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CASULL ARMS CORPORATION
AND
NATIONAL SECURITIES CORPORATION
FORM OF
REPRESENTATIVE'S
WARRANT AGREEMENT
DATED AS OF ___________, 1997
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REPRESENTATIVE'S WARRANT AGREEMENT dated as of ________, 1997, between
CASULL ARMS CORPORATION, a Delaware corporation (the "Company"), and NATIONAL
SECURITIES CORPORATION and its assignees or designees (each hereinafter referred
to variously as a "Holder" or "Representative").
W I T N E S S E T H :
WHEREAS, the Representative has agreed pursuant to the underwriting
agreement (the "Underwriting Agreement") between the Representative and the
Company, to act as the representative of the several underwriters listed
therein (the "Underwriters") in connection with the Company's proposed public
offering of 750,000 shares of the Company's Common Stock (as hereinafter
defined) and 750,000 redeemable Common Stock purchase warrants (the
"Warrants"), each warrant entitling the holder thereof to purchase one share
of Common Stock (collectively, the "Securities"). The Securities are sold as
units ("Units"), each consisting of one (1) share of Common Stock and one (1)
Warrant, although the parties anticipate that there will be no public market
for the Securities as Units;
WHEREAS, pursuant to the Underwriting Agreement, upon the Representative's
request, the Company proposes to issue up to an additional 112,500 shares of
Common Stock and 112,500 Warrants for the purpose of over-allotments, if any;
WHEREAS, pursuant to the Underwriting Agreement, the Company proposes to
issue warrants to the Representative to purchase up to an aggregate of 75,000
Units (the "Representative's Warrants"); and
WHEREAS, the Representative's Warrants to be issued pursuant to this
Agreement will be issued on the Closing Date (as such term is defined in the
Underwriting Agreement) by the Company to the Representative in consideration
for, and as part of the Underwriters' compensation in connection with, the
Representative acting as the representative pursuant to the Underwriting
Agreement.
NOW, THEREFORE, in consideration of the premises, the payment by the
Representative to the Company of an aggregate of ___________________________
____ ($_____), the agreements herein set forth and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
1. GRANT. The Representative is hereby collectively granted the right to
purchase, at any time from ________, 1998 [the first anniversary of the issuance
of the Representative's Warrants] until 5:30 p.m., New York time, on __________,
200_ [5 years from the completion of this Offering ("Closing")], at which
time the Representative's Warrants expire, up to an aggregate 75,000 shares of
Common Stock and 75,000 Warrants, subject to adjustment as provided in Section
8 hereof (the "Representative's Securities"). Each Representative's Warrant
shall entitle the holder thereof to purchase one (1) share of common stock, par
value $.01 per share, of the Company (the "Common Stock") and/or one (1)
Warrant to purchase one (1) share of Common Stock, at an initial exercise price
of $6.48 per share and $.12 per Warrant, respectively [120% of the offering
prices per share and per warrant to the public, respectively] (the "Common Stock
Exercise Price" and the "Warrant Exercise Price," respectively).
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2. REPRESENTATIVE'S WARRANT CERTIFICATES. The Representative's warrant
certificates (the "Warrant Certificates") delivered and to be delivered pursuant
to this Agreement shall be in the form set forth in Exhibit A, attached hereto
and made a part hereof, with such appropriate insertions, omissions,
substitutions, and other variations as required or permitted by this Agreement.
3. REGISTRATION OF WARRANT. The Representative's Warrants shall be
numbered and shall be registered on the books of the Company when issued.
4. EXERCISE OF REPRESENTATIVE'S WARRANT.
4.1 METHOD OF EXERCISE. The Representative's Warrants initially are
exercisable at the Common Exercise Price and/or Warrant Exercise Price (subject
to adjustment as provided in Section 11 hereof) per Representative's Warrant set
forth in Section 8 hereof payable by certified or official bank check in New
York Clearing House funds. Upon surrender of a Representative's Warrant
Certificate with the annexed Form of Election to Purchase duly executed,
together with payment of the Common Stock Exercise Price and/or the Warrant
Exercise Price for shares of Common Stock and/or Warrants purchased at the
Company's principal offices presently located at ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇.▇. ▇▇▇
▇▇▇▇, ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇ the registered holder of a Representative's Warrant
Certificate ("Holder" or "Holders") shall be entitled to receive a certificate
or certificates for the shares of Common Stock and/or Warrants so purchased.
The purchase rights represented by each Representative's Warrant Certificate are
exercisable at the option of the Holder thereof, in whole or in part (but not as
to fractional shares underlying the Representative's Warrants). In the case of
the purchase of less than all of the
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shares or warrants purchasable under any Representative's Warrant
Certificate, the Company shall cancel said Representative's Warrant
Certificate upon the surrender thereof and shall execute and deliver a new
Representative's Warrant Certificate of like tenor for the balance of the
shares or warrants purchasable thereunder.
5. ISSUANCE OF CERTIFICATES. Upon the exercise of the Representative's
Warrant, the issuance of certificates for securities, properties or rights
underlying such Representative's Warrant shall be made forthwith (and in any
event within five (5) business days thereafter) without charge to the Holder
thereof including, without limitation, any tax which may be payable in respect
of the issuance thereof, and such certificates shall (subject to the provisions
of Sections 7 and 9 hereof) be issued in the name of, or in such names as may be
directed by, the Holder thereof; provided, however, that the Company shall not
be required to pay any tax which may be payable in respect of any transfer
involved in the issuance and delivery of any such certificates in a name other
than that of the Holder and the Company shall not be required to issue or
deliver such certificates unless or until the person or persons requesting the
issuance thereof shall have paid to the Company the amount of such tax or shall
have established to the satisfaction of the Company that such tax has been paid.
The Representative's Warrant Certificates and the certificates representing
the securities, property or rights issued upon exercise of the Representative's
Warrant shall be executed on behalf of the Company by the manual or facsimile
signature of the then present President or any Vice President of the Company
under its corporate seal reproduced thereon, attested to by the manual or
facsimile signature of the then present Secretary or any Assistant
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Secretary of the Company. Representative's Warrant Certificates shall be
dated the date of execution by the Company upon initial issuance, division,
exchange, substitution or transfer.
6. TRANSFER OF REPRESENTATIVE'S WARRANT. The Representative's Warrant
shall be transferable only on the books of the Company maintained at its
principal office, where its principal office may then be located, upon delivery
thereof duly endorsed by the Holder or by its duly authorized attorney or
representative accompanied by proper evidence of succession, assignment or
authority to transfer. Upon any registration transfer, the Company shall
execute and deliver the new Representative's Warrant to the person entitled
thereto.
7. RESTRICTION ON TRANSFER OF REPRESENTATIVE'S WARRANT. The Holder of a
Representative's Warrant Certificate, by its acceptance thereof, covenants and
agrees that the Representative's Warrant is being acquired as an investment and
not with a view to the distribution thereof, and that the Representative's
Warrant may not be sold, transferred, assigned, hypothecated or otherwise
disposed of, in whole or in part, for the term of the Representative's Warrant,
except to officers or partners of the Underwriters, or by operation of law.
8. EXERCISE PRICE AND NUMBER OF SECURITIES. Except as otherwise provided
in Section 10 hereof, each Representative's Warrant is exercisable to purchase
one share of Common Stock and/or one Warrant to purchase one share of Common
Stock at an initial exercise price equal to the Common Stock Exercise Price
and/or the Warrant Exercise Price. The Common Stock Exercise Price and/or
Warrant Exercise Price, and the number of shares and/or warrants for which the
Representative's Warrant may be exercised shall be the price(s) and the number
of
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shares and/or warrants which shall result from time to time from any and all
adjustments in accordance with the provisions of Section 11 hereof.
9. REGISTRATION RIGHTS.
9.1 REGISTRATION UNDER THE SECURITIES ACT OF 1933. Each
Representative's Warrant Certificate and each certificate representing
securities issuable upon exercise of the Representative's Warrant or upon
exercise of warrants underlying the Representative's Warrants (collectively, the
"Warrant Shares") shall bear the following legend unless (i) such
Representative's Warrant or Warrant Shares are distributed to the public or sold
to the underwriters for distribution to the public pursuant to Section 9 hereof
or otherwise pursuant to a registration statement filed under the Securities Act
of 1933, as amended (the "Act"), or (ii) the Company has received an opinion of
counsel, in form and substance reasonably satisfactory to counsel for the
Company, that such legend is unnecessary for any such certificate:
THE REPRESENTATIVE'S WARRANT REPRESENTED BY THIS CERTIFICATE AND THE
OTHER SECURITIES ISSUABLE UPON EXERCISE THEREOF MAY NOT BE OFFERED OR
SOLD EXCEPT PURSUANT TO (I) AN EFFECTIVE REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933, (II) TO THE EXTENT APPLICABLE, RULE 144
UNDER SUCH ACT (OR ANY SIMILAR RULE UNDER SUCH ACT RELATING TO THE
DISPOSITION OF SECURITIES), OR (III) AN OPINION OF COUNSEL, IF SUCH
OPINION SHALL BE REASONABLY SATISFACTORY TO COUNSEL FOR THE ISSUER,
THAT AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT IS AVAILABLE.
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THE TRANSFER OR EXCHANGE OF THE REPRESENTATIVE'S WARRANT REPRESENTED
BY THE CERTIFICATE IS RESTRICTED IN ACCORDANCE WITH THE
REPRESENTATIVE'S WARRANT AGREEMENT REFERRED TO HEREIN.
9.2 PIGGYBACK REGISTRATION. If, at any time commencing after the
effective date of the Registration Statement and expiring five (5) years
thereafter, the Company proposes to register any of its securities under the Act
(other than in connection with a merger or pursuant to Form S-4 or Form S-8), it
will give written notice by registered mail, at least thirty (30) days prior to
the filing of each such registration statement, to the Holders of the
Representative's Warrants and/or the Warrant Shares of its intention to do so.
If any of the Holders of the Representative's Warrants and/or Warrant Shares
notify the Company within twenty (20) days after mailing of any such notice of
its or their desire to include any such securities in such proposed registration
statement, the Company shall afford such Holders of the Representative's
Warrants and/or Warrant Shares the opportunity to have any such Representative's
Warrants and/or Warrant Shares registered under such registration statement. In
the event that the managing underwriter for said offering advises the Company in
writing that in its opinion the number of securities requested to be included in
such registration exceeds the number which can be sold in such offering without
causing a diminution in the offering price or otherwise adversely affecting the
offering, the Company will include in such registration (a) FIRST, the
securities the Company proposes to sell, (b) SECOND, the securities held by the
entities that made the demand for registration, (c) THIRD, the Representative's
Warrants and/or Warrant Shares requested to be included in such registration
which in the opinion of such underwriter can be sold, PRO RATA among
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the Holders of Representative's Warrants and/or Warrant Shares on the basis
of the number of Representative's Warrants and/or Warrant Shares requested to
be registered by such Holders, and (d) FOURTH, other securities requested to
be included in such registration.
Notwithstanding the provisions of this Section 9.2, the Company shall have
the right at any time after it shall have given written notice pursuant to this
Section 9.2 (irrespective of whether a written request for inclusion of any such
securities shall have been made) to elect not to file any such proposed
registration statement or to withdraw the same after the filing but prior to the
effective date thereof.
9.3 DEMAND REGISTRATION.
(a) At any time commencing one (1) year after the effective
date of the Registration Statement and expiring five (5) years from the
effective date of Closing, the Holders of the Representative's Warrants
and/or Warrant Shares representing a "Majority" (as hereinafter defined) of
the Representative's Warrants and/or Warrant Shares shall have the right
(which right is in addition to the registration rights under Section 9.2
hereof), exercisable by written notice to the Company, to have the Company
prepare and file with the Securities and Exchange Commission (the
"Commission"), on one occasion, a registration statement and such other
documents, including a prospectus, as may be necessary in the opinion of both
counsel for the Company and counsel for the Holders, in order to comply with
the provisions of the Act, so as to permit a public offering and sale by such
Holders and any other Holders of the Representative's Warrant and/or Warrant
Shares who notify the Company within fifteen (15) days after the Company
mails notice of such request pursuant to Section 9.3(b) hereof
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(collectively, the "Requesting Holders") of their respective Warrant Shares
for the earlier of (i) six (6) consecutive months or (ii) until the sale of
all of the Warrant Shares requested to be registered by the Requesting
Holders.
(b) The Company covenants and agrees to give written notice of any
registration request under this Section 9.3 by any Holder or Holders
representing a Majority of the Representative's Warrants and/or Warrant Shares
to all other registered Holders of the Representative's Warrants and the Warrant
Shares within ten (10) days from the date of the receipt of any such
registration request.
(c) In addition to the registration rights under Section 9.2 and
subsection (a) of this Section 9.3, at any time commencing one (1) year after
the effective date of the Registration Statement and expiring five (5) years
from the effective date of the Registration Statement, the Holders of a Majority
of the Representative's Warrants and/or Warrant Shares shall have the right on
one occasion, exercisable by written request to the Company, to have the Company
prepare and file with the Commission a registration statement so as to permit a
public offering and sale by such Holders of their respective Warrant Shares for
the earlier of (i) six (6) consecutive months or (ii) until the sale of all of
the Warrant Shares requested to be registered by such Holders; provided,
however, that the provisions of Section 9.4(b) hereof shall not apply to any
such registration request and registration and all costs incident thereto shall
be at the expense of the Holder or Holders making such request. If the Holders
have exercised their rights under Section 9.3(a) then the Holders may not
exercise their rights under Section 9.3(c) for a period of
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six (6) months following the effective date of any registration statement
filed pursuant to Section 9.3(a).
(d) Notwithstanding anything to the contrary contained herein, if
the Company shall not have filed a registration statement for the Warrant Shares
within the time period specified in Section 9.4(a) hereof pursuant to the
written notice specified in Section 9.3(a) of the Holders of a Majority of the
Representative's Warrants and/or Warrant Shares, the Company, at its option, may
repurchase (i) any and all Warrant Shares at the higher of the Market Price (as
defined in Section 9.3(e)) per share of Common Stock on (x) the date of the
notice sent pursuant to Section 9.3(a) or (y) the expiration of the period
specified in Section 9.4(a) and (ii) any and all Representative's Warrant at
such Market Price less the exercise price of such Representative's Warrant.
Such repurchase shall be in immediately available funds and shall close within
two (2) days after the later of (i) the expiration of the period specified in
Section 9.4(a) or (ii) the delivery of the written notice of election specified
in this Section 9.3(d).
(e) DEFINITION OF MARKET PRICE. As used herein, the phrase
"Market Price" at any date shall be deemed to be the last reported sale price,
or, in case no such reported sale takes place on such day, the average of the
last reported sale prices for the last three (3) trading days, in either case as
officially reported by the principal securities exchange on which the Common
Stock is listed or admitted to trading, or, if the Common Stock is not listed or
admitted to trading on any national securities exchange, the average closing
sale price as furnished by the NASD through The NASDAQ Stock Market, Inc.
("NASDAQ") or similar organization if NASDAQ is no longer reporting such
information, or if the Common Stock is not quoted on
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NASDAQ, the OTC Electronic Bulletin Board, or as determined in good faith by
resolution of the Board of Directors of the Company, based on the best
information available to it.
9.4 COVENANTS OF THE COMPANY WITH RESPECT TO REGISTRATION. In
connection with any registration under Sections 9.2 or 9.3 hereof, the Company
covenants and agrees as follows:
(a) The Company shall use its best efforts to file a registration
statement within ninety (90) days of receipt of any demand therefor, and to have
any registration statements declared effective at the earliest possible time,
and shall furnish each Holder desiring to sell Warrant Shares such number of
prospectuses as shall reasonably be requested.
(b) The Company shall pay all costs (excluding fees and expenses
of Holder(s)' counsel and any underwriting or selling commissions), fees and
expenses in connection with all registration statements filed pursuant to
Sections 9.2 and 9.3(a) hereof including, without limitation, the Company's
legal and accounting fees, printing expenses, blue sky fees and expenses. The
Holder(s) will pay all costs, fees and expenses (including those of the Company)
in connection with the registration statement filed pursuant to Section 9.3(c).
(c) The Company will take all necessary action which may be
required in qualifying or registering the Warrant Shares included in a
registration statement for offering and sale under the securities or blue sky
laws of such states as reasonably are requested by the Holder(s), provided that
the Company shall not be obligated to execute or file any general consent
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to service of process or to qualify as a foreign corporation to do business
under the laws of any such jurisdiction.
(d) The Company shall indemnify the Holder(s) of the Warrant
Shares to be sold pursuant to any registration statement and each person, if
any, who controls such Holders within the meaning of Section 15 of the Act or
Section 20(a) of the Securities Exchange Act of 1934, as amended ("Exchange
Act"), against all loss, claim, damage, expense or liability (including all
expenses reasonably incurred in investigating, preparing or defending against
any claim whatsoever) to which any of them may become subject under the Act, the
Exchange Act or otherwise, arising from such registration statement but only to
the same extent and with the same effect as the provisions pursuant to which the
Company has agreed to indemnify each of the Underwriters contained in Section 7
of the Underwriting Agreement.
(e) The Holder(s) of the Warrant Shares to be sold pursuant to a
registration statement, and their successors and assigns, shall severally, and
not jointly, indemnify the Company, its officers and directors and each person,
if any, who controls the Company within the meaning of Section 15 of the Act or
Section 20(a) of the Exchange Act, against all loss, claim, damage or expense or
liability (including all expenses reasonably incurred in investigating,
preparing or defending against any claim whatsoever) to which they may become
subject under the Act, the Exchange Act or otherwise, arising from information
furnished by or on behalf of such Holders, or their successors or assigns, for
specific inclusion in such registration statement to the same extent and with
the same effect as the provisions contained in Section 7 of the
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Underwriting Agreement pursuant to which the Underwriters have agreed to
indemnify the Company.
(f) Nothing contained in this Agreement shall be construed as
requiring the Holder(s) to exercise their Representative's Warrant prior to the
initial filing of any registration statement or the effectiveness thereof.
(g) The Company shall not permit the inclusion of any securities
other than the Warrant Shares to be included in any registration statement filed
pursuant to Section 9.3 hereof, or permit any other registration statement to be
or remain effective during the effectiveness of a registration statement filed
pursuant to Section 9.3 hereof, without the prior written consent of National
Securities Corporation or as otherwise required by the terms of any existing
registration rights granted prior to the date of this Agreement by the Company
to the holders of any of the Company's securities.
(h) The Company shall furnish to each Holder participating in the
offering and to each underwriter, if any, a signed counterpart, addressed to
such Holder or underwriter, of (i) an opinion of counsel to the Company, dated
the effective date of such registration statement (and, if such registration
includes an underwritten public offering, an opinion dated the date of the
closing under the underwriting agreement), and (ii) a "cold comfort" letter
dated the effective date of such registration statement (and, if such
registration includes an underwritten public offering, a letter dated the date
of the closing under the underwriting agreement) signed by the independent
public accountants who have issued a report on the
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Company's financial statements included in such registration statement, in
each case covering substantially the same matters with respect to such
registration statement (and the prospectus included therein) and, in the case
of such accountants' letter, with respect to events subsequent to the date of
such financial statements, as are customarily covered in opinions of issuer's
counsel and in accountants' letters delivered to underwriters in underwritten
public offerings of securities.
(i) The Company shall as soon as practicable after the effective
date of the registration statement, and in any event within 15 months
thereafter, make "generally available to its security holders" (within the
meaning of Rule 158 under the Act) an earnings statement (which need not be
audited) complying with Section 11(a) of the Act and covering a period of at
least 12 consecutive months beginning after the effective date of the
registration statement.
(j) The Company shall enter into an underwriting agreement with
the managing underwriters selected for such underwriting by Holders holding a
Majority of the Warrant Shares requested to be included in such underwriting,
which may be the Representative. Such agreement shall be satisfactory in form
and substance to the Company, each Holder and such managing underwriters, and
shall contain such representations, warranties and covenants by the Company and
such other terms as are customarily contained in agreements of that type used by
the managing underwriter. The Holders shall be parties to any underwriting
agreement relating to an underwritten sale of their Warrant Shares and may, at
their option, require that any or all the representations, warranties and
covenants of the Company to or for the benefit of such underwriters shall also
be made to and for the benefit of such Holders. Such Holders shall not
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be required to make any representations or warranties to or agreements with
the Company or the underwriters except as they may relate to such Holders and
their intended methods of distribution.
(k) For purposes of this Agreement, the term "Majority" in
reference to the Representative's Warrants or Warrant Shares, shall mean in
excess of fifty percent (50%) of the then outstanding Representative's Warrants
or Warrant Shares that (i) are not held by the Company, an affiliate, officer,
creditor, employee or agent thereof or any of their respective affiliates,
members of their family, persons acting as nominees or in conjunction therewith
or (ii) have not been resold to the public pursuant to a registration statement
filed with the Commission under the Act.
10. OBLIGATIONS OF HOLDERS. It shall be a condition precedent to the
obligations of the Company to take any action pursuant to SECTION 9 hereof that
each of the selling Holders shall:
(a) Furnish to the Company such information regarding themselves,
the Warrant Shares held by them, the intended method of sale or other
disposition of such securities, the identity of and compensation to be paid to
any underwriters proposed to be employed in connection with such sale or other
disposition, and such other information as may reasonably be required to effect
the registration of their Warrant Shares.
(b) Notify the Company, at any time when a prospectus relating to
the Warrant Shares covered by a registration statement is required to be
delivered under the Act, of the happening of any event with respect to such
selling Holder as a result of which the prospectus
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included in such registration statement, as then in effect, includes an
untrue statement of a material fact or omits to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading in the light of the circumstances then existing.
11. ADJUSTMENTS TO COMMON STOCK EXERCISE PRICE AND NUMBER OF SECURITIES.
The Common Stock Exercise Price in effect at any time and the number and kind of
securities purchased upon the exercise of the Representative's Warrant shall be
subject to adjustment from time to time only upon the happening of the following
events:
11.1 STOCK DIVIDEND, SUBDIVISION AND COMBINATION. In case the Company
shall (i) declare a dividend or make a distribution on its outstanding shares of
Common Stock in shares of Common Stock, (ii) subdivide or reclassify its
outstanding shares of Common Stock into a greater number of shares, or (iii)
combine or reclassify its outstanding shares of Common Stock into a smaller
number of shares, the Common Stock Exercise Price in effect at the time of the
record date for such dividend or distribution or of the effective date of such
subdivision, combination or reclassification shall be adjusted so that it shall
equal the price determined by multiplying the Common Stock Exercise Price by a
fraction, the denominator of which shall be the number of shares of Common Stock
outstanding after giving effect to such action, and the numerator of which shall
be the number of shares of Common Stock outstanding immediately prior to such
action. Such adjustment shall be made successively whenever any event listed
above shall occur.
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11.2 ADJUSTMENT IN NUMBER OF SECURITIES. Upon each adjustment of the
Common Stock Exercise Price pursuant to the provisions of this Section 11, the
number of Warrant Shares issuable upon the exercise at the adjusted Common Stock
Exercise Price of each Representative's Warrant shall be adjusted to the nearest
number of whole shares of Common Stock by multiplying a number equal to the
Common Stock Exercise Price in effect immediately prior to such adjustment by
the number of Warrant Shares issuable upon exercise of the Representative's
Warrant immediately prior to such adjustment and dividing the product so
obtained by the adjusted Common Stock Exercise Price.
11.3 DEFINITION OF COMMON STOCK. For the purpose of this Agreement,
the term "Common Stock" shall mean (i) the class of stock designated as Common
Stock in the Articles of Incorporation of the Company as amended as of the date
hereof, or (ii) any other class of stock resulting from successive changes or
reclassifications of such Common Stock consisting solely of changes in par
value, or from par value to no par value, or from no par value to par value.
11.4 MERGER OR CONSOLIDATION. In case of any consolidation of the
Company with, or merger of the Company into, another corporation (other than a
consolidation or merger which does not result in any reclassification or change
of the outstanding Common Stock), the corporation formed by such consolidation
or merger shall execute and deliver to the Holder a supplemental warrant
agreement providing that the Holder of each Representative's Warrant then
outstanding or to be outstanding shall have the right thereafter (until the
expiration of such Representative's Warrant) to receive, upon exercise of such
Representative's Warrant, the kind
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and amount of shares of stock and other securities and property receivable
upon such consolidation or merger by a holder of the number of shares of
Common Stock for which such Representative's Warrant might have been
exercised immediately prior to such consolidation, merger, sale or transfer.
Such supplemental warrant agreement shall provide for adjustments which shall
be identical to the adjustments provided in Section 11. The above provision
of this subsection shall similarly apply to successive consolidations or
mergers.
11.5 NO ADJUSTMENT OF EXERCISE PRICE IN CERTAIN CASES. No adjustment
of the Common Stock Exercise Price or the Warrant Exercise Price shall be made:
(a) Upon the issuance or sale of the Representative's Warrant or
the Warrant Shares;
(b) Upon the issuance or sale of Common Stock (or any other
security convertible, exercisable, or exchangeable into shares of Common Stock)
upon the direct or indirect conversion, exercise, or exchange of any options,
rights, warrants, or other securities or indebtedness of the Company outstanding
as of the date of this Agreement or granted pursuant to any stock option plan of
the Company in existence as of the date of this Agreement, pursuant to the terms
thereof; or
(c) If the amount of said adjustment shall be less than two
cents ($.02) per share, provided, however, that in such case any adjustment that
would otherwise be required then to be made shall be carried forward and shall
be made at the time of and together with the
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next subsequent adjustment which, together with any adjustment so carried
forward, shall amount to at least two cents ($.02) per Representative's
Warrant.
11.6 ADJUSTMENT OF WARRANT EXERCISE PRICE. With respect to any of the
Warrants whether or not the Warrants have been exercised (or are exercisable)
and whether or not the Warrants are issued and outstanding, the Warrant Exercise
Price and the number of shares of Common Stock underlying such Warrants shall be
automatically adjusted in accordance with Section 8 of the Warrant Agreement
between the Company and Continental Stock Transfer & Trust Company dated
___________, 1997 (the "Warrant Agreement"), upon the occurrence of any of the
events described therein. Thereafter, the underlying Warrants shall be
exercisable at such adjusted Warrant Exercise Price for such adjusted number of
underlying shares of Common Stock or other securities, properties or rights.
12. EXCHANGE AND REPLACEMENT OF REPRESENTATIVE'S WARRANT CERTIFICATES.
Each Representative's Warrant Certificate is exchangeable, without expense, upon
the surrender thereof by the registered Holder at the principal executive office
of the Company for a new Representative's Warrant Certificate of like tenor and
date representing in the aggregate the right to purchase the same number of
Warrant Shares in such denominations as shall be designated by the Holder
thereof at the time of such surrender.
Upon receipt by the Company of evidence reasonably satisfactory to it of
the loss, theft, destruction or mutilation of any Representative's Warrant
Certificate, and, in case of loss, theft or destruction, of indemnity or
security reasonably satisfactory to it and reimbursement to
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the Company of all reasonable expenses incidental thereto, and upon surrender
and cancellation of the Representative's Warrant, if mutilated, the Company
will make and deliver a new Warrant Certificate of like tenor, in lieu
thereof.
13. ELIMINATION OF FRACTIONAL INTERESTS. The Company shall not be
required to issue certificates representing fractions of shares of Common Stock
upon the exercise of the Representative's Warrant, nor shall it be required to
issue scrip or pay cash in lieu of fractional interests, it being the intent of
the parties that all fractional interests shall be eliminated by rounding any
fraction up to the nearest whole number of shares of Common Stock or other
securities, properties or rights.
14. RESERVATION AND LISTING OF SECURITIES. The Company shall at all times
reserve and keep available out of its authorized shares of Common Stock, solely
for the purpose of issuance upon the exercise of the Representative's Warrant
and the Warrant, such number of shares of Common Stock or other securities,
properties or rights as shall be issuable upon the exercise thereof. Every
transfer agent ("Transfer Agent") for the Common Stock and other securities of
the Company issuable upon the exercise of the Representative's Warrant will be
irrevocably authorized and directed at all times to reserve such number of
authorized shares of Common Stock and other securities as shall be requisite for
such purpose. The Company will keep a copy of this Agreement on file with every
Transfer Agent for the Common Stock and other securities of the Company issuable
upon the exercise of the Representative's Warrant. The Company will supply
every such Transfer Agent with duly executed stock and other certificates, as
appropriate, for such purpose. The Company covenants and agrees that, upon
exercise of the
20
Representative's Warrant and payment of the Common Stock Exercise Price or
Warrant Exercise Price therefor, all shares of Common Stock and other
securities issuable upon such exercise shall be duly and validly issued,
fully paid, non-assessable and not subject to the preemptive rights of any
stockholder. As long as the Representative's Warrant shall be outstanding,
the Company shall use its best efforts to cause all shares of Common Stock
issuable upon the exercise of the Representative's Warrant to be listed
(subject to official notice of issuance) on all securities exchanges on which
the Common Stock issued to the public in connection herewith may then be
listed and/or quoted on NASDAQ Market.
15. NOTICES TO REPRESENTATIVE'S WARRANT HOLDERS. Nothing contained in
this Agreement shall be construed as conferring upon the Holders the right to
vote or to consent or to receive notice as a stockholder in respect of any
meetings of stockholders for the election of directors or any other matter, or
as having any rights whatsoever as a stockholder of the Company. If, however,
at any time prior to the expiration of the Representative's Warrants and their
exercise, any of the following events shall occur:
(a) the Company shall take a record of the holders of its shares
of Common Stock for the purpose of entitling them to receive a dividend or
distribution payable otherwise than in cash, or a cash dividend or distribution
payable otherwise than out of current or retained earnings, as indicated by the
accounting treatment of such dividend or distribution on the books of the
Company; or
21
(b) the Company shall offer to all the holders of its Common
Stock any additional shares of capital stock of the Company or securities
convertible into or exchangeable for shares of capital stock of the Company, or
any option, right or warrant to subscribe therefor; or
(c) a dissolution, liquidation or winding up of the Company
(other than in connection with a consolidation or merger) or a sale of all or
substantially all of its property, assets and business as an entirety shall be
proposed;
then in any one or more of said events, the Company shall give written notice of
such event at least fifteen (15) days prior to the date fixed as a record date
or the date of closing the transfer books for the determination of the
stockholders entitled to such dividend, distribution, convertible or
exchangeable securities or subscription rights, or entitled to vote on such
proposed dissolution, liquidation, winding up or sale. Such notice shall
specify such record date or the date of closing the transfer books, as the case
may be. Failure to give such notice or any defect therein shall not affect the
validity of any action taken in connection with the declaration or payment of
any such dividend, or the issuance of any convertible or exchangeable
securities, or subscription rights, options or warrants, or any proposed
dissolution, liquidation, winding up or sale.
16. NOTICES. All notices, requests, consents and other communications
hereunder shall be in writing and shall be deemed to have been duly made and
sent when delivered, or mailed by registered or certified mail, return receipt
requested:
22
(a) if to the registered Holder of the Representative's Warrant,
to the address of such Holder as shown on the books of the Company; or
(b) if to the Company, to the address set forth in SECTION 4
hereof or to such other address as the Company may designate by notice to the
Holders.
17. WARRANTS. The form of the certificate representing Warrants (and the
form of election to purchase shares of Common Stock upon the exercise of
Warrants and the form of assignment period on the reverse thereof) shall be
substantially as set forth in Exhibit "A" to the Warrant Agreement. Each
Warrant issuable upon exercise of the Representative's Warrants shall evidence
the right to initially purchase one fully paid and non-assessable share of
Common Stock at an initial purchase price of $6.48 per share commencing on the
Initial Exercise Date and ending at 5:00 p.m. New York time on the Warrant
Expiration Date at which time the Warrant shall expire. The exercise price of
the Warrants and the number of shares of Common Stock issuable upon the exercise
of the Warrants are subject to adjustment, whether or not the Representative's
Warrants have been exercised and the Warrants have been issued, in the manner
and upon the occurrence of the events set forth in Section 8 of the Warrant
Agreement, which is hereby incorporated herein by reference and made a part
hereof as if set forth in its entirety herein. Subject to the provisions of
this Agreement and upon issuance of the Warrants underlying the Representative's
Warrants, each registered holder of such Warrants shall have the right to
purchase from the Company (and the Company shall issue to such registered
holders) up to the number of fully paid and non-assessable shares of Common
Stock (subject to adjustment as provided herein and in the Warrant Agreement),
free and clear of all preemptive rights of
23
stockholders, provided that such registered holder complies with the terms
governing exercise of the Warrants set forth in the Warrant Agreement, and
pays the applicable exercise price, determined in accordance with the terms
of the Warrant Agreement. Upon exercise of the Warrants, the Company shall
forthwith issue to the registered holder of any such Warrant in his name or
in such name as may be directed by him, certificates for the number of shares
of Common Stock so purchased. Except as otherwise provided herein, the
Warrants underlying the Representative's Warrants shall be governed in all
respects by the terms of the Warrant Agreement. The Warrants shall be
transferable in the manner provided in the Warrant Agreement, and upon any
such transfer, a new Warrant Certificate shall be issued promptly to the
transferee. The Company covenants to, and agrees with, the Holder(s) that
without the prior written consent of the Holder(s), the Warrant Agreement
will not be modified, amended, canceled, altered or superseded, and that the
Company will send to each Holder, irrespective of whether or not the Warrants
have been exercised, any and all notices required by the Warrant Agreement to
be sent to holders of Warrants.
18. SUPPLEMENTS; AMENDMENTS; ENTIRE AGREEMENT. This Agreement (including
the Underwriting Agreement to the extent portions thereof are referred to
herein) contains the entire understanding between the parties hereto with
respect to the subject matter hereof and may not be modified or amended except
by a writing duly signed by the party against whom enforcement of the
modification or amendment is sought. The Company and the Representative may
from time to time supplement or amend this Agreement without the approval of any
holders of Representative's Warrant Certificates (other than the Representative)
in order to cure any ambiguity, to correct or supplement any provision contained
herein which may be defective or
24
inconsistent with any provisions herein, or to make any other provisions in
regard to matters or questions arising hereunder which the Company and the
Representative may deem necessary or desirable and which the Company and the
Representative deem shall not adversely affect the interests of the Holders
of Representative's Warrant Certificates.
19. SUCCESSORS. All of the covenants and provisions of this Agreement
shall be binding upon and inure to the benefit of the Company, the Holders and
their respective successors and assigns hereunder.
20. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All statements in any
schedule, exhibit or certificate or other instrument delivered by or on behalf
of the parties hereto, or in connection with the transactions contemplated by
this Agreement, shall be deemed to be representations and warranties hereunder.
Notwithstanding any investigations made by or on behalf of the parties to this
Agreement, all representations, warranties and agreements made by the parties to
this Agreement or pursuant hereto shall survive.
21. GOVERNING LAW. This Agreement and each Representative's Warrant
Certificate issued hereunder shall be deemed to be a contract made under the
laws of the State of New York and for all purposes shall be construed in
accordance with the laws of said State without giving effect to the rules of
said State governing the conflicts of laws.
22. SEVERABILITY. If any provision of this Agreement shall be held to be
invalid or unenforceable, such invalidity or unenforceability shall not affect
any other provision of this Agreement.
25
23. CAPTIONS. The caption headings of the Sections of this Agreement are
for convenience of reference only and are not intended, nor should they be
construed as, a part of this Agreement and shall be given no substantive effect.
24. BENEFITS OF THIS AGREEMENT. Nothing in this Agreement shall be
construed to give to any person or corporation other than the Company and the
Representative and any other registered Holder(s) of the Representative's
Warrant Certificates or Warrant Shares any legal or equitable right, remedy or
claim under this Agreement; and this Agreement shall be for the sole and
exclusive benefit of the Company and the Underwriters and any other Holder(s) of
the Representative's Warrant Certificates or Warrant Shares.
26
25. COUNTERPARTS. This Agreement may be executed in any number of
counterparts and each of such counterparts shall for all purposes be deemed to
be an original, and such counterparts shall together constitute but one and the
same instrument.
IN WITNESS OF, the parties hereto have caused this Agreement to be duly
executed, as of the day and year first above written.
ATTEST: CASULL ARMS CORPORATION
By: ___________________ By:___________________________________
Name: ▇▇▇▇▇▇▇ ▇. Casull Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: CEO Title: Chairman of the Board
NATIONAL SECURITIES CORPORATION
By:______________________________________
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: Chairman
27
EXHIBIT A
[FORM OF REPRESENTATIVE'S WARRANT CERTIFICATE]
THE REPRESENTATIVE'S WARRANT REPRESENTED BY THIS CERTIFICATE AND THE OTHER
SECURITIES ISSUABLE UPON EXERCISE THEREOF MAY NOT BE OFFERED OR SOLD EXCEPT
PURSUANT TO (i) AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF
1933, (ii) TO THE EXTENT APPLICABLE, RULE 144 UNDER SUCH ACT (OR ANY SIMILAR
RULE UNDER SUCH ACT RELATING TO THE DISPOSITION OF SECURITIES), OR (iii) AN
OPINION OF COUNSEL, IF SUCH OPINION SHALL BE REASONABLY SATISFACTORY TO COUNSEL
FOR THE ISSUER, THAT AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT IS AVAILABLE.
THE TRANSFER OR EXCHANGE OF THE REPRESENTATIVE'S WARRANT REPRESENTED BY THIS
CERTIFICATE IS RESTRICTED IN ACCORDANCE WITH THE WARRANT AGREEMENT REFERRED TO
HEREIN.
EXERCISABLE ON OR BEFORE
5:30 P.M., NEW YORK TIME,__________, 200_
Representative's Warrant No. ____
Issuable for
_____ Shares of Common Stock and
______ Warrants
WARRANT CERTIFICATE
This Warrant Certificate certifies that ______, or registered assigns,
is the registered holder of Warrants to purchase initially, at any time from
_____________, 199___ until 5:30 p.m., New York time on _____________, 200_
("Expiration Date"), up to ______ shares of common stock, par value $.01 per
share, of the Company (the "Common Stock") and/or ______ warrants, each warrant
to purchase one (1) share of Common Stock, at an exercise price of $6.48 per
share and $.12 per Warrant, respectively [120% of the offering prices per share
and per warrant to the public, respectively] (the "Common Stock Exercise Price"
and the "Warrant Exercise Price", respectively), upon surrender of this
Representative's Warrant Certificate and payment of the Common Stock Exercise
Price and the Warrant Exercise Price at an office or agency of the Company, but
subject to the conditions set forth herein and in the Representative's Warrant
Agreement dated as of ___________, 199_ among the Company and National
Securities Corporation (the "Warrant Agreement"). Payment of the Exercise Price
shall be made by certified or official bank check in New York Clearing House
funds payable to the order of the Company.
A-1
No Warrant may be exercised after 5:30 p.m., New York time, on the
Expiration Date, at which time all Representative's Warrant evidenced hereby,
unless exercised prior thereto, shall thereafter be void.
The Representative's Warrant evidenced by this Warrant Certificate are part
of a duly authorized issue of Representative's Warrant issued pursuant to the
Warrant Agreement, which Warrant Agreement is hereby incorporated by reference
in and made a part of this instrument and is hereby referred to for a
description of the rights, limitation of rights, obligations, duties and
immunities thereunder of the Company and the holders (the words "holders" or
"holder" meaning the registered holders or registered holder) of the
Representative's Warrant.
The Warrant Agreement provides that upon the occurrence of certain events
the Exercise Price and the type and/or number of the Company's securities
issuable thereupon may, subject to certain conditions, be adjusted. In such
event, the Company will, at the request of the holder, issue a new Warrant
Certificate evidencing the adjustment in the Exercise Price and the number
and/or type of securities issuable upon the exercise of the Representative's
Warrant; provided, however, that the failure of the Company to issue such new
Warrant Certificates shall not in any way change, alter, or otherwise impair,
the rights of the holder as set forth in the Warrant Agreement.
Upon due presentment for registration of transfer of this Warrant
Certificate at an office or agency of the Company, a new Warrant Certificate or
Warrant Certificates of like tenor and evidencing in the aggregate a like number
of Representative's Warrant shall be issued to the transferee(s) in exchange for
this Warrant Certificate, subject to the limitations provided herein and in the
Warrant Agreement, without any charge except for any tax or other governmental
charge imposed in connection with such transfer.
Upon the exercise of less than all of the Representative's Warrant
evidenced by this Certificate, the Company shall forthwith issue to the holder
hereof a new Warrant Certificate representing such numbered unexercised
Representative's Warrant.
The Company may deem and treat the registered holder(s) hereof as the
absolute owner(s) of this Warrant Certificate (notwithstanding any notation of
ownership or other writing hereon made by anyone), for the purpose of any
exercise hereof, and of any distribution to the holder(s) hereof, and for all
other purposes, and the Company shall not be affected by any notice to the
contrary.
All terms used in this Warrant Certificate which are defined in the Warrant
Agreement shall have the meanings assigned to them in the Warrant Agreement.
A-2
This Warrant Certificate does not entitle any holder thereof to any of the
rights of a shareholder of the Company.
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to be
duly executed under its corporate seal.
Dated as of _________, 1996.
ATTEST: CASULL ARMS CORPORATION
By: ___________________ By: ________________________
Name: ▇▇▇▇▇▇▇ ▇. Casull Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: CEO Title: Chairman of the Board
By: ________________________
Name:
Title: Secretary
A-3
[FORM OF ELECTION TO PURCHASE PURSUANT TO SECTION 3.11]
The undersigned hereby irrevocably elects to exercise the right,
represented by this Warrant Certificate, to purchase _______ shares of
Common Stock and/or _______ warrants, each warrant to purchase one (1) share
of Common Stock, and herewith tenders in payment for such securities a
certified or official bank check payable in New York Clearing House Funds to
the order of Casull Arms Corporation (the "Company") in the amount of $_____,
all in accordance with the terms of Section 3.1 of the Representative's
Warrant Agreement dated as of __________, 199_ among the Company and National
Securities Corporation. The undersigned requests that a certificate for such
securities be registered in the name of __________________________, whose
address is _______________________________________ and that such certificate
be delivered to ________________, whose address is
_____________________________, and if said number of shares shall not be all
the shares purchasable hereunder, that a new Warrant Certificate for the
balance of the shares purchasable under the within Warrant Certificate be
registered in the name of the undesigned warrant holder or his assignee as
below indicated and delivered to the address stated below.
Dated: ___________________________
Signature:__________________________
(Signature must conform in all
respects to name of holder as
specified on the face of the
Warrant Certificate.)
Address:_____________________________
_____________________________
_____________________________________
(Insert Social Security or Other
Identifying Number of Holder)
Signature Guaranteed: __________________________________________________________
(Signature must be guaranteed by a bank savings and loan association,
stockbroker, or credit union with membership in an approved signature guaranty
Medallion Program pursuant to Securities Exchange Act Rule 17Ad-15.)
A-4
[FORM OF ASSIGNMENT]
(TO BE EXECUTED BY THE REGISTERED HOLDER IF SUCH HOLDER
DESIRES TO TRANSFER THE WARRANT CERTIFICATE.)
FOR VALUE RECEIVED __________________ here sells, assigns and transfers unto
[NAME OF TRANSFEREE] this Warrant Certificate, together with all right, title
and interest therein, and does hereby irrevocably constitute and appoint
___________________ Attorney, to transfer the within Warrant Certificate on the
books of the within-named Company, with full power of substitution.
Dated: _______________________
Signature:__________________________
(Signature must conform in all
respects to name of holder as
specified on the face of the
Warrant Certificate.)
Address:_____________________________
_____________________________
_____________________________________
(Insert Social Security or Other
Identifying Number of Holder)
Signature Guaranteed: __________________________________________________________
(Signature must be guaranteed by a bank savings and loan association,
stockbroker, or credit union with membership in an approved signature guaranty
Medallion Program pursuant to Securities Exchange Act Rule 17Ad-15.)
A-5