EXHIBIT 6.2
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THIS WARRANT AND THE SHARES OF COMMON STOCK PURCHASABLE HEREUNDER HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER THE SECURITIES
LAWS OF ANY STATE OR OTHER JURISDICTION AND MAY NOT BE SOLD, OFFERED FOR SALE OR
OTHERWISE TRANSFERRED UNLESS REGISTERED OR QUALIFIED UNDER SAID ACT AND
APPLICABLE STATE SECURITIES LAWS OR UNLESS THE COMPANY RECEIVES AN OPINION OF
COUNSEL REASONABLY SATISFACTORY TO THE COMPANY THAT REGISTRATION, QUALIFICATION
OR OTHER SUCH ACTIONS ARE NOT REQUIRED UNDER SAID ACT. THE OFFERING OF THIS
SECURITY HAS NOT BEEN REVIEWED OR APPROVED BY ANY STATE'S SECURITIES
ADMINISTRATOR. THIS WARRANT AND THE SHARES OF COMMON STOCK PURCHASABLE HEREUNDER
ARE ALSO BENEFITED BY AND SUBJECT TO A REGISTRATION RIGHTS AGREEMENT, DATED
DECEMBER 18,1997, BY AND AMONG THE COMPANY AND THE HOLDERS LISTED THEREIN, A
COPY OF WHICH IS ON FILE WITH THE COMPANY AND WILL BE FURNISHED UPON WRITTEN
REQUEST AND WITHOUT CHARGE.
Dated: December 18, 1997
WARRANT AND
WARRANT AGREEMENT
To Purchase 1,161,000 Shares of Common Stock
THIS IS TO CERTIFY THAT, for value received, Love Savings Holding
Company ("LSHC"), or assigns, is entitled to purchase from Easy Money Holding
Corporation, a Virginia corporation (the "Company"), at the Exercise Price (as
hereinafter defined), 68.3333% of the number of shares of Common Stock, par
value $ .01 per share (the "Common Stock"), of the Company shown above and that
Xxxxxxx X. Xxxxx ("Xxxxx"), or assigns, is entitled to purchase from the
Company, at the Exercise Price, 31.6667% of the Common Stock of the Company
shown above (each of LSHC (including its successors and assigns) and Xxxxx
(including his successors and assigns) is referred to herein as "Holder" or
"Holders"), subject to adjustment and upon the terms and conditions as
hereinafter provided, and is entitled also to exercise the other appurtenant
rights, powers and privileges hereinafter described. This Warrant may be
exercised and the Common Stock of the Company purchased in accordance with the
terms hereof at any time and from time to time (A) after the earlier to occur of
(i) the first Qualified Equity Financing of the Company, which includes a Bona
Fide Initial Public Offering (as hereinafter defined) or other sale, issuance,
transfer or disposition of any stock of the Company or any other equity
securities of the Company, or non-equity securities of the Company that are
convertible into, exchangeable for or evidence the right to subscribe for any
such equity securities, (ii) conversion by the Company from its status as an "S
corporation" to a "C corporation," or (iii) the expiration of the thirtieth
(30th) full calendar month after the date of this Warrant and (B) no later than
5:00 p.m., Eastern Standard Time, six months after the date of a Bona Fide
Initial Public Offering, at the place where a Warrant Agency (as hereinafter
defined) is located. This Warrant is one of one or more warrants (the
"Warrants") of the same form and having the same terms as this Warrant. The
Holder shall designate at the time of exercise whether the Common Stock to be
received shall be voting Common Stock or non-voting Common Stock.
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Any rights to acquire additional Warrants or Common Stock of the
Company or any Subsidiary thereof shall be allocated to the Holders, and to any
successors or assigns of the Holders, as follows: 68.3333% to LSHC and its
successors and assigns, if any, and 31.6667% to Xxxxx and his successors and
assigns, if any.
The Company hereby represents and warrants to the Holders that, as of
the date of issuance of this Warrant, the Company has issued and outstanding one
class of common stock of the Company consisting of 10,000,0000 shares, par value
$ .01 per share; the Company has reserved 250,000 options for distribution to
its employees in connection with an employee stock option plan; has issued
400,000 warrants to Xxxxx X. Xxxxx in connection with the acquisition from him
of Sunnybrook, Inc.; and has issued 200,000 warrants to Xxxxxxx X. Xxxx in
connection with the acquisition from her of Fast Cash, Inc.; and has issued
31,131 warrants to Xxxxx Xxxxxx in connection with his employment. Other than
the 10,000,000 issued and outstanding shares of the Company and the options and
warrants described above, the Company has no other securities (whether equity or
debt) outstanding and no obligations, other than to the Holders, requiring the
issuance of same to any person or entity who is not named above.
Certain terms used in this Warrant are defined in Article V.
ARTICLE I
EXERCISE OF WARRANTS
1.1 Method of Exercise. To exercise this Warrant in whole or in part,
the Holder shall deliver to the Company, at the Warrant Agency, (a) this
Warrant, (b) a written notice, in substantially the form of the Subscription
Notice attached hereto, of such Holder's election to exercise this Warrant,
which notice shall specify the number of shares of Common Stock to be purchased,
the denominations of the share certificate or certificates desired, whether the
Common Stock to be acquired shall be voting Common Stock or non-voting Common
Stock and the name or names in which such certificates are to be registered, and
(c) payment of the Exercise Price with respect to such shares. Notwithstanding
the foregoing, this Warrant shall be exercisable only to the extent and at the
time or times that the Holder could legally take possession of and title to such
shares. Payment made pursuant to clause (c) above may be made, at the option of
the Holder: (x) by cash, money order, certified or bank cashier's check or wire
transfer, (y) the surrender to the Company of securities of the Company having a
value equal to the aggregate Exercise Price, as determined in good faith by the
Company's board of directors, or (z) the delivery of a notice to the Company
that the Holder is exercising this Warrant by authorizing the Company to reduce
the number of shares of Common Stock subject to this Warrant by the number of
shares having an aggregate value equal to the aggregate Exercise Price, as
determined in good faith by the Company's board of directors.
The Company shall, as promptly as practicable and in any event within
three Business Days thereafter, execute and deliver or cause to be executed and
delivered, in accordance with such notice, a certificate or certificates
representing the aggregate number and type of shares of Common Stock specified
in said notice. The share certificate or certificates so delivered shall be in
such denominations as may be specified in such notice or, if such notice shall
not specify denominations, shall be in the amount of the number of shares of
Common Stock for which the Warrant is being exercised, and shall be issued in
the name of the Holder or such other name or
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names as shall be designated in such notice, subject to Section 1.4. Such
certificate or certificates shall be deemed to have been issued, and such Holder
or any other Person so designated to be named therein shall be deemed for all
purposes to have become a Holder of record of such shares, as of the date the
aforementioned notice is received by the Company. If this Warrant shall have
been exercised only in part, the Company shall, at the time of delivery of the
certificate or certificates, deliver to the Holder a new Warrant evidencing the
rights to purchase the remaining shares of Common Stock called for by this
Warrant, which new Warrant shall in all other respects be identical with this
Warrant, or, at the request of the Holder, appropriate notation may be made on
this Warrant which shall then be returned to the Holder. The Company shall pay
all expenses, taxes and other charges payable in connection with the
preparation, issuance and delivery of share certificates and new Warrants,
except that, if share certificates or new Warrants shall be registered in the
name or names other than the name of the Holder, funds sufficient to pay all
transfer taxes payable as a result of such transfer shall be paid by the Holder
at the time of delivering the aforementioned notice of exercise or promptly upon
receipt of a written request of the Company for payment.
1.2 Shares To Be Fully Paid and Nonassessable. All shares of Common
Stock issued upon the exercise of this Warrant shall be validly issued, fully
paid and nonassessable and free from all preemptive rights of any stockholder
(except for the preemptive rights provided to Holders in Section 3.13), and from
all taxes, liens and charges with respect to the issue thereof (other than
transfer taxes) and, if the Common Stock is then listed on any national
securities exchanges (as defined in the Exchange Act) or quoted on NASDAQ within
120 days after completion of a public offering of the Company's Stock pursuant
to a Registration Statement under the Securities Act, be duly listed or quoted
thereon, as the case may be.
1.3 No Fractional Shares To Be Issued. The Company shall not be
required to issue fractions of shares of Common Stock upon exercise of this
Warrant. If any fraction of a share would, but for this Section, be issuable
upon any exercise of this Warrant, and if the Company shall have elected not to
issue such fraction of a share, in lieu of such fractional share the Company
shall pay to the Holder, in cash, an amount equal to such fraction of the Fair
Market Value per share of outstanding Common Stock of the Company on the
Business Day immediately prior to the date of such exercise.
1.4 Share Legend. Each certificate for shares of Common Stock issued
upon exercise of this Warrant, unless at the time of exercise such shares are
registered under the Securities Act, shall bear the following legend:
"THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR UNDER THE SECURITIES LAWS OF ANY STATE OR OTHER JURISDICTION
AND MAY NOT BE SOLD, OFFERED FOR SALE OR OTHERWISE TRANSFERRED UNLESS
REGISTERED OR QUALIFIED UNDER SAID ACT AND APPLICABLE STATE SECURITIES LAWS
OR UNLESS THE COMPANY RECEIVES AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO THE COMPANY THAT REGISTRATION, QUALIFICATION OR OTHER SUCH
ACTIONS ARE NOT REQUIRED UNDER SAID ACT. THE OFFERING OF THIS SECURITY HAS
NOT BEEN REVIEWED OR APPROVED BY ANY STATE SECURITIES ADMINISTRATOR. THIS
SECURITY IS ALSO BENEFITED BY AND SUBJECT TO A REGISTRATION RIGHTS
AGREEMENT, DATED AS OF DECEMBER 18,1997, BETWEEN THE COMPANY AND THE
HOLDERS LISTED THEREIN, A COPY OF
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WHICH IS ON FILE WITH THE COMPANY AND WILL BE FURNISHED UPON WRITTEN
REQUEST AND WITHOUT CHARGE."
Any certificate issued at any time in exchange or substitution for any
certificate bearing such legend (except a new certificate issued upon completion
of a public distribution pursuant to a registration statement under the
Securities Act) shall also bear such legend unless, in the opinion of counsel
selected by the Holder of such certificate and reasonably satisfactory to the
Company, the securities represented thereby are no longer subject to
restrictions on resale under the Securities Act.
1.5 Reservation; Authorization. The Company has reserved and will
keep available for issuance upon exercise of the Warrants the total number of
shares of Common Stock deliverable upon exercise of all Warrants from time to
time outstanding. The issuance of such shares has been duly and validly
authorized and, when issued and sold in accordance with the Warrants, such
shares will be duly and validly issued, fully paid and nonassessable.
ARTICLE II
WARRANT AGENCY; TRANSFER, EXCHANGE
AND REPLACEMENT OF WARRANTS
2.1 Warrant Agency. If a Holder shall request appointment of an
independent warrant agency with respect to the Warrants, the Company shall
promptly appoint and thereafter maintain, at its own expense, an agency, which
agency may be the Company's then-existing transfer agent (the "Warrant Agency"),
for certain purposes specified herein, and shall give prompt notice of such
appointment (and appointment of any successor Warrant Agency) to all Holders of
Warrants. Until an independent Warrant Agency is so appointed, the Company shall
perform the obligations of the Warrant Agency provided herein at its address at
0000 Xxxxxxxxx Xxxx, Xxxxx 000, Xxxxxxxx Xxxxx, Xxxxxxxx 00000 or such other
address as the Company shall specify by notice to all Holders.
2.2 Ownership of Warrant. The Company may deem and treat the Person
in whose name this Warrant is registered as the Holder and owner hereof
(notwithstanding any notations of ownership or writing hereon made by any Person
other than the Warrant Agency) for all purposes and shall not be affected by any
notice to the contrary, until presentation of this Warrant for registration of
transfer as provided in this Article II.
2.3 Transfer of Warrant. The Company agrees to maintain at the
Warrant Agency books for the registration of transfers of the Warrants, and
transfer of this Warrant and all rights hereunder Holder shall be registered, in
whole or in part, on such books, upon surrender of this Warrant at the Warrant
Agency, together with a written assignment of this Warrant duly executed by the
Holder or his duly authorized agent or attorney, with (unless the Holder is the
original Holder) signatures guaranteed by a bank or trust Company or a broker or
dealer registered with the NASD, and funds sufficient to pay any transfer taxes
payable upon such transfer. Upon surrender, the Company shall execute and
deliver a new Warrant or Warrants in the name of the assignees and in the
denominations specified in the instrument of assignment, and this Warrant shall
promptly be canceled. Notwithstanding the foregoing, a Warrant may be exercised
by a new Holder in accordance with the procedures set forth herein without
having a new Warrant issued. The Warrant Agency shall not be required to
register any transfers if the Warrrantholder fails to furnish to the Company,
after a
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request therefor, an opinion of counsel reasonably satisfactory to the Company
that such transfer is exempt from the registration requirements of the
Securities Act.
2.4 Division or Combination of Warrants. This Warrant may be divided
or combined with other Warrants upon surrender hereof and of any Warrant or
Warrants with which this Warrant is to be combined at the Warrant Agency,
together with a written notice specifying the names and denominations in which
the new Warrant or Warrants are to be issued, signed by the Holders hereof and
thereof or their respective duly authorized agents or attorneys. Subject to
compliance with Section 2.3 as to any transfer which may be involved in the
division or combination, the Company shall execute and deliver a new Warrant or
Warrants in exchange for the Warrant or Warrants to be divided or combined in
accordance with such notice.
2.5 Loss, Theft, Destruction or Mutilation of Warrants. Upon receipt
of evidence 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 receipt of indemnity or security reasonably satisfactory to
the Company (the original Holder's indemnity being satisfactory indemnity in the
event of loss, theft or destruction of any Warrant owned by such Holder), or, in
the case of any such mutilation, upon surrender and cancellation of such
Warrant, the Company will make and deliver, in lieu of such lost, stolen,
destroyed or mutilated Warrant, a new Warrant of like tenor and representing the
right to purchase the same aggregate number of shares of Common Stock as
provided for in such lost, stolen, destroyed or mutilated Warrant.
2.6 Expenses of Delivery of Warrants. The Company shall pay all
expenses, taxes (other than transfer taxes or income taxes of a Holder) and
other charges payable in connection with the preparation, issuance and delivery
of Warrants and shares issuable upon exercise of the Warrants hereunder.
2.7 Restrictions on Transfer and Division. This Warrant, and any
Warrants resulting from the division, transfer or combination of this Warrant,
and the rights of a Holder hereunder or thereunder, and any shares of Common
Stock acquired by the exercise hereof or thereof, may not be assigned or
transferred to such persons as are determined in good faith by the Company and
notified to the Holders from time to time to be Competitors of the Company. Such
restriction shall not apply following the earlier of (i) a public offering of
Common Stock (ii) the failure of the Company to exercise the right of first
offer granted by the Holder pursuant to Article VII and (iii) the date this
Warrant or the Common Stock issued upon exercise hereof ceases to be a
Registrable Security. No division, assignment or transfer of the rights of a
Holder under a Warrant shall be effective with respect to other than whole
shares of Common Stock, unless such assignment or transfer is of all of the
rights of such Holder under such Warrant; provided, however that if this Warrant
is originally exercisable with respect to a number of shares of Common Stock
that includes a fractional share, this Warrant may be divided such that such
fractional share, together with one or more whole shares, may be acquired by the
exercise of a Warrant resulting from such division. The term "Competitor" shall
mean any person or any company (or any affiliate of either) engaged in the
payday loans business or any consumer finance or check cashing business.
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ARTICLE III
CERTAIN RIGHTS
3.1 Registration Rights. The Common Stock issuable upon exercise of
this Warrant is entitled to the benefits of the Registration Rights Agreement
dated as of December 18, 1997, by and among the Company and the Holders listed
therein (the "Registration Rights Agreement"). The Company shall keep a copy of
the Registration Rights Agreement, and any amendments thereto, at the Warrant
Agency and shall furnish copies thereof to a Holder upon request.
3.2 Contest and Appraisal Rights. Upon each determination of Fair
Market Value hereunder (other than a determination relating solely to setting
the value of fractional shares), the Company shall promptly give notice thereof
to all Holders, setting forth in reasonable detail the calculation of such Fair
Market Value and the method and basis of determination thereof, as the case may
be. If the Holders shall disagree with such determination and shall, by notice
to the Company given within 30 days after the Company's notice of such
determination, elect to dispute such determination, such dispute shall be
resolved in accordance with this Section 3.2. In the event that a determination
of Market Price, or a determination of Fair Market Value solely involving Market
Price, is disputed, such dispute shall be submitted, at the Company's expense,
to a New York Stock Exchange member firm selected by the Company and acceptable
to the Holders, whose determination of Fair Market Value and/or Market Price, as
the case may be, shall be binding on the Company and the Holders. In the event
that a determination of Fair Market Value, other than a determination solely
involving Market Price, is disputed, such dispute shall be resolved through the
Appraisal Procedure.
3.3 Certain Covenants. The Company covenants and agrees that, until
exercise or cancellation of this Warrant, the Company will deliver to each
Holder:
(a) As soon as available and in any event within 90 days after the
close of each fiscal year of Company, the consolidated balance sheets of Company
as at the end of such fiscal year and the related consolidated statements of
operations, of stockholders' equity and of cash flows for such fiscal year,
setting forth comparative consolidated figures for the preceding fiscal year,
and an unqualified report on such consolidated balance sheets and financial
statements by independent certified public accountants of recognized national
standing.
(b) As soon as available and in any event within 60 days after the
close of each of the first three quarterly accounting periods in each fiscal
year of Company, commencing with the fiscal quarter ending on June 30, 1997, the
consolidated balance sheet of Company as at the end of such quarterly period and
the related consolidated statements of operations, of stockholders' equity and
of cash flows for such quarterly period and for the elapsed portion of the
fiscal year ended with the last day of such quarterly period, and in each case
setting forth comparative consolidated figures for the related periods in the
prior fiscal year, subject to normal year-end audit adjustments.
(c) As soon as available and in any event within 45 days after the
close of each calendar month in each fiscal year of Company, a complete set of
the unaudited internal monthly financial statements of Company (including such
store-by-store data as is customarily prepared).
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(d) As soon as available and in any event by the following Monday, a
complete copy of the sales and collection report in connection with the sales
and collection activities of Company and each Subsidiary for the previous week
(including such store-by-store data as is customarily prepared).
(e) At least 30 days prior to the commencement of each fiscal year,
budgets of Company in reasonable detail for each month of such fiscal year, as
customarily prepared by management for its internal use, setting forth, with
appropriate discussion, the principal assumptions upon which such budgets are
based. Together with each delivery of financial statements pursuant to Sections
3.3(a) and (b), a comparison of the current year to date financial results
against the budgets required to be submitted pursuant to this subsection (d)
shall be presented.
(f) Promptly upon receipt thereof, a copy of each annual "management
letter" submitted to Company by its independent accountants in connection with
any annual audit made by them of the books of Company.
(g) Promptly upon their becoming available, copies of all
consolidated financial statements, reports, notices and proxy statements sent or
made available generally by Company to its security Holders, of all regular and
periodic reports and all registration statements and prospectuses, if any, filed
by Company with any securities exchange or with the SEC and of all press
releases and other statements made available generally by Company to the public
concerning material developments in the business of Company.
(h) Promptly upon any corporate officer of Borrower obtaining
knowledge of the institution of, or written threat of, any action, suit,
proceeding, governmental investigation or arbitration against or affecting
Company or any property of Company not previously disclosed to the Holders in
writing, which action, suit, proceeding, governmental investigation or
arbitration seeks (or in the case of multiple actions, suits, proceedings,
governmental investigations or arbitrations arising out of the same general
allegations or circumstances which seek) recovery from Company or any Subsidiary
thereof aggregating $25,000 or more (exclusive of claims covered by insurance
policies of Company unless the insurers of such claims have disclaimed coverage
or reserved the right to disclaim coverage on such claims), such Company shall
give notice thereof to the Holders and provide such other information as may be
reasonably available to enable the Company and counsel to evaluate such matters;
(ii) as soon as practicable and in any event within 45 days after the end of
each fiscal quarter, Company shall provide a quarterly report to the Holders
covering the institution of, or written threat of, any action, suit, proceeding,
governmental investigation or arbitration (not previously reported) against or
affecting Company or any property of Company not previously disclosed to the
Holders, which action, suit, proceedings, governmental investigation or
arbitration seeks (or in the case of multiple actions, suits, proceedings,
governmental investigations or arbitrations arising out of the same general
allegations or circumstances which seek) recovery from Company aggregating
$25,000 or more (exclusive of claims covered by insurance policies of Company
unless the insurers of such claims have disclaimed coverage or reserved the
right to disclaim coverage on such claims), and shall provide such other
information at such time as may be reasonably available to enable the Holders
and their counsel to evaluate such matters; (iii) in addition to the
requirements set forth in clauses (i) and (ii) of this Section 3.3, Company upon
request shall promptly give notice of the status of any action, suit,
proceeding, governmental investigation or arbitration covered by a report
delivered to the Holders pursuant to clause (i) or (ii) above to the Holders and
provide such other information as may be reasonably available to it to enable
the Holders and their counsel to evaluate such matters; and (iv) promptly upon
any officer of Company
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obtaining knowledge of any dispute in respect of or the institution of, or
written threat of, any action, suit, proceeding, governmental investigation or
arbitration in respect of any material contract of Company, such Company shall
give notice thereof to the Holders and shall provide such other information as
may be reasonably available to enable the Holders and their counsel to evaluate
such matters; provided, however, that the Company shall not be obligated to
provide any information pursuant to this Section 3.3 to the extent that to do so
would, in the reasonable opinion of counsel for Company, waive or otherwise
cause to be inoperative an attorney-client or similar privilege that is
reasonably expected to be asserted in such action, suit, proceeding,
governmental investigation or arbitration.
(i) To the extent reasonably requested by the Holder as soon as
practicable and in any event within ten days of the earlier of such request and
the making of any such amendment or waiver, copies of amendments or waivers with
respect to indebtedness of Company.
(j) Company shall provide to Holder for each month in the fiscal year
commencing January 1, 1998, in each case prepared in accordance with Company's
normal accounting procedures (and which will represent management's reasonable
estimate of Company's projected performance during such periods) applied on a
consistent basis, including, without limitation, (i) forecasted balance sheets,
statements of operations, of stockholders' equity and of cash flows of Company
on a consolidated basis for such periods, and (ii) the amount of forecasted
capital expenditures for such fiscal periods.
(k) With reasonable promptness, such other information and data with
respect to Company or any other entity in which Company has an investment, as
from time to time may be reasonably requested by Holder.
(l) As soon as available, any and all press releases of the Company.
3.4 Non-Disclosure. (a) In the event that a Holder requests to
inspect, examine or copy any of the Company's books, records or other
documentation or information, and the Board of Directors of the Company makes a
good faith determination that such inspection, examination or copying would
place the Company at a competitive disadvantage with respect to any other
entity, including but not limited to such Holder, that then competes, or is
reasonably likely to compete in the foreseeable future, either directly or
indirectly, with the Company, then the Company may refuse to disclose to such
Holder any or all of the following items of the Company, except in connection
with a proposed registration under the Registration Rights Agreement:
(i) interoffice or intraoffice communication intended solely for
management review;
(ii) confidential analyses, plans for business development,
organizational data, marketing plans and strategies, or sales data;
(iii) draft or interim financial reports, or any other internal
documents subject to audit, adjustment or verification;
(iv) unpublished promotional material, cost and pricing information,
customer lists, and contracts, in whatever form, manner or medium recorded
(if recorded);
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(v) documentation or information including, but not limited to, any
and all information and materials that contain, or could lead to the
disclosure of, the Company's trade secrets or any documentation or
information concerning the Company's current, future or proposed products
or services, including without limitation unpublished computer code (both
source code and object code), network configurations, software designs, or
any drawings, specifications, notebook entries, technical notes and graphs,
or research; and
(vi) all other information that the Company or its Affiliates or
Subsidiaries treat or maintain as confidential, proprietary, restricted or
otherwise as not to be disclosed generally.
(b) The provisions of this Section 3.4 shall be binding upon the
Holder's successors and permitted assigns with respect to the shares of Common
Stock issued upon the exercise of this Warrant and, until the date such shares
cease to be Registrable Securities, the shares of Common Stock when issued upon
exercise of this Warrant may bear an appropriate legend stating that the Holder
of such securities is subject to the provisions of this Section 3.4.
3.5 Amendment of Certain Agreements. The Company hereby covenants
that it shall not enter into any agreement not in effect on the date hereof
relating to indebtedness senior to any indebtedness of the Company to the
Holders, or agree to any amendment or modification of, or grant any waiver or
fail to enforce any of its rights pursuant to, any agreement relating to such
senior indebtedness if such agreement, amendment, modification, waiver or
failure has or would have any material adverse effect on any Holder of this
Warrant or Common Stock purchased or purchasable upon exercise of this Warrant
or on the rights and remedies hereunder.
3.6 Compensation; Related Party Transactions. The Company hereby
covenants that compensation (whether in cash or other perquisites) paid to
employees, including employees who are shareholders and their Affiliates (as
hereinafter defined) will be reasonable and consistent with industry norms.
Company further covenants that it will not engage in transactions with
Affiliates unless the terms of such transaction are substantially the same as,
or at least as favorable to the Company, as those prevailing at the time for
comparable transactions involving nonaffiliated parties.
3.7 California Licensing Requirements. If Heartland Bank accelerates
its Loan to the Company prior to June 30, 1998 solely as a result of an Event of
Default under section 7.16 of the Credit Agreement, then this Warrant Agreement
(and each related Warrant) will become null and void. Notwithstanding the
foregoing (but without waiving any such Event of Default or any of Heartland
Bank's rights with respect thereto) if Heartland Bank has not accelerated the
Loan as a result of such Event of Default and either the Company or its
California Subsidiary is not properly licensed and registered in California on
or before June 30, 1998, then this Warrant Agreement (and each related Warrant)
will be modified and adjusted so that the Warrant Agreement (and Warrants) in
the aggregate represent a right by the Holders hereof to purchase up to 12.5% of
the fully diluted equity of the Borrowers (as such term is defined in the Credit
Agreement) and the Company for an aggregate exercise price of $1 million.
3.8 Changes to Charter or Bylaws. The Company hereby covenants that
neither the Company's Certificate of Incorporation nor its by-laws shall be
amended or modified without the express written consent of the Holders.
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3.9 Dividends. The Company hereby covenants that it will not, and
will not permit any of its Subsidiaries to, declare or pay any dividends or
return any capital to, its stockholders or authorize or make any other
distribution, payment or delivery of property or cash to its stockholders as
such, or redeem, retire, purchase or otherwise acquire, directly or indirectly,
for any consideration, any shares of any class of its capital stock now or
hereafter outstanding (or any loans or advances to Affiliates of the Company),
or set aside any funds for any of the foregoing purposes, or permit any of its
Subsidiaries to purchase or otherwise acquire for consideration any shares of
any class of the capital stock of the Company or any other Subsidiary, as the
case may be, now or hereafter outstanding (or any options or warrants or stock
appreciation rights issued by such person or entity with respect to its capital
stock) )all of the foregoing, "Dividends"), except that (i) any Subsidiary of
the Company may pay Dividends to the Company, (ii) any Subsidiary of the Company
may pay to the Company any amounts required for the payment of any taxes payable
(x) by the Company or (y) by the Company and/or its Subsidiaries on a
consolidated combined or unitary basis and (iii) while the Company is not an
organization taxable as a corporation, for each fiscal year of the Company, the
Company may make cash dividends to its shareholders in an aggregate amount equal
to the state and federal income tax liability of such shareholders with respect
to income of the Company for such fiscal year attributable to such shareholders;
provided that no default or event of default under any other agreement with
Heartland Bank exists at the time of and after giving effect to any such
payment.
3.10 Issuance of Securities by Subsidiaries. Except with respect to
securities issued by a Subsidiary to the Company, the Company hereby covenants
that it will not cause or permit any of its Subsidiaries to issue any security
as such term is defined in Section 2(1) of the Securities Act without the
express written consent of each of the Holders.
3.11 Non-Competition; Damages. Without the prior written consent of
each Holder, neither Xxxxx Xxxxxxxxx nor Xxxx XxxXxxxxx may, for a period of two
(2) years following the termination of his or her employment with the Company,
directly or indirectly serve as a director, officer, agent, employee,
stockholder, manager, member, consultant or independent contractor or in any
other individual or representative capacity, to any Competitor (as defined in
Section 2.7 hereof) of the Company. Xxxxx Xxxxxxxxx and Xxxx XxxXxxxxx
acknowledge and recognize that a violation or threatened violation of the
covenant contained in this Section will cause such damage to the Holders and the
Company as will be irreparable and that the Holders and the Company will have no
adequate remedy at law for such violation or threatened violation. Accordingly,
Xxxxx Xxxxxxxxx and Xxxx XxxXxxxxx agree that the Holder and the Company shall
be entitled as a matter of right to seek and obtain an injunction from any court
of competent jurisdiction, restraining any further violation or threatened
violation of the covenant contained in this Section.
3.12 Preemptive Rights of Holders. In the event of any Qualified
Equity Financing (as defined in the first paragraph of this Warrant Agreement),
the Company hereby covenants that it shall grant to each Holder preemptive
rights to acquire securities in such Qualified Equity Financing in such amount
as will allow each Holder to maintain the same pro rata percentage interest in
the Company as such Holder would have if the Holder had exercised all Warrants
granted pursuant to this Warrant Agreement.
3.13 Disposition of Assets. Without the prior written consent of each
Holder, neither Company nor any of its Subsidiaries shall sell, lease, assign,
transfer or otherwise dispose of any of its assets unless such sale, lease,
assignment, transfer or other disposition of assets is in the ordinary course of
Company's business.
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ARTICLE IV
ANTIDILUTION PROVISIONS
4.1 Adjustments Generally. The Exercise Price and the number of
shares of Common Stock (or other securities or property) issuable upon exercise
of this Warrant shall be subject to adjustment from time to time upon the
occurrence of certain events, as provided in this Article IV.
4.2 Common Stock Reorganization. If the Company shall after the date
of issuance of this Warrant subdivide its outstanding shares of Common Stock
into a greater number of shares or consolidate its outstanding shares of Common
Stock into a smaller number of shares (any such event being called a "Common
Stock Reorganization"), then (a) the Exercise Price shall be adjusted, effective
immediately after the record date at which the Holders of shares of Common Stock
are determined for purposes of such Common Stock Reorganization, to a price
determined by multiplying the Exercise Price in effect immediately prior to such
record date by a fraction, the numerator of which shall be the number of shares
of Common Stock outstanding on such record date before giving effect to such
Common Stock Reorganization and the denominator of which shall be the number of
shares of Common Stock outstanding after giving effect to such Common Stock
Reorganization, and (b) the number of shares of Common Stock subject to purchase
upon exercise of this Warrant shall be adjusted, effective at such time, to a
number determined by multiplying the number of shares of Common Stock subject to
purchase immediately before such Common Stock Reorganization by a fraction, the
numerator of which shall be the number of shares outstanding after giving effect
to such Common Stock Reorganization and the denominator of which shall be the
number of shares of Common Stock outstanding immediately before such Common
Stock Reorganization.
4.3 Common Stock Distribution. (a) If the Company shall after the
date of issuance of this Warrant issue or otherwise sell or distribute any
shares of Common Stock, otherwise than pursuant to a Common Stock Reorganization
(any such event, including any event described in paragraphs (b) and (c) below,
being herein called a "Common Stock Distribution"), if such Common Stock
Distribution shall be for a consideration per share less than the Fair Market
Value per share of outstanding Common Stock of the Company on the date of such
Common Stock Distribution, or on the first date of the announcement of such
Common Stock Distribution (whichever is less), then, effective upon such Common
Stock Distribution, the number of shares of Common Stock purchasable upon
exercise of this Warrant shall be adjusted by multiplying the number of shares
of Common Stock subject to purchase upon exercise of this Warrant by a fraction,
the numerator of which shall be the total number of shares of Common Stock
outstanding (and issuable upon exercise or conversion of outstanding options,
warrants and convertible securities) immediately prior to such Common Stock
Distribution plus the number of shares of Common Stock issued (or deemed to be
issued pursuant to paragraphs (b) and (c) below) in such Common Stock
Distribution and the denominator of which shall be an amount equal to the sum of
(A) the number of shares of Common Stock outstanding (and issuable upon exercise
or conversion of outstanding options, warrants and convertible securities)
immediately prior to the Common Stock Distribution, plus (B) the number of
shares of Common Stock which the aggregate consideration, if any, received by
the Company (determined as provided below) for such Common Stock Distribution
would buy at the Fair Market Value thereof, as of the date immediately prior to
such Common Stock Distribution or as of the date immediately prior to the date
of announcement of such Common Stock Distribution (whichever is
11
less). In the event of any such adjustment, the Exercise Price for each Warrant
shall be adjusted to a number determined by dividing the Exercise Price
immediately prior to such Common Stock Distribution by the fraction used for
purposes of the aforementioned adjustment.
The provisions of this paragraph (a), including by operation of
paragraph (b) or (c) below, shall not operate to increase the Exercise Price or
to reduce the number of shares of Common Stock subject to purchase upon exercise
of this Warrant.
(b) If the Company shall after the date of issuance of this Warrant
issue, sell, distribute or otherwise grant in any manner (whether directly or by
assumption in a merger or otherwise) any rights to subscribe for or to purchase,
or any warrants or options for the purchase of, Common Stock or any stock or
securities convertible into or exchangeable for Common Stock (such rights,
warrants or options being herein called "Options" and such convertible or
exchangeable stock or securities being herein called "Convertible Securities"),
whether or not such Options or the rights to convert or exchange any such
Convertible Securities are immediately exercisable, and the price per share for
which Common Stock is issuable upon the exercise of such Options or upon
conversion or exchange of such Convertible Securities (determined by dividing
(i) the aggregate amount, if any, received or receivable by the Company as
consideration for the granting of such Options, plus the minimum aggregate
amount of additional consideration payable to the Company upon the exercise of
all such Options, plus, in the case of Options to acquire Convertible
Securities, the minimum aggregate amount of additional consideration, if any,
payable upon the issue or sale of such Convertible Securities and upon the
conversion or exchange thereof, by (ii) the total maximum number of shares of
Common Stock issuable upon the exercise of such Options or upon the conversion
or exchange of all such Convertible Securities issuable upon the exercise of
such Options) shall be less than the Fair Market Value per share of outstanding
Common Stock of the Company on the date of granting such Options or on the date
of announcement thereof (whichever is less), then for purposes of paragraph (a)
above, the total maximum number of shares of Common Stock issuable upon the
exercise of such Options or upon conversion or exchange of the total maximum
amount of such Convertible Securities issuable upon the exercise of such Options
shall be deemed to have been issued as of the date of granting of such Options
and thereafter shall be deemed to be outstanding and the Company shall be deemed
to have received as consideration such price per share, determined as provided
above, therefor. Except as otherwise provided in paragraph (d) below, no
additional adjustment of the number of shares of Common Stock purchasable upon
the exercise of this Warrant or of the Exercise Price shall be made upon the
actual exercise of such Options or upon conversion or exchange of such
Convertible Securities.
(c) If the Company shall after the date of issuance of this Warrant
issue, sell or otherwise distribute or grant (whether directly or by assumption
in a merger or otherwise) any Convertible Securities, whether or not the rights
to exchange or convert thereunder are immediately exercisable, and the price per
share for which Common Stock is issuable upon such conversion or exchange
(determined by dividing (i) the aggregate amount received or receivable by the
Company as consideration for the issue, sale or distribution of such Convertible
Securities, plus, the minimum aggregate amount of additional consideration, if
any, payable to the Company upon the conversion or exchange thereof, by (ii) the
total maximum number of shares of Common Stock issuable upon the conversion or
exchange of all such Convertible Securities) shall be less than the Fair Market
Value per share of outstanding Common Stock of the Company on the date of such
issue, sale or distribution or on the date of announcement thereof (whichever is
less), then, for purposes of paragraph (a) above, the total maximum number of
shares of Common Stock issuable upon conversion or exchange of all such
Convertible Securities shall be deemed to have been issued as of
12
the date of the issue, sale or distribution of such Convertible Securities and
thereafter shall be deemed to be outstanding and the Company shall be deemed to
have received as consideration such price per share, determined as provided
above, therefor. Except as otherwise provided in paragraph (d) below, no
additional adjustment of the number of shares of Common Stock purchasable upon
exercise of this Warrant or of the Exercise Price shall be made upon the actual
conversion or exchange of such Convertible Securities.
(d) If the purchase price provided for in any Option referred to in
paragraph (b) above, the additional consideration, if any, payable upon the
conversion or exchange of any Convertible Securities referred to in paragraph
(b) or (c) above, or the rate at which any Convertible Securities referred to in
paragraph (b) or (c) above are convertible into or exchangeable for Common Stock
shall change at any time (other than under or by reason of provisions designed
to protect against, and having the effect of protecting against, dilution upon
an event which results in a related adjustment pursuant to this Article IV), the
number of shares of Common Stock purchasable upon exercise of this Warrant and
the Exercise Price then in effect shall forthwith be readjusted (effective only
with respect to any exercise of this Warrant after such readjustment) to the
number of shares of Common Stock purchasable upon exercise of this Warrant and
the Exercise Price which would then be in effect had the adjustment made upon
the issue, sale, distribution or grant of such Options or Convertible Securities
been made based upon such changed purchase price, additional consideration or
conversion rate, as the case may be; provided, however that such readjustment
shall give effect to such change only with respect to such Options and
Convertible Securities as then remain outstanding. If, at any time after any
adjustment of the number of shares of Common Stock purchasable upon exercise of
each Warrant or the Exercise Price shall have been made pursuant to this Article
IV on the basis of the issuance of any Option or Convertible Securities or after
any new adjustments of the number of shares of Common Stock purchasable upon
exercise of each Warrant or the Exercise Price shall have been made pursuant to
this paragraph, the right of conversion, exercise or exchange in such Option or
Convertible Securities shall expire or terminate, and the right of conversion,
exercise or exchange in respect of a portion of such Option or Convertible
Securities shall not have been exercised, such previous adjustment shall be
rescinded and annulled. Thereupon, a recomputation shall be made of the effect
of such Option or Convertible Securities on the basis of treating the number of
shares of Common Stock, if any, theretofore actually issued or issuable pursuant
to the previous exercise of such right of conversion, exercise or exchange as
having been issued on the date or dates of such conversion, exercise or exchange
and for the consideration actually received and receivable therefor, and
treating any such Option or Convertible Securities which then remain outstanding
as having been granted or issued immediately after the time of any such issuance
for the consideration per share for which shares of Common Stock are issuable
under such Option or Convertible Securities; and, if, pursuant to the provisions
of this Section, a new adjustment of the number of shares of Common Stock
purchasable upon exercise of each Warrant and the Exercise Price shall be made,
the new adjustment shall supersede (effective only with respect to any exercise
of this Warrant after such readjustment) any previous adjustment.
(e) If the Company shall after the date of issuance of this Warrant
pay a dividend or make any other distribution upon any capital stock of the
Company payable in Common Stock, options or Convertible Securities, then, for
purposes of paragraph (a) above, such Common Stock, Options or Convertible
Securities, as the case may be, shall be deemed to have been issued or sold
without consideration.
(f) If any shares of Common Stock, Options or Convertible Securities
shall be issued, sold or distributed for cash, the consideration received
therefor shall be deemed to be the
13
amount received by the Company therefor net of any underwriting commissions or
concessions paid or allowed by the Company in connection therewith. If any
shares of Common Stock, Options or Convertible Securities shall be issued, sold
or distributed for a consideration other than cash, the amount of the
consideration other than cash received by the Company shall be deemed to be the
Fair Market Value of such consideration, after deduction of any expenses
incurred and any underwriting commissions or concessions paid or allowed by the
Company in connection therewith. If any shares of Common Stock Options or
Convertible Securities shall be issued in connection with any merger in which
the Company is the surviving corporation, the amount of consideration therefor
shall be deemed to be the Fair Market Value of such portion of the assets and
business of the nonsurviving corporation as shall be attributable to such Common
Stock, Options or Convertible Securities, as the case may be. If any Options
shall be issued in connection with the issue and sale of other securities of the
Company, together comprising one integral transaction in which no specific
consideration is allocated to such Options by the parties thereto, such Options
shall be deemed to have been issued for without consideration.
(g) If the Company shall take a record of the Holders of the Common
Stock for the purpose of entitling them to receive a dividend or other
distribution payable in Common Stock, Options or Convertible Securities or to
subscribe for or purchase Common Stock, Options or Convertible Securities, then
such record date shall be deemed to be the date of the issue, sale, distribution
or grant of the shares of Common Stock deemed to have been issued or sold upon
the declaration of such dividend or the making of such other distribution or the
date of the granting of such right of subscription or purchase, as the case may
be.
(h) For purposes of determining whether any adjustment is required
pursuant to this Article IV any security of the Company having rights
substantially equivalent to the Common Stock as to dividends or upon liquidation
dissolution or winding up of the Company shall be treated as if such security
were Common Stock.
4.4 Dividends. If the Company shall after the date of issuance of
this Warrant issue or distribute to all or substantially all Holders of shares
of Common Stock evidences of indebtedness, any other securities of the Company
or any property, assets or cash, and if such issuance or distribution does not
constitute a Common Stock Reorganization or a Common Stock Distribution (any
such nonexcluded event being herein called a "Dividend"), (i) the number of
shares of Common Stock subject to purchase upon exercise of this Warrant shall
be increased (but not decreased), effective immediately after the record date at
which the Holders of shares of Common Stock are determined for purposes of such
Dividend, to a number determined by multiplying the number of shares of Common
Stock subject to purchase immediately before such Dividend by a fraction, the
numerator of which shall be the Fair Market Value per share of outstanding
Common Stock on such record date and the denominator of which shall be the Fair
Market Value per share of outstanding Common Stock of the Company on such record
date less the then Fair Market Value of the evidences of indebtedness,
securities, cash, or property or other assets issued or distributed in such
Dividend with respect to one share of Common Stock (and in the case of a
repurchase of shares by the Company, determined by a calculation based on the
number of shares outstanding after giving effect to all share repurchases), and
(ii) the Exercise Price shall be decreased (but not increased) to a price
determined by multiplying the Exercise Price then in effect by a fraction, the
numerator of which shall be the number of shares of Common Stock subject to
purchase upon exercise of this Warrant immediately before such Dividend and the
denominator of which shall be the number of shares of Common Stock subject to
purchase upon exercise of this Warrant immediately after such Dividend. If after
the date of issuance of this Warrant the Company repurchases shares of Common
14
Stock for a per share consideration which exceeds the Fair Market Value (as
calculated immediately prior to such repurchase), then the number of shares of
Common Stock purchasable upon exercise of this Warrant and the Exercise Price
shall be adjusted in accordance with the foregoing provisions, as if, in lieu of
such repurchases, the Company had (I) distributed a Dividend having a Fair
Market Value equal to the Fair Market Value of all property and cash expended in
the repurchases, and (II) effected a reverse split of the Common Stock in the
proportion required to reduce the number of shares of Common Stock outstanding
from (A) the number of such shares outstanding immediately before such first
repurchase to (B) the number of such shares outstanding immediately following
all the repurchases. Notwithstanding the foregoing, while the Company is not an
organization taxable as a corporation, no adjustment shall be made as a result
of any cash Dividend paid to its shareholders in an aggregate amount equal to
the state and federal income tax liability of such shareholders with respect to
income of the Company for such fiscal year attributable to such shareholders. In
lieu of the adjustments provided for in this Section 4.4 as a result of a
Dividend, at the option of Holder, the Company shall instead pay to the Holder a
Dividend equal to the amount of consideration to which the Holder would have
been entitled if the Holder had fully exercised this Warrant immediately prior
to the record date at which the Holders of shares of Common Stock were
determined for purposes of such Dividend.
4.5 Capital Reorganization. If after the date of issuance of this
Warrant there shall be any consolidation or merger to which the Company is a
party, other than a consolidation or a merger in which the Company is a
continuing corporation and which does not result in any reclassification of, or
change (other than a Common Stock Reorganization or a change in par value) in,
outstanding shares of Common Stock, or any sale or conveyance of the property of
the Company as an entirety or substantially as an entirety (any such event being
called a "Capital Reorganization"), then, effective upon the effective date of
such Capital Reorganization, the Holder shall have the right to purchase, upon
exercise of this Warrant, the kind and amount of shares of stock and other
securities and property (including cash) which the Holder would have owned or
have been entitled to receive after such Capital Reorganization if this Warrant
had been exercised immediately prior to such Capital Reorganization, assuming
such Holder (i) is not a person with which the Company consolidated or into
which the Company merged or which merged into the Company or to which such sale
or conveyance was made, as the case may be ("constituent person"), or an
Affiliate of a constituent person and (ii) failed to exercise his rights of
election, if any, as to the kind or amount of securities, cash or other property
receivable upon such Capital Reorganization (provided that if the kind or amount
of securities, cash or other property receivable upon such Capital
Reorganization is not the same for each share of Common Stock held immediately
prior to such consolidation, merger, sale or conveyance by other than a
constituent person or an Affiliate thereof and in respect of which such rights
of election shall not have been exercised ("non-electing share"), then for the
purposes of this Section the kind and amount of shares of stock and other
securities or other property (including cash) receivable upon such Capital
Reorganization shall be deemed to be the kind and amount so receivable per share
by a plurality of the non-electing shares). As a condition to effecting any
Capital Reorganization, the Company or the successor or surviving corporation,
as the case may be, shall execute and deliver to each Holder and to the Warrant
Agency an agreement as to the Holder's rights in accordance with this Section
4.5, providing for subsequent adjustments as nearly equivalent as may be
practicable to the adjustments provided for in this Article IV. The provisions
of this Section 4.5 shall similarly apply to successive Capital Reorganizations.
4.6 Capital Reclassification. If after the date of the issuance of
this Warrant the Company shall issue by reclassification of its shares of Common
Stock other securities of the Company, then the number of shares of Common Stock
purchasable upon exercise of the Warrant
15
immediately prior to such issuance shall be adjusted so that the Holder upon
exercise hereof shall be entitled to receive the kind and number of shares of
Common Stock or other securities of the Company which it would have owned or
have been entitled to receive after such issuance, had this Warrant been
exercised immediately prior to such issuance or any record date with respect
thereto. An adjustment made pursuant to this Section 4.6 shall become effective
upon the date of the issuance retroactive to the record date with respect
thereto, if any. Such adjustment shall be made successively whenever such an
issuance is made.
4.7 Certain Other Events. If any event occurs after the date of
issuance of this Warrant as to which the foregoing provisions of this Article IV
are not strictly applicable or, if strictly applicable, would not, in the good
faith judgment of the Board of Directors of the Company, fairly protect the
purchase rights of the Warrants in accordance with the essential intent and
principles of such provisions, then such Board shall make such adjustments in
the application of such provisions, in accordance with such essential intent and
principles, as shall be reasonably necessary, in the good faith opinion of such
Board, to protect such purchase rights as aforesaid, but in no event shall any
such adjustment have the effect of increasing the Exercise Price or decreasing
the number of shares of Common Stock subject to purchase upon exercise of this
Warrant, or otherwise adversely affect the Holders.
4.8 Adjustment Rules. (a) Any adjustments pursuant to this Article IV
shall be made successively whenever an event referred to herein shall occur.
(b) If the Company shall set a record date to determine the Holders
of shares of Common Stock for purposes of a Common Stock Reorganization, Common
Stock Distribution, Dividend or Capital Reorganization, and shall legally
abandon such action prior to effecting such Action, then no adjustment shall be
made pursuant to this Article IV in respect of such action.
(c) No adjustment in the amount of shares purchasable upon exercise
of this Warrant or in the Exercise Price shall be made hereunder unless such
adjustment increases or decreases such amount or price by one percent or more,
but any such lesser adjustment shall be carried forward and shall be made at the
time and together with the next subsequent adjustment which together with any
adjustments so carried forward shall serve to adjust such amount or price by one
percent or more.
(d) No adjustment in the Exercise Price shall be made hereunder if
such adjustment would reduce the exercise price to an amount below par value of
the Common Stock, which shall initially be $.01 per share of Common Stock.
(e) No adjustment shall be made pursuant to this Article IV in
respect of (i) the issuance (or deemed issuance) or repurchase of shares of
Common Stock in connection with the exercise of the Warrants or (ii) the
issuance of shares of Common Stock in Bona Fide Initial Public Offering managed
by a nationally recognized investment banking firm.
(f) The Holder may at any time decline any adjustment which would
otherwise be made under this Article IV.
16
4.9 Proceedings Prior to Any Action Requiring Adjustment. As a
condition precedent to the taking of any action which would require an
adjustment pursuant to this Article IV, the Company shall take any action which
may be necessary, including obtaining regulatory approvals or exemptions, in
order that the Company may thereafter validly and legally issue as fully paid
and nonassessable all shares of Common Stock which the Holders of Warrants are
entitled to receive upon exercise thereof.
4.10 Notice of Adjustment. Not less than 30 nor more than 40 days
prior to the record date or effective date, as the case may be, of any action
which requires or might require an adjustment or readjustment pursuant to this
Article IV, the Company shall give notice to each Holder of such event,
describing such event in reasonable detail and specifying the record date or
effective date, as the case may be, and, if determinable, the required
adjustment and the computation thereof. It the required adjustment is not
determinable at the time of such notice, the Company shall give notice to each
Holder of such adjustment and computation promptly after such adjustment becomes
determinable. If no Holder objects to any such notice within 30 days of receipt
of the Company's notice, the adjustment will be deemed accepted by the Holders.
ARTICLE V
DEFINITIONS
The following terms, as used in this Warrant, have the following
respective meanings:
"Affiliate" of a natural person means the spouse, father, mother,
children, sisters, brothers of such person; the father, mother, brothers and
sisters of such person's spouse; and the spouse of a child, brother or sister of
such person. "Affiliate" also means: (a) any company that controls the Company
or that is under common control with the Company; (b) any Subsidiary of the
Company; (c) any company that is controlled by trust or otherwise for the
benefit of shareholders who control the Company or (d) any company in which a
majority of its directors or partners constitute a majority of the persons
holding any office with the Company.
"Appraisal Procedure" means a procedure whereby two independent
appraisers, one chosen by the Company and one by the Holder, shall mutually
agree upon the determinations then the subject of appraisal. Each party shall
deliver a notice to the other appointing its appraiser within 15 days after the
Appraisal Procedure is invoked. If within 30 days after appointment of the two
appraisers they are unable to agree upon the amount in question, a third
independent. appraiser shall be chosen within 10 days thereafter by the mutual
consent of such first two appraisers or, if such first two appraisers fail to
agree upon the appointment of a third appraiser, such appointment shall be made
by the American Arbitration Association, or any organization successor thereto,
from a panel of arbitrators having experience in the appraisal of the subject
matter to be appraised. The decision of the third appraiser so appointed and
chosen shall be given within 30 days after the selection of such third
appraiser. If three appraisers shall be appointed and the determination of one
appraiser is disparate from the middle determination by more than twice the
amount by which the other determination is disparate from the middle
determination, then the determination of such appraiser shall be excluded, the
remaining two determinations shall be averaged and such average shall be binding
and conclusive on the Company and the Holders; otherwise the average of all
three determinations shall be binding and conclusive on the Company and the
Holders. The costs of
17
conducting any Appraisal Procedure shall be borne by the Holders requesting such
Appraisal Procedure, except (a) the fees and expenses of the appraiser appointed
by the Company and any costs incurred by the Company shall be borne by the
Company and (b) if such Appraisal Procedure shall result in a determination that
is disparate by 10% or more to the benefit of the Holder from the Company's
initial determination, all costs of conducting such Appraisal Procedure shall be
borne by the Company.
"Bona Fide Initial Public Offering" shall mean the offering of common
equity securities of the Company for distribution in a widely dispersed public
offering, which public offering yields proceeds to the Company, after deduction
of offering expenses, fees and commissions, of not less than $15 million.
"Business Day" shall mean (a) if any class of Common Stock is listed or
admitted to trading on a national securities exchange, a day on which the
principal national securities exchange on which such class of Common Stock is
listed or admitted to trading is open for business or (b) if no class of Common
Stock is so listed or admitted to trading, a day on which any New York Stock
Exchange member firm is open for business.
"Capital Reorganization" shall have the meaning set forth in Section
4.5.
"Closing Price" with respect to any publicly traded security on any day
means (a) if such security is listed or admitted for trading on a national
securities exchange, the reported last sales price regular way or, if no such
reported sale occurs on such day, the average of the closing bid and asked
prices regular way on such day, in each case as reported in the principal
consolidated transaction reporting system with respect to securities listed on
the principal national securities exchange on which such class of security is
listed or admitted to trading, or (b) if such security is not listed or admitted
to trading on any national securities exchange, the last quoted sales price, or,
if not so quoted, the average of the high bid and low asked prices in the
over-the-counter market on such day as reported by NASDAQ or any comparable
system then in use or, if not so reported, as reported by any New York Stock
Exchange member firm reasonably selected by the Company for such purpose.
"Common Stock" shall have the meaning set forth in the first paragraph
of this Warrant subject to adjustment pursuant to Article IV.
"Common Stock Distribution" shall have the meaning set forth in Section
4.3(a).
"Common Stock Reorganization" shall xxxx the meaning set forth in
Section 4.2.
"Company" shall have the meaning set forth in the first paragraph of
this Warrant.
"Convertible Securities" shall have the meaning set forth in Section
4.3(b).
"Dividend" shall have the meaning set forth in Section 4.4.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
and any similar or successor federal statute, and the rules and regulations of
the Securities and Exchange Commission (or its successor) thereunder, all as the
same shall be in effect at the time.
18
"Exercise Price" shall mean $.8613
"Fair Market Value" means the fair market value of the business or
property in question, as determined in good faith by the Board of Directors of
the Company, provided, however, that the Fair Market Value of any security for
which a Closing Price is available shall be the Market Price of such security.
The Fair Market Value of the Company shall be the Fair Market Value of the
Company and its Subsidiaries as a going concern. Notwithstanding the foregoing,
if, at any date of determination of the Fair Market Value of the Company, the
Common Stock of any class shall then be publicly traded, the Fair Market Value
of the Company on such date shall be the Market Price on such date multiplied by
the number of shares of Common Stock on a fully diluted basis, giving effect to
any consideration to be paid to the Company in connection with the exercise or
conversion of any security.
"Holder" shall have the meaning set forth in the first paragraph of
this Warrant Agreement.
"Market Price" with respect to any security on any day means the
average of the daily Closing Prices of a share or unit of such security for the
10 consecutive Business Days ending on the most recent Business Day for which a
Closing Price is available; provided, however, that in the event that, in the
case of Common Stock, the Market Price is determined during a period following
the announcement by the Company of (A) a dividend or distribution of Common
Stock, or (B) any subdivision, combination or reclassification of Common Stock
and prior to the expiration of 20 Business Days after the ex-dividend date for
such dividend or distribution, or the record date for such subdivision,
combination or reclassification, then, and in each such case, the Market Price
shall be appropriately adjusted to reflect the current market price per share
equivalent of Common Stock.
"NASD" means The National Association of Securities Dealers, Inc.
"NASDAQ" means The National Association of Securities Dealers, Inc.
Automated Quotation System.
"Options" shall have the meaning set forth in Section 4.3(b).
"Registrable Security" shall have the meaning set forth in the
Registration Rights Agreement dated as of December 18, 1997 among the Company
and the Holders of the Warrants.
"Registration Rights Agreement" shall have the meaning set forth in
Section 3. 1.
"Securities Act" shall mean the Securities Act of 1933, as amended, and
any similar or successor federal statute, and the rules and regulations of the
Securities and Exchange Commission (or its successor) thereunder, all as the
same shall be in effect at the time.
"Subsidiary" means any entity in which the Company holds power to vote
more than 10% of any class of voting securities or any entity over which the
Company exercises a controlling influence.
"Warrant Agency" shall have the meaning set forth in Section 2. 1.
"Warrants" shall have the meaning set forth in the first paragraph of
this Warrant.
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ARTICLE VI
ATTENDANCE AT BOARD MEETINGS
BY DESIGNATED REPRESENTATIVES OF HOLDER;
DIRECTOR SERVICE BY GREENBERGS
6.1 Designated Representatives. Effective on the date of this
Warrant, three representatives of the Holders ("Designated Representatives")
shall have the right to attend as observers all regular and special meetings of
the Board of Directors of the Company. LSHC shall have the right to designate
two of the three Designated Representatives and Xxxxx shall have the right to
designate the third. The Company shall deliver notice of any Board of Directors
meetings to the Designated Representatives at the same time and in the same
manner that such notice is delivered to members of the Company's Board of
Directors; provided, however, that in connection with Special Meetings of the
Board of Directors, the Designated Representatives will receive notice not less
than three business days prior to such Special Meeting unless a longer notice
for Special Meetings is specified in the charter or bylaws of the Company, in
which case such longer notice period shall control.
6.2 Director Service by Greenbergs. For so long as the Holders
continue to hold this Warrant or any portion thereof, Xxxxxx and Xxxxx Xxxxxxxxx
shall serve on the Board of Directors of the Company. The Board of Directors
shall take all corporate actions necessary to assure that Xxxxxx and Xxxxx
Xxxxxxxxx are nominated and elected to serve on such Board in each term during
which the Warrants, or any Common Stock of the Company issued in connection with
exercise of the Warrants, remain outstanding.
6.3 Restrictions on Acquisitions. Xxxxx Xxxxxxxxx and Xxxx XxxXxxxxx
hereby covenant to the Holders that an acquisition or proposed acquisition by
either of them or the Affiliates of either of them (whether individually,
jointly, or in concert with third parties) of more than 5% of the equity or
convertible debt securities of any company, wherever situated, that engages in
the payday loan business or any consumer finance or check cashing business shall
be accomplished through an investment by the Company such that the Company
acquires legal and beneficial ownership of the securities acquired, unless each
of the Holders has consented in writing to waive the restriction imposed by this
Section 6.3.
ARTICLE VII
RIGHTS OF FIRST OFFER
7.1 Right of First Offer of Company. (a) In the event that, prior to
the first Qualified Equity Financing by the Company, the Holder proposes to sell
this Warrant, or any portion hereof, or any Common Stock registered or issued
pursuant to the terms hereof or the Registration Rights Agreement, the Holder
shall give the Company written notice (a "Sales Notice") of the Holder's
intention, describing the price and the general terms upon which the Holder
proposes to sell the same. The Company shall have thirty (30) days from the date
of receipt of any such Sales Notice to agree to purchase all (but not less than
all) of this Warrant and/or Common Stock offered for sale pursuant to such Sales
Notice for the price and upon the general terms specified in the Sales Notice by
giving written notice to the Holder.
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(b) In the event that the Company fails to exercise the right of
first offer as aforesaid, the Holder shall have 180 days thereafter to sell (or
enter into an agreement pursuant to which the sale of this Warrant or Common
Stock covered hereby shall be closed, if at all, within thirty (30) days from
the date of said agreement) this Warrant and/or Common Stock respecting which
the Company's rights were not exercised, at a price not less than, and upon
general terms materially no more favorable to the-purchasers thereof than,
specified in the Holder's Sales Notice. In the event the Holder has not sold
this Warrant and/or Common Stock within said 180 day period (or sold this
Warrant and/or Common Stock in accordance with the foregoing within thirty (30)
days from the date of said agreement), the Holder shall not thereafter offer for
sale this Warrant or any Common Stock without first offering the same to the
Company in the manner provided above. The failure by the Company to exercise its
right of first offer with respect to this Warrant or any Common Stock on any
occasion shall not affect its right to purchase this Warrant or any Common Stock
hereunder on any subsequent occasion.
(c) If the Company gives the Holder notice, in accordance with the
foregoing provisions of this Section 7. 1, that the Company desires to purchase
this Warrant and/or Common Stock in accordance with the terms set forth in the
Sales Notice, payment therefor shall be made by check or wire transfer within
ten (10) Business Days after giving Notice to the Holder.
7.2 Right of First Offer of Holder. (a) In the event that, prior to a
Bona Fide Initial Public Offering by the Company, Xxxxxxxxx or XxxXxxxxx (each a
"Seller") proposes to sell any Common Stock registered, issued or controlled
directly or indirectly by either of them, Seller shall give the Holders written
notice (a "Sales Notice") of the intention, describing the price and the general
terms upon which the Seller proposes to sell the same. Each Holder shall have 30
days from the date of receipt of any such Sales Notice to agree to purchase all,
or a portion, of the Common Stock offered for sale pursuant to such Sales Notice
for the price and upon the general terms specified in the Sales Notice by giving
written notice to the Seller.
(b) In the event that a Holder fails to exercise the right of first
offer as aforesaid, the Seller shall have 180 days thereafter to sell the Common
Stock at a price not less than, and upon general terms materially no more
favorable to the purchasers thereof than, specified in the Sales Notice. In the
event the Seller has not sold Common Stock within said 180 day period (or sold
Common Stock in accordance with the foregoing within 30 days from the date of
said agreement), the Seller shall not thereafter offer for sale any Common Stock
without first offering the same to the Holder in the manner provided above. The
failure by the Holder to exercise its right of first offer with respect to the
Common Stock on any occasion shall not affect its right to purchase any Common
Stock hereunder on any subsequent occasion. In no event shall Seller agree to
sell Common Stock of the Company to any Person who has not agreed in a writing
delivered to the Company prior to consummation of the sale to be bound by the
terms of this Warrant Agreement.
(c) If the Holder gives the Seller notice, in accordance with the
foregoing provisions of this Section 7.2, that the Holder desires to purchase
the Common Stock in accordance with the terms set forth in the Sales Notice,
payment therefor shall be made by check or wire transfer within ten (10)
Business Days after giving notice to the Seller.
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ARTICLE VIII
SHAREHOLDERS' AGREEMENT
8.1 Upon the exercise of all or any portion of the Warrants by the
Holder, the parties to this Warrant Agreement agree to enter into a
shareholders' agreement which shall survive and continue in effect after the
expiration of this Warrant Agreement. The shareholders' agreement Will contain
all of the rights, obligations and restrictions contained in this Warrant
Agreement and other additional provisions, including pro rata co-sale rights
among selling shareholders, customarily included in such agreements. Until such
time as the shareholders' agreement is effective, and notwithstanding the
exercise of all or any portion of the Warrants, the provisions of this Warrant
Agreement shall continue in full force and effect for the benefit of each
Holder.
ARTICLE IX
MISCELLANEOUS
9.1 Notices. All notices, requests, consents and other communications
provided for herein shall be in writing and shall be effective upon delivery in
person, faxed, or mailed by certified or registered mail, return receipt
requested, postage pre-paid, addressed as follows:
(i) if to the Company, to Easy Money Holding Corporation, 0000
Xxxxxxxxx Xxxx, Xxxxx 00 0, Xxxxxxxx Xxxxx, XX 00000, Attention: Xxxxx
Xxxxxxxxx, with a copy to Xxxx X. Xxxxxx, Esq., Harbor Place, Suite D, 000
Xxxxxx Xxxxxx, Xxxxxxx, XX 00000.
(ii) if to the initial Holder of Warrants, to Love Savings Holding
Company, 000 Xxxxx Xxxxxxx, Xxxxx 000, Xx. Xxxxx, Xxxxxxxx 00000-0000 and
to Xxxxxxx X. Xxxxx, 219 Steeplechase, Xxxxxx, Xxxxx 00000 with a copy to
Xxxxx Xxxx, LLP, 000 Xxxxxxxxxx Xxxxxx, X.X., Xxxxxxxxxx, XX 00000-0000,
Attention: Xxxxxxxx X. Xxxxxxxx; and if to any subsequent Holder, to it at
such address as may have been furnished to the Company in writing by such
Holder.
or, in any case, at such other address or addresses as shall have been furnished
in writing to the Company (in the case of a Holder) or to the Holder (in the
case of the Company) in accordance with the provisions of this paragraph.
9.2 Waivers, Amendments. No failure or delay of the Holder in
exercising any power or right hereunder shall operate as a waiver thereof, nor
shall any single or partial exercise of any such right or power, or any
abandonment or discontinuance of steps to enforce such a right or power,
preclude any other or further exercise thereof or the exercise of any other
right or power. The rights and remedies of the Holder are cumulative and not
exclusive of any rights or remedies which it would otherwise have. The
provisions of this Warrant may be amended, modified or waived with (and only
with) the written consent of the Company and each of the Holders. The provisions
of the Registration Rights Agreement may be amended, modified or waived only in
accordance with the respective provisions thereof.
Any such amendment, modification or waiver effected pursuant to this
Section or the applicable provisions of the Registration Rights Agreement shall
be binding upon the Holders of all Warrants and Warrant Shares, upon each future
Holder thereof and upon the Company. In the event
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of any such amendment, modification or waiver the Company shall give prompt
notice thereof to all Holders and, if appropriate, notation thereof shall be
made on all Warrants thereafter surrendered for registration of transfer or
exchange.
No notice or demand on the Company in any case shall entitle the
Company to any other or further notice or demand in similar or other
circumstances.
9.3 Certain Other Events. If any event occurs after the date of
issuance of this Warrant as to which the provisions of this Warrant Agreement
are not strictly applicable or, if strictly applicable, would not, in the good
faith judgment of the Company, fairly protect the rights of the Warrants or the
Holders thereof in accordance with the essential intent and principles of such
provisions, then the Company shall make such adjustments in the application of
such provisions, in accordance with such essential intent and principles, as
shall be reasonably necessary, in the good faith opinion of the Company's Board
of Directors, to protect such rights of the Warrants and the Holders thereof.
9.4 Governing Law. This Warrant shall be construed in accordance with
and governed by the laws of the State of Missouri without regard to principles
of conflicts of law.
9.5 Survival of Agreements; Representations and Warranties etc. All
representations, warranties and covenants made by the Company herein or in any
certificate or other instrument delivered by or on behalf of it in connection
with the Warrants shall be considered to have been relied upon by the Holder and
shall survive the issuance and delivery of the Warrants, regardless of any
investigation made by the Holder, and shall continue in full force and effect so
long as any Warrant is outstanding. All statements in any such certificate or
other instrument shall constitute representations and warranties hereunder.
9.6 Covenants to Bind Successor and Assigns. All covenants,
stipulations, promises and agreements in this Warrant and Warrant Agreement by
or on behalf of the Company or its shareholders shall bind any successors and
assigns, whether so expressed or not.
9.7 Severability. In case any one or more of the provisions contained
in the Registration Rights Agreement or this Warrant shall be invalid, illegal
or unenforceable in any respect, the validity, legality or enforceability of the
remaining provisions contained herein and therein shall not in any way be
affected or impaired thereby. The parties shall endeavor in good faith
negotiations to replace the invalid, illegal or unenforceable provisions with
valid provisions the economic effect of which comes as close as possible to that
of the invalid, illegal or unenforceable provisions.
9.8 Section Headings. The sections headings used herein are for
convenience of reference only, are not part of this Warrant and are not to
affect the construction of or be taken into consideration in interpreting this
Warrant.
9.9 No Impairment. The Company shall not by any action including,
without limitation, amending its certificate 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 at the terms of this Warrant,
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but will at all times in good faith assist in the carrying out of all such terms
and in the taking of all such actions as may be necessary or appropriate to
protect the rights of the Holder against impairment. Without limiting the
generality of the foregoing, the Company will (a) not, directly or indirectly,
increase the par value of any shares of Common Stock receivable upon the
exercise of this warrant above the amount payable therefor upon such exercise
immediately prior to such increase in par value, (b) 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 upon the exercise of
this warrant, and (c) use its commercially reasonable best efforts to obtain all
such authorizations exemptions or consents from any public regulatory body
having jurisdiction thereof as may be necessary to enable the Company to perform
its obligations under this Warrant.
9.10 Submission to Jurisdiction; Venue. (a) Any legal action or
proceeding with respect to this Warrant may be brought in the courts of the
State of Missouri located in St. Louis County or the City of St. Louis or of the
United States for the Eastern District of Missouri, and, by execution and
delivery of this Warrant, the Company irrevocably accepts for itself and in
respect of its property, generally and unconditionally, the non-exclusive
jurisdiction of the aforesaid courts. The Company hereby waives personal service
of any and all process upon it and consents that all such service of process may
be made by registered mail (return receipt requested) directed to the Company at
its address set forth in Section 9.1 and service so made shall be deemed to be
completed five (5) days after the same shall have been deposited in the U.S.
mails. Nothing herein shall affect the right of the Holder to serve process in
any other manner permitted by law or to commence legal proceedings or otherwise
proceed against the Company in any other jurisdiction.
(b) The Company hereby irrevocably waives any objection which it may
now or hereafter have to the laying of venue of any of the aforesaid actions or
proceedings arising out of or in connection with this Warrant brought in the
courts referred to in clause (a) above and hereby further irrevocably waives and
agrees not to plead or claim in any such court that any such action or
proceeding brought in any such court has been brought in an inconvenient forum.
9.11 Counterparts; Execution by Facsimile. This Agreement may be
executed in any number of counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the same
instrument. A facsimile of the signature of any party hereto shall be deemed an
original signature of the executing party for purposes of this Agreement.
[NEXT PAGE IS SIGNATURE PAGE]
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IN WITNESS WHEREOF, Easy Money Holding Corporation has caused this
Warrant to be executed in its corporate name by one of its officers hereunto
duly authorized, and attested by its Secretary or an Assistant Secretary, all as
of the day and year first above written.
EASY MONEY HOLDING CORPORATION
By: /s/ XXXXX XXXXXXXXX
-----------------------
President
Attest:
-----------------------------
[name]
[title]
IN WITNESS WHEREOF, the parties hereto have executed this WARRANT
AGREEMENT, all as of the day and year first written above.
EASY MONEY HOLDING CORPORATION
By: /s/ XXXXX XXXXXXXXX
-----------------------
President
LOVE SAVINGS HOLDING COMPANY
By: /s/ XXXXXX X. LOVE
-----------------------
Chairman of the Board
/s/ XXXXXXX X. XXXXX, Separate Property
---------------------------
/s/ XXXXX XXXXXXXXX
---------------------------
/s/ XXXX XXXXXXXXX
---------------------------
and with respect solely to tile provisions of Sections 6.2 and 6.3 of this
Agreement.
/s/ XXXXXX XXXXXXXXX
---------------------------
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SUBSCRIPTION NOTICE
(To be executed upon exercise of Warrant)
TO: Easy Money Holding Corporation
The undersigned hereby irrevocably elects to exercise the right to
purchase represented by the attached Warrant for, and to purchase thereunder,
________________ shares of [voting] [non-voting] Common Stock, as provided for
therein, and tenders herewith payment of the Exercise Price in full in
accordance with the terms of the attached Warrant and Warrant Agreement.
Please issue a certificate or certificates for such shares of Common
Stock in the following name or names and denominations:
If said number of shares shall not be all the shares issuable upon
exercise of the attached Warrant, a new warrant shall be issued in the name of
the undersigned for the balance remaining of such shares less any fraction of a
share paid in cash.
Dated: _________________________, 19__
-----------------------------------------
Note: The above signature should
correspond exactly with the name on the
face of the attached Warrant or with the
name of the assignee appearing in the
assignment form below.
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ASSIGNMENT
(To be executed upon assignment of Warrant)
For value received, __________________________________ hereby sells,
assigns and transfers unto __________________________ the attached Warrant,
together with all rights, title and interest therein, and does hereby
irrevocably constitute and appoint _____________________ attorney to transfer
said Warrant on the books of Easy Money Holding Corporation, with full power of
substitution in the premises.
-------------------------------------
Note: The above signature should
correspond exactly with the name on the
face of the attached Warrant.
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