Exhibit 10.6
THESE WARRANTS AND THE SHARES FOR WHICH THESE WARRANTS ARE
EXERCISABLE HAVE BEEN OR WILL BE ACQUIRED FOR INVESTMENT AND
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933
(THE "SECURITIES ACT"), OR ANY STATE SECURITIES OR "BLUE
SKY" LAW, AND MAY NOT BE SOLD, ASSIGNED, TRANSFERRED,
PLEDGED OR OTHERWISE DISPOSED OF EXCEPT IN COMPLIANCE WITH
THE SECURITIES ACT AND SUCH BLUE SKY LAWS AND UNTIL THE
ISSUER OF SUCH SECURITIES SHALL HAVE RECEIVED THE WRITTEN
OPINION OF COUNSEL ACCEPTABLE TO IT TO THAT EFFECT.
APPLE RESIDENTIAL INCOME TRUST, INC.
SHARE PURCHASE WARRANTS
WARRANT AGREEMENT
This is to certify that, for value received in the amount of $0.01 per
Warrant, Apple Residential Income Trust, Inc. hereby issues to Xxxxx X. Xxxxxx
200,000 "Founder's Warrants," which upon the due exercise thereof permit the
Holder to purchase the following number of Common Shares, no par value, of the
Company, with such adjustments to such amounts as are required by Section 4
hereof, for the price provided for herein, all on the terms and subject to the
conditions specified herein:
Gross Proceeds Raised From Sales of Number of Common Shares Purchased
Common Shares through Date of Exercise through Exercise of One Founder's Warrant
$50 million 1.0
$100 million 2.4
$150 million 4.2
$200 million 6.4
$250 million 8.0
1. Certain Definitions. Capitalized terms used herein, unless otherwise
defined herein, shall have the meanings ascribed thereto in the Registration
Statement of the Company on Form S-11, Registration No. 333-10635. Unless the
context otherwise requires, the following terms as used in this Warrant
Agreement shall have the following meanings:
"Board of Directors" means the board of directors of the Company.
"Business Day" means any day except a Saturday, Sunday or other day on
which commercial banks in Richmond, Virginia are authorized by law to close.
"Common Shares" means the Common Shares, no par value, of the Company.
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"Company" means Apple Residential Income Trust, Inc., a Virginia
corporation, and its successors and assigns.
"Convertible Securities" means evidences of indebtedness, shares, or other
securities which are directly or indirectly convertible into or exchangeable
for, with or without payment of additional consideration, additional Common
Shares, either immediately or upon the arrival of a specified date or the
happening of a specified event.
"Designated Office" means the office of the Company where the Warrants may
be presented for exercise, registration of transfer, division or combination as
provided in this Warrant Agreement, which initially shall be the office of the
Company at 000 Xxxx Xxxx Xxxxxx, Xxxxxxxx, Xxxxxxxx 00000, Attention: Xxxxx X.
Xxxxxx, and thereafter shall be such office designated by the Company in a
notice delivered to the registered holder of the Warrants.
"Exercise Date" has the meaning described in Section 3 hereof.
"Exercise Period" means the period commencing on a Triggering Event and
ending at 11:00 P.M., Richmond, Virginia time, 180 days later, during which
these Warrants are exercisable.
"Exercise Price" means the price specified in Section 2 hereof.
"Fair Market Value" per Common Share means, as of any date, the fair market
value per Common Share, calculated on a Fully-Diluted Basis, as determined in
good faith by the Board of Directors.
"Fully-Diluted Basis" means at any time, without duplication, in the case
of the Common Shares issuable on exercise of these Warrants, on a basis which
reflects all then outstanding Common Shares and all Underlying Common Shares.
"GAAP" means generally accepted accounting principles as in effect from
time to time, applied on a consistent basis, except for changes in application
in which the Company's independent public accountants concur.
"Holder" means the Person in whose name the Warrants set forth herein are
registered on the books of the Company maintained for such purpose.
"Other Securities" means any securities of the Company (other than Common
Shares, Convertible Securities, and Share Purchase Rights) or of any other
Person which Holder shall become entitled to receive upon exercise of the
Warrants.
"Person" means an individual, partnership, corporation, business trust,
joint stock company, trust, unincorporated association or organization, joint
venture, government or department or agency thereof, or other entity of whatever
nature.
"Share Purchase Rights" means warrants, options or other rights to
subscribe for, purchase or otherwise acquire, either with or without the payment
of consideration or additional consideration, any Common Shares or any
Convertible Securities.
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"Shares" means the Common Shares issuable under this Warrant Agreement.
"Subsidiary" means any corporation a majority of the outstanding Voting
Shares of which is owned, directly or indirectly, by the Company, by one or more
Subsidiaries of the Company, or by the Company and one or more Subsidiaries of
the Company.
"Triggering Event" means the occurrence of either of the following events:
(1) substantially all of the Company's assets, stock or business is sold or
otherwise transferred, whether through sale, exchange, merger, consolidation,
lease, share exchange or otherwise, or (2) the Advisory Agreement with the
Advisor is terminated or not renewed, and the Company ceases to use Apple
Residential Management Group, Inc. to provide substantially all of its property
management services
"Underlying Common Shares" means, at any time, all Common Shares issuable
upon exercise of any then outstanding Share Purchase Rights or Convertible
Securities or other similar instruments or rights; provided that the Common
Shares so issuable shall only be included in "Underlying Common Shares" to the
extent that any such Share Purchase Rights or Convertible Securities are fully
exercisable or convertible at the time the determination is made.
"Voting Shares" means shares of the class or classes having general voting
power under ordinary circumstances to elect at least a majority of the board of
directors of a corporation (irrespective of whether or not at the time shares of
any other class or classes shall have or might have voting power by reason of
the happening of any contingency).
"Warrants" means the Warrants evidenced by this Warrant Agreement.
2. Exercise Price. The Exercise Price per Share at any time shall be $0.01.
3. Exercise.
(a) During the Exercise Period, the Holder may from time to time exercise
the Warrants, on any Business Day, for all or any part of the number of Common
Shares purchasable hereunder. In order to exercise the Warrants, in whole or in
part, the Holder shall deliver to the Company at the Designated Office (i) a
written notice of the Holder's election to exercise the Warrants (an "Exercise
Notice"), which Exercise Notice shall be irrevocable and specify the number of
Common Shares to be purchased, and (ii) payment of the Exercise Price in cash or
by check (the date on which the foregoing items are delivered to the Company
being hereinafter sometimes referred to as the "Exercise Date"). Such Exercise
Notice shall be in the form of the subscription form appearing at the end of
this Warrant Agreement as Exhibit A, duly executed by the Holder or its duly
authorized agent or attorney.
(b) Upon receipt of an Exercise Notice, the Company shall, as promptly as
practicable, and in any event within five Business Days thereafter, issue or
cause to be issued to the Holder the aggregate number of Shares issuable upon
such exercise. The Holder shall be deemed to have become a holder of record of
such Shares for all purposes as of the Exercise Date.
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4. Determination of Number of Shares Issuable.
(a) In case the Company shall (i) pay a dividend or make a distribution on
or in respect of the Common Shares in Common Shares, (ii) subdivide its
outstanding Common Shares, (iii) combine its outstanding Common Shares into a
smaller number of Common Shares, (iv) issue securities by reclassification or
change of outstanding capital shares (other than a change in par value, or from
par value to no par value, or from no par value to par value), (v) be a party to
any consolidation with or merger into, another corporation, or (vi) sell all, or
substantially all, of the property, assets, business and goodwill of the Company
as an entirety, the Company, or such successor or purchasing corporation, as the
case may be, shall provide that, upon such dividend, distribution, subdivision,
combination, reclassification, change, consolidation, merger or sale, Holder
shall thereafter be entitled to purchase the kind and amount of capital shares
and other securities and property that would have been received by Holder if
such Holder had exercised these Warrants immediately prior to such dividend,
distribution, subdivision, combination, reclassification, change, consolidation,
merger or sale. Any such successor or purchasing corporation, which thereafter
shall be deemed to be the Company for purposes of this Warrant Agreement, shall
provide for adjustments which shall be as nearly equivalent as may be
practicable to the adjustments provided for in this Section 4.
(b) In case the Company shall, after the date hereof, issue and sell or
grant any Common Shares, or rights, options, warrants or convertible or
exchangeable securities containing the right to subscribe for or purchase Common
Shares, at a price per Common Share (determined in the case of rights, options,
warrants or convertible or exchangeable securities, by dividing (A) the total
amount received or receivable by the Company in consideration of the sale and
issuance of such rights, options, warrants or convertible or exchangeable
securities plus the total consideration payable to the Company upon exercise or
conversion or exchange thereof, by (B) the total number of Common Shares covered
by such rights, options, warrants or convertible or exchangeable securities)
lower than the then current Fair Market Value per Common Share, then in each
case the number of Shares thereafter purchasable upon the exercise of each
Warrant shall be determined by multiplying the number of Shares theretofore
purchasable upon the exercise of such Warrant by a fraction, the numerator of
which shall be the total number of Common Shares outstanding immediately after
such sale and issuance and the denominator of which shall be an amount equal to
the sum of (A) the total number of Common Shares outstanding immediately prior
to such sale and issuance plus (B) the number of Common Shares which the
aggregate consideration received (determined as provided below) for such sale or
issuance would purchase at the then current Fair Market Value per Common Share;
provided that the provisions of this Section 4(b) shall not apply to (i) the
issuance of the Warrants or any issuance of Common Shares upon exercise of any
Warrants, (ii) the issuance of options pursuant to the Company's 1996 Incentive
Plan and 1996 Non-Employee Directors Stock Option Plan or the issuance of Common
Shares upon exercise of such options, or (iii) the issuance of Common Shares as
to which Section 4(a) is applicable. Such adjustment shall be made successively
whenever such an issuance is made. For the purposes of such adjustments, the
Common Shares which the holder of any such rights, options, warrants or
convertible or exchangeable securities shall be entitled to subscribe for or
purchase shall be deemed to be issued and outstanding as of the date of such
sale and issuance, and the consideration received by the Company therefor shall
be deemed to be the consideration received by the Company (plus any underwriting
discounts or commissions in connection therewith) for such rights, options,
warrants or convertible or exchangeable securities plus the consideration or
premiums stated in such rights, options, warrants or convertible or exchangeable
securities to be paid for the Common Shares purchasable thereby. In case the
Company shall (x) sell and issue Common
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Shares, or rights, options, warrants or convertible or exchangeable securities
containing the right to subscribe for or purchase Common Shares for a
consideration consisting, in whole or in part, of property other than cash or
its equivalent or (y) sell and issue Common Shares, or rights, options, warrants
or convertible or exchangeable securities containing the right to subscribe for
or purchase Common Shares together with one or more other securities as a part
of a unit at a price per unit, then in determining the "price per Common Share"
and the "consideration received by the Company" for purposes of the first
sentence and the immediately preceding sentence of this Section 4(b), the Board
of Directors of the Company shall determine, in its discretion, the fair value
of said property or the Common Shares, or rights, options, warrants or
convertible or exchangeable securities containing the right to subscribe for or
purchase Common Shares then being sold as part of such unit, as the case may be,
and such determinations if made in good faith, shall be binding on Holder. The
determination of whether any adjustment is required under this Section 4(b) by
reason of the sale and issuance of any rights, options, warrants or convertible
or exchangeable securities and the amount of such adjustment, if any, shall be
made only at such time and not at the subsequent time of issuance of Common
Shares upon the exercise of such rights to subscribe or purchase.
5. Covenants of the Company. The Company represents, warrants, covenants
and agrees as follows:
(a) Shares Nonassessable, Free and Clear. All Shares which may be issued
upon the exercise of the Warrants will, upon issuance, be fully paid and
nonassessable and free from all taxes, liens and charges with respect to the
issuance thereof (other than taxes in respect of any transfer occurring
contemporaneously with such issuance).
(b) Reservation of Shares. For so long as any rights represented by these
Warrants may be exercised, the Company will at all times reserve and keep
available, free from preemptive rights, out of its authorized but unissued share
capital (or share capital held in treasury), a sufficient number of Shares to
provide for the exercise in full of the rights represented by these Warrants.
(c) Information Right. For so long as any rights represented by these
Warrants may be exercised, the Company will provide to or make available to, as
the case may be, Holder the same information, reports and notices as it shall
generally provide to, or make available to, holders of its capital shares.
(d) Notice of Shareholder Meetings and Actions and of Record Dates. For so
long as any rights represented by these Warrants may be exercised, the Company
shall provide Holder with ten days' prior written notice of (i) any
shareholders' meeting and a statement of the action expected to be taken
thereat, (ii) the taking of any action by written consent of the shareholders
and the action to be taken thereby, and (iii) the record date for determining
shareholders entitled to participate in any dividend, distribution or pro rata
offering of securities.
(e) Change of the Company Address. For so long as any rights represented by
these Warrants may be exercised, the Company shall give written notice to Holder
of any change in the address of the principal office of the Company.
(f) Further Assurances. The Company will, at the time of any exercise of
these Warrants in whole or in part, upon request of Holder, acknowledge in
writing the Company's continuing obligation to Holder in respect of any rights
to which Holder shall continue to be entitled
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after such exercise in accordance with these Warrants; provided, that the
failure of Holder to make any such request shall not affect the continuing
obligation of the Company to Holder in respect of such rights.
6. Transfer.
(a) These Warrants and all rights hereunder shall be transferable by Holder
in person or by duly authorized attorney upon compliance with all provisions in
this Warrant Agreement and surrender of this Warrant to the Company, together
with the form of transfer authorization attached hereto as Exhibit B duly
executed. Absent any such transfer the Company may deem and treat Holder as the
absolute owner of the Warrants for all purposes and shall not be affected by any
notice to the contrary. Within thirty days of such surrender of this Warrant
Agreement, the Company shall issue a new Warrant Agreement, dated the date
hereof and with terms identical to the terms hereof, except that such new
Warrant Agreement shall refer to Warrants which shall be exercisable, in the
aggregate, for a number of Shares which represents the number of the Warrants
that have not yet been exercised, and such Warrant Agreement shall reflect the
transferee as the holder of such Warrants in place of Holder.
(b) Any attempt to transfer any interest in this Warrant Agreement or in
any rights hereunder which is not in accordance with the provisions hereof shall
be null and void, and the Company shall not give any effect to such attempted
transfer in the records of the Company or in the Warrant Register.
7. Warrant Register. The Company shall at all times while any portion of
the Warrants remain outstanding and exercisable keep and maintain at its
principal office a register (the "Warrant Register") in which the registration,
transfer and exchange of the Warrants shall be recorded. The Company shall not
at any time, except upon the dissolution, liquidation or winding up of the
Company, close the Warrant Register so as to result in preventing or delaying
the exercise of the Warrants. If at any time the Company shall appoint an agent
(the "Warrant Agent") to maintain the Warrant Register, the Company shall
promptly give notice to Holder of the name of the Warrant Agent and of the place
or places at which the Warrants may be presented for transfer, exchange or
exercise. The terms of the agreement between the Company and any Warrant Agent
at any time in effect will be in conformity with the terms of this Warrant.
8. Holder's Rights.
(a) For the purposes of Section 8(b), an "Excluded Dividend" means any
dividend payable in cash out of earnings or earned surplus (computed in
accordance with GAAP) or in Common Shares, Convertible Securities, or Share
Purchase Rights.
(b) Except as otherwise provided herein, the Warrants shall not entitle
Holder to any rights of a shareholder of the Company, except that should the
Company, during the period in which the Warrants are exercisable, declare a
dividend upon Common Shares or make any other distribution in respect of the
Common Shares, payable otherwise than as an Excluded Dividend, then, thereafter,
Holder shall receive, upon exercise of the Warrants pursuant to Section 3, the
number of Shares purchasable upon such exercise and, in addition and without
further payment, the cash, Other Securities and/or other property which Holder
would have received by way of dividends (otherwise than as an Excluded Dividend)
as if, continuously since the date hereof, Holder (a) had been the
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record holder of the number of Shares then being purchased, and (b) had retained
all such cash and/or Other Securities (other than any Excluded Dividend) and/or
other property payable in respect of such Shares or in respect of any shares or
securities paid as dividends (otherwise than as an Excluded Dividend) and
originating directly or indirectly from such Shares.
9. Notice of Adjustment. If there shall be any adjustment as provided above
in Section 4, or if securities or property other than capital shares of the
Company shall become purchasable upon exercise of the Warrants, the Company
shall forthwith cause written notice thereof to be sent to Holder, which notice
shall be accompanied by a certificate of independent public accountants,
reasonably acceptable to Holder, setting forth in reasonable detail the basis
for Holder's becoming entitled to purchase such shares and the number of shares
which may be purchased, or the facts requiring any such adjustment and number of
shares purchasable after such adjustment, or the kind and amount of any such
securities or property so purchasable upon the exercise of the Warrants, as the
case may be. On an annual basis the Company shall cause its independent public
accountants to certify as to any adjustments required during the prior Fiscal
Year. At the request of Holder and upon surrender of this Warrant Agreement, the
Company shall reissue this Warrant Agreement in a form conforming to such
adjustments.
10. Dissolution and Liquidation. In the event of any proposed dissolution
and liquidation of the Company, other than in connection with a consolidation,
merger or sale of all or substantially all of its property, assets, business and
goodwill as an entirety, the Company shall forthwith cause written notice
thereof to be sent to Holder at the address of Holder shown in its records or on
the Warrant Register. Such notice shall be given not later than 30 days prior to
any record date fixed for the purpose of determining shareholders entitled to
participate in any liquidating distribution.
11. Lost, Stolen, Mutilated, or Destroyed Warrant Agreement. If this
Warrant Agreement shall become lost, stolen, mutilated or destroyed, the Company
shall, on such terms as to indemnity or otherwise as it may in its discretion
impose, enter into a new Warrant Agreement of like tenor and date as the Warrant
Agreement so lost, stolen, mutilated, or destroyed. Any such new Warrant
Agreement shall constitute an original contractual obligation of the Company,
whether or not the allegedly lost, stolen, mutilated or destroyed Warrant
Agreement shall be at any time enforceable by anyone.
12. Miscellaneous.
(a) Applicable Law. The validity, interpretation, and performance of this
Warrant Agreement shall be governed by the laws of the Commonwealth of Virginia,
except to the extent that certain matters are governed by the laws of the United
States.
(b) Successors and Permitted Assigns. This Warrant Agreement and the rights
evidenced hereby shall inure to the benefit of and be binding upon the
successors and permitted assigns of the Company and Holder.
(c) Headings. Headings of the paragraphs in this Warrant Agreement are for
convenience of reference only and shall not, for any purpose, be deemed a part
of this Warrant Agreement.
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(d) Notices and Deliveries. All notices and other communications provided
for herein shall be in writing and shall be deemed to have been duly given if
delivered personally or sent by registered or certified mail, return receipt
requested, postage prepaid, if to Holder, to the address set forth in the
records of the Company or on the Warrant Register of the Company from time to
time, and if to the Company, to the address set forth below, and all
certificates, forms, elections, warrants, securities and similar items required
to be surrendered to the Company shall be surrendered to the Company at the
address set forth below:
If to the Company:
Apple Residential Income Trust, Inc.
000 Xxxx Xxxx Xxxxxx
Xxxxxxxx, Xxxxxxxx 00000
Attn: Chief Executive Officer
Telecopier: (000) 000-0000
or to such other address to which the Company may move its principal office and
of which the Company may notify Holder.
IN WITNESS WHEREOF, the Company has caused this Warrant
Agreement to be executed as of the ____ day of October, 1996, by its President
and its corporate seal affixed.
APPLE RESIDENTIAL INCOME TRUST, INC.
By:
----------------------
Name: Xxxxx X. Xxxxxx
Title: President
(CORPORATE SEAL)
See and Agreed To:
--------------------------
Xxxxx X. Xxxxxx, Holder
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EXHIBIT A
To Warrant
Agreement
[Exercise Form]
[To Be Executed Upon Exercise of Warrants]
_______________________________, being the undersigned registered holder of
the Warrants described in the Warrant Agreement dated as of October 18, 1996
between Xxxxx X. Xxxxxx and Apple Residential Income Trust, Inc., hereby (1)
subscribes for _________ Common Shares under the terms of the Warrant Agreement
and (2) makes the full cash payment therefor called for by the Warrant
Agreement.
---------------------------------
Holder
Dated _________, 19___.
Social Security Number or
Employer Identification
Number:
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Address:
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EXHIBIT B
To Warrant
Agreement
[Assignment Form]
(To be executed by the registered holder to effect a transfer of the within
Warrants)
FOR VALUE RECEIVED, ___________________________________ hereby sells,
assigns, and transfers the Warrants described in the Warrant Agreement dated as
of October 18, 1996 between Xxxxx X. Xxxxxx and Apple Residential Income Trust,
Inc. unto the transferee named below, and all right to purchase Shares evidenced
by the Warrants, and does hereby irrevocably constitute and appoint
__________________ to transfer such right on the books of the Company, with full
power of substitution.
Transferee: ________________________
Social Security Number or
Employer Identification
Number:
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Address:
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Holder
Dated _________, 19___.
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