DEBENTURE PURCHASE AGREEMENT
BETWEEN
EFINANCIAL XXXXX.XXX, INC.
AND
OXFORD CAPITAL CORP.
FEBRUARY 2, 2000
DEBENTURE PURCHASE AGREEMENT
This Debenture Purchase Agreement is made as of February 2, 2000, between
Efinancial Xxxxxx.Xxx, Inc. (the "Company"), a Delaware corporation, and Oxford
Capital Corp. (the "Purchaser"), a Cayman Island corporation.
In consideration of the premises, mutual covenants and agreements contained
in this Agreement and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the Company and the Purchaser agree
as follows:
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
SECTION 1.01. DEFINED TERMS. As used in this Agreement, the following terms
have the following meanings (terms defined in the singular to have the same
meaning when used in the plural and vice versa):
"Affiliate" means any Person (1) which directly or indirectly controls, or is
controlled by, or is under common control with the Company or a Subsidiary; (2)
which directly or indirectly beneficially owns or holds five percent (5%) or
more of any class of voting stock of the Company or any Subsidiary; or (3) five
percent (5%) or more of the voting stock of which is directly or indirectly
beneficially owned or held by the Company or a Subsidiary. The term "control"
means the possession, directly or indirectly, of the power to direct or cause
the direction of the management and policies of a Person, whether through the
ownership of voting securities, by contract, or otherwise.
"Agreement" means this Debenture Purchase Agreement, as amended, supplemented,
or modified from time to time.
"Business Day" means any day other than a Saturday, Sunday, or other day on
which commercial banks in the United States are authorized or required to close
under the federal laws of the United States of America.
"Capital Lease" means all leases which have been or should be capitalized on the
books of the lessee in accordance with GAAP.
"Closing Date" means February 2, 2000 and any date thereafter that the Purchaser
and the Company agree upon in writing.
"Code" means the US Internal Revenue Code of 1986, as amended from time to time,
and the regulations and published interpretations thereof.
"Common Stock means the Company's common stock, $.001 par value.
"Commonly Controlled Entity" means an entity, whether or not incorporated, which
is under common control with the Company within the meaning of Section 414(b) or
414(c) of the Code.
"Company" means EFinancial Depot. Com, Inc. and its subsidiary companies, joint
ventures or any other related entities;
"Conversion Date" means any date 30 days after the Closing Date.
"Debenture" shall have the meaning assigned to it in Section 2.01
"Debenture Shares" means the shares of Common Stock of the Company underlying
the Debenture into which the Debenture is convertible.
"Debt" means (1) indebtedness or liability for borrowed money; (2) obligations
evidenced by bonds, Debenture, notes, or other similar instruments; (3)
obligations for the deferred purchase price of property or services (including
trade obligations); (4) obligations as lessee under Capital Leases; (5) current
liabilities in respect of unfunded vested benefits under Plans covered by ERISA;
(6) obligations under letters of credit; (7) obligations under acceptance
facilities; (8) all guaranties, endorsements (other than for collection or
deposit in the ordinary course of business), and other contingent obligations to
purchase, to provide funds for payment, to supply funds to invest in any Person
or entity, or otherwise to assure a creditor against loss; and (9) obligations
secured by any Liens, whether or not the obligations have been assumed.
"Default" means any of the events specified in Section 8.01, whether or not any
requirement for the giving of notice, the lapse of time, or both, or any other
condition, has been satisfied.
"Escrow Agreement" shall have the meaning assigned to such term in Section
2.10(c).
"ERISA" means the Employee Retirement Income Security Act of 1974, as amended
from time to time, and the regulations and published interpretations thereof.
"Event of Default" means any of the events specified in Section 8.01, provided
that any requirement for the giving of notice, the lapse of time, or both, or
any other condition, has been satisfied.
"Exchange Act" means the US Securities Exchange Act of 1934, as amended.
"GAAP" means generally accepted accounting principles either (i) in the United
States, or (ii) in Canada, whichever is applicable, together with accompanying
adjustments to reflect generally accepted accounting principles in the United
States.
"Lien" means any mortgage, deed of trust, pledge, security interest,
hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or
other), or preference, priority, or other security agreement or preferential
arrangement, charge, or encumbrance of any kind or nature whatsoever (including,
without limitation, any conditional sale or other title retention agreement, any
financing lease having substantially the same economic effect as any of the
foregoing, and the filing of any financing statement or other registration or
notification of a debt, obligation or security interest under the law of any
jurisdiction to evidence any of the foregoing).
"Maturity Date" means the date the principle amount outstanding on the Debenture
is due and payable;
"Multiemployer Plan" means a Plan described in Section 4001(a)(3) of ERISA.
"PBGC" means the Pension Benefit Guaranty Corporation or any entity succeeding
to any or all of its functions under ERISA.
"Person" means an individual, partnership, corporation, business trust, joint
stock company, trust, unincorporated association, joint venture, governmental
authority, or other entity of whatever nature.
"Plan" means any pension plan which is covered by Title IV of ERISA and in
respect of which the Company or a Commonly Controlled Entity is an "employer" as
defined in Section 3(5) of ERISA
"Purchaser" means Oxford Capital Corp., a Cayman Island company.
"Principal Office" means 0000-00xx Xxxxxx X.X., Xxxxxxx, Xxxxxxx, X0X 0X0.
"Prohibited Transaction" means any transaction set forth in Section 406 of ERISA
or Section 4975 of the Code.
"Registration Rights Agreement" shall have the meaning assigned to such term in
Section 2.01.
"Reportable Event" means any of the events set forth in Section 4043 of ERISA.
"SEC" means the US Securities and Exchange Commission.
"Securities" means the Debenture and the Warrant.
"Securities Act" means the US Securities Act of 1933, as amended.
"Subsidiary" means, as to the Company, a corporation of which shares of stock
having ordinary voting power (other than stock having such power only by reason
of the happening of a contingency) to elect a majority of the board of directors
or other managers of such corporation are at the time owned, or the management
of which is otherwise controlled, directly or indirectly through one or more
intermediaries, or both, by the Company.
"Transaction Documents" means this Agreement, the Debenture, the Warrant, the
Registration Rights Agreement, and the Escrow Agreement.
"Warrant" shall have the meaning assigned to that term in Section 2.01.
"Warrant Shares" means the shares Common Stock underlying the Warrant issuable
upon the exercise thereof.
SECTION 1.02. ACCOUNTING TERMS. All accounting terms not specifically
defined herein shall be construed in accordance with GAAP consistent with those
applied in the preparation of the financial statements referred to in Section
4.04, and all financial data submitted pursuant to this Agreement shall be
prepared in accordance with such principles.
ARTICLE II
PURCHASE AND SALE OF SECURITIES
SECTION 2.01. PURCHASE AND SALE OF SECURITIES. The Company agrees to sell
and, subject to the terms and conditions and in reliance on the Company's
representations and warranties contained in this Agreement, the Purchaser agrees
to purchase, $2,500,000 USD in principal amount of the Company's 6% Convertible
Debenture (the "Debenture"), due February 2, 2003, (the "Maturity Date") and a
warrant to purchase up 250,000 the Company's Common Stock (the "Warrant")
exercisable at a price of $5.00 per share on or before February 2, 2002. The
Debenture shall be convertible at a price equal to: (i) the lesser of 80% of the
average closing bid price of the Company's common stock for the 5 trading days
preceding the Conversion Date and (ii) $ 5.00; in no event shall the conversion
price be less than $ 3.00 USD. The Warrant shall be exercisable at a price
equal to $5.00 USD per share. The purchase price of the Debenture shall be 100%
of its face value. The purchase price of the Warrant shall be $.01. The
Debenture shall be in the form of Exhibit A hereto. The Warrant shall be in the
form of Exhibit B hereto. All tax returns filed by the Company shall be
consistent in all material respects with such allocation (including for purposes
of section 1271 et seq. of the Code). Contemporaneously with the execution of
this Agreement, the Company shall execute and deliver to the Purchaser a
registration rights agreement (the "Registration Rights Agreement") in the form
of Exhibit C hereto, covering the Debenture Shares and the Warrant Shares.
SECTION 2.02. FORCED CONVERSION. If at any time following the Closing Date, the
Common Stock trades on the OTC Bulletin Board or NASDAQ National Board at a
price equal to or greater than $10.00 USD, on every day for 20 consecutive
trading days, and the provisions of Section 2.06 have never been exercisable by
the Purchaser, then, within 30 days of the determination of the application of
this provision: (i) the Debenture will be converted into Common Stock in
accordance with the provisions of the Debenture; and (ii) the Warrant will be
exercised in accordance with its terms.
SECTION 2.03. CLOSING. The purchase and sale of the Securities shall take
place on the Closing Date, via facsimile, at the Principal Office and the
offices of Xxxxx Xxxxxx, Barristers and Solicitors, Vancouver, B.C.
SECTION 2.04. PLACEMENT FEE. On the Closing Date, the Company shall pay
the Purchaser a placement fee (the "Placement Fee") in an amount equal to 10% of
the principal amount of Debenture purchased at such Closing. The Company hereby
irrevocably authorizes the Purchaser to deduct the amount of the Placement Fee
from the purchase price of the Debenture, together with any reasonable and
documented out-of-pocket expenses for which such Purchaser is entitled to
reimbursement pursuant to this Section 2.04, including the reasonable and
documented fees and expenses of the Purchaser's counsel. If for any reason the
Purchaser does not deduct the amount of the Placement Fee and such expenses from
the purchase price of Debenture, then promptly upon the Purchaser's request, the
Company shall pay and deliver the Placement Fee and such other expenses to the
Purchaser or to such other persons as such Purchaser shall direct, by Federal
funds bank wire transfer of same day funds.
SECTION 2.05. PLAEMENT AGENT WARRANTS. On the Closing Date, the Issuer shall
issue the Purchaser, a Placement Agent Warrant to purchase 50,000 shares of the
Common Stock at an exercise price of $5.00 per share, exerciseable on or before
February 2, 2001.
SECTION 2.06. ANTI-DILUTION PROVISIONS. After February 2, 2000, and so long as
the Debenture or the Warrant is outstanding and not fully converted or
exercised, the Company shall not, without the prior consent of the Holder, issue
or sell (i) any Common Stock without consideration or for a consideration per
share less than $3.00; or (ii) issue or sell any warrant, Warrant, right,
contract, call, or other security or instrument granting the holder thereof the
right to acquire Common Stock without consideration or for a consideration per
share less than $3.00.
SECTION 2.07. LIQUIDITY OF COMMON SHARES. If at any time following 120 days
after the Closing Date, the market value of the volume of the Common Stock, as
traded on the OTC Bulletin Board, multiplied by the average closing market
price of the Common Stock, is less than $100,000, on every day for 20
consecutive trading days, the Purchaser has the right to put any principal
amount of the Debenture unconverted back to the Company at a purchase price
equal to the principle amount outstanding plus a premium of 30% of the principle
amount outstanding.
SECTION 2.08. USE OF PROCEEDS. The Company shall use the proceeds from the
Debenture solely for working capital to grow and expand its business.
SECTION 2.09. EXEMPTION FROM US REGISTRATION. The issuance of the
Debenture and the Warrant shall be exempt from the registration requirements of
the Securities Act pursuant to Section 4(2) thereof; and also pursuant to SEC
Regulation S. Accordingly, the Company represents and warrants to the Purchaser
that it has, and covenants and agrees with the Purchaser that it will, comply in
all material respects with the terms and conditions of SEC Regulation S
applicable to the issuance and sale of the Debenture and the Warrant.
SECTION 2.10. REGISTRATION OF COMMON STOCK; (a) As soon as possible, and
in any event on or before March 31, 2000 in accordance with the Registration
Rights Agreement, the Company shall file the appropriate registration statement
or registration statements (each a "Registration Statement" and collectively
"Registration Statements") with the SEC to register 200% of the Debenture Shares
and 100% of the Warrant Shares under the Securities Act pursuant to the
Registration Rights Agreement.
(b) In accordance with the Registration Rights Agreement, the Company
shall use its best efforts to ensure that the Registration Statements become
effective as soon as possible, and shall cause the Registration Statements to
remain effective until the Debenture have been converted or paid, and the
Warrant fully exercised or expired.
(c) Contemporaneously with the execution of this Agreement the Company shall
enter into an escrow agreement (the "Escrow Agreement") with the Purchaser as
escrow holder (the "Escrow Holder") in the form of Exhibit D. Promptly after the
execution of this Agreement, the Company shall deposit 500,000 common shares of
the Common Stock as security for the Debenture (the "Security Shares").
Promptly upon the effectiveness of a Registration Statement, the Corporation
shall deliver unrestricted certificates for those shares registered thereunder
to the Escrow Agent, in DTC form, in exchange for the Security Shares.
ARTICLE III
CONDITIONS PRECEDENT
SECTION 3.01. CONDITION PRECEDENT TO INITIAL CLOSING. The Purchaser's
obligation to purchase the Debenture is subject to the conditions precedent that
the Purchaser shall have received on or before the Closing Date each of the
following, in form and substance satisfactory to the Purchaser and its counsel:
(1) Debenture. The Debenture, duly executed by the Company;
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(2) Warrant. The Warrant, duly executed by the Company;
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(3) Placement Agent Warrant. The Placement Agent Warrant, duly executed by the
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Company;
(4) Registration Rights Agreement. The Registration Rights Agreement, duly
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executed by the Company;
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(5) Escrow Agreement. The Escrow Agreement, duly executed by the Company;
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(6) Evidence of all corporate action by the Company. Certified (as of the
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date of this Agreement) copies of all corporate action taken by the Company,
including resolutions of its Board of Directors, authorizing the execution,
delivery, and performance of the Transaction Documents to which it is a party
and each other document to be delivered pursuant to this Agreement;
(6) Incumbency and signature certificate of the Company. A certificate (dated as
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of the date of this Agreement) of the Secretary of the Company certifying the
names and true signatures of the officers of the Company authorized to sign the
Transaction Documents to which it is a party and the other documents to be
delivered by the Company under this Agreement;
(7) Opinion of counsel for the Company. A favorable opinion of Xxxxx
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Xxxxxx, Barristers & Solicitors, Counsel for the Company, in substantially the
form of Exhibit E, and as to such other matters as the Purchaser may reasonably
request.
ARTICLE IV
COMPANY'S REPRESENTATIONS AND WARRANTIES
The Company represents and warrants to the Purchaser that:
SECTION 4.01. INCORPORATION, GOOD STANDING, AND DUE QUALIFICATION. The
Company is a corporation duly incorporated, validly existing, and in good
standing under the laws of the jurisdiction of its incorporation and has the
corporate power and authority to own its assets and to transact the business in
which it is now engaged or proposed to be engaged in and is duly qualified as a
foreign corporation and in good standing under the laws of each other
jurisdiction in which such qualification is required.
SECTION 4.02 CORPORATE POWER AND AUTHORITY. The execution, delivery, and
performance by the Company of the Transaction Documents to which each is a party
have been duly authorized by all necessary corporate action and do not and will
not (1) require any consent or approval of the stockholders of such corporation;
(2) contravene such corporation's charter or bylaws; (3) violate any provision
of any law, rule, regulation, order, writ, judgment, injunction, decree,
determination, or award presently in effect having applicability to such
corporation; (4) result in a breach of or constitute a default under any
indenture or loan or credit agreement or any other agreement, lease, or
instrument to which such corporation is a party or by which it or its properties
may be bound or affected; (5) result in, or require, the creation or imposition
of any Lien, upon or with respect to any of the properties now owned or
hereafter acquired by such corporation; and (6) cause such corporation to be in
default under any such law, rule, regulation, order, writ, judgment, injunction,
decree, determination, or award or any such indenture, agreement, lease, or
instrument.
SECTION 4.03 LEGALLY ENFORCEABLE AGREEMENT. This Agreement is, and each of
the other Transaction Documents when delivered under this Agreement will be,
legal, valid, and binding obligations of the Company, enforceable against the
Company in accordance with their respective terms, except to the extent that
such enforcement may be limited by applicable bankruptcy, insolvency, and other
similar laws affecting creditors' rights generally.
SECTION 4.04. FINANCIAL STATEMENTS. The financial statements of the
Company, filed with its Form 10-SB at the Securities Exchange Commission, copies
of which have been furnished to the Purchaser, are complete and correct and
fairly present the financial condition of the Company, all in accordance with
GAAP in the United States consistently applied subject to year-end adjustments.
Since the date of the filing of the Form 10-SB, there has been no material
adverse change in the condition (financial or otherwise), business, or
operations of the Company. There are no liabilities of or claims against the
Company, fixed or contingent, which are material but are not reflected in the
financial statements or in the notes thereto, other than liabilities arising in
the ordinary course of business since the filing of the Form 10-SB or as
otherwise disclosed.
SECTION 4.05. LABOR DISPUTES AND ACTS OF GOD. The business and the
properties of the Company are not affected by any fire, explosion, accident,
strike, lockout or other labor dispute, drought, storm, hail, earthquake,
embargo, act of God or of the public enemy, or other casualty (whether or not
covered by insurance) materially and adversely affecting such business
properties or the operation of the Company.
SECTION 4.06. OTHER AGREEMENTS. The Company is not a party to any indenture,
loan, or credit agreement, or to any lease or other agreement or instrument, or
subject to any charter or corporate restriction which could have a material
adverse effect on the business, properties, assets, operations, or conditions,
financial or otherwise, of the Company, or the ability of the Company to carry
out its obligations under the Transaction Documents other than as disclosed in
the Form 10-SB. The Company is not in default in any respect in the performance,
observance, or fulfillment of any of the obligations, covenants, or conditions
contained in any agreement or instrument material to its business to which it is
a party.
SECTION 4.07. LITIGATION. There is no pending or threatened action or
proceeding against or affecting the Company before any court, governmental
agency, or arbitrator which may, in any one case or in the aggregate, materially
adversely affect the financial condition, operations, properties, or business of
the Company or the ability of the Company to perform its obligation under the
Transaction Documents other than as disclosed in the Form 10-SB.
SECTION 4.08. NO DEFAULTS ON OUTSTANDING JUDGMENTS OR ORDERS. There are no
unsatisfied judgments outstanding against the Company, and the Company is not
in default with respect to any judgment, writ, injunction, decree, rule, or
regulation of any court, arbitrator, or federal, state, municipal, or other
governmental authority, commission, board, bureau, agency or instrumentality,
domestic or foreign.
SECTION 4.09. OWNERSHIP AND LIENS. The Company has title to, or valid leasehold
interests in, all of their properties and assets, real and personal, including
the properties and assets and leasehold interest reflected in the financial
statements referred to in Section 4.04 (other than any properties or assets
disposed of in the ordinary course of business), and none of the properties and
assets owned by the Company and none of its leasehold interests is subject to
any Lien, except such as may be permitted pursuant to Section 6.01 of this
Agreement. Without limiting the generality of the foregoing, this representation
and warrant includes all of the Company's intellectual property (including
software and other technology).
SECTION 4.10. ERISA AND EMPLOYEE BENEFIT LAWS. The Company is in compliance
in all material respects with all applicable provisions of ERISA, and all
applicable national and state employee benefit of the United States, and any
other applicable jurisdictions.
SECTION 4.11. OPERATION OF BUSINESS. The Company possesses all licenses,
permits, franchises, patents, copyrights, trademarks, and trade names, or rights
thereto, to conduct their respective businesses substantially as now conducted
and as presently proposed to be conducted, and the Company and is not in
violation of any valid rights of others with respect to any of the foregoing.
SECTION 4.12. TAXES. The Company has filed all tax returns (national,
federal, provincial, state, and local) required to be filed and has paid all
taxes, assessments, and governmental charges and levies thereon to be due,
including interest and penalties.
SECTION 4.13. ENVIRONMENT. The Company has duly complied with, and their
businesses, operations, assets, equipment, property, leaseholds, or other
facilities are in compliance with, the provisions of all national, federal,
provincial, state, and local environmental, health, and safety laws, codes and
ordinances, and all rules and regulations promulgated thereunder.
ARTICLE V
AFFIRMATIVE COVENANTS
So long as the Debenture is outstanding, or the Warrant has not been fully
exercised or expired, the Company will:
SECTION 5.01. MAINTENANCE OF EXISTENCE. Preserve and maintain, and cause
each active Subsidiary to preserve and maintain, its corporate existence and
good standing in the jurisdiction of its incorporation, and qualify and remain
qualified, and cause each Subsidiary to qualify and remain qualified, as a
foreign corporation in each jurisdiction in which such qualification is
required.
SECTION 5.02. MAINTENANCE OF RECORDS. Keep, and cause each Subsidiary to
keep, adequate records and books of account, in which complete entries will be
made in accordance with GAAP consistently applied, reflecting all financial
transactions of the Company and its Subsidiaries.
SECTION 5.03. MAINTENANCE OF PROPERTIES. Maintain, keep, and preserve, and
cause each Subsidiary to maintain, keep, and preserve, all of its properties
(tangible and intangible) necessary or useful in the proper conduct of its
business in good working order and condition, ordinary wear and tear excepted.
SECTION 5.04. CONDUCT OF BUSINESS. Continue, and cause each Subsidiary to
continue, to engage in an efficient and economical manner in a business of the
same general type as conducted by it on the date of this Agreement.
SECTION 5.05. MAINTENANCE OF INSURANCE. Maintain, and cause each Subsidiary
to maintain, insurance with financially sound and reputable insurance companies
or associations in such amounts and covering such risks as are usually carried
by companies engaged in the same or a similar business and similarly situated,
which insurance may provide for reasonable deductibility from coverage thereof.
SECTION 5.06. COMPLIANCE WITH LAWS. Comply, and cause each Subsidiary to
comply, in all respects with all applicable laws, rules, regulations, and
orders, such compliance to include, without limitation, paying before the same
become delinquent all taxes, assessments, and governmental charges imposed upon
it or upon its property.
SECTION 5.07. RIGHT OF INSPECTION. At any reasonable time and from time to
time, permit the Purchaser or any agent or representative thereof to examine and
make copies of and abstracts from the records and books of account of, and visit
the properties of, the Company and any Subsidiary, and to discuss the affairs,
finances, and accounts of the Company and any Subsidiary with any of their
respective officers and directors and the Company's independent accountants.
SECTION 5.08. REPORTING REQUIREMENTS. Furnish to the Purchaser:
(1) Quarterly financial statements. As soon as available and in any event
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within forty-five (45) days after the end of each of the first three quarters of
each fiscal year of the Company, consolidated and consolidating balance sheets
of the Company and its Subsidiaries as of the end of such quarter, consolidated
and consolidating statements of income and retained earnings of the Company and
its Subsidiaries for the period commencing at the end of the previous fiscal
year and ending with the end of such quarter, and [consolidated and
consolidating] statements of changes in financial position of the Company and
its Subsidiaries for the portion of the fiscal year ended with the last day of
such quarter, all in reasonable detail and stating in comparative form the
respective figures for the corresponding date and period in the previous fiscal
year and all prepared in accordance with GAAP consistently applied and certified
by the chief financial officer of the Company (subject to year-end adjustments);
(2) Annual financial statements. As soon as available and in any event
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within ninety (90) days after the end of each fiscal year of the Company,
[consolidated and consolidating] balance sheets of the Company and its
Subsidiaries as of the end of such fiscal year and [consolidated and
consolidating] statements of income and retained earnings of the Company and its
Subsidiaries for such fiscal year, and [consolidated and consolidating]
statements of changes in financial position of the Company and its Subsidiaries
for such fiscal year, all in reasonable detail and stating in comparative form
the respective figures for the corresponding date and period in the prior fiscal
year and all prepared in accordance with GAAP consistently applied and as to the
consolidated statements accompanied by an opinion thereon acceptable to the
Purchaser by Xxxxxxxx & Company, LLP, Certified Public Accountants, or other
independent accountants selected by the Company and acceptable to the Purchaser;
(3) Management letters. Promptly upon receipt thereof, copies of any
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reports submitted to the Company or any Subsidiary by independent certified
public accountants in connection with examination of the financial statements of
the Company or any Subsidiary made by such accountants;
(4) Certificate of no Default. Within forty five (45) days after the end of
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each of the quarters of each fiscal year of the Company (or earlier upon the
delivery of the financial statements required by Sections 5.08(1) or (2), a
certificate of the chief financial officer of the Company (a) certifying that to
the best of his knowledge no Default or Event of Default has occurred and is
continuing or, if a Default or Event of Default has occurred and is continuing,
a statement as to the nature thereof and the action which is proposed to be
taken with respect thereto, and (b) with computations demonstrating compliance
with the covenants contained in Article VII;
(5) Accountant's report. Simultaneously with the delivery of the annual
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financial statements referred to in Section 5.08(2), a certificate of the
independent public accountants who audited such statements to the effect that,
in making the examination necessary for the audit of such statements, they have
obtained no knowledge of any condition or event which constitutes a Default or
Event of Default, or if such accountants shall have obtained knowledge of any
such condition or event, specifying in such certificate each such condition or
event of which they have knowledge and the nature and status thereof;
(6) Notice of litigation. Promptly after the commencement thereof, notice
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of all actions, suits, and proceedings before any court or governmental
department, commission, board, bureau, agency, or instrumentality, domestic or
foreign, affecting the Company or any Subsidiary, which, if determined adversely
to the Company or such Subsidiary, could have a material adverse effect on the
financial condition, properties, or operations of the Company or such
Subsidiary;
(7) Notice of Defaults and Events of Default. As soon as possible and in
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any event within five (5) days after the occurrence of each Default or Event of
Default, a written notice setting forth the details of such Default or Event of
Default and the action which is proposed to be taken by the Company with respect
thereto;
(8) ERISA reports. As soon as possible, and in any event within thirty (30)
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days after the Company knows or has reason to know that any circumstances exist
that constitute grounds entitling the PBGC to institute proceedings to terminate
a Plan subject to ERISA with respect to the Company or any Commonly Controlled
Entity, and promptly but in any event within two (2) Business Days of receipt by
the Company or any Commonly Controlled Entity of notice that the PBGC intends to
terminate a Plan or appoint a trustee to administer the same, and promptly but
in any event within five (5) Business Days of the receipt of notice concerning
the imposition of withdrawal liability with respect to the Company or any
Commonly Controlled Entity, the Company will deliver to the Purchaser a
certificate of the chief financial officer of the Company setting forth all
relevant details and the action which the Company proposes to take with respect
thereto.
(9) Reports to other creditors. Promptly after the furnishing thereof,
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copies of any statement or report furnished to any other party pursuant to the
terms of any indenture, loan, credit, or similar agreement and not otherwise
required to be furnished to the Purchaser pursuant to any other clause of this
Section 5.08;
(10) Proxy statements, etc. Promptly after the sending or filing thereof,
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copies of all proxy statements, financial statements, and reports which the
Company or any Subsidiary sends to its stockholders, and copies of all regular,
periodic, and special reports, and all registration statements which the Company
or any Subsidiary files with the Securities and Exchange Commission or any
governmental authority which may be substituted therefor, or with any national
securities exchange; and
(11) General information. Such other information respecting the condition
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or operations, financial or otherwise, of the Company or any Subsidiary as the
Purchaser may from time to time reasonably request.
SECTION 5.09. ENVIRONMENT. Be and remain, and cause each Subsidiary to be
and remain, in compliance with the provisions of all national, federal,
provincial, state, and local environmental, health, and safety laws, codes and
ordinances, and all rules and regulations issued thereunder; notify the
Purchaser immediately of any notice of a hazardous discharge or environmental
complaint received from any governmental agency or any other party; notify the
Purchaser immediately of any hazardous discharge from or affecting its premises;
immediately contain and remove the same, in compliance with all applicable laws;
promptly pay any fine or penalty assessed in connection therewith; permit the
Purchaser to inspect the premises, to conduct tests thereon, and to inspect all
books, correspondence, and records pertaining thereto; and at the Purchaser's
request, and at the Company's expense, provide a report of a qualified
environmental engineer, satisfactory in scope, form, and content to the
Purchaser, and such other and further assurances reasonably satisfactory to the
Purchaser that the condition has been corrected.
SECTION 5.10. Be and remain a "reporting company" as defined by the Exchange
Act.
ARTICLE VI
NEGATIVE COVENANTS
So long as the Debenture is outstanding, or the Warrant has not been fully
exercised or expired, Company will not without the written consent of the
Purchaser:
SECTION 6.01. MERGERS, ETC. Wind up, liquidate or dissolve itself, merge
with, or consolidate with another organization unless the other organization is
a subsidiary, or convey, sell, assign, transfer, lease, or otherwise dispose of
(whether in one transaction or in a series of transactions) all or substantially
all of its assets (whether now owned or hereafter acquired) to any Person, or
acquire all or substantially all of the assets or the business of any Person
that is not within the mandate and business plan of the Company, or permit any
Subsidiary to do so, except that (1) any Subsidiary may merge into or transfer
assets to the Company and (2) any Subsidiary may merge into or consolidate with
or transfer assets to any other Subsidiary.
SECTION 6.02 DIVIDENDS. Declare or pay any dividends; or make any
distribution of assets to its stockholders as such whether in cash, assets, or
obligations of the Company; or allocate or otherwise set apart any sum for the
payment of any dividend or distribution on; or permit any of its Subsidiaries to
purchase or otherwise acquire for value any stock of the Company or another
Subsidiary.
SECTION 0.00.XXXX OF ASSETS. Sell, lease, assign, transfer, or otherwise
dispose of, or permit any Subsidiary to sell, lease, assign, transfer, or
otherwise dispose of, any of its now owned or hereafter acquired assets
(including, without limitation, shares of stock and indebtedness of
Subsidiaries, receivables, and leasehold interests), except: (1) inventory
disposed of in the ordinary course of business; (2) the sale or other
disposition of assets no longer used or useful in the conduct of its business;
and (3) that any Subsidiary may sell, lease, assign, or otherwise transfer its
assets to the Company.
SECTION 6.04 TRANSACTIONS WITH AFFILIATES. Enter into any transaction,
including, without limitation, the purchase, sale, or exchange of property or
the rendering of any service, with any Affiliate, or permit any Subsidiary to
enter into any transaction, including, without limitation, the purchase, sale,
or exchange of property or the rendering of any service, with any Affiliate,
except in the ordinary course of and pursuant to the reasonable requirements of
the Company's or such Subsidiary's business and upon fair and reasonable terms
no less favorable to the Company or such Subsidiary than would obtain in a
comparable arm's-length transaction with a Person not an Affiliate.
ARTICLE VII
CORPORATE GOVERNANCE
So long as the Debenture is outstanding, or the Warrant has not been fully
exercised or expired, Company will ensure that the following are fulfilled:
SECTION 7.01. BOARD OF DIRECTORS. The Company will have and maintain a
board of directors of not less than two members. The Company's board of
directors shall meet not less frequently than quarterly. The Company will
appoint and elect a representative of the Purchaser to the Company's Board
within 30 days of the Closing Date and to nominate the representative for
election to the Company's board of directors annually until the representative
delivers to the Company a written resignation from the Company's board of
directors.
SECTION 7.02. AUDIT COMMITTEE. Within 60 days, the Company's board of
directors shall appoint an Audit Committee of not less than three members and no
more than one (1) of the members of the Audit Committee shall be an officer or
employee of or contractor or consultant to the Company. The Audit Committee
shall meet not less frequently than quarterly. The Audit Committee shall review
the Company's financial statements for accuracy and completeness at least
quarterly and before their release. The Audit Committee shall meet with the
Company's independent accountants prior to and immediately following the
Company's annual audit, and such other times as the Audit Committee deems
necessary to assure that the Company's financial statements are accurate,
complete and in accordance with GAAP, and to insure that the Company has
adequate financial and reporting policies, procedures, systems and controls in
place.
ARTICLE VIII
EVENTS OF DEFAULT
SECTION 8.01. EVENTS OF DEFAULT. If any of the following events shall
occur:
(1) The Company should fail to pay the principal of, or interest payable
pursuant to the Debenture, or any amount of a commitment or other fee, as and
when due and payable;
(2) Any representation or warranty made or deemed made by the Company in
this Agreement or which is contained in any certificate, document, opinion, or
financial or other statement furnished at any time under or in connection with
any Transaction Document shall prove to have been incorrect, incomplete, or
misleading in any material respect on or as of the date made or deemed made;
(3) The Company shall fail to perform or observe any term, covenant, or
agreement contained in Articles V, VI, or VII hereof;
(4) The Company or any of its Subsidiaries shall (a) fail to pay any
indebtedness for borrowed money of the Company or such Subsidiary, as the case
may be, or any interest or premium thereon, when due (whether by scheduled
maturity, required prepayment, acceleration, demand, or otherwise), or (b) fail
to perform or observe any term, covenant, or condition on its part to be
performed or observed under any agreement or instrument whose value is in excess
of Ten Thousand ($10,000) Dollars relating to any such indebtedness, when
required to be performed or observed, if the effect of such failure to perform
or observe is to accelerate, or to permit the acceleration of, after the giving
of notice or passage of time, or both, the maturity of such indebtedness;
(5) The Company or any of its Subsidiaries (a) shall generally not pay, or
shall be unable to pay, or shall admit in writing its inability to pay its debts
as such debts become due; or (b) shall make an assignment for the benefit of
creditors, or petition or apply to any tribunal for the appointment of a
custodian, receiver, or trustee for it or a substantial part of its assets; or
(c) shall commence any proceeding under any bankruptcy, reorganization,
arrangement, readjustment of debt, dissolution, or liquidation law or statute of
any jurisdiction, whether now or hereafter in effect; or (d) shall have had any
such petition or application filed or any such proceeding commenced against it
in which an order for relief is entered or an adjudication or appointment is
made, and which remains undismissed for a period of thirty (30) days or more; or
(e) shall take any corporate action indicating its consent to, approval of, or
acquiescence in any such petition, application, proceeding, or order for relief
or the appointment of a custodian, receiver, or trustee for all or any
substantial part of its properties; or (f) shall suffer any such custodianship,
receivership, or trusteeship to continue undischarged for a period of thirty
(30) days or more;
(6) One or more judgments, decrees, or orders for the payment of money in
excess of Twenty five Thousand Dollars ($25,000) in the aggregate shall be
rendered against the Company or any of its Subsidiaries and such judgments,
decrees, or orders shall continue unsatisfied and in effect for a period of 30
consecutive days without being vacated, discharged, satisfied, or stayed or
bonded pending appeal;
(8) Any of the following events shall occur or exist with respect to the
Company and any Commonly Controlled Entity under ERISA: any Reportable Event
shall occur; complete or partial withdrawal from any Multiemployer Plan shall
take place; any Prohibited Transaction shall occur; a notice of intent to
terminate a Plan shall be filed, or a Plan shall be terminated; or circumstances
shall exist which constitute grounds entitling the PBGC to institute proceedings
to terminate a Plan, or the PBGC shall institute such proceedings; and in each
case above, such event or condition, together with all other events or
conditions, if any, could subject the Company to any tax, penalty, or other
liability which in the aggregate may exceed Twenty five Thousand Dollars
($25,000); or
(9) If the Purchaser receives its first notice of a hazardous discharge or
an environmental complaint from a source other than the Company, and the
Purchaser does not receive notice (which may be given in oral form, provided
same is followed with all due dispatch by written notice given by Certified
Mail, Return Receipt Requested) of such hazardous discharge or environmental
complaint from the Company within twenty-four (24) hours of the time the
Purchaser first receives said notice from a source other than the Company; or if
any federal, state, or local agency asserts or creates a Lien upon any or all of
the assets, equipment, property, leaseholds, or other facilities of the Company
by reason of the occurrence of a hazardous discharge or an environmental
complaint; or if any federal, state, or local agency asserts a claim against the
Company and/or its assets, equipment, property, leaseholds, or other facilities
for damages or cleanup costs relating to a hazardous discharge or an
environmental complaint; provided, however, that such claim shall not constitute
a default if, within five (5) Business Days of the occurrence giving rise to the
claim, (a) the Company can prove to the Purchaser's satisfaction that the
Company has commenced and is diligently pursuing either: (i) a cure or
correction of the event which constitutes the basis for the claim, and continues
diligently to pursue such cure or correction to completion or (ii) proceedings
for an injunction, a restraining order, or other appropriate emergent relief
preventing such agency or agencies from asserting such claim, which relief is
granted within ten (10) Business Days of the occurrence giving rise to the claim
and the injunction, order, or emergent relief is not thereafter resolved or
reversed on appeal; and (b) in either of the foregoing events, the Company has
posted a bond, letter of credit, or other security satisfactory in form,
substance, and amount to both the Purchaser and the agency or entity asserting
the claim to secure the proper and complete cure or correction of the event
which constitutes the basis for the claim; then, and in any such event, the
Purchaser may, by notice to the Company, (1) declare its obligation to advance
funds pursuant to the Debenture be terminated, whereupon the same shall
forthwith terminate, and (2) declare the Debenture, all interest thereon, and
all other amounts payable under this Agreement to be forthwith due and payable,
whereupon the Debenture, all such interest, and all such amounts shall become
and be forthwith due and payable, without presentment, demand, protest, or
further notice of any kind, all of which are hereby expressly waived by the
Company.
(10) The Company shall fail to perform or observe any of the provisions
contained in any other section of this Agreement, the Debenture, or any of the
Transaction Documents, and such failure shall continue for more than thirty (30)
days after the Purchaser has given written notice to the Company.
SECTION 8.02. REMEDIES. Upon the occurrence and during the continuance of
any Event of Default as set out in Section 8.01, or in the Debenture, then, or
at any thereafter, and in each and every case, the Purchaser shall have the
rights and remedies as set out in Paragraph 9 of the Debenture.
ARTICLE IX
PURCHASER'S REPRESENTATIONS & WARRANTIES
SECTION 9.01. UNREGISTERED SECURITIES. The Purchaser acknowledges that none
of the Debenture, the Warrant, the Placement Warrant, the Debenture Shares, the
Warrant Shares, or the Placement Warrant Shares have been registered under the
Securities Act and unless so registered may not be offered or sold in the United
States or to U.S. persons, as that term is defined in Regulations under the
Securities Act, except pursuant to an exemption from, or in a transaction not
subject to the registration requirements of the Securities Act.
SECTION 9.02. U.S NON-RESIDENT. The Purchaser is outside the United States
when receiving and executing this Agreement, is not a U.S. person and is not
acquiring the Debenture, the Warrant Placement and/or the Warrant for the
account of or benefit of, directly or indirectly, a U.S. person.
SECTION 9.03. PURCHASER AS PRINCIPAL. The Purchaser is acquiring the
Debenture, the Warrant, and the Placement Warrant as principal for its own
account for investment purposes only and not with a view to, or for resale,
distribution or fractionalization thereof, in whole or in part.
SECTION 9.04. LEGENDED SECURITIES. The Purchaser acknowledges that the
unless registered under the Securities Act, the Debenture, the Warrant, the
Placement Warrant, the Debenture Shares, the Warrant Shares and the Placement
Warrant Shares will be restricted from transfer under the Securities Act and the
certificate representing such securities may bear a legend with respect to such
restriction.
SECTION 9.05. CANADIAN RESALE RESTRICTIONS. The Purchaser acknowledges that
the Company is not currently a reporting issuer in any jurisdiction in Canada
nor does it have any current intention to become one and as a result the
Debenture, the Warrant, the Debenture Shares, the Warrant Shares, and the
Placement Warrant Shares and may be subject to indefinite resale restrictions.
ARTICLE X
MISCELLANEOUS
SECTION 10.01. AMENDMENTS, ETC. No amendment, modification, termination, or
waiver of any provision of any Transaction Document to which the Company is a
party, nor consent to any departure by the Company from any Transaction Document
to which it is a party, shall in any event be effective unless the same shall be
in writing and signed by the Purchaser, and then such waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given.
SECTION 10.02. NOTICES, ETC. All notices and other communications provided
for under this Agreement and under the other Transaction Documents to which the
Company is a party shall be in writing (including telegraphic, telex, and
facsimile transmissions) and mailed or transmitted or delivered;
If to the Company: If to the Purchaser:
Efinancial Xxxxx.Xxx, Inc. Oxford Capital Corp.
150-1875 Century Park East x/x 0000-00xx Xxxxxx X.X.
Century City California Xxxxxxx, Xxxxxxx
00000 X0X 0X0
Xx: (000) 000-0000
Fax: (000) 000-0000
With a copy that does not With a copy that does not
constitute notice to: constitute notice to:
Clark,Wilson, Xxx X. Xxxxxxx,
Barristers & Solicitors Barrister & Solicitor
000-000 X.Xxxxxxx Xx. 0000 - 00xx Xxxxxx
Xxxxxxxxx,Xxxxxx Xxxxxxx, Xxxxxxx
X0X 0X0 X0X 0X0
Attention: Xxxxx Xxxxx Attn: Xxx X. Xxxxxxx
Tel: (000) 000-0000 Tel: (000) 000-0000
Fax: (000) 000-0000 Fax: (000) 000-0000
; or, as to each party, at such other address as shall be designated by such
party in a written notice to the other party complying as to delivery with the
terms of this Section 10.02. Except as otherwise provided in this Agreement, all
such notices and communications shall be effective when deposited in the mails
or delivered to the telegraph company, or sent, answerback received,
respectively, addressed as aforesaid, except that notices to the Purchaser
pursuant to the provisions of Article II shall not be effective until received
by the Purchaser.
SECTION 10.03. NO WAIVER. No failure or delay on the part of the Purchaser
in exercising any right, power, or remedy hereunder shall operate as a waiver
thereof; nor shall any single or partial exercise of any such right, power, or
remedy preclude any other or further exercise thereof or the exercise of any
other right, power, or remedy hereunder. The rights and remedies provided herein
are cumulative, and are not exclusive of any other rights, powers, privileges,
or remedies, now or hereafter existing, at law or in equity or otherwise.
SECTION 10.04. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon
and inure to the benefit of the Company and the Purchaser and their respective
successors and assigns, except that the Company may not assign or transfer any
of its rights under any Transaction Document to which the Company is a party
without the prior written consent of the Purchaser.
SECTION 10.05. COSTS, EXPENSES, AND TAXES. The Company agrees to pay on
demand all costs and expenses incurred by the Purchaser in connection with the
preparation, execution, delivery, filing, and administration of the Transaction
Documents, and of any amendment, modification, or supplement to the Transaction
Documents, including, without limitation, the fees and out-of-pocket expenses of
counsel for the Purchaser incurred in connection with advising the Purchaser as
to its rights and responsibilities hereunder up to $10,000 USD. The Company also
agrees to pay all such costs and expenses, including court costs, incurred in
connection with enforcement of the Transaction Documents, or any amendment,
modification, or supplement thereto, whether by negotiation, legal proceedings,
or otherwise. In addition, the Company shall pay any and all stamp and other
taxes and fees payable or determined to be payable in connection with the
execution, delivery, filing, and recording of any of the Transaction Documents
and the other documents to be delivered under any such Transaction Documents,
and agrees to hold the Purchaser harmless from and against any and all
liabilities with respect to or resulting from any delay in paying or omission to
pay such taxes and fees. This provision shall survive termination of this
Agreement.
SECTION 10.06. INTEGRATION. This Agreement and the Transaction Documents
contain the entire agreement between the parties relating to the subject matter
hereof and supersede all oral statements and prior writings with respect
thereto.
SECTION 10.07. INDEMNITY. The Company hereby covenants and agrees to protect,
indemnify and hold harmless the Purchaser and its directors, officers,
employees, solicitors, agents, affiliates, assignees, transferees and successors
in interest (individually, an "Indemnified Party" and, collectively, the
"Indemnified Parties") from and against all losses, claims, expenses, costs,
damages or liabilities, whether joint or several (including the aggregate amount
paid in reasonable settlement of any actions, suits, proceedings or claims)
which they may suffer or incur caused by or arising directly or indirectly by
reason of: (a) any information or statement (except any information or statement
relating solely to the Purchaser) contained in the Registration Statements being
or being alleged to be a misrepresentation; (b) the omission to state in the
Registration Statements, or any amendment to such document a material fact
required to be stated therein or necessary to make the statements therein not
misleading (except the omission to state a material fact relating solely to the
Purchaser); (c) the Company not complying with any requirement of any securities
legislation or regulatory requirements of any jurisdiction in which Purchasers
reside in connection with the Debenture, the Warrant and the Common Stock
underlying the Debenture and the Warrant; (d) any order made or any inquiry,
investigation or proceeding commenced or threatened by any regulatory authority
based upon an allegation that any untrue statement or alleged omission or any
misrepresentation or alleged misrepresentation in the Registration Statements or
any amendment to such document exists (except information and statements
relating solely to the Purchaser) which prevents or restricts the trading in of
the Common Stock under Canadian or US law; (e) the inaccuracy of any of the
Company's representations or warranties contained in any of the Transaction
Documents; and (e) the Company's failure to comply with any of its obligations
contained in any of the Transaction Documents.
If any action or claim shall be asserted against an Indemnified Party in respect
of which indemnity may be sought from the Company pursuant to the provisions
hereof, or if any potential claim contemplated by this section shall come to the
knowledge of an Indemnified Party, the Indemnified Party shall promptly notify
the Company in writing of the nature of such action or claim (provided that any
failure to so notify shall not affect the Company's liability under this
paragraph unless such delay has prejudiced the defense to such claim). The
Company shall be entitled but not obliged to participate in or assume the
defense thereof, provided, however that the defense shall be through legal
counsel acceptable to the Indemnified Party, acting reasonably. In addition,
the Indemnified Party shall also have the right to employ separate counsel in
any such action and participate in the defense thereof, and the fees and expense
of such counsel shall be borne by the Indemnified Party unless (i) the
employment thereof has been specifically authorized in writing by the Company;
(ii) the Indemnified Party has been advised by counsel acceptable to the
Company, acting reasonably, that representation of the Company and the
Indemnified Party by the same counsel would be inappropriate due to actual or
potential differing interests between them; or (iii) the Company has failed
within a reasonable time after receipt of such written notice to assume the
defense of such action or claim. It is understood and agreed that the Company
shall not, in connection with any suit in the same jurisdiction, be liable for
the legal fees and expenses of more than one separate legal firm to represent
the Indemnified Parties. Neither party shall effect any settlement of any such
action or claim or make any admission of liability without the written consent
of the other party, such consent not to be unreasonably withheld or delayed.
The indemnity hereby provided for shall remain in full force and effect and
shall not be limited to or affected by any other indemnity in respect of any
matters specified in this section obtained by the Indemnified Party from any
other person.
To the extent that any Indemnified Party is not a party to this Agreement, the
Purchaser shall obtain and hold the right and benefit of this section in trust
for and on behalf of such Indemnified Party. The Company hereby waives its
right to recover contribution from the Purchaser with respect to any liability
of the Company by reason of or arising out of any misrepresentation contained in
any Registration Statement or any amendment thereto; provided, however, that
such waiver shall not apply in respect of liability caused or incurred by reason
of or arising out of any misrepresentation which is based upon or results from
information relating solely to the Purchaser contained in such document.
The Company hereby consents to personal jurisdiction and service and venue
in any court in which any claim which is subject to indemnification hereunder is
brought against the Purchaser or any Indemnified Party and to the assignment of
the benefit of this section to any Indemnified Party for the purpose of
enforcement provided that nothing herein shall limit the Company's right or
ability to contest the appropriate jurisdiction or forum for the determination
of any such claims.
SECTION 10.08 GOVERNING LAW; JURISDICTION. This Agreement and the Debenture
shall be governed by, and construed in accordance with, the laws of the State of
Delaware. The courts of the State of Delaware, shall have exclusive jurisdiction
and venue for the adjudication of any civil action between them arising out of
relating to this Agreement, and hereby irrevocably consent to such jurisdiction
and venue.
SECTION 10.09. SEVERABILITY OF PROVISIONS. Any provision of any Transaction
Document which is prohibited or unenforceable in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions of such
Transaction Document or affecting the validity or enforceability of such
provision in any other jurisdiction.
SECTION 10.10. HEADINGS. Article and Section headings in the Transaction
Documents are included in such Transaction Documents for the convenience of
reference only and shall not constitute a part of the applicable Transaction
Documents for any other purpose.
SECTION 10.11. CURRENCY. Unless otherwise specifically stated to the
contrary, all currency and dollar amounts stated herein is currency of the
United States of America.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by
their respective officers thereunto duly authorized, as of the date first above
written.
THE COMPANY: THE PURCHASER:
EFINANCIAL XXXXX.XXX, INC. OXFORD CAPITAL CORP.
By /s/ Xxxx Xxxxxx By /s/ Xxxx Xxxxxxx
------------------ -----------------
Chairman and CEO Chief Financial Officer
Date signed: January , 2000. Dated signed: January , 2000.
Exhibit A - Page 1
EXHIBIT A
FORM OF DEBENTURE
Exhibit B - Page 1
EXHIBIT B
FORM OF WARRANT
Exhibit C - Page 1
EXHIBIT C
FORM OF REGISTRATION RIGHTS AGREEMENT
Exhibit D - Page 1
EXHIBIT D
FORM OF ESCROW AGREEMENT
Exhibit E - Page 1
EXHIBIT E
FORM OF LEGAL OPINION
OF COMPANY'S COUNSEL
