FORM OF WARRANT to Purchase Common Stock of Fremont General Corporation
THIS WARRANT IS NON-TRANSFERABLE OTHER THAN AS PROVIDED IN THE EXCHANGE AND SHAREHOLDER RIGHTS
AGREEMENT, DATED [•], 2007 (THE “EXCHANGE AND SHAREHOLDER RIGHTS AGREEMENT”).
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO AN INVESTMENT AGREEMENT, DATED MAY
21, 2007 (THE “INVESTMENT AGREEMENT”).
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE EXCHANGE AND SHAREHOLDER RIGHTS
AGREEMENT.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED. THE SHARES OF COMMON STOCK OF FREMONT GENERAL CORPORATION UNDERLYING THIS
WARRANT ARE SUBJECT TO THE INVESTMENT AGREEMENT, THE EXCHANGE AND SHAREHOLDER RIGHTS AGREEMENT, AND
A REGISTRATION RIGHTS AGREEMENT, DATED [•], 2007. A COPY OF SUCH INVESTMENT AGREEMENT,
EXCHANGE AND SHAREHOLDER RIGHTS AGREEMENT, OR REGISTRATION RIGHTS AGREEMENT WILL BE FURNISHED
WITHOUT CHARGE BY THE COMPANY TO THE HOLDER HEREOF UPON WRITTEN REQUEST.
Warrant
to Purchase Shares of Common Stock of
Fremont General Corporation
THIS IS TO CERTIFY THAT Xxxxxx’x Xxxx/Ford, Ltd., a Texas limited partnership (the
“Investor”), or its permitted assigns, is entitled, subject to the terms and conditions set forth
herein, at any time and from time to time prior to the Expiration Date (as defined herein), to
purchase from Fremont General Corporation, a Nevada corporation (the “Company”), 7,129,326 shares
of Common Stock, at a purchase price of $8.44 per share (the initial “Exercise Price,” subject to
adjustment as provided herein).
| 1. | DEFINITIONS |
As used in this Warrant, the following terms have the respective meanings set forth below:
“Applicable Base Amount” shall mean $8.44 from the date hereof to (but excluding) the
Shareholder Approval Date, and shall mean $9.00 from (and including) and after the Shareholder
Approval Date.
“Asset Purchase Agreement” means the Asset Purchase Agreement, dated as of May 21,
2007, between the Bank and iStar Financial Inc.
“Bank” means Fremont Investment & Loan, a California industrial banking corporation.
“CDI Litigation” means pending litigation (and related actions) brought against the
Company, its subsidiaries or its officers and directors by the California Insurance Commissioner
alleging, among other things, the improper utilization by the Company or its subsidiary of certain
net operating loss deductions and mismanagement claims.
“Closing Price” means, for each trading day, the last reported sale price regular way
on the principal national securities exchange on which the Common Stock is then listed or admitted
for trading or, if the Common Stock is not listed on a national securities exchange, the average of
the closing bid and asked prices in the over-the-counter market as furnished by any New York Stock
Exchange member firm selected from time to time by the Company for that purpose.
“Company” has the meaning assigned to it in the preamble, and any successor
corporation.
“Current Market Price” means, on any day, the average of the Closing Prices of the
Common Stock for the ten consecutive trading days ending on such day.
“Designated Office” has the meaning assigned to it in Section 6 hereof.
“Exchange and Shareholder Rights Agreement” means that certain Exchange and
Shareholder Rights Agreement, dated [•], by and among the Company, the Bank and the Investor.
“Excluded Stock” has the meaning assigned to it in Section 4.10 hereof.
“Exercise Date” has the meaning assigned to it in Section 2.1(a) hereof.
“Exercise Notice” has the meaning assigned to it in Section 2.1(a) hereof.
“Exercise Price” means, in respect of a Warrant Share, the Exercise Price set forth in
the preamble of this Warrant, as adjusted from time to time pursuant to Section 4 hereof.
“Expiration Date” means the first anniversary of the Reset Date.
“Fair Market Value” means the amount which a willing buyer would pay a willing seller
in an arms-length transaction, as determined in good faith by the Company’s board of directors.
“Fully Diluted Outstanding Shares” as of any date means the number of shares of Common
Stock outstanding on such date on a fully diluted basis (including, without limitation, shares of
restricted stock (whether or not vested) and, in accordance with the treasury method, shares
subject to outstanding stock options, whether or not “in the money”), excluding shares issued or
issuable upon exchange of Series A Preferred Stock or upon exercise of Warrants.
“Holder” means (a) with respect to this Warrant, the Investor or such other Person in
whose name the Warrant is registered on the books of the Company maintained for such purpose and
(b) with respect to any Warrant Shares, the Person in whose name such Warrant Shares are registered
on the books of the Company maintained for such purpose.
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“Investment Agreement” means the Investment Agreement, dated as of May 21, 2007, by
and among the Company, the Bank and the Investor.
“Investor” has the meaning assigned to it in the preamble.
“Measurement Date” has the meaning set forth in the definition of “Reset Date.”
“Original Issue Date” means [•], 2007, the date on which the Warrant was issued
by the Company pursuant to the Investment Agreement.
“Quarter-End Date” has the meaning set forth in the definition of “Reset Date.”
“Premium” means the amount to be paid for the Purchased Non-Loan Assets, as defined in
the Asset Purchase Agreement pursuant to Section 2.04(b) therein, or any successor provisions, not
to exceed $50,000,000.
“Reset Date” means the date that is the 45th day after the earlier to occur
of (i) the last day of the Company’s fiscal quarter during which the Bank consummates the
Commercial Real Estate Transaction (the “Quarter-End Date”) and (ii) December 31, 2007 (the
“Year-End”) (the earlier to occur of the Quarter-End Date and the Year-End being referred to herein
as the “Measurement Date”).
“Shareholder Approval” means the approval by the Company’s shareholders of the
issuance to the Investor of the Additional Warrant.
“Shareholder Approval Date” means the date as of which the Shareholder Approval
occurs.
“Tangible Book Value” means the positive difference, if any, of (a) the Company’s
consolidated assets (excluding goodwill, trademarks and other intangible assets) minus (b) the
Company’s consolidated liabilities, in each case as reported on the Company’s consolidated balance
sheet as of the Measurement Date, calculated in accordance with GAAP consistently applied with
prior periods: provided, however, that: (i) there shall be included in Tangible
Book Value, (A) the portion of the Premium, if any, not included in the earnings of the Company for
periods prior to the Measurement Date, multiplied by 57.954%, (B) an add-back in an amount equal to
the valuation allowance applied to the actual amount of deferred tax assets as of the Measurement
Date for Federal and California franchise tax purposes that may be realized prior to the expiration
of the applicable net operating loss carryforward periods; provided that the amount of such
add-back plus the amount of deferred tax assets for Federal and California franchise tax purposes
reflected on the consolidated balance sheet as of the Measurement Date shall not exceed
$150,000,000, (C) an add-back in an amount equal to any allowance for loan losses specifically
related to the A Participation Interest (as defined in the Asset Purchase Agreement) as of the
Measurement Date multiplied by 57.954%, and (D) the amount of any goodwill on the consolidated
balance sheet as of the Measurement Date related to acquisitions by the Company that were approved
by the Investor in writing and closed between the date of this Agreement and the Measurement Date
and (ii) there shall be excluded from Tangible Book Value, the effect of the issuance of the Series
A Preferred Stock and the Warrants. Tangible Book Value shall be
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determined in good faith by the Board of Directors, subject to the approval of Investor, which
approval will not be unreasonably withheld.
“Underpayment Test” has the meaning assigned to it in Section 4.13 hereof.
“Warrant Price” means an amount equal to (i) the number of Warrant Shares being
purchased upon exercise of this Warrant pursuant to Section 2.1 hereof, multiplied
by (ii) the Exercise Price.
“Warrant Shares” means the shares of Common Stock issuable upon the exercise of this
Warrant.
“Year-End” has the meaning set forth in the definition of “Reset Date.”
All other capitalized terms used but not defined herein shall have the meanings given to such
terms in the Exchange and Shareholder Rights Agreement.
| 2. | EXERCISE OF WARRANT |
2.1. Manner of Exercise.
(a) From and after the Original Issue Date and at any time before 5:00 P.M., New York
time, on the Expiration Date, the Holder may from time to time exercise this Warrant, on any
Business Day, in whole or in part. In order to exercise this Warrant, the Holder shall (i)
deliver to the Company at its Designated Office a written notice of the Holder’s election to
exercise this Warrant (an “Exercise Notice”) substantially in the form attached to this
Warrant as Annex A, which Exercise Notice shall be irrevocable and specify the
number of Warrant Shares to be purchased, together with this Warrant and (ii) pay to the
Company the Warrant Price in full. The date on which such delivery and payment shall have
taken place shall be hereinafter sometimes referred to as the “Exercise Date.” If the
Warrant has not been exercised by 5:00 P.M., New York time, on the Expiration Date, it shall
expire.
(b) Upon receipt by the Company of such Exercise Notice, surrender of this Warrant and
payment of the Warrant Price (in accordance with Section 2.1(c) hereof), the Company shall,
as promptly as practicable, and in any event within five (5) Business Days thereafter,
execute (or cause to be executed) and deliver (or cause to be delivered) to the Holder a
certificate or certificates representing the Warrant Shares issuable upon such exercise
registered in the name of the exercising Holder, together with cash in lieu of any fraction
of a share, as hereafter provided. The stock certificate or certificates so delivered shall
be, to the extent possible, in such denomination or denominations as the exercising Holder
shall reasonably request in the Exercise Notice and shall be registered in the name of the
exercising Holder or such other name as shall be designated in the Exercise Notice. This
Warrant shall be deemed to have been exercised and such certificate or certificates of
shares of Common Stock issuable upon exercise of this Warrant shall be deemed to have been
issued, and the Holder (or any other Person so designated to be named therein) shall be
deemed to have become a holder of record of such shares of Common Stock for all purposes, as
of the Exercise Date.
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(c) Payment of the Warrant Price shall be made at the option of the exercising Holder
in cash or by delivery of a certified or official bank check or bank cashier’s check payable
to the order of the Company, or by wire transfer of immediately available funds, in the
amount of such Warrant Price. Payment shall be made to the Company at its Designated Office
prior to the close of business on the Exercise Date.
(d) All issuances of Common Stock pursuant to this Warrant shall be subject to
compliance with all applicable legal and bank regulatory requirements.
2.2. Payment of Taxes. All shares of Common Stock issuable upon the exercise of this Warrant pursuant to the terms
hereof shall be validly issued, fully paid and nonassessable, issued without violation of any
preemptive or similar rights of any stockholder of the Company and free and clear of all Liens.
The Company will pay any and all expenses and original issuance, transfer, stamp and other similar
taxes that may be payable in respect of the issue or delivery of the Warrant Shares, unless such
tax or charge is imposed by law upon the Holder. In addition, the Company shall not be required to
pay any tax or governmental charge which may be issuable upon exercise of this Warrant payable in
respect of any Transfer involved in the issue and delivery of Warrant Shares in a name other than
that of the exercising Holder, and no such issue or delivery shall be made unless and until the
Person requesting such issue has paid to the Company the amount of any such tax, or has established
to the satisfaction of the Company that such tax has been paid or will be paid.
2.3. Fractional Shares. The Company shall not be required to issue fractional shares of its Common Stock upon exercise
of any Warrant. In lieu of any fraction of a share to which any Holder would otherwise be
entitled, the Company shall make a cash payment equal to the product of such fraction multiplied by
the Current Market Price of one share of Common Stock on the Exercise Date.
| 3. | TRANSFER, DIVISION AND COMBINATION |
3.1. Transfer of this Warrant.
This Warrant is non-transferable other than as provided in the Exchange and Shareholder Rights
Agreement, and any attempted transfer or assignment other than as set forth therein shall be void.
Upon compliance with the provisions of this Section 3.1, each transfer of this Warrant and all
rights hereunder, in whole or in part, shall be registered on the books of the Company to be
maintained for such purpose, upon surrender of this Warrant at the Designated Office and compliance
with the terms hereof, together with a written assignment of this Warrant in the form of Annex
B hereto duly executed by the Holder or its agent or attorney and funds sufficient to pay any
transfer taxes described in Section 2.2 in connection with the making of such transfer. Upon such
compliance, surrender and delivery and, if required, such payment, the Company shall 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, and shall issue to the assignor a new Warrant
evidencing the portion of this Warrant not so assigned and this Warrant shall promptly be
cancelled.
3.2. Mutilation or Loss.
Upon receipt by the Company from the Holder of evidence reasonably satisfactory to the Company
of the loss, theft, destruction or mutilation of this Warrant and an indemnity reasonably
satisfactory to it (it being understood that the written
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indemnification agreement or an affidavit of loss of the Holder shall be a sufficient
indemnity) and, in case of mutilation, upon surrender and cancellation hereof, the Company will
execute and deliver in lieu hereof a new Warrant of like tenor to such Holder; provided,
however, that, in the case of mutilation, no indemnity shall be required if this Warrant in
identifiable form is surrendered to the Company for cancellation. Upon the issuance of any new
Warrant under this Section 3.2, the Company may require the payment of a sum sufficient to cover
any tax or other governmental charge that may be imposed in relation thereto.
3.3. Expenses. Except as provided in Section 3.2, the Company shall prepare, issue and deliver at its own
expense any new Warrant required to be issued hereunder.
3.4. Maintenance of Books.
The Company agrees to maintain, at the Designated Office, books for the registration and
transfer of the Warrant.
| 4. | ADJUSTMENT OF EXERCISE PRICE |
4.1.
(a) If the Shareholder Approval Date occurs prior to the Reset Date, the Exercise Price
shall be increased to $9.00 per share, subject to adjustment from time to time in accordance
with this Section 4.
(b) Effective 5:00 P.M., New York time, on each of the Reset Date and, if it occurs on
or after the Reset Date, the Shareholder Approval Date, the Exercise Price shall be reset to
the lesser of (a) the Applicable Base Amount or (b) an amount equal to the quotient of: (i)
the product of (x) 0.75 multiplied by (y) the Tangible Book Value as of the
Measurement Date, divided by (ii) the Fully Diluted Outstanding Shares as of the Measurement
Date. If, prior to the Reset Date, an adjustment of the Exercise Price has occurred
pursuant to Section 4.2, such adjustment(s) shall be made on the reset Exercise Price
determined by the immediately preceding sentence. If prior to the Reset Date the Holder
shall have already exercised all or any part of this Warrant, then the Company shall
promptly pay in cash to the Holder, in respect of all of the shares of Common Stock received
upon each such exercise, an amount equal to the positive difference, if any, of (i) the
amount by which (A) the sum of the amount paid hereunder by the Holder to the Company for
such shares of Common Stock in such exercise plus all amounts paid by the Holder to the
Company pursuant to Section 4.13 with respect to such shares exceeds (B) the sum of the
payments made by the Company to such Holder in connection with the actual exercise pursuant
to Sections 4.2 and 4.3 minus (ii) the amount the Holder would have paid to the
Company for such shares of Common Stock (and any additional shares subsequently acquired by
the Holder in respect of such shares pursuant to transactions contemplated by Sections 4.4,
4.6, and 4.7) in such exercise at the Exercise Price as adjusted pursuant to this Section
4.1 (giving effect to all prior adjustments under this Section 4). In the event that, prior
to the Reset Date or, if it occurs on or after the Reset Date, the Shareholder Approval
Date, the Exercise Price shall have been adjusted pursuant to Sections 4.4, 4.6 or 4.7, then
the Exercise Price shall be adjusted pursuant to the first sentence of this Section 4.1 as
if the event or events giving
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rise to such adjustment(s) occurred immediately following the adjustment of the
Exercise Price pursuant to this Section 4.1.
4.2. If, on the date a final non-appealable judgment is rendered in the CDI Litigation or a
final binding settlement agreement is entered into by the Company and its relevant subsidiaries
with respect to the CDI Litigation (the “Litigation Resolution Date”), the total costs incurred by
the Company or its subsidiaries related to the CDI Litigation after the Measurement Date
(including, without limitation, judgments, fines and penalties incurred in connection with the CDI
Litigation, but excluding costs incurred in connection with legal defense, consultant fees and any
other third party costs incurred in connection with the defense thereof) (the “Litigation Costs”)
exceed $35,000,000 (such excess being the “Litigation Cost Excess”), then the Exercise Price (after
taking into account the next sentence) shall be immediately adjusted downward by an amount equal to
the product of: (i) 0.75 multiplied by (ii) the quotient of (A) the positive
difference of the Litigation Cost Excess (net of any realizable income tax benefits attributable to
the Litigation Cost Excess) divided by (B) the Fully Diluted Outstanding Shares as
of the Measurement Date. In the event that, prior to the Litigation Resolution Date, the Exercise
Price shall have been adjusted pursuant to Sections 4.4, 4.6 or 4.7, then the Exercise Price shall
be adjusted pursuant to the preceding sentence as if the event or events giving rise to such
adjustment(s) occurred immediately following the adjustment of the Exercise Price pursuant to this
Section 4.2. If, however, as of the Litigation Resolution Date, the Holder has already exercised
all or any part of this Warrant, then, the Company shall promptly pay to the Holder in cash, in
respect of all the shares of Common Stock received upon each such exercise occurring prior to the
Litigation Resolution Date, an amount equal to the positive difference, if any, of (i) the amount
by which (A) the sum of the amount paid hereunder by the Holder to the Company for such shares of
Common Stock in such exercise plus all amounts paid by the Holder to the Company pursuant to
Section 4.13 with respect to such shares exceeds (B) the sum of the payments made by the Company to
such Holder in connection with such exercise pursuant to Sections 4.1 and 4.3 minus (ii)
the amount the Holder would have paid to the Company for such shares of Common Stock (and any
additional shares subsequently acquired by the Holder in respect of such shares pursuant to
transactions contemplated by Sections 4.4, 4.6, and 4.7) in such exercise at the Exercise Price as
adjusted pursuant to this Section 4.2 (giving effect to all prior adjustments under this Section 4)
(such aggregate cash payment by the Company being referred to herein as the “Litigation Settlement
Amount”), provided, however, that if the Company does not have sufficient cash to
make such payment or is legally or contractually prohibited from making such payment, the Company
shall pay such Litigation Settlement Amount in a number of shares of Common Stock equal to the
quotient of the Litigation Settlement Amount divided by the Current Market Price.
4.3. If, on June 30, 2010, the total cumulative losses (excluding losses attributable to early
payment defaults), liabilities or expenses incurred by the Company and its Subsidiaries on a
consolidated basis after the Measurement Date relating to the rights or claims of third parties in
connection with mortgage loans sold (whether as a whole loan sale, securitization or otherwise) by
the Company or any of its Subsidiaries prior to the Measurement Date (the “Loan Losses”) exceed the
sum of $35,000,000 plus a new reserve established on the Company’s consolidated balance
sheet at June 30, 2007 (excluding any reserve for early payment defaults) (prepared in accordance
with GAAP consistently applied with prior periods) in connection with such loans (such excess being
the “Loan Loss Excess”), then the Exercise Price (after taking into account
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the next sentence) shall be adjusted downward on such date by an amount equal to the product
of: (i) 0.75 multiplied by (ii) the quotient of (A) the Loan Loss Excess (net of
any realizable income tax benefits attributable to the Loan Loss Excess) divided by
(B) the Fully Diluted Outstanding Shares as of the Measurement Date. In the event that, prior to
June 30, 2010, the Exercise Price shall have been adjusted pursuant to Sections 4.4, 4.6 or 4.7,
then the Exercise Price shall be adjusted pursuant to the preceding sentence as if the event or
events giving rise to such adjustment(s) occurred immediately following the adjustment of the
Exercise Price pursuant to this Section 4.3. If, however, as of June 30, 2010, the Holder has
already exercised all or any part of this Warrant, then the Company shall promptly pay to the
Holder in cash, in respect of all of the shares of Common Stock received upon each such exercise
occurring prior to June 30, 2010, an amount equal to the positive difference, if any, of (i) the
amount by which (A) the sum of the amount paid hereunder by the Holder to the Company for such
shares of Common Stock in such exercise plus all amounts paid by the Holder to the Company pursuant
to Section 4.13 with respect to such shares exceeds (B) the sum of the payments made by the Company
to such Holder in connection with the actual exercise pursuant to Sections 4.1 and 4.2
minus (ii) the amount the Holder would have paid to the Company for such shares of Common
Stock (and any additional shares subsequently acquired by the Holder in respect of such shares
pursuant to transactions contemplated by Sections 4.4, 4.6, and 4.7) in such exercise at the
Exercise Price as adjusted pursuant to this Section 4.3 (giving effect to all prior adjustments
under this Section 4) (such aggregate cash payment by the Company being referred to herein as the
“Loan Loss Settlement Amount”); provided, however, that if the Company does not
have sufficient cash to make such payment or is legally or contractually prohibited from making
such payment, the Company shall pay such Loan Loss Settlement Amount in a number of shares of
Common Stock equal to the quotient of the Loan Loss Settlement Amount divided by the Current Market
Price.
4.4. Upon Issuance of Common Stock. If the Company shall, at any time or from time to time after the Original Issue Date and on or
before the Expiration Date, issue any shares of Common Stock, options to purchase or rights to
subscribe for Common Stock, securities by their terms convertible into or exchangeable for Common
Stock, or options to purchase or rights to subscribe for such convertible or exchangeable
securities without consideration or for consideration per share less than the Current Market Price,
then the Exercise Price shall forthwith be lowered to a price equal to the price obtained by
multiplying:
(a) the Exercise Price in effect immediately prior to the issuance of such Common
Stock, options, rights or securities by
(b) a fraction of which (x) the numerator shall be the sum of (A) the number of shares
of Common Stock outstanding on a fully diluted basis immediately prior to such issuance and
(B) the number of additional shares of Common Stock which the aggregate consideration for
the number of shares of Common Stock so offered would purchase at the Current Market Price
and (y) the denominator shall be the number of shares of Common Stock outstanding on a fully
diluted basis immediately after such issuance.
The provisions of this Section 4.4 shall not apply to any issuance of Excluded Stock.
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4.5. Provisions Applicable to Adjustments. For the purposes of any adjustment of the Exercise Price pursuant to Section 4.4, the
following provisions shall be applicable:
(a) In the case of the issuance of Common Stock for cash in a public offering or
private placement, the consideration shall be deemed to be the amount of cash paid therefor
before deducting therefrom any discounts, commissions or placement fees payable by the
Company to any underwriter or placement agent in connection with the issuance and sale
thereof.
(b) In the case of the issuance of Common Stock for consideration in whole or in part
other than cash, the consideration other than cash shall be deemed to be the Fair Market
Value thereof.
(c) In the case of the issuance of options to purchase or rights to subscribe for
Common Stock, securities by their terms convertible into or exchangeable for Common Stock,
or options to purchase or rights to subscribe for such convertible or exchangeable
securities (except for options to acquire or rights to subscribe for, or securities
convertible into or exchangeable for, Excluded Stock):
(i) the aggregate maximum number of shares of Common
Stock deliverable upon exercise of any such options to
purchase or rights to subscribe for Common Stock shall be
deemed to have been issued at the time such options or rights
were issued and for a consideration equal to the
consideration (determined in the manner provided in
subparagraphs (a) and (b) of this Section 4.5), if any,
received by the Company upon the issuance of such options or
rights plus the minimum purchase price provided in
such options or rights for the Common Stock covered thereby;
(ii) the aggregate maximum number of shares of Common
Stock deliverable upon conversion of or in exchange for any
such convertible or exchangeable securities or upon the
exercise of options to purchase or rights to subscribe for
such convertible or exchangeable securities and subsequent
conversion or exchange thereof shall be deemed to have been
issued at the time such securities, options, or rights were
issued and for a consideration equal to the consideration
received by the Company for any such securities and related
options or rights, plus the additional consideration,
if any, to be received by the Company upon the conversion or
exchange of such securities or the exercise of any related
options or rights (the consideration in each case to be
determined in the manner provided in paragraphs (a) and (b)
of this Section 4.5);
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(iii) on any change in the number of shares or exercise
price of Common Stock deliverable upon exercise of any such
options or rights or conversions of or exchanges for such
securities, other than a change resulting from the
anti-dilution provisions thereof, the Exercise Price shall
forthwith be readjusted to such Exercise Price as would have
been obtained had the adjustment made upon the issuance of
such options, rights or securities not converted prior to
such change or options or rights related to such securities
not converted prior to such change been made upon the basis
of such change;
(iv) upon the expiration of any options to purchase or
rights to subscribe for Common Stock which shall not have
been exercised, the Exercise Price computed upon the original
issue thereof (or upon the occurrence of a record date with
respect thereto), and any subsequent adjustments based
thereon, shall, upon such expiration, be recomputed as if the
only additional shares of Common Stock issued were the shares
of Common Stock, if any, actually issued upon the exercise of
such options to purchase or rights to subscribe for Common
Stock, and the consideration received therefor was the
consideration actually received by the Company for the issue
of the options to purchase or rights to subscribe for Common
Stock that were exercised, plus the consideration actually
received by the Company upon such exercise; and
(v) no further adjustment of the Exercise Price adjusted
upon the issuance of any such options, rights, convertible
securities or exchangeable securities shall be made as a
result of the actual issuance of Common Stock on the exercise
of any such rights or options or any conversion or exchange
of any such securities.
4.6. Upon Stock Dividends, Subdivisions or Splits. If, at any time after the Original Issue Date and on or before the Expiration Date, the number
of shares of Common Stock outstanding is increased by a stock dividend payable in shares of Common
Stock or by a subdivision or split up of shares of Common Stock, then, following the record date
for the determination of holders of Common Stock entitled to receive such stock dividend, or to be
affected by such subdivision or split up, the Exercise Price shall be appropriately decreased to
equal the product of the Exercise Price multiplied by a fraction, the numerator of which is the
number of shares of Common Stock outstanding immediately prior to such increase and the denominator
of which is the number of shares of Common Stock outstanding immediately after such increase.
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4.7. Upon Combinations or Reverse Stock Splits. If, at any time after the Original Issue Date, the number of shares of Common Stock
outstanding is decreased by a combination or reverse stock split of the outstanding shares of
Common Stock into a smaller number of shares of Common Stock, then, following the record date to
determine shares affected by such combination or reverse stock split, the Exercise Price shall be
appropriately increased to equal the product of the Exercise Price multiplied by a fraction, the
numerator of which is the number of shares of Common Stock outstanding immediately prior to such
decrease and the denominator of which is the number of shares of Common Stock outstanding
immediately after such decrease in outstanding shares.
4.8. Upon Reclassifications, Reorganizations, Consolidations or Mergers.
In the event of any capital reorganization of the Company, any reclassification of the stock
of the Company (other than a change in par value or from par value to no par value or from no par
value to par value or as a result of a stock dividend or subdivision, split up or combination of
shares), or any consolidation or merger of the Company with or into another Person (where the
Company is not the surviving Person or where there is a change in or distribution with respect to
the Common Stock), each Warrant shall after such reorganization, reclassification, consolidation,
or merger be exercisable for the kind and number of shares of stock or other securities or property
of the Company or of the successor Person resulting from such consolidation or surviving such
merger, if any, to which the holder of the number of shares of Common Stock deliverable
(immediately prior to the time of such reorganization, reclassification, consolidation or merger)
upon exercise of such Warrant would have been entitled upon such reorganization, reclassification,
consolidation or merger. The provisions of this clause shall similarly apply to successive
reorganizations, reclassifications, consolidations, or mergers. The Company shall not effect any
such reorganization, reclassification, consolidation or merger unless, prior to the consummation
thereof, the successor Person (if other than the Company) resulting from such reorganization,
reclassification, consolidation or merger, shall assume, by written instrument, the obligation to
deliver to the Holder such shares of stock, securities or assets, which, in accordance with the
foregoing provisions, such Holder shall be entitled to receive upon such conversion.
4.9. Deferral in Certain Circumstances. In any case in which the provisions of this Section 4 shall require that an adjustment shall
become effective immediately after a record date of an event, the Company may defer until the
occurrence of such event (a) issuing to the Holder with respect to any Warrants exercised after
such record date and before the occurrence of such event the shares of Common Stock issuable or
cash payable upon such exercise by reason of the adjustment required by such event and issuing to
such Holder only the shares of Common Stock issuable upon such exercise before giving effect to
such adjustments, and (b) paying to such Holder any amount in cash in lieu of a fractional share of
Common Stock pursuant to Section 2.3 above; provided that the Company shall deliver to such
Holder an appropriate instrument or due bills evidencing such Holder’s right to receive such
additional shares or such cash.
4.10. Adjustment of Number of Shares Purchasable. Upon any adjustment of the Exercise Price as provided in Sections 4.4, 4.6, or 4.7 Holders of
the Warrants shall thereafter be entitled to receive upon the exercise thereof, at the Exercise
Price resulting from such adjustment, the number of shares of Common Stock (calculated to the
nearest 1/100th of a share) obtained by multiplying the Exercise Price in effect immediately prior
to such adjustment by the number of shares of Common Stock issuable on the exercise hereof
immediately prior to such
11
adjustment and dividing the product thereof by the Exercise Price resulting from such
adjustment.
4.11. Form of Warrant. Irrespective of and without limiting any adjustment in the Exercise Price or the number of
shares purchasable upon the exercise of the Warrant, Warrants thereafter issued may continue to
express the same price and number and kind of shares as are stated in the original Warrant.
4.12. Exceptions. This Section 4 shall not apply to any shares of Common Stock (a) issued as consideration when
any corporation or business is acquired, merged into, or becomes part of the Company or a
subsidiary of the Company, (b) issued upon exercise of any options, warrants or other rights
assumed by the Company in connection with a merger or other acquisition, provided, that
such options, warrants or other rights assumed by the Company shall not have been issued in
connection with or in contemplation of such merger or acquisition, (c) issued in good faith in
connection with any other acquisition of assets in an arms-length transaction between the Company
and an unaffiliated third party, (d) issued upon exchange of the Preferred Shares as contemplated
by the Exchange and Shareholder Rights Agreement, (e) issued to employees or directors of the
Company pursuant to an employee stock option plan or stock incentive plan approved by the Board of
Directors at no less than market value on the date of grant, or (f) issued to officers and
employees pursuant to employment agreements in existence on the date hereof at no less than market
value on the date of issuance (collectively, the “Excluded Stock”). Additionally, no further
adjustments to the Exercise Price shall be made under Sections 4.2 or Section 4.3 from and after
the date the Permitted Holders cease to beneficially own and/or have the right to acquire at least
5% of the Aggregate Initial Shares.
4.13. Shareholder Approval Date Adjustment. If, prior to the Shareholder Approval Date, all or any portion of this Warrant has been
exercised and shares of Common Stock have been purchased pursuant thereto, then, within five
Business Days after the Shareholder Approval Date, the Holder shall pay to the Company, in respect
of all the shares of Common Stock so purchased, an amount in cash such that the net amount paid by
such Holder (or its predecessors) to the Company (i.e., net of any payments received by the Holder
from the Company under this Section 4) in respect of all such share purchases equals the net amount
such Holder (or its predecessors) would have been obligated to pay to the Company in respect of
such purchases if the Shareholder Approval had occurred prior to such exercises (the “Underpayment
Test”). If the Underpayment Test is satisfied without a payment by the Holder to the Company, then
the Holder shall not be required to pay any amount under this Section 4.13.
| 5. | TAKING OF RECORD; TRANSFER BOOKS; WARRANT HOLDER NOT DEEMED A STOCKHOLDER |
5.1. Taking of Record. In the case of dividends or other distributions by the Company to the holders of its Common
Stock with respect to which any provision hereof refers to the taking of a record of such holders,
the Company will in each such case take such a record and will take such record as of the close of
business on a Business Day.
5.2. Closing of Transfer Books. The Company shall not at any time close its stock transfer books so as to result in preventing
or delaying the exercise of the Warrant.
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5.3. Warrant Holder Not Deemed a Stockholder. The Company may deem and treat the registered Holder of the Warrant as the absolute owner
thereof (notwithstanding any notation of ownership or other writing thereon made by anyone), for
the purpose of any exercise thereof and for all other purposes, and neither the Company nor any
agent thereof shall be affected by any notice to the contrary. Accordingly, the Company shall not
be bound to recognize any equitable or other claim to, or interest in, the Warrant on the part of
any Person other than such registered Holder, whether or not it shall have express or other notice
thereof. Prior to the valid exercise of the Warrant, no Holder of the Warrant, as such, shall be
entitled to any rights of a stockholder of the Company, including, without limitation, the right to
vote or to consent to an action of the stockholders, to receive dividends or other distributions,
to exercise any preemptive right, or to receive any notice of meetings of stockholders and, except
as otherwise provided in the Investment Agreement, shall not be entitled to receive any notice of
any proceedings of the Company.
| 6. | OFFICE OF THE COMPANY |
As long as the Warrant remains outstanding, the Company shall maintain an office or agency,
which may be the principal executive offices of the Company (the “Designated Office”), where the
Warrant may be presented for exercise, registration of transfer, division or combination as
provided in this Warrant. Such Designated Office shall initially be the office of the Company at
0000 Xxxxxxx Xxxxxxxxx, Xxxxx Xxxxxx, Xxxxxxxxxx 00000. The Company may from time to time change
the Designated Office to another office of the Company or its agent within the United States by
notice given to all registered Holders at least ten (10) Business Days prior to the effective date
of such change.
| 7. | MISCELLANEOUS |
7.1. No Implied Waivers.
No failure or delay by any party in exercising any right, power or privilege hereunder shall
operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or
further exercise thereof or the exercise of any other right, power or privilege. The rights and
remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided
by law.
7.2. Notices. All notices and other communications hereunder shall be in writing and shall be deemed to have
been duly given, if delivered personally, by telecopier or sent by first class mail, postage
prepaid, as follows:
| (a) | If to the Company, to: |
| Fremont General Corporation | ||
| 0000 Xxxxxxx Xxxxxxxxx | ||
| Xxxxx Xxxxxx, XX 00000 | ||
| Attention: General Counsel | ||
| Fax: (000) 000-0000 | ||
| With a copy to: |
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| Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP | ||
| Xxxx Xxxxx Xxxxxx | ||
| Xxx Xxxx, XX 00000 | ||
| Attention: Xxxxxxx X. Xxxxxxxxxx, Esq. | ||
| Fax: (000) 000-0000 |
| (b) | If to the Investor, to: |
| Xxxxxx’x Xxxx/Ford, Ltd. | ||
| 000 Xxxxxxxx Xxxxx, Xxxxx 0000 | ||
| Xxxxxx, XX 00000 | ||
| Attention: Xxxxx Staff | ||
| Fax: (000) 000-0000 | ||
| With a copy to: | ||
| Xxxxxx, Xxxx & Xxxxxxxx LLP | ||
| 000 Xxxxx Xxxxx Xxxxxx | ||
| Xxx Xxxxxxx, Xxxxxxxxxx 00000 | ||
| Attention: Dhiya El-Saden, Esq. | ||
| Fax: (000) 000-0000 |
14
7.3. Limitation of Liability. No provision hereof, in the absence of affirmative action by the Holder to purchase Warrant
Shares, and no enumeration herein of the rights or privileges of the Holder hereof, shall give rise
to any liability of such Holder to pay the Exercise Price for any Warrant Shares other than
pursuant to an exercise of this Warrant or any liability as a stockholder of the Company, whether
such liability is asserted by the Company or by creditors of the Company.
7.4. Remedies. Each Holder of Warrants, in addition to being entitled to exercise its
rights granted by law, including recovery of damages, shall be entitled to specific performance of
its rights provided under this Warrant. The Company agrees that monetary damages would not be
adequate compensation for any loss incurred by reason of a breach by it of the provisions of this
Warrant and hereby agrees, in an action for specific performance, to waive the defense that a
remedy at law would be adequate.
7.5. Successors and Assigns. This Warrant and the rights and obligations evidenced
hereby shall inure to the benefit of and be binding upon the successors of the Company and the
permitted successors and assigns of the Holder hereof.
7.6. Amendment. This Warrant may be modified or amended only with the written consent
of the Company and the Holder.
7.7. Severability. Wherever possible, each provision of this Warrant shall be
interpreted in such manner as to be effective and valid under applicable law, but if any provision
of this Warrant shall be prohibited by or invalid under applicable law, such provision shall be
ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of
such provision or the remaining provisions of this Warrant.
7.8. Headings. The headings and other captions in this Warrant are for convenience
and reference only and shall not be used in interpreting, construing or enforcing any provision of
this Warrant.
7.9. Governing Law; Consent to Jurisdiction. This Warrant shall be governed by, and
interpreted in accordance with, the laws of the State of New York applicable to contracts made and
to be performed in that state. Each of the parties hereto (a) consents to submit itself to the
personal jurisdiction of any Federal or state court located in the State of California in the event
any dispute arises out of this Warrant or the transactions contemplated hereby, (b) agrees that it
will not attempt to deny or defeat such personal jurisdiction by motion or other request for leave
from any such court and (c) agrees that it will not bring any action relating to this Warrant or
the transactions contemplated hereby in any court other than a Federal or state court located in
the State of California.
7.10. Entire Agreement. This Warrant contains the entire agreement with respect to
the subject matter hereof and supersedes and replaces all other prior agreements, written or oral,
with respect to the subject matter hereof.
15
7.11. Waiver of Jury Trial. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ANY
AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATED TO THIS AGREEMENT
OR THE TRANSACTIONS CONTEMPLATED HEREBY.
[Execution Page Follows]
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IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed as of the Original
Issue Date.
| FREMONT GENERAL CORPORATION |
||||
| By: | ||||
| Name: | ||||
| Title: | ||||
| Agreed to and Accepted as of the Original Issue Date: XXXXXX’X XXXX/FORD, LTD. |
||||
| By: | ||||
| Name: | ||||
| Title: | ||||
[Execution Page to the Warrant]
17
ANNEX A
SUBSCRIPTION FORM
[To be executed only upon exercise of Warrant]
The undersigned registered owner of this Warrant irrevocably exercises this Warrant for the
purchase of
shares of Common Stock of Fremont General Corporation and herewith makes payment
therefor in , all at the price and on the terms and conditions specified in this Warrant
and requests that certificates for the shares of Common Stock hereby purchased (and any securities
or other property issuable upon such exercise) be issued in the name of and delivered to
whose address is
| NOTICE: | The signature on this subscription must correspond with the name as written upon the face of the within Warrant in every particular, without alteration or enlargement or any change whatsoever. |
ANNEX B
ASSIGNMENT FORM
FOR VALUE RECEIVED the undersigned registered owner of this Warrant hereby sells, assigns and
transfers unto the assignee named below all of the rights of the undersigned under this Warrant,
with respect to the number of shares of Common Stock set forth below:
| No. of Shares of | ||
| Name and Address of Assignee | Common Stock | |
and does hereby irrevocably constitute and appoint attorney in fact to
register such transfer onto the books of Fremont General Corporation maintained for the purpose,
with full power of substitution in the premises.
Dated: |
Print Name: | |||||||||
Signature: |
||||||||||
| Witness: | ||||||||||
| NOTICE: | The signature on this assignment must correspond with the name as written upon the face of the within Warrant in every particular, without alteration or enlargement or any change whatsoever. |
