$4,000,000.00 10% CONVERTIBLE DEBENTURE
PURCHASE AGREEMENT
THIS $4,000,000.00 10% CONVERTIBLE DEBENTURE PURCHASE AGREEMENT
("Agreement") is made and entered into this ____ day of December, 1997, by and
between Fronteer Financial Holdings, Ltd. ("Seller") and Xxxx Xxxx Finance
Company Limited ("Purchaser").
RECITALS
A. Seller is a corporation duly organized and existing under the laws of
the State of Colorado.
B. Seller desires to sell and Purchaser desires to purchase a $4,000,000.00
10% Convertible Debenture from the Seller in accordance with the terms and
conditions stated below.
NOW THEREFORE, in consideration of the premises and of the mutual covenants
and agreements contained herein, the parties hereto do hereby represent,
warrant, covenant and agree as follows:
ARTICLE 1.
TERMS OF TRANSACTION
1.1. Purchase and Sale. Purchaser hereby agrees, subject to the terms and
conditions of this Agreement, to purchase from Seller, and Seller hereby agrees,
subject to the terms and conditions of this Agreement, to sell to Purchaser a
$4,000,000.00 10% Convertible Debenture ("Debenture") due on the 15th day of
December, 2007, provided, however that the Purchaser shall have the right to
accelerate the repayment of the Debenture to June 15, 1998, if final approval of
the proposed acquisition of more than twenty-five percent (25%) of the equity
ownership of RAF Financial Corp. by Purchaser is not received from the NASD
pursuant to Rule 1018 of the National Association of Securities Dealers, Inc.
("NASD") Membership and Registration Rules and, if required, from any other
regulatory authorities by June 15, 1998.
1.2. Purchase Price. The total consideration ("Purchase Price") to be paid
by Purchaser to Seller for the Debenture is $4,000,000.00 and shall be paid in
cash or certified funds by December 31, 1997.
1.3. Terms of Debenture. The terms of the Debenture shall be as provided in
the form of Debenture attached hereto as Exhibit A and incorporated herein by
reference.
1.4. Conversion. The Debenture shall be convertible into shares of Common
Stock of the Seller as specified in the Debenture attached hereto.
1.5. Option. Upon Xxxx Xxxx Capital [S] Private Limited's ("Capital")
purchase of the balance of Xxxxxx X. Xxxxxxx'x stock to be sold to Capital,
Purchaser shall have the right, exercisable at Purchaser's option at any time up
to and including the earlier of the Maturity Date, as defined in the Debenture,
or the business day next preceding the date fixed for prepayment in full of the
Debenture, (so long as the Seller provides the notice of prepayment in full
required by the Debenture and shall not thereafter default in the making of the
prepayment) to purchase an additional Convertible Debenture in the form as is
attached hereto as Exhibit B. Seller may exercise such option by delivering
written notice of the exercise thereof together with payment therefor by
cashier's or certified check to Seller on or before the expiration date of
Seller's option. Purchaser agrees that the representations and warranties of
Purchaser contained in Article 3 hereof again will be required from Purchaser
upon exercise of Purchaser's option and will be a pre-condition to the exercise
thereof.
ARTICLE 2.
CLOSING
The transaction contemplated herein shall be closed in escrow (the
"Closing") at the offices of Seller, 0000 Xxxxxxx Xxxxxx, 00xx Xxxxx, Xxxxxx,
Xxxxxxxx 00000, at 10:00 a.m. MST on December __, 1997, or at such other place
and time as the parties hereto may mutually agree.
ARTICLE 3.
A. REPRESENTATIONS AND WARRANTIES OF PURCHASER
As an inducement to Seller to enter into this Agreement and to consummate
the transactions contemplated hereby, Purchaser represents and warrants to
Seller as follows:
3.1. Investment Intent. Purchaser acknowledges that the sale of the
Debenture will not be registered under the Securities Act of 1933, as amended
("Act"). Purchaser affirms that Purchaser is acquiring the Debenture for
Purchaser's own account for investment and not with a view to, or for sale or
other disposition in connection with, any distribution thereof, nor with any
present intention of selling or otherwise disposing thereof.
3.2. Information Available. The Purchaser understands that all documents,
records, and books pertaining to this investment have been made available for
inspection by the Purchaser and the Purchaser's attorney and/or accountant
including, but not limited to, the Seller's Annual Reports on Form 10-K and Form
10-K/A for the fiscal year ended September 30, 1996, the Seller's Quarterly
Reports on Form 10-Q and Form 10-Q/A for the quarterly periods ending December
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31, 1996, March 31, 1997, and June 30, 1997, the Seller's Current Reports on
Form 8-K, and Form 8-K/A dated July 23, 1996, February 25, 1997, and September
15, 1997, the Annual Report of RAF Financial Corporation ("RAF") and the
unaudited monthly balance sheet and statement of operations as of and for the
month ended October 31, 1997 for RAF, the Fronteer Directory Division, Fronteer
Marketing Group and Secutron Corporation.
3.3. Accredited Investor. The Purchaser is an "accredited investor" as
defined in Rule 501 of Regulation D adopted under the Act.
3.4. Independent Investigation. Purchaser has made an independent
investigation of the financial condition and business of the Seller. Other than
as set forth herein, Purchaser is relying on its own independent investigation
and not on any representations and warranties made by any other party.
3.5. Risks. The Purchaser recognizes that an investment in the Debenture
involves a number of significant risks and that the Purchaser could lose the
Purchaser's entire investment. The Purchaser is able to bear the substantial
economic risks of an investment in the Debenture for an indefinite period of
time, has no need for liquidity in such investment and, at the present time,
could afford a complete loss of such investment.
3.6. Solicitation. The Purchaser is not subscribing for the Debenture as a
result of or subsequent to any advertisement, article, notice or other
communication published in any newspaper, magazine or similar media or broadcast
over television or radio, or any seminar or meeting whose attendees have been
invited by any general solicitation or general advertising, or any solicitation
of a subscription by a person not previously known to the Purchaser in
connection with investments in securities generally.
3.7. Experts. The Purchaser has or together with the Purchaser's advisor(s)
has such knowledge and experience in financial, tax and business matters so as
to enable the Purchaser to utilize the information made available to the
Purchaser in connection with the sale of the Debenture in order to evaluate the
merits and risks of an investment in the Debenture and to make an informed
investment decision with respect thereto.
3.8. No Transfer. The Purchaser will not sell or otherwise transfer the
Debenture, without registration under the Act or an exemption therefrom and
fully understands and agrees that the Purchaser must bear the economic risk of
the Purchaser's purchase for an indefinite period of time because, among other
reasons, the Debenture has not been registered under the Act or under the
securities laws of any state and, therefore, cannot be resold, pledged, assigned
or otherwise disposed of unless the Debenture is subsequently registered under
the Act and under the applicable securities laws of such states or unless an
exemption from such registration is available.
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3.9. No Registration. The Purchaser understands that the Company is under
no obligation to register the Debenture on the Purchaser's behalf or to assist
the Purchaser in complying with any exemption from registration under the Act.
3.10. Restrictive Legend. The Purchaser understands that a legend
restricting the transfer of the Debenture will appear on the Debenture.
3.11. Authority. Purchaser has full power and authority to make, execute
and perform this Agreement and the transactions contemplated hereby. This
Agreement is a valid and binding obligation of Purchaser enforceable in
accordance with its terms.
3.12. No Default Resulting From Agreement. Neither the execution and
delivery of this Agreement nor the performance of its terms by Purchaser will
result in any material breach of the terms and conditions of, or constitute a
default under any material agreement, lease, mortgage, note, instrument,
undertaking, judgment, decree, governmental order or other restriction or
obligation to which Purchaser is a party which prohibits Purchaser's ability to
perform its obligations pursuant to this Agreement.
3.13. Brokers or Finders. No broker or finder has acted on Purchaser's
behalf in connection with this Agreement or the transaction contemplated hereby.
3.14. Required Consents and Approvals. No application, notice, order,
registration, qualification, waiver, consent, approval, or other action is
required to be filed, given, obtained, or taken by Purchaser by virtue of the
execution, delivery, and performance of this Agreement or the consummation of
the transactions contemplated hereby.
B. REPRESENTATIONS AND WARRANTIES OF SELLER
As an inducement to Purchaser to enter into this Agreement and to
consummate the transactions contemplated hereby, Seller represents and warrants
to Purchaser as follows:
3.15. Organization and Qualification of Seller.
Seller is a corporation duly organized, validly existing and in good
standing under the laws of the State of Colorado and, except in such
jurisdictions where the failure to qualify would not have a material adverse
effect on Seller, is duly qualified and authorized to do business and is in good
standing in each jurisdiction in which the nature of the business conducted by
it or the properties owned, leased or operated by it makes such qualification
necessary. Seller has all requisite corporate power and authority to execute and
deliver this Agreement and to perform its obligations hereunder. The copies of
the Articles of Incorporation and Bylaws of Seller which have been delivered to
Purchaser are complete and correct, and Seller is not in default under or in
violation of any provision of the Articles of Incorporation or Bylaws.
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3.16. Equity Structure.
(a) The authorized capital stock of the Seller consists solely of (i)
100,000,000 shares of Common Stock of which, as of the date of the Agreement,
16,871,557 shares were issued and outstanding and (ii) 25,000,000 shares of
Series A Voting Cumulative Preferred Stock, none of which is issued or
outstanding. All of the outstanding shares of Common Stock have been validly
issued and are fully paid, nonassessable and free of preemptive rights. As of
the date of this Agreement, 10,189,523 shares of Common Stock were reserved for
issuance and issuable upon or otherwise deliverable in connection with the
exercise of outstanding options, warrants or other rights or securities
convertible into shares of Common Stock ("Company Options"), which Company
Options are listed (including type and amount of Company Option, option holder's
name and option price) in Exhibit 3.16(a). Except as set forth above, there are
outstanding: (i) no shares of capital stock or other voting securities of the
Company, (ii) no securities of the Company or its subsidiaries convertible into
or exchangeable for shares of capital stock or voting securities of the Company,
(iii) no options, warrants, subscriptions, calls, rights or other agreements to
acquire from the Company or its subsidiaries, and no obligations of the Company
or its subsidiaries to issue, any capital stock, voting securities or securities
of the Company and (iv) no equity equivalent interests or rights to acquire
equity equivalent interests in the ownership or earnings of the Company or its
subsidiaries other similar rights (collectively "Company Securities"). As of the
date hereof, there are no outstanding obligations of the Company or its
subsidiaries to repurchase, redeem or otherwise acquire any Company Securities.
There are no stockholder agreements, voting trusts or other agreements or
understandings to which the Company is a party or by which it is bound relating
to the voting or registration of any shares of capital stock of the Company or
other Company Securities, and to the knowledge of the Company, no such
agreements have been entered into by shareholders of the Company.
(b) All of the outstanding capital stock of the Company's direct and
indirect subsidiaries (except for Secutron Corporation, approximately sixty
percent (60%) of which is owned by the Company) is owned by the Company,
directly or indirectly, free and clear of any Lien (as defined below) or any
other limitation or restriction (including any restriction on the right to vote
or sell the same except as may be provided as a matter of law). There are no
securities of the Company or its subsidiaries convertible into or exchangeable
for, options or other rights to acquire from the Company or its subsidiaries and
no other contract, understanding, arrangement or obligation (whether or not
contingent) providing for, the issuance or sale, directly or indirectly, of any
capital stock or other ownership interests in or any other securities of any
subsidiary of the Company. There are no outstanding contractual obligations of
the Company or its subsidiaries to repurchase, redeem or otherwise acquire any
outstanding shares of capital stock or other ownership interests in any
subsidiary of the Company. For purposes of this Agreement, "Lien" means, with
respect to any asset (including without limitation any security), any mortgage,
lien, pledge, charge, security interest or encumbrance of any kind in respect of
such asset. For purposes of this Agreement, a "subsidiary" means a corporation
over fifty percent (50%) of the outstanding voting securities of which are owned
by Seller.
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(c) None of the awards, grants or other agreements with respect to the
Company Options have provisions which accelerate the vesting or right to
exercise such options upon the execution of this Agreement, the consummation of
the transactions contemplated hereby (or thereby) or any other "change of
control" events.
(d) The Company's Common Stock constitutes the only class of equity
securities of the Company or its subsidiaries registered or required to be
registered under the Securities Exchange Act o 1934, as amended (the "Exchange
Act").
3.17. Authorization. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly and validly
authorized by the Seller and this Agreement constitutes the valid and binding
obligation of the Seller enforceable in accordance with its terms. Attached
hereto as Exhibit 3.17 is a Certificate which evidences the approval and
authorization of this Agreement by the Board of Directors of the Seller.
3.18. No Conflicting Agreements. Standing alone, the execution and delivery
of this Agreement by the Seller does not, and consummation by the Seller of the
transactions contemplated hereby will not, (a) violate any existing term or
provision of any law, regulation, order, writ, judgment, injunction or decree
applicable to Seller, or (b) conflict with or result in a breach of any of the
terms, conditions or provisions of the charter documents of Seller or of any
agreement or instrument to which Seller is a party.
3.19. Compliance with Applicable Law. The Seller has not received any
notice or information of any violation, probable violation or default by the
Seller under any applicable law, regulation or order of any governmental
department, commission, board or agency or instrumentality, domestic or foreign,
having jurisdiction over the Seller's operations which could materially
adversely affect the Seller's business, operations, financial condition,
properties or assets, or the ability to consummate the transactions contemplated
hereby.
3.20. Material Misstatements or Omissions. No representation or warranty of
the Seller in this Agreement nor in any document set forth in paragraph 3.2
contains any untrue statement of a material fact, or omits to state any material
fact necessary to make the statements contained herein or therein, in light of
the circumstances in which they were made, not misleading.
3.21. Consents and Approvals. Standing alone, the execution and delivery by
the Seller of this Agreement, and the performance by the Seller of its
obligations hereunder, do not require the Seller or any subsidiary of Seller to
obtain any consent, approval, agreement, or action of, or make any filing with
or give any notice to, any corporation, person, entity, or firm or any public,
governmental or judicial authority except (i) such as have been duly obtained or
made, as the case may be, and or will be duly obtained and made as required by
law, and (ii) those as to which the failure to obtain would have no material
adverse effect on the transactions contemplated hereby.
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3.22. Subsidiaries. Except for securities owned by and in the inventory of
RAF Financial Corporation, the Seller does not own, have an ownership interest
in, or control any corporation, partnership, proprietorship or other entity,
other than as shown on the attached Exhibit 3.22.
3.23. Litigation. Except as described in Exhibit 3.23 attached hereto,
there are no actions, proceedings or investigations pending or, to the Seller's
knowledge, threatened against the Seller or any subsidiary before any court or
administrative agency which could result in any material adverse change in the
operations or financial condition of the Seller other than as identified
therein.
3.24. Ownership. The Seller is the owner, beneficially and of record, of
all of the property and equipment identified on Exhibit 3.24 hereto, free and
clear of all liens, encumbrances, security agreements, equities, options,
claims, charges and restrictions, except those disclosed as liabilities in the
Seller's Financial Statements as defined in paragraph 3.27 below.
3.25. Brokers. No broker or finder has acted on Seller's behalf in
connection with this Agreement or the transaction contemplated hereby.
3.26. Leases. Exhibit 3.26 is a list of all of Seller's office leases.
3.27. Financial Statements. The Seller has delivered to the Purchaser
copies of the Seller's financial statements contained in the reports described
in paragraph 3.2, above, and the unaudited monthly balance sheet and statement
of operations as of and for the month ended October 31, 1997 for RAF, the
Fronteer Directory Division, Fronteer Marketing Group and Secutron Corporation,
described in paragraph 3.2, above (collectively, the "Seller's Financial
Statements"). The Seller's Financial Statements are based upon the information
contained in the books and records of the Seller and fairly present the
financial condition of the Seller as at the respective dates thereof and results
of operations for the periods referred to therein, all in accordance with
generally accepted accounting principles consistently applied throughout the
periods involved, except that the unaudited statements do not include notes and
are subject to consolidating adjustments and to year-end and audit adjustments.
Monthly unaudited financial statements will be generated by the Seller from and
after December 31, 1997, and will be prepared on a basis consistent with the
methods and procedures used to prepare the Seller's Financial Statements. For so
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long as any portion of the Debenture remains unpaid, if requested by the
Purchaser, the Seller will deliver such monthly unaudited financial statements
to the Purchaser from and after the period ended December 31, 1997, within 30
days after the end of each month from the date hereof.
3.28. SEC Reports. Since April, 1995, the Seller has filed all required
forms, reports and documents (the "SEC Reports") with the Securities and
Exchange Commission ("SEC"), each of which has complied in all material respects
with all applicable requirements of the Securities Act of 1933, as amended, and
the Securities Exchange Act of 1934, as amended, each as in effect on the dates
such SEC Report was filed. None of such SEC Reports, including (without
limitation) any financial statement or schedule included or incorporated by
reference therein, contained when filed any untrue statement of a material fact
or omitted to state a material fact required to be stated or incorporated by
reference therein or necessary in order to make the statements therein in light
of the circumstances under which they were made not misleading. Seller will
promptly deliver to Purchaser a complete and correct copy of any amendments or
modifications which are required to be filed with the SEC but have not yet been
filed with the SEC to the SEC Reports or to agreements, documents or other
instruments which previously had been filed by the Seller with the SEC.
3.29. Absence of Undisclosed or Contingent Liabilities. To the Seller's
knowledge, the Seller has no liabilities (whether accrued, absolute, contingent,
unliquidated or otherwise, or due or to become due of the type required to be
reflected on a balance sheet prepared in accordance with generally accepted
accounting principles) except current liabilities incurred in the ordinary
course of business or as otherwise set forth in the Seller's Financial
Statements. Neither the Seller nor any of its subsidiaries, nor their respective
employees or agents, has made or agreed to make gifts of money, other property
or similar benefits (other than incidental gifts of articles of nominal value)
to any actual or potential customer, supplier, governmental employee, political
party, candidate for office, governmental agency or instrumentality or any other
person.
3.30. No Material Adverse Changes. Since October 31, 1997, neither the
Seller nor any subsidiary has (i) made any distribution or payment of cash or
other assets to its shareholders, other than as shown on the Seller's Financial
Statements, (ii) suffered or permitted a materially adverse change in its
assets, financial condition, gross profit, operating results, customer, employee
or supplier relations or business condition, or (iii) paid any bonus to any
officer, director, shareholder or employee of Seller or any subsidiary, other
than as shown on the Seller's Financial Statements. For purposes of this
paragraph, a materially adverse change includes an uninsured loss or liability
exceeding $20,000.
3.31. Employees. To Seller's knowledge, (a) no executive employee of the
Seller and no group of the Seller's employees has any plan or intention to
terminate his, her or its employment following the Closing (except as set forth
in the Stock Purchase Agreement of Xxxxxx X. Xxxxxxx, signed contemporaneously
herewith); (b) the Seller has complied in all material respects with all laws
relating to the employment of labor, including provisions thereof relating to
wages, hours, equal opportunity, collective bargaining and the payment of social
8
security and other taxes; (c) the Seller has no known material labor relations
problem pending and believes that its labor relations are satisfactory; (d)
there are no workmen's compensation, sexual harassment, discrimination or claims
pending against the Seller nor is the Seller aware of any facts that would give
rise to such claims; (e) to Seller's actual knowledge, no employee or former
employee of the Partnership has any claim with respect to any intellectual
property rights of the Seller.
3.32. Representations as to Knowledge. The representations and warranties
contained in this Article 3 which are made to the "knowledge" of a specified
person are required to be made in good faith.
ARTICLE 4.
SELLER'S COVENANTS
So long as the Debenture is outstanding, the Seller shall comply with the
following covenants.
A. AFFIRMATIVE COVENANTS
4.1. Formation and Capitalization of Fronteer Capital Inc. On or before the
Closing, Seller, at Purchaser's sole cost and expense, shall form a new
wholly-owned subsidiary named "Fronteer Capital, Inc." (hereinafter "Capital"),
which shall be a Delaware corporation in form and substance satisfactory to
Purchaser. All of the proceeds from the Purchaser's acquisition of the Debenture
shall be deposited, $1,000 as capital and $3,999,000 as an advance (bearing no
interest), to Capital's bank account, which bank account shall be and remain
separate from the bank accounts of Seller or any affiliate of Seller. Upon
failure or refusal of the NASD to approve the proposed change in control of RAF
Financial Corp., as described in paragraph 1.1 above, by June 15, 1998, the
Purchaser's sole and only remedy shall be a strict foreclosure of the stock of
Capital in satisfaction of principal and accrued and unpaid interest on this
Debenture, and any debt owed by Capital to Seller shall be cancelled and deemed
satisfied.
4.2. Control of Fronteer Capital Inc. Contemporaneous with the purchase of
the Debenture, the Purchaser or an affiliate thereof is acquiring stock of the
Seller. In connection with that purchase, Seller shall increase its Board of
Directors to five (5) members, admit two of Purchaser's nominees to the Seller's
Board, and appoint Purchaser's nominees as the directors of Capital, which
appointments to Capital shall be irrevocable so long as the Debenture remains in
effect.
4.3. Security Agreement. At the Closing, Seller agrees to execute the form
of Security Agreement attached hereto as Exhibit "C", which security agreement
conveys 100% of the capital stock of Capital to Purchaser to further secure the
Debenture. The security agreement creates certain rights in Purchaser beyond
9
those set forth in the Debenture, including (without limitation) the right to
vote and to strictly foreclose on the pledged stock in satisfaction of the
Debenture.
4.4. Ongoing Operation. Seller will use all reasonable efforts to carry on
its business diligently and substantially in the manner as heretofore conducted
and solely in the ordinary course, to keep available the services of the present
employees, and to preserve the relationship of the Seller with its customers and
others having business relations with it.
B. NEGATIVE COVENANTS
4.5. Other Contracts. Neither Seller nor its subsidiaries shall become
subject to any agreement, transaction or commitment which would restrict or in
any way impair the obligation or ability of Seller to comply with all of the
terms of this Agreement or the Debenture.
4.6. Employee Benefits. Seller shall not (a) grant salary increases to its
directors, officers or employees, or (b) enter into, amend or alter any savings,
retirement, pension, severance, insurance, death benefit or other benefit plan,
trust agreement or arrangement or any employment, agency, brokerage or
consulting agreement.
4.7. Indebtedness. Seller shall not create, incur, assume, guarantee or
otherwise become liable with respect to any indebtedness, except in the ordinary
course of business.
4.8. Articles and Bylaws. Neither Seller nor any subsidiary shall amend
their articles or certificate of incorporation or bylaws, or take any action
with respect to such amendment, and shall take all steps necessary to maintain
their corporate existence, powers and licenses.
4.9. Acquisition or Disposal of Assets. The Seller and its subsidiaries
shall refrain from acquiring any property or disposing of or encumbering any of
their properties or assets, other than in the ordinary course of business of RAF
Financial Corporation.
4.10. Issuance of Shares. Except with the Purchaser's prior written
consent, neither Seller nor any subsidiary shall authorize or issue any shares
of capital stock or enter into any contract or grant any option, warrant, or
right calling for the issuance of any such shares, or any securities convertible
into any such shares, options, warrants or rights.
4.11. Dividends. Neither Seller nor any subsidiary shall declare or pay any
dividends, make any distributions on shares of capital stock or repurchase any
shares of its capital stock.
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ARTICLE 5.
CONDITIONS PRECEDENT
Each party's obligations under this Agreement are subject to the
fulfillment prior to or at the Closing of each of the following conditions by
the other party, any one or more of which may be waived in writing:
5.1. Accuracy of Representations and Warranties. The representations and
warranties of the other party contained herein or in any certificate, schedule,
exhibit or other document delivered by the other party pursuant to the
provisions hereof, or in connection herewith, shall be true and correct in all
material respects as of the Closing, with the same effect as though such
representations and warranties had been made at the Closing, except to the
extent such representations and warranties expressly relate only to an earlier
date, and except for changes contemplated by this Agreement or approved in
writing.
5.2. Compliance With Conditions. The other party shall have performed and
complied with all agreements and conditions required by this Agreement to be
performed or complied with by it prior to or at the Closing.
5.3. Closing Documents. Purchaser shall have delivered to Seller the
Purchase Price, and Seller shall have delivered an attorney's opinion letter
addressed to Purchaser in form and content satisfactory to Purchaser opining on
the due authorization and capacity of the Seller to into this transaction, the
accuracy of certain representations hereunder.
ARTICLE 6.
TERMINATION
This Agreement may be terminated at any time by Seller prior to the
Closing, upon written notice, if the terms, covenants or conditions of this
Agreement to be complied with or performed by Purchaser at or before the Closing
shall not by that time have been complied with or performed in all material
respects and such noncompliance or nonperformance shall not have been waived in
writing by Seller. Upon any such termination Seller shall not have any liability
to Purchaser.
ARTICLE 7.
MISCELLANEOUS
7.1. Notices. All notices, requests, demands and other communications
required or permitted hereunder shall be in writing and shall be deemed to have
been duly given if delivered or mailed, first class, certified mail, postage
prepaid, return receipt requested:
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a. To Purchaser at: Xxxx Xxxx Finance Company Limited
10th Floor Lippo Protective Tower
000-000 Xxxxxxxxxx Xxxx
Xxxxxxx, Xxxx Xxxx
Attn: Xxxx Xxxx Fai
with a copy to: Xxxxx X. Xxxxxxxx, Esq.
Xxxxx X. Xxxx, Esq.
Berliner Xxxxxx Xxxxxx & Xxxxxxxx, P.C.
0000 Xxxxxxx Xx., Xxxxx 0000
Xxxxxx, XX 00000
b. To Seller at: Fronteer Financial Holdings, Ltd
0000 Xxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxxxxx 00000
Attn: X. X. Xxxxxxx, Xx.
with a copy to: Xxxxxx X. Xxxxx, Esq.
Xxxxx XxXxxxxxxx, P.C.
0000 Xxxxx Xxxxxx Xxxxxx, Xxxxx 000
Xxxxxx, XX 00000
7.2. Entire Agreement. This Agreement and the Exhibits hereto supersedes
all prior discussions and agreements between Purchaser and Seller with respect
to the matters contained herein.
7.3. Amendments and Waivers. This Agreement may be amended only by an
instrument in writing executed by the party against whom enforcement of the
amendment is sought. Seller and Purchaser may, by a signed writing, give any
consent, take any action, waive any inaccuracies in representations or other
compliance to the other party to any of the covenants or conditions herein,
modify the terms of this Agreement, or take any other action deemed by either
party to be necessary or appropriate to consummate the transactions contemplated
by this Agreement.
7.4. Counterparts; Headings. This Agreement may be executed in any number
of counterparts, each of which shall be deemed an original, but all of which
shall constitute one and the same instrument. The headings herein set out are
for convenience of reference only and shall not be deemed a part of this
Agreement.
7.5. Binding Effect. This Agreement shall be binding upon and shall inure
to the benefit of the parties hereto and their respective heirs,
representatives, successors and assigns, but no party may assign, delegate or
otherwise transfer any of such party's rights, duties or obligations hereunder
or interest herein without the written consent of the other party hereto.
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7.6. Further Assurances. After the Closing, each party, at the request of
the other party, shall execute, deliver and acknowledge where necessary from
time to time such other and further acts and things as may be reasonably
necessary to more fully and effectively consummate the transactions contemplated
by this Agreement.
7.7. Governing Law. The validity and effect of this Agreement shall be
governed by and construed and enforced in accordance with the laws of the State
of Colorado.
IN WITNESS WHEREOF, the parties have caused this Agreement to be made
effective on the day and year first above written.
SELLER:
FRONTEER FINANCIAL HOLDINGS, LTD.,
a Colorado corporation
By:
--------------------------------------
X. X. Xxxxxxx, Xx., Chairman
PURCHASER:
XXXX XXXX FINANCE COMPANY LTD.,
a Hong Kong corporation
By:
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13
EXHIBIT A
TO $4,000,000.00 10% CONVERTIBLE DEBENTURE
PURCHASE AGREEMENT
THE SECURITIES REPRESENTED BY THIS DEBENTURE MAY NOT BE OFFERED FOR SALE, SOLD
OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933 (THE "ACT"), OR PURSUANT TO AN EXEMPTION FROM
REGISTRATION UNDER THE ACT, THE AVAILABILITY OF WHICH IS TO BE ESTABLISHED TO
THE SATISFACTION OF THE CORPORATION.
FRONTEER FINANCIAL HOLDINGS, LTD.
10% Convertible Debenture Due December 15, 2007
$ 4,000,000.00 December ___, 1997
FOR VALUE RECEIVED, Fronteer Financial Holdings, Ltd., a corporation duly
organized and existing under the laws of the State of Colorado (the
"Corporation"), hereby promises to pay to the order of Xxxx Xxxx Finance Company
Limited, ("Holder") the principal sum of $4,000,000.00, with interest from the
date hereof at the rate of 10% per annum, amortized over ten (10) years, and
payable in equal quarterly installments of principal and interest of One Hundred
and Fifty-Nine Thousand, Three Hundred Forty-Five Dollars ($159,345.00), with
the first of such payments due and payable on the 31st day of March, 1998,
successive payments due and payable on the last day of each calendar quarter
thereafter, with the final payment of the entire unpaid principal balance and
all accrued and unpaid interest, if not sooner paid, due and payable on the 15th
day of December, 2007 (the "Maturity Date"). At Holder's option, interest may be
paid in stock of the Corporation at the Conversion Price (described below).
The unpaid principal amount of this Convertible Debenture ("Debenture") and
all accrued and unpaid interest hereon shall be due and payable by the
Corporation to the Holder on the Maturity Date.
The Holder shall have the right, exercisable at the Holder's option at any
time and from time to time up to and including the Maturity Date (except that,
if this Debenture shall be called for prepayment in full by the Corporation and
the Corporation shall not thereafter default in the making of the prepayment,
such right shall terminate at the close of business on the business day next
preceding the date fixed for prepayment), to convert all or any part of the
unpaid principal amount hereof into fully paid and non-assessable shares of
Common Stock of the Corporation at the Conversion Price, as defined below, upon
surrender or partial surrender of this Debenture to the Corporation at its
principal place of business. If so required by the Corporation, this Debenture,
upon surrender or partial surrender for conversion as aforesaid, shall be duly
endorsed by or accompanied by instruments of transfer, in form satisfactory to
the Corporation, duly executed by the Holder or by Holder's duly authorized
attorney. The Corporation shall not be required to issue fractional shares of
Common Stock of the Corporation, but shall make adjustment therefor in cash
based upon the Conversion Price of the Common Stock of the Corporation as of the
date of conversion. The certificate representing the shares of Common Stock
issued upon conversion or partial conversion shall contain a legend restricting
the transfer thereof similar to the legend that appears on the top of this
Debenture.
The term "Conversion Price", as used with reference to any share of Common
Stock on any specified date, shall mean $0.53125 per share of Common Stock.
If any payment of interest or any payment of principal and interest, as the
case may be, is not paid by the Corporation within five (5) business days after
the date on which such payment shall have become due and payable under this
Debenture or upon the bankruptcy or receivership of the Corporation (each, an
"Event of Default"), the Holder may, by giving written notice to the
Corporation, declare the unpaid principal amount hereof and all accrued and
unpaid interest hereon to be immediately due and payable and upon such
declaration, the unpaid principal amount hereof and all accrued and unpaid
interest hereon shall be and become immediately due and payable. Upon the
occurrence and continuance of an Event of Default and upon notice from Holder to
the Corporation, the rate of interest on this Debenture shall increase from 10%
per annum to 18% per annum, and Holder shall be entitled (but not required) to
exercise any and all remedies available under Colorado law, including (without
limitation) strict foreclosure upon the stock of Fronteer Capital, Inc. pursuant
to the Security Agreement between the Corporation and the Holder.
Should the indebtedness represented by this Debenture or any part thereof
be collected at law or in equity, or in bankruptcy, receivership or any other
court proceedings (whether at the trial or appellate level), or should this
Debenture be placed in the hands of attorneys for collection upon the occurrence
of an Event of Default, the Corporation agrees to pay, in addition to the
principal and interest due and payable hereon, all costs of collection,
including reasonable attorneys' fees.
This Debenture may not be prepaid before December 15, 1998. Thereafter,
this Debenture may be prepaid, in part or in whole, at the option of the
Corporation, at any time or from time to time prior to the Maturity Date, to the
Holder without premium or penalty, together with accrued interest to the date
fixed for prepayment; provided, however, that prepayment in full of this
Debenture by the Corporation shall require not less than 30 nor more than 60
days prior notice of prepayment to the Holder.
Subject to compliance with the provisions of the Securities Act of 1933, as
amended, this Debenture is transferable in the manner authorized by law. Upon
surrender of this Debenture for transfer, accompanied by a written instrument of
transfer in form satisfactory to the Corporation, a new Debenture or Debentures,
for a like aggregate principal amount, will be issued to the transferee.
2
Prior to the transfer of this Debenture, the Corporation may deem and treat
the Holder hereof as the absolute owner hereof (whether or not this Debenture
shall be overdue) for the purpose of receiving payment of or on account of the
principal hereof and interest hereon, and for all other purposes, and the
Corporation shall not be affected by any notice to the contrary.
Except as expressly provided for herein, the Corporation hereby waives
presentment, demand, notice of demand, protest, notice of protest and notice of
dishonor and any other notice required to be given by law in connection with the
delivery, acceptance, performance, default or enforcement.
This Debenture shall be governed and construed in accordance with the laws
of the State of Colorado.
IN WITNESS WHEREOF, Fronteer Financial Holdings, Ltd. has caused this
Debenture to be signed by its President on the date first above written.
FRONTEER FINANCIAL HOLDINGS, LTD.
By:
-----------------------------------
X. X. Xxxxxxx, Xx., Chairman
3
EXHIBIT B
TO $11,000,000.00 10% CONVERTIBLE DEBENTURE
PURCHASE AGREEMENT
THE SECURITIES REPRESENTED BY THIS DEBENTURE MAY NOT BE OFFERED FOR SALE, SOLD
OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933 (THE "ACT"), OR PURSUANT TO AN EXEMPTION FROM
REGISTRATION UNDER THE ACT, THE AVAILABILITY OF WHICH IS TO BE ESTABLISHED TO
THE SATISFACTION OF THE CORPORATION.
FRONTEER FINANCIAL HOLDINGS, LTD.
10% Convertible Debenture [10 years from purchase]
$ 11,000,000.00 __________, 1997
FOR VALUE RECEIVED, Fronteer Financial Holdings, Ltd., a corporation duly
organized and existing under the laws of the State of Colorado (the
"Corporation"), hereby promises to pay to the order of Xxxx Xxxx Finance Company
Limited, ("Holder") the principal sum of $11,000,000.00, with interest from the
date hereof at the rate of 10% per annum, amortized over ten (10) years, and
payable in equal quarterly installments of principal and interest of Four
Hundred Thirty Eight Thousand, One Hundred Ninety-Nine Dollars
($438,199.00),with the first of such payments due and payable on the last day of
each calendar quarter, with the final payment of the entire unpaid principal
balance and all accrued and unpaid interest, if not sooner paid, due and payable
on the _____ day or [10 years from purchase] (the "Maturity Date").
The unpaid principal amount of this Convertible Debenture ("Debenture") and
all accrued and unpaid interest hereon shall be due and payable by the
Corporation to the Holder on the Maturity Date.
The Holder shall have the right, exercisable at the Holder's option at any
time and from time to time up to and including the Maturity Date (except that,
if this Debenture shall be called for prepayment in full by the Corporation and
the Corporation shall not thereafter default in the making of the prepayment,
such right shall terminate at the close of business on the business day next
preceding the date fixed for prepayment), to convert all or any part of the
unpaid principal amount hereof into fully paid and non-assessable shares of
Common Stock of the Corporation at the Conversion Price, as defined below, upon
surrender or partial surrender of this Debenture to the Corporation at its
principal place of business. If so required by the Corporation, this Debenture,
upon surrender or partial surrender for conversion as aforesaid, shall be duly
endorsed by or accompanied by instruments of transfer, in form satisfactory to
the Corporation, duly executed by the Holder or by Holder's duly authorized
attorney. The Corporation shall not be required to issue fractional shares of
Common Stock of the Corporation, but shall make adjustment therefor in cash
based upon the Conversion Price of the Common Stock of the Corporation as of the
date of conversion. The certificate representing the shares of Common Stock
issued upon conversion or partial conversion shall contain a legend restricting
the transfer thereof similar to the legend that appears on the top of this
Debenture.
The term "Conversion Price", as used with reference to any share of Common
Stock on any specified date, shall mean $0.61 per share of Common Stock.
If any payment of interest or any payment of principal and interest, as the
case may be, is not paid by the Corporation within five (5) business days after
the date on which such payment shall have become due and payable under this
Debenture or upon the bankruptcy or receivership of the Corporation (each, an
"Event of Default"), the Holder may, by giving written notice to the
Corporation, declare the unpaid principal amount hereof and all accrued and
unpaid interest hereon to be immediately due and payable and upon such
declaration, the unpaid principal amount hereof and all accrued and unpaid
interest hereon shall be and become immediately due and payable. Upon the
occurrence and continuance of an Event of Default and upon notice from Holder to
the Corporation, the rate of interest on this Debenture shall increase from 10%
per annum to 18% per annum, and Holder shall be entitled (but not required) to
exercise any and all remedies available under Colorado law, including (without
limitation) strict foreclosure upon the stock of Fronteer Capital, Inc. pursuant
to the Security Agreement between the Corporation and the Holder.
Should the indebtedness represented by this Debenture or any part thereof
be collected at law or in equity, or in bankruptcy, receivership or any other
court proceedings (whether at the trial or appellate level), or should this
Debenture be placed in the hands of attorneys for collection upon the occurrence
of an Event of Default, the Corporation agrees to pay, in addition to the
principal and interest due and payable hereon, all costs of collection,
including reasonable attorneys' fees.
This Debenture may not be prepaid before one year from the date of
purchase. Thereafter, this Debenture may be prepaid, in part or in whole, at the
option of the Corporation, at any time or from time to time prior to the
Maturity Date, to the Holder without premium or penalty, together with accrued
interest to the date fixed for prepayment; provided, however, that prepayment in
full of this Debenture by the Corporation shall require not less than 30 nor
more than 60 days prior notice of prepayment to the Holder.
Subject to compliance with the provisions of the Securities Act of 1933, as
amended, this Debenture is transferable in the manner authorized by law. Upon
surrender of this Debenture for transfer, accompanied by a written instrument of
transfer in form satisfactory to the Corporation, a new Debenture or Debentures,
for a like aggregate principal amount, will be issued to the transferee.
2
Prior to the transfer of this Debenture, the Corporation may deem and treat
the Holder hereof as the absolute owner hereof (whether or not this Debenture
shall be overdue) for the purpose of receiving payment of or on account of the
principal hereof and interest hereon, and for all other purposes, and the
Corporation shall not be affected by any notice to the contrary.
Except as expressly provided for herein, the Corporation hereby waives
presentment, demand, notice of demand, protest, notice of protest and notice of
dishonor and any other notice required to be given by law in connection with the
delivery, acceptance, performance, default or enforcement.
This Debenture shall be governed and construed in accordance with the laws
of the State of Colorado.
IN WITNESS WHEREOF, Fronteer Financial Holdings, Ltd. has caused this
Debenture to be signed by its President on the date first above written.
FRONTEER FINANCIAL HOLDINGS, LTD.
By:
-------------------------------
X. X. Xxxxxxx, Xx., Chairman
3
EXHIBIT "C"
SECURITY AGREEMENT
THIS AGREEMENT, made this _____ day of December, 1997, by and between
Fronteer Financial Holdings, Ltd., hereinafter referred to as "Debtor" and Xxxx
Xxxx Finance Limited, hereinafter referred to as "Secured Party";
WHEREAS, Debtor is the holder of the following hereinafter referred to
"collateral":
One Certificate for 1,000 shares of voting common stock,
representing 100% of the issued and outstanding capital
stock of Fronteer Capital, Inc., a Delaware corporation,
together with a noncancellable assignment, endorsed in
blank, of the certificate for such stock duly signed by
Debtor.
WHEREAS, to induce Secured Party to accept a $4,000,000.00 10% Convertible
Debenture (the "Debenture") of even date herewith, Debtor intends to grant to
Secured Party a security interest in said collateral;
NOW, THEREFORE, it is hereby agreed as follows:
1. Debtor does hereby deliver, assign and grant to Secured Party a security
interest in said collateral to secure the payment of all principal and interest
as provided in said Debenture, and all other indebtedness of Debtor to Secured
Party, however or whenever arising, whether due or to become due. So long as any
portion of the Debenture remains unpaid, Secured Party alone shall have the
right to cast any and all votes and receive any distributions pertaining to the
collateral.
2. Secured Party shall have the right to record and file its lien and, at
any time, to notify any and all third parties of the security interest of
Secured Party in said collateral and, in the event of a default, to cause said
collateral to be transferred to the name of the Secured Party or to the name of
any other person or corporation; and Secured Party or such transferee may
exercise all the rights and privileges in connection with said collateral to
which transferor would have been entitled by virtue of being record holder
thereof.
3. Debtor does hereby constitute and appoint Secured Party as its
attorney-in-fact to, upon default, endorse Debtor's name on said collateral, on
any check or any other instrument of payment to be received therefrom, or on any
other document or instrument which would facilitate the collection or payment of
said collateral; to give receipts therefor in the name of Debtor for any amounts
which may be received thereon; and to apply the amount so collected to any
indebtedness of Debtor to Secured Party. If Secured Party elects to accelerate
the indebtedness represented by the Debenture due to the failure or refusal of
the NASD to consent to the change in control of RAF Financial Corp. by June 15,
1997, the Secured Party's sole and only remedy will be to take the Collateral in
satisfaction of the balance due on the Debenture, without any public notice of
foreclosure sale or public sale of the Collateral.
4. Debtor does hereby warrant and represent that at the time of execution
of this Security Agreement, Debtor has full and complete capacity and authority
to grant the aforesaid security interest to Secured Party, and that the security
interest granted herein to Secured Party is free and clear of any superior
security interest, claim or lien. Debtor further agrees that, so long as this
Security Agreement is in effect, no other lien, security interest, claim or
encumbrance shall be permitted to attach to the Collateral or any part thereof,
and no transfer, assignment, pledge or hypothecation (other than as set forth
herein) of the Collateral or any part thereof shall be permitted.
5. In the event of the default by Debtor in the payment of any sum when due
pursuant to said Debenture or otherwise, then all indebtedness of Debtor to
Secured Party hereby secured shall become due and payable as provided in said
Debenture at the option of Secured Party, its successors and assigns, and Debtor
does hereby authorize, empower and instruct Secured Party, as its
attorney-in-fact, to collect said collateral, to retain such collateral in
satisfaction of the Debenture or to sell the same, the whole or part of said
collateral, at public or private sale, at its discretion after ten (10) days'
prior written notice thereof to Debtor, without advertisement or notice of
public sale, for cash or on credit, for such price and upon such terms as
Secured Party shall determine, delivering said collateral to the purchaser
thereof, Secured Party retaining the right to become the purchaser at such sale;
the proceeds received shall first be applied to expenses, costs and charges,
including (without limitation) attorneys' fees, incurred in the collection,
sale, or delivery of said collateral, then to the payment of all indebtedness of
Debtor to Secured Party, paying any surplus to Debtor.
Debtor waives any right to require Secured Party to proceed against any
person, exhaust any collateral, or pursue any other remedy which Secured Party
may now or hereafter have. Debtor authorizes Secured Party, without notice or
demand, to renew, extend the time of payment of, or accelerate the terms of any
indebtedness due or to become due from Debtor to Secured Party, or to take and
hold additional security for the payment of said indebtedness, or exchange,
enforce, release or substitute any of said collateral.
6. At such time as the Debenture has been fully repaid and satisfied,
Secured Party shall release its security interest in said collateral and deliver
said collateral to Debtor.
7. The rights and liabilities of the parties hereto shall be governed and
construed by the Uniform Commercial Code, as enacted in the State of Colorado.
IN WITNESS WHEREOF, this Agreement has been executed the day and year first
above written.
DEBTOR: SECURED PARTY:
FRONTEER FINANCIAL HOLDINGS, LTD., XXXX XXXX FINANCE COMPANY
a Colorado corporation LIMITED, a Hong Kong corporation
By: By:
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