EXHIBIT 10.30
Neither this Warrant nor the shares of Common Stock to be issued upon exercise
hereof have been registered under the Securities Act (as defined below), and
this Warrant has been, and the shares of Common Stock to be issued upon exercise
hereof will be, acquired for investment and not with a view to, or for release
in connection with, any distribution thereof. No such sale or other disposition
may be made without an effective registration statement under the Securities Act
or unless an exemption from such a registration is available.
Warrant No. 98-C
WARRANT
to Purchase
Common Stock
of
AUTOBOND ACCEPTANCE CORPORATION
THIS IS TO CERTIFY THAT Xxxxxxx Investments Services, Inc.
("Warrantholder"), is entitled, at any time and from time to time from (and
including) the Start Date (as defined below) until 5:00 P.M., New York City
time, on the Warrant Expiration Date (as defined below), to purchase from
AUTOBOND ACCEPTANCE CORPORATION, a Texas corporation (the "Company"), 65,313
Shares, each one of which represents initially one share of Common Stock
(adjusted as provided below), in whole or in part, at the Purchase Price Per
Share set forth herein, all on the terms and conditions and pursuant to the
provisions hereinafter provided.
SECTION 1. DEFINITIONS. The terms defined in this Section 1,
whenever used in this Warrant, shall, unless the context otherwise requires,
have the respective meanings hereinafter specified.
"Additional Shares of Nonpreferred Stock" means all shares of
Nonpreferred Stock issued by the Company after the date hereof, other than the
Warrant Stock.
"Affiliate" has the meaning attributed to it under the Securities
Act.
"Board" means the Board of Directors of the Company.
"Business Day" means a day other than a Saturday, a Sunday or a
day on which commercial banks in the State of Texas or Commonwealth of
Massachusetts are permitted or required by law to close.
"Commission" means the Securities and Exchange Commission or any
other governmental body then administering the Securities Act.
"Common Stock" means the Company's authorized voting Common
Stock, no par value, as constituted on the date of original issuance of this
Warrant, or at the Warrantholder's option, the Company's nonvoting Common Stock,
and any shares of stock into which such class of Common Stock may thereafter be
changed, or that may be issued in respect of, in exchange for, or in
substitution for, such Common Stock by reason of any stock splits, stock
dividends, distributions, mergers, consolidations or other like events and shall
also include stock of the Company of any other class issued to the holders of
shares of Common Stock upon any reclassification thereof.
"Company" means AutoBond Acceptance Corporation., a Texas
corporation, and any successor corporation whether by merger or otherwise.
"Convertible Securities" means evidences of indebtedness, shares
of stock or other securities which are convertible into or exchangeable for
Additional Shares of Nonpreferred Stock, either immediately or upon the arrival
of a specified date or the happening of a specified event.
"Current Market Price" per share of Common Stock for the purposes
of any provision of this Agreement at the date herein specified shall mean, for
any date after the initial public offering of the Company's Common Stock:
(i) if the Common Stock is listed on a domestic exchange or
quoted on NASDAQ, the average of the daily market prices of the Common
Stock over a period of 5 consecutive trading days prior to the day on
which Current Market Price is being determined.
As used in this clause (i), "market price" for each such Business
Day shall be the average of the closing prices on such day of the Common
Stock on all domestic primary national securities exchanges on which the
Common Stock is then listed, or, if there shall have been no sales on
any such exchange on such day, the average of the highest bid and lowest
asked prices on all such exchanges at the end of such day, or if the
Common Stock shall not be so listed, the average of the representative
bid and asked prices at the end of such Business Day as reported by
NASDAQ; or
(ii) if the Common Stock shall not be listed on any domestic
exchange or quoted on NASDAQ, then the Current Market Price shall be
Fair Market Value (of the Company as a whole) divided by the number of
shares of Common Stock (on a fully diluted basis) outstanding;
provided, however, that in the case of (i) a primary underwritten public
offering at a price in excess of the then current exercise price, the
Current Market Price shall be deemed the price to the underwriter set
forth in the prospectus, and (ii) stock options issued to employees and
directors pursuant to a plan adopted by the Company's Board of
Directors, the Current Market Price shall be the exercise price of such
options.
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"Current Warrant Price" per share of Common Stock for the purpose
of any provision of this Warrant at the date herein specified, shall mean the
product of (i) the Purchase Price Per Share in effect on such date, and (ii) the
number of Shares for which this Warrant is exercisable on such date.
"date hereof", "date of original issuance of this Warrant" and
similar references mean the date identified at the foot of this Warrant beside
the name of the Company.
"Exchange Act" means the Securities Exchange Act of 1934
(including any rules and regulations promulgated thereunder), as the same shall
be amended and in effect from time to time.
"Fair Market Value" means the highest price for which the Company
and its subsidiaries could be sold as a going concern in an arm's length
transaction to an independent third party within 12 months after the Valuation
Date (as defined below), as determined by agreement or appraisal in accordance
with the procedures described below.
Within ten (10) calendar days after the date of the occurrence of
any event requiring the determination of Fair Market Value pursuant to this
Warrant (a "Valuation Date"), the Company on the one hand, and the Majority
Holders on the other hand, shall each designate a representative and such two
(2) representatives will meet and use their best efforts to reach an agreement
on the Company's Fair Market Value. If such representatives have been unable to
reach such agreement, the Company on the one hand, and the Majority Holders on
the other hand, will use their best efforts to agree within 20 calendar days
after the Valuation Date upon the selection of an independent appraiser
experienced in valuing businesses of this type. Such appraiser will have 20
calendar days in which to determine the Company's Fair Market Value, and its
determination thereof will be final and binding on all parties concerned. If the
Company and the Majority Holders are unable to reach an agreement as to an
independent appraiser within 20 calendar days after the Valuation Date, the
Company on the one hand, and the Majority Holders on the other hand, will each
within five (5) calendar days thereafter select one independent appraiser
experienced in valuing businesses of this type. The Company, and the Majority
Holders, will each cause the appraiser selected by them respectively to
determine independently the Company's Fair Market Value within 20 calendar days
after their appointment. If the lesser of the two (2) appraised values (the "Low
Value") exceeds or is equal to 90% of the greater of the two (2) appraised
values (the "High Value"), the Company's Fair Market Value will be the average
of the two (2) appraisals. If the Low Value is less than 90% of the High Value,
the two (2) appraisers will themselves appoint a third independent appraiser
experienced in valuing businesses of this type within five (5) calendar days
after the two (2) appraisals have been rendered. Such third appraiser will have
20 calendar days in which to determine independently the Company's Fair Market
Value. The Company's Fair Market Value in such case will be the mean of the two
(2) appraised values which are closest to each other; provided, however, that in
the event the high and the low appraised values are equidistant from the middle
such value, the middle such value shall be deemed the Fair Market Value. The
Company will provide each appraiser with all information about the Company and
its Subsidiaries which any
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such appraiser reasonably deems necessary for determining the Fair Market Value.
The expenses of the appraisal process will be paid by the Company.
"Financial Statement" means the annual audited financial
statements, prepared in accordance with GAAP, which the Company provides to its
shareholders.
"GAAP" means generally accepted accounting principles.
"Holder" means a holder of this Warrant.
"Majority Holders" means the holders of Warrants entitling the
holders thereof to exercise a majority of the Warrant Stock.
"NASDAQ" means, the National Association of Securities Dealers
Automated Quotation System.
"Nonpreferred Stock" means the Common Stock and shall also
include all stock of the Company of any other class unless senior in respect of
the right to participate in dividends and distributions of assets.
"Permitted Transferee" means (a) an "accredited investor" within
the meaning of Rule 501 under the Securities Act, (b) a "qualified institutional
buyer" within the meaning of Rule 144A under the Securities Act, or (c) up to
thirty-five employees (or their spouses and immediate relatives) of Xxxxxxx
Investments Services, Inc., who may hold directly or through a partnership or
trust.
"Person" means any individual, corporation, partnership,
association, trust, joint venture or other entity or organization, including a
government or political subdivision or an agency or instrumentality thereof.
"Purchase Price Per Share" means the price at which the Holder is
entitled to purchase a Share from the Company pursuant to this Warrant, such
price being $6.30 per Share, subject to adjustment as provided for herein.
"Redemption Date" has the meaning set forth in Section 8.1.
"Securities Act" means the Securities Act of 1933 (including any
rules and regulations promulgated thereunder), as the same shall be amended and
in effect from time to time.
"Share" means one share of Common Stock, as such stock was
constituted on the date of original issuance of this Warrant, and thereafter
shall mean such number of shares (including any fractional share) of Common
Stock and other securities, cash or property as shall result from the
adjustments provided for herein, to such one share, specified in Section 4.
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"Start Date" means July 31, 1998.
"Warrant" means this warrant and each warrant issued in
replacement of or substitution herefor or therefor in accordance herewith or
therewith, whether as a result of transfer, division or combination.
"Warrant Expiration Date" means January 30, 2005.
"Warrant Shares" means the Common Stock issuable, from time to
time, upon exercise of the Warrants.
"Warrant Stock" means the shares of Common Stock purchasable by
the Holder upon the exercise of this Warrant.
SECTION 2. EXERCISE OF WARRANT.
A. Manner of Exercise. This Warrant may be exercised at any time
or from time to time from the Start Date until 5:00 P.M., New York City time, on
the Warrant Expiration Date for all or any part of the Shares. In order to
exercise this Warrant, in whole or in part, the Holder shall deliver to the
Company at its office or agency maintained for this purpose pursuant to Section
11: (i) a written notice of the Holder's election to exercise this Warrant,
which notice shall specify the number of Shares to be purchased, (ii) either (a)
a certified or official bank check or checks drawn on a New York Clearing House
bank payable to the order of the Company or (b) an electronic funds transfer of
immediately available funds in an amount equal to the aggregate Purchase Price
Per Share for all Shares as to which this Warrant is exercised. Such notice
shall be in the form of Exhibit A. Upon any exercise of this Warrant, in whole
or in part, the Holder may (instead of the payment described in the preceding
sentence) elect to pay the aggregate Purchase Price Per Share for the number of
Shares to be purchased (collectively, the "Exercise Shares") by surrendering its
rights to a number of Exercise Shares having a Current Market Price immediately
prior to the exercise of this Warrant (based upon the number of shares of Common
Stock for which such Exercise Shares are then exercisable) equal to or greater
than the required aggregate Purchase Price Per Share, in which case the holder
hereof would receive the number of Exercise Shares to which it would otherwise
be entitled upon such exercise, less the surrendered Shares. Upon receipt
thereof, the Company shall, as promptly as practicable, and in any event within
five (5) Business Days thereafter, execute or cause to be executed, and deliver
to the Holder a certificate or certificates representing the aggregate number of
shares of Warrant Stock issuable upon such exercise (i.e., the number of shares
of Common Stock then represented by one Share multiplied by the number of Shares
than being exercised). The stock certificate or certificates so delivered shall
be registered in the name of the Holder or, such other name as shall be
designated in such notice. Unless otherwise specified in such notice, one
certificate representing the aggregate number of shares of Warrant Stock issued
upon such exercise shall be so delivered. This Warrant shall be deemed to have
been exercised and such certificate or certificates shall be deemed to have been
issued, and the Holder or any other person so designated to be named therein
shall be deemed to have become a holder of record of such shares for all
purposes, as of the date such notice, together with such check or checks or
other
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form of payment, and this Warrant are received by the Company as aforesaid. If
this Warrant shall have been exercised and/or surrendered in part, the Company
shall, at the time of delivery of the certificate or certificates representing
Warrant Stock issuable upon such exercise, deliver to or on the order of
the Holder a new Warrant evidencing the right of the Holder to purchase the
unpurchased and/or unsurrendered Shares called for by this Warrant, which new
Warrant shall in all other respects be identical with this Warrant, or, at the
request of the Holder, appropriate notation may be made on this Warrant and the
same returned to the Holder.
B. Payment of Taxes, etc. All shares of Warrant Stock shall be
validly issued, fully paid and non-assessable, and the Company shall pay all
expenses (including any stamp or like taxes) in connection with, or that may be
imposed in respect of, the issue or delivery thereof; provided, however, that
the Holder shall pay all income, franchise and transfer taxes in connection with
such issue and delivery. The Company shall not be required to pay any tax or
other charge imposed in connection with any transfer involved in the issue of
any certificate for shares of Warrant Stock in any name other than that of the
registered Holder of this Warrant (or any Affiliate thereof), and in such case
the Company shall not be required to issue or deliver any stock certificate
until such tax or other charge has been paid or it has been established to the
Company's reasonable satisfaction that no such tax or other charge is due.
SECTION 3. TRANSFER, DIVISION AND COMBINATION. This Warrant
and all rights hereunder are transferable (i) only to Permitted Transferees,
(ii) in whole or in part, and (iii) on the books of the Company to be maintained
for such purpose, upon surrender of this Warrant at the office or agency of the
Company maintained for the purpose pursuant to Section 11, together with a
written assignment (in whole or in part) of this Warrant duly executed by the
Holder or its agent or attorney. Upon surrender the Company shall execute and
deliver a new warrant or warrants in the name of the assignee or assignees
(including, if such assignment is only a partial assignment by the Holder, in
the name of the Holder), and each such warrant shall be identical in form and
substance (including its date) to this Warrant except for the warrant number
(which shall be as determined by the Company), the name of the named holder of
the warrant (if an assignee of the Holder), and the actual number of Shares
(each of which shall be as specified by the Holder), and this Warrant shall
promptly be canceled.
This Warrant may be divided or combined with other Warrants upon
presentation hereof (and thereof, in the case of combination) at the aforesaid
office or agency of the Company, together with a written notice specifying the
names and denominations in which new warrants are to be issued, signed by the
Holder or its agent or attorney. Subject to compliance with the preceding
paragraph as to any transfer which may be involved in such division or
combination, the Company shall execute and deliver a new warrant or warrants in
exchange for the warrant or warrants to be divided or combined in accordance
with such notice.
The Company shall pay all expenses and other charges payable in
connection with the preparation, issuance and delivery of Warrants under this
Section 3. The holder of a Warrant shall pay all taxes (other than any stamp or
like taxes, which shall be paid by the Company) in connection with such issuance
and delivery.
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The Company agrees to maintain, at the office or agency of the
Company maintained for the purpose pursuant to Section 11, books for the
registration and transfer of the Warrant.
SECTION 4. ADJUSTMENT OF SHARES. The number of shares of
Common Stock comprising a Share shall be subject to adjustment from time to time
as set forth in this Section 4.
A. Stock Dividends, Subdivisions and Combinations. In case at any
time or from time to time the Company shall:
(1) take a record of the holders of its Nonpreferred Stock for
the purpose of entitling them to receive a dividend payable in, or other
distribution of, Nonpreferred Stock, or
(2) subdivide its outstanding shares of Nonpreferred Stock into a
larger number of shares of Nonpreferred Stock, or
(3) combine its outstanding shares of Nonpreferred Stock into a
smaller number of shares of Nonpreferred Stock,
then the number of shares of Common Stock comprising a Share immediately after
the happening of any such event shall be adjusted so as to consist of the number
of shares of Common Stock which a record holder of the number of shares of
Common Stock comprising a Share immediately prior to the happening of such event
would own or be entitled to receive after the happening of such event; provided,
however, that in no event shall the Company take any action referred to in
Section 4.A(3) if the effect would be that a share after giving effect thereto
and to any corresponding adjustment of Shares would collectively constitute less
than one share of Common Stock.
B. Issuance of Additional Shares of Nonpreferred Stock. In case
at any time or from time to time the Company shall (except as hereinafter
provided) issue any Additional Shares of Nonpreferred Stock at a price per share
that is lower than the Current Market Price per share of Common Stock on the
date of such issuance, then the number of shares of Common Stock thereafter
comprising a Share shall be adjusted to that number determined by multiplying
the number of shares of Common Stock comprising a Share immediately prior to
such adjustment by a fraction (i) the numerator of which shall be the number of
shares of Nonpreferred Stock outstanding immediately after such issuance of such
shares of Additional Shares of Nonpreferred Stock, and (ii) the denominator of
which shall be an amount equal to the sum of (x) the number of shares of
Nonpreferred Stock outstanding immediately prior to the issuance of such shares
of Additional Shares of Nonpreferred Stock plus (y) the number of shares of
Nonpreferred Stock which the aggregate consideration received by the Company for
the total number of such Additional Shares of Nonpreferred Stock (as determined
in accordance with Section 4.F) so issued would then purchase at the Current
Market Price per share of Common Stock. No adjustment to the number of shares of
Common Stock comprising a Share shall be
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made under this Section 4.B upon the issuance of any Additional Shares of
Nonpreferred Stock which are issued pursuant to the exercise of any warrants or
other subscription or purchase rights or pursuant to the exercise of any
conversion or exchange rights in any Convertible Securities, if any such
adjustment shall previously have been made upon the issuance of such warrants or
other rights or upon the issuance of such Convertible Securities (or upon the
issuance of any warrant or other rights therefor) pursuant to Sections 4.C or D.
C. Issuance of Warrants or Other Rights. In case at any time or
from time to time the Company shall issue any warrants or other rights to
subscribe for or purchase (i) any Additional Shares of Nonpreferred Stock or
(ii) any Convertible Securities and the consideration per share for which
Additional Shares of Nonpreferred Stock may at any time thereafter be issuable
pursuant to such warrants or other rights or pursuant to the terms of such
Convertible Securities shall be less than the Current Market Price per share of
Common Stock, then the number of shares of Common Stock thereafter comprising a
Share shall be adjusted (as at the applicable date specified in the last
sentence of this Section 4.C) as provided in Section 4.B on the basis that (i)
the maximum number of Additional Shares of Nonpreferred Stock issuable pursuant
to all such warrants or other rights or necessary to effect the conversion or
exchange of all such Convertible Securities shall be deemed to have been issued
as of the date for the determination of the Current Market Price per share of
Common Stock as hereinafter provided, and (ii) the aggregate consideration for
such maximum number of Additional Shares of Nonpreferred Stock shall be deemed
to be the minimum consideration received and receivable by the Company for the
issuance of such Additional Shares of Nonpreferred Stock pursuant to such
warrants or other rights or pursuant to the terms of such Convertible
Securities. For purposes of this Section 4.C, the date as of which the Current
Market Price per share of Common Stock shall be computed shall be the earlier of
(a) the date on which the Company shall enter into a firm contract for the
issuance of such warrants or other rights or (b) the date of actual issuance of
such warrants or other rights.
D. Issuance of Convertible Securities. In case at any time or
from time to time the Company shall issue any Convertible Securities and the
consideration per share for which Additional Shares of Nonpreferred Stock may at
any time thereafter be issuable pursuant to such Convertible Securities shall be
less than the Current Market Price per share of Common Stock, then the number of
shares of Common Stock thereafter comprising a Share shall be adjusted (as at
the applicable date specified in the penultimate sentence of this Section 4.D)
as provided in Section 4.B on the basis that (i) the maximum number of
Additional Shares of Nonpreferred Stock necessary to effect the conversion or
exchange of all such Convertible Securities shall be deemed to have been issued
as of the date for the determination of the Current Market Price per share of
Common Stock as hereinafter provided, and (ii) the aggregate consideration for
such maximum number of Additional Shares of Nonpreferred Stock shall be deemed
to be the minimum consideration received and receivable by the Company for the
issuance of such Additional Shares of Nonpreferred Stock pursuant to the terms
of such Convertible Securities. For purposes of this Section 4.D, the date as of
which the Current Market Price per share of Common Stock shall be computed shall
be the earlier of (a) the date on which the Company shall enter into a firm
contract for the issuance of such Convertible Securities, or (b) the date of
actual issuance of such Convertible Securities. No adjustment of the number of
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shares of Common Stock comprising a Share shall be made under this Section 4.D
upon the issuance of any Convertible Securities which are issued pursuant to the
exercise of any warrants or other subscription or purchase rights therefor, if
any such adjustment shall previously have been made upon the issuance of such
warrants or other rights pursuant to Section 4.C.
E. Superseding Adjustment of Shares. If, any time after any
adjustment of the number of shares comprising a Share shall have been made
pursuant to Section 4.C or Section 4.D on the basis of the issuance of warrants
or other rights or the issuance of other Convertible Securities, or after any
new adjustment of the number of shares comprising a Share shall have been made
pursuant to this Section 4.D (but before the Warrant has been exercised), such
warrants or rights or the right of conversion or exchange in such other
Convertible Securities shall expire, and a portion of such warrants or rights,
or the rights of conversion or exchange in respect of a portion of such other
Convertible Securities, as the case may be, shall not have been exercised, such
previous adjustment shall be rescinded and annulled and the Additional Shares of
Nonpreferred Stock which were deemed to have been issued by virtue of the
computation made in connection with the adjustment so rescinded and annulled
shall no longer be deemed to have been issued by virtue of such computation.
Thereupon, a recomputation shall be made of the effect of such rights or options
or other Convertible Securities on the basis of
(1) treating the number of Additional Shares of Nonpreferred
Stock, if any, theretofore actually issued or issuable pursuant to the
previous exercise of such warrants or rights or such right of conversion
or exchange, as having been issued on the date or dates of such
exercise, and
(2) treating any such warrants or rights or any such other
Convertible Securities which then remain outstanding as having been
granted or issued immediately after the time of the last date of such
exercise,
and, if and to the extent called for by the foregoing provisions of this Section
4 on the basis of the aforesaid, a new adjustment of the number of shares
comprising a Share shall be made, which new adjustment shall supersede the
previous adjustment so rescinded and annulled.
If the exercise price provided for in any warrant or right, or
the rate at which any Convertible Securities referred to in Section 4.C or
Section 4.D are convertible into or exchangeable for Additional Shares of
Nonpreferred Stock, shall change or a different exercise price or rate shall
become effective at any time or from time to time (other than under or by reason
of provisions designed to protect against dilution) then, upon such change
becoming effective, the number of shares comprising a Share shall forthwith be
increased or decreased to such number as would have obtained had the adjustments
made and required to be made upon the issuance of such rights or options or
Convertible Securities been made upon the basis of (a) the issuance of the
number of Additional Shares of Nonpreferred Stock theretofore actually delivered
upon the exercise of such options or rights or upon the conversion or exchange
of such Convertible Securities and (b) the original issuance at the time of such
change of any such options, rights and Convertible Securities then still
outstanding. If the exercise price provided
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for in any right or option, or the rate at which any Convertible Securities
referred to in Section 4.C or Section 4.D are convertible into or exchangeable
for Additional Shares of Nonpreferred Stock, shall decrease at any time under or
by reason of provisions with respect thereto designed to protect against
dilution, then in the case of the delivery of Additional Shares of Nonpreferred
Stock upon the exercise of any such right or option or upon the conversion or
exchange of any Convertible Securities, the number of shares comprising a Share
shall forthwith be increased to such number as would have obtained had the
adjustments made upon issuance of such right or option or such Convertible
Securities been made upon the basis of the issuance of (and with respect to
total consideration received for) the Additional Shares of Nonpreferred Stock
delivered as aforesaid. In no event shall any adjustment provided for in this
Section 4.E have retroactive effect relative to Shares as to which the Warrant
has been previously exercised.
F. Other Provisions Applicable to Adjustments Under this Section 4. The
following provisions shall be applicable to the making of adjustments of the
number of shares of Common Stock comprising a Share provided for in this
Section 4:
(1) Treasury or Company Stock. The sale or other disposition of
any issued shares of Nonpreferred Stock owned or held by or for the
account of the Company shall be deemed an issuance thereof for purposes
of this Section 4.
(2) Computation of Consideration. To the extent that any
Additional Shares of Nonpreferred Stock or any Convertible Securities
shall be issued for a cash consideration, the consideration received by
the Company therefor shall be deemed to be the amount of the cash
received by the Company therefor, or, if such Additional Shares of
Nonpreferred Stock or Convertible Securities are offered by the Company
for subscription, the subscription price, or, if such Additional Shares
of Nonpreferred Stock or Convertible Securities are sold to underwriters
or dealers for public offering without a subscription offering, the
initial public offering price, in any such case excluding any amounts
paid or receivable for accrued interest or accrued dividends and without
deduction of any compensation, discounts or expenses paid or incurred by
the Company for and in the underwriting of, or otherwise in connection
with, the issuance thereof. To the extent that such issuance shall be
for a consideration other than cash, then, except as herein otherwise
expressly provided, the amount of such consideration shall be deemed to
be the fair value of such consideration at the time of such issuance as
determined in good faith by the Board. The consideration for any
Additional Shares of Nonpreferred Stock issuable pursuant to any
warrants or other rights to subscribe for or purchase the same shall be
the consideration received or receivable by the Company for issuing such
warrants or other rights, plus the additional consideration payable to
the Company upon the exercise of such warrants or other rights. The
consideration for any Additional Shares of Nonpreferred Stock issuable
pursuant to the terms of any Convertible Securities shall be the
consideration received or receivable by the Company for issuing any
warrants or other rights to subscribe for or purchase such Convertible
Securities, plus the consideration paid or payable to the Company in
respect of the subscription for or purchase of such Convertible
Securities, plus the additional consideration, if any, payable to the
Company upon the exercise of the right of conversion or exchange in such
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Convertible Securities. In case of the issuance at any time of any
Additional Shares of Nonpreferred Stock or Convertible Securities in
payment or satisfaction of any dividend upon any class of stock other
than Nonpreferred Stock, the Company shall be deemed to have received
for such Additional Shares of Nonpreferred Stock or Convertible
Securities a consideration equal to the amount of such dividend so paid
or satisfied.
(3) When Adjustments to be Made. The adjustments required by
Section 4 shall be made whenever and as often as any specified event
requiring an adjustment shall have occurred. 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.
(4) When Adjustments Not Required. If the Company shall take a
record of the holders of its Nonpreferred Stock for the purpose of
entitling them to receive a dividend or distribution or subscription or
purchase rights and shall, thereafter and before the distribution
thereof to shareholders, legally abandon its plan to pay or deliver such
dividend, distribution, subscription or purchase rights, then thereafter
no adjustment shall be required by reason of the taking of such record
and any such adjustment previously made in respect thereof shall be
rescinded and annulled.
G. Merger, Consolidation or Disposition of Assets. The Company
shall not consolidate or merge with another Person, or sell, transfer or
otherwise dispose of all or substantially all of its assets to another Person
unless the Company shall have notified the Holder no less than 20 days prior to
the effective date of such consolidation, merger, sale, transfer or disposal,
and shall have given the Holder the right to exercise all its rights under this
Warrant and participate fully in such transaction as a holder of shares of
Common Stock. Such notice may disclose nonpublic information. Alternatively, if
at the Company's option, such transaction shall be effected in such a way that
all holders of Nonpreferred Stock shall be entitled to receive stock, securities
or assets with respect to or in exchange for Nonpreferred Stock, then, as a
condition of such consolidation, merger or sale, the Company or such successor
or purchasing corporation, as the case may be, shall assume the obligations of
the Company under this Warrant and execute an agreement providing that the
Holder shall have the right thereafter and until the expiration hereof to
exercise this Warrant for the kind and amount of stock, securities or assets
receivable upon such consolidation, merger or sale by a holder of the number of
shares of Common Stock for which this Warrant might have been exercised
immediately prior to such consolidation, merger or sale, subject to adjustments
which shall be as nearly equivalent as may be practicable to the adjustments
provided for in this Section 4.
H. Other Action Affecting Common Stock. If the Company takes any
action affecting its Common Stock after the date hereof, other than an action
described in any of Sections 4.A through 4.G, inclusive, which would have an
adverse effect upon the rights of the holder of this Warrant hereunder, then the
number of shares of Common Stock comprising a Share shall be adjusted in such
manner and at such time as the Board shall in good faith determine to be
equitable under the circumstances.
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SECTION 5. NOTICES TO WARRANT HOLDERS.
A. Notice of Adjustment of Share. Whenever the composition of a
Share shall be adjusted pursuant to Section 4, the Company shall forthwith
obtain a certificate signed by the Company's chief financial officer 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 the Board determined the Current Market Price pursuant to Sections 4.B, C
or D or the fair value of any evidences of indebtedness, shares of stock, other
securities or property or warrants or other subscription or purchase rights
referred to in Section 4.F) and specifying the number of shares of Common Stock
comprising a Share and (if such adjustment was made pursuant to Section 4.G or
Section 4.H) describing the number and kind of any other indebtedness, shares of
stock or other securities or property or warrants or other subscription or
purchase rights comprising a Share, and any change in the purchase price or
prices thereof, after giving effect to such adjustment or change. The Company
shall promptly, and in any case within 10 calendar days after the making of such
adjustment, cause a signed copy of such certificate to be delivered to the
Holder in accordance with Section 12. The Company shall keep at its office or
agency, maintained for the purpose pursuant to Section 11, copies of all such
certificates and cause the same to be available for inspection at said office
during normal business hours by the Holder or any prospective purchaser of all
or part of this Warrant designated by the Holder.
B. Notice of Certain Corporate Action. In case the Company shall
propose (a) to pay any dividend payable in stock of any class to the holders of
its Nonpreferred Stock or to make any other distribution to the holders of its
Nonpreferred Stock, or (b) to offer to the holders of its Nonpreferred Stock
rights to subscribe for or to purchase any Additional Shares of Nonpreferred
Stock or shares of stock of any class or any other securities, rights or
options, or (c) to effect any reclassification of its Nonpreferred Stock (other
than a reclassification involving only the subdivision, or combination, of
outstanding shares of Nonpreferred Stock), or (d) to effect any capital
reorganization, or (e) to effect any consolidation, merger or sale, transfer or
other disposition of all or substantially all of its property, assets or
business, or (f) to effect the liquidation, dissolution or winding up of the
Company, then in each such case, the Company shall give to each holder of a
Warrant, in accordance with Section 12, a notice of such proposed action, which
shall specify the date on which a record is to be taken for purposes of such
stock dividend, distribution or offer of rights, or the date on which such
reclassification, reorganization, consolidation, merger, sale, transfer,
disposition, liquidation, dissolution, or winding up is to take place and the
date of participation therein by the holders of Nonpreferred Stock, if any such
date is to be fixed, and shall also set forth such facts with respect thereto as
shall be reasonably necessary to indicate the effect of such action on the
Nonpreferred Stock and the number and kind of any other property which will
comprise a Share, and the purchase price or prices thereof, after giving effect
to any adjustment which will be required as a result of such action. Such notice
shall be so given in the case of any action covered by clause (a) or (b) above
at least 20 calendar days prior to the record date for determining holders of
the Nonpreferred Stock for purposes of such action, and in the case of any other
such action, at least 20 calendar days prior to the date of the taking of such
proposed action or the date of participation therein by the holders of
Nonpreferred Stock, whichever shall be the earlier.
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SECTION 6. RESERVATION AND AUTHORIZATION OF NONPREFERRED STOCK;
REGISTRATION WITH OR APPROVAL OF ANY GOVERNMENTAL AUTHORITY. The Company shall
at all times reserve and keep available for issuance upon the exercise of the
Warrant such number of its authorized but unissued shares of Common Stock as
will be sufficient to permit the exercise in full of the Warrant. All shares of
Common Stock which shall be so issuable, when issued upon exercise of this
Warrant, shall be duly authorized, validly issued, fully paid and nonassessable,
free and clear of all liens, security interests, charges and other encumbrances
or restrictions (other than encumbrances or restrictions imposed by this Warrant
or the Warrant Agreement).
Before taking any action which would cause an adjustment reducing
the Purchase Price Per Share below the then par value, if any, of the shares of
Common Stock issuable upon exercise of this Warrant, the Company shall take any
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, free and clear of all liens, security interests, charges and other
encumbrances or restrictions (other than encumbrances or restrictions imposed by
this Warrant or the Warrant Agreement), of such Common Stock at such adjusted
Current Warrant Price.
Before taking any action which would result in an adjustment in
the number of shares of Common Stock comprising a Share or in the Current
Warrant Price per share of Common Stock, the Company shall obtain all such
authorizations or exceptions thereof, or consents thereto, as may be necessary
from any public regulatory body or bodies having jurisdiction thereof.
SECTION 7. REGISTRATION RIGHTS.
7.1 Demand Registration. (a) Any Warrantholder may, in writing,
request that the Company effect the registration under the Securities Act of all
(but not less than all) of such holder's Warrant Shares and specifying the
number of Warrant Shares to be registered and the intended method of disposition
thereof (a "Registration Request"). The Company will promptly, and in no event
more than 10 Business Days after receipt of such Registration request, give
written notice (a "Notice of Requested Registration") of such request to all
other holders of Warrant Shares, and thereupon will use its best efforts to
effect the registration (a "Demand Registration") under the Securities Act of:
(i) the Warrant Shares which the Company has been so
requested to register by such Holder; and
(ii) all other Warrant Shares the holders of which have
made written requests to the Company for registration thereof within 20
days after the giving of the Notice of Requested Registration (which
requests shall specify the intended method of disposition thereof) (the
"Other Holders"), all to the extent requisite to permit the disposition
(in accordance with the intended methods thereof) of the Warrant Shares
so to be registered. If requested by the Majority Holders requested to
be included in any Demand Registration, the method of disposition of all
Warrant Shares included in such
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registration shall be an underwritten offering effected in accordance
with Section 7.3 hereof. Subject to Section 7.1(d) hereof, the Company
may include in such registration other securities for sale for its own
account or for the account of any other Person. If any security holders
of the Company (other than the holders of Warrant Shares in such
capacity) register securities of the Company in a Requested Registration
in accordance with this Section 7.1, such holders shall pay the fees and
expenses of their counsel and their pro rata share, on the basis of the
respective amounts of the securities included in such registration on
behalf of each such holder, of the Registration Expenses if the
Registration Expenses for such registration are not paid by the Issuer
for any reason.
(b) Notwithstanding anything herein to the contrary, the
Warrantholder shall have the right to make one such Demand Registration
for an underwritten offering on Form S-1, unless the Warrantholder could
not register all of its Warrant Shares following such a demand by reason
of the managing underwriter's written opinion that inclusion of all such
Warrant Shares in such Demand Registration would materially and
adversely affect the marketing of the securities to be sold therein, in
which case the Warrantholder shall be able to make one such additional
Demand Registration. The Warrantholder shall have the right to make
unlimited Demand Registrations on Form S-3 (or any successor short-form
registration statement).
(c) Demand registrations shall be on such appropriate
registration form promulgated by the Commission as shall be selected by
the Company, shall be reasonably acceptable to the Majority Holders, and
shall permit the disposition of such Warrant Shares in accordance with
the intended method or methods specified in their request for such
registration.
(d) If the number of Warrant Shares included in a Demand
Registration is reduced pursuant to Section 7.1(b), the Company will
include in any such registration, to the extent of the number which the
Managing Underwriter advises the Company can be sold in such offering,
first, the Warrant Shares requested to be included in such registration
by the Warrantholder, second, not less than 50% of any shares registered
in such registration (other than Warrant Shares of the Warrantholder)
shall be Warrant Shares of Other Holders requested to be included in
such registration (which shall be included pro rata according to the
number of Warrant Shares requested by such other Holders to be included
in such registration), and third, other securities of the Company
proposed to be included in such registration, allocated among the
holders thereof in accordance with the priorities then existing among
the Company and the holders of such other securities; and any securities
so excluded shall be withdrawn from and shall not be included in such
Demand Registration.
7.2 Incidental Registration. (a) If the Company at any time
proposes to register any of its Common Stock under the Securities Act for sale
to the public (other than with respect to the initial public offering of its
Common Stock), whether for its own account or for the account of security
holders or both (excluding any registration statement on Form X-0, X-0 or
another form not available for registering the Warrant Shares for sale to the
public), each such time it will give written notice to all Incidental Rights
Holders (as defined below) of its intention
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so to do. For purposes of this Section 7, the term "Warrant Shares" shall not
include any shares which have been (x) effectively registered under the
Securities Act and disposed of in accordance with any registration statement
covering such shares or (y) sold pursuant to Rule 144 (or any similar provision
then in force) and may be further sold without limitation and an "Incidental
Rights Holder" shall mean any Holder in connection with the registration
statement giving rise to the benefits of this Section 7.1. Upon the written
request of any such Incidental Rights Holder, received by the Company within 20
days after the giving of any such notice by the Company, to register any of its
Warrant Shares and/or Warrant Shares issuable upon exercise of a Warrant held by
such Holder, the Company will use its best efforts to cause the Warrant Shares
as to which registration shall have been so requested to be included in the
registration statement proposed to be filed by the Company, all to the extent
requisite to permit the sale or other disposition by the Incidental Rights
Holder (in accordance with its written request) of such Warrant Shares.
Alternatively, the Company may include the Warrant Shares as to which
registration shall have been requested by an Incidental Rights Holder under this
subsection (a) in a separate registration statement to be filed concurrently
with the registration statement proposed to be filed by the Company. In the
event that any registration statement filed pursuant to this Section 7.2 shall
be in whole or in part, in connection with an underwritten public offering, the
number of Warrant Shares to be included in such registration statement may be
reduced or no Incidental Rights Holders may be included in such registration,
subject to and in accordance with subsection (b) below, if and to the extent
that the managing underwriter(s) shall give their written opinion that such
inclusion would materially and adversely affect the marketing of the securities
to be sold therein by the Company. Except as set forth above, there shall be no
limit to the number of registrations that may be requested pursuant to this
Section 7.2.
(b) Any reduction in the number of Warrant Shares owned by
Incidental Rights Holders requested to be included in a registration statement
pursuant to subsection (a) above, or the exclusion of such shares therefrom,
shall be subject to the following conditions:
(i) No such reduction or exclusion shall be made if any
securities are to be included in such registration
statement for the account of any person other than the
Company or the Holders.
(ii) Any such reduction in the number of Warrant Shares owned
by Incidental Rights Holders otherwise permitted under
this subsection (b) shall be made pro rata among the
requesting Incidental Rights Holders based upon the number
of Warrant Shares requested to be registered by such
remaining Incidental Rights Holders in accordance with
this Section 7.2.
(c) In the event that a distribution of Common Shares covered by
a registration statement referred to in subsection (a) above is to be
underwritten, then the distribution of Warrant Shares for the account of the
Incidental Rights Holders shall be underwritten by the same underwriters who are
underwriting the distribution of the securities for the account of the Company
and/or any other persons whose securities are covered by such registration
statement, and the Holders that are selling Warrant Shares pursuant to such
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registration statement shall enter into the agreement with such underwriters
contemplated under Section 7.3.
7.3 Registration Procedures. If and whenever the Company is
required by the provisions of this Section 7 to use its best efforts to effect
the registration of any Warrant Shares under the Securities Act, the Company
will, as expeditiously as possible:
(a) prepare and file with the Commission a registration statement
which, in the case of an underwritten public offering, shall be on such form of
general applicability satisfactory to the managing underwriter selected as
herein provided and shall include the Warrant Shares and use its best efforts to
cause such registration statement to become and remain effective for the period
of the distribution contemplated thereby (determined as hereinafter provided);
(b) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in connection
therewith as may be necessary to keep such registration statement effective for
the period specified in paragraph (a) above and comply with the provisions of
the Securities Act with respect to the disposition of all Warrant Shares covered
by such registration statement in accordance with the Holder's intended method
of disposition set forth in such registration statement for such period;
(c) furnish to each seller of Warrant Shares and to each
underwriter such number of copies of the registration statement and the
prospectus included therein (including each preliminary prospectus) as such
persons reasonably may request in order to facilitate the public sale or other
disposition of the Warrant Shares covered by such registration statement;
(d) use its best efforts to register or qualify the Warrant
Shares covered by such registration statement under the securities or "blue sky"
laws of such jurisdictions as each seller of Warrant Shares or, in the case of
an underwritten public offering, the managing underwriter shall reasonably
request, and do any and all other acts and things which may be necessary under
such securities or blue sky laws to enable such seller to consummate the public
sale or other distribution in such jurisdiction to be sold by such seller,
except that the Company shall not for any such purpose be required to qualify
generally to transact business as a foreign corporation in any jurisdiction
where it is not so qualified or to consent to general service of process or
subject itself to taxation in any such jurisdiction;
(e) use its best efforts to list the Warrant Shares covered by
such registration statement with any securities exchange or automated quotation
system on which any security of the Company is then listed;
For purposes of Section 7.3(a) and 7.3(b), the period of
distribution of Warrant Shares in a firm commitment underwritten public offering
shall be deemed to extend until each underwriter has completed the distribution
of all securities purchased by it, and the period of distribution of Warrant
Shares in any other registration shall be deemed to extend until the earlier of
the sale of all Warrant Shares covered thereby or 120 days after the effective
date thereof.
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In connection with each registration pursuant to this Section 7,
the sellers of Warrant Shares will furnish to the Company in writing such
information with respect to themselves and the proposed distribution by them as
reasonably shall be necessary and shall be requested by the Company in order to
assure compliance with federal and applicable state securities laws.
In connection with each registration pursuant to Sections 7.1
covering an underwritten public offering, if such underwriting agreement
contains restrictions upon the sale of securities of the Company, other than the
securities which are to be included in the proposed distribution, then such
restrictions shall be binding upon the sellers of Warrant Shares for a period
not exceeding 120 days (or such longer time as is customary and required) from
the effective date of the registration statement and, if requested by the
Company, such sellers shall enter into a written agreement to that effect. In
the event of the Company's initial public offering, if requested by the
Company's underwriters, the holders of Warrants and Warrant Shares agree not to
sell, pledge or otherwise transfer their Warrants or Warrant Shares for a period
not exceeding 120 days (or such longer time as is customary and required).
7.4 Expenses. All expenses incurred by the Company in complying
with Sections 7.1 and 7.2, including, without limitation, all registration and
filing fees, printing expenses, fees and disbursements of counsel and
independent public accountants for the Company, fees and expenses (including
reasonable counsel fees) incurred in connection with complying with state
securities or "blue sky" laws, fees of the National Association of Securities
Dealers, Inc., fees of a national securities exchange or the Nasdaq National
Market, transfer taxes, fees of transfer agents and registrants, costs of
insurance and but excluding any Selling Expenses, are called "Registration
Expenses." "Selling Expenses" as used herein means all underwriting discounts
and selling commissions applicable to the sale of Warrant Shares. The Company
will pay all Registration Expenses and the sellers of Warrant Shares will pay
all Selling Expenses in connection with each registration statement prepared or
filed under Sections 7.1 or 7.2.
7.5 Indemnification and Contribution. (a) In the event of a
registration of any Warrant Shares under the Securities Act pursuant to Section
7.1 or 7.2, the Company shall indemnify and hold harmless, to the full extent
permitted by law, each seller of such Warrant Shares thereunder and each
partner, officer, trustee, director, employee, agent or Affiliate of such seller
(collectively, for purposes of this Section 7.5, a "seller"), against any
losses, claims, damages, liabilities or expenses, joint or several, to which
such seller may become subject under the Securities Act or otherwise, insofar as
such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon any untrue statement or alleged untrue statement
of any material fact contained in any registration statement under which such
Warrant Shares were registered under the Securities Act pursuant to Sections
7.1, any preliminary prospectus or final prospectus contained therein, or any
amendment or supplement thereof, or arise out of or are based upon the omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, and shall
pay or reimburse each such seller for any legal or other expenses reasonably
incurred by them in connection with investigating or defending any such loss,
claim, damage, liability or action;
17
provided, however, that the Company shall not be liable in any such case to a
seller, if and to the extent that any such loss, claim, damage or liability
arises out of or is based upon an untrue statement or alleged untrue statement
or omission or alleged omission made in reliance upon and in conformity with
information pertaining to such seller furnished in writing to the Company by
such seller specifically for use in such registration statement, prospectus,
amendment or supplement.
7.6 Rule 144 Reporting. With a view to making available the
benefits of certain rules and regulations of the Commission which may at any
time permit the sale of the Warrant Shares to the public without registration,
on and after the completion of the Company's initial public offering, the
Company agrees to:
(a) make and keep public information available, as those terms
are understood and defined in Rule 144;
(b) use its best efforts to file with the Commission in a timely
manner all reports and other documents required of the Company under the
Securities Act and the Exchange Act; and
(c) furnish to each Holder forthwith upon request a written
statement by the Company as to its compliance with the reporting requirements of
such Rule 144 and of the Securities Act and the Exchange Act, a copy of the most
recent annual or quarterly report of the Company, and such other reports and
documents so filed by the Company as such Holder may reasonably request in
availing itself of any rule or regulation of the Commission allowing such Holder
to sell and Warrant Shares without registration.
SECTION 8. NO IMPAIRMENT. The Company shall not take any action,
including, without limitation, by amendment of its certificate of incorporation
or by-laws or through any consolidation, merger or arrangement, reorganization,
transfer of assets, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms of this Warrant, but will at all times in good faith assist in the
carrying out of all such terms and in the taking of all such action as may be
necessary or appropriate to protect the rights of the holder of this Warrant
against dilution or other impairment. Without limiting the generality of the
foregoing, the Company (a) will take such action as may be necessary or
appropriate in order that the Company may validly and legally issue fully paid
and nonassessable shares of Warrant Stock on the exercise of this Warrant, (b)
will not take any action which results in any adjustment pursuant to Section 4
of this Warrant if the total number of shares of Common Stock issuable after
such action would exceed the total number of shares of Common Stock then
authorized by the Company's certificate of incorporation and available for the
purpose of issue upon such exercise, and (c) use its best efforts to obtain all
such authorizations, exemptions or consents from any public regulatory body
having jurisdiction thereof as may be necessary to enable the Company to perform
its obligations under this Warrant.
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SECTION 9. TAKING OF RECORD; STOCK AND WARRANT TRANSFER BOOKS.
(a) In case of all dividends or other distributions by the Company to the
holders of its Nonpreferred Stock with respect to which provisions of Section 4
refers to the taking of a record of such holders, the Company will in each such
case take such a record and will take such record as of the close of business on
a Business Day. The Company will not at any time, except upon dissolution,
liquidation or winding up of the Company, close its stock transfer books or
warrant transfer books so as to result in preventing or delaying the exercise or
transfer of this Warrant.
(b) If this Warrant is divided between or among more than one
Holder, any time any action, waiver or consent of the Holder of this Warrant is
called for, such action, waiver or consent shall be binding if taken or given by
the Majority Holders (provided that any Warrants owned by the Company or any of
its Affiliates shall not be counted).
SECTION 10. LOSS OR MUTILATION. Upon receipt by the Company of
evidence satisfactory to it (in the exercise of reasonable discretion) of the
ownership of and the loss, theft, destruction or mutilation of this Warrant and
(in case of loss, theft or destruction) of indemnity satisfactory to it, and in
case of mutilation, upon surrender and cancellation hereof, the Company will
execute and deliver in lieu hereof a new warrant of like tenor and date.
SECTION 11. OFFICE OF THE COMPANY. As long as this Warrant
remains outstanding, the Company shall maintain an office or agent at Austin,
Texas, where this Warrant may be presented for exercise, registration, transfer,
division or combination as in this Warrant provided. Such office or agent shall
be maintained at said address unless and until the Company shall designate and
maintain another office or agent for such purposes and give written notice
thereof to the Holder.
SECTION 12. NOTICES GENERALLY. No notice or other communication
shall be deemed given hereunder unless sent in any of the manners, and to the
persons, specified in this Section 12. All notices and other communications
hereunder will be in writing and will be deemed given (a) upon receipt if
delivered personally, mailed by registered or certified mail, or sent by
overnight courier or (b) upon dispatch if transmitted by telex, telegraph,
telecopy or other means of facsimile, in any case to the Holder at the Holder's
last known address appearing on the books of the Company or to the Company at
its address (or at such other address for a party as will be specified by like
notice).
SECTION 13. LIMITATION OF LIABILITY. No provision hereof, in the
absence of affirmative action by the Holder to purchase shares of Common Stock,
and no mere enumeration herein of the rights or privileges of the Holder hereof,
shall give rise to any liability of the Holder for the purchase price or as a
stockholder of the Company, whether such liability is asserted by the Company or
by creditors of the Company or by anyone else.
SECTION 14. SURVIVAL. All covenants and agreements of the
Company, and all rights and duties of the Holder from time to time of this
Warrant or any Common Stock issued pursuant to exercise of this Warrant, shall
be deemed to survive any surrender hereof to the
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Company upon exercise hereof by the Holder as contemplated by Section 2 or
expiration of the right of the Holder to exercise any unexercised balance hereof
on the Warrant Expiration Date.
SECTION 15. CERTAIN WARRANTS DEEMED NOT OUTSTANDING. For the
purposes of determining whether the Holder entitled to purchase a requisite
number of Shares at any time has taken any action, any Warrants owned by the
Company or any Affiliate of the Company, shall be deemed not to be outstanding.
SECTION 16. AUTHORITY; EXECUTION AND DELIVERY. The Company hereby
represents and warrants that the Company has full corporate power and authority
to enter into this Agreement and to issue the Warrants and the Warrant Shares in
accordance with the terms hereof. The execution, delivery and performance of
this Agreement by the Company have been duly and effectively authorized by the
Company. This Agreement has been duly executed and delivered by the Company and
constitutes the legal, valid and binding obligation of the Company enforceable
against the Company in accordance with its terms.
SECTION 17. REGULATORY RESTRICTIONS.
(a) No Warrantholder which is a bank holding company or a
subsidiary of a bank holding company (a "Bank Affiliate") as defined in the Bank
Holding Company Act of 1956, as amended, or other applicable banking laws of the
United States of America and the rules and regulations promulgated thereunder
(the "Bank Holding Company Act") shall acquire voting Common Stock, if, after
giving effect to such acquisition, the Bank Affiliate, together with its
Affiliates, would own more than five percent (5%) of the outstanding voting
securities of the Company. Notwithstanding the foregoing, shares of Common Stock
may otherwise be acquired or held by the Initial Purchaser or any other Bank
Affiliate which is a Small Business Investment Company consistent with and
subject to the limitations contained in the Small Business Act and, to the
extent not inconsistent with the Bank Holding Company Act, shares of Common
Stock may be acquired in the event that:
(i) the Company shall vote to merge or consolidate with or into
any other Person and after giving effect to such merger or consolidation
the Bank Affiliate would not own more than five percent (5%) of the
outstanding voting securities of the surviving corporation; or
(ii) the Common Stock issuable upon exercise of this Warrant is
covered by an effective registration statement.
(b) Small Business Act. No person which is a Small Business
Investment Company, as defined in the Small Business Act, shall exercise "put"
rights as a holder of Warrants or Warrant Stock, hereunder if the exercise
thereof shall violate any of the rules or regulations of the Small Business Act.
(c) Statement of Compliance. For purposes of this Warrant, a
written statement of the Holder or any of its Affiliates acquiring Common Stock,
or exercising "put" or
20
conversion rights with respect to this Warrant, delivered to the Company upon
acquisition of any shares of Common Stock or delivery of any Exercise Notice, to
the effect that Bank or its Affiliate, as the case may be, is legally entitled
to exercise its rights to purchase securities of the Company and that such
exercise will not violate or contravene any law or regulation or any judgment,
decree or order of any governmental authority then applicable to the Holder or
such Affiliate, as the case may be, shall be conclusive and binding upon the
Company and shall absolutely obligate and bind the Company to deliver, in
accordance with the other terms and provisions hereof, certificates or other
appropriate instruments representing the securities so purchased.
SECTION 18. GOVERNING LAW. This Warrant shall be governed by and
construed in accordance with the laws of the State of New York without giving
effect to the conflict of laws rules therein.
IN WITNESS WHEREOF, the Company has caused this Warrant to be
duly executed.
Dated as of February 2, 1998 AUTOBOND ACCEPTANCE CORPORATION
By: /s/ Xxxxxxx X. Xxxxxxxx
-----------------------------
Title: Chairman and CEO
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