EXHIBIT 4.5
WARRANT AGREEMENT
WARRANT AGREEMENT dated as of October 14, 2005, between
(1) VERASUN ENERGY CORPORATION, a corporation duly organized and validly
existing under the laws of the State of South Dakota, with an
organizational identification number of DB050019 (ISSUER); and
(2) TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA (the INVESTOR).
VeraSun Energy Corporation, a corporation duly organized and validly existing
under the laws of the State of South Dakota, with an organizational
identification number of DB044362, and the Investor are parties to a Note
Purchase Agreement dated as of December 23, 2002 (as amended from time to time,
the NOTE PURCHASE AGREEMENT; references to the Note Purchase Agreement herein
shall apply whether or not the Note Purchase Agreement is then in force),
providing, subject to the terms and conditions thereof, for extensions of credit
to be made by the Investor thereunder in an aggregate principal amount of
$20,000,000. To induce the Investor to enter into the First Amendment to the
Note Purchase Agreement, Waivers and Consent dated as of the date hereof, and
for other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, Issuer has agreed to issue Warrants (as hereinafter
defined) to the Investor providing for the purchase of shares of Common Stock
(as hereinafter defined) of Issuer, in the manner hereinafter provided.
Accordingly, the parties hereto agree as follows:
1. DEFINITIONS; ACCOUNTING TERMS AND DETERMINATIONS.
1.1 Definitions
ACCRUING LIABILITY shall have the meaning assigned to such term in Section
6.2(f).
AFFILIATE shall mean, as to any Person (the RELEVANT PERSON), any other Person
that directly or indirectly controls, or is under common control with, or is
controlled by, the Relevant Person and, if such Person is an individual, any
member of the immediate family (including parents, spouse and children) of such
individual and any trust whose principal beneficiary is such individual or one
or more members of such immediate family and any Person who is controlled by any
such member or trust. As used in this Agreement, "control" (including, with its
correlative meanings, "controlled by" and "under common control with") shall
mean possession, directly or indirectly, of the power to direct or cause the
direction of management or policies (whether through ownership of securities or
partnership or other ownership interests, by contract or otherwise), PROVIDED
that, in any event, any Person that owns or has the right to acquire directly or
indirectly (including as part of a group) 5% or more of the Voting Capital Stock
in a corporation or 5% or more of a partnership or other ownership interests of
any other Person, other than as a limited partner of such other Person, will be
deemed to control such corporation or other Person. In
addition, any Person in whom an Affiliate of a Relevant Person has a 10% or
greater equity interest shall also be deemed an Affiliate of such Relevant
Person. Notwithstanding the foregoing, (a) no individual shall be deemed to be
an Affiliate of a Relevant Person, solely by reason of his or her being a
director, officer or employee of such Relevant Person and (b) neither Investor
nor any bank, bank holding company or subsidiary of either shall be an Affiliate
of Issuer.
BOARD shall mean the Board of Directors of Issuer.
BUSINESS DAY shall mean any day on which commercial banks are not authorized or
required to close in New York City.
CHANGE OF CONTROL shall have the meaning assigned to such term in the Note
Purchase Agreement.
CLOSING DATE shall have the meaning assigned to such term in Section 1.3 of the
Note Purchase Agreement.
COMMISSION shall mean the Securities and Exchange Commission or any other
similar or successor agency of the Federal government administering the
Securities Act and/or the Exchange Act.
COMMITMENTS shall have the meaning assigned to such term in the Note Purchase
Agreement.
COMMON STOCK shall mean Issuer's authorized Common Stock as constituted on the
date hereof and any stock into which such Common Stock may thereafter be
converted or changed, and also shall include any other stock of Issuer of any
other class, which is not preferred as to dividends or assets over any other
class of any other stock of Issuer. References herein and in the Warrants to the
Common Stock outstanding "on a fully diluted basis" at any time shall mean the
number of shares of Common Stock then issued and outstanding, assuming full
conversion, exercise and exchange of all Convertible Securities and Options that
are (or may become) exchangeable for, or exercisable or convertible into, Common
Stock, including the Warrants, PROVIDED, that the number of shares of Common
Stock deemed to be outstanding "on a fully diluted basis" shall be reduced by
the number of shares of Common Stock purchasable or issuable upon exercise,
conversion or exchange of Options or Convertible Securities at the time of
calculation which are Out of the Money.
All references to Common Stock herein shall be subject to appropriate adjustment
by reason of any stock dividend, split, reverse split, combination,
recapitalization or any similar corporate transaction.
COMPANY NOTICE DATE shall have the meaning assigned to such term in Section
6.1(b).
Page 2
CONVERTIBLE SECURITIES shall mean evidences of indebtedness, shares of stock or
other securities or rights which are exchangeable for or exercisable or
convertible into a specified security of Issuer either immediately or upon the
arrival of a specified date or the occurrence of a specified event.
DEFAULTS shall have the meaning assigned to such term in Section 6.2(b).
EMPLOYEE SHARES shall mean 3,689,203 shares of Common Stock which may be issued
to founders, employees, directors or consultants of the Issuer.
EMPLOYEE OPTIONS shall mean the options to subscribe for or purchase Employee
Shares.
EXCHANGE ACT shall mean the Securities Exchange Act of 1934, as amended, or any
similar Federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
EXERCISE PRICE shall have the meaning assigned to such term in the form of
Warrant attached as Annex 1 hereto.
EXISTING WARRANTS shall mean the warrants issued by the Issuer and outstanding
as of the date hereof providing for the purchase of 2,150,315 shares of Common
Stock.
EXISTING WARRANT SHARES shall mean the shares of Common Stock issuable upon the
exercise of the Existing Warrants.
EXPIRATION DATE shall mean December 23, 2012.
FAIR MARKET VALUE shall mean, as at any Put Notice Date, the price for which all
the outstanding shares of Common Stock (on a fully diluted basis, assuming
receipt of applicable consideration for any conversion, exchange or exercise of
any Convertible Securities or Options which are exchangeable for or convertible
or exercisable into Common Stock unless they are Out of the Money) could be sold
in an arm's length transaction to a third party which is not an Affiliate within
12 months after such Put Notice Date, treating Issuer as a going concern and
without regard to (i) the lack of liquidity of the Common Stock due to any
restrictions or other limitations contained in this Agreement, the Shareholder
Agreement, the Warrants or otherwise, (ii) any discount for minority interests,
(iii) the fact that some of the issued and outstanding shares of the Common
Stock may not have any voting rights or may not have full voting rights, (iv)
the fact that one or more of the holders of the Common Stock may be unable to
exercise in full any of its voting rights due to regulatory, contractual or
other restrictions, or (v) the fact that contractual or regulatory approvals,
consents, waivers, licenses, permits or notifications may need to be obtained in
connection with such sale and the time required to obtain the same. For purposes
of determining the Fair Market Value, it shall be assumed that, in such an arm's
length transaction, (A) the seller would not be under any compulsion to sell,
and (B) the purchaser would not be under any compulsion
Page 3
to purchase. The Fair Market Value shall be determined by agreement or appraisal
in accordance with the procedures described below.
If the Fair Market Value is being determined in connection with the exercise of
a Put Right, within 20 days after the applicable Company Notice Date, Issuer and
the Holders of a majority of the Warrant Stock issued or issuable upon exercise
of the Warrants who have given Put Notices in connection with such Put Right
(the MAJORITY PUT HOLDERS) shall each designate a representative and such
representatives will meet and use their best efforts to reach an agreement on
the Fair Market Value. The Majority Put Holders (in the case of the exercise of
a Put Right), are herein called the RELEVANT MAJORITY HOLDERS. The Company
Notice Date (in the case of the exercise of a Put Right), is herein called the
RELEVANT NOTICE DATE.
If the representatives designated by Issuer and the Relevant Majority Holders
are unable to reach such agreement within 15 days after the date on which the
later of the two representatives are designated, then (A) the Relevant Majority
Holders shall immediately designate one Independent Appraiser; (B) Issuer shall
immediately designate one Independent Appraiser; (C) the two Independent
Appraisers so selected shall, within 20 days after the date on which the later
of the two Independent Appraisers are appointed, determine independently the
Fair Market Value using the parameters established in the first paragraph of
this definition; (D) if the lesser of the two appraised values exceeds or is
equal to 90% of the other appraised value, then the Fair Market Value will be
the average of the two, which average amount shall be conclusive and binding
upon all the applicable parties; (E) if the lesser of the two appraised values
is less than 90% of the other appraised value, then the two appraisers shall,
within 20 days of the date of the later of the two appraisals appoint a third
Independent Appraiser; and (F) the third Independent Appraiser so selected
shall, within 15 days of its appointment, determine independently the Fair
Market Value using the parameters established in the first paragraph of this
definition, which determination shall be conclusive and binding upon all the
applicable parties.
Issuer will provide each Independent Appraiser with all information about Issuer
which such Independent Appraiser reasonably deems necessary for determining the
Fair Market Value. The fees and expenses of the appraisal process (including
those of the Independent Appraisers) will be paid by Issuer. Issuer may require
that the Independent Appraisers keep confidential any non-public information
received as a result of this paragraph pursuant to reasonable confidentiality
arrangements.
FINANCING shall mean the borrowing of money by Issuer (including in connection
with any refinancing of existing indebtedness of Issuer), the sale or issuance
of Additional Shares of Common Stock (as defined in the Warrant), a
recapitalization of Issuer, a revaluation of Issuer's assets (to the extent
permitted under applicable law and GAAP), transfers by Issuer from its capital
to its surplus accounts, effecting the sale of the Warrants and/or the Warrant
Stock required to be purchased by Issuer under Section 6 to one or more third
parties or any other transaction (other than a sale of a majority of the
Page 4
assets of Issuer) pursuant to which Issuer makes available funds in an amount
sufficient to satisfy in cash all its obligations under Section 6.
GAAP shall mean generally accepted accounting principles, consistently applied
throughout the specified period.
GOVERNMENTAL AUTHORITY shall mean any nation or government, any state or other
political subdivision thereof, and any entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to government,
and any corporation or other entity owned or controlled (whether through
ownership of securities or other ownership interests, by contract or otherwise)
by any of the foregoing.
HOLDER shall mean any Person who acquires Warrants or Warrant Stock pursuant to
the provisions of this Agreement, including any transferees of Warrants or
Warrant Stock, PROVIDED, HOWEVER, that a holder of Warrant Stock purchased
pursuant to an effective registration statement or in an ordinary brokerage
transaction pursuant to Rule 144 shall not be deemed a Holder.
INCLUDE and INCLUDING shall be construed as if followed by the phrase "without
being limited to".
INDEBTEDNESS shall have the meaning assigned to such term in the Note Purchase
Agreement.
INDEPENDENT APPRAISER shall mean an appraiser which is a recognized independent
expert (including any Investment Banking Firm) experienced in valuing businesses
similar or related to the principal business of Issuer.
INVESTMENT BANKING FIRM shall mean a nationally recognized investment banking
firm.
INVESTOR shall have the meaning set forth at the head of this Agreement.
ISSUER shall have the meaning set forth at the head of this Agreement.
JOINDER AGREEMENT shall mean a Joinder Agreement between Issuer and a
Stockholder, which shall be substantially in the form attached as Annex 3
hereto.
LIEN shall mean, with respect to any asset, any mortgage, lien, pledge, charge,
security interest or encumbrance of any kind in respect of such asset. For
purposes of this Agreement, a Person shall be deemed to own subject to a Lien
any asset which it has acquired or holds subject to the interest of a vendor or
lessor under any conditional sale agreement, capital lease or other title
retention agreement relating to such asset.
MAJORITY PUT HOLDERS shall have the meaning assigned to such term in the
definition of Fair Market Value in this Section 1.
Page 5
MAJORITY WARRANT STOCKHOLDERS shall mean the Holders of a majority of the
Warrant Stock issued or issuable upon exercise of the Warrants. For purposes of
giving notices, waivers and consents hereunder, Holders of Warrants shall be
deemed holders of Common Stock issued on exercise thereof.
NASDAQ shall mean the National Association of Securities Dealers automated
quotation system.
NOTEHOLDERS shall have the meaning assigned to such term in the Note Purchase
Agreement.
NOTE PURCHASE AGREEMENT shall have the meaning set forth at the head of this
Agreement.
NOTES shall have the meaning assigned to such term in the Note Purchase
Agreement.
OBSERVER shall have the meaning assigned to such term in Section 8.9.
OFFEREE shall have the meaning assigned to such term in Section 8.8.
OFFER NOTICE shall have the meaning assigned to such term in Section 8.8.
OFFER PERIOD shall have the meaning assigned to such term in Section 8.8.
OPTION shall mean any warrant, option or other right to subscribe for or
purchase a specified security of Issuer.
OTHER EQUITY DOCUMENTS shall mean the Existing Warrants and the Shareholder
Agreement.
OTHER EQUITY SECURITIES shall mean the Employee Options, the Existing Warrant
Shares and the shares of Common Stock purchased or purchasable by the holders of
the Other Securities upon the exercise thereof.
OTHER SECURITIES shall mean any stock (other than Warrant Stock) and other
securities of Issuer or any other Person (corporate or otherwise) which the
Holders at any time shall be entitled to receive, or shall have received, upon
the exercise of the Warrants or pursuant to Section 5 thereof, in lieu of or in
addition to Common Stock, or which at any time shall be issuable or shall have
been issued in exchange for or in replacement of Warrant Stock or Other
Securities received in an earlier exchange, exercise or replacement of Warrant
Stock.
OUT OF THE MONEY shall mean (a) in the case of an Option, that the fair market
value of the shares of Common Stock which the holder thereof is entitled to
purchase or subscribe for is less than the exercise price of such Option and (b)
in the case of a Convertible Security, that the quotient resulting from dividing
the fair market value of such Convertible Security by the number of shares of
Common Stock into or for which such
Page 6
Convertible Security is exercisable, convertible or exchangeable is greater than
the fair market value of a share of Common Stock.
PARTICIPATING SECURITIES shall mean any security the rights of the holders of
which are not limited to a fixed sum or percentage of liquidation preference or
principal amount, a sum determined by reference to a formula based on a
published index of interest rates, an interest rate publicly announced by a
financial institution or a similar index of interest rates in respect of
interest or dividends, and to a fixed sum or percentage of principal amount or
liquidation preference in any distribution of assets.
PERSON shall mean a corporation, an association, a partnership, a joint venture,
an organization, a business, an individual or a Governmental Authority.
PREFERRED STOCK shall mean, as to any Person, any capital stock of such Person
which is preferred as to dividends or assets over any other class of any other
stock of such Person.
PROPERTY shall have the meaning assigned to such term in the Note Purchase
Agreement.
PROPOSED PURCHASER shall have the meaning assigned to such term in Section 7.2.
PUT NOTICE shall have the meaning assigned to such term in Section 6.1(b).
PUT NOTICE DATE shall mean, with respect to a Put Notice, the date on which such
Put Notice is given or deemed given, as the case may be, to Issuer.
PUT POSTPONEMENT shall have the meaning assigned to such term in Section 6.2(e).
PUT PRICE PER SHARE shall mean, as at any date, (i) the Fair Market Value
divided by (ii) the number of shares of Common Stock then outstanding on a fully
diluted basis.
PUT REACTIVATION DATE shall have the meaning assigned to such term in Section
6.2(e).
PUT RESPONSE NOTICE shall have the meaning assigned to such term in Section
6.2(b).
PUT RIGHT shall mean the right of a Holder to require Issuer to purchase
Warrants and Warrant Stock pursuant to, and in accordance with, Section 6.
PUT WITHDRAWAL NOTICE shall have the meaning assigned to such term in Section
6.2(b).
QUALIFIED PUBLIC OFFERING shall mean an offering or offerings of Common Stock
under one or more effective registration statements under the Securities Act
such that, after giving effect thereto, (i) at least 20% of the outstanding
Common Stock (on a fully diluted basis) has been sold pursuant to such
offerings, and (ii) such offerings result in aggregate cash proceeds being
received by Issuer and any selling Stockholders of at least $10,000,000
exclusive of underwriter's discounts and other expenses, as a result of which
Common Stock is listed or admitted to trading on a national securities exchange
or quoted by NASDAQ.
Page 7
RELEVANT MAJORITY HOLDERS shall have the meaning assigned to such term in the
definition of Fair Market Value in this Section 1.
RELEVANT NOTICE DATE shall have the meaning assigned to such term in the
definition of Fair Market Value in this Section 1.
RESTRICTED CERTIFICATE shall mean a certificate for shares of Warrant Stock or
Warrants bearing or required to bear the restrictive legend set forth in Section
4.4.
RESTRICTED SECURITIES shall mean Restricted Stock and Restricted Warrants.
RESTRICTED STOCK shall mean Warrant Stock evidenced by a Restricted Certificate.
RESTRICTED WARRANTS shall mean Warrants evidenced by a Restricted Certificate.
RULE 144 shall mean Rule 144 promulgated by the Commission under the Securities
Act (or any successor or similar rule then in force).
RULE 144A shall mean Rule 144A promulgated by the Commission under the
Securities Act (or any successor or similar rule then in force).
SECURITIES ACT shall mean the Securities Act of 1933, as amended, or any similar
Federal statute, and the rules and regulations of the Commission thereunder, all
as the same shall be in effect at the time.
SELLING STOCKHOLDER shall have the meaning assigned to such term in Section 7.1.
SENIOR NOTES shall have the meaning assigned to it in Section 1.1(C) of the Note
Purchase Agreement.
SHAREHOLDER AGREEMENT shall mean the Shareholder Agreement, dated as of October
14, 2005, among the Issuer and the parties thereto, a copy of which is attached
as Annex 2, as amended from time to time.
STOCKHOLDER shall mean any Person who directly or indirectly owns any shares of
Common Stock, including any shares of Warrant Stock or any shares of Common
Stock purchased or purchasable by the holder of an Option upon the exercise
thereof.
STOCK UNIT shall have the meaning assigned to such term in the form of Warrant
attached as Annex 1 hereto.
SUBSIDIARY shall mean any Person in which Issuer, directly or indirectly through
Subsidiaries or otherwise, beneficially owns more than 50% of either the equity
interests in or the Voting Capital Stock of such Person.
TAG-ALONG PURCHASE OFFER shall have the meaning assigned to such term in Section
7.2.
Page 8
TAG-ALONG SALE shall have the meaning assigned to such term in Section 7.1(a).
TRIGGERING EVENT shall mean the earliest to occur of: (i) the sixth anniversary
of the Closing Date; (ii) a merger, share exchange or consolidation involving
Issuer, unless Issuer is the survivor and the shares of capital stock
outstanding immediately prior to such merger, share exchange or consolidation
are not subject to purchase, redemption, exchange cancellation or any other
change, as a result thereof, or unless the consideration to be received by the
Stockholders in such merger, share exchange or consolidation consists solely of
cash or securities listed or admitted to trading on a national securites
exchange or quoted by NASDAQ, (iii) a sale, lease or other disposition in a
single transaction or series of related transactions of all or a majority of the
assets of Issuer, unless the consideration to be received by the Stockholders in
such sale, lease or other disposition consists solely of cash or securities
listed or admitted to trading on a national securites exchange or quoted by
NASDAQ; and (iv) any Change of Control.
VOTING CAPITAL STOCK with respect to any corporation shall mean its common stock
and Preferred Stock entitled to vote generally for the election of directors.
VSL MERGER shall mean the merger of VeraSun Merger LLC, a Delaware limited
liability company, into VeraSun, LLC, a Delaware limited liability company
effective as of October 14, 2005.
WARRANT STOCK shall mean (i) the shares of Common Stock purchased or purchasable
by the Holders of the Warrants upon the exercise thereof, including any Common
Stock into which such Common Stock may thereafter be changed or converted, and
(ii) any additional shares of Common Stock issued or distributed by way of a
dividend, stock split or other distribution in respect of the Common Stock
referred to in clause (i) above, or acquired by way of any rights offering or
similar offering made in respect of the Common Stock referred to in clause (i)
above. Any Warrant Stock purchased by Issuer shall, upon such purchase, cease to
be Warrant Stock, cease to be outstanding and Issuer, upon such purchase, shall
not be deemed a Holder.
WARRANTS shall have the meaning assigned to such term in Section 2.1.
ACCOUNTING TERMS AND DETERMINATIONS
1.2 Except as otherwise may be expressly provided herein, all accounting terms
used herein shall be interpreted, and all financial statements and certificates
and reports as to financial matters required to be delivered to the Holders
hereunder and under the Warrants shall be prepared, in accordance with GAAP. All
calculations made for the purposes of determining compliance with the terms of
this Agreement and the Warrants shall (except as otherwise may be expressly
provided herein) be made by application of GAAP.
Page 9
2. PURCHASE AND SALE OF WARRANTS
AUTHORIZATION AND ISSUANCE OF SHARES AND WARRANTS
2.1 Issuer has authorized: (a) the issuance of warrant certificates covering the
purchase of Stock Units representing shares of Common Stock in the form of Annex
1 to this Agreement (such certificates, together with the rights to purchase
Common Stock provided thereby and all warrant certificates covering such stock
issued upon transfer, division or combination of, or in substitution for, any
thereof, sometimes called the WARRANTS) for issuance to the Investor pursuant to
this Agreement; and (b) the issuance of such number of shares of Common Stock as
shall be necessary to permit Issuer to comply with its obligations to issue
Common Stock pursuant to the Warrants.
THE PURCHASE OF THE WARRANTS
2.2 On the date hereof:
(a) Issuer shall issue to the Investor Warrants covering 1,180,000 Stock Units
which represents 2.66% of the outstanding shares of Common Stock on a
fully diluted basis on the date of original issuance of the Warrants and
after the effectiveness of the VSL Merger; and
(b) Issuer shall deliver to the Investor a single certificate for the Warrants
to be acquired by the Investor hereunder, registered in the name of the
Investor, except that, if the Investor shall notify Issuer in writing
prior to such issuance that it desires certificates for Warrants to be
issued in other denominations or registered in the name or names of any
Affiliate, nominee or nominees of the Investor for its or their benefit,
then the certificates for Warrants shall be issued to the Investor in the
denominations and registered in the name or names specified in such
notice.
PURCHASE FOR THE INVESTOR'S ACCOUNT
2.3 The Investor represents and warrants to Issuer as follows:
(a) The Investor is purchasing and shall purchase the Warrants for its own
account, without a view to the distribution thereof, all without
prejudice, however, to the right of the Investor at any time, in
accordance with this Agreement or the Shareholder Agreement, lawfully to
sell or otherwise to dispose of all or any part of the Warrants or the
Warrant Stock held by it.
(b) The Investor is an "accredited investor" within the meaning of Regulation
D under the Securities Act.
SECURITIES ACT COMPLIANCE
2.4 The Investor understands that Issuer has not registered the Warrants or the
Warrant Stock under the Securities Act, and the Investor agrees that neither the
Warrants
Page 10
nor the Warrant Stock shall be sold or transferred or offered for sale
or transfer without registration under the Securities Act or the availability of
an exemption therefrom, all as more fully provided in Section 4.
3. REPRESENTATIONS AND WARRANTIES
Issuer represents and warrants as follows:
EXISTENCE; QUALIFICATION
3.1 The Issuer is a corporation duly organized, validly existing and in good
standing under the law of the State of South Dakota. The Issuer is duly
qualified, licensed or admitted to do business and is in good standing as a
foreign corporation in every jurisdiction where the failure to be so qualified
would have a material adverse effect on the business, financial condition,
operations, assets, prospects, liabilities or capitalization of Issuer taken as
a whole and has all requisite corporate power and authority to transact its
business in all such jurisdictions.
NO BREACH
3.2 The execution, delivery and performance of this Agreement, the Warrants and
the Shareholder Agreement by Issuer and the consummation by it of the
transactions contemplated hereby and thereby and the execution, delivery and
performance of this Agreement and the consummation by it of the transactions
contemplated hereby will not (a) violate the certificate of incorporation or
by-laws of Issuer, (b) violate any loan or credit agreement to which Issuer is a
party or is bound, or result in a breach. of or default under any other
instrument or agreement to which Issuer is a party or is bound in a way which
could reasonably be expected to have a material adverse effect on (i) the
property, business, operations, financial condition, prospects, liabilities or
capitalization of Issuer, (ii) the ability of Issuer to perform its obligations
under any of this Agreement, the Warrant and the Shareholder Agreement, (iii)
the validity or enforceability of this Agreement, the Warrant and the
Shareholder Agreement, or (iv) the rights and remedies of the Holders under any
of this Agreement, the Warrant and the Shareholder Agreement, (c) violate any
judgment, order, injunction, decree or award against or binding upon Issuer, (d)
result in the creation of any Lien upon any of the properties or assets of
Issuer, or (e) violate any law, rule or regulation relating to Issuer.
CORPORATE ACTION
3.3 The Issuer has all necessary corporate power and authority to execute,
deliver and perform its respective obligations under this Agreement, the
Warrants and the Shareholder Agreement. The execution, delivery and performance
by Issuer of this Agreement, the Warrants and the Shareholder Agreement have
been duly authorized by all necessary corporate action (including all
stockholder action) on the part of Issuer. This Agreement, the Warrants and the
Shareholder Agreement have been duly executed and delivered by Issuer and
constitutes the legal, valid and binding obligation of Issuer, enforceable
against
Page 11
Issuer in accordance with their respective terms, except as enforceability may
be limited by applicable bankruptcy, insolvency, reorganization, moratorium and
similar laws affecting the rights of creditors generally as applicable to Issuer
and by general equitable principles (regardless of whether such enforceability
is considered in a proceeding in equity or at law).
APPROVALS
3.4 Except in connection with the registration of the Warrant Stock pursuant to
the Shareholder Agreement, no authorizations, approvals or consents of, and no
filings or registrations with, any Governmental Authority or any other Person
are necessary for the execution, delivery or performance by Issuer of this
Agreement, the Warrants or the Shareholder Agreement or for the validity or
enforceability thereof. Any such action required to be taken as a condition to
the execution and delivery of this Agreement and the Shareholder Agreement, or
the execution, issuance and delivery of the Warrants, has been duly taken by all
such Governmental Authorities or other Persons, as the case may be.
INVESTMENT COMPANY ACT
3.5 Issuer is not an "investment company", or a company "controlled by" an
"investment company", within the meaning of the Investment Company Act of 1940,
as amended.
PUBLIC UTILITY HOLDING COMPANY ACT
3.6 Issuer is not a "holding company", or an "affiliate" of a "holding company"
or a "subsidiary company" of a "holding company", within the meaning of the
Public Utility Holding Company Act of 1935, as amended.
CAPITALIZATION
3.7(a) On the date hereof, the total number of shares of capital stock which
Issuer has authority to issue is 350,000,000 shares, consisting of (i)
100,000,000 shares of Preferred Stock, par value $0.01 per share, none of
which are outstanding; and (ii) 250,000,000 shares of Common Stock, par
value $.01 per share. Schedule I hereto correctly sets forth the capital
stock and equity securities owned of record and the names of the owners
of record on the date hereof. Upon the issuance of the Warrants under
this Agreement, other than (A) the Warrants to be issued pursuant to this
Agreement, (B) the Employee Options, and (C) the Existing Warrants,
Issuer shall not have outstanding any Convertible Securities or Options
exercisable or convertible into or exchangeable for any shares of capital
stock or Participating Securities of Issuer, nor, other than the proposed
offering of up to 17,500,000 shares of Common Stock on or about November
30, 2005, shall it have outstanding any agreements providing for the
issuance (contingent or otherwise) of, or any calls, commitments or
claims of any character relating to, any capital stock or
Page 12
Participating Securities of Issuer or Convertible Securities exercisable
or convertible into or exchangeable for any capital stock or
Participating Securities of Issuer, or obligations of the type specified
in Section 8.6(d)(iii).
(b) There is not in effect on the date hereof any agreement by Issuer
pursuant to which any holders of securities of Issuer have a right to
cause Issuer to register such securities under the Securities Act, other
than the Shareholder Agreement, or any agreement to which Issuer or (to
its knowledge) any of its stockholders are a party relating to the
voting, transfer or sale of such securities.
(c) As of the date hereof, all certificates representing issued and
outstanding shares of Common Stock which have been issued to each of the
Stockholders existing as of the date hereof bear the legend set forth in
Section 9 of the Shareholder Agreement on the reverse side thereof.
PRIVATE OFFERING
3.8(a) Assuming the truth and accuracy of the Investor's representations and
warranties contained in Section 2.3, the issuance and sale of the
Warrants to the Investor hereunder are exempt from the registration
and prospectus delivery requirements of the Securities Act.
(b) All stock and securities of Issuer heretofore issued and sold by Issuer
were and all securities of Issuer issued and sold by Issuer on the date
hereof are being issued and sold in accordance with, or were exempt from,
the registration and prospectus delivery requirements of the Securities
Act.
(c) Issuer agrees that neither Issuer nor any Person acting on its behalf has
offered or will offer the Warrants or shares of Warrant Stock or any part
thereof or any similar securities for issue or sale to, or has solicited
or will solicit any offer to acquire any of the same from, any Person so
as to bring the issuance and sale of the Warrants or shares of Warrant
Stock within the provisions of the registration and prospectus delivery
requirements of the Securities Act.
NO LITIGATION
3.9(a) There is no action, suit, proceeding or investigation pending or, to
the best of Issuer's knowledge after due inquiry, threatened against
Issuer before any Governmental Authority seeking to enjoin the
transactions contemplated by this Agreement, the Warrants or the
Shareholder Agreement.
(b) There are no legal or arbitral proceedings or any proceedings by or
before any Governmental Authority, now pending or (to the knowledge of
Issuer) threatened against Issuer which, if adversely determined, could
have a material adverse effect on Issuer's business, financial condition,
operations, assets, prospects, liabilities or capitalization of Issuer.
Page 13
BROKERS
3.10 All negotiations relative to this Agreement and the transactions
contemplated hereby have been carried out by Issuer directly with Investor
without the intervention of any Person on behalf of Issuer in such manner as to
give rise to any valid claim by any Person against Investor or any Holder for a
finder's fee, brokerage commission or similar payment.
4. RESTRICTIONS ON TRANSFERABILITY
TRANSFERS GENERALLY
4.1 Except as otherwise provided in Section 5, the Restricted Securities shall
be transferable only upon the conditions specified in this Section 4 and in the
Shareholder Agreement, which conditions are intended to insure compliance with
the provisions of the Securities Act and applicable state securities laws in
respect of the transfer of any Restricted Securities.
TRANSFERS OF RESTRICTED SECURITIES PURSUANT TO REGISTRATION STATEMENTS, RULE 144
AND RULE 144A
4.2 The Restricted Securities may be offered or sold by the Holder thereof
pursuant to (a) an effective registration statement under the Securities Act, or
(b) to the extent applicable, Rule 144 or Rule 144A or (c) any other legally
available means of transfer.
NOTICE OF CERTAIN PRIVATE TRANSFERS
4.3 If any Holder of any Restricted Security desires to transfer such Restricted
Security other than pursuant to an effective registration statement under the
Securities Act or pursuant to Rule 144 or Rule 144A, then such Holder shall
deliver, at such Holder's expense, to Issuer a notice with respect to the
proposed transfer to the effect that an exemption from registration under the
Securities Act is available.
RESTRICTIVE LEGENDS
4.4 Until otherwise permitted by this Section 4, each certificate for Warrants
issued under this Agreement, each certificate for any Warrants issued to any
subsequent transferee of any such certificate, each certificate for any Warrant
Stock issued upon exercise of any Warrant and each certificate for any Warrant
Stock issued to any subsequent transferee of any such certificate, shall be
stamped or otherwise imprinted with a legend in substantially the following
form:
"THE TRANSFER OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE IS SUBJECT
TO THE CONDITIONS SPECIFIED IN THAT CERTAIN WARRANT AGREEMENT DATED AS OF
OCTOBER 14, 2005 (THE WARRANT AGREEMENT), BETWEEN VERASUN ENERGY
CORPORATION, A SOUTH DAKOTA CORPORATION (ISSUER), WITH AN
Page 14
ORGANIZATIONAL IDENTIFICATION NUMBER OF DB050019, AND TEACHERS INSURANCE
AND ANNUITY ASSOCIATION OF AMERICA, AS THE WARRANT AGREEMENT MAY BE
MODIFIED AND SUPPLEMENTED AND IN EFFECT FROM TIME TO TIME, AND NO TRANSFER
OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE SHALL BE VALID OR
EFFECTIVE UNTIL SUCH CONDITIONS HAVE BEEN FULFILLED. A COPY OF THE FORM OF
THE WARRANT AGREEMENT IS ON FILE AND MAY BE INSPECTED AT THE PRINCIPAL
EXECUTIVE OFFICE OF ISSUER. THE HOLDER OF THIS CERTIFICATE, BY ACCEPTANCE
OF THIS CERTIFICATE, AGREES TO BE BOUND BY THE PROVISIONS OF THE WARRANT
AGREEMENT."
TERMINATION OF RESTRICTIONS
4.5 All the restrictions imposed by this Section 4 upon the transferability of
the Restricted Securities shall cease and terminate as to any particular
Restricted Security when such Restricted Security shall have been effectively
registered under the Securities Act and applicable state securities laws and
sold by the Holder thereof in accordance with such registration or sold under
and pursuant to Rule 144 or is eligible to be sold under and pursuant to
paragraph (k) of Rule 144. Whenever the restrictions imposed by this Section 4
shall terminate as to any Restricted Security as hereinabove provided, the
Holder thereof shall be entitled to receive from Issuer, without expense, a new
certificate evidencing such Restricted Security not bearing the restrictive
legend otherwise required to be borne by a certificate evidencing such
Restricted Security.
5. CERTAIN DISPOSITIONS OF SECURITIES
CERTAIN DISPOSITIONS OF SECURITIES
5.1(a) Notwithstanding anything in this Agreement or the Warrants to the
contrary, but subject to compliance with the Securities Act, applicable
state securities laws and the requirement as to placement of a legend on
certificates for Restricted Securities specified in Section 4.4, any
Holder shall have the right to transfer any or all of its Restricted
Securities:
(i) to any Person who at the time owns (directly or indirectly) at
least a majority of the Voting Capital Stock of such Holder;
(ii) to any Person at least a majority of whose Voting Capital
Stock shall at the time be owned (directly or indirectly) by
such Holder or by any Person who owns (directly or indirectly)
at least a majority of the Voting Capital Stock of such
Holder;
(iii) to another Holder; or
Page 15
(iv) in the case of any Holder which is an insurance company,
pension fund, bank, bank holding company or a subsidiary of an
insurance company, pension fund, bank or bank holding company,
to a third party, if, in the reasonable judgment of such
Holder, such transfer is required to be effected by such
Holder because (A) its investment in Warrants or shares of
Warrant Stock may exceed any limitation to which it is
subject, or is otherwise not permitted, under any law, rule or
regulation of any Governmental Authority, or (B) restrictions
are imposed on such Holder under any law, rule or regulation
which, in the reasonable judgment of such Holder, make it
illegal or unduly burdensome to continue to hold such Warrants
or shares of Warrant Stock or a portion thereof.
The party to which Restricted Securities are transferred pursuant to the
immediately preceding sentence shall be deemed to be a Holder of such
Restricted Securities and bound by the provisions of this Agreement
applicable to Holders so long as he, she or it continues to own any of the
Restricted Securities so transferred to such transferee.
(b) If the circumstances described in clause (iv) of Section 5.1(a) arise,
Issuer shall assist such Holder in disposing of its Warrants and Warrant
Stock in a prompt and orderly manner and, at the request of such Holder,
the Issuer shall provide (and authorize such Holder to provide) financial
and other information covering the Issuer to any prospective purchaser of
the Warrants or Warrant Stock owned by such Holder as such purchaser shall
reasonably request.
CANCELLATION AND ISSUANCE
5.2 If any Holder or any of its Affiliates assigns or otherwise transfers all or
any of its Notes and/or Commitments (including by selling participations
therein), or assigns or otherwise transfers any of its rights or obligations
under the Note Purchase Agreement or the Notes, to any Person, such Holder may
request (upon 10 days' prior notice to Issuer) that (i) a number of Warrants
held by such Holder be canceled on the date of such assignment and transfer; and
(ii) a like number of Warrants be issued by Issuer to the Person to whom such
Notes and/or Commitments, or such rights or obligations, are being assigned or
otherwise transferred. Upon the date specified in such request:
(a) Issuer shall issue, and the Holder shall surrender for cancellation, such
number of Warrants as aforesaid, PROVIDED that such issuance shall not
violate the Securities Act or any applicable state securities laws;
(b) Each Person that receives a certificate for Warrants will deliver a
certificate to Issuer affirming the representations and warranties
contained in Section 2.3 as of such date; and
Page 16
(c) Issuer will deliver a certificate to each Person that receives a
certificate for Warrants affirming the representations and warranties
contained in Section 3 as of such date.
6. PUT RIGHTS
PUT RIGHTS
6.1 (a) At any time on or after the occurrence of the Triggering Event, but
prior to the earlier to occur of (i) the Expiration Date and (ii) the
consummation of a Qualified Public Offering, each Holder will have the
right to require Issuer to purchase all of the Warrants and the Warrant
Stock owned by such Holder.
(b) A Holder may exercise a Put Right by delivering a notice to Issuer stating
that such Holder will require Issuer to purchase the Warrants or Warrant
Stock specified in such notice (a PUT NOTICE). Within five days after
receipt of a Put Notice by Issuer, Issuer shall give a notice to the
Holders (other than the Holder who gave such Put Notice) advising them of
the receipt by Issuer of such Put Notice, together with a copy of such Put
Notice. The date upon which Issuer shall so advise the other Holders is
herein called the COMPANY NOTICE DATE. Within 15 days after the Company
Notice Date, each other Holder also may give a Put Notice to Issuer and
each such Put Notice shall be deemed given as of the date of the Put
Notice given by the Holder initially exercising the Put Right. The failure
so to give a Put Notice by a Holder within such 15-day period shall be
without prejudice to the right of such Holder to give thereafter a Put
Notice pursuant to this Section 6.
PROCEDURES
6.2 (a) The purchase and sale of the Warrants and the Warrant Stock pursuant
to a Put Right shall be consummated on a date selected by Issuer upon at
least five days' prior written notice to such Holders, which date in no
event shall be earlier than the date five days, nor later than the date 10
days, after the determination of Fair Market Value (the PUT CLOSING DATE).
On the Put Closing Date, Issuer shall purchase from the Holder which has
given such Put Notice, and such Holder shall sell to Issuer, the Warrants
and/or the Warrant Stock specified in such Put Notice: (i) in the case of
each share of Warrant Stock so purchased, at a purchase price equal to the
Put Price Per Share as of the Put Notice Date; and (ii) in the case of
each Warrant, at a purchase price equal to (A) the product of (1) the Put
Price Per Share as of the Put Notice Date and (2) the number of shares of
Warrant Stock for which such Warrant is exercisable as of the Put Notice
Date, MINUS (B) an amount equal to the aggregate Exercise Price as of the
Put Notice Date for such number of shares of Warrant Stock. Payment of the
purchase price for the Warrants and/or the Warrant Stock so purchased by
Issuer shall be made by wire transfer in immediately available funds.
Page 17
(b) If Issuer is prohibited from purchasing all Warrants and Warrant Stock put
to it pursuant to a Put Notice because (i) of the existence of a
contractual restriction, including, but not limited to, a default which is
then existing or would result from such purchase under the Note Purchase
Agreement (the DEFAULTS), or (ii) Issuer does not have sufficient funds
legally available therefor under applicable law, then Issuer shall give
notice (a PUT RESPONSE NOTICE) to each Holder which has delivered such Put
Notice of (x) the reason that it is unable to purchase all Warrants and
Warrant Stock put to it pursuant to a Put Notice, including (1) if due to
a deficiency, the computation thereof, and/or (2) if due to a Default, the
nature of the covenants which have been or would be breached and if such
provisions are financial covenants, a computation of the amounts or ratios
setting forth the deficiencies with respect to such covenants, and (y) the
aggregate amount of such Warrants and Warrant Stock, if any, which it will
be able to purchase, which Put Response Notice shall be delivered within
five days of the determination of Fair Market Value and shall be given
together with the notice of the Put Closing Date, if any, given by Issuer
pursuant to the first sentence of Section 6.2(a). Each such Holder shall
have the right to withdraw its Put Notice by delivering a notice (a PUT
WITHDRAWAL NOTICE) to Issuer at any time prior to the Put Closing Date or
if none is set in the Put Response Notice, prior to the last day on which
a Put Closing could occur pursuant to the first sentence of Section
6.2(a). If any such Holders have not timely delivered Put Withdrawal
Notices, unless prohibited by a Default which has not been waived by the
Noteholders, Issuer thereupon shall purchase from such Holders the
aggregate amount of Warrants and Warrant Stock, if any, it may purchase on
such date with funds legally available under applicable law for such
purpose. Such purchase shall be allocated among the Holders which have not
timely delivered Put Withdrawal Notices pro rata, based on the ratio of
the number of shares of Warrant Stock put to Issuer (including Warrant
Stock issuable upon the exercise of Warrants put to Issuer) by each such
Holder to the number of shares of Warrant Stock put to Issuer (including
Warrant Stock issuable upon the exercise of Warrants put to Issuer) by all
such Holders.
(c) If Issuer is prohibited from purchasing any Warrants and/or Warrant Stock
upon the exercise by a Holder of a Put Right for any of the reasons
described in the first sentence of Section 6.2(b), then Issuer shall use
its best efforts to increase its legally available funds under applicable
law to an amount sufficient to enable it to purchase legally all Warrants
and Warrant Stock put to it pursuant to a Put Notice and to obtain relief
from the Defaults in order to enable it to make the required payments,
including through effecting a Financing, obtaining the requisite consent
of the Noteholders under the Note Purchase Agreement or any such holders
of Indebtedness or otherwise, in each case, as soon as possible.
(d) If on the Expiration Date any Holder is prevented from exercising its
rights under this Section 6 for any of the reasons described in the first
sentence of Section 6.2(b), Issuer's obligation to purchase Warrants
and/or Warrant Stock shall be extended until 5:00 p.m., New York City
time, on the last day of the calendar
Page 18
month next following by at least 120 days the date upon which Issuer shall
notify the Holders that such reason or reasons no longer exist.
(e) If Issuer is prohibited from purchasing some of or all Warrants and/or
Warrant Stock upon the exercise by a Holder of a Put Right for any of the
reasons described in the first sentence of Section 6.2(b) and such Holder
shall not have timely delivered a Put Withdrawal Notice, then (i) the Put
Price Per Share for such Holder with respect to such unpurchased Warrants
and/or Warrant Stock shall become an accruing liability of Issuer with
interest thereon commencing on the date of exercise of such Put Right
through the date on which the related Warrants and/or Warrant Stock are
purchased by Issuer at a rate per annum equal to 15.5% compounded
quarterly (such liability and interest being herein called the ACCRUING
LIABILITY); and (ii) such obligation of Issuer to purchase shall otherwise
be deemed suspended for so long as and only to the extent that Issuer is
unable to repurchase such Warrants and/or Warrant Stock after taking all
the action described in the last paragraph of Section 6.2(c) (a PUT
POSTPONEMENT) on any Put Reactivation Date, the Put Price Per Share for
such Warrants and Warrant Stock shall be deemed to be the Accruing
Liability. As used herein, PUT REACTIVATION DATE shall mean a date when
the Put Postponement lapses in whole or in part and the obligation of
Issuer to purchase Warrants and Warrant Stock shall no longer be deemed
suspended to the same extent pursuant to clause (ii) of this Section
6.2(c).
(f) The calculations of the Put Price Per Share under this Section 6, other
than with respect to the determination of Fair Market Value, shall be
subject to the reasonable approval of the applicable Majority Put Holders.
7. RIGHT TO JOIN IN SALE
TAG-ALONG RIGHTS
7.1 (a) Notwithstanding anything herein to the contrary, but subject to the
provisions of Section 7.1(b), if any Stockholder or group of Stockholders
of the Issuer proposes, in a single transaction or a series of related
transactions, to sell, dispose of or otherwise transfer, directly or
indirectly, any shares of Common Stock then outstanding in any manner
(each, a TAG-ALONG SALE), then Issuer shall cause such Stockholder (the
SELLING STOCKHOLDER) to refrain from effecting such transaction unless,
prior to the consummation thereof, the Holders shall have been afforded
the opportunity to join in such transfer as provided in Section 7.2 hereof
(it being understood that such Holders shall pay their own expenses in
connection therewith).
(b) The provisions of Section 7.1(a) shall not apply in connection with any
sale, disposition or other transfer of (i) the Employee Options, (ii)
Existing Warrants (iii) the Employee Shares, (iv) up to 500,000 shares by
any Person in any 12-month period, (v) shares transferred for estate
planning purposes where the transferor retains voting control over such
shares and (vi) any shares of Common
Page 19
Stock (A) pursuant to a registration statement filed pursuant to the
Securities Act in which the Holder may participate pursuant to the terms
of the Shareholder Agreement or (B) in an ordinary brokerage transaction
pursuant to Rule 144.
(c) On the date hereof, Issuer shall deliver to Investor a Joinder Agreement
in the form of Annex 3, executed by the Issuer and each of its
Stockholders.
(d) As a condition to the validity of any sale, disposition or other transfer
of any Common Stock (i) by any of the Persons who have executed and
delivered Joinder Agreements pursuant to Section 7.1(c) or this Section
7.1(d) to any other Person, or (ii) by Issuer to any Person in a
transaction in which such Person would become a Stockholder of Issuer,
other than pursuant to an underwritten public offering or in an ordinary
brokerage transaction under Rule 144, the transferee thereof shall execute
and deliver to Issuer and each Holder a Joinder Agreement.
PROCEDURES
7.2 Prior to the consummation of any transaction subject to Section 7.1, the
Person or group of Persons that proposes to acquire shares of Common Stock in a
Tag-Along Sale (the PROPOSED PURCHASER) shall make a written offer to the
Holders (the TAG-ALONG PURCHASE OFFER) which offer shall describe in reasonable
detail the Common Stock and Warrants proposed to be purchased, the price to be
paid and all other terms of the Tag-Along Sale. The Holders shall have 15 days
after the making of the Tag-Along Purchase offer in which to accept the
Tag-Along Purchase Offer. If any Holder accepts the Tag Along Purchase Offer
(PARTICIPATING HOLDER), such Participating Holder shall be entitled to sell in
the Tag-Along Sale a number of shares of Warrant Stock (including Warrant Stock
issuable upon the exercise of Warrants) equal to the product of (i) the quotient
determined by dividing (x) the number of shares of Warrant Stock owned by such
Participating Holder (including Warrant Stock issuable upon the exercise of
Warrants) by (y) the aggregate number of shares of Common Stock (on a fully
diluted basis) owned by the Selling Stockholder and all Participating Holders,
and (ii) the aggregate number of shares of Common Stock and Warrants proposed to
be purchased by the Proposed Purchaser in the Tag-Along Sale; PROVIDED, HOWEVER,
that if the Tag-Along Sale would cause a Change of Control or would cause any
controlling stockholder and their respective Affiliates to own less than a
majority of the outstanding Common Stock or less than a majority of the Voting
Capital Stock of Issuer, then the Participating Holders shall be entitled to
sell 100% of their respective Warrants and Warrant Stock (but not exceeding the
aggregate amount of shares of Common Stock proposed to be acquired in the
Tag-Along Sale). The Tag-Along Purchase Offer shall be at the same price and on
the same terms and conditions as the offer by the Proposed Purchaser to the
Selling Stockholder, except that no Participating Holders shall be required to
make representations and warranties to or agreements with the Proposed Purchaser
other than representations, warranties and agreements regarding such
Participating Holder and its ownership of the Warrants and/or Warrant Stock to
be sold in the Tag-Along Sale.
Page 20
ISSUER'S COVENANTS
7.3 Issuer will not, on or after the date hereof, either (a) deliver to the
persons specified in Section 7.1(a) a certificate evidencing any shares of
Common Stock being sold in a transaction requiring that a Tag-Along Purchase
Offer be made unless the Proposed Purchaser shall have in fact made a Tag-Along
Purchase Offer in accordance with the provisions of Section 7.2, or (b) deliver
to the persons specified in Section 7.1(a) a certificate evidencing any shares
of Common Stock in connection with any other transaction without including on
the reverse side of such certificate a legend in substantially the following
form:
THE SALE, DISPOSITION OR OTHER TRANSFER OF THE SECURITIES REPRESENTED BY
THIS CERTIFICATE IS SUBJECT TO THE PROVISIONS OF SECTION 7 OF THAT CERTAIN
WARRANT AGREEMENT DATED AS OF OCTOBER 14, 2005, BETWEEN VERASUN ENERGY
CORPORATION, A SOUTH DAKOTA CORPORATION WITH AN ORGANIZATIONAL
IDENTIFICATION NUMBER OF DB050019 (ISSUER) AND TEACHERS INSURANCE AND
ANNUITY ASSOCIATION OF AMERICA, AS SUCH WARRANT AGREEMENT MAY BE MODIFIED
AND SUPPLEMENTED AND IN EFFECT FROM TIME TO TIME. A COPY OF THE FORM OF
SUCH WARRANT AGREEMENT IS ON FILE AND MAY BE INSPECTED AT THE PRINCIPAL
EXECUTIVE OFFICE OF ISSUER. THE HOLDER OF THIS CERTIFICATE, BY ACCEPTANCE
OF THIS CERTIFICATE, AGREES TO BE BOUND BY THE PROVISIONS OF SECTION 7 OF
SUCH WARRANT AGREEMENT.
8. HOLDERS, RIGHTS
DELIVERY EXPENSES
8.1 If any Holder surrenders any certificate for Warrants or Warrant Stock to
Issuer or a transfer agent of Issuer for exchange for instruments of other
denominations or registered in another name or names, Issuer shall cause such
new instruments to be issued and shall pay the cost of delivering to or from the
office of such Holder from or to Issuer or its transfer agent, duly insured, the
surrendered instrument and any new instruments issued in substitution or
replacement for the surrendered instrument.
TAXES
8.2 Issuer shall pay all taxes (other than Federal, state or local income taxes)
which may be payable in connection with the execution and delivery of this
Agreement or the Shareholder Agreement or the issuance of the Warrants and
Warrant Stock hereunder or in connection with any modification of this
Agreement, the Shareholder Agreement or the Warrants and shall hold each Holder
harmless without limitation as to time against any and all liabilities with
respect to all such taxes. The obligations of Issuer under this Section 8.2
shall survive any redemption, repurchase or acquisition of Warrants or Warrant
Stock by
Page 21
Issuer, any termination of this Agreement or the Shareholder Agreement, and any
cancellation or termination of the Warrants.
REPLACEMENT OF INSTRUMENTS
8.3 Upon receipt by Issuer of evidence reasonably satisfactory to it of the
ownership of and the loss, theft, destruction or mutilation of any certificate
or instrument evidencing any Warrants or Warrant Stock, and
(a) in the case of loss, theft or destruction, of indemnity reasonably
satisfactory to it (PROVIDED that, if the owner of the same is the
Investor or an institutional lender or investor, its own agreement of
indemnity shall be deemed to be satisfactory), or
(b) in the case of mutilation, upon surrender or cancellation thereof,
Issuer, at its expense, shall execute, register and deliver, in lieu thereof, a
new certificate or instrument for (or covering the purchase of) an equal number
of Warrants or Warrant Stock.
CERTAIN RESTRICTIONS
8.4 Issuer shall not at any time enter into an agreement or other instrument
limiting in any manner its ability to perform its obligations under this
Agreement, the Shareholder Agreement or the Warrants, or making such performance
or the issuance of shares of Common Stock upon the exercise of any Warrant a
default under any such agreement or instrument.
TRANSACTIONS WITH AFFILIATES
8.5 Except as expressly permitted by this Agreement, Issuer shall not directly
or indirectly: (a) make any loan or advance to, or other investment in, an
Affiliate; (b) transfer, sell, lease, assign or otherwise dispose of any assets
to an Affiliate; (c) merge into or consolidate with or purchase or acquire
Property from an Affiliate; (d) enter into any other transaction directly or
indirectly with or for the benefit of an Affiliate (including guarantees and
assumptions of obligations of an Affiliate); PROVIDED, HOWEVER, that (i) for the
purposes of this Section 8.5, no Subsidiary of Issuer shall be deemed to be an
Affiliate of Issuer; (ii) any Affiliate who is an individual may serve as an
officer, director or employee of Issuer and receive reasonable compensation for
his or her services in such capacity, and (iii) Issuer may enter into
transactions providing for the leasing of Property, the rendering or receipt of
services or the purchase or sale of inventory and other assets in the ordinary
course of business if the monetary or business consideration arising therefrom
would be substantially as advantageous to Issuer as the monetary or business
consideration which would obtain in a comparable transaction with a Person or
entity not otherwise an Affiliate of the Issuer or any of the Issuer's
Stockholders.
Page 22
CERTAIN COVENANTS
8.6(a) Issuer shall, at all times prior to the Expiration Date, retain an
independent accounting firm as its auditors, as provided in the Note
Purchase Agreement.
(b) Except as otherwise specifically provided herein, Issuer shall not effect
any repurchase, recapitalization, reorganization, reclassification,
merger, consolidation, share exchange, liquidation, spin-off, stock split,
non-cash dividend, distribution or stock consolidation, subdivision or
combination that would not afford to each Stockholder and Holder the same
type and amount of consideration.
(c) At any time prior to a Qualified Public Offering, Issuer shall afford any
Holder of Warrants and/or Warrant Stock or its authorized agents or any
prospective purchasers of Warrants and/or Warrant Stock, access, at
reasonable times, upon reasonable prior notice, (i) to inspect the books
and records of Issuer and its Subsidiaries, (ii) to discuss with
management of Issuer and its Subsidiaries the business and affairs of
Issuer and its Subsidiaries, and (iii) to inspect the properties of Issuer
and its Subsidiaries.
(d) So long as any Warrants or Warrant Stock shall remain outstanding, Issuer
shall not (i) issue any Participating Security, options for or Convertible
Securities convertible into a Participating Security, (ii) issue any class
of equity other than Common Stock and Preferred Stock as authorized on the
date hereof, (iii) make or agree to make payments to any Person, such as
any "phantom" stock payments, where the amount thereof is calculated with
reference to fair market or equity value of Issuer or any of the
Subsidiaries, or (iv) issue any Common Stock for less than the Exercise
Price.
(e) Issuer shall afford each Holder and its authorized agents the right to
attend all meetings of shareholders of Issuer and the Subsidiaries.
(f) Issuer shall hold an annual meeting of shareholders in South Dakota.
(g) To enable the ready and consistent determination of the Put Price Per
Share and compliance with the covenants set forth herein, Issuer will not
change the last day of its fiscal year from December 31 of each year, or
the last days of the first three fiscal quarters-in each of its fiscal
years from March 31, June 30 and September 30 of each year, respectively.
(h) Except as otherwise specifically provided herein, Issuer shall not effect
any repurchase or redemption of Common Stock from any stockholder, other
than (a) on a pro rata basis from all stockholders and Warrant Holders
participating in such repurchase or redemption at the same type and amount
of consideration or (b) up to 307,693 shares of Common Stock held by
employees of the Issuer on the date hereof. Any repurchase or redemption
of Common Stock (except for the 307,693 shares described above) shall
include Warrant Stock.
Page 23
(i) Issuer shall provide each Holder with notice of the occurrence of the
Triggering Event as soon as possible, but in no event later than the third
Business Day following such Triggering Event, together with a brief
description of the event.
(j) Issuer shall not amend or consent to any modification, supplement or
waiver of any provision of any Other Equity Documents in any manner which
would have an adverse effect on the Holders without the prior written
consent of the Majority Warrant Stockholders. Without limiting the
generality of the foregoing, Issuer shall not amend, or consent to any
modification, supplement or waiver of any provision of any Other Equity
Documents in a way which would materially increase the benefits of the
parties thereto, increase the number of securities which may be issued or
sold thereunder, or materially modify the requirements as to eligibility
for participation therein.
INDEMNIFICATION
8.7 Issuer shall indemnify and hold harmless each of the Investor and the
Holders and each of their respective directors, officers, employees,
stockholders, Affiliates and agents (each, an INDEMNIFIED PERSON) on demand from
and against any and all losses, claims, damages, liabilities (or actions or
other proceedings commenced or threatened in respect thereof) and expenses that
arise out of, result from, or in any way relate to, this Agreement, the Warrants
or the Shareholder Agreement, or in connection with the other transactions
contemplated hereby and thereby (other than the mere diminution of the
Investment by Holders in the Warrants unaccompanied by any other violation of
this Agreement), and to reimburse each indemnified person, upon its demand, for
any legal or other expenses incurred in connection with investigating, defending
or participating in the defense of any such loss, claim, damage, liability,
action or other proceeding (whether or not such indemnified person is a party to
any action or proceeding out of which any such expenses arise), other than any
of the foregoing claimed by any indemnified person to the extent incurred by
reason of the gross negligence or willful misconduct of such indemnified person.
No indemnified person shall be responsible or liable to either Issuer or any
other Person for any damages which may be alleged as a result of or relating to
this Agreement, the Warrants or the Shareholder Agreement, or in connection with
the other transactions contemplated hereby and thereby, except to extent
incurred by reason of the gross negligence or willful misconduct of such
Indemnified Person.
BOARD OBSERVERS
8.8 Issuer shall afford Teachers Insurance and Annuity Association of America
the opportunity to have one representative (each, an OBSERVER) attend as an
observer at (but not participate in or vote at) each meeting of the Board.
Issuer shall give the Observer notice of all such meetings at the same time and
in the same manner as notice is given to members of the Board. The Observer
shall be entitled to receive all written materials and other information given
to the directors of Issuer in connection with such meetings at the same time and
in the same manner and form such materials and information are given to the
directors, and copies of all minutes and all resolutions adopted by the Board
(whether at
Page 24
meetings, by written consent or otherwise) promptly after such adoption and (if
applicable) approval thereof (it being understood that such copies shall be
certified by the Secretary or Assistant Secretary of Issuer). The Observer shall
be appointed by Teachers Insurance and Annuity Association of America. Issuer
shall reimburse Teachers Insurance and Annuity Association of America for the
reasonable out-of-pocket expenses incurred by it in connection with the exercise
of their rights under this Section 8.9.
FINANCIAL STATEMENTS, ETC.
8.9 Issuer shall deliver the information specified below to each Holder of a
Warrant or Warrant Stock:
(a) as soon as available and in any event within 30 days after the end of each
of the first three fiscal quarters of each fiscal year of Issuer,
statements of income, retained earnings and cash flows of Issuer for such
period and for the period from the beginning of the respective fiscal year
to the end of such period, and the related balance sheets as at the end of
each such period, setting forth in each case in comparative form the
corresponding figures for the corresponding period in the preceding fiscal
year (if any), accompanied by a certificate of a senior financial officer
of Issuer, which certificate shall state that such financial statements
fairly present the financial condition and results of operations of
Issuer, and said financial statements fairly present the respective
individual financial condition and results of operations of Issuer in
accordance with GAAP, as at the end of, and for, such period (subject to
normal year-end audit adjustments and except for the absence of financial
footnotes);
(b) as soon as available and in any event within 120 days after the end of
each fiscal year of Issuer, statements of income, retained earnings and
cash flow of Issuer, for such fiscal year and the related balance sheets
as at the end of such fiscal year, setting forth in each case in
comparative form the corresponding figures for the preceding fiscal year,
and accompanied (i) in the case of said statements and balance sheet, by
an opinion thereon of independent certified public accountants selected by
the Issuer and reasonably acceptable to the Majority Warrant Stockholders,
which opinion shall state that said financial statements fairly present
the financial condition and results of operations of Issuer as at the end
of, and for, such fiscal year in accordance with GAAP, and a certificate
of such accountants stating that, in making the examination necessary for
their opinion, they obtained no knowledge, except as specifically stated,
of any default under any credit agreement to which Issuer is a party, and
(ii) in the case of said statements and balance sheets, by a certificate
of a senior financial officer of Issuer, which certificate shall state
that said financial statements fairly present the respective individual
financial condition and results of operations of Issuer, in each case in
accordance with GAAP, as at the end of, and for, such fiscal year;
(c) promptly upon their becoming available, copies of all registration
statements and regular periodic reports, if any, which Issuer shall have
filed with the Commission
Page 25
(or any Governmental Authority substituted therefor) or any national
securities exchange; and
(d) promptly upon the mailing thereof to the shareholders of Issuer or any
holder of Indebtedness of Issuer generally, copies of all financial
statements, reports and proxy statements so mailed.
HOLDERS' RIGHTS IN CASE OF OTHER SECURITIES
8.10 If the Holders at any time shall have received or shall be entitled to
receive Other Securities, appropriate provision shall be made so that the
Holders receive with respect to such Other Securities as nearly as possible the
intended benefits of this Agreement with respect thereto.
9. MISCELLANEOUS
HOME OFFICE PAYMENT
9.1 Notwithstanding anything to the contrary in this Agreement or the Warrants,
so long as the Investor or any nominee designated by the Investor shall be a
Holder, Issuer shall punctually pay all amounts which become due and payable
with respect to any Warrant or Warrant Stock to the Investor at the address
registered on the books of Issuer maintained for such purpose, or at such other
place and in such manner as the Investor may designate by notice to Issuer,
without presentation or surrender of such Warrant or the making of any notation
thereon. The Investor agrees that prior to the sale, transfer or other
disposition of a part of any Warrant, it will make notation thereon of the
number of Stock Units covered by the part of the Warrant sold, transferred or
disposed, or surrender the same in exchange for a Warrant covering the number of
Stock Units remaining on the Warrant so surrendered. Issuer agrees that the
provisions of this section shall inure to the benefit of any other Holder
registered on the books of Issuer.
WAIVER
9.2 No failure on the part of the Investor to exercise and no delay in
exercising, and no course of dealing with respect to, any right, power or
privilege under this Agreement, the Warrants or the Shareholder Agreement
shall operate as a waiver thereof, nor shall any single or partial
exercise of any right, power or privilege under this Agreement, the
Warrantor the Shareholder Agreement preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. The
remedies provided herein are cumulative and not exclusive of any remedies
provided by law.
NOTICES
9.3 (a) All notices, requests and other communications provided for herein and
the Warrants (including any waivers or consents under, this Agreement and
the Warrants) shall be given or made in writing,
Page 26
(i) if to Issuer:
VeraSun Energy Corporation
βββ ββββ ββββββ
βββββββββ, βββββ ββββββ βββββ
Attention: ββββββ β. ββββββ, Chief Executive Officer
(ii) if to the Investor:
Teachers Insurance and Annuity Association of America
βββ βββββ ββββββ
βββ ββββ, βββ ββββ βββββ
Attention: ββββ βββββββ
(iii) if to any other Person who is the registered Holder of any Warrants
or Warrant Stock, to the address for such Holder as it appears in
the stock or warrant ledger of Issuer:
or, in the case of any Holder, at such other address as shall be
designated by such party in a notice to Issuer; or, in the case of Issuer,
at such other address as Issuer may designate in a notice to the Investor
and all other Holders.
(b) All such notices, requests and other communications shall be: (i)
personally delivered, sent by courier guaranteeing overnight delivery or
sent by registered or certified mail, return receipt requested, postage
prepaid, in each case given or addressed as aforesaid; and (ii) effective
upon receipt.
EXPENSES, ETC.
9.4 Issuer agrees to pay or reimburse the Investor and the Holders for: (a) all
reasonable out-of-pocket costs and expenses of the Investor and the Holders
(including the reasonable fees and expenses of Freshfields Bruckhaus ββββββββ
LLP, special New York counsel to the Investor and other reasonable legal fees
and expenses), in connection with (i) the negotiation, preparation, execution
and delivery of this Agreement and the Shareholder Agreement and the issuance of
Warrants hereunder, and (ii) any amendment, modification or waiver of (or
consents in respect of) any of the terms of this Agreement, the Shareholder
Agreement or the Warrants; and (b) all reasonable costs and expenses of the
Investor and the Holders (including reasonable legal fees and expenses) in
connection with (i) any default by Issuer hereunder or under the Warrants or the
Shareholder Agreement or any enforcement proceedings resulting therefrom, and
(ii) the enforcement of this Section 9.4.
AMENDMENTS, ETC.
9.5 Except as otherwise expressly provided in this Agreement, any provision of
this Agreement may be amended or modified only by an instrument in writing
signed by
Page 27
(a) Issuer and (b) the holders of 51% of the shares of Warrant Stock; PROVIDED,
HOWEVER, that (i) the consent of the holders of any such class of shares or
Warrants shall not be required with respect to any amendment or waiver which
does not affect the rights or benefits of such class under this Agreement, and
(ii) no such amendment or waiver shall, without the written consent of all
holders of such shares and Warrants at the time outstanding, amend this Section
9.5.
SUCCESSORS AND ASSIGNS
9.6 This Agreement shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and permitted assigns.
SURVIVAL
9.7 (a) All representations and warranties made by Issuer herein or in any
certificate or other instrument delivered by it or on its behalf under
this Agreement or the Shareholder Agreement shall be considered to have
been relied upon by the Investor and shall survive the issuance of the
Warrants or the Warrant Stock regardless of any investigation made by or
on behalf of the Investor. All statements in any such certificate or other
instrument so delivered shall constitute representations and warranties by
Issuer hereunder.
(b) All representations and warranties made by the Investor herein shall be
considered to have been relied upon by Issuer and shall survive the
issuance to the Investor of the Warrants or the Warrant Stock regardless
of any investigation made by Issuer or on its behalf.
SPECIFIC PERFORMANCE
9.8 Damages in the event of breach of this Agreement by a Holder or Issuer would
be difficult, if not impossible, to ascertain, and it is therefore agreed that
each Holder and Issuer, in addition to and without limiting any other remedy or
right it may have, will have the right to an injunction or other equitable
relief in any court of competent jurisdiction, enjoining any such breach, and
enforcing specifically the terms and provisions hereof, and each Holder and
Issuer hereby waives any and all defenses it may have on the ground of lack of
jurisdiction or competence of the court to grant such an injunction or other
equitable relief. The existence of this right will not preclude the Holders or
Issuer from pursuing any other rights and remedies at law or in equity which the
Holders or Issuer may have.
CAPTIONS
9.9 The captions and section headings appearing herein are included solely for
convenience of reference and are not intended to affect the interpretation of
any provision of this Agreement.
Page 28
COUNTERPARTS
9.10 This Agreement may be executed on counterpart signature pages or in any
number of counterparts, all of which taken together shall constitute one and the
same instrument and any of the parties hereto may execute this Agreement by
signing any such counterpart signature page or counterpart.
GOVERNING LAW
9.11 This Agreement shall be governed by, and construed in accordance with, the
law of the State of New York.
SEVERABILITY
9.12 If any one or more of the provisions contained herein, or the application
thereof in any circumstance, is held invalid, illegal or unenforceable, the
validity, legality and enforceability of any such provision in every other
respect and of the remaining provisions contained herein shall not be affected
or impaired thereby.
ADJUSTMENT OF COMMON STOCK
9.13 All references to Common Stock herein shall be subject to appropriate
adjustment by reason of any stock dividend, split, reverse split, combination,
recapitalization or any similar corporate transaction.
Page 29
IN WITNESS WHEREOF, the parties hereto have duly executed this Warrant Agreement
as of the date first above written.
VERASUN ENERGY CORPORATION
(ORGANIZATIONAL IDENTIFICATION # DB050019)
By: /s/ ββββββ β. ββββββ
--------------------------
Name: ββββββ β. ββββββ
Title: Chief Executive Officer
TEACHERS INSURANCE AND ANNUITY
ASSOCIATION OF AMERICA
By: /s/ ββββ β. βββββββ
--------------------------
Name: ββββ β. βββββββ
Title: Director
ANNEX 1
TO
WARRANT AGREEMENT
[Form of Warrant]
WARRANT
THE TRANSFER OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO THE
CONDITIONS SPECIFIED IN THAT CERTAIN WARRANT AGREEMENT DATED AS OF OCTOBER 14,
2005 (THE WARRANT AGREEMENT), BETWEEN VERASUN ENERGY CORPORATION, A SOUTH DAKOTA
CORPORATION WITH AN ORGANIZATIONAL IDENTIFICATION NUMBER OF DB050019 (ISSUER),
AND TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA, AS THE WARRANT
AGREEMENT MAY BE MODIFIED AND SUPPLEMENTED AND IN EFFECT FROM TIME TO TIME, AND
NO TRANSFER OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE SHALL BE VALID OR
EFFECTIVE UNTIL SUCH CONDITIONS HAVE BEEN FULFILLED. A COPY OF THE FORM OF THE
WARRANT AGREEMENT IS ON FILE AND MAY BE INSPECTED AT THE PRINCIPAL EXECUTIVE
OFFICE OF ISSUER. THE HOLDER OF THIS CERTIFICATE, BY ACCEPTANCE OF THIS
CERTIFICATE, AGREES TO BE BOUND BY THE PROVISIONS OF THE WARRANT AGREEMENT.
No. of Stock Units: _____________________ Warrant No. _________________
WARRANT
to Purchase Common Stock of
VERASUN ENERGY CORPORATION
(ORGANIZATIONAL IDENTIFICATION# DB050019)
Expiring on December 23, 2012
THIS IS TO CERTIFY THAT [_________________], or its registered assigns, is
entitled to purchase in whole or in part from time to time from VeraSun Energy
Corporation, a South Dakota corporation with an organizational identification
number of DB050019 (ISSUER), at any time on and after the date hereof, but not
later than 5:00 p.m., New York time, on December 23, 2012 (as it may be extended
pursuant to Section 6.3 hereof, the EXPIRATION DATE), [__________] Stock Units
(as hereinafter defined and subject to adjustment as provided herein) at a
purchase price of $.01 per Stock Unit PROVIDED, that such purchase price shall
not be less than the aggregate par value of the capital stock contained in a
Stock Unit, (the EXERCISE PRICE), subject to the terms and conditions
hereinbelow provided. Each exercise made hereunder must be of a minimum of the
lesser of 100 Stock Units and all of the remaining Stock Units covered by this
Warrant.
Page 31
This Warrant is one of the Warrants originally issued pursuant to the Warrant
Agreement dated as of October 14, 2005, between Issuer and Teachers Insurance
and Annuity Association of America.
CERTAIN DEFINITIONS
1.(a) Each capitalized term used herein without definition shall have the
meaning ascribed thereto (or incorporated by reference) in the Warrant
Agreement (as hereinafter defined).
(b) As used in this Warrant, unless the context otherwise requires:
ADDITIONAL SHARES OF COMMON STOCK shall mean all shares (including treasury
shares) of Common Stock issued or sold by Issuer on or after the date hereof,
other than (i) the shares of Common Stock which may be issued pursuant to the
Other Equity Securities (whether issuable immediately or upon the arrival of a
specified date or the occurrence of a specified event) on the date hereof, (ii)
shares purchased by Holder pursuant to the exercise of preemptive rights
pursuant to Section 5 of the Shareholder Agreement, (iii) the shares of Common
Stock described as being issued and outstanding in Section 3.7 of the Warrant
Agreement and (iv) up to 1,102,608 additional shares of Common Stock to be
issued to employees, directors or consultants of the Issuer after the date of
this Warrant and as authorized by the Board.
CONVERTIBLE SECURITY VALUE shall mean the value of a Convertible Security as
computed in accordance with accepted financial practice, taking into account
both its fixed income value (determined by discounting future payments at an
appropriate rate) and the value of the embedded option (determined using an
appropriate option valuation model).
CURRENT MARKET PRICE, per share of Common Stock, for the purposes of any
provision of this Warrant at the date herein specified, shall be deemed to be
the fair market value per share of Common Stock, as reasonably determined by the
Board, or if there shall be a public market for the Common Stock, the average of
the daily market prices for each day during the 30 consecutive trading days
commencing 45 Business Days before such date as of which such price can be
established in the manner set forth below. The market price for each such
Business Day shall be the last sale price on such day as reported in the
Consolidated Last Sale Reporting System or as quoted in the National Association
of Securities Dealers Automated Quotation System, or if such last sale price is
not available, the average of the closing bid and asked prices as reported in
either such system, or in any other case the highest bid price quoted for such
day as reported by The Wall Street Journal and the National Quotation Bureau
pink sheets.
CURRENT WARRANT PRICE, for the purpose of any provision of this Warrant at the
date herein specified, shall mean the amount per share of Common Stock equal to
the quotient resulting from dividing the Exercise Price per Stock Unit in effect
on such date by the number of shares (including any fractional share) of Common
Stock comprising a Stock Unit on such date.
Page 32
EXERCISE NOTICE shall have the meaning set forth in Section 2.
EXERCISE PRICE shall have the meaning set forth at the head of this Warrant.
EXPIRATION DATE shall have the meaning set forth at the head of this Warrant as
extended under Section 6.3.
HOLDER shall mean the registered holder of this Warrant.
INCLUDE and INCLUDING shall be construed as if followed by the phrase ", without
being limited to,".
ISSUER shall have the meaning set forth at the head of this Warrant.
STOCK UNIT shall mean one share of Common Stock, as such Common Stock is
constituted on the date hereof, and thereafter shall mean such number of shares
(including any fractional shares) of Common Stock and other securities, cash or
other property as shall result from the adjustments specified in Section 4 and
Section 5.
WARRANT AGREEMENT shall mean the Warrant Agreement dated as of October 14, 2005
between Issuer and Teachers Insurance and Annuity Association of America, as
such Warrant Agreement shall be modified and supplemented and in effect from
time to time.
WARRANT HOLDER shall mean any Person who acquires Warrants or Warrant Stock
pursuant to the provisions of the Warrant Agreement, including any transferees
of Warrants or Warrant Stock.
WARRANTS shall mean the Warrants originally issued by Issuer pursuant to the
Warrant Agreement, evidencing rights to purchase up to an aggregate of 1,180,000
Stock Units, and all Warrants issued upon transfer, division or combination of,
or in substitution for, any thereof. All Warrants shall at all times be
identical as to terms and conditions, except as to the number of Stock Units for
which they may be exercised.
EXERCISE OF WARRANT
2. On and after the date hereof and until 5:00 p.m., New York time, on the
Expiration Date, Holder may exercise this Warrant, on one or more occasions, on
any Business Day, in whole or in part, by delivering to Issuer, at its office
maintained for such purpose pursuant to Section 12.1, (a) a written notice of
Holder's election to exercise this Warrant, which notice shall specify the
number of Stock Units to be purchased (the EXERCISE NOTICE), (b) a certified or
bank check or checks payable to Issuer in an aggregate amount equal to the
aggregate Exercise Price for the number of Stock Units as to which this Warrant
is being exercised, and (c) this Warrant. Such Exercise Notice may be
substantially in the form of Annex A hereto. Upon receipt thereof, Issuer shall,
as promptly as practicable and in any event within five Business Days
thereafter, execute or cause to be executed and deliver or cause to be delivered
to Holder a stock certificate or certificates representing the aggregate number
of shares of Warrant Stock and other
Page 33
securities issuable upon such exercise and any other property to which such
Holder is entitled.
The stock certificate or certificates for Warrant Stock so delivered shall be in
such denominations as may be specified in the Exercise Notice and shall be
registered in the name of Holder or, subject to Section 4 of the Warrant
Agreement, such other name or names as shall be designated in such Exercise
Notice. Such stock certificate or certificates shall be deemed to have been
issued and Holder or any other Person so designated to be named therein shall be
deemed to have become a holder of record of such shares, including, to the
extent permitted by law, the right to vote such shares or to consent or to
receive notice as a Stockholder, as of the date on which the last of the
Exercise Notice, payment of the Exercise Price and this Warrant is received by
Issuer as aforesaid, and all taxes required to be paid by Holder, if any,
pursuant to Section 9 hereof, prior to the issuance of such shares have been
paid. If this Warrant shall have been exercised only in part, Issuer shall, at
the time of delivery of the certificate or certificates representing Warrant
Stock and other securities, execute and deliver to Holder a new Warrant
evidencing the rights of Holder to purchase the unpurchased Stock Units called
for by this Warrant, which new Warrant shall in all other respects be identical
with this Warrant, or, at the request of Holder, appropriate notation may be
made on this Warrant and the same returned to Holder.
All shares of Common Stock issuable upon the exercise of this Warrant shall,
upon payment therefor in accordance herewith, be duly and validly issued, fully
paid and nonassessable and free and clear of any Liens.
Issuer shall not be required to issue a fractional share of Common Stock upon
exercise of this Warrant. As to any fraction of a share which Holder would
otherwise be entitled to purchase upon such exercise, Issuer shall pay a cash
adjustment in respect of such final fraction in an amount equal to the same
fraction of the Current Market Price per share of Common Stock on the date of
exercise.
TRANSFER, DIVISION AND COMBINATION
3. Subject to Section 12.3, transfer of this Warrant and all rights hereunder,
in whole or in part, shall be registered on the books of Issuer to be maintained
for such purpose, upon surrender of this Warrant at the office of Issuer
maintained for such purpose pursuant to Section 12.1, together with a written
assignment of this Warrant, substantially in the form of Annex B hereto, duly
executed by Holder or its agent or attorney and payment of funds sufficient to
pay any transfer taxes payable upon the making of such transfer. Upon such
surrender and, if required, such payment, Issuer shall, subject to Section 12.3
and the immediately following sentence, (a) execute and deliver a new Warrant or
Warrants in the name of the assignee or assignees and in the denominations
specified in such instrument of assignment, (b) issue to the assignor a new
Warrant evidencing the portion of this Warrant not so assigned and (c) promptly
cancel this Warrant. If and when this Warrant is assigned in blank (in case the
restrictions on transferability referred to in Section 12.3 shall have been
terminated), Issuer may (but
Page 34
shall not be obliged to) treat the bearer hereof as the absolute owner of this
Warrant for all purposes and Issuer shall not be affected by any notice to the
contrary. This Warrant, if properly assigned in compliance with this Section 3
and Section 12.3, may be exercised by an assignee for the purchase of shares of
Common stock without having a new Warrant or Warrants issued. Notwithstanding
any provision herein to the contrary, Issuer shall not be required to register
the transfer of. Warrants or Warrant Stock in the name of any Person who
acquired this Warrant (or part hereof) or any Warrant Stock otherwise than in
accordance with this Warrant and the Warrant Agreement.
Issuer shall maintain at its aforesaid office books for the registration and
transfer of the Warrants.
ADJUSTMENT OF STOCK UNIT
4. The number of shares of Common Stock comprising a Stock Unit shall be subject
to adjustment from time to time as set forth in this Section 4. Issuer shall not
take any action with respect to its Common Stock of any class requiring an
adjustment pursuant to any of Sections 4.1, 4.7 or 5 without at the same time
taking like action with respect to its Common Stock of each other class, and
Issuer shall not create any class of Common Stock which carries any rights to
dividends or assets differing in any respect from the rights of the Common Stock
on the date hereof.
STOCK DIVIDENDS, SUBDIVISIONS AND COMBINATIONS
4.1 If at any time Issuer shall:
(a) take a record of the holders of its Common Stock for the purpose of
entitling them to receive a dividend payable in, or other distribution of,
Additional Shares of Common Stock, or
(b) subdivide its outstanding shares of Common Stock into a larger number of
shares of Common Stock, or
(c) combine its outstanding shares of Common Stock into a smaller number of
shares of Common Stock,
then the number of shares of Common Stock comprising a Stock Unit immediately
after the occurrence of any such event shall be adjusted to equal the number of
shares of Common Stock which a record holder of the number of shares of Common
Stock comprising a Stock Unit immediately prior to the happening of such event
would own or be entitled to receive after the happening of such event.
ISSUANCE OF ADDITIONAL SHARES OF COMMON STOCK
4.2 If at any time Issuer shall (except as hereinafter provided) issue or sell
any Additional Shares of Common Stock in exchange for consideration in an amount
per Additional Share of Common Stock less than the Current Market Price at the
time the
Page 35
Additional Shares of Common Stock are issued, then the number of shares of
Common Stock thereafter comprising a Stock Unit shall be adjusted to that number
determined by multiplying the number of shares of Common Stock comprising a
Stock Unit immediately prior to such adjustment by a fraction (a) the numerator
of which shall be the number of shares of Common Stock outstanding immediately
prior to the issuance of such Additional Shares of Common Stock plus the number
of such Additional Shares of Common Stock so issued, and (b) the denominator of
which shall be the number of shares of Common Stock outstanding immediately
prior to the issuance of such Additional Shares of Common Stock plus the number
of shares of Common Stock which the aggregate consideration for the total number
of such Additional Shares of Common Stock so issued would purchase at the
Current Market Price. For purposes of this Section 4.2, the date as of which the
Current Market Price shall be computed shall be the earlier of (i) the date on
which Issuer shall enter into a firm contract for the issuance of such
Additional Shares of Common Stock and (ii) the date of actual issuance of such
Additional Shares of Common Stock. Subject to Section 4.5, no further adjustment
of the number of shares of Common Stock comprising a Stock Unit shall be made
under this Section 4.2 upon the issuance of any Additional Shares of Common
Stock:
(a) for which an adjustment is provided under Section 4.1: or
(b) which are issued pursuant to the exercise of any Options or the
conversion, exchange or exercise of any Convertible Securities, if any
such adjustment shall previously have been made upon the issuance of such
Options or Convertible Securities (or upon the issuance of any Option
therefor) pursuant to Section 4.3 or 4.4.
ISSUANCE OF OPTIONS
4.3 If at any time Issuer shall issue or sell, or shall fix a record date for
the determination of holders of any class of securities entitled to receive, any
Options for any Additional Shares of Common Stock or for any Convertible
Securities, whether or not the rights to purchase thereunder are immediately
exercisable, then the number of shares of Common Stock thereafter comprising a
Stock Unit shall be adjusted as provided in Section 4.2 on the basis that (a)
the maximum number of Additional Shares of Common Stock issuable pursuant to all
such Options or necessary to effect the conversion or exchange of all such
Convertible Securities shall be deemed to have been issued as of (and,
accordingly, the date as of which the Current Market Price shall be computed
shall be) the computation date specified in the penultimate sentence of this
Section 4.3, and (b) the aggregate consideration for such maximum number of
Additional Shares of Common Stock shall be zero. For purposes of this Section
4.3, the computation date for clause (a) above shall be the earlier of (i) the
date on which Issuer shall take a record of the holders of its Common Stock for
the purpose of entitling them to receive any such Options and (ii) the date on
which Issuer shall enter into a firm contract for the issuance of such Options.
Notwithstanding the foregoing, any issuance of an Option which is issued
together with a debt security of Issuer, as a Unit, shall be treated for the
purpose of this Section 4 as the issuance of a Convertible Security.
Page 36
ISSUANCE OF CONVERTIBLE SECURITIES
4.4 If at any time Issuer shall issue or sell any Convertible Securities,
whether or not the rights to exchange or convert thereunder are immediately
exercisable, and the cash received by Issuer in payment for such Convertible
Securities shall be less than the Convertible Security Value thereof, then the
number of shares of Common Stock thereafter comprising a Stock Unit shall be
increased to a number of shares of Common Stock having a value immediately
following the computation date (as established-below) equal to the value of the
number of shares comprising such Stock Unit immediately before such increase.
For this purpose, the value before the increase will be the Fair Market Value of
the Common Stock as reasonably determined by the Board on the basis set forth in
the first paragraph of the definition thereof (without reference to the
appraisal procedure referred to therein) divided by the number of shares of
Common Stock outstanding on a fully diluted basis as determined under the
Warrant Agreement, and the value immediately following the computation date
shall be the foregoing value, except that the numerator shall be the Fair Market
Value plus the cash amount paid to the Company for such Convertible Securities
less the Convertible Security Value of such Convertible Securities on issuance
and the denominator shall be increased by the number of Additional Shares of
Common Stock issuable on exercise of such Convertible Securities. For purposes
of this Section 4.4, the computation date for clause (a) above shall be the
earliest of (i) the date on which Issuer shall take a record of the holders of
its Common Stock for the purpose of entitling them to receive any such
Convertible Securities, (ii) the date on which Issuer shall enter into a firm
contract for the issuance of such Convertible Securities, and (iii) the date of
actual issuance of such Convertible Securities. No further adjustment of the
number of shares of Common Stock comprising a Stock Unit shall be made under
this Section 4.4 upon the issuance of any Convertible Securities which are
issued pursuant to the exercise of any Option therefor, if any such adjustment
shall previously have been made upon the issuance of such option pursuant to
Section 4.3.
SUPERSEDING ADJUSTMENT OF STOCK UNIT
4.5 If, at any time after any adjustment of the number of shares of Common Stock
comprising a Stock Unit shall have been made pursuant to Section 4.3 or 4.4 as a
result of the issuance of Options or Convertible Securities, or after any new
adjustment of the number of shares of Common Stock comprising a Stock Unit shall
have been made pursuant to this Section 4.5, (a) such Options or the right of
conversion, exchange or exercise of such Convertible Securities shall expire,
and all or a portion of such Options or the right of conversion, exchange or
exercise with respect to all or a portion of such Convertible Securities, as the
case may be, shall not have been exercised or treated as having been exercised
or otherwise canceled or acquired by the Issuer in connection with any
settlement including, without limitation, any cash settlement, of such Options
or the rights of conversion, or exchange or exercise of such Convertible
Securities, or (b) there has been any change in the number of shares issuable
upon exercise, conversion or exchange of such Options or Convertible Securities
(including as a result of the operation of antidilution provisions applicable
thereto), or (c) the consideration per share, for which
Page 37
Additional Shares of Common Stock are issuable pursuant to such Options or the
terms of any Convertible Securities, or the maturity of any such Convertible
Security, shall be changed, then such previous adjustment shall be rescinded and
annulled and the Additional Shares of Common Stock which were deemed to have
been issued by virtue of the computation made in connection with the adjustment
so rescinded and annulled shall no longer be deemed to have been issued by
virtue of such computation. Thereupon, a recomputation shall be made of the
effect of such Options or Convertible Securities on the basis of
(i) treating the number of Additional Shares of Common Stock, if any,
theretofore actually issued or issuable pursuant to the previous
exercise of such Options or such right of conversion or exchange, as
having been issued on the date or dates of such issuance as
determined for purposes of such previous adjustment and for the
consideration actually received and receivable therefor,
(ii) treating the maximum number of Additional Shares of Common Stock (A)
issuable pursuant to all Options which then remain outstanding and
(B) necessary to effect the conversion or exchange of all
Convertible Securities which then remain outstanding, as having been
issued, and
(iii) making the computations called for in Section 4.4 on the basis of
the revised terms of such Convertible Securities as if newly issued
at the time of such revision,
and, if and to the extent called for by the foregoing provisions of this Section
4 on the basis aforesaid, a new adjustment of the number of shares of Common
Stock comprising a Stock Unit shall be made, such new adjustment shall supersede
the previous adjustment so rescinded and annulled.
OTHER PROVISIONS APPLICABLE TO ADJUSTMENTS UNDER THIS SECTION 4
4.6 The following provisions shall be applicable to the making of adjustments of
the number of shares of Common Stock comprising a Stock Unit hereinbefore
provided for in this Section 4:
(a) COMPUTATION OF CONSIDERATION. To the extent that any Additional Shares of
Common Stock or any Convertible Securities shall be issued for a cash
consideration, the consideration received by Issuer therefor shall be
deemed to be the amount of cash received by Issuer therefor, or, if such
Additional Shares of Common Stock or Convertible Securities are offered by
Issuer for subscription, the subscription price, or, if such Additional
Shares of Common Stock or Convertible Securities are sold to underwriters
or dealers for public offering without a subscription offering, the
initial public offering price, in any such case excluding any amounts paid
or receivable for accrued interest or accrued dividends and without
deduction of any reasonable compensation, discounts or
Page 38
expenses paid or incurred by Issuer for and in the underwriting of, or
otherwise in connection with, the issue thereof. To the extent that such
issuance shall be for a consideration other than cash, then, except as
herein otherwise expressly provided, the amount of such consideration
shall be deemed to be the fair market value of such consideration at the
time of such issuance, as reasonably determined by the Board. The
consideration for any Additional Shares of Common Stock issuable pursuant
to any Options to subscribe for or purchase the same shall be zero. The
consideration for any Additional Shares of Common Stock issuable pursuant
to the terms of any Convertible Securities shall be the cash consideration
paid or payable to Issuer in respect of the subscription for or purchase
of such Convertible Securities. In case of the issuance at any time of any
Additional Shares of Common Stock in payment or satisfaction of any
dividend upon any class of stock other than Common Stock, Issuer shall be
deemed to have received for such Additional Shares of Common Stock a
consideration equal to the amount of such dividend so paid or satisfied.
(b) WHEN ADJUSTMENTS TO BE MADE. The adjustments required by this Section 4
shall be made whenever and as often as any specified event requiring an
adjustment shall occur, except that any adjustment of the number of shares
of Common Stock comprising a Stock Unit that would otherwise be required
may be postponed (except in the case of a subdivision or combination of
shares of the Common Stock, as provided for in Section 4.1) up to but not
beyond the date of exercise if such adjustment either by itself or with
other adjustments not previously made adds or subtracts less than both (i)
1/20th of a share to or from the number of shares of Common Stock
comprising a Stock Unit immediately prior to the making of such adjustment
and (ii) 5% of the number of shares of Common Stock comprising a Stock
Unit. Any adjustment representing a change of less than such minimum
amount (except as aforesaid) shall be carried forward and made as soon as
such adjustment, together with other adjustments required by this Section
4 and not previously made, would result in a minimum adjustment on the
date of exercise. For the purpose of any adjustment, any specified event
shall be deemed to have occurred at the close of business on the date of
its occurrence.
(c) FRACTIONAL INTERESTS. In computing adjustments under this Section 4,
fractional interests in Common Stock shall be taken into account to the
nearest one-thousandth of a share.
(d) WHEN ADJUSTMENT NOT REQUIRED. If Issuer shall take a-record of the holders
of its Common Stock for the purpose of entitling them to receive a
dividend or distribution or subscription or purchase rights and shall,
thereafter and before the distribution thereof to stockholders, legally
abandon its plan to pay or deliver such dividend, distribution,
subscription or purchase rights, then thereafter no adjustment shall be
required by reason of the taking of such record and any such adjustment
previously made in respect thereof shall be rescinded and annulled.
Page 39
OTHER DILUTIVE EVENTS
4.7 In case any event shall occur, affecting Issuer, or any Person in which
Issuer has a direct or indirect investment, as to which the provisions of
Section 4 or Section 5 are not strictly applicable but the failure to make any
adjustment would not fairly protect the purchase rights represented by this
Warrant in accordance with the essential intent and principles of such sections
then, in each such case, Issuer shall appoint a firm of independent public
accountants reasonably acceptable to the Majority Warrant Stockholders (which
may be the regular auditors of Issuer), which shall give their opinion upon the
adjustment, if any, on a basis consistent with the essential intent and
principles established in Sections 4 and 5, necessary to preserve, without
dilution, the purchase rights represented by this Warrant. Without limiting the
generality of the foregoing, Issuer acknowledges that issuance of any equity
security by any Person in which Issuer has a direct or indirect investment to
any Person other than Issuer or sale of existing equity securities or investees
by Issuer for a price less than the fair value thereof, and acquisition of less
than 100% of the equity interest in a Person for a price greater than the fair
market value thereof, would be such events. Upon receipt of such opinion, Issuer
will promptly mail a copy thereof to Holder and shall make the adjustments
described therein.
CONSOLIDATION MERGER, SHARE EXCHANGE, ETC.; DISTRIBUTIONS
CONSOLIDATION, MERGER, SHARE EXCHANGE, ETC.
5. In case a consolidation, merger or share exchange of Issuer shall be effected
with another Person on or after the date hereof, or the sale, lease or transfer
of all or a majority of its assets to another Person shall be effected on or
after the date hereof, then, as a condition of such consolidation, merger, share
exchange, sale, lease or transfer, lawful and adequate provision shall be made
whereby Holder shall thereafter have the right to purchase and receive upon the
basis and upon the terms and conditions specified herein and in lieu of each
Stock Unit immediately theretofore purchasable and receivable upon the exercise
of each of the Warrants, such shares of stock, securities, cash or other
property receivable upon such consolidation, merger, share exchange, sale, lease
or transfer by the holder of the number of shares of Common Stock comprising a
Stock Unit immediately prior to such event. In any such case, appropriate and
equitable provision also shall be made with respect to the rights and interests
of Holder to the end that the provisions hereof (including Section 4) and of the
Warrant Agreement and the Shareholder Agreement shall thereafter be applicable,
as nearly as may be, in relation to any shares of stock, securities, cash or
other property thereafter deliverable upon the exercise of any Warrants. Issuer
shall not effect any such consolidation, merger, share exchange, sale, lease or
transfer unless prior to or simultaneously with the consummation thereof the
successor Person (if other than Issuer) resulting from such consolidation,
merger or share exchange or the Person purchasing, leasing or otherwise
acquiring such assets shall assume, by written instrument mailed to Holder at
its last address appearing on the books of Issuer, the obligation to deliver to
Holder such shares of stock, securities, cash or other property as, in
accordance with the foregoing provisions, Holder may be
Page 40
entitled to purchase. The above provisions of this Section 5.1 shall similarly
apply to successive consolidations, mergers, share exchanges, sales, leases or
transfers.
DILUTION IN CASE OF OTHER SECURITIES
5.2 In case any Other Securities shall be issued or sold or shall become subject
to issue or sale upon the conversion or exchange of any stock (or Other
Securities) of Issuer (or any issuer of Other Securities or any other Person
referred to in Section 5.1) or to subscription, purchase or other acquisition
pursuant to any rights, options, warrants to subscribe for, purchase or
otherwise acquire either Additional Shares of Common Stock or securities
directly or indirectly convertible into or exchangeable for Additional Shares of
Common Stock, issued or granted by the Company (or any such other issuer or
Person) for a consideration such as to dilute, on a basis consistent with the
standards established in the other provisions of Section 4, the purchase rights
granted by this Warrant, then, and in each such case, the computations,
adjustments and readjustments provided for in Section 4 with respect to the
Stock Units shall be made as nearly as possible in the manner so provided and
applied to determine the amount of Other Securities from time to time receivable
upon the exercise of the Warrants, so as to protect the Warrant Holders against
the effect of such dilution.
NOTICE TO WARRANT HOLDERS
NOTICE OF ADJUSTMENT OF STOCK UNIT OR EXERCISE PRICE
6.1 Whenever the number of shares of Common Stock comprising a Stock Unit shall
be adjusted pursuant to Section 4, Issuer shall forthwith obtain a certificate
signed by the chief financial officer of Issuer and reasonably acceptable to the
Holders of a majority of the Warrants, setting forth, in reasonable detail, the
event requiring the adjustment and the method by which such adjustment was
calculated (including a description of the basis on which the Board determined
the fair market value of Additional Shares of Common Stock issued or sold and,
if the consideration therefor was other than cash, a description of how such
consideration was valued), specifying the number of shares of Common Stock
comprising a Stock Unit and (if such adjustment was made pursuant to Section 4.7
or Section 5) describing the number and kind of any other securities comprising
a Stock Unit, and any change in the purchase price or prices thereof, after
giving effect to such adjustment or change. Issuer shall promptly, and in any
case within 10 days after the making of such adjustment, cause a signed copy of
such certificate to be delivered to each Warrant Holder in accordance with
Section 12.2. Issuer shall keep at its office or agency, maintained for the
purpose pursuant to Section 12.1, copies of all such certificates and cause the
same to be available for inspection at said office during normal business hours
by any Warrant Holder or any prospective permitted purchaser of a Warrant
designated by a holder thereof. All adjustments set forth in such certificates
shall be subject to the reasonable approval of the Majority Warrant
Stockholders.
Page 41
NOTICE OF CERTAIN CORPORATE ACTION
6.2 In case Issuer shall propose (a) to pay any dividend to the holders of its
Common Stock or to make any other distribution to the holders of its Common
Stock, or (b) to offer to the holders of its Common Stock rights to subscribe
for or to purchase any Additional Shares of Common Stock or shares of stock of
any class or any other securities, rights or options, or (c) to effect any
reclassification of its Common Stock (other than a reclassification involving
only the subdivision, or combination, of outstanding shares of Common Stock), or
(d) to effect any capital reorganization, or (e) to effect any consolidation,
merger, share exchange or sale, lease, transfer or other disposition of all or a
majority of its property, assets or business or (f) to effect the liquidation,
dissolution or winding up of Issuer, then, in each such case, Issuer shall give
to each Warrant Holder, in accordance with Section 12.2, a notice of such
proposed action, which shall specify the date on which a record is to be taken
for the purposes of such stock dividend, distribution or rights, or the date on
which such reclassification, reorganization, consolidation, merger, share
exchange, sale, lease, transfer, disposition, liquidation, dissolution or
winding up is to take place and the date of participation therein by the holders
of Common Stock, if any such date is to be fixed, and shall also set forth such
facts with respect thereto as shall be reasonably necessary to indicate the
effect of such action on the Common Stock, if any, and the number and kind of
any other shares of stock which will comprise a Stock Unit, and the purchase
price or prices thereof, after giving effect to any adjustment, if any, which
will be required as a result of such action. Such notice shall be so given in
the case of any action covered by clause (a) above at least 20 days prior to the
record date for determining holders of the Common Stock for purposes of such
action, and in the case of any other such action, at least 20 days prior to the
date of the taking of such proposed action or the date of participation therein
by the holders of Common Stock, whichever shall be the earlier.
NOTICE OF EXPIRATION DATE
6.3 Issuer shall give to each Warrant Holder notice of the Expiration Date. Such
notice may be given by Issuer not less than 30 days but not more than 60 days
prior to the Expiration Date; PROVIDED, HOWEVER, that if Issuer fails to give
timely notice, the Expiration Date will be extended to the date which is 30 days
after the day on which such notice is given.
RESERVATION AND AUTHORIZATION OF COMMON STOCK
7. Issuer shall at all times reserve and keep available for issue upon the
exercise or conversion of Warrants such number of its authorized but unissued
shares of Common Stock of both classes as will be sufficient to permit the
exercise in full of all outstanding Warrants. Issuer shall not amend its
certificate of incorporation in any respect relating to the Common Stock other
than to increase or decrease the number of shares of authorized capital stock
(subject to the provisions of the preceding sentence) or to decrease the par
value of any shares of Common Stock. All shares of Common Stock which shall be
so issuable, when issued upon exercise of any Warrant and payment of the
applicable
Page 42
Exercise Price therefor in accordance with the terms of this Warrant, shall be
duly and validly issued, fully paid and nonassessable and free and clear of any
Liens.
Before taking any action which would result in an adjustment in the number of
shares of Common Stock comprising a Stock Unit or which would cause an
adjustment reducing the Current Warrant Price per share of Common Stock below
the then par value, if any, of the shares of Common Stock issuable upon exercise
of the Warrants, Issuer shall take any corporate action which is necessary in
order that Issuer may validly and legally issue fully paid and nonassessable
shares of Common Stock free and clear of any Liens upon the exercise of all the
Warrants immediately after the taking of such action.
Before taking any action which would result in an adjustment in the number of
shares of Common Stock comprising a Stock Unit or in the Current Warrant Price
per share of Common Stock, Issuer shall obtain all such authorizations or
exemptions thereof, or consents thereto, as may be necessary from any public
regulatory body or bodies having jurisdiction thereof.
Issuer will list on each national securities exchange on which any Common Stock
may at any time be listed, subject to official notice of issuance upon exercise
of the Warrants, and will maintain such listing of, all shares of Common Stock
from time to time issuable upon the exercise of the Warrants. Issuer will also
so list on each national securities exchange, and will maintain such listing of,
any Other Securities if at the time any securities of the same class shall be
listed on such national securities exchange by Issuer.
TAKING OF RECORD: STOCK AND WARRANT TRANSFER BOOKS
8.(a) In the case of all dividends or other distributions by Issuer to the
holders of its Common Stock with respect to which any provision of Section
4 and Section 5.2 refers to the taking of a record of such holders, Issuer
shall in each such case take such a record as of the close of business on
a Business Day.
(b) Issuer shall not at any time, except upon complete dissolution,
liquidation or winding up, close its stock transfer books or Warrant
transfer books so as to result in preventing or delaying the exercise,
conversion or transfer of any Warrant, unless otherwise required by any
applicable federal, state or local law.
EXPENSES, TRANSFER TAXES AND OTHER CHARGES
9. Issuer shall pay any and all expenses, transfer taxes and other charges,
including all costs associated with the preparation, issue and delivery of stock
or warrant certificates, that are incurred in respect of the issuance or
delivery of shares of Common Stock upon exercise or conversion of this Warrant
pursuant to Section 2, or in connection with any transfer, division or
combination of Warrants pursuant to Section 3. Issuer shall not, however, be
required to pay any tax which may be payable in respect of any transfer involved
in the issue and delivery of shares of Common Stock in a name other than that in
which this Warrant is registered, and no such issue or delivery shall be made
unless
Page 43
and until the Person requesting such issue has paid to Issuer the amount of any
such tax, or has established, to the satisfaction of Issuer, that such tax has
been paid.
NO VOTING RIGHTS
10. This Warrant shall not entitle Holder to any voting or other rights as a
stockholder of Issuer.
PUT RIGHTS
11. This Warrant is subject to certain Put Rights contained in Section 6 of the
Warrant Agreement.
MISCELLANEOUS
OFFICE OF ISSUER
12.1 So long as any of the Warrants remains outstanding, Issuer shall maintain
an office in the continental United States of America where the Warrants may be
presented for exercise, transfer, division or combination as in this Warrant
provided. Such office shall be at VeraSun Energy Corporation, βββ ββββ ββββββ,
βββββββββ, βββββ ββββββ βββββ, unless and until Issuer shall designate and
maintain some other office for such purposes and give notice thereof to all
Warrant Holders.
NOTICES GENERALLY
12.2 Any notices and other communications pursuant to the provisions hereof
shall be sent in accordance with Section 9.3 of the Warrant Agreement.
RESTRICTIONS ON TRANSFERABILITY
12.3 The Warrants and the Warrant Stock shall be transferable only upon
compliance with the conditions specified in Section 4 of the Warrant Agreement
and the Shareholder Agreement therein referred to, which conditions are intended
to ensure compliance with the provisions of the Securities Act in respect of the
transfer of any Warrant or any Warrant Stock, and any Holder shall be bound by
the provisions of (and entitled to the benefits of) said Section 4 and said
Shareholder Agreement.
GOVERNING LAW
12.4 This Warrant shall be governed by, and construed in accordance with, the
law of the State of New York.
LIMITATION OF LIABILITY
12.5 No provision hereof, in the absence of affirmative action by Holder to
purchase shares of Common Stock, and no mere enumeration herein of the rights or
privileges of
Page 44
Holder, shall give rise to any liability of Holder for the Exercise Price or as
a stockholder of Issuer, whether such liability is asserted by Issuer, by any
creditor of Issuer or any other Person.
FAIR MARKET VALUE DETERMINATIONS BY THE BOARD
12.6 Whenever the Board determines fair market value, Convertible Security Value
or the Fair Market Value of the Common Stock pursuant to this Warrant, or a firm
of independent public accountants opines as to an adjustment pursuant to Section
4.7, any such determination or opinion shall be subject to the reasonable
approval of the Majority Warrant Stockholders.
CONVERSION OF WARRANTS
13. On and after the date hereof and prior to the Expiration Date, this Warrant
may be converted, in whole or in part, at the option of Holder, into the number
of shares of Common Stock, for each Stock Unit evidenced by this Warrant which
is being so converted, equal to the product of (a) the number of shares of
Common Stock comprising a Stock Unit at the time of such conversion, and (b) the
Current Market Price per share of Common Stock at the time of such conversion
minus the Exercise Price of the Warrant at the time of such conversion, divided
by (c) the Current Market Price per share of Common Stock at the time of such
conversion.
Page 45
IN WITNESS WHEREOF, Issuer has duly executed this Warrant.
VERASUN ENERGY CORPORATION
(ORGANIZATIONAL IDENTIFICATION # DB050019)
By---------------------------------
Name:
Title:
Page 46
ANNEX A
FORM OF EXERCISE
(To be executed by the registered holder hereof)
The undersigned registered owner of this Warrant irrevocably exercises this
Warrant for the purchase of Stock Units of VeraSun Energy Corporation, a South
Dakota corporation with an organizational identification number of DB050019, and
herewith makes payment therefor, all at the price and on the terms and
conditions specified in this Warrant, and requests that (i) certificates and/or
other instruments covering such Stock Units be issued in accordance with the
instructions given below and (ii) if such Stock Units shall not include all of
the Stock Units to which Holder is entitled under this Warrant, that a new
Warrant of like tenor and date for the unpurchased balance of the Stock Units
issuable hereunder be delivered to the undersigned.
Dated: -------------------------------
---------------------------------
(Signature of Registered Holder)
Instructions for issuance and registration of Stock Units:
----------------------------------
Name of Registered Holder
(please print)
Social Security or other Identifying Number:
----------------------------------
Please deliver certificate to the following address:
----------------------------------
ββββββ
----------------------------------
ββββ, βββββ and Zip Code
Page 47
ANNEX B
FORM OF ASSIGNMENT
(To be executed by the registered holder hereof)
FOR VALUE RECEIVED the undersigned registered owner of this Warrant hereby
sells, assigns and transfers unto the assignee named below all the rights of the
undersigned under this Warrant with respect to the number of Stock Units covered
thereby set forth hereinbelow unto:
Number of
Name of Assignee Address Stock Units
---------------- ------- -----------
Dated: --------------------------
----------------------------------
Signature of Registered Holder
----------------------------------
Name of Registered Holder (Please Print)
Page 48
ANNEX 2 TO WARRANT AGREEMENT
SHAREHOLDER AGREEMENT
Page 1
ANNEX 3 TO WARRANT AGREEMENT
[FORM OF JOINDER AGREEMENT]
JOINDER AGREEMENT, dated the date set forth below, between VERASUN ENERGY
CORPORATION, a South Dakota corporation with an identification number of
DB050019 (the ISSUER) and the undersigned stockholders of the Issuer.
A. Reference is made to that certain Warrant Agreement dated as of October
14, 2005 (as modified and supplemented and in effect from time to time,
the WARRANT AGREEMENT) between the Issuer and Teachers Insurance and
Annuity Association of America. Each capitalized term used but not defined
herein shall have the meaning assigned to such term in the Warrant
Agreement.
[B. Section 7.1(c) of the Warrant Agreement requires that each of the Issuer's
Stockholders execute and deliver to Issuer and each Holder this Joinder
Agreement.]
[B. Section 7.1(c) of the Warrant Agreement requires that certain transferees
of shares of Common Stock execute and deliver to the Issuer and each
Holder this Joinder Agreement.]
In consideration of the foregoing and for other good and valuable consideration,
the receipt and sufficiency of which is hereby acknowledged, the undersigned
hereby agrees that:
1. The undersigned[: (a) is delivering this Joinder Agreement pursuant to
Section 7.1(c) of the Warrant Agreement]; and (b) acknowledges receipt of
a copy of the Warrant Agreement.
2. The undersigned hereby agrees: (a) to be bound by the provisions of
Section 7 of the Warrant Agreement and of Section 7 of the Shareholder
Agreement; (b) to be bound by the covenants in the Warrant Agreement
applicable to it; and (c) to be treated as a Stockholder for all purposes
thereof.
3. In the case of the Persons delivering this Joinder Agreement pursuant to
Section 7.1(c) of the Warrant Agreement: the undersigned hereby agree to
be bound by the provisions of Section 8.6 of the Warrant Agreement.
Page 2
IN WITNESS WHEREOF, the undersigned has signed this Joinder Agreement on the
date set forth below.
Date: -------------------- -----------------
[Description of transferred
securities, name of
transferor, and date of
transfer:
---------------------------
---------------------------
---------------------------
--------------------------]
Acknowledged and Agreed to
as of the date written
above:
VERASUN ENERGY CORPORATION
(ORGANIZATIONAL IDENTIFICATION # DB050019)
By -----------------------
Name:
Title:
Page 3