EXHIBIT 1.2
RUSHMORE FINANCIAL GROUP, INC.
WARRANT AGREEMENT
-----------------
January ___, 1998
First Southwest Company
0000 Xxxxxxx Xxxxxx, Xxxxx 000
Xxxxxx, Xxxxx 00000
Gentlemen:
Rushmore Financial Group, Inc., a Texas corporation (the "Company"), hereby
agrees to issue and sell to you, and you hereby agree to purchase from the
Company at a purchase price of $10.00, a stock purchase warrant entitling the
holder to purchase 50,000 shares of Common Stock, to be evidenced by an
instrument in the form attached hereto as Exhibit A (hereinafter referred to as
the "Warrant," and the Warrant and all instruments hereafter issued in
replacement, substitution, combination or subdivision thereof being hereinafter
collectively referred to as the "Warrants"). The number of shares of Common
Stock purchasable upon exercise of the Warrants is subject to adjustment as
provided in Section 7 below. The Warrants will be exercisable by you or any
other Warrantholder as to all or any lesser number of shares of Common Stock
covered thereby at the per share Purchase Price (as defined below) at any time
and from time to time during a four-year period commencing at 9:00 a.m., Dallas
time, on the date which is one year after the date hereof and ending at 5:00
p.m., Dallas time, on the fifth anniversary of the date hereof (the "Term").
The purchase and sale of the Warrant shall take place at such time and
place as you and the Company mutually agree, at which time you shall deliver a
check for the full purchase price of the Warrant. At such time, the Company will
deliver to you such certificates of its officers with respect to this Warrant
Agreement and the Warrant as you may reasonably request.
1. Definitions.
-----------
As used herein the following terms, unless the context otherwise requires,
shall have for all purposes hereof the following respective meanings:
(a) Common Stock. The term "Common Stock" refers to the common stock, par
------------
value $0.01 per share, of the Company and all other securities of any class or
classes (however designated) of the Company, now or hereafter authorized, the
holders of which shall have the right, without limitation as to amount, either
to all or to a part of the balance of current dividends and liquidating
dividends after the payment of dividends and distributions on any shares
entitled to preference, and the holders of which shall ordinarily in the absence
of contingency be entitled to vote generally in an election of directors of the
Company (even though the right so to vote has been suspended by the occurrence
of a contingency).
(b) Other Securities. The term "Other Securities" refers to any stock
----------------
(other than Common Stock) and other securities of the Company or any other
person (corporate or otherwise) which the holders of the Warrants at any time
shall be entitled to receive, or shall have received, upon the exercise of the
Warrants, in lieu of or in addition to Common Stock, or which at any time shall
be issuable or shall have been issued in exchange for or in replacement of
Common Stock or Other Securities pursuant to Section 7 below or otherwise.
(c) Purchase Price. The term "Purchase Price" refers to the per share
--------------
purchase price of the shares of the Underlying Common Stock subject to this
Warrant Agreement and the Warrants, as set forth in the form of Warrant attached
hereto as Exhibit A, as adjusted pursuant to Section 7 below.
(d) Act. The term "Act" refers to the Securities Act of 1933, as amended
---
from time to time.
(e) Commission. The term "Commission" refers to the Securities and
----------
Exchange Commission.
(f) Underlying Common Stock. The term "Underlying Common Stock" refers to
-----------------------
the shares of Common Stock (or Other Securities) issuable under this Warrant
Agreement and the Warrants pursuant to the exercise, in whole or in part, of the
Warrants.
(g) Warrantholder. The term "Warrantholder" refers to First Southwest
-------------
Company and any transferee or transferees of First Southwest Company permitted
under Section 3(a) below.
2. Representations and Warranties.
------------------------------
The Company represents and warrants to you as follows:
(a) Incorporation; Qualification. The Company has been duly organized and
----------------------------
is validly existing as a corporation in good standing under the laws of the
State of Texas, with power and authority to own or lease its properties and
conduct its business as currently conducted; the subsidiaries of the Company
listed on Schedule 2(a) attached hereto (collectively, the "Subsidiaries") are
the only subsidiaries of the Company, each of which has been duly organized and
is validly existing as a corporation in good standing under the laws of the
jurisdiction of its incorporation; each of the Subsidiaries has the power and
authority to own or lease its properties and conduct its business as currently
conducted; the Company and each of the Subsidiaries are duly qualified to
transact business in all jurisdictions in which the conduct of their business
requires such qualification; the outstanding shares of capital stock of each of
the Subsidiaries have been duly authorized and validly issued, are fully paid
and non-assessable and are owned by the Company or another Subsidiary free and
clear of all liens, encumbrances and security interests; and no options,
warrants or other rights to purchase, agreements or other obligations to issue
or other rights to convert any obligations into shares of capital stock or
ownership interests in the Subsidiaries are outstanding.
-2-
(b) Capitalization. All of the outstanding shares of Common Stock of the
--------------
Company have been duly authorized and validly issued and are fully paid and non-
assessable; and no preemptive rights of shareholders exist with respect to the
Common Stock or the issue and sale thereof.
(c) Corporate and Other Action. The Company has all requisite power and
--------------------------
authority, and has taken all necessary corporate action, to authorize, execute,
deliver and perform this Warrant Agreement, to execute, issue, sell and deliver
the Warrant and a certificate or certificates evidencing the Warrant, to
authorize and reserve for issuance and, upon payment from time to time of the
Purchase Price, to issue, sell and deliver, the shares of the Underlying Common
Stock issuable upon exercise of the Warrant, and to perform all of its
obligations under this Warrant Agreement and the Warrant. This Warrant Agreement
has been duly executed and delivered by the Company and is a legal, valid and
binding agreement of the Company enforceable in accordance with its terms,
except to the extent enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium and other laws affecting creditors' rights generally
and by general principles of equity. No authorization, approval, consent or
other order of any governmental authority is required for such authorization,
issue or sale except to the extent required by the Xxxx-Xxxxx-Xxxxxx Antitrust
Improvements Act of 1976 and applicable federal and state securities laws.
(d) No Violation. The execution and delivery of this Warrant Agreement,
------------
the consummation of the transactions herein contemplated and the compliance with
the terms and provisions of this Warrant Agreement and of the Warrant will not
conflict with, or result in a breach of, or constitute a default or an event
permitting acceleration under, any statute, the Articles of Incorporation or
Bylaws of the Company or any indenture, mortgage, deed of trust, note, bank
loan, credit agreement or any material franchise, license, lease, permit, or any
other material agreement, understanding or instrument, or any judgment, decree,
order, statute, rule or regulation to which the Company is a party or by which
it is bound.
(e) Validity. The Warrant, when delivered to you, will be duly
--------
authorized, executed and delivered and will be a legal, valid and binding
obligation of the Company enforceable in accordance with its terms, except to
the extent enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium and other laws affecting creditors' rights generally
and by general principles of equity. The shares of Underlying Common Stock of
the Company, when issued upon exercise of the Warrant, will have been duly
authorized for issuance and, when issued in accordance with the terms of this
Warrant Agreement, will be validly issued and outstanding, fully paid and
nonassessable and free of statutory preemptive rights.
3. Representations of Warrantholders. You represent and warrant to the
---------------------------------
Company that you are an "accredited investor" within the meaning of Regulation D
under the Act and that the Warrant and the shares of Underlying Common Stock are
being acquired for investment purposes only and not with a view to the
distribution or resale thereof. You represent that the Company has informed you
that neither this Warrant nor the securities which may be purchased pursuant to
this Warrant have been registered with or approved by the Commission under the
Act or the securities
-3-
laws of any state and may not be sold or transferred in the absence of an
effective registration statement or an exemption from such registration
requirements. You agree that, during the one-year period commencing on the date
hereof, the Warrant will not be transferred, sold, assigned or hypothecated,
except to (i) persons who are officers or directors of you; (ii) the respective
successors to you in a merger or consolidation; (iii) the respective purchasers
of all or substantially all of your assets; or (iv) your respective shareholders
only in the event you are liquidated or dissolved. You agree not to make any
sale or other disposition of either the Warrant or the Underlying Common Stock
or Other Securities except pursuant to a registration statement which has become
effective under the Act, setting forth the terms of such offering, the
underwriting discount and the commissions and any other pertinent data with
respect thereto, unless you have provided the Company with an opinion of counsel
reasonably acceptable to the Company that such registration is not required.
4. Registration.
------------
(a) Piggyback Registrations. If at any time after the first anniversary
-----------------------
of the date of this Warrant Agreement and prior to the fifth anniversary hereof
the Company proposes to register (including for this purpose a registration
effected by the Company for shareholders of the Company other than the
Warrantholders or the holders of Underlying Common Stock (you and any person who
acquires Warrants or Underlying Common Stock in accordance with Section 3 are
collectively referred to in this Section 4 as the "Holders")) any shares of
Common Stock or Other Securities under the Act for sale within such four-year
period (other than registration for issuance or sale in connection with (i)
employee or non-employee director compensation or benefit programs, (ii) an
exchange offer or an offering of securities solely to the existing shareholders
or employees of the Company, (iii) an acquisition, merger or other business
combination using a registration statement on Form S-4 or any successor or other
appropriate or similar form), (iv) a registration statement on Form S-8 or
similar form or (v) a shelf registration pursuant to Rule 415 promulgated under
the Act) (each such registration with respect to which registration rights shall
apply being an "Applicable Registration"), the Company will give prompt written
notice (which, in any event, shall be given no less than 30 days prior to the
filing of a registration statement with respect to such offering) to the Holders
of its intention so to do and, upon the written request of any Holder sent
within 20 days after receipt of any such notice, the Company will use its best
efforts to cause all Underlying Common Stock as to which any such Holder shall
have so requested registration to be registered under the Act, all to the extent
necessary to permit the sale in such offering of the Underlying Common Stock so
registered on behalf of any such Holder in the same manner as the Company (or
shareholder other than the Holders, as the case may be) proposes to offer its
shares of Common Stock or Other Securities. The Company shall use commercially
reasonable efforts to cause the managing underwriter or underwriters of an
Applicable Registration that is a proposed underwritten offering to permit the
Underlying Common Stock so requested by any Holder to be included in the
registration for such offering on the same terms and conditions as the shares of
Common Stock or Other Securities of the Company (or other shareholders if no
shares are to be offered on behalf of the Company) included therein.
Notwithstanding the foregoing, if the managing underwriter of such offering
delivers a letter to the Company and the Holders requesting registration that
the total number
-4-
of shares of Common Stock or Other Securities which such Holders or the Company,
and any other person, intend to include in such offering will in the good faith
opinion of such managing underwriter materially and adversely affect the success
of such offering, then the number of shares of Underlying Common Stock to be
offered for the account of the Holders and the shares of Common Stock or Other
Securities to be offered for the account of such other shareholder, if any,
shall be reduced pro rata based upon the number of shares of Common Stock
proposed to be sold by the Holders and other persons to the extent necessary to
reduce the total number of shares of Common Stock or Other Securities to be
included in such offering to the number of shares recommended by such managing
underwriter.
(b) Demand Registration. At any time after the first anniversary of the
-------------------
date of this Warrant Agreement and prior to the fifth anniversary hereof the
Holders of not less than 50% of the Underlying Common Stock not theretofore
registered under the Act pursuant to Section 4(a) hereof may make one demand
(the "Demand Registration") for the Company to register such Underlying Common
Stock under the Act. The Company shall promptly give notice of the proposed
Demand Registration to all Holders (other than Holders whose Underlying Common
Stock was theretofore registered under the Act), and all such notified Holders
shall thereafter have 20 days after the giving of such notice by the Company to
notify the Company if such Holders desire to participate in the proposed Demand
Registration. The Company shall thereafter promptly proceed with the
registration of all Underlying Common Stock to be included in the proposed
Demand Registration in accordance with the registration procedures set forth in
Section 4(c) hereof; provided, however, (i) no such registration shall be deemed
a Demand Registration unless and until the applicable registration statement
becomes effective; (ii) the Company shall have no obligation to file a shelf
registration statement under Rule 415 promulgated under the Act; and (iii) the
Company may delay the filing of a requested Demand Registration for up to 90
days if, in the good faith judgment of the Company's Board of Directors after
consultation with legal counsel, such delay is necessary in order to avoid
interference with a pending material transaction or other corporate event to
which the Company is a party or by which it is directly affected. The
Warrantholders shall collectively only be entitled to one Demand Registration.
(c) Company's Obligations in Registration. In the event you timely elect
-------------------------------------
to participate in an offering by including shares of Underlying Common Stock
under a registration statement pursuant to Section 4(a) above, or if you make or
timely elect to participate in a Demand Registration pursuant to Section 4(b)
above, the Company shall:
(i) notify you as to the filing of any registration statement or
prospectus and of all amendments or supplements thereto filed prior to the
effective date of such registration statement and of all post-effective
amendments or supplements thereto;
(ii) comply in all material respects with all applicable rules and
regulations of the Commission;
-5-
(iii) notify you immediately, and confirm the notice in writing, (1)
when the registration statement becomes effective, (2) of the issuance by
the Commission of any stop order or of the initiation, or the threatening,
of any proceedings for that purpose, (3) of the receipt by the Company of
any notification with respect to the suspension of qualification of the
Underlying Common Stock for sale in any jurisdiction or of the initiation,
or the threatening, of any proceedings for that purpose, and (4) of the
receipt of any comments, or requests for additional information, from the
Commission or any state regulatory authority. If the Commission or any
state regulatory authority shall enter a stop order or order suspending
qualification at any time, the Company will use all commercially reasonable
efforts to obtain the lifting of such order at the earliest possible
moment;
(iv) during any time when a prospectus is required to be delivered
under the Act during the period required for the distribution of the
Underlying Common Stock, use its best efforts to comply with all
requirements imposed upon it under the Act and the rules and regulations
promulgated thereunder, so far as necessary to permit the continuance of
sales of or dealings in the Underlying Common Stock pursuant to a
prospectus complying with Section 10(a)(3) of the Act. If at any time when
a prospectus relating to the Underlying Common Stock is required to be
delivered under the Act and any event shall have occurred as a result of
which, in the opinion of counsel for the Company or your counsel, the
prospectus relating to the Underlying Common Stock as then amended or
supplemented includes an untrue statement of a material fact or omits to
state any material fact required to be stated therein or necessary to make
the statements therein, in the light of the circumstances under which they
were made, not misleading, or if it is necessary at any time to amend such
prospectus to comply with the Act and the rules and regulations of the
Commission promulgated thereunder, the Company will promptly prepare and
file with the Commission an appropriate amendment or supplement in form
satisfactory to you and your counsel;
(v) use all commercially reasonable efforts, in cooperation with
you, at or prior to the time the registration statement becomes effective,
to register or qualify the Underlying Common Stock for offering and sale
under the securities laws relating to the offering or sale of the
Underlying Common Stock in such jurisdictions as you may reasonably
designate and to continue the qualifications in effect so long as required
for purposes of the sale of the Underlying Common Stock; provided, however,
that no such qualification shall be required in any jurisdiction where, as
a result thereof, the Company would be subject to service of process for
all purposes. In each jurisdiction where such qualification shall be
effected, the Company will, unless you agree that such action is not at the
time necessary or advisable, file and make such statements or reports at
such times as are or may reasonably be required by the laws of such
jurisdiction;
(vi) make generally available to its security holders as soon as
practicable an earnings statement which shall satisfy the provisions of
Section 11(a) of the Act and any applicable rules and regulations of the
Commission thereunder covering a period of at least 12 months beginning
after the effective date of the registration statement;
-6-
(vii) use the Company's best efforts to cause the independent
certified public accountants of the Company to deliver to you, and to the
underwriters if the Underlying Common Stock is being sold through
underwriters, letters dated the date that the registration statement
becomes effective and the date the Underlying Common Stock is delivered to
the underwriters for sale pursuant to such registration or, if the
Underlying Common Stock is not being sold through underwriters, on the date
that the registration statement becomes effective, stating that they are
independent certified public accountants within the meaning of the Act and
the rules and regulations of the Commission thereunder, and that, in their
opinion, the financial statements and other financial data of the Company
included in the registration statement or prospectus, or any amendment or
supplement thereto, comply as to form in all material respects with the
applicable accounting requirements of the Act, and such other financial and
accounting matters as the underwriters, if any, or you may reasonably
request;
(viii) after the effective date of such registration statement,
prepare, and promptly notify you of the proposed filing of, and promptly
file with the Commission, each and every amendment or supplement thereto or
to any prospectus forming a part thereof as may be necessary to make any
statements therein not misleading in any material respect; provided,
however, that no such amendment or supplement shall be filed if you shall
advise the Company in writing that, in your reasonable opinion, such
amendment or supplement does not comply with the Act;
(ix) furnish to you, as soon as available, copies of any such
registration statement and each preliminary or final prospectus, or
supplement or amendment prepared pursuant thereto, all in such quantities
as you may from time to time reasonably request in order to facilitate the
public sale or other disposition of the Underlying Common Stock; and
(x) make such representations and warranties to any underwriter of
the Underlying Common Stock and to the holders thereof, and use the
Company's commercially reasonable efforts to cause the Company's legal
counsel to render, at the time or times of the letters referred to in
subparagraph (vii) above, such opinions to such underwriters, if any, and
to you, as such underwriters or you may reasonably request.
(d) Agreements by Warrantholder. In connection with the filing of a
---------------------------
registration statement pursuant to this Section 4, if Underlying Common Stock is
being registered on your behalf under the Act, you shall:
(i) furnish the Company all material information requested by the
Company concerning yourself and your holdings of securities of the Company
and the proposed method of sale or other disposition of the Underlying
Common Stock and such other information and undertakings as shall be
reasonably required in connection with the preparation and filing of any
such registration statement covering all or part of the
-7-
Underlying Common Stock and in order to ensure full compliance with the Act
and the rules and regulations of the Commission promulgated thereunder;
(ii) if in connection with a piggyback registration pursuant to
Section 4(a) the Company is at the time entering into an underwriting
agreement covering its Common Stock, enter into an underwriting agreement
in customary form with the same underwriter or underwriters who are parties
to such underwriting agreement with the Company, provided that the sales of
Common Stock by you and the Company thereunder are at the same price and
upon the same terms and conditions; and
(iii) cooperate in good faith with the Company and its underwriters,
if any, in connection with such registration, including placing the shares
of Underlying Common Stock to be included in such registration statement in
escrow or custody to facilitate the sale and distribution thereof.
(e) Expenses of Registration. All expenses incurred in connection with a
------------------------
registration, filing or qualification pursuant to this Section 4, including,
without limitation, registration, filing and qualification fees, printers' and
accounting fees, and the fees and disbursements of counsel for the Company,
shall be borne and paid by the Company, with the exception of fees and
disbursements of any separate counsel to the Holders, which shall be borne by
the Holders. In addition, the Holders whose shares of Underlying Common Stock
are so registered shall bear and pay all underwriting discounts and selling
commissions attributable to sales of such shares of Underlying Common Stock.
(f) Indemnification.
---------------
(i) The Company shall indemnify and hold harmless you and any
underwriter (as defined in the Act) for you, and your agents, directors,
officers and each person, if any, who controls you or such underwriter
within the meaning of Section 15 of the Act or Section 20(a) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), against
any loss, liability, claim, damage and expense whatsoever (including but
not limited to any and all expense reasonably incurred in investigating,
preparing or defending against any litigation, commenced or threatened, or
any claim whatsoever), joint or several, to which any of you or such
underwriter or such controlling person becomes subject, under the Act or
otherwise, insofar as such loss, liability, claim, damage or expense (or
actions in respect thereof) arise out of or are based upon (1) any untrue
statement or alleged untrue statement of any material fact contained in (A)
a registration statement covering the Underlying Common Stock, in the
prospectus contained therein, or in an amendment or supplement thereto or,
(B) in any application or other document or communication (in this Section
4(f) collectively called an "application") executed by or on behalf of the
Company or based upon written information furnished by or on behalf of the
Company and filed in any jurisdiction in order to qualify the Underlying
Common Stock under the securities laws thereof or filed with the
Commission, or (2) the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein, in the light of the
-8-
circumstances under which they were made, not misleading; provided,
however, that the Company shall not be obligated to indemnify you in any
such case to the extent that any such loss, claim, damage, expense or
liability arises out of or is based upon any untrue statement or alleged
untrue statement or omission or alleged omission made in reliance upon, and
in conformity with, written information duly executed and furnished by you
or such underwriter or such controlling person specifically for use in any
such registration statement or prospectus, or any amendment or supplement
thereto, or any application, as the case may be.
If any action is brought against a person in respect of which
indemnity may be sought against the Company pursuant to the foregoing
paragraph, such person shall promptly notify the Company in writing of the
institution of such action and the Company shall assume the defense of the
action, including the employment of counsel (satisfactory to the
indemnified person in its or his reasonable judgment) and payment of
expenses. The indemnified person shall have the right to employ its or his
own counsel in any such case, but the fees and expenses of such counsel
shall be at the expense of such indemnified person unless the employment of
such counsel shall have been authorized in writing by the Company in
connection with the defense of the action, or unless the Company shall not
have promptly employed counsel to have charge of the defense of the action
or unless the indemnified person shall have reasonably concluded that there
may be defenses available to it or them which are different from or
additional to those available to the Company (in which case the Company
shall not have the right to direct the defense of the action on behalf of
the indemnified person), in any of which events these fees and expenses
shall be borne by the Company. Anything in this paragraph to the contrary
notwithstanding, the Company shall not be liable for any settlement of any
claim or action effected without its written consent, which shall not be
unreasonably withheld.
The Company's indemnity agreements contained in this Section 4(f)
shall remain in full force and effect regardless of any investigation made
by or on behalf of any indemnified person and shall survive any termination
of this Warrant Agreement. The Company agrees promptly to notify you of the
commencement of any litigation or proceedings against the Company or any of
its officers or directors in connection with the registration statement
pursuant to this Section 4(f). The omission to notify you promptly of the
commencement of any action against the Company or its officers and
directors based upon an alleged act or omission, which, if proven, would
result in your having to indemnify the Company pursuant to Section 4(f)(ii)
below, if prejudicial to your ability to defend such action, shall relieve
you of any liability to indemnify the Company under Section 4(f)(ii).
The Company further agrees that, if the indemnity provisions of the
foregoing paragraphs are held to be unenforceable, you, your underwriter or
any person controlling you or your underwriter ("your controlling persons")
may recover contribution from the Company in an amount which, when added to
contributions you or your underwriter or your controlling persons have
theretofore received or concurrently receive from officers and directors of
the Company or controlling persons of the Company, will reimburse you or
your underwriter or
-9-
your controlling persons for all losses, claims, damages or liabilities and
legal or other expenses; provided, however, that if the full amount of the
contribution specified in this paragraph is not permitted by law, then you,
your underwriter and your controlling persons shall be entitled to
contribution from the Company and its officers, directors and controlling
persons to the full extent permitted by law.
(ii) If you choose to include all or a part of the Underlying Common
Stock in a public offering pursuant to Section 4(a), or if you include
Underlying Common Stock in a Demand Registration pursuant to Section 4(b),
then you agree to indemnify and hold harmless the Company and each of its
directors and officers who have signed any such registration statement or
amendment thereto, and (in the case of a piggyback registration pursuant to
Section 4(a) hereof) any underwriter for the Company (as defined in the
Act), and each person, if any, who controls the Company or such underwriter
within the meaning of the Act, to the same extent as the indemnity by the
Company in this Section 4(f), but only with respect to untrue or alleged
untrue statements or omissions or alleged omissions, if any, made in such
registration statement, in any prospectus contained therein, or in any
amendment or supplement thereto, or in any application, made or omitted in
reliance upon, and in conformity with, written information duly executed
and furnished by you to the Company specifically for use in the
registration statement, the prospectus contained therein, any amendment or
supplement thereto, or any application, as the case may be. In case any
action shall be brought in respect of which indemnity may be sought against
you, you shall have the rights and duties given to the Company, and the
persons so indemnified shall have the rights and duties given to you, by
the provisions of Section 4(f)(i).
(g) Certain Definitions. Unless the context otherwise requires,
-------------------
references in this Section 4 to "you" or "your" shall mean and include a
Warrantholder or a holder of Underlying Common Stock, as the case may be.
(h) Limitations on Subsequent Registration Rights. From and after the
---------------------------------------------
date of this Warrant Agreement, the Company shall not, without your prior
written consent, enter into any agreement with any holder or prospective holder
of any securities of the Company which grants registration rights under the Act
on terms and conditions more favorable than the rights granted in this Warrant
Agreement unless substantially similar rights are granted to the Warrantholders.
Except as listed on Schedule 4(h) to this Warrant Agreement, the Company is not
-------------
a party to any currently subsisting agreement with respect to its securities
granting any registration rights to any person.
(i) Benefit of Registration Rights. The right to cause the Company to
------------------------------
register shares of Underlying Common Stock pursuant to Sections 4(a) and (b)
shall inure to the benefit of each person that is now or may hereafter become a
Holder.
-10-
5. Exercise of Warrants; Partial Exercise.
--------------------------------------
(a) Exercise in Full. Each of the Warrants may be exercised in full by
----------------
the holder thereof during the Term hereof by surrender of such Warrant, with the
form of subscription at the end thereof duly executed by such Warrantholder, to
the Company at its principal office at 00000 Xxxx Xxxx, Xxxxx 000, Xxxxxx, Xxxxx
00000, accompanied by payment, in cash or by certified or bank cashier's check
payable to the order of the Company, in the amount obtained by multiplying the
number of shares of the Underlying Common Stock represented by such Warrant or
Warrants by the Purchase Price (after giving effect to any adjustments as
provided in Section 7 below). If this Warrant is not exercised prior to
expiration of its Term, it shall become null and void and all rights granted
hereunder shall cease.
(b) Partial Exercise. Each of the Warrants may be exercised in part by
----------------
the holder thereof during the Term hereof by surrender of such Warrant, with the
form of subscription at the end thereof duly executed by such Warrantholder, in
the manner and at the place provided in Section 5(a) above, accompanied by
payment in cash or by certified or bank cashier's check payable to the order of
the Company, in the amount obtained by multiplying the number of shares of the
Underlying Common Stock designated by the Warrantholder in the form of
subscription attached to such Warrant by the Purchase Price (after giving effect
to any adjustments as provided in Section 7 below). Upon any such partial
exercise, the Company at its expense (except as set forth below) will, upon
surrender of the relevant Warrant, forthwith issue and deliver to or upon the
order of the Warrantholder stock certificates representing the Common Stock
issuable upon such partial exercise and a new Warrant of like tenor, in the name
of the Warrantholder thereof or such other person as the Warrantholder (upon
payment by such Warrantholder of any applicable transfer or similar taxes) may
request, subject to Section 3, giving the Warrantholder or such other person, as
the case may be, the right to purchase that number of shares of the Underlying
Common Stock (as such number may be adjusted from time to time pursuant to
Section 7) equal to the number of such shares called for on the face of the
Warrant so surrendered (after giving effect to any adjustment herein as provided
in Section 7 below) minus the number of such shares designated by the
Warrantholder in the aforementioned form of subscription.
(c) Company to Reaffirm Obligations. The Company will, at the time of any
-------------------------------
exercise of any Warrant, upon the request of the holder thereof, acknowledge in
writing its continuing obligation to afford to such Warrantholder any rights
(including without limitation any right to registration under the Act and state
securities laws of the shares of the Underlying Common Stock issuable or issued
upon such exercise) to which such Warrantholder shall continue to be entitled
after such exercise in accordance with the provisions of this Warrant Agreement;
provided, however, that if the Warrantholder shall fail to make any such
request, such failure shall not affect the continuing obligation of the Company
to afford to such Warrantholder any such rights.
-11-
6. Delivery of Stock Certificates, etc., on Exercise.
-------------------------------------------------
Any exercise of Warrants pursuant to Section 5 shall be deemed to have been
effected immediately prior to the close of business on the date on which the
Warrants with the subscription form and the check for the aggregate Purchase
Price shall have been received by the Company. At such time, the person or
persons in whose name or names any certificate or certificates for shares of
Common Stock shall be issuable upon such exercise shall be deemed to have become
the holder or holders of record of the shares of Common Stock so purchased. As
soon as practicable after the exercise of any Warrant in full or in part, and in
any event within ten days thereafter, the Company at its expense (including the
payment by it of any applicable issue taxes) will cause to be issued in the name
of, and delivered to, the purchasing Warrantholder, a certificate or
certificates for the number of fully paid and nonassessable shares of the
Underlying Common Stock to which such Warrantholder shall be entitled upon such
exercise, plus cash in lieu of any fractional share to which such Warrantholder
would otherwise be entitled in an amount determined pursuant to Section 8(h),
together with any other stock or other securities and property (including cash,
where applicable) to which such holder is entitled upon such exercise pursuant
to Section 7 below or otherwise.
7. Anti-dilution Provisions.
------------------------
The Warrants are subject to the following terms and conditions during the
term thereof:
(a) Stock Distributions, Splits and Combinations; Adjustments. In case (i)
---------------------------------------------------------
the outstanding shares of Common Stock (or Other Securities) shall be subdivided
into a greater number of shares, (ii) a dividend in Common Stock (or Other
Securities) shall be paid in respect of Common Stock (or Other Securities) or
(iii) the outstanding shares of Common Stock (or Other Securities) shall be
combined into a smaller number of shares, then the Purchase Price in effect
immediately prior to such subdivision or combination or at the record date of
such a dividend or distribution shall simultaneously with the effectiveness of
such subdivision or combination or immediately after the record date of such
dividend or distribution be adjusted to equal the product obtained by
multiplying the Purchase Price by a fraction, the numerator of which is that
number of shares of Common Stock (or Other Securities) outstanding immediately
prior to such combination or subdivision, or dividend or distribution record
date, and the denominator of which is that number of shares of Common Stock (or
Other Securities) outstanding after giving effect to such combination,
subdivision, dividend or distribution. Any dividend or distribution paid or
distributed on the Common Stock (or Other Securities) in stock or any other
securities convertible into or exercisable for shares of Common Stock (or Other
Securities) shall be treated as a dividend paid in Common Stock (or Other
Securities) to the extent that shares of Common Stock (or Other Securities) are
issuable upon the conversion or exercise thereof.
Whenever the Purchase Price is adjusted as provided in the immediately
preceding paragraph, the number of shares of the Underlying Common Stock
purchasable upon exercise of the Warrants immediately prior to such Purchase
Price adjustment shall be adjusted, effective simultaneously with such Purchase
Price adjustment, to equal the product obtained (calculated to the nearest full
share)
-12-
by multiplying such number of shares of the Underlying Common Stock by a
fraction, the numerator of which is the Purchase Price in effect immediately
prior to such Purchase Price adjustment and the denominator of which is the
Purchase Price in effect upon such Purchase Price adjustment, which adjusted
number of shares of the Underlying Common Stock shall thereupon be purchasable
upon exercise of the Warrants until further adjusted as provided herein.
(b) Reorganizations and Recapitalizations. In case the Company shall be
-------------------------------------
reorganized or recapitalized by reclassifying its outstanding Common Stock (or
Other Securities) into a stock with a different par value or by changing its
outstanding Other Securities with par value to stock without par value, then, as
a condition of such reorganization or recapitalization, as the case may be,
lawful and adequate provision shall be made whereby each Warrantholder shall
thereafter have the right to purchase, upon the terms and conditions specified
herein, in lieu of the shares of Common Stock (or Other Securities) or assets
theretofore purchasable upon the exercise of the Warrants, the kind and amount
of shares of stock, other securities or assets receivable upon such
reorganization or recapitalization by a holder of the number of shares of Common
Stock (or Other Securities) which the Warrantholder might have purchased
immediately prior to such recapitalization. If any consolidation or merger of
the Company with another corporation, or the sale of all or substantially all of
its assets to another corporation, shall be effected in such a way that holders
of Common Stock (or Other Securities) shall be entitled to receive stock,
securities or assets with respect to or in exchange for Common Stock (or Other
Securities), then, as a condition of such consolidation, merger or sale, lawful
and adequate provisions shall be made whereby the Warrantholders shall have the
right to purchase and receive in lieu of the shares of the Underlying Common
Stock immediately theretofore purchasable and receivable upon the exercise of
the Warrants, the number or amount, as the case may be, of such shares of stock,
securities or assets as may be issuable or payable in respect of or in exchange
for the number of shares of Underlying Common Stock purchasable and receivable
upon the exercise of the Warrants had such consolidation, merger or sale not
occurred; and in any such case appropriate provision shall be made with respect
to the rights and interests of the Warrantholders hereunder so that the
provisions hereof (including without limitation provisions for adjustment of the
Purchase Price and of the number of shares purchasable and receivable upon the
exercise of the Warrants) shall thereafter be applicable, as nearly as may be,
in relation to any shares of such stock or securities, or such assets thereafter
deliverable upon the exercise hereof. The Company will not effect any such
consolidation, merger or sale unless prior to the consummation thereof the
successor corporation (if other than the Company) resulting from such
consolidation or merger or the corporation purchasing such assets shall assume
by written instrument executed and mailed or delivered to the registered holder
of each Warrant at the last address of such Warrantholder appearing on the books
of the Company, the obligation to deliver to such Warrantholder such shares of
stock, securities or assets as, in accordance with the foregoing provisions,
such Warrantholder may be entitled to purchase. If a purchase, tender or
exchange offer is made to and accepted by the holders of more than 50% of the
outstanding shares of Common Stock of the Company, the Company shall not effect
any consolidation, merger or sale with the Person (as hereinafter defined)
having made such offer or with any Affiliate (as hereinafter defined) of such
Person, unless prior to the consummation of such consolidation, merger or sale
the Warrantholders shall have been given the right to elect to receive upon the
exercise of Warrants, either the stock, securities or assets then
-13-
issuable with respect to the Common Stock (or Other Securities) of the Company
or the stock, securities or assets, or the equivalent issued to previous holders
of the Common Stock in accordance with such offer. The term "Person" as used in
this Section 7(b) shall mean and include an individual, a partnership, a
corporation, a trust, a joint venture, an unincorporated organization and a
government or any department or agency thereof. For the purposes of this
Section 7(b), an "Affiliate" of any Person shall mean any Person directly or
indirectly controlling, controlled by or under common control with, such other
Person. A Person shall be deemed to control a corporation if such Person
possesses, directly or indirectly, the power to direct or cause the direction of
the management and policies of such corporation, whether through the ownership
of voting securities, by contract or otherwise.
(c) Effect of Dissolution or Liquidation. In case the Company shall
------------------------------------
dissolve or liquidate all or substantially all of its assets, all rights under
this Warrant Agreement and the Warrants shall terminate as of the date upon
which a certificate of dissolution or liquidation shall be filed with the
Secretary of State of Texas (or, if the Company theretofore shall have been
merged or consolidated with a corporation incorporated under the laws of another
state, the date upon which action of equivalent effect shall have been taken);
provided, however, that (i) no dissolution or liquidation shall affect the
rights under Section 7(b) of any Warrantholder and (ii) if the Company's Board
of Directors shall propose to dissolve or liquidate the Company, each
Warrantholder shall be given written notice of such proposal at the earlier of
(1) the time when the Company's shareholders are first given notice of the
proposal and (2) the time when notice to the Company's shareholders is first
required.
(d) Notice of Change of Purchase Price. Whenever the Purchase Price or the
----------------------------------
kind or amount of securities or assets purchasable under the Warrants shall be
adjusted pursuant to any of the provisions of this Warrant Agreement, the
Company shall forthwith thereafter cause to be sent to each Warrantholder a
certificate setting forth the adjustments in the Purchase Price and/or in such
number of shares, securities or assets purchasable upon exercise of the Warrants
and also setting forth in detail the facts requiring such adjustments, including
without limitation a statement of the consideration received or deemed to have
been received by the Company for any additional shares of stock or other
securities issued by it requiring such adjustment.
(e) Notice of a Record Date. In the event of (i) any taking by the Company
-----------------------
of a record of the holders of any class of securities for the purpose of
determining the holders thereof who are entitled to receive any dividend (other
than a cash dividend payable out of earned surplus of the Company) or other
distribution, or any right to subscribe for, purchase or otherwise acquire any
shares of stock of any class or any other securities or assets, or to receive
any other right, (ii) any reorganization of the Company, or any reclassification
or recapitalization of the capital stock of the Company, or any transfer of all
or substantially all of the assets of the Company to, or consolidation or merger
of the Company with, any other person or (iii) any voluntary or involuntary
dissolution or liquidation of the Company, then and in each such event the
Company will mail or cause to be mailed to each Warrantholder a notice
specifying not only the date on which any such record is to be taken for the
purpose of such dividend, distribution or right and stating the amount and
character
-14-
of such dividend, distribution or right, but also the date on which any such
reorganization, reclassification, recapitalization, transfer, consolidation,
merger, dissolution, liquidation or winding-up is to take place, and the time,
if any, as of which the holders of record of Common Stock (or Other Securities)
shall be entitled to exchange their shares of Common Stock (or Other Securities)
for securities or other property deliverable upon such reorganization,
reclassification, recapitalization, transfer, consolidation, merger,
dissolution, liquidation or winding-up. Such notice shall be mailed at least 15
days prior to the proposed record date therein specified.
(f) Acceleration of Exercisability. If any of the events described in
------------------------------
Section 7(b) or (c) hereof shall occur prior to the first anniversary of the
date of this Warrant Agreement, the Warrants shall become immediately
exercisable.
8. Further Covenants of the Company.
--------------------------------
(a) Impairments. The Company will not, by amendment of its articles of
-----------
incorporation or through any reorganization, transfer of assets, consolidation,
merger, 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 the
Warrants or of this Warrant Agreement, 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 in order to protect the rights of the
Warrantholders against impairment. Without limiting the generality of the
foregoing, the Company:
(i) shall at all times reserve and keep available, solely for
issuance and delivery upon the exercise of the Warrants, all shares of the
Underlying Common Stock from time to time issuable upon the exercise of the
Warrants and shall take all necessary actions to ensure that the par value
per share, if any, of the Underlying Common Stock is at all times equal to
or less than the then effective Purchase Price;
(ii) will take all such action as may be necessary or appropriate in
order that the Company may validly and legally issue fully paid and
nonassessable shares of Common Stock (or Other Securities) upon the
exercise of the Warrants from time to time outstanding; and
(iii) will not transfer all or substantially all of its properties
and assets to any other person or entity, or consolidate with or merge into
any other person or entity or permit any such person or entity to
consolidate with or merge into the Company (if the Company is not the
surviving corporation), unless such other person or entity shall expressly
assume in writing and will be bound by all the terms of this Warrant
Agreement and the Warrants.
(b) Title to Stock. All shares of the Underlying Common Stock delivered
--------------
upon the exercise of the Warrants shall be validly issued, fully paid and
nonassessable; each holder of a Warrant shall receive good and marketable title
to the Underlying Common Stock, free and clear of all voting and other trust
arrangements, liens, encumbrances, equities and claims whatsoever by or
-15-
through the Company; and the Company shall have paid all stamp, stock transfer
or similar taxes, if any, in respect of the issuance thereof.
(c) Listing on Securities Exchanges; Registration. The Company will, at
---------------------------------------------
its expense, list on the Nasdaq Stock Market's SmallCap Market or any other
securities exchange on which the Common Stock is listed, upon official notice of
issuance upon the exercise of the Warrants, and maintain such listing of, all
shares of the Underlying Common Stock from time to time issuable upon the
exercise of the Warrants, and the Company will so list on any securities
exchange, will so register and will maintain such listing of, any Other
Securities if and at the time that any securities of like class or similar type
shall be listed on such securities exchange by the Company.
(d) Remedies. The Company stipulates that the remedies at law of the
--------
Warrantholders or any holder of Underlying Common Stock in the event of any
default or threatened default by the Company in the performance of or compliance
with any of the terms of this Warrant Agreement or the Warrants are not and will
not be adequate and that such terms may be specifically enforced by a decree for
the specific performance of any agreement contained herein or in the Warrants or
by an injunction against a violation of any of the terms hereof or thereof or
otherwise.
(e) Exchange of Warrants. Subject to Section 3 hereof, upon surrender for
--------------------
exchange of any Warrant to the Company, the Company at its expense will promptly
issue and deliver to or upon the order of the holder thereof a new Warrant of
like tenor, in the name of such holder or as such holder (upon payment by such
Warrantholder of any applicable transfer taxes) may direct, providing the holder
the right to purchase the aggregate number of shares of the Underlying Common
Stock indicated on the face or faces of the Warrant or Warrants so surrendered
as being purchasable thereunder, subject to adjustment under Section 7. Any
Warrant and all rights thereunder are transferable in whole or in part upon the
books of the Company by the registered holder thereof subject to the provisions
of Section 3, in person or by duly authorized attorney, upon surrender of such
Warrant, duly endorsed, at the principal office of the Company.
(f) Replacement of Warrants. Upon receipt of evidence reasonably
-----------------------
satisfactory to the Company of the loss, theft, destruction or mutilation of any
Warrant and, in the case of any such loss, theft or destruction, upon delivery
of an indemnity agreement reasonably satisfactory in form and amount to the
Company or, in the case of any such mutilation, upon surrender and cancellation
of such Warrant, the Company, at the expense of the Warrantholder, will execute
and deliver, in lieu thereof, a new Warrant of like tenor.
(g) Reporting by the Company. The Company agrees that during the term of
------------------------
the Warrants it will keep current in the filing of all forms and other
materials, if any, which it may be required to file pursuant to the Exchange Act
and will use its best efforts to keep current in the filing of all other forms
and reports required to be filed with any governmental securities regulatory
authority having jurisdiction over the Company.
-16-
(h) Fractional Shares. No fractional shares of Underlying Common Stock are
-----------------
to be issued upon the exercise of any Warrant, but the Company shall pay cash in
lieu of any fraction of a share which would otherwise be issuable upon exercise
of the Warrant in an amount equal to such fraction multiplied by the highest
market price per share of Underlying Common Stock on the day of exercise, as
determined by the highest sale price, regular way, or, if there shall have been
no sale on such day, the average of the highest reported bid and lowest reported
asked price, in each case as officially reported on the principal securities
exchange on which the Underlying Common Stock is listed or admitted to trading,
or if not listed or admitted to trading on any securities exchange, the average
of the highest reported bid and lowest reported asked price as furnished by the
National Quotation Bureau Incorporated, all as adjusted; provided, however, that
if the Underlying Common Stock is not traded in such manner that the quotations
referred to herein are available, the market price shall be deemed to be the
fair market value of such Underlying Common Stock.
9. Other Warrantholders.
--------------------
The Warrants are issued upon the following terms, to all of which each
holder or owner thereof by the taking thereof consents and agrees: (a) any
person who shall become a transferee, within the limitations on transfer imposed
under Section 3 hereof, of a Warrant properly endorsed shall take such Warrant
subject to the provisions of Section 3 hereof and shall represent to the Company
that he is the absolute owner thereof and, subject to the restrictions contained
in this Warrant Agreement, shall be empowered to transfer absolute title by
endorsement and delivery thereof to a permitted bona fide purchaser for value;
(b) each prior taker or owner waives and renounces all of his equities or rights
in such Warrant in favor of each such permitted bona fide purchaser, and each
such permitted bona fide purchaser shall acquire absolute title thereto and to
all rights represented thereby; (c) until such time as the relevant Warrant is
transferred on the books of the Company, the Company may treat the registered
holder thereof as the absolute owner thereof for all purposes, notwithstanding
any notice to the contrary; and (d) all references to the words "you" or "your"
in this Warrant Agreement shall be deemed to apply with equal effect to any
person to whom a Warrant has been transferred in accordance with the terms
hereof, and where appropriate, to any person holding shares of the Underlying
Common Stock.
10. Miscellaneous.
-------------
All notices, certificates and other communications from or at the request
of the Company to any Warrantholder shall be mailed by first class, registered
or certified mail, postage prepaid, to such address as may have been furnished
to the Company in writing by such Warrantholder, or, until an address is so
furnished, to the address of the last holder of such Warrant who has so
furnished an address to the Company, except as otherwise provided herein. This
Warrant Agreement and any of the terms hereof may be changed, waived, discharged
or terminated only by an instrument in writing signed by the party against which
enforcement of such change, waiver, discharge or termination is
-17-
sought. This Warrant Agreement shall be construed and enforced in accordance
with and governed by the laws of the State of Texas (without reference to the
conflicts of laws provisions thereof). The headings in this Warrant Agreement
are for purposes of reference only and shall not limit or otherwise affect any
of the terms hereof. This Warrant Agreement, together with the forms of
instruments annexed hereto as Exhibit A and the information on outstanding
registration rights in Schedule 4(h), constitutes the full and complete
-------------
agreement of the parties hereto with respect to the subject matter hereof.
* * *
-18-
IN WITNESS WHEREOF, the Company has caused this Warrant Agreement to be
executed on this ____ day of January, 1998, in Dallas, Texas, by its proper
corporate officers, thereunto duly authorized.
RUSHMORE FINANCIAL GROUP, INC.
By: ________________________________
X.X. Xxxxx, Xx.
Chief Executive Officer
The above Warrant Agreement is
confirmed this ____ day of
January, 1998.
FIRST SOUTHWEST COMPANY
By: ______________________________
Name:
Title:
-19-
NEITHER THIS WARRANT NOR THE SECURITIES WHICH MAY BE PURCHASED PURSUANT TO THIS
WARRANT HAVE BEEN REGISTERED WITH OR APPROVED BY THE UNITED STATES SECURITIES
AND EXCHANGE COMMISSION UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE
SECURITIES LAWS OF ANY STATE. THIS WARRANT AND THE SECURITIES WHICH MAY BE
PURCHASED PURSUANT TO THIS WARRANT ARE BEING OFFERED AND SOLD IN RELIANCE UPON
CERTAIN EXEMPTIONS AFFORDED BY SUCH ACTS AND MAY NOT BE SOLD OR TRANSFERRED IN
THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACTS OR AN OPINION
OF COUNSEL ACCEPTABLE TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.
FIRST SOUTHWEST COMPANY
COMMON STOCK PURCHASE WARRANT
-----------------------------
THIS IS TO CERTIFY THAT First Southwest Company ("First Southwest") or its
registered assigns, is entitled to purchase at any time or from time to time
after 9:00 o'clock a.m., Dallas, Texas time, on January __, 1999 until 5:00
o'clock p.m., Dallas, Texas time, on January ___, 2003, up to 50,000 shares of
Common Stock, par value $0.01 per share, of Rushmore Financial Group, Inc., a
Texas corporation (the "Company"), at a purchase price per share (at the time in
effect as adjusted pursuant to the Warrant Agreement referred to herein) of
$6.05 (the "Purchase Price"). This Warrant is issued pursuant to a Warrant
Agreement, dated January ___, 1998 (the "Warrant Agreement"), between the
Company and First Southwest, and all rights of the holder of this Warrant are
subject to the terms and provisions of the Warrant Agreement, copies of which
are available for inspection at the offices of the Company.
Transfer of this Warrant is restricted as provided in the Warrant
Agreement.
Subject to the provisions of the Securities Act of 1933, as amended, and of
the Warrant Agreement, this Warrant and all rights hereunder are transferable,
in whole or in part, at the offices of the Company, at 00000 Xxxx Xxxx, Xxxxx
000, Xxxxxx, Xxxxx 00000, by the holder hereof in person or by his or its duly
authorized attorney, upon surrender of this Warrant, together with the
Assignment hereof duly endorsed. Until transfer hereof on the books of the
Company, the Company may treat the registered holder as the owner hereof for all
purposes.
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed in
Dallas, Texas this ___ day of January, 1998 by its proper corporate officers
thereunto duly authorized.
RUSHMORE FINANCIAL GROUP, INC.
By:
_____________________________________
X.X. Xxxxx, Xx.
Chief Executive Officer
ATTEST:
_______________________________
Name:__________________________
Title:_________________________
-2-
