exv10w8




 Exhibit 10.8

 




WARRANT AGREEMENT



Dated as of



[ ], 2011



between



ORCHID ISLAND CAPITAL, INC.



and



CONTINENTAL STOCK TRANSFER & TRUST COMPANY,



as Warrant Agent



 





Warrants for

Common Stock of

Orchid Island Capital, Inc.




 









 














 





Table of Contents




ARTICLE I



Definitions



	 	 	 	 	 

	Section 1.01. Definitions
	 	 	1	 
	Section 1.02. Other Definitions
	 	 	3	 
	Section 1.03. Rules of Construction
	 	 	3	 
	ARTICLE II
	 	 	 	 
	 
	 	 	 	 
	WARRANT CERTIFICATES
	 	 	 	 
	 
	 	 	 	 
	Section 2.01. Form
	 	 	4	 
	Section 2.02. Execution and Countersignature
	 	 	4	 
	Section 2.03. Certificate Register
	 	 	5	 
	Section 2.04. Transfer
	 	 	5	 
	Section 2.05. Agents
	 	 	10	 
	Section 2.06. Replacement Certificates
	 	 	10	 
	Section 2.07. Outstanding Warrants
	 	 	10	 
	Section 2.08. Cancellation
	 	 	10	 
	Section 2.09. CUSIP Numbers
	 	 	11	 
	 
	 	 	 	 
	ARTICLE III
	 	 	 	 
	 
	 	 	 	 
	EXERCISE TERMS
	 	 	 	 
	 
	 	 	 	 
	Section 3.01. Exercise
	 	 	11	 
	Section 3.02. Exercise Period
	 	 	11	 
	Section 3.03. Expiration
	 	 	11	 
	Section 3.04. Manner of Exercise
	 	 	11	 
	Section 3.05. Issuance of Warrant Shares
	 	 	12	 
	Section 3.06. Fractional Warrant Shares
	 	 	12	 
	Section 3.07. Reservation of Warrant Shares
	 	 	12	 
	Section 3.08. Compliance with Law
	 	 	13	 
	Section 3.09. Restrictions on Exercise and Transfer of Warrants
	 	 	13	 
	 
	 	 	 	 
	ARTICLE IV
	 	 	 	 
	 
	 	 	 	 
	ANTIDILUTION PROVISIONS
	 	 	 	 
	 
	 	 	 	 
	Section 4.01. Changes in Common Stock
	 	 	13	 
	Section 4.02. Cash Dividends and Other Distributions
	 	 	14	 
	Section 4.03. Issuance of Rights or Options
	 	 	15	 
	Section 4.04. Combination; Liquidation
	 	 	15	 
	Section 4.05. Other Events
	 	 	16	 
	Section 4.06. Superseding Adjustment
	 	 	16	 
	Section 4.07. Notice of Adjustment
	 	 	17	 
	Section 4.08. Notice of Certain Transactions
	 	 	17	 






i









 






	 	 	 	 	 

	Section 4.09. Adjustment to Warrant Certificate
	 	 	18	 
	Section 4.10. Calculation of Consideration
	 	 	18	 
	Section 4.11. Minimum Adjustment
	 	 	18	 
	 
	 	 	 	 
	ARTICLE V
	 	 	 	 
	 
	 	 	 	 
	WARRANT AGENT
	 	 	 	 
	 
	 	 	 	 
	Section 5.01. Appointment of Warrant Agent
	 	 	19	 
	Section 5.02. Rights and Duties of Warrant Agent
	 	 	19	 
	Section 5.03. Individual Rights of Warrant Agent
	 	 	20	 
	Section 5.04. Warrant Agent’s Disclaimer
	 	 	20	 
	Section 5.05. Compensation and Indemnity
	 	 	20	 
	Section 5.06. Successor Warrant Agent
	 	 	20	 
	 
	 	 	 	 
	ARTICLE VI
	 	 	 	 
	 
	 	 	 	 
	MISCELLANEOUS
	 	 	 	 
	 
	 	 	 	 
	Section 6.01. Persons Benefiting
	 	 	22	 
	Section 6.02. Rights of Holders
	 	 	22	 
	Section 6.03. Amendment
	 	 	22	 
	Section 6.04. Notices
	 	 	23	 
	Section 6.05. Governing Law
	 	 	23	 
	Section 6.06. Successors
	 	 	23	 
	Section 6.07. Multiple Originals, Counterparts
	 	 	23	 
	Section 6.08. Table of Contents
	 	 	24	 
	Section 6.09. Severability
	 	 	24	 






ii









 





          This WARRANT AGREEMENT (this “Agreement”) is dated as of [ ], 2011 and entered into by and
between ORCHID ISLAND CAPITAL, INC., a Maryland corporation (the “Company”), and CONTINENTAL STOCK
TRANSFER & TRUST COMPANY, as Warrant Agent (the “Warrant Agent”), for the benefit of the Holders
(as defined herein) of Warrants (as defined herein).




RECITALS




          WHEREAS, the Company desires to issue [ ] warrants (the “Warrants”) to purchase shares of
common stock, par value $0.01 per share, of the Company (the “Common Stock”). The Warrants, which
may be transferred to one or more transferees in whole or in part from time to time as permitted
herein, will entitle the holders of such Warrants, including their permitted transferees (each, a
“Holder”), to purchase one share of Common Stock per each Warrant, subject to adjustment as
provided herein.




          WHEREAS, the Company further desires the Warrant Agent to act on behalf of the Company in
connection with the issuance of the Warrants as provided herein, and the Warrant Agent is willing
to so act.




          WHEREAS, each party agrees as follows for the benefit of the other party and for the equal and
ratable benefit of the Holders of Warrants:




AGREEMENT




          NOW, THEREFORE, in consideration of the premises and mutual agreements herein set forth, the
parties hereto agree as follows:




ARTICLE I




DEFINITIONS



          Section 1.01. Definitions.




          “Affiliate” of any specified Person means any other Person, directly or indirectly,
controlling or controlled by or under direct or indirect control with such specified Person. For
the purposes of this definition, “control” when used with respect to any Person means the power to
direct the management and policies of such Person, directly or indirectly, whether through the
ownership of voting securities, by contract or otherwise; and the terms “controlling” and
“controlled” have meanings correlative to the foregoing; provided that beneficial ownership of 10%
or more of the voting securities of a Person shall be deemed to be control.




          “Board” means the Board of Directors of the Company or any committee thereof duly authorized
to act on behalf of such Board of Directors.




          “Business Day” means each day that is not a Saturday, a Sunday or a day on which banking
institutions are not required to be open in the State of New York.














 





          “Capital Stock” of any Person means any and all shares, interests, rights to purchase,
warrants, options, participations or other equivalents of or interests in (however designated)
equity of such Person, including any Preferred Stock, but excluding any debt securities convertible
into such equity.




          “Charter” means the Articles of Amendment and Restatement of the Company filed on [_________],
2011 with the Department of Assessments and Taxation of the State of Maryland.




          “Combination” means an event in which the Company consolidates with, merges with or into, or
sells all or substantially all of its assets to, another Person.




          “Current Market Value” per share of Common Stock or any other security at any date means (i)
if the security is not registered under the Exchange Act, (a) the value of the security, determined
in good faith by the Board and certified in a Board resolution, based on the most recently
completed arm’s-length transaction between the Company and a Person other than an Affiliate of the
Company, the closing of which shall have occurred on such date or within the six-month period
preceding such date, or (b) if no such transaction shall have occurred on such date or within such
six-month period, the value of the security as determined by an independent financial expert, or
(ii) if the security is registered under the Exchange Act, the average of the daily last sale
prices (or the equivalent in an over-the-counter market) for each Business Day during the period
commencing 15 Business Days before such date and ending on the date one day prior to such date, or
if the security has been registered under the Exchange Act for less than 15 consecutive Business
Days before such date, then the average of the daily last sale prices (or such equivalent) for all
of the Business Days before such date for which daily last sale prices are available; provided,
however, that if the last sale price is not determinable for at least ten Business Days in such
period, the “Current Market Value” of the security shall be determined as if the security were not
registered under the Exchange Act.




          “Exchange Act” means the U.S. Securities Exchange Act of 1934, as amended.




          “Exercise Date” means, for a given Warrant, the day on which such Warrant is exercised
pursuant to Section 3.04.




          “Officer” means the Chairman of the Board, the President, the Chief Executive Officer, the
Chief Financial Officer, any Vice President, the Treasurer, or an Assistant Treasurer, or the
Secretary or an Assistant Secretary of the Company.




          “Officers’ Certificate” means a certificate signed by two Officers.




          “Opinion of Counsel” means a written opinion from legal counsel who is reasonably acceptable
to the Warrant Agent. Such counsel may be an employee of or counsel to the Company or the Warrant
Agent.




          “Person” means any individual, corporation, partnership, joint venture, limited liability
company, association, joint-stock company, trust, unincorporated organization, government or any
agency or political subdivision thereof or any other entity.




2









 





          “Preferred Stock,” as applied to the Capital Stock of any Person, means Capital Stock of any
class or classes (however designated) which is preferred as to the payment of dividends or
distributions, or as to the payment of assets upon any voluntary or involuntary liquidation or
dissolution of such Person, over shares of Capital Stock of any other class of such Person.




          “SEC” means the Securities and Exchange Commission.




          “Securities Act” means the U.S. Securities Act of 1933, as amended.




          “Warrant Certificates” mean the registered certificates issued by the Company under this
Agreement representing the Warrants.




          “Warrant Shares” mean the shares of Common Stock (and any other securities) for which the
Warrants are exercisable or which have been issued upon exercise of Warrants.




          Section 1.02. Other Definitions.




	 	 	 
	 	 	Defined in
	Term	 	Section
	“Agreement” 
	 	Recitals
	“Certificate Register” 
	 	2.03
	“Common Stock” 
	 	Recitals
	“Company” 
	 	Recitals
	“Exercise Price” 
	 	3.01
	“Expiration Date” 
	 	3.03
	“Holders” 
	 	Recitals
	“Offering” 
	 	Recitals
	“Registrar” 
	 	3.07
	“Successor Company” 
	 	4.05(a)
	“Transfer Agent” 
	 	3.05
	“Warrant” 
	 	Recitals
	“Warrant Agent” 
	 	Recitals






          Section 1.03. Rules of Construction. Unless the text otherwise requires:




          (a) a defined term has the meaning assigned to it;




          (b) an accounting term not otherwise defined has the meaning assigned to it in accordance with
U.S. generally accepted accounting principles as in effect on the date hereof;




          (c) “or” is not exclusive;




          (d) “including” means including, without limitation; and




3









 





          (e) words in the singular include the plural and words in the plural include the singular
unless the context requires otherwise.




ARTICLE II




WARRANT CERTIFICATES



          Section 2.01. Form.




          (a) The Company shall cause to be executed and delivered to the Holders of Warrants one or
more Warrant Certificates, substantially in the form of Exhibit A attached hereto, and
either (i) deposited with The Depository Trust Company and registered in the name of Cede & Co., as
nominee of The Depository Trust Company, or (ii) upon the request of a Holder, delivered in
physical, certificated form to such Holder of Warrants.




          (b) Each Warrant Certificate shall be in registered form, with such appropriate insertions,
omissions, substitutions and other variations as are required or permitted by this Agreement. Any
Warrant Certificate deposited with The Depository Trust Company and registered in the name of Cede
& Co., as nominee of The Depository Trust Company, shall bear such legend or legends as may be
required by The Depository Trust Company for deposit in its book-entry settlement system. Each
Warrant Certificate shall be printed, lithographed, typewritten, mimeographed or engraved or
otherwise reproduced in any other manner as may be approved by the Officers of the Company
executing the same (such execution to be conclusive evidence of such approval) and may have such
letters, numbers or other marks of identification or designation and such legends or endorsements
printed, lithographed or engraved thereon as the Officers of the Company executing the same may
approve (such execution to be conclusive evidence of such approval) and as are not inconsistent
with the provisions of this Agreement, or as may be required to comply with any law or with any
rule or regulation made pursuant thereto, or with any regulation of any stock exchange or
electronic market on which the Warrants or Warrant Shares may be listed or to conform to usage.




          Section 2.02. Execution and Countersignature.




          (a) Two Officers of the Company shall sign the Warrant Certificates for the Company by manual
signature. If an Officer of the Company whose signature is on a Warrant Certificate no longer
holds that office at the time the Warrant Agent countersigns any such Warrant Certificate, the
Warrants evidenced by such Warrant Certificate shall be valid nevertheless.




          (b) The Warrant Agent shall initially countersign and deliver Warrant Certificates entitling
the Holders of Warrants to purchase in the aggregate not more than [ ] Warrant Shares, subject to
adjustment as provided herein, upon a written order of the Company signed by two Officers of the
Company.




          (c) The Warrant Agent may appoint an agent reasonably acceptable to the Company to countersign
the Warrant Certificates. Unless limited by the terms of such appointment, such agent may
countersign Warrant Certificates whenever the Warrant Agent may do so. Each reference in this
Agreement to countersignature by the Warrant Agent includes




4









 




countersignature by such agent. Such agent will have the same rights as the Warrant Agent for
service of notices and demands.




          (d) At any time and from time to time after the execution of this Agreement, the Warrant Agent
or an agent reasonably acceptable to the Company shall, upon receipt of a written order of the
Company signed by two Officers of the Company, manually countersign for original issue a Warrant
Certificate evidencing the number of Warrants specified in such order; provided, however, that the
Warrant Agent shall be entitled to receive an Officers’ Certificate and an Opinion of Counsel of
the Company that it may reasonably request in connection with such countersignature of Warrants.
Such order shall specify the number of Warrants to be evidenced on the Warrant Certificate to be
countersigned, the date on which such Warrant Certificate is to be countersigned and the number of
Warrants then authorized.




          (e) The Warrants evidenced by a Warrant Certificate shall not be valid until an authorized
signatory of the Warrant Agent or its agent as provided above manually countersigns the Warrant
Certificate. Such signature shall be solely for the purpose of authenticating the Warrant
Certificate and shall be conclusive evidence that the Warrant Certificate has been countersigned
under this Agreement.




          Section 2.03. Certificate Register. The Warrant Agent shall keep a register
(“Certificate Register”) of the Warrant Certificates and of their transfer and exchange. The
Certificate Register shall show the names and addresses of the respective Holders and the date and
number of Warrants evidenced on the face of each of the Warrant Certificates. The Company and the
Warrant Agent may deem and treat the Person in whose name a Warrant Certificate is registered as
the absolute owner of such Warrant Certificate for all purposes whatsoever and neither the Company
nor the Warrant Agent shall be affected by notice to the contrary.




          Section 2.04. Transfer.




          (a) Transfer of Warrants.





          (i) Warrants may be transferred or exchanged as provided herein.




          (ii) Warrants shall be represented by one or more Warrant Certificates and either (A)
deposited with The Depository Trust Company and registered in the name of Cede & Co.,
nominee of the Depository Trust Company, or (B) delivered in physical, certificated form to
the Holder of Warrants upon request.




          (iii) If The Depository Trust Company subsequently ceases to make its book-entry
settlement system available for the Warrants, the Company may instruct the Warrant Agent
regarding making other arrangements for book-entry settlement. In the event that the
Warrants are not eligible for, or it is no longer necessary to have the Warrants available
in, book-entry form, the Company shall provide written instructions to The Depository Trust
Company to deliver to the Warrant Agent for cancellation each Warrant Certificate, and the
Company shall instruct the Warrant Agent to deliver to The Depository Trust Company
definitive Warrant Certificates in physical, certificated form evidencing such Warrants.



5









 






          (iv) The Warrants and the Warrant Shares have not been registered under the Securities
Act and may not be transferred unless registered under the Securities Act or an exemption
from registration is available. In addition, the Warrants may not be exercised unless an
exemption from such registration is available.



          (b) Legend.





          (i) To the extent permitted by applicable law, each Warrant Certificate (and all
Warrants Certificates issued in exchange therefor or in substitution thereof) shall bear a
legend in substantially the following form:








“THE WARRANTS REPRESENTED BY THIS CERTIFICATE AND THE SHARES OF
COMMON STOCK UNDERLYING THE WARRANTS ARE SUBJECT TO RESTRICTIONS
ON BENEFICIAL AND CONSTRUCTIVE OWNERSHIP AND TRANSFER. NO WARRANT
MAY BE EXERCISED OR TRANSFERRED IF IT WOULD CAUSE THE HOLDER OR THE
PURPORTED TRANSFEREE TO BENEFICIALLY OR CONSTRUCTIVELY OWN SHARES
OF COMMON STOCK OF ORCHID ISLAND CAPITAL, INC. (THE “CORPORATION”)
IN EXCESS OF THE STOCK OWNERSHIP LIMIT OR EXCEPTED HOLDER LIMIT
(EACH AS DEFINED IN THE CHARTER OF THE CORPORATION). ANY TRANSFER OF A WARRANT THAT WOULD RESULT IN A VIOLATION OF THE
PRECEDING SENTENCE SHALL BE VOID AB INITIO, AND THE INTENDED TRANSFEREE SHALL ACQUIRE NO RIGHTS IN SUCH WARRANT. SUBJECT TO
CERTAIN FURTHER RESTRICTIONS AND EXCEPT AS EXPRESSLY PROVIDED IN
THE CHARTER OF THE CORPORATION (I) NO PERSON MAY BENEFICIALLY OR
CONSTRUCTIVELY OWN SHARES OF ANY CLASS OR SERIES OF THE CAPITAL
STOCK OF THE CORPORATION IN EXCESS OF NINE AND EIGHT-TENTHS PERCENT
(9.8%) IN VALUE OR IN NUMBER OF SHARES, WHICHEVER IS MORE
RESTRICTIVE, OF ANY CLASS OR SERIES OF CAPITAL STOCK OF THE
CORPORATION UNLESS SUCH PERSON IS AN EXCEPTED HOLDER (IN WHICH CASE
THE EXCEPTED HOLDER LIMIT SHALL BE APPLICABLE); (II) NO PERSON MAY
BENEFICIALLY OR CONSTRUCTIVELY OWN SHARES OF CAPITAL STOCK THAT
WOULD RESULT IN THE CORPORATION BEING “CLOSELY HELD” UNDER SECTION
856(H) OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE
“CODE”) (WITHOUT REGARD TO WHETHER THE OWNERSHIP INTEREST IS HELD
DURING THE LAST HALF OF THE TAXABLE YEAR) OR WOULD OTHERWISE CAUSE
THE CORPORATION TO FAIL TO QUALIFY AS A REIT AND (III) NO PERSON
MAY TRANSFER SHARES OF CAPITAL STOCK THAT WOULD RESULT IN THE
CAPITAL STOCK OF THE CORPORATION BEING BENEFICIALLY OWNED







6









 










BY LESS THAN ONE HUNDRED (100) PERSONS (DETERMINED UNDER THE
PRINCIPLES OF SECTION 856(a)(5) OF THE CODE). ANY PERSON WHO
BENEFICIALLY OR CONSTRUCTIVELY OWNS OR ATTEMPTS TO BENEFICIALLY OR
CONSTRUCTIVELY OWN SHARES OF CAPITAL STOCK WHICH CAUSES OR WILL
CAUSE A PERSON TO BENEFICIALLY OR CONSTRUCTIVELY OWN SHARES OF
CAPITAL STOCK IN EXCESS OR IN VIOLATION OF THE ABOVE LIMITATIONS
MUST IMMEDIATELY NOTIFY THE CORPORATION. IF ANY OF THE
RESTRICTIONS ON TRANSFER OR OWNERSHIP IN (I) AND (II) ABOVE ARE
VIOLATED, THE SHARES OF CAPITAL STOCK REPRESENTED HEREBY WILL BE
AUTOMATICALLY TRANSFERRED TO A TRUSTEE OF A CHARITABLE TRUST FOR
THE BENEFIT OF ONE OR MORE CHARITABLE BENEFICIARIES. IF,
NOTWITHSTANDING THE FOREGOING SENTENCE, A TRANSFER TO THE
CHARITABLE TRUST IS NOT EFFECTIVE FOR ANY REASON TO PREVENT A
VIOLATION OF THE RESTRICTIONS ON TRANSFER AND OWNERSHIP IN (I)
AND (II) ABOVE, THEN THE ATTEMPTED TRANSFER OF THAT NUMBER OF
SHARES OF CAPITAL STOCK THAT OTHERWISE WOULD CAUSE ANY PERSON TO
VIOLATE SUCH RESTRICTIONS SHALL BE VOID AB INITIO.
IF THE RESTRICTION IN (III) ABOVE IS VIOLATED, ANY SUCH TRANSFERS
WILL BE VOID AB INITIO. IN ADDITION, THE CORPORATION
MAY REDEEM SHARES UPON THE TERMS AND CONDITIONS SPECIFIED BY THE
BOARD OF DIRECTORS IN ITS SOLE DISCRETION IF THE BOARD OF DIRECTORS
DETERMINES THAT OWNERSHIP OR A TRANSFER OR OTHER EVENT MAY VIOLATE
THE RESTRICTIONS DESCRIBED ABOVE. ALL CAPITALIZED TERMS IN THIS
PARAGRAPH HAVE THE MEANINGS DEFINED IN THE CHARTER OF THE
CORPORATION, AS THE SAME MAY BE AMENDED FROM TIME TO TIME, A COPY
OF WHICH, INCLUDING THE RESTRICTIONS ON TRANSFER AND OWNERSHIP,
WILL BE FURNISHED TO EACH HOLDER OF CAPITAL STOCK OF THE
CORPORATION ON REQUEST AND WITHOUT CHARGE. REQUESTS FOR SUCH A
COPY MAY BE DIRECTED TO THE SECRETARY OF THE CORPORATION AT ITS
PRINCIPAL OFFICE. KEEP THIS CERTIFICATE IN A SAFE PLACE. IF IT IS
LOST, STOLEN OR DESTROYED, THE CORPORATION WILL REQUIRE A BOND OF
INDEMNITY AS A







7









 






CONDITION TO THE ISSUANCE OF A REPLACEMENT CERTIFICATE.




     THE WARRANTS REPRESENTED BY THIS CERTIFICATE AND THE SHARES OF
COMMON STOCK UNDERLYING THE WARRANTS HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE “1933 ACT”), OR THE
SECURITIES LAWS OF ANY STATE. THE HOLDER OF THIS SECURITY AND ANY
SECURITY UNDERLYING THIS SECURITY AGREES FOR THE BENEFIT OF THE
COMPANY THAT (A) THIS SECURITY AND ANY SECURITY UNDERLYING THIS
SECURITY MAY BE OFFERED, RESOLD, PLEDGED OR OTHERWISE TRANSFERRED
(1) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT, (2) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER
THE SECURITIES ACT AND IN THE CASE OF (2) IN ACCORDANCE WITH ANY
APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY
OTHER APPLICABLE JURISDICTION OR (3) TO THE COMPANY OR A SUBSIDIARY
THEREOF, AND (B) THE HOLDER OF THIS SECURITY AND ANY SECURITY
UNDERLYING THIS SECURITY WILL, AND EACH SUBSEQUENT HOLDER HEREOF AND
THEREOF IS REQUIRED TO, NOTIFY ANY PURCHASER OF THIS SECURITY AND
ANY SECURITY UNDERLYING THIS SECURITY FROM IT OF THE RESALE
RESTRICTIONS REFERRED TO IN (A) ABOVE.




     THE CORPORATION WILL FURNISH TO ANY STOCKHOLDER, ON REQUEST AND
WITHOUT CHARGE, A FULL STATEMENT OF THE INFORMATION REQUIRED BY
SECTION 2-211(B) OF THE CORPORATIONS AND ASSOCIATIONS ARTICLE OF THE
ANNOTATED CODE OF MARYLAND WITH RESPECT TO THE DESIGNATIONS AND ANY
PREFERENCES, CONVERSION AND OTHER RIGHTS, VOTING POWERS,
RESTRICTIONS, LIMITATIONS AS TO DIVIDENDS AND OTHER DISTRIBUTIONS,
QUALIFICATIONS, AND TERMS AND CONDITIONS OF REDEMPTION OF THE STOCK
OF EACH CLASS WHICH THE CORPORATION HAS AUTHORITY TO ISSUE AND, IF
THE CORPORATION IS AUTHORIZED TO ISSUE ANY PREFERRED OR SPECIAL
CLASS IN SERIES, (I) THE DIFFERENCES IN THE RELATIVE RIGHTS AND
PREFERENCES BETWEEN THE SHARES OF EACH SERIES TO THE EXTENT SET, AND
(II) THE AUTHORITY OF THE



8









 






BOARD OF DIRECTORS TO SET SUCH RIGHTS AND PREFERENCES OF SUBSEQUENT
SERIES. THE FOREGOING SUMMARY DOES NOT PURPORT TO BE COMPLETE AND
IS SUBJECT TO AND QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE
CHARTER OF THE CORPORATION, A COPY OF WHICH WILL BE SENT WITHOUT
CHARGE TO EACH STOCKHOLDER WHO SO REQUESTS. SUCH REQUEST MUST BE
MADE TO THE SECRETARY OF THE CORPORATION AT ITS PRINCIPAL OFFICE.




     THE WARRANTS EVIDENCED BY THIS CERTIFICATE SHALL EXPIRE ON THE
CLOSE OF BUSINESS ON [ ], 2018.”




          (ii) To the extent permitted by applicable law, all Warrant Shares shall bear legends
regarding restrictions on transfer and ownership that are similar to those set forth in
Section 2.04(b)(i) above.



          (c) Obligations with Respect to Transfers and Exchanges of Warrants.





          (i) Any person that acquires Warrants in the secondary market will be required to sign
and deliver to the Company and the Warrant Agent the Certificate to be Delivered in
Connection with Transfer of Warrants attached hereto as Exhibit C. Without limiting
the obligation of the transferee to sign the certificate described in the preceding
sentence, in the case of any purported transfer in connection with which such certificate
shall not have been obtained, the transferee shall nonetheless be deemed to have made the
representations and warranties as set forth in such certificate, and the Company shall
retain the right to void the transfer for any inaccuracy in, or any failure to provide, such
representations and warranties.




          (ii) To permit registrations of permitted transfers and exchanges of Warrants, the
Company shall execute, and the Warrant Agent shall countersign, Warrants as required
pursuant to the provisions of Section 2.02 and this Section 2.04.




          (iii) No service charge shall be made to a Holder for any registration of transfer or
exchange, but the Company may require payment of a sum sufficient to cover any transfer tax,
assessments, or similar governmental charge payable in connection therewith.




          (iv) Prior to the due presentation for registration of transfer of any Warrant, the
Company and the Warrant Agent may deem and treat the Person in whose name a Warrant is
registered as the absolute owner of such Warrant, and neither the Company nor the Warrant
Agent shall be affected by notice to the contrary.




          (v) All Warrants issued upon any transfer or exchange pursuant to the terms of this
Agreement shall be the valid obligations of the Company, entitled to the



9









 






same benefits under this Agreement as the Warrants surrendered upon such transfer or
exchange.



          (d) No Obligation of the Warrant Agent. The Warrant Agent shall have no obligation or
duty to monitor, determine or inquire as to compliance with any restrictions on transfer imposed
under this Agreement or under applicable law with respect to any transfer of any interest in any
Warrant other than to require delivery of such certificates and other documentation or evidence as
are expressly required by, and to do so if and when expressly required by, the terms of this
Agreement, and to examine the same to determine substantial compliance as to form with the express
requirements hereof.




          (e) No Registration of Transfer. The Company shall not, and shall cause the Warrant
Agent not to, register any transfer of Warrants or Warrant Shares not made pursuant to the terms of
this Agreement.




          Section 2.05. Agents. The registered Holder of a Warrant may authorize any Person to
take any action which a Holder is entitled to take under this Agreement or the Warrants.




          Section 2.06. Replacement Certificates. If a mutilated Warrant Certificate is
surrendered to the Warrant Agent or if the Holder of a Warrant Certificate claims that the Warrant
Certificate has been lost, destroyed or wrongfully taken, the Company shall issue and the Warrant
Agent shall countersign a replacement Warrant Certificate if the reasonable requirements of the
Warrant Agent and the Company are met. If required by the Warrant Agent or the Company, such
Holder shall furnish a lost stock affidavit and/or an indemnity bond sufficient in the judgment of
the Company and the Warrant Agent to protect the Company and the Warrant Agent from any loss which
either of them may suffer if a Warrant Certificate is replaced. The Company and the Warrant Agent
may charge the Holder for their expenses in replacing a Warrant Certificate. Every replacement
Warrant Certificate evidences an additional obligation of the Company.




          Section 2.07. Outstanding Warrants. Warrants outstanding at any time are all
Warrants evidenced on all Warrant Certificates authenticated by the Warrant Agent except for those
canceled by it and those delivered to it for cancellation. A Warrant ceases to be outstanding if
the Company or an Affiliate of the Company, other than Bimini Capital Management, Inc. or any of
its subsidiaries, holds the Warrant.




          If a Warrant Certificate is replaced pursuant to Section 2.06, the Warrants evidenced thereby
cease to be outstanding unless the Warrant Agent and the Company receive proof satisfactory to them
that the replaced Warrant Certificate is held by a bona fide purchaser.




          Section 2.08. Cancellation. (a) In the event the Company shall purchase or
otherwise acquire Warrants, the same shall thereupon be delivered to the Warrant Agent for
cancellation.




          (b) The Warrant Agent and no one else shall cancel and destroy all Warrant Certificates
surrendered for transfer, exchange, replacement, exercise or cancellation and deliver a certificate
of such destruction to the Company unless the Company directs the Warrant Agent




10









 




to deliver canceled Warrant Certificates to the Company. The Company may not issue new
Warrant Certificates to replace Warrant Certificates to the extent they evidence Warrants which
have been exercised or Warrants which the Company has purchased or otherwise acquired.




          Section 2.09. CUSIP Numbers. The Company in issuing the Warrants may use “CUSIP”
numbers (if then generally in use) and, if so, the Warrant Agent shall use “CUSIP” numbers in
notices as a convenience to Holders; provided, however, that any such notice may state that no
representation is made as to the correctness of such numbers either as printed on the Warrant
Certificates or as contained in any notice and that reliance may be placed only on the other
identification numbers printed on the Warrant Certificates.




ARTICLE III




EXERCISE TERMS



          Section 3.01. Exercise. Each Warrant, when exercised, shall initially entitle the
Holder thereof, subject to adjustment pursuant to the terms of this Agreement, to purchase one
share of Common Stock. The exercise price (the “Exercise Price”) of each Warrant is $[ ] per
share, subject to adjustment as provided herein.




          Section 3.02. Exercise Period. Subject to the terms and conditions set forth herein,
the Warrants shall be exercisable at any time and from time to time on any Business Day beginning
on [ ], 2011 until such Warrant expires pursuant to Section 3.03 (the “Exercise Period”).
Notwithstanding the foregoing, holders of Warrants will be able to exercise their Warrants only if
the exercise of such Warrants is exempt from the registration requirements of the Securities Act
and the Warrant Shares are qualified for sale or exempt from qualification under the applicable
securities laws of the states or other jurisdictions in which such holders reside.




          Section 3.03. Expiration. A Warrant shall terminate and become void as of the close
of business on [ ], 2018 (the “Expiration Date”). The Company shall give notice not less than
30, and not more than 60, days prior to the Expiration Date to the Holders of all then outstanding
Warrants to the effect that the Warrants will terminate and become void as of the close of business
on the Expiration Date; provided, however, that if the Company fails to give notice as provided in
this Section 3.03, the Warrants will nevertheless expire and become void on the Expiration Date.




          Section 3.04. Manner of Exercise. Warrants may be exercised upon (i) surrender to
the Warrant Agent at the office of the Warrant Agent of the related Warrant Certificate, together
with the form of election attached thereto to purchase Common Stock on the reverse thereof duly
filled in and signed by the Holder thereof and (ii) payment to the Warrant Agent, for the account
of the Company, of the Exercise Price for each Warrant Share or other security issuable upon the
exercise of such Warrants then exercised. Such payment shall be made in cash or by certified or
official bank check payable to the order of the Company or by wire transfer of funds to an account
designated by the Company for such purpose. Subject to Section 3.02, the rights represented by the
Warrants shall be exercisable at the election of the Holders thereof either in full at any time or
from time to time in part, and in the event that a Warrant Certificate




11









 




is surrendered for exercise of less than all the Warrants represented by such Warrant
Certificate at any time prior to the Expiration Date, a new Warrant Certificate representing the
remaining Warrants shall be issued. The Warrant Agent shall countersign and deliver the required
new Warrant Certificates, and the Company, at the Warrant Agent’s request, shall supply the Warrant
Agent with Warrant Certificates duly signed on behalf of the Company for such purpose.




          Section 3.05. Issuance of Warrant Shares. Subject to Section 2.06, upon the
surrender of Warrant Certificates and payment of the Exercise Price, as set forth in Section 3.04,
the Company shall issue to the Holder thereof such number of Warrant Shares to which such Holder is
entitled and cause the transfer agent for the Common Stock (the “Transfer Agent”) to countersign
and deliver to or upon the written order of the Holder and in such name or names as the Holder may
designate, a certificate or certificates for the number of full Warrant Shares so purchased upon
the exercise of such Warrants or other securities or property to which it is entitled, registered
or otherwise, to the Person or Persons entitled to receive the same (including any depositary
institution so designated by a Holder), together with cash as provided in Section 3.06 in respect
of any fractional Warrant Shares otherwise issuable upon such exercise. Such certificate or
certificates shall be deemed to have been issued and any Person so designated to be named therein
shall be deemed to have become a holder of record of such Warrant Shares as of the date of the
surrender of such Warrant Certificates and payment of the per share Exercise Price, as aforesaid;
provided, however, that if, at such date, the transfer books for the Warrant Shares shall be
closed, the certificates for the Warrant Shares in respect of which such Warrants are then
exercised shall be issuable as of the date on which such books shall next be opened and until such
date the Company shall be under no duty to deliver any certificates for such Warrant Shares;
provided further, however, that such transfer books, unless otherwise required by law, shall not be
closed at any one time for a period longer than 20 calendar days.




          Section 3.06. Fractional Warrant Shares. The Company shall not be required to issue
fractional Warrant Shares on the exercise of Warrants. If more than one Warrant shall be exercised
in full at the same time by the same Holder, the number of full Warrant Shares which shall be
issuable upon such exercise shall be computed on the basis of the aggregate number of Warrant
Shares which may be purchasable pursuant thereto. If any fraction of a Warrant Share would, except
for the provisions of this Section 3.06, be issuable upon the exercise of any Warrant (or specified
portion thereof), the Company shall pay, in lieu of issuing fractional shares, an amount in cash
equal to the Current Market Value per Warrant Share, as determined on the day immediately preceding
the date the Warrant is presented for exercise, multiplied by such fraction, computed to the
nearest whole cent.




          Section 3.07. Reservation of Warrant Shares. The Company shall at all times keep
reserved out of its authorized shares of Common Stock a number of shares of Common Stock sufficient
to provide for the exercise of all outstanding Warrants. The Company shall cause the registrar for
the Common Stock (the “Registrar”) at all times until the Expiration Date to reserve such number of
authorized but unissued shares as shall be required for such purpose. The Company will keep a copy
of this Agreement on file with the Transfer Agent. The Company will supply such Transfer Agent
with duly executed stock certificates for such purpose and will itself provide or otherwise make
available any cash which may be payable as provided in Section 3.06. The Company will furnish to
such Transfer Agent a copy of all notices of adjustments (and certificates related thereto)
transmitted to each Holder.




12









 





          Before taking any action which would cause an adjustment pursuant to Article IV to reduce the
Exercise Price below the then par value (if any) of the Common Stock, the Company shall take any
and all corporate action which may, in the opinion of its counsel, be necessary in order that the
Company may validly and legally issue fully paid and nonassessable shares of Common Stock at the
Exercise Price as so adjusted.




          The Company covenants that all Warrant Shares which may be issued upon exercise of Warrants
shall, upon issue, be fully paid, nonassessable, free of preemptive rights, free from all taxes and
free from all liens, charges and security interests with respect to the issue thereof.




          Section 3.08. Compliance with Law. (a) Notwithstanding anything in this Agreement
to the contrary, in no event shall a Holder be entitled to exercise a Warrant unless in the opinion
of counsel to the Company addressed to the Warrant Agent, the exercise of such Warrants is exempt
from the registration requirements of the Securities Act and such securities are qualified for sale
or exempt from qualification under the applicable securities laws of the states or other
jurisdictions in which such Holders reside.




          (b) If any shares of Common Stock required to be reserved for purposes of the exercise of
Warrants require, under any other Federal or state law or applicable governing rule or regulation
of any national securities exchange, registration with or approval of any governmental authority,
or listing on any such national securities exchange before such shares may be issued upon exercise,
the Company will use its reasonable best efforts to cause such shares to be duly registered or
approved by such governmental authority or listed on the relevant national securities exchange, as
the case may be.








          Section 3.09. Restrictions on Exercise and Transfer of Warrants. Notwithstanding
anything to the contrary contained herein, no Warrant may be exercised or Transferred if it would
cause the Holder or the purported transferee to Beneficially Own or Constructively Own, within the
meaning of the Charter, outstanding shares of Common Stock in excess of the Stock Ownership Limit
or Excepted Holder Limit. Any Transfer of a Warrant that would result
in a violation of the
preceding sentence shall be void ab initio, and the intended trasferee shall
acquire no rights in such Warrant. Defined terms used in this Section 3.09 that are not otherwise
defined in this Agreement shall have the meaning provided for in the Charter.








ARTICLE IV




ANTIDILUTION PROVISIONS



          Section 4.01. Changes in Common Stock.




          (a) If after the date hereof, and subject to provisions of Section 3.06, the number of
outstanding shares of Common Stock is increased by a stock dividend payable in shares of Common
Stock, or by a split-up of shares of Common Stock, or other similar event, then, on the effective
date of such stock dividend, split-up or similar event, the number of shares




13









 




of Common Stock issuable on exercise of each Warrant shall be increased in proportion to such
increase in outstanding shares of Common Stock.




          (b) If after the date hereof, and subject to provisions of Section 3.06, the number of
outstanding shares of Common Stock is decreased by a consolidation, combination, reverse stock
split or reclassification of shares of Common Stock or other similar event, then, on the effective
date of such consolidation, combination, reverse stock split, reclassification or similar event,
the number of shares of Common Stock issuable on exercise of each Warrant shall be decreased in
proportion to such decrease in outstanding shares of Common Stock.




          (c) Whenever the number of shares of Common Stock purchasable on the exercise of Warrants is
adjusted, as provided in clauses (a) and (b) above, the Exercise Price shall be adjusted (to the
nearest cent) by multiplying such Exercise Price immediately prior to such adjustment by a fraction
(x) the numerator of which shall be the number of shares of Common Stock purchasable on exercise of
the Warrants immediately prior to such adjustment, and (y) the denominator of which shall be the
number of shares of Common Stock so purchasable immediately thereafter.




          Section 4.02. Cash Dividends and Other Distributions. In the event that at any time
and from time to time the Company shall distribute to all holders of Common Stock (i) any dividend
or other distribution (including any dividend or distribution made in connection with a
consolidation or merger in which the Company is the continuing corporation) of cash, evidences of
its indebtedness, shares of its Capital Stock or any other properties or securities or (ii) any
options, warrants or other rights to subscribe for or purchase any of the foregoing (other than, in
the case of clause (i) and (ii) above, (A) any dividend or distribution described in Section 4.01,
(B) any rights, options, warrants or securities described in Section 4.03 and (C) any ordinary cash
dividends or other cash distributions from current or retained earnings), then the number of shares
of Common Stock issuable upon the exercise of each Warrant immediately prior to such record date
for any such dividend or distribution shall be increased to a number determined by multiplying the
number of shares of Common Stock issuable upon the exercise of such Warrant immediately prior to
such record date for any such dividend or distribution by a fraction, the numerator of which shall
be the Current Market Value per share of Common Stock on the record date for such dividend or
distribution, and the denominator of which shall be such Current Market Value per share of Common
Stock less the sum of (x) the amount of cash, if any, distributed per share of Common Stock and (y)
the then fair value (as determined in good faith by the Board, whose determination shall be
evidenced by a board resolution filed with the Warrant Agent, a copy of which will be sent to
Holders upon request) of the portion, if any, of the distribution applicable to one share of Common
Stock consisting of evidences of indebtedness, shares of stock, securities, other property,
warrants, options or subscription or purchase rights; and subject to Section 4.11, the Exercise
Price shall be adjusted to a number determined by dividing the Exercise Price immediately prior to
such record date by the above fraction. Such adjustments shall be made, and shall only become
effective, whenever any dividend or distribution is made; provided, however, that the Company is
not required to make an adjustment pursuant to this Section 4.02 if at the time of such
distribution the Company makes the same distribution to Holders of Warrants as it makes to holders
of Common Stock pro rata based on the number of shares of Common Stock for which such Warrants are
exercisable (whether or not currently exercisable). No adjustment shall be made pursuant to this
Section




14









 




4.02 which shall have the effect of decreasing the number of shares of Common Stock issuable
upon exercise of each Warrant or increasing the Exercise Price.




          Section 4.03. Issuance of Rights or Options. In the event that at any time or from
time to time the Company shall issue to all holders of Common Stock (i) rights, options or warrants
to acquire (provided, however, that no adjustment shall be made under this Section 4.03 upon the
exercise of such rights, options or warrants), or (ii) securities convertible, exchangeable or
exercisable into (provided, however, that no adjustment shall be made under this Section 4.03 upon
the conversion or exchange of such securities (other than issuances specified in clauses (i) or
(ii) which are made as the result of anti-dilution adjustments in such securities)) Common Stock
entitling the holders thereof to subscribe for or purchase shares of Common Stock at a price per
share that is less than the Current Market Value per share of Common Stock in effect immediately
prior to such issuance other than in connection with the issuance of rights to all holders of
Common Stock pursuant to a stockholder rights plan adopted by the Company, the number of shares of
Common Stock issuable upon the exercise of each Warrant immediately after such issuance shall be
determined by multiplying the number of shares of Common Stock issuable upon exercise of each
Warrant immediately prior to such 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 rights,
options, warrants or securities plus the number of additional shares of Common Stock offered for
subscription or purchase or into which such securities are convertible or exchangeable, and the
denominator of which shall be the number of shares of Common Stock outstanding immediately prior to
the issuance of such rights, options, warrants or securities plus the total number of shares of
Common Stock which the aggregate consideration expected to be received by the Company upon the
exercise, conversion or exchange of such rights, options, warrants or securities (as determined in
good faith by the Board, whose determination shall be evidenced by a Board resolution filed with
the Warrant Agent, a copy of which will be sent to Holders upon request) would purchase at the
Current Market Value per share of Common Stock as of the record date; and, subject to Section 4.11,
in the event of any such adjustment, the Exercise Price shall be adjusted to a number determined by
dividing the Exercise Price immediately prior to such date of issuance by the aforementioned
fraction. Such adjustment shall be made, and shall only become effective, whenever such rights,
options, warrants or securities are issued. No adjustment shall be made pursuant to this Section
4.03 as a result of any issuance of rights, options or warrants (A) in connection with the exercise
of Warrants, (B) to officers, directors or employees of the Company pursuant to customary stock
incentive plans, (C) in connection with acquisitions of assets or businesses other than from
Affiliates of the Company or (D) which shall have the effect of decreasing the number of shares of
Common Stock issuable upon exercise of each Warrant or increasing the Exercise Price.




          Section 4.04. Combination; Liquidation. (a) Except as provided in Section 4.04(b),
in the event of a Combination, each Holder shall have the right to receive upon exercise of the
Warrants the kind and amount of shares of Capital Stock or other securities or property which such
Holder would have been entitled to receive upon completion of or as a result of such Combination
had such Warrants been exercised immediately prior to such event or to the relevant record date for
any such entitlement. Unless paragraph (b) is applicable to a Combination, the Company shall
provide that the surviving or acquiring Person (the “Successor Company”) in such Combination will
enter into an agreement with the Warrant Agent confirming the Holders’ rights pursuant to this
Section 4.04(a) and providing for adjustments,






15









 







which shall be as nearly equivalent as may be practicable to the adjustments provided for in
this Article IV. The provisions of this Section 4.04(a) shall similarly apply to successive
Combinations involving any Successor Company.




          (b) In the event of (i) a Combination where consideration to the holders of Common Stock in
exchange for their shares is payable solely in cash or (ii) the dissolution, liquidation or
winding-up of the Company, the Holders of the Warrants shall be entitled to receive, upon surrender
of their Warrant Certificates, such cash distributions on an equal basis with the holders of Common
Stock or other securities issuable upon exercise of the Warrants, as if the Warrants had been
exercised immediately prior to such event, less the Exercise Price, if positive. In no event shall
Holders of Warrants be required to pay any amount to such Successor Company or the Company.




          In the event of any Combination described in this Section 4.04(b), the Successor Company, and,
in the event of any dissolution, liquidation or winding-up of the Company, the Company, shall
deposit promptly with the Warrant Agent the funds, if any, necessary to pay the Holders of the
Warrants the amounts to which they are entitled as described above. After such funds and the
surrendered Warrant Certificates are received, the Warrant Agent shall make payment to the Holders
by delivering a check in such amount as is appropriate (or, in the case of consideration other than
cash, such other consideration as is appropriate) to such Person or Persons as it may be directed
in writing by the Holders surrendering such Warrants.




          Section 4.05. Other Events. If any event occurs as to which the foregoing provisions
of this Article IV are not strictly applicable or, if strictly applicable, would not, in the good
faith judgment of the Board, fairly and adequately protect the purchase rights of the Warrants in
accordance with the essential intent and principles of such provisions, then such Board shall make
such adjustments in the application of such provisions, in accordance with such essential intent
and principles, as shall be reasonably necessary, in the good faith opinion of such Board, to
protect such purchase rights as aforesaid, but in no event shall any such adjustment have the
effect of increasing the Exercise Price or decreasing the number of shares of Common Stock issuable
upon exercise of the Warrants.




          Section 4.06. Superseding Adjustment. Upon the expiration of any rights, options,
warrants or conversion or exchange privileges which resulted in adjustments pursuant to this
Article IV, if any thereof shall not have been exercised, the number of Warrant Shares issuable
upon the exercise of each Warrant shall be readjusted pursuant to the applicable section of Article
IV as if (i) the only shares of Common Stock issuable upon exercise of such rights, options,
warrants, conversion or exchange privileges were the shares of Common Stock, if any, actually
issued upon the exercise of such rights, options, warrants or conversion or exchange privileges and
(ii) shares of Common Stock actually issued, if any, were issuable for the consideration actually
received by the Company upon such exercise plus the aggregate consideration, if any, actually
received by the Company for the issuance, sale or grant of all such rights, options, warrants or
conversion or exchange privileges whether or not exercised and the Exercise Price shall be
readjusted inversely; provided, however, that no such readjustment (except by reason of an
intervening adjustment under Section 4.01) shall have the effect of decreasing the number of
Warrant Shares issuable upon the exercise of each Warrant or increasing the Exercise Price by an
amount in excess of the amount of the adjustment initially




16









 




made in respect of the issuance, sale or grant of such rights, options, warrants or conversion
or exchange privileges.




          Section 4.07. Notice of Adjustment. Whenever the Exercise Price or the number of
shares of Common Stock and other property, if any, issuable upon exercise of the Warrants is
adjusted, as herein provided, the Company shall deliver to the Warrant Agent a certificate of a
firm of independent accountants selected by the Board (who may, to the extent it would not
compromise its “independence,” be the regular accountants employed by the Company) setting forth,
in reasonable detail, the event requiring the adjustment and the method by which such adjustment
was calculated (including a description of the basis on which (i) the Board determined the then
fair value of any evidences of indebtedness, other securities or property or warrants, options or
other subscription or purchase rights and (ii) the Current Market Value of the Common Stock was
determined, if either of such determinations were required), and specifying the Exercise Price and
the number of shares of Common Stock issuable upon exercise of the Warrants after giving effect to
such adjustment. The Company shall promptly cause the Warrant Agent to mail a copy of such
certificate to each Holder in accordance with Section 6.04. The Warrant Agent shall be entitled to
rely on such certificate and shall be under no duty or responsibility with respect to any such
certificate, except to exhibit the same from time to time, to any Holder desiring an inspection
thereof during reasonable business hours. The Warrant Agent shall not at any time be under any
duty or responsibility to any Holder to determine whether any facts exist which may require any
adjustment of the Exercise Price or the number of shares of Common Stock or other stock or property
issuable on exercise of the Warrants, or with respect to the nature or extent of any such
adjustment when made, or with respect to the method employed in making such adjustment or the
validity or value of any shares of Common Stock, evidences of indebtedness, warrants, options, or
other securities or property.




          Section 4.08. Notice of Certain Transactions. In the event that the Company shall
propose to (a) pay any dividend payable in securities of any class to the holders of its Common
Stock or to make any other non-cash dividend or distribution to the holders of its Common Stock,
(b) offer the holders of its Common Stock rights to subscribe for or to purchase any securities
convertible into shares of Common Stock or shares of stock of any class or any other securities,
rights or options, (c) issue any (i) shares of Common Stock, (ii) rights, options or warrants
entitling the holders thereof to subscribe for shares of Common Stock or (iii) securities
convertible into or exchangeable or exercisable for Common Stock (in the case of (i), (ii) and
(iii), if such issuance or adjustment would result in an adjustment hereunder), (d) effect any
capital reorganization, reclassification, consolidation or merger, (e) effect the voluntary or
involuntary dissolution, liquidation or winding-up of the Company or (f) make a tender offer or
exchange offer with respect to the Common Stock, the Company shall within five days after any such
action or offer send to the Warrant Agent a notice and the Warrant Agent shall within five days
after receipt thereof send the Holders a notice (in such form as shall be furnished to the Warrant
Agent by the Company) of such proposed action or offer. Such notice shall be mailed by the Warrant
Agent to the Holders at their addresses as they appear in the Certificate Register, which shall
specify the record date for the purposes of such dividend, distribution or rights, or the date such
issuance or event is to take place and the date of participation therein by the holders of Common
Stock, if any such date is to be fixed, and shall briefly indicate the effect, if any, of such
action on the Common Stock and on the number and kind of any other shares of stock and on other
property, if any, and the number of shares of Common Stock and other property, if any,




17









 




issuable upon exercise of each Warrant and the Exercise Price after giving effect to any
adjustment pursuant to Article IV which will be required as a result of such action. Such notice
shall be given as promptly as possible and, to the extent practicable (x) in the case of any action
covered by clause (a) or (b) above, at least 10 days prior to the record date for determining
holders of the Common Stock for purposes of such action or (y) in the case of any other such
action, at least 20 days prior to the date of the taking of such proposed action or the date of
participation therein by the holders of Common Stock, whichever shall be the earlier.




          Section 4.09. Adjustment to Warrant Certificate. The form of Warrant Certificate
need not be changed because of any adjustment made pursuant to this Article IV, and Warrant
Certificates issued after such adjustment may state the same Exercise Price and the same number of
shares of Common Stock issuable upon exercise of the Warrants as are stated in the Warrant
Certificates initially issued pursuant to this Agreement. The Company, however, may at any time in
its sole discretion make any change in the form of Warrant Certificate that it may deem appropriate
to give effect to such adjustments and that does not affect the substance of the Warrant
Certificate, and any Warrant Certificate thereafter issued or countersigned, whether in exchange or
substitution for an outstanding Warrant Certificate or otherwise, may be in the form as so changed.




          Section 4.10. Calculation of Consideration. For purposes of any computation
respecting consideration received pursuant to this Article IV, the following shall apply:




          (a) in the case of the issuance of additional 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; and




          (b) in the case of the issuance of securities convertible into or exchangeable or exercisable
for 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, exchange or
exercise thereof (exclusive of the securities so converted, exchanged or exercised) (the
consideration in each case to be determined in the same manner as provided in clause (1) of this
subsection).




          Section 4.11. Minimum Adjustment. The adjustments required by the preceding sections
of this Article IV shall be made whenever and as often as any specified event requiring an
adjustment shall occur, except that no adjustment of the Exercise Price or the number of shares of
Common Stock issuable upon exercise of the Warrants that would otherwise be required shall be made
unless and until such adjustment either by itself or with other adjustments not previously made
increases or decreases by at least 1% the Exercise Price or the number of shares of Common Stock
issuable upon exercise of the Warrants immediately prior to the making of such adjustment. Any
adjustment representing a change of less than such minimum amount shall be carried forward and made
as soon as such adjustment, together with other adjustments required by this Article IV and not
previously made, would result in a minimum adjustment. For the purpose of any adjustment, any
specified event shall be deemed to have occurred at the close of business on the date of its
occurrence. In computing adjustments under this Article IV,




18









 




fractional interests in Common Stock shall be taken into account to the nearest one-hundredth
of a share.




ARTICLE V




WARRANT AGENT



          Section 5.01. Appointment of Warrant Agent. The Company hereby appoints the Warrant
Agent to act as agent for the Company in accordance with the provisions of this Agreement, and the
Warrant Agent hereby accepts such appointment. The Warrant Agent shall not be liable for anything
that it may do or refrain from doing in connection with this Agreement, except for its own gross
negligence, willful misconduct or bad faith.




          Section 5.02. Rights and Duties of Warrant Agent.




          (a) Agent for the Company. In acting under this Warrant Agreement and in connection
with the Warrant Certificates, the Warrant Agent is acting solely as agent of the Company and does
not assume any obligation or relationship or agency or trust for or with any of the holders of
Warrant Certificates or beneficial owners of Warrants.




          (b) Counsel. The Warrant Agent may consult with counsel satisfactory to it (who may
be counsel to the Company), and the advice of such counsel shall be full and complete authorization
and protection in respect of any action taken, suffered or omitted by it hereunder in good faith
and in accordance with the advice of such counsel.




          (c) Documents. The Warrant Agent shall be protected and shall incur no liability for
or in respect of any action taken or thing suffered by it in reliance upon any Warrant Certificate,
notice, direction, consent, certificate, affidavit, statement or other paper or document reasonably
believed by it to be genuine and to have been presented or signed by the proper parties.




          (d) No Implied Obligations. The Warrant Agent shall be obligated to perform only such
duties as are specifically set forth herein and in the Warrant Certificates, and no implied duties
or obligations of the Warrant Agent shall be read into this Agreement or the Warrant Certificates
against the Warrant Agent. The Warrant Agent shall not be under any obligation to take any action
hereunder which may tend to involve it in any expense or liability for which it does not receive
indemnity if such indemnity is reasonably requested. The Warrant Agent shall not be accountable or
under any duty or responsibility for the use by the Company of any of the Warrant Certificates
countersigned by the Warrant Agent and delivered by it to the Holders or on behalf of the Holders
pursuant to this Agreement or for the application by the Company of the proceeds of the Warrants.
The Warrant Agent shall have no duty or responsibility in case of any default by the Company in the
performance of its covenants or agreements contained herein or in the Warrant Certificates or in
the case of the receipt of any written demand from a Holder with respect to such default, including
any duty or responsibility to initiate or attempt to initiate any proceedings at law or otherwise.




          (e) Not Responsible for Adjustments or Validity of Stock. The Warrant Agent shall not
at any time be under any duty or responsibility to any Holder to determine




19









 




whether any facts exist that may require an adjustment of the number of shares of Common Stock
issuable upon exercise of each Warrant or the Exercise Price, or with respect to the nature or
extent of any adjustment when made, or with respect to the method employed, or herein or in any
supplemental agreement provided to be employed, in making the same. The Warrant Agent shall not be
accountable with respect to the validity or value of any shares of Common Stock or of any
securities or property which may at any time be issued or delivered upon the exercise of any
Warrant or upon any adjustment pursuant to Article IV, and it makes no representation with respect
thereto. The Warrant Agent shall not be responsible for any failure of the Company to make any
cash payment or to issue, transfer or deliver any shares of Common Stock or stock certificates upon
the surrender of any Warrant Certificate for the purpose of exercise or upon any adjustment
pursuant to Article IV, or to comply with any of the covenants of the Company contained in Article
IV.




          Section 5.03. Individual Rights of Warrant Agent. The Warrant Agent and any
stockholder, director, officer or employee of the Warrant Agent may buy, sell or deal in any of the
Warrants or other securities of the Company or its affiliates or become pecuniarily interested in
transactions in which the Company or its affiliates may be interested, or contract with or lend
money to the Company or its affiliates or otherwise act as fully and freely as though it were not
the Warrant Agent under this Agreement. Nothing herein shall preclude the Warrant Agent from
acting in any other capacity for the Company or for any other legal entity.




          Section 5.04. Warrant Agent’s Disclaimer. The Warrant Agent shall not be responsible
for and makes no representation as to the validity or adequacy of this Agreement or the Warrant
Certificates and it shall not be responsible for any statement in this Agreement or the Warrant
Certificates other than its countersignature thereon.




          Section 5.05. Compensation and Indemnity. The Company agrees to pay the Warrant
Agent from time to time reasonable compensation for its services as set forth on Schedule A
attached hereto and to reimburse the Warrant Agent upon request for all reasonable out-of-pocket
expenses incurred by it, including the reasonable compensation and expenses of the Warrant Agent’s
agents and counsel. The Company shall indemnify the Warrant Agent, its officers, directors, agents
and counsel against any loss, liability or expense (including reasonable agents’ and attorneys’
fees and expenses) incurred by it without gross negligence, willful misconduct or bad faith on its
part arising out of or in connection with the acceptance or performance of its duties under this
Agreement. The Warrant Agent shall notify the Company promptly of any claim for which it may seek
indemnity. The Company need not reimburse any expense or indemnify against any loss or liability
incurred by the Warrant Agent through willful misconduct, gross negligence or bad faith. The
Company’s payment obligations pursuant to this Section 5.05 shall survive the termination of this
Agreement.




          To secure the Company’s payment obligations under this Agreement, the Warrant Agent shall have
a lien prior to the Holders on all money or property held or collected by the Warrant Agent.




          Section 5.06. Successor Warrant Agent.




20









 





          (a) The Company to Provide and Maintain Warrant Agent. The Company agrees for the
benefit of the Holders that there shall at all times be a Warrant Agent hereunder until all the
Warrants have been exercised or cancelled or are no longer exercisable. Any Warrant Agent must be
a bank or trust company authorized under the laws of the jurisdiction of its organization to
exercise corporate trust powers to qualify as the Warrant Agent hereunder.




          (b) Resignation and Removal. The Warrant Agent may at any time resign by giving
written notice to the Company of such intention on its part, specifying the date on which its
desired resignation shall become effective; provided, however, that such date shall not be less
than 60 days after the date on which such notice is given unless the Company otherwise agrees. The
Warrant Agent hereunder may be removed at any time by the filing with it of an instrument in
writing signed by or on behalf of the Company and specifying such removal and the date when it
shall become effective, which date shall not be less than 60 days after such notice is given unless
the Warrant Agent otherwise agrees. Any removal under this Section 5.06 shall take effect upon the
appointment by the Company as hereinafter provided of a successor Warrant Agent (which shall be a
bank or trust company authorized under the laws of the jurisdiction of its organization to exercise
corporate trust powers) and the acceptance of such appointment by such successor Warrant Agent.




          (c) The Company To Appoint Successor. In the event that at any time the Warrant Agent
shall resign, or shall be removed, or shall become incapable of acting, or shall be adjudged
bankrupt or insolvent, or shall commence a voluntary case under the Federal bankruptcy laws, as now
or hereafter constituted, or under any other applicable U.S. Federal or state bankruptcy,
insolvency or similar law or shall consent to the appointment of or taking possession by a
receiver, custodian, liquidator, assignee, trustee, sequestrator (or other similar official) of the
Warrant Agent or its property or affairs, or shall make an assignment for the benefit of creditors,
or shall admit in writing its inability to pay its debts generally as they become due, or shall
take corporate action in furtherance of any such action, or a decree or order for relief by a court
having jurisdiction in the premises shall have been entered in respect of the Warrant Agent in an
involuntary case under the Federal bankruptcy laws, as now or hereafter constituted, or any other
applicable Federal or state bankruptcy, insolvency or similar law, or a decree or order by a court
having jurisdiction in the premises shall have been entered for the appointment of a receiver,
custodian, liquidator, assignee, trustee, sequestrator (or similar official) of the Warrant Agent
or of its property or affairs, or any public officer shall take charge or control of the Warrant
Agent or of its property or affairs for the purpose of rehabilitation, conservation, winding up or
liquidation, a successor Warrant Agent, qualified as aforesaid, shall be appointed by the Company
by an instrument in writing, filed with the successor Warrant Agent. In the event that a successor
Warrant Agent is not appointed by the Company, a successor Warrant Agent, qualified as aforesaid,
shall be appointed by the Warrant Agent or the Warrant Agent shall petition a court to appoint a
successor Warrant Agent. Upon the appointment as aforesaid of a successor Warrant Agent and
acceptance by the successor Warrant Agent of such appointment, the Warrant Agent shall cease to be
Warrant Agent hereunder; provided, however, that in the event of the resignation of the Warrant
Agent under this subsection (c), such resignation shall be effective on the earlier of (i) the date
specified in the Warrant Agent’s notice of resignation and (ii) the appointment and acceptance of a
successor Warrant Agent hereunder.




21









 





          (d) Successor To Expressly Assume Duties. Any successor Warrant Agent appointed
hereunder shall execute, acknowledge and deliver to its predecessor and to the Company an
instrument accepting such appointment hereunder, and thereupon such successor Warrant Agent,
without any further act, deed or conveyance, shall become vested with all the rights and
obligations of such predecessor with like effect as if originally named as Warrant Agent hereunder,
and such predecessor, upon payment of its charges and disbursements then unpaid, shall thereupon
become obligated to transfer, deliver and pay over, and such successor Warrant Agent shall be
entitled to receive, all monies, securities and other property on deposit with or held by such
predecessor, as Warrant Agent hereunder.




          (e) Successor by Merger. Any corporation into which the Warrant Agent hereunder may
be merged or consolidated, or any corporation resulting from any merger or consolidation to which
the Warrant Agent shall be a party, or any corporation to which the Warrant Agent shall sell or
otherwise transfer all or substantially all of its assets and business, shall be the successor
Warrant Agent under this Agreement without the execution or filing of any paper or any further act
on the part of any of the parties hereto; provided, however, that it shall be qualified as
aforesaid.




ARTICLE VI




MISCELLANEOUS



          Section 6.01. Persons Benefiting. Nothing in this Agreement is intended or shall be
construed to confer upon any Person other than the Company, the Warrant Agent and the Holders any
right, remedy or claim under or by reason of this Agreement or any part hereof.




          Section 6.02. Rights of Holders. Except as expressly provided in this Agreement,
Holders of unexercised Warrants are not entitled to (i) receive dividends or other distributions,
(ii) receive notice of or vote at any meeting of the stockholders, (iii) consent to any action of
the stockholders, (iv) receive notice of any other proceedings of the Company, (v) exercise any
preemptive right or (vi) exercise any other rights whatsoever as stockholders of the Company.




          Section 6.03. Amendment. This Agreement may be amended by the parties hereto without
the consent of any Holder for the purpose of (a) curing any ambiguity, (b) curing, correcting or
supplementing any defective provision contained herein or (c) adding or changing any other
provisions with respect to matters or questions arising under this Agreement as the Company and the
Warrant Agent may deem necessary or desirable (including without limitation any addition or
modification to provide for compliance with the transfer restrictions set forth herein); provided,
however, that such action shall not adversely affect the rights of any of the Holders. Any
amendment or supplement to this Agreement that has an adverse effect on the interests of the
Holders shall require the written consent of the Holders of a majority of the then outstanding
Warrants. The consent of each Holder affected shall be required for any amendment pursuant to
which (i) the Exercise Price would be increased, (ii) the number of Warrant Shares issuable upon
exercise of Warrants would be decreased (other than pursuant to adjustments provided for herein),
(iii) the Exercise Period would be decreased or (iv) any other material change is made that
adversely affects the rights of any Holder. In determining whether the Holders of the required
number of Warrants have concurred in any direction, waiver or consent,




22









 




Warrants owned by the Company or by any Person directly or indirectly controlling or
controlled by or under direct or indirect common control with the Company shall be disregarded and
deemed not to be outstanding, except that, for the purpose of determining whether the Warrant Agent
shall be protected in relying on any such direction, waiver or consent, only Warrants which the
Warrant Agent knows are so owned shall be so disregarded. Also, subject to the foregoing, only
Warrants outstanding at the time shall be considered in any such determination.




          Section 6.04. Notices. Any notice or communication shall be in writing and delivered
(i) in Person, (ii) by first-class mail, (iii) by facsimile transmission with telephonic
confirmation or (iv) by registered or certified mail, postage prepaid, return receipt requested,
addressed as follows:





if to the Company:




Orchid Island Capital, Inc.

3305 Flamingo Drive

Vero Beach, Florida 32963

Facsimile: (772) 231-2896

Attention: Robert E. Cauley




if to the Warrant Agent:




Continental
Stock Transfer & Trust Company [ ]

Telephone: [ ]

Facsimile: [ ]

Attention: [ ]



          The Company or the Warrant Agent by notice to the other may designate additional or different
addresses for subsequent notices or communications.




          Any notice or communication mailed to a Holder shall be mailed to the Holder at the Holder’s
address as it appears on the Certificate Register and shall be sufficiently given if so mailed
within the time prescribed.




          Failure to mail a notice or communication to a Holder or any defect in it shall not affect its
sufficiency with respect to other Holders. If a notice or communication is mailed in the manner
provided above, it is duly given, whether or not the addressee receives it.




          Section 6.05. Governing Law. The laws of the State of New York shall govern this
Agreement and the Warrant Certificates.




          Section 6.06. Successors. All agreements of the Company in this Agreement and the
Warrant Certificates shall bind its successors. All agreements of the Warrant Agent in this
Agreement shall bind its successors.




          Section 6.07. Multiple Originals, Counterparts. The parties may sign any number of
copies of this Agreement and may be executed in any number of counterparts, each of which




23









 




shall be deemed to be an original as against any party whose signature appears thereon, and
all of which shall together constitute one and the same instrument. This Agreement shall become
binding when one or more counterparts of this Agreement, individually or taken together, shall bear
the signatures of all of the parties reflected hereon as the signatories. One signed copy is
enough to prove this Agreement.




          Section 6.08. Table of Contents. The table of contents and headings of the Articles
and Sections of this Agreement have been inserted for convenience of reference only, are not
intended to be considered a part hereof and shall not modify or restrict any of the terms or
provisions hereof.




          Section 6.09. Severability. The provisions of this Agreement are severable, and if
any clause or provision shall be held invalid, illegal or unenforceable in whole or in part in any
jurisdiction, then such invalidity or unenforceability shall affect in that jurisdiction only such
clause or provision, or part thereof, and shall not in any manner affect such clause or provision
in any other jurisdiction or any other clause or provision of this Agreement in any jurisdiction.




[Signatures Appear on the Following Page.]




24









 





          IN WITNESS WHEREOF, the parties have caused this Warrant Agreement to be duly executed as of
the date first written above.




	 	 	 	 	 	 	 

	 	 	ORCHID ISLAND CAPITAL, INC.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 

Name: Robert E. Cauley
	 	 
	 

	 	 	 	Title: Chief Executive Officer and President	 	 
	 
	 	 	 	 	 	 
	 	 	CONTINENTAL STOCK TRANSFER & TRUST COMPANY,

as Warrant Agent,	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 

Name:
	 	 
	 

	 	 	 	Title:	 	 
















 





EXHIBIT A




[FORM OF FACE OF WARRANT CERTIFICATE]







     THE WARRANTS REPRESENTED BY THIS CERTIFICATE AND THE SHARES OF COMMON STOCK UNDERLYING THE
WARRANTS ARE SUBJECT TO RESTRICTIONS ON BENEFICIAL AND CONSTRUCTIVE OWNERSHIP AND TRANSFER. NO
WARRANT MAY BE EXERCISED OR TRANSFERRED IF IT WOULD CAUSE THE HOLDER OR THE PURPORTED TRANSFEREE TO
BENEFICIALLY OR CONSTRUCTIVELY OWN SHARES OF COMMON STOCK OF ORCHID ISLAND CAPITAL, INC. (THE
“CORPORATION”) IN EXCESS OF THE STOCK OWNERSHIP LIMIT OR EXCEPTED HOLDER LIMIT (EACH AS DEFINED IN
THE CHARTER OF THE CORPORATION).
ANY TRANSFER OF A WARRANT THAT WOULD RESULT IN A VIOLATION OF THE PRECEDING SENTENCE SHALL BE  VOID
AB INITIO, AND THE INTENDED TRANSFEREE SHALL
ACQUIRE NO RIGHTS IN SUCH WARRANT.
SUBJECT TO CERTAIN FURTHER RESTRICTIONS AND EXCEPT AS EXPRESSLY
PROVIDED IN THE CHARTER OF THE CORPORATION, (I) NO PERSON MAY BENEFICIALLY OR CONSTRUCTIVELY OWN
SHARES OF ANY CLASS OR SERIES OF THE CAPITAL STOCK OF THE CORPORATION IN EXCESS OF NINE AND
EIGHT-TENTHS PERCENT (9.8%) IN VALUE OR IN NUMBER OF SHARES, WHICHEVER IS MORE RESTRICTIVE, OF ANY
CLASS OR SERIES OF CAPITAL STOCK OF THE CORPORATION UNLESS SUCH PERSON IS AN EXCEPTED HOLDER (IN
WHICH CASE THE EXCEPTED HOLDER LIMIT SHALL BE APPLICABLE); (II) NO PERSON MAY BENEFICIALLY OR
CONSTRUCTIVELY OWN SHARES OF CAPITAL STOCK THAT WOULD RESULT IN THE CORPORATION BEING “CLOSELY
HELD” UNDER SECTION 856(H) OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE “CODE”) (WITHOUT
REGARD TO WHETHER THE OWNERSHIP INTEREST IS HELD DURING THE LAST HALF OF THE TAXABLE YEAR) OR WOULD
OTHERWISE CAUSE THE CORPORATION TO FAIL TO QUALIFY AS A REIT AND (III) NO PERSON MAY TRANSFER
SHARES OF CAPITAL STOCK THAT WOULD RESULT IN THE CAPITAL STOCK OF THE CORPORATION BEING
BENEFICIALLY OWNED BY LESS THAN ONE HUNDRED (100) PERSONS (DETERMINED WITHOUT REFERENCE TO ANY
RULES UNDER THE PRINCIPLES OF SECTION 856(a)(5) OF THE CODE). ANY PERSON WHO BENEFICIALLY OR
CONSTRUCTIVELY OWNS OR ATTEMPTS TO BENEFICIALLY OR CONSTRUCTIVELY OWN SHARES OF CAPITAL STOCK WHICH
CAUSES OR WILL CAUSE A PERSON TO BENEFICIALLY OR CONSTRUCTIVELY OWN SHARES OF CAPITAL STOCK IN
EXCESS OR IN VIOLATION OF THE ABOVE LIMITATIONS MUST IMMEDIATELY NOTIFY THE CORPORATION. IF ANY OF
THE RESTRICTIONS ON TRANSFER OR OWNERSHIP IN (I) AND (II) ABOVE ARE VIOLATED, THE SHARES OF CAPITAL
STOCK REPRESENTED HEREBY WILL BE AUTOMATICALLY TRANSFERRED TO A TRUSTEE OF A CHARITABLE TRUST FOR
THE BENEFIT OF ONE OR MORE CHARITABLE BENEFICIARIES. IF, NOTWITHSTANDING THE FOREGOING SENTENCE, A
TRANSFER TO THE CHARITABLE TRUST IS NOT EFFECTIVE FOR ANY REASON TO PREVENT A VIOLATION OF THE
RESTRICTIONS ON TRANSFER AND OWNERSHIP IN (I) AND (II) ABOVE, THEN THE ATTEMPTED TRANSFER OF
THAT NUMBER OF SHARES OF CAPITAL STOCK THAT OTHERWISE WOULD CAUSE ANY PERSON TO VIOLATE SUCH
RESTRICTIONS SHALL BE VOID AB INITIO. IF THE RESTRICTION IN (III) ABOVE IS
VIOLATED, ANY SUCH TRANSFERS WILL BE VOID AB INITIO. IN ADDITION, THE CORPORATION
MAY REDEEM SHARES UPON THE TERMS AND

















 




CONDITIONS SPECIFIED BY THE BOARD OF DIRECTORS IN ITS SOLE DISCRETION IF THE BOARD OF DIRECTORS
DETERMINES THAT OWNERSHIP OR A TRANSFER OR OTHER EVENT MAY VIOLATE THE RESTRICTIONS DESCRIBED
ABOVE. ALL CAPITALIZED TERMS IN THIS PARAGRAPH HAVE THE MEANINGS DEFINED IN THE CHARTER OF THE
CORPORATION, AS THE SAME MAY BE AMENDED FROM TIME TO TIME, A COPY OF WHICH, INCLUDING THE
RESTRICTIONS ON TRANSFER AND OWNERSHIP, WILL BE FURNISHED TO EACH HOLDER OF CAPITAL STOCK OF THE
CORPORATION ON REQUEST AND WITHOUT CHARGE. REQUESTS FOR SUCH A COPY MAY BE DIRECTED TO THE
SECRETARY OF THE CORPORATION AT ITS PRINCIPAL OFFICE. KEEP THIS CERTIFICATE IN A SAFE PLACE. IF
IT IS LOST, STOLEN OR DESTROYED, THE CORPORATION WILL REQUIRE A BOND OF INDEMNITY AS A CONDITION TO
THE ISSUANCE OF A REPLACEMENT CERTIFICATE.




     THE WARRANTS REPRESENTED BY THIS CERTIFICATE AND THE SHARES OF COMMON STOCK UNDERLYING THE
WARRANTS HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “1933 ACT”), OR
THE SECURITIES LAWS OF ANY STATE. THE HOLDER OF THIS SECURITY AND ANY SECURITY UNDERLYING THIS
SECURITY AGREES FOR THE BENEFIT OF THE COMPANY THAT (A) THIS SECURITY AND ANY SECURITY UNDERLYING
THIS SECURITY MAY BE OFFERED, RESOLD, PLEDGED OR OTHERWISE TRANSFERRED (1) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT, (2) PURSUANT TO AN EXEMPTION FROM REGISTRATION
UNDER THE SECURITIES ACT AND IN THE CASE OF (2) IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS
OF ANY STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION OR (3) TO THE COMPANY OR A
SUBSIDIARY THEREOF, AND (B) THE HOLDER OF THIS SECURITY AND ANY SECURITY UNDERLYING THIS SECURITY
WILL, AND EACH SUBSEQUENT HOLDER HEREOF AND THEREOF IS REQUIRED TO, NOTIFY ANY PURCHASER OF THIS
SECURITY AND ANY SECURITY UNDERLYING THIS SECURITY FROM IT OF THE RESALE RESTRICTIONS REFERRED TO
IN (A) ABOVE.



     THE CORPORATION WILL FURNISH TO ANY STOCKHOLDER, ON REQUEST AND WITHOUT CHARGE, A FULL
STATEMENT OF THE INFORMATION REQUIRED BY SECTION 2-211(B) OF THE CORPORATIONS AND ASSOCIATIONS
ARTICLE OF THE ANNOTATED CODE OF MARYLAND WITH RESPECT TO THE DESIGNATIONS AND ANY PREFERENCES,
CONVERSION AND OTHER RIGHTS, VOTING POWERS, RESTRICTIONS, LIMITATIONS AS TO DIVIDENDS AND OTHER
DISTRIBUTIONS, QUALIFICATIONS, AND TERMS AND CONDITIONS OF REDEMPTION OF THE STOCK OF EACH CLASS
WHICH THE CORPORATION HAS AUTHORITY TO ISSUE AND, IF THE CORPORATION IS AUTHORIZED TO ISSUE ANY
PREFERRED OR SPECIAL CLASS IN SERIES, (I) THE DIFFERENCES IN THE RELATIVE RIGHTS AND PREFERENCES
BETWEEN THE SHARES OF EACH SERIES TO THE EXTENT SET, AND (II) THE AUTHORITY OF THE BOARD OF
DIRECTORS TO SET SUCH RIGHTS AND PREFERENCES OF SUBSEQUENT SERIES. THE FOREGOING SUMMARY DOES NOT
PURPORT TO BE COMPLETE AND IS SUBJECT TO AND QUALIFIED IN ITS ENTIRETY



2









 




BY REFERENCE TO THE CHARTER OF THE CORPORATION, A COPY OF WHICH WILL BE SENT WITHOUT CHARGE TO EACH
STOCKHOLDER WHO SO REQUESTS. SUCH REQUEST MUST BE MADE TO THE SECRETARY OF THE CORPORATION AT ITS
PRINCIPAL OFFICE.




     THE WARRANTS EVIDENCED BY THIS CERTIFICATE SHALL EXPIRE ON THE CLOSE OF BUSINESS ON [ ],
2018.



3









 





	 	 	 

	Warrant Certificate No.:

	 	CUSIP No:
	Number of Warrants:
	 	 
	Date:
	 	 






WARRANTS TO PURCHASE COMMON STOCK OF

ORCHID ISLAND CAPITAL, INC.




          THIS CERTIFIES THAT                     ,      or its registered assigns, is the registered holder of the number of
Warrants set forth above (the “Warrants”). Each Warrant entitles the holder thereof (the
“Holder”), at its option and subject to the provisions contained herein and in the Warrant
Agreement referred to below, to purchase from ORCHID ISLAND CAPITAL, INC., a Maryland corporation
(“the Company”), one share of Common Stock, $0.01 par value per share, of the Company (the “Common
Stock”) at an exercise price of $[ ] per share (the “Exercise Price”). This Warrant Certificate
shall terminate and become void as of the close of business on [ ], 2018. The number of shares
issuable upon exercise of the Warrants and the Exercise Price per share shall be subject to
adjustment from time to time as set forth in the Warrant Agreement.




          This Warrant Certificate is issued under and in accordance with a Warrant Agreement dated as
of [ ], 2011 (the “Warrant Agreement”), between the Company and Continental Stock Transfer &
Trust Company (the “Warrant Agent,” which term includes any successor Warrant Agent under the
Warrant Agreement), and is subject to the terms and provisions contained in the Warrant Agreement,
to all of which terms and provisions the Holder of this Warrant Certificate consents by acceptance
hereof. The Warrant Agreement is hereby incorporated herein by reference and made a part hereof.
Reference is hereby made to the Warrant Agreement for a full statement of the respective rights,
limitations of rights, duties and obligations of the Company, the Warrant Agent and the Holders of
the Warrants. Capitalized terms used but not defined herein shall have the meanings ascribed
thereto in the Warrant Agreement. A copy of the Warrant Agreement may be obtained for inspection
by the Holder hereof upon written request to the Warrant Agent at [ ], Attention: [ ].




          Subject to the terms of the Warrant Agreement, the Warrants may be exercised in whole or in
part by presentation of this Warrant Certificate with the Election to Purchase attached hereto duly
executed and with the simultaneous payment of the Exercise Price in cash (subject to adjustment) to
the Warrant Agent for the account of the Company at the office of the Warrant Agent. Payment of
the Exercise Price in cash shall be made by certified or official bank check payable to the order
of the Company or by wire transfer of funds to an account designated by the Company for such
purpose.




          As provided in the Warrant Agreement and subject to the terms and conditions therein set
forth, the Warrants shall be exercisable at any time and from time to time on any Business Day
beginning on [ ], 2011 until the close of business on [ ]; provided, however, that Holders of
Warrants will be able to exercise their Warrants only if the exercise of such Warrants is exempt
from the registration requirements of the Securities Act of 1933 and such securities are qualified
for sale or exempt from qualification under the applicable securities laws of the states or other
jurisdictions in which such Holders reside.




4









 





          In the event of a Combination, the Holder hereof will be entitled to receive upon exercise of
the Warrants the kind and amount of shares of Capital Stock or other securities or other property
as the Holder would have received had the Holder exercised its Warrants immediately prior to such
Combination; provided, however, that in the event that, in connection with such Combination,
consideration to holders of Common Stock in exchange for their shares is payable solely in cash or
in the event of the dissolution, liquidation or winding-up of the Company, the Holder hereof will
be entitled to receive such cash distributions on an equal basis with the holders of Common Stock
or other securities issuable upon exercise of the Warrants, as if the Warrants had been exercised
immediately prior to such Combination, less the Exercise Price, if positive. In no event shall
Holders of Warrants be required to pay any amount to such surviving or acquiring Person or the
Company.




          As provided in the Warrant Agreement, the number of shares of Common Stock issuable upon the
exercise of the Warrants and the Exercise Price are subject to adjustment upon the happening of
certain events.




          The Company may require payment of a sum sufficient to pay all taxes, assessments or other
governmental charges in connection with the transfer or exchange of the Warrant Certificates
pursuant to Section 2.04(c) of the Warrant Agreement, but not for any exchange or original issuance
(not involving a transfer) with respect to temporary warrant Certificates, the exercise of the
Warrants or the Warrant Shares.




          Upon any partial exercise of the Warrants, there shall be countersigned and issued to the
Holder hereof a new Warrant Certificate representing those Warrants which were not exercised. This
Warrant Certificate may be exchanged at the office of the Warrant Agent by presenting this Warrant
Certificate properly endorsed with a request to exchange this Warrant Certificate for other Warrant
Certificates evidencing an equal number of Warrants. At the option of the Company, no fractional
Warrant Shares will be issued upon the exercise of the Warrants, but the Company shall pay, in lieu
of issuing fractional shares, an amount in cash equal to the Current Market Value per Warrant Share
on the day immediately preceding the date the Warrant is exercised, multiplied by the fraction of a
Warrant Share that would be issuable on the exercise of any Warrant.




          All shares of Common Stock issuable by the Company upon the exercise of the Warrants shall,
upon such issue, be duly and validly issued and fully paid and non-assessable.




          The holder in whose name the Warrant Certificate is registered may be deemed and treated by
the Company and the Warrant Agent as the absolute owner of the Warrant Certificate for all purposes
whatsoever, and neither the Company nor the Warrant Agent shall be affected by notice to the
contrary.




          The Warrants do not entitle any Holder hereof to any of the rights of a stockholder of the
Company.




          This Warrant Certificate shall not be valid or obligatory for any purpose until it shall have
been countersigned by the Warrant Agent.




5









 





	 	 	 	 	 	 	 

	 	 	ORCHID ISLAND CAPITAL, INC.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 

Name:
	 	 
	 

	 	 	 	Title:	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 

Name:
	 	 
	 

	 	 	 	Title:	 	 





DATED:



Countersigned:




CONTINENTAL STOCK TRANSFER & TRUST COMPANY,

as Warrant Agent,




	 	 	 	 	 

	By:
	 	 	 	 
	 

	 	 

Authorized Signatory
	 	 






6









 





EXHIBIT B




FORM OF ELECTION TO PURCHASE WARRANT SHARES

(to be executed only upon exercise of Warrants)




ORCHID ISLAND CAPITAL, INC.




          The undersigned hereby irrevocably elects to exercise Warrants to acquire shares of Common
Stock, par value $0.01 per share, of ORCHID ISLAND CAPITAL, INC., at an exercise price of $[ ]
per share of Common Stock, and otherwise on the terms and conditions specified in the within
Warrant Certificate and the Warrant Agreement therein referred to, surrenders this Warrant
Certificate and all right, title and interest therein to ORCHID ISLAND CAPITAL, INC. and directs
that the shares of Common Stock deliverable upon the exercise of such Warrants be registered or
placed in the name and at the address specified below and delivered thereto.



Date:__________________, ____




	 	 	 	 	 

	 

	 	
 

(Signature of Owner)
	(1)	 
	 
	 	 	 	 
	 

	 	 

(Street Address)
	 	 
	 
	 	 	 	 
	 

	 	 

(City)          (State)          
                    
(Zip Code)
	 	 
	 
	 	 	 	 
	 

	 	Signature Guaranteed by:	 	 
	 
	 	 	 	 
	 

	 	 

	 	 








 




			
	1.	 	The signature must correspond with the name as written
upon the face of the within Warrant Certificate in every particular, without
alteration or enlargement or any change whatever, and must be guaranteed by a
national bank or trust company or by a member firm of any national securities
exchange.




7









 









Securities and/or check to be issued to:



Please insert social security or identifying number:



     Name:



     Street Address:



     City, State and Zip Code:


A new Warrant Certificate evidencing any unexercised Warrants evidenced by the within Warrant
Certificate is to be issued to:




     Please insert social security or identifying number:



     Name:



     Street Address:



     City, State and Zip Code:



8









 





EXHIBIT C




CERTIFICATE TO BE DELIVERED IN CONNECTION

WITH TRANSFER OF WARRANTS



          In connection with any transfer of any of the Warrants evidenced by this Warrant Certificate,
the undersigned certifies and represents and warrants to Orchid Island Capital, Inc. (the “Company”) and
Continental Stock Transfer & Trust Company, as Warrant Agent, that the transfer of such Warrants
does not require registration under the Securities Act of 1933, as amended (the “Securities Act”),
because such Warrants are being transferred pursuant to an exemption from registration under the
Securities Act.








          Notwithstanding
anything to the contrary contained in the Warrant Agreement, no Warrant may be exercised or transferred if it would cause the holder or
purported transferee to Beneficially Own or Constructively Own, within the meaning of the Company’s Articles of Amendment and Restatement,
outstanding shares of Common Stock in excess of the Stock Ownership
Limit or Excepted Holder Limit. Any Transfer of a Warrant, that would
result in a violation of the preceding sentence shall be void ab initio, and the intended transferee shall acquire no rights in such Warrant.








          Unless the undersigned has made the representation set forth above, the Warrant Agent will
refuse to register any of the Warrants evidenced by this Warrant Certificate in the name of any
person other than the registered holder thereof; provided, however, that if box (2) is checked, the
Warrant Agent and the Company may require, prior to registering any such transfer of the Warrants,
such legal opinions, additional certifications and other information as the Company has reasonably
requested to confirm that such transfer is being made pursuant to an exemption from, or in a
transaction not subject to, the registration requirements of the Securities Act.




	 	 	 	 	 	 	 

	 

	 	 	 	 

Signature
	 	 
	 
	 	 	 	 	 	 
	Signature Guarantee:
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 

Signature must be guaranteed

	 	 
	 	 

Signature
	 	 







9