.
(iv) In case of the sale by the Company for cash of
any Convertible Securities, whether or not the right of conversion or
exchange thereunder is immediately exercisable, and the price per share
for which Common Stock is issuable upon the conversion or exchange of
such Convertible Securities (determined by dividing (x) the total
amount of consideration received by the Company for the sale of such
Convertible Securities, plus the minimum aggregate amount of additional
consideration, if any, other than such Convertible Securities, payable
upon the conversion or exchange thereof, by (y) the total maximum
number of shares of Common Stock issuable upon the conversion or
exchange of such Convertible Securities) is less than the fair market
value of the Common Stock on the date of the sale of such Convertible
Securities, then the total maximum number of shares of Common Stock
issuable upon the conversion or exchange of such Convertible Securities
(as of the date of the sale of such Convertible Securities) shall be
deemed to be outstanding shares of Common Stock for purposes of
Sections 9(a) and 9(b) hereof and shall be deemed to have been sold for
cash in an amount equal to such price per share.
(v) In case the Company shall modify the rights of
conversion, exchange or exercise of any of the securities referred to
in subsection (iii) above or any other securities of the Company
convertible, exchangeable, or exercisable for shares of Common Stock,
for any reason other than an event that would require adjustment to
prevent dilution, so that the consideration per share received by the
Company after such modification is less than the market price on the
date prior to such modification, the Purchase Price to be in effect
after such modification shall be determined by multiplying the Purchase
Price in effect immediately prior to such event by a fraction, of which
the numerator shall be the number of shares of Common Stock outstanding
multiplied by the market price on the date prior to the modification
plus the number of shares of Common Stock which the aggregate
consideration receivable by the Company for the securities affected by
the modification would purchase at the market price and of which the
denominator shall be the number of shares of Common Stock outstanding
on such date plus the number of shares of Common Stock to be issued
upon conversion, exchange, or exercise of the modified securities at
the modified rate. Such adjustment shall become effective as of the
date upon which such modification shall take effect.
(vi) On the expiration of any such right, warrant or
option or the termination of any such right to convert or exchange any
such Convertible Securities, the Purchase Price then in effect
11
hereunder shall forthwith be readjusted to such Purchase Price as would
have obtained (a) had the adjustments made upon the issuance or sale of
such rights, warrants, options or Convertible Securities been made upon
the basis of the issuance of only the number of shares of Common Stock
theretofore actually delivered (and the total consideration received
therefor) upon the exercise of such rights, warrants, or options or
upon the conversion or exchange of such Convertible Securities and (b)
had adjustments been made on the basis of the Purchase Price as
adjusted under clause (a) for all transactions (which would have
affected such adjusted Purchase Price) made after the issuance or sale
of such rights, warrants, options or Convertible Securities.
(vii) In case of the sale for cash of any shares of
Common Stock, any Convertible Securities, any rights or warrants to
subscribe for or purchase, or any options for the purchase of, Common
Stock or Convertible Securities, the consideration received by the
Company therefor shall be deemed to be the gross sales price therefor
without deducting therefrom any expense paid or incurred by the Company
or any underwriting discounts or commissions or concessions paid or
allowed by the Company in connection therewith.
(g) No adjustment to the Purchase Price of the Warrants or to
the number of shares of Common Stock purchasable upon the exercise of each
Warrant will be made, however,
(i) upon the sale or exercise of the Warrants;
(ii) upon the issuance or sale of Common Stock or
Convertible Securities upon the exercise of any rights or warrants to
subscribe for or purchase, or any options for the purchase of, Common
Stock or Convertible Securities, whether or not such rights, warrants
or options were outstanding on the date of the original sale of the
Warrants or were thereafter issued or sold (including, but not limited
to shares issuable on exercise of any outstanding Class A or Class B
Warrants); or
(iii) upon the issuance or sale of Common Stock upon
conversion or exchange of any Convertible Securities, whether or not
any adjustment in the Purchase Price was made or required to be made
upon the issuance or sale of such Convertible Securities and whether or
not such Convertible Securities were outstanding on the date of the
original sale of the Warrants or were thereafter issued or sold; or
(iv) upon the issuance or sale of Common Stock or
Convertible Securities in an exempt transaction unless the issuance or
sale price is less than 85% of the fair market value of the Common
Stock on the date of issuance, in which case the adjustment shall only
be for the difference between 85% of the fair market value and the
issue or sale price; or
(v) upon the issuance or sale of Common Stock or
Convertible Securities to shareholders of any corporation which merges
with and/or consolidates into or is acquired by the Company or from
which the Company acquires assets and some or all of the consideration
12
consists of equity securities of the Company, in proportion to their
stock holdings of such corporation immediately prior to the acquisition
but only if no adjustment is required pursuant to any other provision
of this Section 9; or
(vi) upon the issuance or exercise of options or upon
the issuance or grant of stock awards granted to the Company's
directors, employees or consultants under a plan or plans (including
for this purpose any arrangement or agreement which would constitute a
"plan" under the instructions to the registration statement on Form
S-8) adopted by the Company's Board of Directors and approved by its
stockholders. For the purposes of determining whether the consideration
received by the Company is less than the Market Price in connection
with any issuance of stock to the Company's directors, employees or
consultants under plans adopted by the Company's Board of Directors and
approved by its stockholders, the consideration received shall be
deemed to be the amount of compensation to the director, employee or
consultant reported by the Company in connection with such issuances;
or
(vii) upon the issuance of Common Stock to the
Company's directors, employees or consultants under a plan or plans
which are qualified under the Internal Revenue Code; or
(viii) upon the issuance of Common Stock in a bona
fide public offering pursuant to a firm commitment underwriting.
(h) As used in this Section 9, the term "Common Stock" shall
mean and include the Company's Common Stock authorized on the date of the
original issue of the Units and shall also include any capital stock of any
class of the Company thereafter authorized which shall not be limited to a fixed
sum or percentage in respect of the rights of the holders thereof to participate
in dividends and in the distribution of assets upon the voluntary liquidation,
dissolution or winding up of the Company; provided, however, that the shares
issuable upon exercise of the Warrants shall include
(i) only shares of such class designated in the
Company's Certificate of Incorporation as Common Stock on the date of
the original issue of the Units or
(ii) in the case of any reclassification, change,
consolidation, merger, sale or conveyance of the character referred to
in Section 9(c) hereof, the stock, securities or property provided for
in such section or
(iii) in the case of any reclassification or change
in the outstanding shares of Common Stock issuable upon exercise of the
Warrants as a result of a subdivision or combination or a change in par
value, or from par value to no par value, or from no par value to par
value, such shares of Common Stock as so reclassified or changed.
(i) Any determination as to whether an adjustment in the
Purchase Price in effect hereunder is required pursuant to Section 9, or as to
the amount of any such adjustment, if required, shall be binding upon the
holders of the Warrants and the Company if made in good faith by the Board of
Directors of the Company.
13
(j) If and whenever the Company shall grant to the holders of
Common Stock, as such, rights or warrants to subscribe for or to purchase, or
any options for the purchase of, Common Stock or securities convertible into or
exchangeable for or carrying a right, warrant or option to purchase Common
Stock, the Company shall concurrently therewith grant to each Registered Holder
as of the record date for such transaction of the Warrants then outstanding, the
rights, warrants or options to which each Registered Holder would have been
entitled if, on the record date used to determine the stockholders entitled to
the rights, warrants or options being granted by the Company, the Registered
Holder were the holder of record of the number of whole shares of Common Stock
then issuable upon exercise (assuming, for purposes of this Section 9(j), that
exercise of Warrants is permissible during periods prior to the Initial Warrant
Exercise Date) of his Warrants. Such grant by the Company to the holders of the
Warrants shall be in lieu of any adjustment which otherwise might be called for
pursuant to this Section 9.
10. FRACTIONAL WARRANTS AND FRACTIONAL SHARES
(a) If the number of shares of Common Stock purchasable upon
the exercise of each Warrant is adjusted pursuant to Section 9 hereof, the
Company nevertheless shall not be required to issue fractions of shares, upon
exercise of the Warrants or otherwise, or to distribute certificates that
evidence fractional shares. In such event, the Company may at its option elect
to round up the number of shares to which the Holder is entitled to the nearest
whole share or to pay cash in respect of fractional shares in accordance with
the following: With respect to any fraction of a share called for upon any
exercise hereof, the Company shall pay to the Holder an amount in cash equal to
such fraction multiplied by the current market value of such fractional share,
determined as follows:
(i) If the Common Stock is listed on a National
Securities Exchange or admitted to unlisted trading privileges on such
exchange or listed for trading on the NASDAQ Quotation System, the
current value shall be the last reported sale price of the Common Stock
on such exchange on the last business day prior to the date of exercise
of this Warrant or if no such sale is made on such day, the average of
the closing bid and asked prices for such day on such exchange; or
(ii) If the Common Stock is not listed or admitted to
unlisted trading privileges, the current value shall be the mean of the
last reported bid and asked prices reported by the National Quotation
Bureau, Inc. on the last business day prior to the date of the exercise
of this Warrant; or
(iii) If the Common Stock is not so listed or
admitted to unlisted trading privileges and bid and asked prices are
not so reported, the current value shall be an amount determined in
such reasonable manner as may be prescribed by the Board of Directors
of the Company.
14
11. WARRANT HOLDERS NOT DEEMED STOCKHOLDERS.
No holder of Warrants shall, as such, be entitled to vote or
to receive dividends or be deemed the holder of Common Stock that may at any
time be issuable upon exercise of such Warrants for any purpose whatsoever, nor
shall anything contained herein be construed to confer upon the holder of
Warrants, as such, any of the rights of a stockholder of the Company or any
right to vote for the election of directors or upon any matter submitted to
stockholders at any meeting thereof, or to give or withhold consent to any
corporate action (whether upon any recapitalization, issue or reclassification
of stock, change of par value or change of stock to no par value, consolidation,
merger or conveyance or otherwise), or to receive notice of meetings, or to
receive dividends or subscription rights, until such Holder shall have exercised
such Warrants and been issued shares of Common Stock in accordance with the
provisions hereof.
12. RIGHTS OF ACTION.
All rights of action with respect to this Agreement are vested
in the respective Registered Holders of the Warrants, and any Registered Holder
of a Warrant or of the holder of any other Warrant, may, in his own behalf and
for his own benefit, enforce against the Company his right to exercise his
Warrants for the purchase of shares of Common Stock in the manner provided in
the Warrant Certificate and this Agreement.
13. AGREEMENT OF WARRANT HOLDERS.
Every holder of a Warrant, by his acceptance thereof, consents
and agrees with the Company, and every other holder of a Warrant that:
(a) The Warrants are transferable only on the registry books
of the Company by the Registered Holder thereof in person or by his attorney
duly authorized in writing and only if the Warrant Certificates representing
such Warrants are surrendered at the office of the Company, duly endorsed or
accompanied by a proper instrument of transfer satisfactory to the Company in
its discretion, together with payment of any applicable transfer taxes; and
(b) The Company may deem and treat the person in whose name
the Warrant Certificate is registered as the holder and as the absolute, true
and lawful owner of the Warrants represented thereby for all purposes, and the
Company shall not be affected by any notice or knowledge to the contrary, except
as otherwise expressly provided in Section 7 hereof.
14. CANCELLATION OF WARRANT CERTIFICATES.
If the Company shall purchase or acquire any Warrant or
Warrants, the Warrant Certificate or Warrant Certificates evidencing the same
shall thereupon be delivered to the Company and canceled by it and retired. The
Company shall also cancel Common Stock following exercise of any or all of the
Warrants represented thereby or delivered to it for transfer, split up,
combination or exchange.
15
15. MODIFICATION OF AGREEMENT.
This Agreement shall not be modified, supplemented or altered
in any respect except with the consent in writing of the Company and the
Registered Holders, other than such changes as are specifically prescribed by
this Agreement as originally executed or such changes that are made solely for
the purpose of compliance with applicable law.
16. NOTICES.
All notices, requests, consents and other communications
hereunder shall be in writing and shall be deemed to have been made when
delivered or mailed first class registered or certified mail, postage prepaid as
follows: if to the Registered Holder of a Warrant Certificate, at the address of
such holder as shown on the registry books maintained by the Company; if to the
Company, ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇.
17. GOVERNING LAW.
This Agreement shall. be governed by and construed in
accordance with the laws of the State of New York, without reference to
principles of conflict of laws.
18. BINDING EFFECT.
This Agreement shall be binding upon and inure to the benefit
of the Company and the Registered Holders, and their respective successors and
assigns, and the holders from time to time of Warrant Certificates. Nothing in
this Agreement is intended or shall be construed to confer upon any other person
any right, remedy or claim, in equity or at law, or to impose upon any other
person any duty, liability or obligation.
19. TERMINATION.
This Agreement shall terminate at the close of business on the
Warrant Expiration Date of all the Warrants or such earlier date upon which all
Warrants have been exercised.
20. COUNTERPARTS.
This Agreement may be executed in several counterparts, which
taken together shall constitute a single document.
16
IN WITNESS WHEREOF, the Company has caused this Agreement to
be executed as of the date first written above.
EASTBROKERS INTERNATIONAL
INCORPORATED
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
____________________________________
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
Title: President and Chief Executive
Officer
17