RESTRUCTURING AGREEMENT AND AMENDMENT
THIS RESTRUCTURING AGREEMENT AND AMENDMENT (the "Agreement") is entered
into this 15th day of January, 1999 by and between those persons or entities
referred to in Exhibit A attached hereto ("Investor" or "Investors"), and Finet
Holdings Corporation, Inc., a Delaware corporation ("Company"). and Investors(s)
are sometimes collectively referred to as Investors ("Investors"). This
Agreement amends and restates the 3% Convertible Debenture Agreements and
Related Agreements listed on Exhibit B, and also amends and restates the Series
A Convertible Preferred Stock Agreements and Related Agreements listed on
Exhibit C.
RECITALS
A. Company and Investor(s) are parties to those certain Convertible
Debenture Agreements and related agreements identified on Exhibit B attached
hereto ("Debenture Agreements"), pursuant to which, among other things,
Investors purchased from the Company 3% Convertible Debentures in the aggregate
principal amount of $ 7,000,000 (the "Principal Debenture Face Amount")
(collectively, the "Debenture" or "Debentures"). Capitalized terms not otherwise
defined herein shall have the meanings given such terms in the Debenture
Agreements.
B. Company and Investor(s) are parties to those certain Series A
Convertible Preferred Stock Agreements and related agreements identified on
Exhibit C attached hereto ("Series A Agreements") pursuant to which, among other
things, Investor(s) purchased from Company Series A Convertible Preferred Stock
("Series A Stock") in the aggregate principal amount of $2.5 million ("Series A
Face Amount"). Capitalized terms not otherwise defined herein shall have the
meanings given such terms in the Series A Agreements.
C. Investor(s) currently hold Debentures in the principal amount of $
7,000,000 allocated among themselves as detailed in Exhibit D hereto, and
currently hold Series A Stock in the face amount of $ 2,500,000 allocated among
themselves as detailed in Exhibit E hereto.
D. Company has requested and Investor have agreed to continue to forbear
from exercising their conversion rights under the Debenture Agreements and/or
the Series A Agreements except in accordance with the provisions of this
Agreement.
E. Company and Investors wish to restructure, convert, and otherwise redeem
the Debentures and the Preferred A shares and to take such further actions as
are described herein for their mutual benefit.
AGREEMENT
In consideration of the Recitals and of the mutual promises and covenants
contained herein, Investor(s) and Company agree as follows:
A. Debenture Agreements.
1. Pursuant to section 4(b) of the Debentures, Investors will submit to the
Company for conversion, and the Company will convert by way of one or more
conversion notices, Debentures in the aggregate face amount of $1,100,000.
a. Despite any provisions to the contrary contained in Debenture
No. 1, $1,100,000 of the Debentures shall by way of one or more conversion
notices be converted into 2,200,000 shares of the Company's common stock.
b. Simultaneously with or promptly following the execution of
this Agreement, Investors will submit to the Company Notices of Conversion
consistent with this Agreement and accompanied by the respective Debentures. The
Date of Conversion will be deemed to be the dates that both the Notice of
Conversion and the respective Debentures are received by the Company.
2. Pursuant to ss. 4(b) of the Debentures, Investors will submit to the
Company for conversion, and the Company will convert, an aggregate of Debentures
in the face amount of $4,400,000.
a. Despite any provisions to the contrary contained in the
Debentures, these Debentures shall be converted at a conversion price of $0.60
per share into 7,333,333 shares of the Company's common stock.
b. Simultaneously with or promptly following the execution of
this Agreement, Investors will submit to the Company Notices of Conversion
consistent with this Agreement and accompanied by the respective Debentures. The
Date of Conversion will be deemed to be the dates that the Notices of Conversion
and the respective Debentures are received by the Company.
3. Pursuant to ss. 5(a) of all remaining Debentures, except as modified
herein, the Company shall redeem all remaining outstanding Debentures in the
aggregate face amount of $1,500,000.
a. Despite any provisions to the contrary contained in the
Debentures, the redemption price of the remaining Debentures shall be
$1,500,000.
b. Simultaneously with or promptly following the execution of
this Agreement, the Company will submit to the Holders of the remaining
Debentures referenced in this section 3, and to the Transfer Agent, its Notice
of Redemption at Company's Election.
c. The provisions of ss. 5(a)(ii) notwithstanding, the Holders
may not convert into Common Stock any Debentures which it otherwise would have
been entitled to convert pursuant to the Debentures, including but not limited
to Debentures selected for Redemption at the Company's Election, except in
compliance with this Agreement.
d. The Redemption shall be deemed to be effective on the date the
Notice of Redemption is received by the Holder(s) ("Cash Redemption Date"). The
foregoing notwithstanding, the parties agree that the Company will pay the
Redemption Price on the Cash Redemption Date or on such other date as mutually
agreed by the parties.
4. Except as otherwise provided and/or amended herein, the provisions of
ss. 4(a), c, g, h and ss. 5(a) of the Debentures are hereby deleted, and the
remaining terms of the Debentures as amended herein remain in force and effect.
5. The parties agree that Warrant Certificates to purchase shares of the
Company's common stock previously sold in connection with the purchase and sale
of the Debentures remain in full force and effect pursuant to their terms.
6. The Company shall keep effective and in full force and effect the
Registration Statement on Form S-3 which was filed on May 28, 1998.
B. Series A Convertible Preferred Stock Agreements.
1. Pursuant to ss. 3 of the Certificate of Designations, Preferences and
Rights of Series A Convertible Preferred Stock of the Company ("Certificate of
Designations"), the Company shall redeem at Closing all of the Series A Stock,
consisting of Certificate Nos. X-0, X-0 xxx X-0 which Certificates represent
125, 100 and 25 shares respectively of the Company's Series A Stock. The
provisions of ss. 3(a)(i) of the Certificate of Designations are hereby amended
so that the Redemption Price at Company's Election shall be calculated as 100%
of the face amount of the Series A Stock.
2. Simultaneously with the execution of this Agreement, the Company will
submit to the Holders of the Series A Convertible Preferred Stock and to the
Transfer Agent its Notice of Redemption at Company's Election.
a. The provisions of ss. 3(a)(ii) of the Certificate of
Designations notwithstanding, the Holders may not convert into common stock any
Series A stock which it otherwise would have been entitled to convert pursuant
to the Certificate of Designations, including but not limited to Series A stock
selected for Redemptions at the Company's Election, except in compliance with
this Agreement.
b. The Redemption shall be deemed to be effective on the date the
Note of Redemption is received by the Holder(s) ("Cash Redemption Date"). The
foregoing and the provisions of ss. 3(c) of the Certificate of Designations
notwithstanding, the parties agree that the Company will pay $500,000 of the
Redemption Price for the Series A stock on the Cash Redemption Date or such
other date as the parties mutually agrees and that the Company will pay the
remaining $2,000,000 of the Redemption Price on the earlier of March 15, 1999
or the effective date on which the Company sells its loan servicing portfolio
("Portfolio Sale").
3. Except as otherwise provided and/or amended herein, Investors hereby
waive the provisions of xx.xx. 2, 4, 5, and 7 of the Certificate of
Designations.
4. The parties agree that Warrant No. 98-10 to purchase shares of Common
Stock previously issued in connection with the purchase and sale of the Series A
stock remains in full force and effect pursuant to its terms.
5. The parties further agree that the certain Registration Rights Agreement
dated September 29, 1998 entered into between the parties in connection with the
purchase and sale of the Series A stock ("Series A Registration Rights
Agreement") is hereby terminated. Investors hereby waive any and all defaults or
alleged defaults by Company under that Series A Registration Rights Agreement.
6. Conversion Limitations. Notwithstanding anything contained herein to the
contrary, it is understood that at no time has or will any Investor be entitled
to convert Debentures or Series A Preferred Shares in excess of that number of
Debentures and/or Series A Preferred Shares which, upon giving effect to such
conversion, would cause the aggregate number of shares of Common Stock
beneficially owned by the Investor and its affiliates to exceed 9.9% of the
outstanding shares of the Common Stock following such conversion. For purposes
of the foregoing proviso, the aggregate number of shares of Common Stock
beneficially owned by the Investor and its affiliates shall include the number
of shares of Common Stock issuable upon conversion of the Series A Shares and
Debentures with respect to which the determination of such proviso is being
made, but shall exclude the number of shares of Common Stock which would be
issuable upon (i) conversion of the remaining, nonconverted Series A Preferred
Shares and debentures beneficially owned by the Investors and its affiliates.
Except as set forth in the preceding sentence, for purposes of this paragraph,
beneficial ownership shall be calculated in accordance with Section 13(d) of the
Securities Exchange Act of 1934, as amended.
C. Additional Warrants. As additional consideration for Investors agreeing
to enter into this Restructuring Agreement and Amendment, Investors shall
receive purchase warrants to acquire shares of the Company's common stock
substantially in the form of Exhibit F hereto. The warrants shall be allocated
among Investors as set forth on Exhibit G hereto.
D. Representations and Warranties of Company. Company hereby represents and
warrants to Investor as follows:
1. Recitals. The Recitals in this Agreement are true and correct in all
respects.
2. Incorporation of Representations. All representations and warranties of
Company in the Debenture Agreements and the Preferred A Agreements, except as
the plain reading requires updating, are incorporated herein in full by this
reference and are true and correct as of the date hereof.
3. Corporate Power; Authorization. Company has the corporate power, and has
been duly authorized by all requisite corporate action, to execute and deliver
this Agreement to perform its obligations hereunder and thereunder. This
Agreement has been duly executed and delivered by Company.
4. Enforceability. This Agreement is a legal, valid and binding obligation
of the Company enforceable against the Company in accordance with its respective
terms.
5. No Violation. Company's execution, delivery and performance of this
Agreement do not and will not (i) violate any law, rule, regulation or court
order to which Company is subject; (ii) conflict with or result in a breach of
Company's Articles of Incorporation or Bylaws or any agreement or instrument to
which Company is party or by which it or its properties are bound, or (iii)
result in the creation or imposition of any lien, security interest or
encumbrance on any property of Company, whether now owned or hereafter acquired,
other than liens in favor of Investor.
6. Outstanding Capital. Set forth as Exhibit G attached hereto is a summary
of the authorized, issued, and outstanding capital and debt structure of the
Company as of the date hereof, giving effect to the completion of the
transactions contemplated herein, but otherwise not on a fully diluted basis and
not taking into account, among other things, all options, warrants and
conversion features of any kind.
7. Mutual Release of Parties. Company hereby releases, remises, acquits and
forever discharges X.X. Xxxxx Securities, Inc. and the Investors, and their
respective employees, agents, representatives, consultants, attorneys,
fiduciaries, servants, officers, directors, partners, predecessors, successors
and assigns, subsidiary corporations, parent corporations, and related corporate
divisions (all of the foregoing hereinafter called the "Investor Released
Parties"), from any and all actions and causes of action, judgments, executions,
suits, debts, claims, demands, liabilities, obligations, damages and expenses of
any and every character, known or unknown, direct and/or indirect, at law or in
equity, of whatsoever kind or nature, whether heretofore or hereafter arising,
for or because of any matter or things done, omitted or suffered to be done by
any of the Investor Released Parties prior to and including the date of
execution hereof, and in any way directly or indirectly arising out of or in any
way connected to the Debenture Documents or the Series A Preferred Stock
Agreements, including, but not limited to, claims relating to any restructuring
negotiations, (all of the foregoing hereinafter called the "Investor Released
Matters").
Investor Released Parties hereby release, remise, acquit and forever
discharge Company, and its respective employees, agents, representatives,
consultants, attorneys, fiduciaries, servants, officers, directors, partners,
predecessors, successors and assigns, subsidiary corporations, parent
corporations, and related corporate divisions (all of the foregoing hereinafter
called the "Company Released Parties"), from any and all actions and causes of
action, judgments, executions, suits, debts, claims, demands, liabilities,
obligations, damages and expenses of any and every character, known or unknown,
direct and/or indirect, at law or in equity, of whatsoever kind or nature,
whether heretofore or hereafter arising, for or because of any matter or things
done, omitted or suffered to be done by any of the Company Released Parties
prior to and including the date of execution hereof, and in any way directly or
indirectly arising out of or in any way connected to the Debenture Documents or
the Series A Preferred Stock Agreements, including, but not limited to, claims
relating to any restructuring negotiations, (all of the foregoing hereinafter
called the "Company Released Matters").
8. Company Legal Opinion. Contemporaneously herewith, Company's counsel has
delivered a legal opinion in a form satisfactory to Investors attached hereto as
Exhibit H.
E. Investors' Representations, Warranties and Acknowledgments
1. Recitals. The Recitals in this Agreement are true and correct in all
respects.
2. Incorporation of Representations. All representations and warranties of
Investors in the Debenture Agreements and the Series A Agreements, except as the
plain reading requires updating, are incorporated herein in full by this
reference and are true and correct as of the date hereof.
3. Authorization. Each Investor, and/or anyone executing this Agreement on
behalf of such Investor, has the legal power and authority to execute and
deliver this Agreement to perform its obligations and commitments hereunder.
This Agreement has been duly executed and delivered by each Investor.
4. Enforceability. This Agreement is a legal, valid and binding obligation
of each Investor enforceable against such Investor in accordance with its
respective terms.
5. No Violation. Each Investor's (or any Agent of any Investor) execution,
delivery and performance of this Agreement does not and will not violate any
rule or order to which such Investor is subject or conflict with or result in a
breach of any agreement or instrument to which such Investor is a party.
F. Effect and Construction of Agreement.
1. Except as expressly provided herein or as no longer relevant or
appropriate following completion of the transactions contemplated herein, the
Debenture Agreements and Series A Preferred Stock Agreements and the related
documents shall remain in full force and effect in accordance with their
respective terms and shall not in any event be construed to require the Investor
or its affiliates to make any Debentures or other extensions of credit to
Company.
2. In the event of any inconsistency between the terms of this Agreement
and the Debenture Agreements or the Series A Preferred Stock Agreements or any
of the related documents or any document referenced herein, this Agreement shall
govern. Company acknowledges that it has consulted with counsel and with such
other experts and advisors as it has deemed necessary in connection with the
negotiation, execution and delivery of this Agreement. This Agreement shall be
construed without regard to any presumption or rule requiring that it be
construed against the party causing this Agreement or any part hereof to be
drafted.
G. Miscellaneous.
1. Further Assurance. The parties agree to execute such other and further
documents and instruments as the other party may request to implement the
provisions of this Agreement.
2. Benefit of Agreement. This Agreement shall be binding upon and inure to
the benefit of and be enforceable by the parties hereto, their respective
successors and assigns. No other person or entity shall be entitled to claim any
right or benefit hereunder, including, without limitation, the status of a
third-party beneficiary of this Agreement.
3. Integration. This Agreement, together with the Debenture Agreements, the
Series A Preferred Stock Agreements, and any related documents, all as modified
or amended herein, constitutes the entire agreement and understanding among the
parties relating to the subject matter hereof, and supersedes all prior
proposals, negotiations, agreements and understandings relating to such subject
matter. In entering into this Agreement, the parties acknowledge that they are
relying on no statement, representation, warranty, covenant or agreement of any
kind made by the other party or any employee or agent of the other party, except
for the agreements set forth herein.
4. Severability. The provisions of this Agreement are intended to be
severable. If any provisions of this Agreement shall be held invalid or
unenforceable in whole or in part in any jurisdiction, such provision shall, as
to such jurisdiction, be ineffective to the extent of such invalidity or
enforceability without in any manner affecting the validity or enforceability of
such provision in any other jurisdiction or the remaining provisions of this
Agreement in any jurisdiction.
5. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware without giving effect to the
principles of the conflicts of laws, except for matters arising under the
Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as
amended, which matters shall be governed by and construed in accordance with
such laws.
6. Counterparts; Telecopied Signatures. This Agreement may be executed in
any number of counterparts and by different parties to this Agreement on
separate counterparts, each of which, when so executed, shall be deemed an
original, but all such counterparts shall constitute one and the same agreement.
Any signature delivered by a party by facsimile transmission shall be deemed to
be an original signature hereto.
7. Notices. All notices and other communications shall be in writing
(including telegraphic communication) and mailed or telegraphed or delivered, if
to the Company, at its address at 14th Floor, 000 Xxxxxxx Xxxxxx, Xxx Xxxxxxxxx,
Xxxxxxxxxx 00000; Attention: Chief Executive Officer and, if to Investor, at its
address as set forth in each Investor's Subscription Agreement executed in
connection with the issuance of the Debentures or the Series A stock by the
Company; or, as to each party, at such other address as shall be designated by
such party in a written notice to the other party. All such notices and
communications shall, when mailed or telegraphed, be effective when deposited in
the mails or delivered to the telegraph company, respectively, addressed as
aforesaid, except that notices pursuant to the provisions of Sections A and B
shall not be effective until received by the party to whom they are to be
delivered.
8. Survival. All representations, warranties, covenants, agreements,
undertakings, waivers and releases of either party contained herein shall
survive the completion of the transactions contemplated herein.
9. Amendment. No amendment, modification, rescission, waiver or release of
any provision of this Agreement shall be effective unless the same shall be in
writing and signed by the parties hereto.
H. Escrow Agreement. The parties agree to enter into the Escrow Agreement
substantially in the form of Exhibit I, which will provide that the Company will
be required to deposit into escrow the Common Stock, the redemption proceeds and
the warrants to be delivered to Investors along with appropriate notices, and
that the Investors shall be required to deposit into escrow the Debentures and
the Series A Preferred Stock, along with appropriate notices, to assist the
parties in complying with the terms of this Agreement. The Escrow Agent shall
initially be Xxxxxxxx & Werson P.C.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day and year first above written.
FINET HOLDINGS CORPORATION
By: /s/ L. Xxxxxx Xxxxxxx
----------------------------------------
Title: President
CANADIAN ADVANTAGE, LP
By: /s/ Xxxx Xxxxxxxxx
----------------------------------------
Title: Pres. VMH Management, General Partner
DOMINION CAPITAL FUND
By: /s/ Xxxx Xxxxxxxxx
-------------------------------------
Title: Agent
SOVEREIGN PARTNERS LP
By: /s/ Xxxx Xxxxxxxxx
----------------------------------------
Title: Agent
ATLANTIS CAPITAL FUND, LTD
By: /s/ Xxxx Xxxxxxxxx
----------------------------------------
Title: Agent
SCHEDULE OF EXHIBITS
EXHIBIT A Investors
EXHIBIT B Debenture Agreements
EXHIBIT C Series A Convertible Preferred Stock Agreements
EXHIBIT D Allocation of Debenture Holders
EXHIBIT E Allocation of Series A Holders
EXHIBIT F Form of Warrant
EXHIBIT G Outstanding Capital
EXHIBIT H Company Opinion of Counsel
EXHIBIT I Escrow Agreement
EXHIBIT A
INVESTORS
EXHIBIT B
DEBENTURE AGREEMENTS
Securities Purchase Agreement
$4,000,000 Debenture issued to Thomson Xxxxxxxx & Co., Ltd at the request of
Investors $1,500,000 Debenture issued to Thomson Xxxxxxxx & Co., Ltd at the
request of Investors $1,500,000 Debenture issued to Thomson Xxxxxxxx & Co., Ltd
at the request of Investors
Warrants for 100,000, _____ and ______ shares respectively issued to Thomson
Xxxxxxxx & Co., Ltd. at the request of Investors.
Registration Rights Agreement
EXHIBIT C
SERIES A CONVERTIBLE PREFERRED STOCK AGREEMENTS
Securities Purchase Agreement
Certificate of Designation, Preferences and rights of the Series A Convertible
Preferred Stock of Finet Holdings Corporation
Registration Rights Agreement
Warrant to Purchase Common Stock
EXHIBIT D
ALLOCATION OF DEBENTURE HOLDERS
Investor Aggregate Amount of Holdings
Dominion Capital Fund $2,250,000
Atlantis Capital Fund 750,000
Sovereign Partners LP 3,500,000
Canadian Advantage LP 500,000
Total $7,000,000
EXHIBIT E
ALLOCATION OF SERIES A HOLDERS
Investor Aggregate Amount of Holdings
Dominion Capital Fund $1,250,000
Atlantis Capital Fund -0-
Sovereign Partners LP 1,000,000
Canadian Advantage LP 250,000
Total $2,500,000
EXHIBIT F
FORM OF WARRANT
THE SECURITIES REPRESENTED BY THIS WARRANT 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 FORM, SUBSTANCE
AND SCOPE REASONABLY ACCEPTABLE TO THE ISSUER THAT REGISTRATION IS NOT REQUIRED
UNDER SAID ACT OR APPLICABLE STATE SECURITIES LAWS OR UNLESS SOLD PURSUANT TO
RULE 144 UNDER SAID ACT.
FINET HOLDINGS CORPORATION
WARRANT TO PURCHASE COMMON STOCK
Warrant No.: 99-1 Number of Shares: 840,000
Date of Issuance: January 15, 1999
Date of Expiration: January 15, 2004
Finet Holdings Corporation, a Delaware corporation (the "Company"), hereby
certifies that, for value received, Thomson & Kernaghan & Co., Ltd., the
registered holder hereof or its assigns, is entitled, subject to the terms set
forth below, to purchase from the Company upon surrender of this Warrant, at any
time or times on or after the date hereof, but not after 5:00 P.M. Pacific
Standard Time on the Expiration Date (as defined herein) fully paid
nonassessable shares of Common Stock (as defined herein) of the Company (the
"Warrant Shares") at the purchase price per share provided in Section 1(b) below
(the "Warrant Exercise Price"); provided, however, that in no event shall the
holder be entitled to exercise this Warrant for a number of Warrant Shares in
excess of that number of Warrant Shares which would cause the aggregate number
of shares of Common Stock beneficially owned by the holder and its affiliates to
exceed 4.9% of the outstanding shares of the Common Stock following such
exercise. For purposes of the foregoing proviso the aggregate number of shares
of Common Stock beneficially owned by the holder and its affiliates shall
include the number of shares of Common Stock issuable upon exercise of this
Warrant with respect to which the determination of such proviso is being made,
but shall exclude shares of Common Stock which would be issuable upon exercise
of the unexercised Debenture Warrants and unexercised Preferred Stock Warrants
(as defined below) beneficially owned by the holder and its affiliates. Except
as set forth in the preceding sentence, for purposes of this paragraph,
beneficial ownership shall be calculated in accordance with Section 13(d) of the
Securities Exchange Act of 1934, as amended.
Section 1.
(a) Debenture Purchase Agreement and Series A Purchase Agreement. Warrants
purchased in connection with the purchase of 3% Convertible Debentures are
referred to as "Debenture Warrants" and warrants purchased in connection with
the purchase of Series A Convertible Preferred Stock are referred to as
"Preferred Stock Warrants."
(b) Definitions. The following words and terms as used in this Warrant
shall have the following meanings:
"Average Market Price" means, with respect to any security for
any period, that price which shall be computed as the arithmetic average of the
last closing bid prices for such security for each trading day in such period on
the principal securities exchange or trading market for such security where such
security is listed or traded as reported by Bloomberg Financial Markets
("Bloomberg"), or if the market value cannot be calculated for such period on
the foregoing basis, the last closing bid price of such security in the
over-the-counter market on the pink sheets or bulletin board for such security
as reported by Bloomberg, or, if no closing bid price is reported for such
security by Bloomberg, the last closing trade price of such security as reported
by Bloomberg. If the market value cannot be calculated for such period on any of
the foregoing bases, the Average Market Price shall be the average fair market
value during such period as is reasonably determined in good faith by the Board
of Directors of the Company (all as appropriately adjusted for any stock
dividend, split or other similar transaction during such period).
"Preferred Stock" means the Company's Series A Preferred Stock
issued as of the date hereof.
"Common Stock" means (i) the Company's common stock, par value
$0.01 per share, and (ii) any capital stock into which such Common Stock shall
have been changed or any capital stock resulting from a reclassification of such
Common Stock.
"Expiration Date" means the date five (5) years from the date of
this Warrant or, if such date falls on a Saturday, Sunday or other day on which
banks are required or authorized to be closed in the City of Los Angeles or the
State of California (a "Holiday"), the next preceding date that is not a
Holiday.
"Person" means an individual, a limited liability company, a
partnership, a joint venture, a corporation, a trust, an unincorporated
organization and a government or any department or agency thereof.
"Securities Act" means the Securities Act of 1933, as amended.
"Warrant" shall mean this warrant and all warrants issued in
exchange, transfer or replacement of any thereof.
"Warrant Exercise Price" shall be equal to $1.50 per share,
subject to adjustment as hereinafter provided.
(c) Other Definitional Provisions.
(i) Except as otherwise specified herein, all references herein (A) to
the Company shall be deemed to include the Company's successors and (B) to any
applicable law defined or referred to herein, shall be deemed references to such
applicable law as the same may have been or may be amended or supplemented from
time to time.
(ii) When used in this Warrant, the words "herein," "hereof," and
"hereunder," and words of similar import, shall refer to this Warrant as a whole
and not to any provision of this Warrant, and the words "Section," "Schedule,"
and "Exhibit" shall refer to Sections of, and Schedules and Exhibits to, this
Warrant unless otherwise specified.
(iii) Whenever the context so requires, the neuter gender includes the
masculine or feminine, and the singular number includes the plural, and vice
versa.
Section 2. Exercise of Warrant.
(a) Subject to the terms and conditions hereof, this Warrant may be
exercised by the holder hereof then registered on the books of the Company, in
whole or in part, at any time during normal business hours on any business day
on or after the opening of business on the date hereof and prior to 5:00 P.M.
Pacific Time on the Expiration Date by (i) delivery of a written notice, in the
form of the subscription notice attached as Exhibit A hereto, of such holder's
election to exercise this Warrant, which notice shall specify the number of
Warrant Shares to be purchased, (ii) payment to the Company of an amount equal
to the Warrant Exercise Price multiplied by the number of Warrant Shares as to
which the Warrant is being exercised (plus any applicable issue or transfer
taxes) (the "Aggregate Exercise Price") in cash or by check or wire transfer,
and (iii) the surrender of this Warrant, at the principal office of the Company;
provided, that if such Warrant Shares are to be issued in any name other than
that of the registered holder of this Warrant, such issuance shall be deemed a
transfer and the provisions of Section 7 shall be applicable.
(b) This Warrant may also be exercised on a cashless basis, by submitting
the Warrant as described above with an indication of election to use cashless
exercise. The number of shares of Common Stock to be issued on cashless exercise
shall be determined as follows:
X = Y(A-B)
----------
A
where X equals the number of shares of Common Stock to be received on
cashless exercise, Y equals the number of Warrants so exercised, A equals the
Average Market Price of the Common Stock for the period of five (5) trading days
immediately preceding the date of exercise, and B equals the Warrant Exercise
Price. For purposes of Rule 144(d)(3)(iii), it is understood that the common
Stock issuable on exercise of this Warrant in a cashless exercise transaction
shall be deemed to have been acquired, and the holding period applicable thereto
shall have commenced, on the date this Warrant was issued.
(c) In the event of any exercise of the rights represented by this Warrant
in compliance with this Section 2(a), a certificate or certificates for the
Warrant Shares so purchased, in such denominations as may be requested by the
holder hereof and registered in the name of, or as directed by, the holder,
shall be delivered at the Company's expense to, or as directed by, such holder
as soon as practicable after such rights shall have been so exercised, and in
any event no later than five (5) business days after such exercise. In the case
of a dispute as to the determination of the Warrant Exercise Price of a security
or the arithmetic calculation of the Warrant Shares, the Company shall promptly
issue to the holder the number of shares of Common Stock that is not disputed
and shall submit the disputed determinations or arithmetic calculations to the
holder via facsimile within one (1) day of receipt of the holder's subscription
notice. If the holder and the Company are unable to agree upon the determination
of the Warrant Exercise Price or arithmetic calculation of the Warrant Shares
within one (1) business day of such disputed determination or arithmetic
calculation being submitted to the holder, then the Company shall immediately
submit via facsimile (i) the disputed determination of the Warrant Exercise
Price to an independent, reputable investment banking firm or (ii) the disputed
arithmetic calculation of the Warrant Shares to its independent, outside
accountant. The Company shall cause the investment banking firm or the
accountant, as the case may be, to perform the determinations or calculations
and notify the Company and the holder of the results no later than forty-eight
(48) hours from the time it receives the disputed determinations or
calculations. Such investment bank's or accountant's determination or
calculation, as the case may be, shall be deemed conclusive absent manifest
error.
(d) Unless the rights represented by this Warrant shall have expired or
shall have been fully exercised, the Company shall, as soon as practicable and
in any event no later than five (5) business days after any exercise and at its
own expense, issue a new Warrant identical in all respects to the Warrant
exercised except (i) it shall represent rights to purchase the number of Warrant
Shares purchasable immediately prior to such exercise under the Warrant
exercised, less the number of Warrant Shares with respect to which such Warrant
is exercised, and (ii) the holder thereof shall be deemed for all corporate
purposes to have become the holder of record of such Warrant Shares immediately
prior to the close of business on the date on which the Warrant is surrendered
and payment of the amount due in respect of such exercise and any applicable
taxes is made, irrespective of the date of delivery of certificates evidencing
such Warrant Shares, except that, if the date of such surrender and payment is a
date when the stock transfer books of the Company are properly closed, such
person shall be deemed to have become the holder of such Warrant Shares at the
opening of business on the next succeeding date on which the stock transfer
books are open.
(e) No fractional shares of Common Stock are to be issued upon the exercise
of this Warrant, but rather the number of shares of Common Stock issued upon
exercise of this Warrant shall be rounded up or down to the nearest whole
number.
(f) If the Company shall fail for any reason or for no reason to issue to a
holder within five (5) business days after the time required under this Section
2, a certificate for the number of shares of Common Stock to which the holder is
entitled upon the holder's exercise of this Warrant or a new Warrant for the
number of shares of Common Stock to which such holder is entitled pursuant to
Section 2(b) hereof, the Company shall, in addition to any other remedies under
this Agreement or otherwise available to such holder including any
indemnification pursuant to Section 8 of Securities Purchase Agreement, pay as
additional damages in cash to such holder for each day such issuance is not
timely effected after the fifth (5th) business day following the time required
under this Section 2, an amount equal to 1% of the product of (x) the number of
shares of Common Stock not issued to the holder and the number of shares of
Common Stock represented by the new Warrant not issued to the holder, on a
timely basis and to which such holder is entitled hereunder and (y) the Closing
Bid Price (as defined in the Certificate of Designations) of the Common Stock on
the last possible date which the Company could have issued such new Warrant or
shares of Common Stock to such holder without violating this Section 2.
Section 3. Covenants as to Common Stock. The Company hereby covenants and
agrees as follows:
(a) This Warrant is, and any Stock Warrants issued in substitution for or
replacement of this Warrant will upon issuance be, duly authorized and validly
issued.
(b) All Warrant Shares which may be issued upon the exercise of the rights
represented by this Warrant will, upon issuance, be validly issued, fully paid
and nonassessable and free from all taxes, liens and charges with respect to the
issue thereof.
(c) During the period within which the rights represented by this Warrant
may be exercised, the Company will at all times have authorized and reserved at
least the number of shares of Common Stock needed to provide for the exercise of
the rights then represented by this Warrant and the par value of said shares
will at all times be less than or equal to the applicable Warrant Exercise
Price.
(d) If at any time during the period after the date of issuance of this
Warrant and ending five (5) years thereafter, the Company shall determine to
register under the Securities Act of 1933, as amended, any shares of Stock to be
offered for cash by it or others,, pursuant to a registration statement on Form
S-1 or S-3 (or their equivalent), the Company will (i) promptly give written
notice to the holder of this Warrant of its intention to file such registration
statement and (ii) at the Company's expense (which shall include, without
limitation, all registration and filing fees, printing expenses, fees and
disbursements of counsel and independent accountants for the Company, and fees
and expenses incident to compliance with state securities law, but shall not
include fees and disbursements of counsel for the holder of this Warrant)
include among the securities covered by the registration statement such portions
of the Shares then held by the holder of this Warrant as shall be specified in a
written request to the Company within thirty (30) days after the date on which
the Company gave the notice described in (a)(i) above. Upon receipt of such
written request and of the Shares specified in the request (any shareholder
requesting registration being individually called a "Selling Shareholder"), the
Company shall (i) use its reasonable best efforts to effect the registration,
qualification or compliance of the Shares under the Securities Act and under any
other applicable federal law and any applicable securities or blue sky laws of
jurisdictions within the United States; (ii) furnish each Selling Shareholder
such number of copies of the prospectus contained in the registration statement
filed under the Securities Act (including preliminary prospectus) in conformity
with the requirements of the Securities Act, and such other documents as the
Selling Shareholder may reasonably request in order to facilitate the
disposition of the Shares covered by the registration statement; (iii) notify
each Selling Shareholder, at any time when a prospectus relating to the Stock
covered by such registration statement is required to be delivered under the
Securities Act, of the happening of any event as a result of which the
prospectus forming a part of such registration statement, as then in effect,
includes an untrue statement of a material fact or omits to state any material
fact required to be stated therein or necessary to make the statements therein
not misleading; and (iv) at the request of the Selling Shareholder, prepare and
furnish to the Selling Shareholder any reasonable number of copies of any
supplement to or amendment of such prospectus as may be necessary so that, as
thereafter delivered to the holder of this Warrant, such prospectus shall not
include an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading.
(e) The Company will not, by amendment of 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 to be
observed or performed by it hereunder, but will at all times in good faith
assist in the carrying out of all the provisions of this Warrant and in the
taking of all such action as may reasonably be requested by the holder of this
Warrant in order to protect the exercise privilege of the holder of this Warrant
against dilution or other impairment, consistent with the tenor and purpose of
this Warrant. No impairment of the designations, preferences and rights of the
Preferred Stock contained in the Certificate of Designations or any waiver
thereof which has an adverse effect on the rights granted hereunder shall be
given effect until the Company has taken appropriate action (satisfactory to the
holders of Preferred Stock Warrants representing a majority of the shares of
Common Stock issuable upon the exercise of such Preferred Stock Warrants then
outstanding) to avoid such adverse effect with respect to this Warrant. Without
limiting the generality of the foregoing, the Company (i) will not increase the
par value of any shares of Common Stock receivable upon the exercise of this
Warrant above the Exercise Price then in effect, and (ii) will take all such
actions as may be necessary or appropriate in order that the Company may validly
and legally issue fully paid and nonassessable shares of Common Stock upon the
exercise of this Warrant.
(f) This Warrant will be binding upon any entity succeeding to the Company
by merger, consolidation or acquisition of all or substantially all of the
Company's assets.
Section 4. Taxes. The Company shall not be required to pay any tax or taxes
attributable to the initial issuance of the Warrant Shares or any permitted
transfer involved in the issue or delivery of any certificates for Warrant
Shares in a name other than that of the registered holder hereof or upon any
permitted transfer of this Warrant.
Section 5. Warrant Holder Not Deemed a Stockholder. Except as otherwise
specifically provided herein, no holder, as such, of this Warrant shall be
entitled to vote or receive dividends or be deemed the holder of shares of the
Company for any purpose, nor shall anything contained in this Warrant be
construed to confer upon the holder hereof, as such, any of the rights of a
stockholder of the Company or any right to vote, give or withhold consent to any
corporate action (whether any reorganization, issue of stock, reclassification
of stock, consolidation, merger, conveyance or otherwise), receive notice of
meetings, receive dividends or subscription rights, or otherwise, prior to the
issuance to the holder of this Warrant of the Warrant Shares which he or she is
then entitled to receive upon the due exercise of this Warrant. In addition,
nothing contained in this Warrant shall be construed as imposing any liabilities
on such holder to purchase any securities or as a stockholder of the Company,
whether such liabilities are asserted by the Company or by creditors of the
Company. Notwithstanding this Section 5, the Company will provide the holder of
this Warrant with copies of the same notices and other information given to the
stockholders of the Company generally, contemporaneously with the giving thereof
to the stockholders.
Section 6. Representations of Holder. The holder of this Warrant, by the
acceptance hereof, represents that it is acquiring this Warrant and the Warrant
Shares for its own account for investment and not with a view to, or for sale in
connection with, any distribution hereof or of any of the shares of Common Stock
or other securities issuable upon the exercise thereof, and not with any present
intention of distributing any of the same. The holder of this Warrant further
represents, by acceptance hereof, that, as of this date, such holder is an
"accredited investor" as such term is defined in Rule 501(a)(1) of Regulation D
promulgated by the Securities and Exchange Commission under the Securities Act
(an "Accredited Investor"). Upon exercise of this Warrant, the holder shall, if
requested by the Company, confirm in writing, in a form satisfactory to the
Company, that the Warrant Shares so purchased are being acquired solely for the
holder's own account and not as a nominee for any other party, for investment,
and not with a view toward distribution or resale and that such holder is an
Accredited Investor. If such holder cannot make such representations because
they would be factually incorrect, it shall be a condition to such holder's
exercise of the Warrant that the Company receive such other representations as
the Company considers reasonably necessary to assure the Company that the
issuance of its securities upon exercise of the Warrant shall not violate any
United States or state securities laws.
Section 7. Ownership and Transfer.
(a) The Company shall maintain at its principal executive offices (or such
other office or agency of the Company as it may designate by notice to the
holder hereof), a register for this Warrant, in which the Company shall record
the name and address of the person in whose name this Warrant has been issued,
as well as the name and address of each transferee. The Company may treat the
person in whose name any Warrant is registered on the register as the owner and
holder thereof for all purposes, notwithstanding any notice to the contrary, but
in all events recognizing any transfers made in accordance with the terms of
this Warrant.
(b) This Warrant and the rights granted to the holder hereof are
transferable, in whole or in part, upon surrender of this Warrant, together with
a properly executed warrant power in the form of Exhibit B attached hereto;
provided, however, that any transfer or assignment shall be subject to the
conditions set forth in Section 7(c) below.
(c) The holder of this Warrant understands that this Warrant has not been
and is not expected to be, registered under the Securities Act or any state
securities laws, and may not be offered for sale, sold, assigned or transferred
unless (a) subsequently registered thereunder, or (b) such holder shall have
delivered to the Company an opinion of counsel, reasonably satisfactory in form,
scope and substance to the Company, to the effect that the securities to be
sold, assigned or transferred may be sold, assigned or transferred pursuant to
an exemption from such registration; (i) any sale of such securities made in
reliance on Rule 144 promulgated under the Securities Act may be made only in
accordance with the terms of said Rule and further, if said Rule 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 Securities Act) may require
compliance with some other exemption under the Securities Act or the rules and
regulations of the Securities and Exchange Commission thereunder; and (ii)
neither the Company nor any other person is under any obligation to register the
Preferred Stock Warrants under the Securities Act or any state securities laws
or to comply with the terms and conditions of any exemption thereunder.
(d) The Company is obligated to register the Warrant Shares for resale
under the Securities Act pursuant to the Registration Rights Agreement dated
September 29, 1998, by and between the Company and the Buyers listed on the
signature page thereto (the "Registration Rights Agreement") and the initial
holder of this Warrant (and certain assignees thereof) is entitled to the
registration rights in respect of the Warrant Shares as set forth in the
Registration Rights Agreement.
Section 8. Adjustment of Warrant Exercise Price. In order to prevent
dilution of the rights granted under this Warrant, the Warrant Exercise Price
shall be adjusted from time to time as follows:
(a) Adjustment of Warrant Exercise Price upon Subdivision or Combination of
Common Stock. If the Company at any time after the date of issuance of this
Warrant, subdivides (by any stock split, stock dividend, recapitalization or
otherwise) one or more classes of its outstanding shares of Common Stock into a
greater number of shares, the Warrant Exercise Price in effect immediately prior
to such subdivision will be proportionately reduced and the number of shares of
Common Stock obtainable upon exercise of this Warrant will be proportionately
increased. If the Company at any time after the date of issuance of this Warrant
combines (by combination, reverse stock split or otherwise) one or more classes
of its outstanding shares of Common Stock into a smaller number of shares, the
Warrant Exercise Price in effect immediately prior to such combination will be
proportionately increased and the number of shares of Common Stock obtainable
upon exercise of this Warrant will be proportionately decreased.
(b) Reorganization, Reclassification, Consolidation, Merger or Sale. Any
recapitalization, reorganization, reclassification, consolidation, merger, sale
of all or substantially all of the Company's assets to another Person (as
defined below) or other similar transaction which is effected in such a way that
holders of Common Stock are entitled to receive (either directly or upon
subsequent liquidation) stock, securities or assets with respect to or in
exchange for Common Stock is referred to herein as "Organic Change." Prior to
the consummation of any Organic Change, the Company will make appropriate
provision (in form and substance satisfactory to the holders of the Preferred
Stock Warrants representing a majority of the shares of Common Stock issuable
upon exercise of such Preferred Stock Warrants then outstanding) to insure that
each of the holders of the Preferred Stock Warrants will thereafter have the
right to acquire and receive in lieu of or in addition to (as the case may be)
the shares of Common Stock immediately theretofore acquirable and receivable
upon the exercise of such holder's Preferred Stock Warrants, such shares of
stock, securities or assets as may be issued or payable with respect to or in
exchange for the number of shares of Common Stock immediately theretofore
acquirable and receivable upon the exercise of such holder's Preferred Stock
Warrants had such Organic Change not taken place. In any such case, the Company
will make appropriate provision (in form and substance satisfactory to the
holders of the Preferred Stock Warrants representing a majority of the shares of
Common Stock issuable upon exercise of such Preferred Stock Warrants then
outstanding) with respect to such holders' rights and interests to insure that
the provisions of this Section 8 and Section 9 below will thereafter be
applicable to the Preferred Stock Warrants. The Company will not effect any such
consolidation, merger or sale, unless prior to the consummation thereof, the
successor entity (if other than the Company) resulting from consolidation or
merger or the entity purchasing such assets assumes, by written instrument (in
form and substance satisfactory to the holders of Preferred Stock Warrants
representing a majority of shares of Common Stock issuable upon exercise of the
Preferred Stock Warrants then outstanding), the obligation to deliver to each
holder of Preferred Stock Warrants such shares of stock, securities or assets
as, in accordance with the foregoing provisions, such holder may be entitled to
acquire.
(c) Notices.
(i) Immediately upon any adjustment of the Warrant Exercise Price, the
Company will give written notice thereof to the holder of this Warrant, setting
forth in reasonable detail and certifying the calculation of such adjustment.
(ii) The Company will give written notice to the holder of this
Warrant at least twenty (20) days prior to the date on which the Company closes
its books or takes a record (A) with respect to any dividend or distribution
upon the Common Stock, (B) with respect to any pro rata subscription offer to
holders of Common Stock or (c) for determining rights to vote with respect to
any Organic Change, dissolution or liquidation, except that in no event shall
such notice be provided to such holder prior to such information being made
known to the public.
(iii) The Company will also give written notice to the holder of this
Warrant at least twenty (20) days prior to the date on which any Organic Change,
dissolution or liquidation will take place.
Section 9. Purchase Rights. If at any time the Company grants, issues or
sells any options, Convertible Securities or rights to purchase stock, warrants,
securities or other property pro rata to the record holders of any class of
Common Stock (the "Purchase Rights"), then the holder of this Warrant will be
entitled to acquire, upon the terms applicable to such Purchase Rights, the
aggregate Purchase Rights which such holder could have acquired if such holder
had held the number of shares of Common Stock acquirable upon complete exercise
of this Warrant immediately before the date on which a record is taken for the
grant, issuance or sale of such Purchase Rights, or, if no such record is taken,
the date as of which the record holders of Common Stock are to be determined for
the grant, issue or sale of such Purchase Rights.
Section 10. Lost, Stolen, Mutilated or Destroyed Warrant. If this Warrant
is lost, stolen, mutilated or destroyed, the Company shall, on receipt of an
indemnification undertaking, issue a new Warrant of like denomination and tenor
as the Warrant so lost, stolen, mutilated or destroyed.
Section 11. Notice. Any notices, consents, waivers or other communications
required or permitted to be given under the terms of this Warrant 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
(1) 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
14th Floor
000 Xxxxxxx Xxxxxx
Xxx Xxxxxxxxx, 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 Xxxxxxxxxxx Xxxxxx
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
If to a holder of this Warrant, to it at the address set forth below such
holder's signature on the signature page hereof.
Each party shall provide five (5) days' prior written notice to the
other party of any change in address or facsimile number.
Section 12. Miscellaneous. This Warrant and any term hereof may be changed,
waived, discharged, or terminated only by an instrument in writing signed by the
party or holder hereof against which enforcement of such change, waiver,
discharge or termination is sought. The headings in this Warrant are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof. 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. The holder 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 the holder hereof 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.
Section 13. Date. The date of this Warrant is January ____, 1999. This
Warrant, in all events, shall be wholly void and of no effect after the close of
business on the Expiration Date, except that notwithstanding any other
provisions hereof, the provisions of Section 7 shall continue in full force and
effect after such date as to any Warrant Shares or other securities issued upon
the exercise of this Warrant.
* * * *
FINET HOLDINGS CORPORATION
By: ______________________________________
Name:
ACCEPTED:
[HOLDER]
By: THOMSON KERNAGHAN & CO., LTD.
Name: _____________________________
Title:______________________________
Address: 000 Xxx Xxxxxx, 00xx Xxxxx
Xxxxxxx, Xxxxxxx
X0X 0X0 XXXXXX
EXHIBIT A TO WARRANT
SUBSCRIPTION FORM
TO BE EXECUTED BY THE REGISTERED HOLDER TO EXERCISE THIS WARRANT
FINET HOLDINGS CORPORATION
The undersigned hereby exercises the right to purchase the number of
Warrant Shares covered by this Warrant specified below according to the
conditions thereof and herewith makes payment therefor in the amount of
$____________________, the Aggregate Exercise Price of such Warrant Shares in
full, and requests that such Warrant Shares be issued in the name of:
[HOLDER]
Dated: ________________
By: ______________________________________
Name: ____________________________________
Title: _____________________________________
Address: __________________________________
Number of Warrant Shares
Being Purchased: _____________________
EXHIBIT B TO WARRANT
FORM OF WARRANT POWER
FOR VALUE RECEIVED, the undersigned does hereby assign and transfer to
______________________________, Federal Identification No. __________________, a
warrant to purchase ______________ shares of the capital stock of Finet Holdings
Corporation, a Delaware corporation, represented by warrant certificate No.
________, standing in the name of the undersigned on the books of said
corporation. The undersigned does hereby irrevocably constitute and appoint
______________________________________________, attorney to transfer the
warrants of said corporation, with full power of substitution in the premises.
Dated: ___________________ _________________________________________
By: ______________________________________
Its: ______________________________________
EXHIBIT G
OUTSTANDING CAPITAL
Common Stock and Stock Rights
As of January 15, 1999:
Common Stock Committed and Outstanding 59,062,844
Giving Effect to Restructure of Debenture and Series A
Convert $1.1 million Debenture into 2,200,000
Convert $4.4 million Debenture into 7,333,333
----------
68,596,177
An Asset Purchase Agreement dated August 30, 1997 between Finet Holdings
Corporation and The Real Estate Office Software Company provides for up to
200,000 shares of Finet Stock to be issued to The Real Estate Office Software
Company. As of this date, 175,000 shares have been issued, the remaining 25,000
shares are escrowed in a Retention Account pending the outcome of post closing
audit reports.
On May 19, 1998, the Company entered into a Stock Purchase Agreement with MICAL
Mortgage, Inc ("MICAL") whereby the Company acquired 100% of the issued and
outstanding stock of MICAL in exchange for up to 552,430 shares of the Company's
common stock, of which 120,460 shares are reserved for potential adjustment for
certain currently undetermined contingencies.
On October 13, 1998, the Company entered into an employment agreement with Xxxx
X. Xxxxxx which granted 500,000 restricted shares of common stock. As of this
date, 125,000 shares have been issued.
On October 15, 1998, the Company entered into an employment agreement with
Xxxxxxx X. Xxxxxx which granted 60,000 restricted shares of common stock. As of
this date, 15,000 shares have been issued.
EXHIBIT H
COMPANY OPINION OF COUNSEL
EXHIBIT I
ESCROW AGREEMENT
ESCROW AGREEMENT
This ESCROW AGREEMENT, dated as of January 15, 1999 (the "Escrow
Agreement"), is by and among FINET HOLDINGS CORPORATION, a Delaware corporation
("Company"), the SUBSCRIBERS as set forth on Attachment A ("Subscriber" or
"Subscribers") and XXXXXXXX & XXXXXX, a California professional corporation, as
escrow agent (the "Escrow Agent").
WHEREAS, the Company and the Subscribers are entered into a Restructuring
Agreement and Amendment ("Restructuring Agreement") calling for, among other
things, the conversion from time to time by the Subscribers of certain
Debentures for shares of the Company's common stock ("Conversion Shares") and
the redemption of the remaining Debentures and all of the outstanding Series A
Convertible Preferred Shares owned by Subscribers ("Preferred Shares") for cash
by the Company, all as set forth in the Restructuring Agreement; and
WHEREAS, the parties wish the Conversion Shares, the cash redemption
proceeds, the Debentures, the Preferred Shares, executed copies of the
Restructuring Agreement and certain other documents to be delivered to the
Escrow Agent to be held in escrow and released by the Escrow Agent in accordance
with the terms and conditions of this Agreement; and
WHEREAS, the Escrow Agent is willing to serve as escrow agent pursuant to
the terms and conditions of this Agreement.
NOW, THEREFORE, in consideration of the mutual agreements contained herein,
intending to be legally bound hereby, the parties agree as follows:
ARTICLE I
INTERPRETATION
1.1. Definitions. Whenever used in this Agreement, the following terms
shall have the following respective meanings:
(a) "Agreement" means this Escrow Agreement and all amendments made
hereto and thereto by written agreement between the parties;
(b) "Conversion Notice(s) " means the Notice or Notices of Conversion
delivered by the Subscriber from time to time pursuant to the Restructure
Agreement.
(c) "Conversion Shares" means the Company's Common Stock issuable upon
conversion of the Debentures and to be delivered pursuant to the Restructuring
Agreement.
(d) "Escrowed Payment" means the sums payable to the Subscribers upon
redemption of the Debentures and Preferred A Shares to be redeemed from the
Subscribers by the Company, pursuant to the Restructure Agreement to be held in
escrow on behalf of the Company and the Subscribers and to be paid to the
Subscribers from time to time as provided in the Restructuring Agreement.
(e) "Expenses" means the reasonable expenses incurred by and payable
to Escrow Agent in connection with the matters described herein.
(f) "Redemption Notice(s)" means the Notice or Notices of Redemption
at Company's Election pursuant to the Restructure Agreement.
(g) "Warrants" means the Warrants issuable to the Subscribers referred
to in the Restructuring Agreement.
(h) Collectively, this Agreement, the Conversion Shares, the
Redemption Notices, the Restructuring Agreement signed on behalf of the Company,
the Warrants and the legal opinion of Company counsel are referred to as
"Company Documents."
(i) Collectively, this Agreement, the Conversion Notices, the
Restructuring Agreement signed on behalf of Subscribers, the Debentures, and the
Preferred Shares are referred to as "Subscriber Documents."
1.2. Extended Meanings. In this Agreement words importing the singular
number include the plural and vice versa; words importing the masculine gender
include the feminine and neuter genders. The word "person" includes an
individual, body corporate, partnership, trustee or trust or unincorporated
association, executor, administrator or legal representative.
ARTICLE II
DOCUMENTS AND PAYMENTS TO BE DELIVERED
2.1. Delivery of Escrowed Payments and Company Documents to Escrow Agent.
On January 15, 1999, the Company delivered to the Escrow Agent Two Million
Dollars as part of the Escrowed Payments by wire transfer to Escrow agent's
escrow account maintained at The Pacific Bank in San Francisco, CA. On or about
January 19, 1999 the Company will deliver to the Escrow Agent the Company
documents executed by the Company.
2.2. Delivery of Subscriber Documents. On or about January 19, 1999, the
Subscriber shall deliver to the Escrow Agent the Subscriber Documents.
Additional Subscriber Documents will be delivered by Subscriber for each
Closing.
2.3. Intention to Create Escrow Over Company Documents, Subscriber
Documents and Escrowed Payments. The Subscriber and Company intend that the
Company Documents, Subscriber Documents and Escrowed Payments shall be held in
escrow by the Escrow Agent pursuant to this Agreement for their benefit as set
forth herein.
2.4. Escrow Agent to Deliver Company Documents, Subscriber Documents and
Escrowed Payments. The Escrow Agent shall hold and release the Company
Documents, Subscriber Documents and the Escrowed Payments subject to receipt of
instructions of Company or Subscribers or otherwise, all only in accordance with
the terms and conditions of this Agreement in one or more closings.
ARTICLE III
RELEASE OF COMPANY DOCUMENTS, SUBSCRIBER DOCUMENTS AND ESCROWED PAYMENT
3.1. Release of Escrow. Subject to the provisions of Section 4 herein, the
Escrow Agent shall release the Company Documents, Subscriber Documents and
Escrowed Payment in one or more closings as follows:
(a) Upon receipt by the Escrow Agent of joint written instructions
("Joint Instructions") signed by the Company and the Subscriber, it shall
deliver in one or more closings the Company Documents, Subscriber Documents, and
Escrowed Payments in accordance with the terms of the Joint Instructions.
(b) Upon receipt by the Escrow Agent of a final and non-appealable
judgment, order, decree or award of a court of competent jurisdiction (a "Court
Order"), the Escrow Agent shall deliver the Company Documents, Subscriber
Documents and Escrowed Payments in accordance with the Court Order. Any Court
Order shall be accompanied by an opinion of counsel for the party presenting the
Court Order to the Escrow Agent (which opinion shall be satisfactory to the
Escrow Agent) to the effect that the court issuing the Court Order has competent
jurisdiction and that the Court Order is final and non-appealable.
3.2. Acknowledgement of Company and Subscriber; Disputes. The Company and
the Subscribers acknowledge that the only terms and conditions upon which the
Company Documents, Subscriber Documents and Escrowed Payments are to be released
are set forth in Sections 3 and 4 of this Agreement. The Company and the
Subscribers reaffirm their agreement to abide by the terms and conditions of
this Agreement with respect to the release of the Company Documents, Subscriber
Documents and Escrowed Payments. Any dispute with respect to the release of the
Company Documents, Subscriber Documents and Escrowed Payments shall be resolved
pursuant to Section 4 or by agreement between the Company and Subscribers.
ARTICLE IV
CONCERNING THE ESCROW AGENT
4.1. The Escrow Agent hereby waives its right to compensation for its
services hereunder, but shall be reimbursed for all reasonable out-of-pocket
expenses, disbursements and advances (including reasonable attorneys' fees and
expenses if actually incurred by the Escrow Agent in connection with the use of
outside attorneys) incurred or made by it in performance of its duties
hereunder. Such disbursements, expenses and advances shall be paid by the
Parties equally.
4.2. The Escrow Agent may resign and be discharged from its duties
hereunder at any time by giving notice of such resignation to the Parties, and
specifying a date (not less than 30 days after the giving of such notice) when
such resignation shall take effect. Prior to the effective date of the
resignation as specified in such notice, the Subscribers and Company will issue
to the Escrow Agent a Joint Instruction authorizing delivery of the Company
Documents, Subscriber Documents and Escrowed Payment to a substitute Escrow
Agent selected by the Subscribers and Company. If no successor Escrow Agent is
named by the Subscriber and Company, the Escrow Agent may apply to a court of
competent jurisdiction in the State of California for appointment of a successor
Escrow Agent, and to deposit the Company Documents and Subscriber Documents with
the clerk of any such court. The Escrow Agent shall continue to serve until its
successor accepts the escrow and receives the Agreements to the extent not
theretofore delivered in accordance with the Escrow Agreement; provided,
however, that if no successor accepts the escrow and receives the Agreements, to
the extent not theretofore delivered in accordance within such 30-day period,
then, upon the expiration of such 30-day period, the Escrow Agent shall be
relieved of its duties hereunder and shall retain the Documents and Payments
solely as custodian.
4.3. The Escrow Agent undertakes to perform only such duties as are
specifically set forth herein. Anything herein to the contrary notwithstanding,
the Escrow Agent's sole duties under the Escrow Agreement shall be (i) to hold
the Documents and Payments in escrow in accordance with the terms hereof, (ii)
to make reports required or appropriate under the Escrow Agreement, (iii) to
make deliveries to the persons entitled thereto, also as specified in such
instructions or as provided in the Escrow Agreement, and (iv) to make
determinations required hereunder. The Escrow Agent acting or refraining from
acting in good faith shall not be liable for any mistake of fact or error of
judgment by it or for any acts or omissions by it of any kind, unless caused by
its willful misconduct or gross negligence, and the Escrow Agent shall be
entitled to rely and shall be protected in doing so, upon (i) any written
notice, instrument or signature reasonably believed by it to be genuine and to
have been signed or presented by the proper party or parries duly authorized to
do so, and (ii) the advice of counsel (which may be of the Escrow Agent's own
choosing). The Escrow Agent shall have no responsibility for the contents of any
writing submitted to it hereunder and shall be entitled in good faith reasonably
to rely without any liability upon the contents thereof.
4.4. The Escrow Agent shall have the right to assume in the absence of
written notice to the contrary from the proper person or persons that a fact or
an event by reason of which an action would or might be taken by the Escrow
Agent does not exist and has not occurred, without incurring liability to the
other parties hereto or to anyone else for any action taken or omitted, or any
action suffered by it to be taken or omitted, in good faith and in the exercise
of its own best judgment, in reliance upon such assumption.
4. 5. The Company on the one hand and Subscribers on the other hand and
each to the extent of one-half of the amount to be paid hereunder, agree to
indemnify the Escrow Agent and hold it harmless against any and all expenses,
including counsel fees and disbursements, or loss suffered by the Escrow Agent
in connection with any action, suit or other proceeding involving any claim, or
in connection with any claim or demand, which in any way, directly or
indirectly, arises out of, or related to the Escrow Agreement, the services of
the Escrow Agent hereunder, provided, however, that this indemnity shall not
apply to any such expense or loss that is the result of the Escrow Agent's gross
negligence or willful misconduct. The Escrow Agent shall have a lien for the
amount of any such expense or loss on the monies and other property held by it
hereunder and shall be entitled to reimburse itself from such monies or properly
for the amount of any such expense or loss. Promptly after the receipt by the
Escrow Agent of notice of any demand or claim or the commencement of any action,
suit or proceeding, the Escrow Agent shall, if a claim in respect thereof is to
be made against any of the other parties hereto, notify such other parties
thereof in writing, but the failure by the Escrow Agent to give such notice
shall not relieve any party from any liability which such party may have to the
Escrow Agent hereunder.
4.6. From time to time on and after the date hereof, the other parties
hereto shall deliver or cause to be delivered to the Escrow Agent such finisher
documents and instruments and shall do and cause to be done such further acts as
the Escrow Agent shall reasonably request (it being understood that the Escrow
Agent shall have no obligation to make any such request) to carry out more
effectively the provisions and purposes of the Escrow Agreement, to evidence
compliance herewith or to assure itself that it is protected in acting
hereunder.
4.7. Dispute Resolution: Judgments. Resolution of disputes arising under
this Agreement shall be subject to the following terms and conditions:
(a) If any dispute shall arise with respect to the delivery,
ownership, right of possession or disposition of the Company Documents,
Subscriber Documents, or Escrowed Payment or if the Escrow Agent shall in good
faith be uncertain as to its duties or rights hereunder, the Escrow Agent shall
be authorized, without liability to anyone, to (i) refrain from taking any
action other than to continue to hold the Company Documents, Subscriber
Documents and escrowed Payment pending receipt of a Joint Instruction from the
Subscriber and Company, or (ii) deposit the Company Documents and Subscriber
Documents with any court of competent jurisdiction in the State of Georgia, in
which event the Escrow Agent shall give written notice thereof to the Subscriber
and the Company and shall thereupon be relieved and discharged from all further
obligations pursuant to this Agreement. The Escrow Agent may, but shall be under
no duty to, institute or defend any legal proceedings which relate to the
Company Documents, Subscriber Documents and Escrowed Payment. The Escrow Agent
shall have the right to retain counsel if it becomes involved in any
disagreement, dispute or litigation on account of this Agreement or otherwise
determines that it is necessary to consult counsel.
(b) The Escrow Agent is hereby expressly authorized to comply with and
obey any Court Order. In case the Escrow Agent obeys or complies with a Court
Order, the Escrow Agent shall not be liable to the Subscribers and Company or to
any other person, firm, corporation or entity by reason of such compliance.
ARTICLE VI
MISCELLANEOUS
5.1. Assignment; Binding Agreement. The Escrow Agreement and all the
provisions hereof shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and permitted assigns, but neither the
Escrow Agreement nor any of the rights, interests or obligations hereunder shall
be assigned by any of the parties hereto without the prior written consent of
the other parties hereto. The Escrow Agreement and the terms contained herein
are solely for the benefit of the Parties and the Escrow Agent and their
respective successors and permitted assigns and no over party is intended to
benefit from the terms and conditions contained herein
5.2. Entire Agreement; Amendments. The Escrow Agreement contains the
entire understanding of the parties hereto with respect to its subject matter,
and the Escrow Agreement may be amended only by a written instrument duly
executed by all the parties hereto.
5.3. Notices. All notices, request, demands and other communications
required or permitted hereunder shall be in writing and shall be deemed to have
been duly given one (1) day after being sent by telecopy (with copy delivered by
overnight courier, regular or certified mail):
(a) If to the Company, to:
Finet Holdings Corporation
14th Floor
000 Xxxxxxx Xxxxxx
Xxx Xxxxxxxxx, 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
(b) If to the Subscriber, to:
the addresses provided in the respective Subscription Agreements.
(c) If to the Escrow Agent, to:
Xxxxx X. Xxxxx, Esq.
Xxxxxxxx & Werson P.C.
Xxx Xxxxxxxxxxx Xxxxxx
Xxxxx 0000
Xxx Xxxxxxxxx, XX 00000
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
or to such other address as any of them shall give to the others by notice made
pursuant to this Section 5.3.
5.4. Counterparts. The Escrow Agreement may be executed simultaneously in
one or more counterparts, each of which shall be deemed an original but all of
which together shall constitute one and the same instrument.
5.5. Termination. This escrow shall terminate upon release of all Company
and Subscriber Documents and Payments in its possession in accordance with the
terms hereof or at any time upon the agreement in writing of the Subscribers and
the Company.
5.6. Headings. Article headings contained herein are for reference purposes
only and shall not in any way affect the meaning or interpretation of the Escrow
Agreement.
5.7. Conflict Waiver. The parties to the Escrow Agreement acknowledge that
the Escrow Agent has represented the Company in connection with the Escrow
Agreement and certain related transactions and may continue to represent it in
connection with such transactions and certain other matters. The parties to the
Escrow Agreement waive any right they now have or may have in the future to any
claim or conflict as a result of the Escrow Agent's execution, delivery and
performance of the Escrow Agreement or the transactions contemplated hereby and
Escrow Agent's representation of Company in any matter.
5.8 Interest. Any funds deposited in escrow shall not be held in an
interest bearing account nor will interest be payable in connection therewith.
5.9. Assignment; Binding Agreement. Neither this Agreement nor any right or
obligation hereunder shall be assignable by any party without the prior written
consent of the other parties hereto. This Agreement shall inure to the benefit
of and be binding upon the parties hereto and their respective legal
representatives, successors and assigns.
5.10. Invalidity. In the event that any one or more of the provisions
contained herein, or the application thereof in any circumstance, is held
invalid, illegal, or unenforceable in any respect for any reason, the validity,
legality and enforceability of any such provision in every other respect and of
the remaining provisions contained herein shall not be in any way impaired
thereby, it being intended that all of the rights and privileges of the parties
hereto shall be enforceable to the fullest extent permitted by law.
5.11. Governing Law. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of California without regard to
principles of conflict of laws.
5.12. Consents to Service of Process. The Company and the Subscriber(s)
each hereby irrevocably consent to the exclusive jurisdiction of the courts of
the State of California and of the Federal Court located in the Northern
District of the state of California, each as may have competent jurisdiction, in
connection with any action, suit or other proceeding arising out of or relating
to this Agreement or any action taken or omitted hereunder, and waive personal
service of any summons, complaint or other process and agree that the service
thereof may be made by certified or registered mail directed to such person at
such person's address for purpose of notice hereunder.
IN WITNESS WHEREOF, the Escrow Agreement has been duly executed and
delivered by the parties as of the date first written above.
FINET HOLDINGS CORPORATION
"Company"
By: /s/ L. Xxxxxx Xxxxxxx
-----------------------------------
Its: President
CANADIAN ADVANTAGE, LP
By: /s/ Xxxx Xxxxxxxxx
------------------------------------
Its: Pres., VMH Management, General Partner
DOMINION CAPITAL FUND
By: /s/ Xxxx Xxxxxxxxx
------------------------------------
Its: Agent
SOVEREIGN PARTNERS LP
By: /s/ Xxxx Xxxxxxxxx
------------------------------------
Its: Agent
ATLANTIS CAPITAL FUND, LTD
By: /s/ Xxxx Xxxxxxxxx
------------------------------------
Its: Agent
ESCROW AGENT:
XXXXXXXX & WERSON
By: /s/ Xxxxxxx X. Xxxxxxx
------------------------------------
A Member of the Firm
