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CASULL ARMS CORPORATION
AND
NATIONAL SECURITIES CORPORATION
FORM OF
PLACEMENT AGENT'S
WARRANT AGREEMENT
Dated as of April , 1997
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PLACEMENT AGENT'S WARRANT AGREEMENT dated as of April , 1997,
between CASULL ARMS CORPORATION, a Delaware corporation (the "Company"), and
NATIONAL SECURITIES CORPORATION and its assignees or designees (each hereinafter
referred to variously as a "Holder" or "Placement Agent").
W I T N E S S E T H :
WHEREAS, the Placement Agent has agreed pursuant to the placement
agent agreement (the "Placement Agent Agreement") between the Placement Agent
and the Company, to act as the placement agent of the Company in connection with
the Company's proposed public offering of up to 1,400,000 shares of the
Company's Common Stock (as hereinafter defined) and 1,400,000 redeemable Common
Stock purchase warrants (the "Warrants"), each warrant entitling the holder
thereof to purchase one share of Common Stock (collectively, the "Securities").
The Securities are sold as units ("Units"), each consisting of one (1) share of
Common Stock and one (1) Warrant, although the parties anticipate that there
will be no public market for the Securities as Units;
WHEREAS, pursuant to the Placement Agent Agreement, the Company
proposes to issue warrants to the Placement Agent to purchase up to an aggregate
of 140,000 Units (the "Placement Agent's Warrants"); and
WHEREAS, the Placement Agent's Warrants to be issued pursuant to
this Agreement will be issued on the Closing Date (as such term is defined in
the Placement Agent Agreement) by the Company to the Placement Agent in
consideration for, and as part of the
Placement Agent's compensation in connection with, the Placement Agent acting as
the Placement Agent pursuant to the Placement Agent Agreement.
NOW, THEREFORE, in consideration of the premises, the payment by the
Placement Agent to the Company of an aggregate of eighty-five dollars and forty
cents ($85.40), the agreements herein set forth and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
1. Grant. The Placement Agent is hereby collectively granted the
right to purchase, at any time from April , 1998 [the first anniversary of the
issuance of the Placement Agent's Warrants] until 5:30 p.m., New York time, on
April , 2002 [5 years from the Effective Date of the Registration Statement], at
which time the Placement Agent's Warrants expire, up to an aggregate 140,000
shares of Common Stock and 140,000 Warrants, subject to adjustment as provided
in Section 8 hereof (the "Placement Agent's Securities"). Each Placement Agent's
Warrant shall entitle the holder thereof to purchase one (1) share of common
stock, par value $.01 per share, of the Company (the "Common Stock") and/or one
(1) Warrant to purchase one (1) share of Common Stock, at an initial exercise
price of $7.20 per share and $.12 per Warrant, respectively [120% of the
offering prices per share and per warrant to the public, respectively] (the
"Common Stock Exercise Price" and the "Warrant Exercise Price," respectively).
2. Placement Agent's Warrant Certificates. The Placement Agent's
warrant certificates (the "Warrant Certificates") delivered and to be delivered
pursuant to this Agreement shall be in the form set forth in Exhibit A, attached
hereto and made a part hereof, with such
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appropriate insertions, omissions, substitutions, and other variations as
required or permitted by this Agreement.
3. Registration of Warrant. The Placement Agent's Warrants shall be
numbered and shall be registered on the books of the Company when issued.
4. Exercise of Placement Agent's Warrant.
4.1 Method of Exercise. The Placement Agent's Warrants
initially are exercisable at the Common Exercise Price and/or Warrant Exercise
Price (subject to adjustment as provided in Section 11 hereof) per Placement
Agent's Warrant set forth in Section 8 hereof payable by certified or official
bank check in New York Clearing House funds. Upon surrender of a Placement
Agent's Warrant Certificate with the annexed Form of Election to Purchase duly
executed, together with payment of the Common Stock Exercise Price and/or the
Warrant Exercise Price for shares of Common Stock and/or Warrants purchased at
the Company's principal offices presently located at 000 Xxxxxxxx Xxxx, X.X. Xxx
0000, Xxxxx, Xxxxxxx 00000 the registered holder of a Placement Agent's Warrant
Certificate ("Holder" or "Holders") shall be entitled to receive a certificate
or certificates for the shares of Common Stock and/or Warrants so purchased. The
purchase rights represented by each Placement Agent's Warrant Certificate are
exercisable at the option of the Holder thereof, in whole or in part (but not as
to fractional shares underlying the Placement Agent's Warrants). In the case of
the purchase of less than all of the shares or warrants purchasable under any
Placement Agent's Warrant Certificate, the Company shall cancel said Placement
Agent's Warrant Certificate upon the surrender thereof and shall execute and
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deliver a new Placement Agent's Warrant Certificate of like tenor for the
balance of the shares or warrants purchasable thereunder.
5. Issuance of Certificates. Upon the exercise of the Placement
Agent's Warrant, the issuance of certificates for securities, properties or
rights underlying such Placement Agent's Warrant shall be made forthwith (and in
any event within five (5) business days thereafter) without charge to the Holder
thereof including, without limitation, any tax which may be payable in respect
of the issuance thereof, and such certificates shall (subject to the provisions
of Sections 7 and 9 hereof) be issued in the name of, or in such names as may be
directed by, the Holder thereof; provided, however, that the Company shall not
be required to pay any tax which may be payable in respect of any transfer
involved in the issuance and delivery of any such certificates in a name other
than that of the Holder and the Company shall not be required to issue or
deliver such certificates unless or until the person or persons requesting the
issuance thereof shall have paid to the Company the amount of such tax or shall
have established to the satisfaction of the Company that such tax has been paid.
The Placement Agent's Warrant Certificates and the certificates
representing the securities, property or rights issued upon exercise of the
Placement Agent's Warrant shall be executed on behalf of the Company by the
manual or facsimile signature of the then present President or any Vice
President of the Company under its corporate seal reproduced thereon, attested
to by the manual or facsimile signature of the then present Secretary or any
Assistant Secretary of the Company. Placement Agent's Warrant Certificates shall
be dated the date of execution by the Company upon initial issuance, division,
exchange, substitution or transfer.
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6. Transfer of Placement Agent's Warrant. The Placement Agent's
Warrant shall be transferable only on the books of the Company maintained at its
principal office, where its principal office may then be located, upon delivery
thereof duly endorsed by the Holder or by its duly authorized attorney or
Placement Agent accompanied by proper evidence of succession, assignment or
authority to transfer. Upon any registration transfer, the Company shall execute
and deliver the new Placement Agent's Warrant to the person entitled thereto.
7. Restriction On Transfer of Placement Agent's Warrant. The Holder
of a Placement Agent's Warrant Certificate, by its acceptance thereof, covenants
and agrees that the Placement Agent's Warrant is being acquired as an investment
and not with a view to the distribution thereof, and that the Placement Agent's
Warrant may not be sold, transferred, assigned, hypothecated or otherwise
disposed of, in whole or in part, for the term of the Placement Agent's Warrant,
except to officers or partners of the Placement Agent, or by operation of law.
8. Exercise Price and Number of Securities. Except as otherwise
provided in Section 10 hereof, each Placement Agent's Warrant is exercisable to
purchase one share of Common Stock and/or one Warrant to purchase one share of
Common Stock at an initial exercise price equal to the Common Stock Exercise
Price and/or the Warrant Exercise Price. The Common Stock Exercise Price and/or
Warrant Exercise Price, and the number of shares and/or warrants for which the
Placement Agent's Warrant may be exercised shall be the price(s) and the number
of shares and/or warrants which shall result from time to time from any and all
adjustments in accordance with the provisions of Section 11 hereof.
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9. Registration Rights.
9.1 Registration Under the Securities Act of 1933. Each
Placement Agent's Warrant Certificate and each certificate representing
securities issuable upon exercise of the Placement Agent's Warrant or upon
exercise of warrants underlying the Placement Agent's Warrants (collectively,
the "Warrant Shares") shall bear the following legend unless (i) such Placement
Agent's Warrant or Warrant Shares are distributed to the public or sold to the
underwriters for distribution to the public pursuant to Section 9 hereof or
otherwise pursuant to a registration statement filed under the Securities Act of
1933, as amended (the "Act"), or (ii) the Company has received an opinion of
counsel, in form and substance reasonably satisfactory to counsel for the
Company, that such legend is unnecessary for any such certificate:
THE PLACEMENT AGENT'S WARRANT REPRESENTED BY THIS
CERTIFICATE AND THE OTHER SECURITIES ISSUABLE UPON
EXERCISE THEREOF MAY NOT BE OFFERED OR SOLD EXCEPT
PURSUANT TO (i) AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933, (ii) TO THE EXTENT
APPLICABLE, RULE 144 UNDER SUCH ACT (OR ANY SIMILAR
RULE UNDER SUCH ACT RELATING TO THE DISPOSITION OF
SECURITIES), OR (iii) AN OPINION OF COUNSEL, IF SUCH
OPINION SHALL BE REASONABLY SATISFACTORY TO COUNSEL
FOR THE ISSUER, THAT AN EXEMPTION FROM REGISTRATION
UNDER SUCH ACT IS AVAILABLE.
THE TRANSFER OR EXCHANGE OF THE PLACEMENT AGENT'S
WARRANT REPRESENTED BY THE CERTIFICATE IS RESTRICTED
IN ACCORDANCE WITH THE
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PLACEMENT AGENT'S WARRANT AGREEMENT REFERRED TO
HEREIN.
9.2 Piggyback Registration. If, at any time commencing after
the effective date of the Registration Statement and expiring five (5) years
thereafter, the Company proposes to register any of its securities under the Act
(other than in connection with a merger or pursuant to Form S-4 or Form S-8), it
will give written notice by registered mail, at least thirty (30) days prior to
the filing of each such registration statement, to the Holders of the Placement
Agent's Warrants and/or the Warrant Shares of its intention to do so. If any of
the Holders of the Placement Agent's Warrants and/or Warrant Shares notify the
Company within twenty (20) days after mailing of any such notice of its or their
desire to include any such securities in such proposed registration statement,
the Company shall afford such Holders of the Placement Agent's Warrants and/or
Warrant Shares the opportunity to have any such Placement Agent's Warrants
and/or Warrant Shares registered under such registration statement. In the event
that the managing underwriter for said offering advises the Company in writing
that in its opinion the number of securities requested to be included in such
registration exceeds the number which can be sold in such offering without
causing a diminution in the offering price or otherwise adversely affecting the
offering, the Company will include in such registration (a) first, the
securities the Company proposes to sell, (b) second, the securities held by the
entities that made the demand for registration, (c) third, the Placement Agent's
Warrants and/or Warrant Shares requested to be included in such registration
which in the opinion of such underwriter can be sold, pro rata among the Holders
of Placement Agent's Warrants and/or Warrant Shares on the basis of the number
of
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Placement Agent's Warrants and/or Warrant Shares requested to be registered by
such Holders, and (d) fourth, other securities requested to be included in such
registration.
Notwithstanding the provisions of this Section 9.2, the Company
shall have the right at any time after it shall have given written notice
pursuant to this Section 9.2 (irrespective of whether a written request for
inclusion of any such securities shall have been made) to elect not to file any
such proposed registration statement or to withdraw the same after the filing
but prior to the effective date thereof.
9.3 Demand Registration.
(a) At any time commencing one (1) year after the
effective date of the Registration Statement and expiring five (5) years from
the effective date of the Registration Statement, the Holders of the Placement
Agent's Warrants and/or Warrant Shares representing a "Majority" (as hereinafter
defined) of the Placement Agent's Warrants and/or Warrant Shares shall have the
right (which right is in addition to the registration rights under Section 9.2
hereof), exercisable by written notice to the Company, to have the Company
prepare and file with the Securities and Exchange Commission (the "Commission"),
on one occasion, a registration statement and such other documents, including a
prospectus, as may be necessary in the opinion of both counsel for the Company
and counsel for the Holders, in order to comply with the provisions of the Act,
so as to permit a public offering and sale by such Holders and any other Holders
of the Placement Agent's Warrant and/or Warrant Shares who notify the Company
within fifteen (15) days after the Company mails notice of such request pursuant
to Section 9.3(b) hereof (collectively, the "Requesting Holders") of their
respective Warrant Shares for the earlier of (i)
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six (6) consecutive months or (ii) until the sale of all of the Warrant Shares
requested to be registered by the Requesting Holders.
(b) The Company covenants and agrees to give written
notice of any registration request under this Section 9.3 by any Holder or
Holders representing a Majority of the Placement Agent's Warrants and/or Warrant
Shares to all other registered Holders of the Placement Agent's Warrants and the
Warrant Shares within ten (10) days from the date of the receipt of any such
registration request.
(c) In addition to the registration rights under Section
9.2 and subsection (a) of this Section 9.3, at any time commencing one (1) year
after the effective date of the Registration Statement and expiring five (5)
years from the effective date of the Registration Statement, the Holders of a
Majority of the Placement Agent's Warrants and/or Warrant Shares shall have the
right on one occasion, exercisable by written request to the Company, to have
the Company prepare and file with the Commission a registration statement so as
to permit a public offering and sale by such Holders of their respective Warrant
Shares for the earlier of (i) six (6) consecutive months or (ii) until the sale
of all of the Warrant Shares requested to be registered by such Holders;
provided, however, that the provisions of Section 9.4(b) hereof shall not apply
to any such registration request and registration and all costs incident thereto
shall be at the expense of the Holder or Holders making such request. If the
Holders have exercised their rights under Section 9.3(a) then the Holders may
not exercise their rights under Section 9.3(c) for a period of six (6) months
following the effective date of any registration statement filed pursuant to
Section 9.3(a).
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(d) Notwithstanding anything to the contrary contained
herein, if the Company shall not have filed a registration statement for the
Warrant Shares within the time period specified in Section 9.4(a) hereof
pursuant to the written notice specified in Section 9.3(a) of the Holders of a
Majority of the Placement Agent's Warrants and/or Warrant Shares, the Company,
at its option, may repurchase (i) any and all Warrant Shares at the higher of
the Market Price (as defined in Section 9.3(e)) per share of Common Stock on (x)
the date of the notice sent pursuant to Section 9.3(a) or (y) the expiration of
the period specified in Section 9.4(a) and (ii) any and all Placement Agent's
Warrant at such Market Price less the exercise price of such Placement Agent's
Warrant. Such repurchase shall be in immediately available funds and shall close
within two (2) days after the later of (i) the expiration of the period
specified in Section 9.4(a) or (ii) the delivery of the written notice of
election specified in this Section 9.3(d).
(e) Definition of Market Price. As used herein, the
phrase "Market Price" at any date shall be deemed to be the last reported sale
price, or, in case no such reported sale takes place on such day, the average of
the last reported sale prices for the last three (3) trading days, in either
case as officially reported by the principal securities exchange on which the
Common Stock is listed or admitted to trading, or, if the Common Stock is not
listed or admitted to trading on any national securities exchange, the average
closing sale price as furnished by the NASD through The NASDAQ Stock Market,
Inc. ("NASDAQ") or similar organization if NASDAQ is no longer reporting such
information, or if the Common Stock is not quoted or reported on NASDAQ, as
determined in good faith by resolution of the Board of Directors of the Company,
based on the best information available to it.
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9.4 Covenants of the Company With Respect to Registration. In
connection with any registration under Sections 9.2 or 9.3 hereof, the Company
covenants and agrees as follows:
(a) The Company shall use its best efforts to file a
registration statement within ninety (90) days of receipt of any demand
therefor, and to have any registration statements declared effective at the
earliest possible time, and shall furnish each Holder desiring to sell Warrant
Shares such number of prospectuses as shall reasonably be requested.
(b) The Company shall pay all costs (excluding fees and
expenses of Holder(s)' counsel and any Placement Agent or selling commissions),
fees and expenses in connection with all registration statements filed pursuant
to Sections 9.2 and 9.3(a) hereof including, without limitation, the Company's
legal and accounting fees, printing expenses, blue sky fees and expenses. The
Holder(s) will pay all costs, fees and expenses (including those of the Company)
in connection with the registration statement filed pursuant to Section 9.3(c).
(c) The Company will take all necessary action which may
be required in qualifying or registering the Warrant Shares included in a
registration statement for offering and sale under the securities or blue sky
laws of such states as reasonably are requested by the Holder(s), provided that
the Company shall not be obligated to execute or file any general consent to
service of process or to qualify as a foreign corporation to do business under
the laws of any such jurisdiction.
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(d) The Company shall indemnify the Holder(s) of the
Warrant Shares to be sold pursuant to any registration statement and each
person, if any, who controls such Holders within the meaning of Section 15 of
the Act or Section 20(a) of the Securities Exchange Act of 1934, as amended
("Exchange Act"), against all loss, claim, damage, expense or liability
(including all expenses reasonably incurred in investigating, preparing or
defending against any claim whatsoever) to which any of them may become subject
under the Act, the Exchange Act or otherwise, arising from such registration
statement but only to the same extent and with the same effect as the provisions
pursuant to which the Company has agreed to indemnify the Placement Agent
pursuant to the Placement Agent Agreement.
(e) The Holder(s) of the Warrant Shares to be sold
pursuant to a registration statement, and their successors and assigns, shall
severally, and not jointly, indemnify the Company, its officers and directors
and each person, if any, who controls the Company within the meaning of Section
15 of the Act or Section 20(a) of the Exchange Act, against all loss, claim,
damage or expense or liability (including all expenses reasonably incurred in
investigating, preparing or defending against any claim whatsoever) to which
they may become subject under the Act, the Exchange Act or otherwise, arising
from information furnished by or on behalf of such Holders, or their successors
or assigns, for specific inclusion in such registration statement to the same
extent and with the same effect as the provisions contained in Section 7 of the
Placement Agent Agreement pursuant to which the Placement Agent has agreed to
indemnify the Company.
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(f) Nothing contained in this Agreement shall be
construed as requiring the Holder(s) to exercise their Placement Agent's Warrant
prior to the initial filing of any registration statement or the effectiveness
thereof.
(g) The Company shall not permit the inclusion of any
securities other than the Warrant Shares in any registration statement filed
pursuant to Section 9.3 hereof, or permit any other registration statement to be
or remain effective during the effectiveness of a registration statement filed
pursuant to Section 9.3 hereof, without the prior written consent of National
Securities Corporation or as otherwise required by the terms of any existing
registration rights granted prior to the date of this Agreement by the Company
to the holders of any of the Company's securities.
(h) The Company shall furnish to each Holder
participating in the offering and to each underwriter, if any, a signed
counterpart, addressed to such Holder or underwriter, of (i) an opinion of
counsel to the Company, dated the effective date of such registration statement
(and, if such registration includes an underwritten public offering, an opinion
dated the date of the closing under the Placement Agent agreement), and (ii) a
"cold comfort" letter dated the effective date of such registration statement
(and, if such registration includes an underwritten public offering, a letter
dated the date of the closing under the underwriting agreement) signed by the
independent public accountants who have issued a report on the Company's
financial statements included in such registration statement, in each case
covering substantially the same matters with respect to such registration
statement (and the prospectus included therein) and, in the case of such
accountants' letter, with respect to events
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subsequent to the date of such financial statements, as are customarily covered
in opinions of issuer's counsel and in accountants' letters delivered to
underwriters in underwritten public offerings of securities.
(i) The Company shall as soon as practicable after the
effective date of the registration statement, and in any event within 15 months
thereafter, make "generally available to its security holders" (within the
meaning of Rule 158 under the Act) an earnings statement (which need not be
audited) complying with Section 11(a) of the Act and covering a period of at
least 12 consecutive months beginning after the effective date of the
registration statement.
(j) The Company shall enter into an underwriting
agreement with the managing underwriters selected for such underwriting by
Holders holding a Majority of the Warrant Shares requested to be included in
such underwriting, which may be the Placement Agent. Such agreement shall be
satisfactory in form and substance to the Company, each Holder and such managing
underwriters, and shall contain such representations, warranties and covenants
by the Company and such other terms as are customarily contained in agreements
of that type used by the managing underwriter. The Holders shall be parties to
any underwriting agreement relating to an underwritten sale of their Warrant
Shares and may, at their option, require that any or all the representations,
warranties and covenants of the Company to or for the benefit of such
underwriters shall also be made to and for the benefit of such Holders. Such
Holders shall not be required to make any representations or warranties to or
agreements with the Company or the underwriters except as they may relate to
such Holders and their intended methods of distribution.
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(k) For purposes of this Agreement, the term "Majority"
in reference to the Placement Agent's Warrants or Warrant Shares, shall mean in
excess of fifty percent (50%) of the then outstanding Placement Agent's Warrants
or Warrant Shares that (i) are not held by the Company, an affiliate, officer,
creditor, employee or agent thereof or any of their respective affiliates,
members of their family, persons acting as nominees or in conjunction therewith
or (ii) have not been resold to the public pursuant to a registration statement
filed with the Commission under the Act.
10. Obligations of Holders. It shall be a condition precedent to the
obligations of the Company to take any action pursuant to Section 9 hereof that
each of the selling Holders shall:
(a) Furnish to the Company such information regarding
themselves, the Warrant Shares held by them, the intended method of sale or
other disposition of such securities, the identity of and compensation to be
paid to any underwriters proposed to be employed in connection with such sale or
other disposition, and such other information as may reasonably be required to
effect the registration of their Warrant Shares.
(b) Notify the Company, at any time when a prospectus
relating to the xxxxxx Shares covered by a registration statement is required to
be delivered under the Act, of the happening of any event with respect to such
selling Holder as a result of which the prospectus included in such registration
statement, as then in effect, includes an untrue statement of a material fact or
omits to state a material fact required to be stated therein or necessary to
make the
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statements therein not misleading in the light of the circumstances then
existing.
11. Adjustments to Common Stock Exercise Price and Number of
Securities. The Common Stock Exercise Price in effect at any time and the number
and kind of securities purchased upon the exercise of the Placement Agent's
Warrant shall be subject to adjustment from time to time only upon the happening
of the following events:
11.1 Stock Dividend, Subdivision and Combination. In case the
Company shall (i) declare a dividend or make a distribution on its outstanding
shares of Common Stock in shares of Common Stock, (ii) subdivide or reclassify
its outstanding shares of Common Stock into a greater number of shares, or (iii)
combine or reclassify its outstanding shares of Common Stock into a smaller
number of shares, the Common Stock Exercise Price in effect at the time of the
record date for such dividend or distribution or of the effective date of such
subdivision, combination or reclassification shall be adjusted so that it shall
equal the price determined by multiplying the Common Stock Exercise Price by a
fraction, the denominator of which shall be the number of shares of Common Stock
outstanding after giving effect to such action, and the numerator of which shall
be the number of shares of Common Stock outstanding immediately prior to such
action. Such adjustment shall be made successively whenever any event listed
above shall occur.
11.2 Adjustment in Number of Securities. Upon each adjustment
of the Common Stock Exercise Price pursuant to the provisions of this Section
11, the number of
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Warrant Shares issuable upon the exercise at the adjusted Common Stock Exercise
Price of each Placement Agent's Warrant shall be adjusted to the nearest number
of whole shares of Common Stock by multiplying a number equal to the Common
Stock Exercise Price in effect immediately prior to such adjustment by the
number of Warrant Shares issuable upon exercise of the Placement Agent's Warrant
immediately prior to such adjustment and dividing the product so obtained by the
adjusted Common Stock Exercise Price.
11.3 Definition of Common Stock. For the purpose of this
Agreement, the term "Common Stock" shall mean (i) the class of stock designated
as Common Stock in the Articles of Incorporation of the Company as amended as of
the date hereof, or (ii) any other class of stock resulting from successive
changes or reclassifications of such Common Stock consisting solely of changes
in par value, or from par value to no par value, or from no par value to par
value.
11.4 Merger or Consolidation. In case of any consolidation of
the Company with, or merger of the Company into, another corporation (other than
a consolidation or merger which does not result in any reclassification or
change of the outstanding Common Stock), the corporation formed by such
consolidation or merger shall execute and deliver to the Holder a supplemental
warrant agreement providing that the Holder of each Placement Agent's Warrant
then outstanding or to be outstanding shall have the right thereafter (until the
expiration of such Placement Agent's Warrant) to receive, upon exercise of such
Placement Agent's Warrant, the kind and amount of shares of stock and other
securities and property receivable upon such consolidation or merger by a holder
of the number of shares of Common Stock for which such
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Placement Agent's Warrant might have been exercised immediately prior to such
consolidation, merger, sale or transfer. Such supplemental warrant agreement
shall provide for adjustments which shall be identical to the adjustments
provided in Section 11. The above provision of this subsection shall similarly
apply to successive consolidations or mergers.
11.5 No Adjustment of Exercise Price in Certain Cases. No
adjustment of the Common Stock Exercise Price or the Warrant Exercise Price
shall be made:
(a) Upon the issuance or sale of the Placement Agent's
Warrant or the Warrant Shares;
(b) Upon the issuance or sale of Common Stock (or any
other security convertible, exercisable, or exchangeable into shares of Common
Stock) upon the direct or indirect conversion, exercise, or exchange of any
options, rights, warrants, or other securities or indebtedness of the Company
outstanding as of the date of this Agreement or granted pursuant to any stock
option plan of the Company in existence as of the date of this Agreement,
pursuant to the terms thereof; or
(c) If the amount of said adjustment shall be less than
two cents ($.02) per share, provided, however, that in such case any adjustment
that would otherwise be required then to be made shall be carried forward and
shall be made at the time of and together with the next subsequent adjustment
which, together with any adjustment so carried forward, shall amount to at least
two cents ($.02) per Placement Agent's Warrant.
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11.6 Adjustment of Warrant Exercise Price. With respect to any
of the Warrants whether or not the Warrants have been exercised (or are
exercisable) and whether or not the Warrants are issued and outstanding, the
Warrant Exercise Price and the number of shares of Common Stock underlying such
Warrants shall be automatically adjusted in accordance with Section 8 of the
Warrant Agreement between the Company and Continental Stock Transfer & Trust
Company dated ___________, 1997 (the "Warrant Agreement"), upon the occurrence
of any of the events described therein. Thereafter, the underlying Warrants
shall be exercisable at such adjusted Warrant Exercise Price for such adjusted
number of underlying shares of Common Stock or other securities, properties or
rights.
12. Exchange and Replacement of Placement Agent's Warrant
Certificates. Each Placement Agent's Warrant Certificate is exchangeable,
without expense, upon the surrender thereof by the registered Holder at the
principal executive office of the Company for a new Placement Agent's Warrant
Certificate of like tenor and date representing in the aggregate the right to
purchase the same number of Warrant Shares in such denominations as shall be
designated by the Holder thereof at the time of such surrender.
Upon receipt by the Company of evidence reasonably satisfactory to
it of the loss, theft, destruction or mutilation of any Placement Agent's
Warrant Certificate, and, in case of loss, theft or destruction, of indemnity or
security reasonably satisfactory to it and reimbursement to the Company of all
reasonable expenses incidental thereto, and upon surrender and cancellation of
the Placement Agent's Warrant, if mutilated, the Company will make and deliver a
new Warrant Certificate of like tenor, in lieu thereof.
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13. Elimination of Fractional Interests. The Company shall not be
required to issue certificates representing fractions of shares of Common Stock
upon the exercise of the Placement Agent's Warrant, nor shall it be required to
issue scrip or pay cash in lieu of fractional interests, it being the intent of
the parties that all fractional interests shall be eliminated by rounding any
fraction up to the nearest whole number of shares of Common Stock or other
securities, properties or rights.
14. Reservation and Listing of Securities. The Company shall at all
times reserve and keep available out of its authorized shares of Common Stock,
solely for the purpose of issuance upon the exercise of the Placement Agent's
Warrant and the Warrant, such number of shares of Common Stock or other
securities, properties or rights as shall be issuable upon the exercise thereof.
Every transfer agent ("Transfer Agent") for the Common Stock and other
securities of the Company issuable upon the exercise of the Placement Agent's
Warrant will be irrevocably authorized and directed at all times to reserve such
number of authorized shares of Common Stock and other securities as shall be
requisite for such purpose. The Company will keep a copy of this Agreement on
file with every Transfer Agent for the Common Stock and other securities of the
Company issuable upon the exercise of the Placement Agent's Warrant. The Company
will supply every such Transfer Agent with duly executed stock and other
certificates, as appropriate, for such purpose. The Company covenants and agrees
that, upon exercise of the Placement Agent's Warrant and payment of the Common
Stock Exercise Price or Warrant Exercise Price therefor, all shares of Common
Stock and other securities issuable upon such exercise shall be duly and validly
issued, fully paid, non-assessable and not subject to the
20
preemptive rights of any stockholder. As long as the Placement Agent's Warrant
shall be outstanding, the Company shall use its best efforts to cause all shares
of Common Stock issuable upon the exercise of the Placement Agent's Warrant to
be listed (subject to official notice of issuance) on all securities exchanges
on which the Common Stock issued to the public in connection herewith may then
be listed and/or quoted on NASDAQ Market.
15. Notices to Placement Agent's Warrant Holders. Nothing contained
in this Agreement shall be construed as conferring upon the Holders the right to
vote or to consent or to receive notice as a stockholder in respect of any
meetings of stockholders for the election of directors or any other matter, or
as having any rights whatsoever as a stockholder of the Company. If, however, at
any time prior to the expiration of the Placement Agent's Warrants and their
exercise, any of the following events shall occur:
(a) the Company shall take a record of the holders of
its shares of Common Stock for the purpose of entitling them to receive a
dividend or distribution payable otherwise than in cash, or a cash dividend or
distribution payable otherwise than out of current or retained earnings, as
indicated by the accounting treatment of such dividend or distribution on the
books of the Company; or
(b) the Company shall offer to all the holders of its
Common Stock any additional shares of capital stock of the Company or securities
convertible into or exchangeable for shares of capital stock of the Company, or
any option, right or warrant to subscribe therefor; or
21
(c) a dissolution, liquidation or winding up of the
Company (other than in connection with a consolidation or merger) or a sale of
all or substantially all of its property, assets and business as an entirety
shall be proposed;
then in any one or more of said events, the Company shall give written notice of
such event at least fifteen (15) days prior to the date fixed as a record date
or the date of closing the transfer books for the determination of the
stockholders entitled to such dividend, distribution, convertible or
exchangeable securities or subscription rights, or entitled to vote on such
proposed dissolution, liquidation, winding up or sale. Such notice shall specify
such record date or the date of closing the transfer books, as the case may be.
Failure to give such notice or any defect therein shall not affect the validity
of any action taken in connection with the declaration or payment of any such
dividend, or the issuance of any convertible or exchangeable securities, or
subscription rights, options or warrants, or any proposed dissolution,
liquidation, winding up or sale.
16. Notices. All notices, requests, consents and other
communications hereunder shall be in writing and shall be deemed to have been
duly made and sent when delivered, or mailed by registered or certified mail,
return receipt requested:
(a) if to the registered Holder of the Placement Agent's
Warrant, to the address of such Holder as shown on the books of the Company; or
(b) if to the Company, to the address set forth in
Section 4 hereof or to such other address as the Company may designate by notice
to the Holders.
22
17. Warrants. The form of the certificate representing Warrants (and
the form of election to purchase shares of Common Stock upon the exercise of
Warrants and the form of assignment period on the reverse thereof) shall be
substantially as set forth in Exhibit "A" to the Warrant Agreement. Each Warrant
issuable upon exercise of the Placement Agent's Warrants shall evidence the
right to initially purchase one fully paid and non-assessable share of Common
Stock at an initial purchase price of $7.20 per share commencing on the Initial
Exercise Date and ending at 5:00 p.m. New York time on the Warrant Expiration
Date at which time the Warrant shall expire. The exercise price of the Warrants
and the number of shares of Common Stock issuable upon the exercise of the
Warrants are subject to adjustment, whether or not the Placement Agent's
Warrants have been exercised and the Warrants have been issued, in the manner
and upon the occurrence of the events set forth in Section 8 of the Warrant
Agreement, which is hereby incorporated herein by reference and made a part
hereof as if set forth in its entirety herein. Subject to the provisions of this
Agreement and upon issuance of the Warrants underlying the Placement Agent's
Warrants, each registered holder of such Warrants shall have the right to
purchase from the Company (and the Company shall issue to such registered
holders) up to the number of fully paid and non-assessable shares of Common
Stock (subject to adjustment as provided herein and in the Warrant Agreement),
free and clear of all preemptive rights of stockholders, provided that such
registered holder complies with the terms governing exercise of the Warrants set
forth in the Warrant Agreement, and pays the applicable exercise price,
determined in accordance with the terms of the Warrant Agreement. Upon exercise
of the Warrants, the Company shall forthwith issue to the registered holder of
any such Warrant in his name or in such name as may be directed by him,
certificates for the number of shares of Common
23
Stock so purchased. Except as otherwise provided herein, the Warrants underlying
the Placement Agent's Warrants shall be governed in all respects by the terms of
the Warrant Agreement. The Warrants shall be transferable in the manner provided
in the Warrant Agreement, and upon any such transfer, a new Warrant Certificate
shall be issued promptly to the transferee. The Company covenants to, and agrees
with, the Holder(s) that without the prior written consent of the Holder(s), the
Warrant Agreement will not be modified, amended, canceled, altered or
superseded, and that the Company will send to each Holder, irrespective of
whether or not the Warrants have been exercised, any and all notices required by
the Warrant Agreement to be sent to holders of Warrants.
18. Supplements; Amendments; Entire Agreement. This Agreement
(including the Placement Agent Agreement to the extent portions thereof are
referred to herein) contains the entire understanding between the parties hereto
with respect to the subject matter hereof and may not be modified or amended
except by a writing duly signed by the party against whom enforcement of the
modification or amendment is sought. The Company and the Placement Agent may
from time to time supplement or amend this Agreement without the approval of any
holders of Placement Agent's Warrant Certificates (other than the Placement
Agent) in order to cure any ambiguity, to correct or supplement any provision
contained herein which may be defective or inconsistent with any provisions
herein, or to make any other provisions in regard to matters or questions
arising hereunder which the Company and the Placement Agent may deem necessary
or desirable and which the Company and the Placement Agent deem shall not
adversely affect the interests of the Holders of Placement Agent's Warrant
Certificates.
24
19. Successors. All of the covenants and provisions of this
Agreement shall be binding upon and inure to the benefit of the Company, the
Holders and their respective successors and assigns hereunder.
20. Survival of Representations and Warranties. All statements in
any schedule, exhibit or certificate or other instrument delivered by or on
behalf of the parties hereto, or in connection with the transactions
contemplated by this Agreement, shall be deemed to be representations and
warranties hereunder. Notwithstanding any investigations made by or on behalf of
the parties to this Agreement, all representations, warranties and agreements
made by the parties to this Agreement or pursuant hereto shall survive.
21. Governing Law. This Agreement and each Placement Agent's Warrant
Certificate issued hereunder shall be deemed to be a contract made under the
laws of the State of New York and for all purposes shall be construed in
accordance with the laws of said State without giving effect to the rules of
said State governing the conflicts of laws.
22. Severability. If any provision of this Agreement shall be held
to be invalid or unenforceable, such invalidity or unenforceability shall not
affect any other provision of this Agreement.
23. Captions. The caption headings of the Sections of this Agreement
are for convenience of reference only and are not intended, nor should they be
construed as, a part of this Agreement and shall be given no substantive effect.
25
24. Benefits of this Agreement. Nothing in this Agreement shall be
construed to give to any person or corporation other than the Company and the
Placement Agent and any other registered Holder(s) of the Placement Agent's
Warrant Certificates or Warrant Shares any legal or equitable right, remedy or
claim under this Agreement; and this Agreement shall be for the sole and
exclusive benefit of the Company and the Placement Agent and any other Holder(s)
of the Placement Agent's Warrant Certificates or Warrant Shares.
25. Counterparts. This Agreement may be executed in any number of
counterparts and each of such counterparts shall for all purposes be deemed to
be an original, and such counterparts shall together constitute but one and the
same instrument.
IN WITNESS OF, the parties hereto have caused this Agreement to be
duly executed, as of the day and year first above written.
ATTEST: CASULL ARMS CORPORATION
By: ___________________ By:___________________________________
Name: Xxxxxxx X. Casull Name: Xxxxx X. Xxxxxxx
Title: CEO Title: Chairman of the Board
NATIONAL SECURITIES CORPORATION
By:___________________________________
Name: Xxxxxx X. Xxxxxxxxx
Title: Chairman
26
EXHIBIT A
[FORM OF PLACEMENT AGENT'S WARRANT CERTIFICATE]
THE PLACEMENT AGENT'S WARRANT REPRESENTED BY THIS CERTIFICATE AND THE OTHER
SECURITIES ISSUABLE UPON EXERCISE THEREOF MAY NOT BE OFFERED OR SOLD EXCEPT
PURSUANT TO (i) AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF
1933, (ii) TO THE EXTENT APPLICABLE, RULE 144 UNDER SUCH ACT (OR ANY SIMILAR
RULE UNDER SUCH ACT RELATING TO THE DISPOSITION OF SECURITIES), OR (iii) AN
OPINION OF COUNSEL, IF SUCH OPINION SHALL BE REASONABLY SATISFACTORY TO COUNSEL
FOR THE ISSUER, THAT AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT IS AVAILABLE.
THE TRANSFER OR EXCHANGE OF THE PLACEMENT AGENT'S WARRANT REPRESENTED BY THIS
CERTIFICATE IS RESTRICTED IN ACCORDANCE WITH THE WARRANT AGREEMENT REFERRED TO
HEREIN.
EXERCISABLE ON OR BEFORE
5:30 P.M., NEW YORK TIME,__________, 2001
PLACEMENT AGENT'S Warrant No.
Issuable for
_____ Shares of Common Stock and
______ Warrants
WARRANT CERTIFICATE
This Warrant Certificate certifies that , or registered assigns, is
the registered holder of Warrants to purchase initially, at any time from
_____________, 1997 until 5:30 p.m., New York time on _____________, 2002
("Expiration Date"), up to shares of common stock, par value $.01 per share, of
the Company (the "Common Stock") and/or ______ warrants, each warrant to
purchase one (1) share of Common Stock, at an exercise price of $7.20 per share
and $.12 per Warrant, respectively [120% of the offering prices per share and
per warrant to the public, respectively] (the "Common Stock Exercise Price" and
the "Warrant Exercise Price", respectively), upon surrender of this Placement
Agent's Warrant Certificate and payment of the Common Stock Exercise Price and
the Warrant Exercise Price at an office or agency of the Company, but subject to
the conditions set forth herein and in the Placement Agent's Warrant Agreement
dated as of ___________, 1997 among the Company and National Securities
A-1
Corporation (the "Warrant Agreement"). Payment of the Exercise Price shall be
made by certified or official bank check in New York Clearing House funds
payable to the order of the Company.
No Warrant may be exercised after 5:30 p.m., New York time, on the
Expiration Date, at which time all Placement Agent's Warrant evidenced hereby,
unless exercised prior thereto, shall thereafter be void.
The Placement Agent's Warrant evidenced by this Warrant Certificate
are part of a duly authorized issue of Placement Agent's Warrant issued pursuant
to the Warrant Agreement, which Warrant Agreement is hereby incorporated by
reference in and made a part of this instrument and is hereby referred to for a
description of the rights, limitation of rights, obligations, duties and
immunities thereunder of the Company and the holders (the words "holders" or
"holder" meaning the registered holders or registered holder) of the Placement
Agent's Warrant.
The Warrant Agreement provides that upon the occurrence of certain
events the Exercise Price and the type and/or number of the Company's securities
issuable thereupon may, subject to certain conditions, be adjusted. In such
event, the Company will, at the request of the holder, issue a new Warrant
Certificate evidencing the adjustment in the Exercise Price and the number
and/or type of securities issuable upon the exercise of the Placement Agent's
Warrant; provided, however, that the failure of the Company to issue such new
Warrant Certificates shall not in any way change, alter, or otherwise impair,
the rights of the holder as set forth in the Warrant Agreement.
Upon due presentment for registration of transfer of this Warrant
Certificate at an office or agency of the Company, a new Warrant Certificate or
Warrant Certificates of like tenor and evidencing in the aggregate a like number
of Placement Agent's Warrant shall be issued to the transferee(s) in exchange
for this Warrant Certificate, subject to the limitations provided herein and in
the Warrant Agreement, without any charge except for any tax or other
governmental charge imposed in connection with such transfer.
Upon the exercise of less than all of the Placement Agent's Warrant
evidenced by this Certificate, the Company shall forthwith issue to the holder
hereof a new Warrant Certificate representing such numbered unexercised
Placement Agent's Warrant.
The Company may deem and treat the registered holder(s) hereof as
the absolute owner(s) of this Warrant Certificate (notwithstanding any notation
of ownership or other writing hereon made by anyone), for the purpose of any
exercise hereof, and of any distribution to the holder(s) hereof, and for all
other purposes, and the Company shall not be affected by any notice to the
contrary.
All terms used in this Warrant Certificate which are defined in the
Warrant Agreement shall have the meanings assigned to them in the Warrant
Agreement.
A-2
This Warrant Certificate does not entitle any holder thereof to any
of the rights of a shareholder of the Company.
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate
to be duly executed under its corporate seal.
Dated as of _________, 1997
ATTEST: CASULL ARMS CORPORATION
By:___________________________ By:______________________________________
Name: Xxxxxxx X. Casull Name: Xxxxx X. Xxxxxxx
Title: CEO Title: Chairman of the Board
By:______________________________________
Name:
Title: Secretary
A-3
[FORM OF ELECTION TO PURCHASE PURSUANT TO SECTION 3.11]
The undersigned hereby irrevocably elects to exercise the right,
represented by this Warrant Certificate, to purchase shares of Common Stock
and/or _______ warrants, each warrant to purchase one (1) share of Common Stock,
and herewith tenders in payment for such securities a certified or official bank
check payable in New York Clearing House Funds to the order of Casull Arms
Corporation (the "Company") in the amount of $_____, all in accordance with the
terms of Section 3.1 of the Placement Agent's Warrant Agreement dated as of
__________, 1997 among the Company and National Securities Corporation. The
undersigned requests that a certificate for such securities be registered in the
name of________________________________________________________________________,
whose address is ____________________________, and that such certificate be
delivered to _______________________, whose address is ________________________,
and if said number of shares shall not be all the shares purchasable hereunder,
that a new Warrant Certificate for the balance of the shares purchasable under
the within Warrant Certificate be registered in the name of the undesigned
warrant holder or his assignee as below indicated and delivered to the address
stated below.
Dated:___________________________
Signature:__________________________________________
(Signature must conform in all respects to name
of holder as specified on the face of the
Warrant Certificate.)
Address:________________________________________
________________________________________
________________________________________________
(Insert Social Security or Other Identifying
Number of Holder)
Signature Guaranteed:___________________________________________________________
(Signature must be guaranteed by a bank savings and loan association,
stockbroker, or credit union with membership in an approved signature guaranty
Medallion Program pursuant to Securities Exchange Act Rule 17Ad-15.)
A-4
[FORM OF ASSIGNMENT]
(To be executed by the registered holder if such holder desires to
transfer the Warrant Certificate.)
FOR VALUE RECEIVED ____________________ here sells, assigns and transfers unto
[NAME OF TRANSFEREE] this Warrant Certificate, together with all right, title
and interest therein, and does hereby irrevocably constitute and appoint
________________ Attorney, to transfer the within Warrant Certificate on the
books of the within-named Company, with full power of substitution.
Dated:_______________________
Signature:______________________________________
(Signature must conform in all respects to name
of holder as specified on the face of the
Warrant Certificate.)
Address:________________________________________
________________________________________
________________________________________________
(Insert Social Security or Other Identifying
Number of Holder)
Signature Guaranteed:___________________________________________________________
(Signature must be guaranteed by a bank savings and loan association,
stockbroker, or credit union with membership in an approved signature guaranty
Medallion Program pursuant to Securities Exchange Act Rule 17Ad-15.)
A-5
