ESCROW AGREEMENT
THIS ESCROW AGREEMENT, dated as of the 18th day of March 1998
("Escrow Agreement") is by and among FINET HOLDINGS CORPORATION, a
Delaware corporation ("Issuer"), the subscribers listed on Exhibit A
attached hereto (each a "Subscriber" and collectively the "Subscribers");
and WACHOVIA BANK , N.A., as Escrow Agent hereunder ("Escrow Agent" or
"Wachovia").
BACKGROUND
A. Issuer has engaged X.X. Xxxxx Securities, Inc., a Georgia
corporation ("Placement Agent") to assist it in locating qualified
investors to purchase up to $7,000,000 principal amount of 3% Convertible
Debentures (the "Debentures") convertible into shares of common stock of
the Issuer in one or more closings, pursuant to the form of the Securities
Purchase Agreement attached hereto as Exhibit B (collectively the
"Subscription Agreements" and individually a "Subscription Agreement").
B. In accordance with the Subscription Agreements, Subscribers for
the Debentures will be required to submit full payment for their
respective investments at the time they execute the Subscription
Agreements.
C. All payments shall be received by Escrow Agent in connection
with subscriptions for Debentures, and Escrow Agent shall agree to accept,
hold, and disburse such funds deposited with it and the earnings thereon
in accordance with the terms of this Escrow Agreement.
D. In order to establish the escrow of funds and to effect the
consummation of the transaction contemplated by the Subscription
Agreements, the parties hereto have entered into this Escrow Agreement.
STATEMENT OF AGREEMENT
NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto, for
themselves, their successors and assigns, hereby agree as follows:
1. Definitions. The following terms shall have the following
meanings when used herein:
"Cash Investment" shall mean the principal amount of Debentures
to be purchased by any Subscriber as set forth in the Subscription
Agreements.
"Cash Investment Instrument" shall mean a wire transfer of
immediately available funds deposited in the "Finet Holdings Corporation,
Private Placement-Escrow Account," in full payment for the Debentures to
be purchased by any Subscriber.
"Escrow Funds" shall mean the funds deposited with the Escrow
Agent pursuant to this Agreement.
"Entire Offering" shall mean, under the Subscription
Agreements, the sale of $7,000,000 in principal amount of Debentures
in one Closing unless the Company agrees to close the offering with
more or less than such amount of Debentures.
"Offering Notice" shall mean a written notification, signed
by Placement Agent, which shall specify that subscriptions for at
least $4,000,000 in aggregate amount the "Minimum Securities" or
thereafter any additional subscriptions up to an aggregate principal
amount of $7,000,000, have been received; that, to the best of
Placement Agent's knowledge after due inquiry and review of its
records, Cash Investment Instruments in full payment for that number
of Debentures equal to the such subscription amounts have been
received, deposited with and collected by Escrow Agent; and that such
subscriptions have not been withdrawn, rejected or otherwise
terminated.
"Subscription Accounting" shall mean an accounting of all
subscriptions for Debentures received from Placement Agent and
accepted by Escrow Agent as of the date of such accounting, which
shall be accepted by the Company, indicating for each subscription
the Subscriber's name and address, the number and total purchase
price of subscribed Debentures and Warrants, the date of receipt by
Escrow Agent of the Cash Investment Instrument, and notations of any
nonpayment of the Cash Investment Instrument submitted with such
subscription, any withdrawal of such subscription by the Subscriber,
any rejection of such subscription by the Company or Escrow Agent, or
other termination, for whatever reason, of such subscription and any
disbursements to be made at Closing.
2. Appointment of and Acceptance by Escrow Agent. Issuer and
Subscribers hereby appoint Escrow Agent to serve as escrow agent
hereunder, and Escrow Agent hereby accepts such appointment in
accordance with the terms of this Escrow Agreement.
3. Deposits into Escrow.
a. All Cash Investment Instruments for the purchase of
Debentures shall be deposited into the following escrow account:
Bank: Wachovia Bank , N.A.
Account Name: Finet Holdings Corporation, Private
Placement
Account No.: 00000000
ABA Routing No.: 000000000
ATTN: Xxxxx X. Xxxxxxxxx
Re: Finet Holdings Corporation, Private
Placement
Notify: (000) 000-0000
Each such deposit shall be accompanied by the following documents:
(1) a report containing such Subscriber's name, taxpayer
identification number, address and other information
required for withholding purposes such as either U.S.
Treasury Department Form W-9 or other applicable form,
e.g., W-8; and
(2) a Subscription Accounting.
ALL FUNDS SO DEPOSITED SHALL REMAIN THE PROPERTY OF THE
SUBSCRIBERS ACCORDING TO THEIR RESPECTIVE INTERESTS AND SHALL NOT BE
SUBJECT TO ANY LIEN OR CHARGE BY ESCROW AGENT OR BY JUDGMENT OR CREDITORS'
CLAIMS AGAINST ISSUER UNTIL RELEASED TO ISSUER IN ACCORDANCE WITH SECTION
4(a) HEREOF.
b. Escrow Agent and Issuer understand and agree that
Subscribers will transmit available funds by wire transfer only and upon
receipt by Escrow Agent hereunder said funds are subject to collection
requirements of presentment and final payment, and that the funds
represented thereby cannot be drawn upon or disbursed until such time as
final payment has been made and is no longer subject to dishonor. Upon
receipt, Escrow Agent shall process each Cash Investment Instrument for
collection, and the proceeds thereof shall be held as part of the Escrow
Funds until disbursed in accordance with Section 4 hereof. If, upon
presentment for payment, any Cash Investment Instrument is dishonored,
Escrow Agent's sole obligation shall be to notify Issuer of such dishonor
and to return such Cash Investment Instrument to Subscriber.
Notwithstanding the foregoing, if for any reason any Cash Investment
Instrument is uncollectible after payment of the funds represented thereby
has been made by Escrow Agent in accordance with this Agreement, Issuer
shall immediately reimburse Escrow Agent upon receipt from Escrow Agent of
written notice thereof.
Upon receipt of any Cash Investment Instrument that represents
payment less than or greater than the Cash Investment, Escrow Agent's sole
obligation shall be to notify Issuer and Subscribers of such fact and to
return such Cash Investment Instrument to Subscriber.
c. All Cash Investment Instruments shall be immediately
available funds sent by wire transfer to the "Finet Holdings Corporation,
Private Placement - Escrow Account," and Escrow Agent shall not be
obligated to accept, or present for payment, any Cash Investment
Instrument that is not payable in that manner.
4. Disbursements of Escrow Funds.
a. Completion of Offering. Subject to the provisions of
Section 10 hereof, Escrow Agent shall pay to Issuer the Escrow Funds, less
a one time fee of $500.00 for fees and expenses owed Escrow Agent, less
the agreed amount of Placement Agent's fee (as stated in the Placement
Agent Agreement and accepted by Issuer), which is 7% of the Cash
Investment, a non-accountable expense allowance equal to 1/2 of 1% of the
Cash Investment, plus warrants to purchase the Common Stock of the issuer
and the fees and expenses of Placements Agent's legal counsel, by wire
transfer, promptly after receipt of the following documents:
(1) An Offering Notice;
(2) Subscription Accounting;
(3) Securities Purchase Agreement signed by all parties;
(4) Debenture Certificates for each Subscriber;
(5) Warrant Certificates for each Subscriber; and
(6) Such other certificates, notices or other documents as
Escrow Agent, in its discretion, shall reasonably require.
Notwithstanding the foregoing, Escrow Agent shall not be
obligated to disburse the Escrow Funds to Issuer if Escrow Agent has
grounds to believe that (a) Cash Investment Instruments in full payment
for that number of Debentures equal to or greater than the minimum amount
for such particular closing have not been received, deposited with and
collected by the Escrow Agent, subject to the right of Issuer and the
Subscribers to consummate the sale of some, but not all, of the Debentures
at such closing or (b) any of the certifications and opinions set forth in
the documents delivered to Escrow Agent are materially incorrect or
incomplete. Prior to disbursing any Escrow Funds or debenture
certificates, Escrow Agent shall be entitled, in its reasonable
discretion, to require any additional written certificates or
authorizations that it deems necessary or desirable.
b. Rejection of any Subscription or Termination of the
Offering. No later than fifteen (15) business days after receipt by
Escrow Agent of written notice (i) from Issuer or Placement Agent that
Issuer intends to reject a Subscriber's subscription, or (ii) from Issuer
or Placement Agent that there will be no closing of the sale of Debentures
to Subscribers, Escrow Agent shall pay to the applicable Subscribers, by
certified or bank check and by first class mail, the amount of the Cash
Investment paid by each Subscriber, without interest or deduction.
c. Expiration of Offering Period. Notwithstanding anything to
the contrary contained herein, if Escrow Agent shall not have received an
Offering Notice on or before April 30, 1998, in the case of the first
closing, and as mutually agreed on with respect to future closings, Escrow
Agent shall, within fifteen (15) business days after such date and without
any further instruction or direction from Placement Agent or Issuer,
return to each Subscriber, by certified or bank check and by first class
mail, the Cash Investment made by such Subscriber, without interest or
deduction.
5. Suspension of Performance or Disbursement Into Court. If, at
any time, there shall exist any dispute between Placement Agent, Issuer,
Escrow Agent, any Subscriber or any other person with respect to the
holding or disposition of any portion of the Escrow Funds or any other
obligations of Escrow Agent hereunder, or if at any time Escrow Agent is
unable to determine, to Escrow Agent's sole satisfaction, the proper
disposition of any portion of the Escrow Funds or Escrow Agent's proper
actions with respect to its obligations hereunder, then Escrow Agent may,
in its sole discretion, take either or both of the following actions:
a. suspend the performance of any of its obligations under
this Escrow Agreement until such dispute or uncertainty
shall be resolved to the sole satisfaction of Escrow Agent
or until a successor Escrow Agent shall have been appointed
(as the case may be); and/or
b. petition (by means of an interpleader action or any other
appropriate method) any court of competent jurisdiction in
Atlanta, Georgia, for instructions with respect to such
dispute or uncertainty, and pay into such court all funds
held by it for holding and disposition in accordance with
the instructions of such court.
Escrow Agent shall have no liability to Placement Agent, Issuer, any
Subscriber or any other person with respect to any such suspension of
performance or disbursement into court, specifically including any
liability or claimed liability that may arise, or be alleged to have
arisen, out of or as a result of any delay in the disbursement of funds
held in the Escrow Funds or any delay in or with respect to any other
action required or requested of Escrow Agent.
6. Investment of Funds. Escrow Agent shall not invest or reinvest
the Escrow Funds. The parties to this Escrow Agreement acknowledge that
no interest shall accrue or be paid with respect to the Escrow Funds.
7. Removal of Escrow Agent. Escrow Agent may be removed, with or
without cause, by Issuer and Subscriber, acting jointly, in writing, at
any time by the giving of ten (10) days' prior written notice to Escrow
Agent. Such removal shall take effect upon the appointment of a successor
Escrow Agent as provided hereinbelow. Upon any such notice of removal,
Issuer shall appoint a successor Escrow Agent hereunder, which shall be a
commercial bank, trust company or other financial institution with a
combined capital and surplus in excess of $100,000,000. Upon the
acceptance in writing of any appointment as Escrow Agent hereunder by a
successor Escrow Agent, such successor Escrow Agent shall thereupon
succeed to and become vested with all the rights, powers, privileges and
duties of the retiring Escrow Agent, and the retiring Escrow Agent shall
be discharged from its duties and obligations under this Escrow Agreement.
After any retiring Escrow Agent's removal, the provisions of this Escrow
Agreement shall inure to its benefit as to any actions taken or omitted to
be taken by it while it was Escrow Agent under this Escrow Agreement.
8. Liability of Escrow Agent.
a. Escrow Agent's sole responsibility shall be for the
safekeeping and disbursement of the Escrow Funds and Debenture
Certificates in accordance with the terms of this Escrow Agreement.
Escrow Agent shall have no implied duties or obligations and shall not be
charged with knowledge or notice of any fact or circumstance not
specifically set forth herein.
b. The Escrow Agent shall not be liable for any error of
judgment, or for any act done or step taken or omitted by it in good
faith, or for any mistake of fact or law, or for anything which it may do
or refrain from doing in connection herewith, except for its own gross
negligence or willful misconduct.
c. The Escrow Agent shall be entitled to rely and act upon any
notice, request, waiver, consent, receipt, or other paper or document
furnished to it (including, but not limited to, the Transaction Documents
(as defined below), not only as to its due execution and the validity and
effectiveness of its provisions, but also as to the truth and accuracy of
any information contained therein. The Escrow Agent is also relieved from
the necessity of satisfying itself as to the authority of any person
executing this Agreement or any other agreement contemplated by the
Closing, including, but not limited to the Subscription Agreements, the
Debentures, the Warrants, the Offering Notice (collectively the
"Transaction Documents") or as to the authenticity of any signature to
this Agreement or the Transaction Documents.
d. In no event shall Escrow Agent be liable for incidental,
indirect, special, consequential or punitive damages. Escrow Agent shall
not be obligated to take any legal action or commence any proceeding in
connection with the Escrow Funds or any account in which Escrow Funds are
deposited or this Escrow Agreement, or to appear in, prosecute or defend
any such legal action or proceeding. Without limiting the generality of
the foregoing, Escrow Agent shall not be responsible for or required to
enforce any of the terms or conditions of any subscription agreement with
any Subscriber or any other agreement between Issuer, Placement Agent
and/or any Subscriber. Escrow Agent shall not be responsible or liable in
any manner for the performance by Issuer or any Subscriber of their
respective obligations under any subscription agreement nor shall Escrow
Agent be responsible or liable in any manner for the failure of Issuer,
Placement Agent or any third party (including any Subscriber) to honor any
of the provisions of this Escrow Agreement. Escrow Agent may consult
legal counsel selected by it in the event of any dispute or question as to
the construction of any of the provisions hereof or of any other agreement
or of its duties hereunder, and shall incur no liability and shall be
fully indemnified from any liability whatsoever in acting in accordance
with the opinion or instruction of such counsel. Issuer shall promptly
pay, upon demand, the reasonable fees and expenses of any such counsel.
e. The Escrow Agent is authorized, in its sole discretion, to
comply with orders issued or process entered by any court with respect to
the Escrow Funds, without determination by the Escrow Agent of such
court's jurisdiction in the matter. If any portion of the Escrow Funds is
at any time attached, garnished or levied upon under any court order, or
in case the payment, assignment, transfer, conveyance or delivery of any
such property shall be stayed or enjoined by any court order, or in case
any order, judgment or decree shall be made or entered by any court
affecting such property or any part thereof, then and in any such event,
the Escrow Agent is authorized, in its sole discretion, to rely upon and
comply with any such order, writ, judgment or decree without the need for
appeal or other action; and if the Escrow Agent complies with any such
order, writ, judgment or decree, it shall not be liable to any of the
parties hereto or to any other person or entity by reason of such
compliance even though such order, writ, judgment or decree may be
subsequently reversed, modified, annulled, set aside or vacated.
9. Indemnification of Escrow Agent. From and at all times after
the date of this Escrow Agreement, Issuer and each Subscriber (each an
"Indemnifying Party") shall, severally and not jointly, to the fullest
extent permitted by law, indemnify and hold harmless the Escrow Agent and
each director, officer, employee, attorney, agent and affiliate of Escrow
Agent (collectively, the "Indemnified Parties") against any and all
actions, claims (whether or not valid), losses, damages, liabilities,
costs and expenses of any kind or nature whatsoever (including without
limitation reasonable attorneys' fees, costs and expenses) incurred by or
asserted against any of the Indemnified Parties from and after the date
hereof, whether direct, indirect or consequential, as a result of or
arising from or in any way relating to any claim, demand, suit, action or
proceeding (including any inquiry or investigation) by any person other
than the Placement Agent, including without limitation Issuer, whether
threatened or initiated, asserting a claim for any legal or equitable
remedy against any person under any statute or regulation, including, but
not limited to, any federal or state securities laws, or under any common
law or equitable cause or otherwise, arising from or in connection with
the negotiation, preparation, execution, performance or failure of
performance of this Escrow Agreement or any transactions contemplated
herein, whether or not any such Indemnified Party is a party to any such
action, proceeding, suit or the target of any such inquiry or
investigation; provided, however, that no Indemnified Party shall have the
right to be indemnified hereunder for any liability finally determined by
a court of competent jurisdiction, subject to no further appeal, to have
resulted solely from the gross negligence or willful misconduct of such
Indemnified Party. If any such action or claim shall be brought or
asserted against any Indemnified Party, such Indemnified Party shall
promptly notify the Indemnifying Party in writing, and the Indemnifying
Party shall assume the defense thereof, including the employment of
counsel and the payment of all expenses. Such Indemnified Party shall, in
its sole discretion, have the right to employ separate counsel (who may be
selected by such Indemnified Party in its sole discretion) in any such
action and to participate in the defense thereof, and the fees and
expenses of such counsel shall be paid by such Indemnified Party, except
that the Indemnifying Party shall be required to pay such fees and
expenses if (a) the Indemnifying Party agrees to pay such fees and
expenses, (b) the Indemnifying Party shall fail to assume the defense of
such action or proceeding or shall fail, in the reasonable discretion of
such Indemnified Party, to employ counsel satisfactory to the Indemnified
Party in any such action or proceeding, (c) the Indemnifying Party is the
plaintiff in any such action or proceeding, or (d) the named parties to
any such action or proceeding (including any impleaded parties) include
both Indemnified Party and the Indemnifying Party, and Indemnified Party
shall have been advised by counsel that there may be one or more legal
defenses available to it which are different from or additional to those
available to Indemnifying Party. Indemnifying Party shall be liable to
pay fees and expenses of counsel pursuant to the preceding sentence. All
such fees and expenses payable by the Indemnifying Party pursuant to the
foregoing sentence shall be paid from time to time as incurred, both in
advance of and after the final disposition of such action or claim. The
obligations of each Indemnifying Party under this Section 9 shall survive
any termination of this Escrow Agreement and the removal of Escrow Agent.
10. Compensation to Escrow Agent. Issuer shall compensate Escrow
Agent for its services hereunder by making the payments set forth on
Exhibit C attached hereto. The obligations of Issuer under this Section
10 shall survive any termination of this Escrow Agreement and the
resignation or removal of Escrow Agent.
11. Representations and Warranties.
a. Issuer makes the following representations and warranties to
Escrow Agent:
(1) Issuer is a corporation duly organized, validly
existing, and in good standing under the laws of the State of Delaware,
and has full power and authority to execute and deliver this Escrow
Agreement and to perform its obligations hereunder.
(2) This Escrow Agreement has been duly approved by all
necessary corporate action of Issuer, including any necessary shareholder
approval, has been executed by duly authorized officers of Issuer, and
constitutes a valid and binding agreement of Issuer, enforceable in
accordance with its terms; provided, however that enforceability is
subject to: (i) applicable bankruptcy, reorganization, insolvency,
moratorium, fraudulent conveyance, and similar federal and state laws
affecting the rights and remedies of creditors generally, and (ii) general
principles of equity limiting the availability of equitable remedies
(including but not limited to the rove written.
"THE COMPANY"
FINET HOLDINGS CORPORATION
By: /s/ L. Xxxxxx Xxxxxxx
L. Xxxxxx Xxxxxxx
Title: CEO
X.X. XXXXX SECURITIES, INC.
By /s/ Xxxx X. Xxxxxxx
Xxxx X Xxxxxxx
Xx. V.P.
Attest: /s/ Xxxxxxx Xxxxx
Name: Xxxxxxx Xxxxx
Title: Admin. Asst
