================================================================================
CAPITAL AUTOMOTIVE REIT
and
AMERICAN STOCK TRANSFER & TRUST COMPANY
as Warrant Agent
-----------------------
WARRANT AGREEMENT
Dated as of ______________, 1998
================================================================================
TABLE OF CONTENTS
-----------------
Page
----
PARTIES ................................................................1
RECITALS ................................................................1
ARTICLE I ISSUANCE, EXECUTION, EXPIRATION AND TRANSFER OF
WARRANT CERTIFICATES............................................1
1.01. Form of Warrant Certificates....................................1
1.02. Execution of Warrant Certificates...............................2
1.03. Issuance, Delivery and Registration of Warrant
Certificates..................................................2
1.04. Transfer and Exchange of Warrant Certificates...................2
ARTICLE II COMMON SHARES ISSUABLE, EXERCISE PRICE,
EXPIRATION DATE AND EXERCISE OF WARRANTS........................3
2.01. Warrant Shares Issuable; Exercise Price;
Expiration Date...............................................3
2.02. Exercise of Warrants............................................3
2.03. No Fractional Shares to Be Issued...............................4
2.04. Cancellation of Warrants........................................5
ARTICLE III ADJUSTMENT OF EXERCISE PRICE; MERGER,
ACQUISITION, ETC.; RESERVATION OF COMMON SHARES;
PAYMENT OF TAXES................................................5
3.01. Adjustment of Exercise Price and Number of
Warrant Shares................................................5
3.02. Exercise Price Adjustment Formula...............................6
3.03. Constructive Issuance of Shares.................................6
3.04. Stock Dividends.................................................8
3.05. Extraordinary Dividends and Distributions.......................8
3.06. Stock Splits and Reverse Stock Splits...........................8
3.07. Reorganizations and Asset Sales.................................8
3.08. Covenant to Reserve Shares for Issuance on
Exercise......................................................9
3.09. Warrant Agent Not Responsible for Validity of
Shares........................................................9
3.10. Statements on Warrants..........................................9
3.11. Notice of Change in Securities Issuable, etc...................10
3.12. References to Common Shares....................................10
i
ARTICLE IV OTHER PROVISIONS RELATING TO RIGHTS OF HOLDERS
OF WARRANTS....................................................10
4.01. No Rights as Shareholders......................................10
4.03. Liquidation, Merger, etc.; Notice to
Warrantholders...............................................11
ARTICLE V CONCERNING THE WARRANT AGENT...................................12
5.01. Change of Warrant Agent........................................12
5.02. Compensation; Further Assurances...............................13
5.03. Reliance on Counsel............................................13
5.04. Proof of Actions Taken.........................................13
5.05. Correctness of Statements......................................14
5.06. Validity of Agreement..........................................14
5.07. Use of Agents..................................................14
5.08. Liability of Warrant Agent.....................................14
5.09. Legal Proceedings..............................................14
5.10. Other Transactions in Shares of the Company....................14
5.11. Actions as Agent...............................................15
5.12. Appointment and Acceptance of Agency...........................15
ARTICLE VI MISCELLANEOUS..................................................15
6.01. Reservation of Shares..........................................15
6.02. Registration of Warrant Shares.................................15
6.03. Enforcement of Warrant Rights..................................15
6.04. Negotiability and Ownership....................................15
6.05. Warrant Legend.................................................16
6.06. Supplements and Amendments.....................................16
6.07. Covenant as to Status as a Real Estate
Investment Trust.............................................17
6.08. Successors and Assigns.........................................17
6.09. Notices........................................................17
6.10. Applicable Law.................................................18
6.11. Benefits of this Agreement.....................................18
6.12. Registered Warrantholders......................................18
6.13. Inspection of Agreement........................................18
6.14. Headings.......................................................19
6.15. Counterparts...................................................19
SIGNATURE AND SEALS.........................................................20
EXHIBIT A. FORM OF WARRANT CERTIFICATE.....................................A-1
ii
WARRANT AGREEMENT
This Agreement is made as of _______________, 1998 between Capital
Automotive REIT, a Maryland real estate investment trust (the "Company"), and
American Stock Transfer & Trust Company (the "Warrant Agent").
RECITALS
A. In connection with its initial public offering (the "Offering"), the
Company proposes to sell, pursuant to an Underwriting Agreement dated
_____________, 1998 (the "Underwriting Agreement") between the Company and
Friedman, Billings, Xxxxxx & Co., Inc. ("FBR"), 20,000,000 common shares of
beneficial interest, par value $.01 per share, of the Company (the "Common
Shares"), to certain underwriters, for which FBR is acting as representative
(the "Underwriters") and up to 3,000,000 Common Shares, to cover
over-allotments, if any. The Common Shares have been registered under the
Securities Act of 1933, as amended (the "Securities Act") on form S-11,
Registration No. 333-41183.
B. The Company deems it advisable, in consideration for the services
rendered to the Company by FBR in connection with the offering of the Common
Shares, to issue to FBR warrants (the "Warrants") entitling the holders thereof
to purchase an aggregate of 1,277,794 Common Shares. The Common Shares issued
upon exercise of the Warrants are referred to as the "Warrant Shares".
C. The Company desires to enter into this Agreement to set forth the terms
and conditions of the Warrants and the rights of the holders thereof.
D. The Company desires that the Warrant Agent act on behalf of the Company,
and the Warrant Agent is willing to act in connection with the issuance,
exchange, transfer, substitution and exercise of Warrants;
NOW, THEREFORE, in consideration of the foregoing and the mutual agreements
herein contained, the parties hereto agree as follows:
ARTICLE I
ISSUANCE, EXECUTION, EXPIRATION AND TRANSFER OF
WARRANT CERTIFICATES
Section 1.01 Form of Warrant Certificates. The Warrants shall be evidenced
----------------------------
by certificates in temporary or definitive fully registered form (the "Warrant
Certificates") substantially in the form of Exhibit A, and may have such
letters, numbers or other marks of identification and such legends or
endorsements placed thereon as may be required to comply with any law or with
any rule or regulation made pursuant thereto or with any rule or regulation of
any securities exchange, or to conform to usage, or as consistently herewith may
be determined by the officers executing such Warrant Certificates, as evidenced
by their execution of the Warrant Certificates. Each Warrant Certificate shall
evidence the right, subject to the
1
provisions of this Agreement and of the Warrant Certificate, to purchase the
number of Common Shares stated therein, adjusted as provided for in Article III,
upon payment of the Exercise Price (as defined in Section 2.01).
Section 1.02 Execution of Warrant Certificates. Each Warrant Certificate,
---------------------------------
whenever issued, shall be dated as of the date of countersignature thereof by
the Warrant Agent either upon initial issuance or upon exchange, substitution or
transfer, shall be signed manually by, or bear the facsimile signature of, the
Chairman of the Board or the President or a Vice President and the Secretary or
Assistant Secretary of the Company, shall have the Company's seal or a facsimile
thereof affixed or imprinted thereon and shall be attested by the manual or
facsimile signature of the Secretary or an Assistant Secretary of the Company.
In case any officer of the Company whose manual or facsimile signature has been
placed upon any Warrant Certificate shall have ceased to be such before such
Warrant Certificate is issued, it may be issued with the same effect as if such
officer had not ceased to be such at the date of issuance. Warrant Certificates
shall be countersigned manually by the Warrant Agent (or successor Warrant
Agent) and shall not be valid for any purpose unless so countersigned. Warrant
Certificates may be countersigned by the Warrant Agent (or successor Warrant
Agent), however, notwithstanding that the persons whose manual or facsimile
signatures appear thereon as proper officers of the Company shall have ceased to
be such officers at the time of such countersignature, issuance or delivery. Any
Warrant Certificate may be signed on behalf of the Company by any person who, at
the actual date of the execution of such Warrant Certificate, shall be a proper
officer of the Company to sign such Warrant Certificate, although at the date of
the execution of this Agreement any such person was not such an officer.
Section 1.03 Issuance, Delivery and Registration of Warrant Certificates.
-----------------------------------------------------------
Upon receipt of written instructions from the Company, the Warrant Agent shall
issue and deliver, at the closing of the sale of the Common Shares to the
Underwriters as provided in the Underwriting Agreement, to FBR or its designees
a Warrant Certificate entitling the holder thereof to purchase an aggregate of
1,277,794 Common Shares. Additionally, the Warrant Agent shall countersign and
deliver Warrant Certificates upon exchange, transfer or substitution for one or
more previously countersigned Warrant Certificates as hereinafter provided. The
Warrant Agent shall maintain books for the registration of transfer and
registration of Warrant Certificates (the "Warrant Register").
Section 1.04 Transfer and Exchange of Warrant Certificates. The Warrant
---------------------------------------------
Agent, from time to time, shall register the transfer of any outstanding Warrant
Certificates in the Warrant Register upon surrender at the office or agency
maintained in The City of New York for such purpose or at the principal office
of the Warrant Agent (or successor Warrant Agent) of Warrant Certificates
accompanied by a written instrument or instruments of transfer, in form
satisfactory to the Company and the Warrant Agent, duly executed by the holder
of the Warrant Certificate (the terms "Warrantholder" and "holder of any
Warrants" and all other similar terms used herein shall mean such person in
whose name Warrants are registered in the Warrant Register) or the
Warrantholder's attorney duly authorized in writing, and evidence, satisfactory
to the Warrant Agent, of compliance with the provisions of Section 6.04. Upon
any such registration of transfer, a new Warrant Certificate shall be
countersigned by the Warrant Agent
2
and issued to the transferee and the surrendered Warrant Certificate shall be
canceled by the Warrant Agent. Warrant Certificates may be exchanged at the
option of the holder thereof, upon surrender, properly endorsed, at the office
or agency maintained in The City of New York for such purpose or at the
principal office of the Warrant Agent (or successor Warrant Agent), with written
instructions, for other Warrant Certificates countersigned by the Warrant Agent
entitling the registered holder thereof, subject to the provisions thereof and
of this Agreement, to purchase in the aggregate a like number of Common Shares
as the Warrant Certificate so surrendered. The Company or the Warrant Agent may
require the payment of a sum sufficient to cover any tax or governmental charge
that may be imposed in connection with any such exchange or transfer.
ARTICLE II
COMMON SHARES ISSUABLE, EXERCISE PRICE, EXPIRATION DATE AND
EXERCISE OF WARRANTS
SECTION 2.01 Warrant Shares Issuable; Exercise Price; Expiration Date. Each
--------------------------------------------------------
Warrant Certificate shall entitle the registered holder thereof, subject to the
provisions thereof and of this Agreement, to purchase from the Company at any
time from the closing date of the Offering (the "Closing Date"), until the close
of business on the fifth anniversary of the Closing Date (or, if such date is
not a Business Day (as defined below), the first following Business Day) the
number of Common Shares stated therein, adjusted as provided in Article III,
upon payment of $_________ per share (which price is equal to the initial public
offering price), adjusted as provided in Article III. Such price, as in effect
from time to time as provided in Article III, is referred to as the "Exercise
Price." Each Common Share issuable upon exercise of a Warrant is referred to as
a "Warrant Share." Each Warrant not exercised during the period set forth above
shall become void, and all rights thereunder and all rights in respect thereof
under this Agreement shall cease, at the end of such period. For purposes of
this Agreement, the term "Business Day" means any day of the week other than a
Saturday, Sunday or a day which in The City of New York or in the city in which
the principal office of the Warrant Agent is located shall be a legal holiday or
a day on which banking institutions are authorized or required by law to close.
SECTION 2.02 Exercise of Warrants. (a) Warrants may be exercised by
--------------------
surrendering the Warrant Certificate evidencing such Warrants at the office or
agency maintained in The City of New York for such purpose or at the principal
office of the Warrant Agent (or successor Warrant Agent), with the Election to
Exercise form set forth on the reverse of the Warrant Certificate duly completed
and signed, and by paying in full to the Warrant Agent for the account of the
Company (i) in cash, or (ii) by certified or official bank check, or (iii) by
any combination of the foregoing, the Exercise Price for each Warrant Share as
to which Warrants are exercised and any applicable taxes, other than taxes that
the Company is required to pay hereunder. A Warrantholder may exercise such
holder's Warrant for the full number of Warrant Shares issuable upon exercise
thereof or any lesser number of whole Warrant Shares.
(b) As soon as practicable after the exercise of any Warrants and payment
by the Warrantholder of the full Exercise Price for the Warrant Shares as to
which such Warrants are
3
then being exercised, the Warrant Agent shall requisition from the transfer
agent of the Common Shares and deliver to or upon the order of such
Warrantholder a certificate or certificates for the number of full Warrant
Shares to which such Warrantholder is entitled, registered in the name of such
Warrantholder or as such Warrantholder shall direct. Fractional Warrant Shares
that otherwise would be issuable in respect of such exercise shall be paid in
cash as provided in Section 2.03, and the number of Warrant Shares issuable to
such Warrantholder shall be rounded down to the next nearest whole number. If
such Warrant Certificate shall not have been exercised in full, the Warrant
Agent on behalf of the Company will issue to such Warrantholder a new Warrant
Certificate exercisable for the number of Common Shares as to which such Warrant
shall not have been exercised. The Warrant Agent on behalf of the Company will
cancel all Warrants so surrendered.
(c) Each person in whose name any such certificate for Warrant Shares is
issued shall for all purposes be deemed to have become the holder of record of
such Warrant Shares on the date on which the Warrant Certificate was surrendered
to the Warrant Agent and payment of the Exercise Price and any applicable taxes
was made to the Warrant Agent for the account of the Company, irrespective of
the date of delivery of such certificate for Warrant Shares.
(d) All Warrant Shares will be duly authorized, validly issued, fully paid
and nonassessable. The Company will pay all documentary stamp taxes attributable
to the initial issuance of Warrant Shares. The Company will not be required,
however, to pay any tax imposed in connection with any transfer involved in the
issue of the Warrant Shares in a name other than that of the Warrantholder. In
such case, the Company will not be required to issue any certificate for Warrant
Shares until the person or persons requesting the same shall have paid to the
Company the amount of any such tax or shall have established to the Company's
satisfaction that the tax has been paid or that no tax is due.
(e) Promptly after the Warrant Agent shall have taken the action required
in Section 2.02(b) or at such later time as may be mutually agreeable to the
Company and the Warrant Agent, the Warrant Agent shall account to the Company
with respect to any Warrants exercised and shall pay to the Company the amount
of money received by it upon the exercise of Warrants.
SECTION 2.03 No Fractional Shares to Be Issued. If more than one Warrant
---------------------------------
Certificate shall be surrendered for exercise at one time by the same holder,
the number of full Warrant Shares which shall be issuable upon exercise thereof
shall be computed on the basis of the aggregate number of Warrants so
surrendered. The Warrantholders, by their acceptance of the Warrant
Certificates, expressly waive their right to receive any fraction of a Warrant
Share or a share certificate representing a fraction of a Warrant Share. In lieu
thereof, the Company will purchase such fractional interest for an amount in
cash equal to the current market value of such fractional interest, as
reasonably determined by the Board of Trustees of the Company and the number of
Warrant Shares issuable to such Warrantholder shall be rounded down to the
nearest whole number.
4
SECTION 2.04 Cancellation of Warrants. The Warrant Agent shall cancel any
------------------------
Warrant Certificate delivered to it for exercise, in whole or in part, or
delivered to it for transfer, exchange or substitution, and no Warrant
Certificates shall be issued in lieu thereof except as expressly permitted by
any of the provisions of this Agreement. On request of the Company, the Warrant
Agent shall destroy canceled Warrant Certificates held by it and shall deliver
its certificates of destruction to the Company, subject to record retention
requirements applicable to the Warrant Agent pursuant to the Securities Exchange
Act of 0000 (xxx "Xxxxxxxx Xxx"). If the Company shall acquire any of the
Warrants, such acquisition shall not operate as a redemption or termination of
the right represented by such Warrants unless and until the Warrant Certificates
evidencing such Warrants are surrendered to the Warrant Agent for cancellation.
ARTICLE III
ADJUSTMENT OF EXERCISE PRICE; MERGER, ACQUISITION, ETC.;
RESERVATION OF COMMON SHARES; PAYMENT OF TAXES
SECTION 3.01 Adjustment of Exercise Price and Number of Warrant Shares. (a)
---------------------------------------------------------
The Exercise Price shall be subject to adjustment from time to time as provided
in this Article III. After each adjustment of the Exercise Price, each
Warrantholder shall at any time thereafter be entitled to purchase, at the
Exercise Price resulting from such adjustment, the number of Warrant Shares
obtained by multiplying the Exercise Price in effect immediately prior to such
adjustment by the number of Warrant Shares purchasable pursuant to the
provisions of such Warrant immediately prior to such adjustment and dividing the
product thereof by the Exercise Price resulting from such adjustment.
(b) For purposes of making adjustments of the Exercise Price pursuant to
this Article III, the "Current Market Price" shall be determined as of the date
of the grant, issuance or sale, whichever is earlier, as the case may be, giving
rise to the adjustment and shall be equal to the last sale price with respect to
Common Shares as reported on the Nasdaq Stock Market on such date. If there are
no reported transactions on the Nasdaq Stock Market on such date, the "Current
Market Price" shall be the average of the highest current independent bid and
lowest current independent offer for the shares.
(c) Notwithstanding anything herein to the contrary, the Exercise Price and
Number of Warrant Shares shall not be adjusted if (i) the sale or issuance price
of any Common Shares is equal to or greater than the Current Market Price as of
the date of issuance or sale, whichever is earlier, as the case may be, (ii) the
exercise price (determined as described in Sections 3.03(a) of any Options (as
defined in Section 3.03(a)) is equal to or greater than the Current Market Price
as of the date of grant, issuance or sale, whichever is earlier, as the case may
be, (iii) the sale or issuance price (determined as described in Section
3.03(b)) of any Convertible Securities (as defined in Section 3.03(b)) is equal
to or greater than the Current Market Price as of the date of issuance or sale,
whichever is earlier, as the case may be, or (iv) notwithstanding clause (i) and
(iii) any Common Shares or Convertible Securities are issued or sold in a firm
commitment underwritten registered public offering.
5
SECTION 3.02 Exercise Price Adjustment Formula. Subject to Section 3.01, if
---------------------------------
the Company issues or sells any Common Shares for a price per share that is less
than the Current Market Price in effect at the time of such issuance or sale,
the Exercise Price immediately shall be adjusted by multiplying the Exercise
Price by (a) an amount equal to the sum of (i) the number of Common Shares
outstanding and deemed (in accordance with the provisions of Section 3.03) to be
outstanding immediately prior to such issuance and sale multiplied by the
Current Market Price at the time of such issuance or sale and (ii) the total
consideration received and deemed (in accordance with the provisions of Section
3.03) to be received by the Company upon such issuance and sale and (b) dividing
the result by an amount equal to (i) the sum of (A) the amount determined in (a)
and (B) the product of the number of shares issued or sold multiplied by the
Current Market Price, minus (ii) the consideration received.
SECTION 3.03 Constructive Issuance of Shares. (a) Subject to Section 3.01,
-------------------------------
if the Company grants any rights, warrants or options (collectively referred to
as "Options") to subscribe for or purchase any Common Shares or any securities
(collectively referred to as "Convertible Securities") convertible into or
exchangeable for Common Shares, whether or not any such Options or the right to
convert or exchange any such Convertible Securities are immediately exercisable,
and the price per share for which Common Shares are issuable upon the exercise
of such Options or upon conversion or exchange of such Convertible Securities
(determined by dividing (i) the total consideration received or receivable by
the Company for the granting of such Options, plus any additional consideration
payable to the Company upon the exercise of such Options, plus in the case of
any such Options which relate to Convertible Securities, any additional
consideration payable to the Company upon the conversion or exchange thereof by
(ii) the maximum number of Common Shares issuable upon the exercise of such
Options or upon the conversion or exchange of such Convertible Securities) shall
be less than the Current Market Price in effect as of the time of granting such
Options, the maximum number of Common Shares issuable upon the exercise of such
Options or upon conversion or exchange of all Convertible Securities issuable
upon the exercise of such Options shall be deemed, upon the granting of such
Options, to be outstanding and to have been issued for such price per share.
Except as provided in Section 3.03(c), no further adjustment of the Exercise
Price shall be made upon the issue or sale of Common Shares upon the exercise of
such Options or the conversion or exchange of such Convertible Securities.
(b) Subject to Section 3.01, if the Company issues or sells any Convertible
Securities (other than securities referred to in Section 3.03(a)), whether or
not the right to convert or exchange any such Convertible Securities is
immediately exercisable, and the price per share for which the Common Shares are
issuable upon such conversion or exchange (determined by dividing (i) the total
consideration received or receivable by the Company for the issue or sale of
such Convertible Securities, plus any additional consideration payable to the
Company upon the conversion or exchange of such Convertible Securities by (ii)
the maximum number of Common Shares issuable upon the conversion or exchange of
such Convertible Securities) shall be less than the Current Market Price in
effect as of the time of such issue or sale of the Convertible Securities, the
maximum number of Common Shares issuable upon conversion or exchange of all such
Convertible Securities shall be deemed, upon the issue or sale of such
Convertible
6
Securities, to be outstanding and to have been issued for such price per share.
Except as provided in Section 3.03(c), no further adjustment of the Exercise
Price shall be made upon the issue or sale of Common Shares upon conversion or
exchange of any such Convertible Securities.
(c) Subject to Section 3.01, if the exercise price provided for in any
Option referred to in Section 3.03(a), or the rate at which any Convertible
Security referred to in Section 3.03(a) or 3.03(b) is convertible into or
exchangeable for Common Shares, shall change or a different exercise price or
rate shall become effective at any time or from time to time, the Exercise Price
immediately shall be adjusted to the Exercise Price that would have obtained had
the adjustments made and required to be made under this Section 3.03 upon the
grant, issuance or sale of such Options or such Convertible Securities been made
upon the basis of (i) the issuance of the number of Common Shares theretofore
delivered upon the exercise of such Options or upon the conversion or exchange
of such Convertible Securities and the total consideration received therefor,
(ii) the issuance of all Common Shares and all other Options or Convertible
Securities and the total consideration received therefor and (iii) the original
issuance at the time of such change of exercise price or rate of any such
Options or Convertible Securities then outstanding and the total consideration
received therefor. On the expiration of any such Option or the termination of
any such right to convert or exchange any such Convertible Securities, the
Exercise Price immediately shall be adjusted to the Exercise Price that would
have obtained (iv) had the adjustments made upon the issuance of such Options or
such Convertible Securities been made upon the issuance of only the number of
Common Shares actually delivered and the total consideration received therefor
upon the exercise of such Options or upon the conversion or exchange of such
Convertible Securities and (v) had adjustments been made on the basis of the
Exercise Price as adjusted under clause (iv) of this Section 3.03(c) for all
issues or sales of Common Shares, Options or Convertible Securities made after
the issuance of such Options or Convertible Securities. If the exercise price
provided for in any Option referred to in Section 3.03(a), or the rate at which
any Convertible Security referred to in Section 3.03(a) or 3.03(b) is
convertible or exchangeable for Common Shares, shall decrease at any time
pursuant to applicable provisions thereof designed to protect against dilution,
the Exercise Price immediately shall be decreased in the case of delivery of
Common Shares upon the exercise of any such Option or upon the conversion or
exchange of any such Convertible Securities, to the Exercise Price that would
have obtained had the adjustments made upon the issue or sale of such Option (as
defined in 3.03(a)) or such Convertible Security (as defined in 3.03(b)) been
made upon the basis of the issuance of the Common Shares so delivered and the
total consideration received therefor.
(d) If any Common Shares or any Convertible Securities or any Option shall
be issued or sold for cash, the consideration received by the Company shall be
deemed to be the amount payable to the Company therefor without deduction of any
expense incurred or any underwriting commission, concession or discount paid or
allowed by the Company in connection therewith. If any Common Shares or any
Convertible Securities or any Option shall be issued or sold for a consideration
other than cash, the consideration received by the Company shall be deemed to be
the fair value of such consideration as determined by the Board of Trustees of
the Company without deduction of any expense incurred or any underwriting
commission,
7
concession or discount paid or allowed by the Company in connection therewith.
If any Common Shares or any Convertible Securities or any Option shall be issued
in connection with a merger of another corporation into the Company, the
consideration received by the Company shall be deemed to be the fair value as
determined by the Board of Trustees of the Company of such portion of the assets
of such merged corporation as the Board of Trustees shall reasonably determine
to be attributable to such Common Shares or such Option or Convertible
Securities, as the case may be.
SECTION 3.04 Stock Dividends. If the Company shall declare a dividend or
---------------
any other distribution upon any capital stock which is payable in Common Shares,
the Exercise Price shall be reduced to the quotient obtained by dividing (i) the
number of Common Shares outstanding and deemed (in accordance with the
provisions of Section 3.03(c)) to be outstanding immediately prior to such
declaration multiplied by the then effective Exercise Price by (ii) the total
number of Common Shares outstanding and deemed (in accordance with the
provisions of Section 3.03(c)) to be outstanding immediately after such
declaration. All Common Shares and all Convertible Securities issuable in
payment of any dividend or other distribution upon the capital stock of the
Company shall be deemed to have been issued or sold without consideration.
SECTION 3.05 Extraordinary Dividends and Distributions. If the Company
-----------------------------------------
shall declare a dividend or any other distribution upon the Common Shares
payable otherwise than out of current earnings, retained earnings or earned
surplus and otherwise than in Common Shares or Convertible Securities, the
Exercise Price shall be reduced by an amount equal, in the case of a dividend or
distribution in cash, to the amount thereof payable per Common Share or, in the
case of any other dividend or other distribution, to the fair value thereof per
Common Share at the time such dividend or other distribution was declared, as
reasonably determined by the Board of Trustees of the Company. A dividend or
distribution other than in cash shall be considered payable out of current
earnings, retained earnings or earned surplus only to the extent that such
current earnings, retained earnings or earned surplus are charged an amount
equal to the fair value of such dividend or distribution as reasonably
determined by the Board of Trustees of the Company.
SECTION 3.06 Stock Splits and Reverse Stock Splits. If the Company shall
-------------------------------------
subdivide its outstanding Common Shares into a greater number of shares, the
Exercise Price shall be proportionately reduced and the number of Warrant Shares
issuable upon exercise of each Warrant shall be proportionately increased. If
the Company shall combine the outstanding Common Shares into a smaller number of
shares, the Exercise Price shall be proportionately increased and the number of
Warrant Shares issuable upon exercise of each Warrant shall be proportionately
decreased.
SECTION 3.07 Reorganizations and Asset Sales. If any capital reorganization
-------------------------------
or reclassification of the Company, or any consolidation or merger of the
Company with another corporation, or the sale of all or substantially all of the
assets of the Company shall be effected in such a way that the holders of the
Common Shares shall be entitled to receive securities or assets with respect to
or in exchange for Common Shares, adequate provision shall be made, prior to and
as a condition of such reorganization, reclassification, consolidation, merger
or sale, whereby
8
each Warrantholder shall have the right to receive, upon the terms and
conditions specified herein and in lieu of the Warrant Shares otherwise
receivable upon the exercise of such Warrants, such securities or assets as may
be issued or payable with respect to or in exchange for the number of
outstanding Common Shares equal to the number of Warrant Shares otherwise
receivable had such reorganization, reclassification, consolidation, merger or
sale not taken place. In any such case, appropriate provision shall be made with
respect to the rights and interests of such Warrantholder so that the provisions
of this Agreement shall be applicable with respect to any securities or assets
thereafter deliverable upon exercise of the Warrants. The Company shall not
effect any such consolidation, merger or sale unless prior to or simultaneously
with the consummation thereof, the survivor or successor corporation resulting
from such consolidation or merger or the purchaser of such assets shall assume
by written instrument delivered to each holder of Warrants the obligation to
deliver to such holder such securities or assets as such holder may be entitled
to receive.
SECTION 3.08 Covenant to Reserve Shares for Issuance on Exercise. (a) The
---------------------------------------------------
Company will cause an appropriate number of Common Shares to be duly and validly
authorized and reserved and will keep available out of its authorized Common
Shares, solely for the purpose of issue upon exercise of Warrants as herein
provided, the full number of Common Shares, if any, then issuable if all
outstanding Warrants then exercisable were to be exercised. The Company
covenants that all Common Shares that shall be so issuable shall be duly and
validly issued and, upon payment of the Exercise Price, fully paid and
non-assessable.
(b) The Company hereby authorizes and directs its current and future
transfer agents for the Common Shares at all times to reserve such number of
authorized shares as shall be requisite for such purpose. The Warrant Agent is
hereby authorized to requisition from time to time from any such transfer
agents' share certificates required to honor outstanding Warrants upon exercise
thereof in accordance with the terms of this Agreement, and the Company hereby
authorizes and directs such transfer agents to comply with all such requests of
the Warrant Agent. The Company will supply such transfer agents with duly
executed stock certificates for such purposes. Promptly after the date of
expiration of the Warrants, the Warrant Agent shall certify to the Company the
aggregate number of Warrants then outstanding, and thereafter no shares shall be
reserved in respect of such Warrants.
SECTION 3.09 Warrant Agent Not Responsible for Validity of Shares. The
----------------------------------------------------
Warrant Agent shall not be accountable with respect to the validity or value (or
the kind or amount) of any Common Shares or of any securities or property that
at any time may be issued or delivered upon the exercise of any Warrant or upon
any adjustment pursuant to Article III, 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 Common
Shares or share certificates or other securities or property upon the surrender
of any Warrant for the purpose of exercise or upon any adjustment pursuant to
Article III, or to comply with any of the covenants of the Company contained in
this Article III.
SECTION 3.10 Statements on Warrants. The form of Warrant Certificate need
----------------------
not be changed because of any adjustment made pursuant to this Article III, and
Warrant
9
Certificates issued after such adjustment may state the same Exercise Price and
the same number of Common Shares as are stated in the Warrant Certificates
initially issued pursuant to this Agreement. The Company, however, may at any
time in its sole discretion (which shall be conclusive) make any change in the
form of Warrant Certificate that it may deem appropriate and that does not
affect the substance thereof; and any Warrant Certificates 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 3.11 Notice of Change in Securities Issuable, etc. Whenever the
---------------------------------------------
securities issuable or deliverable in exchange for Warrants are changed pursuant
to this Article III, the Company promptly shall file with the Warrant Agent a
certificate executed by its chief financial officer, setting forth in reasonable
detail the facts requiring the change and specifying the effective date of such
change and the number or amount of, and describing the shares or other
securities issuable or deliverable in exchange for, each Warrant as so changed.
The Company also shall mail such a notice to each Warrantholder. Failure to file
such statement or to publish such notice, or any defect in such statement or
notice, shall not affect the legality or validity of any such change.
SECTION 3.12 References to Common Shares. Unless the context
---------------------------
otherwise indicates, all references to Common Shares in this Agreement and in
the Warrant Certificates, in the event of a change under this Article III, shall
be deemed to refer also to any other securities issuable or deliverable in
exchange for Warrants pursuant to such change.
ARTICLE IV
OTHER PROVISIONS RELATING TO RIGHTS OF HOLDERS OF WARRANTS
SECTION 4.01 No Rights as Shareholders. Nothing contained in this Agreement
-------------------------
or in any Warrant Certificate shall be construed as conferring on any
Warrantholder any rights whatsoever as a shareholder of the Company, including
the right to vote at, or to receive notice of, any meeting of shareholders of
the Company; nor shall the consent of any such holder be required with respect
to any action or proceeding of the Company; nor shall any such holder, by reason
of the ownership or possession of a Warrant or the Warrant Certificate
representing the same, either at, before or after exercising such Warrant, have
any right to receive any cash dividends, stock dividends, allotments or rights,
or other distributions (except as specifically provided herein), paid, allotted
or distributed or distributable to the shareholders of the Company prior to the
date of the exercise of such Warrant; nor shall such holder have any right not
expressly conferred by such holder's Warrant or Warrant Certificate.
SECTION 4.02 Mutilated or Missing Warrant Certificates. If any Warrant
-----------------------------------------
Certificate is lost, stolen, mutilated or destroyed, the Company in its
discretion may issue and the Warrant Agent may countersign, in exchange and
substitution for and upon cancellation of the mutilated Warrant Certificate, or
in lieu of and substitution for the Warrant Certificate lost, stolen or
destroyed, upon receipt of a proper affidavit or other evidence satisfactory to
the Company and the Warrant Agent (and surrender of any mutilated Warrant
Certificate) and bond of
10
indemnity in form and amount and with corporate surety satisfactory to the
Company and the Warrant Agent in each instance protecting the Company and the
Warrant Agent, a new Warrant Certificate of like tenor and exercisable for an
equivalent number of Common Shares as the Warrant Certificate so lost, stolen,
mutilated or destroyed. Any such new Warrant Certificate shall constitute an
original contractual obligation of the Company, whether or not the allegedly
lost, stolen, mutilated or destroyed Warrant Certificate at any time shall be
enforceable by anyone. An applicant for such a substitute Warrant Certificate
also shall comply with such other reasonable regulations and pay such other
reasonable charges as the Company or the Warrant Agent may prescribe. All
Warrant Certificates shall be held and owned upon the express condition that the
foregoing provisions are exclusive with respect to the replacement of lost,
stolen, mutilated or destroyed Warrant Certificates, and shall preclude any and
all other rights or remedies notwithstanding any law or statute existing or
hereafter enacted to the contrary with respect to the replacement of negotiable
instruments or other securities without their surrender.
SECTION 4.03 Liquidation, Merger, etc.; Notice to Warrantholders. If:
---------------------------------------------------
(a) the Company shall authorize the issuance to all holders of Common
Shares of rights or warrants to subscribe for or purchase capital stock of the
Company or of any other subscription rights or warrants; or
(b) the Company shall authorize the distribution to all holders of Common
Shares of evidences of its indebtedness or assets (other than cash dividends or
cash distributions payable out of current earnings, retained earnings or earned
surplus or dividends payable in Common Shares); or
(c) there shall be proposed any consolidation or merger to which the
Company is to be a party and for which approval of the holders of Common Shares
is required, or the conveyance or transfer of the properties and assets of the
Company substantially as an entirety; or
(d) there shall be proposed the voluntary or involuntary dissolution,
liquidation or winding up of the Company; the Company shall cause to be filed
with the Warrant Agent and shall cause to be given to each Warrantholder, by
first-class mail, postage prepaid, a written notice stating (i) the date as of
which the holders of record of Common Shares to be entitled to receive any such
rights, warrants or distribution are to be determined or (ii) the date on which
any consolidation, merger, conveyance, transfer, reorganization,
reclassification, dissolution, liquidation or winding up is expected to become
effective, and the date as of which it is expected that holders of record of
Common Shares shall be entitled to exchange the shares for securities or other
property, if any, deliverable upon the consolidation, merger, conveyance,
transfer, reorganization, reclassification, dissolution, liquidation or winding
up. Such notice shall be filed and mailed in the case of a notice pursuant to
(i) above, at least ten calendar days before the record date specified and in
the case of a notice pursuant to clause (ii) above, at least 20 calendar days
before the earlier of the dates specified. From the time notice is required to
be given pursuant to this Section 4.03, the holders of Warrants shall be
entitled to exercise such Warrants regardless of the provisions of Section 2.01.
11
ARTICLE V
CONCERNING THE WARRANT AGENT
SECTION 5.01 Change of Warrant Agent. (a) The Warrant Agent, or any
-----------------------
successor to it hereafter appointed, may resign its duties and be discharged
from all further duties and liabilities hereunder after giving 60 days' notice
in writing to the Company, except that such shorter notice may be given as the
Company, in writing, shall accept as sufficient. If the office of the Warrant
Agent becomes vacant by resignation or incapacity to act or otherwise, the
Company shall appoint a successor Warrant Agent in place of the Warrant Agent.
If the Company shall fail to make such appointment within a period of 60 days
after it has been notified in writing of such resignation or incapacity by the
resigning or incapacitated Warrant Agent or by any holder of Warrants (who, with
such notice, shall submit such holder's Warrant Certificate for inspection by
the Company), then the holder of any Warrants may apply to any court of
competent jurisdiction for the appointment of a successor Warrant Agent.
(b) The Warrant Agent may be removed by the Company at any time upon 30
days' written notice to the Warrant Agent; provided, however, that the Company
-------- -------
shall not remove the Warrant Agent until a successor Warrant Agent meeting the
requirements hereof shall have been appointed.
(c) Any successor Warrant Agent, whether appointed by the Company or by a
court of competent jurisdiction, shall be a corporation or association
(including the Company) organized, in good standing and doing business under the
laws of the United States of America or any state thereof or the District of
Columbia. After appointment, any successor Warrant Agent shall be vested with
all the authority, powers, rights, immunities, duties and obligations of its
predecessor Warrant Agent with like effect as if originally named as Warrant
Agent hereunder, without any further act or deed; but if for any reason it
becomes necessary or appropriate, the predecessor Warrant Agent shall execute
and deliver, at the expense of the Company, an instrument transferring to such
successor Warrant Agent all the authority, powers and rights of such predecessor
Warrant Agent hereunder; and upon request of any successor Warrant Agent, the
Company shall make, execute, acknowledge and deliver any and all instruments in
writing to more fully and effectually vest in and confirm to such successor
Warrant Agent all such authority, powers, rights, immunities, duties and
obligations. Upon assumption by a successor Warrant Agent of the duties and
responsibilities hereunder, the predecessor Warrant Agent shall deliver and
transfer, at the expense of the Company, to the successor Warrant Agent any
property at the time held by it hereunder. As soon as practicable after such
appointment, the Company shall give notice thereof to the predecessor Warrant
Agent, the Warrantholders and each transfer agent for the Common Shares. Failure
to give such notice, or any defect therein, shall not affect the validity of the
appointment of the successor Warrant Agent.
(d) Any corporation or association into which the Warrant Agent may be
merged or with which it may be consolidated, or any corporation or association
resulting from any merger or consolidation to which the Warrant Agent shall be a
party, shall be the successor
12
Warrant Agent under this Agreement without any further act. In case at the time
such successor to the Warrant Agent shall succeed to the agency created by this
Agreement, any of the Warrant Certificates shall have been countersigned but not
delivered, any such successor to the Warrant Agent may adopt the
countersignature of the original Warrant Agent and deliver such Warrant
Certificates so countersigned, and in case at that time any of the Warrant
Certificates shall not have been countersigned, any successor to the Warrant
Agent may countersign such Warrant Certificates either in the name of the
predecessor Warrant Agent or in the name of the successor Warrant Agent; and in
all such cases, such Warrant Certificates shall have the full force provided in
the Warrant Certificates and in this Agreement.
(e) In case at any time the name of the Warrant Agent shall be changed and
at such time any of the Warrant Certificates shall have been countersigned but
not delivered, the Warrant Agent may adopt the countersignatures under its prior
name and deliver such Warrant Certificates so countersigned; and in case at that
time any of the Warrant Certificates shall not have been countersigned, the
Warrant Agent may countersign such Warrant Certificates either in its prior name
or in its changed name; and in all such cases, such Warrant Certificates shall
have the full force provided in the Warrant Certificates and in this Agreement.
SECTION 5.02 Compensation; Further Assurances. The Company agrees (i)
--------------------------------
that it will pay the Warrant Agent reasonable compensation for its services as
Warrant Agent hereunder and, except as otherwise expressly provided, will pay or
reimburse the Warrant Agent upon demand for all reasonable expenses,
disbursements and advances incurred or made by the Warrant Agent in accordance
with any of the provisions of this Agreement (including the reasonable
compensation, expenses and disbursements of its agents and counsel), except any
such expense, disbursement or advance as may arise from its or any of their
negligence or bad faith; and (ii) that it will perform, execute, acknowledge and
deliver or cause to be performed, executed, acknowledged and delivered all such
further and other acts, instruments and assurances as reasonably may be required
by the Warrant Agent for the carrying out or performing of the provisions of
this Agreement.
SECTION 5.03 Reliance on Counsel. The Warrant Agent may consult with
-------------------
legal counsel (who may be legal counsel for the Company), and the written
opinion of such counsel or any advice of legal counsel subsequently confirmed by
a written opinion of such counsel shall be full and complete authorization and
protection to the Warrant Agent as to any action taken or omitted by it in good
faith and in accordance with such written opinion or advice.
SECTION 5.04 Proof of Actions Taken. Whenever in the performance of its
----------------------
duties under this Agreement the Warrant Agent shall deem it necessary or
desirable that any matter be proved or established by the Company prior to
taking or suffering or omitting any action hereunder, such matter (unless other
evidence in respect thereof be herein specifically prescribed), in the absence
of bad faith on the part of the Warrant Agent, may be deemed to be conclusively
proved and established by an Officers' Certificate delivered to the Warrant
Agent; and such Officers' Certificate, in the absence of bad faith on the part
of the Warrant Agent, shall be full warrant to the Warrant Agent for any action
taken, suffered or omitted in good faith by it under the provisions of this
Agreement in reliance upon such certificate; but in its discretion, the
13
Warrant Agent in lieu thereof may accept other evidence of such fact or matter
or may require such further or additional evidence as to it may seem reasonable.
SECTION 5.05 Correctness of Statements. The Warrant Agent shall not be
-------------------------
liable for or by reason of any of the statements of fact or recitals contained
in this Agreement or in the Warrant Certificates (except its countersignature
thereon) or be required to verify the same, and all such statements and recitals
are and shall be deemed to have been made by the Company only.
SECTION 5.06 Validity of Agreement. The Warrant Agent shall not be under
---------------------
any responsibility in respect of the validity of this Agreement or the execution
and delivery hereof or in respect of the validity or execution of any Warrant
Certificates (except its countersignature thereon); nor shall it be responsible
for any breach by the Company of any covenant or condition contained in this
Agreement or in any Warrant Certificate; nor shall it by any act hereunder be
deemed to make any representation or warranty as to the authorization or
reservation of any Common Shares to be issued pursuant to this Agreement or any
Warrants or as to whether any Common Shares, when issued, will be validly issued
and fully paid and nonassessable.
SECTION 5.07 Use of Agents. The Warrant Agent may execute and exercise
-------------
any of the rights or powers hereby vested in it or perform any duty hereunder
either itself or by or through its attorneys or agents and the Warrant Agent
shall not be responsible for the misconduct or negligence of any agent or
attorney, provided due care had been exercised in the appointment and continued
employment thereof.
SECTION 5.08 Liability of Warrant Agent. The Warrant Agent shall incur no
--------------------------
liability or responsibility to the Company or to any holder of Warrants for any
action taken in reliance on any notice, resolution, waiver, consent, order,
certificate, or other paper, document or instrument believed by it to be genuine
and to have been signed, sent or presented by the proper party or parties. The
Company agrees to indemnify the Warrant Agent and save it harmless against any
and all liabilities, including judgments, costs and reasonable counsel fees, for
anything done or omitted in good faith by the Warrant Agent in the execution of
this Warrant Agreement, except as a result of the Warrant Agent's gross
negligence or willful misconduct or bad faith.
SECTION 5.09 Legal Proceedings. The Warrant Agent shall be under no
-----------------
obligation to institute any action, suit or legal proceeding or to take any
other action likely to involve expense unless the Company or one or more holders
of Warrants shall furnish the Warrant Agent with reasonable security and
indemnity for any costs and expenses that may be incurred, but this provision
shall not affect the power of the Warrant Agent to take such action as the
Warrant Agent may consider proper, whether with or without any such security or
indemnity.
SECTION 5.10 Other Transactions in Shares of the Company. The Warrant
-------------------------------------------
Agent, in its individual or any other capacity, may become the owner of the
Warrants or other securities of the Company, or become pecuniarily interested in
any transaction in which the Company may be interested, or contract with or lend
money to the Company or otherwise act as
14
fully and freely as though it were not the Warrant Agent under this Warrant
Agreement. Nothing herein shall preclude the Warrant Agent from acting in any
other capacity for the Company or for any other legal entity.
SECTION 5.11 Actions as Agent. The Warrant Agent shall act hereunder
----------------
solely as agent and not in a ministerial capacity, and its duties shall be
determined solely by the provisions hereof. The Warrant Agent shall not be
liable for anything which it may do or refrain from doing in good faith in
connection with this Agreement, except for its own negligence or willful
misconduct or bad faith.
SECTION 5.12 Appointment and Acceptance of Agency. The Company hereby
------------------------------------
appoints the Warrant Agent to act as agent for the Company in accordance with
the instructions set forth in this Agreement, and the Warrant Agent hereby
accepts the agency established by this Agreement and agrees to perform the same
upon the terms and conditions herein set forth.
ARTICLE VI
MISCELLANEOUS
SECTION 6.01 Reservation of Shares. The Company at all times shall
---------------------
reserve and keep available such number of shares of its authorized but unissued
Common Shares as from time to time shall be sufficient to permit the exercise of
all outstanding Warrants. If at any time the number of authorized but unissued
Common Shares shall not be sufficient for such purpose, the Company will take
such action as, in the opinion of its counsel, may be necessary to increase its
authorized but unissued Common Shares to such number of shares as shall be
sufficient for such purpose. Prior to the issuance of any Warrant Shares, the
Company shall secure the listing of such Warrant Shares upon any securities
exchange or market upon which Common Shares are then listed, if any.
SECTION 6.02 Registration of Warrant Shares. The Company has registered
------------------------------
the Warrant Shares under the Securities Act.
SECTION 6.03 Enforcement of Warrant Rights. All rights of action are
-----------------------------
vested in the respective Warrantholders. Any holder of any Warrant, in his own
behalf and for his own benefit, may enforce, and may institute and maintain any
suit, action or proceeding against the Company or the Warrant Agent suitable to
enforce, or otherwise in respect of, his right to exercise his Warrant for the
purchase of the number of Warrant Shares issuable or deliverable in exchange
therefor, in the manner provided in the Warrant Certificate and in this
Agreement.
SECTION 6.04 Negotiability and Ownership. Neither the Warrants nor the
---------------------------
Warrant Shares shall, for a period of one year following the Closing Date, be
sold, transferred, assigned, pledged or hypothecated by the holders thereof,
except (a) to persons who are officers of FBR, (b) members of the selling group
or (c) in the case of an individual, pursuant to such individual's last will and
testament or the laws of descent and distribution and, in any case, only in
compliance with the Securities Act and Rule 2710 of the National Association of
Securities Dealers, Inc. Manual, or any successor rule. For the purposes of this
Section 6.04, the term
15
"officers" shall refer to those persons who are officers of FBR or who become
officers of FBR at any time before the expiration of the Warrants regardless of
whether such persons are officers of FBR at the time they sell, transfer, assign
or hypothecate a Warrant. Any attempt to sell, transfer, assign or hypothecate
in contravention of this Section shall be null and void.
SECTION 6.05 Warrant Legend. (a) Each Warrant shall contain a legend in
--------------
substantially the following form:
"THIS WARRANT AND THE COMMON SHARES ISSUABLE UPON EXERCISE OF THIS
WARRANT ARE SUBJECT TO THE CONDITIONS SPECIFIED IN THE WARRANT AGREEMENT,
DATED ______________, 1998, BETWEEN CAPITAL AUTOMOTIVE REIT AND AMERICAN
STOCK TRANSFER & TRUST COMPANY. ANY ATTEMPT TO SELL, TRANSFER, ASSIGN, OR
HYPOTHECATE THIS WARRANT OR ANY COMMON SHARE ISSUED UPON EXERCISE OF THIS
WARRANT, PRIOR TO ______________, 1999, SHALL BE NULL AND VOID, EXCEPT
TRANSFERS TO PERSONS WHO ARE OFFICERS OF FRIEDMAN, BILLINGS, XXXXXX & CO.,
INC., MEMBERS OF THE SELLING GROUP OR PURSUANT TO AN INDIVIDUAL'S LAST WILL
AND TESTAMENT OR THE LAW OF DESCENT AND DISTRIBUTION. NO TRANSFER IN
VIOLATION OF SUCH AGREEMENT SHALL BE EFFECTIVE.
THIS WARRANT MAY NOT BE SOLD OR TRANSFERRED EXCEPT PURSUANT TO AN
EFFECTIVE AND CURRENT REGISTRATION STATEMENT OR POST EFFECTIVE AMENDMENT
THERETO FOR SUCH SHARES UNDER THE SECURITIES ACT OF 1933 (THE "ACT") OR AN
APPLICABLE EXEMPTION UNDER THE ACT.
(b) Each certificate representing Warrant Shares, issued prior to
_________, 1999, shall contain a legend substantially in the following form:
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE
CONDITIONS SPECIFIED IN THE AGREEMENT, DATED ________________, 1998,
BETWEEN CAPITAL AUTOMOTIVE REIT AND AMERICAN STOCK TRANSFER & TRUST
COMPANY. ANY ATTEMPT TO SELL, TRANSFER, ASSIGN, PLEDGE OR HYPOTHECATE THE
SHARES REPRESENTED BY THIS CERTIFICATE, PRIOR TO _______________, 1999,
SHALL BE NULL AND VOID, EXCEPT TRANSFERS TO PERSONS WHO ARE OFFICERS OF
FBR, MEMBERS OF THE SELLING GROUP OR PURSUANT TO AN INDIVIDUAL'S LAST WILL
AND TESTAMENT OR THE LAW OF DESCENT AND DISTRIBUTION. NO TRANSFER IN
VIOLATION OF SUCH AGREEMENT SHALL BE EFFECTIVE."
SECTION 6.06 Supplements and Amendments. (a) Notwithstanding the
--------------------------
provisions of Section 6.06(b), the Warrant Agent, without the consent or
concurrence of the registered holders of the Warrants, may enter into one or
more supplemental agreements or amendments with the Company for the purpose of
evidencing the rights of Warrantholders upon
16
consolidation, merger, sale, transfer or reclassification pursuant to Section
3.07, making any changes or corrections in this Agreement that are required to
cure any ambiguity, to correct or supplement any provision contained herein that
may be defective or inconsistent with any other provision herein or any clerical
omission or mistake or manifest error herein contained, or making such other
provisions in regard to matters or questions arising under this Agreement as
shall not adversely affect the interests of the holders of the Warrants or be
inconsistent with this Agreement or any supplemental agreement or amendment.
(b) With the consent of the registered holders of at least a majority
in number of the Warrants at the time outstanding, the Company and the Warrant
Agent at any time and from time to time by supplemental agreement or amendment
may add any provisions to or change in any manner or eliminate any of the
provisions of this Agreement or of any supplemental agreement or modify in any
manner the rights and obligations of the Warrantholders and of the Company;
provided, however, that no such supplemental agreement or amendment, without the
-------- -------
consent of the registered holder of each outstanding Warrant affected thereby,
shall:
(1) alter the provisions of this Agreement so as to affect adversely
the terms upon which the Warrants are exercisable; or
(2) reduce the number of Warrants outstanding the consent of whose
holders is required for any such supplemental agreement or amendment.
SECTION 6.07 Covenant as to Status as a Real Estate Investment Trust.
-------------------------------------------------------
The Company shall use its best efforts, until the fifth anniversary of the
Expiration Date, to maintain its status as a "real estate investment trust"
within the meaning of the Internal Revenue Code of 1986, as amended.
Notwithstanding the foregoing, the Company may change the nature of its business
so as to cease to be, or to withdraw its election as, a real estate investment
trust with the approval of the board of trustees and a vote of shareholders as
required by the Company's Amended and Restated Declaration of Trust.
SECTION 6.08 Successors and Assigns. All the covenants and provisions
----------------------
of this Agreement by or for the benefit of the Company or the Warrant Agent
shall bind and inure to the benefit of their respective successors and assigns
hereunder.
SECTION 6.09 Notices. Any notice or demand authorized by this
-------
Agreement to be given or made by the Warrant Agent or by the holder of any
Warrant to or on the Company shall be sufficiently given or made if sent by mail
first-class, postage prepaid, addressed (until another address is filed in
writing by the Company with the Warrant Agent) as follows:
Capital Automotive REIT
0000 Xxxxx Xxxx Xxxxxx, Xxxxx 000
Xxxxxxxxx, Xxxxxxxx 00000
Attention: Xxxxx X. Xxx
17
Any notice or demand authorized by this Agreement to be given or made by
the holder of any Warrant or by the Company to or on the Warrant Agent shall be
sufficiently given or made if sent by mail first-class, postage prepaid,
addressed (until another address is filed in writing by the Warrant Agent with
the Company), as follows:
AMERICAN STOCK TRANSFER & TRUST COMPANY
00 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx Xxxxxx
Any notice or demand authorized by this Agreement to be given or made to
the holder of any Warrants shall be sufficiently given or made if sent by
first-class mail, postage prepaid to the last address of such holder as it shall
appear on the Warrant Register.
SECTION 6.10 Applicable Law. The validity, interpretation and performance
--------------
of this Agreement and of the Warrant Certificate shall be governed by the law of
the State of New York without giving effect to the principles of conflicts of
laws thereof.
SECTION 6.11 Benefits of this Agreement. Nothing in this Agreement
--------------------------
expressed and nothing that may be implied from any of the provisions hereof is
intended, or shall be construed, to confer upon, or give to, any person or
corporation other than the parties hereto and the holders of the Warrants any
right, remedy or claim under or by reason of this Agreement or of any covenant,
condition, stipulation, promise or agreement hereof, and all covenants,
conditions, stipulations, promises and agreements in this Agreement contained
shall be for the sole and exclusive benefit of the parties hereto and their
successors and of the holders of the Warrants.
SECTION 6.12 Registered Warrantholders. Prior to due presentment for
-------------------------
registration of transfer, the Company and the Warrant Agent may deem and treat
the person in whose name any Warrants are registered in the Warrant Register as
the absolute owner thereof for all purposes whatsoever (notwithstanding any
notation of ownership or other writing thereon made by anyone other than the
Company or the Warrant Agent) and neither the Company nor the Warrant Agent
shall be affected by any notice to the contrary or be bound to recognize any
equitable or other claim to or interest in any Warrants on the part of any other
person and shall not be liable for any registration of transfer of Warrants that
are registered or to be registered in the name of a fiduciary or the nominee of
a fiduciary unless made with actual knowledge that a fiduciary or nominee is
committing a breach of trust in requesting such registration of transfer or with
such knowledge of such facts that its participation therein amounts to bad
faith.
SECTION 6.13 Inspection of Agreement. A copy of this Agreement shall be
-----------------------
available at all reasonable times for inspection by any Warrantholder at the
principal office of the Warrant Agent(or successor Warrant Agent). The Warrant
Agent may require any such Warrantholder to submit his Warrant Certificate for
inspection by it before allowing such Warrantholder to inspect a copy of this
Agreement.
18
SECTION 6.14 Headings. The Article and Section headings herein are for
--------
convenience only and are not a part of this Agreement and shall not affect the
interpretation thereof.
SECTION 6.15 Counterparts. The Agreement may be executed in any number of
------------
counterparts, each of which so executed shall be deemed to be an original.
IN WITNESS WHEREOF, this Agreement has been duly executed by the parties
hereto under their respective seals as of the day and year first above written.
CAPITAL AUTOMOTIVE REIT
[CORPORATE SEAL]
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
Attest:
---------------------------
Name:
-----------------------------
Title:
----------------------------
AMERICAN STOCK TRANSFER &
TRUST COMPANY, as Warrant Agent
[CORPORATE SEAL]
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
Attest:
---------------------------
Name:
-----------------------------
Title:
----------------------------
19
EXHIBIT A
[WARRANT CERTIFICATE]
NO. ___ 1,277,794 Warrants
WARRANTS
TO PURCHASE COMMON SHARES OF
CAPITAL AUTOMOTIVE REIT
CAPITAL AUTOMOTIVE REIT, a Maryland real estate investment trust (the
"Company"), for value received, hereby certifies that
----------------------------------------
or registered assigns, is the owner of the number of Warrants, set forth
above, each of which represents the right, subject to the terms and conditions
hereof and of the Warrant Agreement (as defined below), to purchase from the
Company at any time or from time to time, from the date of the closing of the
initial public offering of the Company's Common Shares (as defined below),
registered with the Securities and Exchange Commission on Form S-11 (33-41183)
until the close of business on the fifth anniversary of such date (or, if such
date is not a Business Day (as defined below), the first following Business Day)
(the "Exercise Period"), the number of common shares of beneficial interest, par
value $.01 per share, of the Company (the "Common Shares") described in the
Warrant Agreement (each Common Share issuable upon exercise of a Warrant is
referred to as a "Warrant Share"). Subject to the terms and conditions of the
Warrant Agreement, the exercise price per Warrant represented by this Warrant
Certificate shall be $_____ per share, adjusted as provided in Article III of
the Warrant Agreement, payable in full as to each Warrant exercised at the time
of purchase. The term "Underwriting Agreement" as used herein refers to the
Underwriting Agreement, dated ____________, 1998, between the Company and
Friedman, Billings, Xxxxxx & Co., Inc., as Representative of the several
underwriters. The term "Exercise Price" as used herein refers to the foregoing
price per share in effect at any time. The term "Business Day" as used herein
shall mean any days of the week other than a Saturday, Sunday or a day which the
City of New York or in a city in which the principal office of the Warrant
Agreement is located shall be a legal holiday or which banking institutions are
authorized by law to close.
This Warrant may be exercised in whole or in part at any time or from time
to time during the Exercise Period. The portion of any Warrant not exercised
during the Exercise Period shall become void, and all rights hereunder and all
rights in respect hereof and under the Warrant Agreement shall cease at the end
of the Exercise Period.
A-1
Each such purchase of Warrant Shares shall be made, and shall be deemed
effective for the purpose of determining the date of exercise, only upon
surrender hereof to the Company at the office or agency maintained for such
purpose in The City of New York or the principal office of American Stock
Transfer & Trust Company, Warrant Agent (or any successor Warrant Agent), with
the form of Election to Exercise on the reverse hereof duly completed and
signed, and upon payment in full to the Warrant Agent for the account of the
Company of the Exercise Price (i) in cash or (ii) by certified or official bank
check or (iii) by any combination of the foregoing, all as provided in the
Warrant Agreement and upon compliance with and subject to the conditions set
forth herein and in the Warrant Agreement.
This Warrant Certificate is issued under and in accordance with the Warrant
Agreement, dated as of __________, 1998 (the "Warrant Agreement"), between the
Company and the Warrant Agent and is subject to the terms and provisions of the
Warrant Agreement, which terms and provisions are hereby incorporated by
reference herein and made a part hereof. Copies of the Warrant Agreement and of
the Underwriting Agreement are available for inspection by the registered holder
at the principal office of the Warrant Agent (or successor Warrant Agent).
The Company shall not be required upon the exercise of the Warrants
represented hereby to issue fractions of Warrant Shares or to distribute share
certificates that evidence fractional Warrant Shares. Every holder of this
Warrant Certificate expressly waives its right to receive any fraction of a
Warrant Share or a share certificate representing a fraction of a Warrant Share.
Fractional Warrant Shares that otherwise would be issuable in respect of such
exercise shall be paid in cash as provided in the Warrant Agreement, and the
number of Warrant Shares issuable to such Warrantholder shall be rounded down to
the next nearest whole number. If such Warrant Certificate shall not have been
exercised in full, the Warrant Agent on behalf of the Company will issue to such
Warrantholder a new Warrant Certificate exercisable for the number of Common
Shares as to which such Warrant shall not have been exercised.
This Warrant Certificate may be exchanged either separately or in
combination with other Warrant Certificates at the office or agency maintained
in The City of New York for such purpose or at the principal office of the
Warrant Agent (or successor Warrant Agent) for new Warrant Certificates
representing the same aggregate number of Warrants as were evidenced by the
Warrant Certificate or Warrant Certificates exchanged, upon surrender of this
Warrant Certificate and upon compliance with and subject to the conditions set
forth herein and in the Warrant Agreement.
This Warrant Certificate is transferable (subject to restrictions set forth
in the Warrant Agreement) at the office or agency maintained in The City of New
York for such purpose or at the principal office of the Warrant Agent (or
successor Warrant Agent) by the registered holder hereof in person or by his
attorney duly authorized in writing, upon (i) surrender of this Warrant
Certificate and (ii) upon compliance with and subject to the conditions set
forth herein and in the Warrant Agreement. Upon any such transfer, a new Warrant
Certificate or new Warrant Certificates of different denominations, representing
in the aggregate a like number of Warrants, will be issued to the transferee.
Every holder of Warrants, by
A-2
accepting this Warrant Certificate, consents and agrees with the Company, the
Warrant Agent and with every subsequent holder of this Warrant Certificate that
until due presentation for the registration of transfer of this Warrant
Certificate on the Warrant Register maintained by the Warrant Agent, the Company
and the Warrant Agent may deem and treat the person in whose name this Warrant
Certificate is registered as the absolute and lawful owner for all purposes
whatsoever and neither the Company nor the Warrant Agent shall be affected by
any notice to the contrary.
Nothing contained in the Warrant Agreement or in this Warrant Certificate
shall be construed as conferring on the holder of any Warrants or his transferee
any rights whatsoever as a shareholder of the Company.
This Warrant Certificate shall not be valid unless countersigned manually
by the Warrant Agent.
The Warrant Agreement and each Warrant Certificate, including this Warrant
Certificate, shall be deemed a contract made under the laws of the State of New
York and for all purposes shall be construed in accordance with the laws of the
State of New York without giving effect to the principles of conflicts of law
thereof.
"THIS WARRANT AND THE COMMON SHARES ISSUABLE UPON EXERCISE OF THIS
WARRANT ARE SUBJECT TO THE CONDITIONS SPECIFIED IN THE WARRANT AGREEMENT,
DATED ____________, 1998, BETWEEN CAPITAL AUTOMOTIVE REIT AND AMERICAN
STOCK TRANSFER & TRUST COMPANY. ANY ATTEMPT TO SELL, TRANSFER, ASSIGN, OR
HYPOTHECATE THIS WARRANT OR ANY COMMON SHARE ISSUED UPON EXERCISE OF THIS
WARRANT, PRIOR TO ________________, 1999, SHALL BE NULL AND VOID, EXCEPT
TRANSFERS TO PERSONS WHO ARE OFFICERS OF FRIEDMAN, BILLINGS, XXXXXX & CO.,
INC., MEMBERS OF THE SELLING GROUP OR PURSUANT TO AN INDIVIDUAL'S LAST WILL
AND TESTAMENT OR THE LAW OF DESCENT AND DISTRIBUTION. NO TRANSFER IN
VIOLATION OF SUCH AGREEMENT SHALL BE EFFECTIVE.
THIS WARRANT MAY NOT BE SOLD OR TRANSFERRED EXCEPT PURSUANT TO AN
EFFECTIVE AND CURRENT REGISTRATION STATEMENT OR POST EFFECTIVE AMENDMENT
THERETO FOR SUCH SHARES UNDER THE SECURITIES ACT OF 1933 (THE "ACT") OR AN
APPLICABLE EXEMPTION UNDER THE ACT.
A-3
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to be
duly executed under its corporate seal.
Dated:
CAPITAL AUTOMOTIVE REIT
(CORPORATE SEAL) By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
A-4
ATTEST:
-------------------------
COUNTERSIGNED: AMERICAN STOCK TRANSFER &
TRUST COMPANY,
as Warrant Agent
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
A-5
ELECTION TO EXERCISE
(To be executed upon exercise of Warrant)
TO CAPITAL AUTOMOTIVE REIT:
The Undersigned hereby irrevocably elects to exercise the right of purchase
represented by the within Warrant Certificate for, and to purchase thereunder,
_________________ Common Shares, as provided for therein, and tenders herewith
payment of the purchase price in full in the form of cash or a certified or
official bank check (or combination thereof) in the amount of
$_________________________.
Please issue a certificate or certificates for such Common Shares in the
name of:
PLEASE INSERT SOCIAL SECURITY OR Name
OTHER IDENTIFYING NUMBER OF -------------------------------
ASSIGNEE
Address
------------------------ ----------------------------
Signature
------------------------ --------------------------
-----------------------------------
Note:The above signature should
correspond exactly with the
name on the face of this
Warrant Certificate or with
the name of assignee appearing
in the assignment form below.
Dated:
------------------
ASSIGNMENT
(To be executed only upon assignment of Warrant Certificate)
For value received, _________________________ hereby sells, assigns and transfer
unto ____________________________ the within Warrant Certificate, together with
all right, title and interest therein, and does hereby irrevocably constitute
and appoint ______________________ attorney, to transfer said Warrant
Certificate on the books of the within-named Company, with full power of
substitution in the premises.
Dated:
------------------
---------------------------------
Note: The above signature should
correspond exactly with the
name on the face of this
Warrant Certificate
