THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF
THIS WARRANT HAVE NOT
BEEN REGISTERED
UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR
ANY STATE SECURITIES
LAWS. THIS WARRANT AND THE
COMMON STOCK ISSUABLE
UPON EXERCISE OF THIS
WARRANT MAY NOT BE SOLD,
OFFERED FOR SALE,
PLEDGED OR
HYPOTHECATED
IN THE ABSENCE OF (A)
AN
EFFECTIVE REGISTRATION STATEMENT AS TO THIS WARRANT UNDER SAID ACT
AND
ANY APPLICABLE
STATE SECURITIES LAWS OR (B) AN EXEMPTION FROM
SUCH
REGISTRATION REQUIREMENTS.
Right to Purchase up to the Maximum Number of Warrant Shares (as
defined below)
of Common Stock of Tarpon Industries, Inc.
(subject to adjustment as provided herein)
COMMON STOCK PURCHASE WARRANT
No. _________________
Issue Date: March 31,
2008
TARPON INDUSTRIES,
INC., a corporation organized under the laws of the
State of Michigan (the
"Company"), hereby
certifies that, for
value received,
LAURUS MASTER FUND, LTD. or its assigns (the "Holder"), is
entitled, subject
to
the terms set forth below, to purchase from the Company (as defined
herein) from
and after the Issue
Date of this Warrant
and at any time or
from time to time
before 5:00 p.m., New
York time, through the
close of business
March 26, 2033
(the "Expiration
Date"), up to such number of fully paid and nonassessable
shares of Common Stock
(as hereinafter
defined), $0.01 par value per share,
equal to the Maximum
Number of Warrant
Shares. The term "Maximum Number of
Warrant Shares" shall
mean, in the event that the Company conducts an offering
of its Common Stock on its Principal Market (the "Secondary Offering") upon
consummation of such first Secondary Offering after the date
hereof, the Maximum
Number of Warrant Shares is determined using the following
formula:
Maximum Number of
Warrant Shares =
300,000
-------
(offering price at the Secondary Offering x .75)
The number and
character of such shares of Common Stock and the applicable
Exercise Price per share are subject to adjustment as provided
herein.
As used herein the
following terms,
unless the context otherwise requires,
have the following respective meanings:
(a) The term "Company" shall include Tarpon Industries, Inc. and any
corporation which
shall succeed,
or assume the
obligations
of, Tarpon
Industries, Inc. hereunder.
(b) The term "Common Stock" includes (i) the Company's
Common Stock,
no
par value per share;
and (ii) any other
securities
into which or for
which any of the
securities described
in the preceding
clause (i) may be
<PAGE>
converted or
exchanged
pursuant
to a plan of recapitalization,
reorganization, merger, sale of assets or otherwise.
(c) The term "Other Securities" refers to any stock (other than
Common
Stock) and other
securities of the Company or any other person (corporate
or
otherwise) which the holder of the Warrant at any time shall be
entitled
to
receive, or shall have received, on the exercise of the Warrant, in
lieu
of
or in addition to Common Stock, or which at any time shall be
issuable
or
shall have been issued in exchange for or in replacement of Common
Stock
or
Other Securities pursuant to Section 4 or otherwise.
(d) The "Exercise Price" applicable under this Warrant
shall be $0.01
per
share.
1.
Exercise of Warrant.
1.1.
Number of Shares Issuable upon Exercise. From and after the date
hereof through and including the Expiration Date, the Holder shall be
entitled
to receive, upon exercise of this Warrant in whole or in part, by
delivery of an
original or fax copy
of an exercise
notice in the form attached hereto as
Exhibit A (the
"Exercise Notice"), shares of Common Stock of the Company,
subject to adjustment pursuant to Section 4.
1.2.
Fair Market Value. For purposes hereof, the "Fair Market Value" of a
share of Common Stock as of a particular date (the "Determination Date") shall
mean:
(a) If the Company's
Common Stock is traded on the
American Stock
Exchange or another
national exchange or is quoted on the National or
Capital Market of The Nasdaq Stock Market, Inc.("Nasdaq"), then the
closing
or
last sale price, respectively, reported for the last business day
immediately preceding the Determination Date.
(b) If the Company's
Common Stock is not traded on the American Stock
Exchange or another national exchange or on the Nasdaq but is
traded on the
NASD
Over the Counter
Bulletin Board, then
the mean of the average of the
closing bid and asked prices reported for the last business day
immediately
preceding the Determination Date.
(c) Except as provided in clause (d) below, if the Company's Common
Stock is not publicly
traded, then as the
Holder and the Company agree or
in
the absence of agreement by arbitration in accordance with the rules
then
in effect of the
American Arbitration
Association,
before a single
arbitrator to be chosen from a panel of persons qualified by education and
training to pass on the matter to be decided.
(d) If the Determination Date is the date of a liquidation,
dissolution or
winding up, or any event deemed to be a liquidation,
dissolution or winding
up pursuant
to the Company's charter, then all
amounts to be payable per share to holders of the Common Stock
pursuant to
the
charter in the event of such liquidation, dissolution or winding up,
plus
all other amounts
to be payable per share in respect of the
Common
Stock in liquidation
under the charter,
assuming for the purposes of this
clause (d) that all of
the shares
of Common Stock then issuable upon
2
<PAGE>
exercise of the Warrant are outstanding at the Determination
Date.
1.3.
Company Acknowledgment. The Company will, at the time of
the exercise
of this Warrant, upon
the request of the holder hereof acknowledge in writing
its continuing
obligation
to afford to such
holder any rights to which such
holder shall continue to be entitled after such exercise in
accordance with
the
provisions of this
Warrant. If the holder
shall fail to make any such request,
such failure shall not affect the continuing obligation of the
Company to afford
to such holder any such rights.
1.4.
Trustee for Warrant Holders. In the event that a bank or trust
company
shall have been appointed as trustee for the holders of this
Warrant pursuant to
Subsection 3.2, such
bank or trust company shall have all the powers and duties
of a warrant agent (as hereinafter described) and shall accept, in
its own name
for the account of the
Company or such successor person as may be entitled
thereto, all amounts otherwise payable to the Company or such
successor, as the
case may be, on exercise of this Warrant pursuant to this Section
1.
2.
Procedure for Exercise.
2.1.
Delivery of Stock Certificates, Etc., on Exercise. The Company
agrees
that the shares of Common Stock purchased upon exercise of this
Warrant shall be
deemed to be issued to the Holder as the record owner of such shares as of the
close of business on the date on which this Warrant shall have been
surrendered
and payment made for such shares in accordance herewith.
As soon as
practicable
after the exercise of this Warrant in full or in part,
and in any event
within
three (3) business days thereafter, the Company at its expense
(including the
payment by it of any applicable issue taxes) will cause to be
issued in the name
of and delivered to
the Holder, or as such
Holder (upon payment by such Holder
of any applicable
transfer taxes) may direct in compliance with applicable
securities laws,
a certificate or certificates for the number of duly and
validly issued, fully
paid and nonassessable
shares of Common Stock
(or Other
Securities) to which
such Holder shall be entitled on such exercise, plus, in
lieu of any fractional
share to which such holder would otherwise be entitled,
cash equal to such fraction multiplied by the then Fair Market
Value of one full
share, together with any other stock or other securities and
property (including
cash, where
applicable)
to which such Holder
is entitled upon such
exercise
pursuant to Section 1 or otherwise.
2.2.
Exercise.
(a) Payment may be made either (i) in cash or by certified or
official
bank
check payable
to the order of the
Company equal to the applicable
aggregate Exercise
Price, (ii) by
delivery of this Warrant, or shares of
Common Stock and/or Common Stock receivable upon exercise of this Warrant
in
accordance with the
formula set forth in subsection (b) below, or (iii)
by a
combination of any of the foregoing methods, for the number of Common
Shares specified in
such Exercise Notice (as such exercise number shall be
adjusted to reflect any adjustment in the total number of
shares of Common
Stock issuable to the
Holder per the terms of this Warrant) and the Holder
shall thereupon
be entitled to receive the number of duly authorized,
validly issued,
fully-paid and
non-assessable shares
of Common Stock (or
Other Securities) determined as provided herein.
3
<PAGE>
(b) Notwithstanding any provisions herein to the contrary, if the
Fair
Market Value of one
share of Common Stock
is greater
than the Exercise
Price (at the date of calculation as set forth below), in lieu of
exercising this
Warrant for cash, the
Holder may elect to receive shares
equal to the value (as
determined below) of
this Warrant (or the
portion
thereof being
exercised)
by surrender
of this Warrant at the
principal
office of the Company together with the properly endorsed Exercise Notice
in
which event the Company shall issue to the Holder a number
of shares of
Common Stock computed using the following formula:
X=
Y(A-B)
------
A
Where X =
the number of
shares of Common Stock to be issued to the Holder
Y =
the number
of shares of Common
Stock purchasable under this
Warrant or, if only a portion of this Warrant is being
exercised,
the portion of this Warrant being exercised (at the date of such
calculation)
A =
the Fair Market Value of one share of the Company's Common Stock
(at the date of such calculation)
B =
the Exercise
Price per share (as
adjusted to the date of such
calculation)
3.
Effect of Reorganization, Etc.; Adjustment of Exercise Price.
3.1.
Reorganization,
Consolidation,
Merger, Etc. In case at any time or
from time to time, the Company shall (a) effect a reorganization, (b)
consolidate with or
merge into any other person, or (c) transfer all or
substantially all of its properties or assets to any other person
under any plan
or arrangement
contemplating the dissolution of the Company, then, in each
such
case, as a condition
to the consummation of such a transaction, proper and
adequate provision
shall be made by the
Company whereby
the Holder, on the
exercise hereof as
provided in Section 1 at any time after the consummation of
such reorganization,
consolidation
or merger or the effective date of such
dissolution, as the
case may be, shall receive, in lieu of the Common Stock (or
Other Securities)
issuable on such
exercise prior to such consummation or such
effective date, the stock and other securities and property
(including cash)
to
which such
Holder would have been entitled upon such consummation or in
connection with such
dissolution,
as the case may be, if
such Holder
had so
exercised this
Warrant, immediately prior thereto, all subject to further
adjustment thereafter as provided in Section 4.
3.2.
Dissolution. In the
event of any disso
