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STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT is made as of October 31, 1997 between FINET
HOLDINGS CORPORATION, a Delaware corporation (the "Company"), and XXXX
XXXXX XXXXXX GARCAO (the "Purchaser").
THE PARTIES HEREBY AGREE AS FOLLOWS:
1. Purchase and Sale of the Units. Subject to the terms and conditions of
this Agreement, Purchaser agrees to purchase, and the Company agrees to
sell and issue to the Purchaser, 150,000 Units (the "Units"), each Unit
consisting of one share of the Company's Common (the "Common Stock") at a
purchase price of $3 per share and a warrant to purchase one share of the
Company's Common Stock at an exercise price of $5 per share (the
"Warrants"), for an aggregate purchase price of $450,000. The form of
Warrants is attached hereto as Exhibit A.
2. Closing Date: Delivery. The purchase and sale of the Units shall be
held at the offices of the Company, 0000 Xxxxxx Xxxxxx, Xxxxx 000, Xxxxxx
Xxxxx, Xxxxxxxxxx 00000 on October 31, 1997 or at such other time and place
as the parties may agree upon. At the closing, subject to the terms of
this Agreement, the Company will deliver to the Purchaser the Warrants and
certificates representing the shares of Common Stock to be purchased by the
Purchaser from the Company, against payment at the closing of the cash
purchase price in immediately available funds.
3. Representations and Warranties of the Company. The Company represents
and warrants to, and agrees with, the Purchaser that:
(a) Organization and Standing; Articles and Bylaws. The Company is a
corporation duly organized and existing under, and by virtue of, the laws
of the state of Delaware and is in good standing under such laws. The
Company has the requisite corporate power to own and operate its properties
and assets, and to carry on it business as presently conducted and as
proposed to be conducted. The Company is qualified, licensed or
domesticated as a foreign corporation in all jurisdictions where the nature
of its activities or of its properties owned or leased makes such
qualification, licensing or domestication necessary at this time.
(b) Corporate Power. The Company has now, or will have at the Closing
Date, all requisite legal and corporate power to enter into this Agreement,
to sell the Units hereunder, and to carry out and perform its obligations
under the terms of this Agreement.
(c) Authorization.
(i) All corporate action on the part of the Company, its officers,
directors, and stockholders necessary for the sale and issuance of the
Units pursuant hereto and the performance of the Company's obligations
hereunder, has been taken or will be taken prior to the Closing. This
Agreement is a legal, valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms, except as
limited by bankruptcy, insolvency, reorganization, moratorium or similar
laws of general application affecting enforcement of creditors' rights, and
except as limited by application of legal principles affecting the
availability of equitable remedies.
(ii) The Units, when issued in compliance with the provisions of this
Agreement, will be validly issued, fully paid and nonassessable, and will
be free of any liens or encumbrances; provided, however, that such Units
may be subject to restrictions on transfer under state and/or federal
securities laws as set forth herein, and as may be required by future
changes in such laws.
(iii) No shareholder of the Company has any right of first refusal or any
preemptive rights in connection with the issuance of the Units or of Common
Stock by the Company.
(d) Compliance with Other Instruments, None Burdensome, etc. Neither the
Company nor any subsidiary of the Company (collectively, the
"Subsidiaries") is in violation of any term of its respective Articles of
Incorporation or Bylaws, or in any material respect of any mortgage,
indenture, contract, agreement, instrument, or, to the best knowledge of
the Company, any judgment, decree, order, statute, rule, or regulation
applicable to it. The
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execution, delivery, and performance by the Company of this Agreement, and
the issuance and sale of the Units pursuant hereto, will not result in any
such violation or be in conflict with or constitute a default under any
such term, or cause the acceleration of maturity of any loan or material
obligation to which the Company or the Subsidiaries are a party or by which
any of them are bound or with respect to which any of them is an obligor or
guarantor, or result in the creation or imposition of any material lien,
claim, charge, restriction, equity or encumbrance of any kind whatsoever
upon, or, to the best knowledge of the Company after due inquiry, give to
any other person any interest or right (including any right of termination
or cancellation) in or with respect to any of the material properties,
assets, business or agreements of the Company or the Subsidiaries. To the
best knowledge of the Company after due inquiry, no such term or condition
materially adversely affects or in the future (so far as can reasonably be
foreseen by the Company at the date of this Agreement) may materially
adversely affect the business, property, prospects, condition, affairs, or
operations of the Company and the Subsidiary.
(e) Litigation, etc. There are no actions, proceedings or investigations
pending (or, to the best of the Company's knowledge, any basis therefor or
threat thereof), which, either in any case or in the aggregate, might
result in any adverse change in the business, prospects, conditions,
affairs, or operations of the Company or in any of its properties or
assets, or in any impairment of the right or ability of the Company to
carry on its business as proposed to be conducted, or in any material
liability on the part of the Company, or which question the validity of
this Agreement or any action taken or to be taken in connection herewith.
(f) Governmental Consent, etc. No consent, approval, or authorization of,
or designation, declaration, or filing with, any governmental unit is
required on the part of the Company in connection with the valid execution
and delivery of this Agreement, or the offer, sale or issuance of the
Units, or the consummation of any other transaction contemplated hereby.
(g) Offering. The offer, sale and issuance of the Units in conformity with
the terms of this Agreement will not violate the Securities Act.
(h) The Units:
(i) are free and clear of any security interests, liens, claims, or other
encumbrances;
(ii) have been duly and validly authorized and issued and are, and on
the Closing Date will be, fully paid and non-assessable;
(iii) will not have been, individually and collectively, issued or sold
in violation of any pre-emptive or other similar rights of the holders of
any securities of the Company;
(iv) will not subject the holders thereof to personal liability by
reason of being such holders; and
4. Representations and Warranties of the Purchaser. The Purchaser
represents and warrants to, and agrees with, the Company as follows:
(a) No consent, approval, authorization, or order of any court,
governmental agency or body, or arbitrator having jurisdiction over the
Purchaser is required for execution of this Agreement, including, without
limitation, the purchase of the Units, or the performance of the
Purchaser's obligations hereunder.
(b) The Purchaser understands that no federal or state agency has passed on
or made any recommendation or endorsement of the Units.
(c) The Company has given the Purchaser the opportunity to have answered
all of the Purchaser's questions concerning the Company and its business
and has made available to the Purchaser all information requested by the
Purchaser which is reasonably necessary to verify the accuracy of other
information furnished by the Company. The Purchaser has received and
evaluated all information about the Company and its business which the
Purchaser deems necessary to formulate an investment decision, and does not
desire any further information.
(d) The Purchaser understands that the Units are being offered and sold to
it in reliance on specific exemptions or non-application from the
registration requirements of federal and state securities laws and that the
Company is relying upon the truth and accuracy of the representations,
warranties, agreements, acknowledgments, and
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understandings of the Purchaser set forth herein in order to determine the
applicability of such exemptions or non-applications and the suitability of
the Purchaser to acquire the Units.
(e) The Purchaser is aware that the Units have not been registered under
the Securities Act by reason of their issuance in a transaction exempt from
the registration and prospectus delivery requirements of the Securities Act
pursuant to Section 4(2) and Regulation D thereof, and that they must be
held by the Purchaser for an indeterminate period and the Purchaser must
therefore bear the economic risk of such investment indefinitely, unless a
subsequent disposition thereof is registered under the Securities Act or is
exempt from registration. The Purchaser is aware of the provisions of Rule
144 promulgated under the Securities Act which permits limited resale of
Units purchased in a private placement subject to the satisfaction certain
conditions, including, among other things the existence of a public market
for the Units, the availability of certain current public information about
the Company, the resale occurring not less than two years after a party has
purchased and paid for the security to be sold, the sale being through a
"broker's transaction" or in transactions directly with a "market maker"
(as provided by Rule 144(f)) and the number of Units being sold during any
three-month period not exceeding specified limitations. The Purchaser is
also aware that, while many of the restrictions of Rule 144 do not apply to
the resale of Units by a person who owned those Units for at least two
years prior to their resale and who is not an "affiliate" (within the
meaning of Rule 144(a)) of the issuer and has not been an affiliate of the
issuer for at least three months prior to the date of resale of the
restricted securities, the Company does not warrant or represent that you
are not an affiliate as of the date of this Agreement or that you will not
be an affiliate at any relevant times in the future.
(f) Each instrument representing the Units may be endorsed with the
following legends:
(i) THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD,
TRANSFERRED, ASSIGNED OR HYPOTHECATED UNLESS THERE IS AN EFFECTIVE
REGISTRATION STATEMENT UNDER SUCH ACT COVERING SUCH SECURITIES, THE SALE IS
MADE IN ACCORDANCE WITH RULE 144 UNDER THE ACT, OR THE COMPANY RECEIVES AN
OPINION OF COUNSEL FOR THE HOLDER OF THESE SECURITIES REASONABLY
SATISFACTORY TO THE COMPANY, STATING THAT SUCH SALE, TRANSFER, ASSIGNMENT
OR HYPOTHECATION IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY
REQUIREMENTS OF SUCH ACT.
(ii) Any other legend required by California or other state securities
laws.
The Company need not register a transfer of legended Units, and may
instruct its transfer agent not to register the transfer of the Common
Stock, unless one of the conditions specified in the foregoing legends is
satisfied.
(g) Any legend endorsed on an instrument pursuant to Section 4(f) hereof
and the stop transfer instructions with respect to such Units shall be
removed, and the Company shall issue an instrument without such legend to
the holder of such Units if such Units are registered under the Securities
Act and a prospectus meeting the requirements of Section 10 of the
Securities Act is available or if such holder provides the Company with an
opinion of counsel for such holder of the Units, reasonably satisfactory to
the Company, to the effect that a public sale, transfer or assignment of
such Units may be made without registration.
(h) The Purchaser is either
(i) acquiring the Units for the Purchaser's own account; or
(ii) for the account of another for which the Purchaser acts as a
fiduciary, in which case the Purchaser will so advise the Company. If
acting as a fiduciary, the Purchaser makes the representations, warranties,
and
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covenants as set forth herein on its own behalf and as agent for and on
behalf of such other party. The Purchaser is acquiring the Units for
investment and without any present intention to engage in a distribution
thereof.
(i) The Purchaser has the knowledge and experience in financial and
business matters to evaluate the merits and risks of the proposed
investment.
(j) The Purchaser is an "Accredited Investor" as that term is defined under
Rule 501 adopted pursuant to the Securities Act. "Accredited Investors"
are defined in Rule 501 to include among others: (1) Various specified
institutional investors (such as banks, savings and loan associations,
licensed brokers or dealers, insurance companies, investment companies,
small business investment companies, employee benefit plans having assets
in excess of $5,000,000, and self-directed plans having investment
decisions made solely by persons that are Accredited Investors); (2) Any
entity with total assets in excess of $5,000,000, not formed for the
specific purpose of acquiring the securities offered; (3) Any person who
had individual income in excess of $200,000 in each of the two most recent
years or joint income with that person's spouse in excess of $300,000 in
each of those years and has a reasonable expectation of reaching the same
income level this year; (4) Any person whose individual net worth (or joint
net worth with the person's spouse) at the time of purchase exceeds
$1,000,000; (5) Directors and executive officers of Finet; (6) Trusts with
total assets in excess of $5,000,000 not formed for the specific purpose of
acquiring the securities offered, whose purchase is directed by a
sophisticated person prescribed in Rule 506(b)(2)(ii); and (7) Any entity
in which all the equity owners are deemed accredited.
5. Conditions Precedent to the Purchaser's Obligations. The obligations
of the Purchaser hereunder are subject to the performance by the Company of
its obligations hereunder and to the satisfaction of the following
additional conditions precedent on or before each Closing:
(a) The representations and warranties made by the Company in this
Agreement shall, unless waived by the Purchaser, be true and correct as of
the date hereof and at the Closing Date, with the same force and effect as
if they had been made on and as of the Closing Date.
(b) After the date hereof until each Closing there shall not have occurred:
(i) any change, or any development involving a prospective change, in
either (A) the condition, financial or otherwise, or in the earnings,
business or operations, or in or affecting the properties of the Company or
(B) the financial or market conditions or circumstances in the United
States, in either case which, in the Purchaser's judgment, is material and
adverse and makes it impractical or inadvisable to proceed with the
offering, sale, or delivery of the Units;
(ii) an imposition of a new legal or regulatory restriction not in
effect on the date hereof, or any change in the interpretation of existing
legal or regulatory restrictions, that materially and adversely affects the
offering, sale, or delivery of the Units; or
(iii) a suspension, or material limitation of, trading (A) generally on
or by the New York Stock Exchange or NASDAQ, or (B) of any securities of
the Company on any exchange or in any over-the-counter market.
6. Conditions Precedent to the Company's Obligations. The obligations of
the Company hereunder are subject to the performance by the Purchaser of
its obligations hereunder and to the satisfaction of the following
additional condition precedent:
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The representations and warranties made by the Purchaser in this Agreement
shall, unless waived by the Company, be true and correct at the Closing
Date, with the same force and effect as if they had been made on, and as
of, each Closing .
7. Registration Rights
(a) Company Registration.
Definitions.
"Commission" shall mean the Securities and Exchange Commission or
any other federal agency at the time administering the Securities Act of
1933 (the "Securities Act").
"Register," "registered," and "registration" refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act of 1933, and the declaration or ordering
of the effectiveness of such registration statement.
"Registration Expenses" shall mean all expenses incurred by the
Company in compliance with the provisions of this Section 7, including,
without limitation, all registration and filing fees, printing expenses,
fees and disbursements of counsel for the Company, blue sky fees and
expenses, and the expenses of any special audits incident to or required by
any such registration (but excluding the compensation of regular employees
of the Company, which shall be paid in any event by the Company).
"Selling Expenses" shall mean all underwriting discounts and
selling commissions applicable to the sale of Shares and all fees and
disbursements of counsel to Purchaser.
"Shares" means the Common Stock sold hereunder and any Common
Stock issued with respect thereto (e.g. upon a stock split or stock
dividend).
"Purchaser" means the Purchaser set forth above and any
permitted assignee.
(i) Notice of Registration. If, at any time after January 1, 1998, the
Company shall determine to register any of its securities either for its
own account or the account of a security holder or holders exercising their
respective demand registration rights, other than a registration relating
solely to employee benefit plans, or a registration relating solely to a
Commission Rule 145 transaction, or a registration on any registration form
which does not permit secondary sales, the Company will:
a) promptly give to Purchaser written notice thereof (which shall include
a list of the jurisdictions in which the Company intends to attempt to
qualify such securities under the applicable blue sky or other state
securities laws); and
b) include in such registration (and any related qualification under blue
sky laws or other compliance), and in any underwriting involved therein,
all the Shares specified in a written request or requests, made by
Purchaser within fifteen (15) days after receipt of the written notice from
the Company described in this clause (i), except as set forth in
Section 7(d)(ii) below.
(ii) Underwriting. If the registration of which the Company gives
notice is for a registered public offering involving an underwriting: the
Company shall so advise Purchaser as part of the written notice given
pursuant to Section 7(d) hereof. In such event, the right of Purchaser to
registration pursuant to this Section 7(d) shall be
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conditioned upon Purchaser's participation in such underwriting and the
inclusion of Purchaser's Shares in the underwriting to the extent provided
herein. Purchaser shall (together with the Company, its directors and
officers, and any other shareholders distributing their securities through
such underwriting) enter into an underwriting agreement in customary form
with the underwriter or underwriters selected for underwriting by the
Company.
Notwithstanding any other provision of this Section 7, if the
underwriter determines that marketing factors require a limitation on the
number of Shares to be underwritten, the underwriter may exclude from such
registration and underwriting some or all of the Shares which would
otherwise be underwritten pursuant hereto. Any securities so excluded
shall be apportioned pro rata among Purchaser and any other shareholders
distributing their securities through such underwriting according to the
total amount of securities otherwise entitled to be included therein owned
by such shareholders or in such other proportions as shall mutually be
agreed upon.
If Purchaser disapproves of the terms of any such underwriting, it may
elect to withdraw therefrom by written notice to the Company and the
underwriter. Any Shares excluded or withdrawn from such underwriting shall
be withdrawn from such registration.
The Company shall bear all Registration Expenses incurred in connection
with any registration, qualification and compliance by the Company pursuant
to this Section 7(d). All Selling Expenses shall be borne by the holders
of the securities so registered pro rata on the basis of the number of
their shares so registered.
(iii) Registration Procedures. In the case of registration effected by
the Company pursuant to this Agreement, the Company will keep Purchaser
advised in writing as to the initiation of registration and as to the
completion thereof. At its expense, the Company will:
a) keep such registration effective for a period of three years or until
Purchaser has completed the distribution described in the registration
statement relating thereto, whichever first occurs;
b) furnish such number of prospectuses and other documents incident
thereto as Purchaser from time to time may reasonably request; and
c) use its best efforts to register or qualify the Shares under the
securities or blue sky laws of such jurisdictions as Purchaser may request;
provided, however, that the Company shall not be obligated to register or
qualify such Shares in any particular jurisdiction in which the Company
would be required to execute a general consent to service of process in
order to effect such registration, qualification, or compliance, unless the
Company is already subject to service in such jurisdiction and except as
may be required by the Securities Act or applicable rules or regulations
thereunder.
d) Notify the holder of Shares covered by such registration statement at
any time when a prospectus relating thereto is required to be delivered
under the Act of the happening of any event as a result of which the
prospectus included in such registration statement, as then in effect,
includes an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances then
existing.
(b) Indemnification.
(i) The Company will indemnify and hold harmless the Purchaser with respect
to such registration, qualification, or compliance effected pursuant to
this paragraph, and each placement agent, if any, and each person who
controls any placement agent of the Shares held by or issuable to the
Purchaser, against all claims, losses, damages, and liabilities (or actions
in respect thereto), joint or several, to which they may become subject
under the Act
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or otherwise, arising out of or based on any untrue statement (or alleged
untrue statement) of a material fact contained in any prospectus, offering
circular or other document (including any related registration statement,
notification or the like) incident to any such registration, qualification,
or compliance, or based on any omission (or alleged omission) to state
therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, or any violation by the Company of
any rule or regulation promulgated under the Securities Act applicable to
the Company and relating to action or inaction required of the Company in
connection with any such registration, qualification, or compliance, and
will reimburse the Purchaser, each such placement agent and each person who
controls any such placement agent, for any legal and any other expenses
reasonably incurred in connection with investigating or defending any such
claim, loss, damage, liability or action, provided that the Company will
not be liable in any such case to the extent that any such claim, loss,
damage or liability arises out of or is based on any untrue statement or
omission based upon written information furnished to the Company by an
instrument duly executed by the Purchaser or placement agent specifically
for use therein.
(ii) The Purchaser will, if Shares held by or issuable to the Purchaser
are included in the securities as to which such registration,
qualification, or compliance is being effected, indemnify and hold harmless
the Company, each of its directors and officers who sign such registration
statement, each underwriter or placement agent, if any, of the Company's
securities covered by such a registration statement, and each person who
controls the Company within the meaning of the Securities Act, against all
claims, losses, damages, and liabilities (or actions in respect thereto)
arising out of or based on any untrue statement (or alleged untrue
statement) of a material fact contained in any such registration statement,
prospectus, offering circular, or other document, or any omission (or
alleged omission) to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, and the
Purchaser will reimburse the Company, such directors, officers, persons, or
placement agents for any legal or any other expenses reasonably incurred in
connection with investigating or defending any such claim, loss, damage,
liability, or action, in each case to the extent, but only to the extent,
that such untrue statement (or alleged untrue statement) or omission (or
alleged omission) is made in such registration statement, prospectus,
offering circular, or other document in reliance upon and in conformity
with written information furnished to the Company by an instrument duly
executed by the Purchaser specifically for use therein.
(iii) Each party entitled to indemnification under this paragraph (d)
(the Indemnified Party) shall give notice to the party required to provide
indemnification (the Indemnifying Party) promptly after such Indemnified
Party has actual knowledge of any claim as to which indemnity may be
sought, and shall permit the Indemnifying Party to assume the defense of
any such claim or any litigation resulting therefrom, provided that counsel
for the Indemnifying Party, who shall conduct the defense of such claim or
litigation, shall be approved by the Indemnified Party (whose approval
shall not be unreasonably withheld), and the Indemnified Party may
participate in such defense at such party's expense, and provided further
that the failure of any Indemnified Party to give notice as provided herein
shall not relieve the Indemnifying Party of its obligations under this
paragraph. No Indemnifying Party, in the defense of any such claim or
litigation, shall, except with the consent of each Indemnified Party,
consent to entry of any judgment or enter into any settlement which does
not include as an unconditional term thereof the giving by the claimant or
plaintiff to such Indemnified Party of a release from all liability in
respect to such claim or litigation.
(c) Transfer of Registration Rights. The rights to cause the Company to
register the securities granted to the Purchaser by the Company under
Section 7 may be assigned by the Purchaser to a transferee or assignee of
any of the Purchaser's Shares, provided, that the Company is given written
notice by the Purchaser at the time of or within a reasonable time after
said transfer, stating the name and address of said transferee or assignee
and identifying the securities with respect to which such registration
rights are being assigned.
8. Fees and Expenses. The Company agrees to pay the reasonable fees,
expenses and disbursements of Purchaser's counsel incurred with respect to
this Agreement and the transactions contemplated hereby.
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9. Survival of the Representations, Warranties, etc. The respective
agreements, representations, warranties, indemnities, and other statements
made by or on behalf of the Company and the Purchaser, respectively,
pursuant to this Agreement, shall remain in full force and effect,
regardless of any investigation made by or on behalf of the other party to
this Agreement or any officer, director, or employee of, or person
controlling or under common control with, such party, and will survive
delivery of any payment of the Shares.
10. Miscellaneous.
(a) This Agreement may be executed in one or more counterparts and it is
not necessary that signature of all parties appear on the same counterpart,
but such counterparts together shall constitute but one and the same
agreement.
(b) This Agreement shall inure to the benefit of and be binding upon the
parties hereto, their respective successors and, with respect to Section 7
hereof, the officers, directors, and controlling persons thereof and each
person under common control therewith, and no other person shall have any
right or obligation hereunder.
(c) This Agreement shall be governed by, and construed in accordance with,
the laws of the State of California.
(d) The headings of the sections of this document have been inserted for
convenience of reference only and shall not be deemed to be a part of this
Agreement.
IN WITNESS HEREOF, the parties hereto have duly executed and delivered this
Agreement, all as of the day and year first above written.
COMPANY:
FINET HOLDINGS CORPORATION
By:
President
PURCHASER:
By:
Amount of Investment:
Units Purchased
