Warrant Agreements

Exhibit 10.3


WARRANT AGREEMENT


BETWEEN


NATIONSBANK, N.A.


AND


BREED TECHNOLOGIES, INC.


October 30, 1997


TABLE OF CONTENTS


ARTICLE 1 CERTAIN DEFINITIONS..........................................1


ARTICLE 2 ORIGINAL ISSUE OF WARRANTS...................................3
2.1 Form of Warrant Certificates.................................3
2.2 Legend.......................................................3
2.3 Delivery of the Warrants.....................................4


ARTICLE 3 EXERCISE OF WARRANTS.........................................4
3.1 Exercise of Warrants; Increase in Warrants...................4
3.2 Exercise Price...............................................5
3.3 Restrictions on Exercise; Expiration.........................5
3.4 Method of Exercise; Payment of Exercise Price................5
3.5 Dividends and Distributions..................................6


ARTICLE 4 ADJUSTMENTS..................................................6
4.1 Adjustments..................................................6
4.2 Below Market Price Issuances.................................8
4.3 Notice of Adjustment........................................10
4.4 Statements in the Warrants..................................10
4.5 Notice of Consolidation, Merger or Sale of Assets...........10
4.6 Fractional Interests........................................11
4.7 No Dilution or Impairment...................................11


ARTICLE 5 RESERVATION AND AUTHORIZATION OF COMMON SHARES,
ETC.........................................................11
5.1 Reservation and Authorization...............................11
5.2 Covenant Regarding Securities...............................11
5.3 Registration................................................12
5.4 S-3 Eligibility.............................................12


ARTICLE 6 WARRANT TRANSFER BOOKS: RESTRICTIONS ON TRANSFER............12
6.1 Transfer and Exchange.......................................12
6.2 Special Transfer Provisions.................................13
6.3 Surrender of a Warrant Certificate..........................13


ARTICLE 7 OPTIONS.....................................................13
7.1 Option to Redeem Warrants...................................13


ARTICLE 8 REGISTRATION RIGHTS.........................................14
8.1 Registration by the Corporation.............................14
8.2 Registration Procedures and Expenses........................14
8.3 Indemnification.............................................15
8.4 Conflicting Rights..........................................17
8.5 Termination.................................................17
8.6 Registration on Form S-3....................................17


ARTICLE 9 MISCELLANEOUS...............................................17
9.1 Loss or Mutilation..........................................17
9.2 Payment of Taxes............................................18
9.3 No Merger, Consolidation or Sale of Assets or the Corporation.18


9.4 Notices.....................................................18
9.5 Governing Law...............................................19
9.6 Assignment; Successors......................................19
9.7 Counterparts................................................19
9.8 Amendments..................................................19
9.9 Headings....................................................20
9.10 Third Party Beneficiaries...................................20
9.11 Severability................................................20
9.12 No Inconsistent Agreements..................................20


EXHIBIT A WARRANT CERTIFICATE.........................................22


WARRANT AGREEMENT


WARRANT AGREEMENT, dated as of October 30, 1997 (this "Agreement"), between BREED TECHNOLOGIES, INC. a Delaware corporation (the "Corporation"), and NATIONSBANK, N.A. ("NationsBank").


Pursuant to the terms of a Credit Agreement dated October 30, 1997, NationsBank, N.A. as agent (the "Agent") and as a Lender has agreed to make available to the Corporation loans of up to $900,000,000 (the "Loans") which Loans are to be evidenced by Notes of the Corporation in favor of the Lenders (the "Notes"). In order to induce NationsBank to agree to make the Loans, the Corporation agreed to issue to NationsBank warrants (the "Warrants") exercisable for Common Stock, $.01 par value per share of the Corporation (the "Common Stock").


Initially, the Corporation is authorizing the issuance to NationsBank of 3,000,000 Warrants to purchase a total of 3,000,000 shares of Common Stock (the "Warrant Shares") of the Corporation under the terms and conditions hereof, which amount is subject to increase as provided herein. Each Warrant shall entitle the holder thereof to purchase one share of Common Stock, subject to adjustment as provided herein.


In consideration of the foregoing and of the agreements contained in the Credit Agreement, and for the purpose of defining the terms and provisions of the Warrants and Warrant Shares and the respective rights and obligations thereunder of the Corporation and the Holder(s) (as defined herein), the Corporation and NationsBank hereby agree as follows:


ARTICLE 1


CERTAIN DEFINITIONS


For all purposes of this Agreement, except as otherwise expressly provided:


(a) the terms defined in this Article 1 have the meanings assigned to them in this Article, and include the plural as well as the singular; and


(b) the words "herein," "hereof" and "hereunder," and other words of similar import, refer to this Agreement as a whole and not to any particular article, section or other subdivision.


"Additional Warrants" has the meaning set forth in Section 3.1 hereof.


"Affiliate" means, as to any person, any other person which directly or indirectly controls, or is under common control with, or is controlled by, such person. For purposes of this definition, "control" (including, with correlative meanings, the terms "controlling," "under common control with" and "controlled by"), and 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 stock, by agreement or otherwise; provided, however, that beneficial ownership of 5% or more of the voting stock of a person shall be deemed to be control.


"Appraised Market Value" shall mean the market value of the Common Stock as agreed by the Corporation and the affected Holder(s) of the Warrants, or if the Corporation and such Holder(s) cannot agree, as determined by a valuation by an investment banking company suitable to the Corporation and such Holder(s). In the event the parties cannot agree on an investment banking company to perform the valuation described above, the Corporation and such Holder(s) shall each select an investment banking company and the two investment banking companies so selected shall select a third investment banking company which shall determine the Appraised Market Value. In determining the Appraised Market Value of the Common Stock, no discount shall be applied because the shares of Common Stock


held by the holders thereof (a) have not been registered under the Securities Act, or (b) represent a minority interest in the Corporation. The fees and expenses of the investment banking company or companies shall be borne by the Corporation.


"Board of Directors" means the board of directors of the Corporation.


"Board Resolution" means a copy of a resolution certified by the Secretary or any Assistant Secretary of the Corporation to have been duly adopted by the Board of Directors.


"Business Day" means any day which is not a Saturday, Sunday or a day on which banking institutions in the States of New York and Florida are not authorized or obligated by law, executive order, regulation or governmental decree to close.


"Commission" means the Securities and Exchange Commission.


"Common Stock" has the meaning set forth in the preamble hereto.


"Corporation" has the meaning set forth in the preamble hereto.


"Credit Agreement" has the meaning set forth in the preamble hereto.


"Exchange Act" means the Securities Exchange Act of 1934, as amended, and the rules and regulations of the Commission promulgated thereunder.


"Exercise Price" has the meaning set forth in Section 3.2 hereof.


"Expiration Date" means October 30, 2000.


"Holders" means the holders from time to time of the Warrants or Warrant Shares issued upon exercise of the Warrants.


"Issue Date" means the date of the original issuance of the Warrants.


"Market Price" means the closing price of a share of Common Stock on the principal national securities exchange (including the Nasdaq National Market) on which the shares of Common Stock are listed or admitted to trading as reported in The Wall Street Journal or, if not listed or admitted to trading on any national securities exchange (including the Nasdaq National Market), the average of the bid and asked prices in the over-the-counter market as furnished by Nasdaq, or, if the shares of Common Stock are not publicly traded, the Appraised Market Value.


"NationsBank" has the meaning set forth in the preamble hereto.


"Notes" has the meaning set forth in the preamble hereof.


"Private Placement Legend" means the legend in the form set forth in Section 2.2 hereof.


"Registration Expenses" has the meaning set forth in Section 8.2 hereof.


"Registrable Securities" shall mean the Warrant Shares.


"Rights" means rights, options or warrants for the purchase of, or securities convertible into or exchangeable for, Common Stock.


"Securities Act" means the Securities Act of 1933, as amended, and the rules and regulations of the Commission promulgated thereunder.


"Warrants" have the meaning set forth in the preamble hereto.


"Warrant Certificates" have the meaning set forth in Section 2.1 hereof.


"Warrant Shares" have the meaning set forth in the preamble hereto.


ARTICLE 2 ORIGINAL ISSUE OF WARRANTS


2.1 Form of Warrant Certificates. Any certificate representing the Warrants (a "Warrant Certificate"), the form of which is attached hereto as Exhibit A, shall be detachable from this Agreement, the Credit Agreement and any Notes and shall be dated the date on which it is signed by a duly authorized officer of the Corporation and shall have such insertions as are appropriate or required or permitted by this Agreement and may have such letters, numbers or other marks of identification as the Corporation may deem appropriate and as are not inconsistent with the provisions of this Agreement.


2.2 Legend. Each Warrant Certificate and, until registered or an exemption from registration is available, each certificate representing securities acquired upon exercise of the Warrants shall bear the following legend on the face thereof:


THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "SECURITIES ACT"). THE SECURITIES MAY NOT BE SOLD, TRANSFERRED, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OR AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE ACT.


2.3 Delivery of the Warrants.


This Agreement authorizes the initial issuance of 3,000,000 Warrants which amount is subject to increase as provided in Section 3.1. On the Closing Date (as defined in the Credit Agreement), the Corporation shall issue to NationsBank in connection therewith (but detachable therefrom) a Warrant Certificate for 3,000,000 Warrants.


If Additional Warrants become authorized under Section 3.1, the Corporation shall promptly issue and deliver to NationsBank a Warrant Certificate for the Additional Warrants.


ARTICLE 3 EXERCISE OF WARRANTS


3.1 Exercise of Warrants; Increase in Warrants.


(a) Subject to the limitations and adjustments as provided herein, on or before the Expiration Date, the Warrants may be exercised on any Business Day as to all or any portion of the Warrant Shares for which the Warrants are then exercisable as follows: (a) as of the date of this Agreement and the issuance of the Warrant Certificate, the number of Warrants which may be exercised pursuant to this Agreement, and the number of Warrant Shares issuable


upon exercise of such Warrants, shall be 250,000; (b) in the event the Corporation shall not have paid in full its Obligations (as defined in the Credit Agreement) on or prior to January 27, 1998, the number of Warrants which may be exercised pursuant to this Agreement, and the number of Warrant Shares issuable upon exercise of such Warrants, shall be automatically increased to 1,000,000 effective as of January 27, 1998 unless the Corporation (i) shall have furnished NationsBank a Plan (as defined in the Credit Agreement) and (ii) shall be in receipt of not less than $300,000,000 of permanent capital [excluding indebtedness] (over September 24, 1997 levels) on terms reasonably acceptable to NationsBank; (c) in the event the Corporation shall not have paid in full its Obligations (as defined in the Credit Agreement) (or if a binding commitment to refinance and/or repay the obligations arising under the Credit Agreement does not exist) on or prior to April 27, 1998, the number of Warrants which may be exercised pursuant to this Agreement, and the number of Warrant Shares issuable upon exercise of such Warrants, shall be automatically increased to 2,000,000 effective as of April 27, 1998; and (d) in the event the Corporation shall not have paid in full its Obligations (as defined in the Credit Agreement) on or prior to July 26, 1998, (or if a binding commitment to refinance and/or repay the obligations arising under the Credit Agreement does not exist), the number of Warrants which may be exercised pursuant to this Agreement, and the number of Warrant Shares issuable upon exercise of such Warrants, will be automatically increased to 3,000,000 effective as of July 26, 1998.


(b) If the Corporation shall not have paid in full its Obligations (as defined in the Credit Agreement) on or prior to July 31, 1998, the number of Warrants granted hereunder shall increase and the Holders shall be entitled to immediately exercise and purchase under the terms of this Agreement an amount of Warrant Shares equal to (x) 7.7% of all shares of Common Stock outstanding or deemed outstanding on a fully diluted basis on July 31, 1998 less (y) 3,000,000 (the "Additional Warrants").


For purposes of calculating the number of shares of Common Stock outstanding on July 31, 1998, the number of shares of Common Stock issuable in connection with the exercise of conversion rights of the holders of (i) the Corporation's Series A Preference shares (the "Series A Preference Shares") and (ii) the Breed Capital Trust ____% Convertible Trust Preferred Securities (the "Trust Preferred Securities") or if the Trust Preferred Securities have not been issued then 4,000,000 shares of Common Stock issuable upon conversion of the Corporation's Series B Preference Shares (the "Series B Preference Shares") shall be deemed to be outstanding, whether or not such conversion rights are then exercisable or have been exercised.


3.2 Exercise Price. Initially, the Warrant Certificates shall entitle the Holders thereof, subject to the provisions of this Agreement, to purchase an aggregate of 3,000,000 Warrant Shares at a per share purchase price (the "Exercise Price") determined as follows, subject to adjustment as provided in Article 4 hereof:


The Exercise Price for the 250,000 Warrant Shares exercisable as of the date of this Agreement shall be $23.125. The Exercise Price for the remaining Warrant Shares shall be the Market Price of the Common Stock on the day the Warrants for such Warrant Shares become exercisable under the provisions of Section 3.1.


The Exercise Price for any additional Warrant Shares to be subject to the Additional Warrants shall be the Market Price of the Common Stock on July 31, 1998.


Once established for a number of Warrant Shares, the Exercise Price for those shares shall not be adjusted by reason of any later increase in the total number of Warrants which may be exercised by the Holders.


3.3 Restrictions on Exercise; Expiration. On or before the Expiration Date, the Warrants may be exercised on any Business Day as to all or any portion of the Warrant Shares. If any of the Warrants are not exercised by 5:00 p.m., New York City time, on the Expiration Date, this Agreement and unexercised Warrants shall expire and all rights of the Holders hereunder and thereunder shall terminate unless otherwise provided herein or therein.


3.4 Method of Exercise; Payment of Exercise Price.


(a) In order to exercise all or any of the Warrants, the Holder thereof must provide written notice to the Corporation at its address set forth in Section 9.4 hereof specifying the number of Warrants being exercised. Such notice shall be accompanied by one or more Warrant Certificates representing not less than the number of Warrants being exercised, together with payment in full of the per share Exercise Price multiplied by the number of Warrant Shares to be purchased pursuant to the exercise. The Exercise Price shall be payable, at the option of the Holder, (i) by wire transfer, certified check, official bank check or bank cashier's check payable to the order of the Corporation, or (ii) by the surrender of Warrants exercisable for a number of shares having an aggregate Market Price as of the date of surrender equal to the aggregate Exercise Price of all Warrants covered thereby. If the number of Warrants being exercised is less than the number of Warrants represented by the Warrant Certificate(s) tendered in connection with the exercise, the Corporation shall issue new Warrant Certificate(s) for the unexercised Warrants in accordance with instructions contained in the notice of exercise and this Agreement.


(b) Upon exercise of any Warrant in conformity with the foregoing provisions, the Corporation shall (i) transfer promptly to, or upon the written order of the Holder of such Warrant, appropriate evidence of ownership of any Warrant Shares or other securities or property (including money) to which it is entitled, registered or otherwise placed in such name or names as may be directed in writing by the Holder thereof, (ii) deliver such evidence of ownership and any other securities or property (including money) to the person or persons entitled to receive the same, and (iii) reissue, as the case may be, a Warrant Certificate for any unexercised Warrants. A Warrant shall be deemed to have been exercised immediately prior to the close of business on the date of the surrender for exercise of the Warrant Certificate representing such Warrant being exercised and, for all purposes of this Agreement, the person entitled to receive any Warrant Shares or other securities or property deliverable upon such exercise shall, as between such person and the Corporation, be deemed to be the Holder of such Warrant Shares or other securities or property of record as of the close of business on such date and shall be entitled to receive any Warrant Shares or other securities or property (including money) to which such person would have been entitled had such person been the record holder of such Warrant Shares or other securities or property on such date.


3.5 Dividends and Distributions. For so long as any of the Warrants remain outstanding and unexercised, the Corporation will, upon the declaration of a cash dividend upon its Common Stock or other distribution to the holders of its Common Stock (other than a dividend payable in shares of the Corporation's Common Stock) and at least 20 days prior to the record date, notify the Holders of such declaration, which notice will contain, at a minimum, the following information: (i) the date of the declaration of the dividend or distribution, (ii) the amount of such dividend or distribution, (iii) the record date of such dividend or distribution, (iv) the payment date or distribution date of such dividend or distribution, and (v) the Corporation's best estimate of the frequency and amount of cash dividends or other distributions (other than a dividend payable in shares of the Corporation's Common Stock) to be paid or made in each of the succeeding three years.


ARTICLE 4 ADJUSTMENTS


4.1 Adjustments. The Exercise Price and the number of Warrant Shares issuable upon exercise of each Warrant shall be subject to adjustment from time to time as follows:


(a) Adjustments for Change in Common Stock. If the Corporation at any time after the date hereof (i) declares a dividend payable in shares of the Corporation's Common Stock, (ii) subdivides its outstanding shares of Common Stock into a larger number of shares or (iii) combines its outstanding shares of Common Stock into a smaller number of shares, the number and kind of Warrant Shares issuable upon exercise of each Warrant, at the time of the record date for such dividend or of the effective date of such subdivision or combination shall be proportionately adjusted so that the Holder of any Warrant exercised after such time shall be entitled to receive the


aggregate number and kind of shares of Common Stock which, if such Warrant had been exercised immediately prior to such date, such Holder would have owned upon such exercise and been entitled to receive by virtue of such dividend, subdivision or combination. An adjustment made pursuant to this Section 4.1(a) shall become effective immediately after the effective date of such subdivision or combination. Such adjustment shall be made successively whenever any such event shall occur.


If at any time, as a result of an adjustment made pursuant to this Section 4.1(a), the Holder of any Warrant thereafter exercised becomes entitled to receive any securities other than shares of Common Stock, the number of such other securities so receivable upon exercise of such Warrant shall be subject to adjustment from time to time in a manner and on terms as nearly equivalent as practicable to the provisions with respect to the Warrant Shares contained in this Section 4.1, and the provisions of this Agreement with respect to the Warrant Shares shall apply on like terms to any such other securities.


(b) De Minimis Adjustments. No adjustment in the Exercise Price or number of Warrant Shares purchasable upon exercise of any Warrant pursuant to this Section 4.1 or Section 4.2 below shall be required unless such adjustment would require an increase or decrease of at least one-tenth of one percent in the Exercise Price or number of Warrant Shares purchasable upon the exercise of each Warrant, as the case may be; provided, however, that any adjustments which by reason of this Section 4.1(b) are not required to be made shall be carried forward and taken into account in any subsequent adjustment.


(c) Adjustment of Exercise Price. Whenever the number of Warrant Shares purchasable upon the exercise of each Warrant is adjusted, as herein provided, the Exercise Price per Warrant Share payable upon exercise of each Warrant shall be adjusted (calculated to the nearest $.0001) so that it shall equal the price determined by multiplying such Exercise Price immediately prior to such adjustment by a fraction, the numerator of which shall be the number of shares purchasable upon the exercise of each Warrant immediately prior to such adjustment, and the denominator of which shall be the number of shares so purchasable immediately thereafter.


(d) Consolidation, Merger or Sale of Assets; Liquidation.


(i) Subject to the provisions of Section 4.1(d)(ii) below, in the event that, at any time after the date of this Agreement, the Corporation consolidates with, merges with or into, or sells, transfers or otherwise disposes of all or substantially all of its property and assets to, any person, and in connection therewith consideration is payable to holders of shares of Common Stock, the Warrants shall remain subject to the terms and conditions set forth in this Agreement and each Warrant shall, after such consolidation, merger or sale, entitle the Holder thereof to receive, upon exercise, the number of shares of capital stock or other securities or property (including cash) of the Corporation, or of such person resulting from such consolidation or surviving such merger or to which such sale shall be made, that would have been distributable or payable on account of the shares of Common Stock (or other securities or property purchasable upon exercise of the Warrants) if the Warrants had been exercised immediately prior to such merger, consolidation or sale (or, if applicable, any record date therefor); and, in any such case, the provisions of this Agreement with respect to the rights and interests thereafter of the Holders shall be appropriately adjusted by the Board of Directors, in good faith, as evidenced by a Board Resolution, so as to be applicable, as nearly as reasonably possible, to any shares of stock or other securities or any property thereafter deliverable on the exercise of the Warrants.


(ii) Notwithstanding the provisions of Section 4.1(d)(i) above, (A) if the Corporation consolidates with, merges with or into, or sells all or substantially all of its property and assets to, any person, and consideration is payable to holders of shares of Common Stock in exchange for their shares of Common Stock in connection with such merger, consolidation or sale which consists solely of cash, or (B) in the event of the dissolution, liquidation or winding-up of the Corporation, then the Holders shall receive per share distributions at the same time and on an equal basis with holders of shares of Common Stock (or other


securities or property purchasable upon exercise of the Warrants) as if the Warrants had been exercised immediately prior to such event (or, if applicable, any record date therefor), less the per share Exercise Price. Upon receipt of such payment, with respect to the Warrants in respect of which such payment was received, the rights of the Holders shall terminate except as expressly provided herein or in the Warrant Certificate and such Warrants shall expire. The Holders shall promptly deliver such Warrant Certificates to the Corporation for cancellation. In the case of any such merger, consolidation or sale of assets, the surviving or acquiring person or, in the event of any dissolution, liquidation or winding up of the Corporation, the ...