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THESE
SECURITIES HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND
EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE
IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES
ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD
EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM,
OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH
APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL
OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE
SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE
COMPANY. THESE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A
BONA FIDE MARGIN ACCOUNT WITH A REGISTERED BROKER-DEALER OR
OTHER LOAN WITH A FINANCIAL INSTITUTION THAT IS AN
“ACCREDITED INVESTOR” AS DEFINED IN RULE 501(a)
UNDER THE SECURITIES ACT.
STOCK PURCHASE WARRANT
WARRANT No. 001
To
Purchase 4,000,000 Shares of Common Stock of
Hudson Holding Corporation
THIS
STOCK PURCHASE WARRANT CERTIFIES that, for value received,
Seaport Hudson LLC (the “Holder”), is entitled,
upon the terms and subject to the limitations on exercise and
the conditions hereinafter set forth, at any time on or after
June__, 2008 (the “
Initial Exercise Date ”)
and on or prior to 5:00 P.M. Eastern Time on the five year
anniversary of the Initial Exercise Date (the “
Termination Date ”)
but not thereafter, to subscribe for and purchase from Hudson
Securities, Inc., a corporation incorporated in the State of
Delaware
(the
“
Company ”),
up to 4,000,000 shares (the “
Warrant Shares ”)
of Common Stock, par value $0.001 per share, of the Company (the
“
Common Stock ”).
The purchase price of one share of Common Stock (the “
Exercise Price ”)
under this Warrant shall be $0.75 or market price at the end of the
Trading Date on the Closing Date, whichever is higher, subject to
adjustment hereunder. The Exercise Price and the number of Warrant
Shares for which the Warrant is exercisable shall be subject to
adjustment as provided herein. Capitalized terms used and not
otherwise defined herein shall have the meanings set forth in that
certain Securities Purchase Agreement (the “
Purchase Agreement ”),
dated June __, 2008, between the Company and the investors
signatory thereto.
1.
Title to Warrant .
Prior to the Termination Date and subject to compliance with
applicable laws and Section 7 of this Warrant, this Warrant and all
rights hereunder are transferable, in whole or in part, at the
office or agency of the Company by the Holder in person or by duly
authorized attorney, upon surrender of this Warrant together with
the Assignment Form annexed hereto properly endorsed.
2.
Authorization of Shares .
The Company covenants that all Warrant Shares which may be issued
upon the exercise of the purchase rights represented by this
Warrant will, upon exercise of the purchase rights represented by
this Warrant, be duly authorized, validly issued, fully paid and
nonassessable and free from all taxes, liens and charges in respect
of the issue thereof (other than taxes in respect of any transfer
occurring contemporaneously with such issue).
3.
Exercise of Warrant .
(a)
Except as provided in Section 4 herein, exercise of the
purchase rights represented by this Warrant may be made at any
time or times on or after the Initial Exercise Date and on or
before the Termination Date by the surrender of this Warrant
and the Notice of Exercise Form annexed hereto duly executed,
at the office of the Company (or such other office or agency
of the Company as it may designate by notice in writing to the
registered Holder at the address of such Holder appearing on
the books of the Company) and upon payment of the Exercise
Price of the shares thereby purchased by wire transfer or
cashier’s check drawn on a United States bank. Upon such
exercise, the Holder shall be entitled to receive a
certificate for the number of Warrant Shares so purchased.
Certificates for shares purchased hereunder shall be delivered
to the Holder within three Trading Days after the date on
which this Warrant shall have been exercised as aforesaid.
Notwithstanding anything herein to the contrary, in lieu of
issuing certificates for shares purchased hereunder, upon
mutual agreement of the Company and the Holder, the Company
may authorize its transfer agent to issue shares through
electronic transactions. This Warrant shall be deemed to have
been exercised and such certificate or certificates shall be
deemed to have been issued, and Holder or any other person so
designated to be named therein shall be deemed to have become
a holder of record of such shares for all purposes, as of the
date the Warrant has been exercised by payment to the Company
of the Exercise Price and all taxes required to be paid by the
Holder, if any, pursuant to Section 5 prior to the issuance of
such shares, have been paid. If the Company fails to deliver
to the Holder a certificate or certificates representing the
Warrant Shares pursuant to this Section 3(a) by the third
Trading Day after the date of exercise, then the Holder will
have the right to rescind such exercise. In addition to any
other rights available to the Holder, if the Company fails to
deliver to the Holder a certificate or certificates
representing the Warrant Shares pursuant to an exercise by the
third Trading Day after the date of exercise, and if after
such third Trading Day the Holder is required by its broker to
purchase (in an open market transaction or otherwise) shares
of Common Stock to deliver in satisfaction of a sale by the
Holder of the Warrant Shares which the Holder anticipated
receiving upon such exercise (a "
Buy-In "),
then the Company shall (1) pay in cash to the Holder the amount by
which (x) the Holder's total purchase price (for costs incurred
either directly by such Warrantholder or on behalf of a third
party) for the shares of Common Stock so purchased exceeds (y) the
amount obtained by multiplying (A) the number of Warrant Shares
that the Company was required to deliver to the Holder in
connection with the exercise at issue times (B) the price at which
the sell order giving rise to such purchase obligation was
executed, and (2) at the option of the Holder, either reinstate the
portion of the Warrant and equivalent number of Warrant Shares for
which such exercise was not honored or deliver to the Holder the
number of shares of Common Stock that would have been issued had
the Company timely complied with its exercise and delivery
obligations hereunder. For example, if the Holder purchases Common
Stock having a total purchase price of $11,000 to cover a Buy-In
with respect to an attempted exercise of shares of Common Stock
with an aggregate sale price giving rise to such purchase
obligation of $10,000, under clause (1) of the immediately
preceding sentence, the Company shall be required to pay the Holder
$1,000. The Holder shall provide the Company written notice
indicating the amounts payable to the Holder in respect of the
Buy-In, together with applicable confirmations and other evidence
reasonably requested by the Company. Nothing herein shall limit a
Holder's right to pursue a decree of specific performance and/or
injunctive relief with respect to the Company's failure to timely
deliver certificates representing shares of Common Stock upon
exercise of the Warrant as required pursuant to the terms
hereof.
(b)
If
this Warrant shall have been exercised in part, the Company
shall, at the time of delivery of the certificate or
certificates representing Warrant Shares, deliver to Holder a
new Warrant evidencing the rights of Holder to purchase the
unpurchased Warrant Shares called for by this Warrant, which
new Warrant shall in all other respects be identical with this
Warrant.
(c)
Subject to the provisions of this Section 3, if after the
Effective Date the Closing Price (the “
Measurement Price ”)
exceeds 250% of the then Exercise Price (subject to adjustment
herein)(“
Threshold Price Date ”)
and the daily average trading volume of the Common Stock for the 10
Trading Days including and prior to such Threshold Price Date
exceeds 100,000 shares, then the Company may, within five Trading
Days of such date, call for the exercise of all or any portion of
this Warrant for which a Notice of Exercise has not yet been
delivered (such right, a “
Call ”).
To exercise this right, the Company must deliver to the Holder an
irrevocable written notice (a “
Call Notice ”),
indicating therein the portion of unexercised portion of this
Warrant to which such notice applies (such date, the "
Call Date ").
If Holder wants to exercise Called Warrants within three Trading
Days of the Call Date, the Holder shall pay to the Company by wire
transfer of immediately available funds the exercise price (or
exercise the Warrant on a cashless basis pursuant to Section 18
hereof) for the Warrant Shares to be issued in connection with the
Call Notice. Any unexercised portion of this Warrant to which the
Call Notice does not pertain will be unaffected by such Call
Notice. Notwithstanding anything to the contrary set forth in this
Warrant, the Company may not deliver a Call Notice or require the
cancellation of this Warrant (and any Call Notice will be void),
unless, at the time of sending such Call Notice, the Registration
Statement shall be effective as to all Warrant Shares and the
prospectus thereunder available for use by the Holder for the
resale all such Warrant Shares and the Common Stock shall be listed
or quoted for trading on the Trading Market.
4.
No Fractional Shares or Scrip .
No fractional shares or scrip representing fractional shares shall
be issued upon the exercise of this Warrant. As to any fraction of
a share which Holder would otherwise be entitled to purchase upon
such exercise, the Company shall pay a cash adjustment in respect
of such final fraction in an amount equal to such fraction
multiplied by the Exercise Price.
5.
Charges, Taxes and Expenses .
Issuance of certificates for Warrant Shares shall be made without
charge to the Holder for any issue or transfer tax or other
incidental expense in respect of the issuance of such certificate,
all of which taxes and expenses shall be paid by the Company, and
such certificates shall be issued in the name of the Holder or in
such name or names as may be directed by the Holder;
provided ,
however ,
that in the event certificates for Warrant Shares are to be issued
in a name other than the name of the Holder, this Warrant when
surrendered for exercise shall be accompanied by the Assignment
Form attached hereto duly executed by the Holder; and the Company
may require, as a condition thereto, the payment of a sum
sufficient to reimburse it for any transfer tax incidental
thereto.
6.
Closing of Books .
The Company will not close its stockholder books or records in any
manner which prevents the timely exercise of this Warrant, pursuant
to the terms hereof.
7.
Transfer, Division and Combination .
(a)
Subject
to compliance with any applicable securities laws and the
conditions set forth in Sections 1 and 7(f) hereof and to the
provisions of Section 4.1 of the Purchase Agreement, this
Warrant and all rights hereunder are transferable, in whole or
in part, upon surrender of this Warrant at the principal
office of the Company, together with a written assignment of
this Warrant substantially in the form attached hereto duly
executed by the Holder or its agent or attorney and funds
sufficient to pay any transfer taxes payable upon the making
of such transfer. Upon such surrender and, if required, such
payment, the Company shall execute and deliver a new Warrant
or Warrants in the name of the assignee or assignees and in
the denomination or denominations specified in such instrument
of assignment, and shall issue to the assignor a new Warrant
evidencing the portion of this Warrant not so assigned, and
this Warrant shall promptly be cancelled. A Warrant, if
properly assigned, may be exercised by a new holder for the
purchase of Warrant Shares without having a new Warrant
issued.
(b)
This
Warrant may be divided or combined with other Warrants of like
tenor and terms upon presentation hereof at the aforesaid
office of the Company, together with a written notice
specifying the names and denominations in which new Warrants
are to be issued, signed by the Holder or its agent or
attorney. Subject to compliance with Section 7(a), as to any
transfer which may be involved in such division or
combination, the Company shall execute and deliver a new
Warrant or Warrants in exchange for the Warrant or Warrants to
be divided or combined in accordance with such
notice.
(c)
The
Company shall prepare, issue and deliver at its own expense
(other than transfer taxes) the new Warrant or Warrants under
this Section 7.
(d)
The
Company agrees to maintain, at its aforesaid office, books for
the registration and the registration of transfer of the
Warrants.
(e)
If
,
at the time
of the surrender of this Warrant in connection with any
transfer of this Warrant, the transfer of this Warrant shall
not be registered pursuant to an effective registration
statement
under the Securities Act and
under
applicable state securities or blue sky laws, the Company may
require, as a condition of allowing such transfer (i) that the
Holder or transferee of this Warrant, as the case may be,
furnish to the Company a written opinion of counsel (which
opinion shall be in form, substance and scope customary for
opinions of counsel in comparable transactions) to the effect
that such transfer may be made without registration
under
the
Securities Act and under applicable state securities or blue
sky laws, (ii) that the holder or transferee execute and
deliver to the Company an investment letter in form and
substance acceptable to the Company and (iii) that the
transferee be an "acc
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