WARRANT AGREEMENT
This Warrant Agreement (the "Agreement") dated this _____ day of April,
1999, by and between Smart Choice Automotive Group, Inc., a Florida corporation
(the "Company"), and Xxxxxxxx Inc., an Arkansas corporation ("Xxxxxxxx")
(Xxxxxxxx and any subsequent assignee or transferee hereof are hereinafter
referred to as "Holder" or "Holders").
WITNESSETH:
For and in consideration of $10.00 in hand paid and other good and valuable
consideration, the receipt of sufficiency of which is hereby acknowledged by the
Company, the parties hereto agree as follows:
Section 1. Grant of Warrant; Term. The Company hereby grants to Holder the
right to purchase up to shares of Common Stock of the Company (the "Common
Stock") on the terms set forth herein. The shares of Common Stock issuable upon
exercise of this Warrant are hereinafter referred to as the "Shares." This
Warrant shall be exercisable immediately upon its issuance and at any time
thereafter until 11:59 p.m. on the day immediately preceding the fifth
anniversary of the date of this Agreement.
The period during which any Shares subject to this Warrant may be exercised
shall be referred to as the "Exercise Period."
Section 2. Exercise Price. The exercise price (the "Exercise Price") per
share for which all or any of the Shares may be purchased pursuant to the terms
of this Warrant shall be $ per share.
Section 3. Exercise. The rights represented by this Warrant may be
exercised at any time within the Exercise Period above specified, in whole or in
part, by (i) the surrender of this Warrant (with the purchase form at the end
hereof properly executed) at the principal executive office of the Company (or
such other office or agency of the Company as it may designate by notice in
writing to the Holder); and (ii) payment to the Company of the Exercise Price
then in effect for the number of shares of Common Stock specified in the
above-mentioned purchase form, together with applicable stock transfer taxes, if
any. This Warrant shall be deemed to have been exercised, in whole or in part to
the extent specified immediately prior to the close of business on the date this
Warrant is surrendered and payment is made in accordance with the foregoing
provisions hereof, and the person or persons in whose name or names the
certificates for shares of Common Stock shall be issuable upon such exercise
shall become the holder or holders of record of such shares of Common Stock at
that time and date. The certificate or certificates for the shares of Common
Stock so purchased shall be delivered to such person or persons within a
reasonable time, not exceeding thirty (30) days, after this Warrant shall have
been exercised.
Section 4. Covenants and Conditions. This Agreement is subject to the
following:
(a) Holder acknowledges that neither this Warrant nor the Shares have
been registered under the Securities Act of 1933, as amended ("Securities
Act"), or any state securities laws ("Blue Sky Laws"). Holder agrees that
this Warrant has been acquired for investment purposes and not with a view
to distribute or resell and that neither this Warrant nor the Shares may be
sold or otherwise transferred without (i) an effective registration
statement for such Warrant or Shares under the Securities Act and such
applicable Blue Sky Laws, or (ii) an opinion of counsel, which opinion and
counsel shall be reasonably satisfactory to the Company and its counsel,
that registration is not required under the Securities Act or under any
applicable Blue Sky Laws. At the request of Holder, and subject to the
provisions of Section 8 of this Warrant, the Company shall include the
Shares (or any portion thereof requested by Holder) in any registration
statement filed by the Company for sale of its Common Stock to the public,
provided that such registration statement is filed before the seventh
anniversary of the date of this Agreement.
(b) The Holder and the Company agree to execute such other documents
and instruments as counsel for the Company or the Holder reasonably deems
necessary to effect the compliance of the issuance of this Warrant and the
issuance or transfer of any Shares of Common Stock (or other securities or
property) upon or following exercise of this Warrant in all material
respects with applicable federal and state securities laws.
(c) Holder represents and warrants that it is an "accredited investor"
as such term is defined in Section 501(a) of Regulation D promulgated under
the Securities Act.
(d) The Company covenants, agrees and warrants to Holder that all
Shares which may be transferred or issued to Holder or upon Holder's
request upon exercise of this Warrant have been and will be, upon issuance
thereof following valid exercise of this Warrant, legally and validly
issued and outstanding, fully paid and nonassessable, free from all taxes,
liens, charges and preemptive rights with respect thereto or to the
transfer or reissuance thereof, excluding only any restrictions imposed by
federal and state securities laws applicable to any subsequent transfer of
the Shares.
Section 5. Transfer of Warrant. Subject to provisions of Section 4 hereof,
the Warrant may be transferred, in whole or in part, to any person or business
entity, by delivery to the Company of evidence of such transfer.
Section 6. Adjustments Upon Changes in Stock. The Exercise Price and other
terms of this Warrant shall be adjusted from time to time as follows:
(a) In case the Company shall hereafter (i) pay a dividend or make a
distribution generally on its Common Stock in shares of Common Stock, (ii)
subdivide its outstanding shares of Common Stock into a greater number of
shares, (iii) combine its outstanding shares of Common Stock into a smaller
number of shares, or (iv) issue by reclassification of its Common Stock any
shares of capital stock of the Company, or (v) issue rights or warrants or
other securities generally to the holders of its outstanding Shares of
Common Stock; then and in any such events, the Exercise Price and the
securities to be issued upon exercise of this Warrant in effect immediately
prior to such action shall be adjusted so that the holder of this Warrant
shall thereafter be entitled to receive the number of shares of Common
Stock or other securities of the Company which it would have owned
immediately following such action had this Warrant been exercised
immediately prior to the record date for such transaction. An adjustment
made pursuant to this subparagraph (a) shall become effective immediately
after the record date in the case of a dividend or distribution and shall
become effective immediately after the effective date in the case of a
subdivision, combination or reclassification. If, as a result of an
adjustment made pursuant to this subparagraph (a), the Holder thereafter
exercising this Warrant shall become entitled to receive shares of two or
more classes of capital stock or shares of Common Stock and other capital
stock of the Company, the Board of Directors of the Company shall
determine, on the basis of the opinion of an independent financial advisor,
the equitable allocation of the adjusted Exercise Price between or among
shares of such classes of capital stock or shares of Common Stock and other
capital stock.
(b) Whenever the Exercise Price or other terms of this Warrant are
adjusted as herein provided, the Company shall give at least ten days'
prior written notice to the Holder summarizing the action, transaction or
event that will result in such Exercise Price adjustment, stating (if
applicable) the record date thereof, the planned effective date of such
action, transaction or event and the planned closing date (if applicable)
of such action, transaction or event; and upon the occurrence of such
action, transaction or event, the Company shall promptly deliver to the
Holder a notice stating that the Exercise Price or other terms of this
Warrant have been adjusted and setting forth the adjusted Exercise Price
and the terms of any other applicable adjustments.
(c) In the event that at any time as a result of an adjustment made
pursuant to subparagraph (a) of this Section 6, the Holder thereafter
surrendering this Warrant for exercise shall become entitled to receive any
securities of the Company other than the Shares of Common Stock, thereafter
the Exercise Price of such other shares so receivable upon exercise of this
Warrant or any portion hereof shall be subject to adjustment from time to
time in a manner and on terms as nearly equivalent as practicable to the
provisions with respect to Common stock contained in subparagraphs (a)
hereof.
(d) Notwithstanding any other provision herein to the contrary, in
case of any consolidation or merger to which the Company is party other
than a merger or consolidation in which the Company is the continuing
corporation, or in case of any sale or conveyance to another corporation of
the property of the Company as an entirety or substantially as an entirety,
or in the case of any statutory exchange of securities with another
corporation (including any exchange effected in connection with a merger of
a third corporation into the Company), then the Holder shall have the right
thereafter to exercise this Warrant for the kind and amount of securities,
cash or other property which he would have owned or been entitled to
receive immediately after such consolidation, merger, statutory exchange,
sale or conveyance had this Warrant been exercised immediately prior to the
record date for such consolidation, merger, statutory, exchange, sale or
conveyance, and in any such case, if necessary, appropriate adjustment
shall be made in the application of the exercise and adjustment provisions
set forth herein with respect to the rights and interests thereafter of the
Holders of the Warrant, to the end that the provisions regarding conversion
and adjustment set forth herein shall thereafter correspondingly be made
applicable, as nearly as may reasonably be, in relation to any shares of
stock or other securities or property thereafter deliverable on the
exercise of this Warrant. The above provisions of this Section 6(d) shall
similarly apply to successive consolidations, mergers, statutory exchanges,
sales or conveyances.
Section 7. Other Adjustments.
(a) If the Holder believes that all or any portion of this Warrant or
of any securities or other property to be issued or transferred to Holder
upon exercise of this Warrant would constitute underwriting compensation
pursuant to NASD Rule 2710 (or any successor or substitute for said rule)
(the "Corporate Financing Rule"), then Holder, at Holder's sole option,
may, by giving written notice thereof to the Company, increase the Exercise
Price for exercise of this Warrant to an increased Exercise Price
determined by Holder or decrease the number of Shares (or other securities
or the amount of other property) subject to this Warrant to such decreased
number of Shares (or other securities or amount of other property)
determined by Holder, or both.
(b) If Holder serves as an underwriter for any public offering for the
Company for which the NASD determines that this Warrant is wholly or
partially included as underwriting compensation for Holder in connection
with such underwriting, then this Warrant and any Shares or other
securities subject to this Warrant shall not be sold, transferred,
assigned, pledged or hypothecated, except as permitted by the Corporate
Financing Rule, for a period of one (1) year following the effective date
of the offering, and any certificates hereafter issued representing this
Warrant or any Shares or other securities subject to this Warrant shall
bear an appropriate legend describing this restriction and stating the time
period for which this restriction is applicable.
Section 8. Registration.
(a) (i) The Company agrees that if at any time after the date
hereof the Company shall propose to file a registration statement with
respect to any of its Common Stock on a form suitable for a secondary
offering (excluding a Form X-0, X-0 or similar registration form) it
will give notice in writing to such effect to the Holders at least
thirty (30) days prior to such filing, and, at the written request of
any such registered holder, made within ten (10) days after the
receipt of such notice, will include therein at the Company's cost and
expense (including the fees and expenses of counsel to such Holders,
but excluding underwriting discounts, commissions and filing fees
attributable to the Shares included therein) such of the Shares as
such Holders shall request; provided, however, that if the offering
being registered by the Company is underwritten and if the
representative of the underwriters certifies in writing that the
inclusion therein of the Shares would materially and adversely affect
the sale or marketability of the securities to be sold by the Company
thereunder, then the Company shall be required to include in the
offering only that number of securities owned by shareholders,
including the Shares issuable upon exercise of this Warrant, which the
underwriters determine in their sole discretion will not adversely
affect the success of the offering (such securities so included to be
apportioned pro rata among all selling shareholders according to the
total amount of such securities entitled to be included therein) but
for this provision and any other similar cutback provisions to which
other selling shareholders are subject.
(ii) The Company shall have the right to withdraw and discontinue
registration of the Holder's Shares at any time prior to the effective
date of such registration statement if the registration of the Shares
is withdrawn or discontinued.
(iii) The Company shall not be required to include any of a
Holder's Shares in any registration statement unless such Holder
agrees, if so requested by the Company, to: (a) offer and sell the
Holder's Shares to or through an underwriter selected by the Company
and, to the extent possible, on substantially the same terms and
conditions under which the Shares are to be offered and sold; (b)
comply with any arrangement, terms and conditions with respect to the
offer and sale of the Holder's Shares to which the Company may be
required to agree; and (c) enter into any underwriting agreement
containing customary terms and conditions.
(b) Whenever required under this Agreement to use its reasonable
efforts to effect the registration of any of the Shares, the Company shall,
as expeditiously as reasonably possible:
(i) Prepare and file with the Securities and Exchange Commission
(the "Commission") a registration statement covering such Shares and
use its best efforts to cause such registration statement to be
declared effective by the Commission as expeditiously as possible and
to keep such registration effective until the earlier of (A) the date
when all Shares covered by the registration statement have been sold
or (B) two hundred seventy (270) days from the effective date of the
registration statement; provided, that before filing a registration
statement or prospectus or any amendment or supplements thereto, the
Company will furnish to each Holder of Shares covered by such
registration statement and the underwriters, if any, copies of all
such documents proposed to be filed (excluding exhibits, unless any
such person shall specifically request exhibits), which documents will
be subject to the review of such Holders and underwriters, and the
Company will not file such registration statement or any amendment
thereto or any prospectus or any supplement thereto (including any
documents incorporated by reference therein) with the Commission if
(A) the underwriters, if any, shall reasonably object to such filing
or (B) if information in such registration statement or prospectus
concerning a particular selling Holder has changed and any Holder of
Shares or the underwriters, if any, shall reasonably object.
(ii) Prepare and file with the Commission such amendments and
post-effective amendments to such registration statement as may be
necessary to keep such registration statement effective during the
period referred to in Section 8(b)(i) and to comply with the
provisions of the Securities Act with respect to the disposition of
all securities covered by such registration statement, and cause the
prospectus to be supplemented by any required prospectus supplement,
and as so supplemented to be filed with the Commission pursuant to
Rule 424 under the Securities Act.
(iii) Furnish to the selling Holder(s) of Shares such numbers of
copies of such registration statement, each amendment thereto, the
prospectus included in such registration statement (including each
preliminary prospectus), each supplement thereto and such other
documents as they may reasonably request in order to facilitate the
disposition of the Shares owned by them.
(iv) Use its best efforts to register and qualify under such
other securities laws of such jurisdictions as shall be reasonably
requested by any selling Holder of Shares and do any and all other
acts and things which may be reasonably necessary or advisable to
enable such selling Holder to consummate the disposition of the Shares
owned by such Holder, in such jurisdictions; provided, however, that
the Company shall not be required in connection therewith or as a
condition thereto to qualify to transact business or to file a general
consent to service of process in any such states or jurisdictions.
(v) Promptly notify each selling Holder of Shares of the
happening of any event as a result of which the prospectus included in
such registration statement contains an untrue statement of a material
fact or omits any fact necessary to make the statements therein not
misleading and, at the request of any such Holder, the Company will
prepare a supplement or amendment to such prospectus so that, as
thereafter delivered to the purchasers of such Shares, such prospectus
will not contain an untrue statement of a material fact or omit to
state any fact necessary to make the statements therein not
misleading.
(vi) Provide a transfer agent and registrar for all such Shares
not later than the effective date of such registration statement.
(vii) Enter into such customary agreements (including
underwriting agreements in customary form for such offering) and take
all such other actions as the underwriters, if any, reasonably request
in order to expedite or facilitate the disposition of such Shares
(including, in connection with a registration statement requested
pursuant to Section 8(a), effecting a stock split or a combination of
shares).
(viii) Make available for inspection by any selling Holder of
Shares or any underwriter participating in any disposition pursuant to
such registration statement and any attorney, accountant or other
agent retained by any such selling Holder or underwriter, all
financial and other records, pertinent corporate documents and
properties of the Company, and cause the officers, directors,
employees and independent accountants of the Company to supply all
information reasonably requested by any such seller, underwriter,
attorney, accountant or agent in connection with such registration
statement.
(ix) Promptly notify the selling Holder(s) of Shares and the
underwriters, if any, of the following events and (if requested by any
such person) confirm such notification in writing: (A) the filing of
the prospectus or any prospectus supplement and the registration
statement and any amendment or post-effective amendment thereto, with
respect to the registration statement or any post-effective amendment
thereto, the declaration of the effectiveness of such documents, (B)
any requests by the Commission for amendments or supplements to the
registration statement or the prospectus or for additional
information, (C) the issuance or threat of issuance by the Commission
of any stop order suspending the effectiveness of the registration
statement or the initiation of any proceedings for that purpose and
(D) the receipt by the Company of any notification with respect to the
suspension of the qualification of the Shares for sale in any
jurisdiction or the initiation or threat of initiation of any
proceeding for such purposes.
(x) Make every reasonable effort to prevent the entry of any
order suspending the effectiveness of the registration statement and
obtain at the earliest possible moment the withdrawal of any such
order, if entered.
(xi) Cooperate with the selling Holder(s) of Shares and the
underwriters, if any, to facilitate the timely preparation and
delivery of certificates representing the Shares to be sold and not
bearing any restrictive legends, and enable such Shares to be in such
lots and registered in such names as the underwriters may request at
least two (2) business days prior to any delivery of the Shares to the
underwriters.
(xii) Provide a CUSIP number for all the Shares not later than
the effective date of the registration statement.
(xiii) Prior to the effectiveness of the registration statement
and any post-effective amendment thereto and at each closing of an
underwritten offering, (A) make such representations and warranties to
the selling Holder(s) of Shares and the underwriters, if any, with
respect to the Shares and the registration statement as are
customarily made by issuers in similar offerings; (B) use its best
efforts to obtain "cold comfort" letters and updates thereof from the
Company's independent certified public accountants addressed to the
selling Holders of Shares and the underwriters, if any, such letters
to be in customary form and covering matters of the type customarily
covered in "cold comfort" letters by underwriters in connection with
similar offerings; (C) deliver such documents and certificates as may
be reasonably requested (1) by the Holders of a majority of the Shares
being sold, and (2) by the underwriters, if any, to evidence
compliance with clause (A) above and with any customary conditions
contained in the underwriting agreement or other agreement entered
into by the Company; and (D) obtain opinions of counsel to the Company
and updates thereof (which counsel and which opinions shall be
reasonably satisfactory to the underwriters, if any), covering the
matters customarily covered in opinions requested in similar offerings
and such other matters as may be reasonably requested by the selling
Holders of Shares and underwriters or their counsel. If customary for
similar offerings, such counsel shall also state that no facts have
come to the attention of such counsel which cause them to believe that
such registration statement, the prospectus contained therein, or any
amendment or supplement thereto, as of their respective effective or
issue dates, contains any untrue statement of any material fact or
omits to state any material fact necessary to make the statements
therein not misleading (except that no statement need be made with
respect to any financial statements, notes thereto or other financial
data or other expertized material contained therein). If for any
reason the Company's counsel is unable to give such opinion, the
Company shall so notify the Holders of the Shares and shall use its
best efforts to remove expeditiously all impediments to the rendering
of such opinion.
(xiv) Otherwise use its best efforts to comply with all
applicable rules and regulations of the Commission, and make generally
available to its security holders earnings statements satisfying the
provisions of Section 11(a) of the Securities Act, no later than
forty-five (45) days after the end of any twelve-month period (or
ninety (90) days, if such period is a fiscal year) (A) commencing at
the end of any fiscal quarter in which the Shares are sold to
underwriters in a firm or best efforts underwritten offering, or (B)
if not sold to underwriters in such an offering, beginning with the
first month of the first fiscal quarter of the Company commencing
after the effective date of the registration statement, which
statements shall cover such twelve-month periods.
(c) After the date hereof, the Company shall not grant to any holder
of securities of the Company any registration rights which have a priority
greater than or equal to those granted to Holder(s) pursuant to this
Warrant without the prior written consent of the Holder(s).
(d) The Company's obligations under Sections 8(a) and (b) above with
respect to each Holder of Shares are expressly conditioned upon such
Holder's furnishing to the Company in writing such information concerning
such Holder and the terms of such Holder's proposed offering as the Company
shall reasonably request for inclusion in the registration statement and
such Holder executing, acknowledging, sealing and delivering all documents
reasonable necessary to enable the Company to comply with the Securities
Act, any applicable Blue Sky Laws, and any applicable laws, rules and
regulations of the commission, NASD and Blue Sky Law authorities and
administrators. If any registration statement including any of the Shares
is filed, then the Company shall indemnify each Holder thereof (and each
underwriter for such Holder and each person, if any, who controls such
underwriter within the meaning of the Securities Act) from any loss, claim,
damage or liability arising out of or based upon any untrue statement of a
material fact contained in such registration statement or any omission to
state therein a material fact required to be stated therein or necessary to
make the statements therein no misleading, except for any such statement or
omission based on information furnished in writing by such Holder of the
Shares expressly for use in connection with such registration statement;
and such Holder shall indemnify the Company (and each of its officers and
directors who has signed such registration statement, each other director
and each other person, if any, who controls the Company within the meaning
of the Securities Act, each underwriter for the Company and each person, if
any, who controls such underwriter within the meaning of the Securities
Act) and each other such Holder against any loss, claim, damage or
liability arising out of or based upon any such statement or omission which
was made in reliance upon, and strictly in conformity with, information
furnished in writing to the Company by such Holder of the Shares expressly
for use in connection with such registration statement.
(e) For purposes of this Section 8, all of the Shares shall be deemed
to be issued and outstanding, and all Holders shall be deemed to be holders
of such Shares.
Section 9. Article and Section Headings. Numbered and titled article and
section headings are for convenience only and shall not be construed as
amplifying or limiting any of the provisions of this Agreement.
Section 10. Notice. Any and all notices, elections or demands permitted or
required to be made under this Agreement shall be in writing, signed by the
party giving such notice, election or demand and shall be delivered personally,
telecopied, telexed, or sent by certified mail or overnight via nationally
recognized courier service (such as Federal Express), to the other party at the
address set forth below, or at such other address as may be supplied in writing
and of which receipt has been acknowledged in writing. The date of personal
delivery or telecopy or two (2) business days after the date of mailing (or the
next business day after delivery to such courier service), as the case may be,
shall be the date of such notice, election or demand. For the purpose of this
Agreement;
The Address of Holder is: Xxxxxxxx Inc.
000 Xxxxxx Xxxxxx
Xxxxxx Xxxx, Xxxxxxxx 00000
Attn: Legal Department
Facsimile: ____________________
The Address of Company is: Smart Choice Automotive Group, Inc.
0000 Xxxxx Xxxxxxxxxx Xxxxxx
Xxxxxxxxxx, Xxxxxxx 00000
Attn: Xxxxxx X. Xxxxxxx, Esq.
Chief Legal Officer
Facsimile: (000) 000-0000
Section 11. Severability. If any provision(s) of this Agreement or the
application thereof to any person or circumstances shall be invalid or
unenforceable to any extent, the remainder of this Agreement and the application
of such provisions to other persons circumstances shall not be affected thereby
and shall be enforced to the greatest extent permitted by law.
Section 12. Entire Agreement. This Agreement between the Company, Xxxxxxxx
and Holder represents the entire agreement between the parties concerning the
subject matter hereof, and all oral discussions and prior agreements are merged
herein.
Section 13. Governing Law and Amendments. This Agreement shall be construed
and enforced under the laws of the State of Florida applicable to contracts to
be wholly performed in such state. No amendment or modification hereof shall be
effective except in a writing executed by each of the parties hereto.
Section 14. Counterparts. This Agreement may be executed in any number of
counterparts, each of which when so executed shall be deemed to be an original
and all of which taken together shall constitute one and the same Agreement.
Company
SMART CHOICE AUTOMOTIVE GROUP, INC.
By: /s/
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Title:
Holder
XXXXXXXX INC.
By: /s/
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Title:
