SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
SCHEDULE 13D
(Rule 13d-101)
INFORMATION TO BE INCLUDED IN STATEMENTS FILED PURSUANT TO RULE 13-d-1(a)
AND AMENDMENTS THERETO FILED PURSUANT TO RULE 13d-2(a)
AutoBond Acceptance Corporation
(Name of Issuer)
Common Stock, No Par Value-per Share
(Title of Class of Securities)
052918109
(CUSIP Number)
Elizabeth R. Hughes, Esquire
Venable, Baetjer and Howard, LLP
1800 Mercantile Bank & Trust Building
2 Hopkins Plaza
Baltimore, MD 21201
(410) 244-7400
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
June 9, 1998
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to
report the acquisition which is the subject of this Schedule 13D, and is filing
this schedule because of Rule 13d-1(e), 13d-1(f) or 13d-1(g), check the
following box [ ].
The information required on the remainder of this cover page shall not be
deemed to be "filed" for the purpose of Section 18 of the Securities Exchange
Act of 1934 ("Act") or otherwise subject to the liabilities of that section of
the Act but shall be subject to all other provisions of the Act (however, seethe
Notes).
<PAGE>
CUSIP No. 052918109
1. NAME OF REPORTING PERSON: Dynex Holding, Inc.
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON: 541809773
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [x] (b)[ ]
3. SEC USE ONLY
4. SOURCE OF FUNDS: AF
5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEM 2(d) or 2(e) [ ][ ]
6. CITIZENSHIP OR PLACE OF ORGANIZATION: Virginia
NUMBER OF
SHARES 7. SOLE VOTING POWER: 5,974,500 shares
BENEFICIALLY
OWNED BY 8. SHARED VOTING POWER: 0 shares
EACH
REPORTING 9. SOLE DISPOSITIVE POWER: 5,974,500 shares
PERSON
WITH 10. SHARED DISPOSITIVE POWER: 0 shares
11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON:
5,974,500 shares
12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES [ ]
13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11): 91.5%
14. TYPE OF REPORTING PERSON: CO
<PAGE>
USIP No.: 052918109 13D
1. NAME OF REPORTING PERSON: Dynex Capital, Inc.
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON: 521549373
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [x] (b)[ ]
3. SEC USE ONLY
4. SOURCE OF FUNDS: WC
5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEM 2(d) or 2(e) [ ][ ]
6. CITIZENSHIP OR PLACE OF ORGANIZATION: Virginia
NUMBER OF
SHARES 7. SOLE VOTING POWER: 5,974,500 shares
BENEFICIALLY
OWNED BY 8. SHARED VOTING POWER: 0 shares
EACH
REPORTING 9. SOLE DISPOSITIVE POWER: 5,974,500 shares
PERSON
WITH 10. SHARED DISPOSITIVE POWER: 0 shares
11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON: 5,974,500
shares
12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES [ ]
13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11): 91.5%
14. TYPE OF REPORTING PERSON: CO
<PAGE>
Item 1. Security and Issuer.
The class of equity to which this statement refers is common stock, no par
value (the "Common Stock"), of AutoBond Acceptance Corporation (the "Issuer"),
which has its principal executive office at 301 Congress Avenue, Austin, Texas
78701.
Item 2. Identity and Background.
(i) Dynex Holding, Inc., a Virginia corporation, ("Holding"), is in the
business of originating loans and mortgages, with its principal business and
office located at 10900 Nuckols Road, Third Floor, Richmond, Virginia 23060.
Holding has not been convicted in a criminal proceeding during the last five
years (excluding traffic violations or similar misdemeanors). Holding has not
been a party to a civil proceeding described in Item 2(e) of Schedule 13D during
the last five years.
(ii) Dynex Capital, Inc., a Virginia corporation ("Dynex"), is a mortgage
and consumer finance company which has elected to be treated as a real estate
investment trust for federal income tax purposes. Dynex uses its loan production
operations to create investments for its portfolio. Dynex's principal business
and office are located at 10900 Nuckols Road, Third Floor, Richmond, Virginia
23060. Dynex has not been convicted in a criminal proceeding during the last
five years (excluding traffic violations or similar misdemeanors). Dynex has not
been a party to a civil proceeding described in Item 2(e) of Schedule 13D during
the last five years.
(iii) The executive officers of Holding are Thomas H. Potts, Lynn K.
Geurin, Brian Murray and Stephen J. Benedetti. The directors of Holding are
Thomas H. Potts, Lynn K. Geurin, Brian Murray and Stephen J. Benedetti. Each
person controlling Holding is Thomas H. Potts, Lynn K. Geurin, Brian Murray and
Stephen J. Benedetti.
(iv) The executive officers of Dynex are Thomas H. Potts, Lynn K. Geurin,
William J. Moore, William Robertson and William H. West, Jr. The directors of
Dynex are J. Sidney Davenport, Richard C. Leone, Thomas H. Potts, Paul S. Reid,
Donald B. Vaden, Henry W. Haunns, Jr., and Barry S. Shein.
For information required by Instruction C to Schedule 13D with respect to
the persons set forth in the foregoing Item 2(ii) and (iv) ("Covered Persons"),
reference is made to Schedule I annexed hereto and incorporated hereby by
reference.
Item 3. Source and Amount of Funds or Other Consideration.
Holding, Issuer and certain of Issuer's stockholders have entered into a
stock option agreement (the "Stock Option Agreement") pursuant to which Holding
may purchase all of the 5,474,500 shares of the Common Stock owned by such
stockholders and any shares acquired by such stockholders during the term of the
Stock Option Agreement (the "Stock Option"). The exercise price of the Stock
Option is payable in shares of a newly issued series of preferred stock of
Dynex, which number of shares is determined as set forth in Section 1.3, pages
2-3, of the Stock Option Agreement which is incorporated hereby by reference as
Exhibit 3.1 hereto. The right to exercise the Stock Option expires June 9, 1999.
Dynex has purchased from Issuer a 12% convertible senior note due 2003 (the
"Note"), with face amount of $3,000,000, convertible into 500,000 shares of
Common Stock, subject to adjustment under certain circumstances, which
circumstances are set forth in Section 8.04, pages 23-26, of that certain Senior
Note Agreement dated as of the date hereof (the "Senior Note Agreement") which
is incorporated hereby by reference as Exhibit 3.2 hereto. The purchase price of
such Note was $3,000,000 and was provided by working capital. The right to
convert the Note into Common Stock expires May 31, 1999.
Item 4. Purpose of Transaction.
Dynex has entered into a credit arrangement with the Issuer to provide
funding for the production of automobile loans originated by the Issuer. In
connection therewith, Holding has entered into the Stock Option Agreement with
the Issuer and Dynex has purchased the Note from the Issuer. The Stock Option
expires June 9, 1999 and the right to convert into Common Stock under the Note
expires May 31, 1999. During the term of the Stock Option Agreement, Holding and
Dynex each intend to consider its right to exercise the Stock Option and to
convert the Note, as the case may be, in light of various factors, including the
Issuer's business, results of operations, financial condition and future
prospects and general economic and industry conditions. Based upon such review,
Holding or Dynex, as the case may be, will take such action as it deems
appropriate in light of the circumstances existing from time to time. As a
result of such review, Dynex may convert the Note and Holding may exercise its
rights under the Stock Option. No decision with respect thereto has been made as
of the date hereof.
Neither Holding nor Dynex has at the present time formulated any plans or
proposals of the type referred to in clauses (a) through (j) of Item 4 of
Schedule 13D.
Item 5. Interest in Securities of the Issuer.
(a) Aggregate Number of Shares of Common Stock Beneficially Owned:
5,974,500 shares of Common Stock are deemed beneficially owned by Dynex and
Holding. Of this amount, 5,474,500 shares are deemed beneficially owned pursuant
to the right to acquire such shares under the Stock Option Agreement at any time
and 500,000 shares are deemed beneficially owned pursuant to the right to
acquire such shares upon conversion under the Note at any time.
Percentage of Class: 91.5% (as contained in Amendment No. 1 to the 1997
Form 10-K of the Issuer).
(b) Upon exercise of the Stock Option, Holding will have sole power to vote
and dispose of the 5,474,500 shares beneficially owned by it as set forth in
Item 5(a). Upon conversion of the Note, Dynex will have sole power to vote and
dispose of the 500,000 shares beneficially owned by it as set forth in Item
5(a).
(c) Not applicable.
(d) Not applicable.
(e) Not applicable.
Item 6. Contracts, Arrangements, Understandings or Relationships With
Respect to Securities of the Issuer.
Although no arrangement exists between Holding and Dynex with respect to
the Note and the Stock Option, Dynex owns substantially all of the outstanding
capital stock of Holding. Further, certain of the executive officers, directors
and stockholders of Holding are executive officers and directors of Dynex, as
set forth in Item 2 above. Therefore, Holding and Dynex may be deemed to be
under common control.
Holding, Issuer and certain of Issuer's stockholders have entered into the
Stock Option Agreement pursuant to which Holding may purchase all of the
5,474,500 shares of the Common Stock owned by such stockholders and any shares
acquired by such stockholders during the term of the Stock Option. The exercise
price of the Stock Option is payable in shares of a newly issued series of
preferred stock of Dynex, which number of shares is determined as set forth in
Section 1.3, pages 2-3, of the Stock Option Agreement which is incorporated
hereby by reference as Exhibit 3.1 hereto. The right to exercise the Stock
Option expires June 9, 1999.
Dynex has purchased from Issuer the Note which is a 12% convertible senior
note due 2003, with face amount of $3,000,000, convertible into 500,000 shares
of Common Stock, subject to adjustment under certain circumstances, which
circumstances are set forth in Section 8.04, pages 23-26, of the Senior Note
Agreement which is incorporated hereby by reference as Exhibit 3.2 hereto. The
right to convert the Note into Common Stock expires May 31, 1999.
Item 7. Material to be Filed as Exhibits.
Exhibit No. Item
3.1 Stock Option Agreement
3.2 Senior Note Agreement
99.1 Joint Filing Agreement
Signature
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
Dated: June 19, 1998
DYNEX HOLDING, INC.
By: s/ Stephen J. Benedetti
Stephen J. Benedetti
Vice President and Treasurer
DYNEX CAPITAL, INC.
By: s/ Stephen J. Benedetti
Stephen J. Benedetti
Vice President and Treasurer
<PAGE>
Schedule I
Information with Respect to Covered Persons*
Item 2. Identity and Background.
(a) and (b)
Thomas H. Potts 10900 Nuckols Road, Suite 300
Glen Allen, VA 23060
Lynn K. Geurin 10900 Nuckols Road, Suite 300
Glen Allen, VA 23060
William J. Moore 10900 Nuckols Road, Suite 300
Glen Allen, VA 23060
William Robertson 10900 Nuckols Road, Suite 300
Glen Allen, VA 23060
William H. West, Jr. 10900 Nuckols Road, Suite 300
Glen Allen, VA 23060
J. Sidney Davenport 7202 Glen Forest Drive, Suite 202
Richmond, VA 23226
Richard C. Leone 41 East 70th Street
New York, NY 10021
Paul S. Reid 1125 15th Street, N.W.
Washington, DC 20005-2766
Donald B. Vaden 136 Matthew Scribener
Williamsburg, VA 23185
Henry W. Haunns, Jr. 1345 Avenue of the Americas
New York, NY 10105
Barry S. Shein 1423 Lincolnway East
Goshen, IN 46526
Stephen J. Benedetti 10900 Nuckols Road, Suite 300
Glen Allen, VA 23060
Brian K. Murray 10900 Nuckols Road, Suite 300
Glen Allen, VA 23060
(c)
Thomas H. Potts Dynex Capital, Inc.
President 10900 Nuckols Road, Suite 300
Glen Allen, VA 23060
Lynn K. Geurin Dynex Capital, Inc.
Executive Vice President and 10900 Nuckols Road, Suite 300
Chief Financial Officer Glen Allen, VA 23060
William J. Moore Dynex Capital, Inc.
Executive Vice President 10900 Nuckols Road, Suite 300
Glen Allen, VA 23060
President Dynex Commercial, Inc.
10900 Nuckols Road, Suite 300
Glen Allen, VA 23060
William Robertson Dynex Capital, Inc.
Executive Vice President 10900 Nuckols Road, Suite 300
Glen Allen, VA 23060
President Dynex Financial, Inc.
10900 Nuckols Road, Suite 300
Glen Allen, VA 23060
William H. West, Jr. Dynex Capital, Inc.
Executive Vice President 10900 Nuckols Road, Suite 300
Glen Allen, VA 23060
J. Sidney Davenport Ryland Mortgage Company
Executive Vice President 7202 Glen Forest Drive, Suite 202
Richmond, VA 23226
Richard C. Leone Twentieth Century Fund
President 41 East 70th Street
New York, NY 10021
Paul S. Reid Mortgage Bankers Association of America
Executive Vice President 1125 15th Street N.W.
Washington, DC 20005
Donald B. Vaden Attorney
Attorney 136 Matthew Scribener
Williamsburg, VA 23185
Henry W. Haunns, Jr. UBS Asset Management (NY) Inc.
Managing Director 1345 Avenue of the Americas
New York, NY 10105
Barry S. Shein Commodore Corporation
President 1423 Lincolnway East
Goshen, IN 46526
Stephen J. Benedetti Dynex Capital, Inc.
Vice President, Treasurer and 10900 Nuckols Road, Suite 300
Controller Glen Allen, VA 23060
Brian K. Murray Dynex Capital, Inc.
Senior Vice President 10900 Nuckols Road, Suite 300
Glen Allen, VA 23060
(d)
During the last five years, no Covered Person has been convicted in a
criminal proceeding (excluding traffic violations or similar misdemeanors).
(e)
During the last five years, no Covered Person has been a party to a civil
proceeding of a judicial or administrative body of competent jurisdiction and as
a result of such proceeding was or is subject to a judgment, decree or final
order enjoining future violations of, or prohibiting or mandating activities
subject to, Federal or State securities laws or finding any violation with
respect to such laws, except for Thomas H. Potts. In July 1995, the Securities
and Exchange Commission ("SEC") approved the settlement of its investigation
with respect to a 1992 purchase of Dynex's common stock by Mr. Potts, Dynex's
president. In connection with such settlement, the SEC filed a complaint in the
United States District Court for the District of Maryland, and Mr. Potts agreed
to (i) entry of an injunction permanently enjoining him from violating Section
10(b) of the
*Certain of this information is not available at the date of this Schedule
13D. It is expected that such information will be added through an amendment.
<PAGE>
EXHIBIT INDEX
Exhibit No. Item
3.1 Stock Option Agreement
3.2 Senior Note Agreement
99.1 Joint Filing Agreement
Exhibit 3.1
STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT (this "Agreement"), dated as of June __, 1998,
is by and between Dynex Holding, Inc., a company organized and existing under
the laws of the Commonwealth of Virginia ("Grantee"); Messrs. Adrian Katz,
William O. Winsauer and John S. Winsauer (each a "Stockholder" and,
collectively, the "Stockholders"), each owners of shares of the common stock of
AutoBond Acceptance Corporation ("AutoBond"), a company organized and existing
under the laws of Texas; and AutoBond.
In consideration of the mutual representations, warranties, covenants and
agreements contained herein, and intending to be legally bound hereby, the
parties agree as follows:
1. Option to Purchase Shares.
1.1 Grant of Option. Each Stockholder, severally and not jointly, hereby
grants to Grantee an irrevocable option to purchase all of the issued and
outstanding shares of AutoBond common stock, no par value (the "AutoBond Common
Stock"), owned by such Stockholder, as set forth opposite such Stockholder's
name on Schedule A attached hereto (the "Existing Shares"), and AutoBond Common
Stock acquired by such Stockholder after the date hereof and prior to the
termination hereof, whether upon exercise of options or warrants, conversion of
convertible securities, purchase, exchange or otherwise, (such shares with the
Existing Shares referred to as the "Shares") on the terms and subject to the
conditions set forth herein (the "Option").
1.2 Exercise of Option.
(a) The Option may be exercised by Grantee, as a whole and not in part, at
any time, commencing upon the date hereof and on or prior to the first
anniversary of the date hereof (the "Expiration Date") (such period, the
"Term"); provided, however, this Option shall terminate at such time as Dynex
Capital terminates or breaches its obligation to fund under the Credit Agreement
between Dynex Capital, Inc. and AutoBond of even date herewith.
(b) In the event Grantee wishes to exercise the Option, Grantee shall send
a written notice to each of the Stockholders of its intention to so exercise the
Option (a "Notice"), specifying the place, time and date (the "Closing Date") of
the closing of such purchase (the "Closing"). The Closing Date shall occur on a
date to be determined by Grantee of not less than 20 days and not more than 90
days after the date on which such Notice is delivered; provided that the Closing
shall be held only if: (i) such purchase would not otherwise violate, or cause
the violation of, any applicable law or regulations or the rules of the NYSE,
Nasdaq National Market or the AMEX the result of which violation would have a
material adverse effect on AutoBond, Grantee or Stockholders; and (ii) no
statute, rule, regulation, decree, order or injunction shall have been
promulgated, enacted, entered into, or enforced by any government, governmental
agency or authority or court which prohibits delivery of the Shares pursuant to
the exercise of the Option, whether temporary, preliminary or permanent
(provided, however, that the parties hereto shall use their best efforts to have
any such order, decree or injunction vacated or reversed). In the event the
Closing is delayed pursuant to clause (i) or (ii) above, the Closing Date shall
be within five business days following the cessation of such restriction,
violation, potential violation, order, decree or injunction, as the case may be,
provided that no other such restriction, violation, potential violation, order,
decree or injunction, as the case may be, shall have occurred.
(c) Subject to Section 1.3, at the Closing, each Stockholder shall deliver
to Grantee all of such Stockholder's Shares to be delivered pursuant to the
Notice by delivery of a certificate or certificates evidencing such Shares in
the denominations designated by Grantee, duly endorsed to Grantee or accompanied
by stock powers duly executed in favor of Grantee, with all necessary stock
transfer stamps affixed.
1.3 Exercise Price. The exercise price of the Option shall be payable in
shares of newly issued Series of Preferred Stock of Dynex Capital, Inc. ("Dynex
Shares") set forth in the form of Articles of Amendment attached as Exhibit A
and the number of shares to be issued in payment of such exercise price shall be
determined as follows: The product derived by multiplying the number of Shares
subject to the Option by $6.00 shall be divided by a number equal to the average
of the closing prices per share of the common stock of Dynex Capital, Inc. for
the ten (10) consecutive trading days ending immediately prior to the date of
exercise of the Option by Grantee such average price to be rounded up to the
nearest $0.05 ("Average Price") multiplied by 115%. At Closing Grantee will
deliver to each Stockholder 80% of his pro rata share of the Dynex Shares issued
to him at the Closing of the exercise of the Option. The balance of the Dynex
Shares issued to each Stockholder at Closing shall be held by Grantee subject to
the terms set forth below and the Employment Agreement between Grantee and such
Stockholder attached as Exhibit B. The Dynex Shares of each Stockholder held by
Grantee shall be subject to forfeiture in the event (i) the employment of
Stockholder with Grantee shall be terminated for "cause" as defined in Section
5(c)(i), (ii), (iii) or (v) of the Employment Agreement for such Stockholder and
as defined in Section 5(c)(iv) of the Employment Agreement, provided such gross
negligence causes material damage to the Business (as defined in the Employment
Agreement) or the business relationships of the Grantee or its affiliates or
(ii) such Stockholder voluntarily terminates such employment. Termination due to
death or total disability shall not be deemed a voluntary termination for this
purpose. Grantee shall release to each Stockholder on each anniversary of the
Closing that percentage of the Dynex Shares so held by Grantee determined by
dividing one by the initial term (expressed in years) of the Employment
Agreement with such Stockholder. The initial term of employment to be provided
in the employment agreements for Adrian Katz, William O. Winsauer and John S.
Winsauer shall be three, three and four years, respectively. Each Dynex Share
shall have a Liquidation Preference and an initial Conversion Price as defined
in Exhibit A equal to 115% of the Average Price. Each Dynex Share shall be
entitled to a dividend per quarter as set forth in Section 3(a)(i) of Exhibit A
determined by multiplying the Liquidation Preference by 9% and dividing the
product thereof by four.
2. Representations and Warranties.
2.1 Representations and Warranties of Grantee. Grantee hereby represents
and warrants to AutoBond and Stockholders as follows:
(a) Due Authorization. This Agreement has been duly and validly executed
and delivered by Grantee and constitutes a valid and binding agreement of
Grantee, enforceable against Grantee in accordance with its terms, except that
such enforceability: (i) may be limited by bankruptcy, insolvency, moratorium or
other similar laws affecting or relating to enforcement of creditor' rights
generally; and (ii) is subject to general principles of equity.
(b) No Conflicts. Except for: (i) the applicable requirements of the
Securities Exchange Act of 1934 (the "Exchange Act") and the Securities Act of
1933, as amended (the "Securities Act"); (ii) the applicable requirements of
state securities, takeover or Blue Sky laws; and (iii) listing requirements of
the New York Stock Exchange ("NYSE") and the Nasdaq National Market, (A) no
filing with, and no permit, authorization, consent or approval of, any state,
federal or foreign public body or authority is necessary for the execution of
this Agreement by Grantee and the consummation by Grantee of the transactions
contemplated hereby (including the exercise of the Option) and (B) the execution
and delivery of this Agreement by Grantee shall not (1) conflict with or result
in any breach of any provision of the articles of incorporation or the by-laws
(or similar documents) of Grantee, or (2) violate any order, writ, injunction,
decree, statute, rule or regulation applicable to Grantee, or any of its
properties or assets, except in the case of (2) for violations, breaches or
defaults which would not in the aggregate materially impair the ability of
Grantee to perform its obligations hereunder.
(c) Good Standing. Grantee is a corporation duly organized, validly
existing and in good standing under the laws of the Commonwealth of Virginia and
has all requisite corporate power and authority to execute and deliver this
Agreement.
(d) Distribution. Any shares acquired by Grantee upon exercise of the
Option will not be sold, assigned, transferred or otherwise disposed of except
in a transaction registered or exempt from registration under the Securities Act
and applicable state and Blue Sky securities laws. Grantee is an "accredited"
investor as defined in Regulation D promulgated pursuant to the Securities Act.
2.2 Representations and Warranties of the Stockholders. Each Stockholder
hereby represents and warrants to Grantee as follows:
(a) Due Authorization. Each of the Stockholders has all requisite legal
capacity, power and authority to enter into and perform all of such
Stockholder's obligations under this Agreement. This Agreement has been duly and
validly authorized, executed and delivered by each of the Stockholders and
constitutes a valid and binding agreement of such Stockholder, enforceable
against such Stockholder in accordance with its terms. The execution, delivery
and performance of this Agreement by such Stockholder will not violate any other
agreement to which such Stockholder is a party or by which such Stockholder is
bound, including without limitation any voting agreement, stockholder's
agreement, voting trust or other agreement. There is no beneficiary of or holder
of a voting trust certificate whose consent is required for the execution and
delivery of this Agreement or the consummation of the transactions contemplated
hereby.
(b) Ownership of Shares.
(i) Except as set forth in Exhibit G, each Stockholder is the sole record
holder and sole beneficial owner of the number of the Existing Shares set forth
opposite such Stockholder's name on Schedule A attached hereto. All Shares have
been duly authorized and validly issued and are fully paid and non-assessable
and good and marketable title thereto free and clear of all claims, liens,
encumbrances, security interests and charges of any nature whatsoever shall be
delivered to Grantee upon exercise of this Option.
(ii) On the date hereof, the Existing Shares set forth opposite such
Stockholder's name on Schedule A attached hereto constitute all of the shares of
AutoBond Common Stock owned by such Stockholder.
(iii) Each Stockholder has: (A) sole power of disposition, (B) sole voting
power, and (C) sole power to demand dissenter's or appraisal rights, in each
case with respect to all of such Stockholder's Existing Shares and with no
restrictions on such rights, subject to applicable federal securities laws and
the terms of this Agreement.
(c) No Conflicts. Except as set forth in Exhibit G and except for: (i) the
applicable requirements of the Exchange Act and the Securities Act; (ii) the
applicable requirements of state securities or Blue Sky laws; and (iii) listing
requirements of the AMEX, (A) no filing with, and no permit, authorization,
consent or approval of, any state, federal or foreign public body or authority
is necessary for the execution of this Agreement by any of the Stockholders and
the consummation by each of the Stockholders of the transactions contemplated
hereby and (B) neither the execution and delivery of this Agreement by each of
the Stockholders nor the consummation by each of the Stockholders of the
transactions contemplated hereby (including the exercise of the Option) nor
compliance by each of the Stockholders with any of the provisions hereof shall
(x) conflict with or result in any breach of, (y) result in a violation or
breach of, or constitute (with or without notice or lapse of time or both) a
default (or give rise to any third party right of termination, cancellation,
material modification or acceleration) under any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, license, contract, agreement
or other instrument or obligation to which any of the Stockholders is a party or
by which any of them or any of their properties or assets may be bound, or (z)
violate any order, writ, injunction, decree, statute, rule or regulation
applicable to any of the Stockholders, and of its subsidiaries or any of the
properties or assets.
(d) Each Stockholder represents that (i) his acquisition of the Dynex
Shares is for his own account and not with a view to the distribution thereof
and (ii) such Stockholder is an accredited investor within the meaning of
Regulation D promulgated pursuant to the Securities Act; and (iii) that the
Dynex Shares will not be sold, assigned, transferred or otherwise disposed of
except in a transaction registered or exempt from registration under the
Securities Act and applicable state and Blue Sky securities laws.
(e) All actions necessary to exempt the granting of the Option to Grantee
and the exercise by Grantee of such Option from any applicable takeover,
business combination, control share acquisition or similar law in effect under
the laws of Texas have been validly taken.
(f) Exhibit H represents all the shares of AutoBond Common Stock that have
been pledged or assigned or otherwise encumbered by the Stockholders. There are
no breaches or defaults under any of the agreements related to such pledges or
assignments except for any breach or default caused by the granting of this
Option for which Stockholders agree to obtain within 5 days of the date hereof a
waiver from the pledgee or assignee for 30 days of such breach or default and
within 30 days of the date hereof, a permanent waiver of such breach or default.
Stockholders will immediately notify Grantee of any such breaches or defaults.
The Stockholders agree to obtain within 30 days of the date hereof the waiver of
any breach or default caused by the grant of Option to Grantee and the agreement
of each pledgee or assignee to provide Grantee with notice of any default or
breach under the agreements creating such pledge or assignment and a reasonable
opportunity to cure such default or breach. In the event Grantee elects to cure
such default or breach, the Stockholder with respect to which such default or
breach was cured shall transfer to Grantee that number of shares derived by
dividing the amount paid by Grantee to cure such default or breach (including
the extinguishment of any debt related to such pledge or assignment) by $6.00
and the number of shares deliverable or exercise of this Option shall be reduced
proportionately. In the event Grantee cures any such default or breach and
elects not to exercise the Option, Grantee shall have the right to require the
Stockholder in respect of whom such cure was made to repurchase such shares from
Grantee for an amount equal to the amount Grantee paid in respect of such cure,
plus interest thereon at 18% per annum. Grantee shall be under no obligation to
cure any such default or breach.
2.3 Representations and Warranties of AutoBond. AutoBond hereby represents
and warrants to Grantee as follows:
(a) Due Authorization. AutoBond has taken all corporate proceedings
necessary to authorize this Agreement and to consummate the transactions
contemplated hereby (including the exercise of the Option). This Agreement has
been duly and validly executed and delivered by AutoBond and constitutes a valid
and binding agreement of AutoBond, enforceable against AutoBond in accordance
with its terms, except that such enforceability: (i) may be limited by
bankruptcy, insolvency, moratorium or other similar laws affecting or relating
to enforcement of creditors' rights generally; and (ii) is subject to general
principles of equity. The Shares have been duly authorized and are subject to no
preemptive rights.
(b) No Conflicts. Except as set forth on Exhibit G and except for: (i) the
applicable requirements of the Exchange Act and the Securities Act; (ii) the
applicable requirements of state securities or Blue Sky laws; and (iii) listing
requirements of the AMEX, (A) no filing with, and no permit, authorization,
consent or approval of, any state, federal or foreign public body or authority
is necessary for the execution of this Agreement by AutoBond and the
consummation by AutoBond of the transactions contemplated hereby and (B) neither
the execution and delivery of this Agreement by AutoBond nor the consummation by
AutoBond of the transactions contemplated hereby nor compliance by AutoBond with
any of the provisions hereof shall (x) conflict with or result in any breach of,
or require any notice under any provision of the Restated Articles of
Incorporation or bylaws of AutoBond, (y) result in a violation or breach of, or
constitute (with or without notice or lapse of time or both) a default (or give
rise to any third party right of termination, cancellation, material
modification or acceleration) or trigger any rights under change of control or
similar provisions under any of the terms, conditions or provisions of any note,
bond, mortgage, indenture, license, contract, agreement or other instrument or
obligation to which AutoBond or any of its subsidiaries is a party or by which
any of them or any of their properties or assets may be bound, or (z) violate
any order, writ, injunction, decree, statute, rule or regulation applicable to
AutoBond, and of its subsidiaries or any of their properties or assets.
(c) Status. AutoBond has all requisite power and authority to execute and
deliver this Agreement.
(d) Texas Business Combination Statute. All corporate action necessary to
exempt the grant of the Option pursuant to this Agreement and any exercise by
Grantee thereof from the application of any applicable takeover, business
combination, control share acquisition or similar law in effect in Texas has
been validly taken.
2.4 Representations and Warranties of AutoBond and Stockholders. AutoBond
and each of the Stockholders hereby represents and warrants as follows:
(a) All documents filed by AutoBond and Stockholders, as the case may be,
prior to the date hereof with the Securities and Exchange Commission
("Commission") conformed in all material respects to the requirements of the
Securities Act or Exchange Act, as applicable, and the rules and regulations of
the Commission thereunder, and none of such documents contained an untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements therein not misleading; and
any further documents so filed when such documents are filed, with the
Commission will conform in all material respects to the requirements of the
Securities Act or Exchange Act, as applicable, and the rules and regulations of
the Commission thereunder and will not contain an untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein not misleading.
(b) AutoBond and each of its subsidiaries have been duly incorporated and
are validly existing as corporations in good standing under the laws of their
respective jurisdictions of incorporation, are duly qualified to do business and
are in good standing as foreign corporations in each jurisdiction in which their
respective ownership or lease of property or the conduct of their respective
businesses requires such qualification except where the failure to so qualify
would not have a material adverse effect on the consolidated financial position,
shareholders' equity, results of operations, business or prospects of AutoBond
and its subsidiaries and affiliates, taken as a whole (hereinafter "Material
Adverse Effect"), and have all power and authority necessary to own or hold
their respective properties and to conduct the business in which they are
engaged.
(c) The financial statements of AutoBond (including the related notes and
supporting schedules) including any amendments or supplements thereto filed with
the Commission, present fairly the financial condition, results of operations
and cash flows of the entities purported to be shown thereby, at the dates and
for the periods indicated, and have been prepared in conformity with generally
accepted accounting principles applied on a consistent basis throughout the
periods involved.
(d) There are no legal or governmental proceedings pending, or to the
knowledge of AutoBond threatened, to which AutoBond or any of its subsidiaries
or affiliates is a party or of which are any property or assets of AutoBond or
any of its subsidiaries or affiliates is the subject which, if determined
adversely to AutoBond or any of its subsidiaries or affiliates, would have a
Material Adverse Effect.
(e) Attached hereto as Exhibit C is a complete and accurate description of
the material terms of the securities and debt of AutoBond currently outstanding,
including, without limitation, options, warrants and securities convertible into
capital stock of AutoBond.
(f) Attached hereto as Exhibit D are the waivers of all officers and
employees of AutoBond of any "change in control" provisions that may be
triggered by the transactions contemplated by this Option Agreement.
3. Covenants.
3.1 Covenants of AutoBond and Stockholders. The Stockholders and AutoBond
shall:
(a) Within 20 days after the end of each month furnish to Grantee
projections of the next 12 months cashflow, all certified by such Stockholders
as based on assumptions they believe to be reasonable.
(b) Within 20 days after the end of each month furnish to Grantee the
general ledgers, bank statements and such other financial information relating
to AutoBond as Grantee may request.
(c) Use their best efforts to achieve and not deviate in any material
respect from the Business strategy and plan attached as Exhibit E hereto.
(d) If any event triggering the right of the holders of the Class B Notes
issued in connection with the 1997-B and 1997-C securitizations occurs pursuant
to which such holders are entitled to receive or exchange securities for
convertible securities, pay off such Class B Notes and extinguish any such
entitlement.
(e) During the Term of this Option AutoBond shall furnish promptly to
Grantee a copy of each report or document filed or received by it pursuant to
the requirements of federal and state securities laws or which may have material
effect on its business and shall provide Grantee's employees, attorneys,
accountants and advisors access to such information regarding AutoBond as they
may request. AutoBond shall make available such members of management as Grantee
shall request for purposes of performing its due diligence. Grantee agrees to
keep confidential information received pursuant to this Section 3(e) until such
time as (i) such information becomes publicly available or (ii) ordered to
disclose such information by a court order or order of governmental agency;
provided, however, Grantee may disclose such information to its affiliates,
advisors and attorneys, subject to the agreement such person to keep such
information confidential to the extent provided in this Section 3(e).
(f) Cancel all options for AutoBond Common Stock held by Stockholders as of
the date of Closing, or if requested by Grantee, exercise such options as
Grantee may request and transfer the stock issuable upon such exercise to
Grantee for an amount equal to the exercise price, along with any proxy to vote
such AutoBond Common Stock as Grantee may request.
3.2 Negative Covenants of AutoBond. During the Term, without the prior
written consent of Grantee, AutoBond shall not:
(a) Issue any new shares of capital stock, except pursuant to existing
options, warrants and convertible securities.
(b) Issue any debt of AutoBond with a term in excess of one year.
(c) Make any changes in the compensation of each of the Stockholders.
(d) Make any additional loans to the Stockholders.
(e) Declare or pay any dividends on the AutoBond Common Stock.
(f) Issue or sell any warrants, options or other securities exercisable for
or convertible into capital stock of AutoBond, except for the issuance of
options to employees (other than the Stockholders) in the ordinary course of
business not to exceed 150,000 shares in the aggregate.
(g) Enter into any transactions between AutoBond and any of its affiliates
outside the normal course of business.
(h) Enter into any extraordinary corporate action such as a merger,
consolidation, share exchange, sale of all or substantially all of its assets or
similar transaction.
(i) Amend its Articles of Incorporation or by-laws.
(j) Change its underwriting or servicing practices and guidelines in any
material respect.
3.3 Negative Covenants of Each Stockholder. During the Term, without the
prior written consent of Grantee, each Stockholder shall not:
(a) Sell, assign, pledge, encumber or otherwise dispose of any of the
Existing Shares or grant a proxy or power of attorney with respect to the Shares
or deposit any Shares into a voting agreement or trust.
(b) Take any action that would make any representation or warranty
contained herein incorrect or have the effect of preventing or disabling the
Stockholder from performing the Stockholder's obligations under this Agreement.
(c) Subject to such stockholders' duties in their capacity as directors,
directly or indirectly (including through advisors, agents or other
intermediaries), initiate, solicit, negotiate, encourage or provide confidential
information to facilitate any proposal or offer by any Person that constitutes
or could reasonably be expected to lead to an Acquisition Transaction (as
hereinafter defined). Acquisition Transaction means any proposal or offer
(including, without limitation, any proposal or offer to its stockholders) to
acquire all or any substantial part of the business and properties of the
AutoBond and its subsidiaries or more than fifty percent (50%) of the capital
stock of AutoBond and its subsidiaries, whether by merger, purchase of assets,
tender offer or otherwise, whether for cash, securities or any other
consideration or combination thereof except for the transaction contemplated
herein. If Stockholder receives any such inquiry or proposal, then Stockholder
shall promptly inform Grantee of the material terms and conditions, if any, of
such inquiry or proposal and the identity of the Person making it. Stockholder
will immediately cease and cause to be terminated any existing activities,
discussions or negotiations with any parties conducted heretofore with respect
to any of the foregoing.
(d) Vote his shares in favor and agrees, unless otherwise directed by
Grantee, to vote his Shares against any Acquisition Transaction, amendment to
the articles of incorporation of AutoBond or other extraordinary corporate
action with any party other than Grantee or its affiliates.
(e) Exercise any of the options for AutoBond Common Stock held by such
Stockholder as of the date hereof.
3.4 Stop Transfer. Each Stockholder agrees with, and covenants to, Dynex
that such Stockholder shall not request that AutoBond register the transfer
(book-entry or otherwise) of any certificate or uncertificated interest
representing any of such Stockholder's Shares, unless such transfer is made in
compliance with this Agreement. Each Stockholder agrees, with respect to any
Shares in certificated from, that such Stockholder will tender to AutoBond,
within ten business days after the date hereof, the certificates representing
such Shares and AutoBond will inscribe upon such certificates the following
legend: "The shares of Common Stock, no par value per share, of AutoBond
Acceptance Corporation (the "Company") represented by this certificate are
subject to a Stock Option Agreement dated as of June , 1998, and may not be sold
or otherwise transferred, except in accordance therewith. Copies of such
Agreement may be obtained at the principal executive offices of the Company."
Each Stockholder agrees that within ten business days after the date hereof,
such Stockholder will no longer hold any Shares, whether certificated or
uncertificated, in "street name" or in the name of any nominee.
4. Conditions to Closing. In addition to the satisfaction of the conditions
set forth in Sections 1.2(i) and (ii) hereof, the obligation of Grantee to close
upon exercise of the Option is subject to the satisfaction of the following
conditions unless waived by Grantee:
4.1. The representations and warranties of AutoBond are the Stockholders
set forth herein shall be true and correct as of the date of Closing and
AutoBond and Stockholders shall have complied with each covenant and agreement
set forth herein and each shall deliver to Grantee a certificate certifying
thereto.
4.2. All regulatory and other approvals necessary in connection with the
exercise of the Option shall have been approved and the expiration of any
waiting periods (including those required under the Hart-Scott-Rodino
Improvements Act of 1976) with respect to any such Combination shall have
occurred.
4.3. Grantee and Stockholders shall have entered into the employment
agreements attached as Exhibit B.
4.4 AutoBond and Stockholders shall have delivered the opinion attached
hereto as Exhibit F.
5. Certain Events. Each Stockholder agrees that this Agreement and the
obligations hereunder shall attach to such Stockholder's Shares and shall be
binding upon any Person to which legal or beneficial ownership of such Shares
shall pass, whether by operation of law or otherwise.
6. Indemnification. AutoBond and each of the Stockholders agrees to
indemnify and hold harmless the Grantee, its directors, officers, employees and
agents and each person who controls the Grantee against any and all losses,
claims, damages or liabilities to which they or any of them may become subject
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon any breach of a representation or
warranty made by any of them hereunder or failure to perform any covenant made
by any of them herein. The obligations set forth in this Section 6 shall expire
one year after the Closing.
7. Survival of Representations and Warranties. The respective
representations and warranties of AutoBond, the Stockholders and Grantee
contained herein or in any certificates or other documents delivered at or prior
to the Closing shall survive the closing of the transactions contemplated hereby
for one year.
8. Miscellaneous.
8.1 Entire Agreement; Assignment. This Agreement, the Note Agreement and
the Credit Agreement of even date herewith: (i) constitute the entire agreement
among the parties with respect to the subject matter hereof and supersede all
other prior agreements and understandings, both written and oral, between the
parties with respect to the subject matter hereof; and (ii) shall not be
assigned by operation of law or otherwise, provided that Grantee may assign its
rights and obligations hereunder to any direct or indirect wholly owned
subsidiary or an affiliate of Grantee, but no such assignment shall relieve
Grantee of its obligations hereunder if such assignee does not perform such
obligations.
8.2 Waiver and Amendment. Any provision of this Agreement may be waived at
any time by the party that is entitled to the benefits of such provision. This
Agreement may not be modified, amended, altered or supplemented, except upon the
execution and delivery of a written agreement executed by the parties hereto.
8.3 Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly received if so given) by hand delivery, telegram, telex
or telecopy or by mail (registered or certified mail, postage prepaid, return
receipt requested) or by any courier service, provided proof of delivery. All
communications hereunder shall be delivered to the respective parties at the
following address:
If to Grantee:
Dynex Holding, Inc.
10900 Nuckols Road
Third Floor
Richmond, Virginia 23060
copy to: Venable, Baetjer and Howard, LLP
1800 Mercantile Bank & Trust Building
2 Hopkins Plaza
Baltimore, Maryland 21201
Attention: Elizabeth R. Hughes, Esq.
Telecopy: (410) 244-7742
If to Adrian Katz:
Telecopy:
copy to:
Attention:
Telecopy:
If to William O. Winsauer: ___________________________
Telecopy:
copy to:
Attention:
Telecopy:
If to John S. Winsauer:
Telecopy:
copy to:
Attention:
Telecopy:
If to AutoBond:
AutoBond Acceptance Corporation
301 Congress Avenue
Austin, Texas 78701
copy to:
Attention:
Telecopy:
or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above.
8.4 Governing Law. This Agreement shall be governed by, and construed in
accordance with, the laws of the Commonwealth of Virginia, regardless of
principles of conflicts of law.
8.5 Consent to Jurisdiction. The parties hereto agree that the appropriate
and exclusive forum for any dispute between any of the parties hereto arising
out of this Agreement or the transactions contemplated hereby shall be in any
state or federal court in the Commonwealth of Virginia. The parties hereto
further agree that the parties will not bring suit with respect to any dispute
arising out of this Agreement or the transactions contemplated hereby, except as
expressly set forth below for the execution or enforcement of judgment, in any
court or jurisdiction other than the above specified court. The foregoing shall
not limit the rights of any party to obtain further execution of judgment in any
other jurisdiction. The parties further agree, to the extent permitted by law,
that final and unappealable judgment against any of them in any action or
proceeding contemplated above shall be conclusive and may be enforced in any
other jurisdiction within or outside the United States by suit on the judgment,
a certified or exemplified copy of which shall be conclusive evidence of the
fact and amount of such judgment. THE PARTIES HERETO WAIVE ALL RIGHTS TO A JURY
TRIAL. The parties agree that, upon request of Grantee, the parties will submit
any controversy or claim arising out of or relating to this Agreement for
settlement by arbitration administered by the American Arbitration Association
under its Commercial Arbitration Rules and any judgment on the award rendered by
the arbitrator(s) may be entered in a court selected in accordance with this
Section 8.5.
8.6 Further Assurances. From time to time, at any party's request and
without further consideration, each other party hereto shall execute and deliver
such additional documents and take all such further action as may be necessary
or desirable to consummate and make effective, in the most expeditious manner
possible, the transactions contemplated by this Agreement, including without
limitation to vest in Grantee good title to the Shares purchased hereunder.
8.7 Specific Performance. Each of the parties hereto recognizes and
acknowledges that a breach by it of any covenants or agreements contained in
this Agreement will cause the other party to sustain damages for which it would
not have an adequate remedy at law for money damages, and therefore each of the
parties hereto agrees that in the event of any such breach the aggrieved party
shall be entitled to the remedy of specific performance of such covenants and
agreements and injunctive and other equitable relief in addition to any other
remedy to which it may be entitled, at law or in equity.
8.8 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but both of which
shall constitute one and the same Agreement.
8.9 Descriptive Headings. The descriptive headings used herein are inserted
for convenience of reference only and are not intended to be part of or to
affect the meaning or interpretation of this Agreement.
8.10 Severability. Whenever possible, each provision or portion of any
provision of this Agreement will be interpreted in such manner as to be
effective and valid under applicable law but if any provision or portion of any
provision of this Agreement is held to be invalid, illegal or unenforceable in
any respect under any applicable law or rule in any jurisdiction, such
invalidity, illegality or unenforceability will not affect any other provision
or portion of any provision in such jurisdiction, and this Agreement will be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision or portion or any provision had never been
contained herein.
8.11 Definitions. For purposes of this Agreement:
(a) "Beneficially own" or "beneficial ownership" with respect to any
securities shall mean having "beneficial ownership" of such securities (as
determined pursuant to Rule 13d-3 under the Exchange Act), including pursuant to
any agreement, arrangement or understanding, whether or not in writing. Without
duplicative counting of the same securities by the same holder, securities
beneficially owned by a Person shall include securities beneficially owned by
all other Persons with whom such Person would constitute a "group" as described
in Section 13d-3 of the Exchange Act.
(b) "Person" shall mean an individual, corporation, partnership, limited
liability company, joint venture, association, trust, unincorporated
organization or other entity.
8.12 Consideration. AutoBond acknowledges the consideration for the
representations, agreements and covenants of AutoBond set forth herein is the
agreement of Grantee to make available certain funding to AutoBond as set forth
in the Note Agreement and Credit Agreement between Grantee and AutoBond of even
date herewith. 8.13 Registration Rights.
8.13.1 Requested Registration. If one or more of the Stockholders holding
an aggregate of a majority of the common stock issuable upon conversion of the
Dynex Shares ("Registrable Securities") shall notify the Grantee in writing that
such Stockholder or Stockholders intend to offer or cause to be offered for
public sale all or any portion of their Registrable Securities, the Grantee will
notify all of the remaining holders of Registrable Securities upon receipt of
such notification from such Stockholder or Stockholders. Upon the written
request of any such Stockholder delivered to the Grantee within 15 days after
receipt from the Grantee of such notification, the Grantee will use its best
efforts to cause, at the expense of the Stockholders of such Registrable
Securities, such of the Registrable Securities as may be requested by any such
Stockholder (including the Stockholder or Stockholders giving the initial notice
of intent to register hereunder) to be registered under the Act in accordance
with the terms of this Section 8.13. Notwithstanding the foregoing, the Grantee
shall not be required to effect, or to take any action to effect, a registration
requested pursuant to this Section 8.13 if any of the following conditions
exist:
(i) after the Grantee has effected one (1) registration pursuant to this
Section 8.13 and such registration has been declared or ordered effective by the
Commission;
(ii) if a prior registration has become effective, regardless of the manner
in which it was initiated, within six (6) months of the date of the demand; or
(iii) if the request for registration has been received by the Grantee
subsequent to the giving of written notice by the Grantee, made in good faith,
to the Stockholders of Registrable Securities to the effect that the Grantee is
commencing to prepare a Grantee-initiated registration statement (other than a
registration effected solely to implement an employee benefit plan or a
transaction to which Rule 145 or any other similar rule of the Commission under
the Securities Act is applicable);
provided, however, that, in the case of the condition described in clause
(ii), the Grantee shall use its best efforts to achieve such effectiveness
promptly following such six-month period if the request pursuant to this Section
8.13 has been made prior to the expiration of such six-month period. The Grantee
may postpone the filing of any registration statement requested hereunder for a
reasonable period of time, not to exceed 120 days, if the Grantee has been
advised by legal counsel that such filing would require the disclosure of a
material transaction or other factor and the Grantee determines reasonably and
in good faith that such disclosure would have a material adverse effect on the
Grantee.
(b) If the Grantee shall have received notice of a requested registration
under Section 8.13 and the Grantee shall have obtained an opinion of counsel,
which opinion is concurred in by counsel for the requesting holder or holders,
that registration under the Act is not required in connection with such proposed
disposition, the Grantee shall have no obligation to comply with such request,
and the receipt of such opinion shall not be construed as a registration under
Section 8.13 for the purpose of determining the Grantee's obligations under
Section 8.13 hereof.
8.13.2 Piggy-Back Registration. If the Grantee proposes to file a
registration statement under the Act with respect to an offering by the Grantee
for its own account or for the account of others of any class of security other
than a registration statement on Forms S-4 or S-8 or filed in connection with an
exchange offer or an offering of securities solely to the Grantee's existing
stockholders), then the Grantee shall in each case give written notice of such
proposed filing to the Stockholders at least 30 days prior to the anticipated
filing date, and such notice shall offer such Stockholders the opportunity to
register such shares of Registrable Securities as each such holder may request
(a "Piggy-Back Registration"). In such case, the holders of the Registrable
Securities will bear any incremental expense attributable to the registration of
such Registrable Securities. The Grantee shall use its best efforts to cause the
managing underwriter or underwriters of a proposed underwritten offering to
permit the holders of Registrable Securities requested in writing within fifteen
(15) days after the notice given by the Grantee to be included in the
registration for such offering to include such securities in such offering on
the same terms and conditions as any similar securities of the Grantee included
therein. Notwithstanding the foregoing, if the managing underwriter or
underwriters of such offering deliver an opinion to the Stockholders that the
total amount of securities which they or the Grantee or any other persons or
entities intend to include in such offering is sufficiently large to materially
and adversely affect the success of such offering, then the amount or kind of
securities to be offered for the accounts of Stockholders of Registrable
Securities shall be reduced pro rata with respect to each holder to the extent
necessary to reduce the total amount of securities to be included in such
offering to the amount of securities to be included in such offering to the
amount recommended by such managing underwriter or underwriters.
8.13.3 Other Agreements. The Stockholders seeking to register Registrable
Securities pursuant to this Section 8.13 agree to enter into such
indemnification, hold back and other agreements as may be reasonably requested
by the Grantee or managing underwriter or underwriters in connection with such
registration.
IN WITNESS WHEREOF, Grantee, AutoBond and the Stockholders have duly
executed or have caused this Agreement to be duly executed as of the day and
year first above written.
DYNEX HOLDING, INC. ADRIAN KATZ
By:
Name: Adrian Katz
Title:
WILLIAM O. WINSAUER JOHN S. WINSAUER
By: By:
William O. Winsauer John S. Winsauer
AUTOBOND ACCEPTANCE CORPORATION
By:
Name:
Title:
For the purpose of agreeing to make available the Dynex Shares on exercise
of the Option.
DYNEX CAPITAL, INC.
By:
Name:
Title:
<PAGE>
SCHEDULE A
Share Ownership
Name Number of Shares
Adrian Katz 583,750
William O. Winsauer 3,650,062
John S. Winsauer 1,240,688
5,474,500
<PAGE>
Articles of Amendment A
Employment Agreements B
Capitalization Description C
Waiver of Change-in-Control Provisions D
Business Strategy and Plan E
Opinion of Counsel F
Exceptions to Representations G
<PAGE>
EXHIBIT A
ARTICLES OF AMENDMENT
TO
ARTICLES OF INCORPORATION
DYNEX CAPITAL, INC.
1. The name of the Corporation is Dynex Capital, Inc.
2. A new Article IIID shall be inserted following the existing text
of Article IIIC and shall read as set forth in Exhibit A hereto.
3. This Amendment to the Articles of Incorporation was duly adopted by the
Board of Directors of the Corporation at a meeting held on __________, 1998. In
accordance with Sections 13.1-706.6 and 13.1-639 of the Virginia Stock
Corporations Act, no shareholder action was required.
IN WITNESS WHEREOF, the undersigned President of the Corporation has
executed these Articles of Amendment on behalf of the Corporation.
Date: _________, 199__ DYNEX CAPITAL, INC.
By: /S/ THOMAS H. POTTS
Thomas H. Potts
President
<PAGE>
DYNEX CAPITAL, INC.
Section 1. Number of Shares and Designation. This series of Preferred Stock
shall be designated as Series ____ 9.00% Cumulative Convertible Preferred Stock
(the "Series Preferred Stock") and up to
________________________________________ ($_________) shall be the number of
shares of such Preferred Stock constituting such series.
Section 2. Definitions. For purposes of the Series _____ Preferred Stock,
the following terms shall have the meanings indicated:
"Act" shall mean the Securities Act of 1933, as amended.
"affiliate" of a person means a person that directly, or indirectly through
one or more intermediaries, controls or is controlled by, or is under common
control with, the person specified.
"Board of Directors" shall mean the Board of Directors of the Corporation
or any committee authorized by such Board of Directors to perform any of its
responsibilities with respect to the Series _____ Preferred Stock.
"Business Day" shall mean any day other than a Saturday, Sunday or a day on
which state or federally chartered banking institutions in New York, New York
are not required to be open.
"Call Date" shall have the meaning set forth in paragraph (b) of Section 5
hereof.
"Common Stock" shall mean the common stock, $.01 par value per share, of
the Corporation or such shares of the Corporation's capital stock into which
such Common Stock shall be reclassified.
"Conversion Price" shall mean the conversion price per share of Common
Stock for which each share of Series _____ Preferred Stock is convertible, as
such Conversion Price may be adjusted pursuant to paragraph (d) of Section 7.
The initial Conversion Price shall be $_______ (equivalent to an initial
conversion rate of one share of Common Stock for each share of Series _____
Preferred Stock).
"Current Market Price" of publicly traded shares of Common Stock or any
other class or series of capital stock or other security of the Corporation or
of any similar security of any other issuer for any day shall mean the closing
price, regular way on such day, or, if no sale takes place on such day, the
average of the reported closing bid and asked prices regular way on such day, in
either case as reported on the New York Stock Exchange ("NYSE") or, if such
security is not listed or admitted for trading on the NYSE, on the principal
national securities exchange on which such security is listed or admitted for
trading or, if not listed or admitted for trading on any national securities
exchange, on the National Market of the Nasdaq Stock Market ("Nasdaq") or, if
such security is not quoted on such National Market, the average of the closing
bid and asked prices on such day in the over-the-counter market as reported by
Nasdaq or, if bid and asked prices for such security on such day shall not have
been reported through Nasdaq, the average of the bid and asked prices on such
day as furnished by any NYSE or National Association of Securities Dealers, Inc.
member firm regularly making a market in such security selected for such purpose
by the Chief Executive Officer or the Board of Directors or if any class or
series of securities are not publicly traded, the fair value of the shares of
such class as determined reasonably and in good faith by the Board of Directors
of the Corporation.
"Distribution" shall have the meaning set forth in paragraph (d)(iii) of
Section 7 hereof.
"Dividend Payment Date" shall mean, with respect to each Dividend Period,
the [last day of _________, ______, ______ and _______,] in each year,
commencing on [_________, 199___] with respect to the period commencing on the
date of issue and ending [__________ ___, ______]; provided, however, that if
any Dividend Payment Date falls on any day other than a Business Day, the
dividend payment due on such Dividend Payment Date shall be paid on the Business
Day immediately following such Dividend Payment Date.
"Dividend Periods" shall mean quarterly dividend periods commencing on
[January 1, April 1, July 1 and October 1] of each year and ending on and
including the day preceding the first day of the next succeeding Dividend Period
(other than the initial Dividend Period, which shall commence on the Issue Date
and end on and include [__________ ____, _____]).
"Fair Market Value" shall mean the average of the daily Current Market
Prices of a share of Common Stock during five (5) consecutive Trading Days
selected by the Corporation commencing not more than twenty (20) Trading Days
before, and ending not later than, the earlier of the day in question and the
day before the "ex" date with respect to the issuance or distribution requiring
such computation. The term "'ex' date," when used with respect to any issuance
or distribution, means the first day on which the share of Common Stock trades
regular way, without the right to receive such issuance or distribution, on the
exchange or in the market, as the case may be, used to determine that day's
Current Market Price.
"Issue Date" shall mean ____________, 199___.
"Junior Stock" shall mean the Common Stock and any other class or series of
capital stock of the Corporation over which the shares of Series _____ Preferred
Stock have preference or priority in the payment of dividends or in the
distribution of assets on any liquidation, dissolution or winding up of the
Corporation.
"Parity Stock" shall have the meaning set forth in paragraph (b) of
Section 8 hereof. Series A Preferred Stock, Series B Preferred Stock and Series
C Preferred Stock are Parity Stock.
"Person" shall mean any individual, firm, partnership, corporation or other
entity and shall include any successor (by merger or otherwise) of such entity.
"Press Release" shall have the meaning set forth in paragraph (a)(i) of
Section 5 hereof.
"Series A Preferred Stock" shall mean the Series A Cumulative Convertible
Preferred Stock of the Corporation as set forth in Article IIIA, Section 1 of
the Corporation's Articles of Incorporation (as amended).
"Series B Preferred Stock" shall mean the Series A Cumulative Convertible
Preferred Stock of the Corporation set forth in Article IIIB, Section 1 of the
Corporation's Articles of Incorporation (as amended).
"Series C Preferred Stock" shall mean the Series C Cumulative Convertible
Preferred Stock of the Corporation set forth in Article IIIC, Section 1 of the
Corporation's Articles of Incorporation (as amended).
"Series Preferred Stock" shall have the meaning set forth in Section 1
hereof.
"set apart for payment" shall be deemed to include, without any action
other than the following, the recording by the Corporation in its accounting
ledgers of any accounting or bookkeeping entry which indicates, pursuant to a
declaration of dividends or other distribution by the Board of Directors, the
allocation of funds to be so paid on any series or class of capital stock of the
Corporation; provided, however, that if any funds for any class or series of
Junior Stock or any class or series of Parity Stock are placed in a separate
account of the Corporation or delivered to a disbursing, paying or other similar
agent, then "set apart for payment" with respect to the Series _____ Preferred
Stock shall mean placing such funds in a separate account or delivering such
funds to a disbursing, paying or other similar agent.
"Trading Day", as to any securities, shall mean any day on which such
securities are traded on the NYSE or, if such securities are not listed or
admitted for trading on the NYSE, on the principal national securities exchange
on which such securities are listed or admitted or, if such securities are not
listed or admitted for trading on any national securities exchange, on the
National Market of Nasdaq or, if such securities are not quoted on such National
Market, in the securities market in which such securities are traded.
"Transaction" shall have the meaning set forth in paragraph (e) of Section
7 hereof.
"Transfer Agent" means First Union National Bank of North Carolina or such
other transfer agent as may be designated by the Board of Directors or their
designee as the transfer agent for the Series _____ Preferred Stock.
"Voting Preferred Stock" shall have the meaning set forth in Section 9
hereof.
Section 3. Dividends.
(a) The holders of Series _____ Preferred Stock shall be entitled to
receive, when and as declared by the Board of Directors out of funds legally
available for that purpose, cumulative dividends payable in cash in an amount
per share of Series _____ Preferred Stock equal to $[ ] per quarter (the "Base
Rate"). The initial Dividend Period shall commence on the Issue Date and end on
[___________, 199__]. The dividends payable with respect to the portion of the
initial Dividend Period commencing on the Issue Date and ending on [__________,
199__] shall be prorated from the date of issuance and determined by reference
to the Base Rate. Such dividends shall be cumulative from the Issue Date,
whether or not in any Dividend Period or Periods such dividends shall be
declared or there shall be funds of the Corporation legally available for the
payment of such dividends, and shall be payable quarterly in arrears on the
Dividend Payment Dates, commencing on the first Dividend Payment Date after the
Issue Date. Each such dividend shall be payable in arrears to the holders of
record of the Series _____ Preferred Stock, as they appear on the stock records
of the Corporation at the close of business on a record date which shall be not
more than 60 days prior to the applicable Dividend Payment Date and shall be
fixed by the Board of Directors to coincide with the record date for the regular
quarterly dividends, if any, payable with respect to the Common Stock; provided,
however, that the record dates for the Dividend Period ending December 31, may
be separated so that the record date for the Common Stock dividend is December
31 and the record date for the Series _____ Preferred Stock dividend is January
1 and vice versa. Accumulated, accrued and unpaid dividends for any past
Dividend Periods may be declared and paid at any time, without reference to any
regular Dividend Payment Date, to holders of record on such date, which date
shall not precede by more than 45 days the payment date thereof, as may be fixed
by the Board of Directors.
(b) The amount of dividends payable per share of Series _____ Preferred
Stock for the portion of the initial Dividend Period commencing on the Issue
Date and ending and including [___________ ____, 199__], or any other period
shorter than a full Dividend Period, shall be computed ratably on the basis of
twelve 30-day months and a 360-day year. Holders of Series _____ Preferred Stock
shall not be entitled to any dividends, whether payable in cash, property or
stock, in excess of cumulative dividends, as herein provided, on the Series
_____ Preferred Stock. No interest, or sum of money in lieu of interest, shall
be payable in respect of any dividend payment or payments on the Series _____
Preferred Stock that may be in arrears.
(c) So long as any of the shares of Series _____ Preferred Stock are
outstanding, except as described in the immediately following sentence, no
dividends shall be declared or paid or set apart for payment by the Corporation
and no other distribution of cash or other property shall be declared or made
directly or indirectly by the Corporation with respect to any class or series of
Parity Stock for any period unless dividends equal to the full amount of
accumulated, accrued and unpaid dividends have been or contemporaneously are
declared and paid or declared and a sum sufficient for the payment thereof has
been or contemporaneously is set apart for such payment on the Series _____
Preferred Stock for all Dividend Periods terminating on or prior to the Dividend
Payment Date with respect to such class or series of Parity Stock. When
dividends are not paid in full or a sum sufficient for such payment is not set
apart, as aforesaid, all dividends declared upon the Series _____ Preferred
Stock and all dividends declared upon any other class or series of Parity Stock
shall be declared ratably in proportion to the respective amounts of dividends
accumulated, accrued and unpaid on the Series _____ Preferred Stock and
accumulated, accrued and unpaid on such Parity Stock.
(d) So long as any of the shares of Series _____ Preferred Stock are
outstanding, no dividends (other than dividends or distributions paid in shares
of or options, warrants or rights to subscribe for or purchase shares of Junior
Stock) shall be declared or paid or set apart for payment by the Corporation and
no other distribution of cash or other property shall be declared or made
directly or indirectly by the Corporation with respect to any shares of Junior
Stock, nor shall any shares of Junior Stock be redeemed, purchased or otherwise
acquired (other than a redemption, purchase or other acquisition of Common Stock
made for purposes of an employee incentive or benefit plan of the Corporation or
any subsidiary) for any consideration (or any moneys be paid to or made
available for a sinking fund for the redemption of any shares of any such stock)
directly or indirectly by the Corporation (except by conversion into or exchange
for Junior Stock), nor shall any other cash or other property otherwise be paid
or distributed to or for the benefit of any holder of shares of Junior Stock in
respect thereof, directly or indirectly, by the Corporation unless in each case
(i) the full cumulative dividends (including all accumulated, accrued and unpaid
dividends) on all outstanding shares of Series _____ Preferred Stock and any
other Parity Stock of the Corporation shall have been paid or such dividends
have been declared and set apart for payment for all past Dividend Periods with
respect to the Series _____ Preferred Stock and all past dividend periods with
respect to such Parity Stock and (ii) sufficient funds shall have been paid or
set apart for the payment of the full dividend for the current Dividend Period
with respect to the Series _____ Preferred Stock and the current dividend period
with respect to such Parity Stock.
Section 4. Liquidation Preference.
(a) In the event of any liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary, before any payment or
distribution of the assets of the Corporation (whether capital or surplus) shall
be made to or set apart for the holders of Junior Stock, the holders of shares
of Series _____ Preferred Stock shall be entitled to receive [_________________
($_________)] per share of Series _____ Preferred Stock ("Liquidation
Preference"), plus an amount equal to all dividends (whether or not earned or
declared) accumulated, accrued and unpaid thereon to the date of final
distribution to such holders; but such holders shall not be entitled to any
further payment. Until the holders of the Series _____ Preferred Stock have been
paid the Liquidation Preference in full, plus an amount equal to all dividends
(whether or not earned or declared) accumulated, accrued and unpaid thereon to
the date of final distribution to such holders, no payment will be made to any
holder of Junior Stock upon the liquidation, dissolution or winding up of the
Corporation. If, upon any liquidation, dissolution or winding up of the
Corporation, the assets of the Corporation, or proceeds thereof, distributable
among the holders of Series _____ Preferred Stock shall be insufficient to pay
in full the preferential amount aforesaid and liquidating payments on any other
shares of any class or series of Parity Stock, then such assets, or the proceeds
thereof, shall be distributed among the holders of Series _____ Preferred Stock
and any such other Parity Stock ratably in the same proportion as the respective
amounts that would be payable on such Series _____ Preferred Stock and any such
other Parity Stock if all amounts payable thereon were paid in full. For the
purposes of this Section 4, (i) a consolidation or merger of the Corporation
with one or more corporations, (ii) a sale or transfer of all or substantially
all of the Corporation's assets, or (iii) a statutory share exchange shall not
be deemed to be a liquidation, dissolution or winding up, voluntary or
involuntary, of the Corporation.
(b) Subject to the rights of the holders of any shares of Parity Stock,
upon any liquidation, dissolution or winding up of the Corporation, after
payment shall have been made in full to the holders of Series _____ Preferred
Stock and any Parity Stock, as provided in this Section 4, any other series or
class or classes of Junior Stock shall, subject to the respective terms thereof,
be entitled to receive any and all assets remaining to be paid or distributed,
and the holders of the Series _____ Preferred Stock and any Parity Stock shall
not be entitled to share therein.
Section 5. Redemption at the Option of the Corporation.
(a) The Corporation, at its option, may redeem shares of Series _____
Preferred Stock, in whole or from time to time in part, as set forth herein,
subject to the provisions described below:
(i) Shares of Series _____ Preferred Stock may be redeemed, in whole or in
part, at the option of the Corporation, at any time by issuing and delivering to
each holder for each share of Series _____ Preferred Stock to be redeemed such
number of authorized but previously unissued shares of Common Stock as equals
the Liquidation Preference (which excludes any accumulated, accrued and unpaid
dividends which are to be paid in cash as provided below) per share of Series
_____ Preferred Stock divided by the Conversion Price as in effect as of the
opening of business on the Call Date (as defined in paragraph (b) below);
provided, however, that the Corporation may redeem shares of Series _____
Preferred Stock pursuant to this paragraph (a)(i) only if for ten (10) Trading
Days, within any period of thirty (30) consecutive Trading Days, including the
last Trading Day of such 30-Trading Day period, the Current Market Price of the
Common Stock on each of such ten (10) Trading Days equals or exceeds the
Conversion Price in effect on such Trading Day.
(ii) Shares of Series _____ Preferred Stock may be redeemed, in whole or in
part, at the option of the Corporation at any time out of funds legally
available therefor at a redemption price payable in cash equal to the
Liquidation Preference per share of Series _____ Preferred Stock (plus all
accumulated, accrued and unpaid dividends as provided below).
(iii) In the event of a redemption pursuant to Section 5(a)(i), the
Corporation shall pay in cash all cumulative, accrued and unpaid dividends for
all Dividend Periods ending prior to the Dividend Period in which the redemption
occurs; but no dividend shall accrue or be payable on the Series _____ Preferred
Stock to be redeemed for the Dividend Period in which the redemption occurs
unless the Call Date is after the record date for the dividend payable on the
Common Stock for such Dividend Period in which event such dividend with respect
to the Series _____ Preferred Stock shall accrue and be payable from the period
beginning of the Dividend Period in which the redemption occurs and ending on
the Call Date. In the event of a redemption pursuant to Section 5(a)(ii), the
Corporation shall pay in cash all cumulative, accrued and unpaid dividends for
all Dividend Periods ending prior to the Dividend Period in which the redemption
occurs, plus the dividend (determined by reference to the Base Rate if the Call
Date precedes the date on which the dividend on the Common Stock is declared for
such Dividend Period) accrued from the beginning of the Dividend Period in which
the redemption occurs and ending on the Call Date.
(b) In order to exercise the redemption option of the Corporation described
in Section 5(a), the Corporation shall send a notice of redemption to holders of
record and shares of Series _____ Preferred Stock shall be redeemed by the
Corporation on the date specified in the notice to holders of record (the "Call
Date"). The Call Date shall be selected by the Corporation, shall be specified
in the notice of redemption and shall be not less than 20 days nor more than 60
days after the date notice of redemption is sent by the Corporation. In the
event of a redemption pursuant to Section 5(a)(i) or 5(a)(ii), if the Call Date
falls after a dividend payment record date and prior to the corresponding
Dividend Payment Date, then (i) in the event of a redemption pursuant to Section
5(a)(i) each holder of Series _____ Preferred Stock at the close of business on
such dividend payment record date shall be entitled to the dividend payable on
such shares on the corresponding Dividend Payment Date notwithstanding the
redemption of such shares prior to such Dividend Payment Date and (ii) in the
event of a redemption pursuant to Section 5(a)(ii), each holder of Series _____
Preferred Stock at the close of business on such dividend payment record date
shall be entitled to the portion of the dividend accrued from the beginning of
the Dividend Period in which the redemption occurs and ending on the Call Date
notwithstanding the redemption of such shares prior to such Dividend Payment
Date. Except as provided above, the Corporation shall make no payment or
allowance for accumulated or accrued dividends on shares of Series _____
Preferred Stock called for redemption or on the shares of Common Stock issued
upon such redemption.
(c) If full cumulative dividends on all outstanding shares of Series _____
Preferred Stock and any other class or series of Parity Stock of the Corporation
have not been paid or declared and set apart for payment, no shares of Series
_____ Preferred Stock may be redeemed unless all outstanding shares of Series
_____ Preferred Stock are simultaneously redeemed and neither the Corporation
nor any affiliate of the Corporation may purchase or acquire shares of Series
_____ Preferred Stock, otherwise than pursuant to a purchase or exchange offer
made on the same terms to all holders of shares of Series _____ Preferred Stock.
(d) Notice of redemption shall be provided by first class mail, postage
prepaid, telecopy or overnight courier at such holder's address as the same
appears on the stock records of the Corporation. Any notice which was mailed in
the manner herein provided shall be conclusively presumed to have been duly
given on the date mailed or sent whether or not the holder receives the notice.
Each notice shall state, as appropriate: (1) the Call Date; (2) the number of
shares of Series _____ Preferred Stock to be redeemed and, if fewer than all
such shares held by such holder are to be redeemed, the number of such shares to
be redeemed from such holder; (3) whether redemption will be for shares of
Common Stock pursuant to paragraph (a)(i) of this Section 5 or for cash pursuant
to paragraph (a)(ii) of this Section 5, and, if redemption will be for Common
Stock, the number of shares of Common Stock to be issued with respect to each
share of Series _____ Preferred Stock to be redeemed; (4) the place or places at
which certificates for such shares are to be surrendered for certificates
representing shares of Common Stock; and (5) the then-current Conversion Price.
Notice having been mailed or sent as aforesaid, from and after the Call Date
(unless the Corporation shall fail to issue and make available the number of
shares of Common Stock and/or amount of cash necessary to effect such
redemption), (i)except as otherwise provided herein, dividends on the shares of
Series _____ Preferred Stock so called for redemption shall cease to accumulate
or accrue on the shares of Series _____ Preferred Stock called for redemption
(except that, in the case of a Call Date after a dividend record date and prior
to the related Dividend Payment Date, holders of Series _____ Preferred Stock on
the dividend record date will be entitled on such Dividend Payment Date to
receive the dividend payable on such shares), (ii) said shares shall no longer
be deemed to be outstanding, and (iii) all rights of the holders thereof as
holders of Series _____ Preferred Stock of the Corporation shall cease (except
the rights to receive the shares of Common Stock and/or cash payable upon such
redemption, without interest thereon, upon surrender and endorsement of their
certificates if so required and to receive any dividends payable thereon).
As promptly as practicable after the surrender in accordance with said
notice of the certificates for any such shares so redeemed (properly endorsed or
assigned for transfer, if the Corporation shall so require and if the notice
shall so state), such certificates shall be exchanged for certificates
representing shares of Common Stock and/or any cash (without interest thereon)
for which such shares have been redeemed in accordance with such notice. If
fewer than all the outstanding shares of Series _____ Preferred Stock are to be
redeemed, shares to be redeemed shall be selected by the Corporation from
outstanding shares of Series _____ Preferred Stock not previously called for
redemption by lot or, with respect to the number of shares of Series _____
Preferred Stock held of record by each holder of such shares, pro rata (as
nearly as may be) or by any other method as may be determined by the Board of
Directors in its discretion to be equitable. If fewer than all the shares of
Series _____ Preferred Stock represented by any certificate are redeemed, then a
new certificate representing the unredeemed shares shall be issued without cost
to the holders thereof.
(e) In the case of any redemption pursuant to paragraph (a)(i) of this
Section 5, no fractional shares of Common Stock or scrip representing fractions
of shares of Common Stock shall be issued upon redemption of the shares of
Series _____ Preferred Stock. Instead of any fractional interest in a share of
Common Stock that would otherwise be deliverable upon redemption of shares of
Series _____ Preferred Stock, the Corporation shall pay to the holder of such
share an amount in cash (computed to the nearest cent) based upon the Current
Market Price of the Common Stock on the Trading Day immediately preceding the
Call Date. If more than one share shall be surrendered for redemption at one
time by the same holder, the number of full shares of Common Stock issuable upon
redemption thereof shall be computed on the basis of the aggregate number of
shares of Series _____ Preferred Stock so surrendered.
(f) In the case of any redemption pursuant to paragraph (a)(i) of this
Section 5, the Corporation covenants that any shares of Common Stock issued upon
redemption of shares of Series _____ Preferred Stock shall be validly issued,
fully paid and non-assessable.
Section 6. Stock To Be Retired. All shares of Series _____ Preferred Stock
which shall have been issued and reacquired in any manner by the Corporation
shall be restored to the status of authorized, but unissued shares of Preferred
Stock, without designation as to series. The Corporation may also retire any
unissued shares of Series _____ Preferred Stock, and such shares shall then be
restored to the status of authorized but unissued shares of Preferred Stock,
without designation as to series.
Section 7. Conversion.
Holders of shares of Series _____ Preferred Stock shall have the right to
convert all or a portion of such shares into shares of Common Stock, as follows:
(a) Subject to and upon compliance with the provisions of this Section 7, a
holder of shares of Series _____ Preferred Stock shall have the right, at such
holder's option, at any time to convert such shares, in whole or in part (but
not less than the greater of one-half of the initial number of shares of Series
_____ Preferred Stock issued to such holder or such remaining shares of Series
_____ Preferred Stock held by such holder), into the number of fully paid and
non-assessable shares of authorized but previously unissued shares of Common
Stock per each share of Series _____ Preferred Stock obtained by dividing the
Liquidation Preference (excluding any accumulated, accrued and unpaid dividends)
by the Conversion Price (as in effect at the time and on the date provided for
in the last clause of paragraph (b) of this Section 7) and by surrendering such
shares to be converted, such surrender to be made in the manner provided in
paragraph (b) of this Section 7; provided, however, that the right to convert
shares of Series _____ Preferred Stock called for redemption pursuant to Section
5 shall terminate at the close of business on the Call Date fixed for such
redemption, unless the Corporation shall default in making payment of shares of
Common Stock and/or cash payable upon such redemption under Section 5 hereof.
(b) In order to exercise the conversion right, the holder of each share of
Series _____ Preferred Stock to be converted shall surrender the certificate
representing such share, duly endorsed or assigned to the Corporation or in
blank, at the office of the Transfer Agent, accompanied by written notice to the
Corporation that the holder thereof elects to convert such share of Series _____
Preferred Stock. Unless the shares issuable on conversion are to be issued in
the same name as the name in which such share of Series _____ Preferred Stock is
registered, each share surrendered for conversion shall be accompanied by
instruments of transfer, in form satisfactory to the Corporation, duly executed
by the holder or such holder's duly authorized attorney and an amount sufficient
to pay any transfer or similar tax (or evidence reasonably satisfactory to the
Corporation demonstrating that such taxes have been paid).
Holders of shares of Series _____ Preferred Stock at the close of business
on a dividend payment record date shall be entitled to receive the dividend
payable on such shares on the corresponding Dividend Payment Date
notwithstanding the conversion thereof following such dividend payment record
date and prior to such Dividend Payment Date. Except as provided above, the
Corporation shall make no payment or allowance for unpaid dividends, whether or
not in arrears, on converted shares or for dividends on the shares of Common
Stock issued upon such conversion.
As promptly as practicable after the surrender of certificates for shares
of Series _____ Preferred Stock as aforesaid, the Corporation shall issue and
shall deliver at such office to such holder, or send on such holder's written
order, a certificate or certificates for the number of full shares of Common
Stock issuable upon the conversion of such shares of Series _____ Preferred
Stock in accordance with provisions of this Section 7, and any fractional
interest in respect of a share of Common Stock arising upon such conversion
shall be settled as provided in paragraph (c) of this Section 7.
Each conversion shall be deemed to have been effected immediately prior to
the close of business on the date on which the certificates for shares of Series
_____ Preferred Stock shall have been surrendered and such notice received by
the Corporation as aforesaid, and the person or persons in whose name or names
any certificate or certificates for shares of Common Stock shall be issuable
upon such conversion shall be deemed to have become the holder or holders of
record of the shares represented thereby at such time on such date and such
conversion shall be at the Conversion Price in effect at such time on such date
unless the stock transfer books of the Corporation shall be closed on that date,
in which event such person or persons shall be deemed to have become such holder
or holders of record at the close of business on the next succeeding day on
which such stock transfer books are open, but such conversion shall be at the
Conversion Price in effect on the date on which such shares shall have been
surrendered and such notice received by the Corporation. If the dividend payment
record date for the Series _____ Preferred Stock and Common Stock do not
coincide, and the preceding sentence does not operate to ensure that a holder of
shares of Series _____ Preferred Stock whose shares are converted into Common
Stock does not receive dividends on both the shares of Series _____ Preferred
Stock and the Common Stock into which such shares are converted for the same
Dividend Period, then notwithstanding anything herein to the contrary, it is the
intent, and the Transfer Agent is authorized to ensure that no conversion after
the earlier of such record dates will be accepted until after the latter of such
record dates.
(c) No fractional share of Common Stock or scrip representing fractions of
a share of Common Stock shall be issued upon conversion of the shares of Series
_____ Preferred Stock. Instead of any fractional interest in a share of Common
Stock that would otherwise be deliverable upon the conversion of shares of
Series _____ Preferred Stock, the Corporation shall pay to the holder of such
share an amount in cash based upon the Current Market Price of the Common Stock
on the Trading Day immediately preceding the date of conversion. If more than
one share shall be surrendered for conversion at one time by the same holder,
the number of full shares of Common Stock issuable upon conversion thereof shall
be computed on the basis of the aggregate number of shares of Series _____
Preferred Stock so surrendered.
(d) The Conversion Price shall be adjusted from time to time as follows:
(i) If the Corporation shall after the Issue Date (A) pay a dividend or
make a distribution on its capital stock in shares of Common Stock, (B)
subdivide its outstanding Common Stock into a greater number of shares,
(C) combine its outstanding Common Stock into a smaller number of shares or (D)
issue any shares of capital stock by reclassification of its Common Stock, the
Conversion Price in effect at the opening of business on the day following the
date fixed for the determination of stockholders entitled to receive such
dividend or distribution or at the opening of business on the day following the
day on which such subdivision, combination or reclassification becomes
effective, as the case may be, shall be adjusted so that the holder of any share
of Series _____ Preferred Stock thereafter surrendered for conversion shall be
entitled to receive the number of shares of Common Stock (or fraction of a share
of Common Stock) that such holder would have owned or have been entitled to
receive after the happening of any of the events described above had such share
of Series _____ Preferred Stock been converted immediately prior to the record
date in the case of a dividend or distribution or the effective date in the case
of a subdivision, combination or reclassification. An adjustment made pursuant
to this paragraph (d)(i) of this Section 7 shall become effective immediately
after the opening of business on the day next following the record date (except
as provided in paragraph (h) below) in the case of a dividend or distribution
and shall become effective immediately after the opening of business on the day
next following the effective date in the case of a subdivision, combination or
reclassification.
(ii) If the Corporation shall issue after the Issue Date rights, options or
warrants to all holders of Common Stock entitling them (for a period expiring
within 45 days after the record date described below in this paragraph (d)(ii)
of this Section 7) to subscribe for or purchase Common Stock at a price per
share less than the Fair Market Value per share of the Common Stock on the
record date for the determination of stockholders entitled to receive such
rights or warrants, then the Conversion Price in effect at the opening of
business on the day next following such record date shall be adjusted to equal
the price determined by multiplying (A) the Conversion Price in effect
immediately prior to the opening of business on the day following the date fixed
for such determination by (B) a fraction, the numerator of which shall be the
sum of (X) the number of shares of Common Stock outstanding on the close of
business on the date fixed for such determination and (Y) the number of shares
that the aggregate proceeds to the Corporation from the exercise of such rights
or warrants for Common Stock would purchase at such Fair Market Value, and the
denominator of which shall be the sum of (XX) the number of shares of Common
Stock outstanding on the close of business on the date fixed for such
determination and (YY) the number of additional shares of Common Stock offered
for subscription or purchase pursuant to such rights or warrants. Such
adjustment shall become effective immediately after the opening of business on
the day next following such record date (except as provided in paragraph (h)
below). In determining whether any rights or warrants entitle the holders of
Common Stock to subscribe for or purchase Common Stock at less than such Fair
Market Value, there shall be taken into account any consideration received by
the Corporation upon issuance and upon exercise of such rights or warrants, the
value of such consideration, if other than cash, to be determined in good faith
by the Board of Directors.
(iii) No adjustment in the Conversion Price shall be required unless such
adjustment would require a cumulative increase or decrease of at least 1% in
such price; provided, however, that any adjustments that by reason of this
paragraph (d)(iii) are not required to be made shall be carried forward and
taken into account in any subsequent adjustment until made; and provided,
further, that any adjustment shall be required and made in accordance with the
provisions of this Section 7 (other than this paragraph (d)(iii)) not later than
such time as may be required in order to preserve the tax-free nature of a
distribution to the holders of shares of Common Stock. Notwithstanding any other
provisions of this Section 7, the Corporation shall not be required to make any
adjustment of the Conversion Price for the issuance of any shares of Common
Stock pursuant to any plan providing for the reinvestment of dividends or
interest payable on securities of the Corporation and the investment of
additional optional amounts in shares of Common Stock under such plan. All
calculations under this Section 7 shall be made to the nearest cent (with $.005
being rounded upward) or to the nearest one-tenth of a share (with .05 of a
share being rounded upward), as the case may be. Anything in this paragraph (d)
of this Section 7 to the contrary notwithstanding, the Corporation shall be
entitled, to the extent permitted by law, to make such reductions in the
Conversion Price, in addition to those required by this paragraph (d), as it in
its discretion shall determine to be advisable in order that any stock
dividends, subdivision of shares, reclassification or combination of shares,
distribution of rights or warrants to purchase stock or securities, or a
distribution of other assets (other than cash dividends) hereafter made by the
Corporation to its stockholders shall not be taxable, or if that is not
possible, to diminish any income taxes that are otherwise payable because of
such event.
(e) If the Corporation shall be a party to any transaction (including
without limitation a merger, consolidation, statutory share exchange, issuer or
self tender offer for all or a substantial portion of the shares of Common Stock
outstanding, sale of all or substantially all of the Corporation's assets or
recapitalization of the Common Stock, but excluding any transaction as to which
paragraph (d)(i) of this Section 7 applies) (each of the foregoing being
referred to herein as a "Transaction"), in each case as a result of which shares
of Common Stock shall be converted into the right to receive stock, securities
or other property (including cash or any combination thereof), each share of
Series _____ Preferred Stock which is not converted into the right to receive
stock, securities or other property in connection with such Transaction shall
thereupon be convertible into the kind and amount of shares of stock, securities
and other property (including cash or any combination thereof) receivable upon
such consummation by a holder of that number of shares of Common Stock into
which one share of Series _____ Preferred Stock was convertible immediately
prior to such Transaction. The Corporation shall not be a party to any
Transaction unless the terms of such Transaction are consistent with the
provisions of this paragraph (e), and it shall not consent or agree to the
occurrence of any Transaction until the Corporation has entered into an
agreement with the successor or purchasing entity, as the case may be, for the
benefit of the holders of the Series _____ Preferred Stock that will contain
provisions enabling the holders of the Series _____ Preferred Stock that remain
outstanding after such Transaction to convert into the consideration received by
holders of Common Stock at the Conversion Price in effect immediately prior to
such Transaction. The provisions of this paragraph (e) shall similarly apply to
successive Transactions.
(f) If:
(i) the Corporation shall declare a dividend (or any other distribution) on
the Common Stock (other than cash dividends and cash distributions); or
(ii) the Corporation shall authorize the granting to all holders of the
Common Stock of rights or warrants to subscribe for or purchase any shares of
any class or series of capital stock or any other rights or warrants; or
(iii) there shall be any reclassification of the Common Stock or any
consolidation or merger to which the Corporation is a party and for which
approval of any stockholders of the Corporation is required, or a statutory
share exchange, or an issuer or self tender offer by the Corporation for all or
a substantial portion of its outstanding shares of Common Stock (or an amendment
thereto changing the maximum number of shares sought or the amount or type of
consideration being offered therefor) or the sale or transfer of all or
substantially all of the assets of the Corporation as an entirety; or
(iv) there shall occur the voluntary or involuntary liquidation,
dissolution or winding up of the Corporation,
then the Corporation shall cause to be filed with the Transfer Agent and
shall cause to be mailed to each holder of shares of Series _____ Preferred
Stock at such holder's address as shown on the stock records of the Corporation,
as promptly as possible, but at least 15 days prior to the applicable date
hereinafter specified, a notice stating (A) the record date for the payment of
such dividend, distribution or rights or warrants, or, if a record date is not
established, the date as of which the holders of Common Stock of record to be
entitled to such dividend, distribution or rights or warrants are to be
determined or (B) the date on which such reclassification, consolidation,
merger, statutory share exchange, sale, transfer, liquidation, dissolution or
winding up is expected to become effective, and the date as of which it is
expected that holders of Common Stock of record shall be entitled to exchange
their shares of Common Stock for securities or other property, if any,
deliverable upon such reclassification, consolidation, merger, statutory share
exchange, sale, transfer, liquidation, dissolution or winding up or (C) the date
on which such tender offer commenced, the date on which such tender offer is
scheduled to expire unless extended, the consideration offered and the other
material terms thereof (or the material terms of any amendment thereto). Failure
to give or receive such notice or any defect therein shall not affect the
legality or validity of the proceedings described in this Section 7.
(g) Whenever the Conversion Price is adjusted as herein provided, the
Corporation shall promptly file with the Transfer Agent an officer's certificate
setting forth the Conversion Price after such adjustment and setting forth a
brief statement of the facts requiring such adjustment which certificate shall
be conclusive evidence of the correctness of such adjustment absent manifest
error. Promptly after delivery of such certificate, the Corporation shall
prepare a notice of such adjustment of the Conversion Price setting forth the
adjusted Conversion Price and the effective date such adjustment becomes
effective and shall mail such notice of such adjustment of the Conversion Price
to each holder of shares of Series _____ Preferred Stock at such holder's last
address as shown on the stock records of the Corporation.
(h) In any case in which paragraph (d) of this Section 7 provides that an
adjustment shall become effective on the day next following the record date for
an event, the Corporation may defer until the occurrence of such event (A)
issuing to the holder of any share of Series _____ Preferred Stock converted
after such record date and before the occurrence of such event the additional
Common Stock issuable upon such conversion by reason of the adjustment required
by such event over and above the Common Stock issuable upon such conversion
before giving effect to such adjustment and (B) paying to such holder any amount
of cash in lieu of any fraction pursuant to paragraph (c) of this Section 7.
(i) There shall be no adjustment of the Conversion Price in case of the
issuance of any capital stock of the Corporation in a reorganization,
acquisition or other similar transaction except as specifically set forth in
this Section 7.
(j) If the Corporation shall take any action affecting the Common Stock,
other than action described in this Section 7, that in the opinion of the Board
of Directors would materially adversely affect the conversion rights of the
holders of Series _____ Preferred Stock, the Conversion Price for the Series
_____ Preferred Stock may be adjusted, to the extent permitted by law, in such
manner, if any, and at such time as the Board of Directors, in its sole
discretion, may determine to be equitable under the circumstances.
(k) The Corporation shall at all times reserve and keep available, free
from preemptive rights, out of the aggregate of its authorized but unissued
Common Stock solely for the purpose of effecting conversion of the Series _____
Preferred Stock, the full number of shares of Common Stock deliverable upon the
conversion of all outstanding shares of Series _____ Preferred Stock not
theretofore converted into Common Stock. For purposes of this paragraph (k), the
number of shares of Common Stock that shall be deliverable upon the conversion
of all outstanding shares of Series _____ Preferred Stock shall be computed as
if at the time of computation all such outstanding shares were held by a single
holder.
The Corporation covenants that any shares of Common Stock issued upon
conversion of the shares of Series _____ Preferred Stock shall be validly
issued, fully paid and non-assessable.
(l) The Corporation will pay any and all documentary stamp or similar issue
or transfer taxes payable in respect of the issue or delivery of shares of
Common Stock or other securities or property on conversion or redemption of
shares of Series _____ Preferred Stock pursuant hereto; provided, however, that
the Corporation shall not be required to pay any tax that may be payable in
respect of any transfer involved in the issue or delivery of shares of Common
Stock or other securities or property in a name other than that of the holder of
the shares of Series _____ Preferred Stock to be converted or redeemed, and no
such issue or delivery shall be made unless and until the person requesting such
issue or delivery has paid to the Corporation the amount of any such tax or
established, to the reasonable satisfaction of the Corporation, that such tax
has been paid.
Section 8. Ranking. Any class or series of capital stock of the Corporation
shall be deemed to rank:
(a) prior or senior to the Series _____ Preferred Stock, as to the payment
of dividends and as to distribution of assets upon liquidation, dissolution or
winding up, if the holders of such class or series shall be entitled to the
receipt of dividends or of amounts distributable upon liquidation, dissolution
or winding up, as the case may be, in preference or priority to the holders of
Series _____ Preferred Stock;
(b) on a parity with the Series _____ Preferred Stock, as to the payment of
dividends and as to distribution of assets upon liquidation, dissolution or
winding up, whether or not the dividend rates, dividend payment dates or
redemption or liquidation prices per share thereof be different from those of
the Series _____ Preferred Stock, if the holders of such class of stock or
series and the Series _____ Preferred Stock shall be entitled to the receipt of
dividends and of amounts distributable upon liquidation, dissolution or winding
up in proportion to their respective amounts of accrued and unpaid dividends per
share or liquidation preferences, without preference or priority one over the
other ("Parity Stock"); and
(c) junior to the Series _____ Preferred Stock, as to the payment of
dividends or as to the distribution of assets upon liquidation, dissolution or
winding up, if such stock or series shall be Common Stock or if the holders of
Series _____ Preferred Stock shall be entitled to receipt of dividends or of
amounts distributable upon liquidation, dissolution or winding up, as the case
may be, in preference or priority to the holders of shares of such class or
series ("Junior Stock").
Section 9. Record Holders. The Corporation and the Transfer Agent may deem
and treat the record holder of any share of Series _____ Preferred Stock as the
true and lawful owner thereof for all purposes, and neither the Corporation nor
the Transfer Agent shall be affected by any notice to the contrary.
Exhibit 3.2
SENIOR NOTE AGREEMENT dated as of June 9, 1998,
between AUTOBOND ACCEPTANCE
CORPORATION, a Texas corporation (the "Company"),
and DYNEX CAPITAL, INC., as Agent (the "Agent").
The Company has duly authorized the execution and delivery of this
Agreement to provide for the creation of an issue of its 12% Convertible Senior
Notes Due 2003 (the "Securities"), of substantially the tenor and amount
hereinafter set forth, and to provide therefor the Company has duly authorized
the execution and delivery of this Agreement.
Each party agrees as follows for the benefit of the other party and for the
equal and ratable benefit of the Holders of the Securities:
ARTICLE 1.
Definitions and Incorporation by Reference
SECTION 1.1 Definitions
"Affiliate" of any specified Person means any other Person, directly or
indirectly, controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as used with respect to any Person, shall mean
the possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person, whether through the
ownership of voting securities, by agreement or otherwise; provided that
beneficial ownership of 51% or more of the voting securities of a Person shall
be deemed to be control.
"Agent" means the party named as such in this Agreement until a successor
replaces it and, thereafter, means the successor.
"Agreement" means this Agreement as amended or supplemented from time to
time.
"Asset Disposition" means any sale, lease, transfer or other disposition
(or series of related sales, leases, transfers or dispositions) of assets (of
any kind, nature, or description) by the Company or any Subsidiary, including
any disposition by means of a merger, consolidation or similar transaction.
"Associate" of any Person, means (1) any corporation or organization (other
than the Company or a Subsidiary of the Company) of which such Person is an
officer, employee or partner or is, directly or indirectly, the beneficial owner
of 10% or more of any class of equity securities, (2) any trust or other estate
in which such Person has a substantial beneficial interest or as to which such
Person serves as agent or in a similar fiduciary capacity, and (3) any relative
or spouse of such Person, or any relative of such spouse, who has the same home
as such Person or who is a director or officer of the Company or any of its
Affiliates.
"Average Life" means, as of the date of determination, with respect to any
Indebtedness or Preferred Stock, the quotient obtained by dividing (i) the sum
of the products of numbers of years from the date of determination to the dates
of each successive scheduled principal payment of such Indebtedness or
redemption or similar payment with respect to such Preferred Stock multiplied by
the amount of such payment by (ii) the sum of all such payments.
"Board of Directors" means the Board of Directors of the Company or any
committee thereof duly authorized to act on behalf of such Board.
"Business Day" means each day which is not a Legal Holiday.
"Capital Lease Obligations" means an obligation that is required to be
classified and accounted for as a capital lease for financial reporting purposes
in accordance with GAAP, and the amount of Indebtedness represented by such
obligation shall be the capitalized amount of such obligation determined in
accordance with GAAP; and the Stated Maturity thereof shall be the date of the
last payment of rent or any other amount due under such lease prior to the first
date upon which such lease may be terminated by the lessee without payment of a
penalty.
"Capital Stock" of any Person means, (i) in the case of a corporation,
corporate stock, (ii) in the case of an association, trust or business entity,
any and all shares, interests, participations, rights or other equivalents
(however designated) of corporate stock, (iii) in the case of a partnership,
partnership interests (whether general or limited) and (iv) any other interest
or participation that confers on a Person the right to receive a share of the
profits and losses of, or distributions of assets of, the issuing Person.
"Change of Control" means the occurrence of any of the following: (i) the
sale, lease, transfer, conveyance or other disposition, in one or a series of
related transactions, of all or substantially all of the assets of the Company
to any Person, (ii) the adoption of a plan relating to the liquidation or
dissolution of the Company, or (iii) the acquisition by any Person, together
with any Affiliates or Associates of a direct or indirect interest in more than
51% of the voting power of the voting stock of the Company, by way of merger or
consolidation or otherwise.
"Code" means the Internal Revenue Code of 1986, as amended.
"Common Stock" means any stock of any class of the Company which has no
preference in respect of dividends or of amounts payable in the event of any
voluntary or involuntary liquidation, dissolution or winding up of the Company
and which is not subject to redemption by the Company. However, subject to the
provisions of Section 8.11, shares issuable on conversion of Securities shall
include only shares of the class designated as Common Stock of the Company at
the date of this instrument (or, at the option of the Holder, non-voting Common
Stock) or shares of any class or classes resulting from any reclassification or
reclassifications thereof and which have no preference in respect of dividends
or of amounts payable in the event of any voluntary or involuntary liquidation,
dissolution or winding up of the Company and which are not subject to redemption
by the Company; provided that if any time there shall be more than one such
resulting class, the shares of each such class then so issuable shall be
substantially in the proportion which the total number of shares of such class
resulting from all such reclassifications bears to the total number of shares of
all such classes resulting from all such reclassifications.
"Company" means the party named as such in this Agreement until a successor
replaces it and, thereafter, means the successor.
"Consolidated Restricted Subsidiary" means a Restricted Subsidiary (i) 80%
of the Capital Stock and 80% of the Voting Stock of which is owned by the
Company or one or more Consolidated Restricted Subsidiaries and (ii) which is
treated as a consolidated subsidiary for the purpose of the Company's U.S.
Federal income tax reporting.
"Current Market Price" shall have the meaning specified in Section 8.04(6).
"Currency Agreement" means in respect of a Person any foreign exchange
contract, currency option, currency swap agreement or other similar agreement to
which such Person is a party or a beneficiary.
"Default" means any event which is, or after notice or passage of time or
both would be, an Event of Default.
"Excess Spread" means, over the life of a "pool" of Receivables that have
been sold by a Person to a trust or other Person in a securitization or sale,
the rights retained by such Person or its Restricted Subsidiaries at or
subsequent to the closing of such securitization or sale to receive cash flows
attributable to such "pool."
"Excess Spread Receivables" of a Person means the contractual or
certificated right to Excess Spread capitalized on such Person's consolidated
balance sheet (the amount of which shall be the present value of the Excess
Spread, calculated in accordance with GAAP).
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"GAAP" means generally accepted accounting principles in the United States
of America as in effect from time to time, as set forth (i) in the opinions and
pronouncements of the Accounting Principles Board of the American Institute of
Certified Public Accountants, (ii) in the statements and pronouncements of the
Financial Accounting Standards Board and (iii) in such other statements by such
other entity as approved by a significant segment of the accounting profession.
"Guarantee" means any obligation, contingent or otherwise, of any Person
directly or indirectly guaranteeing any Indebtedness or other obligation of any
Person; provided, however, that the term "Guarantee" shall not include
endorsements for collection or deposit in the ordinary course of business.
"Hedging Obligations" of any Person means the obligations of such Person
pursuant to any Interest Rate Agreement.
"Holder" or "Securityholder" means the Person in whose name a Security is
registered on the Registrar's books; initially, the Agent.
"Indebtedness" means, with respect to any Person on any date of
determination (without duplication), (i) the principal of and premium (if any)
in respect of (A) indebtedness of such Person for money borrowed and (B)
indebtedness evidenced by notes, debentures, bonds or other similar instruments
for the payment of which such Person is responsible or liable; (ii) all Capital
Lease Obligations of such Person; (iii) all obligations of such Person issued or
assumed as the deferred purchase price of property, all conditional sale
obligations of such Person and all obligations of such Person under any title
retention agreement (but excluding trade accounts payable and expense accruals
arising in the ordinary course of business); (iv) all obligations of such Person
for the reimbursement of any obligor on any letter of credit, banker's
acceptance or similar credit transaction (other than obligations with respect to
letters of credit securing obligations (other than obligations described in (i)
through (iii) above) entered into in the ordinary course of business of such
Person to the extent such letters of credit are not drawn upon or, if and to the
extent drawn upon, such drawing is reimbursed no later than the tenth Business
Day following receipt by such Person of a demand for reimbursement following
payment on the letter of credit); (v) accrued net liabilities under Hedging
Obligations; (vi) Warehouse Indebtedness; (vii) in connection with each sale by
such Person of any Receivables, the maximum aggregate contractual claim (if any)
that the purchaser thereof could have against such Person if the amounts
anticipated at the time of such sale to be received by such purchaser in
connection with such Receivables are not received by such purchaser; (viii) all
obligations of the type referred to in clauses (i) through (vii) of other
Persons and all dividends of other Persons for the payment of which, in either
case, such Person is responsible or liable, directly or indirectly, as obligor,
guarantor or otherwise, including by means of any Guarantee; and (ix) all
obligations of the type referred to in clauses (i) through (viii) of other
Persons secured by any Lien on any property or asset of such Person (whether or
not such obligation is assumed by such Person), the amount of such obligation
being deemed to be the lesser of the value of such property or assets or the
amount of the obligation so secured. The amount of Indebtedness of any Person at
any date shall be the outstanding balance at such date of all unconditional
obligations as described above and the maximum liability, upon the occurrence of
the contingency giving rise to the obligation, of any contingent obligations at
such date. Notwithstanding the foregoing, any securities issued in a
securitization by a special purpose corporation (including a Subsidiary) or
similar entity formed by or on behalf of a Person and to which Receivables or
Excess Spread Receivables have been sold or otherwise transferred by or on
behalf of such Person or its Subsidiaries shall not be treated as Indebtedness
of such Person or its Subsidiaries under this Agreement, regardless of whether
such securities are treated as indebtedness for tax purposes.
"Initial Purchaser" means Dynex Capital, Inc., a Virginia corporation.
"interest," when used with respect to any Security, means the amount of all
interest accruing on such Security.
"Interest Rate Agreement" means any interest rate swap agreement, interest
rate cap agreement, repurchase agreement, futures contract or other financial
agreement or arrangement designed to protect the Company or any Restricted
Subsidiary against fluctuations in interest rates.
"Issue Date" means the date on which the Securities are originally issued.
"Lien" means any mortgage, pledge, security interest, encumbrance, lien or
charge of any kind (including any conditional sale or other title retention
agreement or lease in the nature thereof).
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"Officer" means the Chairman of the Board, the Vice Chairman, the
President, the Chief Financial Officer, or the Secretary of the Company.
"Officers' Certificate" means a certificate signed by two Officers.
"Opinion of Counsel" means a written opinion from legal counsel who is
acceptable to the Agent. The counsel may be an employee of or counsel to the
Company or the Agent.
"Person" means any individual, corporation, partnership, joint venture,
association, joint-stock company, limited liability company, trust,
unincorporated organization, government or any agency or political subdivision
thereof or any other entity.
"Preferred Stock", as applied to the Capital Stock of any Person, means
Capital Stock of any class or classes (however designated) which is preferred as
to the payment of dividends, or as to the distribution of assets upon any
voluntary or involuntary liquidation or dissolution of such Person, over shares
of Capital Stock of any other class of such Person.
"Qualified Institutional Buyer" or "QIB" shall have the meaning specified
in Rule 144A under the Securities Act.
"Receivables" means consumer loans, leases and receivables acquired by the
Company, any Restricted Subsidiary or a Strategic Alliance Client in the
ordinary course of business; provided, however, that for purposes of determining
the amount of a Receivable at any time, such amount shall be determined in
accordance with GAAP, consistently applied, as of the most recent practicable
date.
"Refinance" means, in respect of any Indebtedness, to refinance, extend,
renew, refund, repay, prepay, redeem, defease or retire, or to issue other
Indebtedness in exchange or replacement for, such Indebtedness. "Refinanced" and
"Refinancing" shall have correlative meanings.
"Refinancing Indebtedness" means Indebtedness incurred by the Company or
any Restricted Subsidiary that Refinances any Indebtedness of the Company or
such Restricted Subsidiary existing on the Issue Date or incurred in compliance
with this Agreement, including Indebtedness that Refinances Refinancing
Indebtedness; provided, however, that (a) such Refinancing Indebtedness has an
aggregate principal amount (or if incurred with original issue discount, an
aggregate issue price) that is equal to or less than the aggregate principal
amount (or if Incurred with original issue discount, the aggregate accreted
value) then outstanding or committed (plus fees and expenses, including any
premium and defeasance costs) under the Indebtedness being Refinanced, (b) such
Refinancing Indebtedness has a final maturity date later than the final maturity
date of, and has a weighted Average Life equal to or greater than the weighted
Average Life of, such Refinancing Indebtedness and (c) if the Indebtedness being
extended, refinanced, renewed, replaced, defeased or refunded is subordinated in
right of payment of the Securities, such Refinancing Indebtedness is
subordinated in right of payment to the Securities on terms at least as
favorable to the Holders of Securities as those contained in the documentation
governing the Indebtedness being extended, refinanced, renewed, replaced,
defeased or refunded.
"Related Business" means any consumer finance business or any consumer
financial services business.
"Restricted Payment" with respect to any Person means (i) the declaration
or payment of any dividends or any other distributions of any sort in respect of
its Capital Stock (including any payment in connection with any merger or
consolidation involving such Person) or similar payment to the direct or
indirect holders of its Capital Stock (other than (A) dividends or distributions
payable solely in its Capital Stock, (B) dividends or distributions payable
solely to the Company or a Restricted Subsidiary, (C) so long as no Event of
Default has occurred and is continuing, dividends or distributions on the
Company's 15% Series A Cumulative Preferred Stock, and (D) pro rata dividends or
other distributions made by a Subsidiary that is not a Wholly Owned Subsidiary
to minority stockholders (or owners of an equivalent interest in the case of a
Subsidiary that is an entity other than a corporation)), (ii) the purchase,
redemption or other acquisition or retirement for value of any Capital Stock of
the Company held by any Person or of any Capital Stock of a Restricted
Subsidiary held by any Affiliate of the Company (other than a Restricted
Subsidiary), including the exercise of any option to exchange any Capital Stock
(other than into Capital Stock of the Company) or (iii) any payments due on
Subordinated Obligations, or the purchase, repurchase, redemption, defeasance or
other acquisition or retirement for value, prior to scheduled maturity,
scheduled repayment or scheduled sinking fund payment of any Subordinated
Obligations (other than the purchase, repurchase or other acquisition of
Subordinated Obligations purchased in anticipation of satisfying a sinking fund
obligation, principal installment or final maturity, in each case due within one
year of the date of acquisition).
"Restricted Subsidiary" means any Subsidiary of the Company that is not an
Unrestricted Subsidiary.
"Rule 144A" means Rule 144A under the Securities Act.
"SEC" means the Securities and Exchange Commission.
"Securities" has the meaning stated in the first recital of this Agreement.
"Securities Act" means the Securities Act of 1933.
"Significant Subsidiary" means any Restricted Subsidiary that would be a
"Significant Subsidiary" of the Company within the meaning of Rule 1-02 under
Regulation S-X promulgated by the SEC.
"Stated Maturity" means, with respect to any obligation, the date specified
in such security as the fixed date on which the final payment of principal of
such obligation is due and payable, including pursuant to any mandatory
redemption provision (but excluding any provision providing for the repurchase
of such obligation at the option of the holder thereof upon the happening of any
contingency unless such contingency has occurred).
"Strategic Alliance Client" means any Person (other than a Restricted
Subsidiary) engaged in a Related Business to which the Company provides, or
reasonably expects to provide, origination, servicing, financing or asset
securitization expertise.
"Subordinated Obligation" means any Indebtedness of the Company (whether
outstanding on the Issue Date or thereafter incurred) which is pari passu,
subordinate or junior in right of payment to the Securities pursuant to a
written agreement to that effect.
"Subsidiary" means, in respect of any Person, any corporation, association,
partnership or other business entity of which more than 50% of the total voting
power of shares of Capital Stock or other interests (including partnership
interests) entitled (without regard to the occurrence of any contingency) to
vote in the election of directors, managers or agents thereof is at the time
owned or controlled, directly or indirectly, by (i) such Person, (ii) such
Person and one or more Subsidiaries of such Person or (iii) one or more
Subsidiaries of such Person.
"Uniform Commercial Code" means the Texas Uniform Commercial Code as in
effect from time to time.
"Unrestricted Subsidiary" means (i) any Subsidiary of the Company that at
the time of determination shall be designated an Unrestricted Subsidiary by the
Board of Directors in the manner provided below and (ii) any Subsidiary of an
Unrestricted Subsidiary. The Board of Directors may designate any Subsidiary of
the Company (including any newly acquired or newly formed Subsidiary) to be an
Unrestricted Subsidiary, but only so long as such Subsidiary (a) has no
Indebtedness other than Non-Recourse Debt, (b) is not party to any agreement,
contract, arrangement or understanding with the Company or any Restricted
Subsidiary of the Company unless the terms of any such agreement, contract,
arrangement or understanding are no less favorable to the Company or such
Restricted Subsidiary than those that might be obtained at the time from Persons
who are not Affiliates of the Company, (c) is a person with respect to which
neither the Company nor any of its Restricted Subsidiaries has any direct or
indirect obligation (i) to subscribe for additional equity or (ii) to maintain
or preserve such Person's financial condition or to cause such Person to achieve
any specified levels of operating results, and (d) has not guaranteed or
otherwise directly or indirectly provided credit support for any Indebtedness of
the Company or any of its Restricted Subsidiaries. Any such designation by the
Board of Directors shall be evidenced by the Company to the Agent by promptly
filing with the Agent a copy of the board resolution giving effect to such
designation and an Officers' Certificate certifying that such designation
complied with the foregoing provisions.
"U.S. Government Obligations" means direct obligations (or certificates
representing an ownership interest in such obligations) of the United States of
America (including any agency or instrumentality thereof) for the payment of
which the full faith and credit of the United States of America is pledged and
which are not callable at the issuer's option.
"Voting Stock" of a Person means all classes of Capital Stock or other
interests (including partnership interests or membership interests) of such
Person then outstanding and normally entitled (without regard to the occurrence
of any contingency) to vote in the election of directors, managers or agents
thereof.
"Warehouse Facility" means any funding arrangement with a financial
institution or other lender or purchaser exclusively to finance the acquisition
of Receivables by the Company, a Subsidiary of the Company or a Strategic
Alliance Client for the purpose of pooling such Receivables prior to
securitization or sale in the ordinary course of business, including purchase
and sale facilities pursuant to which the Company or a Subsidiary of the Company
sells Receivables or debt of a Strategic Alliance Client secured by Receivables
owned or financed by such Strategic Alliance Client to a financial institution
and retains a right of first refusal upon the subsequent resale of such
Receivables or debt by such financial institution.
"Warehouse Indebtedness" means advances outstanding to the borrower under a
Warehouse Facility.
"Wholly Owned Subsidiary" means a Restricted Subsidiary all the Capital
Stock of which (other than directors' qualifying shares and shares held by other
Persons to the extent such shares are required by applicable law to be held by a
Person other than the Company or a Restricted Subsidiary) is owned by the
Company or one or more Wholly Owned Subsidiaries.
SECTION 1.2 Other Definitions Defined in Term Section
"Bankruptcy Law".............................. 5.01
"Custodian"................................... 5.01
"Event of Default"............................ 5.01
"Legal Holiday"............................... 11.05
"Registrar"................................... 2.03
"Successor Company"........................... 4.01
SECTION 1.3 Rules of Construction. Unless the context otherwise requires:
(a) a term has the meaning assigned to it;
(b) an accounting term not otherwise defined has the meaning assigned to it
in accordance with GAAP;
(c) "or" is not exclusive;
(d) "including" means including without limitation;
(e) words in the singular include the plural and words in the plural
include the singular;
(f) unsecured Indebtedness shall not be deemed to be subordinate or junior
to Secured Indebtedness merely by virtue of its nature as unsecured
Indebtedness;
(g) the principal amount of any noninterest bearing or other discount
security at any date shall be the principal amount thereof that would be shown
on a balance sheet of the issuer dated such date prepared in accordance with
GAAP and accretion of principal on such security shall be deemed to be the
incurrence of Indebtedness; and
(h) the principal amount of any Preferred Stock shall be (i) the maximum
liquidation value of such Preferred Stock or (ii) the maximum mandatory
redemption or mandatory repurchase price with respect to such Preferred Stock,
whichever is greater.
ARTICLE 2.
The Securities
SECTION 2.1 Form and Dating The Securities shall be substantially in the
form of Exhibit A which is hereby incorporated in and expressly made a part of
this Agreement. In addition, the Securities may be evidenced by a combined
certificate. The Securities may have notations, legends or endorsements required
by law, stock exchange rule, agreements to which the Company is subject, if any,
or usage (provided that any such notation, legend or endorsement is in a form
acceptable to the Company and the Agent). Each Security shall be dated the date
of its issuance. The terms of the Securities set forth in Exhibit A are part of
the terms of this Agreement.
SECTION 2.2 Execution. Any Officer may sign the Securities for the Company
by manual signature.
The aggregate principal amount of the Securities outstanding at any time
may not exceed $3,000,000.00, in each case except as provided in Section 2.07.
SECTION 2.3 Registrar and Paying Agent. The Company shall maintain an
office or agency where Securities may be presented for registration of transfer
or for exchange (the "Registrar") and an office or agency where Securities may
be presented for payment (the "Paying Agent"). The Registrar shall keep a
register of the Securities and of their transfer and exchange. The Company may
have one or more co-registrars and one or more additional paying agents. The
term "Paying Agent" includes any additional paying agent.
The Company shall enter into an appropriate agency agreement with any
Registrar, Paying Agent or co-registrar not a party to this Agreement. The
agreement shall implement the provisions of this Agreement that relate to such
agent. The Company shall notify the Agent of the name and address of any such
agent. If the Company fails to maintain a Registrar or Paying Agent, the Agent
shall act as such and shall be entitled to appropriate compensation therefor
pursuant to Section 6.07. The Company may act as Paying Agent, Registrar,
co-registrar or transfer agent.
The Company initially will act as Paying Agent and Registrar in connection
with the Securities.
SECTION 2.4 Paying Agent. By 11:00 a.m., Texas on each due date of the
principal and interest on any Security, the Company shall deposit with the
Paying Agent a sum sufficient to pay such principal and interest when so
becoming due. The Company shall require each Paying Agent (other than the Agent)
to agree in writing that the Paying Agent shall hold in trust for the benefit of
Securityholders all money held by the Paying Agent for the payment of principal
of or interest on the Securities and shall notify the Agent of any default by
the Company in making any such payment. The Paying Agent shall make payments to
Holders in immediately available funds when due. The Company at any time may
require a Paying Agent to pay all money held by it to the Agent and to account
for any funds disbursed by the Paying Agent. Upon complying with this Section,
the Paying Agent shall have no further liability for the money paid to the
Agent.
SECTION 2.5 Securityholder Lists. The Agent shall preserve in as current a
form as is reasonably practicable the most recent list available to it of the
names and addresses of Securityholders. If the Agent is not the Registrar, the
Company shall furnish to the Agent, in writing at least five Business Days
before each interest payment date and at such other times as the Agent may
request in writing, a list in such form and as of such date as the Agent may
reasonably require of the names and addresses of Securityholders.
SECTION 2.6 Transfer and Exchange. The Securities shall be issued in
registered form and shall be transferable only upon the surrender of a Security
for registration of transfer. Subject to the restrictions on transfer set forth
in Section 2.12, when a Security is presented to the Registrar or a co-registrar
with a request to register a transfer, the Registrar shall register the transfer
as requested if the requirements of the Uniform Commercial Code are met. To
permit registration of transfers and exchanges, the Company shall execute
Securities at the Registrar's or co-registrar's request. The Company may require
payment of a sum sufficient to pay all taxes, assessments or other governmental
charges in connection with any transfer or exchange pursuant to this Section.
The Company shall not be required to make and the Registrar need not register
transfers or exchanges of Securities for a period of 15 days before an interest
payment date.
Prior to the due presentation for registration of transfer of any Security,
the Company, the Agent, the Paying Agent, the Registrar or any co-registrar may
deem and treat the person in whose name a Security is registered as the absolute
owner of such Security for the purpose of receiving payment of principal of and
interest on such Security and for all other purposes whatsoever, whether or not
such Security is overdue, and none of the Company, the Agent, the Paying Agent,
the Registrar or any co-registrar shall be affected by notice to the contrary.
SECTION 2.7 Replacement Securities. If a mutilated Security is surrendered
to the Registrar or if the Holder of a Security claims that the Security has
been lost, destroyed or wrongfully taken, the Company shall issue a replacement
Security if the requirements of the Uniform Commercial Code are met and the
Holder satisfies any other reasonable requirements of the Agent. If required by
the Agent or the Company, such Holder shall furnish an indemnity agreement
sufficient in the reasonable judgment of the Company and the Agent to protect
the Company, the Agent, the Paying Agent, the Registrar and any co-registrar
from any loss which any of them may suffer if a Security is replaced. The
Company and the Agent may charge the Holder for their expenses in replacing a
Security.
SECTION 2.8 Outstanding Securities. Securities outstanding at any time are
all Securities executed by the Company except for those delivered to it for
cancellation and those described in this Section as not outstanding. A Security
does not cease to be outstanding because the Company or an Affiliate of the
Company holds the Security.
If a Security is replaced pursuant to Section 2.07, it ceases to be
outstanding unless the Agent and the Company receive proof satisfactory to them
that the replaced Security is held by a bona fide purchaser.
SECTION 2.9 Temporary Securities. Until definitive Securities are ready for
delivery, the Company may prepare temporary Securities. Temporary Securities
shall be substantially in the form of definitive Securities but may have
variations that the Company reasonably considers appropriate for temporary
Securities. Without unreasonable delay, the Company shall prepare definitive
Securities and deliver them in exchange for temporary Securities.
SECTION 2.10 Cancellation. The Company at any time may deliver Securities
to the Agent for cancellation. The Registrar and the Paying Agent shall forward
to the Agent any Securities surrendered to them for registration of transfer,
exchange or payment. The Agent and no one else shall cancel and destroy all
Securities surrendered for registration of transfer, exchange, replacement in
the event of a mutilated security, payment or cancellation and deliver a
certificate of such destruction to the Company unless the Company directs the
Agent to deliver canceled Securities to the Company. The Company may not issue
new Securities to replace Securities it has redeemed, paid or delivered to the
Agent for cancellation.
SECTION 2.11 Defaulted Interest. If the Company defaults in a payment of
interest on the Securities, the Company shall pay defaulted interest (plus
interest on such defaulted interest to the extent lawful) in any lawful manner.
The Company may pay the defaulted interest to the persons who are
Securityholders on a subsequent special record date. The Agent shall fix or
cause to be fixed any such special record date (which shall be no less than 10
days prior to the payment date) and payment date and shall promptly mail to each
Securityholder a notice that states the special record date, the payment date
and the amount of defaulted interest to be paid, which notice shall be mailed
not less than 10 days prior to such special record date.
SECTION 2.12 Special Transfer Provisions. No transfer of any Security may
be made unless such transfer satisfies one of the following: (i) such transfer
is in compliance with Rule 144A under the Securities Act, to a person who the
transferor reasonably believes is a Qualified Institutional Buyer (as defined in
Rule 144A) that is purchasing for its own account or for the account of a
Qualified Institutional Buyer and to whom notice is given that such transfer is
being made in reliance upon Rule 144A under the Securities Act as certified by
such transferee in a letter in the form of Exhibit B hereto; (ii) after the
appropriate holding period, such transfer is pursuant to an exemption from
registration under the Securities Act provided by Rule 144 under the Securities
Act; (iii) such transfer is to a transferee who is an accredited investor in a
transaction exempt from the registration requirements of the Securities Act, in
each case in accordance with any applicable securities laws of any State of the
United States or (iv) such transfer is otherwise exempt from the registration
requirements of the Securities Act. The Company will require, in order to assure
compliance with such laws, that the Securityholder's prospective transferee
referred to in the preceding clauses (iii) or (iv) deliver an investment letter
certifying to the Company and the Agent as to the facts surrounding such
transfer in the Form of Exhibit C hereto. Except in the case of a transfer of
Securities to a transferee referred to in the preceding clause (i), a transfer
to an Affiliate of the Agent or of a Holder, or, in general, a transfer that is
to be made after two years from the Issuance Date, the Agent shall require an
opinion of counsel satisfactory to it to the effect that such transfer may be
made pursuant to an exemption from the Securities Act without such registration
(which opinion of counsel shall not be an expense of the Agent or the Company).
ARTICLE 3.
Covenants
SECTION 3.1 Payment of Securities. The Company shall promptly pay the
principal of and interest on the Securities on the dates and in the manner
provided in the Securities and in this Agreement. Principal and interest shall
be considered paid on the date due if by 2:00 p.m. Texas time on such date the
Agent has received from the Company or the Paying Agent in immediately available
funds money sufficient to pay all principal, interest, premiums and any other
amounts then due. The Company shall pay interest on overdue principal at the
rate specified therefor in the Securities, and it shall pay interest on overdue
installments of interest at the same rate to the extent lawful.
SECTION 3.2 SEC Reports. The Company shall file with the SEC and provide
the Agent and Securityholders with such annual reports and such information,
documents and other reports as are specified in Sections 13 and 15(d) of the
Exchange Act and applicable to a U.S. corporation subject to such Sections, such
information, documents and other reports to be so filed and provided at the time
specified for the filing of such information, documents and reports under such
Sections.
(a) The Company shall not, and shall not permit any Restricted Subsidiary,
directly or indirectly, to make a Restricted Payment if at the time the Company
or such Restricted Subsidiary makes such Restricted Payment or immediately
thereafter an Event of Default shall have occurred and be continuing (or would
result therefrom). (b) The provisions of Section 3.03(a) shall not prohibit: (i)
any purchase or redemption of Capital Stock or Subordinated Obligations of the
Company made by exchange for, or out of the proceeds of the substantially
concurrent sale of, Capital Stock of the Company by the Company (other than
Capital Stock issued or sold to a Subsidiary of the Company or an employee stock
ownership plan or to a trust established by the Company or any of its
Subsidiaries for the benefit of their employees); (ii) the exercise or
conversion of an option, warrant or other security convertible or exchangeable
for an equity security of a Strategic Alliance Client in connection with a
substantially simultaneous sale or other disposition by the Company or a
Restricted Subsidiary of such equity security.
SECTION 3.4 Further Assurances. The Company will from time to time execute
and deliver all such supplements and amendments hereto and all such financing
statements, continuation statements, instruments of further assurance, and other
instruments, and will take such other action as may be necessary or advisable to
maintain or preserve the lien of this Agreement or carry out more effectively
the purposes hereof.
SECTION 3.5 Limitation on Investment Company Status. The Company shall not
take any action, or otherwise permit to exist any circumstance, that would
require the Company to register as an "investment company" under the Investment
Company Act of 1940, as amended.
ARTICLE 4.
Successor Company
SECTION 4.1 When Company May Merge or Transfer Assets. Subject to Article
13, the Company shall not consolidate with or merge with or into, or convey,
transfer or lease, in one transaction or a series of related transactions, all
or substantially all its assets to, any Person, unless:
(i) the resulting, surviving or transferee Person (the "Successor Company")
shall be a Person organized and existing under the laws of the United States of
America, any State thereof or the District of Columbia and the Successor Company
(if not the Company) shall expressly assume, by an Agreement supplemental
hereto, executed and delivered to the Agent, in form satisfactory to the Agent,
all the obligations of the Company under the Securities , this Agreement, and,
if applicable, the Purchase Agreement;
(ii) immediately after giving effect to such transaction (and treating any
Indebtedness which becomes an obligation of the Successor Company or any
Subsidiary as a result of such transaction as having been incurred by the
Successor Company or such Subsidiary at the time of such transaction), no
Default shall have occurred and be continuing (including on a pro forma basis);
and
(iii) the Company shall have delivered to the Agent an Officers'
Certificate and an Opinion of Counsel, each stating that such consolidation,
merger or transfer and such supplemental Agreement (if any) comply with this
Agreement.
The Successor Company shall be the successor to the Company and shall
succeed to, and be substituted for, and may exercise every right and power of,
the Company under this Agreement, but the predecessor Company in the case of a
lease of all or substantially all its assets shall not be released from the
obligation to pay the principal of and interest on the Securities.
Notwithstanding the foregoing clauses, any Restricted Subsidiary may
consolidate with, merge into or transfer all or part of its properties and
assets to the Company.
Defaults and Remedies
SECTION 5.1 Events of Default. An "Event of Default" occurs if:
(1) the Company defaults in any payment of interest on any Security when
the same becomes due and payable, and such default continues for a period of 20
Business Days;
(2) the Company defaults in the payment of the principal of any Security
when the same becomes due and payable at its Stated Maturity, upon declaration
or otherwise;
(3) the Company fails to comply with Section 3.03 or 4.01;
(4) the Company fails to comply with any of its covenants or agreements in
the Securities, this Agreement (other than those referred to in (1), (2) or (3)
above) and such failure continues for 30 days after the occurrence thereof;
(5) Indebtedness of the Company or any Significant Subsidiary is not paid
within any applicable grace period after final maturity or is accelerated by the
holders thereof because of a default and the aggregate amount of all such unpaid
or accelerated Indebtedness exceeds $1,000,000 or its foreign currency
equivalent at the time or if there is a default under that certain Stock Option
Agreement dated as of June 9, 1998 (the "Option Agreement") by and between Dynex
Holding, Inc. and Messrs. Adrian Katz, William O. Winsauer and John S. Winsauer
(collectively, the "Stockholders") by the Company or the Stockholders, which
default materially impairs the value of the Option (as defined in the Option
Agreement);
(6) the Company within the meaning of any Bankruptcy Law:
(A) commences a voluntary case;
(B) is dissolved (other than pursuant to a consolidation, amalgamation or
merger);
(C) becomes insolvent or is unable to pay its debts or fails or admits in
writing its inability generally to pay its debts as they become due;
(D) has a resolution passed for its winding-up, reorganization or
liquidation (other than pursuant to a consolidation, amalgamation or merger);
(E) has a secured party take possession of all or substantially all its
assets or has a distress, execution, attachment, sequestration or other legal
process levied, enforced or sued on or against all or substantially all its
assets and such secured party maintains possession, or any such process is not
dismissed, discharged, stayed or restrained, in each case within 30 days
thereafter;
(F) consents to the entry of an order for relief against it in an
involuntary case;
(G) seeks to consents to the appointment of a Custodian of it or for
substantially all of its assets; or
(H) makes a general assignment, arrangement or composition with, or for the
benefit of, its creditors;
or takes any comparable action under any foreign laws relating to
insolvency;
(7) a court of competent jurisdiction enters an order or decree under any
Bankruptcy Law that:
(A) is for relief against the Company in an involuntary case;
(B) appoints a Custodian of the Company or for any substantial part of its
property; or
(C) orders the winding up or liquidation of the Company;
or any similar relief is granted under any foreign laws and the order or
decree remains unstayed and in effect for 60 days;
(8) any judgments or decrees for the payment of money in excess of
$1,000,000 in the aggregate (for all such judgments and decrees) or its foreign
currency equivalent at the time is entered against the Company or any
Significant Subsidiary and is not discharged or satisfied and there is a period
of 45 days following the entry of such judgment or decree during which such
judgment or decree is not discharged, satisfied, waived or the execution thereof
stayed;
(9) the Agent or any Affiliate of the Agent is a Securityholder, the
material breach of any representation, warranty or covenant of the Company
contained in or the occurrence of a default by the Company under, the Purchase
Agreement, if any, and if such breach or default is susceptible of cure and the
Company is pursuing, and continues to pursue, such cure to the Agent's
reasonable satisfaction, such breach or default remains uncured for 30 days
after its occurrence; or
(10) there shall occur a Change of Control of the Company
The foregoing will constitute Events of Default whatever the reason for any
such Event of Default and whether it is voluntary or involuntary or is effected
by operation of law or pursuant to any judgment, decree or order of any court or
any order, rule or regulation of any administrative or governmental body.
The term "Bankruptcy Law" means Title 11, United States Code, or any
similar Federal or state law for the relief of debtors. The term "Custodian"
means any receiver, Trustee, assignee, liquidator, custodian or similar official
under any Bankruptcy Law.
The Company shall deliver to the Agent, promptly, and in any event within 5
days after the occurrence thereof, written notice in the form of an Officers'
Certificate of any Default, its status and what action the Company is taking or
proposes to take with respect thereto.
SECTION 5.2 Acceleration. If an Event of Default (other than an Event of
Default specified in Section 5.01(6) or (7) with respect to the Company) occurs
and is continuing, the Agent by notice to the Company, or the Holders of at
least 25% in principal amount of the Securities by notice to the Company and the
Agent, may declare the principal of and accrued but unpaid interest on all the
Securities to be due and payable. Upon such a declaration, such principal and
interest shall be due and payable immediately. If an Event of Default specified
in Section 5.01(6) or (7) with respect to the Company occurs and is continuing,
the principal of and interest on all the Securities shall ipso facto become and
be immediately due and payable without any declaration or other act on the part
of the Agent or any Securityholders. The Agent or the Holders of a majority in
principal amount of the Securities by notice to the Agent may in their sole
discretion rescind an acceleration and its consequences if the rescission would
not conflict with any judgment or decree and if all existing Events of Default
have been cured or waived except nonpayment of principal or interest that has
become due solely because of acceleration. No such rescission shall affect any
subsequent Default or impair any right consequent thereto.
SECTION 5.3 Other Remedies. If an Event of Default occurs and is
continuing, the Agent may pursue any available remedy to collect the payment of
principal of or interest on and any other amounts due under the Securities or to
enforce the performance of any provision of the Securities or this Agreement,
including remedies available under the Uniform Commercial Code.
The Agent may maintain a proceeding even if it does not possess any of the
Securities or does not produce any of them in the proceeding. A delay or
omission by the Agent or any Securityholder in exercising any right or remedy
accruing upon an Event of Default shall not impair the right or remedy or
constitute a waiver of or acquiescence in the Event of Default. No remedy is
exclusive of any other remedy. All available remedies are cumulative.
SECTION 5.4 Waiver of Past Defaults. The Holders of a majority in principal
amount of the Securities by notice to the Agent may waive an existing Default
and its consequences except (i) a Default in the payment of the principal of or
interest on a Security or (ii) a Default in respect of a provision that under
Section 8.02 cannot be amended without the consent of each Securityholder
affected. When a Default is waived, it is deemed cured, but no such waiver shall
extend to any subsequent or other Default or impair any consequent right.
SECTION 5.5 Control by Majority. The Holders of a majority in principal
amount of the Securities may direct the time, method and place of conducting any
proceeding for any remedy available to the Agent or of exercising any power
conferred on the Agent. However, the Agent may refuse to follow any direction
that conflicts with law or this Agreement or, subject to Section 6.01, that the
Agent determines is unduly prejudicial to the rights of other Securityholders or
would involve the Agent in personal liability; provided, however, that the Agent
may take any other action deemed proper by the Agent that is not inconsistent
with such direction. Prior to taking any action hereunder, the Agent shall be
entitled to indemnification satisfactory to it in its sole discretion against
all losses and expenses caused by taking or not taking such action.
SECTION 5.6 Limitation on Suits. A Securityholder may not pursue any remedy
with respect to this Agreement or the Securities unless:
(1) the Holder gives to the Agent written notice stating that an Event of
Default is continuing;
(2) the Holders of at least 25% in principal amount of the Securities make
a written request to the Agent to pursue the remedy;
(3) such Holder or Holders offer to the Agent reasonable security or
indemnity against any loss, liability or expense;
(4) the Agent does not comply with the request within 60 days after receipt
of the request and the offer of security or indemnity; and
(5) the Holders of a majority in principal amount of the Securities do not
give the Agent a direction inconsistent with the request during such 60-day
period.
A Securityholder may not use this Agreement to prejudice the rights of
another Securityholder or to obtain a preference or priority over another
Securityholder.
SECTION 5.7 Rights of Holders To Receive Payment. Notwithstanding any other
provision of this Agreement, the right of any Holder to receive payment of
principal of and interest on and any other amounts due under the Securities held
by such Holder, on or after the respective due dates expressed in the
Securities, or to bring suit for the enforcement of any such payment on or after
such respective dates, shall not be impaired or affected without the consent of
such Holder.
SECTION 5.8 Collection Suit by Agent. If an Event of Default occurs and is
continuing, the Agent may recover judgment in its own name and on behalf of the
Holders against the Company for the whole amount then due and owing (together
with interest on any unpaid interest to the extent lawful) and the amounts
provided for in Section 6.07.
SECTION 5.9 Agent May File Proofs of Claim. The Agent may file such proofs
of claim and other papers or documents as may be necessary or advisable in order
to have the claims of the Agent and the Securityholders allowed in any judicial
proceedings relative to the Company, its creditors or its property and, unless
prohibited by law or applicable regulations, may vote on behalf of the Holders
in any election of a trustee in bankruptcy or other Person performing similar
functions, and any Custodian in any such judicial proceeding is hereby
authorized by each Holder to make payments to the Agent and, in the event that
the Agent shall consent to the making of such payments directly to the Holders,
to pay to the Agent any amount due it for the reasonable compensation, expenses,
disbursements and advances of the Agent, its agents and its counsel, and any
other amounts due the Agent under Section 6.06.
SECTION 5.10 Priorities. If the Agent collects any money or property
pursuant to this Article 5, it shall pay out the money or property in the
following order:
FIRST: to the Agent for amounts due under Section 6.07;
SECOND: to Securityholders for amounts due and unpaid on the Securities,
ratably, without preference or priority of any kind, according to the amounts
due and payable on the Securities; and
THIRD: after all amounts due under the Securities have indefeasibly been
paid in full to the Holders, to the Company.
The Agent may fix a record date and payment date for any payment to
Securityholders pursuant to this Section. At least 15 days before such record
date, the Company shall mail to each Securityholder and the Agent a notice that
states the record date, the payment date and amount to be paid.
SECTION 5.11 Undertaking for Costs. In any suit for the enforcement of any
right or remedy under this Agreement or in any suit against the Agent for any
action taken or omitted by it as Agent, a court in its discretion may require
the filing by any party litigant in the suit of an undertaking to pay the costs
of the suit, and the court in its discretion may assess reasonable costs,
including reasonable attorneys' fees, against any party litigant in the suit,
having due regard to the merits and good faith of the claims or defenses made by
the party litigant. This Section does not apply to a suit by the Agent or by a
Holder against the Company,
SECTION 5.12 Waiver of Stay or Extension Laws. The Company (to the extent
it may lawfully do so) shall not at any time insist upon, or plead, or in any
manner whatsoever claim or take the benefit or advantage of, any stay or
extension law wherever enacted, now or at any time hereafter in force, which may
affect the covenants or the performance of this Agreement; and the Company (to
the extent that it may lawfully do so) hereby expressly waives all benefit or
advantage of any such law, and shall not hinder, delay or impede the execution
of any power herein granted to the Agent or to any Holder, but shall suffer and
permit the execution of every such power as though no such law had been enacted.
ARTICLE 6.
The Agent
SECTION 6.1 Duties of The Agent. (a) If an Event of Default has occurred
and is continuing, the Agent shall exercise such of the rights and powers vested
in it by this Agreement and use the same degree of care and skill in their
exercise as the Agent would exercise or use under the circumstances in the
conduct of the Agent's own affairs.
(b) Except during the continuance of an Event of Default:
(1) the Agent undertakes to perform such duties and only such duties as are
specifically set forth in this Agreement and no implied covenants or obligations
shall be read into this Agreement against the Agent; and
(2) in the absence of bad faith on its part, the Agent may conclusively
rely, as to the truth of the statements and the correctness of the opinions
expressed therein, upon certificates or opinions furnished to the Agent and
conforming to the requirements of this Agreement. However, the Agent shall
examine the certificates and opinions to determine whether or not they conform
to the requirements of this Agreement.
(c) The Agent may not be relieved from liability for its own grossly
negligent action, its own grossly negligent failure to act or its own wilful
misconduct, except that:
(1) this paragraph does not limit the effect of paragraph (b) of this
Section;
(2) the Agent shall not be liable for any error of judgment made in good
faith unless it is proved that the Agent was grossly negligent in ascertaining
the pertinent facts; and
(3) the Agent shall not be liable with respect to any action it takes or
omits to take in good faith in accordance with a direction received by it
pursuant to Section 5.05.
(d) Every provision of this Agreement that in any way relates to the Agent
is subject to paragraphs (a), (b) and (c) of this Section.
(e) The Agent shall not be liable for interest on any money received by it.
(f) Money held in trust by the Agent need not be segregated from other
funds except to the
extent required by law.
(g) No provision of this Agreement shall require the Agent to expend or
risk its own funds or otherwise incur financial liability in the performance of
any of its duties hereunder or in the exercise of any of its rights or powers,
if it shall have reasonable grounds to believe that repayment of such funds or
adequate indemnity against such risk or liability is not reasonably assured to
it.
(h) Every provision of this Agreement relating to the conduct or affecting
the liability of or affording protection to the Agent shall be subject to the
provisions of this Section.
SECTION 6.2 Rights of Agent. (a) The Agent may rely on any document
reasonably believed by it to be genuine and to have been signed or presented by
the proper Person. The Agent need not investigate any fact or matter stated in
the document.
(b) Before the Agent acts or refrains from acting, it may require an
Officers' Certificate or an Opinion of Counsel. The Agent shall not be liable
for any action it takes or omits to take in good faith in reliance on the
Officers' Certificate or Opinion of Counsel.
(c) The Agent may act through agents or employees.
(d) The Agent shall not be liable for any action it takes or omits to take
in good faith which it believes to be authorized or within its rights or powers;
provided, however, that the Agent's conduct does not constitute wilful
misconduct or gross negligence.
(e) The Agent may consult with counsel with respect to legal matters
relating to this Agreement and the Securities shall be fully and completely
protected from liability in respect to any action taken, omitted or suffered by
it hereunder in good faith and in accordance with the advice or opinion of such
counsel.
SECTION 6.3 Individual Rights of Agent. The Agent in its individual or any
other capacity may become the owner or pledgee of Securities and may otherwise
deal with the Company or its Affiliates with the same rights it would have if it
were not Agent. Any Paying Agent, Registrar, co-registrar or co-paying agent may
do the same with like rights. However, the Agent must comply with Section 6.09.
SECTION 6.4 Agent's Disclaimer. The Agent shall not be responsible for and
makes no representation as to the validity or adequacy of this Agreement or the
Securities, it shall not be accountable for the Company's use of the proceeds
from the Securities, and it shall not be responsible for any statement of the
Company in the Agreement or in any document issued in connection with the sale
of the Securities or in the Securities.
SECTION 6.5 Notice of Defaults. If a Default occurs and is continuing and
if the Agent receives written notice thereof, the Agent shall mail to each
Securityholder notice of the Default within 90 days after it occurs. Except in
the case of a Default in payment of principal of or interest on any Security
(including payments pursuant to purchase provisions of such Security, if any),
the Agent may withhold the notice if and so long as it in good faith determines
that withholding the notice is in the interests of Securityholders.
SECTION 6.6 Compensation and Indemnity. If neither the Agent nor any of its
Affiliates is a Securityholder, the Company shall pay to the Agent from time to
time reasonable compensation for its services. The Company shall reimburse the
Agent upon request for all reasonable out-of-pocket expenses incurred or made by
it, including costs of collection, in addition to the compensation for its
services in connection with its performance of its duties under this Agreement.
Such expenses shall include the reasonable compensation and expenses,
disbursements and advances of the Agent's agents, counsel, accountants and
experts. The Company shall indemnify the Agent against any and all loss,
liability or reasonable expense (including reasonable attorneys' fees) incurred
by it in connection with the administration of this agreement and the
performance of its duties hereunder. The Agent shall notify the Company promptly
of any claim for which it may seek indemnity. Failure by the Agent to so notify
the Company shall not relieve the Company of its obligations hereunder. The
Company shall defend the claim and the Agent may have separate counsel but the
fees and expenses of such counsel shall be at the expense of the Agent unless
(i) the employment of such counsel shall have been authorized in writing by the
Company, (ii) the Company shall not have employed counsel to have charge of the
defense of such action within 10 days after notice of commencement of the
action, or (iii) the Agent shall have reasonably concluded that there may be
defenses available to it which are different from or additional to the those
available to the Company, in any of which events such fees and expenses shall be
paid by the Company. The Company shall not be liable for any settlement of any
claim or action except with its written consent, which consent shall not be
unreasonably withheld. The Company need not reimburse any expense or indemnify
against any loss, liability or expense to the extent incurred by the Agent
through the Agent's own wilful misconduct, negligence or bad faith.
To secure the Company's payment obligations in this Section, the Agent
shall have a lien prior to the Securities on all money or property held or
collected by the Agent other than money or property held in trust to pay amounts
due under particular Securities.
The Company's payment obligations pursuant to this Section shall survive
the discharge of this Agreement. When the Agent incurs expenses after the
occurrence of a Default specified in Section 5.01(6) or (7) with respect to the
Company, the expenses are intended to constitute expenses of administration
under the Bankruptcy Law.
SECTION 6.7 Successor Agent by Merger. If the Agent consolidates with,
merges or converts into, or transfers all or substantially all its corporate
trust business or assets to, another corporation or banking association, the
resulting, surviving or transferee corporation without any further act shall be
the successor Agent.
ARTICLE 7.
Discharge of Agreement
SECTION 7.1 Discharge of Liability on Securities. (a) When all outstanding
Securities have become due and payable and the Company irrevocably and
indefeasibly deposits with the Agent immediately available funds sufficient to
pay at maturity all outstanding Securities, including interest thereon to
maturity and any applicable premiums and other amounts due thereunder and
payable hereunder by the Company, then this Agreement shall, subject to Section
7.01(b), cease to be of further effect. After such irrevocable and indefeasible
payment, the Agent shall acknowledge satisfaction and discharge of this
Agreement, other than those surviving obligations set forth in Section 7.01(b),
on demand of the Company accompanied by an Officers' Certificate and an Opinion
of Counsel and at the cost and expense of the Company.
(b) Notwithstanding clause (a) above, the Company's obligations in Sections
2.03, 2.04, 2.05, 2.06, 2.07, 6.06 and 6.07 and this Article 7 shall survive
until the Securities have been paid in full. Thereafter, the Company's
obligations in Sections 6.06, 7.04 and 7.05 shall survive.
SECTION 7.2 Repayment to Company. The Agent and the Paying Agent shall
promptly turn over to the Company upon request any excess money or securities
held by them at any time.
Subject to any applicable abandoned property law and the right of the Agent
to publish or mail notice to Securityholders prior to making such payment to the
Company, the Agent and the Paying Agent shall pay to the Company upon request
any money held by them for the payment of principal or interest that remains
unclaimed for two years, and, thereafter, Securityholders entitled to the money
must look to the Company for payment as general creditors.
ARTICLE 8.
Optional Conversion of Securities
SECTION 8.1 Optional Conversion Privilege and Conversion Price
Subject to and upon compliance with the provisions of this Article, at the
option of the Holder thereof, any Security or any portion of the principal
amount thereof which is $100,000 or an integral multiple of $1,000 in excess
thereof may be converted at the principal amount thereof (without premium), or
of such portion thereof, into fully paid and nonassessable shares (calculated as
to each conversion to the nearest 1/100 of a share) of voting, or at the
Holder's option, nonvoting Common Stock of the Company, at the conversion price,
determined as hereinafter provided, in effect at the time of conversion. Such
conversion right commences on and after June 9, 1998 and shall expire on May 31,
1999.
The price at which shares of Common Stock shall be delivered upon
conversion (herein called the "conversion price") shall be initially $6.00 per
share of Common Stock. The Conversion Price shall be adjusted in certain
instances as provided in paragraphs (1), (2), (3), (4), (7) and (8) of Section
8.04.
SECTION 8.2 Exercise of Optional Conversion Privilege
In order to exercise the conversion privilege, the Holder of any Security
to be converted shall surrender such Security, duly endorsed or assigned to the
Company or in blank, at any office or agency of the Company maintained for that
purpose accompanied by written notice to the Company at such office or agency
that the Holder elects to convert such Security or, if less than the entire
principal amount thereof is to be converted, the portion thereof to be
converted.
Securities shall be deemed to have been converted immediately prior to the
close of business on the day of surrender of such Securities for conversion in
accordance with the foregoing provisions, and at such time the rights of the
Holders of such Securities as Holders shall cease, and the Person or Persons
entitled to receive the Common Stock issuable upon conversion shall be treated
for all purposes as the record holder or holders of such Common Stock at such
time. As promptly as practicable on or after the conversion date, the Company
shall issue and shall deliver at such office or agency a certificate or
certificates for the number of full shares of Common Stock issuable upon
conversion, together with payment in lieu of any fraction of a share, as
provided in Section 8.03.
In the case of any Security which is converted in part only, upon such
conversion the Company shall execute and deliver to the Holder thereof, at the
expense of the Company, a new Security or Securities of authorized denominations
in aggregate principal amount equal to the unconverted portion of the principal
amount of such Security.
SECTION 8.3 Fractions of Shares.
No fractional shares of Common Stock shall be issued upon conversion of
Securities. If more than one Security shall be surrendered for conversion at one
time by the same Holder, the number of full shares which shall be issuable upon
conversion thereof shall be computed on the basis of the aggregate principal
amount of the Securities (or specified portions thereof) so surrendered. Instead
of any fractional share of Common Stock which would otherwise be issuable upon
conversion of any Security or Securities (or specified portions thereof), the
Company shall pay a cash adjustment in respect of such fraction in an amount
equal to the same fraction of the market price per share of Common Stock (as
determined by the Board of Directors or in any manner prescribed by the Board of
Directors) at the close of business on the day of conversion.
SECTION 8.4 Adjustment of Conversion Price
(1) In case the Company shall pay or make a dividend or other distribution
on any class of capital stock of the Company in Common Stock, the conversion
price in effect at the opening of business on the day following the date fixed
for the determination of stockholders entitled to receive such dividend or other
distribution shall be reduced by multiplying such conversion price by a fraction
of which the numerator shall be the number of shares of Common Stock outstanding
at the close of business on the date fixed for such determination and the
denominator shall be the sum of such number of shares and the total number of
shares constituting such dividend or other distribution, such reduction to
become effective immediately after the opening of business on the day following
the date fixed for such determination. For the purposes of this paragraph (1),
the number of shares of Common Stock at any time outstanding shall not include
shares held in the treasury of the Company but shall include shares issuable in
respect of scrip certificates issued in lieu of fractions of shares of Common
Stock. The Company will not pay any dividend or make any distribution on shares
of Common Stock held in the treasury of the Company.
(2) In case the Company shall issue or sell to any Person shares of Common
Stock or rights or warrants entitling such Person to subscribe for or purchase
shares of Common Stock at a price per share less than the higher of the current
conversion price or the Current Market Price per share (determined as provided
in paragraph (6) of this Section) of the Common Stock on the date fixed for the
determination of stockholders entitled to receive such rights or warrants (or,
in the case of rights or warrants not exercisable until the occurrence of a
contingent event other than the passage of time or other event that is certain
to occur, on the date that such contingent event occurs), the conversion price
in effect at the opening of business on the day following the date fixed for
such determination or the date such contingent event occurs, as the case may be,
shall be reduced by multiplying such conversion price by a fraction of which the
numerator shall be the number of shares of Common Stock outstanding at the close
of business on the date fixed for such determination or the date such contingent
event occurs, as the case may be, plus the number of shares of Common Stock
which the aggregate of the offering price of the total number of shares of
Common Stock so offered for subscription or purchase would purchase at the
higher of the current conversion price or such Current Market Price and the
denominator shall be the number of shares of Common Stock outstanding at the
close of business on the date fixed for such determination or the date such
contingent event occurs, as the case may be, plus the number of shares of Common
Stock so offered for subscription or purchase, such reduction to become
effective immediately after the opening of business on the day following the
date fixed for such determination or the date such contingent event occurs, as
the case may be. For the purposes of this paragraph (2), the number of shares of
Common Stock at any time outstanding shall not include shares held in the
treasury of the Company but shall include shares issuable in respect of scrip
certificates issued in lieu of fractions of shares of Common Stock. The Company
will not issue any rights or warrants in respect of shares of Common Stock held
in the treasury of the Company.
(3) In case outstanding shares of Common Stock shall be subdivided into a
greater number of shares of Common Stock, the conversion price in effect at the
opening of business on the day following the day upon which such subdivision
becomes effective shall be proportionately reduced, and, conversely, in case
outstanding shares of Common Stock shall each be combined into a smaller number
of shares of Common Stock, the conversion price in effect at the opening of
business on the day following the day upon which such combination becomes
effective shall be proportionately increased, such reduction or increase, as the
case may be, to become effective immediately after the opening of business on
the day following the day upon which such subdivision or combination becomes
effective.
(4) In case the Company shall, by dividend or otherwise, distribute to all
holders of its Common Stock evidences of its indebtedness or assets (including
securities, but excluding any rights or warrants referred to in paragraph (2) of
this Section, any dividend or distribution paid in cash out of the retained
earnings of the Company and any dividend or distribution referred to in
paragraph (1) of this Section), the conversion price shall be adjusted so that
the same shall equal the price determined by multiplying the conversion price in
effect immediately prior to the close of business on the date fixed for the
determination of stockholders entitled to receive such distribution by a
fraction of which the numerator shall be the lower of the current conversion
price or the Current Market Price per share (determined as provided in paragraph
(6) of this Section) of the Common Stock on the date fixed for such
determination less the then fair market value (as determined in good faith by
the Board of Directors, whose determination shall be supported by a fairness
opinion by a nationally recognized investment banking firm and described in a
Board Resolution filed with the Agent) of the portion of the assets or evidences
of indebtedness so distributed applicable to one share of Common Stock and the
denominator shall be the lower of the current conversion price or such Current
Market Price per share of the Common Stock, such adjustment to become effective
immediately prior to the opening of business on the day following the date fixed
for the determination of stockholders entitled to receive such distribution.
(5) The reclassification of Common Stock into securities including other
than Common Stock (other than any reclassification upon a consolidation or
merger to which Section 8.11 applies) shall be deemed to involve (a) a
distribution of such securities other than Common Stock to all holders of Common
stock (and the effective date of such reclassification shall be deemed to be
"the date fixed for the determination of stockholders entitled to receive such
distribution" and "the date fixed for such determination" within the meaning of
paragraph (4) of this Section), and (b) a subdivision or combination, as the
case may be, of the number of shares of Common Stock outstanding immediately
prior to such reclassification into the number of shares of Common Stock
outstanding immediately thereafter (and the effective date of such
reclassification shall be deemed to the "the day upon which such subdivision
becomes effective" or "the day upon which such combination becomes effective",
as the case may be, and "the day upon which such subdivision or combination
becomes effective" within the meaning of paragraph (3) of this Section).
(6) For the purpose of any computation under paragraphs (2) and (4) of this
Section, the current market price per share of Common Stock on any date (the
"Current Market Price") shall be deemed to be the average of the daily closing
prices per share of the Company's Common Stock for the 30 consecutive trading
days immediately before the day in question; provided, however, that in the case
of (i) a primary underwritten public offering at a price in excess of the then
current conversion price, the Current Market Price shall be deemed the price to
the underwriter set forth in the prospectus, and (ii) stock options issued to
employees and directors pursuant to a plan adopted by the Company's Board of
Directors, the Current Market Price shall be the exercise price of such options.
The closing price for each day shall be the last reported sale price regular way
or, in case no such reported sale takes place on such day, the average of the
reported closing bid and asked prices regular way, on the principal national
securities exchange on which the Common Stock is listed or admitted to trading
or stock market if the Common Stock is not listed or admitted to trading on any
national securities exchange or stock market, the average of the closing bid and
asked prices in the over-the-counter market as reported by NASDAQ or, if not
quoted by NASDAQ on such day, as furnished by any registered broker/dealer
selected for that purpose.
(7) The Company may make such reductions in the conversion price, in
addition to those required by paragraphs (1),(2),(3) and (4) of this Section, as
it considers to be advisable in order that any event treated for Federal income
tax purposes as a dividend of stock or stock rights shall not be taxable to the
recipients.
(8) No adjustment in the conversion price shall be required unless such
adjustment would require an increase or decrease of at least 1% in the
conversion price; provided, however, that any adjustments which by reason of
this paragraph (8) are not required to be made shall be carried forward and
taken into account in any subsequent adjustment. All calculations shall be made
to the nearest cent or to the nearest one-thousandth of a share, as the case may
be.
(9) The Company represents and warrants that upon (a) the conversion in
full of this Note and (b) the exercise in full of the option of Dynex Holding,
Inc. ("Dynex") to purchase the shares of the Company's common stock under the
Stock Option Agreement by and between Dynex and Messrs. Adrian Katz, William O.
Winsauer and John S. Winsauer, dated as of June 9, 1998, the combined
shareholdings of Dynex Capital, Inc. and Dynex will be at least 66-2/3% of the
shares of the Company's common stock on a fully-diluted basis. If such
representation and warranty is breached, then the Company agrees to adjust the
conversion price so that such combined holdings would equal 66-2/3%, unless
deemed unnecessary by the Agent.
SECTION 8.5 Notice of Adjustments of Conversion Price.
Whenever the conversion price is adjusted as herein provided:
(a) the Company shall compute the adjusted conversion price in accordance
with Section 8.04 and shall prepare a certificate signed by the Treasurer of the
Company setting forth the adjusted conversion price and showing in reasonable
detail the facts upon which such adjustment is based, and such certificate shall
forthwith be filed (with a copy to the Agent) at each office or agency
maintained for the purpose of conversion of Securities; and
(b) a notice stating that the conversion price has been adjusted and
setting forth the adjusted conversion price shall forthwith be required, and as
soon as practicable after it is required, such notice shall be mailed by the
Company to all Holders at their last addresses as they shall appear in the
Security Register.
SECTION 8.6 Notice of Certain Corporate Action
In case:
(a) the Company shall declare a dividend (or any other distribution) on its
Common Stock payable otherwise than in cash out of its retained earnings; or
(b) the Company shall authorize the granting to the holders of its Common
Stock of rights or warrants to subscribe for or purchase any shares of capital
stock of any class or of any other rights; or
(c) of any reclassification of the Common Stock of the Company (other than
a subdivision or combination of its outstanding shares of Common Stock), or of
any consolidation or merger to which the Company is a party and for which
approval of any stockholders of the Company is required, or of the sale or
transfer of all or substantially all of the assets of the Company; or
(d) of the voluntary or involuntary dissolution, liquidation or winding up
of the Company;
then the Company shall cause to be filed with the Agent and at each office
or agency maintained for the purpose of conversion of Securities, and shall
cause to be mailed to all Holders at their last addresses as they shall appear
in the Security Register, at least 20 days prior to the applicable record or
effective date hereinafter specified, a notice stating (x) the date on which a
record is to be taken for the purpose of such dividend, distribution, rights or
warrants, or, if a record is not to be taken, the date as of which the holders
of Common Stock of record to be entitled to such dividend, distribution, rights
or warrants are to be determined, or (y) the date on which such
reclassification, consolidation, merger, sale, transfer, dissolution,
liquidation or winding up is expected to become effective, and the date as of
which it is expected that holders of Common Stock of record shall be entitled to
exchange their shares of Common Stock for securities, cash or other property
deliverable upon such reclassification, consolidation, merger, sale, transfer,
dissolution, liquidation or winding up.
SECTION 8.7 Company to Reserve Common Stock
The Company shall at all times reserve and keep available, free from
pre-emptive rights, out of its authorized but unissued non-voting and voting
Common Stock, for the purpose of effecting the conversion of Securities, the
full number of shares of Common Stock then issuable upon the conversion of all
outstanding Securities.
SECTION 8.8 Taxes on Conversions
The Company will pay any and all taxes that may be payable in respect of
the issue or delivery of shares of Common Stock on conversion of Securities
pursuant hereto. The Company shall not, however, be required to pay any tax
which may be payable in respect of any transfer involved in the issue and
delivery of shares of Common Stock in a name other than that of the Holder of
the Security or Securities to be converted, 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.
SECTION 8.9 Covenant as to Common Stock; Accounting Treatment of
Consideration.
The Company covenants that all shares of Common Stock which may be issued
upon conversion of Securities will upon issue by fully paid and nonassessable
and, except as provided in Section 8.08, the Company will pay all taxes, liens
and charges with respect to the issue thereof.
The Company covenants that, upon conversion of Securities as herein
provided, there will be credited to Common Stock par capital from the
consideration for which the shares of Common Stock issuable upon such conversion
are issued an amount per share of Common Stock so issued as determined by the
Board of Directors, which amount shall not be less than the amount required by
law and by the Company's certificate of incorporation, as amended, as in effect
on the date of such conversion. For the purposes of this covenant the net
proceeds received by the Company from the issuance and sale of the Securities
converted, less any cash paid in respect of fractional share interests upon such
conversion, shall be deemed to be the amount of consideration for which the
shares of Common Stock issuable upon such conversion are issued.
SECTION 8.10 Cancellation of Converted Securities
All Securities delivered for conversion shall be delivered to the Company
to be canceled.
SECTION 8.11 Provisions in Case of Consolidation, Merger or Sale of Assets.
In case of any consolidation of the Company with, or merger of the Company
into, any other Person, any merger of another Person into the Company (other
than a merger which does not result in any reclassification, conversion,
exchange or cancellation of outstanding shares of Common Stock of the Company)
or any sale or transfer of all or substantially all of the assets of the
Company, the Person formed by such consolidation or resulting from such merger
or which acquires such assets, as the case may be, shall execute and deliver to
the Agent a supplemental Agreement providing that the Holder of each Security
then outstanding shall have the right thereafter, during the period such
Security shall be convertible as specified in Section 8.01, to convert such
Security only into the kind and amount of securities, cash and other property
receivable upon such consolidation, merger, sale or transfer by a holder of the
number of shares of Common Stock of the Company in which such Security might
have been converted immediately prior to such consolidation, merger, sale or
transfer, assuming such holder of Common Stock of the Company (i) is not a
Person with which the Company consolidated or into which the Company merged or
which merged into the Company or to which such sale or transfer was made, as the
case may be ("constituent Person"), or an Affiliate of a constituent Person and
(ii) failed to exercise his rights of election, if any, as to the kind or amount
of securities, cash and other property receivable upon such consolidation,
merger, sale or transfer (provided that if the kind or amount of securities,
cash and other property receivable upon such consolidation, merger, sale or
transfer is not the same for each share of Common Stock of the Company held
immediately prior to such consolidation, merger, sale or transfer by others than
a constituent Person or an Affiliate thereof and in respect of which such rights
of election shall not have been exercised ("non-electing share"), then for the
purpose of this Section the kind and amount of securities, cash and other
property receivable upon such consolidation, merger, sale or transfer by each
non-electing share shall be deemed to be the kind and amount so receivable per
share by a plurality of the nonelecting shares). Such supplemental Agreement
shall provide for adjustments which, for events subsequent to the effective date
of such supplemental Agreement, shall be as nearly equivalent as may be
practicable to the adjustments provided for in this Article. The above
provisions of this Section shall similarly apply to successive consolidations,
mergers, sales or transfers.
SECTION 8.12 Registration and Listing of Shares.
The Company covenants that if any shares of Common Stock, required to be
reserved for purposes of conversion of Securities hereunder, require
registration with or approval of any governmental authority under any Federal,
State or District of Columbia law before such shares may be issued upon
conversion, the Company will in good faith and as expeditiously as possible
endeavor to cause such shares to be duly registered or approved, as the case may
be. The Company further covenants that so long as the Common Stock of the
Company is listed on the NASDAQ Stock Market or any national securities
exchange, the Company will, if permitted by the rules of NASDAQ or such
exchange, list and keep listed on such exchange, upon official notice of
issuance, all shares of Common Stock issuable upon conversion of Securities.
SECTION 8.13. Agent and Conversion Agents Not Liable
Neither the Agent nor any conversion agent shall at any time be under any
duty or responsibility to any Holder of Securities to determine whether any
facts exist which may require any adjustment of the conversion rate, or with
respect to the nature or extent of any such adjustment when made, or with
respect to the method employed, or herein or in any supplemental Agreement
provided to be employed, in making the same. Neither the Agent nor any
conversion agent shall be accountable with respect to the validity or value (or
the kind or amount) of any shares of Common Stock or of any securities or cash
or other property which may at any time be issued or delivered upon the
conversion of any Security, or makes any representation with respect thereto.
Neither the Agent nor any conversion agent shall be responsible for any failure
of the Company to make any cash payment or to issue, transfer or deliver any
shares of Common Stock or stock certificates or other securities or property
upon the surrender of any Security for the purpose of conversion, or subject to
Section 6.01, to comply with any of the covenants of the Company contained in
this Article Eight.
SECTION 8.14. Registration Rights.
The Company agrees to provide to the Agent registration rights on
substantially the same terms and conditions as those afforded to Messrs. Adrian
Katz, William O. Winsauer and John S. Winsauer (the "Stockholders") pursuant to
that certain Stock Option Agreement dated as of June 9, 1998 by and between
Dynex Holding, Inc. and the Stockholders; provided, however, that the expense of
such registration shall be borne by the Company.
ARTICLE 9.
[RESERVED]
ARTICLE 10.
Amendments
SECTION 10.1 Without Consent of Holders. The Company, when authorized by a
resolution of its Board of Directors, and the Agent may amend this Agreement or
the Securities without notice to or consent of any Securityholder:
(1 to cure any ambiguity, omission, defect or inconsistency;
(2) to comply with Article 4;
(3 to add guarantees with respect to the Securities or to secure the
Securities;
(4 to add to the covenants of the Company for the benefit of the Holders or
to surrender any right or power herein conferred upon the Company; or
(5 to make any change that does not adversely affect the rights of any
Securityholder.
After an amendment under this Section becomes effective, the Company shall
mail to Securityholders a notice briefly describing such amendment. The failure
to give such notice to all Securityholders, or any defect therein, shall not
impair or affect the validity of an amendment under this Section.
SECTION 10.2 With Consent of Holders. The Company, when authorized by a
resolution of its Board of Directors, and the Agent may amend this Agreement or
the Securities without notice to any Securityholder but with the written consent
of the Holders of at least a majority in principal amount of the Securities.
However, without the consent of each Securityholder affected, an amendment may
not:
(1 reduce the amount of Securities whose Holders must consent to an
amendment;
(2 reduce the rate of or extend the time for payment of interest on any
Security;
(3 reduce the principal of or extend the Stated Maturity of any Security;
(4 make any Security payable in money other than that stated in the
Security; or
(5 make any change in Section 5.04 or 5.07 or the second sentence of this
Section.
It shall not be necessary for the consent of the Holders under this Section
to approve the particular form of any proposed amendment, but it shall be
sufficient if such consent approves the substance thereof.
After an amendment under this Section becomes effective, the Company shall
mail to Securityholders a notice briefly describing such amendment. The failure
to give such notice to all Securityholders, or any defect therein, shall not
impair or affect the validity of an amendment under this Section.
SECTION 10.3 Revocation and Effect of Consents and Waivers. A consent to an
amendment or a waiver by a Holder of a Security shall bind the Holder and every
subsequent Holder of that Security or portion of the Security that evidences the
same debt as the consenting Holder's Security, even if notation of the consent
or waiver is not made on the Security. However, any such Holder or subsequent
Holder may revoke the consent or waiver as to such Holder's Security or portion
of the Security if the Agent receives the notice of revocation before the date
the amendment or waiver becomes effective. After an amendment or waiver becomes
effective, it shall bind every Securityholder.
The Company may, but shall not be obligated to, fix a record date for the
purpose of determining the Securityholders entitled to give their consent or
take any other action described above or required or permitted to be taken
pursuant to this Agreement. If a record date is fixed, then notwithstanding the
immediately preceding paragraph, those Persons who were Securityholders at such
record date (or their duly designated proxies), and only those Persons, shall be
entitled to give such consent or to revoke any consent previously given or to
take any such action, whether or not such Persons continue to be Holders after
such record date. No such consent shall be valid or effective for more than 120
days after such record date.
SECTION 10.4 Notation on or Exchange of Securities. If an amendment changes
the terms of a Security, the Agent may require the Holder of the Security to
deliver it to the Agent. The Agent may place an appropriate notation on the
Security regarding the changed terms and return it to the Holder. Alternatively,
if the Company or the Agent so determines, the Company in exchange for the
Security shall issue new Security that reflects the changed terms. Failure to
make the appropriate notation or to issue a new Security shall not affect the
validity of such amendment.
SECTION 10.5 Agent To Sign Amendments. The Agent shall sign any amendment
authorized pursuant to this Article 10 if the amendment does not adversely
affect the rights, duties, liabilities or immunities of the Agent. If it does,
the Agent may but need not sign it. In signing such amendment the Agent shall be
entitled to receive indemnity reasonably satisfactory to it and to receive, and
(subject to Section 6.01) shall be fully protected in relying upon, an Officers'
Certificate and an Opinion of Counsel stating that such amendment is authorized
or permitted by this Agreement.
SECTION 10.6 Payment for Consent. Neither the Company nor any Affiliate of
the Company shall, directly or indirectly, pay or cause to be paid any
consideration, whether by way of interest, fee or otherwise, to any Holder for
or as an inducement to any consent, waiver or amendment of any of the terms or
provisions of this Agreement or the Securities unless such consideration is
offered to be paid to all Holders that so consent, waive or agree to amend in
the time frame set forth in solicitation documents relating to such consent,
waiver or agreement.
ARTICLE 11.
Miscellaneous
SECTION 11.1 Notices. Any notice or communication shall be in writing and
delivered in person or mailed by first-class mail, overnight delivery by a
nationally recognized overnight delivery service, or sent by facsimile
transmission addressed as follows:
if to the Company: 301 Congress Avenue 9th Floor
Austin, Texas 78701
Attn: Chairman
Fax: (512) 472-1548
Phone: (512) 472-3600
if to the Agent: 10900 Nuckols Road, Third Floor
Glen Allen, Virginia 23060
Attention: Master Servicing Department
Fax: (804) 217-5935
Phone: (804) 217-5800
if to Initial Holder: Dynex Capital, Inc.
10900 Nuckols Road, Third Floor
Glen Allen, Virginia 23060
Attention: Chief Financial Officer
Fax: (804) 217-5935
Phone: (804) 217-5800
The Company or the Agent by notice to the other may designate additional or
different addresses for subsequent notices or communications.
Any notice or communication mailed to a Securityholder shall be mailed to
the Securityholder at the Securityholder's address as it appears on the
registration books of the Registrar and shall be sufficiently given if so mailed
within the time prescribed.
Failure to mail a notice or communication to a Securityholder or any defect
in it shall not affect its sufficiency with respect to other Securityholders. If
a notice or communication is given in the manner provided above, it is duly
given, upon receipt or (a) for mail, three Business Days thereafter, and (b) for
overnight delivery on the following Business Day.
SECTION 11.2 Certificate and Opinion as to Conditions Precedent. Upon any
request or application by the Company to the Agent to take or refrain from
taking any action under this Agreement, the Company shall furnish to the Agent:
(1 an Officers' Certificate in form and substance reasonably satisfactory
to the Agent stating that, in the opinion of the signers, all conditions
precedent, if any, provided for in this Agreement relating to the proposed
action have been complied with; and
(2 an Opinion of Counsel in form and substance reasonably satisfactory to
the Agent stating that, in the opinion of such counsel, all such conditions
precedent have been complied with.
SECTION 11.3 Statements Required in Certificate or Opinion. Each
certificate or opinion with respect to compliance with a covenant or condition
provided for in this Agreement shall include:
(1 a statement that the individual making such certificate or opinion has
read such covenant or condition;
(2 a brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(3 a statement that, in the opinion of such individual, he has made such
examination or investigation as is necessary to enable him to express an
informed opinion as to whether or not such covenant or condition has been
complied with; and
(4 a statement as to whether or not, in the opinion of such individual,
such covenant or condition has been complied with.
SECTION 11.4 When Securities Disregarded. In determining whether the
Holders of the required principal amount of Securities have concurred in any
direction, waiver or consent, Securities owned by the Company or by any Person
directly or indirectly controlling or controlled by or under direct or indirect
common control with the Company shall be disregarded and deemed not to be
outstanding, except that, for the purpose of determining whether the Agent shall
be protected in relying on any such direction, waiver or consent, only
Securities which the Agent knows are so owned shall be so disregarded. Also,
subject to the foregoing, only Securities outstanding at the time shall be
considered in any such determination.
SECTION 11.5 Legal Holidays. A "Legal Holiday" is a Saturday, a Sunday or a
day on which banking institutions are not required to be open in the State of
New York or in Texas. If a payment date is a Legal Holiday, payment shall be
made on the next succeeding day that is not a Legal Holiday, and no interest
shall accrue for the intervening period. If a regular record date is a Legal
Holiday, the record date shall not be affected.
SECTION 11.6 Governing Law. This Agreement and the Securities shall be
governed by, and construed in accordance with, the laws of the State of New York
but without giving effect to applicable principles of conflicts of law to the
extent that the application of the laws of another jurisdiction would be
required thereby.
SECTION 11.7 No Recourse Against Others. A director, officer, employee or
stockholder, as such, of the Company shall not have any liability for any
obligations of the Company under the Securities or this Agreement or for any
claim based on, in respect of or by reason of such obligations or their
creation. By accepting a Security, each Securityholder shall waive and release
all such liability. The waiver and release shall be part of the consideration
for the issue of the Securities.
SECTION 11.8 Successors. All agreements of the Company in this Agreement
and the Securities shall bind its successors. All agreements of the Agent in
this Agreement shall bind its successors.
SECTION 11.9 Multiple Originals. The parties may sign any number of copies
of this Agreement. Each signed copy shall be an original, but all of them
together represent the same agreement. One signed copy is enough to prove this
Agreement.
SECTION 11.10 Table of Contents; Headings. The table of contents,
cross-reference sheet and headings of the Articles and Sections of this
Agreement have been inserted for convenience of reference only, are not intended
to be considered a part hereof and shall not modify or restrict any of the terms
or provisions hereof.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the date first written above.
AUTOBOND ACCEPTANCE CORPORATION
By:
Name:
Title:
DYNEX CAPITAL, INC.
By:
Name:
Title:
<PAGE>
EXECUTION COPY
AUTOBOND ACCEPTANCE CORPORATION
12% Convertible Senior Notes Due 2003
Senior Note Agreement
Dated as of June 9, 1998
DYNEX CAPITAL, INC.,
Agent
<PAGE>
Table of Contents
ARTICLE 1.Definitions and Incorporation by Reference.........................1
SECTION 1.01 Definitions 1
SECTION 1.02 Other Definitions......................................8
SECTION 1.03 Rules of Construction..................................8
ARTICLE 2.The Securities.....................................................9
SECTION 2.01 Form and Dating........................................9
SECTION 2.02 Execution..............................................9
SECTION 2.03 Registrar and Paying Agent.............................9
SECTION 2.04 Paying Agent10
SECTION 2.05 Securityholder Lists..................................10
SECTION 2.06 Transfer and Exchange.................................10
SECTION 2.07 Replacement Securities................................10
SECTION 2.08 Outstanding Securities................................11
SECTION 2.09 Temporary Securities..................................11
SECTION 2.10 Cancellation11
SECTION 2.11 Defaulted Interest....................................11
SECTION 2.12 Special Transfer Provisions...........................11
ARTICLE 3.Covenants.........................................................12
SECTION 3.01 Payment of Securities.................................12
SECTION 3.02 SEC Reports 12
SECTION 3.03 Limitation on Restricted Payments.....................12
SECTION 3.04 Further Assurances. .................................13
SECTION 3.05 Limitation on Investment Company Status...............13
ARTICLE 4.Successor Company.................................................13
SECTION 4.01 When Company May Merge or Transfer Assets.............13
ARTICLE 5.Defaults and Remedies.............................................14
SECTION 5.01 Events of Default.....................................14
SECTION 5.02 Acceleration16
SECTION 5.03 Other Remedies........................................16
SECTION 5.04 Waiver of Past Defaults...............................16
SECTION 5.05 Control by Majority...................................16
SECTION 5.06 Limitation on Suits...................................17
SECTION 5.07 Rights of Holders To Receive Payment..................17
SECTION 5.08 Collection Suit by Agent..............................17
SECTION 5.09 Agent May File Proofs of Claim........................17
SECTION 5.10 Priorities 18
SECTION 5.11 Undertaking for Costs.................................18
SECTION 5.12 Waiver of Stay or Extension Laws......................18
ARTICLE 6.The Agent.........................................................18
SECTION 6.01 Duties of The Agent...................................18
SECTION 6.02 Rights of Agent.......................................19
SECTION 6.03 Individual Rights of Agent............................20
SECTION 6.04 Agent's Disclaimer....................................20
SECTION 6.05 Notice of Defaults....................................20
SECTION 6.06 Compensation and Indemnity............................20
SECTION 6.07 Replacement of Agent..................................21
SECTION 6.08 Successor Agent by Merger.............................22
SECTION 6.09 Eligibility; Disqualification.........................22
ARTICLE 7.Discharge of Agreement............................................22
SECTION 7.01 Discharge of Liability on Securities..................22
SECTION 7.02 Repayment to Company..................................22
ARTICLE 8.Optional Conversion of Securities................................23
SECTION 8.01 Optional Conversion Privilege and Conversion Price...23
SECTION 8.02 Exercise of Optional Conversion Privilege............23
SECTION 8.03 Fractions of Shares..................................23
SECTION 8.04 Adjustment of Conversion Price.......................24
SECTION 8.05 Notice of Adjustments of Conversion Price............26
SECTION 8.06 Notice of Certain Corporate Action...................27
SECTION 8.07 Company to Reserve Common Stock......................27
SECTION 8.08 Taxes on Conversions.................................28
SECTION 8.09 Covenant as to Common Stock; Accounting Treatment of
Consideration........................................28
SECTION 8.10 Cancellation of Converted Securities.................28
SECTION 8.11 Provisions in Case of Consolidation, Merger or Sale
of Assets............................................28
SECTION 8.12 Registration and Listing of Shares...................29
SECTION 8.13. Agent and Conversion Agents Not Liable...............29
ARTICLE 9.[RESERVED].......................................................30
ARTICLE 10.Amendments......................................................30
SECTION 10.01 Without Consent of Holders...........................30
SECTION 10.02 With Consent of Holders..............................30
SECTION 10.03 Revocation and Effect of Consents and Waivers........31
SECTION 10.04 Notation on or Exchange of Securities................31
SECTION 10.05 Agent To Sign Amendments.............................31
SECTION 10.06 Payment for Consent..................................32
ARTICLE 11.Miscellaneous...................................................32
SECTION 11.01 Notices 32
SECTION 11.02 Certificate and Opinion as to Conditions Precedent...33
SECTION 11.03 Statements Required in Certificate or Opinion........33
SECTION 11.04 When Securities Disregarded..........................33
SECTION 11.05 Legal Holidays.......................................33
SECTION 11.06 Governing Law........................................34
SECTION 11.07 No Recourse Against Others...........................34
SECTION 11.08 Successors 34
SECTION 11.09 Multiple Originals ..................................34
SECTION 11.10 Table of Contents; Headings..........................34
Exhibit A - Form of Series A Note
Exhibit B - Form of Transferee Letter
Exhibit C - Form of Investment Letter
<PAGE>
Exhibit A
[FORM OF NOTE]
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS. BY ITS ACCEPTANCE
HEREOF, EACH PURCHASER REPRESENTS AND AGREES THAT THIS NOTE MAY NOT BE OFFERED,
SOLD, PLEDGED OR OTHERWISE TRANSFERRED, EXCEPT IN COMPLIANCE WITH THE
REGISTRATION PROVISIONS OF THE SECURITIES ACT AND ANY APPLICABLE PROVISIONS
UNDER STATE SECURITIES LAWS OR PURSUANT TO AN AVAILABLE EXEMPTION FROM SUCH
PROVISIONS. THE TRANSFER OF THIS NOTE IS SUBJECT TO CERTAIN CONDITIONS SET FORTH
IN THE AGREEMENT REFERRED TO HEREIN.
12% Convertible Se nior Note due 2003
No. $
AutoBond Acceptance Corporation, a corporation duly organized and existing
under the laws of Texas (herein called the "Company", which term includes any
successor corporation under the Agreement hereinafter referred to), for value
received, hereby promises to pay to Dynex Capital, Inc., or registered assigns,
the principal sum of $3,000,000 on June __, 1999 and to pay interest thereon
from June __, 1998 or from the most recent Interest Payment Date to which
interest has been paid, quarterly on March 1, June 1, September 1, and December
1 in each year, commencing September 1, 1998 (and upon the Stated Maturity), in
arrears at the rate of 12% per annum (14% after Stated Maturity), until the
principal hereof is paid. Payment of the principal of (and premium, if any) and
interest on this Security will be made by wire transfer in immediately available
funds to the Holder. Interest shall be computed on the basis of actual days
elapsed and a 360-day year consisting of twelve 30-day months.
This Security is one of a duly authorized issue of Securities of the
Company designated as its 12% Convertible Notes due 2003 (herein called the
"Securities"), limited in aggregate principal amount to $3,000,000, issued
pursuant to the Note Agreement, dated as of June 9, 1998 (herein called the
"Agreement"), between the Company and Dynex Capital, Inc., as Note Agent (herein
called the "Note Agent", which term includes any successor agent under the
Agreement), to which Agreement and all Agreements supplemental thereto reference
is hereby made for a statement of the respective rights, limitations of rights,
duties and immunities thereunder of the Company, the Agent and the Holders of
the Securities and of the terms upon which the Securities are, and are to be,
executed and delivered.
Optional Conversion. Subject to and upon compliance with the provisions of
the Agreement, the Holder of this Security is entitled, at such Holder's option,
at any time on or before the close of business on June __, 1999, or in case this
Security or a portion hereof is called for redemption, then in respect of this
Security or such portion hereof until and including, but (unless the Company
defaults in making the payment due upon redemption) not after, the close of
business on the Redemption Date, to convert up to the principal amount of this
Security (or any portion of the principal amount hereof which is $100,000 or an
integral multiple thereof in excess of $1,000), at the principal amount hereof,
or of such portion, into fully paid and nonassessable shares (calculated as to
each conversion to the nearest 1/100 of a share) of Common Stock of the Company
at a conversion price equal to $6.00 in aggregate principal amount of Securities
for each share of Common Stock (or at the current adjusted conversion price if
an adjustment has been made as provided in the Agreement) by surrender of this
Security, duly endorsed or assigned to the Company or in blank, to the Company,
accompanied by written notice to the Company that the holder hereof elects to
convert this Security and the portion hereof to be converted. Accrued and unpaid
interest to the date of conversion will be payable by the Company to the Holder.
No payment or adjustment is to be made on conversion for dividends on the Common
Stock issued on conversion. No fractions of shares or scrip representing
fractions of shares will be issued on conversion, but instead of any fractional
interest the Company shall pay a cash adjustment as provided in the Agreement.
The conversion price is subject to adjustment as provided in the Agreement. In
addition, the Agreement provides that in case of certain consolidations or
mergers to which the Company is a party or the transfer of substantially all of
the assets of the Company, the Agreement shall be amended, without the consent
of any holders of Securities, so that this Security, if then outstanding, will
be convertible thereafter, during the period this Security shall be convertible
as specified above, only into the kind and amount of securities, cash and other
property receivable upon the consolidation, merger or transfer by a holder of
the number of shares of Common Stock into which this Security might have been
converted immediately prior to such consolidation, merger or transfer (assuming
such holder of Common Stock failed to exercise any rights of election and
received per share the kind and amount of securities, cash or other property
received per share by a plurality of non-electing shares).
If an Event of Default shall occur and be continuing, the principal of all
the Securities and all other amounts due hereunder may be declared due and
payable in the manner and with the effect provided in the Agreement.
The Agreement permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Holders of the Securities under the Agreement at
any time by the Company and the Agent with the consent of the Holders of not
less than a majority in aggregate principal amount of the Securities at the time
outstanding. The Agreement also contains provisions permitting the Holders of
specified percentages in aggregate principal amount of the Securities at the
time outstanding, on behalf of the Holders of all the Securities, to waive
compliance by the Company with certain provisions of the Agreement and certain
past defaults under the Agreement and their consequences. Any such consent or
waiver by the Holder of this Security shall be conclusive and binding upon such
Holder and upon all future Holders of this Security and of any security issued
upon the registration of transfer hereof or in exchange herefor or in lieu
hereof, whether or not notation of such consent or waiver is made upon this
Security.
No reference herein to the Agreement and no provision of this Security or
of the Agreement shall alter or impair the right of the Holder, which is
absolute and unconditional, to receive payment of the principal of (and premium,
if any) and interest on this Security at the times, place and rate, and in the
coin or currency (i.e., U.S. Dollars), herein prescribed or to convert this
Security as provided in the Agreement.
As provided in the Agreement and subject to certain limitations therein set
forth, the transfer of this Security is registrable in the Security Register,
upon surrender of this Security for registration of transfer at the office or
agency of the Company, duly endorsed by, or accompanied by a written instrument
of transfer in form satisfactory to the Company and the Security Registrar duly
executed by, the Holder hereof or his attorney duly authorized in writing, and
thereupon one or more new Securities, of authorized denominations and for the
same aggregate principal amount, will be issued to the designated transferee or
transferees.
The Securities are issuable only in registered form without coupons in
denominations of $100,000 and any integral multiple of $1,000 in excess thereof.
As provided in the Agreement and subject to certain limitations therein set
forth, Securities are exchangeable for a like aggregate principal amount of
Securities of a different authorized denomination, as requested by the Holder
surrendering the same.
No service charge shall be made for any such registration of transfer or
exchange, but the Company may require payment of a sum sufficient to cover any
tax or other governmental charge payable in connection therewith.
Prior to due presentment of this Security for registration of transfer, the
Company, the Note Agent and any agent of the Company or the Note Agent may treat
the Person in whose name this Security is registered as the owner hereof for all
purposes, whether or not this Security be overdue, and neither the Company, the
Note Agent nor any such agent shall be affected by notice to the contrary.
This Security shall be governed by the laws of the State of New York
(without reference to choice of law rules).
All terms used in this Security which are defined in the Agreement shall
have the meanings assigned to them in the Agreement.
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed.
Dated: June 9, 1998
AUTOBOND ACCEPTANCE CORPORATION
By
Name:
Title:
<PAGE>
[Form of Election to Convert]
To AutoBond Acceptance Corporation:
The undersigned owner of this Security hereby irrevocably exercises the
option to convert this Security, or the portion below designated, into shares of
Common Stock of AutoBond Acceptance Corporation in accordance with the terms of
the Agreement referred to in this Security, and directs that the shares issuable
and deliverable upon conversion, together with any check in payment for
fractional shares, be issued in the name of and delivered to the undersigned
registered Holder hereof, unless a different name has been indicated in the
assignment below. If shares are to be issued in the name of a person other than
the undersigned, the undersigned will pay all transfer taxes payable with
respect thereto. Any amount required to be paid by the undersigned on account of
interest accompanies this Security.
Dated:
Portion of Security to be converted
($1,000 or an integral multiple thereof):
$
Signature ( for conversion only) If shares of
Common Stock are to be issued and registered
otherwise than to the registered Holder named
above, please print or typewrite name and address,
including zip code, and social security or other
taxpayer identifying number.
Exhibit 99.1
JOINT FILING AGREEMENT
In accordance with Rule 13d-1(k)(1)(iii) of Regulation 13D-G of the
Securities Exchange Act of 1934, as amended, the undersigned hereby agree to the
joint filing on behalf of each of them of a statement on Schedule 13D with
respect to the Common Stock, no par value, of AutoBond Acceptance Corporation,
and that this Agreement be included as an Exhibit to such joint filing. This
Agreement may be executed in any number of counterparts all of which taken
together shall constitute one and the same instrument. IN WITNESS WHEREOF, the
undersigned hereby execute this Agreement this 19th day of June, 1998.
DYNEX HOLDING, INC.
Dated: June 19, 1998 By: s/ Stephen J. Benedetti
Stephen J. Benedetti
Vice President and Treasurer
DYNEX CAPITAL, INC.
Dated: June 19, 1998 By: s/ Stephen J. Benedetti
Vice President and Treasurer
