WARRANT AGREEMENT
WARRANT AGREEMENT (including all amendments, modifications or
supplements thereto, this "Agreement"), dated as of August 3, 1994, among
XXXXX FINANCIAL, a California corporation (the "Company") and each of the
Persons listed on Annex 1 hereto (collectively the "Placement Agents").
RECITALS:
A. In consideration of services rendered by the Placement Agents in
connection with the issuance and sale of the Company's Series A Preferred
Stock, no par value (the "Series A Preferred Stock") to the Persons listed on
Schedule 1.01 (collectively the "Purchasers") to that certain Series A
Preferred Stock Purchase Agreement dated as of even date herewith (the
"Series A Preferred Stock Purchase Agreement") among the Company and the
Purchasers, the Company has agreed to issue to the Placement Agents
an aggregate number of 82,353 warrants of the Company, each such warrant
representing the right to purchase one share of Common Stock upon the terms
and subject to the conditions hereinafter set forth (individually a "Warrant"
and collectively the "Warrants").
B. The capitalized terms used in this Agreement have the respective
meanings ascribed to them in Section 6.
AGREEMENT:
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein set forth, the parties to this Agreement hereby agree as
follows:
1. FORM, EXECUTION AND TRANSFER OF WARRANT CERTIFICATES
1.01. FORM OF WARRANT CERTIFICATES. The warrant certificates
(individually a "Warrant Certificate" and collectively the "Warrant
Certificates") evidencing the Warrants, and the forms of assignment and of
election to purchase shares to be attached thereto, shall be substantially in
the form set forth in EXHIBIT A hereto and may have such letters, numbers or
other marks of identification or designation as the Company may deem
appropriate and as are not inconsistent with the provisions of this
Agreement, or as may be required to comply with any law or with any rule or
regulation made pursuant thereto or to conform to usage. The Warrant
Certificates shall be dated as of the date of issuance thereof by the
Company, either upon initial issuance or upon transfer or exchange, and on
their face shall initially entitle the holders thereof to purchase the number
of shares of Common Stock equal to the number of Warrants represented by such
Certificate (which number may be a fractional number) at the price of $17.00
per share (the "Purchase Price"), but the number of such shares and
the Purchase Price shall be subject to adjustment as provided herein.
1.02. EXECUTION OF WARRANT CERTIFICATES; REGISTRATION BOOKS;
PLACEMENT AGENT REPRESENTATIONS.
(a) EXECUTION OF WARRANT CERTIFICATES. The Warrant Certificates
shall be executed on behalf of the Company by its President, one of its Vice
Presidents or any other officer of the Company authorized by the Board of
Directors, which execution shall be attested by the Secretary or an Assistant
Secretary of the Company. In case any officer of the Company who shall have
signed any Warrant Certificate shall cease to be such officer of the Company
before issuance and delivery by the Company of such Warrant Certificate, such
Warrant Certificate, nevertheless, may be issued and delivered with the same
force and effect as though the individual who signed such Warrant Certificate
may be signed on behalf of the Company by any individual who, at the actual
date of the execution of such Warrant Certificate, shall be a proper officer
of the Company to sign such Warrant Certificate, although at the date of the
execution of this Agreement any such individual was not such an officer.
(b) REGISTRATION BOOKS. The Company will keep or cause to be kept
at its office maintained at the address of the Company set forth in Section
7.02 hereof, or at such other office of the Company in the United States of
America of which the Company shall have given notice to each holder of
Warrant Certificates, books for registration and transfer of the Warrant
Certificates issued hereunder. Such books shall show the names and addresses
of the respective holders of the Warrant Certificates, the registration
number and the number of Warrants evidenced on its face by each of the
Warrant Certificates and the date of each of the Warrant Certificates.
(c) PLACEMENT ACCENT REPRESENTATIONS. Each Placement Agent is an
"accredited investor" as defined in Regulation D under the Securities Act,
and is acquiring the Warrants solely for its own account for the purpose of
investment and not with a view to or for sale in connection with any
distribution thereof, and it has no present intention or plan to effect any
distribution of the Warrants. Each Placement Agent acknowledges that it is
able to bear the financial risks associated with an investment in the
Warrants and that it has been given full access to such records of
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the Company and the Subsidiaries and to the officers of the Company and the
Subsidiaries as it has deemed necessary and appropriate to conducting its due
diligence investigation. The Warrants will bear a legend to the following
effect:
"The securities represented by this certificate have not been registered
under the Securities Act of 1933, as amended, or the laws of the State of
California or elsewhere, and may not be sold or transferred except in
compliance with that Act and such laws."
1.03. TRANSFER, SPLIT UP, COMBINATION AND EXCHANGE OF WARRANT
CERTIFICATES; LOST OR STOLEN WARRANT CERTIFICATES; ETC.
(a) TRANSFER, SPLIT UP, ETC. Any Warrant Certificate, with or
without other Warrant Certificates, may be transferred, split up, combined or
exchanged for another Warrant Certificate or Warrant Certificates, entitling
the registered holder or transferee thereof to purchase a like number of
shares of Common Stock as the Warrant Certificate or Warrant Certificates
surrendered then entitled such registered holder to purchase. Any registered
holder desiring to transfer, split up, combine or exchange any Warrant
Certificate shall make such request in writing delivered to the Company, and
shall surrender the Warrant Certificate or Warrant Certificates to be
transferred, split up, combined or exchanged at the office of the Company
referred to in Section 1.02(b) hereof. Thereupon the Company shall deliver
promptly to the Person entitled thereto a Warrant Certificate or Warrant
Certificates, as the case may be, as so requested.
(b) LOSS, THEFT, ETC. Upon receipt by the Company of evidence
reasonably satisfactory to it of the ownership of and the loss, theft,
destruction or mutilation of any Warrant Certificate and (i) in the case of
loss, theft or destruction, of indemnity reasonably satisfactory to it, or
(ii) in the case of mutilation, upon surrender and cancellation thereof, the
Company at its own expense will execute and deliver, in lieu thereof, a new
Warrant Certificate of like tenor to the registered owner in lieu of the
Warrant Certificate so lost, stolen, destroyed or mutilated.
1.04. SUBSEQUENT ISSUANCE OF WARRANT CERTIFICATES. Subsequent to
their original issuance, no Warrant Certificates shall be issued except (a)
Warrant Certificates issued upon any transfer, combination, split up or
exchange of Warrants pursuant to Section 1.03(a) hereof, (b) Warrant
Certificates issued in replacement of mutilated, destroyed, lost or stolen
Warrant Certificates pursuant to Section 1.03(b) hereof and (c) Warrant
Certificates issued pursuant to Section 2.03 hereof upon the partial exercise
of any Warrant Certificate to evidence the unexercised portion of such
Warrant Certificate.
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2. EXERCISE OF WARRANTS; PURCHASE PRICE
2.01. EXERCISE OF WARRANTS. At any time on or after the Closing Date
and prior to the Expiration Date, the holder of any Warrant Certificate may
exercise the Warrants evidenced thereby in whole or in part, by surrender of
such Warrant Certificate, with an election to purchase (a form of which is
attached hereto as part of the form of Warrant Certificate attached as
Exhibit A) attached thereto duly executed, to the Company at its office
referred to in Section 1.02(b) hereof, together with payment of the Purchase
Price (payable as set forth below) for each share of Common Stock as to which
the Warrants are exercised. The Purchase Price shall be payable (a) in cash
or by certified or official bank check payable to the order of the Company or
by wire transfer of immediately available funds to the account of the Company
or (b) by delivery of Warrant Certificates to the Company for cancellation in
accordance with the following formula: in exchange for each share of Common
Stock issuable on exercise of each Warrant represented by any Warrant
Certificate any holder thereof so delivers for cancellation, such holder
shall receive such number of shares of Common Stock as is equal to the
product of (i) the number of shares of Common Stock issuable upon exercise of
such Warrant at such time multiplied by (ii) a fraction, the numerator of
which is the Fair Market Value per share of Common Stock at such time minus
the Purchase Price per share of Common Stock at such time, and the
denominator of which is the Fair Market Value per share of Common Stock at
such time.
2.02. ISSUANCE OF COMMON STOCK. Upon timely receipt of a Warrant
Certificate, with the form of election to purchase duly executed,
accompanied by payment of the Purchase Price for each of the share to be
purchased in the manner provided in Section 2.01 and an amount equal to any
applicable transfer tax (if not payable by the Company as provided in
Section 3.03 hereof), the Company shall thereupon promptly cause
certificates for the number of shares (including any fractional shares)
of Common Stock then being purchased to be delivered to or upon the order
of the registered holder of such Warrant Certificate.
2.03. UNEXERCISED WARRANTS. In case the registered holder
of any Warrant Certificate shall exercise less than all the
Warrants evidenced thereby, a new Warrant Certificate evidencing Warrants
equal in number to the number of Warrants remaining unexercised
shall be issued by the Company to the registered holder of such Warrant
Certificate or to its duly authorized assigns.
2.04. CANCELLATION AND DESTRUCTION OF WARRANT CERTIFICATES. All
Warrant Certificates surrendered to the Company for the purpose of exercise,
exchange, substitution or transfer shall be cancelled by it, and no Warrant
Certificates shall be issued in lieu thereof except as expressly permitted by
any of the
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provisions of this Agreement. The Company shall cancel and return any other
Warrant Certificates purchased or acquired by the Company otherwise than upon
the exercise thereof.
3. RESERVATION AND AVAILABILITY OF SHARES OF COMMON STOCK; TRANSFER
TAXES; REPRESENTATIONS.
3.01. RESERVATION OF COMMON STOCK. The Company shall at all times
reserve and keep available out of its authorized but unissued shares of
Common Stock, solely for the purpose of effecting the exercise of the
Warrants, such number of its shares of Common Stock as shall from time to
time be sufficient to effect the exercise of all outstanding Warrants, and if
at any time the number of authorized but unissued shares of Common Stock
shall not be sufficient to effect the exercise of all then outstanding
Warrants, the Company shall take such action as may be necessary to increase
its authorized but unissued shares of Common Stock to such number of shares
as shall be sufficient for such purpose.
3.02. COMMON STOCK TO BE DULY AUTHORIZED AND ISSUED, FULLY PAID AND
NONASSESSABLE. The Company covenants and agrees that it will take all such
action as may be necessary to ensure that all shares of Common Stock
delivered upon the exercise of any Warrants, at the time of delivery of the
certificates for such shares, shall be duly and validly authorized and issued
and fully paid and nonassessable and the issuance of such shares will not be
subject to preemptive or other similar contractual rights of any other
stockholder of the Company.
3.03. TRANSFER TAXES. The Company further covenants and agrees that
it will pay when due and payable any and all federal and state transfer taxes
and charges that may be payable in respect of the initial issuance or deliver
of (a) each Warrant Certificate and (b) each share of Common Stock issued
upon the exercise of any Warrant. The Company shall not, however, be required
to (y) pay any transfer tax that may be payable in respect of the transfer or
delivery of Warrant Certificates or the issuance or delivery of certificates
for shares of Common Stock in a name other than that of the registered holder
of the Warrant Certificates evidencing any Warrant surrendered for exercise
or (z) issue or deliver any such certificates for shares of Common Stock upon
the exercise of any Warrant until any such tax shall have been paid (any such
tax being payable by the holder of such Warrant Certificate at the time of
surrender).
3.04. COMMON STOCK RECORD DATE. Each Person in whose name any
certificate for shares of Common Stock is issued upon the exercise of
Warrants shall for all purposes be deemed to have become the holder of record
of the Common Stock represented thereby on, and such certificate shall be
dated, the date upon which the Warrant Certificate evidencing such Warrants
was duly surrendered
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with an election to purchase attached thereto duly executed and payment of
the aggregate Purchase Price (and any applicable transfer taxes, if payable
by such Person) was made in accordance with the terms thereof. Prior to the
exercise of the Warrants evidenced thereby, the holder of a Warrant
Certificate shall not be entitled to any rights of a stockholder in the
Company with respect to shares for which the Warrants shall be exercisable,
including, without limitation, the right to vote, to receive dividends or
other distributions, and shall not be entitled to receive any notice of any
proceedings of the Company, except as provided herein or in any other
applicable agreement between the Company and such holder.
3.05. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
hereby represents and warrants to the Placement Agents as of the Closing Date
as follows:
(a) ORGANIZATION, STANDING AND POWER OF THE COMPANY. Each of the
Company and the Subsidiaries is a corporation duly organized, validly
existing and in good standing under the laws of its jurisdiction of
incorporation. Each of the Company and the Subsidiaries has all requisite
power and authority to own, lease and operate its properties and assets and
to conduct its business as now being conducted and is duly qualified to do
business in good standing in those foreign jurisdictions in which such
qualification is required.
(b) AUTHORITY; ENFORCEABILITY; NO CONFLICT. The Company has all
requisite corporate power and authority to enter into this Agreement, to
issue and sell the Warrants, and to carry out its obligations hereunder. The
execution, delivery and performance of this Agreement by the Company and the
issuance and sale of the Warrants by the Company have been duly and validly
authorized by all requisite corporate proceedings on the part of the Company.
This Agreement is a valid and binding obligation of the Company, enforceable
against the Company in accordance with its terms, except that (i) such
enforcement may be subject to bankruptcy, insolvency, reorganization,
moratorium, rehabilitation, liquidation, conservatorship, receivership or
other similar laws now or hereafter in effect relating to creditors' rights
generally and (ii) the remedy of specific performance and injunctive and
other forms of equitable relief may be subject to equitable defenses and to
the discretion of the court before which any proceeding therefor may be
brought. The execution and delivery of this Agreement by the Company does
not, and the consummation by the Company of the transactions contemplated
hereby, will not result in or constitute: (a) a default, breach or violation
of or under the Articles of Incorporation or the By-Laws, (b) a default,
breach or violation of or under any mortgage, deed of trust, indenture, note,
bond, license, lease agreement or other instrument or obligation to which the
Company or any Subsidiary is a party or by which any of
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their respective properties or assets are bound if such default, breach or
violation could reasonably be expected to have a Material Adverse Effect, (c)
a violation of any statute, rule, regulation, order, judgment or decree of
any court, public body or authority by which the Company, any Subsidiary or
any of their respective properties or assets are bound if such violation
could reasonably be expected to have a Material Adverse Effect, (d) an event
which (with notice or lapse of time or both) would permit any Person to
terminate, accelerate the performance required by, or accelerate the maturity
of any indebtedness or obligation of the Company or any Subsidiary under any
agreement or commitment to which the Company or any Subsidiary is a party or
by which the Company or any Subsidiary is bound or by which any of their
respective properties or assets are bound if such termination or acceleration
could reasonably be expected to have a Material Adverse Effect, (e) the
creation or imposition of any lien, charge or encumbrance on any property of
the Company or any Subsidiary under any agreement or commitment to which the
Company or any Subsidiary is a party or by which the Company or any
Subsidiary is bound or by which any of their respective properties or assets
are bound if such creation or imposition could reasonably be expected to have
a Material Adverse Effect, or (f) an event which would require any consent
under any agreement to which the Company or any Subsidiary is a party or by
which the Company or any Subsidiary is bound or by which any of their
respective properties or assets are bound if the failure to obtain such
consent could reasonably be expected to have a Material Adverse Effect (other
than the consent of Xxxxx Fargo Bank which is not expected to be obtained due
to the repayment of all obligations owed to Xxxxx Fargo Bank).
(c) CAPITALIZATION. The authorized capital stock of the Company
consists of (a) 10,000,000 shares of Common Stock, of which 1,795,419 shares
are outstanding, 941,177 are reserved for issuance upon conversion of the
Company's Series A Preferred Stock, 275,000 are reserved for issuance under
the Stock Option Plan, 82,353 are reserved for issuance upon the exercise of
the Warrants and 30,000 are reserved for issuance upon the exercise of
options issued to Xxxxxxx X. Xxxxxx (the "Xxxxxx Options") and (b) 5,000,000
shares of Preferred Stock, no par value, of which 941,777 have been
designated as Series A Preferred Stock, 941,777 of which shall be issued and
outstanding on the Closing Date. All of the outstanding shares of Common
Stock have been duly authorized and validly issued, and are fully paid and
non-assessable. Except for the options issued or to be issued under the
Stock Option Plan, the Warrants, the Xxxxxx Options or as provided in the
Series A Preferred Stock Purchase Agreement, there are no outstanding
preemptive, conversion or other rights, options, warrants or agreements
granted or issued by or binding upon the Company for the purchase or
acquisition by any other Person of any shares of capital stock of the Company
or any other securities convertible into, exchangeable for or evidencing the
right to subscribe for any
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shares of such capital stock. Except for the Company's obligations under the
ESOP, the Tender Offer, the Xxxxxxxx Agreement and the Certificate of
Designation, the Company is not subject to any obligation (contingent or
otherwise) to repurchase or otherwise acquire or retire any shares of its
capital stock or any convertible securities, rights or options of the type
described in the preceding sentence. Except as provided in the Series A
Preferred Stock Purchase Agreement, the Company is not a party to any
agreement granting registration rights to any person with respect to any of
its equity or debt securities. Except as set forth in the Voting Agreement
and the Shareholders Agreement, the Company is not a party to, and it has no
Knowledge of, any agreement restricting the voting or transfer of any shares
of the capital stock of the Company. Except as set forth on Schedule 3.05(c),
the offer and sale of all capital stock, convertible securities, rights or
options of the Company issued prior to the Closing Date complied with or were
exempt from all applicable federal and state securities laws and no
stockholder has a right of rescission or damages with respect thereto.
4. ADJUSTMENT OF PURCHASE PRICE AND NUMBER OF WARRANT SHARES; FRACTIONAL
SHARES
4.01. ADJUSTMENT UPON EXTRAORDINARY COMMON STOCK EVENT. Upon the
happening of an Extraordinary Common Stock Event, the Purchase Price shall,
simultaneously with the happening of such Extraordinary Common Stock Event,
be adjusted by multiplying the purchase Price by a fraction, the numerator of
which shall be the number of shares of Common Stock outstanding immediately
prior to such Extraordinary Common Stock Event and the denominator of which
shall be the number of shares of Common Stock outstanding immediately after
such Extraordinary Common Stock Event, and the product so obtained shall
thereafter be the Purchase Price. The Purchase Price, as so adjusted, shall
be readjusted in the same manner upon the happening of any successive
Extraordinary Common Stock Event or Events.
4.02. DIVIDENDS. In the event the Company shall make or issue, or
shall fix a record date for the determination of holders of Common Stock
entitled to receive (and shall thereafter make or issue), a dividend or other
distribution with respect to the Common Stock payable in (i) securities of
the Company other than shares of Common Stock, or (ii) other assets
(excluding cash dividends or distributions), then and in each such event
provision shall be made so that the holders of the Warrants shall receive
upon exercise thereof in addition to the number of shares of Common Stock
receivable thereupon, the number of securities or such other assets of the
Company which they would have received had their Warrants been exercised into
Common Stock on the date of such event and had they thereafter, during the
period from the date of such event to and including the date of exercise of
the Warrants, retained such
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securities or such other assets receivable by them during such period, giving
application to all other adjustments called for during such period under this
Section 4 with respect to the rights of the holders of the Warrants.
4.03. CAPITAL REORGANIZATION OR RECLASSIFICATION. If the Common
Stock issuable upon the exercise of the Warrants shall be changed into the
same or different number of shares of any class or classes of capital stock,
whether by capital reorganization, recapitalization, reclassification or
otherwise (other than a subdivision or combination of shares or stock
dividend provided for elsewhere in this Section 4, or the sale of all or
substantially all of the Company's capital stock or assets to any other
person), then and in each such event the holders of the Warrants shall have
the right thereafter to exercise such Warrants into the kind and amount of
shares of capital stock and other securities and property receivable upon
such reorganization, recapitalization, reclassification or other change by
the holders of the number of shares of Common Stock into which such Warrants
might have been exercised immediately prior to such reorganization,
recapitalization, reclassification or change, all subject to further
adjustment as provided herein.
4.04. DE MINIMIS CHANGES IN PURCHASE PRICE. No adjustment in the
Purchase Price shall be required unless such adjustment would require an
increase or decrease of at least one percent (1%) of the Purchase Price;
provided, however, that any adjustments that, at the time of the calculation
thereof, are less than one percent (1%) of the Purchase Price at such time
and by reason of this Section 4.04 are not required to be made at such time
shall be carried forward and added to any subsequent adjustment or
adjustments for purposes of determining whether such subsequent adjustments,
as so supplemented, exceed the one percent (1%) amount, all adjustments
deferred prior thereto and not previously made shall then be made. In any
case, all such adjustments being carried forward pursuant to this Section
4.04 shall be given effect upon the exercise of any Warrant by any holder
thereof for purposes of determining the Purchase Price thereof.
4.05. ADJUSTMENT OF NUMBER OF SHARES ISSUABLE PURSUANT TO WARRANTS.
Upon each adjustment of the Purchase Price as a result of the calculations
made in this Section 4, each Warrant outstanding immediately prior to the
making of such adjustment shall thereafter evidence the right to purchase, at
the adjusted Purchase Price, that number of shares of Common Stock obtained
by (i) multiplying the number of shares of Common Stock covered by such
Warrant immediately prior to such adjustment by the Purchase Price in effect
immediately prior to such adjustment and (ii) dividing the product so
obtained by the Purchase Price in effect immediately after such adjustment.
All Warrants originally issued by the Company hereunder shall, subsequent to
any adjustment made
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to the Purchase Price hereunder, evidence the right to purchase, at the
adjusted Purchase Price, the number of shares of Common Stock determined to
be purchasable from time to time hereunder upon exercise of such Warrants,
all subject to further adjustment as provided herein. Irrespective of any
adjustment or change in the Purchase Price or the number of shares of Common
Stock issuable upon the exercise of Warrants, the Warrant Certificates
theretofore and thereafter issued may continue to express the Purchase Price
per share of Common Stock and the number of shares of Common Stock that were
expressed upon the initial Warrant Certificates issued hereunder.
4.06. CERTIFICATE AS TO ADJUSTMENTS; NOTICE BY COMPANY. In each case
of an adjustment or readjustment of the Purchase Price, the Company at its
expense will furnish each holder of Warrants so affected with a certificate
prepared by the Treasurer or Chief Financial Officer of the Company, showing
such adjustment or readjustment, and stating in detail the facts upon which
such adjustment or readjustment is based. Within 90 days of the end of each
fiscal year of the Company, the Company at its expense will furnish each
holder of Warrants so affected with a certificate prepared by the independent
public accountants to the Company, showing such adjustment or readjustment,
and stating in detail the facts upon which such adjustment or readjustment is
based.
4.07. CASH IN LIEU OF FRACTIONAL SHARES. No fractional shares of
Common Stock or scrip representing fractional shares shall be issued upon the
exercise of the Warrants. Instead of any fractional shares of Common Stock
which would otherwise be issuable upon exercise of the Warrants, the Company
shall pay to the holder of the Warrants which were exercised a cash
adjustment in respect of such fractional shares in an amount equal to the
same fraction of the fair market value per share of the Common Stock (as
determined in a reasonable manner prescribed by the Board of Directors) at
the close of business on the date of exercise of the Warrants. The
determination as to whether or not any fractional shares are issuable shall
be based upon the aggregate number of Warrants being exercised at any one
time by any holder thereof, not upon each Warrant being exercised.
5. REGISTRATION RIGHTS
The Placement Agents shall have the right to register their Registrable
Securities in accordance with the following provisions:
5.01. INCIDENTAL REGISTRATION.
(a) If the Company at any time proposes to register any of its equity
securities under the Securities Act (other than a registration (i) relating to
shares of Common Stock issuable upon exercise of employee stock options or
in connection with any
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employee benefit or similar plan of the Company or (ii) in connection with an
acquisition by the Company of another company) in a manner which would permit
registration of Registrable Securities for sale to the public under the
Securities Act, it shall each such time, subject to the provisions of Section
5.01(b), give prompt written notice to all holders of record of Registrable
Securities of its intention to do so and of such holders' rights under this
Section 5.01, at least 30 days prior to the anticipated filing date of the
Registration Statement relating to such registration. Such notice shall offer
all such holders the opportunity to include in such Registration Statement
such number of Registrable Securities as each such holder may request. Upon
the written request of any such holder made within 20 days after the receipt
of the Company's notice (which request shall specify the number of
Registrable Securities intended to be disposed of by such holder and the
intended method of disposition thereof), the Company will use its best
efforts to effect the registration under the Securities Act of all
Registrable Securities which the Company has been so requested to register by
the holders thereof; PROVIDED, that (x) if such registration involves an
underwritten offering, all holders of Registrable Securities requesting to be
included in the Company's registration must sell their Registrable Securities
to the underwriters selected by the Company on the same terms and conditions
as apply to the Company; and (y) if, at any time after giving written notice
of its intention to register any securities pursuant to this Section 5.01(a)
and prior to the Effective Date of the Registration Statement filed in
connection with such registration, the Company shall determine for any reason
not to register such securities, the Company shall give written notice to all
holders of Registrable Securities and shall thereupon be relieved of its
obligation to register any Registrable Securities in connection with such
registration. If a registration pursuant to this Section 5.01(a) involves an
underwritten public offering, any holder of Registrable Securities requesting
to be included in such registration may elect, in writing prior to the date
of the final "preliminary prospectus" circulated in connection with the
offering of the Registration Statement filed in connection with such
registration, not to register such Registrable Securities in connection with
such registration. The Company shall pay all Registration Expenses in
connection with each registration of Registrable Securities requested
pursuant to this Section 5.01. However, each holder of Registrable Securities
shall pay all underwriting discounts and commissions and transfer taxes, if
any, relating to the sale or disposition of such holder's Registrable
Securities pursuant to a Registration Statement effected pursuant to this
Section 5.01.
(b) PRIORITY IN INCIDENTAL REGISTRATIONS. If a registration
pursuant to this Section 5.01 involves an underwritten offering and the
managing underwriter advises the Company in writing that, in its good faith
view, the number of equity
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securities (including all Registrable Securities) which the Company, the
holders of Registrable Securities and any other persons intend to include in
such registration exceeds the largest number of securities which can be sold
without having a material adverse effect on such offering, including the
price at which such Registrable Securities can be sold, the Company will
include in such registration (x) if such registration is initiated by the
holders of Preferred Registrable Securities, (i) FIRST, Preferred Registrable
Securities proposed to be registered by the holders thereof, pro rata based
on the number of securities proposed to be registered by each such Person,
(ii) SECOND, securities that the Company proposes to issue and sell for its
own account and (iii) THIRD, Registrable Securities and all other securities
proposed to be registered by the holders thereof, pro rata based on the
number of securities proposed to be registered by each such Person and (y) if
such registration is initiated by the Company or any other holder of
securities, (i) FIRST, securities that the Company proposes to issue and sell
for its own account, (ii) SECOND, Preferred Registrable Securities proposed
to be registered by the holders thereof, pro rata based on the number of
securities proposed to be registered by each such Person and (iii) THIRD,
Registrable Securities and all other securities proposed to be registered by
the holders thereof, pro rata based on the number of securities proposed to
be registered by each such Person.
5.02. HOLDBACK AGREEMENTS.
(a) If any registration of Registrable Securities shall be in
connection with an underwritten public offering, each holder of Registrable
Securities agrees not to effect any sale or distribution, including any
private placement or any sale pursuant to Rule 144 or any successor
provision, under the Securities Act, of any Registrable Securities, and not
to effect any such sale or distribution of any other equity security of the
Company or of any security convertible into or exchangeable or exercisable
for any equity security of the Company (in each case, other than as part of
such underwritten public offering) during the seven days prior to, and during
the 90 day period which begins on the Effective Date of such Registration
Statement (except as part of such registration) provided that each holder of
Registrable Securities has received written notice of such registration at
least two Business Days prior to the anticipated beginning of the seven day
period referred to above.
(b) If any registration of Registrable Securities shall be in
connection with an underwritten public offering, the Company agrees (i) not
to effect any sale or distribution of any of its equity securities or of any
security convertible into or exchangeable or exercisable for any equity
security of the Company (other than any such sale or distribution of such
securities in connection with any merger or consolidation by the Company or
any
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Affiliate or the acquisition by the Company or an Affiliate of the Company of
the capital stock or substantially all the assets of any other Person or in
connection with an employee stock ownership or other benefit plan) during the
seven days prior to, and during the 90 day period which begins on, the
Effective Date of such Registration Statement (except as part of such
registration) and (ii) that any agreement entered into after the date hereof
pursuant to which the Company issues or agrees to issue any privately placed
equity securities shall contain a provision under which the holders of such
securities agree not to effect any sale or distribution of any such
securities during the period referred to in the foregoing clause (i),
including any sale pursuant to Rule 144 under the Securities Act (except as
part of such registration, if permitted).
5.03. REGISTRATION PROCEDURES. In connection with any offering of
Registrable Securities registered pursuant to this Section 5, the Company
shall:
(a) Prepare and file with the Commission within 90 days after
receipt of a request for registration, a Registration Statement on any form
for which the Company then qualifies or which counsel for the Company shall
deem appropriate, and which form shall be available for the sale of the
Registrable Securities in accordance with the intended methods of
distribution thereof, and use its best efforts to cause such Registration
Statement to become and remain Effective as provided herein, PROVIDED that
before filing with the Commission a Registration Statement or disclosure
document constituting part of a Registration Statement or any amendments or
supplements thereto, the Company will (x) furnish to one counsel selected by
the holders of 67% of the Registrable Securities covered by such Registration
Statement copies of all such documents proposed to be filed for said
counsel's review and comment and (y) notify each holder of Registrable
Securities covered by such Registration Statement of any stop order issued or
threatened by the Commission and take all reasonable actions required to
prevent the entry of such stop order or to remove it if entered.
(b) Prepare and file with the Commission such amendments and
supplements to such Registration Statement and any disclosure document
constituting part of such Registration Statement used in connection therewith
as may be necessary to keep Effective such Registration Statement for a
period of not less than 90 days or such shorter period which will terminate
when all Registrable Securities covered by such Registration Statement have
been sold (but not before the expiration of the applicable prospectus
delivery period, if applicable, referred to in Section 4(3) of the Securities
Act and Rule 174, or any successor thereto, if applicable), and comply with
the provisions of the Securities Act with respect to the disposition of all
securities covered by such Registration Statement during such period in
accordance with the
13
intended methods of disposition by the sellers thereof set forth in such
Registration Statement.
(c) Furnish to each holder and each underwriter, if any, of
Registrable Securities covered by such Registration Statement such number of
copies of such Registration Statement, each amendment and supplement thereto
(in each case including all exhibits thereto), and the disclosure document
included in such Registration Statement (including each preliminary
disclosure document), in conformity with the requirements of the Securities
Act, and such other documents as any holder of Registrable Securities may
reasonably request in order to facilitate the disposition of the Registrable
Securities owned by such holder.
(d) Use its best efforts to register or qualify such Registrable
Securities under such other state securities or "blue sky" laws of such
jurisdictions as any holder, and underwriter, if any, of Registrable
Securities covered by such Registration Statement reasonably requests and do
any and all other acts and things which may be reasonably necessary or
advisable to enable such holder and each underwriter, if any, to consummate
the disposition in such jurisdictions of the Registrable Securities owned by
such holder; PROVIDED that the Company will not be required to (x) qualify
generally to do business in any jurisdiction where it would not otherwise be
required to qualify but for this Section 5.03(d), (y) subject itself to
taxation in any such jurisdiction or (z) consent to general service of
process in any such jurisdiction.
(e) 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 as may be necessary by virtue
of the business and operations of the Company to enable the holder or holders
thereof to consummate the disposition of such Registrable Securities.
(f) Immediately notify each holder of such Registrable Securities
at any time when a disclosure document relating thereto is required to be
delivered under the Securities Act of the happening of any event which comes
to the Company's attention if as a result of such event the disclosure
document included in such Registration Statement contains an untrue statement
of a material fact or omits to state any material fact required to be stated
therein or necessary to make the statements therein not misleading, and the
Company will promptly prepare and furnish to such holder a supplement or
amendment to such disclosure document so that, as thereafter delivered to the
purchasers of such Registrable Securities, such disclosure document will not
contain an 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.
14
(g) Use its best efforts to cause all such Registrable Securities
to be listed on a national securities exchange (including NASDAQ) and on each
securities exchange on which similar securities issued by the Company may
then be listed, and enter into such customary agreements including a listing
application and indemnification agreement in customary form, and to provide a
transfer agent and registrar for such Registrable Securities covered by such
Registration Statement no later than the Effective Date of such Registration
Statement.
(h) Enter into such customary agreements (including an
underwriting agreement in customary form) and take all such other actions as
the holders of at least 51% of the Registrable Securities being covered by
such Registration Statement or the underwriters retained by such holders, if
any, reasonably request in order to expedite or facilitate the disposition of
such Registrable Securities, including customary representations, warranties,
indemnities and agreements.
(i) Make available for inspection by any holder of Registrable
Securities covered by such Registration Statement, any underwriter
participating in any disposition pursuant to such Registration Statement, and
any attorney, accountant or other agent retained by any such holder or
underwriter (collectively, the "Inspectors"), all financial and other records,
pertinent corporate documents and properties of the Company (collectively,
"Records"), if any, as shall be reasonably necessary to enable them to
exercise their due diligence responsibility, and cause the Company's and its
Affiliates' officers, directors and employees to supply all information and
respond during normal business hours to all inquiries reasonably requested by
any such Inspector in connection with such Registration Statement.
(j) Use its best efforts to obtain a "cold comfort" letter from
the Company's independent public accountants in customary form and covering
such matters of the type customarily covered by "cold comfort" letters as the
holders of least 51% of the Registrable Securities being sold reasonably
request.
(k) Otherwise use its best efforts to comply with all applicable
rules and regulations of the Commission, and make available to the holders of
Registrable Securities, as soon as reasonably practicable, an earnings
statement covering a period of at least twelve months, beginning with the
first quarter after the Effective Date of the Registration Statement, which
earnings statement shall satisfy the provisions of Section 11(a) of the
Securities Act and Rule 158 thereunder.
It shall be a condition precedent to the obligation of the Company to take
any action with respect to securities of a holder of Registrable Securities
that such holder shall furnish to
15
the Company such information regarding the securities held by such holder and
the intended method of disposition thereof as the Company shall reasonably
request and as shall be required in connection with the action taken by the
Company.
Each holder of Registrable Securities agrees that, upon receipt of any notice
from the Company of the happening of any event of the kind described in
Section 5.03(f), such holder will forthwith discontinue disposition of
Registrable Securities until such holder's receipt of the copies of the
supplemented or amended disclosure document contemplated by Section 5.03(f)
hereof, and, if so directed by the Company, such holder will deliver to the
Company (at the Company's expense) all copies (including, without limitation,
any and all drafts), other than permanent file copies, then in such holder's
possession, of the disclosure document covering such Registrable Securities
current at the time of receipt of such notice. In the event the Company shall
give any such notice, the period mentioned in Section 5.03(b) shall be
extended by the greater of the number of days during the period from and
including the date of the giving of such notice pursuant to Section 5.03(f)
hereof to and including the date when each holder of Registrable Securities
covered by such Registration Statement shall have received the copies of the
supplemented or amended disclosure document contemplated by Section 5.03
hereof.
5.04. INDEMNIFICATION.
(a) INDEMNIFICATION BY THE COMPANY. In the event of any
registration of any securities of the Company under the Securities Act
pursuant to this Agreement, the Company will indemnify and hold harmless, to
the full extent permitted by law, each of the holders of any Registrable
Securities covered by such Registration Statement, their respective directors
and officers, general partners, limited partners and managing directors, each
other person who participates as an underwriter in the offering or sale of
such securities and each other person, if any, who controls, is controlled by
or is under common control with any such holder or any such underwriter
within the meaning of the Securities Act (and directors, officers,
controlling persons, partners and managing directors of any of the
foregoing), against any and all losses, claims, damages or liabilities, joint
or several, and expenses (including any amounts paid in any settlement
effected with the Company's consent, which consent will not be unreasonably
withheld) to which such holder, any such director or officer or general or
limited partner or managing director or any such underwriter or controlling
person may become subject under the Securities Act, state securities or "blue
sky" laws, common law or otherwise, insofar as such losses, claims, damages
or liabilities (or actions or proceedings in respect thereof) or expenses
arise out of or are based upon (i) any untrue statement or alleged untrue
statement of any material fact contained, on the Effective Date thereof, in
any
16
Registration Statement under which such securities were registered under the
Securities Act, any preliminary, final or summary disclosure document
contained therein, or any amendment or supplement thereto, (ii) any omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, or (iii)
any violation or alleged violation by the Company of any federal, state or
common law rule or regulation applicable to the Company and relating to
action required of or inaction by the Company in connection with any such
registration. The Company shall reimburse each such holder and each such
director, officer, general partner, limited partner, managing director or
underwriter and controlling person for any legal or any other expenses
reasonably incurred by them in connection with investigating or defending
such loss, claim, liability, action or proceeding, PROVIDED, that the Company
shall not be liable in any such case to the extent that any such loss, claim,
damage, liability (or action or proceeding in respect thereof) or expense
arises out of or is based upon any untrue statement or alleged untrue
statement or omission or alleged omission made in such Registration Statement
or amendment or supplement thereto or in any such preliminary, final or
summary disclosure document in reliance upon and in conformity with written
information furnished to the Company through an instrument duly executed by
such holder in its capacity as a holder of Registrable Securities in the
Company or any such director, officer, general or limited partner, managing
director or underwriter specifically stating that it is for use in the
preparation thereof; and, PROVIDED FURTHER, that the Company shall not be
liable to any holder of Registrable Securities, any person who participates
as an underwriter in the offering or sale of Registrable Securities, if any,
or any other person, if any, who controls such underwriter within the meaning
of the Securities Act, pursuant to this Section with respect to any
preliminary disclosure document or the final disclosure document or the final
disclosure document as amended or supplemented as the case may be, to the
extent that any such loss, claim, damage or liability of such underwriter or
controlling person results from the fact that such underwriter sold
Registrable Securities to a person to whom there was not sent or given, at or
prior to the written confirmation of such sale, a copy of the final
disclosure document or of the final disclosure document as then amended or
supplemented, whichever is most recent, if the Company has previously
furnished copies thereof to such underwriter and such final disclosure
document, as then amended or supplemented, had corrected any such
misstatement or omission. The indemnity provided for herein shall remain in
full force and effect regardless of any investigation made by or on behalf of
such holder or any such director, officer, general partner, limited partner,
managing director, underwriter or controlling person and shall survive the
transfer of such securities by such holder.
17
(b) INDEMNIFICATION BY THE HOLDERS OF REGISTRABLE SECURITIES AND
UNDERWRITERS. The Company may require, as a condition to including any
Registrable Securities in any Registration Statement filed in accordance with
the provisions hereof, that the Company shall have received an undertaking
reasonably satisfactory to it from the holders of such Registrable Securities
or any underwriter, to indemnify and hold harmless (in the same manner and to
the same extent as set forth in paragraph (a) above) the Company and its
directors, officers, controlling persons and all other prospective sellers
and their respective directors, officers, general and limited partners,
managing directors, and their respective controlling persons with respect to
any statement or alleged statement in or omission or alleged omission from
such Registration Statement, any preliminary, final or summary disclosure
document contained therein, or any amendment or supplement, if such statement
or alleged statement or omission or alleged omission was made in reliance
upon and in conformity with written information furnished to the Company or
its representatives through an instrument duly executed by or on behalf of
such holder or underwriter specifically stating that it is for use in the
preparation of such Registration Statement, preliminary, final or summary
disclosure document or amendment or supplement, or a document incorporated by
reference into any of the foregoing. Such indemnity shall remain in full
force and effect regardless of any investigation made by or on behalf of the
Company or any of the holders of Registrable Securities, underwriters or any
of their respective directors, officers, general or limited partners,
managing directors or controlling persons and shall survive the transfer of
such securities by such holder, PROVIDED, HOWEVER, that no such holder shall
be liable in the aggregate for any amounts exceeding the product of the sale
price per Registrable Security and the number of Registrable Securities being
sold pursuant to such Registration Statement or disclosure document by such
holder.
(c) NOTICES OF CLAIMS, ETC. Promptly after receipt by an
indemnified party hereunder of written notice of the commencement of any
action or proceeding with respect to which a claim for indemnification may be
made pursuant to this Section 5.04, such indemnified party will, if a claim
in respect thereof is to be made against an indemnified party, promptly give
written notice to the indemnifying party of the commencement of such action,
PROVIDED that the failure of any indemnified party to give notice as provided
herein shall not relieve the indemnifying party of its obligations under the
preceding subsections of this Section, except to the extent that the
indemnifying party is actually materially prejudiced by such failure to give
notice. In case any such action is brought against an indemnified party,
unless in such indemnified party's counsel's reasonable professional judgment
a conflict of interest between such indemnified and indemnifying parties may
exist in respect of such claim, the indemnifying party will be entitled to
participate in and, jointly with any other
18
indemnifying party similarly notified, to assume the defense thereof, to the
extent that it may wish, with counsel reasonably satisfactory to such
indemnified party, and after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
indemnifying party will not be liable to such indemnified party for any legal
or other expenses subsequently incurred by the latter in connection with the
defense thereof, unless in such indemnified party's counsel's reasonable
professional judgment a conflict of interest between such indemnified and
indemnifying parties arises in respect of such claim after the assumption of
the defense thereof, and the indemnifying party will not be subject to any
liability for any settlement made without its consent (which consent shall
not be unreasonably withheld). No indemnifying party will consent to entry of
any judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
indemnified party of a release from all liability in respect to such claim or
litigation. An indemnifying party who is not entitled to, or elects not to,
assume the defense of a claim will not be obligated to pay the fees and
expenses of more than one counsel in any single jurisdiction for all parties
indemnified by such indemnifying party with respect to such claim.
Notwithstanding anything to the contrary set forth herein, and without
limiting any of the rights set forth above, in any event any party will have
the right to retain, at its own expense, counsel with respect to the defense
of a claim.
(d) OTHER INDEMNIFICATION. Indemnification similar to that
specified in the preceding subsections of this Section 5.06 (with appropriate
modifications) shall be given by the Company and each holder of Registrable
Securities with respect to any registration or other qualification of
securities which is provided for in this Agreement or is otherwise provided
for by the Company under any federal or state law or regulation or
governmental authority other than the Securities Act.
(e) CONTRIBUTION. In order to provide for just and equitable
contribution in circumstances in which the indemnity agreement provided for
in this Section is for any reason held to be unenforceable although
applicable in accordance with its terms, the Company, the holders of
Registrable Securities and the underwriters shall contribute to the aggregate
losses, liabilities, claims, damages and expenses of the nature contemplated
by such indemnity agreement incurred by the Company, the holders of
Registrable Securities and the underwriters, in such proportions that the
underwriters are responsible for that portion represented by the percentage
that the underwriting discount appearing in the disclosure document bears to
the initial public offering price appearing therein and the Company and the
holders of Registrable Securities are responsible for the balance; PROVIDED,
HOWEVER, that no person guilty of fraudulent misrepresentation (within the
19
meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. As between the Company and the holders of Registrable
Securities, such parties shall contribute to the aggregate losses,
liabilities, claims, damages and expenses of the nature contemplated by such
indemnity agreement in such proportion as shall be appropriate to reflect (x)
the relative benefits received by the Company, on the one hand, and the
holders of the Registrable Securities included in the offering on the other
hand, from the offering of the Registrable Securities and any other
securities included in such offering, and (y) the relative fault of the
Company, on the one hand, and the holders of the Registrable Securities
included in the offering, on the other, with respect to the statements or
omissions which resulted in such loss, liability, claim, damage or expense,
or action in respect thereof, as well as any other relevant equitable
considerations. The relative benefits received by the Company, on the one
hand, and the holders of the Registrable Securities on the other, with
respect to such offering shall be deemed to be in the same proportion as the
sum of the total purchase price paid to the Company in respect of the
Registrable Securities plus the total net proceeds from the offering of any
securities included in such offering (before deducting expenses) received by
the Company bears to the amount by which the total net proceeds from the
offering of Registrable Securities (before deducting expenses) received by
the holders of the Registrable Securities with respect to such offering
exceeds the purchase price paid to the Company in respect of the Registrable
Securities, and in each case the net proceeds received from such offering
shall be determined as set forth in the disclosure document. The relative
fault shall be determined by reference to, among other things, whether
theuntrue or alleged untrue statement of a material fact or omission or
alleged omission to state a material fact relates to information supplied by
the Company or the holders of the Registrable Securities, the intent of the
parties and their relative knowledge, access to information and opportunity
to correct or prevent such statement or omission. The Company and the holders
of the Registrable Securities agree that it would not be just and equitable
if contribution pursuant to this Section were to be determined by pro rata
allocation or by any other method of allocation which does not take into
account the equitable considerations referred to herein. Notwithstanding
anything to the contrary contained herein, the Company and the holders of
Registrable Securities agree that any contribution required to be made by
such holder pursuant to this Section 5.04(e) shall not exceed the net
proceeds from the offering of Registrable Securities (before deducting
expenses) received by such holder with respect to such offering. For purposes
of this Section, each Person, if any, who controls a holder of Registrable
Securities or an Underwriter within the meaning of Section 15 of the
Securities Act shall have the same rights to contribution as such holder or
Underwriter, and each director of the Company, each officer of the
20
Company who signed the Registration Statement, and each person, if any, who
controls the Company within the meaning of Section 15 of the Securities Act
shall have the same rights to contribution as the Company.
5.05. RULE 144. At all times after a public offering of any of the
Company's equity securities, the Company agrees that it will file in a timely
manner all reports required to be filed by it pursuant to the Exchange Act,
and, if at any time the Company is not required to file such reports, it will
make available to the public, to the extent required to permit the sale of
Warrant Shares by any holder of Registrable Securities pursuant to Rule 144,
current information about itself and its activities as contemplated by Rule
144 under the Securities Act, as such Rule may be amended from time to time.
Notwithstanding the foregoing, the Company may deregister any class of its
equity securities under Section 12 of the Exchange Act or suspend its duty to
file reports with respect to any class of its securities pursuant to Section
15(d) of the Exchange Act if it is then permitted to do so pursuant to the
Exchange Act and the rules and regulations thereunder.
6. DEFINITIONS AND ACCOUNTING TERMS
As used in this Agreement, the following terms shall have the following
meanings:
"Affiliate" shall mean any officer or director of the Company or
any Subsidiary or holder of five percent (5%) or more of any class of capital
stock of the Company or any Subsidiary, or any member of their respective
immediate families or any corporation or other entity directly or indirectly
controlled by one or more of such officers, directors or 5% stockholders or
members of their immediate families.
"Agreement" shall have the meaning assigned to such term in the
introductory sentence hereof.
"Articles of Incorporation" shall mean the Articles of
Incorporation of the Company, including all amendments, modifications or
supplements thereto.
"Board of Directors" shall mean the board of directors of the
Company as constituted from time to time.
"Business Day" shall mean any day except a Saturday, Sunday or
other day on which commercial banks in the State of California are authorized
by law or executive order to close.
"By-Laws" shall mean the By-Laws of the Company, including all
amendments, modifications or supplements thereto.
21
"Certificate of Designation" shall mean the Certificate of
Designation of Series A Preferred Stock of the Company.
"Closing Date" shall mean the time and date scheduled for the
closing of the initial sale of the Series A Preferred Stock.
"Commission" shall mean the Securities and Exchange Commission or
any other federal agency then administering the Securities Act or Exchange
Act.
"Common Stock" shall mean (a) the Company's Common Stock, no par
value, as authorized on the date of this Agreement, (b) any other capital
stock of any class or classes (however designated) of the Company, authorized
on or after the date hereof, the holders of which shall have the right,
without limitation as to amount, either to all or to a share of the balance
of current dividends and liquidating dividends after the payment of dividends
and distributions on any shares entitled to preference, and the holders of
which shall ordinarily, in the absence of contingencies or in the absence of
any provision to the contrary in the Articles of Incorporation, be entitled
to vote for the election of a majority of directors of the Company (even
though the right so to vote has been suspended by the happening of such a
contingency or provision), and (c) any other securities into which or for
which any of the securities described in (a) or (b) may be converted or
exchanged pursuant to a plan of recapitalization, reorganization, merger,
sale of assets or otherwise.
"Company" shall have the meaning assigned to such term in the
introductory sentence hereof.
"Effective" shall mean that all requirements under the Securities
Act with respect to a Registration Statement have been satisfied and that the
Commission has officially approved the public distribution or circulation of
the Registration Statement in connection with a public offering of
Registrable Securities.
"Effective Date" shall mean the date on which a Registration
Statement is declared to be Effective.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
"ESOP" shall mean the XXXXX Financial and Subsidiaries Employee
Stock Ownership Plan (including, without limitation, the XXXXX Financial and
Subsidiaries Employee Stock Ownership Trust), including all amendments,
supplements or modifications thereto.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated pursuant thereto.
22
"Expiration Date" shall mean the earlier to occur of (a) August 3,
1999 and (b) the date of a Reorganization.
"Extraordinary Common Stock Event" shall mean (i) the issue of
additional shares of Common Stock as a dividend or other distribution on
outstanding shares of Common Stock, (ii) a subdivision of outstanding shares
of Common Stock into a greater number of shares of Common Stock, or (iii) a
combination or reverse stock split of outstanding shares of Common Stock into
a smaller number of shares of the Common Stock.
"Fair Market Value" shall mean, at any time, per share of Common
Stock (a) the arithmetic average of the daily last sale prices of the Common
Stock for twenty consecutive trading days ending immediately prior to such
time or, if no such sale takes place on such dates, the average of the
closing bid and asked prices on such dates, in each case as officially
reported on the principal national securities exchange on which the Common
Stock is then listed or admitted to trading, (b) if such Common Stock is not
then listed or admitted to trading on any national securities exchange, but
is designated as a national market system security by the NASD, the
arithmetic average of the daily last trading prices of the Common Stock for
twenty consecutive trading days ending immediately prior to such time, or if
there shall have been not trading on such date or if such stock is not so
designated, the average of the reported closing bid and asked prices on such
dates as shown by the NASDAQ, (c) if the Common Stock is being offered in an
initial public offering at such time, the average price of such Common Stock
per share, net of underwriter's discount and expenses, sold in-such initial
public offering and (d) if the Common Stock is not then listed or admitted to
trading on any national exchange or quoted in the over-the-counter market and
not then being offered in the initial public offering, the fair market value
of the Common Stock as determined in good faith by the Board of Directors
(after giving due consideration to the latest ESOP valuation).
"Material Adverse Effect" means any material adverse effect on (a)
the business, profits, properties or condition of the Company and the
Subsidiaries, taken as a whole, (b) the ability of the Company to perform its
obligations under the Agreement and (c) the binding nature, validity or
enforceability of this Agreement, which, in each case, arises from, or
reasonably could be expected to arise from, any action or omission of action
on the part of the Company or any Subsidiary or the occurrence of any event
or the existence of any fact or condition in respect of the Company or any
Subsidiary or any of their respective properties.
"NASD" shall mean the National Association of Securities Dealers,
Inc.
23
"NASDAQ" shall mean the National Association of Securities Dealers
Automated Quotations System.
"Person" shall mean an individual, corporation, partnership, joint
venture, trust, university, or unincorporated organization, or a government
or any agency or political subdivision thereof.
"Placement Agents" shall have the meaning assigned to such term in
the introductory paragraph hereof.
"Preferred Registrable Securities" shall have the meaning assigned
to the term "Registrable Securities" in the Series A Preferred Stock Purchase
Agreement.
"Purchase Price" shall have the meaning assigned to such term in
Section 1.01.
"Purchasers" shall have the meaning assigned to such term in
Recital A.
"Registrable Securities" shall mean any shares of Common Stock that
have been issued or are issuable upon the exercise of any Warrant; PROVIDED,
HOWEVER, that such securities shall cease to be Registrable Securities if and
when (x) a Registration Statement with respect to the disposition of such
securities shall have become Effective under the Securities Act and such
securities shall have been disposed of pursuant to such Effective
Registration Statement, (y) such securities shall have been otherwise
transferred, if new certificates or other evidences of ownership for such
securities not bearing a legend restricting further transfer and not subject
to any stop transfer order or other restrictions on transfer shall have bean
delivered by the Company, and subsequent disposition of such securities shall
not require registration or qualification of such securities under the
Securities Act, or (z) such securities shall have ceased to be outstanding.
"Registration Expenses" shall mean all expenses incident to the
Company's performance of or compliance with its obligations under Section 5
of this Agreement, including, without limitation, all Commission and stock
exchange or NASD registration and filing fees and expenses, fees and expenses
of compliance with applicable state securities or "blue sky" laws (including,
without limitation, reasonable fees and disbursements of counsel for the
underwriters in connection with "blue sky" qualifications of the Registrable
Securities), printing expenses, messenger and delivery expenses, the fees and
expenses incurred in connection with the listing of the securities to be
registered in a public offering on each securities exchange or national
market system on which such securities are to be so listed and, following
such initial public
24
offering, the fees and expenses incurred in connection with the listing of
such securities to be registered on each securities exchange or national
market system on which such securities are listed, fees and disbursements of
counsel for the Company and all independent certified public accountants
(including the expenses of any annual audit and "cold comfort" letters
required by or incident to such performance and compliance), the fees and
disbursements of underwriters customarily paid by issuers or sellers of
securities (including the fees and expenses of any "qualified independent
underwriter" required by the NASD), the reasonable fees and expenses of any
special experts retained by the Company in connection with such registration,
and fees and expenses of other persons retained by the Company (but not
including any underwriting discounts or commissions or transfer taxes, if
any, attributable to the sale of Registrable Securities by holders of such
Registrable Securities).
"Registration Statement" shall mean any disclosure document that
the Company is required to file under the Securities Act in connection with a
public offering of Registrable Securities.
"Reorganization" shall mean a capital reorganization of the Common
Stock, or a merger or consolidation of the Company with or into another
corporation unless the Company is the surviving corporation, or the sale of
all or substantially all of the Company's capital stock or assets to any
other person or entity, or any other form of business combination or
reorganization in which control of the Company is transferred.
"Xxxxxxxx Agreement" shall mean the Stock Purchase Agreement dated
as of July 26, 1994 among the Company, Xxxxxx X. Xxxxxxxx and Xxxxxxxxx X.
Xxxxxxxx, as trustees of The Xxxxxxxx Family Trust, Xxxxxx X. Xxxxxxxx and
Xxxxxxxxx X. Xxxxxxxx, as individuals, which evidences the obligation of the
Company to repurchase 76,100 shares of Common Stock from The Xxxxxxxx Family
Trust.
"Securities Act" shall mean the Securities Act of 1933, as amended
from time to time or any successor federal act and all rules or regulations
thereunder.
"Series A Preferred Stock" shall have the meaning assigned to such
term in Recital A.
"Series A Preferred Stock Purchase Agreement" shall have the
meaning assigned to such term in Recital A.
"Shareholders Agreement" shall mean the Shareholders Agreement,
dated as of the date hereof, among the Company, the "Shareholders" named
therein and the Purchasers.
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"Xxxxxx Options" shall have the meaning assigned to such term in
Section 3.05(c).
"Stock Option Plan" shall mean the 1994 Stock Incentive Plan of the
Company, including all amendments, supplements or modifications thereto.
"Subsidiary" shall mean any corporation or other entity of which at
least a majority of the securities or other ownership interest having
ordinary voting power (absolutely or contingently) for the election of
directors or other persons performing similar functions are at the time owned
directly or indirectly by the Company and/or any of its other Subsidiaries.
"Tender Offer" shall mean the irrevocable offer by the Company to
repurchase 178,900 shares of Common Stock from its shareholders under that
certain offer letter dated July 27, 1994 and the related transmittal letter.
"Voting Agreement" shall mean the Voting Agreement, dated as of the
date hereof, among the Company, the "Shareholders" named therein and the
Purchasers.
"Warrant" shall have the meaning assigned to such term in Recital A.
"Warrant Certificate" shall have the meaning assigned to such term
in Section 1.01.
"Warrant Shares" shall mean (a) all Warrants then outstanding and
(b) all shares of Common Stock issued by the Company upon the exercise of the
Warrants.
7. MISCELLANEOUS
7.01. NO WAIVER; CUMULATIVE REMEDIES. No failure or delay on the
part of any party to this Agreement in exercising any right, power or remedy
hereunder shall operate as a waiver thereof; nor shall any single or partial
exercise of any such right, power or remedy preclude any other or further
exercise thereof or the exercise of any other right, power or remedy
hereunder. The remedies herein provided are cumulative and not exclusive of
any remedies provided by law.
7.02. AMENDMENTS, WAIVERS AND CONSENTS. Any provision in the
Agreement to the contrary notwithstanding, and except as hereinafter
provided, changes in, termination or amendments of or additions to this
Agreement may be made, and compliance with any covenant or provision set
forth herein may be omitted or waived, if the Company (a) shall obtain
consent thereto in writing from the holders of at least 67% of the Warrant
Shares, and (b) shall
26
deliver copies of such consent in writing to any holders who did not execute
such consent; provided that no consents shall be effective (i) to amend any
of the provisions of this Agreement pertaining to the Purchase Price or the
number of shares of Common Stock purchasable upon the exercise of any Warrant
or (ii) to reduce the percentage in interest of the Warrant Shares the
consent of the holders of which is required under this Section 7.02. Any
waiver or consent may be given subject to satisfaction of conditions stated
therein and any waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given.
7.03. ADDRESSES FOR NOTICES. Any notice, demand, request, waiver or
other communication under this Agreement shall be in writing and shall be
deemed to have been duly given on the date of service if personally served,
on the date of transmission if sent by telecopier or on the third day after
mailing if mailed to the party to whom notice is to be given, by first class
mail, registered, return receipt requested, postage prepaid and addressed as
follows:
To the Company: Xxxxx Financial
000 Xxxxx Xxxx Xxxxxx
Xxxxx 000
Xxxxxxxx, Xxxxxxxxxx 00000
Attention: President
Telecopier No.: (000) 000-0000
With a copy to: Xxxxxx, Xxxx & Xxxxxxxx
000 Xxxxx Xxxxx Xxxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxxxx X. Xxxxx, Esq.
Telecopier No.: (000) 000-0000
To any Placement Agent: At its address specified on
Annex 1 hereto
7.04. COSTS, EXPENSES AND TAXES. As a condition precedent to the
Closing, the Company agrees to pay at the Closing in connection with the
preparation, execution and delivery of this Agreement and the issuance of the
Warrants at the Closing, the reasonable fees and other out-of-pocket expenses
of Messrs. LeBoeuf, Lamb, Xxxxxx & XxxXxx; provided that all such expenses,
together with all similar fees and expenses incurred in preparation of the
Series A Preferred Stock Purchase Agreement, do not exceed $70,000 in the
aggregate. In addition, the prevailing party shall be entitled to the
reasonable fees and out-of-pocket expenses of legal counsel, independent
public accountants, consultants and other outside experts retained by such
party in connection with the successful enforcement of this Agreement or any
Related Agreement.
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In addition, the Company shall pay any and all stamp, or other similar taxes
payable or determined to be payable in connection with the execution and
delivery of this Agreement, the issuance of the Warrants and the other
instruments and documents to be delivered hereunder or thereunder, and agrees
to save the Purchasers harmless from and against any and all liabilities with
respect to or resulting from any delay in paying or omission to pay such
taxes.
7.05. BINDING EFFECT; ASSIGNMENT. This Agreement shall be binding
upon and inure to the benefit of each of the Company and the Placement Agents
and their respective heirs, successors and assigns, except that the Company
shall not have the right to delegate its obligations hereunder or to assign
its rights hereunder or any interest herein other than in connection with a
Reorganization without the prior written consent of the holders of at least
67% of the Warrant Shares.
7.06. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All
representations and warranties made in this Agreement, the Warrants, or any
other instrument or document delivered in connection herewith or therewith,
shall survive the execution and delivery hereof or thereof until February 3,
1996; provided that the representations and warranties shall survive such
date to the extent written notice of any breach thereof is given on or prior
to such date.
7.07. PRIOR AGREEMENTS. This Agreement, the terms of the Warrants,
and the other agreements executed and delivered herewith constitute the
entire agreement between the parties and supersedes any prior understandings
or agreements concerning the subject matter hereof.
7.08. SEVERABILITY. The provisions of this Agreement and the terms
of the Warrants are severable and, in the event that any court of competent
jurisdiction shall determine that any one or more of the provisions or part
of a provision contained in this Agreement or the terms of the Warrants
shall, for any reason, be held to be invalid, illegal or unenforceable in any
respect, such invalidity, illegality or unenforceability shall not affect any
other provision or part of a provision of this Agreement or the terms of the
Warrants; but this Agreement and the terms of the Warrants shall be reformed
and construed as if such invalid or illegal or unenforceable provision, or
part of a provision, had never been contained herein, and such provisions or
part reformed so that it would be valid, legal and enforceable to the maximum
extent possible.
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7.09. CONFIDENTIALITY. Each Placement Agent agrees that it will keep
confidential and will not disclose or divulge any confidential, proprietary
or secret information which such Placement Agent may obtain from the Company
pursuant to financial statements, reports and other materials submitted by
the Company to such Placement Agent pursuant to this Agreement, or pursuant
to visitation or inspection rights granted hereunder, unless such information
is known, or until such information becomes known other than through a breach
of this Section 7.09, to the public; provided, however, that a Placement
Agent may disclose such information (a) on a confidential basis to its
attorneys, accountants, consultants and other professionals to the extent
necessary to obtain their services in connection with its investment in the
Company, (b) to any prospective purchaser of any Warrant Shares from such
Placement Agent as long as such prospective purchaser agrees in writing to be
bound by the provisions of this Section 7.09, (c) to any entity controlling,
controlled by or under common control with such Placement Agent, or to any
partner or stockholder of a Placement Agent which is a partnership or
corporation, or (d) as required by applicable law.
7.10. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF CALIFORNIA,
AND WITHOUT GIVING EFFECT TO CHOICE OF LAW PROVISIONS.
7.11. HEADINGS. Article, section and subsection headings
in this Agreement are included herein for convenience of reference only and
shall not constitute a part of this Agreement for any other purpose.
7.12. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument, and any of the parties hereto may execute this Agreement by
signing any such counterpart.
7.13. FURTHER ASSURANCES. From and after the date of this
Agreement, upon the request of any Placement Agent or the Company, each of
the Company and the Placement Agents shall execute and deliver such
instruments, documents and other writings as may be reasonably necessary or
desirable to confirm and carry out and to effectuate fully the intent and
purposes of this Agreement and the Warrants.
7.14. WAIVER. At any time prior to the Closing Date, any party
hereto may (a) extend the time for the performance of any of the obligations
or other acts of any other party hereto, (b) waive any inaccuracies in the
representations and warranties contained herein or in any document delivered
pursuant hereto, and (c) waive compliance with any of the agreements or
conditions contained herein. Any agreement on the part of a party hereto to
any such extension or waiver shall be valid only if set forth in an
29
instrument in writing signed by the party granting such waiver but such
waiver or failure to insist upon strict compliance with such obligation,
covenant, agreement or condition shall not operate as a waiver of, or
estoppel with respect to, any subsequent or future failure.
7.15. SPECIFIC ENFORCEMENT. Each of the Placement Agents and the
Company acknowledge and agree that irreparable damage would occur in the
event that any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached. It is
accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of the provisions of this Agreement and to
enforce specifically the terms and provisions hereof in any court of the
United States or any state thereof having jurisdiction, this being in
addition to any other remedy to which they may be entitled at law or equity.
7.16. NOTICES OF RECORD DATE. In the event of
(a) any taking by the Company of a record of the holders of any
class of securities for the purpose of determining the holders thereof who
are entitled to receive any dividend or other distribution, or any right to
subscribe for, purchase or otherwise acquire any shares of capital stock of
any class or any other securities or property, or to receive any other right,
or
(b) any capital reorganization of the Company, any
reclassification or recapitalization of the capital stock of the Company, any
merger or consolidation of the Company, or any transfer of all or
substantially all of the assets of the Company to any other Company, or any
other entity or person, or
(c) any voluntary or involuntary dissolution, liquidation or
winding up of the Company,
then and in each such event the Company shall mail or cause to be mailed to
each holder of Warrants a notice specifying (i) the date on which any such
record is to be taken for the purpose of such dividend, distribution or right
and a description of such dividend, distribution or right, (ii) the date on
which any such reorganization, reclassification, recapitalization, transfer,
consolidation, merger, dissolution, liquidation or winding up is expected to
become effective, and (iii) the time, if any, that is to be fixed, as to when
the holders of record of Common Stock (or other securities) shall be entitled
to exchange their shares of Common Stock (or other securities) for securities
or other property deliverable upon such reorganization, reclassification,
recapitalization, transfer, consolidation, merger, dissolution, liquidation
or winding up. Such notice shall be mailed by first class mail, postage
prepaid, at least twenty (20) days prior to the date specified in such notice
on which such action is to be taken.
30
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed as of the date and year first above written.
XXXXX FINANCIAL
By: /s/ [ILLEGIBLE]
-------------------------------
Name:
Title:
PLACEMENT AGENTS:
PRUDENTIAL SECURITIES INCORPORATED
By: /s/ [ILLEGIBLE]
-------------------------------
Name:
Title: Vice President
CONNING & COMPANY
By: /s/ XXXXXX XXXXXXXXX
-------------------------------
Name: Xxxxxx Xxxxxxxxx
Title: Senior Vice President
[SIGNATURE PAGE TO WARRANT AGREEMENT]
