CONVERTIBLE DEBENTURE PURCHASE AGREEMENT, dated as of June 25, 1998 (this
"AGREEMENT"), between Fix-Corp International, Inc., a Delaware corporation (the
"COMPANY"), and JNC Opportunity 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 $3,000,000 of the Company's 4%
Convertible Debentures, due June 25, 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
$3,000,000. 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
$3,000,000, 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 $3,000,000
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
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
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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. This 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 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 Required Approvals, 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
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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.
(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
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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 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
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"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 disclosed in Schedule 6(b) to the
Registration Rights Agreement, the Company has not granted or agreed to grant
any registration rights, including piggy-back registration rights, to any
Person.
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.
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(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 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.
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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 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 JUNE 25, 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.
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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 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.
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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 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
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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. The
provisions of this Section may be waived by the Purchaser upon not less than 75
days prior notice to the Company, and the provisions of this Section shall
continue to apply until such 75th day (or later, if stated in the notice of
waiver).
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
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 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.
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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 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
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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
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right of first refusal set forth above in this paragraph (a), 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 300,000 shares of Common Stock at an exercise
price per share equal to $4.00.
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
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Underlying Securities thereunder as soon as possible but in no event later
than the 30th 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 60th day after
the Closing Date, and shall provide to the Purchaser evidence of such filing
and effectiveness.
ARTICLE IV
MISCELLANEOUS
4.1 FEES AND EXPENSES. The Company shall pay at the Closing (i)
$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 and (ii) $5,000 to Encore for its due diligence expenses and
disbursements in connection with the transactions contemplated hereby. 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, the Registration Rights
Agreement, Escrow Agreement 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:
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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
If to the Purchaser: JNC Opportunity Fund Ltd.
c/o Olympia Capital (Cayman) 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: Managing Member
-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
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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 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 Sections 3.15, 4.1 and 4.3 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
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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 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]
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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: CEO
JNC OPPORTUNITY FUND LTD.
By: /s/ Xxxxxx X. Xxxxx
---------------------------
Name: Xxxxxx X. Xxxxx
Title: Director
