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EXHIBIT 10.23
THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE HEREOF HAVE
NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"),
OR ANY APPLICABLE STATE SECURITIES LAWS, AND MAY NOT BE SOLD OR
TRANSFERRED
UNLESS (I) A REGISTRATION STATEMENT COVERING SUCH SECURITIES IS
EFFECTIVE UNDER
THE SECURITIES ACT OR (II) THE TRANSACTION IS EXEMPT FROM
REGISTRATION UNDER THE
SECURITIES ACT, AND, IF THE COMPANY REQUESTS, AN OPINION
SATISFACTORY TO THE
COMPANY TO SUCH EFFECT HAS BEEN RENDERED BY COUNSEL.
CONSUMER PORTFOLIO SERVICES, INC.
WARRANT
Warrant No. 1
Dated: July 10,
2008
Consumer Portfolio Services, Inc., a California corporation
(the "COMPANY"), hereby certifies that, for value received,
Citigroup Global
Markets Inc. or its registered assigns (including permitted
transferees, the
"HOLDER") is entitled to purchase from the Company up to a total of
two million
five hundred thousand (2,500,000) (as adjusted from time to time as
provided in
Section 9) Shares (as defined below) (each such share, a "WARRANT
SHARE" and all
such shares, the "WARRANT SHARES") at an exercise price equal to
$0.00001 per
share (as adjusted from time to time as provided in Section 9, the
"EXERCISE
PRICE"), at any time and from time to time commencing on the date
hereof (the
"INITIAL EXERCISE DATE") through and including July 10, 2018 (the
"EXPIRATION
DATE"), and subject to the following terms and conditions. This
warrant (the
"WARRANT") is issued pursuant to that certain Amended and Restated
Note Purchase
Agreement, dated as of the Original Issue Date (the "AGREEMENT"),
by and among
Folio Funding II, LLC, a Delaware limited liability company, the
Company, as
Seller, and Citigroup Financial Products Inc., a Delaware
corporation, as the
Note Purchaser and the Administrative Agent.
1. DEFINITIONS. The capitalized terms used herein and not
otherwise
defined herein or in Annex A to the Agreement shall have the
meanings set forth
below:
"AFFILIATE" of any specified Person means any other person or
entity which directly or indirectly through one or more
intermediaries controls,
is controlled by or is under common control with, such specified
Person. For
purposes of this definition, "CONTROL" as used with respect to any
person or
entity means the possession, direct or indirect, 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.
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"COMPANY OFFER" means any tender offer (including exchange
offer), as amended from time to time, made by the Company or any of
its
subsidiaries for the purchase (including the acquisition pursuant
to an exchange
offer) of all or any portion of the outstanding Shares, except as
permitted
pursuant to Rule 10b-18 promulgated under the Securities Exchange
Act of 1934,
as amended (the "EXCHANGE ACT").
"ELIGIBLE MARKET" means any of the New York Stock Exchange,
the American Stock Exchange or Nasdaq.
"MARKET PRICE" means, as to any security, (i) if the principal
trading market for such security is an exchange, the average of the
last
reported sale prices per share for the last ten previous Trading
Days in which a
sale was reported, as officially reported on any consolidated tape,
(ii) if
clause (i) is not applicable, the average of the closing bid price
per share for
the last five previous Trading Days as set forth by Nasdaq or (iii)
if clauses
(i) and (ii) are not applicable, the average of the closing bid
price per share
for the last five previous Trading Days as set forth in the
National Quotation
Bureau sheet listing for such security. Notwithstanding the
foregoing, if there
is no reported sales price or closing bid price, as the case may
be, on any of
the ten Trading Days preceding the event requiring a determination
of Market
Price hereunder, then the Market Price shall be determined in good
faith by
resolution of the Board of Directors of the Company, based on the
best
information available to it.
"NASDAQ" means the Nasdaq Global Market or the Nasdaq Capital
Market.
"ORIGINAL ISSUE
DATE" means July 10, 2008.
"OTHER SECURITIES" refers to any share capital (other than
Shares) and other securities of the Company or any other Person
which the Holder
of this Warrant at any time shall be entitled to receive, or shall
have
received, upon the exercise of this Warrant, in lieu of or in
addition to
Shares, or which at any time shall be issuable or shall have been
issued in
exchange for or in replacement of Shares or Other Securities
pursuant to Section
9 hereof or otherwise.
"PERSON" means any individual or corporation, partnership,
trust, incorporated or unincorporated association, joint venture,
limited
liability company, joint stock company, government (or an agency or
subdivision
thereof) or other entity of any kind.
"REGISTRABLE SECURITIES" means the Warrant Shares; PROVIDED,
HOWEVER, that the Warrant Shares shall cease to be Registrable
Securities when
(i) a Registration Statement with respect to such Warrant Shares
shall have been
declared effective under the Securities Act and such Warrant Shares
shall have
been disposed of pursuant to such Registration Statement, (ii) when
such Warrant
Shares are eligible to be sold to the public pursuant to Rule 144
(or any
similar provision then in force, but not Rule 144A) under the
Securities Act or
(iii) all the Warrant Shares shall have ceased to be
outstanding.
"SHARES" means the shares of common stock of the Company, no
par value per share.
"TRADING DAY" means any day on which the Shares are listed or
quoted and traded on any Eligible Market or any successor market
or, if
applicable, the National Quotation Bureau or, if none of the
foregoing is
applicable, a business day in New York City as such term is
commonly understood.
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"TRANSFER AGENT" shall mean American Stock Transfer & Trust
Company or such other Person as the Company may appoint from time
to time.
"WARRANT
SHARE DELIVERY DATE" shall have the meaning set forth
in Section 5.
2. REGISTRATION OF WARRANT. The Company shall register this
Warrant,
upon records to be maintained by the Company for that purpose (the
"WARRANT
REGISTER"), in the name of the record Holder hereof from time to
time. The
Company may deem and treat the registered Holder of this Warrant as
the absolute
owner hereof for the purpose of any exercise hereof or any
distribution to the
Holder, and for all other purposes, absent actual notice to the
contrary.
3. REGISTRATION OF TRANSFERS. The Company shall register the
transfer
of any portion of this Warrant in the Warrant Register, upon
surrender of this
Warrant, with the Form of Assignment attached hereto as APPENDIX A
duly
completed and signed, to the Company at its address specified
herein. Upon any
such registration and transfer, a new warrant in substantially the
form of a
Warrant (any such new warrant, a "NEW WARRANT"), evidencing the
portion of this
Warrant so transferred shall be issued to the transferee and a New
Warrant
evidencing the remaining portion of this Warrant not so
transferred, if any,
shall be issued to the transferring Holder. Each New Warrant
evidencing the
portion of this Warrant so transferred shall bear the restrictive
legend set
forth above. The acceptance of the New Warrant by the transferee
thereof shall
be deemed the acceptance by such transferee of all of the rights
and obligations
of a holder of a Warrant, and such transferee shall be subject to
the
restrictions on transfer set forth in such restrictive legend.
4. EXERCISE AND DURATION OF WARRANT.
(a) This Warrant shall be exercisable by the registered Holder
at any time and from time to time on and after the Initial Exercise
Date to and
including the Expiration Date. At 5:00 P.M., New York City time on
the
Expiration Date, the portion of this Warrant not exercised prior
thereto shall
be and become void and of no value, regardless of whether this
Warrant shall be
returned to the Company.
(b) A Holder may exercise this Warrant by delivering to the
Company (i) an exercise notice, in the form attached hereto as
APPENDIX B (the
"EXERCISE NOTICE"), appropriately completed and duly signed,
delivered or by
facsimile, PROVIDED that signed originals follow within three
Trading Days, and
(ii) payment of the Exercise Price for the number of Warrant Shares
as to which
this Warrant is being exercised (as set forth in Section 4(c)
below), and the
date such items are received by the Company is an "EXERCISE DATE."
Execution and
delivery of the Exercise Notice shall have the same effect as
cancellation of
the original Warrant and issuance of a New Warrant evidencing the
right to
purchase the remaining number of Warrant Shares, if any.
(c) The Holder shall pay the Exercise Price (i) in cash or by
wire transfer of immediately available funds in accordance with the
Company's
instructions or (ii) if at any time the Market Price exceeds the
Exercise Price,
by means of a "cashless exercise," by presenting and surrendering
to the Company
this Warrant, in whole or in part, in which event the Company shall
issue to the
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Holder the number of Warrant Shares determined as follows:
X = Y [(A-B)/A]
where:
X = the number of Warrant Shares to be issued to
the Holder upon such cashless exercise;
Y = the number of Warrant Shares with
respect to which this Warrant is being
exercised;
A = the Market Price on the Exercise Date; and
B = the Exercise Price.
(d) If an exercise of this Warrant is to be made in connection
with a registered public offering or sale of the Company, such
exercise may, at
the election of the Holder, be conditioned on the consummation of
the public
offering or sale of the Company, in which case such exercise shall
not be deemed
effective until the consummation of such transaction.
5. DELIVERY OF WARRANT SHARES.
(a) Upon exercise of this Warrant and subject to the receipt
of signed originals pursuant to Section 4(b)(i) above, the Company
shall
promptly, but in no event later than the third Trading Day
following such
exercise (the "WARRANT SHARE DELIVERY DATE"), issue or cause to be
issued and
deliver or cause to be delivered to the Holder, in such name or
names as the
Holder may designate, a certificate for the Warrant Shares issuable
upon such
exercise bearing (only if such legend is required by applicable
law) the
restrictive legend set forth above. The Holder, or any Person so
designated by
the Holder to receive the Warrant Shares, shall be deemed to have
become the
holder of record of such Warrant Shares as of the Exercise
Date.
(b) Certificates evidencing the Warrant Shares shall not
contain any legend (including the legend set forth above), (i)
while a
registration statement covering the resale of such Warrant Shares
is effective
under the Securities Act, or (ii) following any sale of such
Warrant Shares
pursuant to Rule 144, or (iii) if such Warrant Shares are eligible
for sale
under Rule 144 without restriction, or (iv) if such legend is not
required under
applicable requirements of the Securities Act (including
judicial
interpretations and pronouncements issued by the staff of the
Securities and
Exchange Commission ("SEC")). If all or any portion of a Warrant is
exercised at
a time when there is an effective registration statement to cover
the resale of
the Warrant Shares or at a time when the Warrant Shares so issued
may be resold
without restriction under Rule 144, such Warrant Shares shall be
issued free of
all legends. The Company agrees that at such time as such legend is
no longer
required under this Section 5(b), it will, no later than three
Trading Days
following the delivery by a purchaser to the Company or the
Company's Transfer
Agent of a certificate representing Warrant Shares issued with a
restrictive
legend (such third Trading Day, the "LEGEND REMOVAL DATE"), deliver
or cause to
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be delivered to such purchaser a certificate representing such
shares that is
free from all restrictive and other legends. The Company may not
make any
notation on its records or give instructions to any Transfer Agent
of the
Company that enlarge the restrictions on transfer set forth in this
Section 5.
Certificates for Warrant Shares subject to legend removal hereunder
shall be
transmitted by the Transfer Agent of the Company to the purchasers
by crediting
the account of the purchaser's prime broker with the Depository
Trust Company
System.
(c) Each purchaser, severally and not jointly with the other
purchasers, agrees that the removal of the restrictive legend from
certificates
representing Warrant Shares as set forth in this Section 5 is
predicated upon
the Company's reliance that the purchaser will sell any Warrant
Shares pursuant
to either the registration requirements of the Securities Act,
including any
applicable prospectus delivery requirements, or an exemption
therefrom.
(d) This Warrant is exercisable, either in its entirety or,
from time to time, for a portion of the number of Warrant Shares.
Upon surrender
of this Warrant following one or more partial exercises, the
Company shall issue
or cause to be issued, at its expense, a New Warrant evidencing the
right to
purchase the remaining number of Warrant Shares.
(e) RESCISSION RIGHTS. If the Company fails to cause its
Transfer Agent to transmit to the Holder a certificate or
certificates
representing the Warrant Shares pursuant to this Section 5(e) by
the Warrant
Share Delivery Date, then the Holder will have the right to rescind
such
exercise.
(f) COMPENSATION FOR BUY-IN ON FAILURE TO TIMELY DELIVER
CERTIFICATES UPON EXERCISE. In addition to any other rights
available to the
Holder, if the Company fails to cause its Transfer Agent to
transmit to the
Holder a certificate or certificates representing the Warrant
Shares pursuant to
an exercise on or before the Warrant Share Delivery Date, and if
after such date
the Holder is required by its broker to purchase (in an open market
transaction
or otherwise) Shares to deliver in satisfaction of a sale by the
Holder of the
Warrant Shares which the Holder anticipated receiving upon such
exercise (a
"BUY-IN"), then the Company shall (1) pay in cash to the Holder the
amount by
which (x) the Holder's total purchase price (including brokerage
commissions, if
any) for the Shares so purchased exceeds (y) the amount obtained by
multiplying
(A) the number of Warrant Shares that the Company was required to
deliver to the
Holder in connection with the exercise at issue times (B) the price
at which the
sell order giving rise to such purchase obligation was executed,
and (2) at the
option of the Holder, either reinstate the portion of the Warrant
and equivalent
number of Warrant Shares for which such exercise was not honored or
deliver to
the Holder the number of Shares that would have been issued had the
Company
timely complied with its exercise and delivery obligations
hereunder. For
example, if the Holder purchases Shares having a total purchase
price of $11,000
to cover a Buy-In with respect to an attempted exercise of Shares
with an
aggregate sale price giving rise to such purchase obligation of
$10,000, under
clause (1) of the immediately preceding sentence the Company shall
be required
to pay the Holder $1,000. The Holder shall provide the Company
written notice
indicating the amounts payable to the Holder in respect of the
Buy-In and, upon
request of the Company, evidence of the amount of such loss.
Nothing herein
shall limit a Holder's right to pursue any other remedies available
to it
hereunder, at law or in equity including, without limitation, a
decree of
specific performance and/or injunctive relief with respect to the
Company's
failure to timely deliver certificates representing Shares upon
exercise of the
Warrant as required pursuant to the terms hereof.
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(g) CLOSING OF BOOKS. The Company will not close its
stockholder books or records in any manner which prevents the
timely exercise of
this Warrant, pursuant to the terms hereof.
6. CHARGES, TAXES AND EXPENSES. Issuance and delivery of
certificates
for Warrant Shares shall be made without charge to the Holder for
any issue or
transfer tax, withholding tax, transfer agent fee or other
incidental tax or
expense in respect of the issuance of such certificates, all of
which taxes and
expenses shall be paid by the Company; PROVIDED, HOWEVER, that the
Company shall
not be required to pay any tax which may be payable in respect of
any transfer
involved in the registration of any certificates for Warrant Shares
or Warrant
in a name other than that of the Holder. The Holder shall be
responsible for all
other tax liability that may arise as a result of holding or
transferring this
Warrant or receiving Warrant Shares upon exercise hereof.
7. REPLACEMENT OF WARRANT. If this Warrant is mutilated, lost,
stolen
or destroyed, the Company shall issue or cause to be issued in
exchange and
substitution for and upon cancellation hereof, or in lieu of and in
substitution
for this Warrant, a New Warrant, but only upon receipt of evidence
reasonably
satisfactory to the Company, if any, of such loss, theft or
destruction and
customary and reasonable indemnity, if requested.
8. RESERVATION OF WARRANT SHARES. The Company covenants that it
will at
all times reserve and keep available out of the aggregate of its
authorized but
unissued and otherwise unreserved Shares, solely for the purpose of
enabling it
to issue, upon exercise of this Warrant as herein provided, the
number of
Warrant Shares which are then issuable and deliverable upon the
exercise of this
entire Warrant, free from all taxes, liens, claims and
encumbrances, and such
Warrant Shares will not be subject to any pre-emptive rights or
similar rights
(taking into account the adjustments and restrictions of Section 9
hereof). The
Company covenants that all Warrant Shares so issuable and
deliverable shall,
upon issuance and the payment of the applicable Exercise Price in
accordance
with the terms hereof, be duly and validly authorized, issued,
fully paid and
nonassessable. The Company covenants and warrants that the issuance
of this
Warrant or the Warrant Shares shall not trigger any price-based
anti-dilution
adjustments in any securities issued by the Company or any
pre-emptive rights,
in each case other than with respect to those securities or rights
held by
Levine Leichtman Capital Partners IV, L.P. The Company will take
all such action
as may be necessary to assure that such Shares may be issued as
provided herein
without violation of any applicable law or regulation, or of any
requirements of
any securities exchange or automated quotation system upon which
the Shares may
be listed or quoted, as the case may be.
9. CERTAIN ADJUSTMENTS. The number of Warrant Shares issuable
upon
exercise of this Warrant are subject to adjustment from time to
time as set
forth in this Section 9.
(a) DIVIDENDS. If the Company, at any time while this Warrant
is outstanding, pays a dividend on its Shares payable in additional
Shares or
otherwise makes a distribution on any class of share capital that
is payable in
Shares, then in each such case the number of Warrant Shares
issuable upon
exercise of this Warrant shall be adjusted by multiplying the
number of Warrant
Shares issuable upon exercise of this Warrant immediately prior to
such
adjustment by a fraction, (A) the numerator of which shall be the
number of
Shares outstanding immediately after such dividend or distribution
and (B) the
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denominator of which shall be the number of Shares outstanding
immediately prior
to the opening of business on the day after the record date for
the
determination of shareholders entitled to receive such dividend or
distribution.
Any adjustment made pursuant to this Section 9(a) shall become
effective
immediately after the record date for the determination of
shareholders entitled
to receive such dividend or distribution; PROVIDED, HOWEVER, that
if such record
date shall have been fixed and such dividend is not fully paid or
if such
distribution is not fully made on the date fixed therefor, any such
adjustment
shall become effective as of the time of actual payment of such
dividends or
distribution.
(b) SHARE SPLITS. If the Company, at any time while this
Warrant is outstanding, (i) subdivides outstanding Shares into a
larger number
of shares, or (ii) combines outstanding Shares into a smaller
number of shares,
then in each such case the number of Warrant Shares issuable upon
exercise of
this Warrant shall be adjusted by multiplying the number of Warrant
Shares
issuable upon exercise of this Warrant immediately prior to such
adjustment by a
fraction, (A) the numerator of which shall be the number of Shares
outstanding
immediately after such event and (B) the denominator of which shall
be the
number of Shares outstanding immediately before s
