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COMMON STOCK PURCHASE AGREEMENT
THIS COMMON STOCK PURCHASE AGREEMENT is made as of December 30, 1996
between FINET HOLDINGS CORPORATION, a Delaware corporation (the "Company"),
and each of the purchasers (unless otherwise stated, the singular
"Purchaser" shall include the plural "Purchasers", and vice versa) whose
names and authorized signatures appear on the signature page hereto (the
"Signature Page").
R E C I T A L S:
WHEREAS, the Company has authorized the issuance and sale outside the
United States (as that term is defined in Regulation S ("Regulation S")
under the United States Securities Act of 1933, as amended (the "Securities
Act") of 6,000,000 shares of its Common Stock (the "Shares); and
WHEREAS, the Purchasers desires to purchase and the Company desires to sell
the Shares 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 the Shares. The Company agrees to sell to the
Purchasers and upon the basis of the representations and warranties, and
subject to the terms and conditions, set forth in this Agreement, the
Purchasers, severally but not jointly, agree to purchase that number of the
Shares for the purchase price set forth opposite such Purchaser's name on
the Signature Page.
2. Closing Date; Escrow; Delivery. Subject to the Company satisfying the
conditions for becoming a Reporting Issuer as that term is defined in Rule
902(l) of Regulation S of the Securities Act, by or before January 15,
1997, the closing date shall be the date the Company becomes a Reporting
Issuer (the "Primary Closing Date"). In such event, on the Primary Closing
Date each of the Purchasers shall deliver payment of the Purchase Price for
such Purchaser's Shares in immediately available funds to the Company or
its appointed agent, and certificates representing the Shares to be
purchased by the Purchasers shall be delivered by the Company to an escrow
account for the Purchasers maintained with Continental Stock Transfer &
Trust Company, Inc. or comparable escrow agent. On the 41st day after the
Primary Closing Date the Share certificates, whose transfer shall be
unrestricted, shall be released from escrow to the Purchasers.
If the Company does not satisfy the conditions for becoming a Reporting
Issuer by or before January 15, 1997, the Purchasers shall have the option
to purchase the Shares. The closing date in such event will be mutually
agreed upon by the parties (the "Alternative Closing Date") (the Primary
and Alternative Closing Dates are collectively referred to herein as the
"Closing Date"). On the Alternative Closing Date the Purchasers shall
deliver payment of the Purchase Price to the Company or its appointed agent
and the Company shall deliver the Share certificates to the Purchasers with
appropriate Regulation S restrictive legends. The Purchasers understand
that if the Company does not become a Reporting Issuer by or before the
Alternative Closing Date, its Share ownership may be subject to up to a 12
month Restricted Period as defined in Rule 902(m) of Regulation S.
3. Representations and Warranties of the Company. The Company
represents and warrants to, and agrees with, the Purchasers that:
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(a) Organization and Standing; Articles and Bylaws. The Company is a
corporation duly organized and existing under, and by virtue of, the laws
of the state of Delaware and is in good standing under such laws. The
Company has the requisite corporate power to own and operate its properties
and assets, and to carry on it business as presently conducted and as
proposed to be conducted. The Company is qualified, licensed or
domesticated as a foreign corporation in all jurisdictions where the nature
of its activities or of its properties owned or leased makes such
qualification, licensing or domestication necessary at this time. The
Company has furnished you with copies of its Articles of Incorporation and
Bylaws. Said copies are true, correct and complete and contain all
amendments through the date of this Agreement.
(b) Corporate Power. The Company has now, or will have at the Closing
Date, all requisite legal and corporate power to enter into this Agreement,
to sell the Shares hereunder, and to carry out and perform its obligations
under the terms of this Agreement.
(c) Subsidiaries. The Company has no subsidiaries other than (i)
Finet Corporation, which is a wholly-owned subsidiary of the Company; (ii)
Finet Correspondent, Inc., a wholly-owned subsidiary of the Company; (iii)
FWC Shell Company ("FWC"), which is a wholly-owned subsidiary of the
Company; (iv) RPM Affiliates, a wholly-owned subsidiary of FWC; (v) RPM
Mortgage, Inc., a wholly-owned subsidiary of FWC; and (vi) Fremont
Mortgage, Inc., a wholly-owned subsidiary of FWC (sometimes hereinafter
collectively referred to as the "Subsidiaries"). The Company does not own,
directly or indirectly, shares of stock or other interests in any other
corporation, association, joint venture, or business organization except as
may be listed on a Schedule of Exceptions filed as an exhibit hereto.
(d) Capitalization. The authorized capital stock of the Company is
30,000,000 shares of Common Stock. There are issued and outstanding
8,796,576 shares of Common Stock. The issued and outstanding shares of
Common Stock have been duly authorized and validly issued, are fully paid
and nonassessable and were issued in compliance with all applicable state
and federal laws concerning the issuance of securities. There are no
outstanding rights, options, warrants, conversion rights, or agreements for
the purchase or acquisition from the Company of any shares of its capital
stock, except (i) that options for 438,876 shares of the Company's Common
Stock have been granted to directors, officers and employees of the Company
pursuant to the Company's 1989 Incentive Stock Option Plan and are
currently outstanding; (ii) a debenture convertible into a maximum of
2,000,000 shares of Common Stock is issued and outstanding to Cumberland
Partners; (iii) warrants for 131,167 shares have been granted to
underwriters in connection with the May 1993 Unit Offering, and are
currently outstanding; and (iv) warrants for 425,000 Common shares have
been granted to certain bridge lenders of the Company.
(e) Authorization.
(i) All corporate action on the part of the Company, its officers,
directors, and stockholders necessary for the sale and issuance of the
Shares pursuant hereto and the performance of the Company's obligations
hereunder, has been taken or will be taken prior to the Closing. This
Agreement is a legal, valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms, except as
limited by bankruptcy, insolvency, reorganization, moratorium or similar
laws of general application affecting enforcement of creditors' rights, and
except as limited by application of legal principles affecting the
availability of equitable remedies.
(ii) The Shares, when issued in compliance with the provisions of this
Agreement, will be validly issued, fully paid and nonassessable, and will
be free of any liens or encumbrances; provided, however, that such shares
may be subject to restrictions on transfer under state and/or federal
securities laws as set forth herein, and as may be required by future
changes in such laws.
(iii) No shareholder of the Company has any right of first refusal or any
preemptive rights in connection with the issuance of the Shares or of
Common Stock by the Company.
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(f) Financial Statements. The Company's audited balance sheet,
statement of income and expenses, and Annual Report on Form 10-K for the
year ended December 31, 1995 and the Company's unaudited balance sheets,
statements of income and expenses, and Quarterly Reports on Form 10-Q for
the 3-month periods ending March 31, 1996, June 30, 1996, and September 30,
1996 (hereinafter collectively referred to as the Financial Statements)
have been supplied to the Purchaser, are true and correct, have been
prepared in accordance with generally accepted accounting principles
consistently applied (except as disclosed therein and except that the
Financial Statements do not contain the footnotes required by generally
accepted accounting principles), and fairly present the financial condition
of the Company and the results of the operations of the Company as of the
date thereof.
(g) The Company has delivered to the Purchaser a copy of its Private
Placement Memorandum dated October 1, 1996.
(h) Material Contracts and Commitments. All the material contracts,
commitments, agreements, and instruments to which the Company is a party
are legal, valid, binding, and in full force and effect in all material
respects and enforceable by the Company in accordance with their terms
except as limited by bankruptcy, insolvency, reorganization, moratorium, or
similar laws of general application affecting enforcement of creditors'
rights, and except as limited by application of legal principles affecting
the availability of equitable remedies. The Company is not in material
default under any of such contracts. A list of all such material
contracts, agreements and instruments is set forth in Exhibit A hereto.
(i) Compliance with Other Instruments, None Burdensome, etc. Neither
the Company nor the Subsidiary is in violation of any term of its
respective Articles of Incorporation or Bylaws, or in any material respect
of any mortgage, indenture, contract, agreement, instrument, or, to the
best knowledge of the Company, any judgment, decree, order, statute, rule,
or regulation applicable to it. The execution, delivery, and performance
by the Company of this Agreement, and the issuance and sale of the Shares
pursuant hereto, will not result in any such violation or be in conflict
with or constitute a default under any such term, or cause the acceleration
of maturity of any loan or material obligation to which the Company or the
Subsidiary is are a party or by which either of them is bound or with
respect to which either of them is an obligor or guarantor, or result in
the creation or imposition of any material lien, claim, charge,
restriction, equity or encumbrance of any kind whatsoever upon, or, to the
best knowledge of the Company after due inquiry, give to any other person
any interest or right (including any right of termination or cancellation)
in or with respect to any of the material properties, assets, business or
agreements of the Company or the Subsidiary. To the best knowledge of the
Company after due inquiry, no such term or condition materially adversely
affects or in the future (so far as can reasonably be foreseen by the
Company at the date of this Agreement) may materially adversely affect the
business, property, prospects, condition, affairs, or operations of the
Company and the Subsidiary.
(j) Litigation, etc. Other than as listed on Exhibit B hereto, there
are no actions, proceedings or investigations pending (or, to the best of
the Company's knowledge, any basis therefor or threat thereof), which,
either in any case or in the aggregate, might result in any adverse change
in the business, prospects, conditions, affairs, or operations of the
Company or in any of its properties or assets, or in any impairment of the
right or ability of the Company to carry on its business as proposed to be
conducted, or in any material liability on the part of the Company, or
which question the validity of this Agreement or any action taken or to be
taken in connection herewith.
(k) Governmental Consent, etc. No consent, approval, or authorization
of, or designation, declaration, or filing with, any governmental unit is
required on the part of the Company in connection with the valid execution
and delivery of this Agreement, or the offer, sale or issuance of the
Shares, or the consummation of any other transaction contemplated hereby
(except qualification or exemption under the California Corporate
Securities Law, which exemption or qualification will be available or
obtained and will be effective on the Closing Date).
(l) Offering. The offer, sale and issuance of the Shares in conformity
with the terms of this Agreement will not violate the Securities Act.
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(m) Use of Proceeds. The net proceeds from the sale of the Shares
shall be used to implement the Company's voluntary
reorganization/recapitalization plan as set forth in the Private Placement
Memorandum dated October 1, 1996.
(n) Insurance. Neither the Company nor any of its Subsidiaries
maintain in force any insurance policies as of the date of this Agreement.
(o) Intellectual Property, etc. Neither the Company nor any of its
Subsidiaries own the rights to any trademarks, service marks, trade names,
copyrights, patents or other intellectual property. Neither the Company
nor any Subsidiary has received any notice or claim of infringement of any
patents, inventions, rights, trademarks, trade names or copyrights of
others with respect to any processes, methods, formulae or procedures used
by any of said corporations in the present or planned conduct of their
respective businesses.
(p) Title to and Condition of Properties. The Company and the
Subsidiaries have good and marketable title to all their respective
tangible and intangible property and assets, including those reflected in
the Financial Statements (except such property or assets as have since
September 30, 1995 been sold or otherwise disposed of in the ordinary
course of business), and such property and assets are subject to no
mortgage or security interests, conditional sales contract, charge, lien or
encumbrance (except for the lien of current taxes not yet due and payable
and such imperfections of title, easements and encumbrances, if any, as are
not substantial in character, amount or extent and do not materially
detract from the value of, or interfere with the present use of the
properties subject thereto or affected thereby, or otherwise materially
impair the business operations of the Company and the Subsidiary), and
subsequent to September 30, 1995 neither the Company nor the Subsidiaries
has sold or disposed of any of its property and assets or obligated itself
to do so except in the ordinary course of business. Except for such minor
defects as are not substantial in character and which do not have a
materially adverse effect upon the validity thereof, all material real and
personal property leases to which the Company or the Subsidiaries are a
party are in good standing, valid and effective, and there is not under any
such lease any existing material default or event which with notice or
lapse of time or both would constitute a material default and in respect of
which the Company or the Subsidiaries has not taken reasonable steps to
prevent such a default from occurring.
(q) Taxes. The Company and the Subsidiaries represent that upon
completion of the offering of the Shares they will file all tax returns
that are required to have been filed by them prior to the date of this
Agreement with appropriate federal, state, county and local governmental
agencies or instrumentalities.
(r) Disclosure. This Agreement, the exhibits hereto, the Financial
Statements, and all certificates delivered to you pursuant to this
Agreement, when read together, do not contain any untrue statement of a
material fact and do not omit to state a material fact necessary in order
to make the statements contained therein or herein not misleading, it being
understood that the Private Placement Memorandum contains estimates and
projects which have been made in good faith by the Company and no warranty
of such projections is expressed or implied hereby. There is, to the best
of the Company's knowledge, no fact which materially adversely affects the
business, prospects, condition, affairs or operations of the Company or any
of its properties or assets which has not been set forth in this Agreement
, the exhibits hereto, or the Financial Statements.
(s) The Shares:
(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;
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(iii) will not have been, individually and collectively, issued or sold
in violation of any pre-emptive or other similar rights of the holders of
any securities of the Company;
(iv) will not subject the holders thereof to personal liability by reason
of being such holders; and
(v) will be, upon release from escrow at the termination of the Regulation
S Restricted Period, issued to the Purchaser free of any transfer
restrictions or legends.
(t) The Company is not currently a Reporting Issuer as defined in
Regulation S and acknowledges that attaining such status is a condition
precedent to the Purchaser's obligations hereunder.
(u) The sale of the Shares pursuant to this Agreement will be made in
accordance with the provisions and requirements of Regulation S and
applicable state or foreign law.
(v) No offer to buy the Shares was made to the Company by any person in the
United States.
(w) None of the Company, any affiliate of the Company, or any person acting
on behalf of the Company or any such affiliate has engaged, or will engage,
in any Directed Selling Efforts with respect to the Shares or any
distribution, as that term is used in the definition of Distributor, with
respect to the Shares.
(x) The transactions contemplated by this Agreement:
(i) have not been prearranged with a purchaser who is in the United States
or who is a U.S. Person; and
(ii) are not part of a plan or scheme to evade the registration provisions
of the Act.
(y) Neither the Company, nor any affiliate of the Company, nor any person
acting on their behalf, has undertaken or carried out any activity for the
purpose of, or that could reasonably be expected to have the effect of,
conditioning the market in the United States for any of the Shares,
including, but not limited to, general solicitation activities or
advertising.
4. Representations and Warranties of the Purchaser. Each Purchaser,
severally but not jointly, 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 Shares, 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 Shares.
(c) The Company has given the Purchaser the opportunity to have answered
all of the Purchaser's questions concerning the Company and its business
and has made available to the Purchaser all information requested by the
Purchaser which is reasonably necessary to verify the accuracy of other
information furnished by the Company. The Purchaser has received and
evaluated all information about the Company and its business which the
Purchaser deems necessary to formulate an investment decision, and does not
desire any further information.
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(d) The Purchaser understands that the Shares are being offered and sold to
it in reliance on specific exemptions or non-application from the
registration requirements of federal and state securities laws and that the
Company is relying upon the truth and accuracy of the representations,
warranties, agreements, acknowledgments, and understandings of the
Purchaser set forth herein in order to determine the applicability of such
exemptions or non-applications and the suitability of the Purchaser to
acquire the Shares.
(e) The Purchaser is not a U.S. Person (as defined in Regulation S) and is
not an affiliate of the Issuer.
(f) No offer of the Shares was made to the Purchaser in the United States.
(g) At the time the buy order for the Shares was originated the Purchaser
was located outside the United States.
(h) The Purchaser is aware that the Shares have not been and will not be
registered under the Securities Act and may be offered or sold only
pursuant to registration under the Securities Act or an available exemption
therefrom. The Purchaser is acquiring the Shares for investment and
without any present intention to engage in a distribution thereof.
(i) The Purchaser is either (i) acquiring the Shares 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.
(j) The Purchaser has the knowledge and experience in financial and
business matters to evaluate the merits and risks of the proposed
investment.
(k) The Purchaser is an "Accredited Investor" as that term is
defined under Rule 501 adopted pursuant to the Securities Act. "Accredited
Investors" are defined in Rule 501 to include among others: (1) Various
specified institutional investors (such as banks, savings and loan
associations, licensed brokers or dealers, insurance companies, investment
companies, small business investment companies, employee benefit plans
having assets in excess of $5,000,000, and self-directed plans having
investment decisions made solely by persons that are Accredited Investors);
(2) Any entity with total assets in excess of $5,000,000, not formed for
the specific purpose of acquiring the securities offered; (3) Any person
who had individual income in excess of $200,000 in each of the two most
recent years or joint income with that person's spouse in excess of
$300,000 in each of those years and has a reasonable expectation of
reaching the same income level this year; (4) Any person whose individual
net worth (or joint net worth with the person's spouse) at the time of
purchase exceeds $1,000,000; (5) Directors and executive officers of Finet;
(6) Trusts with total assets in excess of $5,000,000 not formed for the
specific purpose of acquiring the securities offered, whose purchase is
directed by a sophisticated person prescribed in Rule 506(b)(2)(ii); and
(7) Any entity in which all the equity owners are deemed accredited.
(l) The Purchaser understands that if the Company does not qualify as a
Regulation S Reporting Company as of the Alternative Closing Date,
appropriate legends restricting transfer will be placed on each Common
Stock share certificate delivered at such time.
(m) The Purchaser:
(i) will not, during the period commencing on the Primary Closing Date and
ending on the day 40 days after the Primary Closing Date, or alternatively,
the period commencing on the Alternative Closing Date and ending 12 months
to the day after such date (the "Restricted Period"), offer or sell the
Shares in the United States, to a U.S. Person or for the account or benefit
of a U.S. Person or other than in accordance with Rule 903 or 904 of
Regulation S, pursuant to registration under the Securities Act, or
pursuant to an available exemption from registration; and
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(ii) will not, after the expiration of the Restricted Period, offer, sell,
pledge, or otherwise transfer the Shares in the United States during the
period ending 120 days from the Primary Closing Date unless such offer,
sale, pledge or other transfer is pursuant to registration under the
Securities Act, or pursuant to an available exemption from registration.
(n) None of the Purchaser, its affiliates or any person acting on behalf
of the Purchaser or any such affiliate has engaged, or will engage, in any
Directed Selling Efforts with respect to the Shares or any distribution, as
that term is used in the definition of Distributor, with respect to the
Shares.
(o) The transactions contemplated by this Agreement:
(i) have not been pre-arranged with a purchaser located in the United
States or who is a U.S. Person; and
(ii) are not part of a plan or scheme to evade the registration provisions
of the Securities Act.
(p) The Purchaser has no put options, short positions, or other similar
instruments with respect to any of the Company's securities and has not
entered and does not have the intention of entering, into any such
instruments with respect to the Shares or securities of the same class.
(q) If the Purchaser offers and sells the Shares during the Restricted
Period following the Alternative Closing Date, then it will do so only (i)
in accordance with the provisions of Regulation S, (ii) pursuant to
registration of the Shares under the Securities Act, or (iii) pursuant to
an available exemption from the registration requirements of the Securities
Act.
(r) The Purchaser understands that each person exercising a Warrant will be
required to provide a certification that the Warrant is not owned by or
being exercised by a U.S. Person, or an opinion of counsel, satisfactory to
counsel to the Company, that the Warrant Shares have been registered or
that an exemption from registration is available.
(s) The Purchaser understands that each share certificate of Common Stock
and each Warrant certificate will bear a legend reflecting the foregoing.
5. Affirmative Covenants of the Company. The Company covenants and agrees
with the Purchasers as follows:
(a) To refrain from engaging, and to insure that none of its affiliates
will engage, in any Directed Selling Efforts with respect to the Shares or
any distribution, as that term is used in the definition of Distributor,
with respect to the Shares;
(b) To make every reasonable effort to attain the status of Reporting
Issuer as that term is defined in Regulation S;
(c) In the event the Company fails to attain the status of Reporting
Issuer as defined in Regulation S, it covenants that the Purchasers have
the option of purchasing up to the aggregate amount of Shares offered,
provided that the Restricted Period shall be 12 months instead of 40 days;
(d) The Company will appoint to its Board of Directors a person chosen
by the Purchasers.
(e) To provide an opinion of counsel to the Company in a form
acceptable to the Purchasers.
(f) The Company hereby grants to each Purchaser the right of
participation to purchase, pro rata, all or any part of New Securities (as
defined in this Section 5(f)) which the Company may, from time to time,
propose to sell and issue. A pro rata share, for purposes of this right of
participation, is the quotient obtained by dividing the aggregate
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number of shares of Common Stock held by the Purchaser plus the shares of
Common Stock issuable upon the exercise of any warrants then held by the
Purchaser by the sum of (x) the total number of outstanding shares of
Common Stock plus (y) the total number of shares of Common Stock issuable
upon conversion of all outstanding capital stock convertible into Common
Stock or upon the exercise of all options and warrants to purchase the
Company's Common Stock; notwithstanding the foregoing, if including in the
foregoing equation shares of Common Stock which are issuable upon
conversion of all outstanding capital stock convertible into Common Stock
or upon the exercise of all options and warrants to purchase the Company's
Common Stock results in the Purchaser receiving a lesser right of
participation than if such shares are not included, then such shares shall
not be included. For the purposes of this Section 5(f), Purchaser includes
any general partners and affiliates of a Purchaser. A Purchaser shall be
entitled to apportion the right of participation hereby granted it among
itself and its partners and affiliates in such proportions as it deems
appropriate.
(i) Except as set forth below, "New Securities" shall mean any shares of
capital stock of the Company, including Common Stock and Preferred Stock,
whether now authorized or not, and rights, options or warrants to purchase
said shares of capital stock, and securities of any type whatsoever that
are, or may become, convertible into said shares of capital stock. Notwith
standing the foregoing, "New Securities" does not include: (A) securities
offered to the public generally pursuant to an underwritten registration
statement under the Securities Act, (B) securities issued pursuant to the
acquisition of another corporation by the Company by merger, purchase of
substantially all of the assets or other reorganization whereby the Company
or its shareholders own not less than fifty-one percent (51%) of the voting
power of the surviving or successor corporation, (C) shares of the
Company's Common Stock or options exercisable for the purchase of Common
Stock issued 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, (D) stock issued pursuant to any
currently outstanding rights or agreements including, without limitation,
convertible securities, options and warrants, (E) stock issued in
connection with any stock split, stock dividend or recapitalization by the
Company.
(ii) In the event that the Company proposes to undertake an issuance of New
Securities, it shall first make an offering of such new securities to each
Purchaser by giving the Purchaser written notice of its intention,
describing the type of New Securities, and the price and terms upon which
the Company proposes to issue the same. The Purchaser shall have fifteen
(15) business days from the date of receipt of any such notice to agree to
purchase up to its pro rata share of such New Securities for the price and
upon the terms specified in the notice by giving written notice to the
Company and stating therein the quantity of New Securities to be purchased.
(iii) In the event that the Purchaser fails to exercise the right of
participation within said fifteen (15) business day period, the Company
shall promptly, in writing, inform each Purchaser which purchases all the
shares available to it ("Fully-Exercising Purchaser") of any other
Purchaser's failure to do likewise. During the ten-day period commencing
after receipt of such information, each Fully-Exercising Purchaser shall be
entitled to purchase, pro rata, shares not subscribed for by the other
Purchasers. If all New Securities are not elected to be obtained as
provided herein, the Company shall have sixty (60) days thereafter to sell
or enter into an agreement (pursuant to which the sale of New Securities
covered thereby shall be closed, if at all, within thirty (30) days from
the date of said agreement) to sell the New Securities not elected to be
purchased by the Purchaser at the price and upon terms no more favorable to
the purchasers of such securities than specified in the Company's notice.
In the event the Company has not sold the New Securities or entered into an
agreement to sell the New Securities within said sixty (60) day period (or
sold and issued New Securities in accordance with the foregoing within
thirty (30) days from the date of said agreement), the Company shall not
thereafter issue or sell any New Securities without first offering such
securities in the manner provided above.
(iv) The right of participation granted under this Agreement shall expire
upon the closing of an underwritten registered public offering of the
Common Stock of the Company to the general public with an aggregate price
to the public of not less than $10,000,000 which is effected pursuant to a
registration statement filed with, and declared effective by, the
Securities and Exchange Commission under the Securities Act.
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(v) The right of participation hereunder is not assignable, in whole or in
part, except (A) from the Purchaser to an entity controlling, controlled by
or under common control with the Purchaser and (B) from the Purchaser to a
transferee of the Shares so long as such transferee acquires not less than
300,000 shares of Common Stock (appropriately adjusted for any stock split,
stock dividend or similar capital reorganization).
6. Negative Covenants of the Company. The Company further covenants and
agrees that without the prior written approval of the Purchasers, 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
acquisition of Monument Mortgage, Inc. and Preference America Mortgage
Network, 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. Conditions Precedent to the Purchasers' Obligations. The obligations
of the Purchasers hereunder are subject to the performance by the Company
of its obligations hereunder and to the satisfaction of the following
additional conditions precedent on or before the Closing Date:
(a) The representations and warranties made by the Company in this
Agreement shall, unless waived by the Purchasers, be true and correct as of
the date hereof and at the Closing Date, with the same force and effect as
if they had been made on and as of the Closing Date.
(b) After the date hereof until the Closing Date there shall not have
occurred:
(i) any change, or any development involving a prospective change, in
either (A) the condition, financial or otherwise, or in the earnings,
business or operations, or in or affecting the properties of the Company or
(B) the financial or market conditions or circumstances in the United
States, in either case which, in the Purchaser's judgment, is material and
adverse and makes it impractical or inadvisable to proceed with the
offering, sale, or delivery of the Shares;
(ii) an imposition of a new legal or regulatory restriction not in effect
on the date hereof, or any change in the interpretation of existing legal
or regulatory restrictions, that materially and adversely affects the
offering, sale, or delivery of the Shares; or
110
(iii) a suspension, or material limitation of, trading (A) generally on
or by the New York Stock Exchange or NASDAQ, or (B) of any securities of
the Company on any exchange or in any over-the-counter market.
(c) Effective as of the Closing Date, the Company's Board of
Directors shall include one person designated by the Purchasers.
(d) By or before the Primary Closing Date the Company shall have
satisfied the conditions for becoming a Reporting Company as defined in
Rule 902(l) of Regulation S of the Securities Act.
8. Conditions Precedent to the Company's Obligations. The obligations of
the Company hereunder are subject to the performance by the Purchasers of
its obligations hereunder and to the satisfaction of the following
additional condition precedent:
The representations and warranties made by the Purchasers in this Agreement
shall, unless waived by the Company, be true and correct at the Closing
Date, with the same force and effect as if they had been made on, and as
of, the Closing Date.
9. Registration Rights
(a) Request for Registration. In case the Company shall receive from
the Purchaser a written request that the Company effect any registration,
qualification, or compliance with respect to all or a part of the Shares
the Company will: (i) as soon as practicable, use its diligent best
efforts to effect all such registrations, qualifications and compliances
(including, without limitations, the execution of an undertaking to file
post-effective amendments, appropriate qualifications under the applicable
blue sky or other state securities laws and appropriate compliance with
exemptive regulations issued under the Securities Act and any other
governmental requirements or regulations) as may be so requested and as
would permit or facilitate the sale and distribution of all or such portion
of the Purchaser's Shares as are specified in such request, together with
all or such portion of the Shares of any Holder or Holders joining in such
request as are specified in a written request given within thirty days
after receipt of such written notice from the Company; provided that the
Company shall not be obligated to take any action to effect such
registration, qualification or compliance pursuant to this clause (i): (A)
After the Company has effected two such registrations pursuant to this
subparagraph (i) and such registrations have been declared or ordered
effective; or (B) If the amount of securities being offered for sale is
less than 25 percent of the Shares.
Subject to the foregoing clauses (A) through (B), the Company shall file a
registration statement covering the Shares so requested to be registered as
soon as practical, but in any event within ninety days, after receipt of
the request or requests of the Purchaser; provided, however, that if the
Company shall furnish to such Purchaser a certificate signed by the
President of the Company stating that in the good faith judgment of the
Board of Directors it would be seriously detrimental to the Company and it
stockholders for such registration statement to be filed at the date filing
would be required and it is therefore essential to defer the filing of such
registration statement, the Company shall have an additional period of not
more than ninety days within which to file such registration statement.
(b) In the event registration of the Shares does not become effective
within 150 days after the final closing of the Shares for any reason other
than matters beyond the control of the Company, the Purchasers shall be
granted Common Stock Purchase Warrants, pro rata in proportion to their
Common Stock purchase, in an aggregate amount of 500,000 shares at $0.50
per share and 500,000 shares at $1.00 per share.
(c) Expenses of Registration. All expenses incurred in connection with
any registration, qualification or compliance pursuant to this Agreement,
including without limitation, all registration, filing, and qualification
fees, printing expenses, fees and disbursements of counsel for the Company,
and expenses of any special audits incidental to or required by such
registration, shall be borne by the Company.
111
(d) Indemnification.
(i) The Company will indemnify the Purchaser with respect to such
registration, qualification, or compliance effected pursuant to this
paragraph, and each underwriter, if any, and each person who controls any
underwriter of the Shares held by or issuable to the Purchaser, against all
claims, losses, damages, and liabilities (or actions in respect thereto)
arising out of or based on any untrue statement (or alleged untrue
statement) of a material fact contained in any prospectus, offering
circular or other document (including any related registration statement,
notification or the like) incident to any such registration, qualification,
or compliance, or based on any omission (or alleged omission) to state
therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, or any violation by the Company of
any rule or regulation promulgated under the Securities Act applicable to
the Company and relating to action or inaction required of the Company in
connection with any such registration, qualification, or compliance, and
will reimburse the Purchaser, each such underwriter and each person who
controls any such underwriter, for any legal and any other expenses
reasonably incurred in connection with investigating or defending any such
claim, loss, damage, liability or action, provided that the Company will
not be liable in any such case to the extent that any such claim, loss,
damage or liability arises out of or is based on any untrue statement or
omission based upon written information furnished to the Company by an
instrument duly executed by such Purchaser or underwriter specifically for
use therein.
(ii) The Purchaser will, if Shares held by or issuable to such 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 who sign such registration statement, each
underwriter, if any, of the Company's securities covered by such a
registration statement, and each person who controls the Company within the
meaning of the Securities Act, against all claims, losses, damages, and
liabilities (or actions in respect thereto) arising out of or based on any
untrue statement (or alleged untrue statement) of a material fact contained
in any such registration statement, prospectus, offering circular, or other
document, or any omission (or alleged omission) to state therein a material
fact required to be stated therein or necessary to make the statements
therein not misleading, and will reimburse the Company, such directors,
officers, persons, or underwriters 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 such Purchaser specifically for use therein.
(iii) Each party entitled to indemnification under this paragraph (d)
(the Indemnified Party) shall give notice to the party required to provide
indemnification (the Indemnifying Party) promptly after such Indemnified
Party has actual knowledge of any claim as to which indemnity may be
sought, and shall permit the Indemnifying Party to assume the defense of
any such claim or any litigation resulting therefrom, provided that counsel
for the Indemnifying Party, who shall conduct the defense of such claim or
litigation, shall be approved by the Indemnified Party (whose approval
shall not be unreasonably withheld), and the Indemnified Party may
participate in such defense at such party's expense, and provided further
that the failure of any Indemnified Party to give notice as provided herein
shall not relieve the Indemnifying Party of its obligations under this
paragraph. No Indemnifying Party, in the defense of any such claim or
litigation, shall, except with the consent of each Indemnified Party,
consent to entry of any judgment or enter into any settlement which does
not include as an unconditional term thereof the giving by the claimant or
plaintiff to such Indemnified Party of a release from all liability in
respect to such claim or litigation.
(e) Transfer of Registration Rights. The rights to cause the Company to
register your securities granted to you by the Company under Section 9(a)
may be assigned by you to a transferee or assignee of any of your Shares,
provided, that the Company is given written notice by you at the time of or
within a reasonable time after said transfer, stating the name and address
of said transferee or assignee and identifying the securities with respect
to which such registration rights are being assigned.
112
10. 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.
11. 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.
12. Notices. All communications hereunder shall be in writing, and, if
sent to the Purchasers shall be sufficient in all respects if delivered,
sent by registered mail, or by telecopy and confirmed to the Purchasers at
the addresses listed on the attached Schedule of Purchasers.
with a copy sent to:
Xxxxx X. Xxxxx, Esq.
Xxxxxxxx & Werson
Xxx Xxxxxxxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxxxxxxx, XX 00000
Tel: (000) 000-0000
Fax: (000) 000-0000
or, if sent to the Company, shall be delivered, sent by registered mail, or
by telecopy and confirmed to the Company at:
Finet Holdings Corporation
000 Xxxxxxxxxx Xxxxxx, #000
Xxx Xxxxxxxxx, XX 00000
Tel: (000) 000-0000
Fax: (000) 000-0000
with a copy sent to:
Xxxxxxx X. Xxxxx, Esq.
Xxxxxx, Xxxxxxxxx & Xxxxxx, LLP
000 Xxxxxxxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxxxxx, XX 00000
Tel: (000) 000-0000
Fax: (000) 000-0000
13. 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 9
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.
113
(c) This Agreement shall be governed by, and construed in accordance with,
the laws of the State of California.
(d) The headings of the sections of this document have been inserted for
convenience of reference only and shall not be deemed to be a part of this
Agreement.
IN WITNESS HEREOF, the parties hereto have duly executed and delivered this
Agreement, all as of the day and year first above written.
COMPANY:
FINET HOLDINGS CORPORATION
By:
President
114
(Signature Page to Common Stock Purchase Agreement)
________________________________________
XXXX XXXXX XXXXXX GARCAO
________________________________________
XXXX XXXXX XXXXXX
XXXX XXXXXXX XXXXX
XXXXXXX XXXX XXXXXXX BALBI
XXXXXXX XXXXXX Q. DE XXXXXX
XXXXXX SPYNOLA XXXXXXXX
Xx. XXXX XXXXX XXXXXXXX XXXXXXX
XXXX XXXXXX XXXXX XXXXXX
115
(Signature Page No. 2 to Common Stock Purchase Agreement)
XXXXXX XXXXXX XXXXXX
XXXXXX ALBUQUERQUE X'XXXX
XXXXXX XXXXXXXX XXXXXXX
XXXXXX X'XXXX CAPUCHO
XX. XXXXXX XXXXXXXX XX XXXXXXX
116
EXHIBIT A
FINET HOLDINGS CORPORATION
MATERIAL CONTRACTS, AGREEMENTS AND INSTRUMENTS
1. Finet Holdings Corporation and Monument Mortgage, Inc. Reorganization
Agreement, dated December 30, 1996;
2. Stock Purchase Agreement between Finet Holdings Corporation and
Preference America Mortgage Network , dated December 30, 1996.
