Exhibit 10.2
WARRANT AGREEMENT
This Warrant Agreement, dated as of July 29, 2002 (the "Warrant
Agreement"), is by and between Xxxxxxx xxxxx Mortgage Capital Inc., a Delaware
corporation ("Xxxxxxx"), and SUNTERRA CORPORATION., a Maryland corporation (the
"Company").
Whereas, on May 31, 2000, the Company and certain of its subsidiaries
commenced cases (the "Chapter 11 Cases") under Chapter 11 of Title 11 of the
United States Code in the United States Bankruptcy Court for the District of
Maryland, Baltimore Division, and have retained possession of their assets and
are authorized to continue the operation of their businesses as
debtors-in-possession;
WHEREAS, Xxxxxxx and the Company have proposed to effect an exit
financing in connection with the consummation of a plan of reorganization in the
Chapter 11 Cases (the "Plan of Reorganization") and in connection therewith have
agreed to enter into that certain Loan Agreement dated the date hereof and
related documentation (collectively, the "Exit Financing Agreements"); and
WHEREAS, as an inducement to Xxxxxxx to enter into the Exit Financing
Agreements and as a condition thereof, the Company has agreed to grant to
Xxxxxxx the rights under this Warrant Agreement.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
Section 1. Grant of Warrant. The Company hereby grants to Xxxxxxx a
warrant (the "Warrant") in the form of Exhibit A hereto to purchase fully paid
and non-assessable shares of Common Stock, par value $.01 per share, of the
Company (the "Common Stock") at a purchase price of $15.25 per share (the
"Exercise Price") payable as set forth in the Warrant, all as more fully set
forth herein. As used herein, "Holder" shall mean Xxxxxxx and any registered
assignees of the Warrant as permitted hereby.
Section 2. Exercise Period of Warrant. The Warrant shall be
exercisable at any time commencing on the date of the execution hereof and shall
terminate at 5:00 p.m., New York City Time, on July 29, 2007 (the "Warrant
Termination Date").
Section 3. Number of Shares. The Warrant shall be exercisable for up
to 1,190,148 shares of Common Stock, subject to adjustment as provided herein
(the "Warrant Shares").
Section 4. Anti-Dilution Provisions. The Exercise Price and the number
of shares of Common Stock underlying the Warrant shall be subject to adjustment
from time to time as hereinafter set forth:
(a) Stock Dividends - Stock Splits. If after the date hereof, the
number of outstanding shares of Common Stock is increased by a stock dividend
payable in shares of Common Stock or by a sub-division or a stock split of
shares of Common Stock or other similar event, then, on the effective date
thereof, the number of shares of Common Stock issuable on exercise of the
Warrant shall be increased in proportion to such increase in outstanding shares.
(b) Aggregation of Shares. If after the date hereof, the number of
outstanding shares of Common Stock is decreased by a consolidation, combination,
reverse stock split or reclassification of shares of Common Stock or other
similar event, then, on the effective date thereof, the number of shares of
Common Stock issuable on exercise of the Warrant shall be decreased in
proportion to such decrease in outstanding shares.
(c) Adjustments in Exercise Price. Whenever the number of the shares
of Common Stock issuable upon the exercise of the Warrant is adjusted, as
provided in Section 4(a) or (b), the Exercise Price shall be adjusted (to the
nearest cent) by multiplying such Exercise Price immediately prior to such
adjustment by a fraction (x) the numerator of which shall be the number of the
shares of Common Stock purchasable upon the exercise of the Warrant immediately
prior to such adjustment and (y) the denominator of which shall be the number of
the shares of Common Stock so purchasable immediately thereafter.
(d) Other Dividends and Distributions. If after the date hereof, the
Company distributes to the holders of its Common Stock, other than as part of
its dissolution or liquidation or the winding up of its affairs, any evidence of
indebtedness or any of its assets or securities (other than distributions of
cash paid as a dividend out of earnings after the date hereof or dividends or
distributions provided for in Section 4(a), 4(b) or 4(g)), the Exercise Price in
effect immediately prior to the close of business on the record date fixed for
the determination of holders of Common Stock entitled to receive any such
distribution shall be adjusted, effective as of the close of business on such
record date, to a price (calculated to the nearest cent) determined by
multiplying such Exercise Price by a fraction (x) the numerator of which shall
be the Market Price less the fair market value of such distribution (as
determined in good faith by the Board of Directors of the Company or a duly
constituted committee thereof, if made other than in cash) payable in respect of
one share of the Common Stock, and (y) the denominator of which shall be such
Market Price. As used in this Section 4(d), the term "Market Price" shall mean
(x) the average closing price of a share of Common Stock for the ten consecutive
trading days immediately preceding, but not including, the record date referred
to in the preceding sentence, as reported on the principal national securities
exchange on which the shares of Common Stock are listed or admitted to trading
or (y) if not listed or admitted to trading on any national securities exchange,
the average of the closing sale prices during such ten trading day period as
reported by the Nasdaq Stock Market or, if not traded on such market, the
average of the closing bid and asked prices during such ten trading day period
in the over-the-counter market as reported by the NASD Automated Quotation
System or any comparable system or (z) in all other cases, as determined in good
faith by the Board of Directors of the Company (including any
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authorized committee thereof, the "Board of Directors"), whose determination
shall be conclusive absent manifest error.
(e) Issuance of Additional Stock., etc.
(i) Issuance of Additional Stock Prior to the Market Price
Adjustment Date. Upon each issuance by the Company after the date hereof
and prior to the Market Price Adjustment Date (as defined below) of any
Additional Stock (as defined in Section 4(e)(iv)) without consideration or
for a consideration per share less than the Exercise Price in effect
immediately prior to the issuance of such Additional Stock, the Exercise
Price in effect immediately prior to each such issuance shall forthwith be
adjusted (calculated to the nearest cent) by multiplying the Exercise Price
immediately prior to such adjustment by a fraction, (x) the numerator of
which shall be (i) the number of shares of Common Stock outstanding
immediately prior to such issuance plus (ii) the number of shares issuable
upon the exercise of all rights, options, warrants and convertible
securities which were outstanding as of the date of this Warrant Agreement
and which remain outstanding at the time of such issuance of Additional
Stock plus (iii) the number of shares of Additional Stock which could be
purchased were the then Exercise Price used instead (calculated by dividing
the total consideration to be received by the Company in such issuance by
the then Exercise Price) and (y) the denominator of which shall be (i) the
number of shares of Common Stock outstanding immediately prior to such
issuance plus (ii) the number of shares issuable upon the exercise of all
rights, options, warrants and convertible securities which were outstanding
as of the date of this Warrant Agreement and which remain outstanding at
the time of such issuance of Additional Stock plus (iii) the number of
shares of such Additional Stock issued in such issuance. The "Market Price
Adjustment Date" shall mean the first date upon which the Common Stock has
not traded at a price less than $15.25 (as adjusted for stock splits, stock
dividends and the like) for every trading day during six consecutive months
in which the Common Stock is listed or admitted for trading.
(ii) Issuance of Additional Stock On or After the Market Price
Adjustment Date. Upon each issuance by the Company on or after the Market
Price Adjustment Date of any Additional Stock (as defined below) without
consideration or for a consideration per share less than the Current Market
Price (as defined below) on the date the Company fixes the sale price of
such Additional Stock, the Exercise Price in effect immediately prior to
each such issuance shall forthwith be adjusted (calculated to the nearest
cent) by multiplying the Exercise Price immediately prior to such
adjustment by a fraction, (x) the numerator of which shall be (i) the
number of shares of Common Stock outstanding immediately prior to such
issuance plus (ii) the number of shares issuable upon the exercise of all
rights, options, warrants and convertible securities which were outstanding
as of the date of this Warrant Agreement and which remain outstanding at
the time of such issuance of Additional Stock plus (iii) the number of
shares of Additional Stock which could be purchased were the then Current
Market Price used instead (calculated by dividing the total consideration
to be received by the Company in such issuance by the Current Market Price
on the date the Company fixes the sale price of such Additional Stock) and
(y) the denominator of which shall be (i) the number of shares of Common
Stock outstanding immediately prior to such issuance plus (ii) the
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number of shares issuable upon the exercise of all rights, options,
warrants and convertible securities which were outstanding as of the date
of this Warrant Agreement and which remain outstanding at the time of such
issuance of Additional Stock plus (iii) the number of shares of such
Additional Stock issued in such issuance. The "Current Market Price" on any
date shall mean the "Market Price" as that term is defined in Section 4(d)
but for the twenty consecutive trading days commencing on the thirtieth
trading day prior to the date in question.
(iii) In the case of issuance by the Company of Additional Stock
for consideration in whole or in part other than cash, the consideration
other than cash shall be deemed to be the fair value thereof as determined
in good faith by the Board of Directors of the Company.
(iv) "Additional Stock" shall mean any shares of Common Stock
issued by the Company after the date hereof; provided, however, that the
Company may issue shares of Common Stock without such shares being
considered "Additional Stock" for purposes of this Section 4(e) in the
following instances: (i) shares of Common Stock may be issued to officers,
employees, directors or consultants of the Company or any of its
subsidiaries pursuant to employee benefit plans, including stock option
plans, established by the Company; (ii) shares issuable upon conversion of
any convertible securities of the Company outstanding as of the date hereof
or upon the exercise of any warrants and options outstanding as of the date
hereof to purchase the Common Stock or any securities convertible into
Common Stock; (iii) shares issuable pursuant to the Plan of Reorganization;
and (iv) shares issuable in any merger, acquisition or other business
combination transaction with persons who are not, prior to the date of the
agreement or agreements providing for such transaction, affiliates of the
Company.
(v) Issuance of Rights or Options. In case at any time the
Company shall in any manner after the date hereof grant any rights to
subscribe for or to purchase, or any options for the purchase of, Common
Stock or any stock or securities convertible into or exchangeable for
Common Stock (such convertible or exchangeable stock or securities being
herein called "Convertible Securities"), whether or not such rights or
options or the right to convert or exchange any such Convertible Securities
are immediately exercisable, and the price per share (the "Option Price")
for which Common Stock is issuable upon the exercise of such rights or
options or upon conversion or exchange of such Convertible Securities
(determined by dividing (i) the total amount, if any, received or
receivable by the Company as consideration for the granting of such rights
or options, plus the minimum aggregate amount of additional consideration
payable to the Company upon the exercise of all such rights or options,
plus, in the case of such rights or options which relate to Convertible
Securities, the minimum aggregate amount of additional consideration, if
any, payable upon the issue or sale of such Convertible Securities and upon
the conversion or exchange thereof, by (ii) the total maximum number of
shares of Common Stock issuable upon the exercise of such rights or options
or upon the conversion or exchange of all such Convertible Securities
issuable upon the exercise of such rights or options) shall be less than
the Exercise Price in effect immediately prior to the time of the granting
of such rights or options with respect to rights or options granted prior
to the Market Price Adjustment Date or less than the
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Current Market Price on the date of the grant of such rights or options
with respect to rights or options granted on or after the Market Price
Adjustment Date, as the case may be, then the total maximum number of
shares of Common Stock issuable upon the exercise of such rights or options
or upon conversion or exchange of the total maximum amount of such
Convertible Securities issuable upon the exercise of such rights or options
shall be (as of the date of granting of such rights or options) deemed to
be Additional Stock issued on the date of such grant for the Option Price
per share. Except as otherwise provided in Section 4(e)(viii), no
adjustment of the Exercise Price shall be made upon the actual issue of
such Common Stock or of such Convertible Securities upon exercise of such
rights or options or upon the actual issue of such Common Stock upon
conversion or exchange of such Convertible Securities.
(vi) Issuance of Convertible Securities. In case the Company
shall in any manner after the date hereof issue (whether directly or by
assumption in a merger or otherwise) or sell any Convertible Securities,
whether or not the rights to exchange or convert thereunder are immediately
exercisable, and the price per share (the "Conversion Price") for which
Common Stock is issuable upon which conversion or exchange (determined by
dividing (i) the total amount received or receivable by the Company as
consideration for the issue or sale of such Convertible Securities, plus
the minimum aggregate amount of additional consideration, if any, payable
to the Company upon the conversion or exchange thereof, by (ii) the total
maximum number of shares of Common Stock issuable upon the conversion or
exchange of all such Convertible Securities) shall be less than the
Exercise Price in effect immediately prior to the time of such issue or
sale with respect to Convertible Securities issued or sold prior to the
Market Price Adjustment Date or less than the Current Market Price on the
date of such issue or sale with respect to Convertible Securities issued or
sold on or after the Market Price Adjustment Date, as the case may be, then
the total maximum number of shares of Common Stock issuable upon conversion
or exchange of all such Convertible Securities shall (as of the date of the
issue or sale of such Convertible Securities) be deemed to be Additional
Stock issued on such date for the Conversion Price per share, provided that
(a) except as otherwise provided in Section 4(e)(viii) below, no adjustment
of the Exercise Price shall be made upon the actual issue of such Common
Stock upon conversion or exchange of such Convertible Securities, and (b)
if any such issue or sale of such Convertible Securities is made upon
exercise of any rights to subscribe for or to purchase or any option to
purchase any such Convertible Securities for which adjustments of the
Exercise Price have been or are to be made pursuant to other provisions of
this Section 4, no further adjustment of the Exercise Price shall be made
by reason of such issue or sale.
(vii) Upon each adjustment of the Exercise Price pursuant to this
Section 4(e), the number of shares of Common Stock issuable upon exercise
of the Warrant shall be adjusted so that such number of shares will be
equal to (1)(x) the product of the number of shares of Common Stock the
Holder was entitled to purchase immediately before such adjustment and (y)
the Exercise Price in effect immediately before such adjustment divided by
(2) the Exercise Price in effect after giving effect to such adjustment.
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(viii) Change in Option Price or Conversion Rate; Expiration of
Options or Convertible Securities. Upon the happening of any of the
following events, namely, if the purchase price provided for in any right
or option referred to in Section 4(e)(v), the additional consideration, if
any, payable upon the conversion or exchange of any Convertible Securities
referred to in Section 4(e)(v) or Section 4(e)(vi) or the rate at which any
Convertible Securities referred to in Section 4(e)(v) or Section 4(e)(vi)
are convertible into or exchangeable for Common Stock shall change at any
time (other than under or by reason of provisions designed to protect
against dilution), the Exercise Price in effect at the time of such event
shall forthwith be readjusted to the Exercise Price which would have been
in effect at such time had such rights, options or Convertible Securities
still outstanding provided for such changed purchase price, additional
consideration or conversion rate, as the case may be, at the time initially
granted, issued or sold; and on the expiration without exercise of any such
option or right or the termination without exercise of any such right to
convert or exchange such Convertible Securities, the Exercise Price then in
effect hereunder shall forthwith be increased to the Exercise Price which
would have been in effect at the time of such expiration or termination had
such right, option or Convertible Securities, to the extent outstanding
immediately prior to such expiration or termination, never been issued, and
the Common Stock issuable thereunder shall no longer be deemed outstanding.
If the purchase price provided for in any such right or option referred to
in Section 4(e)(v) or if the rate at which any Convertible Securities
referred to in Section 4(e)(v) or Section 4(e)(vi) are convertible into or
exchangeable for Common Stock shall be reduced at any time under or by
reason of provisions with respect thereto designed to protect against
dilution, then in case of the delivery of Common Stock upon the exercise of
any such right or option or upon conversion or exchange of any such right
or option or upon conversion or exchange of any such Convertible
Securities, the Exercise Price then in effect hereunder shall forthwith be
adjusted to such respective amount as would have obtained had such right,
option or Convertible Security never been issued as to such Common Stock
and had adjustment been made upon the issuance of the shares of Common
Stock delivered as aforesaid, but only if as a result of such adjustment
the Exercise Price then in effect hereunder is thereby reduced. On the
expiration of any option or right or the termination of any right to
convert or exchange any Convertible Securities, the Exercise Price then in
effect hereunder shall forthwith be increased to the Exercise Price which
would have been in effect at the time of such expiration or termination had
such option or rights or Convertible Securities, to the extent outstanding
immediately prior to such expiration or termination, never been issued.
(ix) No Adjustment for Certain Transactions. The provisions of
Sections 4(e)(v) and 4(e)(vi) shall not apply to (i) any transaction for
which an adjustment is made pursuant to Section 4(a), 4(b), 4(d) or 4(g);
(ii) the issuance or grant of any option referred to in Section
4(e)(iv)(i); or (iii) the issuance of securities pursuant to the
anti-dilution provisions of any Convertible Securities outstanding on the
date hereof.
(f) Reorganizations, etc. If after the date hereof, any capital
reorganization or reclassification of the Common Stock of the Company (other
than covered by Section 4(a) or (b)), or consolidation or merger of the Company
with another corporation (other than a
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consolidation or merger which does not result in any reclassification or change
of the outstanding Common Stock), or the sale of all or substantially all of its
assets to another corporation or other similar event shall be effected then, as
a condition of such reorganization, reclassification, consolidation, merger, or
sale, lawful, fair and adequate provision shall be made whereby the Holder shall
thereafter have the right to purchase and receive, upon the basis and upon the
terms and conditions specified herein or in the Warrant and in lieu of the
Common Stock of the Company immediately theretofore purchasable and receivable
upon the exercise of the rights represented thereby, such shares of stock,
securities, or assets as may be issuable or payable with respect to or in
exchange for the number of shares of Common Stock of the Company equal to the
number of shares of Common Stock of the Company immediately theretofore
purchasable and receivable upon the exercise of the rights represented by the
Warrant, had such reorganization, reclassification, consolidation, merger, or
sale not taken place and in such event, adequate and appropriate provision shall
be made with respect to the rights and interests of the Holder to the end that
the provisions hereof (including, without limitation, provisions for adjustments
of the Exercise Price and of the number of shares of Common Stock purchasable
upon the exercise of the Warrant) shall thereafter be applicable, as nearly as
may be, to any share of stock, securities, or assets thereafter deliverable upon
the exercise hereof. The Company shall not effect any such consolidation,
merger, or sale unless, prior to the consummation thereof, the successor
corporation (if other than the Company) resulting from such consolidation or
merger, or the corporation purchasing such assets, shall agree in writing, as
part of any such transaction, to provide the Holder with such shares of stock,
securities, or assets which, in accordance with the foregoing provisions, the
Holder may be entitled to purchase.
(g) Certain Dividends. If the Company declares a dividend on its
Common Stock payable in shares of any class or series of its capital stock or in
securities convertible into or exchangeable for Common Stock (including, without
limitation, rights, options or warrants to subscribe for or purchase shares of
Common Stock), other than covered by Section 4(a), the number and kind of
securities for which the Warrant may be exercised shall be adjusted, as of the
record date for determining which holders of Common Stock shall be entitled to
receive such dividend, so that the Holder shall be entitled to receive, upon
exercise of the Warrant, the aggregate number and kind of shares of Common Stock
and other securities of the Company which, if the Warrant had been exercised
immediately prior to such date, the Holder would have owned or been entitled to
receive upon such exercise and as a result of such dividend; and the Exercise
Price shall be adjusted, if necessary, so that the aggregate amount payable for
the purchase of all the shares of Common Stock and other securities issuable
thereunder immediately after such record date shall equal the aggregate amount
so payable immediately before such record date. Upon the expiration of any
securities exercisable for, convertible into or exchangeable for Common Stock
(if any thereof shall not have been exercised, converted or exchanged) with
respect to which an adjustment has been made pursuant to this Section 4(g), the
number of shares or securities for which the Warrant may be exercised and the
Exercise Price shall be readjusted to be as they would have been had the
securities exercisable for, convertible into or exchangeable for Common Stock
which expired without exercise, conversion or exchange not been issued.
(h) Substitute Warrant. As a condition to any consolidation of the
Company with, or merger of the Company with, or merger of the Company into,
another corporation (other than a consolidation or merger which does not result
in any reclassification or change of the
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outstanding Common Stock), the corporation formed by such consolidation or
merger shall execute and deliver to the Holder a substitute Warrant providing
that the Holder of each Warrant then outstanding or to be outstanding shall have
the right thereafter (until the Warrant Termination Date) to receive, upon
exercise of such Warrant, the kind and amount of shares of stock and other
securities and property receivable upon such consolidation or merger, by a
holder of the number of shares of Common Stock of the Company for which such
Warrant could have been exercised immediately prior to such consolidation,
merger, sale or transfer. Such substitute Warrant shall provide for adjustments
which shall be identical to the adjustments provided in this Section 4. The
terms of this Section 4(h) shall similarly apply to successive consolidations or
mergers.
(i) When De Minimis Adjustment May Be Deferred. No adjustment in the
Exercise Price need be made unless the adjustment would require an increase or
decrease of at least 1% in the Exercise Price. Any adjustments that are not made
shall be carried forward and taken into account in any subsequent adjustment.
All calculations under this Section 4 shall be made to the nearest 1/100th of a
share.
(j) Notice. Whenever there shall be an adjustment as provided in this
Section 4, the Company shall promptly cause written notice thereof to be sent by
registered mail, postage prepaid, to the Holder, at its address as it shall
appear in the Warrant Register (as defined in Section 9), which notice shall be
accompanied by an officer's certificate setting forth the number of Warrant
Shares purchasable upon the exercise of this Warrant and the Exercise Price
after such adjustment and setting forth a brief statement of the facts requiring
such adjustment and the computation thereof. Additionally, in case at any time
the Company shall propose:
(i) to pay any dividend or make any distribution on shares of
Common Stock in shares of Common Stock or make any other distribution to
all holders of Common Stock; or
(ii) to issue any rights, warrants or other securities to all
holders of Common Stock entitling them to purchase any additional shares of
Common Stock or any other rights, warrants or other securities; or
(iii) to effect any reclassification or change of outstanding
shares of Common Stock, or any consolidation, merger or sale; or
(iv) to effect any liquidation, dissolution or winding-up of the
Company;
then, and in any one or more of such cases, the Company shall give written
notice thereof, by registered mail, postage prepaid, to each Holder at the
address for such Holder as it shall appear in the Warrant Register, mailed at
least 15 days prior to (i) the date as of which the holders of record of shares
of Common Stock to be entitled to receive any such dividend, distribution,
rights, warrants, other securities are to be determined or (ii) the date on
which any such reclassification, change of outstanding shares of Common Stock,
consolidation, merger, sale, liquidation, dissolution or winding-up is expected
to become effective, and the date as of which it is expected that holders of
record of shares of Common Stock shall be entitled to exchange
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their shares for securities or other property, if any, deliverable upon such
reclassification, change of outstanding shares, consolidation, merger, sale,
liquidation, dissolution or winding-up.
(k) No Impairment. The Company will not, by amendment of its
certificate of incorporation or through any reorganization, recapitalization,
transfer of assets, consolidation, merger, dissolution, issue or sale of
securities or any other voluntary action, avoid or seek to avoid the observance
or performance of any of the terms to be observed or performed hereunder by the
Company, but will at all times in good faith assist in the carrying out of all
the provisions of Section 4 hereof and in the taking of all such action as may
be necessary or appropriate in order to protect the conversion rights of the
Holders against impairment.
Section 5. Representations, Warranties and Covenants of the Company.
The Company hereby represents, warrants and covenants to Xxxxxxx as follows:
(a) The Company is a corporation duly organized, validly existing and
in good standing under the laws of the State of Maryland and is in good standing
as a foreign corporation in each jurisdiction in which the nature of its
business makes such qualification necessary, except where the failure to be in
good standing would not have a material adverse effect on the business, assets
or financial condition of the Company. The Company has all requisite corporate
power and authority to carry out its business as presently conducted and as
proposed to be conducted and to enter into and discharge its obligations under
this Warrant Agreement and the Warrant.
(b) The execution and delivery of this Warrant Agreement and the
Warrant by the Company and its performance and compliance with the terms of this
Warrant Agreement and the Warrant have been duly authorized by all necessary
corporate action on the part of the Company.
(c) The execution and delivery of this Warrant Agreement and the
Warrant by the Company and the consummation of the transactions contemplated by
this Warrant Agreement and the Warrant will not (i) conflict with, result in any
breach of any of the terms and provisions of, or constitute (with or without
notice or lapse of time or both) a default under, the certificate of
incorporation or bylaws of the Company, or any contract, indenture, mortgage,
deed of trust, or other agreement or instrument to which the Company is a party
or by which it or any of its properties is bound, (ii) result in the creation or
imposition of any lien, adverse claim or other encumbrance upon any of the
properties of the Company pursuant to the terms of any such contract, indenture,
mortgage, deed of trust, or other agreement or instrument, or (iii) violate any
law or order, rule or regulation applicable to the Company of any court or of
any federal or state regulatory body, administrative agency, or other
governmental instrumentality having jurisdiction over the Company or any of its
properties.
(d) The Warrant Agreement and the Warrant each constitutes a legal,
valid and binding obligation of the Company and is enforceable against the
Company in accordance with the terms hereof and thereof, except as enforcement
may be limited by applicable bankruptcy, insolvency, reorganization, moratorium
or other similar laws affecting creditors' rights generally and by general
principles of equity (whether considered in a proceeding in equity or at law).
(e) The authorized capital stock of the Company consists solely of
30,000,000 shares of Common Stock, 18,045,077 of which are issued and
outstanding. Except as described
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in the Exit Financing Agreements or in the Plan of Reorganization (as such term
is defined in the Exit Financing Agreements), there are no options, warrants,
calls, pre-emptive rights, subscriptions or other rights, agreements,
arrangements or commitments of any character, relating to the issued or unissued
capital stock of the Company, obligating the Company to issue, transfer or sell
or cause to be issued, transferred or sold any shares of capital stock or other
equity or debt interest in, the Company or securities convertible into or
exchangeable for such shares or equity interests, or obligating the Company to
grant, extend or enter into any such option, warrant, call, subscription or
other right, agreement, arrangement or commitment.
(f) The Company shall at all times keep a sufficient number of
authorized and unissued Common Stock reserved for issuance upon the exercise of
the Warrant. The Warrant Shares, when issued, delivered and paid for in
accordance with the terms of this Warrant Agreement and the Warrant, will be
duly and validly issued, fully paid and non-assessable and free from all taxes,
liens and charges. The Company will take all such action as may be necessary to
assure that the Warrant Shares may be so issued without violation of any
applicable law or regulation, or of any requirements of any securities exchange
or automated trading system upon which the Common Stock may be listed or traded,
or of any pre-emptive or contractual rights of any person or entity.
(g) Upon receipt of evidence reasonably satisfactory to the Company of
the loss, theft, destruction or mutilation of the Warrant or any certificate
representing Warrant Shares, and, in the case of any such loss, theft or
destruction, upon delivery of indemnity by the Holder thereof reasonably
satisfactory to the Company, or, in the case of any such mutilation, upon
surrender and cancellation of the Warrant or any certificate representing
Warrant Shares, as the case may be, the Company will issue a new Warrant or
certificates representing Warrant Shares, as the case may be, of like tenor
representing an equivalent interest or right, in lieu of such lost, stolen,
destroyed or mutilated Warrant or certificates representing Warrant Shares, as
the case may be. The applicant for such replacement Warrant shall comply with
such other reasonable requests as the Company may reasonably prescribe.
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Section 6. Representations, Warranties and Covenants of Holder. Each
Holder, by accepting a Warrant, hereby represents, warrants and covenants to the
Company that Holder is acquiring the Warrant, and upon exercise of the Warrant
will acquire the Warrant Shares, for its own account with no intention of
distributing or reselling the Warrant or Warrant Shares in any manner that would
be a violation of the securities laws of the United States or any state, without
prejudice to the Holder's rights at all times to sell or otherwise dispose of
all or part of such Warrant under a registration statement under the Securities
Act of 1933, as amended (the "Securities Act") or an exemption available
thereto. Holder is aware that neither the Warrant nor the Warrant Shares are
registered under the Securities Act or any state or other jurisdiction's
securities laws, and that Holder must hold the Warrant and the Warrant Shares
indefinitely unless subsequently registered or an exemption from registration is
available. Holder understands and agrees that the Warrant will bear the
restrictive legend set forth on the Warrant and that the Warrant Shares will
bear the legend set forth in Section 10 of this Warrant Agreement. Holder
represents and warrants that it is an "accredited investor" as that term is
defined in Rule 501 of Regulation D promulgated under the Securities Act.
Section 7. Registration Rights. The Company and Merrill acknowledge
that they are, on the date hereof, entering into a Registration Rights Agreement
with certain other persons, pursuant to which the Company agrees, upon the terms
and subject to the conditions set forth therein, to file and use its best
efforts to cause to be declared effective and maintained a shelf registration
statement covering the Warrant Shares and certain other shares of Common Stock.
Section 8. Put Option.
(a) In the event of a Change in Control (as defined below), the
Holders of Warrants and Warrant Shares shall have the right to cause the Company
to purchase their Warrant Shares (the "Put Right") at a price per share equal to
the fair market value (determined in accordance with Section 8(b) hereof),
measured as of the date of such Change in Control.
(b) Within thirty (30) days after the date of a Change in Control, the
Company shall mail written notice to the registered Holders of the Warrants and
Warrant Shares describing the rights of such Holders under this Section 8 (a
"Change in Control Notice"). Promptly following the delivery of such Change in
Control Notice, the Holders, on the one hand, and the Company, on the other
hand, shall jointly appoint a qualified, independent appraiser of recognized
national standing and experienced in the valuation of shares of companies
similar to the company (a "Qualified Appraiser") to determine the fair market
value of the Warrant Shares as of the date of such Change in Control. In the
event that within thirty (30) days after delivery of such Change in Control
Notice, the Holders and the Company cannot agree on a mutually satisfactory
Qualified Appraiser, the Holders of Warrants and Warrant Shares representing at
least a majority of the sum of (x) the number of Warrant Shares for which the
outstanding Warrants may be exercised and (y) the number of outstanding Warrant
Shares, on the one hand, and the Company, on the other hand, shall be entitled
to select an independent appraiser of recognized national standing (the "Holder
Appraiser" and the "Company Appraiser," respectively) each of whom shall render
an appraisal (the "Holder Appraisal" and the "Company Appraisal," respectively)
to the Holders and the Company as to the fair market value of the Warrant
Shares, and the average of the fair market value of the Warrant Shares as
determined by each of the Holder Appraiser and the Company Appraiser shall be
deemed to be the fair market
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value of the Warrant Shares; provided, however, that in the event there is a ten
percent (10%) or greater difference between the valuations provided in the
Holder Appraisal and the Company Appraisal, the Holder Appraiser and the Company
Appraiser shall in turn select a third appraiser of recognized national standing
(the "Independent Appraiser") to determine the fair market value, which
appraisal shall be final and binding. The fees and expenses of the Company
Appraiser shall be borne by the Company and the fees and expenses of the Holder
Appraiser shall be borne by the Holders. The fees and expenses of the
Independent Appraiser, if applicable, shall be borne equally by the Company and
the Holders.
(c) Any Holder desiring to exercise such Holder's Put Right (a "Put
Exercise") shall notify the Company of such exercise by executing the put option
exercise form accompanying the Change in Control Notice and delivering to the
Company such form, together with the original Warrants or Warrant Shares, at any
time within 60 days after receipt by the Holder of notice from the Company of
the final determination of the fair market value in accordance with Section
8(b), but in all events prior to the Warrant Termination Date.
(d) Within 30 days after receipt of a Put Exercise, the Company shall
pay to each exercising Holder an amount in cash equal to the fair market value
of the Warrant Shares or the Warrant Shares that would be issuable upon exercise
of such Holder's Warrant (net of the Exercise Price).
(e) For purposes of this Section 8, the term "Change in Control" shall
mean the acquisition by any single individual, partnership, limited liability
company, joint venture, corporation, trust, unincorporated organization,
division or operating group of any of the foregoing or any other entity (each, a
"Person") or group (within the meaning of Section 13(d)(3) of the Securities
Exchange Act of 1934) of the power, directly or indirectly (including, without
limitation, through rights of conversion or the exercise of securities), to vote
or direct the voting of securities having more than 50% of the ordinary voting
power for the election of directors of the Company; provided, however, that with
respect to any holder, as of the date of this Warrant Agreement, of 20% or more
of the equity securities of the Company, a Change in Control shall be deemed to
have occurred only upon the acquisition by such holder of the power, directly or
indirectly (including, without limitation, through rights of conversion or the
exercise of securities), to vote or direct the voting of securities having more
than 60% of the ordinary voting power for the election of directors of the
Company.
Section 9. Registry. The Company shall register the Warrant in a
register (the "Warrant Register") maintained by the Company when such Warrant is
issued.
Section 10. Transfers and Exchanges. Subject to the terms of this
Section 10, the Holder may assign the Warrant and its rights hereunder and the
Company shall from time to time register the transfer of the Warrant in the
Warrant Register upon surrender thereof accompanied by a written instrument or
instruments of transfer in form satisfactory to the Company, duly executed by
the Holder thereof or by the duly appointed legal representative thereof or by a
duly authorized attorney. Upon any such transfer, a new Warrant shall be issued
to the transferee(s) and the surrendered Warrant shall be canceled and disposed
of by the Company. The Holder agrees that prior to any proposed transfer of the
Warrant or of the Warrant Shares, if such transfer is not made pursuant to an
effective registration statement under the Securities Act or
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pursuant to Rule 144 and any applicable state securities laws, the Holder shall
deliver to the Company:
(a) an investment covenant substantially similar to Section 6 and
otherwise reasonably satisfactory to the Company signed by the proposed
transferee;
(b) an agreement by such transferee to the impression of the
restrictive investment legend set forth below on the Warrant or the Warrant
Shares;
(c) an agreement by such transferee that the Company may place a
notation in the stock books of the Company or a "stop transfer order" with any
transfer agent or registrar with respect to the Warrant Shares;
(d) an agreement by such transferee to be bound by the provisions of
this Section 10 relating to the transfer of such Warrant or Warrant Shares; and
(e) an opinion of counsel, reasonably satisfactory in form and
substance to the Company, that the transfer is exempt from registration
requirements under the Securities Act and any applicable state securities laws.
The Holder agrees that each Warrant and each certificate representing
Warrant Shares will bear the following legend (the "Legend"):
THE SECURITIES EVIDENCED OR CONSTITUTED HEREBY HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED. SUCH SECURITIES MAY NOT BE SOLD, TRANSFERRED, PLEDGED OR
HYPOTHECATED UNLESS THE REGISTRATION PROVISIONS OF SAID ACT AND ANY
APPLICABLE STATE SECURITIES LAWS HAVE BEEN COMPLIED WITH OR UNLESS THE
COMPANY HAS RECEIVED AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE
COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.
Section 11. Removal of Legend. If such holder satisfies the
requirements of Rule 144(k): (i) the notation or "stop transfer order" referred
to in Section 10(c) above shall be removed; and (ii) the Legend shall be removed
and the Company shall issue a new Warrant and a new certificate representing
Warrant Shares to the holder of a Warrant or Warrant Shares upon which such
Legend is stamped.
Section 12. Notices. All demands, notices and communications relating
to this Warrant Agreement or any Warrant shall be in writing and (i) sent by
registered or certified mail, postage prepaid, return receipt requested, (ii)
hand delivered, (iii) sent by express mail or other reasonable overnight
delivery service, or (iv) sent by telecopy, as follows:
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If to the Company:
Sunterra Corporation
0000 Xxxx Xxxxxx Xxxxx
Xxxxxxx, Xxxxxxx 00000
Attention: General Counsel
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
If to Merrill:
Xxxxxxx Lynch, Pierce, Xxxxxx & Xxxxx Incorporated
4 World Financial Center
New York, New York 10080
Attention: Xxxxxxx Xxxx
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
Any such demand, notice or communication hereunder shall be deemed to
have been duly given when received by the other party or parties at the address
shown above or on the next succeeding business day if the date of receipt is not
a business day, or such other address as may hereafter be furnished to the other
party or parties by like notice and shall be deemed to have been received on the
date delivered to or received at the premises of the addresses.
Section 13. Counterparts. For the purpose of facilitating the
execution of this Warrant Agreement and for other purposes, this Warrant
Agreement may be executed simultaneously in any number of counterparts, each of
which shall be deemed to be an original, and all of which together shall
constitute and be one and the same instrument.
Section 14. Governing Law; Jurisdiction; Waiver of Jury Trial.
(a) Governing Law. This Warrant Agreement shall be governed by, and
construed in accordance with, the laws of the State of Maryland, without regard
to conflict of law principles.
(b) Jurisdiction. Each of the Company and the Holder hereby
irrevocably submits to the non-exclusive jurisdiction of any New York State or
Federal court sitting in New York City in any action or proceeding arising out
of or relating to this Warrant Agreement or the Warrant, and each of the Company
and the Holder hereby irrevocably agrees that all claims in respect of such
action or proceeding may be heard and determined in such New York State court or
in such Federal court. Each of the Company and the Holder hereby irrevocably
waives, to the fullest extent permitted under applicable law, the defense of an
inconvenient forum to the maintenance of such action or proceeding. Each of the
Company and the Holder irrevocably consents, to the fullest extent permitted
under applicable law, to the service of any summons and complaint and any other
process by the mailing of copies of such process to them at their respective
address specified in Section 12. Each of the Company and the Holder hereby
agrees, to the fullest extent permitted under applicable law, that a final
judgment in any such action or
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proceeding shall be conclusive and may be enforced in other jurisdictions by
suit on the judgment or in any other manner provided by law.
(c) Waiver of Jury Trial. TO THE FULLEST EXTENT PERMITTED UNDER
APPLICABLE LAW, EACH OF THE COMPANY AND THE HOLDER HEREBY IRREVOCABLY WAIVES ALL
RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT
OF OR RELATING TO THIS WARRANT AGREEMENT OR ANY WARRANT ISSUED HEREUNDER.
Section 15. Amendments. This Warrant Agreement may be amended from
time to time by written instrument signed by the Company and the Holders of a
majority of the Warrant Shares issued or issuable upon exercise of the Warrant
and no waiver of any of the terms hereof shall be effective unless it is in
writing and signed by the Holders of a majority of the Warrant Shares issued or
issuable upon exercise of the Warrant or the Company, as the case may be. Any
amendment or waiver pursuant to this Section 15 may be given retroactive,
prospective or concurrent effect, depending upon the language in such amendment
or waiver.
Section 16. No Waiver. No failure on the part of the Holder or the
Company to exercise, and no delay in exercising, any right hereunder shall
operate as a waiver thereof; nor shall any single or partial exercise of any
right hereunder preclude any other or further exercise thereof or the exercise
of any other right. The remedies herein provided are cumulative and not
exclusive of any remedies provided by law.
[SIGNATURES ON FOLLOWING PAGE]
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In Witness Whereof, the parties hereto have caused this Warrant
Agreement to be duly executed by their respective officers on the day and year
first above written.
SUNTERRA CORPORATION
By: /s/ Xxxxx X. Xxxxxxxx
-------------------------------
Name: Xxxxx X. Xxxxxxxx
Title: Vice President
XXXXXXX XXXXX MORTGAGE CAPITAL
INC.
By: /s/ Xxxxxxx Xxxxx
-------------------------------
Name: Xxxxxxx Xxxxx
Title: Director
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