3
SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT (the "Agreement"), dated as of March 18,
1998, by and among Finet Holdings Corporation, a Delaware corporation,
with headquarters located at 0000 Xxxxxx Xxxxxx, Xxxxxx Xxxxx, Xxxxxxxxxx
00000 (the "Company"), and the investor listed on the Schedule of Buyers
attached hereto (individually, a "Buyer" or collectively "Buyers").
WHEREAS:
A. The Company and the Buyers are executing and delivering this
Agreement in reliance upon the exemption from securities registration
pursuant to Section 4(2) and/or Regulation D of the Securities Act of
1933, as amended (the "1933 Act"),
B. The Company is offering for sale to the Buyer 3% Convertible
Debentures (the "Debentures") of the Company, due on March 18, 2001, and
offered in denominations of $50,000 up to an aggregate principal amount of
$7,000,000. The terms of the Debentures, including the terms on which the
Debentures may be converted into the common stock of the Company, $.01 par
value, are set forth in the Debenture, in substantially the form attached
as Exhibit "A" hereto.
C. The Buyer wishes to purchase, upon the terms and conditions
stated in this Agreement, an aggregate principal amount of up to
$4,000,000 of Debentures in the respective amounts set forth opposite each
Buyer's name on the Schedule of Buyers;
D. Contemporaneously with the execution and delivery of this
Agreement, the parties hereto are executing and delivering a Registration
Rights Agreement substantially in the form attached hereto as Exhibit "B"
(the "Registration Rights Agreement") pursuant to which the Company has
agreed to provide certain registration rights under the 1933 Act and the
rules and regulations promulgated thereunder, and applicable state
securities laws;
E. The Buyer shall receive purchase warrants to acquire shares of
Common Stock substantially in the form attached hereto as Exhibit "C" (the
"Warrants"); and
NOW THEREFORE, the Company and the Buyer hereby agree as follows:
1 . PURCHASE AND SALE OF DEBENTURES.
a. Purchase of Debentures. Subject to the satisfaction (or
waiver) of the conditions set forth in Sections 6 and 7 below, the
Company shall issue and sell to the Buyers and the Buyers shall
purchase from the Company an aggregate principal amount of
$4,000,000 Debentures, in the respective amounts set forth opposite
each Buyer's name on the Schedule of Buyers (the "Closing").
b. Closing Date. The date and time of the Closing (the
"Closing Date") shall be 10:00 a.m. Central Standard Time, within
five (5) business days following the date hereof, subject to
notification of satisfaction (or waiver) of the conditions to the
Closing set forth in Sections 6 and 7 below (or such later date as is
mutually agreed to by the Company and the Buyer). The Closing shall
occur on the Closing Date at the offices of Xxxx Xxxx Xxxxx & Xxxxx
LLP, 000 Xxxxxxxxx Xxxx Xxxxxx, Xxxxx 000, 0000 Xxxxxxxxx Xxxx, X.X.,
Xxxxxxx, Xxxxxxx 00000.
c. Form of Payment. On the Closing Date, (i) each Buyer shall
pay the Purchase Price to the Company for the Debentures to be
issued and sold to such Buyer at the Closing, by wire transfer of
immediately available funds in accordance with the Company's written
wire instructions, and (ii) the Company shall deliver to each Buyer,
certificates representing such Debentures which such Buyer is then
purchasing (as indicated opposite such Buyer's name on the Schedule
of Buyers), duly executed on behalf of the Company and registered in
the name of such Buyer or its designee (the "Certificates").
2. BUYER'S REPRESENTATIONS AND WARRANTEES.
Each Buyer represents and warrants with respect to only itself
that:
a. Investment Purpose. Such Buyer (i) is acquiring the
Debentures, (ii) upon conversion of the Debentures will acquire the
Conversion Shares then issuable, (iii) will acquire any Warrants,
and (iv) upon exercise of the Warrants will acquire the shares of
Common Stock issuable upon exercise thereof (the "Warrant Shares")
for its own account for investment only and not with a view towards,
or for resale in connection with, the public sale or distribution
thereof, except pursuant to sales registered or exempted under the
1933 Act; provided, however, that by making the representations
herein, such Buyer does not agree to hold any Debentures, Conversion
Shares, Warrants, or Warrant Shares for any minimum or other
specific term and reserves the right to dispose of Debentures,
Conversion Shares, Warrants, or Warrant Shares at any time in
accordance with or pursuant to a registration statement or an
exemption under the 1933 Act.
b. Accredited Investor Status. Such Buyer is an "accredited
investor" as that term is defined in Rule 501(a)(3) of Regulation D
("Regulation D") as promulgated by the United States Securities and
Exchange Commission (the "SEC").
c. Reliance on Exemptions. Such Buyer understands that the Debentures,
Conversion Shares, Warrants, and Warrant Shares are being offered and sold
to it in reliance on specific exemptions from the registration
requirements of United States federal and state securities laws and that
the Company is relying in part upon the truth and accuracy of, and such
Buyer's compliance with, the representations, warranties, agreements,
acknowledgments and understandings of such Buyer set forth herein in order
to determine the availability of such exemptions and the eligibility of
such Buyer to acquire such securities.
d. Information. Such Buyer and its advisors, if any, have
been furnished with all appropriate materials relating to the
business, finances and operations of the Company and materials
relating to the offer and sale of the Debentures, Conversion Shares,
the Warrants, and the Warrant Shares, which have been requested by
such Buyer. Such Buyer and its advisors, if any, have been afforded
the opportunity to ask questions of the Company. Neither such
inquiries nor any other due diligence investigations conducted by
such Buyer or its advisors, if any, or its representatives shall
modify, amend or affect such Buyer's right to rely on the Company's
representations and warranties contained in Section 3 below. Such
Buyer understands that its investment in the Debentures, the
Conversion Shares, the Warrants, and the Warrant Shares involves a
high degree of risk. Such Buyer has sought such accounting, legal
and tax advice as it has considered necessary to make an informed
investment decision with respect to its acquisition of the
Debentures, the Conversion Shares, the Warrants, and the Warrant
Shares.
e. No Governmental Review. Such Buyer understands that no
United States federal or state agency or any other government or
governmental agency has passed on or made any recommendation or
endorsement of the Debentures, the Conversion Shares, the Warrants,
and the Warrant Shares, or the fairness or suitability of the
investment in the Debentures and the Conversion Shares, nor have
such authorities passed upon or endorsed the merits of the offering
of the Debentures, the Conversion Shares, the Warrants, and the
Warrant Shares.
f. Transfer or Resale. Such Buyer understands that except as
provided in the Registration Rights Agreement: (i) the Debentures,
the Conversion Shares, the Warrants, and the Warrant Shares have not
been and are not being registered under the 1933 Act or any state
securities laws, and may not be offered for sale, sold, assigned or
transferred unless (a) subsequently registered thereunder, (b) such
Buyer shall have delivered to the Company an opinion of counsel, in
a generally acceptable form, to the effect that such securities to
be sold, assigned or transferred may be sold, assigned or
transferred pursuant to an exemption from such registration, or (c)
such Buyer provides the Company with reasonable assurance that such
securities can be sold, assigned or transferred pursuant to Rule 144
promulgated under the 1933 Act (or a successor rule thereto); (ii)
any sale of such securities made in reliance on Rule 144 promulgated
under the 1933 Act (or a successor rule thereto) ("Rule 144") may be
made only in accordance with the terms of Rule 144 and further, if
Rule 144 is not applicable, any resale of such securities under
circumstances in which the seller (or the person through whom the
sale is made) may be deemed to be an underwriter (as that term is
defined in the 0000 Xxx) may require compliance with some other
exemption under the 1933 Act or the rules and regulations of the SEC
thereunder; and (iii) neither the Company nor any other person is
under any obligation to register such securities under the 1933 Act
or any state securities laws or to comply with the terms and
conditions of any exemption thereunder.
g. Legends. Such Buyer understands that the certificates or
other instruments representing the Debentures, the Warrants and,
until such time as the sale of the Conversion Shares have been
registered under the 1933 Act as contemplated by the Registration
Rights Agreement, the stock certificates representing the
Conversion Shares and the Warrant Shares shall bear a restrictive
legend in substantially the following form (and a stoptransfer order
may be placed against transfer of such stock certificates):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE
SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT
BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED IN
THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR
THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR APPLICABLE STATE SECURITIES LAWS, OR AN
OPINION OF COUNSEL, IN A GENERALLY ACCEPTABLE FORM, THAT
REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR
APPLICABLE STATE SECURITIES LAWS OR UNLESS SOLD PURSUANT
TO RULE 144 UNDER SAID ACT.
The legend set forth above shall be removed and the Company shall
issue a certificate without such legend to the holder of the
Debentures, the Conversion Shares, the Warrants, or the Warrant
Shares, upon which it is stamped, if, unless otherwise required by
state securities laws, (i) the sale of the Conversion Shares or
Warrant Shares are registered under the 1933 Act, (ii) in connection
with a sale transaction, such holder provides the Company with an
opinion of counsel, reasonably satisfactory to the Company, to the
effect that a public sale, assignment or transfer of the Debentures,
the Conversion Shares, the Warrants, and the Warrant Shares may be
made without registration under the 1933 Act, or (iii) such holder
provides the Company with reasonable assurances that the Debentures,
the Conversion Shares, the Warrants, or the Warrant Shares can be
sold pursuant to Rule 144 without any restriction as to the number
of securities acquired as of a particular date that can then be
immediately sold.
h. Authorization, Enforcement. This Agreement has been duly
and validly authorized, executed and delivered on behalf of such
Buyer and is a valid and binding agreement of such Buyer enforceable
in accordance with its terms, subject as enforceability to general
principles of equity and to applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation and other similar laws
relating to, or affecting generally, the enforcement of applicable
creditors' rights and remedies.
i. Residency. Such Buyer is a resident of that state and country
specified in its address on the Schedule of Buyers.
3 . REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants to each of the Buyers that:
a. Organization and Qualification. The Company and its
subsidiaries are corporations duly organized and validly existing in
good standing under the laws of the jurisdiction in which they are
incorporated, and have the requisite corporate power to own their
properties and to carry on their business as now being conducted.
Each of the Company and its subsidiaries is duly qualified as a
foreign corporation to do business and is in good standing in every
jurisdiction in which the nature of the business conducted by it
makes such qualification necessary, except to the extent that the
failure to be so qualified or be in good standing would not have a
material adverse effect on the Company and its subsidiaries taken as
a whole.
b. Authorization, Enforcement, Compliance with Other
Instruments. (i) The Company has the requisite corporate power and
authority to enter into and perform this Agreement, the Registration
Rights Agreement and any related agreements, and to issue the
Debentures, the Conversion Shares, the Warrants, and the Warrant
Shares, in accordance with the terms hereof and thereof, (ii) the
execution and delivery of this Agreement, the Registration Rights
Agreement, the Warrants and any related agreements by the Company
and the consummation by it of the transactions contemplated hereby
and thereby, including without limitation the issuance of the
Debentures and the reservation for issuance and the issuance of the
Conversion Shares issuable upon conversion or exercise thereof, have
been duly authorized by the Company's Board of Directors and no
further consent or authorization is required by the Company, its
Board of Directors or its stockholders, (iii) this Agreement, the
Registration Rights Agreement, the Warrants, and any related
agreements have been duly executed and delivered by the Company, and
(iv) this Agreement, the Registration Rights Agreement, the
Warrants, and any related agreements constitute the valid and
binding obligations of the Company enforceable against the Company
in accordance with their terms, except as such enforceability may be
limited by general principles of equity or applicable bankruptcy,
insolvency, reorganization, moratorium, liquidation or similar laws
relating to, or affecting generally, the enforcement of creditors'
rights and remedies.
c. Capitalization. As of the date hereof, the authorized
capital stock of the Company consists of 60,000,000 shares of Common
Stock, par value $0.01 per share, and 100,000 shares of Preferred
Stock, par value $0.01 per share ("Preferred Stock"), of which as of
the date hereof 30,526,684 shares of Common Stock and no shares of
Preferred Stock were issued and outstanding. All of such
outstanding shares have been validly issued and are fully paid and
nonassessable. Except as disclosed in Schedule 3(c), no shares of
Common Stock or preferred stock are subject to preemptive rights or
any other similar rights or any liens or encumbrances suffered or
permitted by the Company. Except as disclosed in Schedule 3(c), as
of the effective date of this Agreement, (i) there are no
outstanding options, warrants, scrip, rights to subscribe to, calls
or commitments of any character whatsoever relating to, or
securities or rights convertible into, any shares of capital stock
of the Company or any of its subsidiaries, or contracts,
commitments, understandings or arrangements by which the Company or
any of its subsidiaries is or may become bound to issue additional
shares of capital stock of the Company or any of its subsidiaries or
options, warrants, scrip, rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities
or rights convertible into, any shares of capital stock of the
Company or any of its subsidiaries, (ii) there are no outstanding
debt securities and (iii) there are no agreements or arrangements
under which the Company or any of its subsidiaries is obligated to
register the sale of any of their securities under the 1933 Act
(except the Registration Rights Agreement). There are no securities
or instruments containing anti-dilution or similar provisions that
will be triggered by the issuance of the Debentures or the
Conversion Shares as described in this Agreement. The Company has
furnished to the Buyer true and correct copies of the Company's
Certificate of Incorporation, as amended and as in effect on the
date hereof (the "Certificate of Incorporation"), and the Company's
By-laws, as in effect on the date hereof (the "By-laws"), and the
terms of all securities convertible into or exercisable for Common
Stock and the material rights of the holders thereof in respect
thereto. Schedule 3(c) sets forth a schedule of all issuances of
Common Stock, convertible securities, options, warrants, and the
like for the past twelve (12) calendar months as well as those
holders eligible to sell securities pursuant to Rule 144 in the next
twelve (12) calendar months.
d. Issuance of Securities. The Debentures are duly authorized
and, upon issuance in accordance with the terms hereof, shall be (i)
validly issued, fully paid and nonassessable, are free from all
taxes, liens and charges with respect to the issue thereof and are
entitled to the rights and preferences set forth in the Debentures.
The Conversion Shares issuable upon conversion of the Debentures
have been duly authorized and reserved for issuance. Upon
conversion or exercise in accordance with the Debentures, the
Conversion Shares will be validly issued, fully paid and
nonassessable and free from all taxes, liens and charges with
respect to the issue thereof, with the holders being entitled to all
rights accorded to a holder of Common Stock.
e. No Conflicts. Except as disclosed in Schedule 3(e), the
execution, delivery and performance of this Agreement by the Company
and the consummation by the Company of the transactions contemplated
hereby will not (i) result in a violation of the Certificate of
Incorporation or By-laws or (ii) conflict with or constitute a
default (or an event which with notice or lapse of time or both
would become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of, any
material agreement, indenture or instrument to which the Company or
any of its subsidiaries is a party, or result in a violation of any
law, rule, regulation, order, judgment or decree (including federal
and state securities laws and regulations and the rules and
regulations of the principal market or exchange on which the Common
Stock is traded or listed) applicable to the Company or any of its
subsidiaries or by which any property or asset of the Company or any
of its subsidiaries is bound or affected. Except as disclosed in
Schedule 3(e), neither the Company nor its subsidiaries is in
violation of any term of or in default under its Certificate of
Incorporation or Bylaws or their organizational charter or by-laws,
respectively, or any material contract, agreement, mortgage,
indebtedness, indenture, instrument, judgment, decree or order or
any statute, rule or regulation applicable to the Company or its
subsidiaries. The business of the Company and its subsidiaries is
not being conducted, and shall not be conducted in violation of any
law, ordinance, regulation of any governmental entity. Except as
specifically contemplated by this Agreement and as required under
the 1933 Act and any applicable state securities laws, to the best
of the Company's knowledge, the Company is not required to obtain
any consent, authorization or order of, or make any filing or
registration with, any court or governmental agency in order for it
to execute, deliver or perform any of its obligations under or
contemplated by this Agreement, the Registration Rights Agreement,
and the Warrants in accordance with the terms hereof or thereof.
Except as disclosed in Schedule 3(e), all consents, authorizations,
orders, filings and registrations which the Company is required to
obtain pursuant to the preceding sentence have been obtained or
effected on or prior to the date hereof. The Company and its
subsidiaries are unaware of any facts or circumstances which might
give rise to any of the foregoing.
f. SEC Documents: Financial Statements. Since January 1,
1996, the Company had filed all reports, schedules, forms,
statements and other documents required to be filed by it with the
SEC pursuant to the reporting requirements of the Securities
Exchange Act of 1934, as amended (the "1934 Act") (all of the
foregoing filed prior to the date hereof and all exhibits included
therein and being hereinafter referred to as the "SEC Documents").
As of their respective dates, the SEC Documents complied in all
material respects with the requirements of the 1934 Act and the
rules and regulations of the SEC promulgated thereunder applicable
to the SEC Documents, and none of the SEC Documents, at the time
they were filed with the SEC, contained any untrue statement of a
material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements therein,
in light of the circumstances under which they were made, not
misleading. As of their respective dates, the financial statements
of the Company included in the SEC Documents complied as to form in
all material respects with applicable accounting requirements and
the published rules and regulations of the SEC with respect thereto.
Such financial statements have been prepared in accordance with
generally accepted accounting principles, consistently applied,
during the periods involved (except (i) as may be otherwise
indicated in such financial statements or the notes thereto, or (ii)
in the case of unaudited interim statements, to the extent they may
exclude footnotes or may be condensed or summary statements) and
fairly present in all material respects the financial position of
the Company as of the dates thereof and the results of its
operations and cash flows for the periods then ended (subject, in
the case of unaudited statements, to normal year-end audit
adjustments). No other information provided by or on behalf of the
Company to the Buyer which is not included in the SEC Documents,
including, without limitation information referred to in Section
2(d) of this Agreement, contains any untrue statement of a material
fact or omits to state any material fact necessary in order to make
the statements therein, in the light of the circumstance under which
they are or were made, not misleading.
g. Absence of Certain Changes. Except as disclosed in
Schedule 3(g) and in the SEC documents, since December 15, 1997,
there has been no material adverse change and no material adverse
development in the business, properties, operations, financial
condition, results of operations or prospects of the Company or its
subsidiaries. The Company has not taken any steps, and does not
currently expect to take any steps, to seek protection pursuant to
any bankruptcy law nor does the Company or its subsidiaries have any
knowledge or reason to believe that its creditors intend to initiate
involuntary bankruptcy proceedings.
h. Absence of Litigation. There is no action, suit,
proceeding, inquiry or investigation before or by any court, public
board, government agency, self-regulatory organization or body
pending or, to the knowledge of the Company or any of its
subsidiaries, threatened against or affecting the Company, the
Common Stock or any of the Company's subsidiaries, wherein an
unfavorable decision, ruling or finding would (i) have a material
adverse effect on the transactions contemplated hereby (ii)
adversely affect the validity or enforceability of, or the authority
or ability of the Company to perform its obligations under, this
Agreement or any of the documents contemplated herein or (iii),
except as expressly set forth in the SEC Documents or in Schedule
3(h), have a material adverse effect on the business, operations,
properties, financial condition or results of operation of the
Company and its subsidiaries taken as a whole.
i. No Undisclosed Events, Liabilities, Developments or
Circumstances. No known event, liability, development or
circumstance has occurred or exists, or is contemplated to occur,
with respect to the Company or its subsidiaries or their respective
business, properties, prospects, operations or financial condition,
which could be material but which has not been publicly announced or
disclosed in writing to the Buyer.
j. No General Solicitation. Neither the Company, nor any of
its affiliates, nor any person acting on its or their behalf, has
engaged in any form of general solicitation or general advertising
(within the meaning of Regulation D under the 0000 Xxx) in
connection with the offer or sale of the Debentures or the
Conversion Shares.
k. No Integrated Offering. Neither the Company, nor any of
its affiliates, nor any person acting on its or their behalf has,
directly or indirectly, made any offers or sales of any security or
solicited any offers to buy any security, under circumstances that
would require registration of the Debentures, the Conversion Shares,
the Warrants, or the Warrant Shares under the 1933 Act or cause this
offering of Debentures or the Conversion Shares to be integrated
with prior offerings by the Company for purposes of the 1933 Act or
any applicable stockholder approval provisions.
l. Employee Relations. Neither the Company nor any of its
subsidiaries is involved in any labor dispute nor, to the knowledge
of the Company or any of its subsidiaries, is any such dispute
threatened. None of the Company's or its subsidiaries' employees is
a member of a union and the Company and its subsidiaries believe
that their relations with their employees are good.
m. Intellectual Property Rights. To the best of the Company's
knowledge, the Company and its subsidiaries own or possess adequate
rights or licenses to use all trademarks, trade names, service
marks, service xxxx registrations, service names, patents, patent
rights, copyrights, inventions, licenses, approvals, governmental
authorizations, trade secrets and rights necessary to conduct their
respective businesses as now conducted. Except as set forth on
Schedule 3(m), none of the Company's trademarks, trade names,
service marks, service xxxx registrations, service names, patents,
patent rights, copyrights, inventions, licenses, approvals,
government authorizations, trade secrets or other intellectual
property rights have expired or terminated, or are expected to
expire or terminate in the near future. The Company and its
subsidiaries do not have any knowledge of any infringement by the
Company or its subsidiaries of trademark, trade name rights,
patents, patent rights, copyrights, inventions, licenses, service
names, service marks, service xxxx registrations, trade secret or
other similar rights of others, or of any such development of
similar or identical trade secrets or technical information by
others and, except as set forth on Schedule 3(m), there is no claim,
action or proceeding being made or brought against, or to the
Company's knowledge, being threatened against, the Company or its
subsidiaries regarding trademark, trade name, patents, patent
rights, invention, copyright, license, service names, service marks,
service xxxx registrations, trade secret or other infringement; and
the Company and its subsidiaries are unaware of any facts or
circumstances which might give rise to any of the foregoing. The
Company and its subsidiaries have taken reasonable security measures
to protect the secrecy, confidentiality and value of all of their
intellectual properties.
n. Environmental Laws. To the best of the Company's
knowledge, the Company and its subsidiaries are (i) in compliance
with any and all applicable foreign, federal, state and local laws
and regulations relating to the protection of human health and
safety, the environment or hazardous or toxic substances or wastes,
pollutants or contaminants ("Environmental Laws"), (ii) have
received all permits, licenses or other approvals required of them
under applicable Environmental Laws to conduct their respective
businesses and (iii) are in compliance with all terms and conditions
of any such permit, license or approval.
o. Title. The Company and its subsidiaries have good and marketable
title in fee simple to all real property and good and marketable title to
all personal property owned by them which is material to the business of
the Company and its subsidiaries, in each case free and clear of all
liens, encumbrances and defects except such as are described in Schedule
3(o) or such as do not materially affect the value of such property and do
not interfere with the use made and proposed to be made of such property
by the Company and its subsidiaries.
p. Insurance. The Company and each of its subsidiaries are
insured by insurers of recognized financial responsibility against
such losses and risks and in such amounts as management of the
Company believes to be prudent and customary in the businesses in
which the Company and its subsidiaries are engaged. Neither the
Company nor any such subsidiary has been refused any insurance
coverage sought or applied for and neither the Company nor any such
subsidiary has any reason to believe that it will not be able to
renew its existing insurance coverage as and when such coverage
expires or to obtain similar coverage from similar insurers as may
be necessary to continue its business at a cost that would not
materially and adversely affect the condition, financial or
otherwise, or the earnings, business or operations of the Company
and its subsidiaries, taken as a whole.
q. Regulatory Permits. The Company and its subsidiaries
possess all certificates, authorizations and permits issued by the
appropriate federal, state or foreign regulatory authorities
necessary to conduct their respective businesses, and neither the
Company nor any such subsidiary has received any notice of
proceedings relating to the revocation or modification of any such
certificate, authorization or permit.
r. Internal Accounting Controls. The Company and each of its
subsidiaries maintain a system of internal accounting controls
sufficient to provide reasonable assurance that (i) transactions are
executed in accordance with management's general or specific
authorizations, (ii) transactions are recorded as necessary to
permit preparation of financial statements in conformity with
generally accepted accounting principles and to maintain asset
accountability, (iii) access to assets is permitted only in
accordance with management's general or specific authorization and
(iv) the recorded accountability for assets is compared with the
existing assets at reasonable intervals and appropriate action is
taken with respect to any differences.
s. No Materially Adverse Contracts, Etc. Neither the Company
nor any of its subsidiaries is subject to any charter, corporate or
other legal restriction, or any judgment, decree, order, rule or
regulation which in the judgment of the Company's officers has or is
expected in the future to have a material adverse effect on the
business, properties, operations, financial condition, results of
operations or prospects of the Company or its subsidiaries. Except
as disclosed in the SEC Documents, neither the Company nor any of
its subsidiaries is a party to any contract or agreement which in
the judgment of the Company's officers has or is expected to have a
material adverse effect on the business, properties, operations,
financial condition, results of operations or prospects of the
Company or its subsidiaries.
t. Tax Status. Except as set forth on Schedule 3(t), the
Company and each of its subsidiaries has made or filed all federal
and state income and all other tax returns, reports and declarations
required by any jurisdiction to which it is subject (unless and only
to the extent that the Company and each of its subsidiaries has set
aside on its books provisions reasonably adequate for the payment of
all unpaid and unreported taxes) and has paid all taxes and other
governmental assessments and charges that are material in amount,
shown or determined to be due on such returns, reports and
declarations, except those being contested in good faith and has set
aside on its books provision reasonably adequate for the payment of
all taxes for periods subsequent to the periods to which such
returns, reports or declarations apply. There are no unpaid taxes
in any material amount claimed to be due by the taxing authority of
any jurisdiction, and the officers of the Company know of no basis
for any such claim.
u. Certain Transactions. Except as set forth on Schedule 3(u)
and in the SEC Documents and except for arm's length transactions
pursuant to which the Company makes payments in the ordinary course
of business upon terms no less favorable than the Company could
obtain from third parties and other than the grant of stock options
disclosed on Schedule 3(c), none of the officers, directors, or
employees of the Company is presently a party to any transaction
with the Company (other than for services as employees, officers and
directors), including any contract, agreement or other arrangement
providing for the furnishing of services to or by, providing for
rental of real or personal property to or from, or otherwise
requiring payments to or from any officer, director or such employee
or, to the knowledge of the Company, any corporation, partnership,
trust or other entity in which any officer, director, or any such
employee has a substantial interest or is an officer, director,
trustee or partner.
v. Dilutive Effect. The Company understands and acknowledges
that the number of Conversion Shares issuable upon conversion of the
Debentures will increase in certain circumstances. The Company
further acknowledges that its obligation to issue Conversion Shares
and Warrants upon conversion of the Debentures in accordance with
this Agreement and the Debentures and its obligation to issue the
Warrant Shares upon exercise of the Warrants is, in each case,
absolute and unconditional regardless of the dilutive effect that
such issuance may have on the ownership interests of other
stockholders of the Company.
w. Fees and Rights of First Refusal. The Company is not
obligated to offer the securities offered hereunder on a right of
first refusal basis or otherwise to any third parties including, but
not limited to, current or former shareholders of the Company,
underwriters, brokers, agents, or other third parties.
4. COVENANTS.
a. Best Efforts. Each party shall use its best efforts timely
to satisfy each of the conditions to be satisfied by it as provided
in Sections 6 and 7 of this Agreement.
b. Form D. The Company agrees to file a Form D with respect
to the Debentures, the Conversion Shares, the Warrants, and the
Warrant Shares as required under Regulation D and to provide a copy
thereof to each Buyer promptly after such filing. The Company
shall, on or before the Closing Date, take such action as the
Company shall reasonably determine is necessary to qualify the
Debentures, the Conversion Shares, the Warrants, and the Warrant
Shares for, or obtain exemption for the Debentures, the Conversion
Shares, the Warrants, and the Warrant Shares for, sale to the Buyers
at the Closing pursuant to this Agreement under applicable
securities or "Blue Sky" laws of the states of the United States,
and shall provide evidence of any such action so taken to the Buyers
on or prior to the Closing Date.
c. Reporting Status. Until the earlier of (i) the date as of
which the Investors (as that term is defined in the Registration
Rights Agreement) may sell all of the Conversion Shares and the
Warrant Shares without restriction pursuant to Rule 144(k)
promulgated under the 1933 Act (or successor thereto), or (ii) the
date on which (A) the Investors shall have sold all the Conversion
Shares and the Warrant Shares and (B) none of the Debentures and the
Warrants is outstanding (the "Registration Period"), the Company
shall file all reports required to be filed with the SEC pursuant to
the 1934 Act, and the Company shall not terminate its status as an
issuer required to file reports under the 1934 Act even if the 1934
Act or the rules and regulations thereunder would otherwise permit
such termination.
d. Use of Proceeds. The Company will use the proceeds from
the sale of the Debentures for substantially the same purposes and
in substantially the same amounts as indicated in Schedule 4(d).
e. Financial Information. The Company agrees to send the
following to each Buyer who still holds Debentures or Conversion
Shares during the Registration Period: (i) within five (5) days
after the filing thereof with the SEC, a copy of its Annual Reports
on Form 10-K, its Quarterly Reports on Form 10-Q, any Current
Reports on Form 8-K and any registration statements or amendments
filed pursuant to the 1933 Act; (ii) within one (1) day after
release thereof, copies of all press releases issued by the Company
or any of its subsidiaries and (ii) copies of the same notices and
other information given to the stockholders of the Company
generally, contemporaneously with the giving thereof to the
stockholders.
f. Reservation of Shares. The Company shall take all action
necessary to at all times have authorized, and reserved for the
purpose of issuance, no less than 200% of the number of shares of
Common Stock needed to provide for the issuance of the Conversion
Shares measured at the time of the Closing (based upon a conversion
price of $3 13/16).
g. Listings. The Company shall promptly secure the listing of
the Conversion Shares upon each national securities exchange or
automated quotation system, if any, upon which shares of Common
Stock are then listed (subject to official notice of issuance) and
shall maintain, so long as any other shares of Common Stock shall be
so listed, such listing of all Conversion Shares from time to time
issuable under the terms of this Agreement and the Registration
Rights Agreement. The Company shall use its best efforts to
maintain the Common Stock's authorization for quotation in the over-
the counter market. The Company shall promptly provide to each
Buyer copies of any notices it receives regarding the continued
eligibility of the Common Stock for trading in the over-the-counter
market.
h. Expenses. Each of the Company and the Buyer shall pay all
costs and expenses incurred by such party in connection with the
negotiation, investigation, preparation, execution and delivery of
this Agreement and the Registration Rights Agreement. The costs and
expenses of X.X. Xxxxx Securities, Inc. and its counsel shall be
paid for by the Company at Closing.
i. [LEFT INTENTIONALLY BLANK]
j. Listing. The Company shall use its best efforts to cause
all the Registrable Securities (as defined in the Registration
Rights Agreement) covered by a Registration Statement to be listed
on the Nasdaq SmallCap Market on which securities of the same class
or series issued by the Company are then listed or quoted, if any,
if the listing or quotation of such Registrable Securities is then
permitted under the rules of such exchange. The Company shall (i)
at such time as the Common Stock meets the eligibility requirements
of the Nasdaq National Market System, use its reasonable efforts to
secure the inclusion of shares of the Common Stock for quotation on
the Nasdaq National Market System. If, despite the Company's
reasonable efforts to satisfy the preceding sentences, the Company
is unsuccessful in satisfying the preceding sentences, the Company
shall (i) maintain the inclusion of shares of the Common Stock for
quotation on the over-the-counter market and (ii) secure the
inclusion of such Registrable Securities for quotation on the
over-the-counter market. The Company shall promptly provide to each
holder of Debentures copies of any notices it receives regarding the
continued eligibility of the Common Stock for trading in the
over-the-counter market or, if applicable, any securities exchange
(including the Nasdaq National Market System or the Nasdaq SmallCap
Market) on which securities of the same class or series issued by
the Company are then listed or quoted, if any. The Company shall
pay all fees and expenses in connection with satisfying its
obligation under this Section 4(j).
k. Corporate Existence. So long as any Debentures remain out-
standing,the Company shall not directly or indirectly consummate any
merger, reorganization, restructuring, consolidation, sale of all or
substantially all of the Company's assets or any similar transaction or
related transactions (each such transaction, a "Sale of the Company")
except if the surviving or successor entity in such transaction (i)
expressly assumes, in writing, the Company's obligations hereunder and
under the Registration Rights Agreement, the Debentures and any other
agreements and instruments entered into or delivered by the Company in
connection herewith and (ii) is a publicly traded corporation whose
Common Stock is listed for trading on the New York Stock Exchange, Inc.
the American Stock Exchange or the NASDAQ National Market, NASDAQ
SmallCap Market, or electric bulletin board.
l. Transactions With Affiliates. So long as (i) any
Debentures are outstanding or (ii) any Buyer owns Conversion Shares
and Warrant Shares with a market value equal to or greater than
$200,000, the Company shall not, and shall cause each of its
subsidiaries not to, enter into, amend, modify or supplement, or
permit any subsidiary to enter into, amend, modify or supplement any
agreement, transaction, commitment, or arrangement with any of its
or any subsidiary's officers, directors, person who were officers or
directors at any time during the previous two years, stockholders
who beneficially own 5% or more of the Common Stock, or affiliates
or with any individual related by blood, marriage, or adoption to
any such individual or with any entity in which any such entity or
individual owns a 5% or more beneficial interest (each a"Related
Party"), except for (a) customary employment arrangements and
benefit programs on reasonable terms, (b) any agreement,
transaction, commitment, or arrangement on an arms-length basis on
terms no less favorable than terms which would have been obtainable
from a person other than such Related Party, (c) any agreement
transaction, commitment, or arrangement which is approved by a
majority of the disinterested directors of the Company, for purposes
hereof, any director who is also an officer of the Company or any
subsidiary of the Company shall not be a disinterested director with
respect to any such agreement, transaction, commitment, or
arrangement. "Affiliate" for purposes hereof means, with respect to
any person or entity, another person or entity that, directly or
indirectly, (i) has a 5% or more equity interest in that person or
entity, (ii) has 5% or more common ownership with that person or
entity, (iii) controls that person or entity, or (iv) shares common
control with that person or entity. "Control" or "controls" for
purposes hereof means that a person or entity has the power, direct
or indirect, to conduct or govern the policies of another person or
entity.
m. Shareholder Approval. The Company covenants to promptly
submit to its shareholders at a shareholder's meeting a proposal for
ratification of the issuance of the Debentures, the Conversion
Shares, the Warrants, and the Warrant Shares, if and as required by
the rules of the National Association of Securities Dealers, Inc.
("NASD") and any other applicable law, rules, and regulations
applicable to the transaction. The Company represents and warrants
that Affiliates of the Company, including the Company's officers and
directors, have individually agreed in their capacity as
shareholders to vote their shares of Common Stock in favor of such a
proposal at such meeting.
5. TRANSFER AGENT INSTRUCTIONS.
The Company shall issue irrevocable instructions to its transfer
agent to issue certificates, registered in the name of the Buyer or its
respective nominee(s), for the Conversion Shares and Warrant Shares in
such amounts as specified from time to time by the Buyer to the Company
upon conversion of the Debentures or exercise of the Warrants (the
"Irrevocable Transfer Agent Instructions"). Prior to registration of the
Conversion Shares under the 1933 Act, all such certificates shall bear the
restrictive legend specified in Section 2(g) of this Agreement. The
Company warrants that no instruction other than the Irrevocable Transfer
Agent Instructions referred to in this Section 5, and stop transfer
instructions to give effect to Section 2(f) hereof (in the case of the
Conversion Shares or Warrant Shares, prior to registration of such shares
under the 0000 Xxx) will be given by the Company to its transfer agent and
that the Debentures, the Conversion Shares, the Warrants, and the Warrant
Shares shall otherwise be freely transferable on the books and records of
the Company as and to the extent provided in this Agreement, the
Registration Rights Agreement, or the Warrant. Nothing in this Section 5
shall affect in any way the Buyer's obligations and agreement to comply
with all applicable securities laws upon resale of the Debentures, the
Conversion Shares, the Warrants, or the Warrant Shares. If the Buyer
provides the Company with an opinion of counsel, reasonably satisfactory
in form, and substance to the Company, that registration of a resale by
the Buyer of any of the Debentures, the Conversion Shares, the Warrants,
or the Warrant Shares is not required under the 1933 Act, the Company
shall permit the transfer, and, in the case of the Conversion Shares or
the Warrant Shares, promptly instruct its transfer agent to issue one or
more certificates in such name and in such denominations as specified by
the Buyer. The Company acknowledges that a breach by it of its
obligations hereunder will cause irreparable harm to the Buyer by
vitiating the intent and purpose of the transaction contemplated hereby.
Accordingly, the Company acknowledges that the remedy at law for a breach
of its obligations under this Section 5 will be inadequate and agrees, in
the event of a breach or threatened breach by the Company of the
provisions of this Section 5, that the Buyer shall be entitled, in
addition to all other available remedies, to an injunction restraining any
breach and requiring immediate issuance and transfer, without the
necessity of showing economic loss and without any bond or other security
being required.
6. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
The obligation of the Company hereunder to issue and sell the
Debentures to the Buyer at the Closing is subject to the satisfaction, at
or before the Closing Date, of each of the following conditions, provided
that these conditions are for the Company's sole benefit and may be waived
by the Company at any time in its sole discretion:
a. The Buyer shall have executed this Agreement and the
Registration Rights Agreement and delivered the same to the Company.
b. The Buyer shall have delivered to the Company the Purchase
Price for the Debentures being purchased by the Buyer at the Closing
by wire transfer of immediately available funds pursuant to the wire
instructions provided by the Company.
c. The representations and warranties of the Buyer shall be
true and correct in all material respects as of the date when made
and as of the Closing Date as though made at that time (except for
representations and warranties that speak as of a specific date),
and the Buyer shall have performed, satisfied and complied in all
material respects with the covenants, agreements and conditions
required by this Agreement to be performed, satisfied or complied
with by the Buyer at or prior to the Closing Date.
7. CONDITIONS TO THE BUYER'S OBLIGATION TO PURCHASE.
The obligation of the Buyer hereunder to purchase the Debentures
at the Closing is subject to the satisfaction, at or before the Closing
Date, of each of the following conditions, provided that these conditions
are for the Buyer's sole benefit and may be waived by the Buyer at any
time in its sole discretion:
a. The Company shall have executed this Agreement, the
Registration Rights Agreement, and the Warrants, and delivered the
same to the Buyer.
b. The Common Stock shall be authorized for quotation on the
over-the-counter market, AMEX the NASDAQ SmallCap or National Market
or The New York Stock Exchange, Inc., trading in the Common Stock
shall not have been suspended for any reason and all of the
Conversion Shares issuable upon conversion of the Debentures shall
be approved for listing on the over-the-counter market, AMEX, the
NASDAQ SmallCap National Market, or The New York Stock Exchange,
Inc.
c. The representations and warranties of the Company shall be
true and correct in all material respects (except to the extent that
any of such representations and warranties is already qualified as
to materiality in Section 3 above, in which case, such
representations and warranties shall be true and correct without
further qualification) as of the date when made and as of the
Closing Date as though made at that time (except for representations
and warranties that speak as of a specific date) and the Company
shall have performed, satisfied and complied in all material
respects with the covenants, agreements and conditions required by
this Agreement to be performed, satisfied or complied with by the
Company at or prior to the Closing Date. The Buyer shall have
received a certificate, executed by the Chief Executive Officer of
the Company, dated as of the Closing Date, to the foregoing effect
and as to such other matters as may be reasonably requested by the
Buyer including, without limitation an update as of the Closing Date
regarding the representation contained in Section 3(c) above.
d. The Buyer shall have received the opinion of the Company's
counsel dated as of the Closing Date, in form, scope and substance
reasonably satisfactory to the Buyer and in substantially the form
of Exhibit "D" attached hereto.
e. The Company shall have executed and delivered to the Buyer
the Certificates (in such denominations as the Buyer shall request)
for the Debentures being purchased by the Buyer at the Closing.
f. The Board of Directors of the Company shall have adopted
the resolutions in substantially the form of Exhibit "E" attached
hereto.
g. As of the Closing Date, the Company shall have reserved out
of its authorized and unissued Common Stock, solely for the purpose
of effecting the conversion of the Debentures and the exercise of
the Warrants, such number of shares of Common Stock no less than
200% of the number of shares of Common Stock for which are issuable
upon conversion of all of the Debentures which could be issued
(based upon a conversion effective as of the day before the Closing
Date) under this Agreement or the Debentures.
h. The Irrevocable Transfer Agent Instructions, in form and
substance satisfactory to the Buyer, shall have been delivered to
and acknowledged in writing by the Company's transfer agent.
8. INDEMNIFICATION.
In consideration of the Buyer's execution and delivery of this
Agreement and acquiring the Debentures, the Conversion Shares, the
Warrants, and the Warrant Shares hereunder and in addition to all of the
Company's other obligations under this Agreement, the Company shall
defend, protect, indemnify and hold harmless the Buyer and each other
holder of the Debentures, the Conversion Shares, the Warrants, and the
Warrant Shares and all of their officers, directors, employees and agents
(including, without limitation, those retained in connection with the
transactions contemplated by this Agreement) (collectively, the
"Indemnitees") from and against any and all actions, causes of action,
suits, claims, losses, costs, penalties, fees, liabilities and damages,
and expenses in connection therewith (irrespective of whether any such
Indemnitee is a party to the action for which indemnification hereunder is
sought), and including reasonable attorneys' fees and disbursements (the
"Indemnified Liabilities"), incurred by the Indemnitees or any of them as
a result of, or arising out of, or relating to (a) any misrepresentation
or breach of any representation or warranty made by the Company in this
Agreement, the Debentures, the Registration Rights Agreement, or the
Warrants or any other certificate, instrument or document contemplated
hereby or thereby, (b) any breach of any covenant, agreement or obligation
of the Company contained in this Agreement, the Debentures, the
Registration Rights Agreement, or the Warrants or any other certificate,
instrument or document contemplated hereby or thereby, or (c) any cause of
action, suit or claim brought or made against such Indemnitee by any third
party and arising out of or resulting from the execution, delivery,
performance or enforcement of this Agreement or any other instrument,
document or agreement executed pursuant hereto by any of the Indemnities,
any transaction financed or to be financed in whole or in part, directly
or indirectly, with the proceeds of the issuance of the Debentures or the
status of the Buyer or holder of the Debentures, the Conversion Shares,
the Warrants, and the Warrant Shares, as an investor in the Company. To
the extent that the foregoing undertaking by the Company may be
unenforceable for any reason, the Company shall make the maximum
contribution to the payment and satisfaction of each of the Indemnified
Liabilities which is permissible under applicable law.
9. GOVERNING LAW: MISCELLANEOUS.
a. Governing Law. This Agreement shall be governed by and
interpreted in accordance with the laws of the State of Delaware
without regard to the principles of conflict of laws. Company
acknowledges that upon any breach of Buyer's conversion rights
hereunder, Buyer's resulting injury may not be adequately
compensated by a remedy at law. Accordingly, upon such breach,
Buyer, at its election and without limitation of its other remedies,
shall be entitled to pursue a claim for specific performance of this
Agreement, and Company hereby waives the right to assert any defense
thereto that Purchaser has an adequate remedy at law. The parties
expressly consent to the jurisdiction and venue of the Superior
Court of Contra Costa County, California, and the United States
District Court for the Northern District of California for the
adjudication of any civil action asserted pursuant to this
Paragraph.
b. Acknowledgment Regarding Buyer's Purchase of Debentures.
The parties acknowledge and agree that the Buyer is acting solely in
the capacity of an arm's length purchaser with respect to this
Agreement and the transactions contemplated hereby. The parties
further acknowledge that the Buyer is not acting as a financial
advisor or fiduciary of the Company (or in any similar capacity)
with respect to this Agreement and the transactions contemplated
hereby and any advice given by the Buyer or any of their respective
representatives or agents in connection with this Agreement and the
transactions contemplated hereby is merely incidental to such
Buyer's purchase of the Debentures, the Conversion Shares, the
Warrants, or the Warrant Shares. The parties further acknowledge
Buyer that the Company's decision to enter into this Agreement has
been based solely on the independent evaluation by the Company and
its representatives.
c. Counterparts. This Agreement may be executed in two or
more identical counterparts, all of which shall be considered one
and the same agreement and shall become effective when counterparts
have been signed by each party and delivered to the other party. In
the event any signature page is delivered by facsimile transmission,
the party using such means of delivery shall cause four (4)
additional original executed signature pages to be physically
delivered to the other party within five (5) days of the execution
and delivery hereof
d. Headings. The headings of this Agreement are for
convenience of reference and shall not form part of, or affect the
interpretation of, this Agreement.
e. Severability. If any provision of this Agreement shall be
invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not affect the validity or enforceability of
the remainder of this Agreement in that jurisdiction or the validity
or enforceability of any provision of this Agreement in any other
jurisdiction.
f. Entire Agreement, Amendments. This Agreement supersedes
all other prior oral or written agreements between the Buyer, the
Company, their affiliates and persons acting on their behalf with
respect to the matters discussed herein, and this Agreement and the
instruments referenced herein contain the entire understanding of
the parties with respect to the matters covered herein and therein
and, except as specifically set forth herein or therein, neither the
Company nor any Buyer makes any representation, warranty, covenant
or undertaking with respect to such matters. No provision of this
Agreement may be waived or amended other than by an instrument in
writing signed by the party to be charged with enforcement.
g. Notices. Any notices consents, waivers or other
communications required or permitted to be given under the terms of
this Agreement must be in writing and will be deemed to have been
delivered (i) upon receipt, when delivered personally; (ii) upon
receipt, when sent by facsimile, provided a copy is mailed by U.S.
certified mail, return receipt requested; (iii) three (3) days after
being sent by U.S. certified mail, return receipt requested, or (iv)
one (I) day after deposit with a nationally recognized overnight
delivery service, in each case properly addressed to the party to
receive the same. The addresses and facsimile numbers for such
communications shall be:
If to the Company:
Finet Holdings Corporation
0000 Xxxxxx Xxxxxx
Xxxxxx Xxxxx, Xxxxxxxxxx 00000
Attn: President
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
With a copy to:
Xxxxx X. Xxxxx, Esq.
Xxxxxxxx & Werson
Xxxxx 0000
Xxx Xxxxxxxxxxxx Xxxxxx
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
If to the Transfer Agent:
Continental Stock Transfer Trust Company
0 Xxxxxxxx
Xxx Xxxx, Xxx Xxxx
Attn: Xxxxx Xxxxxxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
If to the Buyer, to its address and facsimile number on the Schedule
of Buyers, with copies to the Buyer's counsel as set forth on the
Schedule of Buyers. Each party shall provide five (5) days' prior
written notice to the other party of any change in address or
facsimile number.
h. Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the parties and their respective
successors and assigns. The Company shall not assign this Agreement
or any rights or obligations hereunder without the prior written
consent of the Buyer. The Buyer may assign its rights hereunder
without the consent of the Company, provided, however, that any such
assignment shall not release the Buyer from its obligations
hereunder unless such obligations are assumed by such assignee and
the Company has consented to such assignment and assumption.
i. No Third Party Beneficiaries. This Agreement is intended
for the benefit of the parties hereto and their respective permitted
successors and assigns, and is not for the benefit of, nor may any
provision hereof be enforced by, any other person.
j. Survival. Unless this Agreement is terminated under
Section 9(l), the representations and warranties of the Company and
the Buyer contained in Sections 2 and 3, the agreements and
covenants set forth in Sections 4, 5 and 9, the indemnification
provisions set forth in Section 8, shall survive the Closing. The
Buyer shall be responsible only for its own representations,
warranties, agreements and covenants hereunder.
k. Publicity. The Company and the Buyer shall have the right
to approve before issuance any press releases or any other public
statements with respect to the transactions contemplated hereby;
provided, however, that the Company shall be entitled, without the
prior approval of the Buyer, to make any press release or other
public disclosure with respect to such transactions as is required
by applicable law and regulations (although the Buyer shall be
consulted by the Company in connection with any such press release
or other public disclosure prior to its release and shall be
provided with a copy thereof).
l. Further Assurances. Each party shall do and perform, or
cause to be done and performed, all such further acts and things,
and shall execute and deliver all such other agreements,
certificates, instruments and documents, as the other party may
reasonably request in order to carry out the intent and accomplish
the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
m. Termination. In the event that the Closing shall not have
occurred with respect to the Buyer on or before five (5) business
days from the date hereof due to the Company's or the Buyer's
failure to satisfy the conditions set forth in Sections 6 and 7
above (and the nonbreaching party's failure to waive such
unsatisfied condition(s)), the nonbreaching party shall have the
option to terminate this Agreement with respect to such breaching
party at the close of business on such date without liability of any
party to any other party- provided, however, that if this Agreement
is terminated pursuant to this Section 9(l), the Company shall
remain obligated to reimburse the Buyer for the expenses described
in Section 4(h) above.
n. Finder. The Company acknowledges that it has engaged X.X.
Xxxxx Securities, Inc. as placement agent in connection with the
sale of the Debentures, which placement agent may have formally or
informally engaged other agents on its behalf. The Company shall be
responsible for the payment of any placement agent or brokers' fees
(which includes cash and warrants to purchase Common Stock) relating
to or arising out of the transactions contemplated hereby.
o. No Strict Construction. The language used in this
Agreement will be deemed to be the language chosen by the parties to
express their mutual intent, and no rules of strict construction
will be applied against any party.
IN WITNESS WHEREOF, the Buyer and the Company have caused this
Securities Purchase Agreement to be duly executed as of the date first
written above.
"COMPANY"
FINET HOLDINGS CORPORATION
By: /s/ L. Xxxxxx Xxxxxxx
Name: L. Xxxxxx Xxxxxxx
Its: CEO
"BUYER"
Atlantis Capital Fund, Ltd
By: /s/ Xxxx Xxxxxxxxx
Name: Xxxx Xxxxxxxxx
Title: Agent
"BUYER"
Sovereign Partners, L.P.
By: /s/ Xxxx Xxxxxxxxx
Name: Xxxx Xxxxxxxxx
Title: Agent
"BUYER"
Dominion Capital Fund, Ltd.
By: /s/ Xxxx Xxxxxxxxx
Name: Xxxx Xxxxxxxxx
Title: Agent
SCHEDULE OF BUYERS
Address and Facsimile Face
Buyer's Name Number of Buyer Amount of Buyer's Legal
Debenture Counsel
s
Atlantis Capital Fund 000 Xxx Xxxxxx $500,000* Xxx Xxxxxxx, Esq.
Limited Toronto Ontario MSH- Xxxxxxx & Prager
c/o Thomson Xxxxxxxx & 202 319 Fifth Avenue
Co., Ltd. CANADA New York, New York
Attn: Xxx Xxxxxxxx 10016
(000) 000-0000
Sovereign Partners, L.P. 000 Xxx Xxxxxx $3,000,00 Xxx Xxxxxxx, Esq.
c/o Thomson Xxxxxxxx & Toronto Ontario MSH- 0* Xxxxxxx & Prager
Co., Ltd. 202 000 Xxxxx Xxxxxx
XXXXXX Xxx Xxxx, Xxx Xxxx
Attn: Xxx Xxxxxxxx 10016
(000) 000-0000
Dominion Capital Fund, 000 Xxx Xxxxxx $500,000* Xxx Xxxxxxx, Esq.
Ltd. Toronto Ontario MSH- Xxxxxxx & Xxxxxx
c/x Xxxxxxx Xxxxxxxx & 202 319 Fifth Avenue
Co., Ltd. CANADA New York, New York
Attn: Xxx Xxxxxxxx 10016
(000) 000-0000
* Issued in the name of Thomson Xxxxxxxx & Co., Ltd.
SCHEDULE 3(c)
Capitalization
3 (c)(i) Options, Warrants, Stock Rights, etc.
As of March 10, 1998:
Common Stock Outstanding 30,526,684
Warrants Outstanding 10,413,197
Options:
1989 Stock Option Plan - Granted 748,249
(Reserve: 748,249)
1998 Stock Option Plan - Granted 0
(Reserve:2,000,000)
1998 Non-Employee Directors Stock Option Plan - Granted 0
(Reserve:500,000)
1998 Stock Bonus Plan - Granted 0
(Reserve:875,000)
A letter agreement dated October 13, 1997 between Finet Holdings
Corporation and Xxxxxxx Xxxxxx provides for 2,000 shares of Common Stock
to be issued for consulting services. The letter agreement also provides
for an additional 1,000 shares to be issued as a bonus, should at any time
during the initial one year term of the letter agreement, Finet's stock
trade in excess of $10.00.
An Asset Purchase Agreement dated August 30, 1997 betweeen Finet Holdings
Corporation and The Real Estate Office Software Company provides for
200,000 shares of Finet Stock to be issued to The Real Estate Office
Software Company. As of this date, theses shares have been ordered but
not yet issued.
On May 29, 1997, the Company and NDS Software, Inc. ("NDS"), a generic
software development company and operator of a nationwide multiple listing
of homes for sale Internet site, entered into an agreement whereby the
Company purchased for $1,010,000, in the form of $202,000 in cash and
202,000 shares of its common stock valued at $4.00 per share. The common
stock was issued on June 5, 1997. The agreement terms require an
adjustment to the share consideration if the market price of the Company's
shares is not at or above $4.00 per share on the earlier of the Company's
registration of the common shares issued to NDS or June 3, 1998, to
maintain a value equal to $808,000 at the time, subject to a maximum
additional shares issuable of 1,414,000 shares. The assets acquired are
being amortized to expense as they are used to produce revenue.
SCHEDULE 3(e)
Conflicts
None.
SCHEDULE 3(g)
Absence of Certain Changes
None.
SCHEDULE 3(h)
Litigation
None.
SCHEDULE 3(m)
Intellectual Property
None
SCHEDULE 3(o)
Liens
As a non-depository, independent mortgage banker, Monument Mortgage, Inc.
funds the loans it originates using its mortgage warehouse borrowing
facility. The warehouse line of credit, the revolving line of credit and
the note payable have been with the same lender for eight years. The
collateral for these obligations is a combination of mortgages held for
sale, receivables from sales of mortgage loans, servicing assets, other
assets of the Company, and Finet's corporate guarantee, as detailed in
Notes to Financial Statements, Item 8. DEBT, in the Company's report on
Form 10-QSB for the quarter ended January 31, 1998.
SCHEDULE 3(t)
Tax Status
None.
SCHEDULE 3(u)
Certain Transactions
None.
SCHEDULE 4(d)
Use of Proceeds
Acquisitions:
$1,500,000
1,000,000
$2,500,000
Servicing:
$2,000,000
$2,000,000
iQualify/E-Commerce Investments:
$2,500,000
$2,500,000
Total $7,000,000
