REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (this "Agreement"), dated as of March
18, 1998, by and among Finet Holdings Corporation, a Delaware corporation,
with headquarters at 0000 Xxxxxx Xxxxxx, Xxxxxx Xxxxx, Xxxxxxxxxx 00000
(the "Company"), and the undersigned buyer (the "Buyer" ).
WHEREAS:
A. In connection with the Securities Purchase Agreement by and
among the parties of even date herewith (the "Securities Purchase
Agreement"), the Company has agreed, upon the terms and subject to the
conditions of the Securities Purchase Agreement, (i) to issue and sell to
the Buyer's shares of the Company's 3% Convertible Debenture (the
"Debentures"), which will be convertible into shares of the Company's
common stock, $.01 par value per share (the "Common Stock") (as converted,
the "Conversion Shares") in accordance with the terms of the Debentures,
(ii) to issue warrants (the "Warrants") which will be exercisable to
purchase shares of Common Stock (the "Warrant Shares"); and
B. To induce the Buyers to execute and deliver the Securities
Purchase Agreement, the Company has agreed to provide certain registration
rights under the Securities Act of 1933, as amended, and the rules and
regulations thereunder, or any similar successor statute (collectively,
the "1933 Act"), and applicable state securities laws:
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company and
the Buyers hereby agree as follows:
1. DEFINITIONS.
As used in this Agreement, the following terms shall have the
following meanings:
a. "Investor" means the Buyer and any transferee or assignee
thereof to whom the Buyer assigns its rights under this Agreement
and who agrees to become bound by the provisions of this Agreement in
accordance with Section 9.
b. "Person" means a corporation, a limited liability company,
an association, a partnership, an organization, a business, an
individual, a governmental or political subdivision thereof or a
governmental agency.
c. "Register," "registered," and "registration" refer to
a registration effected by preparing and filing one or more
Registration Statements in compliance with the 1933 Act and pursuant
to Rule 415 under the 1933 Act or any successor rule providing for
offering securities on a continuous basis ("Rule 415"), and the
declaration or ordering of effectiveness of such Registration
Statement(s) by the United States Securities and Exchange Commission
(the "SEC").
d. "Registrable Securities" means the Conversion Shares and
Warrant Shares issued or issuable upon conversion of the Debentures
and the exercise of the Warrants and any shares of capital stock
issued or issuable with respect to the Conversion Shares or the
Debentures as a result of any stock split, stock dividend,
recapitalization, exchange, or similar event.
e."Registration Statement" means a registration statement of the
Company filed under the 1933 Act.
Capitalized terms used herein and not otherwise defined herein shall
have the respective meanings set for the in the Securities Purchase
Agreement.
2. REGISTRATION.
a. Mandatory Registration. The Company shall prepare, and, on
or prior to sixty (60) (the "Registration Filing Deadline") days
after the date of issuance of any Debentures, file with the SEC a
Registration Statement or Registration Statements (as is necessary)
on Form S-3 (or, if such form is unavailable for such a registration,
on such other form as is available for such a registration, subject
to the consent of each Buyer and the provisions of Section 2(e),
which consent will not be unreasonably withheld), covering only the
resale of all of the Registrable Securities and no other securities
owned or held by any other person, except for the shares to be issued
pursuant to the Mical Mortgage acquisition which are estimated at
500,000 shares of Common Stock, which Registration Statement(s) shall
state that, in accordance with Rule 416 promulgated under the 1933
Act, such Registration Statement(s) also covers such indeterminate
number of additional shares of Common Stock as may become issuable
upon conversion of the Debentures (i) to prevent dilution resulting
from stock splits, stock dividends or similar transactions and (ii)
by reason of changes in the Conversion Price or Conversion Rate of
the Debentures in accordance with the terms thereof Such Registration
Statement shall initially register for resale at least 1,851,851
shares of Common Stock, subject to adjustment as provided in Section
3(b), and such registered shares of Common Stock shall be allocated
among the Investors pro rata based on the total number of Registrable
Securities issued or issuable as of each date that a Registration
Statement, as amended, relating to the resale of the Registrable
Securities is declared effective by the SEC. In the event that the
Registration Statement is not filed by the Company by the
Registration Filing Deadline, then the Applicable Discount to be used
in determining the Conversion Price (as defined in the Debenture)
shall be reduced by an additional 3% (i.e., from 78% to 75%) for each
thirty (30) day period (prorated for partial months) that the
Registration Statement is not filed with the SEC (the "Registration
Filing Penalty"). The Company shall use its best efforts to have the
Registration Statement declared effective by the SEC within one
hundred and twenty (120) days after the issuance of the Debentures
(the "Registration Deadline"). The Company shall permit the
registration statement to become effective within five (5) business
days after receipt of a "no review" notice from the SEC. In the
event that the Registration Statement is not declared effective by
the SEC by the Registration Deadline then the Applicable Discount to
be used in determining the Conversion Price (as defined in the
Debenture) shall be reduced by (i) an additional 3% (i.e., from 78%
to 75%) if the Registration Statement is not declared effective by
the SEC within thirty (30) days following the Registration Deadline
(in each case prorated for partial months), (ii) an additional 6%
(i.e., from 78% to 72%) if the Registration Statement is not declared
effective by the SEC within ninety (90) days of the Registration
Deadline and thereafter an additional 3% for each subsequent thirty
(30) day period for which the Registration Statement is not declared
effective (the "Registration Deadline Penalty"). The Registration
Filing Penalty and the Registration Deadline Penalty shall be
immediately payable by the Company on demand by the Investor in
either cash or Common Stock of the Company, at the sole election of
the Investor upon delivery to the Company of a Notice of Commission
(as defined in the Debenture) by the Investor.
b. Underwritten Offering. If any offering pursuant to a
Registration Statement pursuant to Section 2(a) involves an
underwritten offering, the Buyers shall have the right to select one
legal counsel and an investment banker or bankers and manager or
managers to administer their interest in the offering, which
investment banker or bankers or manager or managers shall be
reasonably satisfactory to the Company.
c. Piggy-Back Registrations. If at any time prior to the
expiration of the Registration Period (as hereinafter defined) the
Company proposes to file with the SEC a Registration Statement
relating to an offering for its own account or the account of others
under the 1933 Act of any of its securities (other than on Form S-4
or Form S-8 or their then equivalents relating to securities to be
issued solely in connection with any acquisition of any entity or
business or equity securities issuable in connection with stock
option or other employee benefit plans) the Company shall promptly
send to each Investor who is entitled to registration rights under
this Section 2(c) written notice of the Company's intention to file
a Registration Statement and of such Investor's rights under this
Section 2(c) and, if within twenty (20) days after receipt of such
notice, such Investor shall so request in writing, the Company shall
include in such Registration Statement all or any part of the
Registrable Securities such Investor requests to be registered,
subject to the priorities set forth in Section 2(d) below. No right
to registration of Registrable Securities under this Section 2(c)
shall be construed to limit any registration required under Section
2(a). The obligations of the Company under this Section 2(c) may be
waived by Investors holding a majority of the Registrable
Securities. If an offering in connection with which an Investor is
entitled to registration under this Section 2(c) is an underwritten
offering, then each Investor whose Registrable Securities are
included in such Registration Statement shall, unless otherwise
agreed by the Company, offer and sell such Registrable Securities in
an underwritten offering using the same underwriter or underwriters
and, subject to the provisions of this Agreement, on the same terms
and conditions as other shares of Common Stock included in such
underwritten offering.
d. Priority in Piggy-Back Registration Rights in
connection with Registrations or Company Account. If the
registration referred to in Section 2(c) is to be an underwritten
public offering for the account of the Company and the managing
underwriter(s) advise the Company in writing, that in their
reasonable good faith opinion, marketing or other factors dictate
that a limitation on the number of shares of Common Stock which may
be included in the Registration Statement is necessary to facilitate
and not adversely affect the proposed offering, then the Company
shall include in such registration: (1) first, all securities the
Company proposes to sell for its own account, (2) second, up to the
full number of securities proposed to be registered for the account
of the holders of securities entitled to inclusion of their
securities in the Registration Statement by reason of demand
registration rights, and (3) third, the securities requested to be
registered by the Investors and other holders of securities entitled
to participate in the registration, drawn from them pro rata based
on the number each has requested to be included in such
registration.
e. Eligibility for Form S-3. The Company represents,
warrants, and covenants that it has filed and shall file all reports
required to be filed by the Company with the SEC in a timely manner
so as to obtain and maintain potential eligibility for the use of
Form S-3. In the event that Form S-3 is not available for sale by
the Investors of the Registrable Securities, then (i) the Company,
with the consent of each Investor pursuant to Section 2(a), shall
register the sale of the Registrable Securities on another
appropriate form and (ii) the Company shall undertake to register
the Registrable Securities on Form S-3 as soon as such form is
available.
3 . RELATED OBLIGATIONS.
Whenever an Investor has requested that any Registrable Securities be
registered pursuant to Section 2(c) or at such time as the Company is
obligated to file a Registration Statement with the SEC pursuant to
Section 2(a), the Company will use its best efforts to effect the
registration of the Registrable Securities in accordance with the intended
method of disposition thereof and, pursuant thereto, the Company shall
have the following obligations:
a. The Company shall promptly prepare and file with the
SEC a Registration Statement with respect to the Registrable
Securities (on or prior to sixtieth (60th) day following the date of
issuance of any Debentures, for the registration of Registrable
Securities pursuant to Section 2(a)) and use its best efforts to
cause such Registration Statement(s) relating to Registrable
Securities to become effective as soon as possible after such filing
(by the one hundred and twentieth (120th) day following the issuance
of the relevant Debentures for the registration of Registrable
Securities pursuant to Section 2(a), and keep the Registration
Statement(s) effective pursuant to Rule 415 at all times until the
earlier of (i) the date as of which the Investors may sell all of
the Registrable Securities without restriction pursuant to Rule
144(k) promulgated under the 1933 Act (or successor thereto) or (ii)
the date on which (A) the Investors shall have sold all the
Registrable Securities and (B) none of the Debentures or Warrants is
outstanding (the "Registration Period"), which Registration
Statement(s) (including any amendments or supplements thereto and
prospectuses contained therein) shall not contain any 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, in light of the circumstances in which they were made, not
misleading.
b. The Company shall prepare and file with the SEC such
amendments (including post-effective amendments) and supplements to
the Registration Statement(s) and the prospectus(es) used in
connection with the Registration Statement(s), which prospectus(es)
are to be filed pursuant to Rule 424 promulgated under the 1933 Act,
as may be necessary to keep the Registration Statement(s) effective
at all times during the Registration Period, and, during such
period, comply with the provisions of the 1933 Act with respect to
the disposition of all Registrable Securities of the Company covered
by the Registration Statement(s) until such time as all of such
Registrable Securities shall have been disposed of in accordance
with the intended methods of disposition by the seller or sellers
thereof as set forth in the Registration Statement(s). In the event
the number of shares available under a Registration Statement filed
pursuant to this Agreement is insufficient in the reasonable opinion
of a majority of the Buyers to cover all of the Registrable
Securities, the Company shall promptly amend the Registration
Statement, or file a new Registration Statement (on the short form
available therefor, if applicable), or both, so as to cover all of
the Registrable Securities, in each case, as soon as practicable,
but in any event within fifteen (15) days after the necessity
therefor arises (based on the market price of the Common Stock and
other relevant factors on which the Company reasonably elects to
rely). The Company shall use its best efforts to cause such
amendment and/or new Registration Statement to become effective as
soon as practicable following the filing thereof. For purposes of
the foregoing provision, the number of shares available under a
Registration Statement shall be deemed "insufficient to cover all of
the Registrable Securities" if at any time the number of Registrable
Securities issued or issuable upon conversion of the Debentures and
the exercise of the Warrants is greater than the quotient determined
by dividing (i) the number of shares of Common Stock available for
resale under such Registration Statement by (ii) 1.0; provided that
in the case of the initial registration of the Registrable
Securities pursuant to Section 2(a), the Company shall be required
to register at least 1,851,851 shares of Common Stock for resale.
For purposes of the calculation set forth in the foregoing sentence,
any restrictions on the convertibility of the Debentures shall be
disregarded and such calculation shall assume that the Debentures
are then convertible into shares of Common Stock at the then
prevailing Conversion Rate (as defined in the Debentures).
c. The Company shall furnish to each Investor whose
Registrable Securities are included in the Registration Statement(s)
and its legal counsel without charge (i) promptly after the same is
prepared and filed with the SEC at least one copy of the
Registration Statement and any amendment thereto, including
financial statements and schedules, all documents incorporated
therein by reference and all exhibits, the prospectus(es) included
in such Registration Statement(s) (including each preliminary
prospectus ) and, with regards to the Registration Statement, any
correspondence by or on behalf of the Company to the SEC or the
staff of the SEC and any correspondence from the SEC or the staff of
the SEC to the Company or its representatives, (ii) upon the
effectiveness of any Registration Statement, ten (10) copies of the
prospectus included in such Registration Statement and all
amendments and supplements thereto (or such other number of copies
as such Investor may reasonably request) and (iii) such other
documents, including any preliminary prospectus, as such Investor
may reasonably request in order to facilitate the disposition of the
Registrable Securities owned by such Investor.
d. The Company shall use reasonable efforts to (i)
register and qualify the Registrable Securities covered by the
Registration Statement(s) under such other securities or "blue sky"
laws of such jurisdictions in the United States as any Investor
reasonably requests, (ii) prepare and file in those jurisdictions,
such amendments (including post-effective amendments) and
supplements to such registrations and qualifications as may be
necessary to maintain the effectiveness thereof during the
Registration Period, (iii) take such other actions as may be
necessary to maintain such registrations and qualifications in
effect at all times during the Registration Period, and (iv) take
all other actions reasonably necessary or advisable to quality the
Registrable Securities for sale in such jurisdictions; provided,
however, that the Company shall not be required in connection
therewith or as a condition thereto to (a) qualify to do business in
any jurisdiction where it would not otherwise be required to qualify
but for this Section 3(d), (b) subject itself to general taxation in
any such jurisdiction, or (c) file a general consent to service of
process in any such jurisdiction. The Company shall promptly notify
each Investor who holds Registrable Securities of the receipt by the
Company of any notification with respect to the suspension of the
registration or qualification of any of the Registrable Securities
for sale under the securities or "blue sky" laws of any jurisdiction
in the United States or its receipt of actual notice of the
initiation or threatening of any proceeding for such purpose.
e. In the event Investors who hold a majority of the
Registrable Securities being offered in the offering select
underwriters for the offering, the Company shall enter into and
perform its obligations under an underwriting agreement, in usual
and customary form, including, without limitation, customary
indemnification and contribution obligations, with the underwriters
of such offering.
f. As promptly as practicable after becoming aware of
such event, the Company shall notify each Investor in writing of the
happening of any event, of which the Company has knowledge, as a
result of which the prospectus included in a Registration Statement,
as then in effect, includes an untrue statement of a material fact
or omission to state a material fact required to be stated therein
or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, and
promptly prepare a supplement or amendment to the Registration
Statement to correct such untrue statement or omission, and deliver
ten (10) copies of such supplement or amendment to each Investor (or
such other number of copies as such Investor may reasonably
request). The Company shall also promptly notify each Investor in
writing (i) when a prospectus or any prospectus supplement or post-
effective amendment has been filed, and when a Registration
Statement or any post-effective amendment has become effective
(notification of such effectiveness shall be delivered to each
Investor by facsimile on the same day of such effectiveness and by
overnight mail) (ii) of any request by the SEC for amendments or
supplements to a Registration Statement or related prospectus or
related information, (iii) of the Company's reasonable determination
that a post-effective amendment to a Registration Statement would be
appropriate.
g. The Company shall use its best efforts to prevent the
issuance of any stop order or other suspension of effectiveness of a
Registration Statement, or the suspension of the qualification of
any of the Registrable Securities for sale in any jurisdiction and,
if such an order or suspension is issued, to obtain the withdrawal
of such order or suspension at the earliest possible moment and to
notify each Investor who holds Registrable Securities being sold
(and, in the event of an underwritten offering, the managing
underwriters) of the issuance of such order and the resolution
thereof or its receipt of actual notice of the initiation or threat
of any proceeding for such purpose.
h. The Company shall permit each Investor a single firm
of counsel or such other counsel as thereafter designated as selling
stockholders' counsel by the Investors who hold a majority of the
Registrable Securities being sold, to review and comment upon the
Registration Statement(s) and all amendments and supplements thereto
at least seven (7) days prior to their filing with the SEC, and not
file any document in a form to which such counsel reasonably
objects. The Company shall not submit a request for acceleration of
the effectiveness of a Registration Statement(s) or any amendment or
supplement thereto without the prior approval of such counsel, which
consent shall not be unreasonably withheld.
i. At the request of the Investors who hold a majority of
the Registrable Securities being sold, the Company shall use their
best efforts to furnish, on the date that Registrable Securities are
delivered to an underwriter, if any, for sale in connection with the
Registration Statement (i) if required by an underwriter, a letter,
dated such date, from the Company's independent certified public
accountants in form and substance as is customarily given by
independent certified public accountants to underwriters in an
underwritten public offering, addressed to the underwriters, and
(ii) an opinion, dated as of such date, of counsel representing the
Company for purposes of such Registration Statement, in form, scope
and substance as is customarily given in an underwritten public
offering, addressed to the underwriters and the Investors.
j. The Company shall make available for inspection by (i)
any Investor, (ii) any underwriter participating in any disposition
pursuant to a Registration Statement, (iii) one firm of attorneys
and one firm of accountants or other agents retained by the
Investors, and (iv) one firm of attorneys retained by all such
underwriters (collectively, the "Inspectors") all pertinent
financial and other records, and pertinent corporate documents and
properties of the Company (collectively, the "Records"), as shall be
reasonably deemed necessary by each Inspector to enable each
Inspector to exercise its due diligence responsibility, and cause
the Company's officers, directors and employees to supply all
information which any Inspector may reasonably request for purposes
of such due diligence provided, however, that each Inspector shall
hold in strict confidence and shall not make any disclosure (except
to an Investor) or use of any Record or other information which the
Company determines in good faith to be confidential, and of which
determination the Inspectors are so notified, unless (a) the
disclosure of such Records is mutually determined to be necessary to
avoid or correct a misstatement or omission in any Registration
Statement or is otherwise required under the 1933 Act, (b) the
release of such Records is ordered pursuant to a final, non-
appealable subpoena or order from a court or government body of
competent jurisdiction, or (c) the information in such Records has
been made generally available to the public other than by disclosure
in violation of this or any other agreement. Each Investor agrees
that it shall, upon learning that disclosure of such Records is
sought in or by a court or governmental body of competent
jurisdiction or through other means, give prompt notice to the
Company and allow the Company, at its expense, to undertake
appropriate action to prevent disclosure of, or to obtain a
protective order for, the Records deemed confidential.
k. The Company shall hold in confidence and not make any
disclosure of information concerning an Investor provided to the
Company unless (i) disclosure of such information is necessary to
comply with federal or state securities laws, (ii) the disclosure of
such information is necessary to avoid or correct a misstatement or
omission in any Registration Statement, (iii) the release of such
information is ordered pursuant to a subpoena or other final, non-
appealable order from a court or governmental body of competent
jurisdiction, or (iv) such information has been made generally
available to the public other than by disclosure in violation of
this or any other agreement. The Company agrees that it shall, upon
learning that disclosure of such information concerning an Investor
is sought in or by a court or governmental body of competent
jurisdiction or through other means, give prompt written notice to
such Investor and allow such Investor, at the Investor's expense, to
undertake appropriate action to prevent disclosure of, or to obtain
a protective order for, such information.
l. The Company shall use its best efforts either to (i)
cause all the Registrable Securities covered by a Registration
Statement to be listed on each national securities exchange on which
securities of the same class or series issued by the Company are
then listed, if any, if the listing of such Registrable Securities
is then permitted under the rules of such exchange, (ii) if at any
time during the Registration Period the Company is able to satisfy
the relevant listing criteria, secure designation and quotation of
all the Registrable Securities covered by the Registration Statement
on the Nasdaq National Market System, (iii) if, despite the
Company's best efforts to satisfy the preceding clause (i) or (ii),
the Company is unsuccessful in satisfying the preceding clause (i)
or (ii), if at any time during the Registration Period the Company
is able to satisfy the relevant listing criteria, to secure the
inclusion for quotation on the Nasdaq SmallCap Market for such
Registrable Securities or, (iv) if, despite the Company's best
efforts to satisfy the preceding clause (iii), the Company is
unsuccessful in satisfying the preceding clause (iii), to secure the
inclusion for quotation on the over-the-counter market for such
Registrable Securities, and, without limiting the generality of the
foregoing, in the case of clause (iii) or (iv), to arrange for at
least two market makers to register with the National Association of
Securities Dealers, Inc. ("NASD") as such with respect to such
Registrable Securities. The Company shall pay all fees and expenses
in connection with satisfying its obligation under this Section
3(l).
m. The Company shall cooperate with the Investors who
hold Registrable Securities being offered and, to the extent
applicable, any managing underwriter or underwriters, to facilitate
the timely preparation and delivery of certificates (not bearing any
restrictive legend) representing the Registrable Securities to be
offered pursuant to a Registration Statement and enable such
certificates to be in such denominations or amounts, as the case may
be, as the managing underwriter or underwriters, if any, or, if
there is no managing underwriter or underwriters, the Investors may
reasonably request and registered in such names as the managing
underwriter or underwriters, if any, or the Investors may request.
Not later than the date on which any Registration Statement
registering the resale of Registrable Securities is declared
effective, the Company shall deliver to its transfer agent
instructions, accompanied by any reasonably required opinion of
counsel, that permit sales of unlegended securities in a timely
fashion that complies with then mandated securities settlement
procedures for regular way market transactions.
n. The Company shall take all other reasonable actions
necessary to expedite and facilitate disposition by the Investors
of Registrable Securities pursuant to a Registration Statement.
o. The Company shall provide a transfer agent and
registrar of all such Registrable Securities not later than the
effective date of such Registration Statement.
p. If requested by the managing underwriters or an
Investor, the Company shall immediately incorporate in a prospectus
supplement or post-effective amendment such information as the
managing underwriters and the Investors agree should be included
therein relating to the sale and distribution of Registrable
Securities, including, without limitation, information with respect
to the number of Registrable Securities being sold to such
underwriters, the purchase price being paid therefor by such
underwriters and with respect to any other terms of the underwritten
(or best efforts underwritten) offering of the Registrable
Securities to be sold in such offering; make all required filings of
such prospectus supplement or post-effective amendment as soon as
notified of the matters to be incorporated in such prospectus
supplement or post-effective amendment; and supplement or make
amendments to any Registration Statement if requested by a
shareholder or any underwriter of such Registrable Securities.
q. The Company shall use its best efforts to cause the
Registrable Securities covered by the applicable Registration
Statement to be registered with or approved by such other
governmental agencies or authorities as may be necessary to
consummate the disposition of such Registrable Securities.
r. The Company shall otherwise use its best efforts to
comply with all applicable rules and regulations of the SEC in
connection with any registration hereunder.
4. OBLIGATIONS OF THE INVESTORS.
a. At least fourteen (14) days prior to the first
anticipated filing date of the Registration Statement, the Company
shall notify each Investor in writing of the information the Company
requires from each such Investor if such Investor elects to have any
of such Investor's Registrable Securities included in the
Registration Statement. It shall be a condition precedent to the
obligations of the Company to complete the registration pursuant to
this Agreement with respect to the Registrable Securities of a
particular Investor that such Investor shall furnish to the Company
such information regarding itself, the Registrable Securities held
by it and the intended method of disposition of the Registrable
Securities held by it as shall be reasonably required to effect the
registration of such Registrable Securities and shall execute such
documents in connection with such registration as the Company may
reasonably request.
b. Each Investor by such Investor's acceptance of the
Registrable Securities agrees to cooperate with the Company as
reasonably requested by the Company in connection with the
preparation and filing of the Registration Statement(s) hereunder,
unless such Investor has notified the Company in writing of such
Investor's election to exclude all of such Investor's Registrable
Securities from the Registration Statement.
c. In the event Investors holding a majority of the
Registrable Securities being registered determine to engage the
services of an underwriter, each Investor agrees to enter into and
perform such Investor's obligations under an underwriting agreement,
in usual and customary form, including, without limitation,
customary indemnification and contribution obligations, with the
managing underwriter of such offering and take such other actions as
are reasonably required in order to expedite or facilitate the
disposition of the Registrable Securities, unless such Investor
notifies the Company in writing of such Investor's election to
exclude all of such Investor's Registrable Securities from the
Registration Statement(s).
d. Each Investor agrees that, upon receipt of any notice
from the Company of the happening of any event of the kind described
in Section 3(g) or the first sentence of 3(f), such Investor will
immediately discontinue disposition of Registrable Securities
pursuant to the Registration Statement(s) covering such Registrable
Securities until such Investor's receipt of the copies of the
supplemented or amended prospectus contemplated by Section 3(g) or
the first sentence of 3(f) and, if so directed by the Company, such
Investor shall deliver to the Company (at the expense of the
Company) or destroy all copies in such Investor's possession, of the
prospectus covering such Registrable Securities current at the time
of receipt of such notice.
e. No Investor may participate in any underwritten
registration hereunder unless such Investor (i) agrees to sell such
Investor's Registrable Securities on the basis provided in any
underwriting arrangements approved by the Investors entitled
hereunder to approve such arrangements, (ii) completes and executes
all questionnaires, powers of attorney, indemnities, underwriting
agreements and other documents reasonably required under the terms
of such underwriting arrangements, and (iii) agrees to pay its pro
rata share of all underwriting discounts and commissions.
5. EXPENSES OF REGISTRATION.
All reasonable expenses, other than underwriting discounts and
commissions, incurred in connection with registrations, filings or
qualifications pursuant to Sections 2 and 3, including, without
limitation, all registration, listing and qualifications fees, printers
and accounting fees, and fees and disbursements of counsel for the Company
and fees and disbursements of one counsel for the Investors, shall be
borne by the Company.
6. INDEMNIFICATION
In the event any Registrable Securities are included in a
Registration Statement under this Agreement:
a. To the fullest extent permitted by law, the Company
will, and hereby does, indemnify, hold harmless and defend each
Investor who holds such Registrable Securities, the directors,
officers, partners, employees, agents and each Person, if any, who
controls any Investor within the meaning of the 1933 Act or the
Securities Exchange Act of 1934, as amended (the "1934 Act"), and
any underwriter (as defined in the 0000 Xxx) for the Investors, and
the directors and officers of, and each Person, if any, who
controls, any such underwriter within the meaning of the 1933 Act or
the 1934 Act (each, an "Indemnified Person"), against any losses,
claims, damages, liabilities, judgments, fines, penalties, charges,
costs, attorneys' fees, amounts paid in settlement or expenses,
joint or several, (collectively, "Claims") incurred in
investigating, preparing or defending any action, claim, suit,
inquiry, proceeding, investigation or appeal taken from the
foregoing by or before any court or governmental, administrative or
other regulatory agency, body or the SEC, whether pending or
threatened, whether or not an indemnified party is or may be a party
thereto ("Indemnified Damages"), to which any of them may become
subject insofar as such Claims (or actions or proceedings, whether
commenced or threatened, in respect thereof) arise out of or are
based upon: (i) any untrue statement or alleged untrue statement of
a material fact in a Registration Statement or any post-effective
amendment thereto or in any filing made in connection with the
qualification of the offering under the securities or other "blue
sky" laws of any jurisdiction in which Registrable Securities are
offered ("Blue Sky Filing"), or the omission or alleged omission to
state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under
which the statements therein were made, not misleading, (ii) any
untrue statement or alleged untrue statement of a material fact
contained in any preliminary prospectus if used prior to the
effective date of such Registration Statement, or contained in the
final prospectus (as amended or supplemented, if the Company files
any amendment thereof or supplement thereto with the SEC) or the
omission or alleged omission to state therein any material fact
necessary to make the statements made therein, in light of the
circumstances under which the statements therein were made, not
misleading, or (iii) any violation or alleged violation by the
Company of the 1933 Act, the 1934 Act, any other law, including,
without limitation, any state securities law, or any rule or
regulation thereunder relating to the offer or sale of the
Registrable Securities pursuant to a Registration Statement (the
matters in the foregoing clauses (i) through (iii) being,
collectively, "Violations"). Subject to the restrictions set forth
in Section 6(d) with respect to the number of legal counsel, the
Company shall reimburse the Investors and each such underwriter or
controlling person, promptly as such expenses are incurred and are
due and payable, for any legal fees or other reasonable expenses
incurred by them in connection with investigating or defending any
such Claim. Notwithstanding anything to the contrary contained
herein, the indemnification agreement contained in this Section
6(a): (i) shall not apply to a Claim arising out of or based upon a
Violation which occurs in reliance upon and in conformity with
information furnished in writing to the Company by any Indemnified
Person or underwriter for such Indemnified Person expressly for use
in connection with the preparation of the Registration Statement or
any such amendment thereof or supplement thereto, if such prospectus
was timely made available by the Company pursuant to Section 3(c);
(ii) with respect to any preliminary prospectus, shall not inure to
the benefit of any such person from whom the person asserting any
such Claim purchased the Registrable Securities that are the subject
thereof (or to the benefit of any person controlling such person) if
the untrue statement or mission of material fact contained in the
preliminary prospectus was corrected in the prospectus, as then
amended or supplemented, if such prospectus was timely made
available by the Company pursuant to Section 3(c), and the
Indemnified Person was promptly advised in writing not to use the
incorrect prospectus prior to the use giving rise to a violation and
such Indemnified Person, notwithstanding such advice, used it; (iii)
shall not be available to the extent such Claim is based on a
failure of the Investor to deliver or to cause to be delivered the
prospectus made available by the Company (i) and (iv) shall not
apply to amounts paid in settlement of any Claim if such settlement
is effected without the prior written consent of the Company, which
consent shall not be unreasonably withheld. Such indemnity shall
remain in full force and effect regardless of any investigation made
by or on behalf of the Indemnified Person and shall survive the
transfer of the Registrable Securities by the Investors pursuant to
Section 9.
b. In connection with any Registration Statement in which
an Investor is participating, each such Investor agrees to severally
and not jointly indemnify, hold harmless and defend, to the same
extent and in the same manner as is set forth in Section 6(a), the
Company, each of its directors, each of its officers who signs the
Registration Statement, each Person, if any, who controls the
Company within the meaning of the 1933 Act or the 1934 Act
(collectively and together with an Indemnified Person, an
"Indemnified Party"), against any Claim or Indemnified Damages to
which any of them may become subject, under the 1933 Act, the 1934
Act or otherwise, insofar as such Claim or Indemnified Damages arise
out of or are based upon any Violation, in each case to the extent,
and only to the extent, that such Violation occurs in reliance upon
and in conformity with written information furnished to the Company
by such Investor expressly for use in connection with such
Registration Statement; and, subject to Section 6(d), such Investor
will reimburse any legal or other expenses reasonably incurred by
them in connection with investigating or defending any such Claim;
provided, however, that the indemnity agreement contained in this
Section 6(b) and Section 7 shall not apply to amounts paid in
settlement of any Claim if such settlement is effected without the
prior written consent of such Investor, which consent shall not be
unreasonably withheld; provided, further, however, that the Investor
shall be liable under this Section 6(b) for only that amount of a
Claim or Indemnified Damages as does not exceed the net proceeds to
such Investor as a result of the sale of Registrable Securities
pursuant to such Registration Statement. Such indemnity shall
remain in full force and effect regardless of any investigation made
by or on behalf of such Indemnified Party and shall survive the
transfer of the Registrable Securities by the Investors pursuant to
Section 9. Notwithstanding anything to the contrary contained
herein, the indemnification agreement contained in this Section 6(b)
with respect to any preliminary prospectus shall not inure to the
benefit of any Indemnified Party if the untrue statement or omission
of material fact contained in the preliminary prospectus was
corrected on a timely basis in the prospectus, as then amended or
supplemented.
c. The Company shall be entitled to receive indemnities
from underwriters, selling brokers, dealer managers and similar
securities industry professionals participating in any distribution,
to the same extent as provided above, with respect to information
such persons so furnished in writing expressly for inclusion in the
Registration Statement.
d. Promptly after receipt by an Indemnified Person or
Indemnified Party under this Section 6 of notice of the commencement
of any action or proceeding (including any governmental action or
proceeding) involving a Claim such Indemnified Person or Indemnified
Party shall, if a Claim in respect thereof is to be made against any
indemnifying party under this Section 6, deliver to the indemnifying
party a written notice of the commencement thereof, and the
indemnifying party shall have the right to participate in, and, to
the extent the indemnifying party so desires, jointly with any other
indemnifying party similarly noticed, to assume control of the
defense thereof with counsel mutually satisfactory to the
indemnifying party and the Indemnified Person or the Indemnified
Party, as the case may be; provided, however, that an Indemnified
Person or Indemnified Party shall have the right to retain its own
counsel with the fees and expenses to be paid by the indemnifying
party, if, in the reasonable opinion of counsel retained by the
indemnifying party, the representation by such counsel of the
Indemnified Person or Indemnified Party and the indemnifying party
would be inappropriate due to actual or potential differing
interests between such Indemnified Person or Indemnified Party and
any other party represented by such counsel in such proceeding. The
Company shall pay reasonable fees for only one separate legal
counsel for the Investors, and such legal counsel shall be selected
by the Investors holding a majority in interest of the Registrable
Securities included in the Registration Statement to which the Claim
relates. The Indemnified Party or Indemnified Person shall
cooperate fully with the indemnifying party in connection with any
negotiation or defense of any such action or claim by the
indemnifying party and shall furnish to the indemnifying party all
information reasonably available to the Indemnified Party or
Indemnified Person which relates to such action or claim. The
indemnifying party shall keep the Indemnified Party or Indemnified
Person fully apprised at all times as to the status of the defense
or any settlement negotiations with respect thereto. No
indemnifying party shall be liable for any settlement of any action,
claim or proceeding effected without its written consent, provided,
however, that the indemnifying party shall not unreasonably
withhold, delay or condition its consent. No indemnifying party
shall, without the consent of the Indemnified Party or Indemnified
Person, consent to entry of any judgment or enter into any
settlement or other compromise which does not include as an
unconditional term thereof the giving by the claimant or plaintiff
to such Indemnified Party or Indemnified Person of a release from
all liability in respect to such claim or litigation. Following
indemnification as provided for hereunder, the indemnifying party
shall be subrogated to all rights of the Indemnified Party or
Indemnified Person with respect to all third parties, firms or
corporations relating to the matter for which indemnification has
been made. The failure to deliver written notice to the
indemnifying party within a reasonable time of the commencement of
any such action shall not relieve such indemnifying party of any
liability to the Indemnified Person or Indemnified Party under this
Section 6, except to the extent that the indemnifying party is
prejudiced in its ability to defend such action.
e. The indemnification required by this Section 6 shall
be made by periodic payments of the amount thereof during the course
of the investigation or defense, as and when bills are received or
Indemnified Damages are incurred.
f. The indemnity agreements contained herein shall be in
addition to (i) any cause of action or similar right of the
Indemnified Party or Indemnified Person against the indemnifying
party or others, and (ii) any liabilities the indemnifying party may
be subject to pursuant to the law.
7. CONTRIBUTION.
To the extent any indemnification by an indemnifying party is
prohibited or limited by law, the indemnifying party agrees to make the
maximum contribution with respect to any amounts for which it would
otherwise be liable under Section 6 to the fullest extent permitted by
law; provided, however, that: (i) no contribution shall be made under
circumstances where the maker would not have been liable for
indemnification under the fault standards set forth in Section 6; (ii) no
seller of Registrable Securities guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the 0000 Xxx) shall be entitled to
contribution from any seller of Registrable Securities who was not guilty
of fraudulent misrepresentation; and (iii) contribution by any seller of
Registrable Securities shall be limited in amount to the net amount of
proceeds received by such seller from the sale of such Registrable
Securities.
8. REPORTS UNDER THE 1934 ACT.
With a view to making available to the Investors the benefits of Rule
144 promulgated under the 1933 Act or any other similar rule or regulation
of the SEC that may at any time permit the investors to sell securities of
the Company to the public without registration ("Rule 144"), the Company
agrees to:
a. make and keep public information available, as those
terms are understood and defined in Rule 144;
b. file with the SEC in a timely manner all reports and
other documents required of the Company under the 1933 Act and the
1934 Act so long as the Company remains subject to such requirements
(it being understood that nothing herein shall limit the Company's
obligations under Section 4(c) of the Securities Purchase Agreement)
and the filing of such reports and other documents is required for
the applicable provisions of Rule 144; and
c. furnish to each Investor so long as such Investor owns
Registrable Securities, promptly upon request, (i) a written
statement by the Company that it has complied with the reporting
requirements of Rule 144, the 1933 Act and the 1934 Act, (ii) a copy
of the most recent annual or quarterly report of the Company and
such other reports and documents so filed by the Company, and (iii)
such other information as may be reasonably requested to permit the
investors to sell such securities pursuant to Rule 144 without
registration.
9. ASSIGNMENT OF REGISTRATION RIGHTS.
The rights to have the Company register Registrable Securities
pursuant to this Agreement shall be automatically assignable by the
Investors to any transferee of all or any portion of Registrable
Securities if: (i) the Investor agrees in writing with the transferee or
assignee to assign such rights, and a copy of such agreement is furnished
to the Company within a reasonable time after such assignment; (ii) the
Company is, within a reasonable time after such transfer or assignment,
furnished with written notice of (a) the name and address of such
transferee or assignee, and (b) the securities with respect to which such
registration rights are being transferred or assigned; (iii) immediately
following such transfer or assignment the further disposition of such
securities by the transferee or assignee is restricted under the 1933 Act
and applicable state securities laws; (iv) at or before the time the
Company receives the written notice contemplated by clause (ii) of this
sentence the transferee or assignee agrees in writing with the Company to
be bound by all of the provisions contained herein; (v) such transfer
shall have been made in accordance with the applicable requirements of the
Securities Purchase Agreement; (vi) such transferee shall be an
"accredited investor" as that term is defined in Rule 501 of Regulation D
promulgated under the 1933 Act; and (vii) in the event the assignment
occurs subsequent to the date of effectiveness of the Registration
Statement required to be filed pursuant to Section 2(a), the transferee
agrees to pay all reasonable expenses of amending or supplementing such
Registration Statement to reflect such assignment.
10. AMENDMENT OF REGISTRATION RIGHTS.
Provisions of this Agreement may be amended and the observance
thereof may be waived (either generally or in a particular instance and
either retroactively or prospectively), only with the written consent of
the Company and Investors who hold two-thirds of the Registrable
Securities. Any amendment or waiver effected in accordance with this
Section 10 shall be binding upon each Investor and the Company.
11. MISCELLANEOUS.
a. A person or entity is deemed to be a holder of
Registrable Securities whenever such person or entity owns of record
such Registrable Securities. If the Company receives conflicting
instructions, notices or elections from two or more persons or
entities with respect to the same Registrable Securities, the
Company shall act upon the basis of instructions, notice or election
received from the registered owner of such Registrable Securities.
b. Any notices consents, waivers or other communications
required or permitted to be given under the terms of this Agreement
must be in writing and will be deemed to have been delivered (i)
upon receipt, when delivered personally; (ii) upon receipt, when
sent by facsimile, provided a copy is mailed by U.S. certified mail,
return receipt requested; (iii) three (3) days after being sent by
U.S. certified mail, return receipt requested, or (d) 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
0000 Xxxxxx Xxxxxx
Xxxxxx Xxxxx, Xxxxxxxxxx 00000
Facsimile: (000) 000-0000
With a copy to:Xxxxx X. Xxxxx, Esq.
Xxxxxxxx & Werson
Xxxxx 0000
Xxx Xxxxxxxxxxxx Xxxxxx
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
Facsimile: (000) 000-0000
If to a Buyer, to its address and facsimile number on the Schedule of
Buyers, with copies to such Buyer's counsel as set forth on the Schedule
of Buyers. Each party shall provide five (5) days' prior written notice
to the other party of any change in address or facsimile number.
c. Failure of any party to exercise any right or remedy
under this Agreement or otherwise, delay by a party in exercising
such right or remedy, shall not operate as a waiver thereof.
d. 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. If any provision of this
Agreement shall be invalid or unenforceable in any jurisdiction,
such invalidity or unenforceability shall not affect the validity or
enforceability of the remainder of this Agreement in that
jurisdiction or the validity or enforceability of any provision of
this Agreement in any other jurisdiction.
e. This Agreement and the Securities Purchase Agreement
constitute the entire agreement among the parties hereto with
respect to the subject matter hereof and thereof. There are no
restrictions, promises, warranties or undertakings, other than those
set forth or referred to herein and therein. This Agreement and the
Securities Purchase Agreement supersede all prior agreements and
understandings among the parties hereto with respect to the subject
matter hereof and thereof.
f. Subject to the requirements of Section 9, this
Agreement shall inure to the benefit and of and be binding upon the
permitted successors and assigns of each of the parties hereto.
g. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning
hereof.
h. This Agreement may be executed in two or more
identical counterparts, each of which shall be deemed an original
but all of which shall constitute one and the same agreement. This
Agreement, once executed by a party, may be delivered to the other
party hereto by facsimile transmission of a copy of this Agreement
bearing the signature of the party so delivering this Agreement.
i. Each party shall do and perform, or cause to be done
and performed, all such further acts and things, and shall execute
and deliver all such other agreements, certificates, instruments and
documents, as the other party may reasonably request in order to
carry out the intent and accomplish the purposes of this Agreement
and the consummation of the transactions contemplated hereby.
IN WITNESS WHEREOF, the parties have caused this Registration Rights
Agreement to be duly executed as of day and year first above written.
COMPANY:
FINET HOLDINGS CORPORATION
By: /s/ L. Xxxxxx Xxxxxxx
Name: L. Xxxxxx Xxxxxxx
Its: CEO
"BUYER"
ATLANTIS CAPITAL FUND, LTD
By: /s/ Xxxx Xxxxxxxxx
Name: Xxxx Xxxxxxxxx
Its: Agent
"BUYER"
SOVEREIGN PARTNERS, L.P.
By: /s/ Xxxx Xxxxxxxxx
Name: Xxxx Xxxxxxxxx
Its: Agent
"BUYER"
DOMINION CAPTIAL FUND, LTD.
By: /s/ Xxxx Xxxxxxxxx
Name: Xxxx Xxxxxxxxx
Its: Agent
SCHEDULE OF BUYERS
Address and Facsimile Face
Buyer's Name Number of Buyer Amount of Buyer's Legal
Debenture Counsel
s
Atlantis Capital Fund 000 Xxx Xxxxxx $500,000* Xxx Xxxxxxx, Esq.
Limited Toronto Ontario MSH- Xxxxxxx & Prager
c/o Thomson Xxxxxxxx & 202 319 Fifth Avenue
Co., Ltd. CANADA New York, New York
Attn: Xxx Xxxxxxxx 10016
(000) 000-0000
Sovereign Partners, L.P. 000 Xxx Xxxxxx $3,000,00 Xxx Xxxxxxx, Esq.
c/o Thomson Xxxxxxxx & Toronto Ontario MSH- 0* Xxxxxxx & Prager
Co., Ltd. 202 000 Xxxxx Xxxxxx
XXXXXX Xxx Xxxx, Xxx Xxxx
Attn: Xxx Xxxxxxxx 10016
(000) 000-0000
Dominion Capital Fund, 000 Xxx Xxxxxx $500,000* Xxx Xxxxxxx, Esq.
Ltd. Toronto Ontario MSH- Xxxxxxx & Xxxxxx
c/x Xxxxxxx Xxxxxxxx & 202 319 Fifth Avenue
Co., Ltd. CANADA New York, New York
Attn: Xxx Xxxxxxxx 10016
(000) 000-0000
* Issued in the name of Thomson Xxxxxxxx & Co., Ltd.
