EXHIBIT 1.2
FORM OF WARRANT AGREEMENT
RELATING TO PURCHASE COMMON STOCK
OF
TARPON INDUSTRIES, INC.
THIS WARRANT AGREEMENT, THE WARRANTS AND THE COMMON SHARES ISSUABLE UPON
EXERCISE OF THE WARRANTS GRANTED HEREUNDER HAVE BEEN ACQUIRED FOR INVESTMENT
PURPOSES ONLY AND MAY NOT BE TRANSFERRED UNTIL (i) A REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") SHALL HAVE
BECOME EFFECTIVE WITH RESPECT THERETO OR (ii) RECEIPT BY THE COMPANY OF AN
OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY TO THE EFFECT THAT
REGISTRATION UNDER THE SECURITIES ACT IS NOT REQUIRED IN CONNECTION WITH SUCH
PROPOSED TRANSFER NOR IS SUCH TRANSFER IN VIOLATION OF ANY APPLICABLE STATE
SECURITIES LAWS. THIS LEGEND SHALL BE ENDORSED UPON ANY WARRANT ISSUED IN
EXCHANGE FOR THIS WARRANT OR ANY COMMON SHARES ISSUABLE UPON EXERCISE OF THIS
WARRANT.
This is to Certify That, FOR VALUE RECEIVED, each person to whom a warrant
(a "Warrant") is issued hereunder (a "Holder"), is entitled to purchase, subject
to the provisions of this Warrant Agreement and such Warrant, from Tarpon
Industries, Inc., a Michigan corporation (the "Company") the number of fully
paid, validly issued and nonassessable common shares, no par value, of the
Company ("Common Stock") set forth therein subject to adjustment as set forth
herein at a price per share of [150% of public offering price] (the "Initial
Exercise Price") which exercise may take place at any time or from time to time
during the period commencing 181 days following the initial closing (the
"Initial Closing") of the public offering (the "Public Offering") of the Company
and continuing until the fifth anniversary of the Initial Closing (the "Exercise
Period"), subject to adjustment as set forth herein. The number of shares of
Common Stock to be received upon the exercise of a Warrant and the price to be
paid for each share of Common Stock may be adjusted from time to time as
hereinafter set forth. The shares of Common Stock deliverable upon such
exercise, and as adjusted from time to time, are hereinafter sometimes referred
to as "Warrant Shares" and the exercise price of a share of Common Stock in
effect at any time and as adjusted from time to time is hereinafter sometimes
referred to as the "Exercise Price". This Warrant Agreement relates to a maximum
of 250,000 Warrant Shares (subject to adjustment as set forth herein).
(a) EXERCISE OF WARRANTS; CANCELLATION OF WARRANTS.
(1) A Warrant may be exercised in whole or in part at any time or
from time to time during the Exercise Period; provided, however, that if the
last day of the Exercise Period is a day on which banking institutions in the
State of Michigan are authorized by law to close, then the last day of the
Exercise Period shall be the next succeeding day which shall not be such a day,
and (ii) in the event of any merger, consolidation or sale of substantially all
the assets of the Company as an entirety, resulting in any distribution to the
Company's stockholders, prior to termination of the Exercise Period, the Holder
shall have the right to exercise a Warrant commencing at such time through the
termination of the Exercise Period into the kind and amount of shares of stock
and other securities and property (including cash) receivable by a holder of the
number of shares of Common Stock for which the Warrant was exercisable
immediately prior thereto. A Warrant may be exercised by presentation and
surrender thereof to the Company at its principal office with the Exercise Form
annexed thereto duly completed and executed and accompanied by payment of the
Exercise Price for the number of Warrant Shares specified in such form. As soon
as practicable after each such exercise of the Warrant, but not later than seven
(7) days following the receipt of the Warrant with a duly completed and executed
Exercise Form and good and available funds, the Company shall issue and deliver
to the Holder a certificate or certificate for the Warrant Shares issuable upon
such exercise, registered in the name of the Holder or, upon presentation of
appropriate transfer documents and compliance with any requirements of the
transfer agent for the common stock and any restrictions on transfer of the
common stock, its designee. If a Warrant should be exercised in part only, the
Company shall, upon surrender of such Warrant for cancellation, execute and
deliver a new Warrant evidencing the rights of the Holder thereof to purchase
the balance of the Warrant Shares purchasable thereunder. Upon receipt by the
Company of a Warrant with a duly completed and executed Exercise Form and,
unless cashless exercise is elected, good and available funds in the amount of
the Exercise Price for the purchased shares at its office in proper form for
exercise, the Holder shall be deemed to be the holder of record of the shares of
Common Stock issuable upon such exercise, notwithstanding that the stock
transfer books of the Company shall then be closed or that certificates
representing such shares of Common Stock shall not then be physically delivered
to the Holder.
(2) At any time during the Exercise Period, the Holder may, at its
option, exercise a Warrant on a cashless basis by exchanging such Warrant, in
whole or in part (a "Warrant Exchange"), for the number of Warrant Shares
determined in accordance with this Section (a)(2), by surrendering such Warrant
at the principal office of the Company or at the office of its stock transfer
agent, accompanied by a completed and executed Exercise Form and a notice
stating such Holder's intent to effect such exchange, the number of Warrant
Shares to be exchanged and the date on which the Holder requests that such
Warrant Exchange occur (the "Notice of Exchange"). The Warrant Exchange shall
take place on the date specified in the Notice of Exchange or, if later, the
date the Warrant, the completed and executed Exercise Form and the Notice of
Exchange are received by the Company (the "Exchange Date"). Certificates for the
shares issuable upon such Warrant Exchange and, if applicable, a new Warrant of
like tenor evidencing the balance of the shares remaining subject to such
Warrant, shall be issued as of the Exchange Date and delivered to the Holder
within seven (7) days following the Exchange Date. In connection with any
Warrant Exchange, such Warrant
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shall represent the right to subscribe for and acquire the number of Warrant
Shares equal to (i) the number of Warrant Shares specified by the Holder in its
Notice of Exchange (the "Total Number") less (ii) the number of Warrant Shares
equal to the quotient obtained by dividing (A) the product of the Total Number
and the existing Exercise Price by (B) the current market value of a share of
Common Stock. Current market value shall have the meaning set forth Section (c)
below, except that for purposes hereof, the date of exercise, as used in such
Section (c), shall mean the Exchange Date.
(b) RESERVATION OF SHARES. The Company shall at all times reserve for
issuance and/or delivery upon exercise of the Warrants such number of shares of
its Common Stock as shall be required for issuance and delivery upon exercise of
the Warrants.
(c) FRACTIONAL SHARES. No fractional shares or script representing
fractional shares shall be issued upon the exercise of a Warrant. With respect
to any fraction of a share called for upon any exercise of a Warrant, the
Company shall pay to the Holder an amount in cash equal to such fraction
multiplied by the current market value of a share, determined as follows:
(1) If the Common Stock is listed on a national securities exchange
or admitted to unlisted trading privileges on such exchange or listed for
trading on the Nasdaq National Market, the current market value shall be the
last reported sale price of the Common Stock on such exchange or market on the
last business day prior to the date of exercise of this Warrant or if no such
sale is made on such day, the average of the closing bid and asked prices for
such day on such exchange or market; or
(2) If the Common Stock is not so listed or admitted to unlisted
trading privileges, but is traded on the Nasdaq SmallCap Market, the current
market value shall be the last reported sale price of the Common Stock on the
Nasdaq SmallCap Market on the last business day prior to the date of exercise of
this Warrant or if no such sale is reported on such day, the average of the
closing bid and asked prices for such day on such market and if the Common Stock
is not so traded, the current market value shall be the mean of the last
reported bid and asked prices reported by the NASD Electronic Bulletin Board on
the last business day prior to the date of the exercise of this Warrant; or
(3) If the Common Stock is not so listed or admitted to unlisted
trading privileges and bid and asked prices are not so reported, the current
market value shall be an amount, not less than book value thereof as at the end
of the most recent fiscal year of the Company ending prior to the date of the
exercise of the Warrant, determined in such reasonable manner as may be
prescribed by the Board of Directors of the Company.
(d) EXCHANGE, TRANSFER, ASSIGNMENT OR LOSS OF WARRANTS. A Warrant is
exchangeable, without expense, at the option of the Holder, upon presentation
and surrender thereof to the Company or at the office of its stock transfer
agent, if any, for other Warrants of different denominations entitling the
holder thereof to purchase in the aggregate the same number of shares of Common
Stock purchasable thereunder. Upon surrender of a Warrant to the Company at its
principal office or at the office of its stock transfer agent, if any, with the
Assignment Form
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annexed thereto duly executed and funds sufficient to pay any transfer tax and
upon compliance with the legend on the first page of this Warrant Agreement, the
Company shall, without charge, execute and deliver a new Warrant in the name of
the assignee named in such instrument of assignment and such Warrant shall
promptly be cancelled. A Warrant may be divided or combined with other Warrants
which carry the same rights upon presentation hereof at the principal office of
the Company or at the office of its stock transfer agent, if any, together with
a completed and executed assignment form (if there will be a different Holder)
and written notice specifying the names and denominations in which new Warrants
are to be issued and signed by the Holder hereof and compliance with the legend
on the first page of this Warrant Agreement. The term "Warrant" as used herein
includes any Warrants into which such Warrant may be divided or exchanged. Upon
receipt by the Company of evidence satisfactory to it of the loss, theft,
destruction or mutilation of a Warrant, and (in the case of loss, theft or
destruction) of reasonably satisfactory indemnification, and upon surrender and
cancellation of a Warrant, if mutilated, and upon receipt of a bond if the
Company's transfer agent requires the same, the Company will execute and deliver
a new Warrant of like tenor and date. Any such new Warrant executed and
delivered shall constitute an additional contractual obligation on the part of
the Company, whether or not such Warrant so lost, stolen, destroyed, or
mutilated shall be at any time enforceable by anyone.
(e) RIGHTS OF THE HOLDER. The Holder shall not, by virtue hereof, be
entitled to any rights of a shareholder in the Company, either at law or equity,
and the rights of the Holder are limited to those expressed in the Warrant and
are not enforceable against the Company except to the extent set forth herein.
(f) ANTI-DILUTION PROVISIONS. Subject to the provisions of Section l
hereof, the Exercise Price in effect at any time and the number and kind of
securities purchasable upon the exercise of the Warrants shall be subject to
adjustment from time to time upon the happening of certain events as follows:
(1) In case the Company shall hereafter (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 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
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 with an appropriate adjustment in the number of
shares purchasable hereunder. Such adjustment shall be made successively
whenever any event listed above shall occur.
(2) Subject to the provisions of Subsection (6) below, in case the
Company shall fix a record date for the issuance of rights or warrants to all
holders of its Common Stock entitling them to subscribe for or purchase shares
of Common Stock (or securities convertible into Common Stock) at a price (the
"Subscription Price") (or having a conversion price per share) less than the
current market price of the Common Stock (as defined in Subsection (9) below) on
the record date
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mentioned below, or less than the Exercise Price on such record date, the
Exercise Price shall be adjusted so that the same shall equal the lower of (i)
the price determined by multiplying the Exercise Price in effect immediately
prior to the date of such issuance by a fraction, the numerator of which shall
be the sum of the number of shares of Common Stock outstanding on the record
date mentioned below and the number of additional shares of Common Stock which
the aggregate offering price of the total number of shares of Common Stock so
offered (or the aggregate conversion price of the convertible securities so
offered) would purchase at such current market price per share of the Common
Stock (as defined in Subsection (9) below), and the denominator of which shall
be the sum of the number of shares of Common Stock outstanding on such record
date and the number of additional shares of Common Stock offered for
subscription or purchase (or into which the convertible securities so offered
are convertible) or (ii) in the event the Subscription Price is equal to or
higher than the current market price but is less than the Exercise Price, the
price determined by multiplying the Exercise Price in effect immediately prior
to the date of issuance by a fraction, the numerator of which shall be the sum
of the number of shares outstanding on the record date mentioned below and the
number of additional shares of Common Stock which the aggregate offering price
of the total number of shares of Common Stock so offered (or the aggregate
conversion price of the convertible securities so offered) would purchase at the
Exercise Price in effect immediately prior to the date of such issuance, and the
denominator of which shall be the sum of the number of shares of Common Stock
outstanding on the record date mentioned below and the number of additional
shares of Common Stock offered for subscription or purchase (or into which the
convertible securities so offered are convertible). Such adjustment shall be
made successively whenever such rights or warrants are issued and shall become
effective immediately after the record date for the determination of
shareholders entitled to receive such rights or warrants; and to the extent that
shares of Common Stock are not delivered (or securities convertible into Common
Stock are not delivered) after the expiration of such rights or warrants the
Exercise Price shall be readjusted to the Exercise 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 Common Stock) actually delivered.
(3) In case the Company shall hereafter distribute to all of the
holders of its Common Stock evidences of its indebtedness or assets (excluding
cash dividends or distributions and dividends or distributions referred to in
Subsection (1) above) or subscription rights or warrants (excluding those
referred to in Subsection (2) above), then in each such case the Exercise Price
in effect thereafter shall be determined by multiplying the Exercise Price in
effect immediately prior thereto by a fraction, the numerator of which shall be
the total number of shares of Common Stock outstanding multiplied by the current
market price per share of Common Stock (as defined in Subsection (8) below),
less the fair market value (as determined by the Company's Board of Directors)
of said assets or evidences of indebtedness so distributed or of such rights or
warrants, and the denominator of which shall be the total number of shares of
Common Stock outstanding multiplied by such current market price per share of
Common Stock. Such adjustment shall be made successively whenever such a record
date is fixed. Such adjustment shall be made whenever any such distribution is
made and shall become effective immediately after the record date for the
determination of shareholders entitled to receive such distribution.
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(4) Subject to the provisions of Subsection (6) below, in case the
Company shall hereafter issue shares of its Common Stock (excluding shares
issued (a) in any of the transactions described in Subsection (1) or (2) above,
(b) to, or upon exercise of options granted to the Company's officers,
directors, employees, consultants or advisors under a plan, plans or agreements
adopted by the Company's Board of Directors and approved by its shareholders, if
such shares would otherwise be included in this Subsection (4), but only to the
extent that the aggregate number of shares excluded hereby and issued after the
date hereof, shall not exceed 10% of the Company's Common Stock outstanding at
the time of any issuance or 650,000 shares, whichever is greater, (c) upon
exercise, conversion or exchange of options, warrants, convertible debentures or
other securities convertible into, exchangeable for, exercisable for, or
otherwise providing a right to acquire shares of Common Stock, (d) to
shareholders of any corporation or other entity which merges into, or is
otherwise acquired by, the Company or one of its subsidiaries in proportion to
their stock holdings of such corporation or other entity immediately prior to
such merger or other acquisition, including without limitation, shares issuable
in connection with the Company's subsidiary's acquisition of Steelbank, Inc.
stock, (e) issued in a bona fide public offering pursuant to a firm commitment
underwriting, including the Public Offering, but only if no adjustment is
required pursuant to any other specific subsection of this Section (f) (without
regard to Subsection (9) below) with respect to the transaction giving rise to
such rights, or (f) described in the prospectus relating to the Public Offering
under "Capitalization" as being outstanding or issuable under existing
instruments) for a consideration per share (the "Offering Price") less than the
current market price per share (as defined in Subsection (8) below on the date
the Company fixes the offering price of such additional shares or less than the
Exercise Price, the Exercise Price shall be adjusted immediately thereafter so
that it shall equal the lower of (i) the price determined by multiplying the
Exercise Price in effect immediately prior thereto by a fraction, the numerator
of which shall be the sum of the number of shares of Common Stock outstanding
immediately prior to the issuance of such additional shares and the number of
shares of Common Stock which the aggregate consideration received (determined as
provided in Subsection (7) below) for the issuance of such additional shares
would purchase at such current market price per share of Common Stock (as
defined in Subsection (8) below), and the denominator of which shall be the
number of shares of Common Stock outstanding immediately after the issuance of
such additional shares or (ii) in the event the Offering Price is equal to or
higher than the current market price per share but less than the Exercise Price,
the price determined by multiplying the Exercise Price in effect immediately
prior to the date of issuance by a fraction, the numerator of which shall be the
number of shares of Common Stock outstanding immediately prior to the issuance
of such additional shares and the number of shares of Common Stock which the
aggregate consideration received (determined as provided in subsection (8)
below) for the issuance of such additional shares would purchase at the Exercise
Price in effect immediately prior to the date of such issuance, and the
denominator of which shall be the number of shares of Common Stock outstanding
immediately after the issuance of such additional shares. Such adjustment shall
be made successively whenever such an issuance is made.
(5) Subject to the provisions of Subsection (6) below, in case the
Company shall hereafter issue any securities convertible into or exchangeable
for its Common Stock (excluding securities issued in transactions described in
Subsections (2) and (3) above) and excluding any securities convertible into or
exchangeable for Common Stock that are excluded from Subsection (4) above) for a
consideration per share of Common Stock (the "Conversion Price") paid for such
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convertible or exchangeable security, if any, plus the amount, if any payable
upon conversion or exchange of such securities (determined as provided in
Subsection (7) below) that is less than the current market price per share (as
defined in Subsection (8) below) in effect immediately prior to the issuance of
such securities, or less than the Exercise Price, the Exercise Price shall be
adjusted immediately thereafter so that it shall equal the lower of (i) the
price determined by multiplying the Exercise Price in effect immediately prior
thereto by a fraction, the numerator of which shall be the sum of the number of
shares of Common Stock outstanding immediately prior to the issuance of such
securities and the number of shares of Common Stock which the aggregate
consideration received (determined as provided in Subsection (7) below) for such
securities would purchase at such current market price per share of Common Stock
(as defined in Subsection (8) below), and the denominator of which shall be the
sum of the number of shares of Common Stock outstanding immediately prior to
such issuance and the maximum number of shares of Common Stock of the Company
deliverable upon conversion of or in exchange for such securities at the initial
conversion or exchange price or rate or (ii) in the event the Conversion Price
is equal to or higher than the current market price per share but less than the
Exercise Price, the price determined by multiplying the Exercise Price in effect
immediately prior to the date of issuance by a fraction, the numerator of which
shall be the sum of the number of shares outstanding immediately prior to the
issuance of such securities and the number of shares of Common Stock which the
aggregate consideration received (determined as provided in subsection (8)
below) for such securities would purchase at the Exercise Price in effect
immediately prior to the date of such issuance, and the denominator of which
shall be the sum of the number of shares of Common Stock outstanding immediately
prior to the issuance of such securities and the maximum number of shares of
Common Stock of the Company deliverable upon conversion of or in exchange for
such securities at the initial conversion or exchange price or rate. Such
adjustment shall be made successively whenever such an issuance is made. If an
adjustment is made pursuant to this Subsection (5) and the Common Stock issuable
pursuant to such securities changes or such securities expire or terminate, or
the conversion or exchange feature expires or terminates, the adjustment shall
be re-computed.
(6) Whenever the Exercise Price payable upon exercise of each
Warrant is adjusted pursuant to Subsections (1), (4) or (5) above, the number of
Shares purchasable upon exercise of this Warrant shall simultaneously be
adjusted by multiplying the number of Shares initially issuable upon exercise of
this Warrant by the Exercise Price in effect on the date hereof and dividing the
product so obtained by the Exercise Price, as adjusted.
(7) For purposes of any computation respecting consideration
received pursuant to Subsections (4) and (5) above, the following shall apply:
(A) in the case of the issuance of shares of Common Stock for
cash, the consideration shall be the amount of such cash, provided
that in no case shall any deduction be made for any commissions,
discounts or other expenses incurred by the Company for any
underwriting of the issue or otherwise in connection therewith;
(B) in the case of the issuance of shares of Common Stock for
a consideration in whole or in part other than cash, the
consideration other than cash shall be deemed to be the fair market
value thereof as determined in good faith by the
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Board of Directors of the Company (irrespective of the accounting
treatment thereof), whose determination shall be conclusive; and
(C) in the case of the issuance of securities convertible into
or exchangeable for shares of Common Stock, the aggregate
consideration received therefor shall be deemed to be the
consideration received by the Company for the issuance of such
securities plus the additional minimum consideration, if any, to be
received by the Company upon the conversion or exchange thereof (the
consideration in each case to be determined in the same manner as
provided in clauses (A) and (B) of this Subsection (7)).
(8) For the purpose of any computation under Subsections (2), (3),
(4) and (5) above, the current market price per share of Common Stock at any
date shall be determined in the manner set forth in Section (c) hereof except
that the current market price per share shall be deemed to be the average of the
closing prices for 30 consecutive business days before such date.
(9) No adjustment in the Exercise Price shall be required unless
such adjustment would require an increase or decrease of at least five cents
($0.05) in such price; provided, however, that any adjustments which by reason
of this Subsection (9) are not required to be made shall be carried forward and
taken into account in any subsequent adjustment required to be made hereunder.
All calculations under this Section (f) shall be made to the nearest cent or to
the nearest one-hundredth of a share, as the case may be. Anything in this
Section (f) to the contrary notwithstanding, the Company shall be entitled, but
shall not be required, to make such changes in the Exercise Price, in addition
to those required by this Section (f), as it shall determine, in its sole
discretion, to be advisable (1) in order that any dividend or distribution in
shares of Common Stock, or any subdivision, reclassification or combination of
Common Stock, hereafter made by the Company shall not result in any Federal
Income tax liability to the holders of Common Stock or securities convertible
into Common Stock (including Warrants), or (2) to decrease such Exercise Price,
either temporarily or permanently.
(10) Whenever the Exercise Price is adjusted, as herein provided,
the Company shall promptly but no later than 10 days after any request for such
an adjustment by the Holder, cause a notice setting forth the adjusted Exercise
Price and adjusted number of Shares issuable upon exercise of each Warrant, and,
if requested, information describing the transactions giving rise to such
adjustments, to be mailed to the Holders at their last addresses appearing in
the Warrant Register, and shall cause a certified copy thereof to be mailed to
its transfer agent, if any. In the event the Company does not provide the Holder
with such notice and information within 10 days of a request by the Holder, then
notwithstanding the provisions of this Section (f), the Exercise Price shall be
immediately adjusted to equal the lowest Offering Price, Subscription Price or
Conversion Price, as applicable, since the date of this Warrant, and the number
of shares issuable upon exercise of this Warrant shall be adjusted accordingly.
The Company may retain a firm of independent certified public accountants
selected by the Board of Directors (who may be the regular accountants employed
by the Company) to make any computation required by this Section (f), and a
certificate signed by such firm shall be conclusive evidence of the correctness
of such adjustment.
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(11) In the event that at any time, as a result of an adjustment
made pursuant to Subsection (1) above, the Holder of a Warrant thereafter shall
become entitled to receive any shares of the Company, other than Common Stock,
thereafter the number of such other shares so receivable upon exercise of such
Warrant shall be subject to adjustment from time to time in a manner and on
terms as nearly equivalent as practicable to the provisions with respect to the
Common Stock contained in Subsections (1) to (10), inclusive above.
(12) Irrespective of any adjustments in the Exercise Price or the
number or kind of shares purchasable upon exercise of a Warrant, Warrants
theretofore or thereafter issued may continue to express the same price and
number and kind of shares as are stated in the similar Warrants initially
issuable pursuant to this Agreement.
(g) OFFICER'S CERTIFICATE. Whenever the Exercise Price shall be adjusted
as required by the provisions of the foregoing Section, the Company shall
forthwith file in the custody of its Secretary or an Assistant Secretary at its
principal office and with its stock transfer agent for the Warrants, if any, an
officer's certificate showing the adjusted Exercise Price determined as herein
provided, setting forth in reasonable detail the facts requiring such
adjustment, including a statement of the number of additional shares of Common
Stock, if any, and such other facts as shall be necessary to show the reason for
and the manner of computing such adjustment. Each such officer's certificate
shall be made available at all reasonable times for inspection by any Holder of
a Warrant executed and delivered pursuant to Section (a) and then outstanding.
(h) NOTICES TO WARRANT HOLDERS. So long as any Warrants shall be
outstanding, (i) if the Company shall pay any dividend or make any distribution
upon the Common Stock or (ii) if the Company shall offer to the holders of
Common Stock for subscription or purchase by them any share of any class or any
other rights or (iii) if any capital reorganization of the Company,
reclassification of the capital stock of the Company, consolidation or merger of
the Company with or into another corporation, sale, lease or transfer of all or
substantially all of the property and assets of the Company to another
corporation, or voluntary or involuntary dissolution, liquidation or winding up
of the Company shall be effected, then in any such case, the Company shall cause
to be mailed by certified mail to the Holder, at least fifteen days prior the
date specified in (x) or (y) below, as the case may be, a notice containing a
brief description of the proposed action and stating the date on which (x) a
record is to be taken for the purpose of such dividend, distribution or rights,
or (y) such reclassification, reorganization, consolidation, merger, conveyance,
lease, dissolution, liquidation or winding up is to take place and the date, if
any is to be fixed, as of which the holders of Common Stock or other securities
shall receive cash or other property deliverable upon such reclassification,
reorganization, consolidation, merger, conveyance, dissolution, liquidation or
winding up.
(i) RECLASSIFICATION, REORGANIZATION OR MERGER. In case of any
reclassification, capital reorganization or other change of outstanding shares
of Common Stock of the Company, or in case of any consolidation or merger of the
Company with or into another corporation (other than a merger with a subsidiary
in which merger the Company is the continuing corporation and which does not
result in any reclassification, capital reorganization or other change of
outstanding shares of Common Stock of the class issuable upon exercise of a
Warrant) or in case of
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any sale, lease or conveyance to another corporation of the property of the
Company as an entirety, the Company shall, as a condition precedent to such
transaction, cause effective provisions to be made so that the Holder shall have
the right thereafter by exercising a Warrant at any time prior to the expiration
of such Warrant, to purchase the kind and amount of shares of stock and other
securities and property receivable upon such reclassification, capital
reorganization and other change, consolidation, merger, sale or conveyance by a
holder of the number of shares of Common Stock subject to such Warrant
immediately prior to such reclassification, change, consolidation, merger, sale
or conveyance. Any such provision shall include provision for adjustments which
shall be as nearly equivalent as may be practicable to the adjustments provided
for in such Warrant. The foregoing provisions of this Section (i) shall
similarly apply to successive reclassifications, capital reorganizations and
changes of shares of Common Stock and to successive consolidations, mergers,
sales or conveyances. In the event that in connection with any such capital
reorganization or reclassification, consolidation, merger, sale or conveyance,
additional shares of Common Stock shall be issued in exchange, conversion,
substitution or payment, in whole or in part, for a security of the Company
other than Common Stock, any such issue shall be treated as an issue of Common
Stock covered by the provisions of Subsection (1) of Section (f) hereof.
(j) REGISTRATION RIGHTS.
(1) (i) The Company hereby agrees with the holders of the Warrants
and the Warrant Shares or their transferees (collectively, the "Holders") that
upon notice by either Xxxxxx Xxxxxx & Co., LLC or Holders beneficially owning at
least 50% of the Warrants and Warrant Shares, given not more than five years
from the date of the commencement of sales under the Public Offering, it will,
within three weeks of such notice prepare and file with the Securities and
Exchange Commission ("SEC") a registration statement under the Securities Act of
1933, as amended (the "Act") covering the resale of the Warrant Shares as
specified in such notice and use its best efforts to cause such registration
statement to become effective as soon as practicable thereafter, unless it has
already registered the Warrant Shares for resale under the Act using the method
of distribution specified by the Holders which registration is then effective
and up to date and remains effective and up to date for the 24 months from the
date of this Agreement (an "Existing Registration").
(ii) If there is no Existing Registration and the Company
determined to proceed with the preparation and filing of a registration
statement under the Act in connection with the proposed offer and sale of any of
its securities by it or any of its security holders (other than a registration
statement on Form X-0, X-0 or other limited purpose form), within five years
from the date of commencement of sales under the Public Offering, then the
Company will give written notice of its determination to all record holders of
the Warrants and Warrant Shares. Upon the written request from any Holder,
received within 30 days of the Company's notice, the Company will, except as
herein provided, cause all such Warrant Shares to be included in such
registration statement, all to the extent requisite to permit the sale or other
disposition by the prospective seller or sellers of the Warrant Shares to be so
registered; provided, further, that nothing herein shall prevent the Company
from, at any time, abandoning or delaying any registration. If any registration
pursuant to this Section j(1) shall be underwritten in whole or in part, the
Company may require that the Warrant Shares requested for inclusion by the
Holders be included in the underwriting on the same terms and conditions as the
securities otherwise being sold through the underwriters. If in an
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underwritten offering described in the preceding sentence, the underwriter
determines in good faith that fewer than all of the shares of Common Stock
requested to be included therein can be included, the Warrant Shares requested
to be included therein shall be reduced last, subject to priority being given
only to securities being offered by the Company and by any other selling
shareholder exercising demand registration rights in such offering, until the
offering is reduced to the level the underwriter determines in good faith should
be offered. Notwithstanding such reduction, the Company shall nevertheless
register the Warrant Shares, which the holders will agree not to distribute for
45 days after the closing of the underwritten offering.
(2) In the event the Company is required to file a registration
statement for the Warrant Shares (other than the Existing Registration), or is
filing a registration statement for other securities in which the Warrant shares
shall be included, the Company will:
(A) prepare and file with the SEC such registration statement
and such amendments to such registration statement and supplements
to the prospectus contained therein as may be necessary process such
registration statement and to keep such registration statement
effective until the earlier of (x) six (6) months from the effective
date and (y) the date all of the registered Warrant Shares are sold;
(B) furnish to the Holders participating in such registration
and to the underwriters of the securities being registered such
reasonable number of copies of the registration statement,
preliminary prospectus, final prospectus and such other documents as
such underwriters may reasonably request in order to facilitate the
public offering of such securities;
(C) use its best efforts to register or qualify the securities
covered by such registration statement under such state securities
or blue sky laws of such jurisdictions as the Holders may reasonably
request in writing within twenty (20) days following the original
filing of such registration statement, except that the Company shall
not for any purpose be required to execute a general consent to
service of process or to qualify to do business as a foreign
corporation in any jurisdiction wherein it is not so qualified or
subject itself to taxation in any such jurisdiction;
(D) notify the Holders or Xxxxxx Xxxxxx & Co., LLC, promptly
after it shall receive notice thereof, of the time when such
registration statement has become effective or a supplement to any
prospectus forming a part of such registration statement has been
filed;
(E) notify the Holders or Xxxxxx Xxxxxx & Co., LLC promptly of
any request by the SEC for the amending or supplementing of such
registration statement or prospectus or for additional information;
(F) prepare and file with the SEC, promptly upon the request
of any Holders, any amendments or supplements to such registration
statement or prospectus
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which, in the opinion of counsel for such Holders (and concurred in
by counsel for the Company), is required under the Act or the rules
and regulations thereunder in connection with the distribution of
Common Stock by such Holders;
(G) prepare and promptly file with the SEC and promptly notify
such Holders or Xxxxxx Xxxxxx & Co., LLC of the filing of such
amendment or supplement to such registration statement or prospectus
as may be necessary to correct any statements or omissions if, at
the time when a prospectus relating to such securities is required
to be delivered under the Act, any event shall have occurred as the
result of which any such prospectus or any other prospectus as then
in effect would include an untrue statement of a material fact or
omit to state any material fact necessary to make the statements
therein, in the light of the circumstances in which they were made,
not misleading; and
(H) advise the Holders, promptly after it shall receive notice
or obtain knowledge thereof, of the issuance of any stop order by
the SEC suspending the effectiveness of such registration statement
or the initiation or threatening of any proceeding for that purpose
and promptly use its best efforts to prevent the issuance of any
stop order or to obtain its withdrawal if such stop order should be
issued.
The Company may require each Holder of Warrant Shares as to which any
registration is being effected to furnish to the Company such information
regarding such Holder and the distribution of such Warrant Shares as the Company
may from time to time reasonably request in writing.
(3) All fees, costs and expenses of and incidental to such
registration, inclusion and public offering in connection therewith shall be
borne by the Company, provided, however, that the Holders shall bear their pro
rata share of the underwriting discount and commissions and transfer taxes. The
fees, costs and expenses of registration to be borne by the Company as provided
above shall include, without limitation, all registration, filing, and NASD
fees, printing expenses, fees and disbursements of counsel and accountants for
the Company, and all legal fees and disbursements and other expenses of
complying with state securities or blue sky laws of any jurisdictions in which
the securities to be offered are to be registered and qualified (except as
provided above). Fees and disbursements of counsel and accountants for the
Holders and any other expenses incurred by the Holders not expressly included
above shall be borne by the Holders.
(4) The Company will indemnify and hold harmless each Holder of
Warrant Shares which are included in a registration statement pursuant to the
provisions of Section (j)(1) hereof, its directors and officers, and any
underwriter (as defined in the Act) for such Holder and each person, if any, who
controls such Holder or such underwriter within the meaning of the Act, from and
against, and will reimburse such Holder and each such underwriter and
controlling person with respect to, any and all loss, damage, liability, cost
and expense to which such Holder or any such underwriter or controlling person
may become subject under the Act or otherwise, insofar as such losses, damages,
liabilities, costs or expenses are caused by any untrue statement or alleged
untrue statement of any material fact contained in such registration statement,
any prospectus contained therein or any amendment or supplement thereto, or
arise out of or are based upon the
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omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading; provided, however, that
the Company will not be liable in any such case to the extent that any such
loss, damage, liability, cost or expenses arises out of or is based upon an
untrue statement or alleged untrue statement or omission or alleged omission so
made in conformity with information furnished by or on behalf of such Holder,
such underwriter or such controlling person in writing specifically for use in
the preparation thereof.
(5) Each Holder of Warrant Shares included in a registration
pursuant to the provisions of Section (j)(1) hereof will indemnify and hold
harmless the Company, its directors and officers, any controlling person of the
Company or any underwriter and any underwriter from and against, and will
reimburse the Company, its directors and officers, any controlling person and
any underwriter with respect to, any and all loss, damage, liability, cost or
expense to which the Company, its directors, its officers, or any controlling
person and/or any underwriter may become subject under the Act or otherwise,
insofar as such losses, damages, liabilities, costs or expenses are caused by
any untrue statement or alleged untrue statement of any material fact contained
in such registration statement, any prospectus contained therein or any
amendment or supplement thereto, or arise out of or are based upon the omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading, in each case to the
extent, but only to the extent, that such untrue statement or alleged untrue
statement or omission or alleged omission was so made in reliance upon and in
strict conformity with written information furnished by or on behalf of such
Holder specifically for use in the preparation thereof.
(6) Promptly after receipt by an indemnified party pursuant to the
provisions of Sections (j)(4) or (5) of notice of the commencement of any action
involving the subject matter of the foregoing indemnity provisions such
indemnified party will, if a claim thereof is to be made against the
indemnifying party pursuant to the provisions of said Sections (j)(4) or (5),
promptly notify the indemnifying party of the commencement thereof; but the
omission to so notify the indemnifying party will not relieve it from any
liability which it may have to any indemnified party otherwise than hereunder.
In case such action is brought against any indemnified party and it notifies the
indemnifying party of the commencement thereof, the indemnifying party shall
have the right to participate in, and, to the extent that it may wish, jointly
with any other indemnifying party similarly notified, to assume the defense
thereof, with counsel satisfactory to such indemnified party, provided, however,
if counsel for the indemnifying party concludes that a single counsel cannot
under applicable legal and ethical considerations, represent both the
indemnifying party and the indemnified party, the indemnified party or parties
have the right to select one separate counsel to participate in the defense of
such action on behalf of such indemnified party or parties. After notice from
the indemnifying party to such indemnified party of its election so to assume
the defense thereof, the indemnifying party will not be liable to such
indemnified party pursuant to the provisions of said Sections (j)(4) or (5) for
any legal or other expense subsequently incurred by such indemnified party in
connection with the defense thereof other than reasonable costs of
investigation, unless (i) the indemnified party shall have employed counsel in
accordance with the provisions of the preceding sentence, (ii) the indemnifying
party shall not have employed counsel reasonably satisfactory to the indemnified
party to represent the indemnified party within a reasonable time after
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the notice of the commencement of the action or (iii) the indemnifying party has
authorized the employment of counsel for the indemnified party at the expense of
the indemnifying party.
(7) If the Company fails to carry out its obligations under this
Section (j), the Company shall cause any outstanding Warrants to be increased by
ten (10%) percent of the Warrant Shares then purchasable thereunder, and shall
issue warrants of like tenor hereto to each holder of Warrant Shares seeking to
register the same equal to ten (10%) percent of such Warrant Shares, for each
month (or a prorated fraction thereof for each portion of a month) of delay in
having an effective registration statement which results from such failure. Any
such additional Warrant Shares shall be entitled to registration hereunder but
shall not be used in calculating additional Warrant Shares under this Section
(j)(7).
(8) If the Warrant Shares have been included in Registration
Statement filed with the Securities and Exchange Commission in connection with
the Public Offering and if such Registration Statement is declared effective,
and for so long as it remains effective, the Holders shall have no rights to
demand a registration or participate in another registration under Section
(j)(1) hereof.
TARPON INDUSTRIES, INC.
By: _______________________________________
Name: Xxxxx Xxxxxxxx
Title:Chief Executive Officer
Dated: January __, 2005
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TARPON INDUSTRIES, INC.
CERTIFICATE OF WARRANT
THIS WARRANT AND THE COMMON SHARES ISSUABLE ON EXERCISE HAVE BEEN ACQUIRED FOR
INVESTMENT PURPOSES ONLY AND MAY NOT BE TRANSFERRED UNTIL (i) A REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT")
SHALL HAVE BECOME EFFECTIVE WITH RESPECT THERETO OR (ii) RECEIPT BY THE COMPANY
OF AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY TO THE EFFECT
THAT REGISTRATION UNDER THE SECURITIES ACT IS NOT REQUIRED IN CONNECTION WITH
SUCH PROPOSED TRANSFER NOR IS SUCH TRANSFER IN VIOLATION OF ANY APPLICABLE STATE
SECURITIES LAWS. THIS LEGEND SHALL BE ENDORSED UPON ANY WARRANT ISSUED IN
EXCHANGE FOR THIS WARRANT AND ANY COMMON SHARES ISSUABLE UPON EXERCISE OF THIS
WARRANT.
For value received, _____________________ (the "Holder") shall be
entitled to purchase up to ________ common shares, no par value, of Tarpon
Industries, Inc., a Michigan corporation (the "Company") pursuant to, and
subject to the terms and conditions of, a Warrant Agreement (the "Warrant
Agreement") of even date herewith. The number of shares for which this Warrant
may be exercised, and the exercise price, are as set forth in the Warrant
Agreement, to which the Holder, by acceptance of this Certificate of Warrant,
subscribes and assumes the rights and obligations of a "Holder" thereunder.
Exercise or transfer of this Warrant shall be carried out using the annexed
forms.
IN WITNESS WHEREOF, the Company has caused this Certificate of
Warrant to be executed and delivered on the date set forth below.
TARPON INDUSTRIES, INC.
By: _______________________________________
Name: Xxxxx Xxxxxxxx
Title:Chief Executive Officer
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EXERCISE FORM
Dated
The undersigned hereby irrevocably elects to exercise the within
Warrant to the extent of purchasing ______ shares of Common Stock and hereby
makes payment of _______ in payment of the actual exercise price thereof _____
(check) or elects a cashless exercise with respect thereto ______ (check) as to
a total of ___________ shares.
INSTRUCTIONS FOR REGISTRATION OF STOCK
Name
(Please typewrite or print in block letters)
Address
Signature
ASSIGNMENT FORM
FOR VALUE RECEIVED, ______________________________ hereby sells,
assigns and transfers unto
Name
(Please typewrite or print in block letters)
Address
the right to purchase Common Stock represented by this Warrant to the extent of
shares as to which such right is exercisable and does hereby irrevocably
constitute and appoint Attorney, to transfer the same on the books of the
Company with full power of substitution in the premises.
Date
Signature
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