WARRANT AGREEMENT dated as of __________, 1997 between First Montauk
Financial Corp., a New Jersey corporation, having its principal place of
business at Parkway 109 Office Center, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇ (the "Company") and North American Transfer Company, a New York
corporation, having its principal place of business at ▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ (the "Warrant Agent").
W I T N E S S E T H :
WHEREAS, the Company proposes to offer (the "Rights Offering") up to
3,072,779 (the "Units") to holders ("Stockholders") of record if its common
stock, no par value (the "Common Stock") at the close of business on ________,
1997 ( the "Record Date"), pursuant to non-transferable rights (the "Rights") to
purchase Units at a price of $.45 per Unit (the "Subscription Price"). Each
Stockholder is receiving one right for each share of Common Stock held of record
at the close of business on the Record Date. Every three Rights entitles the
Rights Holder (the "Basic Subscription Privilege") to subscribe for one Unit.
Each Rights Holder will also be entitled to purchase at the Subscription Price
additional Units that are not otherwise subscribed for pursuant to the exercise
of the Basic Subscription Privilege (the "Oversubscription Privilege").
WHEREAS, each Unit consists of one Class A Redeemable Common Stock
Purchase Warrant, one Class B Redeemable Common Stock Purchase Warrant, and one
Class C Redeemable Common Stock Purchase Warrant (collectively, the "Warrants").
WHEREAS, the Warrants shall be evidenced by certificates
substantially in the form of Exhibits A, B and C annexed hereto (the "Warrant
Certificate"), each Warrant entitling the holder thereof to purchase one share
of Common Stock at the exercise price set forth herein;
WHEREAS, the Class A Redeemable Common Stock Purchase Warrants (the
"Class A Warrants"), entitle the holder thereof to purchase during the three
years commencing on __ [the date of initial issuance] one share of Common Stock
of the Company (the "Class A Warrant Shares"), at an exercise price of $3.00 per
share, subject to adjustment in certain circumstances; the Class B Redeemable
Common Stock Purchase Warrants (the "Class B Warrants"), entitle the holder
thereof to purchase during the five years commencing on __ [the date of initial
issuance] one share of Common Stock of the Company (the "Class B Warrant
Shares"), at an exercise price of $5.00 per share, subject to adjustment in
certain circumstances; and the Class C Redeemable Common Stock Purchase Warrants
(the "Class C Warrants"), entitle the holder thereof to purchase during the
seven years commencing on __ [the date of initial issuance] one share of Common
Stock of the Company Stock,
(the "Class C Warrant Shares"), at an exercise price of $7.00 per share, subject
to adjustment in certain circumstances. The $3.00, $5.00 and $7.00 exercise
price per share of Common Stock, subject to certain adjustments may hereinafter
be referred to, in each case respectively, as the "Warrant Price", and except
for the Underwriters' Warrants, will be exercisable commencing on the date
hereof ("First Exercise Date") until each date specified above ("Last Exercise
Date"), unless extended by the Company, and, will be exercisable during any
period of time fixed for that Warrant's redemption in a Redemption Notice
(hereinafter defined in Section 2.03), which period of time will terminate on a
stated Redemption Date (hereinafter defined in Section 2.03);
WHEREAS, the Company desires the Warrant Agent to act on behalf of
the Company, and the Warrant Agent is willing to so act in connection with the
issuance, registration, transfer, exchange and replacement of the Warrant
Certificates and exercise of the Warrants; and
WHEREAS, the Company and the Warrant Agent desire to set forth in
this Agreement the terms and conditions upon which the Warrant Certificates
shall be issued, transferred, exchanged and replaced and the Warrants exercised,
and to provide for the rights of the holders of the Warrants;
NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the receipt of which is hereby acknowledged, and the
respective undertakings herein below set forth, the Company and the Warrant
Agent agree as follows:
ARTICLE I
ISSUANCE AND EXECUTION OF WARRANTS
SECTION 1.01. The Company hereby appoints the Warrant Agent to act on
behalf of the Company in accordance with the terms and conditions herein set
forth, and the Warrant Agent hereby accepts such appointment and agrees to
perform the same in accordance with such provisions.
SECTION 1.02. The Warrant Certificates for the Warrants shall be issued in
registered form only. The text of the Warrant Certificate, including the form of
assignment and subscription printed on the reverse side thereof, shall be
substantially in the form of Exhibit A annexed hereto, which text is hereby
incorporated in this Agreement by reference as though fully set forth herein and
to whose terms and conditions the Company and the Warrant Agent hereby agree.
Each Warrant Certificate shall evidence the right, subject to the provisions of
this Agreement and of such Warrant Certificate, to purchase the number of
validly issued, fully paid
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and non-assessable shares of Common Stock, as that term is defined in Section
1.05 of this Agreement, stated therein, free of preemptive rights, subject to
adjustment as provided in Article III of this Agreement.
SECTION 1.03. Upon the written order of the Company, signed by the
President or any Vice President, and the Secretary, Treasurer, Assistant
Secretary or Assistant Treasurer of the Company, the Warrant Agent shall issue
and register Warrants in the names and denominations specified in that order,
and will countersign and deliver Warrant Certificates evidencing the same in
accordance with that order. Each Warrant Certificate shall be dated the date of
its countersignature. Each Warrant Certificate shall be executed on behalf of
the Company by the manual or facsimile signature of the President of the
Company, under its corporate seal, affixed or facsimile, attested by the manual
or facsimile signature of the Secretary of the Company and shall be
countersigned manually by the Warrant Agent. The Warrant Certificates shall not
be valid for any purpose unless so countersigned. In case any officer whose
facsimile signature has been placed upon any Warrant Certificate shall have
ceased to be such before such Warrant Certificate is issued, it may be issued
with the same effect as if such officer had not ceased to be such on the date of
issuance.
SECTION l.04. Except as otherwise expressly stated herein, all terms used
in the Warrant Certificate have the meanings provided in this Agreement.
SECTION l.05. As used herein, the term "Common Stock" shall mean the
aggregate number of shares that the Company, by its Certificate of
Incorporation, as from time to time amended, is authorized to issue, which are
not limited by its Certificate of Incorporation to a fixed sum or percentage of
the book value in respect of the rights of the holders thereof to participate in
dividends or in distribution of assets upon the voluntary or involuntary
liquidation, dissolution, or winding up the Company.
SECTION 1.06. The Warrant Agent understands and agrees that the Warrants
are being issued together as constituting Units in the Rights Offering and that
the Warrants are detachable and may be traded separately, immediately upon the
Effective Date.
ARTICLE II
WARRANT PRICE, DURATION AND EXERCISE OF WARRANTS,
CALL OF WARRANTS AND TRADING OF WARRANT
SECTION 2.01. (a) Each Warrant shall entitle the person in whose name at
the time the Warrant shall be registered upon the books to be maintained by the
Warrant Agent for that purpose (the Warrant Holder"), subject to the provisions
of the Warrant Certificates and of this Agreement, to purchase from the Company
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any time on or after the First Exercise Date but at or before the Last Exercise
Date, the number of shares of Common Stock stated therein, as adjusted, at the
Warrant Price in effect at such date, payable in full at the time of purchase in
the manner provided in Section 2.02 of this agreement.
(b) Each Warrant shall be exercisable in accordance with the terms
herein and in the Warrant Certificate which, among other things, contains
certain terms as to the Warrant Price.
SECTION 2.02. (a) The Warrant Holder may exercise a Warrant, in whole or
in part, by surrender of the Warrant Certificate, with the form of subscription
thereon duly executed by the Warrant Agent at its corporate office, together
with the Warrant Price for each share of Common Stock to be purchased in lawful
money of the United States, or by certified check, bank draft, or postal or
express money order payable in United States Dollars to the order of the
Company.
(b) Upon receipt of a Warrant Certificate with the form of election
to purchase thereon duly executed and accompanied by payment of the aggregate
Warrant Price for the shares of Common Stock for which the Warrant is then being
exercised, the Warrant Agent shall requisition from the transfer agent
certificates for the total number of the shares of Common Stock, for which the
Warrant is being exercised in such names and denominations as are required for
delivery to the Warrant Holder, and the Warrant Agent shall thereupon deliver
such certificates to or in accordance with the instructions of the Warrant
Holder. The Company covenants and agrees that it has duly authorized and
directed its transfer agent (and will authorize and direct all its future
transfer agents) to comply with all such requests of the Warrant Agent.
(c) In case any Warrant Holder shall exercise his Warrant with
respect to less than all of the shares of Common Stock that may be purchased
under the Warrant, a new Warrant Certificate for the balance shall be
countersigned and delivered to or upon the order of the Warrant Holder.
(d) The Company covenants and agrees that it will pay when due and
payable any and all issue, transfer and other taxes which may be payable in
respect to the issuance of Warrants, or the issuance of any shares of Common
Stock upon the exercise of Warrants. However, neither the Company nor the
Warrant Agent shall be required to issue or deliver any Warrant Certificate or
shares of Common Stock in a name other than that of the Warrant Holder at the
time of surrender if any tax is payable in respect of such transfer until the
person requesting the same has paid to the Company the amount of such tax or has
established to the Company's satisfaction that such tax has been paid or shall
not be due and payable. In the event that any transfer tax is due and payable,
the Warrant Agent shall be under no obligation to issue or deliver any
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Warrant Certificate or shares of Common Stock in a name other than that of the
Warrant Holder until the Company has notified the Warrant Agent that the
transfer tax, if any, has been paid, or in the alternative, that no transfer tax
is due and payable by reason of an exemption.
(e) The Warrant Agent shall account promptly to the Company with
respect to Warrants exercised and concurrently account to the Company for all
moneys received by the Warrant Agent for the purchase of shares of Common Stock
upon the exercise of Warrants.
(f) The Warrant Agent covenants and agrees that upon the exercise of
any of the Warrants, the Warrant Agent shall provide written notice to the
Company at its office at Parkway 109 Office Center, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇
▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, the expense of which notice shall be borne by the
Company. Each notice shall contain the name of the exercising Warrant Holder,
the number of shares of Common Stock that the Warrant Holder has elected to
purchase, the purchase price paid on a per share basis and the cumulative number
of Warrants exercised by all of the Warrant Holders as of the date of the
transaction which is the subject of the aforesaid notice. Such notice shall be
made on the date of the exercise of the Warrant. Nothing contained herein shall
be construed so as to prevent the Warrant Agent from providing the information
required in this Section 2.02 (f) in a consolidated or tabular form, provided
that all other provisions of this Section are complied with.
(g) The Warrant Agent covenants and agrees that it shall provide a
list of each and every holder of the Warrants to the Company at such time or
from time to time as shall be required by the Company, but in no event shall
such a list be provided less frequently than once per annum at a date as shall
be determined by the Company.
SECTION 2.03. (a) The Company may at any time, subject to the conditions
set forth herein, redeem all, or a portion thereof on a pro-rata basis, the
Warrants and then outstanding at a redemption price of $.05 per Warrant upon not
less than thirty (30) days prior written notice (the "Redemption Notice") to the
holders thereof provided that the closing bid price of the Common Stock for the
10 consecutive trading days ending ten (10) days prior to the date of the
Redemption Notice is not less than: (a) for the Class A Warrants, $5.00 per
share, (b) for the Class B Warrants, $7.00 per share, and (c) for the Class C
Warrants, $12.00 per share, subject to adjustment for stock dividends, stock
splits and other anti-dilution provisions as provided for under Article III
herein. For purposes of this Section 2.03, "closing bid price" at any date shall
be deemed to be: (i) the last bid price as reported on the principal national
securities exchange on which the Common Stock is listed or admitted to trading,
or (ii) if the Common Stock is not listed or admitted to trading on any national
securities exchange,
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the closing bid price for the Common Stock as reported by the Nasdaq National
Market or Nasdaq Small Cap Market of the Nasdaq Stock Market, Inc. ("NASDAQ") or
(iii) if the Common Stock is not listed or admitted for trading on any national
securities exchange, and is not reported by NASDAQ, the closing bid price in the
over-the-counter market as furnished by the National Quotation Bureau, Inc. or
if no such quotation is available, the fair market value of the Common Stock as
determined in good faith by the Board of Directors of the Company. The
Redemption Notice shall be deemed effective upon mailing by first class mail and
the time of mailing is the "Effective Date of The Notice". The Redemption Notice
shall state a redemption date not less than thirty (30) days from the Effective
Date of the Notice (the "Redemption Date"). No Redemption Notice shall be mailed
unless all funds necessary to pay for redemption of all Warrants then
outstanding shall have first been set aside by the Company in trust with the
Warrant Agent for the benefit of all holders of Warrants so as to be and
continue to be available therefor. The redemption price to be paid to the
holders of the Warrants will be $.05 for each share of the Common Stock of the
Company to which the Warrant Holder would then be entitled upon exercise of the
Warrant being redeemed, as adjusted from time to time as provided herein (the
"Redemption Price"). If the number of shares of Common Stock issuable upon
exercise of the Warrant being redeemed is adjusted pursuant to Article III
hereof, then upon each such adjustment the Redemption Price will be adjusted by
multiplying the Redemption Price in effect immediately prior to such adjustment
by a fraction, the numerator of which is the number of shares of Common Stock
issuable upon exercise of the Warrant being redeemed immediately prior to such
adjustment and the denominator of which is the number of shares of Common Stock
issuable upon exercise of such Warrant being redeemed immediately after such
adjustment. The Warrants may only be redeemed if the Company has in effect a
current Registration Statement or post-effective amendment covering the shares
underlying the Warrants. The holders of the Warrants may exercise their Warrants
between the Effective Date of The Notice and the Redemption Date, such exercise
being effective if done in accordance with Section 2.02 (a), and if the Warrant
Certificate, with form of election to purchase duly executed and the Warrant
Price, as applicable for such Warrant subject to redemption for each share of
Common Stock to be purchased is actually received by the Warrant Agent at its
office located at ▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, no later than
5:00 P.M. New York Time on the Redemption Date.
(b) If any holder of Warrants does not wish to exercise any Warrant
being redeemed, the Warrant Holder should mail such Public Warrant to the
Warrant Agent at its office located at ▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇
▇▇▇▇▇, after receiving the Redemption Notice required by this Section. If such
Redemption Notice shall have been so mailed, and if on or before the Effective
Date of the Notice all funds necessary to pay for redemption of all Warrants
then outstanding shall have been set aside by the Company
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in trust with the Warrant Agent for the benefit of all Warrant holders so as to
be and continue to be available therefor, then, on and after said Redemption
Date, notwithstanding that any Warrant subject to redemption shall not have been
surrendered for redemption, the obligation evidenced by all Warrants not
surrendered for redemption or effectively exercised shall be deemed no longer
outstanding, and all rights with respect thereto shall forthwith cease and
terminate, except only the right of the holder of each Warrant subject to
redemption to receive the Redemption Price for each share of Common Stock to
which he would be entitled if he exercised the Warrant upon receiving the
Redemption Notice of the Warrant subject to redemption held by the Holder
hereof.
ARTICLE III
ADJUSTMENT OF SHARES OF COMMON STOCK PURCHASABLE
AND OF WARRANT PRICE
SECTION 3.01. In case the Company shall at any time after the date of this
Agreement (i) declare a dividend on the outstanding Common Stock in shares of
its capital stock, (ii) subdivide the outstanding Common Stock, (iii) combine
the outstanding Common Stock into a smaller number of shares, or (iv) issue any
shares of its capital stock by reclassification of the Common Stock (including
any such reclassification in connection with a consolidation or merger in which
the Company is the continuing corporation), then, in each case, the Warrant
Price, and the number and kind of shares of Common Stock receivable upon
exercise, in effect at the time of the record date for such dividend or of the
effective date of such subdivision, combination, or reclassification shall be
proportionately adjusted so that the holder of any Warrant exercised after such
time shall be entitled to receive the aggregate number and kind of shares which
if such warrant had been exercised immediately prior to such time, he would have
owned upon such exercise and been entitled to receive by virtue of such
dividend, subdivision, combination, or reclassification. Such adjustment shall
be made successively whenever any event listed above shall occur.
SECTION 3.02. In case the Company shall issue rights, options, or warrants
to holders of Common Stock entitling them to subscribe for or purchase Common
Stock (or securities convertible into or exchangeable for Common Stock) at a
price per share (or having a conversion price per share, if a security
convertible into or exchangeable for Common Stock) less than the "current market
price" (as defined in Section 3.04 hereof) per share of Common Stock on the
record date established for the issuance of such rights, options or warrants,
then, in such case, the Warrant Price shall be adjusted by multiplying the
Warrant Price in effect on the record date of such issuance by a fraction, of
which the numerator shall be the number of shares of Common Stock outstanding on
the record
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date for such issuance plus the number of shares of Common Stock which the
aggregate offering price of the total number of shares of Common Stock so to be
issued (or the aggregate initial conversion price of the convertible securities
to be issued or sold) would purchase at such "current market price" and of which
the denominator shall be the number of shares of Common Stock outstanding on the
record date for such issuance plus the number of additional shares of Common
Stock to be issued (or into which the convertible or exchangeable securities to
be issued or sold are initially convertible or exchangeable). Such adjustment
shall become effective at the close of business on such record date; provided,
however, that, to the extent the shares of Common Stock (or securities
convertible to or exchangeable for shares of Common Stock) are not delivered,
the Warrant Price shall be readjusted after the expiration of such rights,
options, or warrants (but only with respect to Warrants exercised after such
expiration), to the Warrant Price which would then be in effect had the
adjustments made upon the issuance of such rights or warrants been made upon the
basis of delivery of only the number of shares of Common Stock or securities
convertible into or exchangeable for shares of Common Stock) actually issued. In
case any subscription price may be paid in a consideration part or all of which
shall be in a form other than cash, the value of such consideration shall be as
determined in good faith by the board of directors of the Company, whose
determination shall be conclusive absent manifest error. Shares of Common Stock
owned by or held for the account of the Company or any majority-owned subsidiary
shall not be deemed outstanding for the purpose of any such computation.
Notwithstanding the foregoing, no adjustment in the Warrant Price or the
number of shares of Common Stock issuable upon exercise of the Warrants shall be
made upon (i) the issuance of options (or upon exercise thereof) by the Company
pursuant to options currently outstanding or which would hereafter be issued to
directors, officers, employees, agents, representatives or consultants of the
Company.
SECTION 3.03. In case the Company shall distribute to holders of Common
Stock (including any such distribution made to the stockholders of the Company
in connection with a consolidation or merger in which the Company is the
continuing corporation) evidences of its indebtedness or assets (other then cash
dividends distributions and dividends payable in shares of Common Stock),
subscription rights, options, or warrants or convertible or exchangeable
securities containing the right to subscribe for or purchase shares of Common
Stock (excluding those referred to in Section 3.02 hereof), then, in each case,
the Warrant price shall be adjusted by multiplying the Warrant Price in effect
immediately prior to the record date for the determination of stockholders
entitled to receive such distribution by a fraction of which the numerator shall
be the "current market price" per share of Common Stock on such record date,
less the fair market value (as
8
determined in good faith by the board of directors of the Company, whose
determination shall be conclusive absent manifest error) of the portion of the
evidences of indebtedness or assets so to be distributed, or of such
subscription rights, options, or warrants, convertible or exchangeable
securities containing the right to subscribe for or purchase shares of Common
Stock, applicable to the share, and of which the denominator shall be such
"current market price" per share of Common Stock. Such adjustment shall be made
whenever any such distribution is made, and shall become effective on the date
of such distribution retroactive to the record date for the determination of
stockholders entitled to receive such distribution.
SECTION 3.04. For the purpose of any computation under sections 3.02 and
3.03 hereof, the "current market price" per share of Common Stock on any date
shall be deemed to be the average of the daily closing prices for the 20
consecutive trading days ending three (3) days prior to such date. The closing
price for each day shall be the last reported sales price regular way or, in
case no such reported sale takes place on such day, the closing bid price
regular way, in either case on the principal national 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
highest reported bid price as furnished by NASDAQ. If on any such date the
Common Stock is not quoted on NASDAQ or any such organization, the closing price
shall be deemed to be the average of the closing bid and asked prices in the
over-the-counter market as reported by the National Quotation Bureau or if no
such quotation is available, the fair value of the Common Stock on such date, as
determined in good faith by the board of directors of the Company, whose
determination shall be conclusive absent manifest error.
SECTION 3.05. No adjustment in the Warrant Price shall be required if such
adjustment is less than $.05; provided, however, that any adjustments which by
reason of this Section 3.05 are not required to be made shall be carried forward
and taken into account in any subsequent adjustment. All calculations under this
Article III shall be made to the nearest cent or to the nearest one-hundredth of
a share, as the case may be.
SECTION 3.06. In any case in which this Article III shall require that an
adjustment in the Warrant Price be made effective as of a record date for a
specified event, the Company may elect to defer, until the occurrence of such
event, issuing to the holder of any Warrant exercised after such record date,
the shares, if any, issuable upon such exercise over and above the shares, if
any, issuable upon such exercise on the basis of the Warrant Price in effect
prior to such adjustment; provided, however, that the Company shall deliver to
such holder a due ▇▇▇▇ or other appropriate instrument evidencing such holder's
right to receive such additional shares upon the occurrence of the event
requiring
9
such adjustment.
SECTION 3.07. Upon each adjustment of the Warrant Price as a result of the
calculations made in Section 3.01, 3.02, or 3.03 hereof, each Warrant
outstanding prior to the making of the adjustment in the Warrant Price shall
thereafter evidence the right to purchase, at the adjusted Warrant Price, that
number of shares (calculated to the nearest thousandth) obtained by dividing (A)
the product obtained by multiplying the number of shares purchasable upon
exercise of a Warrant prior to adjustment of the number of shares by the Warrant
Price in effect prior to adjustment of the Warrant Price by (B) the Warrant
Price in effect after such adjustment of the Warrant Price.
SECTION 3.08. In case of any capital reorganization of the Company, or of
any reclassification of the Common Stock (other than a reclassification of the
Common Stock referred to in Section 3.01 hereof), or in the case of the
consolidation of the Company with or the merger of the Company into any other
corporation or of the sale, transfer, or lease of the properties and assets of
the Company as, or substantially as, an entirety to any other corporation or
other entity, each Warrant shall after such capital reorganization,
reclassification of Common Stock, consolidation, merger, sale, transfer, or
lease, be exercisable, on the same terms and conditions specified in this
Agreement, for the number of shares of stock or other securities, assets, or
cash to which a holder of the number of shares purchasable (at the time of such
capital reorganization, reclassification of Common Stock, consolidation, merger,
sale, transfer, or lease) upon exercise of such Warrant would have been entitled
upon such capital reorganization, reclassification of Common Stock,
consolidation, merger, sale, transfer, or lease; and in any such case, if
necessary, the provisions set forth in this Article III with respect to the
rights and interests thereafter of the holders of the Warrants shall be
appropriately adjusted so as to be applicable, as nearly as may reasonably be,
to any shares of stock other securities, assets, or cash thereafter deliverable
on the exercise of the Warrants. The subdivision or combination of shares of
Common Stock at any time outstanding into a greater or lesser number of shares
shall not be deemed to be a reclassification of the Common Stock for the
purposes of this subsection. The Company shall not effect any such
consolidation, merger, transfer, or lease, unless prior to or simultaneously
with the consummation thereof, the successor corporation (if other than the
Company) resulting from such consolidation or merger or the Corporation
purchasing, receiving, or leasing such assets or other appropriate corporation
or entity shall expressly assume, by written instrument in form satisfactory to
the Underwriter and duly executed and delivered to each holder of a Warrant, 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 to perform the other
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obligations of the Company under this Agreement.
SECTION 3.09. The Company may make such reductions in the Warrant Price,
in addition to those required by this Article III, as it shall, in it sole
discretion, determine to be advisable.
ARTICLE IV
OTHER PROVISIONS RELATING TO RIGHTS OF
WARRANT HOLDERS
SECTION 4.01. No Warrant Holder, as such shall be entitled to vote or
receive dividends or be deemed the holder of shares of Common Stock for any
purposes, nor shall anything contained in any Warrant Certificate be construed
to confer upon any Warrant holder, as such, any of the rights of a shareholder
of the Company or any right to vote, give or withhold consent to any action by
the Company, whether upon any recapitalization, issue of stock, reclassification
of stock, consolidation, merger, conveyance or otherwise, receive dividends or
subscription rights, or otherwise, until in connection with the exercise of any
Warrant, such Warrant shall have been surrendered and the purchase price or the
shares of Common Stock for which such Warrant is being exercised shall have been
received by the Warrant Agent; provided, however, that any such surrender and
payment on any date when the stock transfer books of the Company shall be closed
shall constitute the person or persons in whose name or names the certificate or
certificates for those shares of Common Stock are to be issued as the record
holder or holders thereof for all purposes at the opening of business on the
next succeeding day on which such stock transfer books are open and the Warrant
surrendered shall not be deemed to have been exercised, in whole or in part, as
the case maybe, until such next succeeding day on which stock transfer books are
open.
SECTION 4.02. The Company covenants and agrees that it shall
contemporaneously provide to all Warrant Holders of record any publication,
mailing or notice of an event which it shall provide to all of its shareholders
of record and which event shall result in the adjustment to the Warrant Price as
provided in Article III hereof. For purposes of this Section 4.02, the Warrant
Holders of record shall be those Warrant Holders who are of record on a date
even with the date chosen by the Company for the purpose of determining the
shareholders of record who shall be entitled to receive such publication,
mailing or notice.
SECTION 4.03. If any Warrant Certificate is lost, stolen, mutilated or
destroyed, the Company and the Warrant Agent may, on such terms as to indemnity
or otherwise as they may in their discretion reasonably impose, which shall, in
the case of a mutilated Warrant Certificate, include the surrender thereof,
issue a new Warrant Certificate of like denomination and tenor as, and in
substitution for, the Warrant Certificate so lost, stolen mutilated
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or destroyed.
SECTION 4.04. (a) The Company covenants and agrees that at all times it
shall reserve and keep available for the exercise of outstanding Warrants such
number of authorized shares of Common Stock and the aggregate number and kind of
any other securities which the Warrants are exercisable for, pursuant to the
provisions of Article III hereof, as are sufficient to permit the exercise in
full of such Warrants and that it will make available to the Warrant Agent from
time to time a number of duly executed certificates representing shares of
Common Stock and other securities, sufficient therefor.
(b) The Company shall use its best efforts to secure the listing,
upon official notice of issuance, of the shares of Common Stock issuable upon
exercise of Warrants upon any securities exchange or Nasdaq upon which the
Common Stock becomes listed.
(c) The Company covenants that all shares of Common Stock issued on
exercise of Warrants shall be validly issued, fully paid, non-assessable and
free of preemptive rights.
(d) The Company has filed a Registration Statement on Form S-3
(Registration No. 333-30135) for the registration of, among other things,
the sale of the Warrants and the shares of Common Stock issuable upon exercise
thereof under the Securities Act of 1933, as amended (the "Act"). The Company
shall use its best efforts to secure the effectiveness of the Registration
Statement under the Act, and to register or qualify such Warrants and shares of
Common Stock under the laws of any states in which the sale of the Warrants and
shares of Common Stock was registered or qualified at the time of the Rights
Offering and shall use its reasonable good faith efforts to register and qualify
such Warrants and shares of Common Stock in such additional states and
jurisdictions as may be appropriate. The Company further agrees to use its best
efforts maintain the effectiveness of such Registration Statement and such state
qualifications, as aforesaid, by the filing of any and all amendments to the
Registration Statement and such state qualifications as may be required from
time to time under the Act or the laws of the various states until the
expiration or termination of all the Warrants in accordance herewith.
(e) The Company will furnish to the Warrant Agent, upon request, an
opinion of counsel satisfactory to the Warrant Agent the effect that (i) a
Registration Statement under the Act is then in effect with respect to the
Warrants and shares of Common Stock issuable upon the exercise of the Warrants
and that the prospectus included therein complies as to form in all material
respects, (except as to financial statements, including schedules, and other
accounting and financial data, as to which such counsel need express no
opinion), with the requirements of the Act and the rules
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and regulations of the Commission thereunder; or (ii) a Registration Statement
under the Act with respect to said shares of Common Stock is not required. In
the event that said opinion states that such a Registration Statement is in
effect, the Company will from time to time furnish the Warrant Agent with
current prospectuses meeting the requirements of the Act and such rules and
regulations in sufficient quantity to permit the Warrant Agent to deliver a
prospectus ("Prospectus") to each Warrant Holder upon exercise thereof. The
Company further agrees to pay all fees, costs and expenses in connection with
the preparation and delivery to the Warrant Agent of the foregoing opinions and
Prospectuses and the above mentioned registrations and other actions, and to
immediately notify the Warrant Agent in the event that (i) the Commission shall
have issued or threatened to issue any order preventing or suspending the use of
any Prospectus; (ii) at any time any Prospectus shall contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading; or
(iii) for any reason it shall be necessary to amend or supplement any Prospectus
in order to comply with the Act.
SECTION 4.05. If the number of shares purchasable upon the exercise of
each Warrant is adjusted pursuant to Section 3.07 hereof, the Company shall not
be required to issue fractions of shares upon exercise of the Warrants or to
distribute share certificates which evidence fractional shares. In lieu of
fractional shares, there shall be paid to the registered holders of Warrant
Certificates at the time such Warrants are exercised as herein provided an
amount in cash equal to the same fraction of the current market value of a
share. For purposes of this Section 4.05, the current market value of a share
issuable upon the exercise of a Warrant shall be the closing price of a share of
Common Stock, as determined pursuant to the second and third sentences of
Section 3.04, for the trading day immediately prior to the date of such
exercise.
ARTICLE V
TREATMENT OF WARRANT HOLDERS
SECTION 5.01. Prior to due presentment for registration of transfer of any
Warrant, the Company and the Warrant Agent may deem and treat the Warrant Holder
as the absolute owner of such warrant, notwithstanding any notation of ownership
or other writing thereon, for the purpose of any exercise thereof and for all
other purposes, and neither the Company nor the Warrant Agent shall be affected
by any notice to the contrary.
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ARTICLE VI
CONCERNING THE WARRANT AGENT
AND OTHER MATTERS
SECTION 6.01. The Company will from time to time promptly pay, subject to
the provisions of Section 2.02 (d) of this Agreement, all taxes and charges that
may be imposed upon the Company or the Warrant Agent in respect of the issuance
or delivery of shares of Common Stock upon the exercise of Warrants.
SECTION 6.02. (a) The Warrant Agent may resign and be discharged from its
duties under this Agreement upon sixty (60) days notice in writing, mailed to
the Company by registered or certified mail, and to each Warrant Holder. The
Company may remove the Warrant Agent or any successor warrant agent upon sixty
(60) days notice in writing, mailed to the Warrant Agent or successor Warrant
Agent, as the case may be, by registered or certified mail, and to each Warrant
Holder; provided, however, the Company shall appoint a new Warrant Agent as
hereinafter provided and such removal shall not become effective until a
successor Warrant Agent has been appointed and has accepted such appointment. If
the Warrant Agent shall resign or shall otherwise become capable of acting, the
Company shall appoint a successor to the Warrant Agent. If the Company shall
fail to make such appointment within a period of sixty (60) days after it has
been notified in writing of such resignation or incapability by the Warrant
Agent by a Warrant Holder, who shall, with such notice, submit his Warrant
Certificate for inspection by the Company, then any Warrant Holder may apply to
any court of competent jurisdiction or the appointment of a successor to the
Warrant Agent. Any successor Warrant Agent, whether appointed by the Company or
by such a court shall be a registered transfer agent, bank or trust company,
subject to the terms and conditions of this Section 6.02, in good standing and
incorporated under the laws of any State of the United States, having its
principal office in the United States of America. After appointment, the
successor Warrant Agent shall be vested with the same powers, rights, duties and
responsibilities as if it had been originally named as Warrant Agent without
further act or deed. The former Warrant Agent shall deliver and transfer to the
successor Warrant Agent any property at the time held by it hereunder and
execute and deliver any further assurance, conveyance, act or deed necessary for
the purpose. Failure to give any notice provided for in this Section, however,
or any defect therein, shall not affect the legality or validity of the
resignation or removal of the Warrant Agent or the appointment of the successor
Warrant Agent, as the case may be.
(b) Any corporation into which the Warrant Agent may be merged or
with which it may be consolidated, or any corporation resulting from any merger
or consolidation to which the Warrant Agent shall be a party, or any corporation
succeeding to the
14
corporate trust business of the Warrant Agent, shall be the successor to the
Warrant Agent hereunder without the execution or filing of any paper or any
further act on the part of any of the parties hereto. In case at the time such
successor to the Warrant Agent shall succeed to the agency created by this
Agreement, any of the Warrant Certificates shall have been countersigned but not
delivered, any such successor to the Warrant Agent may adopt the
countersignature of the original Warrant Agent and deliver such Warrant
Certificates so countersigned, and in case at that time any of the Warrant
Certificates shall not have been countersigned, any successor to the Warrant
Agent may countersign such Warrant Certificate in its own name or in the name of
the successor Warrant Agent; and in all such cases such Warrant Certificates
shall have the full force provided in the Warrant Certificates and this
Agreement.
In case at any time the name of the Warrant Agent shall be changed
and at such time any of the Warrant Certificates shall have been countersigned
but not delivered, the Warrant Agent may adopt the countersignature under this
prior name and deliver Warrant Certificates so countersigned; and in case at
that time any of the Warrant Certificates shall not have been countersigned, the
Warrant Agent may countersign such Warrant Certificates either in its prior name
or in its changed name; and in all such cases such Warrant Certificates shall
have the full force provided in the Warrant Certificates and in this Agreement.
SECTION 6.03. The Company agrees to pay the Warrant Agent the sum of
$__________ plus a monthly fee $__________ of for all services rendered by it
hereunder. The Company also agrees to indemnify the Warrant Agent for, and to
hold it harmless against, any loss, liability or expense, incurred without gross
negligence, willful misconduct or bad faith on the part of the Warrant Agent,
arising out of or in connection with the acceptance and administration of this
Agreement, including the costs and expenses of defending against any claim of
liability in the premises.
SECTION 6.04. The Company covenants and agrees that it shall, at the
Company's expense, provide to the Warrant Agent copies of its current
prospectus, if any, in such quantity as to enable the Warrant Agent to deliver
one copy of such current prospectus to such Warrant Holder who shall exercise
his rights under a Warrant. Notwithstanding anything else contained in this
Section 6.04, the Company shall not be obligated to provide copies of its
current prospectus for the purpose of allowing the Warrant Agent to deliver such
copies to any Warrant Holder who delivers all of his redeemable warrants for
redemption pursuant to Section 2.03 or who shall notice the Company of his
intent to permit redemption of all of his Warrants pursuant to Section 2.03
herein or to any person who shall hold any Warrant subject to the terms of this
Agreement after the earlier of the Redemption Date or the Last Exercise Date of
the Warrants.
15
SECTION 6.05. The Warrant Agent undertakes the duties and obligations
imposed by this Agreement upon the following terms and conditions, by all of
which the Company and the holders of Warrant certificates, by their acceptance
thereof, shall be bound:
(a) Whenever in the performance of its duties under this Agreement
the Warrant Agent shall deem it necessary or desirable that any fact or matter
be proved or established by the Company prior to taking or suffering any action
hereunder, that fact or matter, unless other evidence in respect thereof be
herein specifically prescribed, may be deemed to be conclusively proved and
established by a certificate signed by the President or the Secretary of the
Company and delivered to the Warrant Agent. That certificate shall be full
authorization to the Warrant Agent for any action taken or suffered in good
faith by it under the provisions of this Agreement in reliance upon that
certificate.
(b) The Warrant Agent shall be liable hereunder only for its own
negligence, willful misconduct or bad faith.
(c) The Warrant Agent shall not be liable for or by reason of any of
the statements of fact or recitals contained in this agreement or in the Warrant
Certificates, except its countersignature thereof, or be required to verify the
same, but all such statements and recitals are and shall be deemed to have been
made by the Company only.
(d) The Warrant Agent shall not be under any responsibility in
respect of the validity of this Agreement or the execution and delivery hereof,
except the due execution hereof by the Warrant Agent, or in respect of the
validity or execution of any Warrant Certificate, except its countersignature
thereof; nor shall it be responsible for any Warrant Certificate; nor shall it
be responsible for the adjustment of the Warrant Price or the making of any
change in the number of shares of Common Stock required under the provisions of
Article III of this Agreement or responsible for the manner, method or amount of
any such change or the ascertaining of the existence of facts that would require
any such adjustment or change except with respect to the exercise of Warrant
Certificates after actual notice of any adjustment of the Warrant Price; nor
shall it by any act under this Agreement be deemed to make any representation or
warranty as to the authorization or reservation of any shares of Common Stock to
be issued pursuant to this Agreement or any Warrant Certificate or as to whether
any share of Common Stock will when issued be validly issued, fully paid,
non-assessable and free of preemptive rights.
(e) The Warrant Agent and any shareholder, director, officer or
employee of the Warrant Agent may buy, sell or deal in any of the Warrant
Certificates or other securities of the Company to retain a pecuniary interest
in any transaction in which the Company may be interested or contract with or
lend money to or
16
otherwise act as fully and freely as though it was not Warrant Agent or subject
to this Agreement. Nothing herein shall preclude the Warrant Agent from acting
in any other capacity for the Company or for any other legal entity.
(f) The Warrant Agent is hereby authorized and directed to accept
instructions with respect to the performance of its duties hereunder from any
officer or assistant officer of the Company, and to apply to any such officer or
assistant officer for advice or instructions in connection with its duties, and
shall not be liable for any action taken or suffered to be taken by it in good
faith in accordance with instructions of any such officer or assistant officer.
(g) The Warrant Agent may consult with its counsel or other counsel
satisfactory to it, including counsel for the Company, and the opinion of such
counsel shall be full and complete authorization and protection in respect of
any action taken, offered, or omitted by it hereunder in good faith and in
accordance with the opinion of such counsel.
(h) The Warrant Agent shall incur no liability to the Company or to
any holder of any Warrant for any action taken by it in reliance upon any
Warrant Certificate or certificate for Common Stock, instrument of assignment or
transfer, power of attorney, endorsement, affidavit, letter, notice, direction,
consent, certificate, statement, or other paper or document believed by it to be
genuine and to be signed, executed, and where necessary, certified or
acknowledged, by the proper person or persons.
SECTION 6.06. The Warrant Agent may, without the consent or concurrence of
the Warrant Holders, by supplemental agreement or otherwise, concur with the
Company in making any changes or corrections in this Agreement that (i) it shall
have been advised by counsel, who may be counsel for the Company, are required
to cure any ambiguity or to correct any defective or inconsistent provision or
clerical omission or mistake or manifest error herein contained, or (ii) as
provided in Section 3.09, the Company deems necessary of advisable and which
shall not be inconsistent with the provisions of the Warrant Certificates,
provided such changes or corrections do not adversely affect the privileges or
immunities of the Warrant Holders.
SECTION 6.07. All the covenants and provisions of this Agreement by or for
the benefit of the Company or the Warrant Agent shall bind and inure to the
benefit of their respective successors and assigns hereunder.
SECTION 6.08. Forthwith upon the appointment after the date thereof of any
transfer agent for the Common Stock, or of any subsequent transfer agent for the
Common Stock, the Company will file with the Warrant Agent a statement setting
forth the name and
17
address of such transfer agent.
SECTION 6.09. Notice or demand pursuant to this Agreement to be given or
made by the Warrant Agent or by any Warrant Holder to or on the Company shall be
sufficiently given or made and effective on the third business day after posting
thereof, unless otherwise provided in this Agreement, if sent by first-class
mail, postage prepaid, addressed (until another address is filed in writing by
the Company with the Warrant Agent) as follows:
First Montauk Financial Corp.
Parkway 109 Office Center
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, President
notice or demand pursuant to this Agreement to be given or made by the Company
or any Warrant Holder to or on the Warrant Agent shall be sufficiently given or
made and effective on the third business day after posting thereof, unless
otherwise provided in this Agreement, if sent by first-class mail, postage
prepaid, addressed until another address is filed in writing by the Warrant
Agent with the Company) as follows:
North American Transfer Company
▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: Compliance Department
notice or demand pursuant to this Agreement to be given or made by the Company
or the Warrant Agent to or on any Warrant Holder shall be sufficiently given or
made and effective on the third business day after posting thereof, unless
otherwise provided in this Agreement, if sent by first-class mail, postage
prepaid, addressed to such Warrant Holder at his last known address as it shall
appear in the records of the Company, if such notice shall be given by the
Company, or, if such notice shall be given by the Warrant Agent, as it shall
appear on the register maintained by the Warrant Agent.
A copy of any Notice or demand given or made pursuant to this Agreement on
the Warrant Agent, Company or Underwriter shall be promptly forwarded by the
recipient thereof to each of the Company, Warrant Agent or Underwriter who shall
not have received or made such demand or notice.
SECTION 6.10. The validity, interpretation and performance of this
Agreement and the Warrants shall be governed by the law of the State of New
York.
SECTION 6.11. Nothing in this Agreement shall be construed to give to any
person or corporation other than the parties hereto and the Warrant Holders any
right, remedy or claim under promise or
18
agreement hereof. All covenants, conditions, stipulations, promises and
agreements contained in this Agreement shall be for the sole and exclusive
benefit of the Company and the Warrant Agent and their successors and of the
Warrant Holders, and their heirs, representatives, successors, assigns and
transferees.
SECTION 6.12. A copy of this Agreement shall be available for inspection
by any Warrant Holder during the regular business hours and at the corporate
office of the Warrant Agent in Freeport, New York, at which time the Warrant
Agent may require any Warrant Holder to submit his Warrant Certificate for
inspection by it.
SECTION 6.13. This Agreement shall terminate on the Last Exercise Date, or
such earlier date upon which all Warrants have been exercised or redeemed,
except that the Warrant Agent shall account to the Company pursuant to Section
2.02 (e) of this Agreement for all cash held by it. The provisions of Section
6.03 and 6.04 of this Agreement shall survive such termination.
SECTION 6.14. The Article headings in this Agreement are for convenience
only and are not part of this Agreement and shall not affect the interpretation
thereof.
SECTION 6.15. This Agreement may be executed in any number counterparts,
each of which is so executed shall be deemed to be an original, and all such
counterparts shall together constitute but one and the same agreement.
ATTEST: First Montauk Financial Corp.
BY:____________________________
▇▇▇▇▇▇▇ Kurinksy
President
North American Transfer Company
BY:___________________________
Name:
Title:
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