EXHIBIT 10.31
WARRANT AGREEMENT
February 17, 1998
TEJAS SECURITIES GROUP, INC.
As a Representative of the Several Underwriters
c/o Tejas Securities Group, Inc.
1250 Capital of Texas Hwy., South Building Two
Suite 500
Austin, Texas 78746
Gentlemen:
AutoBond Acceptance Corporation, a Texas corporation (the "Company"),
hereby agrees to sell to you, and you hereby agree to purchase from the Company
at an aggregate purchase price of $100, stock purchase warrants (the
"Underwriter Warrants") covering 100,000 shares of the Company's Common Stock,
no par value. The Underwriter Warrants will be exercisable by you as to all or
any lesser number of shares of the Company's Common Stock, no par value, covered
thereby, at the Purchase Price per share as defined below, at any time and from
time to time on and after the first anniversary of the date hereof and ending at
5:00 p.m. on the fifth anniversary of the date hereof.
1. DEFINITIONS.
As used herein, the following terms, unless the context otherwise
requires, shall have for all purposes hereof the following meanings:
The term "Act" refers to the Securities Act of 1933, as amended.
The term "Affiliate" of any Person refers to any Person directly or
indirectly controlling, controlled by or under direct or indirect 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.
The term "Commission" refers to the Securities and Exchange Commission.
The term "Common Stock" refers to all stock 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 for the election of a majority of the directors of the Company
(even though the right so to vote has been suspended by the occurrence of such a
contingency).
The term "Current Market Price" on any date refers to the average of the
daily Market Price per share for the 30 consecutive Trading Days commencing 45
Trading Days before the date in question.
The term "Exchange Act" refers to the Securities Exchange Act of 1934,
as amended.
The term "Market Price" refers to the closing sale price on the American
Stock Exchange ("AMEX") or, if no closing sale price is reported, the closing
bid price of the Common Stock, as quoted on the Nasdaq National Market, or, if
the Common Stock is not quoted on the Nasdaq National Market, as reported by the
National Quotation Bureau Incorporated. If Market Price cannot be established as
described above, market price shall be the fair market value of the Common Stock
as determined in good faith by the Board of Directors whose determination shall
be conclusive.
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 Underwriter Warrants at any time shall be
entitled to receive, or shall have received, upon the exercise of the
Underwriter 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 6 below or
otherwise.
The term "Person" refers to an individual, a partnership, a corporation,
a trust, a joint venture, an unincorporated organization and a government or any
department or agency thereof.
The term "Purchase Price" refers to the purchase price, per share, of
the shares of Common Stock subject to this Agreement. The Purchase Price shall
equal $7.75, subject to adjustment as provided in Section 6 below.
The term "Registration Statement" refers to a Registration Statement
filed with the Commission pursuant to the Rules and Regulations of the
Commission promulgated under the Act.
The term "Trading Day" shall mean a day on which the Nasdaq National
Market or the principal national securities exchange on which the Common Stock
is listed or admitted to trading is open for the transaction of business.
The term "Underlying Stock" refers to the shares of Common Stock (or
Other Securities) issuable under this Warrant Agreement pursuant to the
exercise, in whole or in part, of the Underwriter Warrants.
The purchase and sale of the Underwriter Warrants shall take place, and
the purchase price therefore shall be paid by delivery of your check,
simultaneously with the purchase of and payment for any shares of 15% Series A
Cumulative Preferred Stock as provided in that certain Underwriting Agreement
dated February 17, 1998, relating to the public offering of shares of the 15%
Series A Cumulative Preferred Stock pursuant to a Registration Statement filed
under the Act.
2. REPRESENTATIONS AND WARRANTIES.
The Company represents and warrants to you as follows:
(a) Corporate Action. The Company has all requisite corporate power and
authority, and has taken all necessary corporate action, to execute and deliver
this Agreement, to issue and deliver the Underwriter Warrants and certificates
evidencing same, and to authorize and reserve for issuance, and upon payment
from time to time of the Purchase Price to issue and deliver, the Shares.
(b) No Violation. Neither the execution nor delivery of this Agreement,
the consummation of the actions herein contemplated nor compliance with the
terms and provisions hereof will conflict with, or result in a breach of, or
constitute a default or an event permitting acceleration under, any of the
terms, provisions or conditions of the Articles of Incorporation or Bylaws of
the Company or any indenture, mortgage, deed of trust, note, bank loan, credit
agreement, franchise, license, lease, permit, judgment, decree, order, statute,
rule or regulation or any other agreement, understanding or instrument to which
the Company is a party or by which it is bound.
2
3. COMPLIANCE WITH THE ACT.
(a) Transferability of Underwriter Warrants. You agree that the
Underwriter Warrants may not be transferred, sold, assigned or hypothecated for
a period of one (1) year from the date hereof, except to (i) persons who are
officers of you; (ii) a successor to you in a merger or consolidation; (iii) a
purchaser of all or substantially all of your assets; (iv) your shareholders in
the event you are liquidated or dissolved; and (v) persons who are officers of
participating broker-dealers.
(b) Registration of Underlying Stock. The Underlying Stock issuable upon
the exercise of the Underwriter Warrants have not been registered under the Act.
You agree not to make any sale or other disposition of the Underlying Stock
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.
(c) Demand Registration. At any time and from time to time after the
effective date hereof but prior to the fifth anniversary of the effective date
hereof, the holders of Underwriter Warrants shall have the right to make written
request of the Company on one occasion to register under the Act at least fifty
percent (50%) of the Underlying Stock which would be issuable upon exercise of
the Underwriter Warrants pursuant to the terms and conditions hereof. The
Underlying Stock specified in such request or a request pursuant to Section 3(d)
hereof is referred to herein as the "Subject Stock." Promptly upon receipt of
such request, the Company shall file with the Commission a Registration
Statement on the applicable form for the registration of the Subject Stock and
use its best efforts to cause such Registration Statement to become effective
(including, without limitation, filing post-effective amendments, appropriate
qualifications under applicable blue sky or other state securities laws and
appropriate compliance with the Act and the Rules and Regulations promulgated
thereunder) as soon as practicable to permit or facilitate the sale and
distribution of the Subject Stock. Immediately upon receipt of a request for
registration pursuant to this Section 3(c), the Company shall notify each of the
holders of Underwriter Warrants of such request.
Notwithstanding the provisions of this Section 3(c), if the
Company shall furnish to the holders of Underwriter Warrants a certificate
signed by the Chief Executive Officer of the Company stating that in the good
faith judgment of the Board of Directors of the Company it would be seriously
detrimental to the Company and its stockholders for such a Registration
Statement to be filed and it is therefore essential to defer a filing of such
Registration Statement, the Company shall have the right to defer such filing
for a period of not more than one hundred twenty (120) days after receipt of the
request from the holders of Underwriter Warrants to effect such a registration;
provided, however, that the Company may not utilize the right more than once in
any twenty-four (24) month period; and, provided further, that the holders of
Underwriter Warrants may, at any time in writing, withdraw such request for such
registration and therefore preserve the right provided in this Section 3(c) for
the holders of Underwriter Warrants to request such registration.
(d) Inclusion in Registration of Other Securities. If at any time after
the effective date hereof but prior to the fifth anniversary of the effective
date hereof, the Company shall propose the registration on an appropriate form
under the Act of any shares of Common Stock or Other Securities, the Company
shall at least 30 days prior to the filing of such Registration Statement give
you written notice, or telegraphic or telephonic notice followed as soon as
practicable by written confirmation thereof, of such proposed registration and,
upon written notice, or telegraphic or telephonic notice followed as soon as
practicable by written confirmation thereof, given to the Company within five
business days after the giving of such notice by the Company, shall include or
cause to be included in any such Registration Statement all or such portion of
the Underlying Stock as you may request,
3
provided, however, that the Company may at any time withdraw or cease proceeding
with any such registration if it shall at the same time withdraw or cease
proceeding with the registration of such Common Stock or such Other Securities
originally proposed to be registered.
Notwithstanding any provision of this Agreement to the contrary,
if any holder of Underwriter Warrants exercises such Underwriter Warrants but
shall not have included all the Underlying Stock in a Registration Statement
which complies with Section 10(a)(3) of the Act, which has been effective for at
least 30 calendar days following the exercise of the Underwriter Warrants, the
registration rights set forth in this Section 3(d) shall be extended until such
time as (i) such a Registration Statement including such Underlying Stock has
been effective for at least 30 calendar days or (ii) in the opinion of counsel
satisfactory to you and the Company, registration is not required under the Act
or under applicable state laws for resale of the Underlying Stock in the manner
proposed.
(e) Company's Obligations in Registration. In connection with any
offering of Subject Stock pursuant to Section 3(c) or 3(d) above, the Company
shall:
(i) Notify you as to the filing thereof and of all amendments
or supplements thereto filed prior to the effective date
thereof;
(ii) Comply with all applicable rules and regulations of the
Commission;
(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 Subject 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
such a stop order or order suspending qualification at any
time, the Company will make every reasonable effort to
obtain the lifting of such order as promptly as
practicable.
(iv) During the time when a Prospectus is required to be
delivered under the Act during the period required for the
distribution of the Subject Stock, comply so far as it is
able with all requirements imposed upon it by the Act, as
hereafter amended, and by the Rules and Regulations
promulgated thereunder, as from time to time in force, so
far as necessary to permit the continuance of sales of or
dealings in the Subject Stock. If at any time when a
Prospectus relating to the Subject Stock is required to be
delivered under the Act 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 Subject
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, the Company will promptly prepare
and file with the Commission an appropriate amendment or
supplement (in form satisfactory to you).
(v) Endeavor in good faith, in cooperation with you, at or
prior to the time the Registration Statement becomes
effective, to qualify the Subject Stock for offering and
sale under the securities laws relating to the offering or
sale of the Subject Stock of such jurisdictions
4
as you may reasonably designate and to continue the
qualifications in effect so long as required for purposes
of the sale of the Subject Stock; provided that no such
qualification shall be required in any jurisdiction where,
as a result thereof, the Company would be subject to
service of general process, or to taxation as a foreign
corporation doing business in such jurisdiction. 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.
For the purposes of this paragraph, "good faith" is
defined as the same standard of care and degree of effort
as the Company will use to qualify its securities other
than the Subject Stock.
(vi) Make generally available to its security holders as soon
as practicable, but not later than the first day of the
eighteenth full calendar month following the effective
date of the Registration Statement, an earnings statement
(which need not be certified by independent public or
independent certified public accountants unless required
by the Act or the rules and regulations promulgated
thereunder, but which shall satisfy the provisions of
Section 11(a) of the Act) covering a period of at least
twelve months beginning after the effective date of the
Registration Statement.
(vii) 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; provided that no such
amendment or supplement shall be filed if you shall object
thereto in writing promptly after being furnished a copy
thereof.
(viii) 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;
(ix) Make such representations and warranties to any
underwriter of the Subject Stock, and use your best
efforts to cause Company counsel to render such opinions
to such underwriter, as such underwriter may reasonably
request; and
(x) Pay all costs and expenses incident to the performance of
the Company's obligations under Section 3(c) or 3(d) above
and under this Section 3(e), including without limitation
the fees and disbursements of the Company's auditors and
legal counsel, of legal counsel for you and of legal
counsel responsible for qualifying the Subject Stock under
blue sky laws, all filing fees and printing expenses, all
expenses in connection with the transfer and delivery of
the Underlying Stock, and all expenses in connection with
the qualification of the Subject Stock under blue sky
laws; provided, however, that the Company shall not be
responsible for compensation and reimbursement of expenses
to underwriters or selling agents for the included Subject
Stock.
(f) Agreements by Warrant Holder. In connection with the filing of a
Registration Statement pursuant to Section 3(c) or 3(d) above, if you
participate in the offering of the Subject Stock by including shares owned by
you, you agree:
5
(i) To 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 Subject 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 a part of
the Subject Stock and in order to ensure full compliance
with the Act; and
(ii) To cooperate in good faith with the Company and its
underwriters, if any, in connection with such
registration, including placing the shares of Subject
Stock to be included in such Registration Statement in
escrow or custody to facilitate the sale and distribution
thereof.
(g) Indemnification. The Company shall indemnify and hold harmless you
and any underwriter (as defined in the Act) for you, and each person, if any,
who respectively controls you or such underwriter within the meaning of Section
15 of the Act or Section 20(a) of the Exchange Act, against any loss, liability,
claim, damage and expense whatsoever (including but not limited to any and all
expense whatsoever 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 and expense (or actions in respect thereof) arise out of or are
based upon any untrue statement or alleged untrue statement of any material fact
contained in (i) a Registration Statement covering the Subject Stock, in the
prospectus contained therein, or in an amendment or supplement thereto or (ii)
in any application or other document or communication (in this Section
collectively called "application") executed by or on behalf of the Company or
based upon written information furnished by or on behalf of the Company filed in
any jurisdiction in order to qualify the Subject Stock under the securities laws
thereof or filed with the Commission, or arise out of or based upon the omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading; provided,
however, that the Company shall not be obligated to indemnify 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 respectively furnished by you or such underwriter or such
controlling person for use in the Registration Statement, 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 reasonable judgment) and payment of expenses. The indemnified
person shall have the right to employ its or their own counsel in any such case,
but the fees and expenses of such counsel shall be at the expense of such
indemnified person or unless the employment of such counsel shall have been
authorized in writing by the Company in connection with the defense of the
action or the Company shall not have employed counsel to have charge of the
defense of the action or 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. The Company's indemnity
agreements contained in this Section 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 Agreement. The Company agrees
6
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 Section 3(c) or 3(d) above.
If you choose to include any Subject Stock in a public offering
pursuant to Section 3(c) or 3(d) above, then you agree to indemnify and hold
harmless the Company and each of its directors and officers who have signed any
such Registration Statement, and 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 3(g) but only with respect to statements or omissions,
if any, made in such Registration Statement, or any amendment or supplement
thereto, or in any application in reliance upon, and in conformity with, written
information furnished by you to the Company for use in the Registration
Statement, or 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 the first paragraph of this Section.
The Company further agrees that, if the indemnity provisions of
the foregoing paragraphs are held to be unenforceable, any holder of an
Underwriter Warrant or controlling person of such a holder may recover
contribution from the Company in an amount which, when added to contributions
such holder or controlling person has theretofore received or concurrently
receives from officers and directors of the Company or controlling persons of
the Company, will reimburse such holder or controlling person 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 Section 3(g) is
not permitted by law, then such holder or controlling person shall be entitled
to contribution from the Company and its officers, directors and controlling
persons to the full extent permitted by law.
4. EXERCISE OF UNDERWRITER WARRANTS.
(a) Cash Exercise. Each Underwriter Warrant may be exercised in full or
in part (but not as to a fractional share of Common Stock) by the holder thereof
by surrender of the Warrant Certificate, with the form of subscription at the
end thereof duly executed by such holder, to the Company at its principal
office, accompanied by payment, in cash or by certified or bank cashiers' check
payable to the order of the Company, in the respective amount obtained by
multiplying the number of shares of the Underlying Stock to be purchased by the
Purchase Price per share.
(b) Net Exercise. Notwithstanding anything to the contrary contained in
Section 4(a), any holder of an Underwriter Warrant may elect to exercise the
Underwriter Warrant and receive shares on a "net exercise" basis in an amount
equal to the value of the Underwriter Warrant by delivery of the form of
subscription attached to the Warrant Certificate and surrender of the
Underwriter Warrant at the principal office of the Company, in which event the
Company shall issue to the holder a number of shares computed using the
following formula:
7
(P)(Y)(A-B)
X= -----------
A
Where: X= the number of shares of Common Stock to be issued
to holder.
P= the portion of the Underwriter Warrant being
exercised (expressed as a fraction).
Y= the total number of shares of Common Stock issuable
upon exercise of the Underwriter Warrant.
A= the Current Market Price of one share of Common
Stock.
B= Purchase Price.
(c) Partial Exercise. Prior to the expiration of the Underwriter
Warrants, upon any partial exercise, the Company at its expense will forthwith
issue and deliver to or upon the order of the purchasing holder, a new Warrant
Certificate or Certificates of like tenor, in the name of the holder thereof or
as such holder (upon payment by such holder of any applicable transfer taxes)
may request calling in the aggregate for the purchase of the number of shares of
the Underlying Stock equal to the number of such shares called for on the face
of the Warrant Certificate (after giving effect to any adjustment therein as
provided in Section 6 below) minus the number of such shares (after giving
effect to such adjustment) designated by the holder in the aforementioned form
of subscription.
(d) Company to Reaffirm Obligations. The Company will, at the time of
any exercise of any Underwriter Warrant, upon the request of the holder thereof,
acknowledge in writing its continuing obligation to afford to such holder any
rights (including without limitation any right to registration of the shares of
the Underlying Stock issued upon such exercise) to which such holder shall
continue to be entitled after such exercise in accordance with the provisions of
this Agreement; provided, however, that if the holder of an Underwriter Warrant
shall fail to make any such request, such failure shall not affect the
continuing obligation of the Company to afford to such holder any such rights.
5. DELIVERY OF CERTIFICATES, ETC, ON EXERCISE.
As soon as practicable after the exercise of any Underwriter Warrant in
full or in part, and in any event within twenty 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 holder
thereof, a certificate or certificates for the number of fully paid and
nonassessable shares of the Underlying Stock to which such holder shall be
entitled upon such exercise, plus in lieu of any fractional share to which such
holder would otherwise be entitled, cash in an amount determined pursuant to
Section 7(g), 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 6 below or otherwise.
6. ANTI-DILUTION PROVISIONS.
The Underwriter Warrants are subject to the following terms and
conditions during the term thereof:
(a) Stock Distributions and Splits. In case (i) the outstanding shares
of Common Stock (or Other Securities) shall be subdivided into a greater number
of shares or (ii) a dividend in Common Stock (or Other Securities) shall be paid
in respect of Common Stock (or Other Securities), the Purchase Price per share
in effect
8
immediately prior to such subdivision or at the record date of such dividend or
distribution shall simultaneously with the effectiveness of such subdivision or
immediately after the record date of such dividend or distribution be
proportionately reduced; and if outstanding shares of Common Stock (or Other
Securities) shall be combined into a smaller number of shares thereof, the
Purchase Price per share in effect immediately prior to such combination shall
simultaneously with the effectiveness of such combination be proportionately
increased. Any dividend paid or distributed on the Common Stock (or Other
Securities) in stock or any other securities convertible into 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 thereof.
(b) Adjustments. Whenever the Purchase Price per share is adjusted as
provided in Section 6(a) above, the number of shares of the Underlying Stock
purchasable upon exercise of the Underwriter 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) by multiplying such number of shares of the Underlying Stock
by a fraction, the numerator of which is the Purchase Price per share in effect
immediately prior to such Purchase Price adjustment and the denominator of which
is the Purchase Price per share in effect upon such Purchase Price adjustment,
which adjusted number of shares of the Underlying Stock shall thereupon be the
number of shares of the Underlying Stock purchasable upon exercise of the
Underwriter Warrants until further adjusted as provided herein.
(c) Reorganizations. In case the Company shall be recapitalized by
reclassifying its outstanding Common Stock (or Other Securities) into a stock
with a different par value or by changing its outstanding Common Stock (or Other
Securities) with par value to stock without par value, then, as a condition of
such reorganization, lawful and adequate provision shall be made whereby each
holder of an Underwriter Warrant 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) theretofore purchasable upon the exercise of the
Underwriter Warrants, the kind and amount of shares of stock and other
securities receivable upon such recapitalization by a holder of the number of
shares of Common Stock (or Other Securities) which the holder of an Underwriter
Warrant 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 shall be entitled to receive stock,
securities or assets with respect to or in exchange for Common Stock, then, as a
condition of such consolidation, merger or sale, lawful and adequate provisions
shall be made whereby the holder hereof shall thereafter have the right to
purchase and receive upon the basis and upon the terms and conditions specified
in this Warrant Agreement and in lieu of the shares of the Common Stock of the
Company immediately theretofore purchasable and receivable upon the exercise of
the rights represented hereby, such shares of stock, securities or assets as may
be issued or payable with respect to or in exchange for a number of outstanding
shares of such Common Stock equal to the number of shares of such stock
immediately theretofore purchasable and receivable upon the exercise of the
rights represented hereby had such consolidation, merger or sale not taken
place, and in any such case, appropriate provision shall be made with respect to
the rights and interests of the holders of Underwriter Warrants to the end that
the provisions hereof (including without limitation provisions for adjustments
of the Purchase Price and of the number of shares purchasable and receivable
upon the exercise of the Underwriter Warrants) shall thereafter be applicable,
as nearly as may be, in relation to any shares of stock, securities or assets
thereafter deliverable upon the exercise hereof (including an immediate
adjustment, by reason of such consolidation or merger, of the Purchase Price to
the value for the Common Stock reflected by the terms of such consolidation or
merger if the value so reflected is less than the Purchase Price in effect
immediately prior to such consolidation or merger). In the event of a merger or
consolidation of the Company with or into another corporation as a result of
which a number of shares of Common Stock of the surviving corporation greater or
lesser than the number of shares of Common Stock of the Company outstanding
immediately prior to such merger or consolidation are issuable to holders of
Common Stock of the Company, then the Purchase Price in effect immediately prior
to such merger or consolidation shall be adjusted in the same manner as though
there were a subdivision or combination of the outstanding shares of Common
Stock of the Company. The Company will not
9
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 hereof at the last address of such holder appearing on the books of the
Company, the obligation to deliver to such holder such shares of stock,
securities or assets as, in accordance with the foregoing provisions, such
holder may be entitled to purchase. If a purchase, tender or exchange offer is
made to and accepted by the holders of more than of the outstanding shares of
Common Stock of the Company, the Company shall not effect any consolidation,
merger or sale with the Person having made such offer or with any Affiliate of
such Person, unless prior to the consummation of such consolidation, merger or
sale the holders of Underwriter Warrants shall have been given a reasonable
opportunity to then elect to receive upon the exercise of Underwriter Warrants
either the stock, securities or assets then issuable with respect to the Common
Stock 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.
(d) Effect of Dissolution or Liquidation. In case the Company shall
dissolve or liquidate all or substantially all of its assets, all rights under
this Agreement shall terminate as of the date upon which a certificate of
dissolution or liquidation shall be filed with the Secretary of the 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
6(c) of any holder of an Underwriter Warrant and (ii) if the Company's Board of
Directors shall propose to dissolve or liquidate the Company, each holder of an
Underwriter Warrant shall be given written notice of such proposal at the
earlier of (x) the time when the Company's shareholders are first given notice
of the proposal or (y) the time when notice to the Company's shareholders is
first required.
(e) Notice of Change of Purchase Price. Whenever the Purchase Price per
share or the kind or amount of securities purchasable under the Underwriter
Warrants shall be adjusted pursuant to any of the provisions of this Agreement,
the Company shall forthwith thereafter cause to be sent to each holder of an
Underwriter Warrant, a certificate setting forth the adjustments in the Purchase
Price per share and/or in such number of shares, 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 issued by it requiring such
adjustment. In addition, the Company at its expense shall within 90 days
following the end of each of its fiscal years during the term of this Agreement,
and promptly upon the reasonable request of any holder of an Underwriter Warrant
in connection with the exercise from time to time of all or any portion of any
Underwriter Warrant, cause independent certified public accountants of
recognized standing selected by the Company to compute any such adjustment in
accordance with the terms of the Underwriter Warrants and prepare a certificate
setting forth such adjustment and showing in detail the facts upon which such
adjustment is based.
10
(f) 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 property, or to receive
any other right, (ii) any capital 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 or into, 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 holder of
an Underwriter Warrant 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 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 20 days prior to the proposed record date
therein specified.
7. FURTHER COVENANTS OF THE COMPANY.
(a) Reservation of Stock. The Company shall at all times reserve and
keep available, solely for issuance and delivery upon the exercise of the
Underwriter Warrants, all shares of the Underlying Stock from time to time
issuable upon the exercise of the Underwriter Warrants and shall take all
necessary actions to ensure that the par value per share, if any, of the
Underlying Stock is, at all times equal to or less than the then effective
Purchase Price per share.
(b) Title to Shares. All shares of the Underlying Stock delivered upon
the exercise of the Underwriter Warrants shall be validly issued, fully paid and
nonassessable; each holder of an Underwriter Warrant shall receive good and
marketable title to the Underlying Stock, free and clear of all voting and other
trust arrangements, liens, encumbrances, equities and claims whatsoever; and the
Company shall have paid all taxes, if any, in respect of the issuance thereof.
(c) Listing on Securities Exchanges; Registration. If the Company at any
time shall list any Common Stock on any national securities exchange, the
Company will, at its expense, simultaneously list on such exchange, upon
official notice of issuance upon the exercise of the Underwriter Warrants, and
maintain such listing of, all shares of the Underlying Stock from time to time
issuable upon the exercise of the Underwriter Warrants; and the Company will so
list on any national 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 national securities exchange
by the Company.
(d) Exchange of Underwriter Warrants. Subject to Section 3(a) hereof,
upon surrender for exchange of any Warrant Certificate 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 Certificate or certificates of like tenor, in
the name of such holder or as such holder (upon payment by such holder of any
applicable transfer taxes) may direct, calling in the aggregate for the purchase
of the number of shares of the Underlying Stock called for on the face or faces
of the Warrant Certificate or Certificates so surrendered.
(e) Replacement of Underwriter Warrants. Upon receipt of evidence
reasonably satisfactory to the Company of the loss, theft, destruction or
mutilation of any Warrant Certificate and, in the case of any such loss,
11
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 Certificate, the
Company, at the expense of the warrant holder will execute and deliver, in lieu
thereof, a new Warrant Certificate of like tenor.
(f) Reporting by the Company. The Company agrees that, if it files a
Registration Statement during the term of the Underwriter Warrants, it will use
its best efforts to keep current in the filing of all forms and other materials
which it may be required to file with the appropriate regulatory authority
pursuant to the Exchange Act, and all other forms and reports required to be
filed with any regulatory authority having jurisdiction over the Company.
(g) Fractional Shares. No fractional shares of Underlying Stock are to
be issued upon the exercise of any Underwriter Warrant, but the Company shall
pay a cash adjustment in respect of any fraction of a share which would
otherwise be issuable in an amount equal to the same fraction of the highest
market price per share of Underlying Stock on the day of exercise, as determined
by the Company.
8. OTHER HOLDERS.
The Underwriter Warrants are issued upon the following terms, to all of
which each holder or owner thereof by the taking thereof consents and agrees as
follows: (a) any person who shall become a transferee, within the limitations on
transfer imposed by Section 3(a) hereof, of an Underwriter Warrant properly
endorsed shall take such Underwriter Warrant subject to the provisions of
Section 3(a) hereof and thereupon shall be authorized to represent himself as
absolute owner thereof and, subject to the restrictions contained in this
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
Underwriter 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 presented thereby; (c) until such time as the respective
Underwriter 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 word "you" in this Warrant Agreement shall be deemed to apply with equal
effect to any person to whom a Warrant Certificate or Certificates have been
transferred in accordance with the terms hereof, and where appropriate, to any
person holding shares of the Underlying Stock.
9. MISCELLANEOUS.
All notices, certificates and other communications from or at the
request of the Company to the holder of any Underwriter Warrant 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 holder, or, until
an address is so furnished, to the address of the last holder of such
Underwriter Warrant who has so furnished an address to the Company, except as
otherwise provided herein. This 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 sought. This Agreement shall be construed and enforced in
accordance with and governed by the laws of the State of Texas. The headings in
this Agreement are for reference only and shall not limit or otherwise affect
any of the terms hereof. This Agreement, together with the forms of instruments
annexed hereto as Schedule I, constitutes the full and complete agreement of the
parties hereto with respect to the subject matter hereof.
12
IN WITNESS WHEREOF, the Company has caused this Warrant Agreement to be
executed on this 17th day of February, 1998, in Austin, Texas, by its proper
corporate officers thereunto duly authorized.
AUTOBOND ACCEPTANCE CORPORATION
By: /s/ Xxxxxxx X. Xxxxxxxx
-------------------------------------
Chairman of the Board and
Chief Executive Officer
The above Warrant Agreement is confirmed this 17th day of February, 1998.
TEJAS SECURITIES GROUP, INC.
By: /s/ Xxxxxx X. Xxxxx, III
------------------------------------
13
SCHEDULE I
AUTOBOND ACCEPTANCE CORPORATION
STOCK PURCHASE WARRANT
CERTIFICATE EVIDENCING RIGHT TO PURCHASE 100,000 SHARES OF COMMON STOCK
This is to certify that Tejas Securities Group, Inc. ("TSG") or assigns,
is entitled to purchase at any time or from time to time after 9 A.M., Austin,
Texas time, on February 17, 1999 and until 9 A.M., Austin, Texas time, on
February 17, 2003 up to the above referenced number of shares of Common Stock,
no par value, of AutoBond Acceptance Corporation, a Texas corporation (the
"Company"), for the consideration specified in Section 4 of the Warrant
Agreement dated February 17, 1998 between the Company and TSG (the "Warrant
Agreement"), pursuant to which this Warrant is issued. All rights of the holder
of this Warrant Certificate are subject to the terms and provisions of the
Warrant Agreement, copies of which are available for inspection at the office of
the Company.
The shares of Common Stock issuable upon the exercise of this Warrant
have not been registered under the Securities Act of 1933, as amended (the
"Act"), and no distribution of such shares may be made until the effectiveness
of a Registration Statement under the Act covering such Shares. Transfer of this
Warrant Certificate is restricted as provided in Section 3(a) of the Warrant
Agreement.
This Warrant has been issued to the registered owner in reliance upon
written representations necessary to ensure that this Warrant was issued in
accordance with an appropriate exemption from registration under any applicable
state and federal securities laws, rules and regulations. This Warrant may not
be sold, transferred, or assigned unless, in the opinion of the Company and its
legal counsel, such sale, transfer or assignment will not be in violation of the
Act, applicable rules and regulations of the Securities and Exchange Commission,
and any applicable state securities laws.
Subject to the provisions of the Act and of such Warrant Agreement, this
Warrant Certificate and all rights hereunder are transferable, in whole or in
part, at the offices of the Company, by the holder hereof in person or by duly
authorized attorney, upon surrender of this Warrant Certificate, together with
the Assignment hereof duly endorsed. Until transfer of this Warrant Certificate
on the books of the Company, the Company may treat the registered holder hereof
as the owner hereof for all purposes.
Any shares of Common Stock (or other securities) which are acquired
pursuant to the exercise of this Warrant shall be acquired in accordance with
the Warrant Agreement and certificates representing all securities so acquired
shall bear a restrictive legend reading substantially as follows:
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933 OR UNDER ANY APPLICABLE STATE LAW. THEY MAY NOT BE OFFERED FOR
SALE, SOLD, TRANSFERRED OR PLEDGED WITHOUT (1) REGISTRATION UNDER THE
SECURITIES ACT OF 1933 AND ANY APPLICABLE STATE LAW, OR (2) AN OPINION
OF COUNSEL (SATISFACTORY TO THE CORPORATION) THAT REGISTRATION IS NOT
REQUIRED.
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to
be executed on this 17th day of February, 1998, in Austin, Texas, by its proper
corporate officer's thereunto duly authorized.
AUTOBOND ACCEPTANCE CORPORATION
By: ____________________________ Attest:_____________________________
Xxxxxxx X. Xxxxxxxx
Chairman of the Board and
Chief Executive Officer
SUBSCRIPTION
(To be signed only upon exercise of Warrant)
To: AutoBond Acceptance Corporation
The undersigned, the holder of the enclosed Warrant Certificate, hereby
irrevocably elects to exercise the purchase right represented by such Warrant
Certificate for, and to purchase thereunder, _________________ shares of Common
Stock, no par value, of AutoBond Acceptance Corporation and either tenders
herewith payment of the purchase price in full in the form of cash or a
certified or official bank check in the amount of $______________ therefor or,
if the undersigned elects pursuant to Section 4(b) of the Warrant Agreement to
convert the Warrant into Common Stock by net issuance, the undersigned exercises
the Warrant by exchange under the terms of said Section 4(b), and requests that
the certificate or certificates for such shares be issued in the name of and
delivered to the undersigned.
Date: ______________________________
------------------------------
(Signature must conform
in all respects to name
of holder as specified on
the face of the Warrant
Certificate)
------------------------------
------------------------------
(Address)
Please indicate in the space below the number of shares called for on
the face of the Warrant Certificate (or, in the case of a partial exercise, the
portion thereof as to which the Warrant is being exercised), in either case
without making any adjustment for additional shares or other securities or
property or cash which, pursuant to the adjustment provisions of the Warrant,
may be deliverable upon exercise and whether the exercise is a cash exercise
pursuant to Section 4(a) of the Warrant Agreement or a net issuance exercise
pursuant to Section 4(b) of the Warrant Agreement.
Number of Shares:__________
Cash:____________________
Net issuance:______________
ASSIGNMENT
(To be signed only upon transfer of Warrant)
For value received, the undersigned hereby sells, assigns and transfers unto
_______________________________ the right represented by the enclosed Warrant
Certificate to purchase ________ shares of Common Stock, no par value, of
AutoBond Acceptance Corporation with full power of substitution in the premises.
The undersigned represents and warrants that the transfer, in whole in
or in part, of such right to purchase represented by the enclosed Warrant
Certificate is permitted by the terms of the Warrant Agreement pursuant to which
the enclosed Warrant has been issued, and the transferee hereof, by his
acceptance of this Assignment, represents and warrants that he is familiar with
the terms of such Warrant Agreement and agrees to be bound by the terms thereof
with the same force and effect as if a signatory thereto.
Date:___________________
------------------------------
(Signature must conform
in all respects to name of
holder as specified on
the face of the Warrant
Certificate)
------------------------------
(Address)
Signed in the presence of:
