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WARRANT PURCHASE AGREEMENT
THIS WARRANT PURCHASE AGREEMENT is made as of March 21, 1997 between FINET
HOLDINGS CORPORATION, a Delaware corporation (the "Company"), and ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇ GARCAO (the "Purchaser").
RECITALS:
WHEREAS, the Company has authorized the issuance and sale of a warrant to
purchase up to 600,000 Shares of its Common Stock, exercisable at varying
per share prices over a five year term as set forth herein (the "Warrant")
(the Warrant and the Shares of Common Stock to be issued upon the exercise
of the Warrant are hereinafter referred to as "the Securities"); and
WHEREAS, the Purchaser desires to purchase and the Company desires to sell
the Securities on the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of these premises and the mutual covenants
and agreements herein contained and other valuable consideration, the
receipt and adequacy of which the parties hereto acknowledge, the parties
have agreed as follows:
1. Purchase and Sale of Warrants. The Company agrees to sell to the
Purchaser and upon the basis of the representations and warranties, and
subject to the terms and conditions set forth in this Agreement, the
Purchaser agrees to purchase the Warrant, the consideration for such sale
being the Purchaser's material assistance in funding the Company's
voluntary plan of reorganization. The Warrant shall be in the form of
Exhibit A hereto.
2. Number of Shares and Exercise Price. The Warrant expires five years
from the date of this Agreement. The purchase price of shares of Common
Stock issuable upon exercise of the Warrants is as follows:
200,000 shares at $1.50 per share
200,000 shares at $2.00 per share
200,000 shares at $2.50 per share
3. Representations and Warranties of the Company. The representation and
warranties of the Company set forth in the Common Stock Purchase Agreement
dated March 21, 1997 between the Company and ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ Garcao are
incorporated herein by reference (the Common Stock Purchase Agreement is
attached hereto as Exhibit B). In addition, the Company represents and
warrants to the Purchaser as follows:
(a) The Securities:
(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; and
(iv) will not subject the holders thereof to personal
liability by reason of being such holders.
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4. Representations and Warranties of the Purchaser. The representations
and warranties of the Purchaser contained in the Common Stock Purchase
Agreement, Exhibit B hereto) are incorporated by reference herein. In
addition, the Purchaser represents and warrants to, and agrees with, the
Company:
(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 Securities, 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 Securities.
(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 verity 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 Securities have not been
registered under the Securities Act and that it must hold the Securities
indefinitely unless the Securities are subsequently registered under the
Securities Act and qualified under applicable state securities laws, or
unless an exemption from such registration and qualification is available.
The Purchaser is acquiring the Securities for investment and without any
present intention to engage in a distribution thereof.
(e) The Purchaser is either (i) acquiring the Securities 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 covenants as set forth herein on its own
behalf and as agent for and on behalf of such other party.
(f) The Purchaser has the knowledge and experience in financial and
business matters to evaluate the merits and risks of the proposed
investment.
(g) The Purchaser is an "Accredited Purchaser" as that term is
defined under Rule 501 adopted pursuant to the Securities Act. "Accredited
Purchasers" are defined in Rule 501 to include among others: (1) Various
specified institutional Purchasers (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
Purchasers); (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. Restrictions on Transfer. The Purchaser agrees that:
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(a) The Purchaser will not attempt to transfer the Securities in
violation of the restrictions set forth in this Agreement.
(b) The Company may note such restrictions on transfer in its
records and refuse to recognize any transfer which violates this agreement
or for which the Company has not received an acceptable opinion of counsel
stating that such transfer will not violate such restrictions.
(c) One or more legends indicating a lack of registration under the
Securities Act and a lack of qualification under state securities laws will
be imprinted on the Securities. One such legend shall read substantially as
follows:
THE SECURITIES HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE
COMMISSION UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND ANY SALE,
TRANSFER, PLEDGE OR OTHER DISPOSITION THEREOF MAY BE MADE ONLY (i) IN A
REGISTRATION UNDER SAID ACT OR (ii) IF AN EXEMPTION FROM REGISTRATION UNDER
SAID ACT IS AVAILABLE AND THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL TO
THAT EFFECT REASONABLY SATISFACTORY TO IT.
6. Negative Covenants of the Company. The Company further covenants and
agrees that without the prior written approval of the Purchaser, it will
not:
(a) Engage in any business other than the business engaged in or
proposed to be engaged in by the Company or any subsidiary on the date
hereof and any businesses or activities substantially similar or related
thereto.
(b) Issue and sell any options to purchase more than an aggregate of
1,000,000 shares of the Company's Common Stock to employees, officers and
directors of, and consultants and franchisees to the Company, pursuant to
any incentive program approved by the Board of Directors of the Company.
(c) Liquidate or dissolve, merge, consolidate or sell substantially
all of its assets.
(d) Declare or pay any dividends; or purchase, redeem or otherwise
acquire for value or make any other distribution with respect to any of the
Company's capital stock, other than the repurchase of shares of capital
stock from terminating or terminated employees at a price no greater than
fair market value.
(e) Invest, directly or indirectly, in any business or enterprise
other than in connection with the operation of its business; provided
however, pending the use of the net proceeds of this offering in its
businesses the Company may invest such net proceeds in short term interest
bearing deposits and securities.
(f) By amendment of its articles of incorporation, through the
voluntary reorganization or recapitalization, or through any transfer of
its assets, consolidation, merger, dissolution, issue or sale of
securities, or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms to be observed or performed
hereunder by the Company.
7. Registration Rights. The Company hereby grants to Purchaser the
following registration rights with respect to the Common Shares to be
issued upon exercise of the Warrant (the "Shares"):
(a) 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").
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"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 Shares exercisable pursuant to the Warrant and
any common stock issued with respect thereto (e.g. upon a stock split or
stock dividend).
"Purchaser" means the person set forth above and any permitted assignee.
(b) Company Registration.
i) Notice of Registration. If; at any time after March 21,
1997, 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(b)(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(b) hereof. In such event, the right of Purchaser to
registration pursuant to this Section 7 shall be 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.
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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. 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.
(c) Indemnification.
i) The Company will indemnify the Purchaser with respect to
which registration, qualification or compliance has been effected pursuant
to this Agreement, and each underwriter, if any, and each person who
controls any underwriter within the meaning of Section 15 of the Securities
Act or the 1934 Act, against all expenses, claims, losses, damages or
liabilities (or actions in respect thereof), including any of the foregoing
incurred in settlement of any litigation, commenced or threatened, arising
out of or based on any untrue statement (or alleged untrue statement) of a
material fact contained in any registration statement, prospectus, offering
circular or other document, or any amendment or supplement thereto,
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,
in the light of the circumstances in which they were made, not misleading,
or any violation by the Company of the Securities Act, or the 1934 Act, or
any rule or regulation promulgated under the Securities Act, or the 1934
Act, or under any state securities law or under common law, applicable to
the Company in connection with any such registration, qualification or
compliance, and the Company will reimburse the Purchaser, each such
underwriter and each person who controls any such underwriter, for any
legal and any other expenses reasonably incurred, as such expenses are
incurred, in connection with investigating, preparing or defending any such
claim, loss, damage, liability or action; provided, however, that the
Company will not be liable (i) for amounts paid in settlement of any such
loss, claim, damage, liability or action if such settlement is effected
without the consent of the Company (which consent shall not be
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unreasonably withheld) and (ii) in any such case to the extent that any
such claim, loss, damage, liability or expense arises out of or is based on
any untrue statement or omission or alleged untrue statement or omission,
made in reliance upon and in conformity with written information furnished
to the Company by an instrument duly executed by the Purchaser, controlling
person or underwriter and stated to be specifically for use therein.
ii) The Purchaser will, if Shares held by the Purchaser are
included in the securities as to which such registration, qualification or
compliance is being effected, indemnify the Company, each of its directors
and officers, each underwriter, if any, of the Company's securities covered
by such a registration statement, each person who controls the Company or
such underwriter within the meaning of Section 15 of the Securities Act
against all claims, losses, damages and liabilities (or actions in respect
thereof) 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
will reimburse the Company, such directors, officers, persons, underwriters
or control persons 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 and stated to be specifically for use therein.
Notwithstanding the foregoing, the liability of the Purchaser under this
subsection shall not apply to amounts paid in settlement of any such loss,
claim, damage, liability or action if such settlement is effected without
the consent of the Purchaser (which consent shall not be unreasonably
withheld), and (ii) shall be limited in an amount equal to the aggregate
net proceeds of the shares sold by the Purchaser, except to the extent such
liability arises out of or is based on willful misconduct by the Purchaser.
iii) Each party entitled to indemnification under this Section
7(c) (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 unreasonably be 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
Agreement except to the extent that the failure to give such notice is
materially prejudicial to an Indemnifying Party's ability to defend such
action and provided further, that the Indemnifying Party shall not assume
the defense for matters as to which there is a conflict of interest or
separate and different defenses, but shall pay the fees and expenses of one
separate counsel retained by the Indemnified Party in the event of such
conflict of interest. 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.
iv) If the indemnification provided for in this Section 7(c)
is held by a court of competent jurisdiction to be unavailable to an
indemnified party with respect to any loss, liability, claim, damage, or
expense referred to therein, then the Indemnifying Party, in lieu of
indemnifying such Indemnified Party hereunder, shall contribute to the
amount paid or payable by such Indemnified Party as a result of such loss,
liability, claim, damage, or expense in such proportion as is appropriate
to reflect the relative fault of the Indemnifying Party on the one hand and
of the Indemnified Party on the other in connection with the statements or
omissions that resulted in such loss, liability, claim, damage, or expense
as well as any other relevant equitable considerations. The relative fault
of the Indemnifying
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Party and of the Indemnified Party shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement of a
material fact or the omission to state a material fact relates to
information supplied by the indemnifying party or by the indemnified party
and the parties' relative intent, knowledge, access to information, and
opportunity to correct or prevent such statement or omission.
v) The obligations of the Company and the Purchaser under
this Section 7(c) shall survive the completion of any offering of Shares in
a registration statement under this Section 7 and otherwise.
vi) Information by Purchaser. The Purchaser of Shares
included many registration shall furnish to the Company such information
regarding Purchaser, the Shares held by it and the distribution proposed by
such Purchaser as the Company may reasonably request in writing and as
shall be reasonably required in connection with any registration,
qualification or compliance referred to in this Agreement.
vii) Transfer of Registration Rights. The rights to cause the
Company to register securities granted the Purchaser under Section 7 may be
assigned to a transferee or assignee in connection with any transfer or
assignment of Shares by the Purchaser provided that:(i) such transfer may
otherwise be effected in accordance with applicable securities laws and
(ii) such assignee or transferee becomes a party to this Agreement and
assumes all of the obligations of the transferring Purchaser under Section
7.
8. Rule 144 Reporting. With a view to making available the benefits of
certain rules and regulations of the Commission which may at any time
permit the sale of the Shares to the public without registration, the
Company agrees to use its best efforts to:
(a) Make and keep public information available, as those terms are
understood and defined in Rule 144 under the Securities Act.
(b) File with the Commission in a timely manner all reports and
other documents required of the Company under the Securities Act and the
Securities Exchange Act of 1934, as amended; and
(c) So long as the Purchaser owns any Shares, to furnish to the
Purchaser forthwith upon request a written statement by the Company as to
its compliance with the reporting requirements of said Rule 144, and of the
Securities Act and the Securities Exchange Act of 1934, a copy of the most
recent annual or quarterly report of the Company, and such other reports
and documents of the Company and other information in the possession of or
reasonably obtainable by the Company as the Purchaser may reasonably
request in availing itself of any rule or regulation of the Commission
allowing the Purchaser to sell any such securities without registration.
9. Fees and Expenses. The Purchaser and the Company each agrees to pay its
own expenses incident to the performance of its obligations hereunder,
except that the Company agrees to pay the fees, expenses and disbursements
of the Purchaser's counsel.
10. Survival of the Representations, Warranties, etc. The respective
agreements, representations, warranties, indemnities, and other statements
made by or on behalf of the Company and 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.
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11. Notices. All communications hereunder shall be in writing, and, if
sent to the Purchaser shall be sufficient in all respects if delivered,
sent by registered mall, or by telecopy and confirmed to the Purchaser at:
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ Garcao
Lote CT-14
▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇
with a copy sent to:
▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Tel: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
or, if sent to the Company, shall be delivered sent by registered mall, or
by telecopy and confirmed to the Company at:
Finet Holdings Corporation
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, #▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Tel: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy sent to:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
▇▇▇▇▇ & ▇▇▇▇▇▇▇, LLP
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Tel: (▇▇▇)▇▇▇-▇▇▇▇
Fax: (▇▇▇)▇▇▇-▇▇▇▇
12. 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.
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(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.
(i)1. COMPANY:
(i)2. FINET HOLDINGS CORPORATION
(i)2.1. By: /s/ ▇▇▇ ▇▇▇▇▇▇▇
(i)2.2. President
PURCHASER:
(i)2.3. By: /s/ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ Garcao
(i)2.4. ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ Garcao
