EXHIBIT 10.31
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CONVERTIBLE DEBENTURE PURCHASE AGREEMENT
Between
FIX-CORP INTERNATIONAL, INC.,
and
JNC STRATEGIC FUND LTD.
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March 11, 1998
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CONVERTIBLE DEBENTURE PURCHASE AGREEMENT, dated as of March 11, 1998
(this "AGREEMENT"), between Fix-Corp International, Inc., a Delaware
corporation (the "COMPANY"), and JNC Strategic Fund Ltd., a corporation
organized under the laws of the Cayman Islands (the "PURCHASER").
WHEREAS, subject to the terms and conditions set forth in this
Agreement, the Company desires to issue and sell to the Purchaser and the
Purchaser desires to purchase an aggregate principal amount of $1,500,000 of
the Company's 4% Convertible Debentures, due March 11, 2001 (the
"DEBENTURES"), which are convertible into shares of the Company's common
stock, par value $.001 per share (the "COMMON STOCK").
IN CONSIDERATION of the mutual covenants and agreements set forth herein
and for good and valuable consideration, the receipt and adequacy of which
are hereby acknowledged, the parties agree as follows:
ARTICLE I
PURCHASE AND SALE OF DEBENTURES; CLOSING
1.1 THE CLOSING.
(a) THE CLOSING. (i) Subject to the terms and conditions set
forth in this Agreement, the Company shall issue and sell to the Purchaser
and the Purchaser shall purchase the Debentures for an aggregate purchase
price of $1,500,000. The closing of the purchase and sale of the Debentures
(the "CLOSING") shall take place at the offices of Xxxxxxxx Xxxxxxxxx Xxxxxx
Xxxxxxxx & Xxxxxx LLP (the "ESCROW AGENT"), 0000 Xxxxxx xx xxx Xxxxxxxx, Xxx
Xxxx, Xxx Xxxx 00000, immediately following the execution hereof or such
later date as the parties shall agree. The date of the Closing is
hereinafter referred to as the "CLOSING DATE."
(ii) Prior to the Closing the parties shall deliver to the
Escrow Agent such items as are required to be delivered by them in accordance
with and subject to the terms and conditions of the Escrow Agreement, dated
as of the date hereof, by and among the Company, the Purchaser and the Escrow
Agent (the "ESCROW AGREEMENT"), including, the following: (i) the Company
shall deliver or cause to be delivered (A) Debentures in aggregate principal
amount equal to $1,500,000, registered in the name of the Purchaser, (B) the
Warrant (as defined in Section 3.16), and (C) the legal opinion of Xxxxxxx &
Xxxxxx LLP substantially in the form of EXHIBIT C ("LEGAL OPINION") addressed
to the Purchaser; (ii) the Purchaser shall deliver or cause to be delivered
$1,500,000 in United States dollars; and (iii) each party hereto shall
deliver or cause to be delivered all other executed instruments, agreements
and certificates as are required to be delivered by or on their behalf at the
Closing.
1.2 FORM OF DEBENTURES. The Debentures shall be in the form of EXHIBIT A.
1.3 CERTAIN DEFINITIONS. For purposes of this Agreement, "CONVERSION
PRICE," "ORIGINAL ISSUE DATE," "CONVERSION DATE", "TRADING DAY", "BUSINESS
DAY " and "PER SHARE MARKET VALUE" shall have the meanings set forth in the
Debentures; and "MARKET PRICE" as at any date shall mean the average Per
Share Market Value for the five (5) Trading Days immediately preceding such
date.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
2.1 REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF THE COMPANY. The
Company hereby makes the following representations and warranties to the
Purchaser:
(a) ORGANIZATION AND QUALIFICATION. The Company is a corporation,
duly incorporated, validly existing and in good standing under the laws of
the jurisdiction of its incorporation, with the requisite corporate power and
authority to own and use its properties and assets and to carry on its
business as currently conducted. The Company has no subsidiaries other than
as set forth in SCHEDULE 2.1(a) attached hereto (collectively, the
"SUBSIDIARIES"). Each of the Subsidiaries is a corporation, duly
incorporated, validly existing and in good standing under the laws of the
jurisdiction of its incorporation, with the full corporate power and
authority to own and use its properties and assets and to carry on its
business as currently conducted. Each of the Company and the Subsidiaries is
duly qualified to do business and is in good standing as a foreign
corporation in each jurisdiction in which the nature of the business
conducted or property owned by it makes such qualification necessary, except
where the failure to be so qualified or in good standing, as the case may be,
could not, individually or in the aggregate, (x) adversely affect the
legality, validity or enforceability of this Agreement, the Debentures, the
Escrow Agreement, the Warrant or the Registration Rights Agreement, dated the
date hereof, among the Company and the Purchaser (the "REGISTRATION RIGHTS
AGREEMENT" and, together with this Agreement, the Debentures and the Warrant,
the "TRANSACTION DOCUMENTS"), (y) have a material adverse effect on the
results of operations, assets, prospects, or condition (financial or
otherwise) of the Company and the Subsidiaries, taken as a whole, or (z)
adversely impair the Company's ability to perform fully on a timely basis its
obligations under any Transaction Document (any of the foregoing, a "MATERIAL
ADVERSE EFFECT").
(b) AUTHORIZATION; ENFORCEMENT. The Company has the requisite
corporate power and authority to enter into and to consummate the
transactions contemplated by the Transaction Documents and otherwise to carry
out its obligations thereunder. The execution and delivery of each of the
Transaction Documents by the Company and the consummation by it of the
transactions contemplated thereby have been duly authorized by all necessary
action on the part of the Company. Each of the Transaction Documents has been
duly executed by the Company and when delivered in accordance with the terms
hereof shall constitute the legal, valid and binding obligation of the
Company enforceable against the Company in accordance with its terms, except
as such enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws relating to, or
affecting generally the enforcement of, creditors' rights and remedies or by
other equitable principles of general
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application. Neither the Company nor any Subsidiary is in violation of any of
the provisions of its respective certificate of incorporation, by-laws or
other charter documents.
(c) CAPITALIZATION. The authorized, issued and outstanding
capital stock of the Company is set forth in SCHEDULE 2.1(c). No shares of
Common Stock are entitled to preemptive or similar rights, nor is any holder
of the Common Stock entitled to preemptive or similar rights arising out of
any agreement or understanding with the Company by virtue of any of the
Transaction Documents. Except as disclosed in SCHEDULE 2.1(c), there are no
outstanding options, warrants, script rights to subscribe to, calls or
commitments of any character whatsoever relating to, or, except as a result
of the purchase and sale of the Debentures and Warrant hereunder, securities,
rights or obligations convertible into or exchangeable for, or giving any
person any right to subscribe for or acquire any shares of Common Stock, or
contracts, commitments, understandings, or arrangements by which the Company
or any Subsidiary is or may become bound to issue additional shares of Common
Stock, or securities or rights convertible or exchangeable into shares of
Common Stock. To the knowledge of the Company, except as specifically
disclosed in the Disclosure Materials (as defined below) or SCHEDULE 2.1(c),
no Person (as defined below) beneficially owns (as determined pursuant to
Rule 13d-3 promulgated under the Securities Exchange Act of 1934, as amended
(the "EXCHANGE ACT")) or has the right to acquire by agreement with or by
obligation binding upon the Company, beneficial ownership of in excess of 5%
of the Common Stock. A "PERSON" means an individual or corporation,
partnership, trust, incorporated or unincorporated association, joint
venture, limited liability company, joint stock company, government (or an
agency or subdivision thereof) or other entity of any kind.
(d) ISSUANCE OF DEBENTURES AND WARRANT. The Debentures and the
Warrant are duly authorized, and, when issued in accordance with the terms
hereof, shall be validly issued, fully paid and nonassessable, free and clear
of all liens, encumbrances and rights of first refusals of any kind
(collectively, "LIENS"). The Company has and at all times while the
Debentures and the Warrant are outstanding will maintain an adequate reserve
of duly authorized shares of Common Stock to enable it to perform its
conversion, exercise and other obligations under this Agreement, the Warrant
and the Debentures and in no circumstances shall such reserved and available
shares of Common Stock be less than the sum of (i) 200% of (A) the number of
shares of Common Stock as would be issuable upon conversion in full of the
Debentures, assuming such conversion were effected on the Original Issue Date
and (B) the number of shares of Common Stock as are issuable as payment of
interest on the Debentures, and (ii) the number of shares of Common Stock as
are issuable upon exercise in full of the Warrant (the "INITIAL RESERVE").
If at any time the sum of the number of shares of Common Stock issuable (a)
upon conversion in full of the then outstanding Debentures, (b) as the
payment of interest on the Debentures (assuming all such interest is to be
paid in Common Stock) and (c) upon exercise in full of the Warrant exceeds
85% of the Initial Reserve, the Company shall duly reserve 200% of the number
of shares of Common Stock equal to such excess to fulfill such obligations.
The obligation shall similarly apply to successive excesses. The shares of
Common Stock issuable upon conversion of the Debentures, as payment of
interest in respect thereof and upon exercise of the Warrant are sometimes
referred to herein as the "UNDERLYING SHARES," and the Debentures, Warrant
and Underlying Shares are, collectively, the "SECURITIES." When issued in
accordance
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with the terms of the Debentures and the Warrant, the Underlying Shares will
be duly authorized, validly issued, fully paid and nonassessable, and free
and clear of all Liens.
(e) NO CONFLICTS. The execution, delivery and performance of the
Transaction Documents by the Company and the consummation by the Company of
the transactions contemplated thereby do not and will not (i) conflict with
or violate any provision of its certificate of incorporation, bylaws or other
charter documents (each as amended through the date hereof) or (ii) subject
to obtaining the consents referred to in Section 2.1(f), conflict with, or
constitute a default (or an event which with notice or lapse of time or both
would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, any agreement, indenture or
instrument (evidencing a Company debt or otherwise) to which the Company is a
party or by which any property or asset of the Company is bound or affected,
or (iii) result in a violation of any law, rule, regulation, order, judgment,
injunction, decree or other restriction of any court or governmental
authority to which the Company is subject (including federal and state
securities laws and regulations), or by which any property or asset of the
Company is bound or affected, except in the case of each of clauses (ii) and
(iii), as could not, individually or in the aggregate, have or result in a
Material Adverse Effect. The business of the Company is not being conducted
in violation of any law, ordinance or regulation of any governmental
authority, except for violations which, individually and in the aggregate,
could not have or result in a Material Adverse Effect.
(f) CONSENTS AND APPROVALS. Except as specifically set forth in
SCHEDULE 2.1(f), neither the Company nor any Subsidiary is required to obtain
any consent, waiver, authorization or order of, or make any filing or
registration with, any court or other federal, state, local or other
governmental authority or other Person in connection with the execution,
delivery and performance by the Company of the Transaction Documents other
than (i) the filing of a registration statement covering the resale of the
Underlying Shares by the Purchaser (the "UNDERLYING SECURITIES REGISTRATION
STATEMENT") with the Securities and Exchange Commission (the "COMMISSION"),
(ii) the application for the listing of the Underlying Shares on the OTC
Bulletin Board (and with any other national securities exchange, market or
trading facility on which the Common Stock is then listed), (iii) state blue
sky laws, and (iv) other than, in all other cases, where the failure to
obtain such consent, waiver, authorization or order, or to give or make such
notice or filing, could not have or result in, individually or in the
aggregate, a Material Adverse Effect (together with the consents, waivers,
authorizations, orders, notices and filings referred to in SCHEDULE 2.1(f),
the "REQUIRED APPROVALS").
(g) LITIGATION; PROCEEDINGS. Except as specifically disclosed in
the Disclosure Materials (as hereinafter defined), there is no action, suit,
notice of violation, proceeding or investigation pending or, to the best
knowledge of the Company, threatened against or affecting the Company or any
of its Subsidiaries or any of their respective properties before or by any
court, governmental or administrative agency or regulatory authority
(federal, state, county, local or foreign) which (i) adversely affects or
challenges the legality, validity or enforceability of any of the Transaction
Documents or the Securities or (ii) could, individually or in the aggregate,
have or result in a Material Adverse Effect.
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(h) NO DEFAULT OR VIOLATION. Neither the Company nor any
Subsidiary (i) is in default under or in violation of (or has received notice
of a claim that it is in default under or that it is in violation of) any
indenture, promissory note, loan or credit agreement or any other agreement
or instrument to which it is a party or by which it or any of its properties
is bound, (ii) is in violation of any order of any court, arbitrator or
governmental body, or (iii) is in violation of any statute, rule or
regulation of any governmental authority, except as could not individually or
in the aggregate, have or result in, individually or in the aggregate, a
Material Adverse Effect.
(i) PRIVATE OFFERING. Subject in part to the truth and accuracy
of the Purchaser' representations set forth in Section 2.2, the offer, sale
and issuance of the Securities as contemplated by this Agreement are exempt
for the registration requirement of the Securities Act of 1933, as amended
(the "SECURITIES ACT"), and neither the Company nor any Person acting on its
behalf has taken or will take any action which might subject the offering,
issuance or sale of the Securities to the registration requirements of
Section 5 of the Securities Act.
(j) DISCLOSURE MATERIALS. The financial statements of the Company
dated December 31, 1996, July 31, 1997 and any other financial statements
delivered by the Company to the Purchaser (the "FINANCIAL STATEMENTS" and,
together with the Schedules to this Agreement and other documents and
information furnished by or on behalf of the Company at any time prior to the
Closing, the "DISCLOSURE MATERIALS") comply in all material respects with
applicable accounting requirements. Such Financial Statements have been
prepared in accordance with generally accepted accounting principles applied
on a consistent basis during the periods involved, except as may be otherwise
specified in such Financial Statements or the notes thereto, and fairly
present in all material respects the financial position of the Company as of
and for the dates thereof and the results of operations and cash flows for
the periods then ended, subject, in the case of unaudited statements, to
normal year-end audit adjustments. There are no liabilities, contingent or
otherwise, of the Company involving material amounts not disclosed in said
Financial Statements. The Disclosure Materials do not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light
of the circumstances under which they were made, not misleading. Since July
31, 1997, there has been no event, occurrence or development that has had or
that could have or result in a Material Adverse Effect.
(k) INVESTMENT COMPANY. The Company is not, and is not an
"Affiliate person" of, an "investment company" within the meaning of the
Investment Company Act of 1940, as amended.
(l) CERTAIN FEES. Except for fees payable to CDC Consulting,
Inc., no fees or commissions will be payable by the Company to any broker,
financial advisor, finder, investment banker, placement agent, or bank with
respect to the transactions contemplated hereby. The Purchaser shall have no
obligation with respect to such fees or with respect to any claims made by or
on behalf of other Persons for fees of a type contemplated in this Section
that may be due in connection with the transactions contemplated hereby. The
Company shall indemnify and hold harmless the Purchaser, its respective
employees, officers, directors, agents, and partners, and its respective
Affiliates (as such term is defined under Rule 405 promulgated under the
Securities Act), from and against all claims, losses, damages, costs
(including the costs of
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preparation and attorney's fees) and expenses suffered in respect of any such
claimed or existing fees, as and when incurred.
(m) SOLICITATION MATERIALS. The Company has not (i) distributed
any offering materials in connection with the offering and sale of the
Securities other than the Disclosure Materials and any amendments and
supplements thereto or (ii) solicited any offer to buy or sell the Securities
by means of any form of general solicitation or advertising.
(n) FORM SB-2 ELIGIBILITY. The Company is, and at the Closing
Date will be, eligible to register securities for resale with the Commission
under Form SB-2 promulgated under the Securities Act.
(o) EXCLUSIVITY. The Company shall not issue and sell Debentures
to any Person other than the Purchaser.
(p) LISTING AND MAINTENANCE REQUIREMENTS COMPLIANCE. The Company
has not in the two years preceding the date hereof received written notice
from any stock exchange, market or trading facility on which the Common Stock
is or has been listed (or on which it has been quoted) to the effect that the
Company is not in compliance with the listing or maintenance requirements of
such exchange, market or trading facility. The Company has no reason to
believe that it does not now or will not in the future meet any such
maintenance requirements.
(q) PATENTS AND TRADEMARKS. The Company has, or has rights to
use, all patents, patent applications, trademarks, trademark applications,
service marks, trade names, copyrights, licenses and rights which are
necessary for use in connection with its business and which the failure to so
have would have a Material Adverse Effect (collectively, the "INTELLECTUAL
PROPERTY RIGHTS"). To the best knowledge of the Company, there is no
existing infringement on any of the Intellectual Property Rights.
(r) DISCLOSURE. All information relating to or concerning the
Company set forth in the Transaction Documents or provided to the Purchaser
or its respective representatives, agents and counsel in connection with the
transactions contemplated hereby is true and correct in all material respects
and does not fail to state any material fact necessary in order to make the
statements herein or therein, in light of the circumstances under which they
were made, not misleading. The Company confirms that it has not provided to
the Purchaser or any of its representatives or agents any information that
constitutes or might constitute material non-public information other than
information that has specifically been identified to the recipient as
material non-public information in writing. The Company understands and
confirms that the Purchaser shall be relying on the foregoing representation
in effecting transactions in securities of the Company.
(s) REGISTRATION RIGHTS. Except as provided in the Registration
Rights Agreement, the Company has not granted or agreed to grant any
registration rights, including piggy-back registration rights, to any Person.
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2.2 REPRESENTATIONS AND WARRANTIES OF THE PURCHASER. The Purchaser
hereby makes the following representations and warranties to the Company.
(a) ORGANIZATION; AUTHORITY. The Purchaser is an entity
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization with the requisite power and authority to
enter into and to consummate the transactions contemplated by the Transaction
Documents and to carry out its obligations thereunder. The acquisition of
the Securities to be acquired hereunder by the Purchaser has been duly
authorized by all necessary action on the part of the Purchaser. Each of
this Agreement, the Registration Rights Agreement and the Escrow Agreement
has been duly executed by the Purchaser and, when delivered by the Purchaser
in accordance with the terms hereof and the Escrow Agreement constitutes the
valid and legally binding obligation of the Purchaser, enforceable against it
in accordance with its terms, subject to bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium and similar laws of general
applicability relating to or affecting creditors' rights generally and to
general principles of equity.
(b) INVESTMENT INTENT. The Purchaser is acquiring the Securities
for its own account for investment purposes only and not with a view to or
for distributing or reselling such Securities or any part thereof or interest
therein, without prejudice, however, to the Purchaser's right, subject to the
provisions of this Agreement and the Registration Rights Agreement, at all
times to sell or otherwise dispose of all or any part of such Securities
pursuant to an effective registration statement under the Securities Act and
in compliance with applicable state securities laws or under an exemption
from such registration.
(c) PURCHASER STATUS. At the time the Purchaser was offered the
Securities, it was, at the date hereof, it is, and at the Closing Date, it
will be, an "accredited investor" as defined in Rule 501(a) under the
Securities Act.
(d) EXPERIENCE OF PURCHASER. The Purchaser either alone or
together with its representatives, has such knowledge, sophistication and
experience in business and financial matters so as to be capable of
evaluating the merits and risks of the prospective investment in the
Securities, and has so evaluated the merits and risks of such investment.
(e) ABILITY OF PURCHASER TO BEAR RISK OF INVESTMENT. The
Purchaser acknowledges that an investment in the Securities is speculative
and involves a high degree of risk. The Purchaser is able to bear the
economic risk of an investment in the Securities to be acquired hereunder by
the Purchaser, and, at the present time, is able to afford a complete loss of
such investment.
(f) ACCESS TO INFORMATION. The Purchaser acknowledges receipt of
the Disclosure Materials and further acknowledges that it has been afforded
(i) the opportunity to ask such questions as it has deemed necessary of, and
to receive answers from, representatives of the Company concerning the terms
and conditions of the offering of the Securities, and the merits and risks of
investing in the Securities, (ii) access to information about the Company and
the Company's financial condition, results of operations, business,
properties, management and prospects sufficient to enable it to evaluate its
investment and (iii) the opportunity to obtain such
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additional information which the Company possesses or can acquire without
unreasonable effort or expense that is necessary to make an informed
investment decision with respect to the investment and to verify the accuracy
and completeness of the information contained in the Disclosure Materials.
Neither such inquiries nor any other investigation conducted by or on behalf
of the Purchaser or its representatives, agents or counsel shall modify,
amend or affect the Purchaser's right to rely on the truth, accuracy and
completeness of the Disclosure Materials and the Company's representations
and warranties contained in the Transaction Documents.
(g) RELIANCE. The Purchaser understands and acknowledges that (i)
the Securities are being offered and sold to it without registration under
the Securities Act in a private placement that is exempt from the
registration provisions of the Securities Act and (ii) the availability of
such exemption, depends in part on, and the Company will rely upon the
accuracy and truthfulness of, the foregoing representations and the Purchaser
hereby consents to such reliance.
The Company acknowledges and agrees that the Purchaser makes no
representations or warranties with respect to the transactions contemplated
hereby other than those specifically set forth in this Section 2.2.
ARTICLE III
OTHER AGREEMENTS OF THE PARTIES
3.1 TRANSFER RESTRICTIONS. (a) Securities may only be disposed of
pursuant to an effective registration statement under the Securities Act, to
the Company or pursuant to an available exemption from or in a transaction
not subject to the registration requirements thereof. In connection with any
transfer of any Securities other than pursuant to an effective registration
statement or to the Company, the Company may require the transferor thereof
to provide to the Company an opinion of counsel selected by the transferor,
the form and substance of which opinion shall be reasonably satisfactory to
the Company, to the effect that such transfer does not require registration
under the Securities Act. Notwithstanding the foregoing, the Company hereby
consents to and agrees to register on the books and records of the Company or
on the register of any transfer agent for the Securities any transfer by the
Purchaser to an Affiliate (as such term is defined under Rule 405 promulgated
under the Securities Act) of the Purchaser or any transfers among any such
Affiliates provided the transferee certifies to the Company that it is an
"accredited investor" as defined in Rule 501(a) under the Securities Act and
makes the appropriate investment representations. Each such transferee shall
have the rights of the Purchaser under this Agreement and the Registration
Rights Agreement.
(b) The Purchaser agrees to the imprinting, so long as is required
by this Section 3.1(b), of the following legend on the Securities:
NEITHER THESE SECURITIES NOR THE SECURITIES INTO WHICH THESE
SECURITIES ARE [CONVERTIBLE] [EXERCISABLE] HAVE BEEN REGISTERED WITH THE
SECURITIES AND EXCHANGE COMMISSION OR THE
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SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO
AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH
APPLICABLE STATE SECURITIES LAWS.
[FOR DEBENTURES ONLY] THIS DEBENTURE IS SUBJECT TO CERTAIN RESTRICTIONS
ON CONVERSION SET FORTH IN SECTION 3.8 OF THE CONVERTIBLE DEBENTURE
PURCHASE AGREEMENT, DATED AS OF MARCH 11, 1998, BETWEEN FIX-CORP
INTERNATIONAL, INC. (THE "COMPANY") AND THE ORIGINAL HOLDER HEREOF. A
COPY OF THAT AGREEMENT IS ON FILE AT THE PRINCIPAL OFFICE OF THE COMPANY.
Underlying Shares shall not contain any legend if conversion of
Debentures, exercise of Warrant or other issuances of Underlying Shares, as
the case may be, occurs at any time while an Underlying Securities
Registration Statement is effective under the Securities Act or, in the event
there is not an effective Underlying Securities Registration Statement at
such time, if in the opinion of counsel to the Company such legend is not
required under applicable requirements of the Securities Act (including
judicial interpretations and pronouncements issued by the staff of the
Commission). The Company agrees that it will provide the Purchaser, upon
request, with a certificate or certificates representing Underlying Shares,
free from such legend at such time as such legend is no longer required
hereunder. The Company may not make any notation on its records or give
instructions to any transfer agent of the Company which enlarge the
restrictions of transfer set forth in this Section 3.1(b).
3.2 ACKNOWLEDGEMENT OF DILUTION. The Company acknowledges that the
issuance of Underlying Shares upon (i) conversion of the Debentures and as
payment of interest thereon and (ii) exercise of the Warrant may result in
dilution of the outstanding shares of Common Stock, which dilution may be
substantial under certain market conditions. The Company further
acknowledges that its obligation to issue Underlying Shares in accordance
with the terms of the Debentures and the Warrant is unconditional and
absolute regardless of the effect of any such dilution.
3.3 FURNISHING OF INFORMATION. As long as the Purchaser owns
Securities, the Company covenants to timely file (or obtain extensions in
respect thereof and file within the applicable grace period) all reports
required to be filed by the Company after the Filing Date (as defined in the
Registration Rights Agreement) pursuant to Section 13(a) or 15(d) of the
Exchange Act. If at any time prior to the date on which the Purchaser may
resell all of its Underlying Shares without volume restrictions pursuant to
Rule 144(k) promulgated under the Securities Act (as determined by counsel to
the Company pursuant to a written opinion letter to such effect, addressed
and acceptable to the Company's transfer agent for the benefit of and
enforceable by the Purchaser) the Company is not required to file reports
pursuant to such sections, it will prepare and furnish to the Purchaser and
make publicly available in accordance
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with Rule 144(c) promulgated under the Securities Act annual and quarterly
financial statements, together with a discussion and analysis of such
financial statements in form and substance substantially similar to those
that would otherwise be required to be included in reports required by
Section 13(a) or 15(d) of the Exchange Act in the time period that such
filings would have been required to have been made under the Exchange Act.
The Company further covenants that it will take such further action as any
holder of Securities may reasonably request, all to the extent required from
time to time to enable such Person to sell Securities without registration
under the Securities Act within the limitation of the exemptions provided by
Rule 144 promulgated under the Securities Act, including the legal opinion
referenced above in this Section. Upon the request of any such Person, the
Company shall deliver to such Person a written certification of a duly
authorized officer as to whether it has complied with such requirements.
3.4 USE OF DISCLOSURE MATERIALS. The Company consents to the use of
the Disclosure Materials and any information provided by or on behalf of the
Company pursuant to Section 3.3, and any amendments and supplements thereto,
by the Purchaser in connection with resales of the Securities other than
pursuant to an effective registration statement; PROVIDED, THAT the Company
shall have a reasonable opportunity to update such information.
3.5 BLUE SKY LAWS. In accordance with the Registration Rights
Agreement, the Company shall qualify the Underlying Shares under the
securities or Blue Sky laws of such jurisdictions as the Purchaser may
request and shall continue such qualification at all times during the
Effectiveness Period (as defined in the Registration Rights Agreement);
PROVIDED, HOWEVER, that neither the Company nor its Subsidiaries shall be
required in connection therewith to qualify as a foreign corporation where
they are not now so qualified or to take any action that would subject the
Company to general service of process in any such jurisdiction where it is
not then so subject.
3.6 INTEGRATION. The Company shall not and shall use its best efforts
to ensure that no Affiliate shall sell, offer for sale or solicit offers to
buy or otherwise negotiate in respect of any security (as defined in Section
2 of the Securities Act) that would be integrated with the offer or sale of
the Securities in a manner that would require the registration under the
Securities Act of the issue or sale of the Securities to the Purchaser.
3.7 INCREASE IN AUTHORIZED SHARES. At such time as the Company would
be, if a notice of conversion or exercise (as the case may be) were to be
delivered on such date, precluded from (a) converting the full outstanding
principal amount of Debentures (and paying any accrued but unpaid interest in
respect thereof in shares of Common Stock) that remain unconverted at such
date or (b) honoring the exercise in full of the Warrant due to the
unavailability of a sufficient number of shares of authorized but unissued or
re-acquired Common Stock, the Board of Directors of the Company shall
promptly (and in any case within 30 Business Days from such date) prepare and
mail to the shareholders of the Company proxy materials requesting
authorization to amend the Company's restated certificate of incorporation to
increase the number of shares of Common Stock which the Company is authorized
to issue to at least a number of shares equal to the sum of (i) all shares of
Common Stock then outstanding, (ii) the number of shares of Common Stock
issuable on account of all outstanding warrants, options and convertible
10
securities (other than the Debentures and the Warrant) and on account of all
shares reserved under any stock option, stock purchase, warrant or similar
plan, (iii) 200% of the number of Underlying Shares as would then be issuable
upon a conversion in full of the then outstanding Debentures and as payment
of all future interest thereon in shares of common Stock in accordance with
the terms of this Agreement and the Debentures and (iv) such number of
Underlying Shares as would then be issuable upon the exercise in full of the
warrants. In connection therewith, the Board of Directors shall (x) adopt
proper resolutions authorizing such increase, (y) recommend to 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 no
later than the 60th day after delivery of the proxy materials relating to
such meeting) and (z) within 5 Business Days of obtaining such shareholder
authorization, file an appropriate amendment to the Company's certificate of
incorporation to evidence such increase.
3.8 PURCHASER OWNERSHIP OF COMMON STOCK. In no event shall the
Purchaser be permitted to use its ability to convert Debentures or exercise
its Warrant to the extent that such conversion or exercise would result in
the Purchaser beneficially owning (for purposes of Rule 13d-3 under the
Exchange Act and the rules thereunder) in excess of 4.999% of the then issued
and outstanding shares of Common Stock, including shares issuable upon
conversion of the Debentures held by the Purchaser after application of this
Section. To the extent that the limitation contained in this Section
applies, the determination of whether Debentures are convertible (in relation
to other securities owned by the Purchaser) and of which Debentures are
convertible shall be in the sole discretion of the Purchaser, and the
submission of Debentures for conversion shall be deemed to be the Purchaser's
determination of whether such Debentures are convertible (in relation to
other securities owned by the Purchaser) and of which Debentures are
convertible, in each case subject to such aggregate percentage limitation,
and the Company shall have no obligation to verify or confirm the accuracy of
such determination. Nothing contained herein shall be deemed to restrict
the right of the Purchaser to convert Debentures at such time as such
conversion will not violate the provisions of this Section. Notwithstanding
anything to the contrary contained herein, if ten days have elapsed since the
Purchaser has declared an event of default under any Transaction Document and
such event shall not have been cured to the Purchaser's satisfaction prior to
the expiration of such ten-day period, the provisions of this Section 3.8
shall be null and void AB INITIO.
3.9 LISTING OF UNDERLYING SHARES. If the Common Stock hereafter is
listed for trading on the Nasdaq National Market, Nasdaq SmallCap Market (or
on the American Stock Exchange or New York Stock Exchange, or any other
national securities market or exchange), then the Company shall (1) take all
necessary steps to list the Underlying Shares thereon, including the
preparation of any required additional listing application therefor covering
at least the sum of (i) two times the number of Underlying Shares as would be
issuable upon a conversion in full of the then outstanding principal amount
of Debentures (plus all Underlying Shares issuable as payment of interest
thereon, assuming all such interest were paid in shares of Common Stock) and
upon exercise in full of the then unexercised portion of the Warrant and (2)
provide to the Purchaser evidence of such listing, and the Company shall
thereafter maintain the listing of its Common Stock on such exchange or
market as long as Underlying Shares are issuable and/or outstanding. The
Company will use its commercially reasonable efforts to list the Common
11
Stock for trading on either the Nasdaq SmallCap Market or Nasdaq National
Market as soon as possible after the Closing Date.
3.10 CONVERSION PROCEDURES. EXHIBIT E sets forth the procedures with
respect to the conversion of the Debentures, including the form of legal
opinion, if necessary, that shall be rendered to the Company's transfer agent
and such other information and instructions as may be reasonably necessary to
enable the Purchaser to exercise its right of conversion smoothly and
expeditiously which are not set forth in the Debentures.
3.11 PURCHASER' RIGHTS IF TRADING IN COMMON STOCK IS SUSPENDED OR
DELISTED. If at any time while the Purchaser (or any assignee thereof) owns
any Securities, trading in the shares of the Common Stock is suspended on or
delisted from the OTC Bulletin Board or any other principal market or
exchange for such shares (other than as a result of the suspension of trading
in securities on such market or exchange generally, or temporary suspensions
pending the release of material information) for more than three (3) Trading
Days, then, notwithstanding anything to the contrary contained in any
Transaction Document, at the Purchaser's option exercisable by ten Business
Days prior written notice to the Company, the Company shall, PROVIDED, THAT
trading has not been reinstated within such period, repay the entire
principal amount of then outstanding Debentures and redeem all then
outstanding Underlying Shares then held by the Purchaser, at an aggregate
purchase price equal to the sum of (I) the aggregate outstanding principal
amount of Debentures then held by the Purchaser divided by the Conversion
Price on (a) the day prior to the date of such suspension or delisting, (b)
the day of such notice or (c) the date of payment in full of the repurchase
price calculated under this Section, whichever is less, and multiplied by the
Market Price preceding (x) the day prior to the date of such suspension or
delisting, (y) the day of such notice and (z) the date of payment in full of
the repurchase price calculated under this Section, whichever is greater,
(II) the aggregate of all accrued but unpaid interest and other non-principal
amounts (including liquidated damages, if any) then payable in respect of all
Debentures to be repaid, (III) the number of Underlying Shares then held by
the Purchaser multiplied by the Market Price immediately preceding (x) the
day prior to the date of such suspension or delisting, (y) the date of the
notice or (z) the date of payment in full by the Company of the repurchase
price calculated under this Section, whichever is greater, and (IV) interest
on the amounts set forth in I - III above accruing from the 10th Business Day
after such notice until the repurchase price under this Section is paid in
full at the rate of 18% per annum. If after the Original Issue Date the
Common Stock shall be listed for trading or quoted on the Nasdaq SmallCap
Market, Nasdaq National Market or any other national securities exchange or
market, this provision shall similarly apply to any delistings or suspensions
therefrom.
3.12 USE OF PROCEEDS. The Company shall use all of the proceeds from
the sale of the Securities for working capital purposes and not for the
satisfaction of any portion of Company debt or to redeem Company equity or
equity-equivalent securities. Pending application of the proceeds of this
placement in the manner permitted hereby the Company will invest such
proceeds in money market funds, interest bearing accounts and/or short-term,
investment grade interest bearing securities.
3.13 NOTICE OF BREACHES. The Company and the Purchaser shall give
prompt written notice to the other of any breach by it of any representation,
warranty or other agreement
12
contained in any Transaction Document, as well as any events or occurrences
arising after the date hereof, which would reasonably be likely to cause any
representation or warranty or other agreement of such party, as the case may
be, contained in the Transaction Document to be incorrect or breached as of
such Closing Date. However, no disclosure by either party pursuant to this
Section shall be deemed to cure any breach of any representation, warranty or
other agreement contained in any Transaction Document.
Notwithstanding the generality of the foregoing, the Company shall
promptly notify the Purchaser of any notice or claim (written or oral) that
it receives from any lender of the Company to the effect that the
consummation of the transactions contemplated by the Transaction Documents
violates or would violate any written agreement or understanding between such
lender and the Company, and the Company shall promptly furnish by facsimile
to the holders of the Debentures a copy of any written statement in support
of or relating to such claim or notice.
3.14 CONVERSION OBLIGATIONS OF THE COMPANY. The Company shall honor
conversions of the Debentures and exercises of the Warrant and shall deliver
Underlying Shares in accordance with the respective terms and conditions and
time periods set forth in the Debentures and the Warrant.
3.15 RIGHT OF FIRST REFUSAL; SUBSEQUENT REGISTRATIONS; CERTAIN CORPORATE
ACTIONS. (a) The Company shall not, directly or indirectly, without the
prior written consent of the Encore Capital Management, L.L.C. ("Encore") on
behalf of the Purchaser, offer, sell, grant any option to purchase, or
otherwise dispose (or announce any offer, sale, grant or any option to
purchase or other disposition) of any of its or its Affiliates equity,
equity-equivalent or derivative securities (a "SUBSEQUENT FINANCING") for a
period of 180 days after the Closing Date, except (i) the granting of options
or warrants to employees, officers and directors, and the issuance of shares
upon exercise of options granted, under any stock option plan heretofore or
hereinafter duly adopted by the Company, (ii) shares issued upon exercise of
any currently outstanding warrants and upon conversion of any currently
outstanding convertible preferred stock in each case disclosed in SCHEDULE
2.1(c), and (iii) shares of Common Stock issued upon conversion of the
Debentures, as payment of interest thereon, or upon exercise of the Warrant
in accordance with their respective terms, unless (A) the Company delivers to
Encore a written notice (the "SUBSEQUENT FINANCING NOTICE") of its intention
to effect such Subsequent Financing, which Subsequent Financing Notice shall
describe in reasonable detail the proposed terms of such Subsequent
Financing, the amount of proceeds intended to be raised thereunder, the
Person with whom such Subsequent Financing shall be affected, and a term
sheet or similar document relating thereto shall be attached to such
Subsequent Financing Notice and (B) Encore shall not have notified the
Company by 5:00 p.m. (New York City Time) on the tenth (10th) Trading Day
after its receipt of the Subsequent Financing Notice of its willingness to
cause the Purchaser to provide (or to cause its sole designee to provide),
subject to completion of mutually acceptable documentation, financing to the
Company on substantially the terms set forth in the Subsequent Financing
Notice. If Encore shall fail to notify the Company of its intention to enter
into such negotiations within such time period, the Company may effect the
Subsequent Financing substantially upon the terms and to the Persons (or
Affiliates of such Persons) set forth in the Subsequent Financing Notice;
PROVIDED, that the Company shall provide Encore with a second Subsequent
Financing Notice, and Encore shall again have the right of first refusal set
forth above in this paragraph (a),
13
if the Subsequent Financing subject to the initial Subsequent Financing
Notice shall not have been consummated for any reason on the terms set forth
in such Subsequent Financing Notice within thirty (30) Trading Days after the
date of the initial Subsequent Financing Notice with the Person (or an
Affiliate of such Person) identified in the Subsequent Financing Notice.
(b) Except for Underlying Shares and other "Registrable
Securities" (as such term is defined in the Registration Rights Agreement) to
be registered in accordance with the Registration Rights Agreement,
securities to be registered pursuant to Schedule 6(c) to the Registration
Rights Agreement, and other than Company securities to be registered for
resale in connection with financings permitted pursuant to paragraph (a)(i)
through (iii) of this Section, the Company shall not, without the prior
written consent of Encore, (i) issue or sell any of its or any of its
Affiliates' equity or equity-equivalent securities pursuant to Regulation S
promulgated under the Securities Act, or (ii) register for resale any
securities of the Company for a period of not less than 90 Trading Days after
the date that the Underlying Securities Registration Statement is declared
effective by the Commission. Any days that the Purchaser is not permitted to
sell Underlying Shares under the Underlying Securities Registration Statement
shall be added to such 90 Trading Day period for the purposes of (i) and (ii)
above.
(c) As long as there are Debentures outstanding, the Company shall
not and shall cause the Subsidiaries not to, without the consent of the
holders of the Debentures, (i) amend its certificate of incorporation, bylaws
or other charter documents so as to adversely affect any rights of the
holders of Debentures; (ii) repay, repurchase or offer to repay, repurchase
or otherwise acquire shares of its Common Stock other than as to the
Underlying Shares; or (iii) enter into any agreement with respect to any of
the foregoing.
3.16 THE WARRANT. Prior to the Closing, the Company shall issue and
deliver to the Escrow Agent for delivery at the closing a Common Stock
purchase warrant, in the form of EXHIBIT D and registered in the name of the
Purchaser (the "WARRANT"), pursuant to which the Purchaser shall have the
right at any time and from time to time thereafter through the third
anniversary of the date of issuance thereof, to acquire 126,268 shares of
Common Stock at an exercise price per share equal to $3.31.
3.17 TRANSFER OF INTELLECTUAL PROPERTY RIGHTS. Except in connection
with the sale of all or substantially all of the assets of the Company, the
Company shall not transfer, sell or otherwise dispose of, any Intellectual
Property Rights, or allow the Intellectual Property Rights to become subject
to any Liens, or fail to renew such Intellectual Property Rights (if
renewable and would otherwise expire), without the prior written consent of
the Purchaser.
3.18 FORM SB-2. The Company has filed with the Commission on January
20, 1998 a registration statement on Form SB-2 (the "FORM SB-2") pursuant to
the Exchange Act. The Company shall use its best efforts to amend the Form
SB-2 in order to include the resale of the Underlying Securities thereunder
as soon as possible but in no event later than the 20th day after the Closing
Date and shall take all commercially reasonable steps necessary to cause such
Form SB-2 to be declared effective as soon as possible thereafter but in no
event later than the 50th day after the Closing Date, and shall provide to
the Purchaser evidence of such filing and effectiveness.
14
ARTICLE IV
MISCELLANEOUS
4.1 FEES AND EXPENSES. The Company shall pay at the Closing $7,500 to
the Escrow Agent for the legal fees and disbursements incurred by the
Purchaser in connection with the preparation and negotiation of the
Transaction Documents. Other than the amount contemplated by the immediately
preceding sentence and except as set forth in the Registration Rights
Agreement, each party shall pay the fees and expenses of its advisers,
counsel, accountants and other experts, if any, and all other expenses
incurred by such party incident to the negotiation, preparation, execution,
delivery and performance of this Agreement. The Company shall pay all stamp
and other taxes and duties levied in connection with the issuance of the
Debentures pursuant hereto. The Purchaser shall be responsible for its own
respective tax liability that may arise as a result of the investment
hereunder or the transactions contemplated by this Agreement.
4.2 ENTIRE AGREEMENT; AMENDMENTS. This Agreement, together with the
Exhibits and Schedules hereto, the Debentures and the Warrant contain the
entire understanding of the parties with respect to the subject matter hereof
and supersede all prior agreements and understandings, oral or written, with
respect to such matters.
4.3 NOTICES. Any and all notices or other communications or deliveries
required or permitted to be provided hereunder shall be in writing and shall
be deemed given and effective on the earliest of (i) the date of
transmission, if such notice or communication is delivered via facsimile at
the facsimile telephone number specified in this Section prior to 7:00 p.m.
(New York City time) on a Business Day, (ii) the Business Day after the date
of transmission, if such notice or communication is delivered via facsimile
at the facsimile telephone number specified in the Purchase Agreement later
than 7:00 p.m. (New York City time) on any date and earlier than 11:59 p.m.
(New York City time) on such date, (iii) the Business Day following the date
of mailing, if sent by nationally recognized overnight courier service, or
(iv) upon actual receipt by the party to whom such notice is required to be
given. The address for such notices and communications shall be as follows:
If to the Company: Fix-Corp International, Inc.
0000 Xxxxx Xxxxx Xxxx, Xxxxx 000
Xxxxxxxxx, XX 00000
Facsimile No.: (000) 000-0000
Attn: Chief Financial Officer
With copies to: Xxxxxxx & Xxxxxx LLP
000 Xxxxx Xxxxx Xxxxxx
Xxxxxxxx, XX 00000
Facsimile No.: (000) 000-0000
Attn: Xxxxxx Xxxxxx
15
If to the Purchaser: JNC Strategic Fund Ltd.
Olympia Capital (Cayman) Ltd.
c/o Olympia Capital (Bermuda) Ltd.
Xxxxxxxx Xxxxx
00 Xxxx Xxxxxx
Xxxxxxxx XX00
Xxxxxxx
Facsimile No.: (000) 000-0000
Attn: Director
With copies to (for Encore Capital Management, L.L.C.
communications to 00000 Xxxxxxx Xxxxxx Xxxxx
either Purchaser): Xxxxx 000
Xxxxxx, XX 00000
Facsimile No.: (000) 000-0000
Attn: Xxxx X. Xxxx
-and-
Xxxxxxxx Xxxxxxxxx Xxxxxx Xxxxxxxx &
Xxxxxx LLP
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, XX 00000
Facsimile No.: (000) 000-0000
Attn: Xxxx X. Xxxxx
or such other address as may be designated in writing hereafter, in the same
manner, by such Person.
4.4 AMENDMENTS; WAIVERS. No provision of this Agreement may be waived
or amended except in a written instrument signed, in the case of an
amendment, by both the Company and the Purchaser; or, in the case of a
waiver, by the party against whom enforcement of any such waiver is sought.
No waiver of any default with respect to any provision, condition or
requirement of this Agreement shall be deemed to be a continuing waiver in
the future or a waiver of any other provision, condition or requirement
hereof, nor shall any delay or omission of either party to exercise any right
hereunder in any manner impair the exercise of any such right accruing to it
thereafter.
4.5 HEADINGS. The headings herein are for convenience only, do not
constitute a part of this Agreement and shall not be deemed to limit or
affect any of the provisions hereof.
4.6 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
inure to the benefit of the parties and their successors and permitted
assigns, including any Persons to whom the Purchaser transfers Debentures or
Warrant. The assignment by a party of this
16
Agreement or any rights hereunder shall not affect the obligations of such
party under this Agreement.
4.7 NO THIRD-PARTY BENEFICIARIES. This Agreement is intended for the
benefit of the parties hereto and their respective permitted successors and
assigns and, other than Encore, who is an intended beneficiary of the
provisions of Section 3.15 entitled to enforce such provisions against the
parties hereto, and permitted assignees under Section 4.6, is not for the
benefit of, nor may any provision hereof be enforced by any other Person.
4.8 GOVERNING LAW. This Agreement shall be governed by and construed
and enforced in accordance with the internal laws of the State of New York
without regard to the principles of conflicts of law thereof.
4.9 SURVIVAL. The representations, warranties, agreements and
covenants contained in this Agreement shall survive the Closing and the and
conversion of the Debentures and exercise of the Warrant.
4.10 EXECUTION. This Agreement may be executed in two or more
counterparts, all of which when taken together shall be considered one and
the same agreement and shall become effective when counterparts have been
signed by each party and delivered to the other parties, it being understood
that all parties need not sign the same counterpart. In the event that any
signature is delivered by facsimile transmission, such signature shall create
a valid and binding obligation of the party executing (or on whose behalf
such signature is executed) the same with the same force and effect as if
such facsimile signature page were an original thereof.
4.11 PUBLICITY. The Company and the Purchaser shall consult with each
other in issuing any press releases or otherwise making public statements
with respect to the transactions contemplated hereby and no party shall issue
any such press release or otherwise make any such public statement without
the prior written consent of the other, which consent shall not be
unreasonably withheld or delayed, except that no prior consent shall be
required if such disclosure is required by law, in which such case the
disclosing party shall provide the other party with prior notice of such
public statement.
4.12 SEVERABILITY. In case any one or more of the provisions of this
Agreement shall be invalid or unenforceable in any respect, the validity and
enforceability of the remaining terms and provisions of this Agreement shall
not in any way be affected or impaired thereby and the parties will attempt
to agree upon a valid and enforceable provision which shall be a reasonable
substitute therefor, and upon so agreeing, shall incorporate such substitute
provision in this Agreement.
4.13 REMEDIES. Each of the parties to this Agreement acknowledges and
agrees that the other parties would be damaged irreparably in the event any
of the provisions of this Agreement are not performed in accordance with
their specific terms or otherwise are breached. Accordingly, each of the
parties hereto agrees that the other parties shall be entitled to an
injunction or injunctions to prevent breaches of the provisions of this
Agreement and to enforce specifically this Agreement and the terms and
provisions of this Agreement in any action
17
instituted in any court of the United States of America or any state thereof
having jurisdiction over the parties to this Agreement and the matter, in
addition to any other remedy to which they may be entitled, at law or in
equity.
4.14 LIQUIDATED DAMAGES. Each of the parties to this Agreement
acknowledges and agrees that the any and all liquidated damage provisions set
forth in the Transaction Documents express a reasonable pre-estimate of the
damages which would be incurred.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
[SIGNATURE PAGE FOLLOWS]
18
IN WITNESS WHEREOF, the parties hereto have caused this Convertible
Debenture Purchase Agreement to be duly executed by their respective
authorized persons as of the date first indicated above.
FIX-CORP INTERNATIONAL, INC.
By: /s/ Xxxx Xxxxxx
-----------------------------------
Name: Xxxx Xxxxxx
Title: President/CEO
JNC STRATEGIC FUND LTD.
By: /s/ Xxxxxx X. Xxxxx
-----------------------------------
Name: Xxxxxx X. Xxxxx
Title: Director
19
