SECURITIES PURCHASE AGREEMENT
DATED AS OF
JUNE 30, 1997
BY AND AMONG
AUTOBOND ACCEPTANCE CORPORATION,
AS THE ISSUER,
AND
LION CAPITAL PARTNERS, L.P.
AND
INFINITY EMERGING OPPORTUNITIES LIMITED
AS THE PURCHASERS
SECURITIES PURCHASE AGREEMENT
AGREEMENT, dated as of June 30, 1997, among AutoBond Acceptance
Corporation (the "Company"), and LION CAPITAL PARTNERS, L.P., a Texas limited
partnership and INFINITY EMERGING OPPORTUNITIES LIMITED, a Nevis West Indies
business corporation (collectively, the "Purchasers").
The parties hereto agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1. DEFINITIONS. The following terms, as used herein, have the
following meanings:
"Additional Shares" has the meaning set forth in the Registration Rights
Agreement.
"Affiliate" means, with respect to any Person (the "Subject Person"),
(i) any other Person (a "Controlling Person") that directly, or indirectly
through one or more intermediaries, Controls the Subject Person or (ii) any
other Person (other than the Subject Person or a Consolidated Subsidiary of the
Subject Person) which is Controlled by or is under common Control with a
Controlling Person.
"Agreement" means this Securities Purchase Agreement, as amended,
supplemented or otherwise modified from time to time in accordance with its
terms.
"Asset Sale" has the meaning set forth in Section 7.20.
"AutoBond Manual" means that manual in effect on the date hereof, as
amended, supplemented or otherwise modified from time to time, which sets forth
the appropriate standards for determining which Finance Contracts owned, held or
acquired by the Company may be sold or contributed to special purpose
corporations and/or trusts established by the Company for the purpose of
securitizing same.
"Balance Sheet" has the meaning set forth in Section 4.5
"Balance Sheet Date" has the meaning set forth in Section 4.5.
"Benefit Arrangement" means at any time an employee benefit plan within
the meaning of Section 3(3) of ERISA which is not a Plan or a Multiemployer Plan
and which is maintained or otherwise contributed to by the Company.
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"Benefit Plans" has the meaning set forth in Section 4.7(b).
"Business Day" means any day except a Saturday, Sunday or other day on
which commercial banks in the City of New York are authorized or required by law
to close.
"Call Date" has the meaning as set forth in Section 3.2(b).
"Capital Expenditures" means any expenditure by the Company or any
Subsidiary for an asset which will be used in a year or years subsequent to the
year in which the expenditure is made and which asset is properly classifiable
in relevant financial statements as property, equipment, improvements or fixed
assets, or a similar type of capitalized asset in accordance with GAAP.
"Capital Reorganization" has the meaning set forth in Section 10.5.
"Cash Equivalents" means (i) securities issued or directly and fully
guaranteed or insured as to principal and interest by the United States of
America or any agency or instrumentality thereof (provided that the full faith
and credit of the United States of America is pledged in support thereof),
maturing within one year of the date of acquisition, (ii) time deposits and
certificates of deposit of any domestic commercial bank having combined capital,
surplus and undivided profits of not less than $100,000,000 (including a
domestic branch of a foreign bank) whose outstanding senior long-term debt
securities are rated, or that is a wholly owned Subsidiary of a bank holding
company whose outstanding senior long-term debt securities are rated, either A-
or higher by Standard & Poor's Ratings Service or A3 or higher by ▇▇▇▇▇'▇
Investors Service, Inc., maturing within one year of the date of acquisition,
(iii) repurchase obligations with a term of not more than 7 days for underlying
securities of the types described in clause (i) above entered into with any bank
meeting the qualifications specified in clause (ii) above, (iv) commercial paper
rated at least A-1 or the equivalent thereof by Standard & Poor's Ratings
Service or at least P-1 or the equivalent thereof by ▇▇▇▇▇'▇ Investors Service,
Inc., maturing within one year after the date of acquisition and (v) investments
in money market funds substantially all of whose assets are comprised of
securities of the types described in clauses (i) through (iv) above.
"Cash Flow Coverage Ratio" means the ratio of Consolidated EBITDA to
Consolidated Fixed Charges.
"Change of Control" means (i) after the date of this Agreement any
person or group of persons (within the meaning of Sections 13 and 14 of the
Exchange Act and the rules and regulations of the Commission relating to such
Sections) shall have acquired beneficial ownership (within the meaning of Rules
13d-3 and 13d-5 promulgated by the Commission pursuant to the Exchange Act) of
33 1/3% or more of the outstanding shares of Common Stock of the Company, (ii)
any sale or other disposition (other than by reason of death or disability) of
any Common Stock of the Company held by any of ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇ resulting in such Persons owning, in the aggregate less
than 50.1% of the outstanding shares of such Common Stock; or (iii) individuals
constituting the board of directors of the Company on the date hereof (together
with any new directors whose election by such board of directors or whose
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nomination for election by the stockholders of the Company was approved by a
vote of at least 50.1% of the directors then still in office who were either
directors as of the date hereof or whose election or nomination for election was
previously so approved) cease for any reason to constitute a majority of the
board of directors of the Company then in office.
"Closing Bid Price" shall mean the closing bid price of the Company's
Common Stock as reported by Bloomberg L.P. on the Nasdaq Market or, if not
reported by Bloomberg, L.P. on the Nasdaq Market, as reported by such other
exchange or market where the Common Stock is then traded.
"Closing Date" means the date on which all of the conditions set forth
in Sections 6.1 and 6.2 shall have been satisfied and the Securities have been
issued by the Company and the Purchase Price paid by the Purchasers.
"Code" means the Internal Revenue Code of 1986, as amended.
"Collateral" has the meaning set forth in the Security Agreement.
"Commission" means the Securities and Exchange Commission or any entity
succeeding to all of its material functions.
"Common Stock" means the common stock, no par value per share, of the
Company.
"Company" means AutoBond Acceptance Corporation, a corporation
incorporated under the laws of Texas, and its successors.
"Company Corporate Documents" means the certificate of incorporation and
by-laws of the Company.
"Consolidated EBITDA" means, without duplication, with respect to the
Company for any period the sum of (a) Consolidated Net Earnings after taxes and
(b) the sum of (i) interest expense for such period, (ii) federal, state and
local income taxes deducted in determining such net income, (iii) amortization
of goodwill and other intangibles (including, without limitation, deferred
financing costs and debt discount) deducted in determining such net income and
(iv) depreciation, depletion and obsolescence of property, in each case,
determined in accordance with GAAP.
"Consolidated Fixed Charges" means, for any period, the sum of (i) cash
interest payable on all Debt of the Company and its Consolidated Subsidiaries
during such period plus (ii) rentals payable by the Company and its Consolidated
Subsidiaries under leases of real or personal, or mixed, property during such
period and (iii) principal amounts of all Debt of the Company and its
Consolidated Subsidiaries payable during such period resulting from borrowings
or the granting of credit (other than normal trade credit) plus (iv) the amount
of Capital Expenditures of the Company and its Consolidated Subsidiaries during
such period; provided, however, Consolidated Fixed Charges shall not include
non-recourse Debt issued by any Consolidated Subsidiary of the
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Company in connection with warehousing or securitization transactions entered
into in the ordinary course of its business.
"Consolidated Net Earnings" means, at any date, the consolidated net
income (or loss) of the Company determined on a consolidated basis, provided
there shall be excluded therefrom (a) the net income (but not net loss) of any
Subsidiary of the Company which is subject to restrictions which prevent or
limit the payment of dividends or the making of distributions to the Company to
the extent of such restrictions, (b) the net income of any Person that is not a
Subsidiary of the Company except to the extent of the amount of dividends or
other distributions actually paid in cash to the Company by such other Person
during such period, (c) gains or losses on asset dispositions by the Company or
its Subsidiaries other than the sale of Finance Contracts pursuant to a
securitization consummated in accordance with the terms of the AutoBond Manual,
(d) all extraordinary gains and extraordinary losses and (e) the net income of
any Person accrued prior to the date it becomes a Consolidated Subsidiary of the
Company or is merged into or consolidated with the Company.
"Consolidated Subsidiary" means at any date with respect to any Person
any Subsidiary or other entity, the accounts of which would be consolidated with
those of such Person in its consolidated financial statements if such statements
were prepared as of such date.
"Control" (including, with correlative meanings, the terms
"Controlling," "Controlled by" and under "common Control with"), as used with
respect to any Person, means the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of that
Person, whether through the ownership of voting securities, by contract or
otherwise .
"Conversion Date" shall mean the date of delivery (including delivery
via telecopy) of a Notice of Conversion for all or a portion of a Convertible
Note by the holder thereof to the Company and the Transfer Agent.
"Conversion Price" shall mean the formula F/P where F = the outstanding
principal amount of the Convertible Note being converted, and P = the lesser of
(x) the Maximum Conversion Price and (y) 85% of the average of the five (5)
lowest Closing Bid Prices during the Lookback Period.
"Convertible Notes" means the Company's 18% senior secured convertible
promissory notes substantially in the form set forth as Exhibit A hereto.
"Deadline" has the meaning set forth in Section 9.3.
"Debt" of any Person means at any date, without duplication, (i) all
obligations of such Person for borrowed money, (ii) all obligations of such
Person evidenced by bonds, debentures, notes, or other similar instruments
issued by such Person, (iii) all obligations of such Person as lessee which (y)
are capitalized in accordance with GAAP or (z) arise pursuant to sale-leaseback
transactions, (iv) all reimbursement obligations of such Person in respect of
letters of credit or other similar instruments, (v) all Debt of others secured
by a Lien on any asset of such Person,
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whether or not such Debt is otherwise an obligation of such Person and (vi) all
Debt of others Guaranteed by such Person.
"Debt Financing" means a public or private financing consummated
(meaning closing and funding) through the issuance of debt securities (or
securities convertible into or exchangeable for debt securities) of the Company,
other than Permitted Debt Financings.
"Default" means any event or condition which constitutes an Event of
Default or which with the giving of notice or lapse of time or both would,
unless cured or waived, become an Event of Default.
"Default Fee" has the meaning set forth in the Registration Rights
Agreement.
"Derivative Securities" has the meaning set forth in Section 9.2.
"Designated Subsidiary" means those Subsidiaries of the Company known as
(1) AutoBond Funding Corporation 1995-A, (2) AutoBond Funding Corporation
1996-A, (3) AutoBond Funding Corporation 1996-B, and (4) AutoBond Funding
Corporation 1996-C.
"Discounted Equity Offerings" has the meaning set forth in Section 9.2.
"Directors" means the individuals then serving on the board of directors
or similar such management council of the Company.
"Early Repayment Price" has the meaning set forth in Section 3.2(b).
"Environmental Laws" means any and all federal, state, local and foreign
statutes, laws, regulations, ordinances, rules, judgments, orders, decrees,
permits, concessions, grants, franchises, licenses, agreements or other
governmental restrictions relating to the environment or to emissions,
discharges or releases of pollutants, contaminants, petroleum or petroleum
products, chemicals or industrial, toxic or hazardous substances or wastes into
the environment, including, without limitation, ambient air, surface water,
ground water, or land, or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
pollutants, contaminants, petroleum or petroleum products, chemicals or
industrial, toxic or hazardous substances or wastes or the cleanup or other
remediation thereof.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, or any successor statute.
"ERISA Group" means the Company and each Subsidiary and all members of a
controlled group of corporations and all trades or businesses (whether or not
incorporated) under common control which, together with the Company or any
Subsidiary, are treated as a single employer under the Code.
"Event of Default" has the meaning set forth in Article XI hereof.
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"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Finance Contracts" means fixed rate, closed end consumer installment
finance contracts acquired by the Company in the ordinary course of its business
arising from the sale of new and used automobiles, vans and light-duty trucks.
"Financing Documents" means this Agreement, the Warrants, the Transfer
Agent Agreement, the Registration Rights Agreement, the Security Agreement and
the Convertible Notes.
"First Required Effectiveness Date" has the meaning set forth in the
Registration Rights Agreement.
"Fixed Price(s)" has the meaning set forth in Section 10.1.
"Funded Debt" shall mean any and all non-convertible and/or convertible
debt financings where the holder of such debt may not acquire shares of Common
Stock at a price less than the prevailing Market Price on the date of issuance
or, if such debt has a conversion price based on any formula (other than
standard anti-dilution provisions) based on the Market Price on a date later
than the date of issuance, the date of conversion of such debt, (whether through
discounts to the Market Price at the time of issuance or conversion (if
applicable), warrants or other equity components, or commissions or fees in
excess of ordinary placement or underwriting commissions or fees).
"Formula Price" has the meaning set forth in Section 3.3(c).
"GAAP" has the meaning set forth in Section 1.2.
"Guarantee" by any Person means any obligation, contingent or otherwise,
of such Person directly or indirectly guaranteeing (whether by virtue of
partnership arrangements, by agreement to keep well, to purchase assets, goods,
securities or services, to take-or-pay, or to maintain a minimum net worth,
financial ratio or similar requirements, or otherwise) any Debt of any other
Person and, without limiting the generality of the foregoing, any obligation,
direct or indirect, contingent or otherwise, of such Person (i) to purchase or
pay (or advance or supply funds for the purchase or payment of) such Debt or
(ii) entered into for the purpose of assuring in any other manner the holder of
such Debt of the payment thereof or to protect such holder against loss in
respect thereof (in whole or in part); provided that the term Guarantee shall
not include endorsements for collection or deposit in the ordinary course of
business. The term Guarantee used as a verb has a corresponding meaning.
"Hazardous Materials" means any hazardous materials, hazardous wastes,
hazardous constituents, hazardous or toxic substances or petroleum products
(including crude oil or any derivative or fraction thereof), defined or
regulated as such in or under any Environmental Laws.
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"Intellectual Property" has the meaning set forth in Section 4.19.
"Investment" means any investment in any Person, whether by means of
share purchase, partnership interest, capital contribution, loan, time deposit
or otherwise.
"Lien" means, any lien, mechanic's lien, materialmen's lien, lease,
easement, charge, encumbrance, mortgage, conditional sale agreement, title
retention agreement, agreement to sell or convey, option, claim, title
imperfection, encroachment or other survey defect, pledge, restriction, security
interest or other adverse claim, whether arising by contract or under law or
otherwise (including, without limitation, any financing lease having
substantially the same economic effect as any of the foregoing, and the filing
of any financing statement under the Uniform Commercial Code or comparable law
of any jurisdiction in respect of any of the foregoing).
"Limitation on Conversion" has the meaning set forth in Section 9.5.
"Listing Applications" shall have the meaning set forth in Section 4.3.
"Lookback Period" shall mean each of the sixty (60) Trading Days
immediately preceding the Conversion Date or the applicable date of repayment
(as specified by Section 3.2 herein), as the case may be.
"Majority Holders" means (i) as of the Closing Date, the Purchasers and
(ii) at any time thereafter, the holders of more than 50% in aggregate principal
amount of the Convertible Notes outstanding at such time.
"Majority Stockholders" shall have the meaning set forth in Section 8.4.
"Make-Whole Amount" means, with respect to any Convertible Note, an
amount equal to the excess, if any, of the Discounted Value of the Remaining
Scheduled Payments with respect to the Called Principal of such Convertible Note
over the amount of such Called Principal; provided that the Make-Whole Amount
may in no event be less than zero. For the purposes of determining the
Make-Whole Amount, the following terms have the following meanings:
"Called Principal" means, with respect to any Convertible Note,
the principal of such Convertible Note that is to be prepaid or has
become or is declared to be immediately due and payable, as the context
requires.
"Discounted Value" means, with respect to the Called Principal of
any Convertible Note, the amount obtained by discounting all Remaining
Scheduled Payments with respect to such Called Principal from their
respective scheduled due dates to the Settlement Date with respect to
such Called Principal, in accordance with accepted financial practice
and at a discount factor (applied on the same periodic basis as that on
which interest on the Convertible Notes is payable) equal to the
Reinvestment Yield with respect to such Called Principal.
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"Reinvestment Yield" means, with respect to the Called Principal
of any Convertible Note, the yield to maturity implied by (a) the yields
reported, as of 10:00 A.M. (New York City time) on the second Business
Day preceding the Settlement Date with respect to such Called Principal,
on the display designated as "Page PX1" of the Bloomberg Financial
Markets Services Screen (or, if not available, any other national
recognized trading screen reporting on-line intraday trading in the U.S.
Treasury securities) for actively traded U.S. Treasury securities having
a maturity equal to the Remaining Average Life of such Called Principal
as of such Settlement Date, or (b) if such yields are not reported as of
such time or the yields reported as of such time are not ascertainable,
the Treasury Constant Maturity Series Yields reported, for the latest
day for which such yields have been so reported as of the second
Business Day preceding the Settlement Date with respect to such Called
Principal, in Federal Reserve Statistical Release H.15 (519) (or any
comparable successor publication) for actively traded U.S. Treasury
securities having a constant maturity equal to the Remaining Average
Life of such Called Principal as of such Settlement Date. Such implied
yield will be determined, if necessary, by (i) converting U.S. Treasury
▇▇▇▇ quotations to bond-equivalent yields in accordance with accepted
financial practice and (ii) interpolating linearly between (1) the
actively traded U.S. Treasury security with the duration closest to and
greater than the Remaining Average Life and (2) the actively traded U.S.
Treasury security with the duration closest to and less than the
Remaining Average Life.
"Remaining Average Life" means, with respect to any Called
Principal, the number of years (calculated to the nearest one-twelfth
year) obtained by dividing (a) such Called Principal into (b) the sum of
the products obtained by multiplying (i) the principal component of each
Remaining Scheduled Payment with respect to such Called Principal by
(ii) the number of years (calculated to the nearest one-twelfth year)
that will elapse between the Settlement Date with respect to such Called
Principal and the scheduled due date of such Remaining Scheduled
Payment.
"Remaining Scheduled Payments" means, with respect to the Called
Principal of any Convertible Note, all payments of such Called Principal
and interest thereon that would be due after the Settlement Date with
respect to such Called Principal if no payment of such Called Principal
were made prior to its scheduled due date; provided that if such
Settlement Date is not a date on which interest payments are due to be
made under the terms of the Convertible Notes, then the amount of the
next succeeding scheduled interest payment will be reduced by the amount
of interest accrued to such Settlement Date and required to be paid on
such Settlement Date.
"Settlement Date" means, with respect to the Called Principal of
any Note, the date on which such Called Principal is to be prepaid or
has become or is declared to be immediately due and payable, as the
context requires.
"Market Price" shall mean the Closing Bid Price of the Common Stock
preceding the date of determination.
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"Material Plan" means at any time a Plan or Plans having aggregate
Unfunded Liabilities in excess of $500,000.
"Maturity Date" shall mean the date of maturity of the Convertible
Notes; specifically, June 30, 2000.
"Maximum Conversion Price" shall mean $5.00, as such price is adjusted
as provided herein.
"Minimum Number" has the meaning set forth in the Transfer Agent
Agreement.
"Multiemployer Plan" means at any time an employee pension benefit plan
within the meaning of Section 4001(a)(3) of ERISA to which any member of the
ERISA Group is then making or accruing an obligation to make contributions or
has within the preceding five plan years made contributions, including for these
purposes any Person which ceased to be a member of the ERISA Group during such
five year period.
"Nasdaq Market" means the Nasdaq Stock Market's National Market.
"Net Cash Proceeds" means, with respect to any transaction, the total
amount of cash proceeds received by the Company or any Subsidiary less (i)
reasonable underwriters' fees, brokerage commissions, reasonable professional
fees and other customary out-of-pocket expenses payable in connection with such
transaction, and (ii) in the case of dispositions of assets, (A) actual transfer
taxes (but not income taxes) payable with respect to such dispositions, and (B)
the amount of Debt, if any, secured by a Lien on the asset or assets disposed of
and required to be, and actually repaid by the Company or any Subsidiary in
connection therewith, and any trade payables specifically relating to such asset
or assets sold by the Company or any Subsidiary that are not assumed by the
purchaser of such asset or assets.
"Notice of Conversion" means the form to be delivered by a holder of a
Convertible Note upon conversion of all or a portion thereof to the Transfer
Agent and the Company substantially in the form of Exhibit B attached hereto.
"Notice of Exercise" means the form to be delivered by a holder of a
Warrant upon exercise of all or a portion thereof to the Company substantially
in the form of Exhibit C attached hereto.
"Officer's Certificate" shall mean a certificate executed by the
President, chief executive officer or chief financial officer of the Company in
the form of Exhibit G attached hereto.
"Other Taxes" has the meaning set forth in Section 3.6(b).
"Par Value Redemption Price" has the meaning set forth in Section
3.2(d).
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"PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.
"Permits" means all domestic and foreign licenses, permits and approvals
required for the full operation of the Company and the Subsidiaries, including
state, federal, city and county permits and approvals.
"Permitted Debt" has the meaning set forth in Section 7.8.
"Permitted Debt Financings" shall mean (i) Permitted Debt and (ii)
Funded Debt not to exceed $10,000,000 in the aggregate.
"Permitted Transferee" means any Person that acquires the Convertible
Notes or Warrants, or the shares of Common Stock issuable upon conversion of the
Convertible Notes or exercise of the Warrants, in compliance with Article VIII
other than any Person who acquires such Convertible Notes, Warrants or shares of
Common Stock issuable upon conversion or exercise thereof (i) in a public
offering or (ii) in the open market, pursuant to sales under Rule 144 of the
Securities Act or otherwise.
"Person" means an individual, corporation, partnership, trust,
incorporated or unincorporated association, joint venture, joint stock company,
government (or any agency or political subdivision thereof) or other entity of
any kind.
"Plan" means at any time an employee pension benefit plan (other than a
Multiemployer Plan) which is covered by Title IV of ERISA or subject to the
minimum funding standards under the Code and either (i) is maintained, or
contributed to, by any member of the ERISA Group for employees of any member of
the ERISA Group or (ii) has at any time within the preceding five years been
maintained, or contributed to, by any Person which was at such time a member of
the ERISA Group for employees of any Person which was at such time a member of
the ERISA Group.
"Principal Transactions" means the payment of fees and expenses relating
to the issuance and sale of the Securities.
"Purchase Price" means the purchase price for the Securities set forth
in Section 2.1 hereof.
"Purchasers" means, collectively, those entities listed in the
introduction to this Agreement and their successors and assigns, including
holders from time to time of the Convertible Notes.
"Registrable Securities" has the meaning set forth in the Registration
Rights Agreement.
"Registration Maintenance Period" has the meaning set forth in the
Registration Rights Agreement.
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"Registration Statement" has the meaning set forth in Section 9.1(b).
"Registration Rights Agreement" means the agreement between the Company
and the Purchasers dated the date hereof substantially in the form set forth in
Exhibit D attached hereto.
"Restricted Payment" means, with respect to any Person, (i) any dividend
or other distribution on any shares of capital stock of such Person (except
dividends payable solely in shares of capital stock of the same or junior class
of such Person and dividends from a wholly-owned direct or indirect Subsidiary
of the Company to its parent corporation), (ii) any payment on account of the
purchase, redemption, retirement or acquisition of (a) any shares of such
Person's capital stock or (b) any option, warrant or other right to acquire
shares of such Person's capital stock or (iii) any loan, or advance or capital
contribution to any Person (a "Stockholder") owning any capital stock of such
Person other than relocation, travel or like advances to officers and employees
in the ordinary course of business.
"Revolving Credit Debt" means any borrowing by the Company under a
revolving credit facility, provided the amount of Debt owed thereunder is
required to be or is reduced to zero for at least thirty (30) consecutive days
during the fiscal year in which such facility is established.
"Rights Offering" has the meaning set forth in Section 10.3.
"SEC Reports" shall have the meaning set forth in Section 4.5.
"Securities" means the Convertible Notes, the Warrants and, as
applicable, the shares of Common Stock issuable upon conversion of the
Convertible Notes and the exercise of the Warrants.
"Securities Act" means the Securities Act of 1933, as amended.
"Security Interests" has the meaning set forth in Section 3.5.
"Security Agreement" shall mean the Security Agreement in the form of
Exhibit E attached hereto dated the Closing Date and executed by the Company
pursuant to which the Company grants to the Purchasers security interests in the
Collateral as collateral security for the payment of the Convertible Notes and
the other obligations of the Company to the Purchasers under the Financing
Documents.
"Share Reorganization" has the meaning set forth Section 10.2.
"Solvency Certificate" shall mean a certificate executed by the chief
financial officer of the Company as to the solvency of the Company, the adequacy
of its capital and its ability to pay its debts, all after giving effect to the
Principal Transactions, which such Solvency Certificate shall be in the form of
Exhibit F attached hereto.
"Special Distribution" has the meaning set forth in Section 10.4.
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"Subsidiary" means, with respect to any Person, any corporation or other
entity of which a majority of the capital stock or other ownership interests
having ordinary voting power to elect a majority of the board of directors or
other persons performing similar functions are at the time directly or
indirectly owned by such Person. Unless specified to the contrary, "Subsidiary"
means a Subsidiary of the Company.
"Subsidiary Corporate Documents" means the certificates of incorporation
and by-laws of each Subsidiary.
"Taxes" has the meaning set forth in Section 3.6.
"Trading Day" shall mean any Business Day in which the Nasdaq Market or
other automated quotation system or exchange on which the Common Stock is then
traded is open for trading for at least four (4) hours.
"Trading Price" shall mean any price at which the Company's Common Stock
has been traded, as reported by Bloomberg L.P. on the Nasdaq Market or, if not
reported by Bloomberg, L.P. on the Nasdaq Market, as reported by such other
exchange or market where the Common Stock is then traded.
"Transfer" means any disposition of Securities that would constitute a
sale thereof under the Securities Act.
"Transfer Agent" means the Company's stock transfer agent; specifically,
American Stock Transfer & Trust Company.
"Transfer Agent Agreement" means the agreement dated the date hereof
among the Company, the Transfer Agent and the Purchasers, dated the date hereof
substantially in the form set forth in Exhibit H attached hereto.
"Trust Agreement" means that Trust Securities Purchase Agreement
contemplated between the parties hereto on the date hereof which such agreement
shall be on terms substantially in conformity with the Commitment Letter dated
June 25, 1997 between HW Partners, L.P. (as representative of, among others, the
Purchasers) and the Company; provided, however, that no party shall be under any
obligation to enter into such Trust Agreement unless it approves of the terms
and conditions ultimately agreed upon therein in its sole discretion.
"Unfunded Liabilities" means, with respect to any Plan at any time, the
amount (if any) by which (i) the present value of all benefits under such Plan
exceeds (ii) the fair market value of all Plan assets allocable to such benefits
(excluding any accrued but unpaid contributions), all determined as of the then
most recent valuation date for such Plan, but only to the extent that such
excess represents a potential liability of a member of the ERISA Group to the
PBGC or any other Person under Title IV of ERISA.
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(AutoBond Acceptance Corporation)
"Warrants" means the Common Stock Purchase Warrants issued to the
Purchasers on the Closing Date in the form of Exhibit I hereto to purchase
200,000 shares of Common Stock in the aggregate (subject to adjustment as set
forth therein).
SECTION 1.2. ACCOUNTING TERMS AND DETERMINATIONS. Unless otherwise
specified herein, all accounting terms used herein shall be interpreted, all
accounting determinations hereunder shall be made, and all financial statements
required to be delivered hereunder shall be prepared, in accordance with
generally accepted accounting principles as in effect from time to time, applied
on a consistent basis (except for changes concurred in by the Company's
independent public accountants) ("GAAP"); provided that if the Company notifies
each of the Purchasers that it wishes to amend any covenant in Article VII to
eliminate the effect of any change in GAAP on the operation of such covenant (or
if any of the Purchasers notify the Company that the Majority Holders wish to
amend Article VII for such purpose), then the Company's compliance with such
covenant shall be determined on the basis of GAAP in effect immediately before
the relevant change in GAAP became effective, until either such notice is
withdrawn or such covenant is amended in a manner satisfactory to the Company
and the Majority Holders. All references to "dollars," "Dollars" or "$" are to
United States dollars unless otherwise indicated.
ARTICLE II
PURCHASE AND SALE OF SECURITIES
SECTION 2.1. COMMITMENT TO PURCHASE. (a) Subject to the terms and
conditions set forth herein, the Company agrees to issue and sell and, subject
to the terms and conditions set forth herein and in reliance on the
representations and warranties of the Company contained herein, the Purchasers
agree to purchase, the Securities as set forth below.
(b) Each Purchaser shall acquire a portion of the Convertible
Notes on the Closing Date in an aggregate principal amount of $2,000,000.
(c) In connection with the Purchasers agreement to purchase the
Convertible Notes specified in this Article II, the Company shall issue and
deliver to each Purchaser, on the Closing Date, a portion of the Warrants to
purchase 200,000 shares of Common Stock.
(d) The portion of the Convertible Notes and Warrants to be
acquired by each Purchaser is set forth on Schedule I attached hereto.
(e) The aggregate consideration payable by the Purchasers to the
Company for the Convertible Notes and the Warrants shall be $2,000,000 (the
"Purchase Price").
SECTION 2.2. PURCHASE OF SECURITIES. (a) On the Closing Date, subject to
the satisfaction of all terms and conditions set forth herein, each of the
Purchasers shall deliver by wire transfer to the Transfer Agent immediately
available funds in an amount equal to the portion
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(AutoBond Acceptance Corporation)
of the Purchase Price of the Convertible Notes to be purchased by it on the
Closing Date, in the proportions as set forth on Schedule I attached hereto.
(b) On the Closing Date, against payment as set forth in subsection 2.2
(a) above, the Company shall deliver to the Transfer Agent (i) a single
Convertible Note for each Purchaser representing the principal amount of such
Convertible Note issued to such Purchaser as of the Closing Date and (ii) a
single Warrant for each Purchaser representing the aggregate Warrants issued to
such Purchaser as of the Closing Date.
(c) As contemplated by the Transfer Agent Agreement, immediately upon
receipt of the items specified in subsections 2.2 (a) and (b) above, the
Transfer Agent shall (i) disburse the Purchase Price in accordance with Section
1 of the Transfer Agent Agreement, (ii) deliver the Warrants to the Purchasers
and (iii) retain the Convertible Notes for the benefit of the Purchasers, as
described therein.
(d) As further contemplated by Section 1(d) of the Transfer Agent
Agreement, in lieu of effecting the closing of the purchase and sale of the
Securities through the Transfer Agent, the Company and the Purchasers may
consummate the deliveries described above in the manner described in Section
1(d) of the Transfer Agent Agreement.
ARTICLE III
PAYMENT TERMS OF CONVERTIBLE NOTES; COLLATERAL SECURITY
SECTION 3.1. PAYMENT OF PRINCIPAL AND INTEREST; PAYMENT MECHANICS. So
long as any Purchaser or its nominee shall be the holder of any Convertible
Note, the Company will pay all sums becoming due on such Convertible Note for
principal, Make-Whole Amount, if any, and interest by the method and at the
address specified for such purpose below such Person's name on Schedule I, or by
such other method or at such other address as such Person shall have from time
to time specified to the Company in writing for such purpose, without the
presentation of surrender of such Convertible Note or the making of any notation
thereon, except that upon written request of the Company made concurrently with
or reasonably promptly after payment or prepayment in full of any Convertible
Note, the holder shall surrender such Convertible Note for cancellation,
reasonably promptly after any such request, to the Company at its principal
executive office. Prior to any sale or other disposition of any Convertible Note
held by any Purchaser or its nominee, such Person will, at its election, either
endorse thereon the amount of principal paid thereon and the last date to which
interest has been paid thereon or surrender such Convertible Note to the Company
in exchange for a new Convertible Note or Notes. The Company will afford the
benefits of this Section 3.1 to any direct or indirect transferee of any
Convertible Note purchased under this Agreement and that has made the same
agreement relating to such Convertible Note as the Purchaser has in this Section
3.1; provided that such transferee is an "accredited investor" under rule 501 of
the Securities Act.
SECTION 3.2. VOLUNTARY PREPAYMENTS. (a) Subject to the terms of this
Section 3.2, the Company may, at its option, following thirty (30) days prior
written notice to the
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(AutoBond Acceptance Corporation)
Purchasers (the expiration of such 30 day period being referred to as the
"prepayment date"; provided, however, if such date is not a Business Day, the
prepayment date shall be the next Business Day thereafter) prepay all or any
portion of the Convertible Notes remaining unconverted on the prepayment date,
specifying the amount of the prepayment pursuant to the terms of this Article
III. Partial prepayments shall be in an aggregate principal amount of $250,000
or a multiple thereof.
(b) If the prepayment date is before June 30, 1998 (the "Call Date"),
the price to be paid by the Company to prepay the Convertible Notes shall be the
Early Repayment Price. The "Early Repayment Price" shall mean that amount equal
to the sum of (a) the aggregate principal amount of the Convertible Notes being
repaid, plus (b) the applicable amount of accrued but unpaid interest thereon
through the date of consummation of the repayment (as specified in Section 3.4
below), plus (c) the Make-Whole Amount.
(c) If the prepayment date is after the Call Date, the price to be paid
by the Company to prepay the Convertible Notes shall be the Formula Price. The
"Formula Price" shall mean the sum of (a) the product of (i) the number of
shares of Common Stock into which the Convertible Notes being redeemed are then
convertible at the then current Conversion Price and (ii) the highest Trading
Price during the Lookback Period, and (b) the applicable amount of accrued but
unpaid interest on the Convertible Notes being repaid through the date of
consummation of the repayment (as specified in Section 3.4 below).
(d) On the Call Date, the Company shall have the one time right, but not
the obligation, to redeem the Convertible Notes at the Par Value Redemption
Price. The "Par Value Redemption Price" shall mean the aggregate principal
amount of the applicable Convertible Notes being redeemed, plus any accrued and
unpaid interest on the Convertible Notes through the applicable date of
consummation of the redemption (as specified in Section 3.4 below).
SECTION 3.3. MANDATORY PREPAYMENTS.
(a) Upon (i) the occurrence of a Change of Control of the Company, (ii)
a transfer of all or substantially all of the assets of the Company to any
Person in a single transaction or series of related transactions or (iii) a
consolidation, merger or amalgamation of the Company with or into another Person
(other than a merger (x) which does not result in any reclassification,
conversion, exchange or cancellation of outstanding shares of Common Stock or
(y) which is effected solely to change the jurisdiction of incorporation of the
Company and results in a reclassification, conversion or exchange of outstanding
shares of Common Stock solely into shares of Common Stock), the Company shall
redeem all of the Convertible Notes in cash for the Formula Price.
(b) Upon the consummation of one or more Debt Financings, the Company
shall use up to 100% of the Net Cash Proceeds therefrom to redeem the
Convertible Notes. The redemption price payable upon any such redemption shall
be (x) the Early Repayment Price, if such redemption occurs (as specified in
Section 3.4 below) prior to the Call Date, and (y) the Formula Price, if such
redemption occurs (as specified in Section 3.4 below) after the Call Date.
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(AutoBond Acceptance Corporation)
(c) Upon the consummation of one or more Discounted Equity Offerings,
the Company shall use up to 100% of the Net Cash Proceeds therefrom to redeem
the Convertible Notes. The redemption price payable upon any such redemption
shall be (x) the Early Repayment Price, if such redemption occurs (as specified
in Section 3.4 below) prior to the Call Date and (y) the Formula Price, if such
redemption occurs (as specified in Section 3.4 below) after the Call Date.
(d) If Taxes are imposed upon the Company and the holders of Convertible
Notes subject to such Taxes have not exercised their right to transfer the
Convertible Notes to a qualified assignee as set forth in Section 3.6 (either by
notice to the Company to that effect or failure to exercise such right within
the thirty-day period prescribed), the Company shall, on the fifth (5th)
Business Day after the failure to exercise such right (such day being referred
to as the "redemption date") prepay all of the Convertible Notes remaining
unconverted on the redemption date and held by a party subject to Taxes for the
Par Value Redemption Price.
SECTION 3.4. PREPAYMENT PROCEDURES.
(a) Any prepayment or redemption of the Convertible Notes pursuant to
Sections 3.2 or 3.3 above shall be deemed to be effective and consummated (for
purposes of determining the Early Repayment Price, Par Value Redemption Price or
Formula Price, as applicable, and the time at which the Purchasers shall
thereafter not be entitled to deliver a Notice of Conversion for the Convertible
Notes) as follows:
(I) A redemption pursuant to Sections 3.2(b) and (c), the
"prepayment date" specified therein;
(II) A redemption pursuant to Section 3.2(d), the Call Date;
(III) A redemption pursuant to Section 3.3(a), the date of
consummation of the applicable Change of Control, merger or asset sale;
(IV) A redemption pursuant to Section 3.3(b), the date of
consummation of the applicable Debt Financing (meaning closing and
funding);
(V) A redemption pursuant to Section 3.3(c), five (5) Business
Days following the receipt by the Company of the Net Cash Proceeds
specified therein;
(VI) A redemption pursuant to Section 3.3(d), the "redemption
date" specified therein.
(b) Within one (1) Business Day after (x) the Maturity Date or (y) the
effective date of a repayment or redemption of the Convertible Notes as
specified in Section 3.4(a) above, the Company shall deposit the applicable
repayment/redemption price with the Transfer Agent for immediate delivery to
each Purchaser of the Convertible Notes subject to redemption as
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(AutoBond Acceptance Corporation)
contemplated by the Transfer Agent Agreement. Should any Purchaser not receive
payment of any amounts due on redemption of its Convertible Notes by reason of
the Company's failure to make payment at the times prescribed above for any
reason, the Company shall pay to the applicable holder on demand (x) interest on
the sums not paid when due at an annual rate equal to the lesser of (I) the
maximum lawful rate and (II) the then applicable interest rate on the
Convertible Notes being redeemed plus three percent (3%) compounded at the end
of each thirty (30) days, until the applicable holder is paid in full and (y)
all costs of collection, including, but not limited to, reasonable attorneys'
fees and costs, whether or not suit or other formal proceedings are instituted.
(c) The Company shall select the Convertible Notes to be redeemed in any
redemption in which not all of the Convertible Notes are to be redeemed so that
the ratio of the Convertible Notes of each holder selected for redemption to the
total Convertible Notes owned by that holder shall be the same as the ratio of
all such Convertible Notes selected for redemption bears to the total of all
then outstanding Convertible Notes. Should any Convertible Notes be required to
be redeemed under the terms hereof not be redeemed solely by reason of
limitations imposed by law, the applicable Convertible Notes shall be redeemed
on the earliest possible dates thereafter that the applicable Convertible Notes
may be redeemed to the maximum extent permitted by law.
(d) Any Notice of Conversion delivered by any Purchaser (including
delivery via telecopy) to the Company and the Transfer Agent prior to the (x)
Maturity Date or (y) effective date of a redemption specified in Section 3.4(a)
above, shall be honored by the Company and the conversion of the Convertible
Notes shall be deemed effected on the Conversion Date.
SECTION 3.5. RANKING; COLLATERAL. The Convertible Notes will rank as
senior, secured obligations of the Company. As collateral security for the
payment and performance of the Convertible Notes, the Purchasers shall be
granted first priority liens and security interests (collectively, the "Security
Interests") on, in and to the Collateral (as defined in the Security Agreement).
Upon payment in full of the Convertible Notes, the Purchasers shall promptly
release such Security Interests and deliver to the Company appropriate
terminations of all Uniform Commercial Code filings, or their equivalent, made
in favor of the Purchasers.
SECTION 3.6. PAYMENT OF ADDITIONAL AMOUNTS. (a) Any and all payments by
the Company hereunder or under the Convertible Notes to any Purchaser and each
"qualified assignee" thereof shall be made free and clear of and without
deduction or withholding for any and all present or future taxes, levies,
imposts, deductions, charges or withholdings, and all liabilities with respect
thereto (all such taxes, levies, imposts, deductions, charges, withholdings and
liabilities being hereinafter referred to as "Taxes") unless such Taxes are
required by law or the administration thereof to be deducted or withheld. If the
Company shall be required by law or the administration thereof to deduct or
withhold any Taxes from or in respect of any sum payable under the Convertible
Notes (i) the holders of Convertible Notes subject to such Taxes shall have the
right, but not the obligation, for a period of thirty (30) days commencing upon
the day it shall have received written notice from the Company that it is
required to withhold Taxes to transfer all or any portion of the Convertible
Notes to a qualified assignee to the extent such transfer can be effected in
accordance with the other provisions of this Agreement and applicable law; (ii)
the
SECURITIES PURCHASE AGREEMENT - Page 17
(AutoBond Acceptance Corporation)
Company shall make such deductions or withholdings; and (iii) the Company shall
forthwith pay the full amount deducted or withheld to the relevant taxation or
other authority in accordance with applicable law. A "qualified assignee" of a
Purchaser is a Person that is organized under the laws of (I) the United States
or (II) any jurisdiction other than the United States or any political
subdivision thereof and that (y) represents and warrants to each of the Company
that payments of the Company to such assignee under the laws in existence on the
date of this Agreement would not be subject to any Taxes and (z) from time to
time, as and when requested by the Company, executes and delivers to the Company
and the Internal Revenue Service forms, and provides the Company with any
information necessary to establish such assignee's continued exemption from
Taxes under applicable law.
(b) The Company shall forthwith pay any present or future stamp or
documentary taxes or any other excise or property taxes, charges or similar
levies (all such taxes, charges and levies hereinafter referred to as "Other
Taxes") which arise from any payment made under any of the Financing Documents
or from the execution, delivery or registration of, or otherwise with respect
to, this Agreement other than Taxes payable solely as a result of the transfer
from the Purchasers to a Person of any Security.
(c) Within 30 days after the date of any payment of Taxes, the Company
will furnish to each Purchaser the original or a certified copy of a receipt
evidencing payment thereof.
(d) Infinity Emerging Opportunities Limited shall provide to the Company
a Form W-8, stating that it is a non-U.S. person, together with any additional
tax forms which may be required under the Code, as amended after the date
hereof, to allow interest payments to be made to it without deduction.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Purchasers, and each of them,
as of the Closing Date as set forth herein.
SECTION 4.1. CORPORATE EXISTENCE AND POWER. The Company and each
Subsidiary is a corporation (or other legal entity) duly organized, validly
existing and in good standing under the laws of its jurisdiction of
incorporation and is duly qualified to conduct business as a foreign
corporation, and has all corporate power and all governmental licenses,
authorizations, permits, consents and approvals required to carry on its
business as now conducted and as proposed to be conducted, except where such
failure would not have a material adverse effect on the Company or the ability
of the Company to continue its current operations.
SECTION 4.2. AUTHORIZATION AND EXECUTION. The execution, delivery and
performance by the Company of each Financing Document and the issuance by the
Company of the Securities have been duly and validly authorized and are within
its corporate powers. This Agreement has been duly executed and delivered by the
Company and constitutes the valid and
SECURITIES PURCHASE AGREEMENT - Page 18
(AutoBond Acceptance Corporation)
binding agreement of the Company. Each of the Financing Documents constitutes
the valid and binding obligation of the Company, in each case enforceable
against the Company in accordance with its respective terms, subject to (i)
applicable bankruptcy, insolvency or similar laws affecting the enforceability
of creditors rights generally and (ii) equitable principles of general
applicability.
SECTION 4.3. GOVERNMENTAL AUTHORIZATION; THE SECURITIES. The execution
and delivery by the Company of the Financing Documents does not and will not,
the issuance and sale by the Company of the Securities does not and will not,
and the consummation of the transactions contemplated hereby and thereby will
not, require any action by or in respect of, or filing with, any governmental
body, agency or governmental official except (a) such actions or filings that
have been undertaken or made prior to the date hereof and that will be in full
force and effect (or as to which all applicable waiting periods have expired) on
and as of the date hereof or which are not required to be filed on or prior to
the Closing Date, (b) such actions or filings that, if not obtained, would not
in the aggregate impose materially adverse conditions upon the Company and (c)
listing applications ("Listing Applications") to be filed with the Nasdaq Market
relating to the shares of Common Stock issuable upon conversion of the
Convertible Notes and exercise of the Warrants. Upon conversion in accordance
with the terms of the Convertible Notes, or upon exercise in accordance with the
terms of the Warrants (assuming the payment of the exercise price set forth in
the Warrants), the shares of Common Stock when issued upon conversion or
exercise thereof shall be duly and validly issued and outstanding, fully paid
and nonassessable, free and clear of any claims or pre-emptive rights. Assuming
the representations and warranties of the Purchasers herein are true and correct
in all material respects, each of the Securities will have been issued in
material compliance with all applicable U.S. federal and state securities laws.
SECTION 4.4. CONTRAVENTION. The execution and delivery by the Company of
the Financing Documents to which it is a party did not and will not, the
issuance and sale by the Company of the Securities did not and will not and the
consummation of the transactions contemplated hereby and thereby will not,
contravene or constitute a default under or violation of (i) any provision of
applicable law or regulation, (ii) the Company Corporate Documents or the
Subsidiary Corporate Documents relating to the Designated Subsidiaries (iii) any
agreement, judgment, injunction, order, decree or other instrument binding upon
the Company or any Subsidiary or any of their respective assets, or result in
the creation or imposition of any Lien on any asset of the Company or any
Subsidiary. The Company and each Subsidiary is in compliance with and conforms
to all statutes, laws, ordinances, rules, regulations, orders, restrictions and
all other legal requirements of any domestic or foreign government or any
instrumentality thereof having jurisdiction over the conduct of its businesses
or the ownership of its properties, except where such failure would not have a
material adverse effect on the business, condition (financial or otherwise),
operations, performance, properties or prospects of such corporation.
SECTION 4.5. FINANCIAL INFORMATION AND SEC REPORTS. The Company has
timely filed all forms, reports and documents with the Commission since November
8, 1996, required to be filed by it under the Exchange Act through the date
hereof (collectively, the "SEC Reports"). Such SEC Reports, at the time filed,
complied in all material respects with the requirements of the Exchange Act.
None of the SEC Reports, including without limitation any financial statements
or schedules included therein, contains any untrue statement of a material fact
or omits to state a material
SECURITIES PURCHASE AGREEMENT - Page 19
(AutoBond Acceptance Corporation)
fact necessary in order to make the statements made, in light of the
circumstances under which they were made, not misleading. There have been no
material adverse changes in the Company=s business, properties, results of
operations, condition (financial or otherwise) or prospects since the date of
the Company=s most recent Report on Form 10-K for the year ended December 31,
1996, which have not been disclosed to the Purchasers in writing. The audited
and unaudited consolidated balance sheets of the Company and its Subsidiaries
contained in the SEC Reports, and the related consolidated statements of income,
changes in stockholders= equity and changes in cash flows for the periods ended
December 31, 1996 (the consolidated balance sheet of the Company and its
subsidiaries as of December 31, 1996 is hereinafter referred to as the "Balance
Sheet"), including the footnotes thereto, except as indicated therein, have been
prepared in accordance with GAAP consistently followed throughout the periods
indicated, except that the unaudited financial statements do not contain notes
and may be subject to normal audit adjustments and normal annual adjustments.
The Balance Sheet fairly presents the financial condition of the Company and its
Subsidiaries at the date thereof and, except as indicated therein, reflects all
claims against and all Debts and liabilities of the Company and its
Subsidiaries, fixed or contingent, as at the date thereof and the related
statements of income, stockholders= equity and changes in cash flows fairly
present the results of the operations of the Company and its Subsidiaries and
the changes in their financial position for the period indicated. Since December
31, 1996 (the "Balance Sheet Date"), except as disclosed in the SEC Reports,
there has been (x) no material adverse change in the assets or liabilities, or
in the business or condition, financial or otherwise, or in the results of
operations or prospects, of the Company and its subsidiaries, whether as a
result of any legislative or regulatory change, revocation of any license or
rights to do business, fire, explosion, accident, casualty, labor trouble,
flood, drought, riot, storm, condemnation, act of God, public force or otherwise
and (y) no material adverse change in the assets or liabilities, or in the
business or condition, financial or otherwise, or in the results of operations
or prospects, of the Company and its Subsidiaries except in the ordinary course
of business; and no fact or condition exists or is contemplated or threatened
which might cause such a change in the future.
SECTION 4.6. LITIGATION. There is no action, suit or proceeding pending
or, to the knowledge of the Company, threatened against the Company or any
Subsidiary, before any court or arbitrator or any governmental body, agency or
official in which there is a reasonable possibility of an adverse decision which
could materially adversely affect the business, condition (financial or
otherwise), operations, performance, properties or prospects of the Company or
which challenges the validity of any Financing Document.
SECTION 4.7. COMPLIANCE WITH ERISA AND OTHER BENEFIT PLANS.
(a) Each member of the ERISA Group has fulfilled its obligations under
the minimum funding standards of ERISA and the Code with respect to each Plan
and is in compliance in all material respects with the presently applicable
provisions of ERISA and the Code with respect to each Plan. No member of the
ERISA Group has (i) sought a waiver of the minimum funding standard under
Section 412 of the Code in respect of any Plan, (ii) failed to make any required
contribution or payment to any Plan or Multiemployer Plan or in respect of any
Benefit Arrangement, or made any amendment to any Plan or Benefit Arrangement,
which has resulted or could result in the imposition of a Lien or the posting of
a bond or other security under ERISA or
SECURITIES PURCHASE AGREEMENT - Page 20
(AutoBond Acceptance Corporation)
the Code or (iii) incurred any liability under Title IV of ERISA other than a
liability to the PBGC for premiums under Section 4007 of ERISA
(b) The benefit plans not covered under clause (a) above (including
profit sharing, deferred compensation, stock option, employee stock purchase,
bonus, retirement, health or insurance plans, collectively the "Benefit Plans")
relating to the employees of the Company are duly registered where required by,
and are in good standing in all material respects under, all applicable laws.
All required employer and employee contributions and premiums under the Benefit
Plans to the date hereof have been made, the respective fund or funds
established under the Benefit Plans are funded in accordance with applicable
laws, and no past service funding liabilities exist thereunder.
(c) No Benefit Plans have any unfunded liabilities, either on a "going
concern" or "winding up" basis and determined in accordance with all applicable
laws and actuarial practices and using actuarial assumptions and methods that
are reasonable in the circumstances. No event has occurred and no condition
exists with respect to any Benefit Plans that has resulted or could reasonably
be expected to result in any pension plan having its registration revoked or
wound up (in whole or in part) or refused for the purposes of any applicable
laws or being placed under the administration of any relevant pension benefits
regulatory authority or being required to pay any taxes or penalties (in any
material amounts) under any applicable laws.
SECTION 4.8. ENVIRONMENTAL MATTERS. The costs and liabilities associated
with Environmental Laws (including the cost of compliance therewith) are
unlikely to have a material adverse effect on the business, condition (financial
or otherwise), operations, performance, properties or prospects of the Company
or any Subsidiary. Each of the Company and the Subsidiaries conducts its
businesses in compliance in all material respects with all applicable
Environmental Laws.
SECTION 4.9. TAXES. All United States federal, state, county,
municipality local or foreign income tax returns and all other material tax
returns (including foreign tax returns) which are required to be filed by or on
behalf of the Company and each Subsidiary have been filed and all material taxes
due pursuant to such returns or pursuant to any assessment received by the
Company and each Subsidiary have been paid except those being disputed in good
faith and for which adequate reserves have been established. The charges,
accruals and reserves on the books of the Company and each Subsidiary in respect
of taxes or other governmental charges have been established in accordance with
GAAP.
SECTION 4.10. INVESTMENTS, JOINT VENTURES. The Company has no
Subsidiaries or other direct or indirect Investment in any Person, and the
Company is not a party to any partnership, management, shareholders' or joint
venture or similar agreement other than as set forth on Schedule II hereto.
SECTION 4.11. NOT AN INVESTMENT COMPANY. Neither the Company nor any
Subsidiary is an "investment company" within the meaning of the Investment
Company Act of 1940, as amended.
SECURITIES PURCHASE AGREEMENT - Page 21
(AutoBond Acceptance Corporation)
SECTION 4.12. FULL DISCLOSURE. The information heretofore furnished by
the Company to the Purchasers for purposes of or in connection with this
Agreement or any transaction contemplated hereby does not, and all such
information hereafter furnished by the Company or any Subsidiary to the
Purchasers will not (in each case taken together and on the date as of which
such information is furnished), contain any untrue statement of a material fact
or omit to state a material fact necessary in order to make the statements
contained therein, in the light of the circumstances under which they are made,
not misleading.
SECTION 4.13. CAPITALIZATION. As of the date hereof, the authorized,
issued and outstanding capital stock of the Company is as set forth on Schedule
III hereto; and no other shares of capital stock of the Company will be
outstanding. Other than as set forth on Schedule III hereto, there are no
subscriptions, options, warrants, rights, convertible securities, exchangeable
securities or other agreements or commitments of any character pursuant to which
the Company is required to issue any shares of its capital stock.
SECTION 4.14. SOLICITATION. No form of general solicitation or general
advertising was used by the Company or, to the best of its actual knowledge, any
other Person acting on behalf of the Company in connection with the offer and
sale of the Securities. Neither the Company, nor, to its knowledge, any Person
acting on behalf of the Company, has, either directly or indirectly, sold or
offered for sale to any Person (other than the Purchasers) any of the Securities
or, within the six months prior to the date hereof, any other similar security
of the Company except as contemplated by this Agreement, and the Company
represents that neither itself nor any Person authorized to act on its behalf
(except that the Company makes no representation as to the Purchasers and their
Affiliates) will sell or offer for sale any such security to, or solicit any
offers to buy any such security from, or otherwise approach or negotiate in
respect thereof with, any Person or Persons so as thereby to cause the issuance
or sale of any of the Securities to be in violation of any of the provisions of
Section 5 of the Securities Act.
SECTION 4.15. PERMITS. (a) Each of the Company and its Subsidiaries has
all material Permits as are necessary for the conduct of its business as it has
been carried on; (b) all such Permits are in full force and effect, and each of
the Company and its Subsidiaries has fulfilled and performed all material
obligations with respect to such Permits; (c) no event has occurred which
allows, or after notice or lapse of time would allow, revocation or termination
by the issuer thereof or which results in any other material impairment of the
rights of the holder of any such Permit; and (d) the Company has no reason to
believe that any governmental body or agency is considering limiting, suspending
or revoking any such Permit.
SECTION 4.16. LEASES. Except as disclosed on Schedule IV hereto, neither
the Company nor any Subsidiary is a party to any capital lease obligation with a
value greater than $100,000 or to any operating lease with an aggregate annual
rental greater than $100,000 during the life of such lease.
SECTION 4.17. ABSENCE OF ANY UNDISCLOSED LIABILITIES OR CAPITAL CALLS.
There are no liabilities of the Company or any Subsidiary of any kind
whatsoever, whether accrued,
SECURITIES PURCHASE AGREEMENT - Page 22
(AutoBond Acceptance Corporation)
contingent, absolute, determined, determinable or otherwise, and there is no
existing condition, situation or set of circumstances which could reasonably be
expected to result in such a liability, other than (i) those liabilities
provided for in the financial statements delivered pursuant to Section 4.5
hereof and (ii) other undisclosed liabilities which, individually or in the
aggregate, are not material to the Company.
SECTION 4.18. GOVERNMENTAL REGULATION. Neither the Company nor any
Subsidiary is, or will be upon the issuance and sale of the Securities and the
use of the proceeds described herein, subject to regulation under the Public
Utility Holding Company Act of 1935, as amended, the Federal Power Act, the
Interstate Commerce Act or to any federal or state statute or regulation
limiting its ability to issue and perform its obligations under any Financing
Document.
SECTION 4.19. INTELLECTUAL PROPERTY RIGHTS. Each of the Company and its
Subsidiaries owns, or is licensed under, and has the rights to use, all material
patents, trademarks, trade names, copyrights, technology, know-how and processes
(collectively, "Intellectual Property") used in, or necessary for the conduct of
its business; no claims have been asserted by any Person to the use of any such
Intellectual Property or challenging or questioning the validity or
effectiveness of any license or agreement related thereto. To the best of the
Company's and its Subsidiaries' knowledge, there is no valid basis for any such
claim and the use of such Intellectual Property by the Company and its
Subsidiaries will not infringe upon the rights of any Person.
SECTION 4.20. INSURANCE. The Company and its Subsidiaries maintain, with
financially sound and reputable insurance companies, insurance in at least such
amounts and against such risks such that any uninsured loss would not have a
material adverse effect on the business, condition (financial or otherwise),
operations, performance, properties or prospects of the Company. All insurance
coverages of the Company and its Subsidiaries are in full force and effect and
there are no past due premiums in respect of any such insurance.
SECTION 4.21. TITLE TO PROPERTIES. The Company and its Subsidiaries have
good and marketable title to all their respective properties reflected on the
financial statements referred to in Section 4.5, and, except for the Liens (x)
permitted by Section 7.11 or (y) listed on Schedule VI hereto (which list shall
specify that the Collateral is not encumbered thereby), there is no Lien on any
asset of the Company or its Subsidiaries. Except for financing statements (or
their equivalent) filed, recorded or registered with respect to Liens permitted
by Section 7.11, there are no currently effective financing statements (or their
equivalent) of record in any jurisdiction covering (i) any portion of the
Collateral or (ii) any tangible or intangible assets of the Company (other than
those assets referenced in (i) above), the existence of which could impair to
any significant extent the value to the Purchasers of the Security Interests
granted to the Purchasers in the Collateral.
SECURITIES PURCHASE AGREEMENT - Page 23
(AutoBond Acceptance Corporation)
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS
SECTION 5.1. PURCHASE FOR INVESTMENT; AUTHORITY; BINDING AGREEMENT. Each
Purchaser as to itself only hereby represents and warrants to the Company that:
(a) the Purchaser is an "accredited investor" within the meaning of Rule
501(a) under the Securities Act and the Securities to be acquired by it pursuant
to this Agreement are being acquired for its own account and not with a view
toward, or for sale in connection with, any distribution thereof except in
compliance with applicable United States federal and state securities law;
provided that the disposition of the Purchaser's property shall at all times be
and remain within its control;
(b) the execution, delivery and performance of this Agreement and the
purchase of the Securities pursuant hereto are within the Purchaser's corporate
or partnership powers, as applicable, and have been duly and validly authorized
by all requisite corporate or partnership action;
(c) this Agreement has been duly executed and delivered by the
Purchaser.
(d) the execution and delivery by the Purchaser of the Financing
Documents to which it is a party does not, and the consummation of the
transactions contemplated hereby and thereby will not, contravene or constitute
a default under or violation of (i) any provision of applicable law or
regulation, or (ii) any agreement, judgment, injunction, order, decree or other
instrument binding upon the Purchasers;
(e) Purchaser understands that the Securities have not been registered
under the Securities Act and may not be transferred or sold except as specified
in this Agreement;
(f) this Agreement constitutes a valid and binding agreement of the
Purchaser enforceable in accordance with its terms, subject to (i) applicable
bankruptcy, insolvency or similar laws affecting the enforceability of creditors
rights generally and (ii) equitable principles of general applicability;
(g) the Purchaser has such knowledge and experience in financial and
business matters so as to be capable of evaluating the merits and risks of its
investment in the Securities and the Purchaser is capable of bearing the
economic risks of such investment;
(h) the Purchaser is knowledgeable, sophisticated and experienced in
business and financial matters; the Purchaser has previously invested in
securities similar to the Securities and fully understands the limitations on
transfer described herein; the Purchaser has been afforded access to information
about the Company and the financial condition, results of operations, property,
management and prospects of the Company sufficient to enable it to evaluate its
investment in the Securities; the Purchaser has been afforded the opportunity to
ask such
SECURITIES PURCHASE AGREEMENT - Page 24
(AutoBond Acceptance Corporation)
questions as it has deemed necessary of, and to receive answers from,
representatives of the Company concerning the terms and conditions of the
offering of the Securities and the merits and the risks of investing in the
Securities; and the Purchaser has been afforded the opportunity to obtain such
additional information which the Company possesses or can acquire that is
necessary to verify the accuracy and completeness of the information given to
the Purchaser concerning the Company. The foregoing does not in any way relieve
the Company of its representations and other undertakings hereunder, and shall
not limit the Purchasers' ability to rely thereon;
(i) Lion Capital Partners, L.P. is a Texas limited partnership and
Infinity Emerging Opportunities Limited is a Nevis West Indies business
corporation; and
(j) no part of the source of funds used by the Purchaser to acquire the
Securities constitutes assets allocated to any separate account maintained by
the Purchaser in which any employee benefit plan (or its related trust) has any
interest.
ARTICLE VI
CONDITIONS PRECEDENT TO PURCHASE OF SECURITIES
SECTION 6.1. CLOSING. The closing hereunder shall occur upon the date
upon which each of the following conditions shall be satisfied:
(a) Receipt by each of the Purchasers of a Solvency Certificate executed
by the chief financial officer of the Company;
(b) Receipt by each of the Purchasers of evidence satisfactory to it as
to (i) the receipt by the Company of all governmental, board of directors,
shareholders and third party consents and approvals necessary or desirable in
connection with the issuance and sale of the Securities, or the consummation of
the Principal Transactions, (ii) the expiration of all applicable waiting
periods without any action having been taken by any competent authority that
could restrain, prevent or impose any materially adverse conditions thereon or
that could seek or threaten any of the foregoing and (iii) the absence of any
law or regulation that, in the judgment of any Purchaser, could have any such
effect;
(c) Receipt by each of the Purchasers of duly executed counterparts of
this Agreement, the Registration Rights Agreement, the Security Agreement and
the Transfer Agent Agreement signed by the Company and, with respect to the
Transfer Agent Agreement, signed by the Transfer Agent;
(d) Each of the Purchasers shall have received opinions, dated the
Closing Date, of ▇▇▇▇▇▇ & ▇▇▇▇▇▇, L.L.P., Houston, Texas and/or ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, New York, New York, each counsel to the Company, substantially in
the form attached as Exhibit J hereto.
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(AutoBond Acceptance Corporation)
(e) All fees and expenses due and payable by the Company on or prior to
the Closing Date shall have been paid or duly provided for in full as
contemplated by the Transfer Agent Agreement;
(f) The Convertible Notes and the Warrants shall have been duly executed
by the parties thereto as provided in the Transfer Agent Agreement;
(g) The Purchasers shall have received an Officer's Certificate executed
by the President, chief executive officer or chief financial officer of the
Company;
(h) The Company shall not have any Debt outstanding other than as
specifically identified on Schedule V attached hereto;
(i) The Company Corporate Documents and the Subsidiary Corporate
Documents, if any, shall be in full force and effect and no term or condition
thereof shall have been amended, waived or otherwise modified without the prior
written consent of the Purchasers;
(j) There shall have occurred no material adverse change in the
business, condition (financial or otherwise), operations, performance,
properties or prospects of the Company or any Subsidiary since March 31, 1997;
(k) There shall exist no action, suit, investigation, litigation or
proceeding pending or threatened in any court or before any arbitrator or
governmental instrumentality that challenges the validity of or purports to
affect any Financing Document, any Principal Transaction or other transaction
contemplated hereby or thereby or that could reasonably be expected to have a
material adverse effect on the business, condition (financial or otherwise),
operations, performance, properties or prospects of the Company and its
Subsidiaries, taken as a whole, the enforceability of the Financing Documents or
the Securities or the rights of the holders of the Securities or the Purchasers
hereunder;
(l) The representations and warranties of the Company contained in each
Financing Document shall be true and correct in all respects (in the case of any
representation or warranty containing any materiality qualification) or in all
material respects (in the case of any representation or warranty without any
materiality qualification) and the Company shall have performed and complied
with all covenants and agreements required by such Financing Documents to be
performed or complied with by it at or prior to the Closing Date;
(m) The Purchasers or the Transfer Agent, as applicable, shall have
confirmed receipt of the Convertible Notes and the Warrants to be issued, duly
executed by the Company in the denominations and registered in the names of the
Purchasers specified in or pursuant to Schedule I;
(n) There shall not have occurred any disruption or adverse change in
the financial or capital markets generally, or in the market for the Common
Stock, which the Purchasers reasonably deem material in connection with the
purchase of the Securities;
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(AutoBond Acceptance Corporation)
(o) Immediately before and after the Closing Date, no Default shall have
occurred and be continuing;
(p) Receipt by the Purchasers of Uniform Commercial Code financing
statements, or their equivalent, duly executed by the Company or other
appropriate party with respect to the Collateral, for filing in all
jurisdictions as may be necessary to perfect the Security Interests created in
such Collateral in such jurisdictions pursuant to the Financing Documents; and
(q) The Purchasers shall have received all other opinions, resolutions,
certificates, instruments, agreements or other documents as they shall
reasonably request.
SECTION 6.2. CONDITIONS TO THE COMPANY'S OBLIGATIONS. The obligations of
the Company to issue and sell to the Purchasers the Securities to be issued and
sold pursuant to this Agreement are subject to the satisfaction, at or prior to
the Closing Date, of the following conditions:
(a) The representations and warranties of the Purchasers contained
herein shall be true and correct in all material respects on the Closing Date
and the Purchasers shall have performed and complied in all material respects
with all agreements required by this Agreement to be performed or complied with
by the Purchasers at or prior to the Closing Date;
(b)The issue and sale of the Securities by the Company shall not be
prohibited by any applicable law, court order or governmental regulation;
(c) Receipt by the Company of duly executed counterparts of this
Agreement, the Registration Rights Agreement, the Security Agreement and the
Transfer Agent Agreement signed by the Purchasers, and, with respect to the
Transfer Agent Agreement, signed by the Transfer Agent; and
(d) The Company shall have received payment of the Purchase Price of the
Convertible Notes and Warrants.
ARTICLE VII
COVENANTS
The Company hereby agrees that, from and after the date hereof for so
long as any Securities remain outstanding and for the benefit of the Purchasers
and such holders from time to time of the Securities:
SECTION 7.1. INFORMATION. The Company will deliver to each holder of the
Convertible Notes:
SECURITIES PURCHASE AGREEMENT - Page 27
(AutoBond Acceptance Corporation)
(a) promptly upon the filing thereof, copies of all registration
statements (other than the exhibits thereto and any registration statements on
Form S-8 or its equivalent) and reports on Forms 10-K, 10-Q and 8-K (or their
equivalents) which the Company or any Subsidiary has filed with the Commission;
(b) simultaneously with the delivery of each item referred to in clause
(a) above, a certificate from the Company stating that no Default has occurred
and is continuing, or, if as of the date of such delivery a Default shall have
occurred and be continuing, a certificate from the Company setting forth the
details of such Default and the action which the Company is taking or proposes
to take with respect thereto;
(c) within two (2) days after any officer of the Company obtains
knowledge of a Default, a certificate of the chief financial officer or the
chief accounting officer of the Company setting forth the details thereof and
the action which the Company is taking or proposes to take with respect thereto;
(d) promptly upon the mailing thereof to the shareholders of the Company
generally, copies of all financial statements, reports and proxy statements so
mailed and any other document generally distributed to shareholders;
(e) if and when any member of the ERISA Group (i) gives or is required
to give notice to the PBGC of any "reportable event" (as defined in Section 4043
of ERISA) with respect to any Plan which might constitute grounds for a
termination of such Plan under Title IV of ERISA, or knows that the plan
administrator of any Plan has given or is required to give notice of any such
reportable event, a copy of the notice of such reportable event given or
required to be given to the PBGC; (ii) receives notice of complete or partial
withdrawal liability under Title IV of ERISA or notice that any Multiemployer
Plan is in reorganization, is insolvent or has been terminated, a copy of such
notice; (iii) receives notice from the PBGC under Title IV of ERISA of an intent
to terminate, impose liability (other than for premiums under Section 4007 of
ERISA) in respect of, or appoint a trustee to administer any Plan, a copy of
such notice; (iv) applies for a waiver of the minimum funding standard under
Section 412 of the Code, a copy of such application; (v) gives notice of intent
to terminate any Plan under Section 4041(c) of ERISA, a copy of such notice and
other information filed with the PBGC; (vi) gives notice of withdrawal from any
Plan pursuant to Section 4063 of ERISA, a copy of such notice; or (vii) fails to
make any required payment or contribution to any Plan or Multiemployer Plan or
in respect of any Benefit Arrangement or makes any amendment to any Plan or
Benefit Arrangement which has resulted or could result in the imposition of a
Lien or the posting of a bond or other security, a certificate of the chief
financial officer or the chief accounting officer of the Company setting forth
details as to such occurrence and action, if any, which the Company or
applicable member of the ERISA Group is required or proposes to take;
(f) promptly following the commencement thereof, notice and a
description in reasonable detail of any litigation or proceeding to which the
Company or any Subsidiary is a party in which the amount involved is $250,000 or
more and not covered by insurance or in which injunctive or similar relief is
sought; and
SECURITIES PURCHASE AGREEMENT - Page 28
(AutoBond Acceptance Corporation)
(g) at least thirty (30) days prior to any material change in the
AutoBond Manual, written notice thereof to each Purchaser setting forth in
reasonable detail the change to be made and the reasons therefor.
SECTION 7.2. PAYMENT OF OBLIGATIONS. The Company and its Subsidiaries
will pay and discharge, at or before maturity, all their respective material
obligations, including, without limitation, tax liabilities, except where the
same may be contested in good faith by appropriate proceedings and will
maintain, in accordance with GAAP, appropriate reserves for the accrual of any
of the same.
SECTION 7.3. MAINTENANCE OF PROPERTY; INSURANCE. The Company and each
Subsidiary will keep, all property useful and necessary in its business in good
working order and condition, ordinary wear and tear excepted. In addition, the
Company and each Subsidiary will maintain insurance in at least such amounts and
against such risks as it has insured against as of the Closing Date.
SECTION 7.4. MAINTENANCE OF EXISTENCE. The Company will continue, and
each Subsidiary will continue, to engage in business of the same general type as
now conducted by the Company and such Subsidiaries, and will preserve, renew and
keep in full force and effect its respective corporate existence and their
respective material rights, privileges and franchises necessary or desirable in
the normal conduct of business.
SECTION 7.5. COMPLIANCE WITH LAWS. The Company and each Subsidiary will
comply, in all material respects, with all federal, state, municipal, local or
foreign applicable laws, ordinances, rules, regulations, municipal by-laws,
codes and requirements of governmental authorities (including, without
limitation, Environmental Laws and ERISA and the rules and regulations
thereunder) except (i) where compliance therewith is contested in good faith by
appropriate proceedings or (ii) where non-compliance therewith could not
reasonably be expected, in the aggregate, to have a material adverse effect on
the business, condition (financial or otherwise), operations, performance,
properties or prospects of the Company or such Subsidiary.
SECTION 7.6. INSPECTION OF PROPERTY, BOOKS AND RECORDS. The Company and
each Subsidiary will keep proper books of record and account in which full, true
and correct entries shall be made of all dealings and transactions in relation
to their respective businesses and activities; and will permit, during normal
business hours, H.W. Partners, L.P., or an affiliate thereof, as representatives
of the Purchasers, to visit and inspect any of their respective properties, upon
reasonable prior notice, to examine and make abstracts from any of their
respective books and records and to discuss their respective affairs, finances
and accounts with their respective executive officers and independent public
accountants, all at such reasonable times.
SECTION 7.7. INVESTMENT COMPANY ACT. The Company will not be or become
an open-end investment trust, unit investment trust or face-amount certificate
company that is or is required to be registered under Section 8 of the
Investment Company Act of 1940, as amended.
SECURITIES PURCHASE AGREEMENT - Page 29
(AutoBond Acceptance Corporation)
SECTION 7.8. LIMITATION ON DEBT OR OTHER LIABILITIES. Neither the
Company nor any Subsidiary will create, incur, assume or suffer to exist (at any
time after the Closing Date, after giving effect to the application of the
proceeds of the issuance of the Securities) any Debt exceeding, in the
aggregate, $10,000,000, except for the following (such Debt being referred to as
"Permitted Debt"):
(i) Debt incurred or assumed solely to pay all or any part of the
purchase price or cost of construction, of any real or personal property (or any
improvement thereon) acquired or constructed by the Company or a Subsidiary
after the Closing Date provided: (a) any Lien with respect to such Debt shall
extend solely to the item or items of such property (or improvements thereon) so
acquired or constructed and, if required by the terms of the instrument
originally creating such Lien, other property (or improvement thereon) which is
an improvement to or is acquired for specific use in connection with such
acquired or constructed property (or improvement thereon) or which is real
property being improved by such acquired or constructed property (or improvement
thereon); (b) the principal amount of the Debt for such property shall at no
time exceed an amount equal to the cost of the acquisition or the operation of
the property (or improvement thereon) so acquired or constructed; and (c) any
Lien with respect to such Debt shall be created substantially contemporaneously
with the acquisition or construction of such property;
(ii) Non-recourse Debt which such Debt, by its terms, bars the lender
thereof from action against the Company or any Subsidiary, as borrower, if the
security value falls below the amount required to repay such Debt;
(iii) Debt incurred in connection with equipment leases to which the
Company or its Subsidiary is a party incurred in the ordinary course of
business;
(iv) Debt incurred in connection with trade accounts payable, imbalances
and refunds arising in the ordinary course of business;
(v) Revolving Credit Debt;
(vi) Debt incurred with respect to the Convertible Notes;
(vii) Debt incurred in connection with the Company's warehouse
facilities and asset securitization transactions in compliance with the AutoBond
Manual; and
(viii) the Convertible Notes.
SECTION 7.9. RESTRICTED PAYMENTS. Neither the Company nor any Subsidiary
will declare or make Restricted Payments in excess of $50,000 during any
calendar year.
SECTION 7.10. INVESTMENTS. Neither the Company nor any Subsidiary will
make or acquire any Investment in any Person exceeding, in the aggregate
$2,000,000, other than (a)
SECURITIES PURCHASE AGREEMENT - Page 30
(AutoBond Acceptance Corporation)
Investments in Cash Equivalents, (b) Investments in Subsidiaries existing on the
Closing Date and (c) Investments in special purpose corporations and/or trusts
formed for the purpose of facilitating securitizations of Finance Contracts and
related lines of businesses, in each case, in accordance with the Company's
current and past practices and the AutoBond Manual.
SECTION 7.11. LIENS. Neither the Company nor any Subsidiary will create,
assume or suffer to exist any Lien on any asset now owned or hereafter acquired
by it, except:
(i) (A) inchoate mechanics, workmen's and carriers' liens,
incident to current construction, (B) mechanics, warehousemen's, unpaid
vendors and carriers' liens incident to such construction, (C) statutory
and common law Liens of landlords under equipment leases to which the
Company or any Subsidiary is a party and (D) Liens of carriers,
warehousemen, mechanics and materialmen or other similar statutory
Liens;
(ii) Liens incurred on deposits made in the ordinary course of
business in connection with workers' compensation, performance bonds,
unemployment insurance and other types of social security, other than
any Lien imposed by or under ERISA;
(iii) Liens for taxes not yet due;
(iv) Easements, rights of way, permits, licenses, zoning
ordinances, covenants, restrictions, defects, minor irregularities of
title and other similar Liens on property which in the case of any
particular parcel of real property do not materially detract from the
value or utilization of such real property;
(v) Liens created by or resulting from any litigation or legal
proceeding which is currently being contested by such Company or
Subsidiary in good faith and by appropriate proceedings;
(vi) Liens securing Permitted Debt;
(vii) Liens granted to the Purchasers pursuant to the Security
Agreement; and
(viii) Liens with respect to assets of the Company, other than
the Collateral, associated with interests in Finance Contracts, or
otherwise established to facilitate warehouse facilities or
securitizations thereof.
SECTION 7.12. TRANSACTIONS WITH AFFILIATES. The Company and each
Subsidiary will not, directly or indirectly, pay any funds to or for the account
of, make any investment (whether by acquisition of stock or indebtedness, by
loan, advance, transfer of property, guarantee or other agreement to pay,
purchase or service, directly or indirectly, any Debt, or otherwise) in, lease,
sell, transfer or otherwise dispose of any assets, tangible or intangible, to,
or participate in, or effect any transaction in connection with any joint
enterprise or other joint arrangement with, any Affiliate, except, (1) pursuant
to those agreements specifically identified on Schedule VII attached hereto
(with a copy of such agreements annexed to such Schedule VII) and
SECURITIES PURCHASE AGREEMENT - Page 31
(AutoBond Acceptance Corporation)
(2) on terms to the Company or such Subsidiary no less favorable than terms that
could be obtained by the Company or such Subsidiary from a Person that is not an
Affiliate of the Company upon negotiation at arms' length, as determined in good
faith by the Board of Directors of the Company; provided that no determination
of the Board of Directors shall be required with respect to any such
transactions entered into in the ordinary course of business. It is expressly
acknowledged that the sale of Finance Contracts made in accordance with current
and past practice and pursuant to Section 7.24 shall be deemed to be entered
into in the ordinary course of business. In addition, transactions between the
Company and its wholly owned Subsidiaries or among such Subsidiaries which do
not violate any other provisions of this Agreement shall not be prohibited.
SECTION 7.13. MERGER OR CONSOLIDATION. The Company will not, in a single
transaction or a series of related transactions, (i) consolidate with or merge
with or into any other Person, or (ii) permit any other Person to consolidate
with or merge into it, unless (w) either (A) the Company shall be the survivor
of such merger or consolidation or (B) the surviving Person shall expressly
assume by supplemental agreement all of the obligations of the Company under the
Securities and this Agreement; (x) immediately before and immediately after
giving effect to such transaction (including any indebtedness incurred or
anticipated to be incurred in connection with the transaction), no Default or
Event of Default shall have occurred and be continuing and, following the
transaction, the Company may incur $1.00 of Debt without violating Section 7.8
hereof; (y) if the Company is not the surviving entity, such surviving entity's
common shares shall be listed on either The New York Stock Exchange, American
Stock Exchange, or the Nasdaq Stock Market's National Market or the Nasdaq Small
Cap Market and (z) the Company has delivered to the Purchasers an officers'
certificate and opinion of counsel, each stating that such consolidation, merger
or transfer complies with this Agreement, that the surviving Person agrees to be
bound thereby and that all conditions precedent in this Agreement relating to
such transaction have been satisfied; provided, however, nothing contained in
this Section 7.13 shall alter or diminish the Company's obligations under
Section 3.3(a) of this Agreement.
SECTION 7.14. SUPPLEMENTAL INFORMATION. If at any time the Company is
not subject to the requirements of Section 13 or 15(d) of the Exchange Act, the
Company will promptly furnish at its expense, upon request, for the benefit of
the holders from time to time of Securities, and prospective purchasers of
Securities, information satisfying the information requirements of Rule 144
under the Securities Act.
SECTION 7.15. USE OF PROCEEDS. The proceeds from the issuance and sale
of the Securities by the Company shall be used solely for general corporate
purposes. None of the proceeds from the issuance and sale of Securities by the
Company pursuant to this Agreement will be used directly or indirectly for the
purpose, whether immediate, incidental or ultimate, of purchasing or carrying
any "margin stock" within the meaning of Regulation G of the Board of Governors
of the Federal Reserve System.
SECTION 7.16. LIMITATION ON RESTRICTIONS AFFECTING SUBSIDIARIES. The
Company will not enter into, or suffer to exist, any agreement with any Person
which prohibits or limits the ability of any Subsidiary to (a) pay dividends or
make other distributions or pay any
SECURITIES PURCHASE AGREEMENT - Page 32
(AutoBond Acceptance Corporation)
Debt owed to the Company or any Subsidiary, (b) make loans or advances to the
Company or any Subsidiary or (c) transfer any of its properties or assets to the
Company or any Subsidiary; provided, however, nothing contained in this Section
7.16 shall be deemed to preclude any agreement executed in connection with a
transaction effected to consummate the securitizations of Finance Contracts in
accordance with the Company's current and past practices and the AutoBond
Manual.
SECTION 7.17. RESTRICTIONS ON CERTAIN AMENDMENTS. Neither the Company
nor any Subsidiary will waive any provision of, amend, or suffer to be amended,
any provision of such entity's existing indebtedness, any material contract or
agreement previously or hereafter filed by the Company with the Commission as
part of its SEC Reports, any Company Corporate Document or Subsidiary Corporate
Document if such amendment would materially adversely affect the Purchasers or
the holders of the Securities without the prior written consent of the Majority
Holders which such consent shall not be unreasonably withheld.
SECTION 7.18. COMPLIANCE WITH TERMS AND CONDITIONS OF MATERIAL
CONTRACTS. The Company will comply, in all material respects, with all terms and
conditions of all material contracts to which it is subject.
SECTION 7.19. FINANCIAL COVENANT. The Company will not permit its Cash
Flow Coverage Ratio to be less than 1.0 to 1.0, for every 12-month period ending
March 31, June 30, September 30 or December 31. The Company shall furnish to
H.W. Partners, L.P., as representatives of the Purchasers, a compliance
certificate for (and executed by the chief financial officer of) the Company
within five (5) Business Days after each Annual Report on Form 10-K or Quarterly
Report on Form 10-Q shall have been filed (or should have been filed) with the
Commission, which such compliance certificate shall indicate the Company's Cash
Flow Coverage Ratio for the preceding 12-month period and the method of
calculating same.
SECTION 7.20. LIMITATION ON ASSET SALES. Neither the Company nor any
Subsidiary will consummate an Asset Sale unless (i) it receives consideration in
cash at the time of such Asset Sale at least equal to the fair market value of
the assets sold or otherwise disposed of (as determined in good faith by the
Company's Board of Directors) and (ii) the Net Cash Proceeds of such sale are
used to either (a) purchase similar assets in the same line of business of
equivalent value within 12 months of the date of the Asset Sale or (b)
immediately redeem or prepay the Convertible Notes or (c) a combination of
purchases and prepayment permitted by the foregoing clauses (a) and (b). As used
herein, "Asset Sale" means any sale, lease, transfer or other disposition (or
series of related sales, leases, transfers or dispositions) of shares of capital
stock of a Subsidiary (other than directors' qualifying shares), property or
other assets (each referred to for the purposes of this definition as a
"disposition"), including any disposition by means of a merger, consolidation or
similar transaction (other than as permitted under Section 7.13), other than a
disposition of property or assets at fair market value in the ordinary course of
business; provided, however, nothing contained in this Section 7.20 shall be
deemed to preclude the sale of any assets to a Subsidiary for the purpose of
facilitating securitizations of Finance Contracts in accordance with the
Company's current and past practices and the AutoBond Manual.
SECURITIES PURCHASE AGREEMENT - Page 33
(AutoBond Acceptance Corporation)
SECTION 7.21. LIMITATION ON SUBSIDIARIES. Neither the Company nor any
Subsidiary shall permit the creation of any Subsidiaries not in existence on the
Closing Date unless approved, in writing, by the Majority Holders which such
consent shall not be unreasonably withheld; provided, however, nothing contained
in this Section 7.21 shall be deemed to preclude the creation of any Subsidiary
formed for the purpose of facilitating securitizations of Finance Contracts in
accordance with the Company's current and past practices and the AutoBond
Manual.
SECTION 7.22. RESERVED SHARES AND LISTINGS.
(a) The Company will reserve from its authorized but unissued
shares of Common Stock a sufficient number of shares of Common Stock to
permit issuance of the conversion in full of the then outstanding
Convertible Notes and the exercise in full of the then outstanding
Warrants;
(b) The Company will maintain the listing of its Common Stock on
the Nasdaq Market;
(c) The Company will not repurchase or otherwise enter into any
other transaction (including stock split, recapitalization or other
transaction) which would cause a decrease in the number of its shares of
Common Stock issued and outstanding (other than transactions that
similarly decrease the number of shares of Common Stock into which the
Convertible Notes and Warrants are convertible or exercisable, as the
case may be);
(d) The Company will (i) retain the Transfer Agent as the stock
transfer agent for the Company's Common Stock, and (ii) if the Transfer
Agent voluntarily or involuntarily fails to so serve, select an
independent, unaffiliated replacement stock transfer agent willing to
perform the duties of the Transfer Agent under the Transfer Agent
Agreement; and
(e) On or prior to the date that the Commission declares
effective the Registration Statement, the Company shall properly file
all Listing Applications with the Nasdaq Market associated with the
shares of Common Stock covered by such registration statement.
SECTION 7.23 ISSUANCE OF SHARES OF COMMON STOCK. Upon conversion of any
Convertible Notes in accordance with their terms, and/or exercise of any Warrant
in accordance with their terms, the Company will, and will use its best lawful
efforts to cause the Transfer Agent to, issue one or more certificates
representing shares of Common Stock in such name or names and in such
denominations specified by a Purchaser in a Notice of Conversion or Notice of
Exercise, as the case may be. As long as the Registration Statement contemplated
by the Registration Rights Agreement shall remain effective the shares of Common
Stock issuable upon conversion of Convertible Notes or exercise of the Warrants
shall be issued to any transferee of
SECURITIES PURCHASE AGREEMENT - Page 34
(AutoBond Acceptance Corporation)
such shares from a Purchaser without restrictive legend. The Company further
warrants and agrees that no instructions other than these instructions have been
or will be given to the Transfer Agent. Nothing in this Section shall affect in
any way a Purchaser's obligations to comply with all securities laws applicable
to such Purchaser upon resale of such shares of Common Stock, including any
prospectus delivery requirements.
SECTION 7.24 MAINTENANCE OF UNDERWRITING STANDARDS. The Company agrees
that, until the Convertible Notes are repaid in full, it will not originate,
acquire or sell any Finance Contracts which do not meet the then current
standards of the AutoBond Manual. Furthermore, the Company agrees that, until
the Convertible Notes are repaid in full, it will not modify the AutoBond Manual
to provide that a Finance Contract not meeting each of the minimum standards
below is or could be deemed a Finance Contract satisfying the standards of such
AutoBond Manual:
1. The Finance Contract must be secured by a new or used vehicle;
2. The Finance Contract must have originated in the United
States;
3. The Finance Contract must provide for level monthly payments
that fully amortize the amount financed over its original term;
4. The Finance Contract must have an original term of between 24
and 72 months;
5. The Finance Contract must provide for finance charges of
between 14.00% and 29.95% annual percentage rate;
6. The Finance Contract must not be more than two payments past
due as of the date of securitization; and
7. The obligor under the Finance Contract may not have a related
financed vehicle which is in repossession.
ARTICLE VIII
LIMITATION ON TRANSFERS
SECTION 8.1 RESTRICTIONS ON TRANSFER. From and after their respective
dates of issuance, none of the Securities shall be transferable except upon the
conditions specified in this Article VIII, which conditions are intended to
ensure compliance with the provisions of the Securities Act in respect of the
Transfer of any of such Securities or any interest therein. Each Purchaser will
use its best efforts to cause any proposed transferee of any Securities held by
it to agree to take and hold such Securities subject to the provisions and upon
the conditions specified in this Article VIII.
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(AutoBond Acceptance Corporation)
SECTION 8.2. RESTRICTIVE LEGENDS.
(a) Each certificate for Securities issued to a Purchaser or to a
subsequent transferee shall (except as contemplated by Section 7.23 and Section
9.3 hereof) include a legend in substantially the following form:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE UNITED
STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"). THE HOLDER
HEREOF, BY PURCHASING SUCH SECURITIES, AGREES FOR THE BENEFIT OF THE CORPORATION
THAT SUCH SECURITIES MAY BE OFFERED, SOLD OR OTHERWISE TRANSFERRED ONLY (A) TO
THE CORPORATION, (B) PURSUANT TO THE EXEMPTION FROM REGISTRATION UNDER THE
SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER, IF AVAILABLE, OR (C) IF
REGISTERED UNDER THE SECURITIES ACT.
SECTION 8.3. NOTICE OF PROPOSED TRANSFERS. Prior to any proposed
Transfer of the Securities other than a transfer (i) registered under the
Securities Act, (ii) to an affiliate of a Purchaser which is an "accredited
investor" within the meaning of Rule 501(a) under the Securities Act, provided
that any such transferee shall agree to be bound by the terms of this Agreement,
and (iii) to be made in reliance on Rule 144 under the Securities Act, the
holder thereof shall give written notice to the Company of such holder's
intention to effect such Transfer, setting forth the manner and circumstances of
the proposed Transfer, which shall be accompanied by (A) an opinion of counsel
to the Company, confirming that such transfer does not give rise to a violation
of the Securities Act, (B) representation letters in form and substance
reasonably satisfactory to the Company to ensure compliance with the provisions
of the Securities Act and (C) letters in form and substance reasonably
satisfactory to the Company from each such transferee stating such transferee's
agreement to be bound by the terms of this Agreement and the Registration Rights
Agreement. Such proposed Transfer may be effected only if the Company shall have
received such notice of transfer, opinion of counsel, representation letters and
other letters referred to in the immediately preceding sentence, whereupon the
holder of such Securities shall be entitled to Transfer such Securities in
accordance with the terms of the notice delivered by the holder to the Company.
SECTION 8.4. RESTRICTIONS ON CERTAIN STOCKHOLDERS. Each of ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇ (collectively, the "Majority
Stockholders") covenants and agrees that he will not (and the Company agrees to
use its best efforts to ensure that such Majority Stockholders will not),
directly or indirectly, offer, sell, contract to sell, grant any option to
purchase or otherwise dispose of more than an aggregate of ten percent (10%) of
the shares of the Company's common stock legally or beneficially owned by such
Majority Stockholders on the date of this Agreement until the Convertible Notes
have been paid in full, redeemed, fully converted or otherwise cease to be
outstanding obligations of the Company, without the prior written consent of the
Majority Holders.
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(AutoBond Acceptance Corporation)
ARTICLE IX
ADDITIONAL AGREEMENTS AMONG THE PARTIES
SECTION 9.1. REGISTRATION RIGHTS.
(a) The Company shall grant the Purchasers registration rights covering
all of the shares of Common Stock issuable on conversion of the Convertible
Notes or upon exercise of the Warrants on the terms set forth in the
Registration Rights Agreement. The Registration Rights Agreement shall also
provide for subsequent registrations by the Company covering the Additional
Shares.
(b) The Company shall prepare and file on or before fifteen (15)
calendar days after the Closing Date, a registration statement (the
"Registration Statement") on Form S-3 (or such other form as is then available
for registration) covering the sale of the shares of Common Stock issuable upon
conversion of the Convertible Notes and upon exercise of the Warrants. The
Company shall use its best efforts to cause the Registration Statement to be
declared effective by the Commission no later than the First Required
Effectiveness Date. If the Registration Statement is (x) not declared effective
by the Commission by the First Required Effectiveness Date, or (y) such
effectiveness is not maintained for the Registration Maintenance Period, the
Company shall pay to each Purchaser monthly, as liquidated damages and not as a
penalty, its pro rata portion of the Default Fee specified in the Registration
Rights Agreement.
(c) Any such Default Fee shall be paid in cash by the Company to the
Purchasers by wire transfer in immediately available funds on the last day of
each calendar month following the event requiring its payment.
SECTION 9.2. PROHIBITION ON DISCOUNTED EQUITY OFFERINGS. Until such time
as the Convertible Notes have been repaid in full, the Company agrees that it
will not issue (or, unless such issuance would, upon the closing thereof, result
in the repayment in full of the Convertible Notes, agree to issue) any of its
equity securities (or securities convertible into or exchangeable or exercisable
for equity securities (the "Derivative Securities")), on terms that allow a
holder thereof to acquire such equity securities (or Derivative Securities) at a
discount to the Market Price of the Common Stock at the time of issuance or, if
such debt has a conversion price based on any formula (other than standard
anti-dilution provisions) based on the Market Price on a date later than the
date of issuance, the date of conversion (each such event, a "Discounted Equity
Offering"). As used herein, "discount" shall include, but not be limited to, (1)
any warrant, right or other security granted or offered in connection with such
issuance which, on the applicable date of grant is offered with an exercise or
conversion price, as the case may be, at less than the then current Market Price
of the Common Stock or, if such security has an exercise or conversion price
based on any formula (other than standard anti-dilution provisions) based on the
Market Price on a date later than the date of issuance, then such price shall be
at least equal to the Market Price on such date of exercise or conversion, as
the case may be, or (2) any commissions, fees or other allowances paid in
connection with such issuances (other than customary underwriter or placement
agent commissions, fees or allowances). The restrictions contained in this
Section 9.2 shall not apply to the issuance by the Company of (or the agreement
to issue) Common
SECURITIES PURCHASE AGREEMENT - Page 37
(AutoBond Acceptance Corporation)
Stock or (Derivative Securities) in connection with (x) the acquisition of a
business or of assets otherwise permitted under this Agreement, or (y) stock
option or other compensatory plans.
SECTION 9.3. LIQUIDATED DAMAGES.
(a) The Company shall, and shall use its best efforts to cause the
Transfer Agent to, issue and deliver shares of Common Stock within three (3) New
York Stock Exchange Trading Days of delivery of a Notice of Conversion or Notice
of Exercise, as applicable (the "Deadline") to the Purchaser (or any party
receiving Securities by Transfer from such Purchaser) at the address of the
Purchaser set forth in the Notice of Conversion or Notice of Exercise, as the
case may be. As contemplated by Section 5 of the Transfer Agent Agreement, and
consistent with Section 7.23 hereof, if such Notice of Conversion or Notice of
Exercise, as applicable, is delivered while the Registration Statement is
effective, such certificates shall be delivered without restrictive legend. The
Company understands that a delay in the issuance of such certificates after the
Deadline could result in economic loss to the Purchaser. If for any reason
(other than as a result of actions taken by a Purchaser in breach of this
Agreement) the Company fails to issue such certificates of Common Stock by the
Deadline, as compensation, and not as a penalty, the Company agrees to pay
liquidated damages to the Purchasers for such late issuance of such certificates
an amount equal to $1,000 per day for each day such certificates are not
delivered for the first ten (10) days after the Deadline and $2,000 per day for
each day thereafter.
(b) Upon demand, the Company shall promptly pay the Purchasers any
liquidated damages incurred under this Section by wire transfer in immediately
available funds to an account designated by the Purchasers. Nothing herein shall
waive the Company's obligations to deliver shares of Common Stock upon a
conversion of the Convertible Notes or exercise of the Warrants or limit any
Purchaser's right to pursue actual damages (less the amount of any liquidated
damages received pursuant to the foregoing) for the Company's failure to issue
and deliver shares of Common Stock to such Purchaser consistent with the terms
of this Agreement.
SECTION 9.4. CONVERSION NOTICE. The Company agrees that, in addition to
any other remedies which may be available to the Purchasers, including, but not
limited to, the remedies available under Section 9.3, in the event the Company
fails for any reason (other than as a result of actions taken by a Purchaser in
breach of this Agreement) to effect delivery to a Purchaser of certificates as
contemplated by Section 9.3 representing the Minimum Number of shares of Common
Stock on or prior to the Deadline after conversion of any Convertible Notes, or
certificates contemplated by Section 9.3 after exercise of any Warrant, such
Purchaser will be entitled, if prior to the delivery of such certificates, to
revoke the Notice of Conversion or Notice of Exercise, as applicable, by
delivering a notice to such effect to the Company and the Transfer Agent
whereupon the Company and the Purchaser shall each be restored to their
respective positions immediately prior to delivery of such Notice of Conversion
or Notice of Exercise.
SECTION 9.5. LIMITATION ON CONVERSION PRIOR TO DEFAULT.
(a) In addition to and not in lieu of the limitations on conversion set
forth in the Convertible Notes and Warrants, the conversion and exercise rights
of the Purchasers set forth in the
SECURITIES PURCHASE AGREEMENT - Page 38
(AutoBond Acceptance Corporation)
Convertible Notes and Warrants, as applicable, shall be limited, solely to the
extent required, from time to time, such that in no instance shall the maximum
number of shares of Common Stock which the Purchasers (singularly, together with
any Persons who in the determination of such Purchasers, together with such
Purchasers, constitute a group as defined in Rule 13d-5 of the Exchange Act) may
receive in respect of any conversion of the Convertible Notes or exercise of the
Warrants, exceed, at any one time, an amount equal to the remainder of (i) 4.99%
of the then issued and outstanding shares of Common Stock of the Company
following such conversion or exercise minus (ii) the number of shares of Common
Stock of the Company then owned by the Purchasers (but exclusive of any shares
of Common Stock deemed beneficially owned due to ownership of the Convertible
Notes and Warrants) (the foregoing being herein referred to as the "Limitation
on Conversion"). At the written request of the Company, the applicable
Purchasers shall certify in each Notice of Conversion and Notice of Exercise
that it is in compliance with the Limitation on Conversion.
(b) The Limitation on Conversion shall not apply, and shall be of no
further force and effect, (i) upon the occurrence of any redemption transaction
described in Sections 3.2 or 3.3 hereof, (ii) on the Maturity Date or (iii) the
occurrence of any Event of Default described in Section 11.1 hereof and for
which the Purchaser has provided written notice thereof and which is not cured
within the greater of the applicable time period specified in either (A) such
written notice of the Purchaser or (B) Section 11.1 hereof.
(c) Subject to the foregoing limitations, each Purchaser shall, at its
option, have the sole right to determine whether to exercise the right of
conversion or exercise for the Convertible Notes and Warrants. The Company shall
honor each Notice of Conversion and Notice of Exercise in the order received.
ARTICLE X
ADJUSTMENT OF FIXED PRICE
SECTION 10.1. REORGANIZATION. The exercise price of the Warrants set
forth therein and the Maximum Conversion Price (collectively, the "Fixed
Prices") shall be adjusted as hereafter provided.
SECTION 10.2. SHARE REORGANIZATION. If and whenever the Company shall:
(i) subdivide the outstanding shares of Common Stock into a
greater number of shares;
(ii) consolidate the outstanding shares of Common Stock into a
smaller number of shares;
(iii) issue Common Stock or securities convertible into or
exchangeable for shares of Common Stock as a stock dividend to all or
substantially all the holders of Common Stock; or
SECURITIES PURCHASE AGREEMENT - Page 39
(AutoBond Acceptance Corporation)
(iv) make a distribution on the outstanding Common Stock to all
or substantially all the holders of Common Stock payable in Common Stock
or securities convertible into or exchangeable for Common Stock;
any of such events being herein called a "Share Reorganization", then in each
such case the applicable Fixed Price shall be adjusted, effective immediately
after the record date at which the holders of Common Stock are determined for
the purposes of the Share Reorganization or, if no record date is fixed, the
effective date of the Share Reorganization, by multiplying the applicable Fixed
Price in effect on such record or effective date, as the case may be, by a
fraction of which:
(I) the numerator shall be the number of shares of Common Stock
outstanding on such record or effective date (without giving effect to
the transaction); and
(II) the denominator shall be the number of shares of Common
Stock outstanding after giving effect to such Share Reorganization,
including, in the case of a distribution of securities convertible into
or exchangeable for shares of Common Stock, the number of shares of
Common Stock that would have been outstanding if such securities had
been converted into or exchanged for Common Stock on such record or
effective date.
SECTION 10.3. RIGHTS OFFERING. If and whenever the Company shall issue
to all or substantially all the holders of Common Stock, rights, options or
warrants under which such holders are entitled, during a period expiring not
more than 45 days after the record date of such issue, to subscribe for or
purchase Common Stock (or securities convertible into or exchangeable for Common
Stock), at a price per share (or, in the case of securities convertible into or
exchangeable for Common Stock, at an exchange or conversion price per share at
the date of issue of such securities) of less than 95% of the Market Price of
the Common Stock on such record date (any such event being herein called a
"Rights Offering"), then in each such case the applicable Fixed Price shall be
adjusted, effective immediately after the record date at which holders of Common
Stock are determined for the purposes of the Rights Offering, by multiplying the
applicable Fixed Price in effect on such record date by a fraction of which:
(i) the numerator shall be the sum of:
(I) the number of shares of Common Stock outstanding on such
record date; and
(II) a number obtained by dividing:
(A) either,
(x) the product of the total number of shares of Common
Stock so offered for subscription or purchase and the price at which
such shares are so offered, or
SECURITIES PURCHASE AGREEMENT - Page 40
(AutoBond Acceptance Corporation)
(y) the product of the maximum number of shares of Common
Stock into or for which the convertible or exchangeable securities so
offered for subscription or purchase may be converted or exchanged and
the conversion or exchange price of such securities,
or, as the case may be, by
(B) the Market Price of the Common Stock on such record date; and
(ii) the denominator shall be the sum of:
(I) the number of shares of Common Stock outstanding on such
record date; and
(II) the number of shares of Common Stock so offered for
subscription or purchase (or, in the case of securities convertible into
or exchangeable for Common Stock, the maximum number of shares of Common
Stock for or into which the securities so offered for subscription or
purchase may be converted or exchanged).
To the extent that such rights, options or warrants are not exercised prior to
the expiry time thereof, the applicable Fixed Price shall be readjusted
effective immediately after such expiry time to the applicable Fixed Price which
would then have been in effect upon the number of shares of Common Stock (or
securities exchangeable into Common Stock) actually delivered upon the exercise
of such rights, options or warrants.
SECTION 10.4. SPECIAL DISTRIBUTION. If and whenever the Company shall
issue or distribute to all or substantially all the holders of Common Stock:
(i) shares of the Company of any class, other than Common Stock;
(ii) rights, options or warrants; or
(iii) any other assets (excluding cash dividends and equivalent
dividends in shares paid in lieu of cash dividends in the ordinary
course);
and if such issuance or distribution does not constitute a Share Reorganization
or a Rights Offering (any such event being herein called a "Special
Distribution"), then in each such case the applicable Fixed Price shall be
adjusted, effective immediately after the record date at which the holders of
Common Stock are determined for purposes of the Special Distribution, by
multiplying the applicable Fixed Price in effect on such record date by a
fraction of which:
(i) the numerator shall be the difference between:
(A) the product of the number of shares of Common Stock
outstanding on such record date and the Market Price of the Common Stock
on such date; and
SECURITIES PURCHASE AGREEMENT - Page 41
(AutoBond Acceptance Corporation)
(B) the fair market value, as determined by the Directors (whose
determination shall be conclusive), to the holders of Common Stock of
the shares, rights, options, warrants, evidences of indebtedness or
other assets issued or distributed in the Special Distribution (net of
any consideration paid therefor by the holders of Common Stock), and
(ii) the denominator shall be the product of the number of shares
of Common Stock outstanding on such record date and the Market Price of
the Common Stock on such date.
SECTION 10.5. CAPITAL REORGANIZATION. If and whenever there shall
occur:
(i) a reclassification or redesignation of the shares of Common
Stock or any change of the shares of Common Stock into other shares,
other than in a Share Reorganization;
(ii) a consolidation, merger or amalgamation of the Company with,
or into another body corporate; or
(iii) the transfer of all or substantially all of the assets of
the Company to another body corporate;
(any such event being herein called a "Capital Reorganization"), then in each
such case the holder who exercises the right to convert Convertible Notes or
exercise the Warrants after the effective date of such Capital Reorganization
shall be entitled to receive and shall accept, upon the exercise of such right,
in lieu of the number of shares of Common Stock to which such holder was
theretofore entitled upon the exercise of the conversion privilege, the
aggregate number of shares or other securities or property of the Company or of
the body corporate resulting from such Capital Reorganization that such holder
would have been entitled to receive as a result of such Capital Reorganization
if, on the effective date thereof, such holders had been the holder of the
number of shares of Common Stock to which such holder was theretofore entitled
upon conversion; provided, however, that no such Capital Reorganization shall be
consummated in effect unless all necessary steps shall have been taken so that
such holders shall thereafter be entitled to receive such number of shares or
other securities of the Company or of the body corporate resulting from such
Capital Reorganization, subject to adjustment thereafter in accordance with
provisions the same, as nearly as may be possible, as those contained above.
SECTION 10.6. ADJUSTMENT RULES. The following rules and procedures shall
be applicable to adjustments made in this Article X:
(a) no adjustment in the applicable Fixed Price shall be required
unless such adjustment would result in a change of at least 1% in the
applicable Fixed Price then in effect, provided, however, that any
adjustments which, but for the provisions of this clause would otherwise
have been required to be made, shall be carried forward and taken into
account in any subsequent adjustment;
SECURITIES PURCHASE AGREEMENT - Page 42
(AutoBond Acceptance Corporation)
(b) no adjustment in the applicable Fixed Price shall be made
pursuant to this Article XI in respect of the issue from time to time of
Common Stock to holders of Common Stock who exercise an option to
receive substantially equivalent dividends in Common Stock in lieu of
receiving cash dividends in the ordinary course; and
(c) if a dispute shall at any time arise with respect to any
adjustment of the applicable Fixed Price, such dispute shall be
conclusively determined by the auditors of the Company or, if they are
unable or unwilling to act, by a firm of independent chartered
accountants selected by the Directors and any such determination shall
be binding upon the Company and Purchasers.
SECTION 10.7. CERTIFICATE AS TO ADJUSTMENT. The Company shall from time
to time promptly after the occurrence of any event which requires an adjustment
in the applicable Fixed Price deliver to the Purchasers a certificate specifying
the nature of the event requiring the adjustment, the amount of the adjustment
necessitated thereby, the applicable Fixed Price after giving effect to such
adjustment and setting forth, in reasonable detail, the method of calculation
and the facts upon which such calculation is based.
SECTION 10.8. NOTICE TO NOTEHOLDERS. If the Company shall fix a record
date for:
(a) any Share Reorganization (other than the subdivision of
outstanding Common Stock into a greater number of shares or the
consolidation of outstanding Common Stock into a smaller number of
shares),
(b) any Rights Offering.,
(c) any Special Distribution,
(d) any Capital Reorganization (other than a reclassification or
redesignation of the Common Stock into other shares), or
(e) any cash dividend,
the Company shall, not less than 10 days prior to such record date or, if no
record date is fixed, prior to the effective date of such event, give to the
Purchasers notice of the particulars of the proposed event or the extent that
such particulars have been determined at the time of giving the notice.
ARTICLE XI
EVENTS OF DEFAULT
SECTION 11.1. EVENTS OF DEFAULT. If one or more of the following
events (each an "Event of Default") shall have occurred and be continuing:
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(AutoBond Acceptance Corporation)
(a) failure by the Company to pay or prepay when due, all or any
part of the principal or Make Whole Amount on any of the Convertible
Notes;
(b) failure by the Company to pay (i) within three (3) Business
Days of the due date thereof any interest on any Convertible Notes or
(ii) within five (5) Business Days following the delivery of notice to
the Company of any fees or any other amount payable (not otherwise
referred to in (a) above or this clause (b)) by the Company under this
Agreement;
(c) failure by the Company to timely comply with the requirements
of Section 9.3(a) or (b) hereof, which failure is not cured within seven
(7) days of such failure;
(d) an event of default shall have occurred and is continuing
under any Financing Document;
(e) failure on the part of the Company to observe or perform any
covenant contained in Sections 7.7 - 7.13, 7.15, 7.20, 7.22, 7.23 and
7.24 of this Agreement;
(f) failure on the part of the Company to observe or perform any
covenant contained in any Financing Document (other than those covered
by clauses (a), (b), (c), (d) or (e) above) for 30 days from the date of
such occurrence;
(g) the trading in the Common Stock shall have been suspended by
the Commission or by the Nasdaq Market (except for any suspension of
trading of limited duration solely to permit dissemination of material
information regarding the Company and except if, at the time there is
any suspension on the Nasdaq Market, the Common Stock is then listed and
approved for trading on either the New York Stock Exchange, the American
Stock Exchange, the Nasdaq Stock market's Small Cap Market, or the
Nasdaq National Market within two (2) Trading Days thereof);
(h) failure of the Company to file the Listing Applications,
which failure is not cured within fifteen (15) Business Days of such
failure;
(i) the Company shall have its Common Stock delisted from the
Nasdaq Market for at least ten (10) consecutive Trading Days and is
unable to obtain a listing on either the New York Stock Exchange, the
American Stock Exchange, the Nasdaq Stock market's Small Cap Market or
the Nasdaq Stock Market's National Market within such ten (10) Trading
Days;
(j) the Registration Statement shall not have been declared
effective by the Commission, with such effectiveness maintained for the
Registration Maintenance Period, which results in the Company incurring
the Default Fee for a period in excess of 60 days;
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(AutoBond Acceptance Corporation)
(k) the Company or any Designated Subsidiary has commenced a
voluntary case or other proceeding seeking liquidation, winding-up,
reorganization or other relief with respect to itself or its debts under
any bankruptcy, insolvency, moratorium or other similar law now or
hereafter in effect or seeking the appointment of a trustee, receiver,
liquidator, custodian or other similar official of it or any substantial
part of its property, or has consented to any such relief or to the
appointment of or taking possession by any such official in an
involuntary case or other proceeding commenced against it, or has made a
general assignment for the benefit of creditors, or has failed generally
to pay its debts as they become due, or has taken any corporate action
to authorize any of the foregoing;
(l) an involuntary case or other proceeding has been commenced
against the Company or any Designated Subsidiary, seeking liquidation,
winding-up, reorganization or other relief with respect to it or its
debts under any bankruptcy, insolvency, moratorium or other similar law
now or hereafter in effect or seeking the appointment of a trustee,
receiver, liquidator, custodian or other similar official of it or any
substantial part of its property, and such involuntary case or other
proceeding shall remain undismissed and unstayed for a period of 60
days, or an order for relief has been entered against the Company or any
Designated Subsidiary under the federal bankruptcy laws as now or
hereafter in effect;
(m) default in respect of any Debt in excess of $100,000 of the
Company or any Subsidiary, or the Company or any Subsidiary has failed
to pay at maturity or within any applicable period of grace any such
Debt;
(n) judgments or orders for the payment of money which in the
aggregate at any one time exceed $250,000 and are not covered by
insurance have been rendered against the Company or any Subsidiary by a
court of competent jurisdiction and such judgments or orders shall
continue unsatisfied and unstayed for a period of 60 days;
(o) any representation, warranty, certification or statement made
by the Company in any Financing Document or which is contained in any
certificate, document or financial or other statement furnished at any
time under or in connection with any Financing Document shall prove to
have been untrue in any material respect when made;
(p) any member of the ERISA Group has failed to pay when due an
amount or amounts aggregating in excess of $100,000 which it shall have
become liable to pay under Title IV of ERISA; or notice of intent to
terminate a Material Plan has been filed under Title IV of ERISA by any
member of the ERISA Group, any plan administrator or any combination of
the foregoing; or the PBGC has instituted proceedings under Title IV of
ERISA to terminate, to impose liability (other than for premiums under
Section 4007 of ERISA) in respect of, or to cause a trustee to be
appointed to administer any Material Plan; or a condition has existed by
reason of which the PBGC is entitled to obtain a decree adjudicating
that any Material Plan must be terminated; or there has occurred a
complete or partial withdrawal from, or a default, within the meaning of
Section 4219(c) (5) of ERISA, with respect to, one or more Multiemployer
Plans which could cause one or more
SECURITIES PURCHASE AGREEMENT - Page 45
(AutoBond Acceptance Corporation)
members of the ERISA Group to incur a current payment obligation in
excess of $100,000; or
(q) failure by the Company to timely and completely comply with
its obligations under the Trust Agreement,
then, and in every such occurrence, any Purchaser may, with respect to
an Event of Default specified in paragraphs (a) or (b), and the Majority
Holders may, with respect to any other Event of Default, by notice to
the Company, declare the Convertible Notes to be, and the Convertible
Notes shall thereon become immediately due and payable; provided that in
the case of any of the Events of Default specified in paragraph (k) or
(l) above with respect the Company or any Designated Subsidiary, then,
without any notice to the Company or any other act by any Purchaser, the
entire amount of the Convertible Notes shall become immediately due and
payable, provided further, if any Event of Default has occurred and is
continuing, and irrespective of whether any Convertible Note has been
declared immediately due and payable hereunder, any Purchaser of
Convertible Notes may proceed to protect and enforce the rights of such
Purchaser by an action at law, suit in equity or other appropriate
proceeding, whether for the specific performance of any agreement
contained herein or in any Convertible Note, or for an injunction
against a violation of any of the terms hereof or thereof, or in aid of
the exercise of any power granted hereby or thereby or by law or
otherwise, and provided further, in the case of an Event of Default, the
amount declared due and payable on the Convertible Notes shall be (x)
prior to the Call Date, the Early Repayment Price thereof and (y) on or
after the Call Date, the Formula Price thereof.
SECTION 11.2. POWERS AND REMEDIES CUMULATIVE. No right or remedy herein
conferred upon or reserved to the Purchasers is intended to be exclusive of any
other right or remedy, and every right and remedy shall, to the extent permitted
by law, be cumulative and in addition to every other right and remedy given
hereunder or now or hereafter existing at law or in equity or otherwise. The
assertion or employment of any right or remedy hereunder, or otherwise, shall
not prevent the concurrent assertion or employment of any other appropriate
right or remedy. Every power and remedy given by the Convertible Notes or by law
may be exercised from time to time, and as often as shall be deemed expedient,
by the Purchasers.
ARTICLE XII
MISCELLANEOUS
SECTION 12.1. NOTICES. All notices, demands and other communications to
any party hereunder shall be in writing (including telecopier or similar
writing) and shall be given to such party at its address set forth on the
signature pages hereof, or such other address as such party may hereafter
specify for the purpose to the other parties. Each such notice, demand or other
communication shall be effective (i) if given by telecopy, when such telecopy is
transmitted to the telecopy number specified on the signature page hereof, (ii)
if given by mail, four days after such communication is deposited in the mail
with first class postage prepaid, addressed as
SECURITIES PURCHASE AGREEMENT - Page 46
(AutoBond Acceptance Corporation)
aforesaid or (iii) if given by any other means, when delivered at the address
specified in or pursuant to this Section.
SECTION 12.2. NO WAIVERS; AMENDMENTS.
(a) No failure or delay on the part of any party 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.
(b) Any provision of this Agreement may be amended, supplemented or
waived if, but only if, such amendment, supplement or waiver is in writing and
is signed by the Company and the Majority Holders; provided, that without the
consent of each holder of any Convertible Note affected thereby, an amendment or
waiver may not (a) reduce the aggregate principal amount of Convertible Notes
whose holders must consent to an amendment or waiver, (b) reduce the rate or
extend the time for payment of interest on any Convertible Note, (c) reduce the
principal amount of or extend the stated maturity of any Convertible Note or (d)
make any Convertible Note payable in money or property other than as stated in
such Convertible Note. In determining whether the holders of the requisite
principal amount of Convertible Notes have concurred in any direction, consent,
or waiver as provided in any Financing Document, Convertible Notes which are
owned by the Company or any other obligor on or guarantor of the Convertible
Notes, or by any Person Controlling, Controlled by, or under Common Control with
any of the foregoing, shall be disregarded and deemed not to be outstanding for
the purpose of any such determination; and provided further that no such
amendment, supplement or waiver which affects the rights of the Purchasers and
their affiliates otherwise than solely in their capacities as holders of
Convertible Notes shall be effective with respect to them without their prior
written consent.
SECTION 12.3. INDEMNIFICATION. The Company agrees to indemnify and hold
harmless each Purchaser, its affiliates, and each Person, if any, who controls
such Purchaser, or any of its affiliates, within the meaning of the Securities
Act or the Exchange Act (a Controlling Person"), and the respective partners,
agents, employees, officers and directors of the Purchasers, their affiliates
and any such Controlling Person (each an Indemnified Party" and collectively,
the "Indemnified Parties"), from and against any and all losses, claims,
damages, liabilities and expenses (including, without limitation and as
incurred, reasonable costs of investigating, preparing or defending any such
claim or action, whether or not such Indemnified Party is a party thereto,
provided that the Company shall not be obligated to advance such costs to any
Indemnified Party other than the Purchasers unless it has received from such
Indemnified Party an undertaking to repay to the Company the costs so advanced
if it should be determined by final judgment of a court of competent
jurisdiction that such Indemnified Party was not entitled to indemnification
hereunder with respect to such costs) which may be incurred by such Indemnified
Party in connection with any investigative, administrative or judicial
proceeding brought or threatened that relates to or arises out of, or is in
connection with any activities contemplated by any Financing Document or any
other services rendered in connection herewith; provided that the Company will
not be responsible for any claims, liabilities losses, damages or expenses that
are
SECURITIES PURCHASE AGREEMENT - Page 47
(AutoBond Acceptance Corporation)
determined by final judgment of a court of competent jurisdiction to result from
such Indemnified Party's gross negligence, willful misconduct or bad faith.
If any action shall be brought against an Indemnified Party with respect
to which indemnity may be sought against the Company under this Agreement, such
Indemnified Party shall promptly notify the Company in writing and the Company,
at its option, may, assume the defense thereof, including the employment of
counsel reasonably satisfactory to such Indemnified Party and payment of all
reasonable fees and expenses. The failure to so notify the Company shall not
affect any obligations the Company may have to such Indemnified Party under this
Agreement or otherwise unless the Company is materially adversely affected by
such failure. Such Indemnified Party shall have the right to employ separate
counsel in such action and participate in the defense thereof, but the fees and
expenses of such counsel shall be at the expense of such Indemnified Party,
unless: (i) the Company has failed to assume the defense and employ counsel or
(ii) the named parties to any such action (including any impleaded parties)
include such Indemnified Party and the Company, and such Indemnified Party shall
have been advised by counsel that there may be one or more legal defenses
available to it which are different from or additional to those available to the
Company, in which case, if such Indemnified Party notifies the Company in
writing that it elects to employ separate counsel at the expense of the Company,
the Company shall not have the right to assume the defense of such action or
proceeding on behalf of such Indemnified Party, provided, however, that the
Company shall not, in connection with any one such action or proceeding or
separate but substantially similar or related actions or proceedings in the same
jurisdiction arising out of the same general allegations or circumstances, be
responsible hereunder for the reasonable fees and expenses of more than one such
firm of separate counsel, in addition to any local counsel, which counsel shall
be designated by the Purchasers. The Company shall not be liable for any
settlement of any such action effected without the written consent of the
Company (which shall not be unreasonably withheld) and the Company agrees to
indemnify and hold harmless each Indemnified Party from and against any loss or
liability by reason of settlement of any action effected with the consent of the
Company. In addition, the Company will not, without the prior written consent of
the Purchasers, settle or compromise or consent to the entry of any judgment in
or otherwise seek to terminate any pending or threatened action, claim, suit or
proceeding in respect to which indemnification or contribution may be sought
hereunder (whether or not any Indemnified Party is a party thereto) unless such
settlement, compromise, consent or termination includes an express unconditional
release of the Purchasers and the other Indemnified Parties, satisfactory in
form and substance to the Purchasers, from all liability arising out of such
action, claim, suit or proceeding.
If for any reason the foregoing indemnity is unavailable (otherwise than
pursuant to the express terms of such indemnity) to an Indemnified Party or
insufficient to hold an Indemnified Party harmless, then in lieu of indemnifying
such Indemnified Party, the Company shall contribute to the amount paid or
payable by such Indemnified Party as a result of such claims, liabilities,
losses, damages, or expenses (i) in such proportion as is appropriate to reflect
the relative benefits received by the Company on the one hand and by the
Purchasers on the other from the transactions contemplated by this Agreement or
(ii) if the allocation provided by clause (i) is not permitted under applicable
law, in such proportion as is appropriate to reflect not only the relative
benefits received by the Company on the one hand and the Purchasers on the
other, but also the
SECURITIES PURCHASE AGREEMENT - Page 48
(AutoBond Acceptance Corporation)
relative fault of the Company and the Purchasers as well as any other relevant
equitable considerations. Notwithstanding the provisions of this Section 12.3,
the aggregate contribution of all Indemnified Parties shall not exceed the
amount of interest and fees actually received by the Purchasers pursuant to this
Agreement. It is hereby further agreed that the relative benefits to the Company
on the one hand and the Purchasers on the other with respect to the transactions
contemplated hereby shall be determined by reference to, among other things,
whether any untrue or alleged untrue statement of material fact or the omission
or alleged omission to state a material fact related to information supplied by
the Company or by the Purchasers and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such statement or
omission. No Person guilty of fraudulent misrepresentation (within the 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
The indemnification, contribution and expense reimbursement obligations
set forth in this Section 12.3 (i) shall be in addition to any liability the
Company may have to any Indemnified Party at common law or otherwise, (ii) shall
survive the termination of this Agreement and the other Financing Documents and
the payment in full of the Convertible Notes and (iii) shall remain operative
and in full force and effect regardless of any investigation made by or on
behalf of the Purchasers or any other Indemnified Party.
SECTION 12.4. EXPENSES: DOCUMENTARY TAXES. The Company agrees to pay (i)
the out-of-pocket costs, expenses and other payments in connection with the
purchase and sale of the Securities as contemplated by this Agreement, including
the fees and disbursements of special counsel for the Purchasers incurred in
connection with the preparation of the Financing Documents, in the amount of
$25,000 as contemplated by Section 1 of the Transfer Agent Agreement, (ii) all
reasonable out-of-pocket expenses of the Purchasers, including fees and
disbursements of counsel, in connection with any waiver or consent hereunder or
under any other Financing Document or any amendment hereof or thereof and (iii)
all reasonable out-of-pocket expenses of the Purchasers and each holder of
Securities, including fees and disbursements of counsel, in connection with any
collection, bankruptcy, insolvency and other enforcement proceedings resulting
therefrom. In addition, the Company agrees to pay any and all stamp, transfer
and other similar taxes, assessments or charges payable in connection with the
execution and delivery of any Financing Document or the issuance of the
Securities to the Purchasers, excluding their assigns.
SECTION 12.5. PAYMENT. The Company agrees that, so long as a Purchaser
shall own any Convertible Notes purchased by it from the Company hereunder, the
Company will make payments to such Purchaser of all amounts due thereon by wire
transfer by 1:00 P.M. (New York City time) on the date of payment to the
Transfer Agent Agreement for disbursement to the Purchasers as required by the
Transfer Agent Agreement.
SECTION 12.6. SUCCESSORS AND ASSIGNS. This Agreement shall be binding
upon the Company and upon the Purchasers and their respective successors and
assigns; provided that the Company shall not assign or otherwise transfer its
rights or obligations under this Agreement to any other Person without the prior
written consent of the Majority Holders. All provisions
SECURITIES PURCHASE AGREEMENT - Page 49
(AutoBond Acceptance Corporation)
hereunder purporting to give rights to Purchasers and their affiliates or to
holders of Securities are for the express benefit of such Persons and their
successors and assigns.
SECTION 12.7. BROKERS. The Company represents and warrants that it has
not employed any broker, finder, financial advisor or investment banker who
would be entitled to any brokerage, finder's or other fee or commission payable
by the Company or the Purchasers in connection with the sale of the Securities.
Each Purchaser hereby warrants that it has not employed any broker, finder,
financial advisor or investment banker who would be entitled to any brokerage,
finder's or other fee or commission payable by the Company in connection with
the sale of the Securities.
SECTION 12.8. NEW YORK LAW; SUBMISSION TO JURISDICTION; WAIVER OF JURY
TRIAL; APPOINTMENT OF AGENT. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE
WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK. EACH PARTY HERETO HEREBY
SUBMITS TO THE EXCLUSIVE JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR
THE SOUTHERN DISTRICT OF NEW YORK AND OF ANY NEW YORK STATE COURT SITTING IN NEW
YORK CITY FOR PURPOSES OF ALL LEGAL PROCEEDINGS ARISING OUT OF OR RELATING TO
THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. EACH PARTY HERETO
IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH
IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY SUCH PROCEEDING
BROUGHT IN SUCH A COURT AND ANY CLAIM THAT ANY SUCH PROCEEDING BROUGHT IN SUCH A
COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. EACH PARTY HERETO HEREBY
IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING
ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY.
The Company and each Purchaser hereby irrevocably designates, appoints
and empowers ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ with offices at 1301 Avenue of the Americas, ▇▇▇
▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇ as its designees, appointee and agent to receive,
accept and acknowledge for and on its behalf, and in respect of its property,
service of any and all legal process, summons, notices and documents which may
be served in any such action or proceeding. If for any reason such designee,
appointee and agent shall cease to be available to act as such, the Company and
Purchasers agree to designate a similarly qualified entity as their new
designee, appointee and agent in New York.
SECTION 12.9. SEVERABILITY. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction to be
invalid, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions of this Agreement shall remain in full force and
effect and shall in no way be affected, impaired or invalidated unless a failure
of consideration would result thereby.
SECTION 12.10 SURVIVAL. In addition to the survival of the
indemnification, contribution and expense reimburse obligations set forth in
Section 3.6 and Section 12.3 hereof,
SECURITIES PURCHASE AGREEMENT - Page 50
(AutoBond Acceptance Corporation)
the provisions contained herein which are incorporated by reference into the
Warrants and the provisions set forth in Sections 9.1 and 9.3 hereof shall
survive the termination of this Agreement and the payment in full of the
Convertible Notes and shall remain operative and in full force and effect.
SECTION 12.11.COUNTERPARTS. This Agreement may be executed by telecopy
signature and in any number of counterparts each of which shall be an original
with the same effect as if the signatures there to and hereto were upon the same
instrument.
[SIGNATURE PAGES FOLLOW]
SECURITIES PURCHASE AGREEMENT - Page 51
(AutoBond Acceptance Corporation)
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers, as of the date first
above written.
AUTOBOND ACCEPTANCE CORPORATION
By:_________________________________
Name:_______________________________
Title:______________________________
Address: ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: Will ▇▇▇▇▇▇▇▇,
Chief Executive Officer
With a copy to: ▇▇▇▇▇▇ & ▇▇▇▇▇▇, L.L.P.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
INFINITY EMERGING
OPPORTUNITIES LIMITED
By:_________________________________
Name:_______________________________
Title:______________________________
Address: ▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇
Fax: ▇▇▇-▇▇-▇▇▇-▇▇▇-▇▇▇▇
Attn: ▇. ▇. ▇▇▇▇▇▇▇▇
With a copy to: HW Partners, L.P.
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attn.: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, Esq.
SECURITIES PURCHASE AGREEMENT - Page 52
(AutoBond Acceptance Corporation)
LION CAPITAL PARTNERS, L.P.
By: Mountain Capital Management, L.L.C.,
its general partner
By:
Name:
Title:
Address: ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
With a copy to: HW Partners, L.P.
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attn.: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, Esq.
MAJORITY STOCKHOLDERS' ACKNOWLEDGEMENT OF SECTION 8.4
The undersigned persons hereby acknowledge Section 8.4 of this Agreement
and agree to be bound by the restrictions imposed by such Section in their
individual capacities.
___________________________________ _____________________________
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
___________________________________
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
SECURITIES PURCHASE AGREEMENT - Page 53
(AutoBond Acceptance Corporation)
SCHEDULES
Schedule I - Pro Rata Portion of Securities
Schedule II - Investments, Joint Ventures
Schedule III - Capitalization
Schedule IV - Leases
Schedule V - Debt
Schedule VI - Liens
Schedule VII - Transactions with Affiliates
EXHIBITS
Exhibit A - Form of Convertible Note
Exhibit B - Form of Notice of Conversion
Exhibit C - Form of Notice of Exercise
Exhibit D - Form of Registration Rights Agreement
Exhibit E - Form of Security Agreement
Exhibit F - Form of Solvency Certificate
Exhibit G - Form of Officer's Certificate
Exhibit H - Form of Transfer Agent Agreement
Exhibit I - Form of Warrant
Exhibit J - Form of Company Counsel's Opinion
SECURITIES PURCHASE AGREEMENT - Page 54
(AutoBond Acceptance Corporation)
SCHEDULE 1
SECURITIES
----------------------------------------- --------------------------- --------------------------
AGGREGATE PRINCIPAL
NAME/ADDRESS AMOUNT OF NOTES NUMBER OF WARRANT SHARES
----------------------------------------- --------------------------- --------------------------
Lion Capital Partners, L.P.
Address: ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇ 1,000,000 100,000
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Wire Instructions:
Bank One, Texas N.A.
ABA 111 000 614
Credit: Lion Capital Partners
Acct No: 182 215 0536
----------------------------------------- --------------------------- --------------------------
Infinity Emerging Opportunities Limited
Address: ▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ 1,000,000 100,000
London, England WIY 7TG
Wire Instructions:
Citibank New York
ABA 021 000 089
Credit: Bear ▇▇▇▇▇▇▇
Account No. 0925-3186
Further credit: Infinity Emerging
Opportunities Ltd.
Acct No: ▇▇▇-▇▇▇▇▇-▇
----------------------------------------- --------------------------- --------------------------
TOTAL $2,000,000 200,000
----------------------------------------- --------------------------- --------------------------
EXHIBIT D TO SECURITIES PURCHASE AGREEMENT
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (this "Agreement"), dated as of June 30,
1997, among AUTOBOND ACCEPTANCE CORPORATION, a Texas corporation (the
"Company"), and the other undersigned parties hereto, (collectively, the
"Funds").
1. INTRODUCTION. The Company and the Funds have today executed that
certain Securities Purchase Agreement (the "Purchase Agreement"), pursuant to
which the Company has agreed, among other things, to issue an aggregate of $2.0
million (U.S.) principal amount of 18% Convertible Notes of the Company (the
"Notes") to the Funds or their successors, assigns or transferees (collectively,
the "Holders"). The Notes are convertible into an indeterminable number of
shares (the "Conversion Shares") of the Company's common stock, no par value per
share (the "Common Stock"), pursuant to the terms of the Notes. In addition,
pursuant to the terms of the Purchase Agreement and the transactions
contemplated thereby, the Company has issued to the Funds certain Common Stock
Purchase Warrants exercisable for an aggregate of up to 200,000 shares of Common
Stock (the "Warrant Shares"). The number of Conversion Shares and Warrant Shares
is subject to adjustment upon the occurrence of stock splits, recapitalizations
and similar events occurring after the date hereof. Additionally, the parties
hereto are currently negotiating the terms of a Trust Securities Purchase
Agreement (the "Trust Agreement"), pursuant to which the Company may issue,
although it is currently under no obligation to issue, (either directly or upon
conversion, exchange or exercise of certain derivative securities issued) an
indeterminable number of additional shares of Common Stock (the "Additional
Shares") upon the occurrence of certain events described therein. The parties
desire that if and to the extent they can come to agreement on the precise terms
of the Trust Agreement, the Additional Shares potentially issuable as a result
thereof should also be covered by this Agreement. The Company represents and
warrants that the Company's Common Stock is currently eligible for trading on
the Nasdaq Stock Market's National Market (the "National Market") under the
symbol "ABND". This Agreement shall become effective upon the issuance of the
Notes to any of the Holders pursuant to the Purchase Agreement. Certain
capitalized terms used in this Agreement are defined in Section 3 hereof;
references to sections shall be to sections of this Agreement.
2. REGISTRATION UNDER SECURITIES ACT, ETC.
2.1 IMMEDIATE REGISTRATION.
(a) REGISTRATION OF CONVERSION SHARES AND WARRANT SHARES. As soon
as practicable after the date hereof, but in any event prior to fifteen (15)
calendar days after the issuance of the Notes to any Holders, the Company shall
prepare and file a registration statement to effect the registration under the
Securities Act of all, but not less than all, of the Registrable Securities
which relate to the Conversion Shares and the Warrant Shares, demand for which
is hereby given and acknowledged; all to the extent requisite to permit the
public resale of the Conversion Shares and Warrant Shares to be so registered.
The Company shall use its best efforts to cause the registration statement which
is the subject of this Section 2.1(a) (the "First Registration Statement") to be
declared effective by the Commission upon the earlier to occur of
REGISTRATION RIGHTS AGREEMENT - Page 1
(AutoBond Acceptance Corporation)
(i) ninety (90) calendar days after the original filing thereof and (ii) five
(5) days after receipt of a "no review" or similar letter from the Commission
("First Required Effectiveness Date").
(b) REGISTRATION OF ADDITIONAL SHARES. As soon as practicable
after the issuance of any of the Additional Shares, should this occur (or,
derivative securities convertible, exchangeable or exercisable therefor), but in
any event prior to fifteen (15) calendar days thereafter, the Company shall
prepare and file a registration statement to effect the registration under the
Securities Act of all, but not less than all, of the then outstanding
Registrable Securities which relate to the Additional Shares, without
requirement of further demand or notice; all to the extent requisite to permit
the public resale of the Additional Shares to be so registered. The Company
shall use its best efforts to cause each of the registration statements which
are the subject of this Section 2.1(b) (each, a "Subsequent Registration
Statement" and, collectively, with each other Subsequent Registration Statement
and the First Registration Statement, the "Registration Statements") to be
declared effective by the Commission upon the earlier of (i) ninety (90)
calendar days from the original filing thereof and (ii) five (5) days after
receipt of a "no review" or similar letter from the Commission (each, a
"Subsequent Effectiveness Date").
(c) REGISTRATION IN FULL. Nothing contained herein shall be
deemed to limit the number of Registrable Securities to be registered by the
Company hereunder. As a result, should the First Registration Statement filed by
the Company and declared effective by the Commission pursuant to the terms
hereof not relate to the maximum number of Registrable Securities acquired by
(or potentially acquirable by) the holders thereof upon conversion of the Notes
or upon exercise of the Warrants, the Company shall be required to file a
separate registration statement (utilizing Rule 462 promulgated under the
Exchange Act, where applicable) relating to such Registrable Securities which
then remain unregistered. Furthermore, the Company undertakes to utilize Rule
462, as applicable, to register Additional Shares, when and as issued.
(d) REGISTRATION STATEMENT FORM. Registrations under this Section
2.1 shall be on such appropriate registration form of the Commission as shall
(i) be reasonably selected by the Company and (ii) permit the disposition of
such Registrable Securities in accordance with the intended method or methods of
disposition specified by the Funds.
(e) EXPENSES. The Company will pay all Registration Expenses in
connection with any registration requested pursuant to this Section 2.1.
(f) EFFECTIVE REGISTRATION STATEMENT. A registration pursuant to
this Section 2.1 shall not be deemed to have been effected (i) unless a
registration statement with respect thereto has become effective within the time
period specified herein, provided that a registration which does not become
effective after the Company has filed a registration statement with respect
thereto solely by reason of the refusal to proceed of any holder of Registrable
Securities (other than a refusal to proceed based upon the advice of counsel
relating to a disclosure matter unrelated to such holder) shall be deemed to
have been effected by the Company unless the holders of the Registrable
Securities shall have elected to pay all Registration Expenses in connection
with such registration, (ii) if, after it has become effective, such
registration becomes subject to any stop order, injunction or other order or
extraordinary requirement of the Commission or other governmental agency or
court for any reason, (iii) if, after it has become
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(AutoBond Acceptance Corporation)
effective, such registration ceases to be effective or useful to the sellers of
the Registrable Securities for more than an aggregate of ninety (90) days or
(iv) the conditions to closing specified in the purchase agreement or
underwriting agreement entered into in connection with such registration are not
satisfied, other than by reason of some act or omission by the Holders.
(g) SELECTION OF UNDERWRITERS. The offerings contemplated by this
Section 2.1 may be, at the option of a majority (by number of Securities) of the
holders of the Registrable Securities so included, an underwritten offering and
the underwriter or underwriters thereof shall be selected by the holders of at
least a majority (by number of Securities) of the Registrable Securities as to
which registration has been requested and shall be acceptable to the Company.
(h) PRIORITY IN REQUESTED REGISTRATIONS. If a registration
pursuant to this Section 2.1 involves an underwritten offering, and the managing
underwriter shall advise the Company in writing (with a copy to each holder of
Registrable Securities) that, in its opinion, the number of securities requested
to be included in such registration exceeds the number which can be sold in such
offering, the Company will include in such registration, to the extent of the
number which the Company is so advised can be sold in such offering, Registrable
Securities, pro rata among such holders on the basis of the number of such
securities held (or then acquirable upon conversion of the Securities) by such
holders. In connection with any registration in which any Registrable Securities
requested for inclusion are excluded, no securities other than Registrable
Securities shall be covered by such registration.
2.2 INCIDENTAL REGISTRATION.
(a) RIGHT TO INCLUDE REGISTRABLE SECURITIES. If at any time after
the date hereof the Company proposes to register any of its securities under the
Securities Act (other than by a registration in connection with an acquisition
in a manner which would not permit registration of Registrable Securities for
sale to the public, on Form S-8, or any successor form thereto, on Form S-4, or
any successor form thereto and other than pursuant to Section 2.1), on an
underwritten basis (either best-efforts or firm-commitment) it will each such
time give prompt written notice to all Holders of its intention to do so and of
such Holders' rights under this Section 2.2. Upon the written request of any
such Holder made within twenty (20) days after the receipt of any such notice
(which request shall specify the Registrable Securities intended to be disposed
of by such Holder and the intended method of disposition thereof), the Company
will, subject to the terms of this Agreement, effect the registration under the
Securities Act of that number of Registrable Securities which the Company has
been so requested to register by the Holders thereof, to the extent requisite to
permit the disposition (in accordance with the intended methods thereof as
aforesaid) of such Registrable Securities so to be registered, by inclusion of
such Registrable Securities in the registration statement which covers the
securities which the Company proposes to register, provided that if, at any time
after giving written notice of its intention to register any securities and
prior to the effective date of the registration statement filed in connection
with such registration, the Company shall determine for any reason either not to
register or to delay registration of such securities, the Company may, at its
election, give written notice of such determination to each Holder and,
thereupon, (i) in the case of a determination not to register, shall be relieved
of its obligation to register any Registrable Securities in connection with such
registration (but not from its obligation to pay the Registration Expenses in
connection
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(AutoBond Acceptance Corporation)
therewith), without prejudice, however, to the rights of any holder or holders
of Registrable Securities entitled to do so to request that such registration be
effected as a registration under Section 2.1, and (ii) in the case of a
determination to delay registering, shall be permitted to delay registering any
Registrable Securities, for the same period as the delay in registering such
other securities. No registration effected under this Section 2.2 shall relieve
the Company of its obligation to effect any registration upon request under
Section 2.1, nor shall any such registration hereunder be deemed to have been
effected pursuant to Section 2.1. The Company will pay all Registration Expenses
in connection with each registration of Registrable Securities requested
pursuant to this Section 2.2. The right provided the Holders of the Registrable
Securities pursuant to this Section shall be exercisable at their sole
discretion and will in no way limit any of the Company's obligations to pay the
Securities according to their terms.
(b) PRIORITY IN INCIDENTAL REGISTRATIONS. If the managing
underwriter of the underwritten offering contemplated by this Section 2.2 shall
inform the Company and holders of the Registrable Securities requesting such
registration by letter of its belief that the number of securities requested to
be included in such registration exceeds the number which can be sold in (or
during the time of) such offering, then the Company will include in such
registration, to the extent of the number which the Company is so advised can be
sold in (or during the time of) such offering, (i) first securities proposed by
the Company to be sold for its own account, and (ii) second Registrable
Securities and securities of other selling security holders requested to be
included in such registration pro rata on the basis of the number of shares of
such securities so proposed to be sold and so requested to be included;
provided, however, the holders of Registrable Securities shall have priority to
all shares sought to be included by officers and directors of the Company as
well as holders of ten percent (10%) or more of the Company's Common Stock.
2.3 REGISTRATION PROCEDURES. If and whenever the Company is required to
effect the registration of any Registrable Securities under the Securities Act
as provided in Section 2.1 and, as applicable, 2.2, the Company shall, as
expeditiously as possible:
(i) prepare and file with the Commission the Registration
Statement to effect such registration (including such audited financial
statements as may be required by the Securities Act or the rules and
regulations promulgated thereunder) and thereafter use its best efforts
to cause such registration statement to be declared effective by the
Commission, as soon as practicable, but in any event no later than the
First Required Effectiveness Date or Subsequent Effectiveness Date, as
applicable, provided, however, that before filing such registration
statement or any amendments thereto, the Company will furnish to the
counsel selected by the holders of Registrable Securities which are to
be included in such registration, copies of all such documents proposed
to be filed;
(ii) 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 and to comply with the provisions of the Securities
Act with respect to the disposition of all Registrable Securities
covered by such registration statement until the earlier to occur of (I)
with respect to the First Registration Statement, six (6) years after
the date of this Agreement, (II) with respect to
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(AutoBond Acceptance Corporation)
any Subsequent Registration Statement, two (2) years after the issuance
of the Additional Shares covered thereby and (III) in each case, such
time as all of the securities which are the subject of such registration
statement cease to be Registrable Securities (such period, in each case,
the "Registration Maintenance Period") subject, however, to the right of
the Company to suspend effectiveness of the registration statement for
not more than 30 consecutive days or an aggregate of 90 days during such
Registration Maintenance Period, provided the reference to 30
consecutive days shall be 60 consecutive days in the event the Company
has publicly announced a transaction and, in connection therewith, the
Company's independent certified public accountants have delivered a
certificate to the Holders stating that it is not practicable to prepare
and file with the Commission all necessary accounting information
associated with such transaction to cause the registration statement to
be reinstated during such 30 day period;
(iii) furnish to each seller of Registrable Securities covered by
such registration statement and each underwriter, if any, of the
Registrable Securities being sold by such seller such number of
conformed copies of such registration statement and of each such
amendment and supplement thereto (in each case including all exhibits),
such number of copies of the prospectus contained in such registration
statement (including each preliminary prospectus and any summary
prospectus) and any other prospectus filed under Rule 424 under the
Securities Act, in conformity with the requirements of the Securities
Act, and such other documents, as such seller and underwriter, if any,
may reasonably request in order to facilitate the public sale or other
disposition of the Registrable Securities owned by such seller;
(iv) use its best efforts to register or qualify all Registrable
Securities and other securities covered by such registration statement
under such other securities laws or blue sky laws as any seller thereof
and any underwriter of the securities being sold by such seller shall
reasonably request, to keep such registrations or qualifications in
effect for so long as such registration statement remains in effect, and
take any other action which may be reasonably necessary or advisable to
enable such seller and underwriter to consummate the disposition in such
jurisdictions of the securities owned by such seller, except that the
Company shall not for any such purpose be required to qualify generally
to do business as a foreign corporation in any jurisdiction wherein it
would not but for the requirements of this subdivision (iv) be obligated
to be so qualified or to consent to general service of process in any
such jurisdiction;
(v) use its best efforts to cause all Registrable Securities
covered by such registration statement to be registered with or approved
by such other governmental agencies or authorities as may be necessary
to enable the seller or sellers thereof to consummate the disposition of
such Registrable Securities;
(vi) furnish to each seller of Registrable Securities a signed
counterpart, addressed to such seller, and the underwriters, if any, of:
(x) an opinion of counsel for the Company, dated
the effective date of such registration statement (or, if such
registration includes an underwritten public
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(AutoBond Acceptance Corporation)
offering, an opinion dated the date of the closing under the
underwriting agreement), reasonably satisfactory in form and
substance to such seller, and
(y) a "comfort" letter (or, in the case of any such
Person which does not satisfy the conditions for receipt of a
"comfort" letter specified in Statement on Auditing Standards No.
72, an "agreed upon procedures" letter), dated the effective date
of such registration statement (and, if such registration
includes an underwritten public offering, a letter of like kind
dated the date of the closing under the underwriting agreement),
signed by the independent public accountants who have certified
the Company's financial statements included in such registration
statement, covering substantially the same matters with respect
to such registration statement (and the prospectus included
therein) and, in the case of the accountants' letter, with
respect to events subsequent to the date of such financial
statements, as are customarily covered in opinions of issuer's
counsel and in accountants' letters delivered to the underwriters
in underwritten public offerings of securities (with, in the case
of an "agreed upon procedures" letter, such modifications or
deletions as may be required under Statement on Auditing
Standards No. 35) and, in the case of the accountants' letter,
such other financial matters, and, in the case of the legal
opinion, such other legal matters, as such seller (or the
underwriters, if any) may reasonably request;
(vii) notify the holders of Registrable Securities, their counsel
and the managing underwriter or underwriters, if any, promptly and
confirm such advice in writing promptly thereafter:
(v) when the registration statement, the prospectus
or any prospectus supplement related thereto or post-effective
amendment to the registration statement has been filed, and, with
respect to the registration statement or any post-effective
amendment thereto, when the same has become effective;
(w) of any request by the Commission for amendments
or supplements to the registration statement or the prospectus or
for additional information;
(x) of the issuance by the Commission of any stop
order suspending the effectiveness of the registration statement
or the initiation of any proceedings by any Person for that
purpose;
(y) if at any time the representations and
warranties of the Company made herein cease to be true and
correct in all material respects;
(z) of the receipt by the Company of any
notification with respect to the suspension of the qualification
of any Registrable Securities for sale under the securities or
blue sky laws of any jurisdiction or the initiation or threat of
any proceeding for such purpose;
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(AutoBond Acceptance Corporation)
(viii) notify each seller of Registrable Securities covered by
such registration statement, at any time when a prospectus relating
thereto is required to be delivered under the Securities Act, upon
discovery that, or upon the happening of any event as a result of which,
the prospectus included in such registration statement, as then in
effect, includes an untrue statement of a material fact or omits to
state any material fact required to be stated therein or necessary to
make the statements therein not misleading in the light of the
circumstances then existing, and at the request of any such seller
promptly prepare and furnish to such seller and each underwriter, if
any, a reasonable number of copies of a supplement to or an amendment of
such prospectus as may be necessary so that, as thereafter delivered to
the purchasers of such securities, such prospectus shall not include an
untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances then existing;
(ix) use its best efforts to obtain the withdrawal of any order
suspending the effectiveness of the registration statement at the
earliest possible moment;
(x) otherwise use its best efforts to comply with all applicable
rules and regulations of the Commission, and make available to its
security holders, as soon as reasonably practicable, an earning
statement covering the period of at least twelve months, but not more
than eighteen months, beginning with the first full calendar month after
the effective date of such registration statement, which earnings
statement shall satisfy the provisions of Section 11(a) of the
Securities Act and Rule 158 thereunder;
(xi) enter into such agreements and take such other actions as
sellers of such Registrable Securities holding 51% of the shares so to
be sold shall reasonably request in writing (at the expense of such
sellers) in order to expedite or facilitate the disposition of such
Registrable Securities; and
(xii) use its best efforts to list all Registrable Securities
covered by such registration statement on any securities exchange on
which any of the Registrable Securities are then listed.
The Company may require each seller of Registrable Securities as to
which any registration is being effected to furnish the Company such information
regarding such seller and the distribution of such securities as the Company may
from time to time reasonably request in writing.
The Company will not file any registration statement or amendment
thereto or any prospectus or any supplement thereto (including such documents
incorporated by reference and proposed to be filed after the initial filing of
the registration statement) to which the holders of at least a majority of the
Registrable Securities covered by such registration statement or the underwriter
or underwriters, if any, shall reasonably object, provided that the Company may
file such document in a form required by law or upon the advice of its counsel.
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(AutoBond Acceptance Corporation)
The Company represents and warrants to each holder of Registrable
Securities that it has obtained all necessary waivers, consents and
authorizations necessary to execute this Agreement and consummate the
transactions contemplated hereby.
Each holder of Registrable Securities agrees by acquisition of such
Registrable Securities that, upon receipt of any notice from the Company of the
occurrence of any event of the kind described in subdivision (viii) of this
Section 2.3, such holder will forthwith discontinue such holder's disposition of
Registrable Securities pursuant to the registration statement relating to such
Registrable Securities until such holder's receipt of the copies of the
supplemented or amended prospectus contemplated by subdivision (viii) of this
Section 2.3 and, if so directed by the Company, will deliver to the Company (at
the Company's expense) all copies, other than permanent file copies, then in
such Holder's possession of the prospectus relating to such Registrable
Securities current at the time of receipt of such notice.
If any such registration statement refers to any Holder of Registrable
Securities by name or otherwise as the holder of any securities of the Company,
then such holder shall have the right to require (a) the insertion therein of
language, in form and substance satisfactory to such holder, to the effect that
the holding by such holder of such securities is not to be construed as a
recommendation by such holder of the investment quality of the Company's
securities covered thereby and that such holding does not imply that such holder
will assist in meeting any future financial requirements of the Company, or (b)
in the event that such reference to such holder by name or otherwise is not
required by the Securities Act or any similar federal statute then in force, the
deletion of the reference to such holder.
2.4 UNDERWRITTEN OFFERINGS.
(a) REQUESTED UNDERWRITTEN OFFERINGS. If requested by the
underwriters for any underwritten offering by holders of Registrable Securities
pursuant to a registration requested under Section 2.1, the Company will enter
into an underwriting agreement with such underwriters for such offering, and to
contain such representations and warranties by the Company and such other terms
as are generally prevailing in agreements of this type, including, without
limitation, indemnities to the effect and to the extent provided in Section 2.7.
The holders of the Registrable Securities will cooperate with the Company in the
negotiation of the underwriting agreement and will give consideration to the
reasonable suggestions of the Company regarding the form thereof, provided that
nothing herein contained shall diminish the foregoing obligations of the
Company. The holders of Registrable Securities to be distributed by such
underwriters shall be parties to such underwriting agreement and may, at their
option, require that any or all of the representations and warranties by, and
the other agreements on the part of, the Company to and for the benefit of such
underwriters shall also be made to and for the benefit of such holders of
Registrable Securities and that any or all of the conditions precedent to the
obligations of such underwriters under such underwriting agreement be conditions
precedent to the obligations of such holders of Registrable Securities. Any such
holder of Registrable Securities shall not be required to make any
representations or warranties to or agreements with the Company or the
underwriters other than representations and warranties contained in a writing
furnished by such holder expressly for use in such registration statement or
representations, warranties and
REGISTRATION RIGHTS AGREEMENT - Page 8
(AutoBond Acceptance Corporation)
agreements regarding such holder, such holder's Registrable Securities and such
holder's intended method of distribution and any other representation required
by law.
(b) INCIDENTAL UNDERWRITTEN OFFERINGS. If the Company at any time
proposes to register any of its securities under the Securities Act as
contemplated by section 2.2 and such securities are to be distributed by or
through one or more underwriters, the Company will, if requested by any holder
of Registrable Securities as provided in section 2.2 and subject to the
provisions of section 2.2(b), use its best efforts to arrange for such
underwriters to include all the Registrable Securities to be offered and sold by
such holder among the securities to be distributed by such underwriters,
provided that if the managing underwriter of such underwritten offering shall
inform the holders of the Registrable Securities requesting such registration,
in respect of such underwritten offering, by letter of its belief that inclusion
in such underwritten distribution of all or a specified number of such
Registrable Securities so requested to be included would interfere with the
successful marketing of the securities (other than such Registrable Securities
and other securities so requested to be included which may be included in such
underwritten offering without such effect) then, the Company may, upon written
notice to all holders of such Registrable Securities and of such other shares so
requested to be included) exclude pro rata from such underwritten offering (if
and to the extent stated by such managing underwriter to be necessary to
eliminate such effect) the number of such Registrable Securities and shares of
such other securities so requested to be included the registration of which
shall have been requested by each holder of Registrable Securities and by the
holders of such other securities so that the resultant aggregate number of such
Registrable Securities and of such other shares or securities so requested to be
included which are included in such underwritten offering shall be equal to the
approximate number of shares stated in such managing underwriter's letter. The
holders of Registrable Securities to be distributed by such underwriters shall
be parties to the underwriting agreement between the Company and such
underwriters and may, at their option, require that any or all of the
representations and warranties by, and the other agreements on the part of, the
Company to and for the benefit of such underwriters shall also be made to and
for the benefit of such holders of Registrable Securities and that any or all of
the conditions precedent to the obligations of such underwriters under such
underwriting agreement be conditions precedent to the obligations of such
holders of Registrable Securities. Any such holder of Registrable Securities
shall not be required to make any representations or warranties to or agreements
with the Company or the underwriters other than representations, warranties or
agreements regarding such holder, such holder's Registrable Securities and such
holder's intended method of distribution and any other representation required
by law.
(c) PARTICIPATION IN UNDERWRITTEN OFFERINGS. No Person may
participate in any underwritten offering hereunder unless such Person (i) agrees
to sell such Person's securities on the basis provided in any underwriting
arrangements approved, subject to the terms and conditions hereof, by the
holders of a majority of Registrable Securities to be included in such
underwritten offering and (ii) completes and executes all questionnaires,
indemnities, underwriting agreements and other documents (other than powers of
attorney) required under the terms of such underwriting arrangements.
Notwithstanding the foregoing, no underwriting agreement (or other agreement in
connection with such offering) shall require any holder of Registrable
Securities to make any representations or warranties to or agreements with the
Company or the underwriters other than representations and warranties contained
in a writing furnished by such holder
REGISTRATION RIGHTS AGREEMENT - Page 9
(AutoBond Acceptance Corporation)
expressly for use in the related registration statement or representations,
warranties or agreements regarding such holder, such holder's Registrable
Securities and such holder's intended method of distribution and any other
representation required by law.
2.5 PREPARATION; REASONABLE INVESTIGATION. In connection with the
preparation and filing of each registration statement under the Securities Act
pursuant to this Agreement, the Company will give the holders of Registrable
Securities registered under such registration statement, their underwriters, if
any, and their respective counsel and accountants, the opportunity to
participate in the preparation of such registration statement, each prospectus
included therein or filed with the Commission, and each amendment thereof or
supplement thereto, and will give each of them such access to its books and
records and such opportunities to discuss the business of the Company with its
officers and the independent public accountants who have certified its financial
statements as shall be necessary, in the reasonable opinion of such holders' and
such underwriters' respective counsel, to conduct a reasonable investigation
within the meaning of the Securities Act.
2.6 DEFAULT FEE. In the event (I) the First Registration Statement is
either (i) not declared effective by the Commission by the First Required
Effectiveness Date or (ii) such effectiveness is not maintained during the
applicable Registration Maintenance Period or (II) any Subsequent Registration
Statement is either (i) not declared effective by the Commission by the
Subsequent Effectiveness Date or (ii) such effectiveness is not maintained
during the applicable Registration Maintenance Period, then, in each such event,
the Company shall pay to the Funds, as liquidated damages and not as a penalty,
an amount equal to two percent (2%) of the sum of the aggregate outstanding
principal balance of the Notes; provided, however, if the default causing the
payment of such liquidated damages has not been cured within thirty (30) days
after the occurrence thereof, such fee shall be increased to three percent (3%)
of the sum of the aggregate outstanding principal balance of the Notes, which
such amount shall be due and payable monthly for each month (or portion thereof)
which such obligations are not being completely performed (the "Default Fee").
Such Default Fee shall be paid in cash by the Company to the Funds by wire
transfer in immediately available funds on the last day of each calendar month
following the event requiring payment.
2.7 INDEMNIFICATION.
(a) INDEMNIFICATION BY THE COMPANY. In the event of any
registration of any securities of the Company under the Securities Act, the
Company will, and hereby does agree to, indemnify and hold harmless the holder
of any Registrable Securities covered by such registration statement, its
directors and officers, each other Person who participates as an underwriter in
the offering or sale of such securities and each other Person, if any, who
controls such holder or any such underwriter within the meaning of the
Securities Act against any losses, claims, damages or liabilities, joint or
several, to which such holder or any such director or officer or underwriter or
controlling person may become subject under the Securities Act or otherwise,
insofar as such losses, claims, damages or liabilities (or actions or
proceedings, whether commenced or threatened, 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
securities were registered under the Securities Act, any preliminary prospectus,
final prospectus or
REGISTRATION RIGHTS AGREEMENT - Page 10
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summary prospectus contained therein, or any amendment or supplement thereto, or
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, and
the Company will reimburse such holder and each such director, officer,
underwriter and controlling person for any legal or any other expenses
reasonably incurred by them in connection with investigating or defending any
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 an untrue statement or alleged untrue statement or
omission or alleged omission made in such registration statement, any such
preliminary prospectus, final prospectus, summary prospectus, amendment or
supplement in reliance upon and in conformity with written information furnished
to the Company by such holder or underwriter stating that it is for use in the
preparation thereof and, provided further that the Company shall not be liable
to any Person who participates as an underwriter in the offering or sale of
Registrable Securities or to any other Person, if any, who controls such
underwriter within the meaning of the Securities Act, 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 such Person's failure to send or give
a copy of the final prospectus, as the same may be then supplemented or amended,
within the time required by the Securities Act to the Person asserting the
existence of an untrue statement or alleged untrue statement or omission or
alleged omission at or prior to the written confirmation of the sale of
Registrable Securities to such Person if such statement or omission was
corrected in such final prospectus. Such indemnity shall remain in full force
and effect regardless of any investigation made by or on behalf of such holder
or any such director, officer, underwriter or controlling person and shall
survive the transfer of such securities by such holder.
(b) INDEMNIFICATION BY THE SELLERS. The Company may require, as a
condition to including any Registrable Securities in any registration statement
filed pursuant to this Agreement, that the Company shall have received an
undertaking satisfactory to it from the prospective seller of such Registrable
Securities, to indemnify and hold harmless (in the same manner and to the same
extent as set forth in subdivision (a) of this Section 2.7) the Company, each
director of the Company, each officer of the Company and each other Person, if
any, who controls the Company within the meaning of the Securities Act, with
respect to any statement or alleged statement in or omission or alleged omission
from such registration statement, any preliminary prospectus, final prospectus
or summary prospectus contained therein, or any amendment or supplement thereto,
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 through an instrument duly executed by such seller specifically stating
that it is for use in the preparation of such registration statement,
preliminary prospectus, final prospectus, summary prospectus, amendment or
supplement. Any such indemnity shall remain in full force and effect, regardless
of any investigation made by or on behalf of the Company or any such director,
officer or controlling person and shall survive the transfer of such securities
by such seller.
(c) NOTICES OF CLAIMS, ETC. Promptly after receipt by an
indemnified party of notice of the commencement of any action or proceeding
involving a claim referred to in the preceding subdivisions of this Section 2.7,
such indemnified party will, if a claim in respect thereof is to be made against
an indemnifying party, give written notice to the latter of the commencement of
such action, provided that the failure of any indemnified party to give notice
as provided herein
REGISTRATION RIGHTS AGREEMENT - Page 11
(AutoBond Acceptance Corporation)
shall not relieve the indemnifying party of its obligations under the preceding
subdivisions of this Section 2.7, except to the extent that the indemnifying
party is actually prejudiced by such failure to give notice. In case any such
action is brought against an indemnified party, unless in such indemnified
party's reasonable judgment a conflict of interest between such indemnified and
indemnifying parties may exist in respect of such claim, the indemnifying party
shall be entitled to participate in and to assume the defense thereof, jointly
with any other indemnifying party similarly notified, to the extent that the
indemnifying party 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 shall not be liable to such indemnified party for any legal
or other expenses subsequently incurred by the latter in connection with the
defense thereof other than reasonable costs of investigation. No indemnifying
party shall, without the consent of the indemnified party, consent to entry of
any judgment or enter into any settlement of any such action 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, or a covenant not to
▇▇▇, in respect to such claim or litigation. No indemnified party shall consent
to entry of any judgment or enter into any settlement of any such action the
defense of which has been assumed by an indemnifying party without the consent
of such indemnifying party.
(d) OTHER INDEMNIFICATION. Indemnification similar to that
specified in the preceding subdivisions of this Section 2.7 (with appropriate
modifications) shall be given by the Company and each seller of Registrable
Securities (but only if and to the extent required pursuant to the terms of
2.7(b)) with respect to any required registration or other qualification of
securities under any Federal or state law or regulation of any governmental
authority, other than the Securities Act.
(e) INDEMNIFICATION PAYMENTS. The indemnification required by
this Section 2.7 shall be made by periodic payments of the amount thereof during
the course of the investigation or defense, as and when bills are received or
expense, loss, damage or liability is incurred.
(f) CONTRIBUTION. If the indemnification provided for in the
preceding subdivisions of this Section 2.7 is unavailable to an indemnified
party in respect of any expense, loss, claim, damage or liability referred to
therein, then each indemnifying party, in lieu of indemnifying such indemnified
party, shall contribute to the amount paid or payable by such indemnified party
as a result of such expense, loss, claim, damage or liability (i) in such
proportion as is appropriate to reflect the relative benefits received by the
Company on the one hand and the holder or underwriter, as the case may be, on
the other from the distribution of the Registrable Securities or (ii) if the
allocation provided by clause (i) above is not permitted by applicable law, in
such proportion as is appropriate to reflect not only the relative benefits
referred to in clause (i) above but also the relative fault of the Company on
the one hand and of the holder or underwriter, as the case may be, on the other
in connection with the statements or omissions which resulted in such expense,
loss, damage or liability, as well as any other relevant equitable
considerations. The relative benefits received by the Company on the one hand
and the holder or underwriter, as the case may be, on the other in connection
with the distribution of the Registrable Securities shall be deemed to be in the
same proportion as the total net proceeds received by the Company from the
REGISTRATION RIGHTS AGREEMENT - Page 12
(AutoBond Acceptance Corporation)
initial sale of the Registrable Securities by the Company to the purchasers
pursuant to the Note Purchase Agreement and the Warrants bear to the gain, if
any, realized by the selling holder or the underwriting discounts and
commissions received by the underwriter, as the case may be. The relative fault
of the Company on the one hand and of the holder or underwriter, as the case may
be, on the other shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or omission to
state a material fact relates to information supplied by the Company, by the
holder or by the underwriter and the parties' relative intent, knowledge, access
to information and opportunity to correct or prevent such statement or omission,
provided that the foregoing contribution agreement shall not inure to the
benefit of any indemnified party if indemnification would be unavailable to such
indemnified party by reason of the provisions contained in the first sentence of
subdivision (a) of this Section 2.7, and in no event shall the obligation of any
indemnifying party to contribute under this subdivision (f) exceed the amount
that such indemnifying party would have been obligated to pay by way of
indemnification if the indemnification provided for under subdivisions (b) of
this Section 2.7 had been available under the circumstances.
The Company and the holders of Registrable Securities agree that it
would not be just and equitable if contribution pursuant to this subdivision (f)
were determined by pro rata allocation (even if the holders and any underwriters
were treated as one entity for such purpose) or by any other method of
allocation that does not take account of the equitable considerations referred
to in the immediately preceding paragraph. The amount paid or payable by an
indemnified party as a result of the losses, claims, damages and liabilities
referred to in the immediately preceding paragraph shall be deemed to include,
subject to the limitations set forth in the preceding sentence and subdivision
(c) of this Section 2.7, any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating or defending any such action
or claim.
Notwithstanding the provisions of this subdivision (f), no holder of
Registrable Securities or underwriter shall be required to contribute any amount
in excess of the amount by which (i) in the case of any such holder, the net
proceeds received by such holder from the sale of Registrable Securities or (ii)
in the case of an underwriter, the total price at which the Registrable
Securities purchased by it and distributed to the public were offered to the
public exceeds, in any such case, the amount of any damages that such holder or
underwriter has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission. No Person guilty of fraudulent
misrepresentation (within the 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.
3. DEFINITIONS. As used herein, unless the context otherwise requires,
the following terms have the following respective meanings:
"Additional Shares": As defined in Section 1, such term to include any
securities issued in substitution of or in addition to such Additional Shares.
"Commission": The Securities and Exchange Commission or any other
Federal agency at the time administering the Securities Act.
"Common Stock": As defined in Section 1.
REGISTRATION RIGHTS AGREEMENT - Page 13
(AutoBond Acceptance Corporation)
"Company": As defined in the introductory paragraph of this Agreement.
"Conversion Shares": As defined in Section 1, such term to include any
securities issued in substitution of or in addition to such Conversion Shares.
"Default Fee": As defined in Section 2.6.
"Exchange Act": The Securities Exchange Act of 1934, as amended, and the
rules and regulations of the Commission thereunder.
"First Registration Statement": As defined in Section 1.
"First Required Effectiveness Date": As defined in Section 2.1(a).
"Holders": As defined in Section 1.
"National Market": As defined in Section 1.
"Notes": As defined in Section 1, such term to include any securities
issued in substitution of or in addition to such Notes.
"Person": A corporation, association, partnership, organization,
business, individual, governmental or political subdivision thereof or a
governmental agency.
"Purchase Agreement": As defined in Section 1.
"Registrable Securities": The Securities and any securities issued or
issuable with respect to such Securities by way of stock dividend or stock split
or in connection with a combination of shares, recapitalization, merger,
consolidation or other reorganization or otherwise. Once issued such securities
shall cease to be Registrable Securities when (a) a registration statement with
respect to the sale of such securities shall have become effective under the
Securities Act and such securities shall have been disposed of in accordance
with such registration statement, (b) they shall have been distributed to the
public pursuant to Rule 144 (or any successor provision) under the Securities
Act, (c) they shall have been otherwise transferred, new certificates for them
not bearing a legend restricting further transfer shall have been delivered by
the Company and subsequent disposition of them shall not require registration or
qualification of them under the Securities Act or any similar state law then in
force, (d) they shall have ceased to be outstanding, (e) in the case of
securities covered by the First Registration Statement, on the sixth (6th)
anniversary of this Agreement, or (f) in the case of securities covered by a
Subsequent Registration Statement, on the second (2nd) anniversary of the
issuance of such securities.
"Registration Expenses": All expenses incident to the Company's
performance of or compliance with this Agreement, including, without limitation,
all registration, filing and NASD fees, all stock exchange and National Market
listing fees, all fees and expenses of complying with securities or blue sky
laws, all word processing, duplicating and printing expenses, messenger and
REGISTRATION RIGHTS AGREEMENT - Page 14
(AutoBond Acceptance Corporation)
delivery expenses, the fees and disbursements of counsel for the Company and of
its independent public accountants, including the expenses of any special audits
or "cold comfort" letters required by or incident to such performance and
compliance, the reasonable fees and disbursements of not more than one law firm
(not to exceed $25,000) retained by the holder or holders of more than 50% of
the Registrable Securities, premiums and other costs of policies of insurance of
the Company against liabilities arising out of the public offering of the
Registrable Securities being registered and any fees and disbursements of
underwriters customarily paid by issuers or sellers of securities, but excluding
underwriting discounts and commissions and transfer taxes, if any, provided
that, in any case where Registration Expenses are not to be borne by the
Company, such expenses shall not include salaries of Company personnel or
general overhead expenses of the Company, auditing fees, premiums or other
expenses relating to liability insurance required by underwriters of the Company
or other expenses for the preparation of financial statements or other data
normally prepared by the Company in the ordinary course of its business or which
the Company would have incurred in any event.
"Registration Maintenance Period": As defined in Section 2.3.
"Registration Statements": As defined in Section 2.1(a).
"Securities": Collectively, the Conversion Shares, Warrant Shares and
Additional Shares.
"Securities Act": The Securities Act of 1933, as amended, and the rules
and regulations of the Commission thereunder.
"Subsequent Effectiveness Date": As defined in Section 1.
"Subsequent Registration Statements": As defined in Section 1.
"Trust Agreement": As defined in Section 1.
"Warrant Shares": As defined in Section 1, such term to include any
securities issued in substitution of or in addition to such Warrants.
4. RULE 144. The Company shall timely file the reports required to be
filed by it under the Securities Act and the Exchange Act (including but not
limited to the reports under Sections 13 and 15(d) of the Exchange Act referred
to in subparagraph (c) of Rule 144 adopted by the Commission under the
Securities Act) and the rules and regulations adopted by the Commission
thereunder (or, if the Company is not required to file such reports, will, upon
the request of any holder of Registrable Securities, make publicly available
other information) and will take such further action as any holder of
Registrable Securities may reasonably request, all to the extent required from
time to time to enable such holder to sell Registrable Securities without
registration under the Securities Act within the limitation of the exemptions
provided by (a) Rule 144 under the Securities Act, as such Rule may be amended
from time to time, or (b) any similar rule or regulation hereafter adopted by
the Commission. Upon the request of any holder of Registrable Securities, the
Company will deliver to such holder a written statement as to whether it has
complied with the requirements of this Section 4.
REGISTRATION RIGHTS AGREEMENT - Page 15
(AutoBond Acceptance Corporation)
5. AMENDMENTS AND WAIVERS. This Agreement may be amended and the Company
may take any action herein prohibited, or omit to perform any act herein
required to be performed by it, only if the Company shall have obtained the
written consent to such amendment, action or omission to act, of the holder or
holders of the sum of the 51% or more of the shares of (i) Registrable
Securities issued at such time, plus (ii) Registrable Securities issuable upon
exercise or conversion of the Securities then constituting derivative securities
(if such Securities were not fully exchanged or converted in full as of the date
such consent is sought). Each holder of any Registrable Securities at the time
or thereafter outstanding shall be bound by any consent authorized by this
Section 5, whether or not such Registrable Securities shall have been marked to
indicate such consent.
6. NOMINEES FOR BENEFICIAL OWNERS. In the event that any Registrable
Securities are held by a nominee for the beneficial owner thereof, the
beneficial owner thereof may, at its election, be treated as the holder of such
Registrable Securities for purposes of any request or other action by any holder
or holders of Registrable Securities pursuant to this Agreement or any
determination of any number or percentage of shares of Registrable Securities
held by any holder or holders of Registrable Securities contemplated by this
Agreement. If the beneficial owner of any Registrable Securities so elects, the
Company may require assurances reasonably satisfactory to it of such owner's
beneficial ownership of such Registrable Securities.
7. NOTICES. Except as otherwise provided in this Agreement, all notices,
requests and other communications to any Person provided for hereunder shall be
in writing and shall be given to such Person (a) in the case of a party hereto
other than the Company, addressed to such party in the manner set forth in the
Note Purchase Agreement or at such other address as such party shall have
furnished to the Company in writing, or (b) in the case of any other holder of
Registrable Securities, at the address that such holder shall have furnished to
the Company in writing, or, until any such other holder so furnishes to the
Company an address, then to and at the address of the last holder of such
Registrable Securities who has furnished an address to the Company, or (c) in
the case of the Company, at the address set forth on the signature page hereto,
to the attention of its President, or at such other address, or to the attention
of such other officer, as the Company shall have furnished to each holder of
Registrable Securities at the time outstanding. Each such notice, request or
other communication shall be effective (i) if given by mail, 72 hours after such
communication is deposited in the mails with first class postage prepaid,
addressed as aforesaid or (ii) if given by any other means (including, without
limitation, by fax or air courier), when delivered at the address specified
above, provided that any such notice, request or communication shall not be
effective until received.
8. ASSIGNMENT. This Agreement shall be binding upon and inure to the
benefit of and be enforceable by the parties hereto. In addition, and whether or
not any express assignment shall have been made, the provisions of this
Agreement which are for the benefit of the parties hereto other than the Company
shall also be for the benefit of and enforceable by any subsequent holder of any
Registrable Securities, subject to the provisions respecting the minimum numbers
or percentages of shares of Registrable Securities required in order to be
entitled to certain rights, or take certain actions, contained herein.
REGISTRATION RIGHTS AGREEMENT - Page 16
(AutoBond Acceptance Corporation)
9. DESCRIPTIVE HEADINGS. The descriptive headings of the several
sections and paragraphs of this Agreement are inserted for reference only and
shall not limit or otherwise affect the meaning hereof.
10. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED BY, THE LAWS OF
THE STATE OF NEW YORK WITHOUT REFERENCE TO THE PRINCIPLES OF CONFLICTS OF LAWS.
11. COUNTERPARTS. This Agreement may be executed by facsimile and may be
signed simultaneously in any number of counterparts, each of which shall be
deemed an original, but all such counterparts shall together constitute one and
the same instrument.
12. ENTIRE AGREEMENT. This Agreement embodies the entire agreement and
understanding between the Company and each other party hereto relating to the
subject matter hereof and supersedes all prior agreements and understandings
relating to such subject matter.
14. SEVERABILITY. If any provision of this Agreement, or the application
of such provisions to any Person or circumstance, shall be held invalid, the
remainder of this Agreement, or the application of such provision to Persons or
circumstances other than those to which it is held invalid, shall not be
affected thereby.
[SIGNATURE PAGE FOLLOWS]
REGISTRATION RIGHTS AGREEMENT - Page 17
(AutoBond Acceptance Corporation)
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed and delivered by their respective officers thereunto duly authorized as
of the date first above written.
AUTOBOND ACCEPTANCE CORPORATION
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
Address: ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: Will ▇▇▇▇▇▇▇▇
With a copy to: ▇▇▇▇▇▇ & ▇▇▇▇▇▇, L.L.P.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
INFINITY EMERGING
OPPORTUNITIES LIMITED
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
Address: ▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇
Fax: ▇▇▇-▇▇-▇▇▇-▇▇▇-▇▇▇▇
Attn: ▇. ▇. ▇▇▇▇▇▇▇▇
With a copy to: HW Partners, L.P.
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attn.: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, Esq.
REGISTRATION RIGHTS AGREEMENT - Page 18
(AutoBond Acceptance Corporation)
LION CAPITAL PARTNERS, L.P.
By: Mountain Capital Management, L.L.C.,
its general partner
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
Address: ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
With a copy to: HW Partners, L.P.
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attn.: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, Esq.
REGISTRATION RIGHTS AGREEMENT - Page 19
(AutoBond Acceptance Corporation)
EXHIBIT E TO SECURITIES PURCHASE AGREEMENT
SECURITY AGREEMENT
SECURITY AGREEMENT dated as of June 30, 1997 between AUTOBOND ACCEPTANCE
CORPORATION ("Borrower"), a Texas corporation, and LION CAPITAL PARTNERS, L.P.,
as agent for and representative (in such capacity, "Pledgee") of INFINITY
EMERGING OPPORTUNITIES LIMITED and LION CAPITAL PARTNERS, L.P. ("Purchasers")
under the Purchase Agreement (as hereinafter defined).
W I T N E S S E T H:
WHEREAS, pursuant to that certain Securities Purchase Agreement dated
the date hereof between Borrower and Purchasers (as the same may from time to
time be amended, modified or supplemented, the "Purchase Agreement"), Borrower
has issued to Purchasers its Convertible Notes dated the date hereof (the
"Notes") in the aggregate principal amount of $2,000,000 payable by Borrower to
the order of Purchasers; and
WHEREAS, Purchasers are willing to purchase the Notes but only upon the
condition, among others, that Borrower shall have executed and delivered to
Pledgee this Security Agreement.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants herein contained and for other good and valuable consideration, the
receipt of which is hereby acknowledged, the parties hereto agree as follows:
1. Defined Terms. Unless otherwise defined herein, terms defined in the
Purchase Agreement are used herein as therein defined, and the following terms
shall have the following meanings (such meanings being equally applicable to
both the singular and plural forms of the terms defined):
"Collateral" shall have the meaning assigned to such term in
Section 2 of this Security Agreement.
"Contracts" shall mean the agreements listed on Schedule I hereto
and all amendments, renewals, modifications, restatements and extensions
of such agreements.
"hereby," "herein," "hereof," "hereunder" and words of similar
import refer to this Security Agreement as a whole (including, without
limitation, any schedules hereto) and not merely to the specific
section, paragraph or clause in which the respective word appears.
"Proceeds" shall mean "proceeds," as such term is defined in
Section 9-306(a) of the UCC.
SECURITY AGREEMENT PAGE 1
"Secured Obligations" shall mean (i) all indebtedness,
obligations and liabilities of Borrower to Secured Parties of any kind
or character, now existing or hereafter arising, whether direct,
indirect, related, unrelated, fixed, contingent, liquidated,
unliquidated, joint, several or joint and several, arising under or
pursuant to the Purchase Agreement, the Notes or any of the other
Financing Documents, (ii) all accrued but unpaid interest on any of the
indebtedness described in (i) above, (iii) all obligations of Borrower
to Secured Parties under any documents evidencing, securing, governing
and/or pertaining to all or any part of the indebtedness described in
(i) and (ii) above, (iv) all costs and expenses incurred by Pledgee or
Secured Parties in connection with the collection and administration of
all or any part of the indebtedness and obligations described in (i),
(ii) and (iii) above or the protection or preservation of, or
realization upon, the collateral securing all or any part of such
indebtedness and obligations, including without limitation all
reasonable attorneys' fees, and (v) all renewals, extensions,
modifications and rearrangements of the indebtedness and obligations
described in (i), (ii), (iii) and (iv) above.
"Secured Parties" means each of the Purchasers and any subsequent
holders of the Notes.
"Security Agreement" shall mean this Security Agreement, as the
same may from time to time be amended, modified or supplemented and
shall refer to this Security Agreement as in effect of the date such
reference becomes operative.
"UCC" shall mean the Uniform Commercial Code as the same may,
from time to time, be in effect in the State of New York; provided,
however, in the event that, by reason of mandatory provisions of law,
any or all of the attachment, perfection or priority of Pledgee's
security interest in any Collateral is governed by the Uniform
Commercial Code as in effect in a jurisdiction other than the State of
New York, the term "UCC" shall mean the Uniform Commercial Code as in
effect in such other jurisdiction for purposes of the provisions hereof
relating to such attachment, perfection or priority and for purposes of
definitions related to such provisions.
2. Grant of Security Interest. As collateral security for the prompt and
complete payment and performance when due (whether at stated maturity, by
acceleration or otherwise) of all the Secured Obligations and to induce
Purchasers to enter into the Purchase Agreement and to purchase the Notes in
accordance with the terms thereof, Borrower hereby assigns, conveys, mortgages,
pledges, hypothecates and transfers to Pledgee (on behalf of and as agent for
Secured Parties), and hereby grants to Pledgee a security interest in, all of
Borrower's right, title and interest in and to any and all now existing and
hereafter arising dividend payments from its Subsidiaries, to the extent
representing cash flows from each "Transferor's Interest" under, and as defined
in, the Contracts (all of which being hereinafter collectively called the
"Collateral").
SECURITY AGREEMENT PAGE 2
3. Rights of Pledgee; Limitations on Pledgee's Obligations.
(a) It is expressly agreed by Borrower that, anything herein to
the contrary notwithstanding, Borrower and its Subsidiaries shall remain liable
under each of the Contracts to observe and perform all the conditions and
obligations to be observed and performed by it thereunder and Borrower and such
Subsidiaries shall perform all of its duties and obligations thereunder, all in
accordance with and pursuant to the terms and provisions of each such Contract.
Pledgee and Secured Parties shall not have any obligation or liability with
respect to any Collateral by reason of or arising out of this Security Agreement
or the granting to Pledgee of a security interest in the Collateral or the
receipt by Pledgee of any payment relating to any Collateral pursuant hereto,
nor shall Pledgee or any Secured Party be required or obligated in any manner to
perform or fulfill any of the obligations of any such Subsidiary under or
pursuant to any Contract, or to make any payment, or to make any inquiry as to
the nature or the sufficiency of any payment received by it or the sufficiency
of any performance by any party with respect to any Collateral, or to present or
file any claim, or to take any action to collect or enforce any performance or
the payment of any amounts which may have been assigned to it or to which it may
be entitled at any time or times.
(b) If required by Pledgee at any time during the continuation of
any Default or Event of Default, any Proceeds or payments, when first collected
by Borrower, received in payment in respect of the Collateral shall be promptly
deposited by Borrower in precisely the form received (with all necessary
endorsements) in a special bank account maintained by Pledgee subject to
withdrawal by Pledgee only, as hereinafter provided, and until so turned over
shall be deemed to be held in trust by Borrower for Pledgee and Secured Parties
and shall not be commingled with Borrower's other funds or properties. Such
Proceeds, when deposited, shall continue to be collateral security for all of
the Secured Obligations and shall not constitute payment thereof until applied
as hereinafter provided. At any time, Pledgee may elect to apply all or part of
the funds on deposit in said special account to the principal of or interest on
or both in respect of any of the Secured Obligations in accordance with the
provisions of Section 8(d) hereof, and any part of such funds which Pledgee
elects not so to apply and deemed not required as collateral security for the
Secured Obligations shall be paid over from time to time by Pledgee to Borrower.
(c) Pledgee may at any time, upon the occurrence and during the
continuance of any Event of Default (whether or not waived), notify obligors
under the Collateral, including Subsidiaries of Borrower that are parties to
Contracts, that the right, title and interest of Borrower in and under such
Collateral, including without limitation Borrower's rights to or interest in
dividend payments from such Subsidiary, have been assigned to Pledgee and that
payments shall be made directly to Pledgee. Pledgee may at any time in its own
name or in the name of others communicate with such obligors, including such
Subsidiaries, to verify with such Persons to Pledgee's satisfaction the
existence, amount and terms of any Collateral.
4. Representations and Warranties. Borrower hereby represents and
warrants that:
(a) Except for the security interest granted to Pledgee pursuant
to this Security Agreement, Borrower is the sole owner of each item of the
Collateral in which it purports to grant a security interest hereunder, having
good and marketable title thereto, free and clear of any and all liens,
SECURITY AGREEMENT PAGE 3
security interests or other encumbrances. No amount payable to Borrower with
respect to any Collateral is evidenced by promissory notes or other instruments
which have not been delivered to Pledgee.
(b) No effective security agreement, financing statement,
equivalent security or lien instrument or continuation agreement covering all or
any part of the Collateral is on file or of record in any public office, except
such as may have been filed by Borrower in favor of Pledgee pursuant to this
Security Agreement.
(c) Upon the filing of appropriate financing statements in the
jurisdictions listed on Schedule II hereto, this Security Agreement will be
effective to create a valid and continuing first priority lien on and first
priority perfected security interest in the Collateral with respect to which a
security interest may be perfected by filing pursuant to the UCC in favor of
Pledgee, prior to all other security interests (other than the security
interests granted to Pledgee under this Security Agreement), and is enforceable
as such as against creditors of and purchasers from Borrower. All action
necessary or desirable to protect and perfect such security interest in each
item of the Collateral will have been duly taken within seven days of the date
hereof.
(d) The address of Borrower's principal place of business and the
place where its records concerning the Collateral are kept is set forth on
Schedule III hereto, and Borrower will not change such principal place of
business or remove such records unless it has taken such action as is necessary
to cause the security interest of Pledgee in the Collateral to continue to be
perfected. Borrower will not change its principal place of business or the place
where its records concerning the Collateral is kept without giving 40 days prior
written notice thereof to Pledgee.
(e) The amount represented by Borrower to Pledgee from time to
time as the value of the "Transferor's Interest" in respect of each Contract
will have been determined in accordance with GAAP.
5. Covenants. Borrower covenants and agrees with Pledgee that from
and after the date of this Security Agreement and until the Secured Obligations
are fully satisfied:
(a) Further Documentation; Legending of Stock Certificates;
Dividending Stock of Subsidiaries. At any time and from time to time, upon the
written request of Pledgee, and at the sole expense of Borrower, Borrower will
promptly and duly execute and deliver any and all such further instruments and
documents and take such further action as Pledgee may reasonably deem necessary
to obtain the full benefits of this Security Agreement and of the rights and
powers herein granted, including, without limitation, using its best efforts to
secure all consents and approvals necessary or appropriate for the assignment to
Pledgee of any Collateral held by Borrower or in which Borrower has any rights
not heretofore assigned and the filing of any financing or continuation
statements under the UCC with respect to the liens and security interests
granted hereby. Borrower also hereby authorizes Pledgee to file any such
financing or continuation statement without the signature of Borrower to the
extent permitted by applicable law. A photocopy of this Security Agreement may
be filed as a financing statement. If any amount payable under or in connection
with any of the Collateral shall be or become evidenced by any instrument, such
instrument shall be immediately pledged to
SECURITY AGREEMENT PAGE 4
Pledgee hereunder, and shall be duly endorsed in a manner satisfactory to
Pledgee and delivered to Pledgee. Within five days after the date hereof,
Borrower shall cause AutoBond Funding Corporation I, AutoBond Funding
Corporation II and AutoBond Funding Corporation III to dividend all of the
shares of common stock held by them in AutoBond Funding Corporation 1995-A,
AutoBond Funding Corporation 1996-A, AutoBond Funding Corporation 1996-B and
AutoBond Funding Corporation 1996-C (collectively, the "Funding Corporations")
to Borrower. Within five days after the date hereof, Borrower agrees to cause
each stock certificate representing shares of capital stock of each of AutoBond
Funding Corporation I, AutoBond Funding Corporation II and AutoBond Funding
Corporation III (which shall not, in each case, be less than 100% of the issued
and outstanding capital stock of each such corporation) to be reissued with a
legend to the following effect:
"DIVIDEND RIGHTS ASSOCIATED WITH THE SHARES OF STOCK REPRESENTED
BY THIS CERTIFICATE ARE SUBJECT TO A SECURITY AGREEMENT, DATED
JUNE 30, 1997 BETWEEN AUTOBOND ACCEPTANCE CORPORATION AND LION
CAPITAL PARTNERS, L.P., A COPY OF WHICH IS ON FILE AT THE
PRINCIPAL OFFICE OF THE ISSUER HEREOF, AND SAID SHARES MAY NOT BE
SOLD, TRANSFERRED, ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE
DISPOSED OF EXCEPT IN STRICT ACCORDANCE WITH THE TERMS OF THAT
AGREEMENT"
(b) Maintenance of Records. Borrower will keep and maintain at
its own cost and expense satisfactory and complete records of the Collateral.
Borrower will ▇▇▇▇ its books and records pertaining to the Collateral to
evidence this Security Agreement and the security interests granted hereby. For
Pledgee's further security, Borrower agrees that Pledgee shall have a special
property interest in all of Borrower's books and records pertaining to the
Collateral and, upon the occurrence and during the continuation of any Event of
Default, Borrower shall permit inspection of any such books and records to
Pledgee or to its representatives at any time on demand of Pledgee. Prior to the
occurrence of an Event of Default and upon reasonable notice from Pledgee,
Borrower shall permit any representative of Pledgee to inspect such books and
records during normal business hours, and will provide photocopies thereof to
Pledgee.
(c) Indemnification. In any suit, proceeding or action brought by
Pledgee or any Secured Party relating to any of the Collateral for any sum owing
thereunder, or to enforce any provision of any Contract, Borrower will save,
indemnify and keep Pledgee and Secured Parties harmless from and against all
expense, loss or damage suffered by reason of any defense, setoff, counterclaim,
recoupment or reduction of liability whatsoever of the obligor thereunder,
arising out of a breach by Borrower or any Subsidiary of any obligation
thereunder or arising out of any other agreement, indebtedness or liability at
any time owing to, or in favor of, such obligor or its successors from Borrower,
and all such obligations of Borrower shall be and remain enforceable against and
only against Borrower and shall not be enforceable against Pledgee or any
Secured Party.
(d) Compliance with Laws, etc. Borrower will comply, in all
material respects, with all acts, rules, regulations, orders, decrees and
directions of any governmental authority, applicable
SECURITY AGREEMENT PAGE 5
to the Collateral or any part thereof or to the operation of Borrower's
business; provided, however, that Borrower may contest any act, regulation,
order, decree or direction in any reasonable manner which shall not, in the sole
opinion of Pledgee, adversely affect Pledgee's rights hereunder or adversely
affect the first priority of its security interest in the Collateral.
(e) Compliance with Terms of Contracts. Borrower will perform and
comply with, and will cause each Subsidiary that is a party to a Contract to
comply with, all obligations in respect of Contracts, the Collateral and all
other agreements to which it is a party or by which it is bound.
(f) Limitation on Liens on Collateral. Borrower will not create,
permit or suffer to exist, and will defend the Collateral against and take such
other action as is necessary to remove, any lien, security interest or other
encumbrance on the Collateral, and will defend the right, title and interest of
Pledgee in and to any of Borrower's rights under any Collateral and in and to
the Proceeds thereof against the claims and demands of all Persons whomsoever.
(g) Limitations on Modifications. Borrower will not, without
Pledgee's prior written consent, permit any amendment or modification to any of
the Collateral that would decrease the value of the "Transferor's Interest"
thereunder.
(h) Limitations on Disposition. Borrower will not sell, lease,
assign, transfer or otherwise dispose of any of the Collateral or any capital
stock of any Subsidiary that is a party to a Contract.
(i) Further Identification of Collateral. Borrower will if so
requested by Pledgee furnish to Pledgee, as often as Pledgee reasonably
requests, statements and schedules further identifying and describing the
Collateral and such other reports in connection with the Collateral as Pledgee
may reasonably request, all in reasonable detail.
(j) Notices. Borrower will advise Pledgee promptly, in reasonable
detail, (i) of any lien, security interest, encumbrance or claim made or
asserted against any of the Collateral, (ii) of any material change in the
composition of the Collateral, and (iii) of the occurrence of any other event
which would have a material adverse effect on the aggregate value of the
Collateral or on the security interests created hereunder.
(k) Declaration and Payment of Dividends. At the request of
Pledgee, Borrower agrees to cause each of its Subsidiaries that is a party to
any Contract to declare and pay dividends with respect to its capital stock in
the maximum amount then legally payable under applicable law to the full extent
of payments received by such Subsidiaries in respect of the "Transferor's
Interest" under each Contract, and to direct that each such Subsidiary pay such
dividends directly to Pledgee. Borrower further agrees that a breach of any of
the covenants contained in this Section 5(k) will cause irreparable injury to
Pledgee and Secured Parties, and that Pledgee and Secured Parties have no
adequate remedy at law in respect of such breach and, as a consequence, agrees
that each and every covenant contained in this Section 5(k) shall be
specifically enforceable against Borrower, and that Borrower hereby waives and
agrees, to the fullest extent permitted by law, not to assert
SECURITY AGREEMENT PAGE 6
as a defense against any action for specific performance of such covenants that
(x) Borrower's failure to perform such covenants will not cause irreparable
injury to Pledgee or any Secured Party or (y) Pledgee and Secured Parties have
an adequate remedy at law in respect of such breach.
(l) Continuous Perfection. Borrower will not change its name,
identity or corporate structure in any manner which might make any financing or
continuation statement filed in connection herewith seriously misleading within
the meaning of Section 9-402(g) of the UCC (or any other then applicable
provision of the UCC) unless Borrower shall have given Pledgee at least 40 days
prior written notice thereof and shall have taken all action (or made
arrangements to take such action substantially simultaneously with such change
if it is impossible to take such action in advance) necessary or reasonably
requested by Pledgee to amend such financing statement or continuation statement
so that it is not seriously misleading.
(m) Limited Purpose Corporations. Each Subsidiary that is a party
to a Contract is and shall at all times continue to be a limited purpose
corporation whose primary activities shall be limited, as set forth in its
certificate or articles of incorporation, to purchasing motor vehicle retail
installment finance contracts and related assets from Borrower, transferring its
interest in such assets to trusts pursuant to structured-finance transactions
and conducting such other activities as it deems necessary or appropriate to
carry out such primary activities. Borrower will not permit any such Subsidiary
to (x) amend its certificate or articles of incorporation without obtaining the
prior written consent of Lender to such amendment, (y) issue any additional
capital stock or (z) agree to or permit to exist any encumbrance or restriction
on its ability to pay dividends with respect to its capital stock.
6. Pledgee's Appointment as Attorney-in-Fact.
(a) Borrower hereby irrevocably constitutes and appoints Pledgee
and any officer or agent thereof, with full power of substitution, as its true
and lawful attorney-in-fact with full irrevocable power and authority in the
place and stead of Borrower and in the name of Borrower or in its own name, from
time to time in Pledgee's reasonable discretion, for the purpose of carrying out
the terms of this Security Agreement, to take any and all appropriate action and
to execute and deliver any and all documents and instruments which may be
necessary or desirable to accomplish the purpose of this Security Agreement and,
without limiting the generality of the foregoing, hereby gives Pledgee the power
and right, on behalf of Borrower, without notice to or assent by Borrower to do
the following:
(i) to ask, demand, collect, receive and give acquittances and
receipts for any and all moneys due and to become due under any
Collateral and, in the name of Borrower or its own name or
otherwise, to take possession of and endorse and collect any
checks, drafts, notes, acceptances or other instruments for the
payment of monies due under any Collateral, to access all post
office boxes maintained by or for Borrower for the collection of
any of the Collateral, and to file any claim or to take any other
action or proceeding in any court of law or equity or otherwise
deemed appropriate by Pledgee for the purpose of collecting any
and all such moneys due under any Collateral whenever payable and
to file any claim or to take any other action or proceeding in
any
SECURITY AGREEMENT PAGE 7
court of law or equity or otherwise deemed appropriate by
Pledgee for the purpose of collecting any and all such moneys due
under any Collateral whenever payable;
(ii) to pay or discharge taxes, liens, security interests or
other encumbrances levied or placed on or threatened against the
Collateral, and to pay all or any part of the insurance premiums
therefor and the costs thereof; and
(iii) (A) to direct any party liable (including any Subsidiary
that is a party to any Contract) for any payment under any of the
Collateral to make payment of any and all moneys due, and to
become due thereunder, directly to Pledgee or as Pledgee shall
direct; (B) to receive payment of and receipt for any and all
moneys, claims and other amounts due, and to become due at any
time, in respect of or arising out of any Collateral; (C) to
commence and prosecute any suits, actions or proceedings at law
or in equity in any court of competent jurisdiction to collect
the Collateral or any part thereof and to enforce any other right
in respect of any Collateral; (D) to defend any suit, action or
proceeding brought against Borrower with respect to any
Collateral; (E) to settle, compromise or adjust any suit, action
or proceeding described above and, in conjunction therewith, to
give such discharges or releases as Pledgee may deem appropriate;
(F) generally to sell, transfer, pledge, make any agreement with
respect to or otherwise deal with any of the Collateral as fully
and completely as though Pledgee were the absolute owner thereof
for all purposes, and to do, at Pledgee's option and Borrower's
expense, at any time, or from time to time, all acts and things
which Pledgee reasonably deems necessary to protect, preserve or
realize upon the Collateral and Pledgee's security interest
therein, in order to effect the intent of this Security
Agreement, all as fully and effectively as Borrower might do.
(b) Pledgee agrees that, except upon the occurrence and during
the continuation of an Event of Default, it will forebear from exercising the
power of attorney or any rights granted to Pledgee pursuant to this Section 6.
Borrower hereby ratifies, to the extent permitted by law, all that said
attorneys shall lawfully do or cause to be done by virtue hereof. The power of
attorney granted pursuant to this Section 6 is a power coupled with an interest
and shall be irrevocable until the Secured Obligations are indefeasibly paid in
full.
(c) The powers conferred on Pledgee hereunder are solely to
protect Pledgee's interests in the Collateral and shall not impose any duty upon
it to exercise any such powers. Pledgee shall be accountable only for amounts
that it actually receives as a result of the exercise of such powers and neither
it nor any of its officers, directors, employees or agents shall be responsible
to Borrower for any act or failure to act, except for its or their own gross
negligence or willful misconduct.
(d) Borrower also authorizes Pledgee, at any time and from time
to time upon the occurrence and during the continuation any Event of Default,
(i) to communicate in its own name with any Subsidiary that is party to any
Contract with regard to the assignment of the right, title and interest of
Borrower in and under the Collateral hereunder and other matters relating
thereto and (ii) to execute, in connection with the sale provided for in Section
8 hereof, any endorsements, assignments or other instruments of conveyance or
transfer with respect to the Collateral.
SECURITY AGREEMENT PAGE 8
7. Performance by Pledgee of Borrower's Obligations. If Borrower fails
to perform or comply with any of its agreements contained herein and Pledgee, as
provided for by the terms of this Security Agreement, shall itself perform or
comply, or otherwise cause performance or compliance, with such agreement, the
reasonable expenses of Pledgee incurred in connection with such performance or
compliance, together with interest thereon at the rate then in effect in respect
of the Notes, shall be payable by Borrower to Pledgee on demand and shall
constitute Secured Obligations secured hereby.
8. Remedies, Rights Upon Default.
(a) If any Event of Default shall occur and be continuing,
Pledgee may (on behalf of and as agent for Secured Parties) exercise in addition
to all other rights and remedies granted to it in this Security Agreement and in
any other instrument or agreement securing, evidencing or relating to the
Secured Obligations, all rights and remedies of a secured party under the UCC.
Without limiting the generality of the foregoing, Borrower expressly agrees that
in any such event Pledgee, without demand of performance or other demand,
advertisement or notice of any kind (except the notice specified below of time
and place of public or private sale) to or upon Borrower or any other Person
(all and each of which demands, advertisements and/or notices are hereby
expressly waived to the maximum extent permitted by the UCC and other applicable
law), may forthwith collect, receive, appropriate and realize upon the
Collateral, or any part thereof, and/or may forthwith sell, lease, assign, give
an option or options to purchase, or sell or otherwise dispose of and deliver
said Collateral (or contract to do so), or any part thereof, in one or more
parcels at public or private sale or sales, at any exchange or broker's board or
at any of Pledgee's offices or elsewhere at such prices as it may deem best, for
cash or on credit or for future delivery without assumption of any credit risk.
Pledgee shall have the right upon any such public sale or sales, and, to the
extent permitted by law, upon any such private sale or sales, to purchase the
whole or any part of said Collateral so sold, free of any right or equity of
redemption, which equity of redemption Borrower hereby releases. Borrower
further agrees, at Pledgee's request, to assemble the Collateral and make it
available to Pledgee at places which Pledgee shall reasonably select, whether at
Borrower's premises or elsewhere. Pledgee shall apply the net proceeds of any
such collection, recovery, receipt, appropriation, realization or sale, as
provided in Section 8(d) hereof, Borrower remaining liable for any deficiency
remaining unpaid after such application, and only after so paying over such net
proceeds and after the payment by Pledgee of any other amount required by any
provision of law, including Section 9-504(a)(3) of the UCC, need Pledgee account
for the surplus, if any, to Borrower. To the maximum extent permitted by
applicable law, Borrower waives all claims, damages, and demands against Pledgee
or any Secured Party arising out of the repossession, retention or sale of the
Collateral except such as arise out of the gross negligence or willful
misconduct of Pledgee. Borrower agrees that the Pledgee need not give more than
ten days' notice (which notification shall be deemed given when mailed or
delivered on an overnight basis, postage prepaid, addressed to Borrower at its
address referred to in Section 11 hereof) of the time and place of any public
sale or of the time after which a private sale may take place and that such
notice is reasonable notification of such matters. Borrower shall remain liable
for any deficiency if the proceeds of any sale or disposition of the Collateral
are insufficient to pay all amounts to which Secured Parties are entitled,
Borrower also being liable for the reasonable fees of any attorneys employed by
Pledgee or any Secured Party to collect such deficiency.
SECURITY AGREEMENT PAGE 9
(b) Borrower also agrees to pay all costs of Pledgee and Secured
Parties, including, without limitation, reasonable attorneys' fees, incurred in
connection with the enforcement of any of its rights and remedies hereunder.
(c) Borrower hereby waives presentment, demand, protest or any
notice (to the maximum extent permitted by applicable law) of any kind in
connection with this Security Agreement or any Collateral.
(d) The Proceeds of any sale, disposition or other realization
upon all or any part of the Collateral shall be distributed by Pledgee in the
following order of priorities:
first, to Pledgee in an amount sufficient to pay in full the
expenses of Pledgee and Secured Parties in connection with such sale,
disposition or other realization, including all expenses, liabilities
and advances incurred or made by Pledgee in connection therewith,
including, without limitation, reasonable attorney's fees;
second, to Pledgee or Secured Parties in an amount equal to the
then unpaid principal of and accrued interest and prepayment premiums,
if any, on the Secured Obligations;
third, to Pledgee or Secured Parties in an amount equal to any
other Secured Obligations which are then unpaid; and
finally, upon payment in full of all of the Secured Obligations,
to pay to Borrower, or its representatives or as a court of competent
jurisdiction may direct, any surplus then remaining from such Proceeds.
9. Limitation on Pledgee's Duty in Respect of Collateral. Pledgee shall
use reasonable care with respect to the Collateral in its possession or under
its control. Pledgee shall not have any other duty as to any Collateral in its
possession or control or in the possession or control of any agent or nominee of
it or any income thereon or as to the preservation of rights against prior
parties or any other rights pertaining thereto. Upon request of Borrower,
Pledgee shall account for any moneys received by it in respect of any
foreclosure on or disposition of the Collateral.
10. Reinstatement. This Agreement shall remain in full force and effect
and continue to be effective should any petition be filed by or against Borrower
for liquidation or reorganization, should Borrower become insolvent or make an
assignment for the benefit of creditors or should a receiver or trustee be
appointed for all or any significant part of Borrower's assets, and shall
continue to be effective or be reinstated, as the case may be, if at any time
payment and performance of the Secured Obligations, or any part thereof, is,
pursuant to applicable law, rescinded or reduced in amount, or must otherwise be
restored or returned by any obligee of the Secured Obligations, whether as a
"voidable preference", "fraudulent conveyance", or otherwise, all as though such
payment or performance had not been made. In the event that any payment, or any
part thereof, is rescinded, reduced, restored or returned, the Secured
Obligations shall be reinstated and deemed reduced only by such amount paid and
not so rescinded, reduced, restored or returned.
SECURITY AGREEMENT PAGE 10
11. Notices. Except as otherwise provided herein, whenever it is
provided herein that any notice, demand, request, consent, approval, declaration
or other communication shall or may be given to or served upon any of the
parties by any other party, or whenever any of the parties desires to give or
serve upon any other party any other communication with respect to this Security
Agreement, each such notice, demand, request, consent, approval, declaration or
other communication shall be given as set forth in Section 12.1 of the Purchase
Agreement. The giving of any notice required hereunder may be waived in writing
by the party entitled to receive such notice. Failure or delay in delivering
copies of any notice, demand, request, consent, approval, declaration or other
communication to the persons designated above to receive copies shall in no way
adversely affect the effectiveness of such notice, demand, request, consent,
approval, declaration or other communication.
12. Severability. Any provision of this Security Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
13. No Waiver; Cumulative Remedies. Pledgee shall not by any act, delay,
omission or otherwise be deemed to have waived any of its rights or remedies
hereunder, and no waiver shall be valid unless in writing, signed by Pledgee,
and then only to the extent therein set forth. A waiver by Pledgee of any right
or remedy hereunder on any one occasion shall not be construed as a bar to any
right or remedy which Pledgee would otherwise have had on any future occasion.
No failure to exercise nor any delay in exercising on the part of Pledgee, any
right, power or privilege hereunder, shall operate as a waiver thereof, nor
shall any single or partial exercise of any right, power or privilege hereunder
preclude any other or future exercise thereof or the exercise of any other
right, power or privilege. The rights and remedies hereunder provided are
cumulative and may be exercised singly or concurrently, and are not exclusive of
any rights and remedies provided by law. None of the terms or provisions of this
Security Agreement may be waived, altered, modified or amended except by an
instrument in writing, duly executed by Pledgee and Borrower.
14. Successors and Assigns; Governing Law.
(a) This Security Agreement and all obligations of Borrower
hereunder shall be binding upon the successors and assigns of Borrower, and
shall, together with the rights and remedies of Pledgee hereunder, inure to the
benefit of Pledgee, all future holders of the Notes and their respective
successors and assigns. No sales of participations, other sales, assignments,
transfers or other dispositions of any agreement governing or instrument
evidencing the Secured Obligations or any portion thereof or interest therein
shall in any manner affect the security interest granted to Pledgee hereunder.
(b) THIS SECURITY AGREEMENT SHALL BE GOVERNED BY, AND BE
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
SECURITY AGREEMENT PAGE 11
15. Waiver of Jury Trial. BORROWER HEREBY WAIVES ALL RIGHT TO TRIAL
BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS OR REMEDIES
HEREUNDER.
[SIGNATURE PAGES FOLLOW]
SECURITY AGREEMENT PAGE 12
IN WITNESS WHEREOF, each of the parties hereto has caused this Security
Agreement to be executed and delivered by its duly authorized officer on the
date first set forth above.
AUTOBOND ACCEPTANCE CORPORATION
By:______________________________
Name:____________________________
Title:___________________________
Accepted and acknowledged by:
LION CAPITAL PARTNERS, L.P.
By: Mountain Capital Management, L.L.C.,
its general partner
By:__________________________________
Name:________________________________
Title:_______________________________
SECURITY AGREEMENT PAGE 13
Acknowledged and agreed to:
AUTOBOND FUNDING CORPORATION 1995-A
By:_______________________________________
Name:_____________________________________
Title:____________________________________
AUTOBOND FUNDING CORPORATION 1996-A
By:_______________________________________
Name:_____________________________________
Title:____________________________________
AUTOBOND FUNDING CORPORATION 1996-B
By:_______________________________________
Name:_____________________________________
Title:____________________________________
AUTOBOND FUNDING CORPORATION 1996-C
By:_______________________________________
Name:_____________________________________
Title:____________________________________
SECURITY AGREEMENT PAGE 14
SCHEDULE I
LIST OF CONTRACTS
SCHEDULE II
FILINGS
DEBTOR JURISDICTION FILING OFFICE
AutoBond Acceptance Corporation Texas Secretary of State
SCHEDULE III
LOCATION OF RECORDS
Principal Place of
Location of Records
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
EXHIBIT H TO SECURITIES PURCHASE AGREEMENT
TRANSFER AGENT AGREEMENT
THIS TRANSFER AGENT AGREEMENT (this "Agreement"), dated June 30, 1997,
between AUTOBOND ACCEPTANCE CORPORATION, a Texas corporation (the "Company"),
LION CAPITAL PARTNERS, L.P., a Texas limited partnership ("Lion") and INFINITY
EMERGING OPPORTUNITIES LIMITED, a Nevis West Indies business corporation
("Emerging Opportunities") (Lion and Emerging Opportunities being collectively
referred to herein as the "Holders") and AMERICAN STOCK TRANSFER & TRUST
COMPANY, the transfer agent for the Company's common stock (the "Transfer
Agent").
R E C I T A L S:
WHEREAS, pursuant to that certain Securities Purchase Agreement dated
June 30, 1997 (the "Purchase Agreement") by and among the Company and the
Holders, the Company agreed to issue to the Holders (1) $2,000,000 aggregate
principal amount of 18% senior secured convertible notes (the "Convertible
Notes"), which are convertible, at the option of the Holders, into shares of
common stock, no par value per share, of the Company (the "Common Stock") (such
shares issuable upon such conversion being referred to as the "Shares") and (2)
Common Stock Purchase Warrants (the "Warrants") exercisable for certain
additional shares of Common Stock; and
WHEREAS, the Company and the Holders have agreed to enter into this
Agreement with the Transfer Agent to (i) facilitate the closing of the Purchase
Agreement (the "Closing"), (ii) provide for a system of accounting for the
Convertible Notes and (iii) facilitate the conversion of the Convertible Notes
and issuance of the Shares associated therewith.
NOW, THEREFORE, in consideration of the foregoing, the parties hereby
agree as follows:
1. CLOSINGS. The Transfer Agent hereby agrees to act as an escrow agent
to facilitate the Closing as follows:
(a) On the date hereof, the Holders shall wire transfer to an
account designated by the Transfer Agent $2,000,000 in the aggregate (the
"Purchase Price"), and the Company shall deliver to the Transfer Agent the
Convertible Notes and the Warrants in the names of the Holders and in the
amounts as set forth on Schedule 1 hereto. The Transfer Agent may, at its
discretion, confirm the authenticity of the Convertible Notes and the Warrants
by transmitting a copy of same in the form received from the Company to Lion, on
behalf of the Holders or its counsel, for written or oral verification as to the
form thereof.
(b) Immediately following such deliveries, together with a
delivery from the Company to the Transfer Agent of a fully executed copy of the
Purchase Agreement, the Transfer
TRANSFER AGENT AGREEMENT-Page 1
(AutoBond Acceptance Corporation)
Agent shall wire transfer to the Company the Purchase Price less $25,000 (the
"Expense Reimbursement Fee"), pursuant to wire transaction instructions as
provided by the Company. The Transfer Agent shall also wire transfer the Expense
Reimbursement Fee to the Holders, care of HW Partners L.P., at the wire transfer
account set forth on Schedule 2 attached hereto.
(c) Contemporaneous with the transfer of funds as described in
Subsection (b) above, the Transfer Agent shall (i) hold the Convertible Notes
for the benefit of the respective Holders, as hereafter described and (ii)
deliver the Warrants to the Holders at the address(es) set forth herein.
(d) Notwithstanding the foregoing, by joint written agreement the
Holders and the Company may agree to effect the Closing (either partially or
entirely) without using the services of the Transfer Agent. In such event, the
Holders shall (i) wire the Purchase Price, less the Expense Reimbursement Fee to
the Company against counter-delivery by the Company of the original Convertible
Notes and Warrants to the Holders or their designee, (ii) retain or wire
transfer the Expense Reimbursement Fee to HW Partners, L.P., and (iii)
thereafter deliver the Convertible Notes to the Transfer Agent to be held for
the benefit of the Holders pursuant to the terms of this Agreement.
2. OWNERSHIP OF CONVERTIBLE NOTES. Record and beneficial ownership of
the Convertible Notes shall remain in the name of the Holders (unless and until
transferred pursuant to the terms thereof, with written notice thereof to the
Transfer Agent). Any transfer or purported transfer of the Convertible Notes (a)
not made pursuant to the terms of the Convertible Notes and (b) not properly
noticed to the Transfer Agent shall be null and void ab initio and shall not be
given effect thereto by the Transfer Agent. The Transfer Agent shall not be
required to acknowledge any transfer of the Convertible Notes unless accompanied
by written confirmation thereof from the Holders.
3. PAYING AGENT. The Transfer Agent shall act as paying agent for the
Convertible Notes. Accordingly, all payments of interest or principal amounts
required of the Company related to the Convertible Notes shall be made to the
Transfer Agent for the account and benefit of the holders of such Convertible
Notes as registered on the books of the Transfer Agent (each, a "Registered
Holder"). Upon the receipt of any such payment of interest or principal amounts,
in cash, the Transfer Agent shall promptly wire transfer such sum to the account
of the Registered Holders as reflected on the books of the Transfer Agent.
4. ACCOUNTING AGENT. The Transfer Agent shall act as the accounting
agent of the Company and the Registered Holders and shall establish and maintain
an accounting ledger for the Convertible Notes (the "Accounting Ledger"). The
Transfer Agent shall credit (reduce) the outstanding balance of the Convertible
Notes by all (i) payments of principal and interest made by the Company to the
Transfer Agent as paying agent as required pursuant to Section 3 above, and (ii)
by the appropriate amount upon delivery of Shares to the applicable Registered
Holder following receipt of a Notice of Conversion (as defined in Section 5
below). At such time as the balance of the Convertible Notes, as reflected on
the Account Ledger is zero following the procedures described in this Agreement,
the Transfer Agent shall return such convertible Notes to the Company marked
"paid in full" or "cancelled."
TRANSFER AGENT AGREEMENT-Page 2
(AutoBond Acceptance Corporation)
5. ISSUANCE OF CONVERTED SHARES.
(a) Consistent with Article 4 of each Convertible Note, in order
to convert all or a portion of a Convertible Note into Shares, a Registered
Holder shall deliver written notice (each, a "Notice of Conversion"), in the
form prescribed by the Convertible Notes, to the Transfer Agent for the portion
of the Convertible Note that it elects to so convert and a calculation of the
number of Shares to be issued upon such conversion. Upon receipt by the Transfer
Agent of any such Notice of Conversion (including receipt via facsimile) from
any Registered Holder, the Transfer Agent shall immediately deliver a copy
thereof to the Company, via facsimile, requesting the Company to confirm the
number of Shares to be issued to such Registered Holder in connection therewith.
The Company shall, within two (2) Business Days (as defined in the Purchase
Agreement) of the receipt thereof, in good faith confirm or dispute the number
of Shares to be issued to the Registered Holder, providing written notice (with
supporting calculations and related information) thereof via facsimile to the
Transfer Agent and the Registered Holder (the "Company Notice"). In any event,
the Company shall include in the Company Notice that number of Shares which it
believes, in good faith, are in fact issuable upon conversion of the Convertible
Note (the "Minimum Number"). In the event the Company confirms the number of
Shares to be so issued, it shall, as part of the Company Notice, direct the
Transfer Agent to issue such Shares. In the event the Company Notice disputes
the number of Shares to be so issued, the Company and the Registered Holder
shall immediately, in good faith, seek to resolve such dispute.
(b) The Transfer Agent shall not be required to issue any Shares
unless and until receipt (including via facsimile) of (i) written notice from
either (x) the Company, confirming the number of Shares to be issued or (y) the
Registered Holder and the Company, setting forth the number of Shares to be
issued, or (ii) a final nonappealable order of a court of competent jurisdiction
directing the Transfer Agent to issue a specified number of Shares.
Notwithstanding the foregoing, each Holder expressly reserves all rights and
remedies against the Company for the failure of the Company to confirm to the
Transfer Agent in any applicable Company Notice the number of Shares issuable as
set forth in a properly completed and accurate Notice of Conversion.
(c) Reference is hereby made to that certain Registration Rights
Agreement appended to the Purchase Agreement. At such time as the First
Registration Statement as contemplated therein has been declared effective by
the Securities and Exchange Commission covering the resale of the Shares, the
Company shall cause its legal counsel to deliver to the Transfer Agent an
opinion certifying that Shares may be sold by the Registered Holder pursuant to
such registration statement with the purchaser thereof receiving share
certificates, without restrictive legend, which opinion shall remain effective
so long as such First Registration Statement remains in full force and effect.
In the event that, at any time, the First Registration Statement ceases to be
effective, the Company or its legal counsel shall immediately deliver written
notice thereof to the Transfer Agent and the Registered Holders stating that the
opinion of the Company's legal counsel may no longer be relied upon by the
Transfer Agent (unless and until an additional or amended, as applicable,
registration statement is so declared effective with an accompanying opinion to
that effect from the Company's
TRANSFER AGENT AGREEMENT-Page 3
(AutoBond Acceptance Corporation)
legal counsel). Upon the receipt of any Notice of Conversion while the First
Registration Statement is effective, the share certificates representing the
Shares described above shall be with a restrictive legend unless the Registered
Holder, either in connection with the delivery of the Notice of Conversion or
thereafter, delivers written notice to the Transfer Agent and the Company
(including notice via telecopy) that the Shares have been sold by the Registered
Holder pursuant to such registration statement, whereupon the Transfer Agent
shall issue share certificates to the purchaser thereof without restrictive
legend.
(d) Each time a payment of principal is recorded in the
Accounting Ledger (whether by virtue of a cash payment or by virtue of a
conversion into Shares), the Transfer Agent may, at its option, deliver the
Convertible Notes to the Company requiring the Company to reissue Convertible
Notes in the names of the Registered Holders with new principal balances
reflecting such payment.
6. TERMINATION. This Agreement shall terminate promptly upon the earlier
to occur of (i) written demand by the Company and all Registered Holders or (ii)
no unpaid balance remains with respect to any of the Convertible Notes.
Notwithstanding the foregoing, the Transfer Agent may terminate its obligations
under this Agreement at such time as the Transfer Agent no longer serves as the
Transfer Agent for the Company's Common Stock, by delivery of written notice
thereof to the Registered Holders and the Company. Upon delivery of such notice,
the Transfer Agent shall deliver the original Convertible Notes to Lion, on
behalf of all Registered Holders, together with a copy of the Accounting Ledger
(with corresponding copies delivered to the Company). Immediately thereafter,
Lion, as representative of the Holders, and the Company shall, in good faith,
attempt to establish an agreement similar to this Agreement with the Company's
new stock transfer agent.
7. FEES. The Company hereby agrees to pay the Transfer Agent for
customary fees charged for all services rendered hereunder.
8. NOTICES. Any notice or demand to be given or that may be given under
this Agreement shall be in writing and shall be (a) delivered by hand, or (b)
delivered through or by expedited mail or package service, or (c) transmitted by
telecopy, in each case with personal delivery acknowledged, addressed to the
parties as follows. Each such notice or demand shall be effective (i) if given
by telecopy, when such telecopy is transmitted to telecopier number specified in
this Agreement, (ii) if given by any other means, when delivered at the
addressed as specified herein.
TRANSFER AGENT AGREEMENT-Page 4
(AutoBond Acceptance Corporation)
As to the Company: AutoBond Acceptance Corporation
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Fax: 512/▇▇▇-▇▇▇▇
Attn: Will ▇▇▇▇▇▇▇▇
Chairman and Chief
Executive Officer
With a copy to: ▇▇▇▇▇▇ & ▇▇▇▇▇▇, L.L.P.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
As to: Infinity Emerging Opportunities Limited
▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇
Fax: ▇▇▇-▇▇-▇▇▇-▇▇▇-▇▇▇▇
Attn: ▇. ▇. ▇▇▇▇▇▇▇▇
With a copy to: HW Partners, L.P.
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Telephone: 214/▇▇▇-▇▇▇▇
Fax: 214/▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, Esq.
As to: Lion Capital Partners, L.P.
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Telephone: 214/▇▇▇-▇▇▇▇
Fax: 214/▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
With a copy to: HW Partners, L.P.
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Telephone: 214/▇▇▇-▇▇▇▇
Fax: 214/▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, Esq.
TRANSFER AGENT AGREEMENT-Page 5
(AutoBond Acceptance Corporation)
As to any other As set forth on the books of
Registered Holder: the Transfer Agent.
As to the Transfer
Agent: American Stock Transfer & Trust Company
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Fax: 718/▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
9. NONCONTRAVENTION. The Company agrees that it will not at any time
take any action or undertake any activity that would in any way impede, restrict
or limit the right and ability of the Registered Holders to convert the
Convertible Notes and receive Shares pursuant to the terms and provisions of
this Agreement.
10. INDEMNIFICATION. The Company agrees to indemnify and hold harmless
the Transfer Agent, each officer, director, employee and agent of the Transfer
Agent, and each person, if any, who controls the Transfer Agent within the
meaning of the Securities Act of 1933, as amended (the "Act") or the Securities
Exchange Act of 1934, as amended (the "Exchange Act") against any losses,
claims, damages, or liabilities, joint or several, to which it, they or any of
them, or such controlling person, may become subject, under the Act, the
Exchange Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon the
performance by the Transfer Agent of its duties pursuant to the Agreement; and
will reimburse the Transfer Agent, and each officer, director, employee and
agent of the Transfer Agent, and each such controlling person for any reasonable
legal or other expenses reasonably incurred by it or any of them in connection
with investigating or defending any such loss, claim, damage, liability or
action; provided, however, that the Company will not be liable in any case if
such loss, claim, damage or liability arises out of or is based upon any action
not taken in good faith, or any action or omission that constitutes gross
negligence or willful misconduct.
Promptly after receipt by an indemnified party under this Section of
notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against the Company under this Section,
notify in writing the Company of the commencement thereof, and failure so to
notify the Company will relieve the Company from any liability under this
Section as to the particular item for which indemnification is then being sought
but not from any other liability which it may have to any indemnified party. In
case any such action is brought against any indemnified party, and it notifies
the Company of the commencement thereof, the Company will be entitled to assume
the defense thereof, with counsel who shall be to the reasonable satisfaction of
such indemnified party. The Company shall not be liable to any such indemnified
party on account of any settlement of any claim of action effected without the
consent of the Company.
11. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York, without giving effect to
conflicts of law rules of such jurisdiction. Any action brought to enforce, or
otherwise arising out of, this Agreement, shall be heard and determined in
either a federal or state court sitting in the State of New York.
TRANSFER AGENT AGREEMENT-Page 6
(AutoBond Acceptance Corporation)
12. ENTIRE AGREEMENT; AMENDMENTS. This Agreement, constitutes the full
and entire understanding of the parties with respect to the subject matter
hereof. Neither this Agreement nor any term hereof may be amended, waived,
discharged, or terminated other than by a written instrument signed by the party
against whom enforcement of any such amendment, waiver, discharge or termination
is sought.
13. COUNTERPARTS. This Agreement may be executed in one or more
counterparts and by facsimile signature.
[Signature page follows]
TRANSFER AGENT AGREEMENT-Page 7
(AutoBond Acceptance Corporation)
IN WITNESS WHEREOF, the undersigned have hereunto set their hands as of
the date first above written.
AUTOBOND ACCEPTANCE CORPORATION
By:_______________________________
Title:____________________________
INFINITY EMERGING
OPPORTUNITIES LIMITED
By:_______________________________
Name:_____________________________
Title:____________________________
LION CAPITAL PARTNERS, L.P.
By: Mountain Capital Management,
L.L.C., its general partner
By:_______________________________
Name:_____________________________
Title:____________________________
AMERICAN STOCK TRANSFER
& TRUST COMPANY
By:_______________________________
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Vice President
TRANSFER AGENT AGREEMENT-Page 8
(AutoBond Acceptance Corporation)
SCHEDULE 1
SECURITIES
================================================================================
Name of Holder Aggregate Principal Warrant Shares
Amount of Notes
================================================================================
Lion Capital Partners, L.P. $1,000,000 100,000
--------------------------------------------------------------------------------
Infinity Emerging Opportunities $1,000,000 100,000
Limited
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
TOTAL $2,000,000 200,000
========== =======
================================================================================
EXHIBIT I TO SECURITIES PURCHASE AGREEMENT
THIS COMMON STOCK PURCHASE WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"); OR UNDER ANY APPLICABLE LAW OR
REGULATION OF ANY STATE. THIS COMMON STOCK WARRANT MAY NOT BE SOLD, OFFERED,
ASSIGNED OR TRANSFERRED UNLESS THE WARRANT IS REGISTERED UNDER THE SECURITIES
ACT AND APPLICABLE STATE SECURITIES LAWS, OR SUCH OFFERS, SALES, ASSIGNMENTS AND
TRANSFERS ARE MADE PURSUANT TO THE AVAILABLE EXEMPTIONS FROM THE REGISTRATION
REQUIREMENTS OF THOSE LAWS. FURTHERMORE, THESE SECURITIES ARE SUBJECT TO CERTAIN
LIMITATIONS ON CONVERSION AS DESCRIBED IN THAT CERTAIN SECURITIES PURCHASE
AGREEMENT DATED THE DATE HEREOF (THE "PURCHASE AGREEMENT") BETWEEN, AMONG
OTHERS, THE COMPANY AND THE INITIAL HOLDER HEREOF. THIS COMMON STOCK PURCHASE
WARRANT CERTIFICATE REFERS TO AND IS SPECIFICALLY GOVERNED BY CERTAIN PROVISIONS
CONTAINED IN THE PURCHASE AGREEMENT, A COPY OF WHICH IS ON FILE WITH AND MAY BE
OBTAINED FROM THE COMPANY AT ITS PRINCIPAL PLACE OF BUSINESS.
AUTOBOND ACCEPTANCE CORPORATION
COMMON STOCK PURCHASE WARRANT
DATED: June 30, 1997
--------------------------------------------------------------------------------
No. 1
Number of Common Shares: -------------- Holder:
--------------
---------
Purchase Price: -------------- --------------
Expiration Date: June 30, 2002 --------------
For identification only. The governing terms of this Warrant are set
forth below.
--------------------------------------------------------------------------------
AUTOBOND ACCEPTANCE CORPORATION, a Texas corporation (the "Company"),
hereby certifies that, for value received, _____________________ or assigns
(each a "Holder"), is entitled, subject to the terms set forth below, to
purchase from the Company at any time or from time to time after the date hereof
and prior to the fifth anniversary hereof (the "Exercise Period"), at the
Purchase Price hereinafter set forth, ____________________________
(_____________) fully paid and nonassessable shares of Common Stock (as
hereinafter defined) of the Company. The number and character of such shares of
Common Stock and the Purchase Price are subject to adjustment as provided
herein.
This Warrant (this "Warrant"; such term to include any warrants issued
in substitution therefor) is one of a series of Common Stock Purchase Warrants
issued in connection with that certain Securities Purchase Agreement (the
"Purchase Agreement") dated of even date herewith between, among others, the
initial Holder hereof and the Company.
COMMON STOCK PURCHASE WARRANT NO. 1 - Page 1
(AutoBond Acceptance Corporation)
The purchase price per share of Common Stock issuable upon exercise of
this Warrant (the "Purchase Price") shall initially be $________________;
provided, however, that the Purchase Price shall be adjusted from time to time
as provided herein.
As used herein the following terms, unless the context otherwise
requires, have the following respective meanings:
(a) The term "Company" shall include AutoBond Acceptance
Corporation and any entity that shall succeed or assume the obligations
of such corporation hereunder.
(b) The term "Common Stock" includes (a) the Company's common
stock, no par value per share, (b) any other capital stock of any class
or classes (however designated) of the Company, authorized on or after
such date, 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, 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) 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.
(c) The term "Other Securities" refers to any stock (other than
Common Stock) and other securities of the Company or any other person
(corporate or otherwise) that the holder of this Warrant at any time
shall be entitled to receive, or shall have received, on the exercise of
this Warrant, in lieu of or in addition to Common Stock, or that at any
time shall be issuable or shall have been issued in exchange for or in
replacement of Common Stock or Other Securities pursuant to Section 4 or
otherwise.
(d) The term "Vested Shares" means as of any date during the
Exercise Period, that number of shares of Common Stock which shall be
exercisable by the Holder hereof pursuant to the terms of this Warrant;
specifically, this Warrant shall vest as to the greater of (i) 25,000
shares of Common Stock on each of September 30, 1997, December 31, 1997,
March 31, 1998 and June 30, 1998, cumulatively; and (ii) immediately as
to that number of shares of Common Stock equal to the product of (A) the
total number of shares covered by this Warrant, as adjusted pursuant
hereto, and (B) a fraction, the numerator of which is the amount of
fundings completed under that Trust Securities Purchase Agreement
contemplated between the parties hereto on the date hereof which such
agreement shall be on terms substantially in conformity with the
Commitment Letter dated June 25, 1997 between H.W. Partners, L.P. (as
representative of certain funds (each a "Fund"), including the Holder)
and the Company (the "Trust Agreement") and the denominator of which is
the total initial funding commitment under the Trust Agreement;
provided, however, it is expressly agreed that no party shall be under
any obligation to enter into the Trust Agreement unless it approves of
the terms and conditions ultimately
COMMON STOCK PURCHASE WARRANT NO. 1 - Page 2
(AutoBond Acceptance Corporation)
agreed upon therein in its sole discretion; and provided, further, that
this Warrant and the shares of Common Stock to become vested hereunder
shall be deemed to have been vested as of the last day of the calendar
quarter immediately preceding the occurrence of the event giving rise to
such vesting or the vesting date specified herein, whichever is earlier.
This Warrant shall terminate, and no shares shall be deemed exercisable
hereunder, if the Trust Agreement shall not be executed on or before
July 31, 1997.
1. Exercise of Warrant.
1.1. Method of Exercise. This Warrant may be exercised in whole
or in part (but not as to a fractional share of Common Stock), at any
time and from time to time during the Exercise Period for up to, but not
more than, the number of Vested Shares at such time, by the Holder
hereof by delivery of a notice of exercise (a "Notice of Exercise")
substantially in the form attached hereto as Exhibit A via facsimile to
the Company. Promptly thereafter the Holder shall surrender this Warrant
to the Company at its principal office, accompanied by payment of the
Purchase Price multiplied by the number of shares of Common Stock for
which this Warrant is being exercised (the "Exercise Price"). Payment of
the Exercise Price shall be made by check or bank draft payable to the
order of the Company or by wire transfer to the account of the Company.
If the amount of the payment received by the Company is less than the
Exercise Price, the Holder will be notified of the deficiency and shall
make payment in that amount within five (5) business days. In the event
the payment exceeds the Exercise Price, the Company will promptly refund
the excess to the Holder. Upon exercise, the Holder shall be entitled to
receive, promptly after payment in full, one or more certificates,
issued in the Holder's name or in such name or names as the Holder may
direct, subject to the limitations on transfer contained herein, for the
number of shares of Common Stock so purchased. The shares so purchased
shall be deemed to be issued as of the close of business on the date on
which the Company shall have received from the Holder payment in full of
the Exercise Price (the "Exercise Date").
1.2. Regulation D Restrictions. The Holder hereof represents and
warrants to the Company that it has acquired this Warrant and
anticipates acquiring the shares of Common Stock issuable upon exercise
of the Warrant solely for its own account for investment purposes and
not with a view to or for distributing such securities unless such
distribution has been registered with the Securities and Exchange
Commission or an applicable exemption is available therefor. At the time
this Warrant is exercised, the Company may require the Holder to state
in the Notice of Exercise such representations concerning the Holder as
are necessary or appropriate to assure compliance by the Holder with the
Securities Act.
1.3. Company Acknowledgment. The Company will, at the time of
the exercise of this Warrant, upon the request of the Holder hereof,
acknowledge in writing its continuing obligation to afford to the Holder
any rights to which the Holder shall continue to be entitled after such
exercise in accordance with the provisions of this
COMMON STOCK PURCHASE WARRANT NO. 1 - Page 3
(AutoBond Acceptance Corporation)
Warrant. If the Holder shall fail to make any such request, such failure
shall not affect the continuing obligation of the Company to afford to
the Holder any such rights.
1.4. Limitation on Exercise. Notwithstanding the rights of the
Holder to exercise all or a portion of this Warrant as described herein,
such exercise rights shall be limited solely in the manner set forth in
the Purchase Agreement as if such provisions were specifically set forth
herein.
2. Delivery of Stock Certificates, etc., on Exercise. As soon as
practicable after the exercise of this Warrant, and in any event within the time
periods specified in the Purchase Agreement, the Company at its expense
(including the payment by it of any applicable issue, stamp or transfer taxes
upon issuance to the Holder) will cause to be issued in the name of and
delivered to the Holder thereof, or, to the extent permissible hereunder, to
such other person as the Holder may direct, a certificate or certificates for
the number of fully paid and nonassessable shares of Common Stock (or Other
Securities) to which the Holder shall be entitled on such exercise, plus, in
lieu of any fractional share to which the Holder would otherwise be entitled,
cash equal to such fraction multiplied by the then applicable Purchase Price,
together with any other stock or other securities and property (including cash,
where applicable) to which the Holder is entitled upon such exercise pursuant to
Section 1 or otherwise.
3. Adjustment for Dividends in Other Stock Property, etc.,
Reclassification, etc. In case at any time or from time to time the holders of
Common Stock (or Other Securities) shall have received, or (on or after the
record date fixed for the determination of stockholders eligible to receive)
shall have become entitled to receive, without payment therefor, other or
additional stock or other securities or property by way of dividend or any cash
(excluding cash dividends payable solely out of earnings or earned surplus of
the Company), or other or additional stock or other securities or property
(including cash) by way of spin-off, split-up, reclassification,
recapitalization, combination of shares or similar corporate rearrangement other
than additional shares of Common Stock (or Other Securities) issued as a stock
dividend or in a stock split (adjustments in respect of which are provided for
in Section 5), then and in each such event, the Holder of this Warrant, on the
exercise hereof as provided in Section 1 shall be entitled to receive the amount
of stock and other securities and property that the Holder would have been
entitled to receive on the effective date of such event if the Holder had so
exercised this Warrant immediately prior thereto, giving effect to all
adjustments called for during such period by Sections 4 and 5.
4. Adjustment for Reorganization, Consolidation, Merger, etc.
4.1. Reorganization, etc. In case at any time or from time to
time, the Company shall (a) effect a reorganization, (b) consolidate
with or merge into any other person or (c) transfer all or substantially
all of its properties or assets to any other person under any plan or
arrangement contemplating the dissolution of the Company, then, in each
such case, the Holder of this Warrant, on the exercise hereof as
provided in Section 1 at any time after the consummation of such
reorganization, consolidation or merger or the effective date of such
dissolution, as the case may be, shall receive, in lieu of the Common
COMMON STOCK PURCHASE WARRANT NO. 1 - Page 4
(AutoBond Acceptance Corporation)
Stock (or Other Securities) issuable on such exercise prior to such
consummation or such effective date, the stock and other securities and
property (including cash) to which the Holder would have been entitled
upon such consummation or in connection with such dissolution, as the
case may be, if the Holder had so exercised this Warrant, immediately
prior thereto, all subject to further adjustment thereafter as provided
herein.
4.2. Dissolution. In the event of any dissolution of the Company
following the transfer of all or substantially all of its properties or
assets, the Company, prior to such dissolution, shall at its expense
deliver or cause to be delivered the stock and other securities and
property (including cash, where applicable) receivable by the Holder of
this Warrant after the effective date of such dissolution pursuant to
this Section 4 to a bank or trust company, as trustee for the Holder or
Holders of this Warrant.
4.3. Continuation of Terms. Upon any reorganization,
consolidation, merger or transfer (and any dissolution following any
transfer) referred to in this Section 4, this Warrant shall continue in
full force and effect and the terms hereof shall be applicable to the
shares of stock and other securities and property receivable on the
exercise of this Warrant after the consummation of such reorganization,
consolidation or merger or the effective date of dissolution following
any such transfer, as the case may be, and shall be binding upon the
issuer of any such stock or other securities, including, in the case of
any such transfer, the person acquiring all or substantially all of the
properties or assets of the Company, whether or not such person shall
have expressly assumed the terms of this Warrant as provided in
Section 8.
5. Adjustment for Extraordinary Events. The Purchase Price to be paid by
the Holder upon exercise of this Warrant shall be adjusted in case at any time
or from time to time the Company should (i) subdivide the outstanding shares of
Common Stock into a greater number of shares, (ii) consolidate the outstanding
shares of Common Stock into a smaller number of shares, (iii) issue shares of
Common Stock or securities convertible into or exchangeable for shares of Common
Stock as a dividend to all or substantially all holders of shares of Common
Stock or (iv) issue by reclassification of shares of Common Stock, any shares of
capital stock of the Company, in each event pursuant to Article X of the
Purchase Agreement as if such provisions were specifically set forth herein.
6. Adjustment Upon Breach of Trust Agreement. If and to the extent any
Fund defaults under the terms of the Trust Agreement to provide certain
subordinated debt funding to the Company and/or a special purpose corporation
or trust formed by the Company for the specific purpose of facilitating the
securitization of automobile finance contracts, under the terms and upon the
conditions therein specified, then, in each such event, the future vesting of
this Warrant shall be deemed modified (without in any way affecting the number
of then existing Vested Shares) such that the aggregate number of shares of
Common Stock which could become Vested Shares after such event shall be reduced
by a number of shares equal to the product of (i) the number of shares of Common
Stock initially purchasable upon exercise of this Warrant (as shown on the face
hereof) and (ii) a fraction, the numerator of which shall be that amount which
COMMON STOCK PURCHASE WARRANT NO. 1 - Page 5
(AutoBond Acceptance Corporation)
has gone unfunded by the Funds in violation of the Trust Agreement and
the denominator of which shall be the aggregate initial funding
commitment of the Funds under the Trust Agreement.
7. No Impairment. The Company will not, by amendment of its Certificate
of Incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any 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 in order to protect the rights of the Holder of this
Warrant against impairment. Without limiting the generality of the foregoing,
the Company (a) will not increase the par value of any shares of stock
receivable on the exercise of this Warrant above the amount payable therefor on
such exercise, (b) will take all such action as may be necessary or appropriate
in order that the Company may validly and legally issue fully paid and
nonassessable shares of stock on the exercise of this Warrant and (c) will not
transfer all or substantially all of its properties and assets to any other
person (corporate or otherwise), or consolidate with or merge into any other
person or permit any such person to consolidate with or merge into the Company
(if the Company is not the surviving person), unless such other person shall
expressly assume in writing and will be bound by all the terms of this Warrant.
8. Accountants' Certificate as to Adjustments. In each case of any
adjustment or readjustment in the shares of Common Stock (or Other Securities)
or the Purchase Price issuable on the exercise of this Warrant, the Company at
its expense will cause independent certified public accountants of national
standing selected by the Company (which may be the Company's auditors) to
compute such adjustment or readjustment in accordance with the terms of this
Warrant and prepare a certificate setting forth such adjustment or readjustment
and showing in detail the facts upon which such adjustment or readjustment is
based, including a statement of (a) the consideration received or receivable by
the Company for any additional shares of Common Stock (or Other Securities)
issued or sold or deemed to have been issued or sold, (b) the number of shares
of Common Stock (or Other Securities) outstanding or deemed to be outstanding
and (c) the Purchase Price and the number of shares of Common Stock to be
received upon exercise of this Warrant, in effect immediately prior to such
issue or sale and as adjusted and readjusted as provided in this Warrant. The
Company will forthwith mail a copy of each such certificate to the Holder of
this Warrant, and will, on the written request at any time of the Holder of this
Warrant, furnish to the Holder a like certificate setting forth the Purchase
Price at the time in effect and showing how it was calculated.
COMMON STOCK PURCHASE WARRANT NO. 1 - Page 6
(AutoBond Acceptance Corporation)
9. Notices of Record Date, etc. In the event of
(a) any taking by the Company of a record of the holders
of any class or 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 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 or any transfer of all or substantially all the assets of
the Company to, or consolidation or merger of the Company with or
into, any other person, or
(c) any voluntary or involuntary dissolution, liquidation
or winding-up of the Company,
then, and in each such event, the Company will mail or cause to be mailed to the
Holder of this Warrant 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
stating the amount and character of such dividend, distribution or right, and
(ii) the date on which any such reorganization, reclassification,
recapitalization, transfer, consolidation, merger, dissolution, liquidation or
winding-up is to take place, and the time, if any, as of which the holders of
record of Common Stock (or Other Securities) shall be entitled to exchange their
shares of Common Stock (or Other Securities) for securities or other property
deliverable on such reorganization, reclassification, recapitalization,
transfer, consolidation, merger, dissolution, liquidation or winding-up. Such
notice shall be mailed at least 20 days prior to the date specified in such
notice on which any action is to be taken.
10. Reservation of Stock, etc. Issuable on Exercise of Warrant. The
Company will at all times reserve and keep available, solely for issuance and
delivery on the exercise of this Warrant, all shares of Common Stock (or Other
Securities) from time to time issuable on the exercise of this Warrant.
11. Exchange of Warrant. On surrender for exchange of this Warrant,
properly endorsed, to the Company, the Company at its expense will issue and
deliver to or on the order of the holder thereof a new Warrant of like tenor, in
the name of such Holder or as such Holder (on payment by such holder of any
applicable transfer taxes) may direct, calling in the aggregate on the face or
faces thereof for the number of shares of Common Stock called for on the face of
the Warrant so surrendered.
12. Replacement of Warrant. On receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and, in the case of any such loss, theft or destruction of this
Warrant, on delivery of an indemnity agreement or security reasonably
satisfactory in form and amount to the Company or, in the case of any such
mutilation,
COMMON STOCK PURCHASE WARRANT NO. 1 - Page 7
(AutoBond Acceptance Corporation)
on surrender and cancellation of this Warrant, the Company at its expense will
execute and deliver, in lieu thereof, a new Warrant of like tenor.
13. Remedies. The Company stipulates that the remedies at law of the
Holder of this Warrant in the event of any default by the Company in the
performance of or compliance with any of the terms of this Warrant are not and
will not be adequate, and that such terms may be specifically enforced by a
decree for the specific performance of any agreement contained herein or by an
injunction against a violation of any of the terms hereof or otherwise.
14. Negotiability, etc. This Warrant is issued upon the following terms,
to all of which each Holder or owner hereof by the taking hereof consents and
agrees:
(a) title to this Warrant may be transferred by
endorsement (by the Holder hereof executing the form of
assignment at the end hereof) and delivery in the same manner as
in the case of a negotiable instrument transferable by
endorsement and delivery;
(b) any person in possession of this Warrant properly
endorsed is authorized to represent himself as absolute owner
hereof and is empowered to transfer absolute title hereto by
endorsement and delivery hereof to a bona fide purchaser hereof
for value; each prior taker or owner waives and renounces all of
his equities or rights in this Warrant in favor of each such bona
fide purchaser, and each such bona fide purchaser shall acquire
absolute title hereto and to all rights represented hereby;
(c) until this Warrant is transferred on the books of the
Company, the Company may treat the registered Holder hereof as
the absolute owner hereof for all purposes, notwithstanding any
notice to the contrary; and
(d) notwithstanding the foregoing, this Warrant may not be
sold, transferred or assigned except pursuant to an effective
registration statement under the Securities Act of 1933, as
amended (the "Act"), or, pursuant to an applicable exemption
therefrom (including in accordance with Regulation D promulgated
under the Act).
15. Registration Rights. The Company is obligated to register the shares
of Common Stock issuable upon exercise of this Warrant in accordance with the
terms of a Registration Rights Agreement between the Company and the Holder
dated the date hereof.
16. Notices, etc. All notices and other communications from the Company
to the holder of this Warrant shall be mailed by first class registered or
certified mail, postage prepaid, at such address as may have been furnished to
the Company in writing by the Holder or, until any the Holder furnishes to the
Company an address, then to, and at the address of, the last Holder of this
Warrant who has so furnished an address to the Company.
COMMON STOCK PURCHASE WARRANT NO. 1 - Page 8
(AutoBond Acceptance Corporation)
17. Miscellaneous. This Warrant and any term hereof may be changed,
waived, discharged or terminated only by an instrument in writing signed by the
party against which enforcement of such change, waiver, discharge or termination
is sought. This Warrant shall be construed and enforced in accordance with and
governed by the internal laws of the State of New York, except where the Texas
Business Corporation Act or other law applies. The headings in this Warrant are
for purposes of reference only, and shall not limit or otherwise affect any of
the terms hereof. The invalidity or unenforceability of any provision hereof
shall in no way affect the validity or enforceability of any other provision.
[SIGNATURE PAGE FOLLOWS]
COMMON STOCK PURCHASE WARRANT NO. 1 - Page 9
(AutoBond Acceptance Corporation)
DATED as of June 30, 1997.
AUTOBOND ACCEPTANCE CORPORATION
By:_________________________________________
Name:_______________________________________
Title:______________________________________
COMMON STOCK PURCHASE WARRANT NO. 1 - Page 10
(AutoBond Acceptance Corporation)
EXHIBIT A
FORM OF NOTICE OF EXERCISE - WARRANT
(To be executed only upon exercise or conversion
of the Warrant in whole or in part)
To AutoBond Acceptance Corporation
The undersigned registered holder of the accompanying Warrant hereby
exercises such Warrant or portion thereof for, and purchases thereunder,
____________(1) shares of Common Stock (as defined in such Warrant) and herewith
makes payment therefor of $__________ as of the date written below. The
undersigned requests that the certificates for such shares of Common Stock be
issued in the name of, and delivered to, _________________________________ whose
address is ________________________________________________________________.
Upon exercise pursuant to this Notice of Exercise, the holder will be in
compliance with the Limitation on Exercise (as defined in the Securities
Purchase Agreement pursuant to which this Warrant was issued).
Dated: ____________________
_________________________________________
(Name must conform to name of holder as
specified on the face of the Warrant)
By:______________________________________
Name:_________________________________
Title:________________________________
Address of holder:
_________________________________________
_________________________________________
_________________________________________
Date of exercise:_____________
_______________________________
(1) Insert the number of shares of Common Stock as to which the accompanying
Warrant is being exercised. In the case of a partial exercise, a new Warrant
or warrants will be issued and delivered, representing the unexercised portion
of the accompanying Warrant, to the holder surrendering the same.
COMMON STOCK PURCHASE WARRANT NO. 1 - Page 11
(AutoBond Acceptance Corporation)
THIS COMMON STOCK PURCHASE WARRANT HAS NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"); OR UNDER ANY
APPLICABLE LAW OR REGULATION OF ANY STATE. THIS COMMON STOCK WARRANT MAY NOT BE
SOLD, OFFERED, ASSIGNED OR TRANSFERRED UNLESS THE WARRANT IS REGISTERED UNDER
THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS, OR SUCH OFFERS, SALES,
ASSIGNMENTS AND TRANSFERS ARE MADE PURSUANT TO THE AVAILABLE EXEMPTIONS FROM THE
REGISTRATION REQUIREMENTS OF THOSE LAWS. FURTHERMORE, THESE SECURITIES ARE
SUBJECT TO CERTAIN LIMITATIONS ON CONVERSION AS DESCRIBED IN THAT CERTAIN
SECURITIES PURCHASE AGREEMENT DATED THE DATE HEREOF (THE "PURCHASE AGREEMENT")
BETWEEN, AMONG OTHERS, THE COMPANY AND THE INITIAL HOLDER HEREOF. THIS COMMON
STOCK PURCHASE WARRANT CERTIFICATE REFERS TO AND IS SPECIFICALLY GOVERNED BY
CERTAIN PROVISIONS CONTAINED IN THE PURCHASE AGREEMENT, A COPY OF WHICH IS ON
FILE WITH AND MAY BE OBTAINED FROM THE COMPANY AT ITS PRINCIPAL PLACE OF
BUSINESS.
AUTOBOND ACCEPTANCE CORPORATION
COMMON STOCK PURCHASE WARRANT
DATED: June 30, 1997
--------------------------------------------------------------------------------
No. 1
Number of Common Shares: ______________ Holder: ______________
___________
Purchase Price: ______________ ______________
Expiration Date: June 30, 2002 ______________
For identification only. The governing terms of this Warrant are set
forth below.
--------------------------------------------------------------------------------
AUTOBOND ACCEPTANCE CORPORATION, a Texas corporation (the "Company"),
hereby certifies that, for value received, _____________________ or assigns
(each a "Holder"), is entitled, subject to the terms set forth below, to
purchase from the Company at any time or from time to time after the date hereof
and prior to the fifth anniversary hereof (the "Exercise Period"), at the
Purchase Price hereinafter set forth, _________________ (____________) fully
paid and nonassessable shares of Common Stock (as hereinafter defined) of the
Company. The number and character of such shares of Common Stock and the
Purchase Price are subject to adjustment as provided herein.
This Warrant (this "Warrant"; such term to include any warrants issued
in substitution therefor) is one of a series of Common Stock Purchase Warrants
issued in connection with that certain Securities Purchase Agreement (the
"Purchase Agreement") dated of even date herewith between, among others, the
initial Holder hereof and the Company.
COMMON STOCK PURCHASE WARRANT NO. 1 - Page 12
(AutoBond Acceptance Corporation)
The purchase price per share of Common Stock issuable upon exercise of
this Warrant (the "Purchase Price") shall initially be $_______________;
provided, however, that the Purchase Price shall be adjusted from time to time
as provided herein.
As used herein the following terms, unless the context otherwise
requires, have the following respective meanings:
(a) The term "Company" shall include AutoBond Acceptance
Corporation and any entity that shall succeed or assume the obligations
of such corporation hereunder.
(b) The term "Common Stock" includes (a) the Company's common
stock, no par value per share, (b) any other capital stock of any class
or classes (however designated) of the Company, authorized on or after
such date, 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, 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) 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.
(c) The term "Other Securities" refers to any stock (other than
Common Stock) and other securities of the Company or any other person
(corporate or otherwise) that the holder of this Warrant at any time
shall be entitled to receive, or shall have received, on the exercise of
this Warrant, in lieu of or in addition to Common Stock, or that at any
time shall be issuable or shall have been issued in exchange for or in
replacement of Common Stock or Other Securities pursuant to Section 4 or
otherwise.
1. Exercise of Warrant.
1.1. Method of Exercise. This Warrant may be exercised in whole
or in part (but not as to a fractional share of Common Stock), at any
time and from time to time during the Exercise Period, by the Holder
hereof by delivery of a notice of exercise (a "Notice of Exercise")
substantially in the form attached hereto as Exhibit A via facsimile to
the Company. Promptly thereafter the Holder shall surrender this Warrant
to the Company at its principal office, accompanied by payment of the
Purchase Price multiplied by the number of shares of Common Stock for
which this Warrant is being exercised (the "Exercise Price"). Payment of
the Exercise Price shall be made by check or bank draft payable to the
order of the Company or by wire transfer to the account of the Company.
If the amount of the payment received by the Company is less than the
Exercise Price, the Holder will be notified of the deficiency and shall
make payment in that amount within five (5) business days. In the event
the payment exceeds the Exercise Price, the Company will promptly refund
the excess to the Holder. Upon exercise, the Holder shall be entitled to
COMMON STOCK PURCHASE WARRANT NO. 1 - Page 13
(AutoBond Acceptance Corporation)
receive, promptly after payment in full, one or more certificates,
issued in the Holder's name or in such name or names as the Holder may
direct, subject to the limitations on transfer contained herein, for the
number of shares of Common Stock so purchased. The shares so purchased
shall be deemed to be issued as of the close of business on the date on
which the Company shall have received from the Holder payment in full of
the Exercise Price (the "Exercise Date").
1.2. Regulation D Restrictions. The Holder hereof represents and
warrants to the Company that it has acquired this Warrant and
anticipates acquiring the shares of Common Stock issuable upon exercise
of the Warrant solely for its own account for investment purposes and
not with a view to or for distributing such securities unless such
distribution has been registered with the Securities and Exchange
Commission or an applicable exemption is available therefor. At the time
this Warrant is exercised, the Company may require the Holder to state
in the Notice of Exercise such representations concerning the Holder as
are necessary or appropriate to assure compliance by the Holder with the
Securities Act.
1.3. Company Acknowledgment. The Company will, at the time of
the exercise of this Warrant, upon the request of the Holder hereof,
acknowledge in writing its continuing obligation to afford to the Holder
any rights to which the Holder shall continue to be entitled after such
exercise in accordance with the provisions of this Warrant. If the
Holder shall fail to make any such request, such failure shall not
affect the continuing obligation of the Company to afford to the Holder
any such rights.
1.4. Limitation on Exercise. Notwithstanding the rights of the
Holder to exercise all or a portion of this Warrant as described herein,
such exercise rights shall be limited solely in the manner set forth in
the Purchase Agreement as if such provisions were specifically set forth
herein.
2. Delivery of Stock Certificates, etc., on Exercise. As soon as
practicable after the exercise of this Warrant, and in any event within the time
periods specified in the Purchase Agreement, the Company at its expense
(including the payment by it of any applicable issue, stamp or transfer taxes
upon issuance to the Holder) will cause to be issued in the name of and
delivered to the Holder thereof, or, to the extent permissible hereunder, to
such other person as the Holder may direct, a certificate or certificates for
the number of fully paid and nonassessable shares of Common Stock (or Other
Securities) to which the Holder shall be entitled on such exercise, plus, in
lieu of any fractional share to which the Holder would otherwise be entitled,
cash equal to such fraction multiplied by the then applicable Purchase Price,
together with any other stock or other securities and property (including cash,
where applicable) to which the Holder is entitled upon such exercise pursuant to
Section 1 or otherwise.
3. Adjustment for Dividends in Other Stock Property, etc.,
Reclassification, etc. In case at any time or from time to time the holders of
Common Stock (or Other Securities) shall have received, or (on or after the
record date fixed for the determination of stockholders eligible
COMMON STOCK PURCHASE WARRANT NO. 1 - Page 14
(AutoBond Acceptance Corporation)
to receive) shall have become entitled to receive, without payment therefor,
other or additional stock or other securities or property by way of dividend or
any cash (excluding cash dividends payable solely out of earnings or earned
surplus of the Company), or other or additional stock or other securities or
property (including cash) by way of spin-off, split-up, reclassification,
recapitalization, combination of shares or similar corporate rearrangement other
than additional shares of Common Stock (or Other Securities) issued as a stock
dividend or in a stock split (adjustments in respect of which are provided for
in Section 5), then and in each such event, the Holder of this Warrant, on the
exercise hereof as provided in Section 1 shall be entitled to receive the amount
of stock and other securities and property that the Holder would have been
entitled to receive on the effective date of such event if the Holder had so
exercised this Warrant immediately prior thereto, giving effect to all
adjustments called for during such period by Sections 4 and 5.
4. Adjustment for Reorganization, Consolidation, Merger, etc.
4.1. Reorganization, etc. In case at any time or from time to
time, the Company shall (a) effect a reorganization, (b) consolidate
with or merge into any other person or (c) transfer all or substantially
all of its properties or assets to any other person under any plan or
arrangement contemplating the dissolution of the Company, then, in each
such case, the Holder of this Warrant, on the exercise hereof as
provided in Section 1 at any time after the consummation of such
reorganization, consolidation or merger or the effective date of such
dissolution, as the case may be, shall receive, in lieu of the Common
Stock (or Other Securities) issuable on such exercise prior to such
consummation or such effective date, the stock and other securities and
property (including cash) to which the Holder would have been entitled
upon such consummation or in connection with such dissolution, as the
case may be, if the Holder had so exercised this Warrant, immediately
prior thereto, all subject to further adjustment thereafter as provided
herein.
4.2. Dissolution. In the event of any dissolution of the Company
following the transfer of all or substantially all of its properties or
assets, the Company, prior to such dissolution, shall at its expense
deliver or cause to be delivered the stock and other securities and
property (including cash, where applicable) receivable by the Holder of
this Warrant after the effective date of such dissolution pursuant to
this Section 4 to a bank or trust company, as trustee for the Holder or
Holders of this Warrant.
4.3. Continuation of Terms. Upon any reorganization,
consolidation, merger or transfer (and any dissolution following any
transfer) referred to in this Section 4, this Warrant shall continue in
full force and effect and the terms hereof shall be applicable to the
shares of stock and other securities and property receivable on the
exercise of this Warrant after the consummation of such reorganization,
consolidation or merger or the effective date of dissolution following
any such transfer, as the case may be, and shall be binding upon the
issuer of any such stock or other securities, including, in the case of
any such transfer, the person acquiring all or substantially all of the
properties or assets of the
COMMON STOCK PURCHASE WARRANT NO. 1 - Page 15
(AutoBond Acceptance Corporation)
Company, whether or not such person shall have expressly assumed the
terms of this Warrant as provided in Section 8.
5. Adjustment for Extraordinary Events. The Purchase Price to be paid by
the Holder upon exercise of this Warrant shall be adjusted in case at any time
or from time to time the Company should (i) subdivide the outstanding shares of
Common Stock into a greater number of shares, (ii) consolidate the outstanding
shares of Common Stock into a smaller number of shares, (iii) issue shares of
Common Stock or securities convertible into or exchangeable for shares of Common
Stock as a dividend to all or substantially all holders of shares of Common
Stock or (iv) issue by reclassification of shares of Common Stock, any shares of
capital stock of the Company, in each event pursuant to Article X of the
Purchase Agreement as if such provisions were specifically set forth herein.
6. Adjustment Upon Breach of Trust Securities Purchase Agreement. If and
to the extent the Purchasers (as defined in the Purchase Agreement) default
under the terms of that Trust Securities Purchase Agreement dated the date
hereof between, among others, the initial Holder hereof and the Company (the
"Trust Agreement") to provide certain subordinated debt funding to the Company
and/or a special purpose corporation or trust formed by the Company for the
specific purpose of facilitating the securitization of automobile finance
contracts, under the terms and upon the conditions therein specified, then, in
each such event, this Warrant shall be deemed modified such that the aggregate
number of shares of Common Stock acquirable upon exercise hereof shall be
reduced by a fraction, the numerator of which shall be that amount which has
gone unfunded by the Purchasers in violation of the Trust Agreement and the
denominator of which shall be $10,000,000.
7. No Impairment. The Company will not, by amendment of its Certificate
of Incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any 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 in order to protect the rights of the Holder of this
Warrant against impairment. Without limiting the generality of the foregoing,
the Company (a) will not increase the par value of any shares of stock
receivable on the exercise of this Warrant above the amount payable therefor on
such exercise, (b) will take all such action as may be necessary or appropriate
in order that the Company may validly and legally issue fully paid and
nonassessable shares of stock on the exercise of this Warrant and (c) will not
transfer all or substantially all of its properties and assets to any other
person (corporate or otherwise), or consolidate with or merge into any other
person or permit any such person to consolidate with or merge into the Company
(if the Company is not the surviving person), unless such other person shall
expressly assume in writing and will be bound by all the terms of this Warrant.
8. Accountants' Certificate as to Adjustments. In each case of any
adjustment or readjustment in the shares of Common Stock (or Other Securities)
or the Purchase Price issuable on the exercise of this Warrant, the Company at
its expense will cause independent
COMMON STOCK PURCHASE WARRANT NO. 1 - Page 16
(AutoBond Acceptance Corporation)
certified public accountants of national standing selected by the Company (which
may be the Company's auditors) to compute such adjustment or readjustment in
accordance with the terms of this Warrant and prepare a certificate setting
forth such adjustment or readjustment and showing in detail the facts upon which
such adjustment or readjustment is based, including a statement of (a) the
consideration received or receivable by the Company for any additional shares of
Common Stock (or Other Securities) issued or sold or deemed to have been issued
or sold, (b) the number of shares of Common Stock (or Other Securities)
outstanding or deemed to be outstanding and (c) the Purchase Price and the
number of shares of Common Stock to be received upon exercise of this Warrant,
in effect immediately prior to such issue or sale and as adjusted and readjusted
as provided in this Warrant. The Company will forthwith mail a copy of each such
certificate to the Holder of this Warrant, and will, on the written request at
any time of the Holder of this Warrant, furnish to the Holder a like certificate
setting forth the Purchase Price at the time in effect and showing how it was
calculated.
9. Notices of Record Date, etc. In the event of
(a) any taking by the Company of a record of the holders
of any class or 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 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 or any transfer of all or substantially all the assets of
the Company to, or consolidation or merger of the Company with or
into, any other person, or
(c) any voluntary or involuntary dissolution, liquidation
or winding-up of the Company,
then, and in each such event, the Company will mail or cause to be mailed to the
Holder of this Warrant 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
stating the amount and character of such dividend, distribution or right, and
(ii) the date on which any such reorganization, reclassification,
recapitalization, transfer, consolidation, merger, dissolution, liquidation or
winding-up is to take place, and the time, if any, as of which the holders of
record of Common Stock (or Other Securities) shall be entitled to exchange their
shares of Common Stock (or Other Securities) for securities or other property
deliverable on such reorganization, reclassification, recapitalization,
transfer, consolidation, merger, dissolution, liquidation or winding-up. Such
notice shall be mailed at least 20 days prior to the date specified in such
notice on which any action is to be taken.
10. Reservation of Stock, etc. Issuable on Exercise of Warrant. The
Company will at all times reserve and keep available, solely for issuance and
delivery on the exercise of this
COMMON STOCK PURCHASE WARRANT NO. 1 - Page 17
(AutoBond Acceptance Corporation)
Warrant, all shares of Common Stock (or Other Securities) from time to time
issuable on the exercise of this Warrant.
11. Exchange of Warrant. On surrender for exchange of this Warrant,
properly endorsed, to the Company, the Company at its expense will issue and
deliver to or on the order of the holder thereof a new Warrant of like tenor, in
the name of such Holder or as such Holder (on payment by such holder of any
applicable transfer taxes) may direct, calling in the aggregate on the face or
faces thereof for the number of shares of Common Stock called for on the face of
the Warrant so surrendered.
12. Replacement of Warrant. On receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and, in the case of any such loss, theft or destruction of this
Warrant, on delivery of an indemnity agreement or security reasonably
satisfactory in form and amount to the Company or, in the case of any such
mutilation, on surrender and cancellation of this Warrant, the Company at its
expense will execute and deliver, in lieu thereof, a new Warrant of like tenor.
13. Remedies. The Company stipulates that the remedies at law of the
Holder of this Warrant in the event of any default by the Company in the
performance of or compliance with any of the terms of this Warrant are not and
will not be adequate, and that such terms may be specifically enforced by a
decree for the specific performance of any agreement contained herein or by an
injunction against a violation of any of the terms hereof or otherwise.
14. Negotiability, etc. This Warrant is issued upon the following terms,
to all of which each Holder or owner hereof by the taking hereof consents and
agrees:
(a) title to this Warrant may be transferred by
endorsement (by the Holder hereof executing the form of
assignment at the end hereof) and delivery in the same manner as
in the case of a negotiable instrument transferable by
endorsement and delivery;
(b) any person in possession of this Warrant properly
endorsed is authorized to represent himself as absolute owner
hereof and is empowered to transfer absolute title hereto by
endorsement and delivery hereof to a bona fide purchaser hereof
for value; each prior taker or owner waives and renounces all of
his equities or rights in this Warrant in favor of each such bona
fide purchaser, and each such bona fide purchaser shall acquire
absolute title hereto and to all rights represented hereby;
(c) until this Warrant is transferred on the books of the
Company, the Company may treat the registered Holder hereof as
the absolute owner hereof for all purposes, notwithstanding any
notice to the contrary; and
(d) notwithstanding the foregoing, this Warrant may not be
sold, transferred or assigned except pursuant to an effective
registration statement under
COMMON STOCK PURCHASE WARRANT NO. 1 - Page 18
(AutoBond Acceptance Corporation)
the Securities Act of 1933, as amended (the "Act"), or, pursuant
to an applicable exemption therefrom (including in accordance
with Regulation D promulgated under the Act).
15. Registration Rights. The Company is obligated to register the shares
of Common Stock issuable upon exercise of this Warrant in accordance with the
terms of a Registration Rights Agreement between the Company and the Holder
dated the date hereof.
16. Notices, etc. All notices and other communications from the Company
to the holder of this Warrant shall be mailed by first class registered or
certified mail, postage prepaid, at such address as may have been furnished to
the Company in writing by the Holder or, until any the Holder furnishes to the
Company an address, then to, and at the address of, the last Holder of this
Warrant who has so furnished an address to the Company.
17. Miscellaneous. This Warrant and any term hereof may be changed,
waived, discharged or terminated only by an instrument in writing signed by the
party against which enforcement of such change, waiver, discharge or termination
is sought. This Warrant shall be construed and enforced in accordance with and
governed by the internal laws of the State of New York, except where the Texas
Business Corporation Act or other law applies. The headings in this Warrant are
for purposes of reference only, and shall not limit or otherwise affect any of
the terms hereof. The invalidity or unenforceability of any provision hereof
shall in no way affect the validity or enforceability of any other provision.
[SIGNATURE PAGE FOLLOWS]
COMMON STOCK PURCHASE WARRANT NO. 1 - Page 19
(AutoBond Acceptance Corporation)
DATED as of June 30, 1997.
AUTOBOND ACCEPTANCE CORPORATION
By:_______________________________
Name:_____________________________
Title:____________________________
COMMON STOCK PURCHASE WARRANT NO. 1 - Page 20
(AutoBond Acceptance Corporation)
EXHIBIT A
FORM OF NOTICE OF EXERCISE - WARRANT
(To be executed only upon exercise or conversion
of the Warrant in whole or in part)
To AutoBond Acceptance Corporation
The undersigned registered holder of the accompanying Warrant hereby
exercises such Warrant or portion thereof for, and purchases thereunder,
____________(2) shares of Common Stock (as defined in such Warrant) and herewith
makes payment therefor of $__________ as of the date written below. The
undersigned requests that the certificates for such shares of Common Stock be
issued in the name of, and delivered to, _________________________________ whose
address is ___________________________________________________________________.
Upon exercise pursuant to this Notice of Exercise, the holder will be in
compliance with the Limitation on Exercise (as defined in the Securities
Purchase Agreement pursuant to which this Warrant was issued).
Dated: ____________________
______________________________________
(Name must conform to name of holder as
specified on the face of the Warrant)
By:___________________________________
Name:_______________________________
Title:______________________________
Address of holder:
_____________________________________
_____________________________________
_____________________________________
Date of exercise:_____________
____________
(2) Insert the number of shares of Common Stock as to which the accompanying
Warrant is being exercised. In the case of a partial exercise, a new Warrant or
Warrants will be issued and delivered, representing the unexercised portion of
the accompanying Warrant, to the holder surrendering the same.
COMMON STOCK PURCHASE WARRANT NO. 1 - Page 21
(AutoBond Acceptance Corporation)