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