WARRANT AGREEMENT
THESE SECURITIES AND THE SECURITIES
ISSUABLE UPON THEIR EXERCISE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933
AND MAY NOT BE TRANSFERRED UNLESS
COVERED BY AN EFFECTIVE REGISTRATION
STATEMENT UNDER SAID ACT, A "NO ACTION"
LETTER FROM THE SECURITIES AND EXCHANGE
COMMISSION WITH RESPECT TO SUCH
TRANSFER, A TRANSFER MEETING THE
REQUIREMENTS OF RULE 144 OF THE SECURITIES AND
EXCHANGE COMMISSION, OR AN OPINION OF
COUNSEL SATISFACTORY TO THE ISSUER TO THE
EFFECT THAT ANY SUCH TRANSFER IS EXEMPT
FROM SUCH REGISTRATION.
Walker Financial Corp.
WARRANT NO. December 101
Dated: December 23, 2005
Walker Financial Corp., a corporation
organized under the laws of the State of
Delaware (the "Company"), hereby certifies
that, for value received from
Dutchess Private Equities Fund, II, L.P.,
("Holder"), is entitled, subject to
the terms set forth below, to purchase from
the Company up to a total of
fifty-five thousand dollars ($55,000) worth
of shares of Common Stock, $.10 par
value per share (the "Common Stock"), of
the Company (each such share, a
"Warrant Share" and all such shares, the
"Warrant Shares") at an exercise price
equal to the Fixed Conversion Price (as
defined in the Debenture Agreement of
even date between the Company and the
original Holder). The Warrant may be
exercised on a cashless basis anytime after
issuance through and including the
fifth (5th) anniversary of its original
issuance (the "Expiration Date"),
subject to the following terms and
conditions:
1. Registration of Warrant. The Company shall register this
Warrant, upon records to be maintained by
the Company for that purpose (the
"Warrant Register"), in the name of the
record Holder hereof from time to time.
The Company may deem and treat the
registered Holder of this Warrant as the
absolute owner hereof for the purpose of
any exercise hereof or any distribution
to the Holder, and for all other purposes,
and the Company shall not be affected
by notice to the contrary.
2. Registration of Transfers and Exchanges.
(a) The Company or the transfer agent shall enter or
record the transfer of any portion of this
Warrant in the Warrant Register, upon
surrender of this Warrant to the Company at
the office specified in or pursuant
to Section 3(b). Upon any such registration
or transfer, a new warrant to
purchase Common Stock, in substantially the
form of this Warrant (any such new
warrant, a "New Warrant"), evidencing the
portion of this Warrant so transferred
shall be issued to the transferee and a New
Warrant evidencing the remaining
portion of this Warrant not so transferred,
if any, shall be issued to the
transferring Holder. The acceptance of the
New Warrant by the transferee thereof
shall be deemed the acceptance of such
transferee of all of the rights and
obligations of a holder of a Warrant.
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(b) This Warrant is exchangeable, upon the surrender hereof
by the Holder to the office of the Company
specified in or pursuant to Section
3(b) for one or more New Warrants,
evidencing in the aggregate the right to
purchase the number of Warrant Shares which
may then be purchased hereunder. Any
such New Warrant will be dated the date of
such exchange.
3. Duration and Exercise of Warrants.
(a) This Warrant shall be exercisable by the registered
Holder on any business day before 5:00
P.M., Boston time, at any time and from
time to time on or after the date hereof to
and including the Expiration Date.
At 5:00 P.M., Boston time on the Expiration
Date, the portion of this Warrant
not exercised prior thereto shall be and
become void and of no value. Prior to
the Expiration Date, the Company may not
call or otherwise redeem this Warrant
without the prior written consent of the
Holder.
(b) Subject to Sections 2(b), 6 and 10, upon surrender of
this Warrant, with the Form of Election to
Purchase attached hereto duly
completed and signed, to the Company at its
address for notice set forth in
Section 12 and upon payment of the Exercise
Price multiplied by the number of
Warrant Shares that the Holder intends to
purchase hereunder, in the manner
provided hereunder, all as specified by the
Holder in the Form of Election to
Purchase, the Company shall promptly (but
in no event later than 5 business days
after the Date of Exercise (as defined
herein)) issue or cause to be issued and
cause to be delivered to or upon the
written order of the Holder and in such
name or names as the Holder may designate,
a certificate for the Warrant Shares
issuable upon such exercise, free of
restrictive legends except (i) either in
the event that a registration statement
covering the resale of the Warrant
Shares and naming the Holder as a selling
stockholder thereunder is not then
effective or the Warrant Shares are not
freely transferable without volume
restrictions pursuant to Rule 144(k)
promulgated under the Securities Act of
1933, as amended (the "Securities Act"), or
(ii) if this Warrant shall have been
issued pursuant to a written agreement
between the original Holder and the
Company, as required by such agreement. In
the case of (i) above, the Warrant
Shares will bear a Securities Act
restrictive legend. Any person so designated
by the Holder to receive Warrant Shares
shall be deemed to have become holder of
record of such Warrant Shares as of the
Date of Exercise (as defined in this
subsection) of this Warrant. A "Date of
Exercise" means the date on which the
Company shall have received (i) this
Warrant (or any New Warrant, as
applicable), with the Form of Election to
Purchase attached hereto (or attached
to such New Warrant) appropriately
completed and duly signed, and (ii) payment
of the Exercise Price for the number of
Warrant Shares so indicated by the
holder hereof to be purchased.
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(c) This Warrant shall be exercisable, either in its
entirety or, from time to time, for a
portion of the number of Warrant Shares.
If less than all of the Warrant Shares
which may be purchased under this Warrant
are exercised at any time, the Company
shall issue or cause to be issued, at its
expense, a New Warrant evidencing the right
to purchase the remaining number of
Warrant Shares for which no exercise has
been evidenced by this Warrant. In the
event the Common Stock representing the
Warrant Shares is not delivered per the
written instructions of the Purchaser,
within ten (10) business days after the
Notice of Election and Warrant is received
by the Company (the "Delivery Date"),
then in such event the Company shall pay to
Holder two percent (2.0%) in cash,
of the dollar value of the Warrant Shares
to be issued per each day after the
Delivery Date that the Warrant Shares are
not delivered. The Company
acknowledges that its failure to deliver
the Warrant Shares by the Delivery Date
will cause the Holder to suffer damages in
an amount that will be difficult to
ascertain. Accordingly, the parties agree
that it is appropriate to include in
this Warrant a provision for liquidated
damages. The parties acknowledge and
agree that the liquidated damages provision
set forth in this section represents
the parties' good faith effort to quantify
such damages and, as such, agree that
the form and amount of such liquidated
damages are reasonable and will not
constitute a penalty. The payment of
liquidated damages shall not relieve the
Company from its obligations to deliver the
Common Stock pursuant to the terms
of this Warrant. The Company shall make any
payments incurred under this Section
3 in immediately available funds within
five (5) business days from the date of
issuance of the applicable Warrant Shares.
Nothing herein shall limit Holder's
right to pursue actual damages or cancel
the Notice of Election for the
Company's failure to issue and deliver
Common Stock to the Holder within seven
(7) business days following the Delivery
Date.
4. Registration Rights. During the term of this Warrant, the
Company agrees to use its best efforts to
file, within twenty-one (21) calendar
days of the Closing, a registration
statement with the Securities and Exchange
Commission covering the resale of the
Warrant Shares and naming the Holder as a
selling stockholder thereunder (unless the
Warrant Shares are otherwise freely
transferable without volume restrictions
pursuant to Rule 144(k) or Rule 144A
promulgated under the Act). The
registration rights granted to the Holder
pursuant to this Section shall continue
until all of the Holder's Warrant Shares
have been sold in accordance with an
effective registration statement or upon
the Expiration Date, or as otherwise
provided in the Debenture Registration
Rights Agreement entered into between the
Company and the original Holder as of
the original issuance date hereof. The
Company will pay all registration
expenses in connection therewith.
5. Payment of Taxes. The Company will pay all documentary
stamp taxes attributable to the issuance of
Warrant Shares upon the exercise of
this Warrant; provided, however, that the
Company shall not be required to pay
any tax that may be payable in respect of
any transfer involved in the
registration of any certificates for
Warrant Shares or Warrants in a name other
than that of the Holder. The Holder shall
be responsible for all other tax
liability that may arise as a result of
holding or transferring this Warrant or
receiving Warrant Shares upon exercise
hereof.
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6. Replacement of Warrant. If this Warrant is mutilated, lost,
stolen or destroyed, the Company shall
issue or cause to be issued in exchange
and substitution for and upon cancellation
hereof, or in lieu of and
substitution for this Warrant, a New
Warrant, but only upon receipt of evidence
reasonably satisfactory to the Company of
such loss, theft or destruction and
indemnity, if requested, satisfactory to
it. Applicants for a New Warrant under
such circumstances shall also comply with
such other reasonable regulations and
procedures and pay such other reasonable
charges as the Company may prescribe.
7. Reservation of Warrant Shares. The Company covenants that
it will at all times reserve and keep
available out of the aggregate of its
authorized but unissued Common Stock,
solely for the purpose of enabling it to
issue Warrant Shares upon exercise of this
Warrant as herein provided, the
number of Warrant Shares which are then
issuable and deliverable upon the
exercise of this entire Warrant, free from
preemptive rights or any other actual
contingent purchase rights of persons other
than the Holder (taking into account
the adjustments and restrictions of Section
8). The Company covenants that all
Warrant Shares that shall be so issuable
and deliverable shall, upon issuance
and the payment of the applicable Exercise
Price in accordance with the terms
hereof, be duly and validly authorized,
issued and fully paid and nonassessable.
If the Company does not have a sufficient
amount of Common Stock authorized to
reserve for the Warrant Shares, it shall
use its best efforts to place before
shareholder vote a proposal to increase the
number of its authorized shares as
soon as reasonably practicable.
8. Certain Adjustments. The Exercise Price and number of
Warrant Shares issuable upon exercise of
this Warrant are subject to adjustment
from time to time as set forth in this
Section 8. Upon each such adjustment of
the Exercise Price pursuant to this Section
8, the Holder shall thereafter prior
to the Expiration Date be entitled to
purchase, at the Exercise Price resulting
from such adjustment, the number of Warrant
Shares obtained by multiplying the
Exercise Price in effect immediately prior
to such adjustment by the number of
Warrant Shares issuable upon exercise of
this Warrant immediately prior to such
adjustment and dividing the product thereof
by the Exercise Price resulting from
such adjustment.
(a) If the Company, at any time while this Warrant is
outstanding, (i) shall pay a stock dividend
(except scheduled dividends paid on
outstanding preferred stock as of the date
hereof which contain a stated
dividend rate) or otherwise make a
distribution or distributions on shares of
its Common Stock or on any other class of
capital stock and not the Common Stock
payable in shares of Common Stock, (ii)
subdivide outstanding shares of Common
Stock into a larger number of shares, or
(iii) combine outstanding shares of
Common Stock into a smaller number of
shares, the Exercise Price shall be
multiplied by a fraction of which the
numerator shall be the number of shares of
Common Stock (excluding treasury shares, if
any) outstanding before such event
and of which the denominator shall be
