Neither this Warrant nor the shares of Common Stock to be issued upon exercise
hereof have been registered under the Securities Act (as defined below), and
this Warrant has been, and the shares of Common Stock to be issued upon exercise
hereof will be, acquired for investment and not with a view to, or for release
in connection with, any distribution thereof. No such sale or other disposition
may be made without an effective registration statement under the Securities Act
or unless an exemption from such a registration is available.
Warrant No. 98-B
WARRANT
to Purchase
Common Stock
of
AUTOBOND ACCEPTANCE CORPORATION
THIS IS TO CERTIFY THAT BancBoston Investments, Inc.
("Warrantholder"), is entitled, at any time and from time to time from (and
including) the Start Date (as defined below) until 5:00 P.M., New York City
time, on the Warrant Expiration Date (as defined below), to purchase from
AUTOBOND ACCEPTANCE CORPORATION, a Texas corporation (the "Company"), 368,462
Shares, each one of which represents initially one share of Common Stock
(adjusted as provided below), in whole or in part, at the Purchase Price Per
Share set forth herein, all on the terms and conditions and pursuant to the
provisions hereinafter provided.
Section 1. DEFINITIONS. The terms defined in this Section 1, whenever
used in this Warrant, shall, unless the context otherwise requires, have the
respective meanings hereinafter specified.
"Additional Shares of Nonpreferred Stock" means all shares of
Nonpreferred Stock issued by the Company after the date hereof, other than the
Warrant Stock.
"Affiliate" has the meaning attributed to it under the Securities Act.
"Board" means the Board of Directors of the Company.
"Business Day" means a day other than a Saturday, a Sunday or a day on
which commercial banks in the State of Texas or Commonwealth of Massachusetts
are permitted or required by law to close.
"Call Option" means the right of the Company to redeem the Warrants
pursuant to Section 8.
"Commission" means the Securities and Exchange Commission or any other
governmental body then administering the Securities Act.
"Common Stock" means the Company's authorized voting Common Stock, no
par value, as constituted on the date of original issuance of this Warrant, or
at the Warrantholder's option, the Company's nonvoting Common Stock, and any
shares of stock into which such class of Common Stock may thereafter be changed,
or that may be issued in respect of, in exchange for, or in substitution for,
such Common Stock by reason of any stock splits, stock dividends, distributions,
mergers, consolidations or other like events and shall also include stock of the
Company of any other class issued to the holders of shares of Common Stock upon
any reclassification thereof.
"Company" means AutoBond Acceptance Corporation., a Texas corporation,
and any successor corporation whether by merger or otherwise.
"Convertible Securities" means evidences of indebtedness, shares of
stock or other securities which are convertible into or exchangeable for
Additional Shares of Nonpreferred Stock, either immediately or upon the arrival
of a specified date or the happening of a specified event.
"Current Market Price" per share of Common Stock for the purposes of
any provision of this Agreement at the date herein specified shall mean, for any
date after the initial public offering of the Company's Common Stock:
(i) if the Common Stock is listed on a domestic exchange or quoted on
NASDAQ, the average of the daily market prices of the Common Stock over a
period of 30 consecutive trading days prior to the day on which Current
Market Price is being determined.
As used in this clause (i), "market price" for each such Business Day
shall be the average of the closing prices on such day of the Common Stock
on all domestic primary national securities exchanges on which the Common
Stock is then listed, or, if there shall have been no sales on any such
exchange on such day, the average of the highest bid and lowest asked
prices on all such exchanges at the end of such day, or if the Common Stock
shall not be so listed, the average of the representative bid and asked
prices at the end of such Business Day as reported by NASDAQ; or
(ii) if the Common Stock shall not be listed on any domestic exchange
or quoted on NASDAQ, then the Current Market Price shall be Fair Market
Value (of the Company as a whole) divided by the number of shares of Common
Stock (on a fully diluted basis) outstanding;
provided, however, that in the case of (i) a primary underwritten public
offering at a price in excess of the then current exercise price, the
Current Market Price shall be deemed the price to the underwriter set forth
in the prospectus, and (ii) stock options issued to employees and directors
pursuant to a plan adopted by the Company's Board of Directors, the Current
Market Price shall be the exercise price of such options.
2
"Current Warrant Price" per share of Common Stock for the purpose of
any provision of this Warrant at the date herein specified, shall mean the
product of (i) the Purchase Price Per Share in effect on such date, and (ii) the
number of Shares for which this Warrant is exercisable on such date.
"date hereof", "date of original issuance of this Warrant" and similar
references mean the date identified at the foot of this Warrant beside the name
of the Company.
"Exchange Act" means the Securities Exchange Act of 1934 (including
any rules and regulations promulgated thereunder), as the same shall be amended
and in effect from time to time.
"Fair Market Value" means the highest price for which the Company and
its subsidiaries could be sold as a going concern in an arm's length transaction
to an independent third party within 12 months after the Valuation Date (as
defined below), as determined by agreement or appraisal in accordance with the
procedures described below.
Within ten (10) calendar days after the date of the occurrence of any
event requiring the determination of Fair Market Value pursuant to this Warrant
(a "Valuation Date"), the Company on the one hand, and the Majority Holders on
the other hand, shall each designate a representative and such two (2)
representatives will meet and use their best efforts to reach an agreement on
the Company's Fair Market Value. If such representatives have been unable to
reach such agreement, the Company on the one hand, and the Majority Holders on
the other hand, will use their best efforts to agree within 20 calendar days
after the Valuation Date upon the selection of an independent appraiser
experienced in valuing businesses of this type. Such appraiser will have 20
calendar days in which to determine the Company's Fair Market Value, and its
determination thereof will be final and binding on all parties concerned. If the
Company and the Majority Holders are unable to reach an agreement as to an
independent appraiser within 20 calendar days after the Valuation Date, the
Company on the one hand, and the Majority Holders on the other hand, will each
within five (5) calendar days thereafter select one independent appraiser
experienced in valuing businesses of this type. The Company, and the Majority
Holders, will each cause the appraiser selected by them respectively to
determine independently the Company's Fair Market Value within 20 calendar days
after their appointment. If the lesser of the two (2) appraised values (the "Low
Value") exceeds or is equal to 90% of the greater of the two (2) appraised
values (the "High Value"), the Company's Fair Market Value will be the average
of the two (2) appraisals. If the Low Value is less than 90% of the High Value,
the two (2) appraisers will themselves appoint a third independent appraiser
experienced in valuing businesses of this type within five (5) calendar days
after the two (2) appraisals have been rendered. Such third appraiser will have
20 calendar days in which to determine independently the Company's Fair Market
Value. The Company's Fair Market Value in such case will be the mean of the two
(2) appraised values which are closest to each other; provided, however, that in
the event the high and the low appraised values are equidistant from the middle
such value, the middle such value shall be deemed the Fair Market Value. The
Company will provide each appraiser with all information about the Company and
its Subsidiaries which any
3
such appraiser reasonably deems necessary for determining the Fair Market Value.
The expenses of the appraisal process will be paid by the Company.
"Financial Statement" means the annual audited financial statements,
prepared in accordance with GAAP, which the Company provides to its
shareholders.
"GAAP" means generally accepted accounting principles.
"Holder" means a holder of this Warrant.
"Majority Holders" means the holders of Warrants entitling the holders
thereof to exercise a majority of the Warrant Stock.
"NASDAQ" means, the National Association of Securities Dealers
Automated Quotation System.
"Nonpreferred Stock" means the Common Stock and shall also include all
stock of the Company of any other class unless senior in respect of the right to
participate in dividends and distributions of assets.
"Permitted Transferee" means an "accredited investor" within the
meaning of Rule 501 under the Securities Act, or a "qualified institutional
buyer" within the meaning of Rule 144A under the Securities Act.
"Person" means any individual, corporation, partnership, association,
trust, joint venture or other entity or organization, including a government or
political subdivision or an agency or instrumentality thereof.
"Purchase Price Per Share" means the price at which the Holder is
entitled to purchase a Share from the Company pursuant to this Warrant, such
price being $3.30 per Share, subject to adjustment as provided for herein.
"Put Option" means the right of a Warrantholder to require the Company
to repurchase Warrants pursuant to Section 9.
"Redemption Date" has the meaning set forth in Section 8.1.
"Redemption Price" means the greater of (a) the Current Market Price
less the Current Warrant Price, and (b) that price which represents a rate of
return of 10% per annum (compounded annually), accruing through the Redemption
Date, on a deemed investment of $7,500,000 as of the date of original issuance
of this Warrant.
"Repurchase Date" has the meaning set forth in Section 9.1.
"Repurchase Price" means the Current Market Price less the Current
Warrant Price.
4
"Securities Act" means the Securities Act of 1933 (including any rules
and regulations promulgated thereunder), as the same shall be amended and in
effect from time to time.
"Share" means one share of Common Stock, as such stock was constituted
on the date of original issuance of this Warrant, and thereafter shall mean such
number of shares (including any fractional share) of Common Stock and other
securities, cash or property as shall result from the adjustments provided for
herein, to such one share, specified in Section 4.
"Start Date" means January 31, 2001.
"Triggering Event" means the occurrence of any of the following: (a)
an offering or placement of the Company's Common Stock for cash at least equal
to $10 per share, in an aggregate amount at least equal to $50 million; or (b)
an agreement in principle with respect to the sale, transfer or other
disposition by the Company or any affiliate of Common Stock in an amount at
least equal to 51% of the Company's outstanding Common Stock; or (c) an
agreement in principle with respect to a merger or consolidation of the Company
or the sale of the assets of Company substantially as an entirety; provided,
however, that an agreement in principle under (b) or (c) above shall cease to
constitute a Triggering Event if not consummated within 60 days.
"Warrant" means this warrant and each warrant issued in replacement of
or substitution herefor or therefor in accordance herewith or therewith, whether
as a result of transfer, division or combination.
"Warrant Expiration Date" means the earlier to occur of (i) January
30, 2005 and (ii) the occurrence of a Repurchase Date or a Redemption Date with
respect to all of the Outstanding Warrants (provided that the repurchase
required on such date has been consummated on the terms provided herein).
"Warrant Shares" means the Common Stock issuable, from time to time,
upon exercise of the Warrants.
"Warrant Stock" means the shares of Common Stock purchasable by the
Holder upon the exercise of this Warrant.
Section 2. EXERCISE OF WARRANT.
A. Manner of Exercise. This Warrant may be exercised at any time or
from time to time from the Start Date until 5:00 P.M., New York City time, on
the Warrant Expiration Date for all or any part of the Shares. In order to
exercise this Warrant, in whole or in part, the Holder shall deliver to the
Company at its office or agency maintained for this purpose pursuant to Section
13: (i) a written notice of the Holder's election to exercise this Warrant,
which notice shall specify the number of Shares to be purchased, (ii) either (a)
a certified or official bank check or checks drawn on a New York Clearing House
bank payable to the order of the Company
5
or (b) an electronic funds transfer of immediately available funds in an amount
equal to the aggregate Purchase Price Per Share for all Shares as to which this
Warrant is exercised. Such notice shall be in the form of Exhibit A. Upon any
exercise of this Warrant, in whole or in part, the Holder may (instead of the
payment described in the preceding sentence) elect to pay the aggregate Purchase
Price Per Share for the number of Shares to be purchased (collectively, the
"Exercise Shares") by surrendering its rights to a number of Exercise Shares
having a Current Market Price immediately prior to the exercise of this Warrant
(based upon the number of shares of Common Stock for which such Exercise Shares
are then exercisable) equal to or greater than the required aggregate Purchase
Price Per Share, in which case the holder hereof would receive the number of
Exercise Shares to which it would otherwise be entitled upon such exercise, less
the surrendered Shares. Upon receipt thereof, the Company shall, as promptly as
practicable, and in any event within five (5) Business Days thereafter, execute
or cause to be executed, and deliver to the Holder a certificate or certificates
representing the aggregate number of shares of Warrant Stock issuable upon such
exercise (i.e., the number of shares of Common Stock then represented by one
Share multiplied by the number of Shares than being exercised). The stock
certificate or certificates so delivered shall be registered in the name of the
Holder or, such other name as shall be designated in such notice. Unless
otherwise specified in such notice, one certificate representing the aggregate
number of shares of Warrant Stock issued upon such exercise shall be so
delivered. This Warrant shall be deemed to have been exercised and such
certificate or certificates shall be deemed to have been issued, and the Holder
or any other person so designated to be named therein shall be deemed to have
become a holder of record of such shares for all purposes, as of the date such
notice, together with such check or checks or other form of payment, and this
Warrant are received by the Company as aforesaid. If this Warrant shall have
been exercised and/or surrendered in part, the Company shall, at the time of
delivery of the certificate or certificates representing Warrant Stock issuable
upon such exercise, deliver to or on the order of the Holder a new Warrant
evidencing the right of the Holder to purchase the unpurchased and/or
unsurrendered Shares called for by this Warrant, which new Warrant shall in all
other respects be identical with this Warrant, or, at the request of the Holder,
appropriate notation may be made on this Warrant and the same returned to the
Holder.
B. Payment of Taxes, etc. All shares of Warrant Stock shall be validly
issued, fully paid and non-assessable, and the Company shall pay all expenses
(including any stamp or like taxes) in connection with, or that may be imposed
in respect of, the issue or delivery thereof; provided, however, that the Holder
shall pay all income, franchise and transfer taxes in connection with such issue
and delivery. The Company shall not be required to pay any tax or other charge
imposed in connection with any transfer involved in the issue of any certificate
for shares of Warrant Stock in any name other than that of the registered Holder
of this Warrant (or any Affiliate thereof), and in such case the Company shall
not be required to issue or deliver any stock certificate until such tax or
other charge has been paid or it has been established to the Company's
reasonable satisfaction that no such tax or other charge is due.
Section 3. TRANSFER, DIVISION AND COMBINATION. This Warrant and all
rights hereunder are transferable (i) only to Permitted Transferees, (ii) in
whole or in part, and (iii) on the books of the Company to be maintained for
such purpose, upon surrender of this Warrant at the office or agency of the
Company maintained for the purpose pursuant to Section
6
13, together with a written assignment (in whole or in part) of this Warrant
duly executed by the Holder or its agent or attorney. Upon surrender the Company
shall execute and deliver a new warrant or warrants in the name of the assignee
or assignees (including, if such assignment is only a partial assignment by the
Holder, in the name of the Holder), and each such warrant shall be identical in
form and substance (including its date) to this Warrant except for the warrant
number (which shall be as determined by the Company), the name of the named
holder of the warrant (if an assignee of the Holder), and the actual number of
Shares (each of which shall be as specified by the Holder), and this Warrant
shall promptly be canceled.
This Warrant may be divided or combined with other Warrants upon
presentation hereof (and thereof, in the case of combination) at the aforesaid
office or agency of the Company, together with a written notice specifying the
names and denominations in which new warrants are to be issued, signed by the
Holder or its agent or attorney. Subject to compliance with the preceding
paragraph as to any transfer which may be involved in such division or
combination, the Company shall execute and deliver a new warrant or warrants in
exchange for the warrant or warrants to be divided or combined in accordance
with such notice.
The Company shall pay all expenses and other charges payable in
connection with the preparation, issuance and delivery of Warrants under this
Section 3. The holder of a Warrant shall pay all taxes (other than any stamp or
like taxes, which shall be paid by the Company) in connection with such issuance
and delivery.
The Company agrees to maintain, at the office or agency of the Company
maintained for the purpose pursuant to Section 13, books for the registration
and transfer of the Warrant.
Section 4. ADJUSTMENT OF SHARES. The number of shares of Common Stock
comprising a Share shall be subject to adjustment from time to time as set forth
in this Section 4.
A. Stock Dividends, Subdivisions and Combinations. In case at any time
or from time to time the Company shall:
(1) take a record of the holders of its Nonpreferred Stock for the
purpose of entitling them to receive a dividend payable in, or other
distribution of, Nonpreferred Stock, or
(2) subdivide its outstanding shares of Nonpreferred Stock into a
larger number of shares of Nonpreferred Stock, or
(3) combine its outstanding shares of Nonpreferred Stock into a
smaller number of shares of Nonpreferred Stock,
then the number of shares of Common Stock comprising a Share immediately after
the happening of any such event shall be adjusted so as to consist of the number
of shares of Common Stock which a record holder of the number of shares of
7
Common Stock comprising a Share immediately prior to the happening of such event
would own or be entitled to receive after the happening of such event; provided,
however, that in no event shall the Company take any action referred to in
Section 4.A(3) if the effect would be that a share after giving effect thereto
and to any corresponding adjustment of Shares would collectively constitute less
than one share of Common Stock.
B. Issuance of Additional Shares of Nonpreferred Stock. In case at any
time or from time to time the Company shall (except as hereinafter provided)
issue any Additional Shares of Nonpreferred Stock at a price per share that is
lower than the Current Market Price per share of Common Stock on the date of
such issuance, then the number of shares of Common Stock thereafter comprising a
Share shall be adjusted to that number determined by multiplying the number of
shares of Common Stock comprising a Share immediately prior to such adjustment
by a fraction (i) the numerator of which shall be the number of shares of
Nonpreferred Stock outstanding immediately after such issuance of such shares of
Additional Shares of Nonpreferred Stock, and (ii) the denominator of which shall
be an amount equal to the sum of (x) the number of shares of Nonpreferred Stock
outstanding immediately prior to the issuance of such shares of Additional
Shares of Nonpreferred Stock plus (y) the number of shares of Nonpreferred Stock
which the aggregate consideration received by the Company for the total number
of such Additional Shares of Nonpreferred Stock (as determined in accordance
with Section 4.F) so issued would then purchase at the Current Market Price per
share of Common Stock. No adjustment to the number of shares of Common Stock
comprising a Share shall be made under this Section 4.B upon the issuance of any
Additional Shares of Nonpreferred Stock which are issued pursuant to the
exercise of any warrants or other subscription or purchase rights or pursuant to
the exercise of any conversion or exchange rights in any Convertible Securities,
if any such adjustment shall previously have been made upon the issuance of such
warrants or other rights or upon the issuance of such Convertible Securities (or
upon the issuance of any warrant or other rights therefor) pursuant to Sections
4.C or D.
C. Issuance of Warrants or Other Rights. In case at any time or from
time to time the Company shall issue any warrants or other rights to subscribe
for or purchase (i) any Additional Shares of Nonpreferred Stock or (ii) any
Convertible Securities and the consideration per share for which Additional
Shares of Nonpreferred Stock may at any time thereafter be issuable pursuant to
such warrants or other rights or pursuant to the terms of such Convertible
Securities shall be less than the Current Market Price per share of Common
Stock, then the number of shares of Common Stock thereafter comprising a Share
shall be adjusted (as at the applicable date specified in the last sentence of
this Section 4.C) as provided in Section 4.B on the basis that (i) the maximum
number of Additional Shares of Nonpreferred Stock issuable pursuant to all such
warrants or other rights or necessary to effect the conversion or exchange of
all such Convertible Securities shall be deemed to have been issued as of the
date for the determination of the Current Market Price per share of Common Stock
as hereinafter provided, and (ii) the aggregate consideration for such maximum
number of Additional Shares of Nonpreferred Stock shall be deemed to be the
minimum consideration received and receivable by the Company for the issuance of
such Additional Shares of Nonpreferred Stock pursuant to such warrants or other
rights or pursuant to the terms of such Convertible Securities. For purposes of
8
this Section 4.C, the date as of which the Current Market Price per share of
Common Stock shall be computed shall be the earlier of (a) the date on which the
Company shall enter into a firm contract for the issuance of such warrants or
other rights or (b) the date of actual issuance of such warrants or other
rights.
D. Issuance of Convertible Securities. In case at any time or from
time to time the Company shall issue any Convertible Securities and the
consideration per share for which Additional Shares of Nonpreferred Stock may at
any time thereafter be issuable pursuant to such Convertible Securities shall be
less than the Current Market Price per share of Common Stock, then the number of
shares of Common Stock thereafter comprising a Share shall be adjusted (as at
the applicable date specified in the penultimate sentence of this Section 4.D)
as provided in Section 4.B on the basis that (i) the maximum number of
Additional Shares of Nonpreferred Stock necessary to effect the conversion or
exchange of all such Convertible Securities shall be deemed to have been issued
as of the date for the determination of the Current Market Price per share of
Common Stock as hereinafter provided, and (ii) the aggregate consideration for
such maximum number of Additional Shares of Nonpreferred Stock shall be deemed
to be the minimum consideration received and receivable by the Company for the
issuance of such Additional Shares of Nonpreferred Stock pursuant to the terms
of such Convertible Securities. For purposes of this Section 4.D, the date as of
which the Current Market Price per share of Common Stock shall be computed shall
be the earlier of (a) the date on which the Company shall enter into a firm
contract for the issuance of such Convertible Securities, or (b) the date of
actual issuance of such Convertible Securities. No adjustment of the number of
shares of Common Stock comprising a Share shall be made under this Section 4.D
upon the issuance of any Convertible Securities which are issued pursuant to the
exercise of any warrants or other subscription or purchase rights therefor, if
any such adjustment shall previously have been made upon the issuance of such
warrants or other rights pursuant to Section 4.C.
E. Superseding Adjustment of Shares. If, any time after any adjustment
of the number of shares comprising a Share shall have been made pursuant to
Section 4.C or Section 4.D on the basis of the issuance of warrants or other
rights or the issuance of other Convertible Securities, or after any new
adjustment of the number of shares comprising a Share shall have been made
pursuant to this Section 4.D (but before the Warrant has been exercised), such
warrants or rights or the right of conversion or exchange in such other
Convertible Securities shall expire, and a portion of such warrants or rights,
or the rights of conversion or exchange in respect of a portion of such other
Convertible Securities, as the case may be, shall not have been exercised, such
previous adjustment shall be rescinded and annulled and the Additional Shares of
Nonpreferred Stock which were deemed to have been issued by virtue of the
computation made in connection with the adjustment so rescinded and annulled
shall no longer be deemed to have been issued by virtue of such computation.
Thereupon, a recomputation shall be made of the effect of such rights or options
or other Convertible Securities on the basis of
(1) treating the number of Additional Shares of Nonpreferred Stock, if
any, theretofore actually issued or issuable pursuant to the previous
exercise of such warrants or rights or such right of conversion or
exchange, as having been issued on the date or
9
dates of such exercise, and
(2) treating any such warrants or rights or any such other Convertible
Securities which then remain outstanding as having been granted or issued
immediately after the time of the last date of such exercise,
and, if and to the extent called for by the foregoing provisions of this Section
4 on the basis of the aforesaid, a new adjustment of the number of shares
comprising a Share shall be made, which new adjustment shall supersede the
previous adjustment so rescinded and annulled.
If the exercise price provided for in any warrant or right, or the
rate at which any Convertible Securities referred to in Section 4.C or Section
4.D are convertible into or exchangeable for Additional Shares of Nonpreferred
Stock, shall change or a different exercise price or rate shall become effective
at any time or from time to time (other than under or by reason of provisions
designed to protect against dilution) then, upon such change becoming effective,
the number of shares comprising a Share shall forthwith be increased or
decreased to such number as would have obtained had the adjustments made and
required to be made upon the issuance of such rights or options or Convertible
Securities been made upon the basis of (a) the issuance of the number of
Additional Shares of Nonpreferred Stock theretofore actually delivered upon the
exercise of such options or rights or upon the conversion or exchange of such
Convertible Securities and (b) the original issuance at the time of such change
of any such options, rights and Convertible Securities then still outstanding.
If the exercise price provided for in any right or option, or the rate at which
any Convertible Securities referred to in Section 4.C or Section 4.D are
convertible into or exchangeable for Additional Shares of Nonpreferred Stock,
shall decrease at any time under or by reason of provisions with respect thereto
designed to protect against dilution, then in the case of the delivery of
Additional Shares of Nonpreferred Stock upon the exercise of any such right or
option or upon the conversion or exchange of any Convertible Securities, the
number of shares comprising a Share shall forthwith be increased to such number
as would have obtained had the adjustments made upon issuance of such right or
option or such Convertible Securities been made upon the basis of the issuance
of (and with respect to total consideration received for) the Additional Shares
of Nonpreferred Stock delivered as aforesaid. In no event shall any adjustment
provided for in this Section 4.E have retroactive effect relative to Shares as
to which the Warrant has been previously exercised.
F. Other Provisions Applicable to Adjustments Under this Section 4.
The following provisions shall be applicable to the making of adjustments of the
number of shares of Common Stock comprising a Share provided for in this Section
4:
(1) Treasury or Company Stock. The sale or other disposition of any
issued shares of Nonpreferred Stock owned or held by or for the account of
the Company shall be deemed an issuance thereof for purposes of this
Section 4.
(2) Computation of Consideration. To the extent that any Additional
Shares of Nonpreferred Stock or any Convertible Securities shall be issued
for a cash consideration, the consideration received by the Company
therefor shall be deemed to be
10
the amount of the cash received by the Company therefor, or, if such
Additional Shares of Nonpreferred Stock or Convertible Securities are
offered by the Company for subscription, the subscription price, or, if
such Additional Shares of Nonpreferred Stock or Convertible Securities are
sold to underwriters or dealers for public offering without a subscription
offering, the initial public offering price, in any such case excluding any
amounts paid or receivable for accrued interest or accrued dividends and
without deduction of any compensation, discounts or expenses paid or
incurred by the Company for and in the underwriting of, or otherwise in
connection with, the issuance thereof. To the extent that such issuance
shall be for a consideration other than cash, then, except as herein
otherwise expressly provided, the amount of such consideration shall be
deemed to be the fair value of such consideration at the time of such
issuance as determined in good faith by the Board. The consideration for
any Additional Shares of Nonpreferred Stock issuable pursuant to any
warrants or other rights to subscribe for or purchase the same shall be the
consideration received or receivable by the Company for issuing such
warrants or other rights, plus the additional consideration payable to the
Company upon the exercise of such warrants or other rights. The
consideration for any Additional Shares of Nonpreferred Stock issuable
pursuant to the terms of any Convertible Securities shall be the
consideration received or receivable by the Company for issuing any
warrants or other rights to subscribe for or purchase such Convertible
Securities, plus the consideration paid or payable to the Company in
respect of the subscription for or purchase of such Convertible Securities,
plus the additional consideration, if any, payable to the Company upon the
exercise of the right of conversion or exchange in such Convertible
Securities. In case of the issuance at any time of any Additional Shares of
Nonpreferred Stock or Convertible Securities in payment or satisfaction of
any dividend upon any class of stock other than Nonpreferred Stock, the
Company shall be deemed to have received for such Additional Shares of
Nonpreferred Stock or Convertible Securities a consideration equal to the
amount of such dividend so paid or satisfied.
(3) When Adjustments to be Made. The adjustments required by Section 4
shall be made whenever and as often as any specified event requiring an
adjustment shall have occurred. For the purpose of any adjustment, any
specified event shall be deemed to have occurred at the close of business
on the date of its occurrence.
(4) When Adjustments Not Required. If the Company shall take a record
of the holders of its Nonpreferred Stock for the purpose of entitling them
to receive a dividend or distribution or subscription or purchase rights
and shall, thereafter and before the distribution thereof to shareholders,
legally abandon its plan to pay or deliver such dividend, distribution,
subscription or purchase rights, then thereafter no adjustment shall be
required by reason of the taking of such record and any such adjustment
previously made in respect thereof shall be rescinded and annulled.
G. Merger, Consolidation or Disposition of Assets. The Company shall
not consolidate or merge with another Person, or sell, transfer or otherwise
dispose of all or substantially all of its assets to another Person unless the
Company shall have notified the Holder no less than 20 days prior to the
effective date of such consolidation, merger, sale, transfer or
11
disposal, and shall have given the Holder the right to exercise all its rights
under this Warrant and participate fully in such transaction as a holder of
shares of Common Stock. Such notice may disclose nonpublic information.
Alternatively, if at the Company's option, such transaction shall be effected in
such a way that all holders of Nonpreferred Stock shall be entitled to receive
stock, securities or assets with respect to or in exchange for Nonpreferred
Stock, then, as a condition of such consolidation, merger or sale, the Company
or such successor or purchasing corporation, as the case may be, shall assume
the obligations of the Company under this Warrant and execute an agreement
providing that the Holder shall have the right thereafter and until the
expiration hereof to exercise this Warrant for the kind and amount of stock,
securities or assets receivable upon such consolidation, merger or sale by a
holder of the number of shares of Common Stock for which this Warrant might have
been exercised immediately prior to such consolidation, merger or sale, subject
to adjustments which shall be as nearly equivalent as may be practicable to the
adjustments provided for in this Section 4.
H. Other Action Affecting Common Stock. If the Company takes any
action affecting its Common Stock after the date hereof, other than an action
described in any of Sections 4.A through 4.G, inclusive, which would have an
adverse effect upon the rights of the holder of this Warrant hereunder, then the
number of shares of Common Stock comprising a Share shall be adjusted in such
manner and at such time as the Board shall in good faith determine to be
equitable under the circumstances.
I. Conversions of the Company's Convertible Notes. The amount of
Warrant Shares available for exercise hereunder shall be reduced by the number
of shares of Common Stock issued upon conversion of the Company's 15%
Subordinated Convertible Notes due 2001.
Section 5. NOTICES TO WARRANT HOLDERS.
A. Notice of Adjustment of Share. Whenever the composition of a Share
shall be adjusted pursuant to Section 4, the Company shall forthwith obtain a
certificate signed by the Company's chief financial officer setting forth, in
reasonable detail, the event requiring the adjustment and the method by which
such adjustment was calculated (including a description of the basis on which
the Board determined the Current Market Price pursuant to Sections 4.B, C or D
or the fair value of any evidences of indebtedness, shares of stock, other
securities or property or warrants or other subscription or purchase rights
referred to in Section 4.F) and specifying the number of shares of Common Stock
comprising a Share and (if such adjustment was made pursuant to Section 4.G or
Section 4.H) describing the number and kind of any other indebtedness, shares of
stock or other securities or property or warrants or other subscription or
purchase rights comprising a Share, and any change in the purchase price or
prices thereof, after giving effect to such adjustment or change. The Company
shall promptly, and in any case within 10 calendar days after the making of such
adjustment, cause a signed copy of such certificate to be delivered to the
Holder in accordance with Section 14. The Company shall keep at its office or
agency, maintained for the purpose pursuant to Section 13, copies of all such
certificates and cause the same to be available for inspection at said office
during normal business hours by the Holder or any prospective purchaser of all
or part of this Warrant designated by the Holder.
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B. Notice of Certain Corporate Action. In case the Company shall
propose (a) to pay any dividend payable in stock of any class to the holders of
its Nonpreferred Stock or to make any other distribution to the holders of its
Nonpreferred Stock, or (b) to offer to the holders of its Nonpreferred Stock
rights to subscribe for or to purchase any Additional Shares of Nonpreferred
Stock or shares of stock of any class or any other securities, rights or
options, or (c) to effect any reclassification of its Nonpreferred Stock (other
than a reclassification involving only the subdivision, or combination, of
outstanding shares of Nonpreferred Stock), or (d) to effect any capital
reorganization, or (e) to effect any consolidation, merger or sale, transfer or
other disposition of all or substantially all of its property, assets or
business, or (f) to effect the liquidation, dissolution or winding up of the
Company, or (g) to effect or be subject to any Triggering Event, then in each
such case, the Company shall give to each holder of a Warrant, in accordance
with Section 14, a notice of such proposed action, which shall specify the date
on which a record is to be taken for purposes of such stock dividend,
distribution or offer of rights, or the date on which such reclassification,
reorganization, consolidation, merger, sale, transfer, disposition, liquidation,
dissolution, or winding up is to take place and the date of participation
therein by the holders of Nonpreferred Stock, if any such date is to be fixed,
and shall also set forth such facts with respect thereto as shall be reasonably
necessary to indicate the effect of such action on the Nonpreferred Stock and
the number and kind of any other property which will comprise a Share, and the
purchase price or prices thereof, after giving effect to any adjustment which
will be required as a result of such action. Such notice shall be so given in
the case of any action covered by clause (a) or (b) above at least 20 calendar
days prior to the record date for determining holders of the Nonpreferred Stock
for purposes of such action, and in the case of any other such action, at least
20 calendar days prior to the date of the taking of such proposed action or the
date of participation therein by the holders of Nonpreferred Stock, whichever
shall be the earlier.
Section 6. RESERVATION AND AUTHORIZATION OF NONPREFERRED STOCK;
REGISTRATION WITH OR APPROVAL OF ANY GOVERNMENTAL AUTHORITY. The Company shall
at all times reserve and keep available for issuance upon the exercise of the
Warrant such number of its authorized but unissued shares of Common Stock as
will be sufficient to permit the exercise in full of the Warrant. All shares of
Common Stock which shall be so issuable, when issued upon exercise of this
Warrant, shall be duly authorized, validly issued, fully paid and nonassessable,
free and clear of all liens, security interests, charges and other encumbrances
or restrictions (other than encumbrances or restrictions imposed by this Warrant
or the Warrant Agreement).
Before taking any action which would cause an adjustment reducing the
Purchase Price Per Share below the then par value, if any, of the shares of
Common Stock issuable upon exercise of this Warrant, the Company shall take any
corporate action which may, in the opinion of its counsel, be necessary in order
that the Company may validly and legally issue fully paid and nonassessable
shares, free and clear of all liens, security interests, charges and other
encumbrances or restrictions (other than encumbrances or restrictions imposed by
this Warrant or the Warrant Agreement), of such Common Stock at such adjusted
Current Warrant Price.
Before taking any action which would result in an adjustment in the
number of
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shares of Common Stock comprising a Share or in the Current Warrant Price per
share of Common Stock, the Company shall obtain all such authorizations or
exceptions thereof, or consents thereto, as may be necessary from any public
regulatory body or bodies having jurisdiction thereof.
Section 7. REGISTRATION RIGHTS.
7.1 Demand Registration. (a) Any Warrantholder may, in writing,
request that the Company effect the registration under the Securities Act of all
(but not less than all) of such holder's Warrant Shares and specifying the
number of Warrant Shares to be registered and the intended method of disposition
thereof (a "Registration Request"). The Company will promptly, and in no event
more than 10 Business Days after receipt of such Registration request, give
written notice (a "Notice of Requested Registration") of such request to all
other holders of Warrant Shares, and thereupon will use its best efforts to
effect the registration (a "Demand Registration") under the Securities Act of:
(i) the Warrant Shares which the Company has been so requested to
register by such Holder; and
(ii) all other Warrant Shares the holders of which have made written
requests to the Company for registration thereof within 20 days after the
giving of the Notice of Requested Registration (which requests shall
specify the intended method of disposition thereof) (the "Other Holders"),
all to the extent requisite to permit the disposition (in accordance with
the intended methods thereof) of the Warrant Shares so to be registered. If
requested by the Majority Holders requested to be included in any Demand
Registration, the method of disposition of all Warrant Shares included in
such registration shall be an underwritten offering effected in accordance
with Section 7.3 hereof. Subject to Section 7.1(d) hereof, the Company may
include in such registration other securities for sale for its own account
or for the account of any other Person. If any security holders of the
Company (other than the holders of Warrant Shares in such capacity)
register securities of the Company in a Requested Registration in
accordance with this Section 7.1, such holders shall pay the fees and
expenses of their counsel and their pro rata share, on the basis of the
respective amounts of the securities included in such registration on
behalf of each such holder, of the Registration Expenses if the
Registration Expenses for such registration are not paid by the Issuer for
any reason.
(b) Notwithstanding anything herein to the contrary, the Warrantholder
shall have the right to make one such Demand Registration for an underwritten
offering on Form S-1, unless the Warrantholder could not register all of its
Warrant Shares following such a demand by reason of the managing underwriter's
written opinion that inclusion of all such Warrant Shares in such Demand
Registration would materially and adversely affect the marketing of the
securities to be sold therein, in which case the Warrantholder shall be able to
make one such additional Demand Registration. The Warrantholder shall have the
right to make unlimited Demand Registrations on Form S-3 (or any successor
short-form registration statement).
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(c) Demand registrations shall be on such appropriate registration
form promulgated by the Commission as shall be selected by the Company, shall be
reasonably acceptable to the Majority Holders, and shall permit the disposition
of such Warrant Shares in accordance with the intended method or methods
specified in their request for such registration.
(d) If the number of Warrant Shares included in a Demand Registration
is reduced pursuant to Section 7.1(b), the Company will include in any such
registration, to the extent of the number which the Managing Underwriter advises
the Company can be sold in such offering, first, the Warrant Shares requested to
be included in such registration by the Warrantholder, second, not less than 50%
of any shares registered in such registration (other than Warrant Shares of the
Warrantholder) shall be Warrant Shares of Other Holders requested to be included
in such registration (which shall be included pro rata according to the number
of Warrant Shares requested by such other Holders to be included in such
registration), and third, other securities of the Company proposed to be
included in such registration, allocated among the holders thereof in accordance
with the priorities then existing among the Company and the holders of such
other securities; and any securities so excluded shall be withdrawn from and
shall not be included in such Demand Registration.
7.2 Incidental Registration. (a) If the Company at any time proposes
to register any of its Common Stock under the Securities Act for sale to the
public (other than with respect to the initial public offering of its Common
Stock), whether for its own account or for the account of security holders or
both (excluding any registration statement on Form X-0, X-0 or another form not
available for registering the Warrant Shares for sale to the public), each such
time it will give written notice to all Incidental Rights Holders (as defined
below) of its intention so to do. For purposes of this Section 7, the term
"Warrant Shares" shall not include any shares which have been (x) effectively
registered under the Securities Act and disposed of in accordance with any
registration statement covering such shares or (y) sold pursuant to Rule 144 (or
any similar provision then in force) and may be further sold without limitation
and an "Incidental Rights Holder" shall mean any Holder in connection with the
registration statement giving rise to the benefits of this Section 7.1. Upon the
written request of any such Incidental Rights Holder, received by the Company
within 20 days after the giving of any such notice by the Company, to register
any of its Warrant Shares and/or Warrant Shares issuable upon exercise of a
Warrant held by such Holder, the Company will use its best efforts to cause the
Warrant Shares as to which registration shall have been so requested to be
included in the registration statement proposed to be filed by the Company, all
to the extent requisite to permit the sale or other disposition by the
Incidental Rights Holder (in accordance with its written request) of such
Warrant Shares. Alternatively, the Company may include the Warrant Shares as to
which registration shall have been requested by an Incidental Rights Holder
under this subsection (a) in a separate registration statement to be filed
concurrently with the registration statement proposed to be filed by the
Company. In the event that any registration statement filed pursuant to this
Section 7.2 shall be in whole or in part, in connection with an underwritten
public offering, the number of Warrant Shares to be included in such
registration statement may be reduced or no Incidental Rights Holders may be
included in such registration, subject to and in accordance with
15
subsection (b) below, if and to the extent that the managing underwriter(s)
shall give their written opinion that such inclusion would materially and
adversely affect the marketing of the securities to be sold therein by the
Company. Except as set forth above, there shall be no limit to the number of
registrations that may be requested pursuant to this Section 7.2.
(b) Any reduction in the number of Warrant Shares owned by Incidental
Rights Holders requested to be included in a registration statement pursuant to
subsection (a) above, or the exclusion of such shares therefrom, shall be
subject to the following conditions:
(i) No such reduction or exclusion shall be made if any securities
are to be included in such registration statement for the account
of any person other than the Company or the Holders.
(ii) Any such reduction in the number of Warrant Shares owned by
Incidental Rights Holders otherwise permitted under this
subsection (b) shall be made pro rata among the requesting
Incidental Rights Holders based upon the number of Warrant Shares
requested to be registered by such remaining Incidental Rights
Holders in accordance with this Section 7.2.
(c) In the event that a distribution of Common Shares covered by a
registration statement referred to in subsection (a) above is to be
underwritten, then the distribution of Warrant Shares for the account of the
Incidental Rights Holders shall be underwritten by the same underwriters who are
underwriting the distribution of the securities for the account of the Company
and/or any other persons whose securities are covered by such registration
statement, and the Holders that are selling Warrant Shares pursuant to such
registration statement shall enter into the agreement with such underwriters
contemplated under Section 7.3.
7.3 Registration Procedures. If and whenever the Company is required
by the provisions of this Section 7 to use its best efforts to effect the
registration of any Warrant Shares under the Securities Act, the Company will,
as expeditiously as possible:
(a) prepare and file with the Commission a registration statement
which, in the case of an underwritten public offering, shall be on such form of
general applicability satisfactory to the managing underwriter selected as
herein provided and shall include the Warrant Shares and use its best efforts to
cause such registration statement to become and remain effective for the period
of the distribution contemplated thereby (determined as hereinafter provided);
(b) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in connection
therewith as may be necessary to keep such registration statement effective for
the period specified in paragraph (a) above and comply with the provisions of
the Securities Act with respect to the disposition of all Warrant Shares covered
by such registration statement in accordance with the Holder's intended method
of disposition set forth in such registration statement for such period;
16
(c) furnish to each seller of Warrant Shares and to each
underwriter such number of copies of the registration statement and the
prospectus included therein (including each preliminary prospectus) as such
persons reasonably may request in order to facilitate the public sale or other
disposition of the Warrant Shares covered by such registration statement;
(d) use its best efforts to register or qualify the Warrant
Shares covered by such registration statement under the securities or "blue sky"
laws of such jurisdictions as each seller of Warrant Shares or, in the case of
an underwritten public offering, the managing underwriter shall reasonably
request, and do any and all other acts and things which may be necessary under
such securities or blue sky laws to enable such seller to consummate the public
sale or other distribution in such jurisdiction to be sold by such seller,
except that the Company shall not for any such purpose be required to qualify
generally to transact business as a foreign corporation in any jurisdiction
where it is not so qualified or to consent to general service of process or
subject itself to taxation in any such jurisdiction;
(e) use its best efforts to list the Warrant Shares covered by such
registration statement with any securities exchange or automated quotation
system on which any security of the Company is then listed;
For purposes of Section 7.3(a) and 7.3(b), the period of distribution
of Warrant Shares in a firm commitment underwritten public offering shall be
deemed to extend until each underwriter has completed the distribution of all
securities purchased by it, and the period of distribution of Warrant Shares in
any other registration shall be deemed to extend until the earlier of the sale
of all Warrant Shares covered thereby or 120 days after the effective date
thereof.
In connection with each registration pursuant to this Section 7, the
sellers of Warrant Shares will furnish to the Company in writing such
information with respect to themselves and the proposed distribution by them as
reasonably shall be necessary and shall be requested by the Company in order to
assure compliance with federal and applicable state securities laws.
In connection with each registration pursuant to Sections 7.1 covering
an underwritten public offering, if such underwriting agreement contains
restrictions upon the sale of securities of the Company, other than the
securities which are to be included in the proposed distribution, then such
restrictions shall be binding upon the sellers of Warrant Shares for a period
not exceeding 120 days (or such longer time as is customary and required) from
the effective date of the registration statement and, if requested by the
Company, such sellers shall enter into a written agreement to that effect. In
the event of the Company's initial public offering, if requested by the
Company's underwriters, the holders of Warrants and Warrant Shares agree not to
sell, pledge or otherwise transfer their Warrants or Warrant Shares for a period
not exceeding 120 days (or such longer time as is customary and required).
7.4 Expenses. All expenses incurred by the Company in complying with
Sections 7.1 and 7.2, including, without limitation, all registration and filing
fees, printing
17
expenses, fees and disbursements of counsel and independent public accountants
for the Company, fees and expenses (including reasonable counsel fees) incurred
in connection with complying with state securities or "blue sky" laws, fees of
the National Association of Securities Dealers, Inc., fees of a national
securities exchange or the Nasdaq National Market, transfer taxes, fees of
transfer agents and registrants, costs of insurance and but excluding any
Selling Expenses, are called "Registration Expenses." "Selling Expenses" as used
herein means all underwriting discounts and selling commissions applicable to
the sale of Warrant Shares. The Company will pay all Registration Expenses and
the sellers of Warrant Shares will pay all Selling Expenses in connection with
each registration statement prepared or filed under Sections 7.1 or 7.2.
7.5 Indemnification and Contribution. (a) In the event of a
registration of any Warrant Shares under the Securities Act pursuant to Section
7.1 or 7.2, the Company shall indemnify and hold harmless, to the full extent
permitted by law, each seller of such Warrant Shares thereunder and each
partner, officer, trustee, director, employee, agent or Affiliate of such seller
(collectively, for purposes of this Section 7.5, a "seller"), against any
losses, claims, damages, liabilities or expenses, joint or several, to which
such seller may become subject under the Securities Act or otherwise, insofar as
such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon any untrue statement or alleged untrue statement
of any material fact contained in any registration statement under which such
Warrant Shares were registered under the Securities Act pursuant to Sections
7.1, any preliminary prospectus or final prospectus contained therein, or any
amendment or supplement thereof, or arise out of or are based upon the omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, and shall
pay or reimburse each such seller for any legal or other expenses reasonably
incurred by them in connection with investigating or defending any such loss,
claim, damage, liability or action; provided, however, that the Company shall
not be liable in any such case to a seller, if and to the extent that any such
loss, claim, damage or liability arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged omission made in
reliance upon and in conformity with information pertaining to such seller
furnished in writing to the Company by such seller specifically for use in such
registration statement, prospectus, amendment or supplement.
7.6 Rule 144 Reporting. With a view to making available the benefits
of certain rules and regulations of the Commission which may at any time permit
the sale of the Warrant Shares to the public without registration, on and after
the completion of the Company's initial public offering, the Company agrees to:
(a) make and keep public information available, as those terms are
understood and defined in Rule 144;
(b) use its best efforts to file with the Commission in a timely
manner all reports and other documents required of the Company under the
Securities Act and the Exchange Act; and
18
(c) furnish to each Holder forthwith upon request a written statement
by the Company as to its compliance with the reporting requirements of such Rule
144 and of the Securities Act and the Exchange Act, a copy of the most recent
annual or quarterly report of the Company, and such other reports and documents
so filed by the Company as such Holder may reasonably request in availing itself
of any rule or regulation of the Commission allowing such Holder to sell and
Warrant Shares without registration.
Section 8. REDEMPTION OF WARRANTS.
8.1 Right of Redemption. So long as no Triggering Event has occurred
prior to January 30, 2003 (except to the extent the Warrantholder was precluded
from participating in such Triggering Event, despite its request), the Warrants
may be redeemed, as a whole, at any time on or after January 30, 2003 (the
"Redemption Date"), at the Redemption Price.
8.2 Notice of Redemption. Notice of redemption shall be given by the
Company by first-class mail, postage prepaid, mailed not less than 20 or more
than 60 days prior to the Redemption Date, to each Warrantholder to be redeemed,
at his address appearing in the Company's records. Such notice shall be presumed
to have been given when so mailed.
All notices of redemption shall state:
(1) the Redemption Date,
(2) the Redemption Price,
(3) the exercise price and the date on which the right to convert the
Warrants to be redeemed will terminate, and
(4) the place or places where such Warrants are to be surrendered for
payment of the Redemption Price.
8.3 Redemption Price Payable on Redemption Date. Notice of redemption
having been given as aforesaid, the Warrants so to be redeemed shall, on the
Redemption Date, become due and payable at the Redemption Price therein
specified.
If any Warrant called for redemption shall not be paid upon surrender
thereof for redemption, such Warrant shall remain outstanding.
Section 9. RIGHT TO REQUIRE REPURCHASE.
9.1 Right to Require Repurchase. So long as no Triggering Event has
occurred prior to January 31, 2001 (except to the extent the Warrantholder was
precluded from participating in such Triggering Event, despite its request),
then each Holder shall have the right, at such Holder's option, to require the
Company to purchase, and upon the exercise of such right the Company shall
purchase, all of such Holder's Warrants (or the Common Stock issued upon
exercise of such Warrants) on any Business Day (the "Repurchase Date") on or
after January 31,
19
2001, at the Repurchase Price.
9.2 Right to Put Warrants or Warrant Stock. Any Holder desiring to
exercise the option granted in Section 9.1 above, (a "Tendering Holder") shall
give written notice to the Company (a "Put Notice"). Promptly upon its receipt
of a Put Notice, the Company shall give written notice of the particulars
thereof to each (if any) other Holder of Warrants and, if any such other Holder
delivers a Put Notice ot the Company within 10 days after its receipt of such
notice from the Company, the Holders of all Warrants or Warrant Stock shall be
entitled to close their put of such Warrants or Warrant Stock on, but not
before, the date scheduled pursuant to Section 9.3 for the closing of the put
pursuant to this Section 9.2. For all purposes of this Section 9, each Warrant
shall be treated as the number of shares of Warrant Stock for which it is then
exercisable.
9.3 Put Closing. The put closing, except as otherwise provided in this
Section 9, shall take place on a date (a) not more than sixty (60) days after
the date a Put Notice is received by the Company as the Company shall specify by
notice to the Tendering Holders, or (b) at such other time and place as the
Tendering Holders and the Company may agree upon (a "Put Closing Date"). At the
put closing, the Tendering Holders will deliver to the Company a certificate or
certificates evidencing the Warrant Stock and Warrants then to be purchased by
the Company (properly endorsed or accompanied by stock powers or, in the case of
any Warrant, assignments) against payment of the Repurchase Price to the
Tendering Holders in the manner specified in Section 9.4 hereof (together with a
certificate or certificates evidencing any shares of Warrant Stock, and Warrants
of like tenor evidencing the right to purchase any shares of Warrant Stock,
presented to the Company but not then being purchased by the Company). Except to
the extent prohibited by applicable law, prior to the Put Closing Date, the
Company will provide the Tendering Holders with all available information that
may be material to the exercise of the Tendering Holders' rights under this
Section 9, including any plans or proposals for any mergers, sales of assets,
acquisitions and substantial sales of stock by its stockholders.
9.4 Payment. The Company shall pay the Repurchase Price at any closing
under Section 9.3 hereof out of funds legally available therefor in cash or
immediately available funds. In the event that any portion of the Repurchase
Price is not paid as a result of any insufficiency of legally available funds or
otherwise, either (a) the Tendering Holders may rescind their Put Notice, or (b)
the Company shall pay to the Tendering Holders that portion of the aggregate
Repurchase Price which the Company is able to pay pro rata to each such
Tendering Holder based on the ratio of the Repurchase Price payable to such
Tendering Holder to the aggregate Repurchase Price payable to all such Tendering
Holders, and such Tendering Holders shall retain a contract claim for the unpaid
balance of the Repurchase Price and shall retain all their respective rights
hereunder and under and in connection with the Warrants and Warrant Stock as to
that number of shares of Warrant Stock or portion of the Warrants exercisable
for that number of shares as such unpaid portion represents (the "Unrepurchased
Securities"), until such time as the unpaid portion of the Repurchase Price and
interest thereon, determined as set forth below, shall be paid to the Tendering
Holders in full. The unpaid portion of the Repurchase Price allocable to the
Unrepurchased Securities shall remain an obligation of the Company and shall
become due and payable, in cash or immediately available funds, as soon
20
as there are funds legally available therefor, and the Tendering Holders shall
be entitled to pursue whatever legal remedies may be available to them under
applicable law. Interest shall accrue from the Put Closing Date on any unpaid
portion of the Repurchase Price at the rate of 18% per annum, compounded on a
monthly basis to the extent permitted by law, and payable on demand.
Section 10. NO IMPAIRMENT. The Company shall not take any action,
including, without limitation, by amendment of its certificate of incorporation
or by-laws or through any consolidation, merger or arrangement, reorganization,
transfer of assets, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms of this Warrant, but will at all times in good faith assist in the
carrying out of all such terms and in the taking of all such action as may be
necessary or appropriate to protect the rights of the holder of this Warrant
against dilution or other impairment. Without limiting the generality of the
foregoing, the Company (a) will take such action as may be necessary or
appropriate in order that the Company may validly and legally issue fully paid
and nonassessable shares of Warrant Stock on the exercise of this Warrant, (b)
will not take any action which results in any adjustment pursuant to Section 4
of this Warrant if the total number of shares of Common Stock issuable after
such action would exceed the total number of shares of Common Stock then
authorized by the Company's certificate of incorporation and available for the
purpose of issue upon such exercise, and (c) use its 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.
Section 11. TAKING OF RECORD; STOCK AND WARRANT TRANSFER BOOKS. (a) In
case of all dividends or other distributions by the Company to the holders of
its Nonpreferred Stock with respect to which provisions of Section 4 refers to
the taking of a record of such holders, the Company will in each such case take
such a record and will take such record as of the close of business on a
Business Day. The Company will not at any time, except upon dissolution,
liquidation or winding up of the Company, close its stock transfer books or
warrant transfer books so as to result in preventing or delaying the exercise or
transfer of this Warrant.
(b) If this Warrant is divided between or among more than one Holder,
any time any action, waiver or consent of the Holder of this Warrant is called
for, such action, waiver or consent shall be binding if taken or given by the
Majority Holders (provided that any Warrants owned by the Company or any of its
Affiliates shall not be counted).
Section 12. LOSS OR MUTILATION. Upon receipt by the Company of
evidence satisfactory to it (in the exercise of reasonable discretion) of the
ownership of and the loss, theft, destruction or mutilation of this Warrant and
(in case of loss, theft or destruction) of indemnity satisfactory to it, and in
case of mutilation, upon surrender and cancellation hereof, the Company will
execute and deliver in lieu hereof a new warrant of like tenor and date.
Section 13. OFFICE OF THE COMPANY. As long as this Warrant remains
outstanding, the Company shall maintain an office or agent at Austin, Texas,
where this Warrant
21
may be presented for exercise, registration, transfer, division or combination
as in this Warrant provided. Such office or agent shall be maintained at said
address unless and until the Company shall designate and maintain another office
or agent for such purposes and give written notice thereof to the Holder.
Section 14. NOTICES GENERALLY. No notice or other communication shall
be deemed given hereunder unless sent in any of the manners, and to the persons,
specified in this Section 14. All notices and other communications hereunder
will be in writing and will be deemed given (a) upon receipt if delivered
personally, mailed by registered or certified mail, or sent by overnight courier
or (b) upon dispatch if transmitted by telex, telegraph, telecopy or other means
of facsimile, in any case to the Holder at the Holder's last known address
appearing on the books of the Company or to the Company at its address (or at
such other address for a party as will be specified by like notice).
Section 15. LIMITATION OF LIABILITY. No provision hereof, in the
absence of affirmative action by the Holder to purchase shares of Common Stock,
and no mere enumeration herein of the rights or privileges of the Holder hereof,
shall give rise to any liability of the Holder for the purchase price or as a
stockholder of the Company, whether such liability is asserted by the Company or
by creditors of the Company or by anyone else.
Section 16. SURVIVAL. All covenants and agreements of the Company, and
all rights and duties of the Holder from time to time of this Warrant or any
Common Stock issued pursuant to exercise of this Warrant, shall be deemed to
survive any surrender hereof to the Company upon exercise hereof by the Holder
as contemplated by Section 2 or expiration of the right of the Holder to
exercise any unexercised balance hereof on the Warrant Expiration Date.
Section 17. CERTAIN WARRANTS DEEMED NOT OUTSTANDING. For the purposes
of determining whether the Holder entitled to purchase a requisite number of
Shares at any time has taken any action, any Warrants owned by the Company or
any Affiliate of the Company, shall be deemed not to be outstanding.
Section 18. AUTHORITY; EXECUTION AND DELIVERY. The Company hereby
represents and warrants that the Company has full corporate power and authority
to enter into this Agreement and to issue the Warrants and the Warrant Shares in
accordance with the terms hereof. The execution, delivery and performance of
this Agreement by the Company have been duly and effectively authorized by the
Company. This Agreement has been duly executed and delivered by the Company and
constitutes the legal, valid and binding obligation of the Company enforceable
against the Company in accordance with its terms.
Section 19. REGULATORY RESTRICTIONS.
(a) No Warrantholder which is a bank holding company or a subsidiary
of a bank holding company (a "Bank Affiliate") as defined in the Bank Holding
Company Act of 1956, as amended, or other applicable banking laws of the United
States of America and the rules and regulations promulgated thereunder (the
"Bank Holding Company Act") shall acquire voting
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Common Stock, if, after giving effect to such acquisition, the Bank Affiliate,
together with its Affiliates, would own more than five percent (5%) of the
outstanding voting securities of the Company. Notwithstanding the foregoing,
shares of Common Stock may otherwise be acquired or held by the Initial
Purchaser or any other Bank Affiliate which is a Small Business Investment
Company consistent with and subject to the limitations contained in the Small
Business Act and, to the extent not inconsistent with the Bank Holding Company
Act, shares of Common Stock may be acquired in the event that:
(i) the Company shall vote to merge or consolidate with or into any
other Person and after giving effect to such merger or consolidation the
Bank Affiliate would not own more than five percent (5%) of the outstanding
voting securities of the surviving corporation; or
(ii) the Common Stock issuable upon exercise of this Warrant is
covered by an effective registration statement.
(b) Small Business Act. No person which is a Small Business Investment
Company, as defined in the Small Business Act, shall exercise "put" rights as a
holder of Warrants or Warrant Stock, hereunder if the exercise thereof shall
violate any of the rules or regulations of the Small Business Act.
(c) Statement of Compliance. For purposes of this Warrant, a written
statement of the Holder or any of its Affiliates acquiring Common Stock, or
exercising "put" or conversion rights with respect to this Warrant, delivered to
the Company upon acquisition of any shares of Common Stock or delivery of any
Exercise Notice, to the effect that Bank or its Affiliate, as the case may be,
is legally entitled to exercise its rights to purchase securities of the Company
and that such exercise will not violate or contravene any law or regulation or
any judgment, decree or order of any governmental authority then applicable to
the Holder or such Affiliate, as the case may be, shall be conclusive and
binding upon the Company and shall absolutely obligate and bind the Company to
deliver, in accordance with the other terms and provisions hereof, certificates
or other appropriate instruments representing the securities so purchased.
Section 20. GOVERNING LAW. This Warrant shall be governed by and
construed in accordance with the laws of the State of New York without giving
effect to the conflict of laws rules therein.
IN WITNESS WHEREOF, the Company has caused this Warrant to be duly
executed.
Dated as of January 30, 1998 AUTOBOND ACCEPTANCE CORPORATION
By:
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Name:
Title:
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