Waiver Agreement
September 17, 1998
VIA FACSIMILE TRANSMISSION (original via mail)
JNC Strategic Fund Ltd.
JNC Opportunity Fund Ltd.
Olympia Capital (Cayman) Ltd.
c/o Olympia Capital (Bermuda) Ltd.
Xxxxxxxx Xxxxx, 00 Xxxx Xxxxxx
Xxxxxxxx XX00, Xxxxxxx
Re: InnovaCom, Inc. 7% Convertible Debentures
Dear Ladies and Gentlemen:
Reference is made to the Convertible Debenture Purchase Agreement dated
as of December 22, 1997 (the "December 22nd Agreement") and related Convertible
Debentures (the "December 22nd Debentures") and Warrants (the "December 22nd
Warrants," and collectively with the December 22nd Agreement and December 22nd
Debentures, the "December 22nd Transaction Documents") made by and between
InnovaCom, Inc., a Nevada corporation (the "Company"), and JNC Opportunity Fund
Ltd. ("JNC Opportunity"), and the Convertible Debenture Purchase Agreement dated
as of June 29, 1998 (the "June 29th Agreement", and together with the December
22nd Agreement, the "Agreements") and related Convertible Debentures (the "June
29th Debentures", and together with the December 22nd Debentures, the
"Debentures"), the Warrants (the "June 29th Warrants, and together with the
December 22nd Warrants, the "Warrants"), and Registration Rights Agreement (the
"June 29th Registration Rights Agreement", and together with the June 29th
Agreement, the June 29th Debentures, and the June 29th Warrants, the "June 29th
Transaction Documents; together, the December 22nd Transaction Documents and
June 29th Transaction Documents will be referred to herein as the "Transaction
Documents"), made by and between the Company and JNC Strategic Fund Ltd. ("JNC
Strategic", and together with JNC Opportunity, "JNC"). The capitalized terms
used and not otherwise defined herein shall have the same meanings as ascribed
to them in the respective above-referenced Transaction Documents.
JNC Strategic Fund Ltd.
JNC Opportunity Fund Ltd.
September 17, 1998
Page 2
The Company has, in the past, breached and/or defaulted under the
provisions of the Transaction Documents described herein, which past breaches
and/or defaults, subject to the terms hereof, JNC has now agreed to waive in
accordance with the terms hereof. Now, therefore, for good and valuable
consideration, JNC and the Company hereby agree as follows:
1. Reservation of Shares.
(a) Under Section 2.1(d) of the December 22nd Agreement, the Company
represented that it would maintain a reserve of duly authorized shares of Common
Stock in the sum of at least two times the number of shares of Common Stock as
would be issuable upon conversion in full of the December 22nd Debentures,
assuming such conversion were effected on the Original Issue Date or the Filing
Date, whichever yields a lower Conversion Price, (ii) the number of shares of
Common Stock as are issuable as payment of interest on the December 22nd
Debentures, and (iii) the number of shares of Common Stock as are issuable upon
exercise in full of the December 22nd Warrants. Under Section 4(d) of the
December 22nd Debentures, the Company covenanted to reserve and keep available
not less than the number of shares of Common Stock as would be issuable upon the
conversion of the outstanding principal amount of the December 22nd Debentures
and payment of interest thereunder. Under Section 7 of the December 22nd
Warrants, the Company covenanted to reserve and keep available the number of
Warrant Shares which are then issuable and deliverable upon the exercise of the
December 22nd Warrants. The Company has reserved 5,500,000 shares of Common
Stock in connection with the December 22nd Transaction Documents, which number
of shares, because of the decline in the share price since the Original Issue
Date, is now inadequate if the full outstanding principal amount of December
22nd Debentures were converted to shares of Common Stock and all December 22nd
Warrants exercised for Warrant Shares. Subject to Section 1(b) hereof, for a
period of one year and one day from the date stated above, JNC Opportunity
hereby waives and relinquishes its rights and remedies under the December 22nd
Transaction Documents relating to the Company's past breaches or defaults under
the December 22nd Transaction Documents with respect to the Company's failure to
reserve the requisite number of shares of Common Stock. Furthermore, subject to
the Company's compliance with Section 1(b) of this Agreement, JNC Opportunity
shall forbear from exercising any of its rights or remedies under the December
22nd Transaction Documents relating to continuing breaches and defaults of the
Company after the date
JNC Strategic Fund Ltd.
JNC Opportunity Fund Ltd.
September 17, 1998
Page 3
hereof and prior to the earlier of November 30, 1998 and the date such defaults
are cured in full (the "Section 1(a) Cure Date") with respect to the Company's
failure to reserve the requisite number of shares of Common Stock; provided,
that nothing contained herein shall be construed to be a waiver of any rights or
remedies under the December 22nd Transaction Documents in respect of any further
defaults under the Sections specified in this Section 1(a) that occur after the
Section 1(a) Cure Date.
(b) The Company shall prepare and mail to the shareholders of the
Company proxy materials requesting authorization to amend the Company's Articles
of Incorporation to increase the number of shares of Common Stock which the
Company is authorized to issue in order to comply with its obligations
respecting conversion, exercise, and reservation of shares as set forth in the
December 22nd Transaction Documents. In connection therewith, the Board of
Directors shall (a) adopt proper resolutions authorizing an increase in the
number of authorized and available shares of Common Stock to a minimum of
75,000,000 shares of Common Stock , (b) make an appropriate recommendation to
stockholders and otherwise use its best efforts to promptly and duly obtain
stockholder approval to carry out such resolutions (and hold a special meeting
of the shareholders) and (c) by November 30, 1998, file an appropriate amendment
to the Company's Articles of Incorporation in order to increase the number of
authorized and available shares of Common Stock to a minimum of 75,000,000
shares of Common Stock, and simultaneously amend its share reservation order
with its transfer agent so that the Company will be in compliance with the
Sections of the December 22nd Agreement, the December 22nd Debentures, and the
Debenture 22nd Warrants specified in Section 1(a) above. In the event the
Company fails to obtain the required stockholder approval or otherwise fails to
timely amend its Articles of Incorporation or amend its share reservation order
as provided herein, then notwithstanding anything to the contrary set forth in
this Waiver Agreement, the waiver contemplated in Section 1(a) of this Waiver
Agreement shall be null and avoid ab initio and JNC Opportunity shall be
entitled to exercise all of its rights and remedies under the December 22nd
Transaction Documents arising as a result of the Company's defaults specified in
Section 1(a) above.
2. SEC Documents.
(a) Under Section 3.3 of the Agreements, the Company covenanted to
timely file (or obtain extensions in respect thereof and file within the
applicable grace period) all reports required
JNC Strategic Fund Ltd.
JNC Opportunity Fund Ltd.
September 17, 1998
Page 4
to be filed by the Company after the date hereof pursuant to Section 13(a) of
the Exchange Act. The Company is in default of these provisions because it has
been late in filing its Form 10-QSB for the quarters ending March 31, 1998, and
June 30, 1998. Subject to the Company's compliance with its obligations under
Section 2(b), for a period of one year and one day from the date stated above,
JNC hereby waives and voluntarily relinquishes its rights and remedies under the
Transaction Documents relating to the Company's failure to timely file its Form
10-QSB for the quarters ending March 31, 1998, and June 30, 1998.
(b) As soon as reasonably practicable, and in any event prior to
September 25, 1998 with respect to the Form 10-QSB for the quarter ending March
31, 1998, and prior to October 30, 1998 with respect to the Form 10-QSB for the
quarter ending June 30, 1998, the Company shall file with the Commission its
Quarterly Reports Form 10-QSB for the quarters ending March 31, 1998 and June
30, 1998.
3. Trading Volume.
(a) Under Section 3.11 of the Agreements, if at any time while JNC owns
any Securities, the average value of Common Stock traded on the OTC Bulletin
Board in each week, measured over a four week period, on a rolling basis, is
less than $750,000, then, at JNC's option, the Company would be required to
repay the entire principal amount of the then outstanding Debentures (and all
accrued and unpaid interest thereon) and redeem all then outstanding Underlying
Shares then held by JNC, in the therein designated amount. In addition, under
the terms of the Debentures, the Company may not issue shares of Common Stock in
payment of interest on the principal amount of the Debentures if, among other
things, the shares are not "actively traded" (as defined in the Debentures).
Currently, the average value of Common Stock traded on the OTC Bulletin Board in
each week, measured over a four week period, is substantially less than
$750,000. For a period of one year and one day from the date stated above, JNC
hereby waives its rights and remedies under Section 3.11 of the Agreements and
waives enforcement of the relevant provisions of the August 28th Debentures
relating to the Company's past failure to maintain "actively traded" Common
Stock as provided in the Transaction Documents.
JNC Strategic Fund Ltd.
JNC Opportunity Fund Ltd.
September 17, 1998
Page 5
(b) Under Section 3.8 of the Convertible Debenture Purchase Agreement
by and among the Company and JNC Strategic dated as of August 28, 1998 (the
"August 28th Agreement"), if at any time while JNC Strategic owns any Securities
(as defined therein), the average value of Common Stock traded on the OTC
Bulletin Board in each week, measured over a four week period, on a rolling
basis, is less than $80,000, then, at JNC's option, the Company would be
required to repay the entire principal amount of then outstanding Convertible
Debentures dated as of August 28, 1998 (the "August 28th Debentures") (and all
accrued and unpaid interest thereon) and redeem all then outstanding Underlying
Shares then held by JNC, in the therein designated amount. In addition, under
the terms of the August 28th Debentures, the Company may not issue shares of
Common Stock in payment of interest on the principal amount of the August 28th
Debentures if, among other things, the shares are not "actively traded", meaning
having a trading volume as stated in Section 3.8 of the August 28th Agreement.
The average value of Common Stock traded on the OTC Bulletin Board in each week,
measured over a four week period, is currently less than $80,000. For a period
of one year and one day from the date stated above, JNC hereby waives its rights
and remedies under Section 3.8 of the August 28th Agreement and waives
enforcement of the relevant provisions of the August 28th Debentures relating to
the Company's past failure to maintain "actively traded" Common Stock as stated
above.
4. Payment of Interest. Under the terms of the Debentures, the Company
is required to pay seven percent (7%) interest on a quarterly basis on the
outstanding principal amount of the Debentures. Since the issuance of the
Debentures, the Company has not paid any interest to JNC, either in shares of
Common Stock or in cash, with respect to any of the Debentures. Without waiving
its right to receive unpaid accrued interest on the Debentures, for a period of
one year and one day from the date stated above, JNC waives its rights and
remedies under Section 3(a)(i) of the Debentures with respect to past defaults
by the Company of its obligation to pay interest on the Debentures; provided
that any late interest charges applicable to such failure under the Debentures
shall continue to accrue and be payable as to such late interest payments.
5. Registration Statement.
(a) Under the June 29th Registration Rights Agreement, the Company was
required to file a Registration Statement within thirty (30) days following the
June 29th Closing Date, and such
JNC Strategic Fund Ltd.
JNC Opportunity Fund Ltd.
September 17, 1998
Page 6
Registration Statement was to be effective within ninety (90) days following the
Closing Date. Section 4(c) of the Debentures provides for various penalties in
the event the Registration Statement is not filed on or prior to the Filing
Date, or is not declared effective by the Effectiveness Date. For a period of
one year and one day from the date hereof, JNC hereby agrees to waive and
voluntarily relinquish its rights and remedies arising as a result of the past
default by the Company under the June 29th Debentures and the June 29th
Registration Rights Agreement with respect to both the filing and effectiveness
of a Registration Statement. Furthermore, subject to the Company's compliance
with Section 6(b) hereof, JNC shall forbear from exercising any of its rights or
remedies under the June 29th Debentures and June 29th Registration Rights
Agreement relating to breaches or defaults occurring after the date hereof with
respect to the Company's failure to timely file or have declared effective the
Registration Statement.
(b) The Filing Date and the Effectiveness Date under the June 29th
Registration Statement shall be amended to correspond with the Filing Date
(October 27, 1998) and the Effectiveness Date (December 28, 1998) under that
certain Registration Statement dated as of August 28, 1998 between JNC Strategic
and the Company. In the event the Company breaches its obligation under this
Section 6(b), then notwithstanding the agreement of waiver and forbearance given
hereunder, JNC Strategic shall be entitled at that time to exercise all of its
rights and remedies under the June 29th Debentures and June 29th Registration
Rights Agreement arising as a result of the Company's failure to timely file or
have declared effective the Registration Statement.
6. Except for the specific waivers granted herein, JNC shall
not be deemed to have waived any rights or remedies under, or the enforcement of
any provision of, the Transaction Documents. Except as may be specifically
indicated herein, any waivers granted herein shall be limited as set forth
herein. No further waivers are to be implied herein and any waiver given shall
be subject to the limitations set forth in Section 4.4 of the Purchase
Agreements.
[the remainder of this page has been intentionally left blank]
JNC Strategic Fund Ltd.
JNC Opportunity Fund Ltd.
September 17, 1998
Page 7
6. Counterparts. This Agreement may be executed in one or more
counterparts (by facsimile signature or otherwise) which together shall
constitute one and the same instrument.
EXECUTED as of the date first written above.
Very truly yours,
INNOVACOM, INC.
By:___________________
Xxxxx Xxxxxx, President
AGREED TO AND ACCEPTED as of the date first written above.
JNC STRATEGIC FUND LTD.
By:______________________________________
Name:___________________________________
Title:____________________________________
JNC OPPORTUNITY FUND LTD.
By:______________________________________
Name:___________________________________
Title:____________________________________
