Document:

EX-4.3

 Exhibit 4.3 

[Form of Security] 
 [UNLESS THIS CERTIFICATE IS
PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION (“DTC”), TO CORPORACIÓN ANDINA DE FOMENTO OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT AND ANY CERTIFICATE ISSUED IS
REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO., OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF
DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.]* 

 

			
	CUSIP NO.                        	  	No. R-        
	ISIN NO.                    	  	
	Common Code:                    	  	

 CORPORACIÓN ANDINA DE FOMENTO 

[Title of Security] 
 1.
CORPORACIÓN ANDINA DE FOMENTO (“CAF”), for value received, hereby promises to pay to Cede & Co., or registered assigns, the principal sum of 

                 [US DOLLARS] 

([USD]          ,          ,
        ) 
 on
                    , and to pay interest on said principal sum from
                     or from the most recent
[                     or
                    ] to which such interest has been paid or duly provided for, [semi-annually] on each
[                     and
                    ], commencing
                    , at the rate [of          % per annum], until payment of said principal
sum has been made or duly provided for. If such principal payment date or any interest payment date would otherwise be a day which is not a Business Day (as defined below), such principal payment date or any such interest payment date shall be
postponed to the next Business Day. Business Day means any day on which commercial banks and foreign exchange markets settle payments in The City of New York. The interest so payable and punctually paid or duly provided for on any interest payment
date will be paid to the person in whose name this [Global] Security (as defined in paragraph 6) is registered at the close of business on the preceding
[                     or
                    ], as the case may be (“Record Date”). Interest will be calculated on the basis of [a 360-day year, consisting of twelve 30-day months]. Any such interest not so punctually paid or duly provided for will forthwith cease to be payable to the person in whose name
this [Global] Security is registered on such Record Date and may be paid to the person in whose name this [Global] Security is registered at the close of business on a special record date for the payment of such defaulted interest to be fixed by CAF
or be paid at any time in any other lawful manner not inconsistent with the requirements of any securities exchange on which [the Securities (as defined in paragraph 3) evidenced by] this [Global] Security may be listed. CAF and the Fiscal Agent may
deem and treat the registered owner hereof as the absolute owner hereof (notwithstanding any notice of ownership or writing) for the purpose of receiving payment hereon and for all other purposes whether or not this [Global] Security or any of the
Securities evidenced hereby shall be overdue. 
  

	*	 Include if a Global security. 

 Payment of the principal of and interest on this [Global] Security will be made in
immediately available funds in [US Dollars or in such other coin or currency of the United States of America] as at the time of payment is legal tender for the payment therein of public and private debts. [In the case of a Security in definitive
form (as provided in paragraph 6), payment of the principal will be made against presentation and surrender of the Security at the corporate trust office of the Fiscal Agent, as paying agent, in The City of New York and at the offices of such other
paying agents as CAF shall have appointed. Payment of interest on each Security in definitive form will be made at the corporate trust office of the Fiscal Agent in The City of New York and at the offices of such other paying agents as CAF shall
have appointed, provided that interest on each Security may be paid (i) by a [US Dollar] check drawn on a bank in The City of New York mailed to the address of the person entitled thereto as such address shall appear in the Security Register
(as defined in paragraph 6) on the Record Date for such payment or (ii) at the request of a Holder (as defined in paragraph 3) of more than one million US Dollars (USD 1,000,000.00)* principal amount (or the equivalent thereof in another
currency or currency unit) of Securities, by wire transfer to such Holder.] CAF covenants that until this [Global] Security has been delivered to the Fiscal Agent for cancellation, or monies sufficient to pay the principal of and interest on this
[Global] Security have been made available for payment and either paid or returned to CAF as provided herein, CAF will at all times maintain an office or agency in The City of New York for the payment of the principal of and interest on the
Securities as herein provided. 
 2. All payments of principal and interest in respect of the Securities by or on behalf of CAF will be made
free and clear of, and without withholding or deduction for or on account of, any present or future taxes, duties, assessments or governmental charges of whatever nature imposed, levied, collected, withheld or assessed by or on behalf of any of the
full member shareholder countries of CAF or any political subdivision therein or any authority therein or thereof having power to tax, unless the withholding or deduction of such taxes, duties, assessments or governmental charges is required by law.
In that event, CAF will pay such additional amounts as will result in receipt by the Holder of Securities after such withholding or deduction of such amounts as would have been received by them had no such withholding or deduction been required,
except that no such additional amounts shall be payable in respect of any Securities presented for payment: 
 (i) by
or on behalf of a Holder of a Security who is liable for such taxes, duties, assessments or governmental charges in respect of such Security by reason of having some connection with any of the full member shareholder countries of CAF other than the
mere holding of the Security; or 
 (ii) if such withholding or deduction may be avoided by a Holder of a Security complying
with a request of CAF relating to any certification, identification or other reporting concerning its nationality, residence, identity or connection with any full member shareholder country of CAF if the Holder is able to comply with the request
without undue hardship and CAF has provided the notice in writing at least 60 days before such information is required to be provided by the Holder; or 

(iii) more than 30 days after the Relevant Date, except to the extent that the Holder of such Security would have been entitled
to such additional amounts on presenting such Security for payment on the last day of such period of 30 days; or 
  

	*	 If the Security is denominated in another currency or currency unit, insert the amount of such currency or
currency unit that is the equivalent (rounded upwards) of USD 1,000,000.00. 

 (iv) if such withholding or deduction is imposed or required pursuant to
Sections 1471 through 1474 of the U.S. Internal Revenue Code of 1986, as amended (the “Code”), any current or future regulations or official interpretations thereof, any agreement entered into pursuant to Section 1471(b) of the Code,
or any fiscal or regulatory legislation, rules or practices adopted pursuant to any intergovernmental agreement entered into in connection with the implementation of such Sections of the Code. 

Any reference in this section to principal or interest shall be deemed to include any additional amounts in respect of principal or interest
(as the case may be) which may be payable under this section. 
 As used herein, the “Relevant Date” means, in respect of any
payment, the date on which such payment first becomes due and payable, but if the full amount of the moneys payable has not been received by the Fiscal Agent on or prior to the due date, it means the first date on which, the full amount of the
moneys having been so received and being available for payment to Holders of Securities, notice to that effect will have been duly published as set forth herein. 

3. This [Global] Security is [a permanent global security evidencing] [one of] the series of a duly authorized issue of debt securities of CAF,
initially issued in the aggregate principal amount of [            ] US Dollars (USD
                    ), known as its “[Title of Securities]” (the “Securities”). CAF has, for the benefit of the Holders
from time to time of the Securities, entered into a Fiscal Agency Agreement, dated as of March 17, 1998 (the “Fiscal Agency Agreement”), with The Bank of New York Mellon (as successor to JPMorgan Chase Bank, National Association), as
Fiscal Agent, copies of which Agreement are on file and available for inspection during normal business hours at the corporate trust office of the Fiscal Agent in The City of New York. The Bank of New York Mellon and its respective successors as
Fiscal Agent are herein called “Fiscal Agent”. As used herein, the term “Holder” means the person in whose name the Security is registered in the Security Register. 

4. The Securities constitute direct, unconditional, unsecured and general obligations of CAF. So long as any of the Securities shall be
outstanding and unpaid, but only up to the time amounts sufficient for payment of all principal and interest have been placed at the disposal of the Fiscal Agent, CAF will not cause or permit to be created on any of its property or assets any
mortgage, pledge or other lien or charge as security for any bonds, notes or other evidences of indebtedness heretofore or hereafter issued, assumed or guaranteed by CAF for money borrowed (other than purchase money mortgages, pledges or liens on
property purchased by CAF as security for all or part of the purchase price thereof), unless the Securities shall be secured by such mortgage, pledge or other lien or charge equally and ratably with such other bonds, notes or evidences of
indebtedness. 
 Subject to the preceding paragraph, the Securities and each of them will rank pari passu with all other
unsecured Indebtedness of CAF, other than such obligations as may be preferred by provisions of law that are both mandatory and of general application. “Indebtedness” means all indebtedness of CAF in respect of monies borrowed by CAF and
guarantees given by CAF for monies borrowed by others. 
 5. The Securities may be redeemed at our option in whole, but not
in part [at any time]*[on any interest payment date]† on giving not less than 30 nor more than 60 days’ notice to the Holders of the Securities (which notice shall be irrevocable), at the principal amount of such Securities [or [insert
other amount or provision for determining such other amount]], together with interest accrued (if any) to the date fixed for redemption, if: 

 

	*	 Include if floating rate note provisions are not applicable. 

	†	 Include if floating rate note provisions are applicable.

 (i) CAF has or will become obliged to pay additional amounts as provided or
referred to herein as a result of any change in, or amendment to, the laws or regulations of any of the full member shareholder countries of CAF or any political subdivision or any authority therein or thereof having power to tax, or any change in
the application or official interpretation of such laws or regulations (including a holding by a court of competent jurisdiction), which change or amendment becomes effective on or after the date of issue of the first tranche of the Securities; and

 (ii) such obligation cannot be avoided by CAF taking reasonable measures available to CAF, 

provided, however, that no such notice of redemption shall be given earlier than [90 days prior to the earliest date on which CAF would be
obliged to pay such additional amounts if a payment in respect of the Securities were then due]*[60 days prior to the interest payment date occurring immediately before the earliest date on which CAF would be obliged to pay such additional amounts
if a payment in respect of the Securities were then due]†. 
 Prior to the publication of any notice of redemption pursuant to this
section, CAF shall deliver to the Fiscal Agent (a) a certificate signed by two authorized officers of CAF stating that CAF is entitled to effect such redemption and setting forth a statement of facts showing that the conditions precedent to the
right of CAF so to redeem have occurred and (b) an opinion of independent legal advisers of recognized standing to the effect that CAF has or will become obliged to pay such additional amounts as a result of such change or amendment. Upon the
expiration of any such notice as is referred to in this section, CAF shall be bound to redeem the Securities in accordance with this section. 

6. [Except as set forth in the following sentence, the Securities are issuable only as fully registered global securities, without interest
coupons, each registered in the name of DTC, a nominee thereof or a successor to DTC or a nominee thereof (each, a “Global Security”), and (i) no Global Security may be transferred, except in whole and not in part, and only to DTC,
one or more nominees of DTC or one or more respective successors of DTC and its nominees, and (ii) no Global Security may be exchanged for any Security other than another Global Security. Notwithstanding any other provisions of the Fiscal
Agency Agreement or this Global Security, a Global Security shall be transferred to, or exchanged for registered Securities registered in the name of, a person other than DTC, a nominee of DTC or a successor of DTC or its nominee if (i) DTC (a)
notifies CAF that it is unwilling or unable to continue as depositary for such Global Security or (b) ceases to be a clearing agency registered under the Securities Exchange Act of 1934 at a time when it is required to be, and in either such
case (a) or (b) a successor depositary is not appointed by CAF within 90 days after receiving such notice or becoming aware that DTC is no longer so registered, (ii) CAF, in its sole discretion, instructs the Fiscal Agent in writing that a
Global Security shall be so transferable and exchangeable or (iii) there shall have occurred and be continuing an event of default with respect to the Securities evidenced by this Global Security (as set forth in paragraph 9). Registered
Securities issued in exchange for this Global Security will be registered in such names, and issued in such denominations (of one thousand [US Dollars ] ([USD]1,000.00) and integral multiples thereof), as an authorized representative of DTC
shall request.]‡ 
  
  

	*	 Include if floating rate note provisions are not applicable. 

	†	 Include if floating rate note provisions are applicable. 

	‡	 Include if a Global Security. 

 [Subject, in the case of this Global Security, to the preceding paragraph, transfer]*
[Transfer] of this [Global] Security is registrable on the Security Register upon surrender of this [Global] Security for registration at the office of the Fiscal Agent duly endorsed by, or accompanied by a written instrument of transfer in form
satisfactory to CAF and the Fiscal Agent duly executed by, the Holder hereof or his attorney duly authorized in writing. Upon such surrender of this [Global] Security for registration of transfer, CAF shall execute, and the Fiscal Agent shall
authenticate and deliver, in the name of the designated transferee or transferees, one or more new registered Securities, dated the date of authentication thereof, of any authorized denominations and of a like aggregate principal amount, and
registered in such name or names as may be requested [(subject, in the case of this Global Security, to the preceding paragraph)]. CAF and the Fiscal Agent may deem and treat the registered owner hereof as the absolute owner hereof (notwithstanding
any notice of ownership or writing hereon made by anyone other than CAF or the Fiscal Agent) for the purposes of receiving payment hereon or on account hereof and for all other purposes whether or not this [Global] Security shall be overdue. CAF
covenants that, at all times so long as this [Global] Security shall be outstanding, it shall maintain in The City of New York an office or agency for the registration and registration of transfers, as aforesaid, of the registered Securities. CAF
has appointed the corporate trust office of the Fiscal Agent as its agent in The City of New York for such purpose and has agreed to cause to be kept at such office a register (the register maintained in such office and in any other office or agency
for such purpose being herein sometimes collectively referred to as the “Security Register”) in which, subject to such reasonable regulations as it may prescribe, CAF shall provide for such registration and registration of transfers. 

In the manner and subject to the limitations and upon payment of the charges (if any) provided in the Fiscal Agency Agreement and this
[Global] Security, registered Securities may be exchanged for a like aggregate principal amount of registered Securities of other authorized denominations but may never be exchanged for coupon Securities. CAF covenants that it shall maintain at all
times so long as this [Global] Security shall be outstanding, in The City of New York, an office or agency where registered Securities may be surrendered in exchange for registered Securities in other authorized denominations. CAF has appointed the
corporate trust office of the Fiscal Agent, in The City of New York, as its agent for such purposes. 
 No registrations of transfers or
exchanges of Securities shall be made for a period of 15 days preceding any interest payment date. 
 All Securities issued upon any
registration of transfer or exchange of Securities shall be the valid obligations of CAF, evidencing the same debt, and entitled to the same benefits, as the Securities surrendered upon such registration of transfer or exchange [(except that a
Security not in global form issued upon any registration of transfer or exchange of this Global Security shall not be subject or entitled to the provisions set forth in this Global Security relating to Securities in global form)]*. Any new Security
delivered pursuant to this Paragraph 6 shall be so dated that neither gain nor loss in interest shall result from such registration or exchange. 

No service charge shall be made to any Holder for any such exchange or registration of transfer, but CAF may require payment of a sum
sufficient to cover any tax or other governmental charge payable in connection therewith. 
  

 

	*	 Include if Global Security 

 7. In case any Security [(including this Global Security)] shall at any time become
mutilated or destroyed or stolen or lost, then, provided that such Security, or evidence of the loss, theft or destruction thereof (together with the indemnity hereinafter referred to and such other documents or proof as may be required in
the premises) shall be delivered to the Fiscal Agent in The City of New York, a replacement Security of like tenor and principal amount will be issued by CAF and, at its request, authenticated and delivered by the Fiscal Agent at the office of the
Fiscal Agent, in The City of New York, in exchange for the Security so mutilated, or in lieu of the Security so destroyed or stolen or lost; and provided however that, in the case of destroyed, stolen or lost Securities, (i) CAF
or the Fiscal Agent shall not have received notice that such Securities have been acquired by a bona fide purchaser, and (ii) CAF and the Fiscal Agent shall have received evidence satisfactory to them that such Securities were destroyed, stolen
or lost, and, if required, shall also have received an indemnity satisfactory to each of them. All expenses and reasonable charges associated with procuring such indemnity and with the preparation, authentication and delivery of a replacement
Security shall be borne by the owner of the Security mutilated, destroyed, stolen or lost. In case such mutilated, destroyed, lost or stolen Security has become or is about to become due and payable, CAF in its discretion may, instead of issuing a
new Security, pay or cause to be paid such Security. 
 Any new Security delivered pursuant to this Paragraph 7 shall be so dated that
neither gain nor loss in interest shall result from such replacement. 
 Upon the issuance of any new Security under this Paragraph 7, CAF
may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses (including the fees and expenses of the Fiscal Agent) connected therewith. 

Every new Security issued pursuant to this Paragraph 7 in lieu of any mutilated, destroyed, lost or stolen Security, shall constitute an
original additional contractual obligation of CAF, whether or not the destroyed, lost or stolen Security shall be at any time enforceable by anyone. 

The provisions of this Paragraph 7 are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the
replacement or payment of mutilated, destroyed, lost or stolen Securities. 
 8. In order to provide for the payment of the principal of and
the interest on the Securities as the same shall become due, CAF does hereby agree to pay to the Fiscal Agent at its corporate trust office in The City of New York, in immediately available funds in [US Dollars] or in such other coin or currency of
[the United States of America] as at the time of payment is legal tender for the payment therein of public and private debts, the amounts set forth below in this paragraph, to be held in trust and applied by the Fiscal Agent as hereinafter set
forth: (a) CAF shall pay to the Fiscal Agent at least one (1) full Business Day prior to each interest payment date an amount sufficient to pay the interest becoming due on all Securities on such interest payment date and the Fiscal Agent
shall apply the amounts so paid to it to the payment of such interest on such interest payment date; and (b) at least one (1) full Business Day prior to the maturity date of the Securities, CAF shall pay to the Fiscal Agent an amount
which, together with any monies then held by the Fiscal Agent and available for the purpose, shall be equal to the entire amount of interest and principal to be due on such maturity date on the Securities then outstanding, and the Fiscal Agent shall
apply such amount to the payment of interest on and principal of such Securities in accordance with the terms thereof. 
 Any monies paid by
CAF to the Fiscal Agent for the payment of the principal of or interest on any Securities and remaining unclaimed at the end of two (2) years after such principal or interest shall have become due and payable and provision for such payment
shall have been made shall then be repaid to CAF, and upon such repayment the aforesaid trust shall terminate and all liability of the Fiscal Agent with respect to such monies shall thereupon cease, without, however, limiting in any way the
unconditional obligation of CAF to pay the principal of and interest on this [Global] Security as the same shall become due. 

 9. If an Event of Default (as defined below) occurs, each Holder of Securities may, by
written notice to CAF and the Fiscal Agent, declare the principal of and any accrued interest on the Securities held by it to be, and such principal and accrued interest shall thereupon become, immediately due and payable, unless prior to receipt of
such notice by CAF all Events of Default in respect of such Securities shall have been cured. If all such Events of Default shall have been cured following such declaration, such declaration may be rescinded by any such Holder with respect to such
previously accelerated Securities upon delivery of written notice of such rescission to CAF and the Fiscal Agent. 
 An “Event of
Default” is: (a) a failure to pay any principal of or interest on the Securities when due and the continuance of such failure for 30 days; (b) a failure to perform or observe any material obligation under or in respect of the
Securities or the Fiscal Agency Agreement and the continuance of such failure for a period of 90 days after written notice thereof has been delivered to CAF and to the Fiscal Agent by the Holder of any Security; (c) a failure to pay any amount
in excess of one hundred million US Dollars (USD100,000,000.00) (or the equivalent thereof in any other currency or currencies) of principal or interest or premium in respect of any indebtedness incurred, assumed or guaranteed by CAF as and when
such amount becomes due and payable and the continuance of such failure until the expiration of any applicable grace period or 30 days, whichever is longer; or (d) the acceleration of any indebtedness incurred or assumed by CAF with an
aggregate principal amount in excess of one hundred million US Dollars (USD100,000,000.00) (or the equivalent thereof in any other currency or currencies) by any holder or holders thereof. 

10. The Fiscal Agency Agreement and the terms and conditions of the Securities may be modified or amended by CAF and the Fiscal Agent, without
the consent of the Holders of the Securities, for the purpose of adding to the covenants of CAF for the benefit of the Holders, surrendering any right or power conferred upon CAF, securing the Securities pursuant to the requirements of the
Securities or otherwise, effecting the issue of further Securities as described in paragraph 15, curing any ambiguity, correcting or supplementing any defective provision therein, or for any purpose that CAF deems necessary or desirable and that
shall not adversely affect the interests of the Holders of the Securities in any material respect, to all of which the Holder of this Security shall, by acceptance hereof, consent. 

CAF may modify any of the terms or provisions contained in the Securities in any way with the written consent of the Holders of not less than
66 2/3% in principal amount of the Securities at the time outstanding, provided, however, that no such action may, without the consent of the Holder of each Security affected thereby, (a) change the due date for the payment of the principal of
or of any installment of interest on the Securities, (b) reduce the principal amount of the Securities, the portion of such principal that is payable upon acceleration of the maturity of such Security or the interest rate thereon,
(c) change the currency or place of payment of principal of or interest on the Securities, (d) reduce the proportion of the principal amount of the Securities the vote or consent of the Holders of which is necessary to modify, amend or
supplement the Fiscal Agency Agreement or the terms and conditions of the Securities or to make, take or give any request, demand, authorization, direction, notice, consent, waiver or other action provided hereby or therein to be made, taken or
given, or (e) change the obligation of CAF to pay additional amounts. 
 11. CAF hereby certifies and declares that all acts and
conditions required to be performed and to have happened precedent to the creation and issuance of this Global Security, and to constitute the same the valid and legally binding obligation of CAF in accordance with its terms, have been performed and
have happened in due and strict compliance with the Constitutive Agreement of CAF. 

 12. All notices will be delivered by CAF in writing to each Holder of the Securities. [If at
the time of any such notice the Securities are represented by this Global Security, such notice shall be delivered to DTC and shall be deemed to have been given three Business Days after delivery to DTC. If at the time of any such]* [Such] notice
the Securities are not represented by any Global Security, such notice shall be delivered to the Holders of the Securities and in such case shall be deemed to have been given three Business Days after the mailing of such notice by first class mail.

 13. This [Global] Security shall not become valid or obligatory for any purpose unless and until this [Global] Security has been
authenticated by The Bank of New York Mellon, or its successor, as Fiscal Agent. 
 14. This [Global] Security shall be governed by, and
shall be construed in accordance with, the laws of the State of New York. 
 15. CAF may at any time or from time to time, without notice to
or the consent of the Holders of the Securities, create and issue further Securities ranking pari passu with the Securities in all respects (or in all respects except for the payment of interest accruing prior to the issue date of such
further Securities or except for the first payment of interest following the issue date of such Securities) and so that such further Securities shall be consolidated and form a single issue with the Securities and shall have the same terms as to
status, redemption or otherwise as the Securities. 
 16. CAF has appointed CT Corporation System in The City New York as its authorized
agent upon which process may be served in any action arising out of or based on the Securities which may be instituted in any State or Federal court in The City and State of New York by the Fiscal Agent or the Holder of a Security, and, subject to
the last sentence of this paragraph 16, CAF hereby expressly accepts the jurisdiction of any such court in respect of any such action. CAF hereby agrees to keep such appointment in force at all times while this or any other Security shall be
outstanding. CAF hereby waives irrevocably any immunity (except for immunity from execution prior to final judgment) to which it might otherwise be entitled in any action based on the Securities which may be instituted by the Holder of any Security
in any State or Federal court in The City and State of New York. Anything in the Fiscal Agency Agreement or this [Global] Security to the contrary notwithstanding, such appointment of an authorized agent for service of process and such waiver of
immunity shall not be interpreted to include actions brought under the United States Federal securities laws. 

*    *    *    *    * 

 
  

	*	 Include if a Global Security. 

 IN WITNESS WHEREOF, CAF has caused this Global Security to be executed with the signature of
the Director of Financial Policies and International Issues of CAF, all in The City of New York, State of New York, United States of America. 
 Dated:
                     
  

			
	 CORPORACIÓN ANDINA DE FOMENTO

	
	  

	By:	 	         [Executive President]

 [FORM OF CERTIFICATE OF AUTHENTICATION] 

This is one of the Securities referred to in the within-mentioned Fiscal Agency Agreement. 

 

			
	THE BANK OF NEW YORK MELLON, as Fiscal Agent
	
	  

	By:	 	        Authorized Officer

 ASSIGNMENT 

FOR VALUE RECEIVED, the undersigned sells, assigns and transfers unto (name and address including zip code and taxpayer I.D. or Social
Security Number of assignee) 
  

                          
                                         
                                         
                                         
                                         
                       
  

                          
                                         
                                         
                                         
                                         
                       
  

                          
                                         
                                         
                                         
                                         
                       
 the within
Security and does hereby irrevocably constitute and appoint 
  

                          
                                         
                                         
                                         
                                         
                       
 to transfer such
Security on the books kept for registration thereof with full power of substitution in the premises. 
 Dated:
                                         
                                         
                                       * 
 Signature Guaranteed: 
  

 
  

 

	* 	 NOTE: The signature to this assignment must correspond with the name of the registered owner as it appears on
the face of the within Security in every particular, without alteration, enlargement or any change whatsoever.ex_154341.htm

Exhibit 10.1

 

 

FIRST AMENDMENT TO SENIOR SECURED NOTE PURCHASE AGREEMENT

 

THIS FIRST AMENDMENT TO SENIOR SECURED NOTE PURCHASE AGREEMENT is dated as of August 9, 2019, by and among NOVATION COMPANIES, INC., a Maryland corporation (“Issuer”), each of those Subsidiaries of the Issuer identified as a “Guarantor” on the signature pages hereto and such other Subsidiaries of the Issuer as may from time to time become a party hereto (each a “Guarantor” and collectively, the “Guarantors”), the Noteholders listed on the signature page hereof (together with such Persons who may become Noteholders hereunder from time to time, each a “Noteholder” and collectively, the “Noteholders”), and Wilmington Savings Fund Society, FSB as Collateral Agent (the “Collateral Agent”) (the “Amendment”).

 

R E C I T A L S

 

A.     Issuer, the Guarantors, the Noteholders and the Collateral Agent are parties to that certain Senior Secured Note Purchase Agreement dated as of July 27, 2017 (as amended, modified or supplemented, the “Note Purchase Agreement”).

 

B.     Issuer’s obligations under the Note Purchase Agreement are further evidenced by Notes executed by Issuer payable to the Noteholders.

 

C.     On April 1, 2019, Issuer made an interest payment in an amount equal to $1,337,839.19 (One million three hundred and thirty-seven thousand eight hundred and thirty-nine dollars and nineteen cents) which exceeded the amount due under the Amended and Restated Notes (as defined herein) by $1,125,382.59 (One million one hundred and twenty-five thousand three hundred and eighty-two dollars and fifty-nine cents) (the “April 2019 Payment Surplus”).

 

D.     On July 1, 2019, Issuer made an interest payment in an amount equal to $1,323,316.35 (One million three hundred and twenty-three thousand three hundred and sixteen dollars and thirty-five cents) which exceeded the amount due under the Amended and Restated Notes (as defined herein) by $1,110,859.75 (One million one hundred and ten thousand eight hundred and fifty-nine dollars and seventy-five cents) (the “July 2019 Payment Surplus”, and, together with the April 2019 Payment Surplus, the “2019 Payment Surplus”).

 

E.     The parties desire to amend the Note Purchase Agreement and the Notes to, among other things, adjust the Applicable Rate in effect as of April 1, 2019 and to provide Issuer a credit against future interest payments in an amount equal to the 2019 Payment Surplus, on the terms as hereinafter provided.

 

NOW, THEREFORE, in consideration of these premises and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

 

1.     Same Terms. All terms used herein which are defined in the Note Purchase Agreement shall have the same meanings when used herein, unless the context hereof otherwise requires or provides. In addition, all references in the Note Purchase Agreement and the Notes to the “Agreement” shall mean the Note Purchase Agreement, as amended by this Amendment, as the same shall hereafter be amended from time to time. In addition, the following terms have the meanings set forth below:

 

“Amended and Restated Notes” shall mean collectively the amended and restated senior secured notes issued by Issuer hereunder in substantially the form of Exhibit A attached hereto.

 

“Effective Date” means August 9, 2019.

 

“Modification Papers” means this Amendment, the Amended and Restated Notes and all of the other documents and agreements executed in connection with the transactions contemplated by this Amendment.

 

2.     Conditions Precedent. The transactions contemplated by this Amendment shall be deemed to be effective as of the Effective Date, when the following conditions have been complied with to the satisfaction of the Noteholders, unless waived in writing by the Noteholders:

 

A.     Amendment. This Amendment shall be fully executed by the parties hereto.

 

B.     Amended and Restated Notes. The Amended and Restated Notes shall be executed and delivered to the Noteholders.

 

C.     Shares of Common Stock of Issuer. Issuer shall issue an aggregate of nine million (9,000,000) shares of common stock of Issuer to the Noteholders to be allocated ratably among the Noteholders as set forth on Schedule 1 attached hereto.

 

D.     Warrants. Issuer shall issue warrants substantially in the form of Exhibit B attached hereto to purchase an aggregate of twenty-two million two hundred fifty thousand (22,250,000) shares of common stock of Issuer to the Noteholders to be allocated ratably among the Noteholders as set forth on Schedule 1 attached hereto.

 

E.     Further Assurances. Execution and/or delivery of all other agreements, instruments and documents requested by the Noteholders to effectuate and implement the terms hereof.

 

F.     Representations and Warranties. All representations and warranties contained herein or in the documents referred to herein or otherwise made in writing in connection herewith or therewith shall be true and correct in all material respects as of the date hereof, in each case other than representations and warranties that relate to a specific date.

 

G.     No Event of Default. After giving effect to this Amendment, no Event of Default shall have occurred and be continuing.

 

3.     Amendments to Note Purchase Agreement. On the Effective Date, the Note Purchase Agreement shall be amended as follows:

 

A.     Section 1.1 of the Note Purchase Agreement shall be amended by amending and restating the definition of “Applicable Rate” in its entirety to read as follows:

 

“Applicate Rate” shall have the meaning set forth in Section 2 of the Notes.

 

B.     Section 1.1 of the Note Purchase Agreement shall be amended by adding the following new definitions in their proper alphabetical order:

 

“Excess Cash Flow” shall mean Consolidated Net Income plus depreciation and amortization expense of the Issuer and its Subsidiaries for such period less the sum of, without duplication, (i) all cash principal payments on the Notes made during such period and all cash payments on Indebtedness (other than Indebtedness incurred under this Agreement) of the Issuer or its Subsidiaries during such period to the extent such other Indebtedness is permitted to be incurred, and such payments are permitted to be made, under this Agreement, (ii) any capital expenditures made by the Issuer or its Subsidiaries during such period, (iii) fees and expenses paid in cash and incurred in connection with any amendments or other modifications to this Agreement or the Notes, (iv) all scheduled loan servicing fees and other similar fees in respect of Indebtedness of the Issuer or its Subsidiaries paid in cash during such period, to the extent such Indebtedness is permitted to be incurred, and such payments are permitted to be made, under this Agreement, (v) fees and expenses paid in cash and incurred in connection with any consummated Permitted Acquisition and (vi) the excess, if any of working capital at the end of such period over working capital at the beginning of such period (or plus the excess, if any, of the working capital at the beginning of such period over working capital at the end of such period).

 

“First Amendment Effective Date” shall mean August 9, 2019.”

 

C.     The Note Purchase Agreement shall be amended by adding the following as a new Section 2.9 to the Note Purchase Agreement to read as follows:

 

“Section 2.9     Mandatory Prepayment.

 

Contemporaneously with the delivery to the Noteholders of annual financial statements pursuant to Section 5.1(a) hereof, commencing with the delivery to the Noteholders of the financial statements for the fiscal year ended on December 31, 2019 or, if such financial statements are not delivered to the Noteholders on the date such statements are required to be delivered pursuant to Section 5.1(a) hereof, on the date such statements are required to be delivered to the Noteholders pursuant to Section 5.1(a) hereof, the Issuer shall prepay the outstanding principal amount of the Notes in accordance with Section 2.4 in an amount equal to the result of (to the extent positive) (1) 50% of the Excess Cash Flow of the Issuer and its Subsidiaries for such fiscal year minus (2) the aggregate principal amount of all payments made by the Issuer pursuant to Section 2.5 for such fiscal year (solely to the extent not included in the calculation of Excess Cash Flow). Notwithstanding the foregoing, Excess Cash Flow shall exclude any amounts attributable to periods prior to (x) the First Amendment Effective Date and (y) in the case of any Person that becomes a Subsidiary of the Issuer after the First Amendment Effective Date pursuant to a Permitted Acquisition, the consummation date of such Permitted Acquisition.”

 

D.     Section 5.4 of the Note Purchase Agreement shall be amended by amending and restating such section in its entirety to read as follows:

 

“Preserve, renew and keep in full force and effect its corporate or other formative existence and good standing, take all reasonable action to maintain all rights, privileges and franchises necessary or desirable in the normal conduct of its business and to maintain its goodwill and comply with all Contractual Obligations and Requirements of Law, except where the failure to do so could not reasonably be expected to have a Material Adverse Effect. Notwithstanding the foregoing, upon consultation and consent of the Required Noteholders (such consent not to be unreasonably withheld or delayed), the Issuer shall be permitted to liquidate any Guarantor (other than in connection with an Asset Sale) so long as 100% of its assets are distributed to the Issuer or another Guarantor.”

 

E.     Sections 5.9 of the Note Purchase Agreement shall be amended by amending and restating the introductory clause of such section in its entirety to read as follows:

 

“Beginning on December 31, 2021, comply with the following financial covenants:”

 

F.     Exhibit 1.1(b) to the Note Purchase Agreement shall be amended in its entirety by replacing it with Exhibit A attached hereto.

 

4.     Retroactive Effect. For purposes of clarification, the Applicable Rate as amended herein shall be applied retroactively in accordance with the terms of the Amended and Restated Notes.

 

5.     Continuation of Obligations. As of the Effective Date, Issuer does hereby agree that it remains liable for the payment and performance of all of the terms, conditions, liabilities, indemnities, and obligations under the Note Purchase Agreement and the Notes, including, without limitation, the Obligations, whether now or hereafter arising or accruing.

 

6.     Reaffirmation. Issuer hereby represents and agrees that there are no oral agreements which modify any of the Note Purchase Agreement or the Notes and that the Note Purchase Agreement and the Notes, as expressly modified herein, constitute the entire agreement between Issuer and the Noteholders with respect to the Obligations. Nothing herein shall constitute any novation with respect to the Note Purchase Agreement or the Notes. Except as expressly modified herein, all terms, covenants and provisions of the Note Purchase Agreement and the Notes shall remain unaltered and in full force and effect.

 

7.     Certain Representations. Issuer represents and warrants that, as of the date hereof: (a) Issuer has full power and authority to execute the Modification Papers to which it is a party, and such Modification Papers constitute the legal, valid and binding obligation of Issuer enforceable in accordance with their terms, except as enforceability may be limited by general principles of equity and applicable bankruptcy, insolvency, reorganization, moratorium, and other similar laws affecting the enforcement of creditors’ rights generally; and (b) no authorization, approval, consent or other action by, notice to, or filing with, any governmental authority or other person is required for the execution, delivery and performance by Issuer of the Modification Papers to which it is a party.

 

8.     Limitation on Agreements. Except as expressly set forth herein, the modifications set forth herein are limited precisely as written and shall not be deemed (a) to be a consent under or a waiver of or an amendment to any other term or condition in the Note Purchase Agreement, or (b) to prejudice any right or rights which any Noteholder now has or may have in the future under or in connection with the Note Purchase Agreement, as amended hereby, or any of the other documents referred to herein or therein.

 

9.     Counterparts. This Amendment may be executed in any number of counterparts, each of which when executed and delivered shall be deemed an original, but all of which constitute one instrument. In making proof of this Amendment, it shall not be necessary to produce or account for more than one counterpart thereof signed by each of the parties hereto.

 

10.     Incorporation of Certain Provisions by Reference. The provisions of Sections 9.1 and 9.2 of the Note Purchase Agreement are incorporated herein by reference for all purposes.

 

11.     Entirety, Etc. This instrument and the Note Purchase Agreement and the Notes embody the entire agreement between the parties. THIS AMENDMENT AND THE NOTE PURCHASE AGREEMENT AND THE AMENDED AND RESTATED NOTES REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.

 

[Signature Page Follows.]

 

 

 

IN WITNESS WHEREOF, the parties hereto have executed this Amendment to be effective as of the Effective Date.

 

	
			ISSUER:

				
			NOVATION COMPANIES, INC., a Maryland corporation

			

 

By:       /s/ Carolyn Campbell

Name: Carolyn Campbell

Title: Chief Financial Officer

 

	
			GUARANTORS:

				
			NOVATION HOLDING, INC., a Delaware corporation

			

 

By:       /s/ Carolyn Campbell

Name: Carolyn Campbell

Title: Chief Financial Officer

 

 

HEALTHCARE STAFFING, INC., a Georgia corporation

 

By:       /s/ Carolyn Campbell

Name: Carolyn Campbell

Title: Chief Financial Officer

 

[Signatures Continue on Following Pages]

 

NOTEHOLDERS:          

TABERNA PREFERRED FUNDING II, LTD.

By: TP Management LLC, as attorney-in-fact for Taberna Capital Management, LLC, its Collateral Manager

 

By:     /s/ Daniel Bass                    

Name: Daniel Bass

Title:    Authorized Signatory

 

KODIAK CDO I, LTD.

By: EJF CDO Manager LLC, its Collateral Manager

By: EJF Investments Manager LLC, its Managing Member

 

By:      /s/ Neal J. Wilson

Name: Neal J. Wilson

Title: Chief Executive Officer

 

[Signatures Continue on Following Pages]

 

 

COLLATERAL AGENT:          Wilmington Savings fund society, FSB

 

By:       /s/ Haley Harris

Name: Haley Harris

Title: Trust Officer

 

 

 

 

SCHEDULE 1

 

Allocation of Shares

 

Kodiak CDO I, Ltd. – 3,240,000 shares

 

Taberna Preferred Funding I, Ltd. – 2,880,000 shares

 

Taberna Preferred Funding II, Ltd. – 2,880,000 shares

 

Allocation of Warrants

 

Kodiak CDO I, Ltd. – 8,010,000 shares

 

Taberna Preferred Funding I, Ltd. – 7,120,000 shares

 

Taberna Preferred Funding II, Ltd. – 7,120,000 shares

 

 

 

 

 

EXHIBIT A

 

Exhibit 1.1(b)

 

[FORM OF AMENDED AND RESTATED SENIOR SECURED PROMISSSORY NOTE]

 

 

THE OFFER AND SALE OF THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS AND THIS NOTE MAY NOT BE TRANSFERRED, SOLD OR OTHERWISE DISPOSED OF EXCEPT WHILE A REGISTRATION STATEMENT IS IN EFFECT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM REGISTRATION UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS.

 

AMENDED AND RESTATED SENIOR SECURED PROMISSORY NOTE

 

$[ ]     [City/State of Issuer]

_________, 2019

 

 

FOR VALUE RECEIVED, the undersigned, NOVATION COMPANIES, INC., a Maryland corporation (the "Maker"), hereby promises to pay to the order of [Noteholder], a [jurisdiction and entity], its successors and assigns (collectively, the "Holder"), the principal sum of [AMOUNT] U.S. DOLLARS ($[#########]), together with interest on the outstanding balance hereof at the rate specified herein.

 

This Amended and Restated Senior Secured Promissory Note (this "Note") is one of the Notes referred to in, and is entitled to the benefits of, the Senior Secured Note Purchase Agreement dated as of July 27, 2017, among the Holder, the Maker and certain other parties (as the same may be amended, the "Note Purchase Agreement"). This Note amends and restates that certain promissory note issued by the Maker to the Holder, dated July 27, 2017 in the principal amount of [AMOUNT] U.S. DOLLARS ($[#########]). The Note Purchase Agreement contains provisions, among others, for the acceleration of the maturity hereof in certain circumstances. All capitalized terms used herein and not otherwise defined will have the meanings assigned to such terms in the Note Purchase Agreement, as amended.

 

Applicable Rate: The unpaid principal balance of the Note will bear interest at the rates set forth below (in each case, as applicable, the “Applicable Rate”):

 

	
			Period

				
			Interest Rate 

			
	
			From July 27, 2017 through March 31, 2019

				
			LIBOR plus 3.50%

			
	
			From April 1, 2019 through December 31, 2023

				
			1.00% per annum

			
	
			From January 1, 2024 through December 31, 2028

				
			2.00% per annum

			
	
			From January 1, 2029 until the later of (a) the Maturity Date or (b) the date on which all unpaid principal under the Notes, together with all accrued and unpaid interest thereon, is paid in full

				
			10.00% per annum

			

 

The Applicable Rate shall be based on a year of 360 days and actual days elapsed. Accrued interest on the unpaid principal balance hereof will be due and payable in arrears commencing on April 1, 2019, and on the first day of each January, April, July and October thereafter (each an "Interest Payment Date") and on the Maturity Date (defined below); provided, however, the 2019 Payment Surplus shall be credited against Maker’s ratable share of the payment obligations due to it under the Note Purchase Agreement as of October 1, 2019 and each succeeding quarter thereafter until the 2019 Payment Surplus is exhausted. 

 

The unpaid principal balance hereof, all accrued and unpaid interest due hereunder and any other amounts due from the Maker to the Holder hereunder will be due and payable on the date (the "Maturity Date") which is the earliest to occur of (a) the date when the payment of this Note has been accelerated pursuant to Section 7.2 of the Note Purchase Agreement, (b) upon the date of redemption set forth in a Redemption Notice pursuant to Section 2.5 of the Note Purchase Agreement (to the extent of the principal amount to be redeemed), or (c) March 30, 2033.

 

If any payment of principal or interest is not paid on the date when due, and upon the occurrence and during the continuance of any financial covenant, voluntary or involuntary Bankruptcy Event of Default, then any overdue payment and the entire principal amount hereof will bear interest at the rate of 3.0% per annum plus the Applicable Rate and will be payable on demand until such default is cured (if capable of cure) or until all amounts due hereunder are paid in full, which interest is payable upon demand. If any amount due under this Note is not paid when due, the Maker will pay reasonable attorneys' fees and other reasonable costs of collection in accordance with Section 9.6(a) of the Note Purchase Agreement.

 

Payments hereunder will be made in accordance with Section 2.4 of the Note Purchase Agreement. Subject to the provisions of the next sentence, the Maker may redeem this Note in whole or in part at any time. Any redemption of the Note will be at a redemption price equal to 101% of the principal amount of Notes redeemed plus accrued and unpaid interest thereon, if any, to the redemption date. Any partial prepayment shall be in an amount equal to $500,000 or a higher integral multiple of $100,000. 

 

The Maker hereby: (a) waives presentment for payment, demand, notice of protest and all other notices (not expressly provided for in this Note or the Note Purchase Agreement) in connection with the delivery, acceptance, performance, default or enforcement of the payment of this Note; (b) agrees that its liability is unconditional without regard to the liability of any other party and will not be affected in any manner by any indulgence, extensions of time, renewal, waiver or modification granted or consented to by the Holder at any time; (c) consents to any and all indulgences, extensions of time, renewals, waivers or modifications granted or consented to by the Holder at any time; and (d) agrees that additional makers, endorsers, guarantors or sureties may become parties to this Note or the Note Purchase Agreement without notice to it and without affecting its liability under this Note.

 

This Note: (a) may be amended only by a writing signed by the Maker and the Holder; (b) may not be assigned or otherwise transferred, whether by operation of law or otherwise, (i) by the Maker without the prior consent of the Holder or (ii) by the Holder, except as permitted under Section 8.2 of the Note Purchase Agreement; (c) is governed by, and will be construed and enforced in accordance with, the laws of the State of New York without regard to conflict of law rules (other than Section 5-1401 of the New York General Obligations Law); and (d) is binding upon the Maker and its successors and permitted assigns, and will inure to the benefit of the Holder and its successors and permitted assigns.

 

[Signature Page Follows]

 

 

 

 

 

SIGNATURE PAGE TO AMENDED AND RESTATED SENIOR SECURED PROMISSORY NOTE

 

 

NOVATION COMPANIES, INC.

 

 

 

By:

Title:

 

EXHIBIT B

 

FORM OF WARRANT

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NEITHER THIS SECURITY NOR THE SECURITIES FOR WHICH THIS SECURITY IS EXERCISABLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY. THIS SECURITY AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH SECURITIES.

 

[FORM OF] WARRANT

 

 NOVATION COMPANIES, INC.

 

Warrant Shares:_____                              Initial Exercise Date: ________, 2019

THIS WARRANT (the “Warrant”) certifies that, for value received, ____________ (the “Holder”) is entitled, upon the terms and subject to the limitations on exercise and the conditions hereinafter set forth, at any time on or after the date hereof (the “Initial Exercise Date”) and on or prior to the close of business on the ten year anniversary of the Initial Exercise Date (the “Termination Date”) but not thereafter, to subscribe for and purchase from Novation Companies, Inc., a Maryland corporation (the “Company”), up to _______ shares (as subject to adjustment hereunder, the “Warrant Shares”) of common stock of the Company (“Common Stock”). The purchase price of one share of Common Stock under this Warrant shall be equal to the Exercise Price, as defined in Section 2(b).

 

Section 1.     Definitions. Capitalized terms used and not otherwise defined herein shall have the meanings set forth in that certain Senior Secured Note Purchase Agreement (the “Note Purchase Agreement”), dated July 27, 2017, as amended, among the Company, certain subsidiaries of the Company as guarantors, the purchasers signatory thereto and Wilmington Saving Fund Society, FSB as collateral agent.

 

Section 2.     Exercise.

 

a)     Exercise of Warrant. Exercise of the purchase rights represented by this Warrant may be made, in whole or in part, at any time or times on or after the Initial Exercise Date and on or before the Termination Date by delivery to the Company (or such other office or agency of the Company as it may designate by notice in writing to the registered Holder at the address of the Holder appearing on the books of the Company) of a duly executed facsimile copy of the Notice of Exercise form annexed hereto. Within three (3) Business Days following the date of exercise as aforesaid, the Holder shall deliver the aggregate Exercise Price for the shares specified in the applicable Notice of Exercise by wire transfer or cashier’s check drawn on a United States bank. Notwithstanding anything herein to the contrary, the Holder shall not be required to physically surrender this Warrant to the Company until the Holder has purchased all of the Warrant Shares available hereunder and the Warrant has been exercised in full, in which case, the Holder shall surrender this Warrant to the Company for cancellation within three (3) Business Days of the date the final Notice of Exercise is delivered to the Company. Partial exercises of this Warrant resulting in purchases of a portion of the total number of Warrant Shares available hereunder shall have the effect of lowering the outstanding number of Warrant Shares purchasable hereunder in an amount equal to the applicable number of Warrant Shares purchased. The Company shall maintain records showing the number of Warrant Shares purchased, the date of such purchases and the number of Warrant Shares that remain unpurchased. The Company shall deliver any objection to any Notice of Exercise Form within one (1) Business Day of receipt of such notice. The Holder and any assignee, by acceptance of this Warrant, acknowledge and agree that, by reason of the provisions of this paragraph, following the purchase of a portion of the Warrant Shares hereunder, the number of Warrant Shares available for purchase hereunder at any given time may be less than the amount stated on the face hereof.

 

b)     Exercise Price. The exercise price per share of the Common Stock under this Warrant shall be $0.01, subject to adjustment hereunder (the “Exercise Price”).

 

	 	
			c)

				
			Mechanics of Exercise.

			

 

i.     Delivery of Certificates Upon Exercise. Warrant Shares purchased hereunder shall be transmitted by the Company’s transfer agent (the “Transfer Agent”) to the Holder by crediting the account of the Holder’s prime broker with The Depository Trust Company through its Deposit or Withdrawal at Custodian system (“DWAC”) if the Company is then a participant in such system and either (A) there is an effective registration statement permitting the issuance of the Warrant Shares to or resale of the Warrant Shares by the Holder or (B) the shares are eligible for resale by the Holder without volume or manner-of-sale limitations pursuant to Rule 144, and otherwise, at the option of the Holder, either in book entry form on the records of the Company’s transfer agent or by physical delivery in certificated form to the address specified by the Holder in the Notice of Exercise by the date that is five (5) Business Days after the latest of (A) the delivery to the Company of the Notice of Exercise, (B) surrender of this Warrant (if required), and (C) payment of the aggregate Exercise Price as set forth above (including by cashless exercise, if permitted) (such date, the “Warrant Share Delivery Date”). The Warrant Shares shall be deemed to have been issued, and Holder or any other person so designated to be named therein shall be deemed to have become a holder of record of such shares for all purposes, as of the date the Warrant is exercised, with payment to the Company of the Exercise Price and all taxes required to be paid by the Holder, if any, pursuant to Section 2(c)(v) prior to the issuance of such shares, having been paid

 

ii.     Delivery of New Warrants Upon Exercise. If this Warrant shall have been exercised in part, the Company shall, at the request of a Holder and upon surrender of this Warrant certificate, at the time of delivery of the certificate or certificates representing Warrant Shares, deliver to the Holder a new Warrant evidencing the rights of the Holder to purchase the unpurchased Warrant Shares called for by this Warrant, which new Warrant shall in all other respects be identical with this Warrant.

 

iii.     Rescission Rights. If the Company fails to cause the Transfer Agent to transmit to the Holder a certificate or the certificates representing the Warrant Shares pursuant to Section 2(c)(i) by the Warrant Share Delivery Date, then the Holder will have the right to rescind such exercise.

 

iv.     No Fractional Shares or Scrip. No fractional shares or scrip representing fractional shares shall be issued upon the exercise of this Warrant. As to any fraction of a share which the Holder would otherwise be entitled to purchase upon such exercise, the Company shall, at its election, either pay a cash adjustment in respect of such final fraction in an amount equal to such fraction multiplied by the Exercise Price or round up to the next whole share.

 

v.     Charges, Taxes and Expenses. Issuance of certificates for Warrant Shares shall be made without charge to the Holder for any issue or transfer tax or other incidental expense in respect of the issuance of such certificate, all of which taxes and expenses shall be paid by the Company, and such certificates shall be issued in the name of the Holder or in such name or names as may be directed by the Holder; provided, however, that in the event certificates for Warrant Shares are to be issued in a name other than the name of the Holder, this Warrant when surrendered for exercise shall be accompanied by the Assignment Form attached hereto duly executed by the Holder and the Company may require, as a condition thereto, the payment of a sum sufficient to reimburse it for any transfer tax incidental thereto.

 

vi.     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.

 

Section 3.     Certain Adjustments.

 

a)     Stock Dividends and Splits. If the Company, at any time while this Warrant is outstanding: (i) pays a stock dividend or otherwise makes a distribution or distributions on shares of its Common Stock or any other equity or equity equivalent securities payable in shares of Common Stock (which, for avoidance of doubt, shall not include any shares of Common Stock issued by the Company upon exercise of this Warrant or the other warrants being issued in connection with the Note Purchase Agreement), (ii) subdivides outstanding shares of Common Stock into a larger number of shares, (iii) combines (including by way of reverse stock split) outstanding shares of Common Stock into a smaller number of shares or (iv) issues by reclassification of shares of the Common Stock any shares of capital stock of the Company, then in each case the Exercise Price shall be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock (excluding treasury shares, if any) outstanding immediately before such event and of which the denominator shall be the number of shares of Common Stock outstanding immediately after such event, and the number of shares issuable upon exercise of this Warrant shall be proportionately adjusted such that the aggregate Exercise Price of this Warrant shall remain unchanged. Any adjustment made pursuant to this Section 3(a) shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision, combination or re-classification. Upon any such adjustment, the Company shall deliver to the Holder a new Warrant evidencing the adjustment in the number of Warrant Shares issuable hereunder and in all other respects identical with this Warrant.

 

b)     Calculations. All calculations under Section 3(a) shall be made to the nearest cent or the nearest 1/100th of a share, as the case may be. For purposes of Section 3(a), the number of shares of Common Stock deemed to be issued and outstanding as of a given date shall be the sum of the number of shares of Common Stock (excluding treasury shares, if any) issued and outstanding.

 

c)     Notice to Holder. Whenever the Exercise Price is adjusted pursuant to Section 3(a) , the Company shall promptly mail to the Holder a notice setting forth the Exercise Price after such adjustment and any resulting adjustment to the number of Warrant Shares and setting forth a brief statement of the facts requiring such adjustment.

 

Section 4.     Transfer of Warrant.

 

a)     Transferability. Subject to compliance with any applicable securities laws and the conditions set forth in Section 4(d) hereof, this Warrant and all rights hereunder (including, without limitation, any registration rights) are transferable, in whole or in part, upon surrender of this Warrant at the principal office of the Company or its designated agent, together with a written assignment of this Warrant substantially in the form attached hereto duly executed by the Holder or its agent or attorney and funds sufficient to pay any transfer taxes payable upon the making of such transfer. Upon such surrender and, if required, such payment, the Company shall execute and deliver a new Warrant or Warrants in the name of the assignee or assignees, as applicable, and in the denomination or denominations specified in such instrument of assignment, and shall issue to the assignor a new Warrant evidencing the portion of this Warrant not so assigned, and this Warrant shall promptly be cancelled. The Warrant, if properly assigned in accordance herewith, may be exercised by a new holder for the purchase of Warrant Shares without having a new Warrant issued.

 

b)     New Warrants. This Warrant may be divided or combined with other Warrants upon presentation hereof at the aforesaid office of the Company, together with a written notice specifying the names and denominations in which new Warrants are to be issued, signed by the Holder or its agent or attorney. Subject to compliance with Section 4(a), as to any transfer which may be involved in such division or combination, the Company shall execute and deliver a new Warrant or Warrants in exchange for the Warrant or Warrants to be divided or combined in accordance with such notice. All Warrants issued on transfers or exchanges shall be dated the Initial Exercise Date and shall be identical with this Warrant except as to the number of Warrant Shares issuable pursuant thereto.

 

c)     Warrant Register. 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.

 

d)     Transfer Restrictions. If, at the time of the surrender of this Warrant in connection with any transfer of this Warrant, the transfer of this Warrant shall not be either (i) registered pursuant to an effective registration statement under the Securities Act and under applicable state securities or blue sky laws or (ii) eligible for resale without volume or manner-of-sale restrictions pursuant to Rule 144.e) Representation by the Holder. The Holder, by the acceptance hereof, represents and warrants that it is acquiring this Warrant and, upon any exercise hereof, will acquire the Warrant Shares issuable upon such exercise, for its own account and not with a view to or for distributing or reselling such Warrant Shares or any part thereof in violation of the Securities Act or any applicable state securities law, except pursuant to sales registered or exempted under the Securities Act.

 

Section 5.     Miscellaneous.

 

a)     No Rights as Stockholder Until Exercise. This Warrant does not entitle the Holder to any voting rights, dividends or other rights as a stockholder of the Company prior to the exercise hereof as set forth in Section 2(c)(i).

 

b)     Notice of Fundamental Transaction. At any time while this Warrant is outstanding, the Company shall give notice with reasonable detail to the Holder at least five (5) Business Days prior to the anticipating taking any of the following actions: (i) the Company, directly or indirectly, in one or more related transactions effects any merger or consolidation of the Company with or into another Person, (ii) the Company, directly or indirectly, effects any sale, lease, license, assignment, transfer, conveyance or other disposition of all or substantially all of its assets in one or a series of related transactions, (iii) any, direct or indirect, purchase offer, tender offer or exchange offer (whether by the Company or another Person) is completed pursuant to which holders of Common Stock are permitted to sell, tender or exchange their shares for other securities, cash or property and has been accepted by the holders of 50% or more of the outstanding Common Stock, (iv) the Company, directly or indirectly, in one or more related transactions effects any reclassification, reorganization or recapitalization of the Common Stock or any compulsory share exchange pursuant to which the Common Stock is effectively converted into or exchanged for other securities, cash or property, or (v) the Company, directly or indirectly, in one or more related transactions consummates a stock or share purchase agreement or other business combination (including, without limitation, a reorganization, recapitalization, spin-off or scheme of arrangement) with another Person or group of Persons whereby such other Person or group acquires more than 50% of the outstanding shares of Common Stock (not including any shares of Common Stock held by the other Person or other Persons making or party to, or associated or affiliated with the other Persons making or party to, such stock or share purchase agreement or other business combination).

 

c)     Loss, Theft, Destruction or Mutilation of Warrant. The Company covenants that upon receipt by the Company of evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of this Warrant or any stock certificate relating to the Warrant Shares, and in case of loss, theft or destruction, of indemnity or security reasonably satisfactory to it (which, in the case of the Warrant, shall not include the posting of any bond), and upon surrender and cancellation of such Warrant or stock certificate, if mutilated, the Company will make and deliver a new Warrant or stock certificate of like tenor and dated as of such cancellation, in lieu of such Warrant or stock certificate.

 

d)     Saturdays, Sundays, Holidays, etc. If the last or appointed day for the taking of any action or the expiration of any right required or granted herein shall not be a Business Day, then, such action may be taken or such right may be exercised on the next succeeding Business Day.

 

e)     Authorized Shares.

 

The Company covenants that, during the period the Warrant is outstanding, it will reserve from its authorized and unissued Common Stock a sufficient number of shares to provide for the issuance of the Warrant Shares upon the exercise of any purchase rights under this Warrant. The Company further covenants that its issuance of this Warrant shall constitute full authority to its officers who are charged with the duty of executing stock certificates to execute and issue the necessary certificates for the Warrant Shares, or to take such other action necessary to effect the issuance of the Warrant Shares, upon the exercise of the purchase rights under this Warrant. The Company will take all such reasonable action as may be necessary to assure that such Warrant Shares may be issued as provided herein without violation of any applicable law or regulation, or of any requirements of the trading market upon which the Common Stock may be listed. The Company covenants that all Warrant Shares which may be issued upon the exercise of the purchase rights represented by this Warrant will, upon exercise of the purchase rights represented by this Warrant and payment for such Warrant Shares in accordance herewith, be duly authorized, validly issued, fully paid and nonassessable and free from all taxes, liens and charges created by the Company in respect of the issue thereof (other than taxes in respect of any transfer occurring contemporaneously with such issue).

 

Except and to the extent as waived or consented to by the Holder, the Company shall not by any action, including, without limitation, amending its certificate 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 this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such actions as may be necessary or appropriate to protect the rights of Holder as set forth in this Warrant against impairment. Without limiting the generality of the foregoing, the Company will (i) not increase the par value of any Warrant Shares above the amount payable therefor upon such exercise immediately prior to such increase in par value and (ii) take all such action as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable Warrant Shares upon the exercise of this Warrant

 

Except as have been obtained prior to the date hereof and as may be required in connection with any of the events described in Section 3(a), no authorizations, exemptions or consents from any public regulatory body having jurisdiction over the Company are necessary to enable the Company to perform its obligations under this Warrant.

 

Before taking any action described in Section 3(a) which would result in an adjustment in the number of Warrant Shares for which this Warrant is exercisable or in the Exercise Price, the Company shall obtain all such authorizations or exemptions thereof, or consents thereto, as may be necessary from any public regulatory body or bodies having jurisdiction thereof.

 

f)     Jurisdiction. All questions concerning the construction, validity, enforcement and interpretation of this Warrant shall be determined in accordance with the provisions of the Note Purchase Agreement.

 

g)     Restrictions. The Holder acknowledges that the Warrant Shares acquired upon the exercise of this Warrant, if not registered, will have restrictions upon resale imposed by state and federal securities laws.

 

h)     Nonwaiver. No course of dealing or any delay or failure to exercise any right hereunder on the part of Holder shall operate as a waiver of such right or otherwise prejudice the Holder’s rights, powers or remedies, notwithstanding the fact that all rights hereunder terminate on the Termination Date.

 

i)     Notices. Any notice, request or other document required or permitted to be given or delivered to the Holder by the Company shall be delivered in accordance with the notice provisions of the Note Purchase Agreement.

 

j)     Limitation of Liability. No provision hereof, in the absence of any affirmative action by the Holder to exercise this Warrant to purchase Warrant Shares, and no enumeration herein of the rights or privileges of the Holder, shall give rise to any liability of the Holder for the purchase price of any Common Stock or as a stockholder of the Company, whether such liability is asserted by the Company or by creditors of the Company.

 

k)     Remedies. The Holder, in addition to being entitled to exercise all rights granted by law, will be entitled to specific performance of its rights under this Warrant. The Company agrees that monetary damages would not be adequate compensation for any loss incurred by reason of a breach by it of the provisions of this Warrant and hereby agrees to waive and not to assert the defense in any action for specific performance that a remedy at law would be adequate.

 

l)     Successors and Assigns. Subject to applicable securities laws, this Warrant and the rights and obligations evidenced hereby shall inure to the benefit of and be binding upon the successors and permitted assigns of the Company and the successors and permitted assigns of Holder. The provisions of this Warrant are intended to be for the benefit of any Holder from time to time of this Warrant and shall be enforceable by the Holder or successors and permitted assigns of this Warrant.

 

m)     Amendment. This Warrant may be modified or amended or the provisions hereof waived with the written consent of the Company and the Holder.

 

n)     Severability. Wherever possible, each provision of this Warrant shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Warrant shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provisions or the remaining provisions of this Warrant.

 

o)     Headings. The headings used in this Warrant are for the convenience of reference only and shall not, for any purpose, be deemed a part of this Warrant.

 

 

********************

 

 

(Signature Page Follows)

 

 

 

 

 

 

IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by its officer thereunto duly authorized as of the date first above indicated.

 

 

	
			NOVATION COMPANIES, INC.

			 

			
	
			By:__________________________________________

			     Name:

			     Title:

			

 

 

NOTICE OF EXERCISE

 

To:     NOVATION COMPANIES, INC.

 

(1)     ()The undersigned hereby elects to purchase ________ Warrant Shares of the Company pursuant to the terms of the attached Warrant (only if exercised in full), and tenders herewith payment of the exercise price in full, together with all applicable transfer taxes, if any.

(2)     () Please issue said Warrant Shares in the name of the undersigned or in such other name as is specified below:

 

_______________________________

 

The Warrant Shares shall be delivered to the following DWAC Account Number, in the following name on the books and records of the Company’s transfer agent or by physical delivery of a certificate to:

 

_______________________________

_______________________________

_______________________________

 

(3) Accredited Investor. The undersigned is an “accredited investor” as defined in Regulation D promulgated under the Securities Act of 1933, as amended.

 

[SIGNATURE OF HOLDER]

Name of Investing Entity: ________________________________________________________________________

Signature of Authorized Signatory of Investing Entity: _________________________________________________

Name of Authorized Signatory: ___________________________________________________________________

Title of Authorized Signatory: ____________________________________________________________________

Date: ________________________________________________________________________________________

 

 

 

 

 

 

 

 

ASSIGNMENT FORM

 

(To assign the foregoing warrant, execute

this form and supply required information.

Do not use this form to exercise the warrant.)

 

 

 

FOR VALUE RECEIVED, [____] all of or [_______] shares of the foregoing Warrant and all rights evidenced thereby are hereby assigned to

 

 

_______________________________________________ whose address is

 

_______________________________________________________________.

 

 

 

_______________________________________________________________

 

Dated: ______________, _______

 

 

Holder’s Signature:     _____________________________

 

Holder’s Address:     _____________________________

_____________________________

 

 

 

Signature Guaranteed: ___________________________________________

 

 

NOTE: The signature to this Assignment Form must correspond with the name as it appears on the face of the Warrant, without alteration or enlargement or any change whatsoever, and must be guaranteed by a bank or trust company. Officers of corporations and those acting in a fiduciary or other representative capacity should file proper evidence of authority to assign the foregoing Warrant.

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