EXHIBIT 10.13
WESTMARK GROUP HOLDINGS, INC.
WARRANT AGREEMENT
April 1, 1996
To the Person Named on
the Signature Page Hereof
Gentlemen:
Westmark Group Holdings, Inc., a Colorado corporation (the "Company"), for
value received, hereby agrees to issue stock purchase warrants entitling the
person whose name appears on the signature page of this Agreement to purchase an
aggregate of 45,000 shares of the Company's common stock (the "Common Stock").
Such warrants are evidenced by warrant certificates in the form attached hereto
as EXHIBIT A (each such instrument being hereinafter referred to as a "Warrant,"
and each Warrant and all instruments hereafter issued in replacement,
substitution, combination or subdivision thereof being hereinafter collectively
referred to as the "Warrants"). The Warrants will be issued in consideration of
service to the Company by the person whose name appears on the signature page of
this Agreement. The number of shares of Common Stock purchasable upon exercise
of the Warrants is subject to adjustment as provided in Section 5 below. The
Warrants will be exercisable by each you or any other Warrant holder (as defined
below) as to all or any lesser number of shares of Common Stock covered thereby,
at an initial Purchase Price of $2.25 per share, subject to adjustment as
provided in Section 5 below, for the exercise period defined in Section 3(a)
below. The term "Warrant holder" refers to each person whose name appears on the
signature page of this agreement and any transferee or transferees of any of
them permitted by Section 2(a) below. Such term, when used in this Warrant
Agreement in reference to or in the context of a person who holds or owns shares
of Common Stock issued upon exercise of a Warrant, refers where appropriate to
such person who holds or owns such shares of Common Stock.
1. REPRESENTATIONS AND WARRANTIES.
The Company represents and warrants to you as follows:
(a) CORPORATE AND OTHER ACTION. The Company has all requisite power and
authority (corporate and other), and has taken all necessary corporate action,
to authorize, execute, deliver and perform this Warrant Agreement, to execute,
issue, sell and deliver the Warrants and a certificate or certificates
evidencing the Warrants, to authorize and reserve for issue and, upon payment
from time to time of the Purchase Price, to issue, sell and deliver, the shares
of the Common Stock issuable upon exercise of the Warrants (the "Shares"), and
to perform all of its obligations under this Warrant Agreement and the Warrants.
The Shares, when issued in accordance with this Agreement, will be duly
authorized and validly issued and outstanding, fully paid and nonassessable and
free of all liens, claims, encumbrances and preemptive rights. This Warrant
Agreement and, when issued, each Warrant issued pursuant hereto, has been or
will be duly executed and delivered by the Company and is or will be a legal,
valid and binding agreement of the Company, enforceable in accordance with its
terms. No authorization, approval, consent or other order of any governmental
entity, regulatory authority or other third party is required for such
authorization, execution, delivery, performance, issue or sale.
(b) NO VIOLATION. The execution and delivery of this Warrant Agreement,
the consummation of the transactions herein contemplated and the compliance with
the terms and provisions of this Warrant Agreement and of the Warrants will not
conflict with, or result in a breach of, or constitute a default or an event
permitting acceleration under, any statute, the Articles of Incorporation or
Bylaws of the Company or any indenture, mortgage, deed of trust, note, bank
loan, credit agreement, franchise, license, lease, permit, or any other
agreement, understanding, instrument, judgment, decree, order, statute, rule or
regulation to which the Company is a party or by which it is or may be bound.
2. TRANSFER.
(a) TRANSFERABILITY OF WARRANTS. You agree that the Warrants are being
acquired as an investment and not with a view to distribution thereof and that
the Warrants may not be transferred, sold, assigned or hypothecated except as
provided herein and in compliance with all applicable securities and other laws.
(b) REGISTRATION OF SHARES. You agree not to make any sale or other
disposition of the Shares except pursuant to a registration statement which has
become effective under the Securities Act of 1933, as amended (the "Act"),
setting forth the terms of such offering, the underwriting discount and
commissions and any other pertinent data with respect thereto, unless you have
provided the Company with an opinion of counsel reasonably acceptable to the
Company that such registration is not required. Certificates representing the
Shares, which are not registered as provided in Section 2, shall bear an
appropriate legend and be subject to a "stop-transfer" order.
3. EXERCISE OF WARRANTS, PARTIAL EXERCISE.
(a) EXERCISE PERIOD. Subject to the terms of this Section 3(a), each
Warrant is exercisable at any time after April 17, 1997 provided that the
Company reaches or exceeds $480,000.00 of net income, after tax for fiscal year
1996, 1997 or 1998. If the Company fails to meet the earnings threshold, the
warrants will vest on a pro rata basis (for example, if the Company earns
$240,000.00 only 22,500 of the warrants shall vest). Any unvested warrants shall
carry over to the succeeding year, however the unvested options shall be subject
to the succeeding year's earning threshold which shall remain $480,000.00 for
the exercise period. The warrants shall expire on the earlier of April 1, 2004
or five years from the date they become fully vested.
WARRANT AGREEMENT PAGE 2
(b) EXERCISE IN FULL. Subject to Section 3(a), Warrants may be exercised
in full by the Warrant holder by surrender of the Warrants, with the form of
subscription at the end thereof duly executed by such Warrant holder, to the
Company at its principal office at 355 N.E. Fifth Avenue, Delray Beach, Florida
33483, Attention: Chief Executive Officer, accompanied by payment, in cash or by
certified or bank cashier's check payable to the order of the Company, in the
amount obtained by multiplying the number of shares of the Common Stock
represented by the respective Warrant or Warrants by the Purchase Price per
share (after giving effect to any adjustments as provided in Section 5 below).
(c) PARTIAL EXERCISE. Subject to Section 3(a), each Warrant may be
exercised in part by the Warrant holder by surrender of the Warrant, with the
form of subscription at the end thereof duly executed by such Warrant holder, in
the manner and at the place provided in Section 3(b) above, accompanied by
payment, in cash or by certified or bank cashier's check payable to the order of
the Company, in amount obtained by multiplying the number of shares of the
Common Stock designated by the Warrant holder in the form of subscription
attached to the Warrant by the Purchase Price per share (after giving effect to
any adjustments as provided in Section 5 below). Upon any such partial exercise,
the Company at its expense will forthwith issue and deliver to or upon the order
of the Warrant holder a new Warrant of like tenor, in the name of the Warrant
holder thereof or as the Warrant holder (upon payment by such Warrant holder of
any applicable transfer taxes) may request, subject to Section 2(a), calling in
the aggregate for the purchase of the number of shares of the Common Stock equal
to the number of such shares called for on the face of the respective Warrant
(after giving effect to any adjustment herein as provided in Section 5 below)
minus the number of such shares designated by the Warrant holder in the
aforementioned form of subscription.
(d) COMPANY TO REAFFIRM OBLIGATIONS. The Company will, at the time of any
exercise of any Warrant, upon the request of the Warrant holder, acknowledge in
writing its continuing obligation to afford to such Warrant holder any rights to
which such Warrant holder shall continue to be entitled after such exercise in
accordance with the provisions of this Warrant Agreement; PROVIDED, HOWEVER,
that if the Warrant holder shall fail to make any such request, such failure
shall not affect the continuing obligation of the Company to afford to such
Warrant holder any such right.
4. DELIVERY OF STOCK CERTIFICATES ON EXERCISE.
Any exercise of the Warrants pursuant to Section 3 shall be deemed to have
been effected immediately prior to the close of business on the date on which
the Warrants together with the subscription form and the payment for the
aggregate Purchase Price shall have been received by the Company. At such time,
the person or persons in whose name or names any certificate or certificates
representing the Shares or Other Securities (as defined below) shall be issuable
upon such exercise shall be deemed to have become the holder or holders of
record of the Shares or Other Securities so purchased. As soon as practicable
after the exercise of any Warrant in full or in part, and in any event within 10
WARRANT AGREEMENT PAGE 3
days thereafter, the Company at its expense (including the payment by it of any
applicable issue taxes) will cause to be issued in the name of, and delivered to
the purchasing Warrant holder, a certificate or certificates representing the
number of fully paid and nonassessable shares of Common Stock or Other
Securities to which such Warrant holder shall be entitled upon such exercise,
plus in lieu of any fractional share to which such Warrant holder would
otherwise be entitled, cash in an amount determined pursuant to Section 6(h),
together with any other stock or other securities and property (including cash,
where applicable). The term "Other Securities" refers to any stock (other than
Common Stock), other securities or assets (including cash) of the Company or any
other person (corporate or otherwise) which the holders of the Warrants at any
time shall be entitled to receive, or shall have received, upon the exercise of
the Warrants, in lieu of or in addition to Common Stock, or which at any time
shall be issuable or shall have been issued in exchange for or in replacement of
Common Stock or Other Securities pursuant to Section 5 below or otherwise.
5. ADJUSTMENT OF PURCHASE PRICE AND NUMBER OF SHARES PURCHASABLE.
The Purchase Price and the number of Shares are subject to adjustment from
time to time as set forth in this Section 5.
(a) In case the Company shall at any time after the date of this Agreement
(i) declare a dividend on the Common Stock in shares of its capital stock, (ii)
subdivide the outstanding Shares, (iii) combine the outstanding Common Stock
into a smaller number of Common Stock, or (iv) issue any shares of its capital
stock by reclassification of the Common Stock (including any such
reclassification in connection with a consolidation or merger in which the
Company is the continuing corporation), then in each case the Purchase Price,
and the number and kind of Shares receivable upon exercise, in effect at the
time of the record date for such dividend or of the effective date of such
subdivision, combination, or reclassification 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 which, if such Warrant had been
exercised immediately prior to such time, he would have owned upon such exercise
and been entitled to receive by virtue of such dividend, subdivision,
combination, or reclassification. Such adjustment shall be made successively
whenever any event listed above shall occur.
(b) No adjustment in the Purchase Price shall be required if such
adjustment is less than $.05; PROVIDED, HOWEVER, that any adjustments which by
reason of this subsection (h) are not required to be made shall be carried
forward and taken into account in any subsequent adjustment. All calculations
under this Section 5 shall be made to the nearest cent or to the nearest
one-thousandth of a share, as the case may be.
(c) Upon each adjustment of the Purchase Price as a result of the
calculations made in any of subsection (a) of this Section 5, each Warrant
outstanding prior to the making of the adjustment in the Purchase Price shall
thereafter evidence the right to purchase, at the adjusted Purchase Price, that
number of Shares (calculated to the nearest
WARRANT AGREEMENT PAGE 4
thousandth) obtained by (i) multiplying the number of Shares purchasable upon
exercise of a Warrant immediately prior to adjustment of the number of Shares by
the Purchase Price in effect prior to adjustment of the Purchase Price and (ii)
dividing the product so obtained by the Purchase Price in effect immediately
after such adjustment of the Purchase Price.
(d) In case of any capital reorganization of the Company, or of any
reclassification of the Common Stock (other than a reclassification of the
Common Stock referred to in subsection (a) of this Section 5), or in the case of
the consolidation of the Company with or the merger of the Company into any
other corporation or of the sale, transfer, or lease of the properties and
assets of the Company as, or substantially as, an entirety to any other
corporation, each Warrant shall after such capital reorganization,
reclassification of the Common Stock, consolidation, merger, sale, transfer, or
lease be exercisable, upon the terms and conditions specified in this Agreement,
for the number of shares of stock or other securities, assets, or cash to which
a holder of the number of shares of Common Stock purchasable (at the time of
such capital reorganization, reclassification of shares, consolidation, merger,
sale, transfer, or lease) upon exercise of such Warrant would have been entitled
upon such capital reorganization, reclassification of the Common Stock,
consolidation, merger, sale, transfer, or lease; and in any such case, if
necessary, the provisions set forth in this Section 5 with respect to the rights
and interests thereafter of the holders of the Warrants shall be appropriately
adjusted so as to be applicable, as nearly as may reasonably be, to any shares
of stock or other securities, assets, or cash thereafter deliverable upon the
exercise of the Warrants. The subdivision or combination of the Common Stock at
any time outstanding into a greater or lesser number of shares shall not be
deemed to be a reclassification of the Common Stock for the purposes of this
paragraph. The Company shall not effect any such consolidation, merger,
transfer, or lease, unless prior to or simultaneously with the consummation
thereof, the successor corporation (if other than the Company) resulting from
such consolidation or merger or the corporation purchasing, receiving, or
leasing such assets or other appropriate corporation or entity shall assume, by
written instrument executed and delivered to the Warrant holder, the obligation
to deliver to the Warrant holder such shares of stock, securities, or assets as,
in accordance with the foregoing provisions, such holders may be entitled to
purchase, and to perform the other obligations of the Company under this Warrant
Agreement.
6. FURTHER COVENANTS OF THE COMPANY.
(a) DILUTION OR IMPAIRMENTS. The Company will not, by amendment of its
certificate or articles of incorporation or through any reorganization, transfer
of assets, consolidation, merger, dissolution, issue or sale of securities or
any other voluntary action, avoid or seek to avoid the observance or performance
of any of the terms of the Warrants or of this Warrant Agreement, but will at
all times in good faith assist in the carrying out of all such terms and in the
taking of all such action as may be necessary or appropriate in order to protect
the rights of the Warrant holders against dilution or other impairment.
Without limiting the generality of the foregoing, the Company:
WARRANT AGREEMENT PAGE 5
(i) shall at all times reserve and keep available, solely for
issuance and delivery upon the exercise of the Warrants, all shares of
Common Stock (or Other Securities) from time to time issuable upon the
exercise of the Warrants and shall take all necessary actions to ensure
that the par value per share, if any, of the Common Stock (or Other
Securities) is at all times equal to or less than the then effective
Purchase Price per share;
(ii) will take all such action as may be necessary or appropriate in
order that the Company may validly and legally issue fully paid and
nonassessable shares of Common Stock or Other Securities upon the exercise
of the Warrants from time to time outstanding;
(iii) will not issue any capital stock of any class which is
preferred as to dividends or as to the distribution of assets upon
voluntary or involuntary dissolution, liquidation or winding-up, unless
the rights of the holders thereof shall be limited to a fixed sum or
percentage of par value in respect of participation in dividends and in
any such distribution of assets; and
(iv) will not transfer all or substantially all of its properties
and assets to any person (corporate or otherwise), or consolidate with or
merge into any other person or permit any such person to consolidate with
or merge into the Company (if the Company is not the surviving
corporation), unless such other person shall expressly assume in writing
and will be bound by all the terms of this Warrant Agreement and the
Warrants.
(b) TITLE TO STOCK. All shares of Common Stock delivered upon the exercise
of the Warrants shall be validly issued, fully paid and nonassessable; each
Warrant holder shall, upon such delivery, receive good and marketable title to
the Shares, free and clear of all voting and other trust arrangements, liens,
encumbrances, equities and claims whatsoever; and the Company shall have paid
all taxes, if any, in respect of the issuance thereof.
(c) REMEDIES. The Company stipulates that the remedies at law of the
Warrant holder or any holder of Shares in the event of any default or threatened
default by the Company in the performance of or compliance with any of the terms
of this Warrant Agreement or the Warrants are not and will not be adequate and
that such terms may be specifically enforced by a decree for the specific
performance of any agreement contained herein or in the Warrants or by an
injunction against a violation of any of the terms hereof or thereof or
otherwise.
(d) EXCHANGE OF WARRANTS. Subject to Section 2(a) hereof, upon surrender
for exchange of any Warrant to the Company, the Company at its expense will
promptly issue and deliver to or upon the order of the holder thereof a new
Warrant or like tenor, in the name of such holder or as such holder (upon
payment by such Warrant holder of any applicable transfer taxes) may direct,
calling in the aggregate for the purchase of the number
WARRANT AGREEMENT PAGE 6
of shares of the Common Stock called for on the face or faces of the Warrant or
Warrants so surrendered. The Warrants and all rights thereunder are transferable
in whole or in part upon the books of the Company by the registered holder
thereof, subject to the provisions of Section 2(a), in person or by duly
authorized attorney, upon surrender of the Warrant, duly endorsed, at the
principal office of the Company.
(e) REPLACEMENT OF WARRANTS. Upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of any
Warrant and, in the case of any such loss, theft or destruction, upon delivery
of an indemnity agreement reasonably satisfactory in form and amount to the
Company or, in the case of any such mutilation, upon surrender and cancellation
of such Warrant, the Company, at the expense of the Warrant holder, will execute
and deliver, in lieu thereof, a new Warrant of like tenor.
(f) REPORTING BY THE COMPANY. The Company agrees that during the term of
the Warrants it will use its best efforts to keep current in the filing of all
forms and other materials, if any, which it may be required to file with the
appropriate regulatory authority pursuant to the Securities Exchange Act of
1934, as amended (the "Exchange Act"), and all other forms and reports required
to be filed with any regulatory authority having jurisdiction over the Company.
(g) FRACTIONAL SHARES. No fractional Shares are to be issued upon the
exercise of any Warrant, but the Company shall pay a cash adjustment in respect
of any fraction of a share which would otherwise be issuable in an amount equal
to such fraction multiplied by the closing price which shall be the last
reported sales price regular way or, in case no such reported sales takes place
on such day, the average of the closing bid and asked prices regular way, on the
principal national securities exchange in the United States on which the Common
Stock is listed or admitted to trading, or if the Common Stock is not listed or
admitted to trading on any such national securities exchange, the average of the
highest reported bid and lowest reported asked price as furnished by the
National Association of Securities Dealers, Inc. through its automated quotation
system ("Nasdaq") or a similar organization if Nasdaq is no longer reporting
such information.
7. OTHER WARRANT HOLDERS: HOLDERS OF SHARES.
The Warrants are issued upon the following terms, to all of which each
Warrant holder by the taking thereof consents and agrees: (a) any person who
shall become a transferee, within the limitations on transfer imposed by Section
2(a) hereof, of a Warrant properly endorsed shall take such Warrant subject to
the provisions of Section 2(a) hereof and thereupon shall be authorized to
represent himself as absolute owner thereof and, subject to the restrictions
contained in this Warrant Agreement, shall be empowered to transfer absolute
title by endorsement and delivery thereof to a permitted BONA FIDE purchaser for
value; (b) any person who shall become a holder or owner of Shares shall take
such shares subject to the provisions of Section 2(b) hereof; (c) each prior
taker or owner waives and renounces all of his equities or rights in such
Warrant in favor of each such
WARRANT AGREEMENT PAGE 7
permitted BONA FIDE purchaser, and each such permitted BONA FIDE purchaser shall
acquire absolute title thereto and to all rights presented thereby; and (d)
until such time as the respective Warrant is transferred on the books of the
Company, the Company may treat the registered holder thereof as the absolute
owner thereof for all purposes, notwithstanding any notice to the contrary.
8. MISCELLANEOUS.
All notices, certificates and other communications from or at the request
of the Company to any Warrant holder shall be mailed by first class, registered
or certified mail, postage prepaid, to such address as may have been furnished
to the Company in writing by such Warrant holder, or, until an address is so
furnished, to the address of the last holder of such Warrant who has so
furnished an address to the Company, except as otherwise provided herein. This
Warrant Agreement and any of the terms hereof may be changed, waived, discharged
or terminated only by an instrument in writing signed by the party against which
enforcement of such change, waiver, discharge or termination is sought. This
Warrant Agreement shall be construed and enforced in accordance with and
governed by the laws of the State of Florida. The headings in this Warrant
Agreement are for purposes of reference only and shall not limit or otherwise
affect any of the terms hereof. This Warrant Agreement, together with the forms
of instruments annexed hereto as exhibits, constitutes the full and complete
agreement of the parties hereto with respect to the subject matter hereof.
IN WITNESS WHEREOF, the Company has caused this Warrant Agreement to be
executed on this the 1st day of April, 1996, in Delray Beach, Florida, by its
proper corporate officers, thereunto duly authorized.
WESTMARK GROUP HOLDINGS, INC.
By DAWN DRELLA,
Chief Financial Officer
The above Warrant Agreement is confirmed
as of this 1st day of April, 1996
NORMAN J. BIRMINGHAM
WARRANT AGREEMENT PAGE 8
EXHIBIT A
WARRANT
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER: (A) THE SECURITIES ACT OF 1933,
AS AMENDED, IN RELIANCE UPON THE EXEMPTIONS FROM REGISTRATION PROVIDED IN
SECTIONS 3 AND 4 OF SUCH ACT AND REGULATION D PROMULGATED THEREUNDER; OR (B) ANY
STATE SECURITIES LAWS IN RELIANCE UPON APPLICABLE EXEMPTIONS THEREUNDER. THESE
WARRANTS MUST BE ACQUIRED FOR INVESTMENT ONLY FOR THE ACCOUNT OF THE INVESTOR,
AND NEITHER THE WARRANTS NOR THE UNDERLYING STOCK MAY BE TRANSFERRED OR
EXERCISED EXCEPT IN COMPLIANCE WITH ALL APPLICABLE SECURITIES AND OTHER LAWS.
Warrant No. ___ To Purchase
45,000 Shares of
Common Stock
WESTMARK GROUP HOLDINGS, INC.
Incorporated Under the Laws of Colorado
This certifies that, for value received, the hereafter named registered
owner is entitled, subject to the terms and conditions of this Warrant, until
the expiration date, to purchase the number of shares set forth above of the
common stock (the "Common Stock"), of Westmark Group Holdings, Inc. (the
"Corporation") from the Corporation at the purchase price per share hereafter
set forth, on delivery of this Warrant to the Corporation with the exercise form
duly executed and payment of the purchase price (in cash or by certified or bank
cashier's check payable to the order of the Corporation) for each share
purchased. This Warrant is subject to the terms of the Warrant Agreement between
the parties thereto dated as of April 1, 1996, the terms of which are hereby
incorporated herein. Reference is hereby made to such Warrant Agreement for a
further statement of the rights of the holder of this Warrant.
Registered Owner: Norman J. Birmingham Date: April 1, 1996
Purchase Price
Per Share: $2.25
Expiration Date: Subject to Section 3(a) of the Warrant Agreement, 5:00 p.m.
Delray Beach, Florida time on April 31, 1999.
WITNESS the signature of the Corporation's authorized officer:
WESTMARK GROUP HOLDINGS, INC.
By NORMAN J. BIRMINGHAM,
Chief Executive Officer
A-1
FORM OF SUBSCRIPTION
(TO BE SIGNED ONLY UPON EXERCISE OF WARRANT)
To Westmark Group Holdings, Inc.:
The undersigned, the holder of the enclosed Warrant, hereby irrevocably
elects to exercise the purchase right represented by such Warrant for, and to
purchase thereunder, _________* shares of Common Stock of Westmark Group
Holdings, Inc. and herewith makes payment of $_______________ therefor, and
requests that the certificate or certificates for such shares be issued in the
name of and delivered to the undersigned.
Dated:______________
--------------------------------------------
(Signature must conform in all respects to
name of holder as specified on the face of
the enclosed Warrant)
--------------------------------------------
(Address)
- ---------------------------
(*) Insert here the number of shares called for on the face of the Warrant or,
in the case of a partial exercise, the portion thereof as to which the
Warrant is being exercised, in either case without making any adjustment
for additional Common Stock or any other stock or other securities or
property or cash which, pursuant to the adjustment provisions of the
Warrant Agreement pursuant to which the Warrant was granted, may be
delivered upon exercise.
A-2
FORM OF ASSIGNMENT
For value received, the undersigned hereby sells, assigns and transfers
unto __________________________________ the right represented by the enclosed
Warrant to purchase _________________ shares of Common Stock of Westmark Group
Holdings, Inc. to which the enclosed Warrant relates, and appoints
_____________________ Attorney to transfer such right on the books of Westmark
Group Holdings, Inc. with full power of substitution in the premises.
The undersigned represents and warrants that the transfer of the enclosed
Warrant is permitted by the terms of the Warrant Agreement pursuant to which the
enclosed Warrant has been issued, and the transferee hereof, by his acceptance
of this Agreement, represents and warrants that he is familiar with the terms of
said Warrant Agreement and agrees to be bound by the terms thereof with the same
force and effect as if a signatory thereto.
Dated:_________________________
--------------------------------------
(Signature must conform in all
respects to name of holder as
specified on the face of the enclosed
Warrant)
--------------------------------------
(Address)
Signed in the presence of:
- ------------------------------------
A-3