-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, L9aTXep83Dg8jzDzg52vPkmHeW8KQeEBNbHs3dcfJKfwsgXux7yv+IN985o4UBAU joLVJBRSXe087cAMGLF4BQ== 0001038838-04-001145.txt : 20041213 0001038838-04-001145.hdr.sgml : 20041213 20041213163905 ACCESSION NUMBER: 0001038838-04-001145 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20041207 ITEM INFORMATION: Other Events ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20041213 DATE AS OF CHANGE: 20041213 FILER: COMPANY DATA: COMPANY CONFORMED NAME: HOMENET CORP CENTRAL INDEX KEY: 0000910639 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-MANAGEMENT CONSULTING SERVICES [8742] IRS NUMBER: 330565710 STATE OF INCORPORATION: DE FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-22236 FILM NUMBER: 041199157 BUSINESS ADDRESS: STREET 1: 175 SOUTH MAIN STREET STREET 2: SUITE 1240 CITY: SALT LAKE CITY STATE: UT ZIP: 84111 BUSINESS PHONE: 801-502-6100 MAIL ADDRESS: STREET 1: 175 SOUTH MAIN STREET STREET 2: SUITE 1240 CITY: SALT LAKE CITY STATE: UT ZIP: 84111 FORMER COMPANY: FORMER CONFORMED NAME: FARADAY FINANCIAL INC DATE OF NAME CHANGE: 19930816 8-K 1 form8k120704.txt FORM 8-K DATED DECEMBER 7, 2004 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ______________________ FORM 8-K Current Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported) ------------------------------------------------ December 7, 2004 HOMENET CORPORATION ------------------------------------------------------ (Exact name of registrant as specified in its charter) Delaware 000-22236 33-0565710 - ------------------------------- ------------------------ ------------------- (State or other jurisdiction of (Commission file number) (IRS employer incorporation) identification no.) 5252 North Edgewood Drive, #310, Prove, Utah 84604 -------------------------------------------- ---------- (Address of principal executive offices) (Zip code) (801) 502-6100 --------------------------------------------------- (Registrant's telephone number, including area code) Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2.below): [ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) [ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) [ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b) [ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13c-4(c) This document contains a total of 11 pages. Item 8.01 Other Information The Company entered into loan arrangement with two accredited lenders who agreed to loan the Company the principal amount of $1,200,000 (the "Loan"). The loan agreement is dated December 6, 2004, but an executed copies of the agreement were not delivered until December 7, 2004. The Loan was guaranteed by affiliates and other parties that are related to the Company. The Loan is payable in full on the 120 day anniversary of the date upon which any security interest associated with the Loan are executed. A loan origination fee in the amount of $204,000 is payable in connection with the Loan. As additional consideration for the Loan, the Company agreed to issued to the Lenders warrants exercisable for 75,000 shares of common stock that are exercisable for a five year period at $1.50 per share. The Loan proceeds are not immediately available to the Company, but are paid upon satisfaction of certain contingencies. In addition, part of the Loan proceeds are to be utilized to pay the Company's obligation to Zions National Bank in full. Item 9.01 Financial Statements and Exhibits a. Financial statements of businesses acquired Not applicable. b. Pro forma financial information Not applicable. c. Exhibits Number Description ------ ----------- 10.1 Loan Agreement by and between the Company and Horn Irrevocable Trust and Vescovo Finance, LLC. 10.2 Secured Promissory Note by and between the Company and Horn Irrevocable Trust and Vescovo Finance, LLC. 2 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. HOMENET CORPORATION Date: December 13, 2004 By /s/ Frank Gillen Frank Gillen President 3 EX-10.1 2 ex101form8k120704.txt LOAN AGREEMENT EXHIBIT 10.1 LOAN AGREEMENT For valuable consideration, the sufficiency of which is hereby acknowledged, this Loan Agreement ("Agreement") is entered into this 6th day of December, 2004 by and between Horn Irrevocable Trust (Horn) dated July 1, 2002, and Vescovo Finance, LLC (Vescovo), a Utah limited liability company, hereinafter collectively referred to as "Lender," and HomeNet Corporation, a Delaware corporation, HomeNet Communications, Inc., a Washington corporation, and Home Marketing Group, a Utah corporation, hereinafter collectively referred to as "Borrower" upon the terms and conditions hereinafter set forth. 1. Loan Amount. Lender hereby agrees to loan Borrower the original principal sum of One Million Two Hundred Thousand Dollars ($1,200,000.00 USD) (the "Loan"), upon the following terms and conditions. 2. Collateral. Borrower shall pledge, or caused to be pledged through its Guarantors, the five (5) parcels of real property located at the following addresses: 1) 712 Arrowhead Ln., Murray, Utah, 84107, No debt with a $400,000 value, 2) 420 W. 4500 S. Murray, Utah, 84107, No Debt with a $600,000 value, 3) 997 E. 3900 S., SLC, Utah, 84124, no debt with a $450,000 value, 4) 2728 Gallivan Loop, Park City, Utah, $600,000 debt with a $1.2 Million value and 5) 8031 N. Tuscany Dr., Tucson, AZ, 85742, $230,000 debt with a $950,000 value. The aforementioned 5 Properties are additionally described through a legal description on Exhibit A hereto, as collateral for this Loan (hereinafter collectively referred to as the "Properties" or "Property" if referring to any individual Property). 3. Borrower's Warranties and Representations. Borrower hereby represents and warrants as follows: A. That Borrower and each of them is a duly organized and validly existing corporation in good standing under the laws of the States in which they were organized. B. That Borrower has taken all necessary corporate action to authorize Borrower to enter into and perform this Agreement. C. That the execution by Borrower of this Agreement, and the performance of its obligations hereunder no not and will not violate or conflict with any provision of Borrower's Articles of Incorporation or Bylaws. D. To the best of Borrower's knowledge and belief, the owners have obtained all governmental licenses, permits and approvals necessary to use and occupy the Properties, and the owners are in compliance with all applicable requirements of federal, state and local law, including without limitation building and use ordinances and environmental protection statutes, and any restrictive covenants of record affecting the operation, use and occupancy of the Properties. E. That there are no unrecorded easements or claims of interest in and to the Properties, nor any facts indicating the existence of any such easements, claims or interest other than those covenants and easements set forth as exceptions to the title insurance policy. F. That there are no mechanic's or materialmen's liens in existence on or against the Properties. G. That it/they have personal knowledge on information and belief of the facts hereinabove given and are competent to make these representations. Each of the Undersigned acknowledges that the Lender has relied on their representations contained herein in entering into this transaction. H. That the execution and delivery by Borrower or owner of a Deed of Trust will not violate any indenture, agreement or other instrument to which the Borrower is a party, or the Properties are bound, or be in conflict with, result in a breach of or constitute (with due notice and/or lapse of time) a default under any such indenture, agreement or other instrument, or result in the creation or imposition of any lien, charge or encumbrance of any nature whatsoever upon the Properties. I. That no consent or approval of any regulatory body is required for the execution, delivery and performance of a Deed of Trust. J. That no suits, proceedings or investigations are pending or threatened against or affecting the Borrower or owners of the Properties, at law or in equity, or before or by any governmental or administrative agency or instrumentality, which, if adversely determined, would have a material adverse effect on the Properties. K.. That no decree or order of any court or governmental or administrative agency or instrumentality has been issued against the Borrower or any owner of the Properties which has or may have any material, adverse effect on the Properties. L. That the execution and the delivery of a Deed of Trust does not contravene any law, order, decree, rule or regulation to which the Borrower or any owner of the Properties is subject M. That Borrower is not bankrupt, nor has any of the undersigned committed any acts of bankruptcy nor are there any outstanding liens, suits, garnishments, petitions (whether voluntary or involuntary) in bankruptcy or court actions which could render the Borrower insolvent or bankrupt. N. That to Borrower's knowledge and belief there are currently no hazardous or toxic materials (including without limitation, asbestos, PCB's, toxic wastes, or any substance which is defined as "hazardous" in the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, or similar State or local statute or regulation) present on, under or about the Properties. O. That Borrower shall not store, use or dispose of hazardous materials (including without limitation, asbestos, PCB's, toxic wastes or any substance which is prohibited or limited by Federal, State or local statute or regulation), nor allow the storage, use or disposal of such hazardous materials, on, under or about the Properties. The Borrower shall be liable for and indemnify, defend and hold Lender harmless against any and all damages and/or claims resulting from said hazardous materials. 2 P. The foregoing representations and warranties shall be true and correct as of the date of this Agreement and are restated as of closing. Borrower agrees to give Lender written notice of any fact, circumstance, or development which would limit, impair, or invalidate these warranties and representations, and failure to do so shall constitute a breach of this Agreement by Borrower. Lender shall have the right, but not the obligation, to terminate this Agreement in full and to avail itself of any and all remedies under applicable law, including (without limitation) the remedy of specific performance, restitution, collection of damages, and the recovery of costs and attorneys' fees for Borrower's breach of the foregoing representations and warranties. Q. That Borrower has obtained competent legal counsel in the State of Utah specific to the terms of this Agreement. R. That the Loan is solely for Business Purposes and as such, Borrower agrees that all Properties (Borrower is pledging or causing to be pledged) shall be vested in the name of an entity that is either a Corporation, Limited Liability Company, Limited Partnership, or Trust. S. That Borrower has represented the values and debts against the Properties to be as found under Paragraph 2 "Collateral" above. Borrower has also represented that the equity in the Collateral to be worth a minimum of 2.5 Million Dollars. 4. Use of Proceeds. Borrower shall receive a first disbursement of $150,000 upon the execution of the Note, Deeds of Trust against all collateral Properties located in Utah as well as the execution of Personal Guarantees by the guarantors as outlined in 7(B) below. The subsequent loan proceeds shall be disbursed, contingent upon the recording of all the Deeds of Trust against all the Properties. The second disbursement shall be performed first towards the repayment of a Business loan to Zions bank in the approximate amount of $720,000.00. This second disbursement shall be disbursed directly to Zion's Bank for the benefit of Borrower in paying off its existing loan with Zion's Bank, and the remainder of the loan proceeds if any, shall be disbursed directly to Borrower for working capital or any other lawful business purpose of Borrower. 5. Cost of Loan. The cost to Borrower for the Loan shall be 17 points ($204,000.00), payable to Lender concurrent with and as a condition of funding of the Loan, together with other terms as set forth in the security instruments associated with the Loan, which documents Borrower hereby affirms that they have read and fully understand. The foregoing fee shall be deemed earned in full by Lender upon the funding, or any partial funding of the Loan Proceeds. In addition, Borrower shall pay all costs associated with the preparation and closing of the Loan including but not limited to legal fees, Title & Escrow Fees, and due diligence fees by Vescovo. Additionally, no later than the closing of the Loan, Borrower shall provide Lender with valid and enforceable common stock purchase warrants, in a form acceptable to Lender, to acquire seventy-five thousand (75,000) shares of HomeNet common stock at an exercise price of one dollar and fifty cents ($1.50) per share (the "Warrant"). Lender shall release the Warrant instrument to Lender at closing and Lender shall be given a period of five (5) years from the date of closing of the Loan to exercise each of the Warrants. Additionally, Lender and HomeNet acknowledge and understand that the Loan shall be contingent to the prior or concurrent execution of a Lease Agreement suitable to Horn, specific to office space owned by Horn. Borrower herein grants to Lender, at the sole discretion of Lender, the option to convert any portion of the loan proceeds including any points or interest due lender towards the purchase of securities of HomeNet at a discount of 20% off HomeNet's next round of equity financing. 3 6. Term of Loan. The Loan shall be due in full one-hundred and twenty (120) days after the date upon which any of the security instruments associated with the Loan are executed. Failure by Borrower to repay the full amount of the outstanding principal, fees and interest by said date shall be an event of default and shall entitle Lender to all remedies provided by this Agreement, in the Loan documents described in paragraph 7 below, and under applicable law. Borrower may prepay any portion of the principal at any time without penalty. 7. Security. The following provisions shall be conditions precedent to the funding of the Loan. A. Promissory Note & Deed of Trust. Borrower shall execute a Promissory Note in favor of Lender evidencing Borrower's obligation to repay the loan and setting forth the specific loan provisions as expressed herein. Additionally, Borrower shall execute and have recorded, prior to or contemporaneous with the disbursement of Loan proceeds, Deed(s) of Trust naming Lender as Beneficiary with respect to the Properties. To the extent that title to any of the Properties is held by a legal entity other than a natural person, Borrower shall provide Lender with the organizing and governing instruments of such entities, and the approval of such instruments by Lender shall be a condition to this Loan. B. Guaranty. The following individuals and entities shall guaranty the performance and satisfaction of all duties and obligations set forth herein and in the Promissory Note and Deed(s) of Trust required hereby: Richard Jackson, Leroy Jackson, Shauna Badger, Rodney Badger, Frank J. Gillen, Kelly Ryan, and Mike Devine. C. No Other Encumbrance. With the exception of encumbrances which are acceptable to Lender at Lender's sole discretion, said exceptions to be based on representations to Lender by Borrower specific to existing debt owed against the Properties as well as value and equity in the Properties, Borrower hereby warrants that at the time of closing there shall be no encumbrances or claims against the Properties, and that during the term of the Loan, Borrower will not cause or allow any encumbrance or claim to arise against the Properties. Borrower, shall indemnify Lender against any and all loss arising from any violation of this provision. 8. Title Insurance. At Borrower's expense, Borrower shall provide Lender with a standard form lender's policy of title insurance with respect to the Properties, which policy shall include coverage against mechanic's lien claims. 9. Closing. Closing shall occur at and be performed by and through Independence Title, 7069 S. Highland Drive, Salt Lake City, UT unless otherwise directed by Lender (the "Closing Agent"). Prior to Closing, all necessary documentation together with the Loan proceeds shall be delivered to the Closing Agent, who shall provide title and escrow services customary to this type of transaction. Closing shall have occurred when the initial Loan proceeds are made available to Borrower, or when Borrower otherwise receives the benefit of the initial loan proceeds. Borrower shall be responsible for all costs associated with the closing of the Loan. The Loan proceeds will not be disbursed until Lender has received evidence that Deeds of Trust respecting the Properties have been recorded with the appropriate County Recorder's Offices. Notwithstanding the foregoing, $150,000.00 of the Loan proceeds may be released to Borrower upon the execution of the Deeds of 4 Trust against all of the Properties located in Utah, with the balance released upon the recording of the Deeds of Trust against any of the remaining Properties including the execution and recording of the Deed of Trust against the Property located in Arizona. In the event that Lender learns, at any time during the disbursement period of proceeds for the Loan, information you have furnished by Borrower contains factual inaccuracies and/or misstatements, including, but not limited to existing debt or value of collateral Properties, Borrower's income and financial status, and credit status, Lender shall not be obligated to proceed and in such event, Borrower agrees that it shall release and hold Lender harmless and waives any defenses, claims, setoffs, suits, defenses, demands, allegations, charges, damages, or causes of action whatsoever, in law or in equity, under federal, state, municipal or local statute, law, ordinance, regulation, constitution, or common law, whether known or unknown, which Borrower may desire to assert against Lender, which arise in whole or in part from the Loan. 10. Default. Upon any event of default by Borrower, which for the purposes of this agreement shall be defined as the breach of any contractual provision, or any event that could impair Lender's security in the Collateral, Lender shall be entitled to pursue any remedy or remedies provided by this Agreement or any document associated with the loan, and any remedy or remedies allowed by law. The election of any remedy or remedies by Lender shall in no way operate to deprive Lender of the right to seek a deficiency judgement against Borrower or any guarantor of the Loan. 11. Attorneys Fees. Upon an event of default of any of the covenants or agreements contained herein or in any instrument or contract associated with this transaction, or should litigation be commenced, the non breaching or prevailing party shall be entitled to all costs and expenses, including a reasonable attorney's fee, which may arise or accrue from enforcing or terminating this Agreement, or in obtaining possession of the property, or in pursuing any remedy provided hereunder or by applicable law. 12. Governing Law. This Agreement shall be interpreted and enforced in accordance with the laws of the State of Utah. Any legal action initiated to enforce this Agreement, shall be filed and prosecuted only in the District Court in and for Utah County. 13. Binding Effect. This Agreement is and shall be binding upon and inure to the benefit of the parties hereto and to their respective heirs, personal representatives, successors and assigns. The provisions herein shall survive the closing of this loan transaction as necessary to protect the interests of the parties. 14. Entire Agreement. This Agreement, together with the terms of the documents described herein, contains the entire agreement between the parties hereto relative to the subject matter hereof. Any provisions hereof not enforceable under the laws of the State of Utah shall not affect the validity of any other provisions hereof. No supplement modification or amendment of this Agreement shall be binding on the parties hereto unless signed in writing by both parties hereto. 5 IN WITNESS WHEREOF, the parties have set their signatures on the day and year first above written. BORROWER LENDER HomeNet Corporation Horn Irrevocable Trust Address: Address: 175 S. Main Street, #1240 2520 North University Ave #50 Salt Lake City, UT 84111 Provo, Utah 84604 Phone: (801) 746-3311 Phone: (801) Fax: (801) 746-3312 Fax: (801) By /s/ Frank J. Gillen By /s/ Harrison Horn - -------------------------------------- ------------------------------ Its: President Its: Trustee HomeNet Communications, Inc. Vescovo Finance, LLC Address: Address: 5252 North Englewood Drive, Suite 310 525 W. 880 S. Provo, UT 84603 Orem, UT 84058 Phone: (801)746-3311 Phone: (801) 224-6065 Fax: (801) 746-3312 Fax: (801) 224-4516 By /s/ Kelly Ryan By /s/ Steve A. Bishop - -------------------------------------- ------------------------------ Its: CEO Its: Manager BORROWER Home Marketing Group, a Utah corporation Address: 5252 North Englewood Drive, Suite 300 Provo, Utah 84603 Phone: (801) 746-3311 Fax: (801) 746-3312 By /s/ Frank J. Gillen - -------------------------------------- Its: President 6 EX-10.2 3 ex102form8k120704.txt SECURED PROMISSORY NOTE EXHIBIT 10.2 SECURED PROMISSORY NOTE $1,200,000.00 December 6, 2004 Orem, Utah FOR VALUE RECEIVED, HomeNet Corporation, a Delaware Corporation, whose address is 175 S. Main St., #1240, Salt Lake City, Utah 84111 and HomeNet Communications, Inc., a Washington Corporation, whose address is 5252 N. Edgewood Dr., Suite 310, Provo, Utah 84603 and Home Marketing Group, a Utah corporation (collectively "Borrower"), hereby promises and agrees to pay to the order of The Horn Irrevocable Trust dated July 1 2002, Harrison H. Horn, Trustee, whose address is 2520 N. University Avenue, Suite 50, Provo, Utah 84604, and Vescovo Finance, L.L.C., whose address is 525 W. 880 S., Orem, Utah 84058 (collectively "Lender" or "Holder" in accordance with the terms of a Loan Participation Agreement of even date herewith), in lawful money of the United States of America, without offset or adjustment for any reason, the principal sum of One-Million Two-Hundred Thousand and 00/100 Dollars ($1,200,000.00), together with interest from the date hereof until paid, minus the $204,000 origination fee which will be paid to the Lender upon the funding of this Note. The annual interest rate on the principal balance of this Note is zero percent 0% per annum (the "Base Rate") for 120 days and other fees in connection therewith, all in accordance with the terms and conditions set forth below. 1. Except pursuant to Paragraph 5 below, interest shall accrue on the outstanding principal balance hereof at the Base Rate. 2. (a) Borrower shall pay the entire outstanding balance of this Secured Promissory Note (this "Note"), including principal, accrued and unpaid interest and all other fees and charges accrued and unpaid hereunder, no later than 5:00 p.m., Utah time, on the 121st calendar day following the date hereof (as such payment date may be adjusted hereunder pursuant to the following subsections, the "Maturity Date"). (b) If any due date for a payment under this Note falls on a day which is not a Business Day (as defined below), then such due date shall be automatically adjusted so that it falls instead on the first Business Day following such scheduled due date. For purposes of the Note, "Business Day' means any day other than Saturday or Sunday or a day on which commercial banks are required or authorized to close in any of (1) New York, New York, or (2) Salt Lake City, Utah. 3. Borrower may prepay any amount due hereunder, in whole or in part, at any time without penalty or premium for such early payment. 4. (a) The occurrence or existence of any of the following events or circumstances shall constitute an "Event of Default' hereunder: (1) Any payment or delivery required by this Note is not made when due hereunder, or any obligation or covenant undertaken by Borrower hereunder is not performed or observed as and when required hereby, (2) Any representation or warranty made by Borrower in this Note or any other instrument, agreement, or document delivered by any Borrower or any other party for a Borrower's benefit in connection herewith proves to have been materially false or inaccurate when made; or (3) Any event of default occurs under any instrument or agreement evidencing, securing or guaranteeing the obligations evidenced by this Note; or (4) Any event of default occurs under any security agreement, trust deed, or similar document relating to a lien prior to the lien of any instrument described in Paragraph 4(a)(3) above; or (5) Any event of default occurs under any other indebtedness owing by Borrower to Lender or any of its subsidiaries or affiliates; or (6) Borrower or any guarantor of this Note files a general assignment for the benefit of creditors, or files for relief under any provision of the Bankruptcy Code, or suffers an involuntary petition in bankruptcy or receivership to be filed and not vacated within 30 days. (b) Upon the occurrence and during the continuance of any Event of Default, the entire unpaid principal balance and accrued but unpaid interest hereunder shall, at the option of Lender exercised by written notice to Borrower, at once become due and payable. Failure to exercise such option shall not constitute a waiver of the right to exercise the same in the event of any subsequent Event of Default. 5. In the event Borrower fails to make a payment under this Note on the due date therefor, (a) Borrower agrees to pay Holder a one-time late charge equal to Fifteen Percent (15%) of the amount so unpaid (such late charge constituting liquidated damages in lieu of actual damages and not a penalty), and (b) all amounts owing and past due hereunder, including without limitation principal (whether by acceleration or in due course), interest, late fees, and other charges, shall, if permitted by applicable law, bear interest at the rate of Eighteen Percent (18%) per annum both before and after judgment. 6. This Note shall be secured by first-position Deeds of Trust with Assignment of Rents encumbering the following properties: 712 Arrowhead Lane, City of Murray, County of Salt Lake, State of Utah 420 West 4500 South, City of Murray, County of Salt Lake, State of Utah 997 East 3900 South, City of Salt Lake City, County of Salt Lake, State of Utah 2728 Gallivan Loop, City of Park City, County of Summit, State of Utah 8031 North Tuscany Drive, City of Tucson, County of Pima, State of Arizona 7. Borrower shall pay all legal, closing and other costs and fees incurred by Lender in connection with the negotiation, preparation, execution, delivery, filing, and recording, as applicable, of this Note, the security and guaranty documents referred to in Paragraph 6 above, and all other documents or instruments delivered in connection with or relating to the loan evidenced by this Note (the "Loan"). In addition, in the event that any payment under this Note is not made at the time and in the manner required (whether before or after maturity), Borrower agrees to pay any and all costs and expenses (regardless of the particular nature thereof and whether incurred before or after the initiation of suit or before or after judgment) which may be incurred by Holder in connection with the enforcement of any of its rights under this Note, including, but not limited to, attorneys' fees and all costs and expenses of collection. Any amount owing by Borrower under this Paragraph and not paid directly or reimbursed by Borrower shall (until so paid or reimbursed) constitute an additional principal obligation hereunder as of the date such obligation arises. 8. All amounts paid by Borrower in respect of amounts due hereunder shall be applied by Holder in the following order of priority: (a) amounts due and payable, if any, pursuant to Paragraph 7 above, (b) interest and late fees due and payable hereunder, and (c) the outstanding principal balance hereof. 2 9. Borrower, on behalf of itself and all sureties, guarantors, and endorsers hereof, hereby waives presentment for payment, demand, and notice of dishonor and nonpayment of this Note, and consents to any and all extensions of time, renewals, waivers, or modifications that may be granted by Holder with respect to the payment or other provisions of this Note, and to the release of any security, or any part thereof, with or without substitution. 10. Notwithstanding any other provision contained in this Note or in any instrument given to evidence or secure the obligations evidenced hereby: (a) the rates of interest and charges provided for herein and therein shall in no event exceed the rates and charges which result in interest being charged at a rate equaling the maximum allowed by law; and (b) if, for any reason whatsoever, Holder ever receives as interest in connection with the transaction of which this Note is a part an amount which would result in interest being charged at a rate exceeding the maximum allowed by law, such amount or portion thereof as would otherwise be excessive interest shall automatically be applied toward reduction of the unpaid principal balance then outstanding hereunder and not toward payment of interest. 11. The failure of Holder in any one or more instances to insist upon strict performance of any of the terms and provisions of this Note, or to exercise any option conferred herein shall not be construed as a waiver or relinquishment, to any extent, of the right to assert or rely upon any such terms, provisions, or options on any future occasion. 12. This Note is delivered in the State of Utah and shall be governed by and construed in accordance with the laws of said State, without giving effect to any conflict of laws provisions. This Note shall bind the successors and assigns of Borrower and shall inure to the benefit of the successors and assigns of Lender. 13. Borrower acknowledges, represents, and warrants to Lender that (a) the terms and conditions of this Note, the documents and agreements referred to in Section 6 above, and any other documents or agreements executed and delivered by Borrower in connection with the Loan (collectively, including without limitation the security and guaranty documents referred to in Paragraph 6 about, the "Loan Documents") are fair and reasonable in light of the risks to Lender in making the Loan, (b) all funds advanced hereunder by Lender are being used by Borrower for business purposes and not for personal, consumer or household purposes, and (c) Borrower owes Lender the entire amount set forth in this Note and that the amount stated as due is correct. Without limiting the generality of the foregoing, Borrower also represents to Lender that the property covered by the trust deed referenced in Section 6 above does not include any occupied residence or any residence that will be occupied during the term of the Loan or such trust deed. 14. Borrower represents and warrants to Lender that (a) Borrower is a limited liability company duly organized and validly existing in good standing pursuant to the laws of the State of Utah and shall at all times during such time as any obligation remains under this Note maintain its limited liability company existence in good standing and keep current all necessary filings relating thereto, (b) the execution, delivery and performance by Borrower of this Note and the other Loan Documents have been duly authorized by all necessary company action on the part of Borrower and do not and will not contravene or violate any provision of Borrower's charter documents, and the person executing this Note and the other Loan Documents to be executed by Borrower on behalf of the Borrower has been duly authorized to do so, and (c) none of the written statements furnished to Lender by or on behalf of Borrower in connection with the negotiation and consummation of the transactions contemplated by this Note contained, as of the date thereof, any untrue statement of a material fact or omitted, as of the date thereof, a material fact necessary to make the statements contained therein or herein not misleading. 3 15. Borrower hereby agrees to release, indemnify and hold harmless Lender, its affiliates, and the managers, members, officers, employees, counsel, and agents of any of them, from and against all claims, expenses, or liabilities of any kind which may be incurred by or asserted against any such person or entity in connection with or arising out of this Note and the Loan, the financing of the Loan, the collateral therefor, and any investigation, litigation or proceeding related to any such matters. Under no circumstances shall Lender or any of its affiliates be liable for punitive, exemplary, consequential or indirect damages which may be alleged to result from this Note or the Loan. 16. Time is of the essence regarding the obligations of Borrower under this Note. IN WITNESS WHEREOF, Borrower has caused this Note to be executed by its duly authorized representative on or as of the day and year first above written. HomeNet Corporation, a Delaware corporation By: /s/ Frank J. Gillen ---------------------------------------- Name: Frank J. Gillen Title: President 175 S. Main St., #1240 Salt Lake City, UT 84111 Federal Tax I. D. No.: 86-0560471 HomeNet Communications, Inc., a Washington corp. By: /s/ Kelly Ryan ---------------------------------------- Name: Title: CEO 5252 N. Edgewood Dr., Suite 310 Provo, UT 84603 Federal Tax I.D. No.: 91-2133121 Home Marketing Group, a Utah corporation By: /s/ Frank Gillen ---------------------------------------- Name: Title: President 5252 N. Edgewood Dr., Suite 310 Provo, UT 84603 Federal Tax I.D. No.: 4 -----END PRIVACY-ENHANCED MESSAGE-----