Document:

Exhibit 10

 

Exhibit 10.3            Option to Acquire Shares from a

Shareholder

 

 

OPTION TO ACQUIRE SHARES FROM A SHAREHOLDER

 

THIS AGREEMENT

is by and between TEMPORARY FINANCIAL SERVICES, INC. (“TFS”) which owns 800,000

shares of the common stock of Genesis Financial, Inc., a Washington corporation

(the “GENESIS”), and Michael A. Kirk and Douglas B. Durham (collectively the

“Buyer”).

 

R E C I T A L S

 

This Agreement

is entered into upon the basis of the following facts and intentions of the

parties:

 

A.                                   TFS

owns 800,000 shares of the common stock (collectively the “Shares”) of GENESIS.

 

B.                                     Buyer

desires to obtain an option to purchase the Shares from TFS and TFS is willing

to grant such an option to Buyer.

 

NOW,

THEREFORE, for good and valuable consideration, the receipt and adequacy of

which are hereby acknowledged, the parties hereby agree as follows:

 

1.                                       Option.

As of the date hereof, TFS grants to Buyer an option (the “Option”) to purchase

up to 200,000 of the Shares from TFS upon the terms, covenants and conditions

hereinafter set forth. The share certificates representing the Shares shall

hereafter bear a legend referring to this Option Agreement.

 

2.                                       Consideration

for the Option. This Option is given in connection with the transaction (the

“Transaction”) described in the Stock Investment Agreement executed on January

25, 2002, and the agreement of TFS to sell the securities to Buyers is an

integral part of the transaction, supported by adequate consideration, receipt

of which is hereby acknowledged by TFS.

 

3.                                       Term

and Exercise. Buyer may exercise the Option at any time up to and until

December 31, 2005, by giving TFS written notice of the intention to exercise

the Option.

 

4.                                       Purchase

Price. The purchase price (“Purchase Price”) which Buyer agrees to pay upon

exercise of the Option is the lesser of Five Dollars ($5.00) per share, or the

Initial Public Offering Price if GENESIS conducts an Initial Public Offering

prior to the expiration date of the Option. 

The Purchase Price is payable in cash.

 

5.                                       Number

of Shares. The number and class of Shares specified in this Agreement and/or

the Purchase Price are subject to appropriate adjustment in the event of any

merger, reorganization, consolidation, recapitalization, liquidation, stock

dividend, split-up, share combination or other change in the corporate

structure of the GENESIS affecting the Shares.

 

6.                                       Representations

and Warranties of TFS. TFS represents and warrants to the Buyer that:

 

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(a)                                  TFS

has full power and authority to execute and deliver this Agreement, and this

Agreement is a valid and binding agreement enforceable against the TFS in

accordance with its terms;

 

(b)                                 Neither

the execution of this Agreement nor the sale of the Shares will constitute a

violation of, or conflict with, or default under, any contract, commitment,

agreement, understanding or arrangement to which the TFS is a party or by which

TFS is bound or of any law, decree, or judgment;

 

(c)                                  Now

and up to the time of exercise of the Option, TFS will have valid title to the

Shares, free and clear of all claims, liens, charges, encumbrances and security

interests, and will transfer such Shares upon exercise of the Option to the

Buyer free and clear of all claims, liens, charges, encumbrances and security

interests;

 

(d)                                 The

Purchase Price may or may not reflect the actual value of the Shares, that TFS

has investigated the value independently, that it has been represented by

independent counsel, and that it understands that the value of the Shares when

and if the Option is exercised may be significantly higher than the Purchase

Price; and

 

(e)                                  Prior

to December 31, 2005, TFS shall not sell, assign, transfer, pledge,

hypothecate, or otherwise encumber 200,000 of the Shares.

 

7.                                       Cooperation.

Each party shall, upon request of the other party, promptly execute and deliver

all additional documents reasonably deemed by the requesting party to be

necessary, appropriate or desirable to complete and evidence the sale,

assignment and transfer of the Shares pursuant to this Agreement.

 

8.                                       Representations

and Warranties of the Buyer. Buyer represents and warrants to the TFS that (a)

this Agreement is a valid and binding agreement enforceable against Buyer in

accordance with its terms and (b) Buyer, if he exercises the option, will be

purchasing the Shares for his own account and not with a view to or for sale in

connection with any distribution of such Shares in violation of applicable

securities laws.

 

9.                                       Purchase

and Sale. If Buyer exercises the Option, at a closing (the “Closing”), TFS

shall sell, transfer and deliver the Shares, represented by certificates duly

endorsed in blank or accompanied by stock powers duly executed, to the Buyer,

and the Buyer shall purchase the Shares in exchange for the Purchase Price.

 

10.                                 Dividends

and Voting Rights. Until the Option is exercised, if at all, all dividends and

voting rights attendant to the Shares shall remain with TFS.

 

11.                                 Buyer

May Exercise Option for Less Than All Shares. Notwithstanding any other

provision herein to the contrary, the Buyer may exercise the Option with respect

to less than all of the Shares.  Michael

A. Kirk (Kirk) and Douglas B. Durham (Durham) shall each be entitled to

purchase 100,000 shares in accordance with this Option.  If either Kirk 

 

3

 

or Durham does

not purchase the full number of shares available to him under this Option prior

to the expiration date, the other shall have the right for ten days following

expiration of this Option, to purchase the remaining shares, and for this

purpose only, the expiration date of the Option shall be considered extended. 

 

12.                                 Survival.

All representations, warranties and agreements made by the TFS and by the Buyer

in this Agreement shall survive the execution of this Agreement and any Closing

and any investigation at any time made by or on behalf of any party hereto.

 

13.                                 Modification;

Assignment. This Agreement may not be modified, amended, altered or

supplemented except upon the execution and delivery of a written agreement

executed by the parties hereto. Buyer may assign his rights under this

Agreement with the consent of TFS.

 

14.                                 Successors.

This Agreement will be binding upon, inure to the benefit of and be enforceable

by and against the parties hereto and their respective heirs, beneficiaries,

executors, representatives and permitted assigns.

 

15.                                 Governing

Law. This Agreement shall be governed by and construed in accordance with the

laws of the State of Washington.

 

16.                                 Entire

Agreement. This Agreement constitutes the entire agreement among the parties

with respect to its subject matter and supersedes all agreements,

understanding, representations, or warranties, whether oral or written, by or

among the parties, previously or contemporaneously made or given.

 

IN WITNESS WHEREOF, this

Agreement has been duly executed and delivered by the Buyer and TFS as of the

day and year first written below:

 

	

  BUYER:

  	

   

  	

   

  	

  TFS:

  	

   

  
	

   

  	

   

  	

   

  	

   

  
	

  /s/Michael

  A. Kirk

  	

  01/25/2002

  	

   

  	

  /s/John R. Coghlan

  	

  01/25/2002

  
	

  Michael A.

  Kirk

  	

  Date

  	

   

  	

  John R.

  Coghlan, President

  	

   

  
							

 

	

  /s/Douglas

  B. Durham

  	

  01/25/2002

  	

   

  	

   

  
	

  Douglas B.

  Durham

  	

  Date

  	

   

  	

   

  

 

4Exhibit 10

Exhibit 10.4            Warehousing Line of Credit

Promissory Note dated February 20, 2002

 

 

WAREHOUSING LINE OF

CREDIT PROMISSORY NOTE

 

INTRODUCTION.  This Warehousing Line of Credit Promissory

Note (the “NOTE”), governs your line of credit (the “CREDIT LINE”) with

Temporary Financial Services, Inc.  The

words “BORROWER,” “you,” and “your,” mean Genesis Financial, Inc., a Washington

corporation.  The words “LENDER,” “we,”

“us,” and “our,” means Temporary Financial Services, Inc., the entity that is

making the loans and advances described in this NOTE.  The CREDIT LINE will provide BORROWER with financing to acquire

eligible real estate loans in accordance with the procedures described in this

NOTE and the attached exhibits.

 

MAXIMUM

CREDIT.  The unpaid principal balance

under the CREDIT LINE may not exceed $2,000,000 outstanding at any given time

during the term of the NOTE. 

 

PROMISE TO

PAY.  You promise to pay LENDER the

total of all loan advances and finance charges, together with all costs and

expenses for which you are responsible under this NOTE.  You will pay the CREDIT LINE according to

the payment terms set forth below.  

 

DUE DATE.  You promise to pay the balance of this NOTE

on February 15, 2003, or at the option of LENDER on demand.  So long as this NOTE is in good standing,

you may obtain advances on the CREDIT LINE in accordance with the procedures

described in this NOTE and the attached exhibits.

 

INTEREST.  Interest shall accrue on the daily net

principal balance outstanding, and is payable on the 5th day of each

month during the term of this loan. 

Interest will be calculated at the rate equal to two percent above the

rate that Sterling Savings Bank, Spokane, Washington, refers to as its “prime

rate.”  Any change in the interest rate

resulting from a change in the prime rate will be effective on the date of the

change.

 

COMMITMENT

FEE.  BORROWER will pay LENDER One

Quarter of One Percent (1/4%) of the Maximum Credit amount as a Loan commitment

fee.  This amount, aggregating $5,000 is

payable on the date of this NOTE.

 

ADVANCES AND

REPAYMENTS.  BORROWER may request

advances on the CREDIT LINE from time to time, and shall make payments against

the outstanding principal balance from time to time in accordance with the

procedures set forth in EXHIBIT A (attached).

 

FINANCIAL

COVENANTS.  So long as this CREDIT LINE

is in effect, BORROWER will comply with the “Financial Covenants” and the

“Reporting Obligations” described in EXHIBIT B (attached).  Each month, on or before the interest

payment due date, BORROWER will provide a “Compliance Certificate” in form

satisfactory to LENDER, either representing that BORROWER is in compliance with

the applicable financial covenants, or describing the non-compliance and the

steps being taken to bring BORROWER back into compliance.

 

SECURITY.  This NOTE is secured by a first lien on all

of the assets of BORROWER.  The Security

Agreement is attached as EXHIBIT C (attached).

 

2

 

PERSONAL

GUARANTEES.  This NOTE is jointly and

severally personally guaranteed by Michael A. Kirk, an individual residing in

Spokane, Washington, and Douglas B. Durham and Colleen D. Durham, husband and

wife, residing in Spokane, Washington. 

The personal guarantee agreement is attached as EXHIBIT D (attached). 

 

DEFAULT.  If BORROWER defaults in timely payment of

any amount due under this NOTE, including non-payment upon LENDER’S demand, or

is in default as a result of non-compliance with the Financial Covenant

requirements or the provisions of the Security Agreement, and such default

continues without cure for ten days, LENDER may pursue any legal or equitable

remedies for collection of the amounts due. 

BORROWER waives presentment, demand for payment, protest, and notice of

nonpayment.  BORROWER agrees to pay

LENDER all costs and expenses of collection of the amounts due or to become due

under this NOTE, including reasonable attorneys’ fees.  Upon Lender’s declaration of a default, and

Borrower’s failure to cure the default within ten days, the interest rate charged

on this NOTE shall be the lesser of 12% per annum, or the highest rate then

allowed by law.

 

ASSIGNMENT.  This NOTE, the Security Agreement and the

Personal Guarantees may be assigned by LENDER to an affiliated entity, and

BORROWER consents to the assignment to such an affiliated entity.  Assignment to an unaffiliated entity may

only be done after written consent of BORROWER.

 

SIGNATURES.  This NOTE is executed on February 20th,

2002, in Spokane, Washington.

 

GENESIS FINANCIAL, INC.

 

	

  /s/Michael A. Kirk

  	

   

  
	

  Michael A.

  Kirk, President

  	

   

  
	

   

  
	

  ATTEST:

  
	

   

  
	

  /s/Douglas B. Durham

  	

   

  
	

  Douglas B.

  Durham, Chairman

  	

   

  

 

 

Accepted this 20th

day of February, 2002 in Spokane, Washington.

 

Temporary Financial Services,

Inc.

 

 

	

  /s/John R. Coghlan

  	

   

  
	

  John R.

  Coghlan, President

  	

   

  

 

	

   

  
	

   

  
	

  Attest:

  
	

   

  
	

  /s/Brad E. Herr

  	

   

  
	

  Brad E. Herr,

  Secretary

  	

   

  

 

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