EXHIBIT 10.3
EXECUTION COPY
WARRANT
to Purchase Common Stock of
ACCREDITED HOME LENDERS HOLDING CO.
Warrant No. F-1
Original Issue Date: March 30, 2007
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TABLE OF CONTENTS
PAGE
1. DEFINITIONS
1
2. EXERCISE OF WARRANT
7
2.1. Manner of Exercise.
7
2.2. Payment of Taxes.
8
2.3. Fractional Shares.
9
3. TRANSFER, DIVISION AND COMBINATION
9
3.1. Transfer.
9
3.2. Division and Combination.
9
3.3. Expenses.
9
3.4. Maintenance of Books.
9
4. ANTIDILUTION PROVISIONS
9
4.1. Stock Dividends, Subdivisions and Combinations.
10
4.2. Issuance of Additional Shares of Common Stock.
10
4.3. Issuances of Stock Purchase Rights and Convertible Securities.
10
4.4. Adjustment of Number of Shares Purchasable.
12
4.5. Reorganization, Reclassification, Merger, Consolidation or Disposition of Assets.
12
4.6. Determination of Consideration.
13
4.7. Other Dilutive Events.
14
4.8. Other Provisions Applicable to Adjustments Under this Section.
14
4.9. Additional Adjustment for Certain Dividends.
15
5. NO IMPAIRMENT
16
6. RESERVATION AND AUTHORIZATION OF COMMON STOCK; REGISTRATION WITH OR APPROVAL OF ANY GOVERNMENTAL AUTHORITY
16
7. NOTICE OF CORPORATE ACTIONS; TAKING OF RECORD; TRANSFER BOOKS
16
7.1. Notices of Corporate Actions.
17
7.2. Taking of Record.
17
7.3. Closing of Transfer Books.
17
8. PUT RIGHTS.
17
8.1. Put and Call Rights.
17
8.2. Consents and Approvals.
18
9. TRANSFER
18
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9.1. Restrictions on Transfer.
18
9.2. Restrictive Legends.
18
9.3. Termination of Securities Law Restrictions.
19
9.4. Listing on Securities Exchange.
20
9.5. Nominees for Beneficial Owners.
20
10. SUPPLYING INFORMATION; RULE 144
20
11. LOSS OR MUTILATION
20
12. OFFICE OF THE COMPANY
21
13. NO RIGHTS AS A STOCKHOLDER
22
14. MISCELLANEOUS
23
14.1. Nonwaiver.
23
14.2. Notice Generally.
23
14.3. Indemnification.
23
14.4. Limitation of Liability.
24
14.5. Remedies.
24
14.6. Successors and Assigns.
24
14.7. Amendment.
24
14.8. Severability.
24
14.9. Headings.
24
14.10. GOVERNING LAW; JURISDICTION.
24
ANNEXES AND SCHEDULES:
ANNEX A 96 Subscription Form
ANNEX B 96 Assignment Form
SCHEDULE A 96 Applicable Licensing laws
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NEITHER THE WARRANTS REPRESENTED BY THIS CERTIFICATE NOR ANY OF THE SECURITIES ISSUABLE UPON EXERCISE THEREOF HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE " ACT"), OR ANY STATE SECURITIES LAW. NO TRANSFER OF THE WARRANTS REPRESENTED BY THIS CERTIFICATE OR OF THE SECURITIES ISSUABLE UPON EXERCISE THEREOF SHALL BE VALID OR EFFECTIVE UNLESS SUCH TRANSFER IS MADE PURSUANT TO (A) AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR (B) AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE ACT, AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS.
Warrant No. F-1
WARRANT
ACCREDITED HOME LENDERS HOLDING CO.
THIS IS TO CERTIFY THAT MORTGAGE INVESTMENTS FUNDING, L.L.C., or registered assigns, is entitled, at any time prior to the Expiration Date (such term, and certain other capitalized terms used herein being hereinafter defined), to purchase from ACCREDITED HOME LENDERS HOLDING CO., a Delaware corporation (the " Company"), three million two hundred and twenty-six thousand four hundred and thirty-one (3,226,431) shares of the Common Stock of the Company (subject to adjustment as provided herein), at a purchase price of $10.00 per share (the initial " Exercise Price", subject to adjustment as provided herein), all on the terms and conditions and pursuant to the provisions hereinafter set forth.
1. DEFINITIONS
As used in this Warrant, the following terms have the respective meanings set forth below:
" Affiliate" of any Person means a Person (a) which directly or indirectly through one or more intermediaries controls, or is controlled by, or is under common control with such Person, (b) which beneficially owns or holds more than five percent (5.0%) of the outstanding shares of any class of voting stock of such Person or (c) more than five percent (5.0%) of the outstanding shares of any class of voting stock (or, in the case of a Person which is not a corporation, more than five percent (5.0%) of the equity interest) of which is beneficially owned or held by such Person. The term " control" as used with respect to any Person means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities, by contract or otherwise.
" After-Tax Basis" when referring to a payment that is required hereunder (the " target amount"), shall mean a total payment (the " total amount") that, after deduction of all federal, state and local taxes that are required to be paid by the recipient in respect of the receipt or accrual of such total amount, is equal to the target amount.
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" Agreed Rate" shall mean 13% per annum.
" Applicable Licensing Laws" shall have the meaning set forth in Section 2.1(a).
" Appraised Value" per share of Common Stock as of a date specified herein shall mean the value of such a share as of such date as determined by an investment bank of nationally recognized standing selected jointly by the Majority Warrant Holders and the Company. If the Company and the Majority Warrant Holders cannot agree on a mutually acceptable investment bank, then the Company and the Majority Warrant Holders shall each choose one such investment bank and the respective chosen firms shall jointly select a third investment bank, which shall make the determination. The Company shall pay the costs and fees of each such investment bank (including any such investment bank selected by the Majority Warrant Holders), and the decision of the investment bank making such determination of Appraised Value shall be final and binding on the Company and all affected holders of Warrants or Warrant Stock. Such Appraised Value shall be determined as a pro rata portion of the value of the Company taken as a whole, based on the higher of (A) the value derived from a hypothetical sale of the entire Company as a going concern by a willing seller to a willing buyer (neither acting under any compulsion) and (B) the liquidation value of the entire Company. No discount shall be applied on account of (i) any Warrants or Warrant Stock representing a minority interest, (ii) any lack of liquidity of the Common Stock or the Warrants, (iii) the fact that the Warrants or Warrant Stock may constitute "restricted securities" for securities law purposes or (iv) the existence of the call option set forth in Section 8.1.
" Bid Price" shall mean the amount of cash and the fair value of any other consideration offered to be paid per share of Common Stock in any Change of Control Event, as determined in good faith by the Company92s Board of Directors.
" Book Value" per share of Common Stock as of a date specified herein shall mean the consolidated book value of the Company and its Subsidiaries as of such date divided by the number of shares of Common Stock Outstanding on such date. Such book value shall be determined in accordance with GAAP, except that there shall be no reduction in such book value by reason of any amount that may be required either as an offset to or reserve against retained earnings or as a deduction from book value as a result of the issuance, existence, anticipated exercise of, or anticipated cost to the Company of the repurchase of, any of the Warrants.
" Business Day" shall mean any day that is not a Saturday or Sunday or a day on which banks are required or permitted to be closed in the State of New York or California.
" Change of Control Event" shall mean shall mean the first to occur of any of the following events:
(i) the entry by the Company into a merger agreement or any other agreement pursuant to which any "person" or related "group" of "persons" (as such terms are used in Sections 13(d) and 14(d)(2) of the Exchange Act directly or indirectly acquires beneficial ownership (within the meaning of Rule 13d-3 under the Exchange Act) of securities of the Company possessing more than 50% of the total combined voting power of the Company92s securities outstanding immediately after such acquisition;
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(ii) the entry by the Company into any agreement for a sale of all or substantially all of its consolidated assets or the entry by the Company or any Subsidiary of the Company for a sale of all or substantially all of the equity securities or assets of the REIT, Accredited Home Lenders, Inc., or any successor or assigns to their respective businesses or assets that is an Affiliate of the Company;
(iii) the commencement of any tender or exchange offer for shares of capital stock of the Company which, if successful, would result in the acquisition by a Person of shares of capital stock of the Company possessing more than 50% of the total combined voting power of the Company92s shares of capital stock outstanding immediately after such acquisition; or
(iv) any public announcement by the Company of any of the foregoing.
" Commission" shall mean the Securities and Exchange Commission or any other federal agency then administering the Securities Act and other federal securities laws.
" Common Stock" shall mean (except where the context otherwise indicates) the Common Stock of the Company, par value $0.001 per share, as constituted on the Original Issue Date, and any capital stock into which such Common Stock may thereafter be changed, and shall also include (i) capital stock of the Company of any other class (regardless of how denominated) issued to the holders of shares of any Common Stock upon any reclassification thereof which is also not preferred as to dividends or liquidation over any other class of stock of the Company and which is not subject to redemption and (ii) shares of common stock of any successor or acquiring corporation (as defined in Section 4.5) received by or distributed to the holders of Common Stock of the Company in the circumstances contemplated by Section 4.5.
" Company" means Accredited Home Lenders Holding Co., a Delaware corporation, and any successor corporation.
" Company Default" means (a) the breach of any warranty or the inaccuracy at the time when made of any representation made by the Company herein or (b) the failure by the Company to comply with any covenant of the Company contained herein.
" Convertible Securities" shall mean evidences of indebtedness, shares of stock or other securities that are convertible into or exchangeable for, with or without payment of additional consideration in cash or property, shares of Common Stock, either immediately or upon the occurrence of a specified date or a specified event.
" Current Market Price" shall mean as of any specified date the volume weighted average price of the Common Stock of the Company for the ten (10) consecutive Business Days immediately preceding such date; provided that if the volume weighted average price of the Common Stock of the Company is not available, then the Current Market Price shall mean as of any specified date the average daily market price of the Common Stock of the Company for the ten (10) consecutive Business Days immediately preceding such date. The "daily market price" for each such Business Day shall be: (i) if the Common Stock is then listed on a national
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securities exchange or is listed on NASDAQ, the last sale price, regular way, on such day on the principal stock exchange or market system on which such Common Stock is then listed or admitted to trading, or, if no such sale takes place on such day, the average of the closing bid and asked prices for the Common Stock on such day as reported on such stock exchange or market system or (ii) if the Common Stock is not then listed or admitted to trading on any national securities exchange or on NASDAQ but is traded over-the-counter, the average of the closing bid and asked prices for the Common Stock as reported on the OTC Bulletin Board or by Pink Sheets LLC, as applicable.
" Designated Office" shall have the meaning set forth in Section 12.
" Exchange Act" shall mean the Securities Exchange Act of 1934, as amended, or any similar federal statute, and the rules and regulations of the Commission thereunder, all as the same shall be in effect from time to time.
" Exercise Date" shall have the meaning set forth in Section 2.1(a).
" Exercise Notice" shall have the meaning set forth in Section 2.1(a).
" Exercise Period" shall mean the period during which this Warrant is exercisable pursuant to Section 2.1.
" Exercise Price" shall mean, in respect of a share of Common Stock at any date herein specified, the initial Exercise Price set forth in the preamble of this Warrant as adjusted from time to time pursuant to Section 4.
" Expiration Date" shall mean the tenth anniversary of the Original Issue Date.
" Fair Value" per share of Common Stock as of any specified date shall mean (i) if the Common Stock is publicly traded on such date, the Current Market Price per share or (ii) if the Common Stock is not publicly traded on such date, (x) the fair market value per share of Common Stock as determined in good faith by the Board of Directors of the Company and set forth in a written notice to each Holder or (y) if any such Holder objects in writing to such price as determined by the Board of Directors within fifteen (15) days after receiving notice of same, the Appraised Value per share as of such date.
" Fully Diluted Outstanding" shall mean, when used with reference to Common Stock, at any date as of which the number of shares thereof is to be determined, all shares of Common Stock Outstanding on such date and all shares of Common Stock issuable in respect of (x) the Warrants outstanding on such date, (y) any Convertible Securities outstanding on such date and (z) any other Stock Purchase Rights outstanding on such date, in each case regardless of whether or not the conversion, exchange, subscription or purchase rights associated with such Convertible Securities or Stock Purchase Rights are presently exercisable.
" GAAP" shall mean generally accepted accounting principles in the United States of America as from time to time in effect.
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" Holder" shall mean the Person in whose name the Warrant set forth herein is registered on the books of the Company maintained for such purpose.
" Initial Exercise Date" shall mean the later of (i) the tenth day after Farallon Capital Management LLC amends its Schedule 13G with respect to the Company into a Schedule 13D and (ii) earlier of (x) 75th day after the Original Issue Date and (y) a Change of Control Event.
" Initial Holder" shall mean Mortgage Investments Funding, L.L.C.
" Lien" shall mean any mortgage or deed of trust, pledge, hypothecation, assignment, deposit arrangement, lien, charge, claim, security interest, easement or encumbrance, or preference, priority or other security agreement or preferential arrangement of any kind or nature whatsoever (including, without limitation, any lease or title retention agreement, any financing lease having substantially the same economic effect as any of the foregoing, and the filing of, or agreement to give, any financing statement perfecting a security interest under the Uniform Commercial Code or comparable law of any jurisdiction).
" Loan Agreement" shall mean the Loan Agreement, dated as of March 30, 2007, by and among Farallon Capital Management, L.L.C., as Collateral Agent and Administrative Agent, the lending entities party thereto from time to time, as Lenders, the Company, Accredited Home Lenders, Inc. and Accredited Mortgage Loan REIT Trust.
" Majority Warrant Holders" shall mean the holders of Warrants exercisable for the purchase of more than fifty percent (50%) of the aggregate number of shares of Warrant Stock then purchasable upon exercise of all Warrants.
" NASD" shall mean the National Association of Securities Dealers, Inc., or any successor corporation thereto.
" NASDAQ" shall mean the NASDAQ quotation system, or any successor reporting system.
" Opinion of Counsel" means a written opinion of counsel (who may be an employee of a Holder) experienced in Securities Act matters chosen by the holder of this Warrant or Warrant Stock issued upon the exercise hereof and reasonably acceptable to the Company.
" Original Issue Date" shall mean the date on which the Original Warrants were issued, as set forth on the cover page of this Warrant.
" Original Warrants" shall mean the Warrants originally issued by the Company on the Original Issue Date to the Initial Holder.
" Other Property" shall have the meaning set forth in Section 4.5.
" Outstanding" shall mean, when used with reference to Common Stock, at any date as of which the number of shares thereof is to be determined, all issued shares of Common Stock, except shares then owned or held by or for the account of the Company or any Subsidiary thereof, and shall include all shares issuable in respect of outstanding scrip or any certificates representing fractional in ...
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