Exhibit 10.1
NEITHER THIS WARRANT NOR THE SECURITIES ISSUABLE UPON EXERCISE HEREOF NOR ANY
INTEREST OR PARTICIPATION HEREIN OR THEREIN MAY BE SOLD, ASSIGNED, PLEDGED,
HYPOTHECATED, ENCUMBERED OR IN ANY OTHER MANNER TRANSFERRED OR DISPOSED OF,
EXCEPT IN COMPLIANCE WITH THE SECURITIES ACT OF 1933, AS AMENDED, AND THE TERMS
AND CONDITIONS HEREOF. THE HOLDER OF THIS WARRANT AND THE SECURITIES ISSUABLE
UPON EXERCISE HEREOF ARE SUBJECT TO THE RESTRICTIONS HEREIN SET FORTH.
VOID AFTER 5:00 P.M. NEW YORK CITY TIME, MARCH 22, 2014.
****************************************
Number 1
WARRANT
to
PURCHASE COMMON STOCK
of
SUNSET FINANCIAL RESOURCES, INC.
****************************************
This certifies that, for good and valuable consideration, Sunset
Financial Resources, Inc., a Maryland corporation (the "Company"), grants to
Sapphire Advisors, LLC or permitted registered assigns (the "Warrantholder" or
"Warrantholders"), the right to subscribe for and purchase from the Company, at
$13.00 per share (the "Exercise Price"), two hundred thirty-three thousand
(233,000) shares (the "Warrant Shares") of the Company's common stock, par value
$0.01 per share (the "Common Stock"), subject to the provisions and upon the
terms and conditions herein set forth. The Exercise Price and the number of
Warrant Shares are subject to adjustment from time to time as provided in
subsection 1.10 herein.
1. Duration and Exercise of Warrant; Limitation on Exercise;
Payment of Taxes.
1.1 Duration and Exercise of Warrant.
(a) Subject to subsection 1.1(c) herein, this Warrant may
be exercised to purchase (i) 100% of the underlying shares from and
after 9:00 A.M. New York City time on March 22, 2005 (the "Exercise
Date"); to and including 5:00 P.M. New York
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City time on March 22, 2014 (the "Expiration Date").
(b) Subject to subsection 1.1(c) herein, the rights
represented by this Warrant may be exercised by the Warrantholder of
record, in whole, or from time to time in part, by:
(i) Surrender of this Warrant, accompanied by
either the Exercise Form annexed hereto, or if the
Warrantholder decides to exercise the Warrant pursuant to the
broker-assisted cashless exercise program instituted by the
Company, an applicable exercise form provided by the Company
(the "Exercise Form") duly executed by the Warrantholder of
record and specifying the number of Warrant Shares to be
purchased, to the Company at the office of the Company located
at ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
(or such other office or agency of the Company as it may
designate by notice to the Warrantholder at the address of
such Warrantholder appearing on the books of the Company)
during normal business hours on any day (a "Business Day")
other than a Saturday, Sunday or a day on which the New York
Stock Exchange is authorized to close or on which the Company
is otherwise closed for business (a "Nonbusiness Day") on or
after 9:00 A.M. New York City time on the Exercise Date but
not later than 5:00 P.M. on the Expiration Date (or 5:00 P.M.
on the next succeeding Business Day, if the Expiration Date is
a Nonbusiness Day);
(ii) Delivery of payment to the Company in cash
or by certified or official bank check in New York Clearing
House Funds, of the Exercise Price for the number of Warrant
Shares specified in the Exercise Form (such payment may be
made by the Warrantholder directly or by a designated broker
pursuant to the broker-assisted cashless exercise program
instituted by the Company, subject to subsection 1.5 herein)
and
(iii) Such documentation as to the identity and
authority of the Warrantholder as the Company may reasonably
request.
Such Warrant Shares shall be deemed by the Company to be
issued to the Warrantholder as the record holder of such Warrant Shares
as of the close of business on the date on which this Warrant shall
have been surrendered and payment made for the Warrant Shares as
aforesaid. Certificates for the Warrant Shares specified in the
Exercise Form shall be delivered to the Warrantholder (or designated
broker, as the case may be) as promptly as practicable, and in any
event within 10 business days, thereafter. The stock certificates so
delivered shall be in denominations of at least one thousand (1,000)
shares each or such other denomination as may be specified by the
Warrantholder and agreed upon by the Company, and shall be issued in
the name of the Warrantholder or, if permitted by subsection 1.5 herein
and in accordance with the provisions thereof, such other name as shall
be designated in the Exercise Form. If this Warrant shall have been
exercised only in part, the Company shall, at the time of delivery of
the certificates for the Warrant Shares, deliver to the Warrantholder
(or designated broker, as the case may
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be) a new Warrant evidencing the rights to purchase the remaining
Warrant Shares, which new Warrant shall in all other respects be
identical with this Warrant. No adjustments or payments shall be made
on or in respect of Warrant Shares issuable on the exercise of this
Warrant for any cash dividends paid or payable to holders of record of
Common Stock prior to the date as of which the Warrantholder shall be
deemed to be the record holder of such Warrant Shares.
(c) Notwithstanding anything to the contrary in this
Warrant, the Warrantholder hereby irrevocably agrees not to, directly
or indirectly (i) sell, offer, contract to sell, sell any option or
contract to purchase, purchase any option or contract to sell, grant
any option right or warrant to purchase, transfer the economic risk of
ownership in, make any short sale, pledge or otherwise dispose of this
Warrant or the Warrant Shares, or (ii) enter into any swap or other
arrangement that transfers to another, in whole or in part, any of the
economic consequences of ownership of this Warrant or the Warrant
Shares, whether any such transaction described in clause (i) or (ii)
above is to be settled by delivery of this Warrant or the Warrant
Shares, for a period commencing on the date hereof and, (A) with
respect to 33 1/3% of the Warrant Shares, ending ▇▇▇▇▇ ▇▇, ▇▇▇▇, (▇)
with respect to an additional 33 1/3% of the Warrant Shares, ending
March 22, 2006 and (C) with respect to the remaining 33 1/3% of the
Warrant Shares, ending March 22, 2007.
Notwithstanding the foregoing: (a) if the Warrantholder is an
individual, he or she may transfer this Warrant or the Warrant Shares
either during his or her lifetime or on death (i) by gift, will or
intestacy or (ii) to a member or members of his or her immediate family
or to a partnership or trust, the partners or beneficiaries of which
are exclusively the Warrantholder and/or a member or members of his or
her immediate family and (b) if the Warrantholder is a partnership,
trust, corporation or similar entity, it may distribute any such shares
or securities to its partners or shareholders; provided, however, that
in each such case, prior to any such transfer or distribution, each
transferee or distributee shall execute an agreement, reasonably
satisfactory to the Company, pursuant to which such transferee or
distributee shall agree to receive and hold such Warrant or Warrant
Shares, subject to the provisions hereof, and there shall be no further
transfer except in accordance with the provisions hereof. For the
purposes of this paragraph, "immediate family" shall mean spouse,
domestic partner, lineal descendant, father, mother, brother or sister
of the Warrantholder.
The Warrantholder understands that the Company is relying on
this agreement in issuing this Warrant. The Warrantholder hereby waives
any rights of the Warrantholder under any agreement, instrument or
understanding to sell this Warrant or the Warrant Shares except in
accordance with the terms of this Warrant.
The Warrantholder understands that this agreement is
irrevocable and shall be binding upon the Warrantholder's heirs, legal
representatives, successors and assigns.
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1.2 Limitation on Exercise. If this Warrant is not exercised prior
to 5:00 P.M. on the Expiration Date (or the next succeeding Business Day, if the
Expiration Date is a Nonbusiness Day), this Warrant, or any new Warrant issued
pursuant to subsection 1.1 herein, shall cease to be exercisable and shall
become void and all rights of the Warrantholder hereunder shall cease. This
Warrant shall not be exercisable, and no Warrant Shares shall be issued
hereunder, prior to 9:00 A.M. New York City time on the Exercise Date.
1.3 Exercise Upon a Change of Control. At any time during the term
of this Warrant following a Change in Control (as defined below), this Warrant
shall immediately vest in its entirety with respect to the Warrantholder's right
to purchase all of the shares underlying the Warrant and may be exercised in
whole or in part for 90 days after a Change in Control. A "Change in Control"
shall be deemed to have occurred if:
(i) Any person, other than the Company or an
employee benefit plan of the Company, acquires directly or
indirectly the Beneficial Ownership (as defined in Section
13(d) of the Securities and Exchange Act of 1934, as amended
(the" Exchange Act")) of any voting security of the Company
and immediately after such acquisition such Person is,
directly or indirectly, the Beneficial Owner of voting
securities representing 50% or more of the total voting power
of all of the then-outstanding voting securities of the
Company;
(ii) At any time during any 12-month period, the
Board of Directors of the Company in office at the beginning
of such period shall have ceased to constitute a majority of
the Board of Directors without the approval of the nomination
of such directors by a majority of the Board of Directors
consisting of directors who were serving at the beginning of
such period;
(iii) The stockholders of the Company shall
approve a merger, consolidation, recapitalization, or
reorganization of the Company, a reverse stock split of
outstanding voting securities, or consummation of any such
transaction if stockholder approval is not sought or obtained,
other than any such transaction which would result in at least
50% of the total voting power represented by the voting
securities of the surviving entity outstanding immediately
after such transaction being Beneficially Owned by at least
50% of the holders of outstanding voting securities of the
Company immediately prior to the transaction, with the voting
power of each such continuing holder relative to other such
continuing holders not substantially altered in the
transaction; or
(iv) The stockholders of the Company shall
approve a plan of complete liquidation of the Company or an
agreement for the sale or disposition by the Company of more
than 50% of the total assets of the Company and its
subsidiaries.
1.4 Payment of Taxes. The issuance of certificates for Warrant
Shares shall be made without charge to the Warrantholder for any stock transfer
or other issuance tax in respect
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thereto; provided, however, that the Warrantholder shall be required to pay any
and all taxes which may be payable in respect to any transfer involved in the
issuance and delivery of any certificates for Warrant Shares in a name other
than that of the then Warrantholder as reflected upon the books of the Company.
1.5 Transfer Restriction and Legend.
(a) Without limiting the generality of the foregoing,
neither this Warrant nor any of the Warrant Shares, nor any interest or
participation in either, may be in any manner transferred or disposed
of, in whole or in part, except in compliance with applicable United
States federal and state securities laws.
(b) Each certificate for Warrant Shares and any Warrant
issued at any time in exchange or substitution for any Warrant bearing
such a legend shall bear a legend similar in effect to the foregoing
paragraph unless, in the opinion of counsel for the Company, the
Warrant and the Warrant Shares need no longer be subject to the
restriction contained herein. The provisions of this subsection 1.5
shall be binding upon all subsequent holders of this Warrant and the
Warrant Shares, if any. Warrant Shares transferred to the public as
expressly permitted by, and in accordance with, the provisions of this
Warrant shall thereafter cease to be deemed to be "Warrant Shares" for
purposes hereof.
1.6 Divisibility of Warrant. This Warrant may be divided into
warrants representing one Warrant Share or multiples thereof, upon surrender at
the principal office of the Company on any Business Day, without charge to any
Warrantholder, except as provided below. The Warrantholder will be charged for
reasonable out-of-pocket costs incurred by the Company in connection with the
division of this Warrant into Warrants representing fewer than one thousand
(1,000) Warrant Shares. Upon any such division, and, if permitted by subsection
1.5(b) herein and in accordance with the provisions thereof, the Warrants may be
transferred of record to a name other than that of the Warrantholder of record;
provided, however, that the Warrantholder shall be required to pay any and all
transfer taxes with respect thereto.
1.7 Reservation and Listing of Shares, Etc. All Warrant Shares
which are issued upon the exercise of the rights represented by this Warrant
shall, upon issuance and payment of the Exercise Price, be validly issued, fully
paid and nonassessable and free from all taxes, liens, security interests,
charges and other encumbrances with respect to the issue thereof other than
taxes in respect of any transfer occurring contemporaneously with such issue.
During the period within which this Warrant may be exercised, the Company shall
at all times have authorized and reserved, and keep available free from
preemptive rights, a sufficient number of shares of Common Stock to provide for
the exercise of this Warrant, and shall at its expense use its best efforts to
procure such listing thereof (subject to official notice of issuance) as then
may be required on all stock exchanges on which the Common Stock is then listed
or on the New York Stock Exchange. The Company shall, from time to time, take
all such action as may be required to assure that the par value per share of the
Warrant Shares is at all times equal to or less than the then effective Exercise
Price.
5
1.8 Exchange, Loss or Destruction of Warrant. If permitted by
subsections 1.5 or 1.6 herein and in accordance with the provisions thereof,
upon surrender of this Warrant to the Company with a duly executed instrument of
assignment and funds sufficient to pay any transfer tax, the Company shall,
without charge, execute and deliver a new Warrant of like tenor in the name of
the assignee named in such instrument of assignment and this Warrant shall
promptly be canceled. Upon receipt by the Company of evidence satisfactory to it
of the loss, theft, destruction or mutilation of this Warrant, and, in the case
of loss, theft or destruction, of such bond or indemnification as the Company
may reasonably require, and, in the case of such mutilation, upon surrender and
cancellation of this Warrant, the Company will execute and deliver a new Warrant
of like tenor. The term "Warrant" as used herein includes any Warrants issued in
substitution or exchange of this Warrant.
1.9 Ownership of Warrant. The Company may deem and treat the
person in whose name this Warrant is registered as the holder and owner hereof
(notwithstanding any notations of ownership or writing hereon made by anyone
other than the Company) for all purposes and shall not be affected by any notice
to the contrary, until presentation of this Warrant for registration of transfer
as provided in subsections 1.1 and 1.5 or in Section 3 herein.
1.10 Certain Adjustments. The Exercise Price at which Warrant
Shares may be purchased hereunder, and the number of Warrant Shares to be
purchased upon exercise hereof, are subject to change or adjustment as follows:
The number of Warrant Shares purchasable upon the exercise of this
Warrant and the Exercise Price shall be subject to adjustment as follows:
In case the Company shall (i) pay a dividend in shares of
Common Stock or make a distribution in shares of Common Stock (ii)
subdivide its outstanding shares of Common Stock into a greater number
of shares of Common Stock, (iii) combine its outstanding shares of
Common Stock into a smaller number of shares of Common Stock or (iv)
issue by reclassification of its shares of Common Stock other
securities of the Company (including any such reclassification in
connection with a consolidation or merger in which the Company is the
surviving corporation), the number of Warrant Shares purchasable upon
exercise of this Warrant shall be adjusted so that the Warrantholder
shall be entitled to receive the kind and number of Warrant Shares or
other securities of the Company which he would have owned or have been
entitled to receive after the happening of any of the events described
above, had this Warrant been exercised immediately prior to the
happening of such event or any record date with respect thereto. An
adjustment made pursuant to this paragraph (a) shall become effective
immediately after the effective date of such event retroactive to the
record date, if any, for such event.
2. Voluntary Adjustment by the Company. The Company may, at its
option, at any time during the term of the Warrants, reduce the then current
Exercise Price to any amount, consistent with applicable law, deemed appropriate
by the Board of Directors of the Company in its sole discretion.
6
3. Notice of Adjustment. Whenever the number of Warrant Shares or
the Exercise Price of such Warrant Shares is adjusted, as herein provided, the
Company shall promptly mail first class, postage prepaid, to all Warrantholders,
notice of such adjustment.
4. No Adjustment for Cash Dividends. No adjustment in respect of
any cash dividends shall be made during the term of this Warrant or upon the
exercise of this Warrant.
5. Preservation of Purchase Rights Upon Merger, Consolidation,
etc. In case of any consolidation of the Company with or merger of the Company
into another corporation or in case of any sale, transfer or lease to another
corporation of all or substantially all of the property of the Company, the
Company or such successor or purchasing corporation, as the case may be, shall
execute with the Warrantholders an agreement that the Warrantholders shall have
the right thereafter upon payment of the Exercise Price in effect immediately
prior to such action to purchase upon exercise of this Warrant the kind and
amount of shares and other securities and property which such holder would have
owned or have been entitled to receive after the happening of such
consolidation, merger, sale, transfer or lease had this Warrant been exercised
immediately prior to such action; provided, however, that no adjustment in
respect of cash dividends, interest or other income on or from such shares or
other securities and property shall be made during the term of this Warrant or
upon the exercise of this Warrant. Such agreement shall provide for adjustments,
which shall be as nearly equivalent as practicable to the adjustments provided
for in this Section 5. The provisions of this Section 5 shall apply similarly to
successive consolidations, mergers, sales, transfers or leases.
6. Registration Rights. The Company shall use commercially
reasonable efforts to file a registration statement covering the Warrant Shares
on a Form S-3 or other applicable registration statement on or prior to June 21,
2005. The Company shall use commercially reasonable efforts to keep such Form
S-3 or other applicable registration statement current and effective until the
earlier of the Expiration Date or the date this Warrant has been exercised in
full.
The Company shall have sole control in connection with the preparation,
filing, amending and supplementing of any registration statement, including the
right to withdraw the same or delay the effectiveness thereof when, in the sole
judgment of the Board of Directors of the Company, the pendency of such
registration statement or the effectiveness thereof would impose an undue burden
upon the ability of the Company to proceed with any other material financing for
its own account or any material corporate transaction, including, but not
limited to, a reorganization, recapitalization, merger, consolidation or
material acquisition of the securities or assets of another firm or corporation;
and the Company shall be required to file a new registration statement or to
proceed with such actions as reasonably may be required to cause the
registration statement to become effective within a reasonable time after the
consummation of the event or transaction which required such withdrawal or
delay.
7. Miscellaneous.
7.1 Entire Agreement. This Warrant constitutes the entire
agreement between the
7
Company and the Warrantholder with respect to this Warrant and the Warrant
Shares.
7.2 Binding Effects; Benefits. This Warrant shall inure to the
benefit of and shall be binding upon the Company, the Warrantholder and holders
of Warrant Shares and their respective heirs, legal representatives, successors
and assigns. Nothing in this Warrant, expressed or implied, is intended to or
shall confer on any person other than the Company, the Warrantholders and
holders of Warrant Shares, or their respective heirs, legal representatives,
successors or assigns, any rights, remedies, obligations or liabilities under or
by reason of this Warrant or the Warrant Shares.
7.3 Amendments and Waivers. This Warrant may not be modified or
amended except by an instrument in writing signed by the Company and
Warrantholders that hold Warrants entitling them to purchase at least 50% of the
Warrant Shares. The Company, any Warrantholder or holders of Warrant Shares may,
by an instrument in writing, waive compliance by the other party with any term
or provision of this Warrant on the part of such other party hereto to be
performed or complied with. The waiver by any such party of a breach of any term
or provision of this Warrant shall not be construed as a waiver of any
subsequent breach.
7.4 Section and Other Headings. The section and other headings
contained in this Warrant are for reference purposes only and shall not be
deemed to be a part of this Warrant or to affect the meaning or interpretation
of this Warrant.
7.5 Further Assurances. Each of the Company, the Warrantholders
and holders of Warrant Shares shall do and perform all such further acts and
things and execute and deliver all such other certificates, instruments and/or
documents (including without limitation, such proxies and/or powers of attorney
as may be necessary or appropriate) as any party hereto may, at any time and
from time to time, reasonably request in connection with the performance of any
of the provisions of this Warrant.
7.6 Notices. All demands, requests, notices and other
communications required or permitted to be given under this Warrant shall be in
writing and shall be deemed to have been duly given if delivered personally or
sent by United States certified or registered first class mail, postage prepaid,
to the parties hereto at the following addresses or at such other address as any
party hereto shall hereafter specify by notice to the other party hereto:
(a) If to the Company, addressed to:
Sunset Financial Resources, Inc.
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention:
(b) If to any Warrantholder or holder of Warrant Shares,
addressed to the address of such person then appearing on the books of
the Company.
8
Except as otherwise provided herein, all such demands, requests,
notices and other communications shall be deemed to have been received on the
date of personal delivery thereof or on the third Business Day after the mailing
thereof.
7.7 Separability. Any term or provision of this Warrant that is
invalid or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable any other term or provision of this Warrant
or affecting the validity or enforceability of any of the terms or provisions of
this Warrant in any other jurisdiction.
7.8 Fractional Shares. No fractional shares or scrip representing
fractional shares shall be issued upon the exercise of this Warrant. With
respect to any fraction of a share called for upon any exercise hereof, the
Company shall pay to the Warrantholder an amount in cash equal to such fraction
multiplied by the current market price (as determined as of the date of
exercise, and with reference to the applicable trading market, in accordance
with paragraph (d) of subsection 5.1 herein) of a share of such stock as of the
date of such exercise.
7.9 Rights of the Holder. The Warrantholder shall not, solely by
virtue of this Warrant, be entitled to any rights of a stockholder of the
Company, either at law or in equity.
7.10 Governing Law. This Warrant shall be deemed to be a contract
made under the laws of the State of Maryland and for all purposes shall be
governed by and construed in accordance with the laws of such State applicable
to contracts made and performed in Maryland.
7.11 Effect of Stock Splits, etc. Whenever any rights under this
Agreement are available only when at least a specified minimum number of Warrant
Shares is involved, such number shall be appropriately adjusted to reflect any
stock split, stock dividend, combination of securities into a smaller number of
securities or reclassification of stock.
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IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by
its duly authorized officer.
SUNSET FINANCIAL RESOURCES, INC.
By: /s/ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
-----------------------
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
Chairman, President and
Chief Executive Officer
Dated: March 22, 2004
ACCEPTED AND AGREED:
SAPPHIRE ADVISORS LLC
By: /s/ ▇▇▇▇▇ ▇. SILVER
------------------------
▇▇▇▇▇ ▇. Silver
Managing Partner
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EXERCISE FORM
(To be executed upon exercise of this Warrant)
The undersigned, the record holder of this Warrant, hereby
irrevocably elects to exercise the right, represented by this Warrant, to
purchase __________ of the Warrant Shares and herewith tenders payment for such
Warrant Shares to the order of SUNSET FINANCIAL RESOURCES, INC., in the amount
of $_______ in accordance with the terms of this Warrant. The undersigned
requests that a certificate for such Warrant Shares be registered in the name of
_________________________________ and that such certificate be delivered to
_________________________ whose address is ____________________________________.
Date _________________ Signature _________________________