EXHIBIT 10.23
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WARRANT AGREEMENT
BETWEEN
NOVASTAR FINANCIAL, INC.
and
FIRST UNION CORPORATION
DATED AS OF FEBRUARY 12, 1999
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TABLE OF CONTENTS
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Section 1. Definitions........................................................................................ 1
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Section 2. Representations, Warranties and Covenants.......................................................... 5
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Section 3. Warrant Certificates............................................................................... 8
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Section 4. Issuance and Delivery of Warrant Certificates...................................................... 9
Section 5. Registration....................................................................................... 9
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Section 6. Transfer; Registration of Transfers and Exchanges.................................................. 9
Section 7. Duration and Exercise of Warrants.................................................................. 10
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Section 8. Payment of Expenses and Taxes...................................................................... 10
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Section 9. Mutilated or Missing Warrant Certificates.......................................................... 11
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Section 10. Reservation and Issuance of Warrant Shares......................................................... 11
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Section 11. No Registration under the Act; Legend.............................................................. 11
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Section 12. Registration Rights................................................................................ 13
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Section 13. Fair Market Value.................................................................................. 25
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Section 14. Adjustment of Exercise Price and Number of Shares of Common Stock
Purchasable or Number of Warrants 25
Section 15. Fractional Warrants and Fractional Warrant Shares.................................................. 29
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Section 16. Financial Information.............................................................................. 29
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Section 17. No Rights or Liabilities as Shareholder............................................................ 29
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Section 18. Decisions of Holders............................................................................... 29
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Section 19. Notices to Holders................................................................................. 30
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Section 20. Amendments and Waivers............................................................................. 30
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Section 21. Survival........................................................................................... 31
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Section 22. Indemnification.................................................................................... 31
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Section 23. Expenses........................................................................................... 31
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Section 24. Notices............................................................................................ 31
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Section 25. Binding Effect..................................................................................... 31
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Section 26. Termination........................................................................................ 31
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Section 27. Severability....................................................................................... 32
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Section 28. Counterparts....................................................................................... 32
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Section 29. Governing Law; Remedies............................................................................ 32
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Section 30. No Impairment...................................................................................... 32
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EXHIBIT A - Company's Articles of Incorporation and By-laws
EXHIBIT B - Warrant Certificate
EXHIBIT C - Purchase Form
EXHIBIT D - Assignment Form
EXHIBIT E - Options and Convertible Securities
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WARRANT AGREEMENT
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WARRANT AGREEMENT dated as of February 12, 1999, between NOVASTAR
FINANCIAL, INC. (together with its permitted successors and assigns, the
"Company"), a Maryland corporation with its principal office at 0000 X. 00xx
Xxxxx, Xxxxxxxx, Xxxxxx 00000 and FIRST UNION CORPORATION, a Delaware
corporation ("First Union") with its principal office at One First Union Center,
000 Xxxxx Xxxxxxx Xxxxxx, Xxxxxxxxx, Xxxxx Xxxxxxxx, 00000.
W I T N E S S E T H:
WHEREAS, the Company and First Union Corporation, a subsidiary of First
Union, are parties to the Master Repurchase Agreement dated as of the date
hereof (as the same may be amended, supplemented or otherwise modified from time
to time and together with all documents and agreements executed and delivered in
connection therewith, collectively, the "Repo Documents"); and
WHEREAS, as a condition to the obligation of First Union Corporation
to enter into the Repo Documents, First Union Corporation has required, inter
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alia, that the Company shall have executed and delivered this Warrant Agreement;
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NOW, THEREFORE, in consideration of the premises and the agreements
hereinafter set forth, the parties hereto agree as follows:
Section 1. Definitions. For purposes hereof, the terms set forth below
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in this Section 1 shall have this respective meanings hereinafter assigned to
them in this Warrant Agreement:
"Act" shall mean the Securities Act of 1933, as amended, or any
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similar successor federal statute.
"Affiliate" of any Person shall mean any other Person directly or
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indirectly controlling, controlled by or under direct or indirect common control
with such Person. A Person shall be deemed to control another Person if such
first Person possesses directly or indirectly the power to direct, or cause the
direction of, the management and policies of the second Person, whether through
the ownership of voting securities, by contract or otherwise.
"Appraiser" shall mean an investment bank or other qualified
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independent appraiser of national standing.
"Blue Sky Laws" shall mean any and all applicable state securities
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laws.
"Board of Directors" shall have the same meaning as in the Company's
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Charter, and shall also include any governing body with similar functions of any
successor entity of the Company as it may then be constituted.
"Business Day" shall mean any day that is not a Saturday or Sunday or
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a day on which
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banks are required or permitted to be closed in the State of North Carolina.
"Closing Date" shall mean the date this Warrant Agreement is originally
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executed.
"Commission" shall mean the Securities and Exchange Commission or any
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entity succeeding to its functions relating to the registration of securities
and securities markets under the federal securities laws.
"Common Stock" shall mean (except where the context otherwise indicates)
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the shares of Common Stock of the Company as constituted on the Closing Date,
and any equity interests (whether in the form of common stock or otherwise) into
which such shares may thereafter be changed, by reclassification or otherwise,
and shall also include (i) equity interests (whether in the form of common stock
or otherwise) of the Company of any other class (regardless of how denominated)
which is also not preferred as to dividends or distributions of assets over any
other class of equity of the Company and which is not subject to redemption and
(ii) equity interests (whether in the form of common stock or otherwise) of any
successor or acquiring Person received by or distributed to the holders of
shares of Common Stock of Company in the circumstances contemplated by Section
14(f).
"Common Stock Certificate" shall mean a certificate evidencing one or more
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shares of Common Stock.
"Company's Charter" shall mean the Company's Articles of Incorporation and
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By-laws, true, accurate and correct copies of which are attached hereto as
Exhibit A.
"Convertible Securities" shall mean any evidences of indebtedness, shares
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of stock or other securities directly or indirectly convertible into or
exchangeable (with or without payment of additional consideration) for shares of
Common Stock.
"Current Price" with respect to any security on any day shall mean the
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closing sale price, regular way, on such day or, in case no such sale takes
place on such day, the average of the reported closing bid and asked prices,
regular way, in each case on the Nasdaq National Market or if such security is
not quoted on the Nasdaq National Market, on the principal national securities
exchange or quotation system on which such security is quoted or listed or
admitted to trading or, if not quoted or listed or admitted to trading on any
national securities exchange or quotation system, the average of the closing bid
and asked prices of such security on the over-the-counter market on the day in
question as reported by the National Quotation Bureau Incorporated, or a similar
generally accepted reporting service, or, if the security is not publicly
traded, the Fair Market Value of such security determined in accordance with
Section 13.
"Date of Exercise" shall mean, with respect to any Warrant, the first date
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on which the Company shall have received (i) the Warrant Certificate evidencing
such Warrant, together with a purchase form (in the form attached hereto as
Exhibit C) duly filled in and signed, and (ii) payment of the Exercise Price.
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"Delay Period" is defined in Section 12.
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"Demanding Parties" is defined in Section 12.
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"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended,
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or any similar successor federal statute.
"Exercise Price" shall mean the exercise price of a Warrant, which shall
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initially be $_________ per Warrant Share, subject to adjustment as provided in
Section 2(b)(vii) and Section 14.
"Expiration Date" shall mean, with respect to any Warrant, the calendar
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date corresponding to the date three years from the Closing Date.
"First Union" is defined in the introductory paragraph.
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"Five Percent Purchasers" shall have the meaning set forth in the
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Registration Rights Agreement entered into as of December 9, 1996 by and between
the Company and Xxxxxx, Xxxxxxxx & Company, Incorporated, as in effect on the
Closing Date.
"GAAP" shall mean generally accepted accounting principles as in effect in
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the United States of America from time to time.
"GMAC" is defined in Section 2.
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"GMAC Warrants" is defined in Section 2.
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"Holder" shall mean the registered holder, from time to time, of any
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Subject Security.
"Holder Representative" is defined in Section 17.
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"NASD" shall mean the National Association of Securities Dealers, Inc.
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"NASDAQ/NMS" shall mean the Nasdaq National Market.
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"1996 Warrants" shall mean the warrants to purchase shares of Common Stock
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issued pursuant to the Warrant Agreement dated as of December 9, 1996.
"Options" shall mean rights, options or warrants (other than the Warrants)
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to subscribe for, purchase or otherwise acquire either shares of Common Stock or
Convertible Securities.
"Other Registrable Securities" shall mean securities as to which the
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holders of 1996 Warrants have registration rights as of the Closing Date and as
to which other Persons are granted registration rights.
"Other Securities" shall mean any securities (other than shares of Common
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Stock) of the Company or any other Person which the Holders at any time shall be
entitled to receive, or shall have received, upon the exercise of the Warrants,
in lieu of or in addition to the Warrant Shares, or which at any time shall be
issuable or shall have been issued to holders of the Warrant Shares
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in exchange for, in addition to or in replacement of, the Warrant Shares.
"Person" shall mean an individual, an association, a partnership, a
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corporation, a limited liability company, a trust, an unincorporated
organization, a government or any other entity or organization.
"Piggyback Registration" is defined in Section 12(a).
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"Preferred Stock" shall mean shares of capital stock which are preferred as
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to dividends or distributions of assets over any other class of equity
securities of the Company.
"Prospectus" shall mean the prospectus included in any Registration
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Statement (including, without limitation, a prospectus that discloses
information previously omitted from a prospectus filed as part of an effective
Registration Statement in reliance upon Rule 430A promulgated under the
Securities Act), as amended or supplemented by any prospectus supplement, with
respect to the terms of the offering of any portion of the Registrable
Securities covered by such Registration Statement, and all other amendments and
supplements to the Prospectus, including post-effective amendments, and all
material incorporated by reference or deemed to be incorporated by reference in
such Prospectus.
"Public Offering" shall mean an offering and/or sale to the public of
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shares of Common Stock, which offering and sale are registered under the Act.
"Register" shall mean the register for the registration and registration of
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transfer of the Warrants, which shall be maintained by the Company at its
principal office, or such other place as the Company may specify in writing to
the Persons named therein as Holders of the Warrants.
"Registrable Securities" is defined in Section 12(a).
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"Registration Statement" shall mean any registration statement of the
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Company that covers any of the Registrable Securities pursuant to the provisions
of this Warrant Agreement, including the Prospectus, amendments and supplements
to such Registration Statement, including post-effective amendments, all
exhibits and all material incorporated by reference or deemed to be incorporated
by reference in such Registration Statement.
"Repo Documents" is defined in the first Whereas clause.
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"Representative" is defined in Section 13.
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"Shelf Registration Statement" shall have the meaning provided in Section
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12 (c) hereof.
"Supplemental Shelf Registration Statement" shall have the meaning provided
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in Section 12 (c) hereof.
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"Subject Securities" shall mean, without duplication if the context
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requires, the Warrants issued hereunder and the Warrant Shares and Other
Securities issued upon exercise of such Warrants.
"Trading Day" shall mean (x) if the applicable security is quoted on the
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Nasdaq National Market, a day on which a trade may be made on the Nasdaq
National Market, (y) if the applicable security is listed or admitted for
trading on a national securities exchange, a day on which such national
securities exchange is open for business or (z) if the applicable security is
not otherwise listed, admitted for trading or quoted, any day other than a
Saturday or Sunday or a day on which banking institutions in the State of New
York are authorized or obligated by law or executive order to close.
"Warrant" shall mean a Warrant issued to First Union pursuant hereto and
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all Warrants issued upon transfer, division or combination of, or in
substitution for, any thereof.
"Warrant Certificate" shall mean a certificate substantially in the form of
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Exhibit B evidencing one or more Warrants.
"Warrant Shares" shall mean the shares of Common Stock issuable, from time
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to time, upon exercise of the Warrants.
Section 2. Representations, Warranties and Covenants . (a) The Company
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represents and warrants to the Holder that:
(i) The Company has the power to execute and deliver this Warrant
Agreement and has the power to issue the Warrant Shares and to perform its
obligations under this Warrant Agreement and the Warrant Certificates.
(ii) The execution, delivery and performance by the Company of this
Warrant Agreement and the issuance of Warrant Shares upon the exercise of
the Warrants have been duly authorized by all necessary action, and do not
(A) violate any provision of applicable law or regulation or of the
Company's Charter or of any order, writ, injunction or decree of any court
or governmental authority applicable to the Company, or (B) result in a
breach of, or constitute a default under, or require any consent under, any
contractual obligation to which the Company is a party or by which the
Company is bound or affected. The Company has taken sufficient corporate
action to reserve a sufficient number of shares of authorized but unissued
Common Stock in connection with the prospective issuance of the Warrant
Shares.
(iii) This Warrant Agreement has been duly executed and delivered
by the Company and constitutes a legal, valid, binding and enforceable
obligation of the Company, except as limited by bankruptcy, insolvency or
other similar laws now or hereafter in effect affecting the enforcement of
creditors' rights and by the application of equitable principles. The
Warrants and the Warrant Certificates constitute legal, valid, binding and
enforceable obligations of the Company, except as limited by bankruptcy,
insolvency or other similar laws now or hereafter in effect affecting the
enforcement of creditors' rights and by the application of equitable
principles, and the Warrant Shares,
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when issued upon exercise of the Warrants, will be duly authorized, validly
issued, fully paid and nonassessable and be free from all taxes, liens and
charges with respect to the issuance thereof (other than any liens or
charges resulting from the Holder's actions).
(iv) The Company's authorized shares of Common Stock are as
described in the Company's Charter. A total of 8,130,069 shares of Common
Stock were issued and outstanding on February __, 1999.
(v) Except as set forth on Exhibit E, there are no Options,
subscriptions or similar rights to acquire from the Company, or agreements
or other obligations by the Company, absolute or contingent, to issue, sell
or register shares of Common Stock, whether by Public Offering or on
conversion or exchange of Convertible Securities or otherwise.
(vi) No holder of shares of Common Stock of the Company has any
preemptive rights to subscribe for or to purchase any Warrants or Warrant
Shares under the Company's Charter, any agreement to which the Company is a
party or otherwise bound or the corporation law of the Company's
jurisdiction of organization.
(vii) Assuming the accuracy of First Union's representations as
set forth in Section 2(c), no consent, approval, authorization or other
order of any court, regulatory body, administrative agency or other
governmental body is required to be obtained by the Company in connection
with the execution of this Warrant Agreement and the transactions
contemplated hereby, including the valid issuance of the Subject
Securities.
(viii) Assuming the accuracy of First Union's representations as
set forth in Section 2(c), it is not necessary in connection with the
offer, issuance or sale to First Union of the Subject Securities to
register the Subject Securities under the Act or any Blue Sky Law. The
Company will not take or authorize any action which may cause the issuance
or sale of the Subject Securities to be subject to any such registration,
except as contemplated by Section 12.
(ix) No legal proceeding or investigation is pending or to the
best knowledge of the Company threatened before any court, arbitrator or
administrative or governmental authority, bureau or agency to restrain or
prohibit the Company from performing this Warrant Agreement or the
transactions contemplated hereby.
(x) No representation or warranty made by the Company in this
Warrant Agreement, or in any schedule, written statement or certificate
furnished to the Holder in connection with the transactions contemplated by
this Warrant Agreement, contains any untrue statement of a material fact or
omits to state a material fact necessary to make the statements contained
herein and therein not false or misleading.
(b) The Company hereby covenants for so long as this Warrant Agreement
remains in effect that:
(i) The Company will not (and will cause any Affiliate not to)
take any
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action, including, without limitation, amending the Company's Charter,
reorganizing, consolidating, merging, dissolving, transferring assets or
issuing or selling securities or take any other voluntary action, to avoid,
or seek to avoid, observing or performing any of the terms, or complying
with the essential intent and principles, of this Warrant Agreement or the
Subject Securities, and 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 Holders against
dilution or impairment to the extent contemplated by the terms hereof. In
furtherance and not in limitation of the foregoing, the Company shall not
(1) enter into any agreement with respect to its securities that is
inconsistent with the rights granted to Holders of Subject Securities in
this Warrant Agreement or otherwise conflicts with the provisions hereof or
(2) increase the par value of any Warrant Shares or other Securities above
the Exercise Price then in effect. Before taking any action that would
cause an adjustment pursuant to Section 14, the Company will take all
corporate action that, in the opinion of its counsel (which may be counsel
employed by the Company), may be necessary in order that the Company may
validly and legally issue fully paid and nonassessable Warrant Shares at
the then applicable Exercise Price.
(ii) The Company will take all actions necessary or appropriate
to be taken by it to validly and legally issue fully paid and nonassessable
shares of Common Stock upon exercise of the Warrants and will use 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 Agreement.
In respect of the issuance of the Warrants to the Holders, the exercise
thereof by the Holders and the resulting issuance of Subject Securities,
the Company shall not set off, recoup, claim, xxxxx, withhold or defer any
property or amount for any reason whatsoever.
(iii) At all times during the term of this Warrant Agreement, the
Company shall retain a nationally recognized accounting firm as its
auditor.
(iv) (A) The Company will file with the Commission such
information as the Commission may require under Section 13 or 15(d) of the
Exchange Act, as applicable, and shall use its best efforts to take all
action as may be required as a condition to the availability of Rule 144 or
Rule 144A under the Act (or any successor or similar exemptive rules
hereafter in effect) and (B) the Company shall (1) furnish to any Holder of
Subject Securities upon request a written statement executed by the Company
as to the steps it has taken to comply with the current public information
requirements of Rule 144 or Rule 144A or such successor rules and (2) make
available to Holders of Subject Securities such reports, documents and
information as such Holders reasonably request to enable such Holders to
make sales of Subject Securities pursuant to such rules. If the Company
ceases to be subject to Section 13 or 15(d) of the Exchange Act, the
Company shall make available to the Holder of Subject Securities in
connection with any sale thereof, the information required by Rule
144A(d)(4) under the Act in order to permit resales of Subject Securities
pursuant to Rule 144A.
(v) If the Company becomes eligible to use Form S-3 under the Act
or a
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comparable successor form, the Company shall use its best efforts to
continue to qualify at all times for registration of its shares of Common
Stock on Form S-3 or such successor form.
(vi) In the event that any of the terms of the warrant agreement
or the warrants to be issued by the Company to GMAC/Residential Funding
Corporation or any of its Affiliates (collectively, "GMAC"), other than (1)
the initial exercise price, (2) the term of the warrant agreement, (3) the
grant of tag-along rights to GMAC, and (4) the number of warrants to be
issued, are more favorable to GMAC than the terms hereof are to the
Holders, then a majority in interest of the Holders may prepare, and the
Company agrees to sign, an amendment to this Warrant Agreement making such
changes as shall be necessary in order to make the terms of this Warrant
Agreement at least as favorable as those set forth in the Warrant Agreement
or warrants to be issued to GMAC ("GMAC Warrants").
(vii) In the event that the Company reduces the exercise price of
the 1996 Warrants to an amount below the Exercise Price of the Warrants,
the Exercise Price of the Warrants shall be reduced concurrently to such
lower price.
(c) First Union hereby represents and warrants to and agrees with the
Company that:
(i) First Union is acquiring and will acquire the Subject
Securities for its own account for investment and not with a view to any
distribution thereof that might cause a violation of the Act or any rules
or regulations thereunder; provided, however that subject to Section 6
hereof, the disposition of the Subject Securities shall be at all times
within the sole discretion of the Holders.
(ii) First Union has had an opportunity to ask questions of the
principal officers and representatives of the Company and to obtain any
additional information necessary to permit an evaluation of the benefits
and risks associated with the investment made hereby.
(iii) First Union has had sufficient experience in business,
financial and investment matters to evaluate the merits and risks involved
in the investment made hereby and is able to bear the economic risk of such
investment for an indefinite period of time.
(d) In addition to any reduction in the Exercise Price required by
Sections 2(b)(vii) and 14, the Company and First Union hereby agree that
the Company shall have the right to reduce the Exercise Price at any time,
in its sole discretion, for such limited periods as it may from time to
time determine, upon no less than 10 days and no more than 60 days prior
written notice to Holders, provided that no such reduction may be effected
without the approval of a majority of Company's Board of Directors.
Section 3. Warrant Certificates. The Warrant Certificates shall be in
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registered form only and shall be substantially in the form of Exhibit B hereto,
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with such changes therein as may be required from time to time to reflect any
adjustments made pursuant to Section 14 hereof.
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The Warrant Certificates may have such letters, numbers or other marks of
identification or designation and such legends, summaries or endorsements
printed, lithographed or engraved thereon as the Company may deem appropriate
and as are not inconsistent with the provisions of this Warrant Agreement, or as
may be required to comply with any law, or with any rule or regulation made
pursuant thereto, or with any rule or regulation of any stock exchange on which
the Common Stock or the Warrants may be listed, or any inter-dealer quotation
system upon which the Common Stock or the Warrants may be quoted. Warrant
Certificates shall be executed on behalf of the Company by its Chairman of the
Board, President or any Executive or Senior Vice President, and attested by its
Secretary or an Assistant Secretary. The signature of any of such officers may
be manual or facsimile. Warrant Certificates bearing the manual or facsimile
signatures of individuals who were at any time the proper officers of the
Company shall bind the Company, notwithstanding that any of such individuals
shall have ceased to hold such offices prior to the delivery of such Warrant
Certificates or did not hold such offices on the date of this Warrant Agreement.
Section 4. Issuance and Delivery of Warrant Certificates. The Company
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hereby agrees to issue and deliver on the Closing Date to First Union 350,000
Warrants registered in the name of First Union, and shall deliver to First Union
two (2) separate Warrant Certificates in the amount of 230,000 Warrants and
120,000 Warrants, evidencing such Warrants. First Union hereby agrees to
deliver on the Closing Date to the Company for cancellation certificates
representing 186,667 1996 Warrants.
Section 5. Registration. The Warrants shall be registered in the name(s)
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of the recordholder(s) thereof from time to time. The Company may deem and treat
the registered Holder(s) of the Warrants as the absolute owner(s) thereof
(notwithstanding any notation of ownership or other writing on the Warrant
Certificates made by anyone) for the purpose of any exercise thereof or any
distribution to the Holder(s) thereof, and for all other purposes.
Section 6. Transfer; Registration of Transfers and Exchanges.
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(a) Subject to compliance with U.S. securities laws, the Warrants and all
rights thereunder are fully transferable in whole or in part and from time to
time to any Person. The Company shall register the transfer of any outstanding
Warrants made in accordance with the terms hereof and applicable law upon the
Register, upon surrender of the Warrant Certificate(s) to the Company's
principal office, accompanied by a written instrument of transfer substantially
in the form attached as Exhibit D, duly executed by the registered Holder(s)
thereof or by the duly appointed legal representative thereof. Upon any such
registration of transfer, new Warrant Certificate(s) evidencing such transferred
Warrants shall be issued to the transferee(s) and the surrendered Warrant
Certificate(s) shall be cancelled.
(b) Warrant Certificates may be exchanged at the option of the Holder
thereof, when surrendered to the Company at its principal office, for other
Warrant Certificates of like tenor
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and representing in the aggregate a like number of Warrants. Warrant
Certificates surrendered for exchange shall be cancelled.
Section 7. Duration and Exercise of Warrants.
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(a) The Warrants shall be exercisable by the Holder thereof on any Business
Day on or after the Closing Date and prior to the close of business on the
Expiration Date.
(b) Subject to the provisions of this Warrant Agreement, the Holder of each
Warrant shall have the right to purchase from the Company (and the Company shall
issue and sell to such Holder of a Warrant) one fully paid and nonassessable
share of Common Stock per Warrant held upon (i) surrender of the Warrant
Certificate evidencing such Warrant, with a purchase form substantially in the
form attached as Exhibit C duly filled in and signed, to the Company at its
principal office or at such other address as the Company may specify in writing
to the then registered Holders, and (ii) payment of the Exercise Price. Payment
of the Warrant Price shall be made at the option of the Holder by (i) cash or
certified or official bank check, (ii) by surrendering additional Warrants or
shares of Common Stock for cancellation to the extent the Company may lawfully
accept shares of Common Stock, with the value of such shares of Common Stock for
such purpose to equal the average Current Market Price of the Common Stock
during the 10 Trading Days immediately preceding the date of surrender and the
value of the Warrants to equal the difference between the aggregate value of the
Warrant Shares issuable on the exercise of such Warrants, calculated as set
forth in this clause 7(b)(ii), and the Exercise Price, or (iii) any combination
thereof, duly endorsed by or accompanied by appropriate instruments of transfer
duly executed by Holder or by Holder's attorney duly authorized in writing.
(c) Upon such surrender of the Warrant Certificate evidencing any Warrants
and payment of the Exercise Price, the Company shall, as promptly as
practicable, and in any event within five Business Days thereafter, issue and
cause to be delivered to, or upon the written order of, the Holder of such
Warrants and in such name or names as such Holder may designate, a certificate
for the Warrant Shares issued upon such exercise of such Warrants. Any Person(s)
so designated to be named therein shall be deemed to have become the Holder of
record of the Warrant Shares as of the Date of Exercise of such Warrants. The
stock certificate or certificates so delivered shall be, to the extent possible,
in such denomination or denominations as such Holder shall request.
(d) The Warrants evidenced by a Warrant Certificate are exercisable, from
time to time, either in whole or in part for any number of Warrant Shares as are
evidenced by the Warrant Certificate. If fewer than all of the Warrants
evidenced by a Warrant Certificate are exercised at any time, a new Warrant
Certificate or Certificates shall be issued as promptly as practicable (and in
any event within five Business Days), at the Company's expense, for the
remaining number of Warrants evidenced by such Warrant Certificate. All Warrant
Certificates surrendered upon exercise of Warrants shall be cancelled.
Section 8. Payment of Expenses and Taxes. The Company shall pay all
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expenses in connection with, and all taxes and other governmental charges that
may be imposed with respect to, the issue or delivery of Warrant Shares, unless
such tax or charge is imposed by law upon the
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Holder, in which case such taxes or charges shall be paid by the Holder. The
Company shall not be required, however, to pay any tax or other charge imposed
in connection with any transfer involved in the issue of any certificate for
Warrant Shares in any name other than that of the Holder.
Section 9. Mutilated or Missing Warrant Certificates . Upon receipt by the
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Company from any Holder of evidence reasonably satisfactory to it of the loss,
theft, destruction or mutilation of a Warrant Certificate and indemnity
reasonably satisfactory to it (it being understood that the written agreement of
First Union, without posting of a bond, shall be sufficient indemnity), and in
case of mutilation upon surrender and cancellation of the mutilated Warrant
Certificate, the Company will execute and deliver in lieu thereof a new Warrant
Certificate of like tenor to such Holder; provided, in the case of mutilation,
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no indemnity shall be required if the mutilated Warrant Certificate in
identifiable form is surrendered to Company for cancellation.
Section 10. Reservation and Issuance of Warrant Shares . The Company will
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at all times authorize, reserve and have available, free from preemptive rights,
solely for the purpose of enabling it to satisfy any obligation to issue and
deliver Warrant Shares upon the exercise of the Warrants, the number of shares
of Common Stock that is equal to the total number of Warrant Shares issuable
upon the exercise of the Warrants, as such number shall vary from time to time
in accordance with Section 14, and, if necessary, will amend its Certificate of
Incorporation to provide sufficient reserves of shares of Common Stock issuable
upon exercise of the Warrants. The transfer agent for the Common Stock and
every subsequent transfer agent for any shares of the Company's capital stock
issuable upon the exercise of the Warrants shall be irrevocably authorized and
directed at all times to reserve the maximum number of authorized shares as
shall be required for such purpose. The Company shall keep a copy of this
Warrant Agreement on file with the transfer agent for the Common Stock and with
every subsequent transfer agent for any shares of the Company's capital stock
issuable upon the exercise of the Warrants.
Section 11. No Registration under the Act; Legend . None of the Subject
-------------------------------------
Securities has been registered under the Act. In agreeing to issue the Warrants,
the Company has relied upon the exemption from registration provided by Section
4(2) of the Act on the ground that Warrants are to be issued in transactions by
an issuer not involving any Public Offering.
A copy of this Warrant Agreement shall be filed with the Secretary of the
Company and kept at its principal office. The Warrant Certificates shall
contain a legend substantially in the following form:
THE WARRANTS REPRESENTED BY THIS CERTIFICATE AND THE SHARES OF COMMON STOCK
ISSUABLE PURSUANT TO THE TERMS HEREOF HAVE THE BENEFIT AND ARE SUBJECT TO THE
TERMS AND CONDITIONS SPECIFIED IN THE WARRANT AGREEMENT, DATED AS OF FEBRUARY
12, 1999, BETWEEN THE COMPANY AND THE INITIAL HOLDER OF THE WARRANTS THEREIN
NAMED, AS FROM TIME TO TIME AMENDED, A COMPLETE AND CORRECT COPY OF WHICH IS
AVAILABLE FOR INSPECTION AT THE PRINCIPAL OFFICE OF THE COMPANY AND WILL BE
FURNISHED TO THE HOLDER OF THIS WARRANT UPON WRITTEN REQUEST AND WITHOUT CHARGE.
11
THE WARRANTS AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF THE
WARRANTS HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "ACT"), OR ANY STATE OR OTHER SECURITIES LAW AND MAY NOT BE TRANSFERRED
EXCEPT (i) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR (ii)
UPON FIRST FURNISHING TO THE COMPANY AN OPINION OF COUNSEL THAT SUCH TRANSFER IS
NOT IN VIOLATION OF THE REGISTRATION REQUIREMENTS OF THE ACT.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO RESTRICTIONS ON
OWNERSHIP AND TRANSFER FOR THE PURPOSE OF MAINTAINING THE COMPANY'S STATUS AS A
REAL ESTATE INVESTMENT TRUST UNDER THE INTERNAL REVENUE CODE OF 1986, AS
AMENDED, INCLUDING A RESTRICTION ON OWNERSHIP OF EQUITY STOCK IN EXCESS OF 9.8%
(SUBJECT TO CERTAIN EXCEPTIONS) OF THE OUTSTANDING EQUITY STOCK OF THE COMPANY,
ALL AS SET FORTH IN THE COMPANY'S ARTICLES OF INCORPORATION, AS THE SAME MAY BE
AMENDED FROM TIME TO TIME, A COPY OF WHICH WILL BE SENT WITHOUT CHARGE TO EACH
STOCKHOLDER WHO SO REQUESTS. SUCH REQUEST MAY BE MADE TO THE SECRETARY OF THE
COMPANY.
IN ADDITION, THE COMPANY WILL FURNISH TO ANY STOCKHOLDER ON REQUEST AND
WITHOUT CHARGE A FULL STATEMENT OR SUMMARY OF THE DESIGNATIONS AND PREFERENCES,
CONVERSION AND OTHER RIGHTS, VOTING POWERS, RESTRICTIONS, LIMITATIONS AS TO
DIVIDENDS, QUALIFICATIONS AND TERMS AND CONDITIONS OF REDEMPTION OF THE STOCK OF
EACH CLASS WHICH THE COMPANY IS AUTHORIZED TO ISSUE AND THE DIFFERENCES IN THE
RELATIVE RIGHTS AND PREFERENCES BETWEEN SUCH SHARES OF EACH SERIES, IF ANY, TO
THE EXTENT THEY HAVE BEEN SET, AND OF THE AUTHORITY OF THE BOARD OF DIRECTORS TO
SET THE RELATIVE RIGHTS AND PREFERENCES OF SUBSEQUENT SERIES. SUCH REQUEST MAY
BE MADE TO THE SECRETARY OF THE COMPANY.
The Common Stock Certificates shall contain a legend substantially in the
following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY STATE OR OTHER
SECURITIES LAW AND MAY NOT BE TRANSFERRED EXCEPT (i) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE ACT OR (ii) UPON FIRST FURNISHING TO THE
COMPANY AN OPINION OF COUNSEL THAT SUCH TRANSFER IS NOT IN VIOLATION OF THE
REGISTRATION REQUIREMENTS OF THE ACT.
12
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO RESTRICTIONS
ON OWNERSHIP AND TRANSFER FOR THE PURPOSE OF MAINTAINING THE COMPANY'S STATUS AS
A REAL ESTATE INVESTMENT TRUST UNDER THE INTERNAL REVENUE CODE OF 1986, AS
AMENDED, INCLUDING A RESTRICTION ON OWNERSHIP OF EQUITY STOCK IN EXCESS OF 9.8%
(SUBJECT TO CERTAIN EXCEPTIONS) OF THE OUTSTANDING EQUITY STOCK OF THE COMPANY,
ALL AS SET FORTH IN THE COMPANY'S ARTICLES OF INCORPORATION, AS THE SAME MAY BE
AMENDED FROM TIME TO TIME, A COPY OF WHICH WILL BE SENT WITHOUT CHARGE TO EACH
STOCKHOLDER WHO SO REQUESTS. SUCH REQUEST MAY BE MADE TO THE SECRETARY OF THE
COMPANY.
IN ADDITION, THE COMPANY WILL FURNISH TO ANY STOCKHOLDER ON REQUEST AND
WITHOUT CHARGE A FULL STATEMENT OR SUMMARY OF THE DESIGNATIONS AND PREFERENCES,
CONVERSION AND OTHER RIGHTS, VOTING POWERS, RESTRICTIONS, LIMITATIONS AS TO
DIVIDENDS, QUALIFICATIONS AND TERMS AND CONDITIONS OF REDEMPTION OF THE STOCK OF
EACH CLASS WHICH THE COMPANY IS AUTHORIZED TO ISSUE AND THE DIFFERENCES IN THE
RELATIVE RIGHTS AND PREFERENCES BETWEEN SUCH SHARES OF EACH SERIES, IF ANY, TO
THE EXTENT THEY HAVE BEEN SET, AND OF THE AUTHORITY OF THE BOARD OF DIRECTORS TO
SET THE RELATIVE RIGHTS AND PREFERENCES OF SUBSEQUENT SERIES. SUCH REQUEST MAY
BE MADE TO THE SECRETARY OF THE COMPANY.
Any opinion of counsel obtained in connection with a transfer or delegending of
the Subject Securities will be at the expense of the relevant Holder. At such
time as a legend stated above is no longer applicable for any reason, including
without limitation the operation of Section 12 or Rule 144(k), the Company will,
upon receipt of an opinion of counsel to the relevant Holder to such effect,
issue new Warrant Certificates or Common Stock Certificates which do not contain
such legend.
Section 12. Registration Rights.
-------------------
(a) Piggyback Registration
----------------------
(i) If (and on each occasion that) the Company proposes to register
any of its securities under the Act in connection with a Public Offering or
effect an underwritten Public Offering under an effective shelf
registration statement, either for the Company's own account and/or for the
account of any of its securityholders, other than any such registration
described in the next to last sentence of clause (ii) below (each such
registration being herein called a Piggyback Registration), then the
Company will give written notice to all Holders who then hold Registrable
Securities (as hereinafter defined) of the Company's intention to effect
such Piggyback Registration not later than the earlier to occur of (A) 30
days prior to the anticipated initial filing date of such Piggyback
Registration if such registration is on Form S-3 and (B) 45 days prior to
such date if the registration is on any other form.
13
(ii) Subject to the provisions contained in Section 12(b) and in the
next to last sentence of this clause (ii), in connection with any
registration subject to the provisions of this Section 12, if within 20
days after the date of the Company notice pursuant to clause (i) above
Holders of Registrable Securities request the inclusion of some or all of
the Registrable Securities owned by them in such registration (in the form
of shares of Common Stock to be obtained upon exercise of the Warrants then
held by them), the Company will use best efforts to effect the registration
under the Act of all Registrable Securities which such Holders request to
be registered. Holders of Registrable Securities shall be permitted to
withdraw all or any part of the Registrable Securities of such Holders from
any Piggyback Registration at any time prior to the final filing (which has
been made by and in the discretion of the Company) of such Piggyback
Registration, and the Company shall have the right to postpone or withdraw
any registration without obligation to any Holder (other than for payment
of any reasonable expense incurred by the Holders). Notwithstanding
anything herein to the contrary, the Company will not be obligated or
required to include any Registrable Securities in any registration effected
on Form S-4; on Form S-8 solely to implement an employee benefit plan
(including any option plan) or a transaction of the type to which Rule 145
of the Commission or any successor provision is applicable; or in
connection with a dividend reinvestment or direct stock purchase plan for
the benefit of the Company's stockholders. The term "Registrable
-----------
Securities" shall mean the Warrants, any shares of Common Stock or Other
----------
Securities issuable or issued upon exercise of the Warrants, any shares of
Common Stock or Other Securities of the Company issued as a dividend or
other distribution with respect to, or in exchange or in replacement of
such shares of Common Stock.
(b) Allocation on Piggyback Registrations. In connection with an
-------------------------------------
underwritten Public Offering, if the managing underwriter or underwriters in
connection with a Piggyback Registration shall advise the Company in writing
that, in the reasonable opinion of such managing underwriter or underwriters,
the inclusion of all Registrable Securities for which registration is requested
pursuant to Section 12(a) hereof would materially and adversely affect the
success of such offering, then subject to the rights, if any, of the Five
Percent Purchasers, registration for the Registrable Securities shall be cut
back such that (i) no Holder of Registrable Securities shall be entitled to
participate in such underwritten Public Offering unless all shares of Common
Stock proposed to be sold by the Company for its own account or for the account
of the parties for which the underwritten Public Offering was commenced as a
result of the exercise of demand registration rights ("Demanding Parties") have
been included in such underwritten Public Offering, and (ii) after the Company
or the Demanding Party has included its own shares of Common Stock, the Holders,
the holders of 1996 Warrants and the holders of GMAC Warrants (if not a
Demanding Party) and any other owners of Other Registrable Securities shall be
entitled to include their Registrable Securities and Other Registrable
Securities in an amount up to the amount that such managing underwriter or
underwriters advise may be included therein (as allocated among the Holders, the
holders of 1996 Warrants, the holders of GMAC Warrants and such other owners of
Registrable Securities pro rata on the basis of the number of securities
requested to be included therein by each such Holder or holder).
14
(c) Demand Registration.
-------------------
(i) The Company shall cause to be filed with the Commission as promptly
as practicable, but in no event more than three (3) months following the
Closing Date, a shelf Registration Statement pursuant to Rule 415 under the
Securities Act (the "Shelf Registration Statement") on Form S-11 (or other
appropriate form, such as Form S-3 after having established eligibility
therefor) to cover sales of the Registrable Securities. In connection with
the Shelf Registration Statement, the Company shall also register the offer
and sale of the Warrant Shares issuable upon exercise of the Warrants as a
primary registration. The Company shall use its best efforts to cause such
Shelf Registration Statement to be declared effective by the Commission as
soon as practicable thereafter. The Company shall use its best efforts to
keep such Shelf Registration Statement continuously effective until the
earlier to occur of three (3) years following the Closing Date or such time
as, in the written opinion of counsel to the Company, such registration is
not required for the unrestricted resale under Rule 144 (k) of Registrable
Securities entitled to registration rights under this Agreement. If Holders
of a majority of the Registrable Securities to be registered for resale in
the Shelf Registration Statement so elect, an offering of Registrable
Securities pursuant to the Shelf Registration Statement may be effected in
the form of an underwritten offering. Upon the receipt of a notice of
election by a majority of the Registrable Securities to effect an
underwritten offering, the Company will notify in writing all Holders whose
names are not included in such notice and such non-electing Holders may,
within five (5) business days of receipt of such notice, elect to be
included with, and treated as, an electing Holder. If the managing
underwriter or underwriters advises the Company and the Holders of such
Registrable Securities that in its opinion the amount of Registrable
Securities proposed to be sold in such offering exceeds the amount of
Registrable Securities which can be sold in such offering, there shall be
included in such underwritten offering the amount of such Registrable
Securities which in the opinion of such underwriter(s) can be sold, and
such amount or number of shares of such Registrable Securities shall be
allocated pro rata among the Holders electing to participate in such
underwritten offering.
(ii) In addition to their rights under Sections 12(a), (b) and (c)(i)
hereof following the expiration of the Shelf Registration Statement,
Holders collectively holding at least 25% of the then outstanding
Registrable Securities shall have the right to request and have effected
registrations of Registrable Securities for a Public Offering of
Registrable Securities unless, in the written opinion of counsel to the
Company, which opinion is reasonably acceptable to such Holders, such
registration is not necessary for such Holders to sell their Registrable
Securities in the manner contemplated in compliance with applicable
securities laws. Such requests shall be in writing and shall state the
number of Registrable Securities to be disposed of and the intended method
of disposition of such Registrable Securities by such Holders. The Company
shall give notice to all of the Holders of Registrable Securities of the
receipt of a request for registration pursuant to this Section 12(c)(ii)
and shall provide a reasonable opportunity for such Persons to participate
in such a registration provided they elect to do so in writing to the
Company within 15 days after the date of the Company's notice. Subject to
the foregoing, the Company will use its best efforts to effect promptly the
registration of all Registrable Securities to the extent requested by the
Holder or Holders thereof, and to
15
keep such registration effective for 36 months or until all such Holder's
Registrable Securities registered thereunder are sold, whichever is
shorter. If so requested by any Holder in connection with a registration
under this Section 12(c)(ii), and if the Company is then eligible to use
Form S-11 or Form S-3, the Company shall take such steps as are required to
register such Holder's Registrable Securities for sale on a delayed or
continuous basis (the "Supplemental Shelf Registration") under Rule 415 of
the Act or any successor provision (if applicable).
(iii) The Company further agrees to use its best efforts to prevent
the happening of any event that would cause a Registration Statement to
contain a material misstatement or omission or to be not effective and
usable for resale of the Registrable Securities during the period that such
Registration Statement is required to be effective and usable. Upon the
occurrence of any event that would cause a Registration Statement (1) to
contain a material misstatement or omission, or (2) to be not effective and
usable for resale of Registrable Securities during the period that such
Registration Statement is required to be effective and usable, the Company
shall as promptly as reasonably practicable file an amendment to the
Registration Statement, in the case of clause (1) immediately above,
correcting any such misstatement or omission, and in the case of either
clause (1) or (2) immediately above, use its best efforts to cause such
amendment to be declared effective and such Registration Statement to
become usable as soon as reasonably practicable thereafter. If requested
by the majority in interest of the Holders selling Registrable Securities
pursuant to an underwritten offering as provided in this Section 12(c), the
Company's management shall cooperate in roadshow presentations to assist
such Holders in selling their Registrable Securities and shall otherwise
work in good faith with any managing underwriter(s) in connection with
taking all actions necessary to successfully consummate the Public
Offering. If any demand registration pursuant to this Section 12(c)
involves an underwritten public offering, the underwriter(s) to be used in
connection with such registration shall be selected by a majority in
interest of the Holders of Registrable Securities to be sold in such
registration , subject to the approval of the Company (which shall not be
unreasonably withheld).
(iv) Notwithstanding Sections 12(c)(i) and (ii) above, if the
Company files a Registration Statement (other than on Form S-4 or Form S-8
or any successor form or in connection with a dividend reinvestment plan or
direct stock purchase plan) with respect to an underwritten Public Offering
of Common Stock or proposes to effect an underwritten Public Offering for
its own account or the account of a Demanding Party pursuant to an
effective shelf registration statement and the managing underwriter or
underwriters advise the Company in writing that an underwritten offering of
Registrable Shares would materially and adversely affect the success of
such proposed underwritten Public Offering, then the Company shall provide
timely written notice of such advice from the underwriter(s) to the Holders
(a "Holdback Notice") and the Company shall not be required (1) to cause a
Registration Statement for an underwritten Public Offering that is demanded
pursuant to Section 12 (c)(ii) after the date on which the Holdback Notice
is given to the Holders to become effective or (2) to effect an
underwritten Public Offering under a Shelf Registration Statement that is
elected pursuant to Section 12(c)(i) after the date on which such Holdback
Notice is given, in either case until the earlier of (A) the abandonment of
the previously proposed underwritten offering or (B) 90 days after the
16
effective date of the registration statement for such previously proposed
Public Offering or, in the case of a previously proposed Public Offering
pursuant to an effective shelf registration statement, 75 days after the
first day on which sales to the public commence pursuant to such offering,
in either case unless a shorter period is agreed to by such managing
underwriter or underwriters (the "Delay Period"); provided that the Company
shall use its best efforts (taking into account the possibility of other
pending demands for registration made by other securityholders) to effect
an underwritten Public Offering under a Shelf Registration Statement
elected under Section 12(c)(i) or to achieve the effectiveness of the
Registration Statement demanded pursuant to Section 12 (c) (ii), as the
case may be, promptly following such Delay Period and that the Company
shall treat any demand or election by the Holders with at least the same
priority as any pending demands for registration made by other
securityholders. The foregoing provisions shall not apply to a previously
proposed underwritten Public Offering for the account of a Demanding Party
unless such Demanding Party has agreed to restrictions on such Demanding
Party's ability to sell securities of the Company after the Holders demand
or elect, as the case may be, an underwritten Public Offering (which
restrictions shall be at least as favorable to the Holders as those
provided to other Demanding Parties under this Section 12(c)(iv)). This
Section 12(b)(iv) shall not apply to any Holder of Registrable Securities
if such Holder is prevented by applicable statute or regulation from
entering into any such agreement; provided, however, that any such Holder
shall undertake upon written request not to effect any underwritten
offering during the Delay Period unless it has provided forty-five (45)
days' prior written notice of such offering to the managing underwriter or
underwriters.
(v) The Company agrees that without the written consent of the
managing underwriter or underwriters in an underwritten offering of
Registrable Securities pursuant to Sections 12(a) and 12(c) hereof, it will
not effect any public sale or distribution of its equity securities (except
(i) pursuant to registrations on Form S-4 or Form S-8 or any successor form
or pursuant to any dividend reinvestment or direct stock purchase plan of
the Company, (ii) in connection with an exchange offer, or (iii) in
connection with the acquisition of assets by the Company or its
subsidiaries) from the date the Company receives a notice of election to
effect an underwritten offering under Section 12(c) (i) or a demand for
registration under Section 12(c) (ii) until the earlier of (A) the
abandonment of such underwritten offering or (B) 90 days after the
effective date of the registration statement for such previously proposed
Public Offering or, in the case of a previously proposed Public Offering
pursuant to an effective Shelf Registration Statement, 75 days after the
first day on which sales to the public commence pursuant to such offering,
in either case unless a shorter time period is agreed upon by the managing
underwriter or underwriters.
(d) Other Provisions Relating to Registration Rights. In connection with
------------------------------------------------
the Company's registration obligations pursuant to this Section 12, the Company
shall as expeditiously as possible:
(i) Prepare and file with the Commission, as soon as practicable, a
Registration Statement or Registration Statements on such form as shall be
available for the sale of the Registrable Securities by the Holders thereof in
accordance with the
17
intended method or methods of distribution thereof, and use its best
efforts to cause such Registration Statement to become effective and to
remain effective as provided herein; provided, however, that before filing
a Registration Statement or Prospectus or any amendments or supplements
thereto (including documents that would be incorporated or deemed to be
incorporated therein by reference), the Company shall notify the Holders of
the Registrable Securities covered by such Registration Statement, their
counsel and the managing underwriters, if any, of its intention to file
such documents, and upon written request shall furnish to such parties so
requesting copies of all such documents proposed to be filed, which
documents will be subject to the review of such Holders, their counsel and
such underwriters, if any; provided, further, that the Company shall not be
required to deliver to such Holders a copy of any such document that has
not been materially changed from a copy of such document that was
previously delivered to such Holders.
(ii) Prepare and file with the Commission such amendments and post-
effective amendments to each Registration Statement as may be necessary to
keep such Registration Statement continuously effective during the period
provided in this Warrant Agreement with respect to the disposition of all
securities covered by such Registration Statement, and cause the related
Prospectus to be supplemented by any required Prospectus supplement, and as
so supplemented to be filed pursuant to Rule 424 (or any similar provisions
then in force) under the Act.
(iii) Notify the selling Holders of the Registrable Securities, their
counsel and the managing underwriters, if any, promptly, and (if requested
in writing by any such Person), confirm such notice in writing: (1) when a
Registration Statement or any amendment thereto has been filed, and, with
respect to a Registration Statement or any post-effective amendment, when
the same has become effective, (2) of any request by the Commission or any
other Federal or state governmental authority for amendments or supplements
to a Registration Statement or related Prospectus or for additional
information, (3) of the issuance by the Commission of any stop order
suspending the effectiveness of a Registration Statement or the initiation
of any proceedings for that purpose, (4) if at any time the representations
and warranties of the Company contained in any agreement (including any
underwriting agreement) contemplated by Section 12(d)(xiv) below cease to
be true and correct, (5) of the receipt by the Company of any notification
with respect to the suspension of the qualification or exemption from
qualification of any of the Registrable Securities for sale in any
jurisdiction, or the initiation or threatening of any proceeding for such
purpose, and (6) of the happening of any event that makes any statement
made in such Registration Statement or related Prospectus or any document
incorporated or deemed to be incorporated therein by reference untrue in
any material respect or that requires the making of any changes to such
Registration Statement, Prospectus or documents so that, in the case of the
Registration Statement, it will not contain any untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein, not misleading, and
that in the case of the Prospectus, it will not contain any untrue
statement of a material fact or omit to state any material fact necessary
in order to make the statements therein, in light of the circumstances
under which they were made, not misleading.
18
(iv) Use its best efforts to obtain the withdrawal of any order
suspending the effectiveness of a Registration Statement, or the lifting of
any suspension of the qualification (or exemption from qualification) of
any of the Registrable Securities for sale in any jurisdiction.
(v) If requested by the managing underwriters, if any, or the
Holders of a majority in interest of the Registrable Securities being sold
in connection with an underwritten offering, promptly include in a
Prospectus supplement or post-effective amendment such information as the
managing underwriters, if any, and such Holders may reasonably request in
order to permit the intended method of distribution of such securities and
make all required filings of such Prospectus supplement or such post-
effective amendment as soon as practicable after the Company has received
such request.
(vi) Furnish to each selling Holder of Registrable Securities, their
counsel and each managing underwriter, if any, without charge, at least one
conformed copy of the Registration Statement and each post-effective
amendment thereto, including financial statements (including schedules, all
documents incorporated or deemed to be incorporated therein by reference,
and all exhibits).
(vii) Deliver to each selling Holder, their counsel, and the
Underwriters, if any, without charge, as many copies of the Prospectus or
Prospectuses (including each form of prospectus) and each amendment or
supplement thereto as such Persons may reasonably request in connection
with the distribution of the Registrable Securities; and the Company hereby
consents to the use of such Prospectus and each amendment or supplement
thereto by each of the selling Holders of Registrable Securities and the
underwriters, if any, in connection with the offering and sale of the
Registrable Securities covered by such Prospectus and any such amendment or
supplement thereto.
(viii) Use its best efforts to register or qualify, or obtain an
exemption therefrom (or cooperate with the selling Holders of Registrable
Securities, the underwriters, if any, and their respective counsel in
connection with the registration or qualification (or exemption from such
registration or qualification)) of such Registrable Securities for offer
and sale under the securities or "Blue Sky" laws of such jurisdictions
within the United States as any seller (or underwriter) reasonably requests
in writing and to keep each such registration or qualification (or
exemption therefrom) effective during the period such Registration
Statement is required to be kept effective; provided, however, that the
Company will not be required to (1) qualify generally to do business in any
jurisdiction where it is not then so qualified, or (2) take any action that
would subject it to general service of process or to taxation in any
jurisdiction where it is not then so subject other than as to matters and
transactions related to such Registration Statement.
(ix) Cooperate with the selling Holders of Registrable Securities
and the managing underwriters, if any, to facilitate the timely preparation
and delivery of certificates representing Registrable Securities to be
sold, which certificates shall be in a form eligible for deposit with The
Depository Trust Company; and enable such Registrable Securities to be in
such denominations and registered in such names as the
19
managing underwriters, if any, or Holders may request in writing at least
two (2) business days prior to any sale of Registrable Securities.
(x) Use its best efforts to cause the Registrable Securities
covered by such Registration Statement to be registered with or approved by
such other governmental agencies or authorities within the United States as
may be necessary to enable the seller or sellers thereof or the
underwriters, if any, to consummate the disposition of such Registrable
Securities.
(xi) Upon the occurrence of any event contemplated by Section
12(d)(iii)(6) above, prepare a supplement or post-effective amendment to
the Registration Statement or a supplement to the related Prospectus or any
document incorporated or deemed to be incorporated therein by reference, or
file any other required document so that, as thereafter delivered to the
purchasers of the Registrable Securities being sold thereunder, such
Prospectus will not contain an untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading.
(xii) Prior to the effective date of the Registration Statement
relating to the Registrable Securities, provide a CUSIP number for the
Registrable Securities.
(xiii) Use its best efforts to cause the Common Stock covered by such
Registration Statement to be listed on the New York Stock Exchange (or on
such other exchange or trading system on which the Common Stock is then
listed or authorized to be quoted), and to cause all Registrable Securities
other than Common Stock that are covered by such Registration Statement to
be authorized to be quoted on the NASDAQ/NMS or listed on a national
securities exchange to the extent eligible therefor under the rules of the
NASDAQ/NMS or such national securities exchange.
(xiv) Enter into such agreements (including an underwriting
agreement in form, scope and substance as is customary in underwritten
offerings) and take all such other actions reasonably requested by the
Holders of a majority in interest of the Registrable Securities being sold
in connection therewith (including those reasonably requested by the
managing underwriters, if any) in order to expedite or facilitate the
disposition of such Registrable Securities, and in such connection, whether
or not an underwriting agreement is entered into and whether or not the
registration is an underwritten offering, (1) make such representations and
warranties to the Holders of such Registrable Securities and the
underwriters, if any, with respect to the business of the Company and its
subsidiaries, and the Registration Statement, Prospectus and documents, if
any, incorporated or deemed to be incorporated by reference therein, in
each case, in form, substance and scope as are customarily made by issuers
to underwriters in underwritten offerings, and, if true, confirm the same
if and when requested in writing to do so, (2) obtain opinions of counsel
to the Company and updates thereof (which counsel and opinions, in form,
scope and substance, shall be reasonably satisfactory to the managing
underwriters, if any, and counsel to the Holders of Registrable Securities
being sold), addressed to each selling Holder and each of the underwriters,
if any, covering the matters customarily covered in opinions requested in
underwritten offerings and such other matters as may be reasonably
20
requested in writing by such counsel and underwriters, (3) obtain "cold
comfort" letters and updates thereof from the independent certified public
accountants of the Company (and, if necessary, any other independent
certified public accountants of any subsidiary of the Company or of any
business acquired by the Company for which financial statements and
financial data are, or are required to be, included in the Registration
Statement), addressed to each selling Holder (unless such accountants shall
be prohibited from so addressing such letters by applicable standards of
the accounting profession) and each of the underwriters, if any, such
letters to be in customary form and covering matters of the type
customarily covered in "cold comfort" letters in connection with
underwritten offerings, (4) if an underwriting agreement is entered into,
the same shall contain indemnification provisions and procedures
substantially to the effect set forth in Section 12(f) hereof with respect
to all parties to be indemnified pursuant to Section 12(f) and (5) deliver
such additional documents and certificates as may be reasonably requested
by the Holders of a majority of the Registrable Securities being sold,
their counsel and the managing underwriters, if any, to evidence the
continued validity of the representations and warranties made pursuant to
Section 12(d)(xiv)(1) above and to evidence compliance with any customary
conditions contained in the underwriting agreement or other agreement
entered into by the Company. The above shall be done at each closing under
such underwriting or similar agreement, or as and to the extent required
thereunder.
(xv) Make available for inspection by a representative of the
Holders of Registrable Securities being sold, each underwriter
participating in any such disposition of Registrable Securities, if any,
and any attorney or accountant retained by such selling Holder or
underwriter, at the offices where normally kept, during reasonable business
hours, all financial and other records, pertinent corporate documents and
properties of the Company and its subsidiaries, and cause the officers,
directors and employees of the Company and its subsidiaries to supply all
information reasonably requested by any such representative, underwriter,
attorney or accountant in connection with such Registration Statement;
provided, however, that any information that is designated by the Company
in writing as confidential at the time of delivery of such information
shall be kept confidential by such Persons unless (1) disclosure of such
information is required by court or administrative order, (2) disclosure of
such information, in the opinion of counsel to such Person, is required by
law, or (3) such information becomes generally available to the public
other than as a result of a disclosure or failure to safeguard by such
Person. Without limiting the foregoing, no such information shall be used
by such Person as the basis for any market transactions in securities of
the Company or its subsidiaries in violation of law.
(xvi) Comply with all applicable rules and regulations of the
Commission and make generally available to its security Holders earning
statements satisfying the provisions of Section 11(a) of the Act and Rule
158 thereunder, or any similar rule promulgated under the Act, no later
than forty-five (45) days after the end of any twelve (12) month period (or
ninety (90) days after the end of any twelve (12) month period if such
period is a fiscal year) (A) commencing at the end of any fiscal quarter in
which Registrable Securities are sold to underwriters in a firm commitment
or best efforts underwritten offering, and (B) if not sold to underwriters
in such an offering, commencing on the first day of the first fiscal
quarter of the Company after the effective
21
date of a Registration Statement, which statements shall cover such twelve
(12) month periods.
(xvii) Make every reasonable effort to obtain the withdrawal of any
order suspending the effectiveness of any Registration Statement at the
earliest possible moment.
(xviii) Cooperate and assist in any filings required to be made with
the NASD and in the performance of any due diligence investigation by any
underwriter (including any "qualified independent underwriter" that is
required to be retained in accordance with the rules and regulations of the
NASD).
(e) Registration Expenses. All fees and expenses incident to the
---------------------
Company's performance of or compliance with this Section 12 will be borne by the
Company, regardless of whether a Registration Statement filed pursuant to this
Section 12 becomes effective and whether or not any securities are sold pursuant
to such Registration Statement, including without limitation:
(i) all registration and filing fees and expenses associated
therewith including, without limitation, fees and expenses with respect to
filings required to be made with the Commission and the NASD;
(ii) fees and expenses of compliance with federal securities or state
Blue Sky laws (including fees and disbursements of counsel for the
Underwriters or selling Holders in connection with Blue Sky qualifications
of the Registrable Securities pursuant to Section 12(d)(viii) hereof);
(iii) expenses of printing (including, without limitation, expenses
of printing or engraving certificates for the Registrable Securities in a
form eligible for deposit with The Depositary Trust Company and of printing
Prospectuses), messenger and delivery services and telephone;
(iv) reasonable fees and disbursements of counsel for the Company and
of not more than one counsel for the Holders of Registrable Securities
(chosen by a majority of the Holders of the Registrable Securities to be
included in the Registration Statement);
(v) fees and disbursements of all independent certified public
accountants of the Company (including the expenses of any special audit and
"cold comfort" letters required by or incident to such performance);
(vi) fees and expenses associated with any NASD filing required to be
made in connection with a Registration Statement, including, if applicable,
the fees and expenses of any "qualified independent underwriter" (and its
counsel) that is required to be retained in accordance with the rules and
regulations of the NASD; and
(vii) fees and expenses of listing the Registrable Securities on any
securities exchange or quotation system in accordance with Section
12(d)(xii) hereof.
22
The Company will, in any event, bear its internal expenses (including,
without limitation, all salaries and expenses of its officers and employees
performing legal or accounting duties), the expense of any annual audit, rating
agency fees and the fees and expenses of any Person, including special experts,
retained by the Company. The Holders of Registrable Securities shall bear the
expense of any broker's commission or Underwriters' discount or commission.
(f) Indemnification; Contribution.
-----------------------------
(i) Subject to applicable law, the Company will indemnify and hold
harmless each Holder of Registrable Securities (and each underwriter for
such Holder (if any and if retained by the Holder)) being registered, and
each person who controls any of them within the meaning of Section 15 of
the Act or Section 20 of the Exchange Act, to the full extent lawful, from
and against any and all losses, claims, damages, judgments, expenses and
liabilities, joint or several (including any investigation, legal and other
expenses incurred in connection with, and any amount paid in any settlement
of, any action, suit or proceeding or any claim asserted), to which they,
or any of them, may become subject under the Act, the Exchange Act or other
federal or state statutory law or regulation, at common law or otherwise,
insofar as such losses, claims, damages, judgments, expenses or liabilities
arise out of or are based on (A) any untrue statement or alleged untrue
statement of a material fact contained in such Registration Statement
(including any related preliminary or definitive Prospectus, or any
amendment or supplement to such Registration Statement or Prospectus), (B)
any omission or alleged omission to state in such document a material fact
required to be stated in it or necessary to make the statements in it not
misleading, or (C) any violation by the Company of the Act, the Exchange
Act, any Blue Sky Laws or any rule or regulation thereunder in connection
with such registration; provided, however, that the Company will not be
liable to the extent that such loss, claim, damage, judgment, expense or
liability arises from and is based on a material untrue statement or
omission or alleged material untrue statement or omission made in reliance
on and in conformity with information furnished in writing to the Company
by such Holder, underwriter or controlling person expressly for use in such
Registration Statement. Each Holder of Registrable Securities will
indemnify and hold harmless the Company, each other Holder of Registrable
Securities and each person who controls any of them within the meaning of
Section 15 of the Act or Section 20 of the Exchange Act, from and against
any and all losses, claims, damages, judgments, expenses and liabilities,
joint or several, to which they, or any of them, may become subject under
the Act, the Exchange Act or other federal or state statutory law or
regulation, at common law or otherwise insofar as such losses, claims,
damages, judgments, expenses and liabilities arise solely by reason of a
material untrue statement or omission made in reliance on and in conformity
with information furnished in writing to the Company by such Holder for use
in such Registration Statement. The obligations of any Holder under this
clause (i) shall be limited to the net proceeds to such Holder of the
Registrable Securities sold pursuant to the Registration Statement to which
the loss, claim, damage, judgment, expense or liability relates.
(ii) If the indemnification provided for in clause (i) above for any
reason is held by a court of competent jurisdiction to be unavailable to an
indemnified party in
23
respect of any losses, claims, damages, judgments, expenses or liabilities
referred to therein, then each indemnifying party under such paragraph, in
lieu of indemnifying such indemnified party thereunder, shall contribute to
the amount paid or payable by such indemnified party as a result of such
losses, claims, damages, judgments, expenses or liabilities in such
proportion as is appropriate to reflect the relative fault, if any, of the
Company and the other selling Holders in connection with the statements or
omissions which resulted in such losses, claims, damages, expenses or
liabilities, as well as any other relevant equitable considerations. The
relative fault of the Company and the selling Holders shall be determined
by reference to, among other things, whether the untrue statement or
alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by the
Company or the selling Holders and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such statement
or omission. The Company, the Holders, and the underwriters agree that it
would not be just and equitable if contribution pursuant to this clause
(ii) were determined by pro rata or per capita allocation or by any other
method of allocation which does not take account of the equitable
considerations referred to in the immediately preceding sentence. The
obligations of any Holder under this clause (ii) are several, not joint,
and shall be limited to an amount equal to the net proceeds to such Holder
of Registrable Securities sold pursuant to the Registration Statement to
which the loss, claim, damage, judgment expense or liability relates. No
person found guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation.
(iii) If any action or proceeding (including any governmental or
regulatory investigation or proceeding) shall be brought or asserted
against any indemnified party with respect to which indemnity may be sought
against the indemnifying party pursuant to this Section 12(f), such
indemnified party shall promptly notify the indemnified party in writing
and the indemnifying party shall have the right to assume the defense
thereof, including the employment of counsel reasonably satisfactory to
such indemnified party and the indemnifying party shall be responsible for
the payment of all fees and expenses; provided, however, that the omission
so to notify the indemnifying party shall not relieve the indemnifying
party from any liability that it may have to any indemnified party (except
to the extent that the indemnifying party is materially prejudiced or
otherwise forfeits substantive rights or defenses by reason of such
failure). An indemnified party shall have the right to employ separate
counsel in any such action or proceeding and to participate in the defense
thereof, but the fees and expenses of such counsel shall be at the expense
of such indemnified party unless (1) the indemnifying party agrees in
writing to pay such fees and expenses, (2) the indemnifying party has
failed promptly to assume the defense and employ counsel satisfactory to
the indemnified party or (3) the named parties to any such action or
proceeding (including any impleaded parties) include both the indemnified
party and the indemnifying party and such indemnified party shall have been
advised in writing by its counsel that representation of it and the
indemnifying party by the same counsel would be inappropriate under
applicable standards of professional conduct (whether or not such
representation has been proposed) due to actual or potential differing
interests between them (in which case the indemnifying party shall not have
the right to assume the defense of such action on behalf of such
indemnified party). It is
24
understood that the indemnifying party shall not, in connection with any
one such action or separate but substantially similar or related actions in
the same jurisdiction arising out of the same general allegations or
circumstances, be liable for the fees and expenses of more than one
separate firm of attorneys (in addition to any local counsel) at any time
for such indemnified parties which firm shall be designated in writing by
the Holders of a majority in interest of the Registrable Securities on
behalf of the Holders of all of the Registrable Securities, and that all
such fees and expenses shall be reimbursed as they are incurred. The
indemnifying party shall not be liable for any settlement of any such
action effected without the written consent of the indemnifying party
(which shall not be unreasonably withheld), but if settled with the written
consent of the indemnifying party, or if there is a final judgment with
respect thereto, the indemnifying party agrees to indemnify and hold
harmless each indemnified party from and against any loss or liability by
reason of such settlement or judgment. The indemnifying party shall not,
without the prior written consent of each indemnified party affected
thereby, effect any settlement of any pending or threatened proceeding in
which such indemnified party has sought indemnity hereunder, unless such
settlement includes an unconditional release of such indemnified party from
all liability arising out of such action, claim, litigation or proceeding.
(g) Survival.
--------
The provisions of this Section 12 shall survive the termination or
expiration of this Warrant Agreement.
Section 13. Fair Market Value. In order to determine Fair Market Value
-----------------
for purposes of this Warrant Agreement, the Company and a representative (the
"Representative") designated by the Holders shall attempt to agree upon such
Fair Market Value. If the Company and the Representative are unable to agree
upon the Fair Market Value within 20 days after notification of the event
requiring such a determination, the Company and the Representative shall agree
on an Appraiser to be appointed by the Company to determine the Fair Market
Value. In the event that the parties cannot agree upon an Appraiser in the
foregoing period, then the determination of Fair Market Value shall be conducted
by two Appraisers, one of whom shall be selected by the Company, and one of whom
shall be selected by the Representative. If either of such two determinations of
Fair Market Value is within ten percent (10%) of the other determination of Fair
Market Value, then the Fair Market Value shall be the average of such two
determinations. The Company shall pay the expenses of each such Appraiser. If
neither of such two determinations of Fair Market Value is within ten percent
(10%) of the other determination of Fair Market Value, a third Appraiser shall
be selected by the other two Appraisers. The third Appraiser shall make its own
independent final determination of Fair Market Value. The Company shall pay the
expenses of such third Appraiser. All appraisal reports shall be in writing,
shall be signed by the Appraisers and shall be delivered to the Company and the
Holders. The Fair Market Value determined pursuant to this Section 13 shall be
final and binding upon the Company and the Holders.
Section 14. Adjustment of Exercise Price and Number of Shares of Common
-----------------------------------------------------------
Stock Purchasable or Number of Warrants. In addition to any reduction in the
---------------------------------------
Exercise Price required pursuant to Section 2(b)(vii) above, prior to the
Expiration Date, the Exercise Price, the number
25
of shares of Common Stock purchasable upon the exercise of each Warrant and the
number of Warrants outstanding are subject to adjustment from time to time upon
the occurrence of any of the events enumerated in this Section 14.
(a) In case the Company shall at any time after the date of this Warrant
Agreement (i) make a distribution to holders of shares of Common Stock of
additional shares of Common Stock or of Other Securities, (ii) subdivide the
outstanding shares of Common Stock, (iii) combine the outstanding shares of
Common Stock into a smaller number of shares of Common Stock, or (iv) issue any
Other Securities by reclassification of the shares of Common Stock (including
any such reclassification in connection with a consolidation or merger in which
the Company is the continuing entity), then (1) the number and kind of shares of
Common Stock and/or Other Securities issuable, at the time of the record date
for such dividend or of the effective date of such subdivision, combination or
reclassification shall be proportionately adjusted so that the Holder(s) after
such time shall be entitled to receive upon exercise of its Warrants the
aggregate number and kind of shares of Common Stock and/or Other Securities
which, if its Warrants had been exercised immediately prior to such time, it
would have owned upon such exercise and been entitled to receive by virtue of
such dividend, subdivision, combination or reclassification and (2) the Exercise
Price shall be proportionately adjusted. Such adjustment shall be made
successively whenever any event listed above shall occur.
(b) (i) In case the Company shall issue any Common Stock or any class or
series of capital stock that is not Preferred Stock at a price per share
less than the greater of (i) $___ and (ii) the Fair Market Value per share
of such security (such greater amount being hereinafter referred to as the
"Base Rate"), then the Exercise Price in effect at the opening of business
on the day next following such issuance shall be adjusted to equal the
price determined by multiplying (A) the Exercise Price in effect
immediately prior to the opening of business on the day next following such
issuance by (B) a fraction, the numerator of which shall be the sum of (x)
the number of shares of all classes and series of capital stock (other than
Preferred Stock) outstanding on the close of business on the day next
preceding the day of such issuance and (y) the number of shares that could
be purchased at the Base Rate from the aggregate proceeds to the Company
from the issuance of such new shares of capital stock, and the denominator
of which shall be the sum of (xx) the number of shares of all classes and
series of capital stock (other than Preferred Stock) outstanding on the
close of business on the day next preceding the day of such issuance and
(yy) the number of additional shares of capital stock being issued. For
purposes of this Section, "Fair Market Value" shall mean, as to any class
or series of capital stock that is not publicly traded, the fair value of
the shares of such class or series as determined in accordance with Section
13 hereof and, as to publicly-traded securities, shall mean the average of
the daily Current Market Prices of a share of such capital stock during the
ten (10) Trading Days immediately preceding the effective day of the
Exercise Price adjustment pursuant to this subsection. Upon each
adjustment of the Exercise Price, the number of Warrant Shares that a
Holder of a Warrant shall be entitled to receive upon exercise shall be
adjusted by multiplying the number of Warrant Shares
26
issuable upon exercise immediately prior to such adjustment by a fraction,
the numerator of which is $______________ and the denominator of which is
the Exercise Price after such adjustment.
(ii) If at any time Company shall issue or sell any Options or any
Convertible Securities, whether or not the rights to exercise, exchange or
convert thereunder 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 shall be less than
the Base Rate in effect immediately prior to the time of such issue or
sale, then the number of shares for which a Warrant is exercisable and the
Exercise Price shall be adjusted as provided in Section 12(b)(i) above on
the basis that the maximum number of additional shares of Common Stock
issuable pursuant to all such Options or necessary to effect the conversion
or exchange of all such Convertible Securities shall be deemed to have been
issued and outstanding and Company shall be deemed to have received all of
the consideration payable therefor, if any, as of the date of the issuance
of such Options and Convertible Securities. No further adjustments of the
Exercise Price shall be made upon the actual issue of such Common Stock or
of such Convertible Securities upon exercise of such Options or upon the
actual issue of such Common Stock upon such conversion or exchange of such
Convertible Securities or upon the expiration or termination of such
Options or Convertible Securities. If the number of shares for which any
Option is exercisable or the rate at which any Convertible Securities are
convertible into or exchangeable for shares of Common Stock shall increase,
the number of shares of Common Stock purchasable upon the exercise of the
Warrants in effect at the time of such event shall promptly be readjusted
to the number of shares of Common Stock which would have been so
purchasable at such time had such Options or Convertible Securities
initially been exercisable or convertible into such changed number of
shares of Common Stock and the Exercise Price shall be adjusted
accordingly. The provisions of this Section 14(b)(ii) shall not apply to
the issuance by the Company of GMAC Warrants to purchase 1,624,650 shares
of Common Stock. The provisions of this Section 14(b) also shall not apply
to any issuance of shares of Common Stock upon exercise of any Warrants or
issuances covered by subsections (a), (c) or (f) of this Section 14.
(c) In case the Company shall fix a record date for making a distribution
to any holders of the shares of Common Stock (including any such distribution
made in connection with a consolidation or merger in which the Company is the
continuing corporation) of shares of stock other than Common Stock, other
securities, evidences of its indebtedness or assets or property of whatever
nature (excluding cash dividends consistent with past practice), (i) the number
of shares of Common Stock for which a Warrant is exercisable shall be adjusted
to equal the product of the number of shares of Common Stock for which a Warrant
is exercisable immediately prior to such adjustment multiplied by a fraction (A)
the numerator of which shall be the Fair Market Value per share of Common Stock
immediately prior to such record date and (B) the denominator of which shall be
such Fair Market Value per share of Common Stock minus the amount allocable to
one share of Common Stock of any such cash so distributable and of the Fair
Market Value of any and all such shares of stock, other securities, evidences of
indebtedness, or assets or property so distributable, and (ii) the Exercise
Price to be in effect after such record date shall be determined by multiplying
the Exercise Price in effect immediately prior to such record date by a
27
fraction, of which the numerator shall be the current Fair Market Value per
share of Common Stock immediately prior to such record date minus the amount
allocable to one share of Common Stock of any such cash so distributable and of
the Fair Market Value of any and all such shares of stock, other securities,
evidences of indebtedness, or assets or property so distributable, and of which
the denominator shall be such current Fair Market Value per share of Common
Stock immediately prior to such record date. Such adjustment shall be made
successively whenever such a record date is fixed; and, if such distribution is
not so made, the Exercise Price shall again be adjusted to be the Exercise Price
which would then be in effect if such record date had not been fixed.
(d) No adjustment in the Exercise Price shall be required unless such
adjustment would require an increase or decrease of at least 1% in such price;
provided that any adjustments which by reason of this subsection (d) are not
required to be made shall be carried forward and taken into account in any
subsequent adjustment. All calculations under this Section 14 shall be made to
the nearest hundredth of a cent or to the nearest share of Common Stock, as the
case may be.
(e) If at any time, as a result of an adjustment made pursuant to
subsection (a) of this Section 14, a Holder shall become entitled to receive any
Other Securities, thereafter the number of such Other Securities so receivable
shall be subject to adjustment from time to time in a manner and on terms as
nearly equivalent as practicable to the provisions contained in this Section 14.
(f) In the case of any capital reorganization of the Company, or of any
reclassification of the shares of Common Stock, or in case of the consolidation
of the Company with or the merger of the Company with or into any other
corporation (where the Company is not the Surviving Corporation) or of the sale
of the properties and assets of the Company as, or substantially as, an entirety
to any other company, each Warrant shall after such capital reorganization,
reclassification of shares of Common Stock, consolidation, merger or sale be
exercisable, upon the terms and conditions specified in this Warrant Agreement,
for the number of shares of stock and the cash or other securities or property
of any nature whatsoever that is receivable upon or as a result of the
reorganization, reclassification, consolidation, merger or sale by a holder of
the number of shares of Common Stock (or Other Securities) for which a Warrant
is exercisable immediately prior to such event; and in any such case, if
necessary, the provisions set forth in this Section 14 with respect to the
rights thereafter of the Holders shall be appropriately adjusted so as to be
applicable, as nearly as may reasonably be, to any shares of stock or other
securities or assets thereafter deliverable on the exercise of the Warrants. The
subdivision or combination of the shares of Common Stock at any time outstanding
into a greater or lesser number of units or any other event covered by
subsection (a) of this Section 14 shall not be deemed to be a reclassification
of the shares of Common Stock for the purposes of this subsection (f). The
Company shall not effect any such consolidation, merger or sale, unless prior to
or simultaneously with the consummation thereof, the successor corporation
resulting from such consolidation or merger or the corporation purchasing such
assets or the appropriate corporation or entity shall assume, by written
instrument, the obligation to deliver to each Holder the shares of stock, cash,
other securities or assets to which, in accordance with the foregoing
provisions, each Holder may be entitled to and all other obligations of the
Company under this Warrant Agreement.
28
(g) In case of any adjustment or readjustment in the Warrants, Warrant
Shares or Exercise Price in accordance with this Section 14, the Company at its
expense will promptly compute such adjustment or readjustment in accordance with
the terms of this Warrant Agreement and cause independent public accountants of
recognized national standing selected by the Company to verify such computation;
and the Company will prepare a report, certified by the principal financial
officer of the Company, setting forth such adjustment or readjustment and
showing, in detail, the facts upon which such adjustment or readjustment is
based, and all calculations relating to any adjustments made in accordance with
this Section 14. The Company will forthwith mail a copy of each such report to
each Holder, and will, upon the written request at any time of any Holder,
furnish to such Holder a report setting forth such information as may be
requested by such Holder, including any calculations with respect thereto in
order that such Holder may verify such calculations.
Section 15. Fractional Warrants and Fractional Warrant Shares.
-------------------------------------------------
The Company shall not be required to issue a fractional share
of Common Stock upon exercise of any Warrant. As to any
fraction of a share which the Holder of one or more Warrants,
the rights under which are exercised in the same transaction,
would otherwise be entitled to purchase upon such exercise, the
Company shall pay a cash adjustment in respect of such final
fraction in an amount equal to the same fraction of the Current
Market Price per share of Common Stock on the date of exercise.
Section 16. Financial Information.
---------------------
(a) The Company will furnish to the Holders the reports and information
that is required to be delivered to the Company's stockholders.
(b) Unless otherwise specified herein, all accounting terms used herein
shall be interpreted, all accounting determinations hereunder shall be made, and
all financial statements required to be delivered hereunder shall be prepared in
accordance with GAAP, applied on a basis consistent (except for changes
concurred in by the Company's independent public accountants) with the most
recent audited consolidated financial statements of the Company.
Section 17. No Rights or Liabilities as Shareholder. Nothing contained in
---------------------------------------
this Warrant Agreement shall be construed as conferring upon the Holder any
rights as a shareholder of the Company or as imposing any liabilities on the
Holder as a shareholder of the Company, whether such liabilities are asserted by
the Company or by creditors or shareholders of the Company or otherwise.
Section 18. Decisions of Holders. All decisions to be made and actions to
--------------------
be taken by the Holders as a group pursuant to this Warrant Agreement will be
made or taken by a majority in interest of the Holders (each Warrant counting as
the number of Warrant Shares obtainable upon the exercise of the Warrant at such
time).
Section 19. Notices to Holders. In case:
------------------
(a) the Company shall authorize the issuance to any holders of shares of
Common
29
Stock of Options to purchase shares of Common Stock of the Company or any other
similar subscription rights; or
(b) the Company shall authorize a dividend or the distribution to all
holders of shares of Common Stock of evidences of its indebtedness or assets
(including distributions payable in shares of Common Stock and cash dividends or
distributions, other than cash dividends consistent with past practice); or
(c) of any consolidation or merger to which the Company is a party and for
which approval of any shareholders of the Company is required, or of the
conveyance or transfer of all or substantially all of the properties and assets
of the Company, or of a capital reorganization or reclassification or change of
the shares of Common Stock; or
(d) of the voluntary or involuntary dissolution, liquidation or winding up
of the Company; or
(e) the Company proposes to take any other action which would require an
adjustment of the number of Warrant Shares issuable upon exercise of the
Warrants or an adjustment of the Exercise Price pursuant to Section 14;
then the Company shall cause notice to be given to each Holder of shares of
Common Stock at its address appearing on the Register, at least 30 calendar days
prior to the applicable record or effective date specified. Such notice shall
state (i) the date as of which the holders of record of shares of Common Stock
to be entitled to receive any such dividend, rights, warrants or distribution
are to be determined, or (ii) the date on which any such consolidation, merger,
conveyance, transfer, dissolution, liquidation, winding up or other action is
expected to become effective, and, if applicable, the date as of which it is
expected that holders of record of shares of Common Stock shall be entitled to
exchange their shares of Common Stock for securities or other property, if any,
deliverable upon such reclassification, consolidation, merger, conveyance,
transfer, dissolution, liquidation or winding up.
Section 20. Amendments and Waivers. Any provision of this Warrant
----------------------
Agreement or the Warrant Certificates may be amended or waived if, but only if,
such amendment or waiver is in writing and is signed by the Company and two
thirds of the Holders; provided that the Warrant Agreement and the Warrant
--------
Certificate may not be modified or amended to reduce the number of shares of
Common Stock for which a Warrant is exercisable or to increase the price at
which such shares may be purchased upon exercise of a Warrant without the prior
written consent of the Holder thereof. Notwithstanding the foregoing, a waiver
or consent to departure from the provisions hereof that relates exclusively to
the rights of Holders of Registrable Securities whose securities are being sold
pursuant to a Registration Statement and that does not directly or indirectly
affect the rights of other Holders of Registrable Securities shall be valid only
with the written consent of Holders of at least 66-2/3% of the Registrable
Securities being sold.
Section 21. Survival. The provisions of this Warrant Agreement shall
--------
survive the exercise of any Warrant in whole or part and, in event of such
exercise, the term "Holder" shall refer to the holder of any Warrant Shares
issued upon exercise hereunder; provided, however, that in the case of any sale
of Subject Securities pursuant to a Public Offering or Rule 144 under
30
the Act, the Subject Securities which are so transferred will no longer have the
benefits of this Warrant Agreement.
Section 22. Indemnification. Company agrees to indemnify and hold
---------------
harmless the Holders from and against any liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, claims, costs, attorneys' fees,
expenses and disbursements of any kind which may be imposed upon, incurred by or
asserted against the Holders in any manner relating to or arising out of any
litigation to which a Holder is made a party in its capacity as a stockholder or
warrantholder of Company; provided, however, that the Company will not be liable
-------- -------
hereunder to the extent that any liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, claims, costs, attorneys' fees, expenses
or disbursements are found in a final non-appealable judgment by a court to have
resulted from a Holder's fraud or willful misconduct in its capacity as a
stockholder or warrantholder of the Company.
Section 23. Expenses. Except as provided herein, the Company shall pay all
--------
reasonable legal and other professional fees (and related disbursements) of
First Union in connection with this Warrant Agreement and the transactions
contemplated hereby.
Section 24. Notices. Any notice or demand authorized by this Warrant
-------
Agreement to be given shall be in writing and shall be delivered in person, sent
by telecopy, mailed (registered or certified, return receipt requested), postage
prepaid, or sent by overnight delivery service addressed to the Company or the
Holders at their respective addresses specified above or in the Register or, as
to any such party, at such other address as may be designated by it in a notice
to the other parties hereto. All notices shall be deemed to be properly given or
made upon the earlier to occur of (i) actual delivery, (ii) 5 days after being
deposited in the mail addressed as aforesaid, or (iii) 1 Business Day after
being sent by facsimile (with answer back confirmed) or overnight delivery
service. For the purposes of notices sent by facsimile, the parties' facsimile
numbers are: the Company (000) 000-0000, and First Union (000) 000-0000.
Section 25. Binding Effect. This Warrant Agreement shall be binding upon
--------------
and inure to the sole and exclusive benefit of the Company, and its permitted
successors and each registered Holder from time to time of the Subject
Securities and each of its respective permitted successors.
Section 26. Termination. Except as provided herein, this Warrant
-----------
Agreement shall terminate and be of no further force and effect at the close of
business on the Expiration Date unless, prior to such Expiration Date, there
shall no longer be any Holders in which event this Warrant Agreement shall
terminate as of such date except with respect to the provisions hereof which are
intended to survive.
Section 27. Severability. In the event that any provision of this Warrant
------------
Agreement is held to be invalid, prohibited or unenforceable in any jurisdiction
for any reason, unless such provision is narrowed by judicial construction, this
Warrant Agreement shall, as to such jurisdiction, be construed as if such
invalid, prohibited or unenforceable provision had been more narrowly drawn so
as not to be invalid, prohibited or unenforceable. Notwithstanding the
foregoing, if any provision of this Warrant Agreement is held to be invalid,
prohibited or unenforceable in any jurisdiction, such provision, as to such
jurisdiction, shall be ineffective to
31
the extent of such invalidity, prohibition or unenforceability without
invalidating the remaining portion of such provision or the other provisions of
this Warrant Agreement and without affecting the validity or enforceability of
such provision or the other provisions of this Warrant Agreement in any other
jurisdiction.
Section 28. Counterparts. This Warrant Agreement may be executed by one or
------------
more of the parties hereto on any number of
separate counterparts and all of said counterparts taken together shall be
deemed to constitute one and the same instrument.
Section 29. Governing Law; Remedies.
-----------------------
(a) This Warrant Agreement and each Warrant Certificate shall be construed
in accordance with and governed by the laws of the State of New York (without
giving effect to its conflicts of law principles).
(b) Each holder of a Subject Security, in addition to being entitled to
exercise all rights granted by law, including recovery of damages, will be
entitled to specific performance of its rights under this Warrant Agreement.
The Company agrees that monetary damages would not be adequate compensation for
any loss incurred by reason of a breach by it of the provisions of this Warrant
Agreement and hereby agrees to waive the defense in any action for specific
performance that a remedy at law would be adequate.
Section 30. No Impairment. If any event occurs as to which the provisions
-------------
of this Warrant Agreement or the Subject Securities are strictly applicable and
the application thereof would not fairly protect the rights of the Holders 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 to protect such rights as aforesaid.
32
IN WITNESS WHEREOF, the parties hereto have caused this Warrant Agreement to
be duly executed and delivered by their proper and duly authorized officers, as
of the date and year first above written.
NOVASTAR FINANCIAL, INC.
By _____________________
Name:
Title:
FIRST UNION CORPORATION
By ______________________
Name:
Title:
33
EXHIBIT B
---------
Warrant Certificate
No._____________ _______ Warrants
VOID AFTER 5:00 P.M. NEW YORK CITY TIME
ON FEBRUARY __, 2002
THE WARRANTS REPRESENTED BY THIS CERTIFICATE AND THE SHARES OF COMMON STOCK
ISSUABLE PURSUANT TO THE TERMS HEREOF HAVE THE BENEFIT AND ARE SUBJECT TO THE
TERMS AND CONDITIONS SPECIFIED IN THE WARRANT AGREEMENT, DATED AS OF FEBRUARY
12, 1999, BETWEEN THE COMPANY AND THE INITIAL HOLDER OF THE WARRANTS THEREIN
NAMED, AS FROM TIME TO TIME AMENDED, A COMPLETE AND CORRECT COPY OF WHICH IS
AVAILABLE FOR INSPECTION AT THE PRINCIPAL OFFICE OF THE COMPANY AND WILL BE
FURNISHED TO THE HOLDER OF THIS WARRANT UPON WRITTEN REQUEST AND WITHOUT CHARGE.
THE WARRANTS AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF THE
WARRANTS HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "ACT"), OR ANY STATE OR OTHER SECURITIES LAW AND MAY NOT BE TRANSFERRED
EXCEPT (i) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR (ii)
UPON FIRST FURNISHING TO THE COMPANY AN OPINION OF COUNSEL THAT SUCH TRANSFER IS
NOT IN VIOLATION OF THE REGISTRATION REQUIREMENTS OF THE ACT.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO RESTRICTIONS ON
OWNERSHIP AND TRANSFER FOR THE PURPOSE OF MAINTAINING THE COMPANY'S STATUS AS A
REAL ESTATE INVESTMENT TRUST UNDER THE INTERNAL REVENUE CODE OF 1986, AS
AMENDED, INCLUDING A RESTRICTION ON OWNERSHIP OF EQUITY STOCK IN EXCESS OF 9.8%
(SUBJECT TO CERTAIN EXCEPTIONS) OF THE OUTSTANDING EQUITY STOCK OF THE COMPANY,
ALL AS SET FORTH IN THE COMPANY'S ARTICLES OF INCORPORATION, AS THE SAME MAY BE
AMENDED FROM TIME TO TIME, A COPY OF WHICH WILL BE SENT WITHOUT CHARGE TO EACH
STOCKHOLDER WHO SO REQUESTS. SUCH REQUEST MAY BE MADE TO THE SECRETARY OF THE
COMPANY.
IN ADDITION, THE COMPANY WILL FURNISH TO ANY STOCKHOLDER ON REQUEST AND WITHOUT
CHARGE A FULL STATEMENT OR SUMMARY OF THE DESIGNATIONS AND PREFERENCES,
CONVERSION AND OTHER RIGHTS, VOTING POWERS, RESTRICTIONS, LIMITATIONS AS TO
DIVIDENDS, QUALIFICATIONS AND TERMS AND CONDITIONS OF REDEMPTION OF THE STOCK OF
EACH CLASS
34
WHICH THE COMPANY IS AUTHORIZED TO ISSUE AND THE DIFFERENCES IN THE RELATIVE
RIGHTS AND PREFERENCES BETWEEN SUCH SHARES OF EACH SERIES, IF ANY, TO THE EXTENT
THEY HAVE BEEN SET, AND OF THE AUTHORITY OF THE BOARD OF DIRECTORS TO SET THE
RELATIVE RIGHTS AND PREFERENCES OF SUBSEQUENT SERIES. SUCH REQUEST MAY BE MADE
TO THE SECRETARY OF THE COMPANY.
THIS CERTIFIES THAT for value received the registered holder hereof or
registered assign (the "Holder"), is the owner of the number of Warrants set
forth above, each of which entitles the owner thereof to purchase at any time on
or before 5:00 P.M., New York City time, on February __, 2002, one fully paid
and nonassessable share of Common Stock of NOVASTAR FINANCIAL, INC., a Delaware
corporation (the "Company"), at the purchase price of $6.9375 per share of
Common Stock (the "Exercise Price"). As provided in the Warrant Agreement
referred to below, the Exercise Price and the number or kind of shares of Common
Stock which may be purchased upon the exercise of the Warrants evidenced by this
Warrant Certificate are, upon the happening of certain events, subject to
modification and adjustment.
This Warrant Certificate is subject to and entitled to the benefits of
all of the terms, provisions and conditions of that certain agreement dated as
of February 12, 1999 (the "Warrant Agreement") by and between the Company and
FIRST UNION CORPORATION, which Warrant Agreement is hereby incorporated herein
by reference and made a part hereof and to which Warrant Agreement reference is
hereby made for a full description of the rights, limitations of rights,
obligations, duties and immunities hereunder of the Company and the Holders of
the Warrant Certificates. Copies of the Warrant Agreement are on file at the
principal office of the Company.
The Holder hereof may be treated by the Company and all other persons
dealing with this Warrant Certificate as the absolute owner hereof for any
purpose and as the person entitled to exercise the rights represented hereby, or
to the transfer hereof on the books of the Company, any notice to the contrary
notwithstanding, and until such transfer on such books, the Company may treat
the Holder hereof as the owner for all purposes.
This Warrant Certificate, with or without other Warrant Certificates,
upon surrender at the principal office of the Company, may be exchanged for
another Warrant Certificate or Warrant Certificates of like tenor and date
evidencing Warrants entitling the Holder to purchase a like aggregate number of
shares of Common Stock as the Warrants evidenced by the Warrant Certificate or
Warrant Certificates surrendered. If this Warrant Certificate shall be
exercised in part, the Holder shall be entitled to receive upon surrender
hereof, another Warrant Certificate or Warrant Certificates for the number of
whole Warrants not exercised.
No fractional share of Common Stock will be issued upon the exercise
of any Warrant or Warrants evidenced hereby, as provided in the Warrant
Agreement.
35
IN WITNESS WHEREOF, the Company has executed this Warrant Certificate.
NOVASTAR FINANCIAL, INC.
By:_____________________
Name:
Title:
Attest:
____________________________
Name:
Secretary
36
EXHIBIT C
---------
PURCHASE FORM
(To be signed only upon exercise of Warrant)
To: NOVASTAR FINANCIAL, INC.:
The undersigned, the holder of the within Warrant Certificate, hereby
irrevocably elects to exercise the purchase right represented by such Warrant
Certificate for, and to purchase thereunder, * Shares of Common Stock of
NOVASTAR FINANCIAL, INC., and herewith makes payment of $ therefor, and
requests that the certificates for such shares of Common Stock be issued in the
name of, and delivered to, , whose address is
Dated:
___________________________________________________
(Signature must conform in all respects to name of
holder as specified on the face of the Warrant
certificate)
_________________ (Address)
----------
* Insert here the number of shares of Common Stock called for on the face of
the Warrant Certificate (or, in the case of a partial exercise, the portion
thereof as to which Warrants are being exercised), in either case without
making any adjustment for additional shares of Common Stock or other
securities or property or cash which, pursuant to the adjustment provisions
of the Warrant Agreement, may be deliverable upon exercise.
37
EXHIBIT D
---------
ASSIGNMENT FORM
FOR VALUE RECEIVED the undersigned registered owner of the Warrants
represented by this Warrant Certificate, hereby sells, assigns and transfers
unto the Assignee named below all of the rights of the undersigned with respect
to the number of Warrants set forth below:
Name and Address of Assignee No. of Warrants
---------------------------- ---------------
and does hereby irrevocably constitute and appoint _______ ________________
attorney-in-fact to register such transfer on the books of NOVASTAR FINANCIAL,
INC. maintained for the purpose, with full power of substitution in the
premises.
Dated:__________________ Print Name:___________________
Signature:____________________
Witness:______________________
NOTICE: The signature on this assignment must correspond with the name as
written upon the face of the within Warrant Certificate in every particular,
without alteration or any change whatsoever.
38
EXHIBIT E
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OPTIONS AND CONVERTIBLE SECURITIES
39
