Exhibit 2.0
GENESIS FINANCIAL, INC.
STOCK INVESTMENT AGREEMENT
This Agreement is made as of January 25, 2002, among GENESIS FINANCIAL, INC., a
Washington corporation (the "GENESIS"), and the Purchasers listed in Section
1.1.2, below (the "Purchasers").
1. Authorization and Sale of Common Stock and Convertible Debt.
1.1. Common Stock.
1.1.1. Authorization. GENESIS will authorize the sale and issuance of up to
500,000 shares (the "Shares") of its common stock (the "Common
Stock").
1.1.2. Sale of Common Stock. Subject to the terms and conditions hereof,
GENESIS will severally issue and sell to each of such Purchasers, and
the Purchasers will severally buy from GENESIS, the total number of
shares of Common Stock at the aggregate purchase price set forth in
the following table. References to "Purchaser" in the remainder of
this Stock Investment Agreement (this "Agreement") will be to the
individual listed purchasers set forth in the Table, or all of the
listed purchasers, as the context requires.
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Name Shares Consideration
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Xxxxxxx X. Xxxx ("Xxxx" ) 25,000 $25,000
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Xxxxxxx X. Xxxxxx ("Durham") 25,000 $25,000
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Temporary Financial Services, Inc. ("TFS") 200,000 $200,000
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Temporary Financial Services, Inc. ("TFS") 250,000 50,000 shares of TFS Common Stock
valued at $5.00 per share or $250,000
in the aggregate.
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Totals 500,000 $500,000
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1.2. Convertible Debt. In addition to the Common Stock being purchased pursuant
to Section 1.1, TFS will also loan Genesis $200,000 in the form of
Convertible Debt, evidenced by a Convertible Note (the "Convertible Note"),
incorporating the following terms and conditions is attached as Exhibit A.
1.2.1. The Convertible Note will mature on January 4, 2004.
1.2.2. The interest rate will be 6%, and interest shall accrue from the date
the principal amount is advanced to GENESIS.
1.2.3. TFS will enter into appropriate subordination agreements with GENESIS'
senior lender if required by Genesis' senior secured lender or if
necessary to facilitate favorable terms on the senior secured debt.
1.2.4. The Convertible Note will contain loan covenants and default provisions
that mirror the default provisions of any senior secured debt.
1.2.5. The Convertible Note will be convertible into additional shares of
Genesis' common stock at the rate of $1.00 per share for the principal
at the date of conversion (up to a maximum of 200,000 shares). If the
holder of the Convertible Note elects to convert, the interest accrued
to the date of conversion may be converted into stock at the rate of
$1.00 per share, or paid in cash, at the election of Genesis. The
Convertible Debt may be converted into Common Stock at any time after
January 1, 2003.
1.2.6. The common stock underlying the conversion feature of the Convertible
Note is hereafter referred to as the Conversion Stock.
2. Closing Dates: Delivery
2.1. Closing Dates. The closing of the purchase and sale of the
Common hereunder shall be held at the offices of Temporary
Financial Services, Inc. at 1:00 p.m., on January 25, 2002
(the "Closing"), or at such other time and place that GENESIS
and the Purchasers shall agree (the date of the Closing is
hereinafter referred to as the "Closing Date").
2.2. Delivery.
2.2.1. At the Closing, GENESIS will deliver to each Purchaser a
certificate or certificates, registered in such Purchaser's
name and in the amount as set forth on the Section 1.1.2,
against payment of the purchase price.
2.2.2. At the Closing, GENESIS will deliver to TFS, the executed
Convertible Note against payment of the face amount.
2.2.3. At Closing, TFS will deliver payment for the Common Stock, the
Convertible Note, and a Certificate for 50,000 shares of TFS
Common Stock.
3. Representations and Warranties of GENESIS
3.1. Organization and Standing; Articles and Bylaws. GENESIS is a
corporation duly organized and existing under, and by virtue
of, the laws of the State of Washington and is in good
standing under such laws. GENESIS has requisite corporate
power and authority to own and operate its properties and
assets, and to carry on its business as presently conducted
and as proposed to be conducted. GENESIS is not presently
qualified to do business as a foreign corporation in any
jurisdiction, and the failure to be so qualified will not have
a materially adverse affect on GENESIS' business as now
conducted or as now proposed to be conducted.
3.2. Corporate Power. GENESIS will have at the Closing Date all
requisite legal and corporate power and authority to execute
and deliver this agreement, to sell and issue the Common Stock
hereunder, and to carry out and perform its obligations under
the terms of this Agreement.
3.3. Subsidiaries. GENESIS has no subsidiaries or affiliated
companies and does not otherwise own or control, directly or
indirectly, any equity interest in any corporation,
association or business entity.
3.4. Capitalization. The authorized capital stock of GENESIS
consists, or at the Closing Date will consist, of 100,000,000
shares of common stock, of which 1,400,000 shares are issued
and outstanding, and 10,000,000 shares of Preferred Stock,
none of which is issued and outstanding. The outstanding
shares have been duly authorized and validly issued, and are
fully paid and nonassessable. GENESIS has reserved shares of
Common Stock for issuance hereunder, 224,000 shares of common
stock for issuance upon conversion of the Convertible Note,
and 650,000 shares of common stock for issuance to employees,
consultants, or directors under stock plans or arrangements
approved by its Board of Directors. No options to purchase
shares of common stock are currently issued and outstanding.
All outstanding securities of GENESIS were issued in
compliance with applicable federal and state securities laws.
3.5. Authorization. All corporate action on the part of GENESIS,
its directors and shareholders necessary for the
authorization, execution, delivery and performance of this
Agreement by GENESIS, the authorization, sale, issuance and
delivery of the Common Stock, the Convertible Note and the
Conversion Stock and the performance of all of GENESIS'
obligations hereunder has been taken or will be taken prior to
the Closing. This Agreement, when executed and delivered by
GENESIS, shall constitute a valid and binding obligation of
GENESIS, enforceable in accordance with its terms. The Shares,
when issued in compliance with the provisions of this
Agreement, will be validly issued, fully paid and
nonassessable.
3.6. Financial Statements. GENESIS is a newly formed company and
all of the company's initial capitalization will be the result
of the transactions described in this Agreement. Accordingly,
financial statements will not be required prior to the Closing
Date.
3.7. Material Liabilities. GENESIS has no material liabilities or
obligations, except the liabilities and obligations incurred
in connection with the organization of the corporation and the
preparation of documentation for this transaction.
3.8. Litigation, etc. There are no actions, suits, proceedings or
investigations pending against GENESIS or its properties
before any court or governmental agency (nor, to the best of
GENESIS' knowledge, is there any reasonable basis for or
threat of such litigation).
3.9. Employees. To the best of GENESIS' knowledge, no employee of
GENESIS is in violation of any term of any employment contract
or any other contract or agreement relating to the
relationship of such employee with GENESIS or any other party
as a result of the business conducted or to be conducted by
GENESIS.
3.10. Certain Transactions. GENESIS is not indebted, directly or
indirectly, to any of its officers, directors or shareholders
or to their respective spouses or children, and none of its
officers, directors or, to the best of GENESIS' knowledge,
shareholders, or any members of their immediate families, are
indebted to GENESIS.
3.11. Material Contracts and Obligations. Except as noted on Exhibit
B (attached), GENESIS is not subject to any material contracts
or obligations.
3.12. Registration Rights. Except as set forth in this Agreement,
GENESIS is not under any contractual obligation to register
any of its presently outstanding securities or any of its
securities which may hereafter be issued.
3.13. Governmental Consent, etc. No consent, approval or
authorization of (or designation, declaration or filing with)
any governmental authority is required in connection with the
valid execution and delivery of this Agreement, or the offer,
sale or issuance of the Common Stock, or the consummation of
any other transaction contemplated hereby.
3.14. Offering. The offer, sale and issuance of the Common Stock and
the Convertible Debt to be issued in conformity with the terms
of this Agreement, constitute transactions exempt from the
registration requirements of Section 5 of the Securities Act
of 1933, as amended (the "Securities Act").
3.15. Brokers or Finders; Other Offers. Except as described in
Exhibit C (attached), GENESIS has not incurred, and will not
incur, directly or indirectly, as a result of any action taken
by GENESIS, any liability for brokerage or finders' fees or
agents' commissions or any similar charges in connection with
this Agreement.
3.16. Employee Benefit Plans. GENESIS does not have any Employee
Benefit Plan as defined in the Employee Retirement Income
Security Act of 1974, as amended. It is understood by the
parties that GENESIS intends to adopt an Employee Benefit Plan
following the Closing Date. The Employee Benefit Plan will
allow for grants of incentive stock options (ISO's), and for
Non-qualified Stock Options (NQSO's). As described in Section
3.4., GENESIS intends to reserve up to 650,000 Common shares
for distribution under the plan. Of the 650,000 shares
reserved for issuance under the plan, options for 500,000
shares are reserved for key employees and/or consultants of
GENESIS, and 150,000 may be directed to persons selected by
TFS. The grant of options under the plan will be subject to
the discretion and approval of the Board of Directors of
GENESIS. Any options issued to Kirk, Durham, TFS, Xxxxxxx, or
their affiliates will include vesting at 20% per year over a
five year period and an option price of 120% of the fair
market value of the shares at the time of the grant.
3.17. Minute Books. The minute books of GENESIS provided to counsel
for the Purchasers contain a complete summary of all meetings
of directors and shareholders since the time of incorporation
and reflect all transactions referred to in such minutes
accurately in all material respects.
3.18. Disclosure. This Agreement with the Exhibits and GENESIS'
Business Plan, when taken as a whole, do not contain any
untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements
contained herein or therein not misleading in light of the
circumstances under which they were made. The Business Plan
and the financial projections contained in the Business Plan
were prepared in good faith; however, GENESIS does not warrant
that it will achieve such financial projections.
4. SECTION 4 - Representations and Warranties of the Purchasers
Each Purchaser hereby severally represents and warrants to GENESIS with
respect to the purchase of the Shares as follows:
4.1. Experience. It has substantial experience in evaluating and
investing in private placement transactions of securities in
companies similar to GENESIS so that it is capable of
evaluating the merits and risks of its investment in GENESIS
and has the capacity to protect its own interests.
4.2. Investment Intent. It is acquiring the Common Stock for
investment for its own account, not as a nominee or agent, and
not with the view to, or for resale in connection with, any
distribution thereof. It understands that the Shares and the
Conversion Stock have not been, and will not be, registered
under the Securities Act by reason of a specific exemption
from the registration provisions of the Securities Act, the
availability of which depends upon, among other things, the
bona fide nature of the investment intent and the accuracy of
such Purchaser's representations as expressed herein and in
the Suitability Questionnaire.
4.3. Rule 144. It acknowledges that the Common Stock must be held
indefinitely unless subsequently registered under the
Securities Act or unless an exemption from such registration
is available. It is aware of the provisions of Rule 144
promulgated under the Securities Act (Rule 144) which permits
limited resale of shares purchased in a private placement
subject to the satisfaction of certain conditions, including,
among other things, the existence of a public market for the
shares.
4.4. No Public Market. It understands that no public market now
exists for any of the securities issued by GENESIS and that
GENESIS has made no assurances that a public market will ever
exist for GENESIS' securities.
4.5. Access to Data. It has had an opportunity to discuss GENESIS'
business, management and financial affairs with GENESIS'
management and has had the opportunity to review GENESIS'
facilities and Business Plan. It has also had an opportunity
to ask questions of officers of GENESIS, which questions were
answered to its satisfaction. It understands that such
discussions, as well as any written information issued by
GENESIS, including the Business Plan, were intended to
describe certain aspects of GENESIS's business and prospects
but were not a thorough or exhaustive description.
4.6. Authorization. This Agreement when executed and delivered by
such Purchaser will constitute a valid and legally binding
obligation of the Purchaser, enforceable in accordance with
its terms.
4.7. Brokers or Finders. Except as described in Exhibit C, GENESIS
has not incurred and will not incur, directly or indirectly,
as a result of any action taken by such Purchaser, any
liability for brokerage or finders' fees or agents'
commissions or any similar charges in connection with this
Agreement.
5. Purchasers' Conditions to Closing
The Purchasers' obligations to purchase the Shares at the Closing are
subject to the fulfillment of the following conditions, the waiver of
which shall not be effective against any Purchaser who does not consent
in writing thereto:
5.1. Representations and Warranties Correct. The representations
and warranties made by GENESIS in Section 3 hereof shall be
true and correct when made, and shall be true and correct on
the Closing Date.
5.2. Covenants. All covenants, agreements and conditions contained
in this Agreement to be performed by GENESIS on or prior to
the Closing Date shall have been performed or complied with in
all material respects. 5.3. Compliance with State Securities
Laws. GENESIS shall have obtained all permits and
qualifications required by any state for the offer and sale of
the Shares and the Convertible Debt (including the underlying
stock to be issued on conversion), or shall have the
availability of exemptions therefrom. 5.4. Legal Matters. All
material matters of a legal nature which pertain to this
Agreement and the transactions contemplated hereby shall have
been reasonably approved by counsel to the Purchasers. 5.5.
Directors. Effective as of the Closing Date, GENESIS's Board
of Directors will consist of Xxxxxxx X. Xxxx, Xxxxxxx X.
Xxxxxx and Xxxx X. Xxxx.
6. SECTION 6 - GENESIS's Conditions to Closing
GENESIS's obligation to sell and issue the Shares at the Closing Date
is, at the option of GENESIS, subject to the fulfillment as of the
Closing Date of the following conditions:
6.1. Representations and Warranties Correct. The representations
made by the Purchasers in Section 4 hereof shall be true and
correct when made, and shall be true and correct on the
Closing Date.
6.2. Compliance with State Securities Laws. GENESIS shall have
obtained all permits and qualifications required by any state
for the offer and sale of the Shares and the Conversion Stock,
or shall have the availability of exemptions therefrom.
6.3. Legal Matters. All material matters of a legal nature which
pertain to this Agreement, and the transactions contemplated
hereby, shall have been reasonably approved by counsel to
GENESIS and counsel to Purchasers.
6.4. Grant of Option. At or prior to Closing, TFS shall have
provided to Xxxx and Xxxxxx, an option to purchase up to
200,000 shares of the Genesis Common Stock that TFS is
acquiring pursuant to this Stock Investment Agreement. The
form of the Option is attached as Exhibit D.
7. SECTION 7 - Affirmative Covenants of GENESIS
GENESIS hereby covenants and agrees as follows:
7.1. Financial Information. Subject to Section 7.4, GENESIS will
mail the following reports to each Purchaser for so long as
such Purchaser is a holder of any of the Common Stock or
Convertible Note:
7.1.1. As soon as practicable after the end of each fiscal year, and
in any event within 90 days thereafter, consolidated balance
sheets of GENESIS and its subsidiaries, if any, as of the end
of such fiscal year, and consolidated statements of operations
and consolidated statements of cash flows of GENESIS and its
subsidiaries, if any, for such year, prepared in accordance
with generally accepted accounting principles and setting
forth in each case in comparative form similar information for
the previous fiscal year, all in reasonable detail and audited
or reviewed by independent public accountants selected by
GENESIS.
7.1.2. As soon as practicable after the end of the first, second and
third quarterly accounting periods in each fiscal year of
GENESIS and in any event within 45 days thereafter, a
consolidated balance sheet of GENESIS and its subsidiaries, if
any, as of the end of each such quarterly period, and
consolidated statements of operations and consolidated
statements of cash flows of GENESIS and its subsidiaries, if
any, for such period and for the current fiscal year to date,
prepared in accordance with generally accepted accounting
principles (other than for accompanying notes), all in
reasonable detail and certified by an officer of GENESIS.
7.2. Assignment of Rights to Financial Information. The rights
granted pursuant to Section 7.1 may not be assigned or
otherwise conveyed by any Purchaser or by any subsequent
transferee of any such rights without the prior written
consent of GENESIS.
7.3. Termination of Covenants. The covenants set forth in Sections
7.1 shall terminate and be of no further force or effect at
such time as GENESIS is required to file reports pursuant to
Sections 13 or 15(d) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act").
7.4. Key Man Life Insurance. As soon as possible after the Closing
Date, GENESIS shall use its best efforts to obtain and shall
thereafter maintain key man life insurance on the lives of
Xxxxxxx X. Xxxx and Xxxxxxx X. Xxxxxx in the amount of $-0-
each, with all proceeds payable to GENESIS.
7.5. Employment Agreements. GENESIS will enter into employment
agreements with Xxxx and Durham. The form of the employment
agreements are included as Exhibit E (attached).
7.6. Confidentiality Agreements. Unless otherwise determined by the
Board of Directors, all future employees and consultants of
GENESIS who have access to confidential information shall be
required to execute and deliver Confidentiality Agreements in
substantially the form of Exhibit F attached hereto. Prior to
Closing, Genesis shall have obtained such Confidentiality
Agreements from Xxxx and Xxxxxx (contained in their employment
agreements).
7.7. Taxes and Other Liabilities. GENESIS will pay and discharge,
before the same become delinquent and before penalties accrue
thereon, all undisputed taxes, assessments and governmental
charges upon or against it or any of its properties, and all
its other undisputed material liabilities at any time
existing.
7.8. Notice of Litigation and Disputes. GENESIS will promptly
notify each Purchaser that is entitled to receive financial
statements pursuant to Section 7.1 of any suits or litigation
instituted against it, if such suit would have a material
adverse effect on GENESIS.
7.9. Election of Directors. So long as at least one-quarter of the
Common Stock issued hereunder and/or upon conversion of the
Convertible Note are held of record by Purchasers, (a) XXXX
and DURHAM agree that in any election of a director or
directors of GENESIS, they shall vote all of their shares of
capital stock of GENESIS in such a manner that immediately
after such election GENESIS' Board of Directors shall include
at least one representative selected by Temporary Financial
Services, Inc., (b) GENESIS will use its best efforts to cause
such representative(s) to be elected to GENESIS's Board of
Directors; and (c) in the event of any vacancy on the Board of
Directors, GENESIS and XXXX and XXXXXX will use their best
efforts to fill the vacancy such that the Board will include
the representative(s) selected by Temporary Financial
Services,Inc. If GENESIS is determined to be in default under
its senior credit facility, or is in default under the
Convertible Note, TFS will be entitled to the number of
representatives equal to a majority of the Board of Directors,
and that number shall be substituted for "one" in Paragraph
7.8(a), above.
7.10. Use of Proceeds. GENESIS shall use the proceeds from the sale
of the Shares and the Convertible Debt for working capital in
accordance with the financial projections included in the
Business Plan.
7.11. Rule 144 Reporting. With a view to making available to the
Purchasers the benefits of certain rules and regulations of
the Securities and Exchange Commission which may permit the
sale of the Common Stock and Conversion Stock to the public
without registration, after such time as a public market
exists for the Common Stock of GENESIS, GENESIS agrees to use
its best efforts to:
7.11.1. Make and keep public information available, as those terms are
understood and defined in Rule 144 under the Securities Act,
at all times after the date that GENESIS becomes subject to
the reporting requirements of the Exchange Act;
7.11.2. Use its best efforts to file with the Securities and Exchange
Commission in a timely manner all reports and other documents
required of GENESIS under the Securities Act and the Exchange
Act (at any time after it has become subject to such reporting
requirements); and
7.11.3. So long as a Purchaser owns any Restricted Securities (as
defined in Section 8.1 hereof), furnish to the Purchaser
forthwith upon request a written statement by GENESIS as to
its compliance with the reporting requirements of Rule 144,
and of the Securities Act and the Exchange Act (at any time
after it has become subject to such reporting requirements), a
copy of the most recent annual or quarterly report of GENESIS
filed with the Securities and Exchange Commission, and such
other reports and documents of GENESIS and other information
in the possession of or reasonably obtainable by GENESIS as a
Purchaser may reasonably request in availing itself of any
rule or regulation of the Securities and Exchange Commission
allowing a Purchaser to sell any such securities without
registration.
8. SECTION 8 - Restrictions on Transferability of Securities; Compliance
with Securities Act; Registration Rights
8.1. Restrictions on Transferability. The Common Stock and the
Convertible Note and/or the Conversion Stock shall not be
sold, assigned, transferred or pledged except in compliance
with applicable laws and regulations governing the transfers
of restricted securities.
8.2. Restrictive Legend. Each certificate representing (i) the
Common Stock, (ii) the Convertible Note, (iii) the Conversion
Stock and (iv) any other securities issued in respect of the
Common Stock, the Convertible Note, or the Conversion Stock,
upon any stock split, stock dividend, recapitalization,
merger, consolidation or similar event, shall be stamped or
otherwise imprinted with a legend in the following form (in
addition to any legend required under applicable state
securities laws):
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. SUCH
SHARES MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR
HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT AS TO THE SECURITIES UNDER SAID ACT OR AN OPINION OF
COUNSEL SATISFACTORY TO THE CORPORATION THAT SUCH REGISTRATION
IS NOT REQUIRED. COPIES OF THE AGREEMENT COVERING THE PURCHASE
OF THESE SHARES AND RESTRICTING THEIR TRANSFER MAY BE OBTAINED
AT NO COST BY WRITTEN REQUEST MADE BY THE HOLDER OF RECORD OF
THIS CERTIFICATE TO THE SECRETARY OF THE CORPORATION AT THE
PRINCIPAL EXECUTIVE OFFICES OF THE CORPORATION.
8.3. Each Purchaser and Holder consents to GENESIS making a
notation on its records and giving instructions to any
transfer agent of the Shares or the Conversion Stock in order
to implement the restrictions on transfer established in this
Section 8.
8.4. Registration Rights.
8.4.1. Notice of Registration. If at any time or from time to time
GENESIS shall determine to register any of its securities,
either for its own account or the account of a security holder
or holders, other than a registration relating solely to
employee benefit plans or a registration relating solely to a
Commission Rule 145 transaction, GENESIS will:
8.4.1.1. promptly give to each Purchaser under this Agreement written
notice thereof; and
8.4.1.2. include in such registration (and any related qualification
under blue sky laws or other compliance), and in any
underwriting involved therein, all the Registrable Securities
specified in a written request or requests, made within 20
days after receipt of such written notice from GENESIS, by any
Purchaser.
8.4.1.3. For this purpose, the Registrable Securities include all of
the Common Stock, and the Conversion Stock (if any is then
outstanding), being purchased by Purchasers in accordance with
the terms of this Stock Investment Agreement. In this Section
8, the owners of the Registrable Securities at the time of the
proposed registration are referred to as Holders of the
securities.
8.4.2. Underwriting. If the registration of which GENESIS gives
notice is for a registered public offering involving an
underwriting, GENESIS shall so advise the Purchasers as a part
of the written notice given pursuant to Section 8.4.1.1. In
such event the right of any Purchaser to registration pursuant
to this Section 8.4 shall be conditioned upon:
8.4.2.1. such Purchaser's participation in such underwriting and the
inclusion of such Purchaser's Registrable Securities in the
underwriting to the extent provided herein.
8.4.2.2. All Purchasers proposing to distribute their securities
through such underwriting shall (together with GENESIS and any
other shareholders distributing their securities through such
underwriting) enter into an underwriting agreement in
customary form with the managing underwriter selected for such
underwriting by GENESIS. Notwithstanding any other provision
of this Section 8.4, if the managing underwriter determines
that marketing factors require a limitation of the number of
shares to be underwritten, the managing underwriter may limit
the Registrable Securities to be included in such
registration.
8.4.2.2.1. GENESIS shall so advise all Holders and the number of shares
of Registrable Securities that may be included in the
registration and underwriting shall be allocated among all
Holders in proportion, as nearly as practicable, to the
respective amounts of Registrable Securities held by such
Holders at the time of filing the registration statement. To
facilitate the allocation of shares in accordance with the
above provisions, GENESIS may round the number of shares
allocated to any Holder or other shareholder to the nearest
100 shares.
8.4.2.2.2. If any Holder or other shareholder disapproves of the terms
of any such underwriting, he may elect to withdraw therefrom
by written notice to GENESIS and the managing underwriter. Any
securities excluded or withdrawn from such underwriting shall
be withdrawn from such registration, and shall not be
transferred in a public distribution prior to 90 days after
the effective date of the registration statement relating
thereto, or such other shorter period of time as the
underwriters may require. GENESIS may include shares of Common
Stock held by shareholders other than Holders in a
registration statement pursuant to this Section 8.6 to the
extent that the amount of Registrable Securities otherwise
includible in such registration statement would not thereby be
diminished.
8.4.3. Right to Terminate Registration. GENESIS shall have the right
to terminate or withdraw any registration initiated by it
under this Section 8.4 prior to the effectiveness of such
registration whether or not any Holder has elected to include
securities in such registration.
8.5. Limitations on Subsequent Registration Rights. From and after
the Closing Date, GENESIS shall not enter into any agreement
granting any holder or prospective holder of any securities of
GENESIS registration rights with respect to such securities
unless (i) such new registration rights, including standoff
obligations, are on a pari passu basis with those rights of
the Holders hereunder; or (ii) such new registration rights,
including standoff obligations, are subordinate to the
registration rights granted Holders hereunder.
8.6. Expenses of Registration. All Registration Expenses incurred
in connection with registrations pursuant to Section 8.4,
shall be borne by GENESIS. Unless otherwise stated, all
Selling Expenses relating to securities registered on behalf
of the Holders and all other Registration Expenses shall be
borne by the Holders of such securities pro rata on the basis
of the number of shares so registered.
8.7. Information by Holder. The Holder or Holders of Registrable
Securities included in any registration shall furnish GENESIS
such information regarding such Holder or Holders, the
Registrable Securities held by them and the distribution
proposed by such Holder or Holders as GENESIS may request in
writing and as shall be required in connection with any
registration, qualification or compliance referred to in this
Section 8.
8.8. Indemnification. If a registration is effected pursuant to
Section 8.4, GENESIS will indemnify Purchasers, and Purchasers
will indemnify GENESIS for any expenses, claims, losses,
damages, or liabilities, which result to the party seeking
indemnification as a result of the misrepresentation or
failure to disclose one or more material facts by the party
from whom indemnification is sought. Appropriate
indemnification language will be included in the registration
documents at the time the registration is undertaken.
9. Purchasers' Right of First Refusal
9.1. If a Founder (Xxxx, Xxxxxx or TFS are the Founders) elects to
offer any of the Common Stock or the Conversion Stock for
sale, the selling Founder must first offer to sell the offered
Common Stock or Conversion Stock to the other Founders on the
same terms that the selling Founder plans to offer the shares
for sale to other parties. The non-selling Founders shall then
have thirty days to elect to purchase the Common Stock or
Conversion Stock offered by the Selling Founder on a pro rata
basis. If any non-selling Founder does not wish to purchase
the offered shares, the other non-selling Founders shall have
an additional ten days to elect to purchase the non-electing
shareholders share of the offered Common Stock or Conversion
Stock. If any of the offered Common Stock or Conversion Stock
is not purchased under this right of first refusal, for a
period of six months thereafter, the selling Founder may offer
the Common Stock or the Conversion Stock to others on the same
terms proposed to the other Founders. If the selling Founder
does not sell the offered Common Stock or Conversion Stock
within six months, the offer must be withdrawn and the selling
Founder may thereafter reoffer to the other Founders in
accordance with these rights of first refusal.
9.2. These rights of first refusal shall expire upon the first to
occur of the following: (i) the closing of the first public
offering of the Common Stock of GENESIS to the general public
which is effected pursuant to a registration statement filed
with, and declared effective by, the Commission under the
Securities Act; (ii) January 1, 2004, or (iii) as to a
Purchaser if such Purchaser no longer holds at least 25% of
shares of Common Stock and/or Conversion Stock (appropriately
adjusted for Recapitalizations) purchased in accordance with
the terms of this Stock Investment Agreement.
10. Co-Sale Rights.
10.1. If any Founder receives an offer from a third party to
purchase some or all of that Founder's Common Stock or
Conversion Stock whether purchased in this transaction or
acquired in some other transaction, the other Founders shall
have the right to participate in the sale of the Common Stock
or Conversion Stock on the same terms as the selling Founder.
The selling Founder must notify the other Founders of the
offer, and the other Founders will have thirty days after
notice in which to elect to participate in the sale (or to
purchase the shares offered under the rights of first refusal
described in Paragraph 9). If a Founder does not elect to
participate in the sale, the remaining Founders shall allocate
the total number of shares to be offered to the purchasing
party among them pro rata based on the number of shares each
holds immediately prior to the sale.
10.2. These co-sale rights shall expire upon the first to occur of
the following: (i) the closing of the first public offering of
the Common Stock of GENESIS to the general public which is
effected pursuant to a registration statement filed with, and
declared effective by, the Commission under the Securities
Act; (ii) January 1, 2004, or (iii) if such selling Founder no
longer holds at least 25% of shares of Common Stock and/or
Conversion Stock (appropriately adjusted for
Recapitalizations) purchased in accordance with the terms of
this Stock Investment Agreement.
11. Miscellaneous
11.1. Governing Law. This Agreement shall be governed in all
respects by the internal laws of the State of Washington.
11.2. Survival. The representations, warranties, covenants and
agreements made herein shall survive any investigation made by
any Purchaser and the closing of the transactions contemplated
hereby.
11.3. Successors and Assigns. Except as otherwise provided herein,
the provisions hereof shall inure to the benefit of, and be
binding upon, the successors, assigns, heirs, executors and
administrators of the parties hereto, provided, however, that
the rights of a Purchaser to purchase the Shares shall not be
assignable without the consent of GENESIS.
11.4. Entire Agreement: Amendment. This Agreement and the other
documents delivered pursuant hereto at the Closing constitute
the full and entire understanding and agreement between the
parties with regard to the subjects hereof and thereof, and no
party shall be liable or bound to any other party in any
manner by any warranties, representations or covenants except
as specifically set forth herein or therein. Except as
expressly provided herein, neither this Agreement nor any term
hereof may be amended, waived, discharged or terminated other
than by a written instrument signed by the party against whom
enforcement of any such amendment, waiver, discharge or
termination is sought.
11.5. Notices.
11.5.1. All notices and other communications required or permitted
hereunder shall be in writing and shall be mailed by
registered or certified mail, postage prepaid, sent by
facsimile, or otherwise delivered by hand or by a
nationally-recognized overnight courier, addressed to the last
designated address of the party to receive the notification.
Initial addresses are set forth on the signature page of this
Stock Investment Agreement. Addresses may be changed from time
to time by written notice to the other parties in accordance
with this provision.
11.5.2. Each such notice or other communication shall for all purposes
of this Agreement be treated as effective or having been given
(a) in the case of personal delivery or delivery by facsimile
copy, on the date of such delivery, (b) in the case of a
nationally-recognized overnight courier, on the next business
day after the date when sent and (c) in the case of mailing,
on the third business day following that on which the piece of
mail containing such communication has been deposited in a
regularly maintained receptacle for the deposit of the United
States mail, addressed and mailed as aforesaid.
11.6. Delays or Omissions. Except as expressly provided herein, no
delay or omission to exercise any right, power or remedy
accruing to any holder of any Shares, upon any breach or
default of GENESIS under this Agreement, shall impair any such
right, power or remedy, nor shall it be construed to be a
waiver of any such breach or default, or an acquiescence
therein, or of or in any similar breach or default thereafter
occurring
11.7. Expenses. GENESIS and each Purchaser shall bear its own
expenses incurred on its behalf with respect to this Agreement
and the transactions contemplated hereby.
11.8. Counterparts. This Agreement may be executed in any number of
counterparts, each of which may be executed by less than all
of the Purchasers, each of which shall be enforceable against
the parties actually executing such counterparts, and all of
which together shall constitute one instrument.
11.9. Severability. In the event that any provision of this
Agreement becomes or is declared by a court of competent
jurisdiction to be illegal, unenforceable or void, this
Agreement shall continue in full force and effect without said
provision.
11.10. Titles and Subtitles. The titles and subtitles used in this
Agreement are used for convenience only and are not considered
in construing or interpreting this Agreement.
The foregoing Agreement is hereby executed as of the date first above written.
GENESIS FINANCIAL, INC., a Washington corporation.
By: /s/ Xxxxxxx X. Xxxx
-------------------------
Xxxxxxx X. Xxxx, President
By: /s/ Xxxx X. Xxxx
--------------------------
Xxxx X. Xxxx, Secretary
PURCHASERS
/s/ Xxxxxxx X. Xxxx /s/ Xxxxxxx X. Xxxxxx
-------------------------------- ---------------------------------
Xxxxxxx X. Xxxx (25,000 Shares) Xxxxxxx X. Xxxxxx (25,000 Shares)
/s/ Xxxx X. Xxxxxxx
--------------------------------
Xxxx X. Xxxxxxx, President
Temporary Financial Services, Inc.
(200,000 shares for cash)
(250,000 shares for 50,000 TFS shares)
($200,000 Convertible Note)
