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U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-SB/A
GENERAL FORM FOR REGISTRATION OF SECURITIES OF
SMALL BUSINESS ISSUERS
UNDER SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
FIX-CORP INTERNATIONAL, INC.
(Name of Small Business Issuer in its charter)
DELAWARE 34-1783774
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
27040 CEDAR ROAD / SUITE 218
BEACHWOOD, OHIO 44122
(Address of principal executive offices) (Zip Code)
Issuer's telephone number (216) 292-3182
Securities to be registered under Section 12(b) of the Act:
Title of each class Name of each exchange on which
to be so registered each class is to be registered
NONE NONE
Securities to be registered under Section 12(g) of the Act:
COMMON STOCK, PAR VALUE $ 0.001 PER SHARE
(Title of class)
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PART I
ITEM 1. DESCRIPTION OF BUSINESS
Fix-Corp International, Inc. (the "Company") is organized under the
laws of the state of Delaware. A predecessor of the Company was initially
incorporated in 1995 under the laws of the state of Utah and under the name
Lifechoice, Inc. In 1995, in connection with the acquisition by the Company
of a company organized by Mark Fixler, the Company's Chief Executive Officer
and President and Chairman of its Board of Directors, the Company changed its
name from Lifechoice, Inc. to Fix-Corp International, Inc., and was
redomociled from being a corporation organized under Utah law to one
organized in Delaware. (See notes 1 and 11 to the Financial Statements.)
The Company's principal business is the manufacturing of recycled
plastic (in particular, high-density polyethylene or "HDPE") resin, through
its wholly-owned subsidiary, Fixcor Industries, Inc. ("Fixcor"), a Delaware
corporation. The Company expects before the end of fiscal year 1997 to
commence the manufacturing of plastic pallets from recycled resin through its
wholly-owned subsidiary, Palletech, Inc. ("Palletech"), a Delaware
corporation.
The Company also markets jewelry products for corporate awards and
gifts and extends financing to small businesses collateralized by purchase
orders. These two businesses constituted substantially all of the businesses
of the Company prior to the end of fiscal year 1996. During the first nine
months of fiscal year 1997, however, revenues from these businesses
constituted less than 10% of the Company's total revenues, with more than 90%
of its revenues generated by the manufacturing of recycled plastic resin.
(See Part I, Item 2, Management's Discussion and Analysis or Plan of
Operations.)
In December, 1996, the Company acquired a recycling plant in Heath,
Ohio, also known as the Heath Resource Recovery Plant (the "Facility"), from
Quantum Chemical Corporation ("Quantum"). In connection with this
acquisition, in December, 1996, the Company formed Fixcor to own and operate
the Facility. On January 8, 1997, the first processing line at the Facility
became operational. During July, 1997, the Company formed Palletech to
manufacture plastic pallets from recycled plastic resin. The Company expects
that it will dedicate significantly less resources to the corporate awards
jewelry marketing and purchase order financing businesses, that the plastic
recycling business will continue to grow, and that the operations of Fixcor
and Palletech will generate a greater percentage and, eventually,
substantially all of the revenue of the Company in fiscal year 1998, such
that the Company is considered primarily to be in the plastic recycling and
recycled products business.
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SPECIAL NOTE--FORWARD-LOOKING STATEMENTS
Certain statements contained in this Registration Statement,
including, without limitation, statements containing the words "believes,"
"anticipates," "expects" and words of similar import, constitute
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. Such forward-looking statements involve known
and unknown risks, uncertainties and other factors that may cause the actual
results, performance or achievements of the Company, or industry results, to
be materially different from any future results, performance or achievements
expressed or implied by such forward-looking statements. Such factors
include, among others, the following: international, national and local
general economic and market conditions; demographic changes; the size and
growth of the plastic packaging markets for both consumer and industrial
uses; the ability of the Company to sustain, manage or forecast its growth;
the ability of the Company to successfully make and integrate acquisitions;
raw material costs and availability; new product development and
introduction; existing government regulations and changes in, or the failure
to comply with, government regulations; adverse publicity; competition; the
loss of significant customers or suppliers; fluctuations and difficulty in
forecasting operating results; changes in business strategy or development
plans; business disruptions; the ability to attract and retain qualified
personnel; the ability to protect technology; and other factors referenced in
this Registration Statement. Certain of these factors are discussed in more
detail elsewhere in this Registration Statement. Given these uncertainties,
readers of this Registration Statement and investors are cautioned not to
place undue reliance on such forward-looking statements. The Company
disclaims any obligation to update any such factors or to publicly announce
the result of any revisions to any of the forward-looking statements
contained herein to reflect future events or developments.
THE COMPANY
The Company has two wholly-owned subsidiaries, Fixcor and Palletech.
Fixcor owns and operates the Facility, located in the Mid-Ohio Industrial
Park at 1835 James Parkway in Heath, Ohio 43056. Palletech's operations will
also take place at the Facility. The closest major metropolitan area is
Columbus, Ohio, about 30 miles away. Within the plastics industry, the
Company intends to establish itself as a high volume supplier of recycled
HDPE resin. Simultaneously the Company intends to pursue a program of
vertical integration whereby it has the capacity to utilize its own resin
product and fabricate a value-added plastic end product.
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ACQUISITION OF THE FACILITY
In December, 1996, the Company consummated the acquisition of the
Facility pursuant to the Purchase and Sale Agreement (the "Quantum
Agreement"), a copy of which is attached to this Registration Statement. The
Facility was acquired from Quantum, a Virginia corporation with its principal
place of business located in Cincinnati, Ohio. The Facility includes a
stand-alone post-consumer plastic recycling operation involving two parallel
recycling lines inside a 50,000 square foot building on its own plot of
ground with access to an adjoining railroad spur and truck scale, plus
various other support equipment.
In connection with the acquisition of the Facility, the Company
obtained bridge financing from Gordon Brothers Capital Corp., a commercial
lender with its principal place of business located in Boston, Massachusetts.
This bridge financing was in the amount of $2,500,000 and was secured by a
first mortgage on the Facility and a security interest in all inventory,
accounts receivables and contracts with customers. Mr. Fixler also
guaranteed the Company's obligations under the bridge financing agreement.
Upon consummation of the purchase of the Facility and prior to the
securing of permanent financing, the Company entered into a formal
Acquisition Agreement (the "Acquisition Agreement") under which the Company
conveyed the Facility to Fixcor in connection with its original subscription
to all of the shares of common stock of Fixcor. Mr. Fixler was also a party
to this Acquisition Agreement. Before the Company acquired the Facility
under the Quantum Agreement, he had an option to purchase the Facility. He
waived his option to purchase and allowed the Company to make the
acquisition. In addition, he personally guaranteed the bridge financing for
the purchase of the Facility, and the Company issued to him 6,521,740 shares
of common stock of the Company (the "Common Stock"), all of which were
restricted shares.
In May, 1997, Fixcor secured financing for the Facility from
NationsCredit Commercial Corporation. This consisted of revolving loans up
to $7,000,000 for inventory and account receivable financing, permanent
financing, and equipment acquisition. This financing included a mortgage
security agreement which encumbered substantially all of the assets of the
Facility. Mr. Fixler is the guarantor of this facility in an amount up to
$750,000 plus expenses.
OPERATIONS AT THE FACILITY
The Facility produces post-consumer high density polyethylene (HDPE)
plastic resin pellets. The Facility has three recycling lines which are
capable of producing approximately 66,000,000 to 72,000,000 pounds of
post-consumer plastic resin per year. The Company expects that the average
selling price of this resin can be maintained at the current level of
approximately $0.35 per pound, resulting in annual gross sales of
approximately $23,000,000 to $25,200,000 per year with all three processing
lines operating.
The manufacturing process is substantially automated and runs around
the clock, permitting Fixcor to utilize three shifts. Fixcor's current
production (i.e., output that it
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expects to produce through approximately the end of fiscal year 1997) is sold
out. With the third line operating as of October, 1997, Fixcor expects its
capacity to come closer to meeting the demand for the HDPE resin. The
Company believes that it can sell all of the resin that the Facility can and
will produce in the near future. Company management believes that the
recycling of HDPE is not generally a seasonal business, either with respect
to the supply of raw materials or with respect to customers' demand. The
demand is one that the Company believes is not currently being met. While
Fixcor's business is not concentrated on any one region of the United States,
the Company believes that it may be advantageous in the future to expand by
opening plants in the Western and Southeastern United States to be closer to
suppliers and customers. The Company expects to open a second HDPE recycling
facility during fiscal year 1998, and has ordered equipment for that
facility. Fixcor currently has no sales to foreign customers. Its customers
are generally companies with annual sales revenue of between $50,000,000 and
$250,000,000. In addition, management believes that Fixcor enjoys a
competitive advantage over its competitors due to an advantageous rate for
electric power from Ohio Power. Fixcor owns its own substation that
regulates and supplies its power. The national rate charged to commercial
customers is $0.09 per kilowatt hour. Fixcor pays $0.032 per kilowatt hour
for use at the Facility. This differential translates into a cost of $0.011
per pound of plastic produced. In addition, the Facility has its own waste
water treatment plant. This permits the Facility to recycle 50% to 75% of
the water that it consumes per day and aids in lowering the cost of producing
resin pellets.
The Facility is designed to produce recycled HDPE. HDPE is a
constituent ingredient of many consumer packaging plastic products. The
prices of raw materials are a function of, among other things, the
manufacturing capacity for such raw materials of such consumer products. In
the event of cost increases for raw materials, failure to achieve
corresponding sales price increases in a timely manner, sales price erosion
without a corresponding reduction in raw material costs or failure to
renegotiate favorable raw material supply contracts could have a material
adverse effect on the Company.
Lot numbers are assigned to each incoming shipment for quality
control purposes. As the material for a given lot progresses through the
recycling process, sample material from each lot is tracked and checked a
minimum of five times. The bales are first split apart and thoroughly washed
to remove any contaminants, then sorted and prepared to enter the shredding
process. The shredder turns all of the material into small flakes, which
are then washed again in hot water. Once the flakes are dried, they are
fed into the extruder, which converts the plastic flakes into a liquid and
then squeezes the liquid plastic out through narrow openings under pressure.
The extrusion process involves technology in the public domain and does not
involve any technology that is licensed. This is the process which brings
recycled plastic to its finished form, namely a small plastic pellet called a
"resin." To assure quality, samples of these resin pellets are tested for
every 1,000 pounds of raw material produced and a sample is retained of each
lot.
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PALLETECH, INC.
Palletech is a recently formed subsidiary which will specialize in
the production of plastic pallets. Palletech is ordering a specialized,
state-of-the-art injection molding machine which will transform resin pellets
into plastic pallets. This will enable the Company to be less dependent on
commodity pricing and instead achieve pricing which reflects the value added
properties of a finished good. The pallets will be produced from recycled
plastic resin produced by Fixcor at the Facility. The Company believes that
the engineering work is complete and that the product is ready to go into
production. The Company believes that plastic possesses numerous advantages
over wood, the material currently used for pallets: plastic is extremely
durable, has historically been less expensive, possesses greater strength,
will serve for a much longer term of service and, when its life is finally
over, can itself be recycled.
In July, 1997, the Company, Fixcor and Palletech, as borrowers,
secured financing from Gordon Brothers Capital Corp., in the form of a
$3,500,000 line of credit, intended to finance the acquisition of equipment
for use in the operations of Palletech. Like the facility from NationsCredit
Commercial Corporation, this facility is secured by substantially all of the
assets of the Company and its subsidiaries. The two lenders have entered
into an Intercreditor Agreement with respect to their respective security
interests. Mr. Fixler is the guarantor of this line of credit in an amount
up to $1,000,000.
LEVERAGE
As discussed above, the Company is significantly leveraged. It has
entered into security agreements with two lenders which substantially
encumber all of the Company's assets. The Company's future operating
performance and ability to service or refinance its indebtedness will be
subject to future economic conditions and to financial, business and other
factors, many of which are beyond its control, and consequently the Company
may be unable to service all of its debt in the future. There can be no
assurance that the Company's future operating performance will be sufficient
to service such indebtedness or that the Company will be able to refinance
its indebtedness in whole or in part.
The degree to which the Company is leveraged can have significant
effects on the Company, including the following: (i) the Company's ability to
obtain additional financing in the future for working capital, capital
expenditures, acquisitions, general corporate purposes or other purposes may
be limited; (ii) a substantial portion of the Company's cash flow from
operations will be dedicated to the payment of the principal of and interest
on its existing indebtedness, thereby reducing funds available for
operations; (iii) the agreements governing the Company's indebtedness and
convertible debentures contain certain restrictive covenants. The Company's
ability to make scheduled payments of the principal of, or interest on, or to
refinance, its indebtedness will depend on its future operating performance
and cash flow, which are subject to prevailing economic conditions, primarily
interest rate levels and financial, competitive, business and other factors,
many of which are beyond its control.
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CUSTOMERS
Fixcor ships the resin it produces to its customers by rail and
truck. The resin is used by Fixcor's customers for manufacturing plastic
pipe and for containers for household cleaners such as laundry detergent and
bleach (but not for containers of items for human consumption). Generally,
in manufacturing the plastic containers from the resin, customers mix the
resin with other materials, but do not do so in the manufacturing of plastic
pipe.
Fixcor's accounts payable, as well as its accounts receivable, are
generally due within 35 days of invoice. The Company believes that this is
consistent with industry practice. Fixcor's operations and budget account
for the delay between paying for the raw materials and being paid for the
resin produced. Again, the Company believes that this is consistent with
industry practice.
No customer of Fixcor purchases 30% or more of Fixcor's production.
The one customer that approaches purchasing 30% of the production is H.
Muehlstein & Co., to whom Fixcor sells resin for further distribution. No
other customer purchases more than 10% of Fixcor's production. The Company
believes that Palletech's operations will be commenced before the end of
fiscal year 1997 and will be fully operational during the first quarter of
fiscal year 1998. At that time, the Company expects Palletech to use
approximately 25% of Fixcor's output.
Management expects that the customers of Palletech will be
closed-loop warehouses and distribution centers, such as large retailers who
are directly involved in much of the manufacturing, warehousing and retail
distribution of their products. Palletech has not yet entered into agreements
for the sale of its products. The Company expects to ship Palletech's
products through traditional rail and truck channels.
RAW MATERIALS
Polyethylene constitutes the principal raw material used in the
recycling of plastic processed by the Company's subsidiaries. This raw
material must be sorted and baled before it can be utilized. Generally,
there has been no problem obtaining sorted and baled HDPE raw materials,
which are available from a wide variety of suppliers, including but not
limited to major waste haulers and landfills. Costs for these raw materials
used by Fixcor tend to fluctuate with various economic factors which
generally affect the Company and its competitors. The availability of raw
materials was adequate in 1996 and 1997 and management expects it to remain
adequate throughout the remainder of 1997 and 1998. The Company believes
that there is adequate inventory of raw materials to meet Fixcor's production
requirements, and that its practices are consistent with industry norms.
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PATENTS, TRADEMARKS AND LICENSES
Palletech has entered into a Licensing and Marketing Agreement with
Nitro Plastics Technologies of Israel, a copy of which is attached to this
Registration Statement. Under that agreement, Palletech is the sub-licensee
of certain proprietary injection molding technology for the manufacturing of
plastic pallets and other products from recycled plastic. The Company
believes that otherwise it and its subsidiaries have all rights necessary to
carry on their operations. In particular, in connection with the acquisition
of the Facility from Quantum, the Company purchased equipment and other
tangible assets that it believes are necessary for Fixcor's operations. The
Company is not the holder of any letters patent, trademark or copyright
registrations, and has not applied for any of the foregoing.
CALIFORNIA GRANT AND ALLIED SIGNAL AGREEMENT
In June, 1997, the Company was awarded a $256,868 research grant
from the Integrated Waste Management Board of the State of California to
develop a solution to the problems associated with non-recyclable HDPE motor
oil containers, which have historically been sent to landfills. The solution
will involve the separation of the remaining oil from the "empty" container,
and then the recycling of the HDPE container and the separate recycling of
the remaining oil. To do this, in September, 1997, Fixcor entered into a
license agreement with The Federal Manufacturing & Technologies business unit
of AlliedSignal Inc. ("AlliedSignal") under which AlliedSignal licenses to
Fixcor certain technology and Fixcor pays a license fee and ongoing royalties
based principally on sales of products sold arising out of use of the
licensed technology. A copy of the license agreement between Fixcor and
AlliedSignal is attached to this Registration Statement.
The Company has not spent significant amounts on research and
development in the past and, except for the grant from the State of
California, does not expect its research and development budget in the future
to be material.
EMPLOYMENT AGREEMENTS
Mr. Fixler has entered into a written employment agreement with the
Company with a term of three years commencing January 1, 1997 and Gary
M. DeLaurentiis has entered into an employment agreement with the Company
with a term of five years commencing January 1, 1997. See Part I,
Item 6, "Executive Compensation." No other employees have written employment
or collective bargaining agreements with the Company or any of its
subsidiaries. A copy of each employment agreement is attached to this
Registration Statement.
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COMPETITION
Fixcor sells a commodity (recycled HDPE plastic) in a commodity
market. As is true with all commodity markets, this market is highly
competitive, although Fixcor has experienced no difficulty in running at full
capacity and selling its full production. Nevertheless, many of its
competitors are considerably larger than the Company and have substantially
greater financial and other resources than the Company, while others are
significantly smaller with lower fixed costs and greater operating
flexibility. The Company has approximately 15 competitors. With the
addition of Palletech's operations and production of an end product, the
Company expects to be less dependent on the market for the plastic resin that
Fixcor produces.
ENVIRONMENTAL MATTERS AND GOVERNMENT REGULATION
The business operations of the Company and the ownership and
operations of real property by the Company are subject to extensive and
changing federal, state, local and foreign environmental laws and regulations
pertaining to the discharge of materials into the environment, the handling
and disposition of wastes (including solid and hazardous wastes) or otherwise
relating to the protection of the environment. As is the case with
manufacturers in general, if a release of hazardous substances occurs on or
from the Company's properties or any associated offsite disposal location, or
if contamination from prior activities is discovered at any of the Company's
properties, the Company may be held liable. From time to time, the Company
is involved in inquiries relating to compliance with environmental laws,
permits and other environmental matters. In the future, the Company may be
identified as a potentially responsible party and be subject to liability
under applicable law. No assurances can be given that additional
environmental issues will not require future expenditures.
The plastics industry, in general, and the Company also are subject
to existing and potential federal, state, local and foreign legislation
designed to reduce solid wastes by requiring, among other things, plastics to
be degradable in landfills, minimum levels of recycled content, various
recycling requirements, disposal fees and limits on the use of plastic
products. In addition, various consumer and special interest groups have
lobbied from time to time for the implementation of these and other such
similar measures. Although the Company believes that the legislation
promulgated to date and such initiatives to date have not had a material
adverse effect on the Company, there can be no assurance that any such future
legislative or regulatory efforts or future initiatives would not have a
material adverse effect on the Company.
Fixcor's current expenses for compliance with environmental laws and
regulations is approximately $300,000 per year, primarily the cost of water
treatment. Two environmental "Phase I" examinations were done in connection
with the purchase of the Facility and the reports from those examinations did
not reveal any contamination.
Fixcor has made no material capital expenditures, and expects to
make none, for environmental control facilities in connection with the
recently installed third operating line, and Palletech expects to make none
in connection with its operations, at the Facility.
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The United States Food and Drug Administration (the "FDA") regulates
the content of direct-contact food containers and packages, including
containers and packages made from recycled plastics and paper products. The
FDA currently limits the amount of recycled materials that can be used in
such containers and packages.
EMPLOYEES
As of November 10, 1997, the Company and its subsidiaries had a
total of 75 employees, all of whom were full-time employees. Of these,
Fixcor had 65 production personnel and a support staff of five at the
Facility. The Company had another five employees at its headquarters office
in Beachwood. The Company has no collective bargaining agreement with its
employees and no union represents them. There have been no interruptions or
curtailments of operations due to labor disputes and the Company believes
that relations with its and its subsidiaries' employees are good.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
DEVELOPMENT STAGE ACTIVITIES
In December, 1996, the Company formed Fixcor, a wholly-owned
subsidiary. This entity acquired the Facility, a stand-alone post-consumer
plastic recycling operation. The acquisition significantly changed the focus
of the Company from corporate awards jewelry marketing and financing to the
manufacturing of plastic resin.
With this acquisition, the Company's business plan may be divided
into four phases based upon the services performed, the products produced,
and the products and services to be performed and produced.
PHASE 1
This phase of the business plan relates to the source of the
Company's revenues prior to acquisition of the Facility now owned and
operated by Fixcor. The sources of these revenues were corporate awards
jewelry marketing and the extension of financing to small businesses
collateralized by purchase orders.
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PHASE 2
With the acquisition of the Facility in Heath, Ohio, the Company,
through its wholly-owned subsidiary, became the owner and operator of a
stand-alone post-consumer plastic recycling operation. This operation
contains three operating lines. The first became operational January 8,
1997, the second March 4, 1997, and the third October 22, 1997. Since the
acquisition of this Facility, the corporate awards jewelry marketing and the
financing of purchase orders has become an immaterial portion of the revenues
and operations of the Company. Funding of the Facility acquisition was made
by obtaining bridge financing in the amount of $2.5 million from Gordon
Brothers Capital Corp., and the issuance of 6,521,740 restricted common
shares of the Company. The bridge financing was secured by a mortgage on the
Facility, and a security interest in all inventory, accounts receivables and
contracts with customers, and a personal guarantee of Mr. Fixler. On May 14,
1997, the Company replaced this bridge financing with permanent financing
from NationsCredit Commercial Corporation for up to $7,000,000. This
financing consisted of a security agreement on all of Fixcor's assets, and a
credit line based upon a percentage of inventory and accounts receivable.
See Part I, Item 1, "DESCRIPTION OF BUSINESS; THE COMPANY; ACQUISITION OF THE
FACILITY."
PHASE 3
On July 7, 1997, the Company formed another wholly-owned subsidiary,
Palletech. The purpose of this subsidiary is to specialize in the production
of plastic pallets. Palletech, Inc., has ordered a specialized,
state-of-the-art, injection molding machine which will transform resin
pellets, produced by Fixcor, into plastic pallets. Management expects to
install this equipment during December, 1997 and to have it operating at full
capacity by February, 1998. The Company conservatively estimates that
Palletech revenues for 1998 will be $13.0 million.
Bridge financing for this equipment has been secured from Gordon
Brothers Capital Corp. Management is currently reviewing proposals from
financial institutions for the source of financing that will permanently
provide funds for the acquisition of the equipment and working capital. See
Part I, Item 1, "DESCRIPTION OF BUSINESS; THE COMPANY; CALIFORNIA GRANT AND
ALLIEDSIGNAL AGREEMENT."
PHASE 4
During September, 1997, the Company's wholly-owned subsidiary, Fixcor
entered into an agreement with AlliedSignal. Under the licensing agreement,
Fixcor is entitled to utilize technology owned by Allied in the recovery of
oil and plastic from shredded motor oil containers. This process produces two
useable products from a previous waste stream. The Company expects to
commence these operations during fiscal year 1998. The agreement requires
Fixcor to pay royalties to Allied based upon the volume of recycling
performed by Fixcor under these licenses.
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RESULTS OF OPERATIONS--FOR THE YEAR ENDED DECEMBER 31, 1996, AS COMPARED TO
SEPTEMBER 30, 1997
Substantially all revenues for fiscal year 1996 were from corporate
awards jewelry marketing and financing of purchase orders. The Company had no
revenues for this period from the Fixcor or the Palletech operations.
Revenues for the twelve months in fiscal year 1996 from the purchase order
financing were $510,779 versus $191,795 for the nine months ended September
30, 1997, an annualized decrease of approximately 50 percent. The 1997
revenue represents the funds the Company had available for these purposes
before startup of the Fixcor operations. As the year has continued, these
investments have declined due to the Company's emphasis on the operations at
the Fixcor Facility. For the year ended December 31, 1996 revenues from
merchandise sales were $232,824. For the nine months ended September 30,
1997 revenues from these sales were $187,964. On an annualized basis, this
represents a 7.6% percent increase in revenues. This increase is a result of
an increase in staffing and sales efforts in this area.
The revenues of Fixcor through the nine months ended September 30, 1997,
are $5,441,225. As previously noted, these revenues are not reflected in the
1996 net income since operations did not begin until 1997. Cost of goods sold
for these sales was $4,089,419 reflecting a gross profit of 24.8%.
General and administrative expenses for the year ended December 31, 1996,
were $454,632, compared with $1,523,379 for the nine months ended September 30,
1997. The increase reflects the operations of Fixcor for the period in
operation during fiscal year 1997 against the pre-Fixcor-operation year of 1996.
LIQUIDITY AND CAPITAL RESOURCES AS OF SEPTEMBER 30, 1997
The Company's cash balance increased by $2,174,002 to $2,398,541 from
December 31, 1996 to September 30, 1997 and working capital increased by
$4,473,009 to $11,706,800 from December 31, 1996 to September 30, 1997. The
increases are the result of three occurrences. First, funds were generated by
internal operations and formula borrowings on inventories (up to 55%) and
receivables (up to 85%)
The second source of funds was from the issuance of capital stock. During
the nine months ended September 30, 1997, 3,490,986 shares were issued resulting
in additional funds of $4,751,475. These monies were used to acquire additional
equipment and fund working capital needs in Fixcor's operations.
Management believes that the present cash balances and funding available
through the permanent financing and line of credit will be sufficient to meet
the needs of the Fixcor operations. However, additional funding may be
necessary with regard to the Palletech operations when they start up during
1998. Management is working with financial institutions to ensure that
sufficient monies are available to meet these needs, and it is believed that
those monies will be available. See the discussion of the "CONVERTIBLE
DEBENTURES" below.
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CONVERTIBLE DEBENTURES
On October 24, 1997, pursuant to a Convertible Debenture Purchase Agreement
the Company issued and sold in a private placement to two institutional
investors an aggregate $5,000,000 principal amount of convertible debentures
bearing interest at the rate of 6% per annum, payable quarterly in arrears, and
due October 24, 2000. The Company expects to use the net proceeds of the
transactions primarily for such things as the acquisition of equipment for the
start-up and expansion of Palletech and Fixcor operations. The principal amount
of the debentures, together with any accrued and unpaid interest thereon, are
convertible at any time into shares of Common Stock at a conversion price equal
to the lesser of (i) $3.91 (110% of the average closing bid price for the 5
trading days preceding closing), or (ii) 85% of the average of the 5 lowest
closing bid prices during the 10 trading days preceding conversion. Except in
limited circumstances, the conversion rights are subject to an aggregate limit
of 4.9% of the Company's outstanding Common Stock.
The purchasers also received warrants to purchase an aggregate 331,400
shares of Common Stock at an exercise price equal to $3.91 per share. The
warrants are exercisable at any time through October 24, 2000. The Company
has reserved authorized shares of Common Stock sufficient to cover conversion
of debentures (and payment of interest thereon in shares of Common Stock) and
the exercise of the warrants, and is required to effect and maintain for
three years a registration statement under the Securities Act of 1933, as
amended (the "Securities Act") covering resales by the holders of such shares
following conversion of debentures (and payment of interest thereon in shares
of Common Stock) and exercise of warrants.
The debenture transaction documents include additional representations,
warranties, covenants and default provisions not atypical for such
financings. The principal debenture transaction documents are attached to
this Registration Statement.
ITEM 3. DESCRIPTION OF PROPERTY
The Facility is located in an industrial park which is about three miles
from Interstate 70 and two miles from U.S. Highway 40, within the city limits of
Heath (Licking County), Ohio. The closest metropolitan area is Columbus, Ohio,
about 30 miles away. There is vacant land to the north which has been zoned for
additional industrial buildings. The site is approximately 10 acres.
The Facility was constructed in 1991 and includes 48,000 square feet of
space for manufacturing and an additional 1,643 square feet for a finished
office area. In connection with the third operating line, Fixcor put into
service 7,000 of these 48,000 square feet. There is also a concrete slab in
the rear with a portion of it covered by a canopy. The site is served by a
railroad spur to the south.
Fixcor holds the title to the real estate and real estate improvements
constituting the Facility. To secure its permanent financing, Fixcor granted
the lender a continuing security interest in all of Fixcor's property,
including the Facility.
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The book value of the Facility represented more than 10% of the total
assets of the Company as of the end of fiscal year 1996. Currently, the only
planned material renovation, improvement or further development of the
Facility is the installation of equipment related to Palletech operations.
The estimated cost of this improvement is approximately $4,000,000, and the
Company is examining several options to finance this cost, including but not
limited to a lease arrangement or using certain of the proceeds of the
convertible debentures. The Company believes that the value of the real
estate and improvements at the Facility are subject to general economic
conditions. In the opinion of management, the Facility is adequately covered
by insurance. The Company has no current plans to lease out any portion of
the Facility. With respect to each component of the Facility upon which
depreciation is taken, the following table sets forth the projected federal
tax basis, life claimed and method for purposes of depreciation.
BASIS LIFE CLAIMED METHOD
Building $2,000,000 39 years Straight-line
Equipment $12,500,000 7 years MACRS
The projected realty tax rate on the Facility is $51.90 per $1,000 of
valuation. The land is valued at $87,500. The gross annual real estate tax
is approximately $4,500 per year which is reduced by rebates to a net amount
of approximately $3,300.
The Company leases 1,200 sq. ft. of office space at 27040 Cedar Road,
Suite 218, Beachwood, Ohio 44122 at a lease rate of $900 per month. The
lease has a term of one year commencing January 1, 1997. Beachwood is a
suburb of Cleveland, Ohio.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the beneficial ownership of the Company's
principal stockholders, defined as parties that own five percent or more of the
common stock, as of November 10, 1997.
COMMON STOCK
Amount and
Name and Address Amount and Nature
of Beneficial Owner of Beneficial Owner Percent of Class
Mark Fixler 10,244,067* 30.0%
27040 Cedar Road
Suite 218
Beachwood, Ohio 44122
- -----------------------------
* Includes 4,000,000 shares which are subject to options granted by the
Company to Mr. Fixler, which are exercisable during the term of his current
employment agreement with the Company.
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The following table sets forth information with respect to the beneficial
ownership of the Common Stock by the Directors of the Company and the Directors
and officers of the Company as a group.
COMMON STOCK
Amount and
Name and Address Amount and Nature
of Beneficial Owner of Beneficial Owner Percent of Class
Mark Fixler 10,244,067* 30.0%
27040 Cedar Road
Suite 218
Beachwood, Ohio 44122
All Directors and
Officers as a Group 10,368,067* 30.4%
* Includes 4,000,000 shares which are subject to options granted by the
Company to Mr. Fixler, which are exercisable during the term of his current
employment agreement with the Company.
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
MARK FIXLER, 41, is the Company's Chief Executive Officer and President
and the Chairman of its Board of Directors. Prior to founding Fix-Corp
International, Inc., Mr. Fixler served as President of several retail
businesses chiefly engaged in the jewelry business. He was President of
Richard's Jewelers, Inc. from November, 1989 until October, 1994. From
October, 1994 to October, 1995 Mr. Fixler was President of Fix-Corp
International, Inc., an Ohio corporation and a predecessor of the Company.
He is currently Council President of his home community, Mayfield Village.
See Part I, Item 6, "EXECUTIVE COMPENSATION."
GARY M. DELAURENTIIS, 53, is the President of Fixcor and a Vice
President of the Company. Mr. DeLaurentiis joined the Company after it
acquired the Facility. Mr. DeLaurentiis has 21 years of management
experience and 10 years of experience in the plastic resin industry. Prior
to joining the Company, he operated his own consulting firm, GMD &
Associates, from June, 1995 to December, 1996. Prior to being a consultant,
from 1991 to June, 1995, Mr. DeLaurentiis developed another start-up company
in the plastic resin field, ANEW Corporation, which was subsequently sold.
Mr. DeLaurentiis also negotiated with the Chinese government to develop a
plastic recycling plant as part of a pilot project in a Free Trade Zone of
Southern China. This occurred when he was employed by RPX Resins, Inc.,
another firm which he founded and managed from 1987 to 1992.
BOARD OF DIRECTORS
The Board of Directors is composed of three individuals, Mr. Fixler, Mr.
DeLaurentiis and Lawrence Schmelzer. A brief biography of Mr. Schmelzer
follows. Each of the directors is serving a one-year term expiring at the
annual meeting of the Company's stockholders in 1998.
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LAWRENCE C. SCHMELZER, 61, is the Chairman of 1st Cleveland Securities,
Inc., a full service brokerage firm in Cleveland, Ohio, and has held that
position since 1991. He is a graduate of the Wharton School of Finance and
he has also studied at the New York Institute of Finance, the London School
of Economics and New York University. Mr. Schmelzer has been active in the
securities industry since 1959, with experience in venture capital funding,
portfolio management, mergers and acquisitions. Through family partnership,
he is also active in commercial real estate investment and management.
None of the directors currently receives compensation from the Company
for his service in such capacity.
DEPENDENCE ON MANAGEMENT
The Company's success is principally dependent on its current management
personnel for the operation of its business. In particular, Mr. Fixler, its
President and Chief Executive Officer and Chairman of its Board of Directors,
has played a significant role in the development and management of the
Company. There is no assurance that additional managerial assistance will not
be required. The Company has entered into an employment agreement with each
of Mr. Fixler and Mr. DeLaurentiis. If the Company should lose the services
of either Mr. Fixler or Mr. DeLaurentiis, the Company may be significantly
affected.
ITEM 6. EXECUTIVE COMPENSATION
Mr. Fixler is party to a three year employment contract with the Company
dated January 1, 1997. Under this agreement, the Company pays him a salary
of $200,000 during the first year, $250,000 during the second year and
$300,000 during the final year. In addition, Mr. Fixler receives a car
allowance and reasonable car phone expenses, plus other benefits customarily
given to executive officers. Under this agreement, Mr. Fixler is also
granted an option to purchase 4,000,000 shares of common stock of the Company
at a fixed price of $.50 per share and this option may be exercised at any
time during the employment period. Finally, in the event of a consolidation
or purchase of assets to another company or termination of employment for any
other reason, Mr. Fixler is entitled to a $2,000,000 severance benefit.
Prior to 1997, Mr. Fixler was not subject to a written employment agreement
with the Company. He was paid a salary of $119,000 in 1996 and $64,000 in
1995.
Mr. DeLaurentiis is party to a five year employment contract with the
Company dated January 1, 1997. Under this agreement, the Company pays him a
salary of $125,000 per year. He is also eligible for annual bonuses subject
to the approval of the Board of Directors of the Company. In addition, Mr.
DeLaurentiis receives a car allowance and other benefits customarily given to
executive officers. He is President of Fixcor and Vice President of the
Company. He was not employed by the Company or Fixcor during fiscal year
1996.
The Company currently has no stock appreciation rights, long-term
incentive, stock option plans or similar benefit plans for its executives or
other employees.
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ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During 1996, the Company loaned to Fix-Sports, Inc., a company partially
owned by Mr. Fixler $26,000. This note bears interest at 10% per year and is
collateralized by 52,000 shares of the Company's Common Stock. Otherwise, no
director, officer, promoter or control person is, or has been, in debt to the
Company. Mr. Fixler has guaranteed certain bridge and permanent financing of
the Company.
Upon consummation of the purchase of the Facility and prior to the
securing of permanent financing, the Company entered into a formal
Acquisition Agreement (the "Acquisition Agreement") under which the Company
conveyed the Facility to Fixcor in connection with its original subscription
to all of the shares of common stock of Fixcor. Mr. Fixler was also a party
to this Acquisition Agreement. Before the Company acquired the Facility
under the Quantum Agreement, he had an option to purchase the Facility. He
elected to forego that opportunity and to allow the Company to make the
acquisition. In addition, he personally guaranteed the bridge financing for
the purchase of the Facility, and the Company issued to him 6,521,740 shares
of Common Stock (valued at $6,000,000 or $.92 per share), all of which were
restricted shares. Mr. Fixler also has guaranteed up to $1,000,000 of the
July, 1997 financing from Gordon Brothers Capital Corp.
ITEM 8. DESCRIPTION OF SECURITIES
The authorized capital stock of the Company consists of 100,000,000
shares of Common Stock with a par value of $0.001 per share, and 2,000,000
shares of Preferred Stock with a par value of $0.001 per share.
COMMON STOCK
30,053,289 shares of Common Stock were issued and outstanding as of
November 10, 1997.
Holders of the Common Stock do not have preemptive rights to purchase
additional shares of Common Stock or other subscription rights. The Common
Stock carries no conversion rights and is not subject to redemption or to any
sinking fund provisions. All shares of Common Stock are entitled to share
equally in dividends from sources legally available therefor when, as and if
declared by the Board of Directors and, upon liquidation or dissolution of
the Company, whether voluntary or involuntary, to share equally in the assets
of the Company available for distribution to stockholders. The Board of
Directors is authorized to issue additional shares of Common Stock on such
terms and conditions and for such consideration as the Board may deem
appropriate without further stockholder action. Reference is made to the
Company's Amended and Restated Certificate of Incorporation and Bylaws which
are attached as exhibits to this Registration Statement, as well as to the
applicable statutes of the State of Delaware for a more complete description
concerning the rights and liabilities of stockholders.
Each holder of Common Stock is entitled to one vote per share, either in
person or by proxy, on all matters that may be voted on by the owners thereof
at meetings of the stockholders. Since the shares of Common Stock do not
have cumulative voting rights, the holders of more than 50% of the shares
voting for the election of directors can elect all the directors
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and, in such event, the holders of the remaining shares will not be able to
elect any person to the Board of Directors. At its last annual meeting, the
stockholders approved a provision whereby a quorum shall be deemed present
for the conduct of business at either an annual meeting of the stockholders
or at a special meeting of the stockholders with only one-third of the
outstanding shares represented, either in person or through proxy.
PREFERRED STOCK
No shares of preferred stock of the Company (the "Preferred Stock") were
issued and outstanding as of October 1, 1997. Shares of Preferred
Stock were issued during the second and third quarters of fiscal year 1997,
but all have been converted to Common Stock by the holders thereof.
Subject to the Company's Amended and Restated Certificate of
Incorporation and the Delaware General Corporation Law, the terms of one or
more classes or series of Preferred Stock, including dividend rights,
conversion prices, voting rights, redemption prices and similar matters will
be determined by the Board of Directors.
TRANSFER AGENT
The registrar and transfer agent for the Common Stock is CDR Transfer
Inc., located at 412 Main Street, Old Saybrook, Connecticut 06475.
PART II
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND
OTHER SHAREHOLDER MATTERS
The Company's Common Stock is traded over-the-counter ("OTC") on the
Electronic Bulletin Board (the "Bulletin Board") maintained by the National
Association of Securities Dealers ("NASD") under the Symbol "FIXC."
As of November 10, 1997, 30,058,289 shares of Common Stock were issued
and outstanding, and there were approximately 300 record holders of Common
Stock. As of that date, no shares of Preferred Stock were issued and
outstanding. (See Part I, Item 8, "Description of Securities.") Mr. Fixler
holds certain options to purchase shares of Common Stock under his employment
agreement with the Company. (See Part I, Item 6, "EXECUTIVE COMPENSATION.")
The following table sets forth the range of high and low sales prices
for the Common Stock on the OTC Bulletin Board for each quarter for the
fiscal year 1996 and the first three quarters of 1997.
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Quarter Ending High Low
9/30/97 4-1/4 1-3/8
6/30/97 3/4 1/2
3/31/97 7/8 1/2
12/31/96 15/16 7/16
9/30/96 13/16 5/8
6/30/96 1-9/16 11/16
3/31/96 1-1/2 13/16
The source of this information is America Online quotation services.
These prices reflect inter-dealer prices, without retail markup, mark-down or
commission and may not represent actual transactions.
RESTRICTED SECURITIES
A significant portion of the Company's Common Stock is held by insiders
and persons who acquired shares in private offerings. These are "restricted
securities," as that term is defined in Rule 144 promulgated under the
Securities Act. In general, Rule 144 provides that, during any three-month
period, each person holding restricted securities can sell an amount of such
securities equal to the greater of (a) 1% of the number of outstanding
shares, or (b) the average weekly reported trading volume of those securities
during the preceding four calendar week period, provided that certain
conditions are met. One of these conditions is that the stock must be
purchased for investment purposes and held for a minimum period of one year,
and in some instances even longer. Sales of these restricted securities
under Rule 144 or otherwise by current stockholders of the Company could have
a depressive effect on any trading market for Common Stock. No predictions
can be made of the effect, if any, that market sales of shares or the
availability of shares for sale will have on the market price prevailing from
time to time. Nevertheless, sales of significant amounts of the Common Stock
of the Company in the public market may adversely affect market prices, and
may impair the Company's ability to raise capital at that time through
additional sale of its equity securities.
NO DIVIDENDS
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The Company has not declared or paid any dividends on its Common Stock
and there is no assurance that the Company will pay dividends in the future.
The Company currently intends to retain future earnings to fund the
development and growth of its businesses, to repay indebtedness and for
general corporate purposes, and, therefore, does not anticipate paying any
cash dividends in the foreseeable future. Any future determination to
declare and pay dividends will be made by the Board of Directors of the
Company in light of the Company's earnings, financial position, capital
requirements, credit agreements and such other factors as the Board of
Directors deems relevant. Any decision to pay dividends is subject to
Delaware law, under which the Company is permitted to pay cash dividends to
the Company only (i) out of the Company's capital surplus (the excess of net
assets over stated capital) or (ii) out of the net income of the Company for
the fiscal year in which the dividend is declared and/or the preceding fiscal
year.
SECONDARY TRADING RESTRICTIONS
The Common Stock is governed by a Securities and Exchange Commission
rule for "penny stocks" (defined as stocks that cost $5.00 or less per share)
that imposes additional sales practice burdens and requirements upon
broker-dealers which sell such securities to persons other than established
customers and accredited investors (generally institutions with assets in
excess of $5,000,000 or individuals with a net worth in excess of $1,000,000
or annual income exceeding $200,000 or $300,000 jointly with their spouse).
For transactions covered by this penny stock rule, broker-dealers must make a
special suitability determination for the unaccredited purchaser and receive
the purchaser's written agreement to the transaction prior to the sale.
Consequently, the penny stock rule may affect the ability of broker-dealers
to sell the Company's securities and also may affect the ability of persons
now owning or subsequently acquiring the Company's securities to resell such
securities in any trading market that may develop. Although the Company's
goal is to have its securities included in the National Association of
Securities Dealers Automated Quotation System ("NASDAQ"), which would exempt
such securities from the above rule, there is no assurance that the Company
will meet the NASDAQ listing requirements.
PRICE VOLATILITY OF THE COMPANY'S SHARES
The Common Stock is traded on the NASD OTC Electronic Bulletin Board.
Because of the limited market for Bulletin Board stocks, even mild
expressions of interest may have a profound impact upon the stock's price on
any given day. Accordingly, Bulletin Board stock customarily experience above
average price fluctuations and volatility. Accordingly, the Company's common
stock should be expected to experience substantial price changes in short
periods of time, owing to the vagaries of the Bulletin Board exchange for
stocks. Even if the Company is performing according to its plan and there is
no legitimate financial component for this volatility, it must still be
expected that substantial percentage price swings will occur in these
securities for the foreseeable future, and percentage changes in stock
indices (such as the Dow Jones Industrial Average) could be magnified,
particularly in downward movements of the markets.
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ITEM 2. LEGAL PROCEEDINGS
The Company is from time to time made a party to legal proceedings
arising in the ordinary course of business. The Company does not believe
that the results of such legal proceedings, even if unfavorable to the
Company, will have a materially adverse impact on its financial condition or
the results of its operations.
The Company is a third party defendant in a lawsuit pending in the
Common Pleas Court of Cuyahoga County, Ohio, GLOBAL INVESTMENTS & ADVISORY
GROUP, INC. V. 3DM, LIMITED LIABILITY CO., ET AL. V. FIX-CORP INTERNATIONAL,
ET AL. This case arises out of the relationship between the Company and 3DM,
Limited Liability Co. ("3DM"), which the Company believes has been terminated
and settled, and the relationship between 3DM and Quantum. The latter
relationship was the subject of prior litigation in which the Company was
also joined as a third party defendant. The Company subsequently was
dismissed from this earlier litigation. 3DM did not bring any claim against
the Company in the prior litigation, and a default judgment was entered
against 3DM on the matter of its breach of its agreement with Quantum. The
Company does not believe that the pending litigation involving 3DM will have
a material adverse affect on the Company or its operations.
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
The Company did not engage an independent accountant until during fiscal
year 1997, when it engaged Harmon & Company, CPA, Inc., Columbus, Ohio,
generally, and in particular for purposes of preparing the Financial
Statements included with this Registration Statement. The Company has had no
material disagreements with its accountants.
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES
In October, 1995, pursuant to the reorganization involving the Company
and following a reverse stock split and other transactions, the outstanding
shares of Common Stock of the Company were held as follows: 3,600,000
restricted shares held by Mr. Fixler, 204,020 restricted shares held by an
affiliate and consultant of the Company's predecessor, and 195,980 shares
held by the public shareholders of the Company's predecessor.
In April, 1997, pursuant to the Acquisition Agreement, the Company
issued to Mr. Fixler 6,521,740 shares of Common Stock (at a value of $.92 per
share) in a transaction exempt from registration under Section 4(2) of the
Securities Act. During the period November, 1995 through August, 1997, the
Company issued, in other private placement transactions exempt from
registration under Section 4(2) of the Securities Act, additional shares of
Common Stock at prices ranging from $.35 per share to $1.00 per share.
During the period November, 1995 through March, 1996, pursuant to Rule
504 of Regulation D, the Company offered and sold 2,000,000 shares of Common
Stock at $.50 per
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share. During the period November, 1996 through March, 1997, the Company,
pursuant to Rule 504 of Regulation D, offered and sold approximately
4,000,000 additional shares of Common Stock for an aggregate consideration of
$1,000,000.
In December, 1996 in connection with certain bridge financing, the
Company granted to Generation Capital Associates, a New York limited
partnership, warrants for the purchase of an aggregate of 100,000 shares of
Common Stock at an exercise price of $.65 per share.
In December, 1996 and July, 1997 in connection with debt financings from
Gordon Brothers Capital Corporation and pursuant to Section 4(2) of the
Securities Act, the Company granted to the lender warrants for the purchase
of an aggregate of 1,000,000 shares of Common Stock at an exercise price of
$1.25 per share, which the lender exercised in November, 1997. Certain
"piggyback" and other registration rights with respect to the warrant shares
were also granted to Gordon Brothers Capital Corporation.
From June, 1997 to October 1, 1997, pursuant to an offering under Rule
506 of Regulation D, the Company sold 1,925,000 shares of Preferred Stock at
$1.00 per share. Each share of Preferred Stock was convertible into one
share of Common Stock, and as of October 1, 1997 all of the Preferred Stock
had been converted into 1,925,000 shares of Common Stock. In addition,
holders of Preferred Stock were granted rights to acquire additional shares
of Common Stock at $1.00 per share, and 1,100,000 shares of Common Stock were
issued pursuant to exercise of such rights.
In October, 1997, pursuant to Rule 506 of Regulation D, the Company
issued to two institutional investors $5,000,000 aggregate principal amount
of 6% convertible debentures. The principal amount of the debentures,
together with any accrued and unpaid interest thereon, are convertible at any
time into shares of Common Stock at a conversion price equal to the lesser of
(i) $3.91 (110% of the average closing bid price for the 5 trading days
preceding closing), or (ii) 85% of the average of the 5 lowest closing bid
prices during the 10 trading days preceding conversion. The purchasers also
received warrants to purchase an aggregate 331,400 shares of Common Stock at
an exercise price equal to $3.91 per share. The warrants are exercisable at
any time through October 24, 2000.
The Company is subject to an administrative "cease and desist" order
(the "Order") issued in August, 1997 by the Ohio Division of Securities, and
relating to certain matters deemed to constitute violations of Ohio
securities laws, including unregistered sales of securities and false
representations in connection with a registration application. The Company
believes that such violations resulted principally from miscommunication
between the Company and its legal counsel at the time as to certain
information communicated to the Ohio Division of Securities in connection
with an application for registration by description filed in December, 1995
with respect to sales of the Company's common stock in Ohio. The Company
believes that it is in compliance with the Order.
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS
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On May 16, 1997, at the Company's Annual Meeting, the stockholders
adopted Amended and Restated Certificate of Incorporation. Article X of
those Articles provides, in accordance with Section 145 of the General
Corporation Law of Delaware, that a director shall not be personally liable
to the Company or its stockholders for breach of duty or care or other duty
as a director, except for liability for acts not in good faith or which
involve intentional misconduct, or any transaction in which the director
derived an improper personal benefit or for any type of liability not
contemplated by Section 145 of the General Corporation Law of Delaware. As a
result of the Company's Certificate of Incorporation and Delaware law,
stockholders may have more limited rights to recover against directors for
breach of fiduciary duty than as compared to the standard of care imposed
upon a director in the state where the investor resides. In addition, to the
fullest extent permitted by Delaware law, the Company shall indemnify its
corporate officers. Section 145 of the General Corporation Law of Delaware
reads as follows:
Section 145 Indemnification of officers, directors, employees and
agents; insurance.
(a) A corporation shall have power to indemnify any person who was
or is a party or is threatened to be made a party to any threatened,
pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (other than an action by or in
the right of the corporation) by reason of the fact that the person is
or was a director, officer, employee or agent of the corporation, or is
or was serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture,
trust or other enterprise, against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably
incurred by the person in connection with such action, suit or
proceeding if the person acted in good faith and in a manner the person
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had
no reasonable cause to believe the person's conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order,
settlement, conviction, or upon a plea of nolo contendere or its
equivalent, shall not, of itself, create a presumption that the person
did not act in good faith and in a manner which the person reasonably
believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had
reasonable cause to believe that the person's conduct was unlawful.
(b) A corporation shall have power to indemnify any person who was
or is a party or is threatened to be made a party to any threatened,
pending or completed action or suit by or in the right of the
corporation to procure a judgment in its favor by reason of the fact
that the person is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise against expenses
(including attorneys' fees) actually and reasonably incurred by the
person in connection with the defense or settlement of such action or
suit if the person acted in good faith and in a manner the person
reasonably believed to be in or not opposed to the best interests of the
corporation and except that no indemnification shall be made in respect
of any claim, issue or matter as to which such person shall have been
adjudged to be liable to
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the corporation unless and only to the extent that the Court of Chancery
or the court in which such action or suit was brought shall determine
upon application that, despite the adjudication of liability but in view
of all the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expenses which the Court of
Chancery or such other court shall deem proper.
(c) To the extent that a present or future director or officer of
a corporation has been successful on the merits or otherwise in defense
of any action, suit or proceeding referred to in subsections (a) and (b)
of this section, or in defense of any claim, issue or matter therein,
such person shall be indemnified against expenses (including attorneys'
fees) actually and reasonably incurred by such person in connection
therewith.
(d) Any indemnification under subsections (a) and (b) of this
section (unless ordered by a court) shall be made by the corporation
only as authorized in the specific case upon a determination that
indemnification of the present or future director or officer is proper
in the circumstances because the person has met the applicable standard
of conduct set forth in subsections (a) and (b) of this section. Such
determination shall be made with respect to a person who is a director
or officer at the time of such determination (1) by a majority vote of
the directors who are not parties to such action, suit or proceeding,
even though less than a quorum, or (2) by committee of such directors
designated by majority vote of such directors, even though less than a
quorum, or (3) if there are no such directors, or if such directors so
direct, by independent legal counsel in a written opinion, or (4) by the
stockholders.
(e) Expenses (including attorneys' fees) incurred by an officer or
director in defending any civil, criminal, administrative or
investigative action, suit or proceeding may be paid by the corporation
in advance of the final disposition of such action, suit or proceeding
upon receipt of an undertaking by or on behalf of such director or
officer to repay such amount if it shall ultimately be determined that
such person is not entitled to be indemnified by the corporation as
authorized in this section. Such expenses (including attorneys' fees)
incurred by former directors and officers or other employees and agents
may be so paid upon such terms and conditions, if any, as the
corporation deems appropriate.
(f) The indemnification and advancement of expenses provided by,
or granted pursuant to, the other subsections of this section shall not
be deemed exclusive of any other rights to which those seeking
indemnification or advancement of expenses may be entitled under any
bylaw, agreement, vote of stockholders or disinterested directors or
otherwise, both as to action in such person's official capacity and as
to action in another capacity while holding such office.
(g) A corporation shall have power to purchase and maintain
insurance on behalf of any person who is or was a director, officer,
employee or agent of the corporation, or is or was serving at the
request of the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other
enterprise against any
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liability asserted against such person and incurred by such person in
any such capacity, or arising out of such person's status as such,
whether or not the corporation would have the power to indemnify such
person against such liability under this section.
(h) For purposes of this section, references to "the corporation"
shall include, in addition to the resulting corporation, any constituent
corporation (including any constituent of a constituent) absorbed in a
consolidation or merger which, if its separate existence had continued,
would have had power and authority to indemnify its directors, officers,
and employees or agents, so that any person who is or was a director,
officer, employee or agent of such constituent corporation, or is or was
serving at the request of such constituent corporation as a director,
officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, shall stand in the same position
under this section with respect to the resulting or surviving
corporation as such person would have with respect to such constituent
corporation if its separate existence had continued.
(i) For purposes of this section, references to "other
enterprises" shall include employee benefit plans; references to "fines"
shall include any excise taxes assessed on a person with respect to any
employee benefit plan; and references to "serving at the request of the
corporation" shall include any service as a director, officer, employee
or agent of the corporation which imposes duties on, or involves
services by, such director, officer, employee or agent with respect to
an employee benefit plan, its participants or beneficiaries; and a
person who acted in good faith and in a manner such person reasonably
believed to be in the interest of the participants and beneficiaries of
an employee benefit plan shall be deemed to have acted in a manner "not
opposed to the best interests of the corporation" as referred to in this
section.
(j) The indemnification and advancement of expenses provided by,
or granted pursuant to, this section shall, unless otherwise provided
when authorized or ratified, continue as to a person who has ceased to
be a director, officer, employee or agent and shall inure to the benefit
of the heirs, executors and administrators of such a person.
(k) The Court of Chancery is hereby vested with exclusive
jurisdiction to hear and determine all actions for advancement of
expenses or indemnification brought under this section or under any
bylaw, agreement, vote of stockholders or disinterested directors, or
otherwise. The Court of Chancery may summarily determine a corporation's
obligation to advance expenses (including attorneys' fees).
24
<PAGE>
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934,
the registrant has duly caused this registration statement to be signed on
its behalf by the undersigned, thereunto duly authorized.
FIX-CORP INTERNATIONAL, INC.
By /s/ Mark Fixler
-------------------------------------------
Mark Fixler, Chief Executive Officer and President
Date: November 13, 1997
---
25
<PAGE>
PART F/S
The Company's Financial Statements and Independent Auditor's Report for
the fiscal years ending December 31, 1996 and December 31, 1995, and
unaudited consolidated balance sheet and consolidated income statement and
statement of retained earnings for the nine month period ending September 30,
1997, are included.
____________________________
FIX-CORP INTERNATIONAL, INC.
(FORMERLY LIFECHOICE, INC.)
FINANCIAL STATEMENTS
&
INDEPENDENT AUDITOR'S REPORT
DECEMBER 31, 1996 & 1995
____________________________
_____________________________
HARMON & COMPANY, CPA, INC.
COLUMBUS, OHIO
_____________________________
<PAGE>
____________________________
FIX-CORP INTERNATIONAL, INC.
(FORMERLY LIFECHOICE, INC.)
____________________________
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Independent Auditors' Report . . . . . . . . . . . . . . . . . . . . . 2
Balance Sheet. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Statements of Operations . . . . . . . . . . . . . . . . . . . . . . . 4
Statement of Changes in Stockholders' Equity . . . . . . . . . . . . . 5
Statements of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . 6
Notes to the Financial Statements. . . . . . . . . . . . . . . . . . . 7
</TABLE>
-1-
<PAGE>
INDEPENDENT AUDITOR'S REPORT
TO THE BOARD OF DIRECTORS OF
FIX-CORP INTERNATIONAL, INC.
We have audited the accompanying Balance Sheets of Fix-Corp International,
Inc. as of December 31, 1996 and 1995 and the related statements of operations,
cash flow, and stockholders' equity for the years then ended. These financial
statements are the responsibility of the management of Fix-Corp International,
Inc. Our responsibility is to express an opinion on these financial statements
based on our audit.
We have conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the statements are free of material
misstatements. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the 1996 and 1995 financial statements referred to above
present fairly, in all material respects, the financial position of Fix-Corp
International, Inc. as of December 31, 1996 and 1995 and the results of its
operations and its cash flows for the years then ended in conformity with
generally accepted accounting principles.
_____________________________
HARMON & COMPANY, CPA, INC.
APRIL 16, 1997
<PAGE>
FIX-CORP INTERNATIONAL, INC.
(FORMERLY LIFECHOICE, INC.)
BALANCE SHEETS
DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
12/31/96 12/31/95
------------ ------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash $ 224,539 $ 33,860
Investment in Marketable Securities 130,692 -0-
Trade Accounts Receivable, net 88,763 59,436
Purchase Order Financing Contracts 221,672 72,800
Inventory 96,002 -0-
------------ ------------
Total Current Assets 761,668 166,096
------------ ------------
PROPERTY, PLANT & EQUIPMENT
(at cost less accumulated depreciation and amortization)
Land & Land Held for Development 750,000 -0-
Buildings 2,000,000 -0-
Plant Equipment 6,642,000 -0-
Office Furniture & Fixtures 122,500 22,500
------------ ------------
9,514,500 22,500
Less Accumulated Depreciation and Amortization (6,428) (3,214)
------------ ------------
Total Property, Plant & Equipment 9,508,072 19,286
------------ ------------
DEFERRED INCOME TAXES 412,150 359,300
------------ ------------
OTHER ASSETS & DEFERRED CHARGES 212,226 75,826
------------ ------------
Total Assets $10,894,116 $ 620,508
------------ ------------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Secured Equipment Loan Payable $ 2,500,000 $ -0-
Bridge Financing Notes Payable 450,000 -0-
Notes Payable 598,000 500,000
Accounts Payable 68,008 113,183
Accrued Interest Payable 44,317 40,600
------------ ------------
Total Current Liabilities 3,660,325 653,783
------------ ------------
LONG-TERM DEBT
Notes Payable to Officers -0- 160,000
------------ ------------
STOCKHOLDERS' EQUITY
Preferred stock, $.001 par value, 2,000,000 shares
authorized, -0- shares issued or outstanding - -
Common Stock, $.0001 par value, 100,000,000 shares
authorized, 7,106,056 and 20,974,024 issued and
outstanding in 1995 and 1996 2,097 711
Additional Paid in Capital 8,246,406 641,230
Unrealized Holding Loss on Investments (68,673) -0-
Retained Earnings (Deficit) (946,039) (835,216)
------------ ------------
Total Stockholders' Equity 7,233,791 (193,275)
------------ ------------
Total Liabilities and Stockholders' Equity $10,894,116 $ 620,508
------------ ------------
</TABLE>
The accompanying notes are an integral part
of these financial statements.
-3-
<PAGE>
FIX-CORP INTERNATIONAL, INC.
(FORMERLY LIFECHOICE, INC.)
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
12/31/96 12/31/95
------------ ------------
<S> <C> <C>
REVENUE
Fees on Purchase Order Contract Financing $ 408,337 $ 530,629
Commission & Shared Finance Fees 102,442 133,123
Merchandise Sales 232,824 91,812
------------ ------------
Total Revenue 743,603 755,564
------------ ------------
COST OF SALES AND CONTRACT FINANCING OPERATIONS
Interest Expense, Contract Financing 250,822 398,087
Bad Debts -0- 962,471
Consulting Fees & Shared Commissions 42,939 135,180
Cost of Merchandise Sales, Including Freight 126,153 47,340
------------ ------------
Cost of Sales and Contract Financing Operations 419,914 1,543,078
------------ ------------
Gross Profit 323,689 (787,514)
------------ ------------
OPERATING EXPENSES
Salaries, Wages and Related Costs 277,317 114,447
Depreciation & Amortization 19,514 19,514
Legal & Professional, Including Consulting Fees 98,513 91,454
Other General & Administrative 96,038 71,564
Deferred Preoperating Plant Startup Costs (36,750) -0-
------------ ------------
Total Expenses 454,632 296,979
------------ ------------
Operating Income (Loss) (130,943) (1,084,493)
------------ ------------
OTHER INCOME (EXPENSE)
Interest Expense and Financing Costs, Other 32,730 30,149
------------ ------------
Net (Loss) Before Income Taxes (163,673) (1,114,642)
LESS PROVISION FOR DEFERRED INCOME TAXES
Federal (43,000) (292,500)
------------ ------------
State (9,850) (66,800)
------------ ------------
Total Deferred Income Taxes (52,850) (359,300)
------------ ------------
Net Loss $ (110,823) $ (755,342)
------------ ------------
Net Loss Per Common Share (0.008) (0.124)
------------ ------------
Weighted Average Common Shares Outstanding 14,040,040 6,084,546
------------ ------------
</TABLE>
The accompanying notes are an integral part
of these financial statements.
-4-
<PAGE>
FIX-CORP INTERNATIONAL, INC.
(FORMERLY LIFECHOICE, INC.)
STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL RETAINED TOTAL
------------ PAID-IN EARNINGS STOCKHOLDERS'
SHARES AMOUNT CAPITAL (DEFICIT) EQUITY
----------- -------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Balances at January 1, 1995, as originally reported 400,000 $ 40 $1,960 $(100) $ 1,900
Conversion of Notes Payable 250,000 25 124,975 125,000
Effect of Merger With Fix-Corp International, Inc.
(a Delaware corporation) 4,413,036 441 -0- (79,774) (79,333)
----------- -------- ---------- ---------- -------------
Balances at January 1, 1995, as restated 5,063,036 506 126,935 (79,874) 47,567
----------- -------- ---------- ---------- -------------
Private Placement of Common Stock, net of
issuance cost 1,249,000 125 461,875 462,000
Issuance of Common Stock for payment of
Professional Fees 599,020 60 149,940 150,000
Loss on Stock Subscriptions 195,000 20 (97,520) (97,500)
Net loss for the period (755,342) (755,342)
----------- -------- ---------- ---------- -------------
Balances at December 31, 1995 7,106,056 711 641,230 (835,216) (193,275)
----------- -------- ---------- ---------- -------------
Acquisition of Ohio Resources Recovery Plant 8,000,000 800 5,999,200 6,000,000
Private Placement of Common Stock, net of
issuance cost 4,267,968 426 1,605,976 1,606,402
Issuance of shares to secure bridge financing,
held in escrow subject to loan agreements 1,600,000 160 -0- 160
Net loss for the period (110,823) (110,823)
----------- -------- ---------- ---------- -------------
Balances at December 31, 1996 20,974,024 $2,097 $8,246,406 $(946,039) $7,302,464
----------- -------- ---------- ----------
Unrealized Holding Loss on Investments (68,673)
-------------
Total Stockholders' Equity $7,233,791
-------------
-------------
</TABLE>
The accompanying notes are an integral part
of these financial statements.
-5-
<PAGE>
FIX-CORP INTERNATIONAL, INC.
(FORMERLY LIFECHOICE, INC.)
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
12/31/96 12/31/95
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income (loss) $ (110,823) $ (755,342)
ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES
Depreciation & Amortization Expense 19,514 19,514
Investment in Marketable Securities (199,365) -0-
(Increase) Decrease in Trade Accounts Receivable (29,327) 3,064
(Increase) Decrease in Purchase Order Financing Contracts (148,872) 456,636
(Increase) in Inventory (96,002) -0-
(Increase) in Deferred Tax Asset (52,850) (359,300)
Increase (Decrease) in Accounts Payable (45,176) 31,659
Increase in Accrued Interest Payable 3,717 40,600
------------ ------------
Net Cash Provided (Used) by Operating Activities (659,184) (563,169)
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of Land & Land Held for Development (500,000) -0-
Purchase of Buildings (1,000,000) -0-
Purchase of Plant Equipment (1,992,000) -0-
Purchase of Office Furniture & Fixtures (100,000) (22,500)
Additions to Other Assets (152,700) (95,203)
------------ ------------
Net Cash Provided (Used) by Investing Activities (3,744,700) (117,703)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from Sale of Stock 1,606,402 612,000
Proceeds from Secured Equipment Loan Payable 2,500,000 -0-
Proceeds from Bridge Financing Notes Payable 450,000 -0-
Proceeds from Notes Payable, net 198,161 36,777
Payments on long-term debt (160,000) (500)
------------ ------------
Net Cash Provided (Used) by Financing Activities 4,594,563 648,277
------------ ------------
Net Income Increase (Decrease) in Cash $190,679 $ (32,595)
------------ ------------
Cash at Beginning of Period $ 33,860 $ 66,454
------------ ------------
Cash at End of Period $ 224,539 $ 33,860
------------ ------------
SUPPLEMENTAL DISCLOSURES
INTEREST PAID, EXCLUDING PURCHASE ORDER CONTRACT FINANCING $ 32,730 $30,149
------------ ------------
ISSUANCE OF COMMON STOCK FOR:
Professional Fees & Services -0- 150,000
------------
Conversion of Notes Payable -0- 125,000
------------
ACQUISITION OF OHIO RESOURCES RECOVERY PLANT, HEATH, OHIO FOR
COMMON STOCK AND ALLOCATED AS FOLLOWS:
Land & Land Held for Development 250,000 -0-
Buildings 1,000,000 -0-
Plant Equipment 4,650,000 -0-
Office Furniture & Fixtures 100,000 -0-
------------ ------------
6,000,000 -0-
------------ ------------
</TABLE>
The accompanying notes are an integral part
of these financial statements.
-6-
<PAGE>
FIX-CORP INTERNATIONAL, INC.
(FORMERLY LIFECHOICE, INC.)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996 & 1995
NOTE 1 - ORGANIZATION AND DESCRIPTION OF THE BUSINESS
Lifechoice, Inc. (Lifechoice) was incorporated on August 11, 1995 under
the laws of the State of Utah. On or about October 23, 1995, Fix-Corp
International, Inc. (Fix-Corp), a newly-formed Delaware corporation was
acquired by Lifechoice preparatory to a reverse merger in which Fix-Corp
assumed control over Lifechoice, a publicly traded company listed on the NASD
Bulletin Board. Lifechoice possessed no assets and no liabilities and was, in
effect, a shell corporation. The company assumed the name of Fix-Corp
International, Inc. and was redomiciled to Delaware.
Effective with the company's $9,400,000 acquisition of the Heath Resource
Recovery plant and manufacturing facility, more fully described in Note 4,
the Company's primary business will be plastic resin recycling. The Company's
business, therefor, consists of three (3) distinct segments: the recycling of
post consumer polyethylene and other plastic resins, merchandise or product
sales and purchase order contract financing. Prior to December 1996, the
Company was in the business of extending financing to small businesses,
collateralized by a Purchase Order issued by a reputable business. In effect,
the Company funds a portion of this Purchase Order in advance, then stands in
the place of its client, the Vendor, and becomes the owner of this Purchase
Order and its requisite proceeds.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed in
the preparation of these financial statements. The financial statements and
notes are the representation of the Company's Management, who is responsible
for their integrity and objectivity. The policies conform to generally
accepted accounting principles and have been consistently applied.
(A.) Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
(B.) Effect of New Accounting Pronouncements
Effective in 1996, Fix-Corp adopted Statement of Financial Accounting
Standards No. 115, "Accounting for Certain Investments in Debt and Equity
Securities." Under Statement No. 115, debt and marketable equity securities
are required to be classified in one of three categories: trading,
available-for-sale, or held to maturity. Fix-Corp's equity securities qualify
under the provisions of Statement No. 115 as available-for-sale. Such
securities are recorded at fair value, unrealized holding gains and losses,
net of the related tax effect, are not reflected in earnings but are reported
as a separate component of stockholders' equity until realized. A decline in
the market value of an available-for-sale security below cost that is deemed
other than temporary is charged to earnings and results in the establishment
of a new cost basis for the security.
Statement of Financial Accounting Standards No. 121 "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of"
requires that long-lived assets held and used by a company be reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. SFAS No. 121 also
establishes the procedures for review of recoverability, and measurement of
impairment, if necessary, of long-lived assets. Fix-Corp, with the
acquisition of the Heath Resource Recovery plant, adopted SFAS No.121 and
determined that no impairment provision of the carrying cost of the plant was
necessary.
(C.) Allowance for Doubtful Accounts
It is the opinion of Management that all accounts receivable are
collectible, therefore an allowance for doubtful accounts is not necessary. The
Company incurred a bad debt of $962,471 charged against current operations in
1995.
-7-
<PAGE>
FIX-CORP INTERNATIONAL, INC.
(FORMERLY LIFECHOICE, INC.)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
(D.) Inventory
Inventory is stated at the lower of cost or market, using the First-in,
First-out, (FIFO), method of accounting, and consists of plastic recycled
products.
(E.) Property and Equipment
Property and equipment are stated at cost. Costs of maintenance and repairs
are charged to expense as incurred. Major improvements and renewals, in
general, are capitalized. Acquisitions to fixed assets are depreciated on the
straight-line method. The estimated useful lives used in computing depreciation
are as follows:
DESCRIPTION LIFE IN YEARS
- -------------------------------------------------------------------------------
Buildings 10-25 Years
Plant Machinery and Equipment 5-10 Years
Office Furniture and Fixtures 5-7 Years
Depreciation charged against operations for the years ended December 31,
1995 and 1996 were $3,214 and $3,214, respectively.
Statement of Financial Accounting Standards No. 121 "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of"
requires that long-lived assets held and used by a company be reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. SFAS No. 121 also
establishes the procedures for review of recoverability, and measurement of
impairment, if necessary, of long-lived assets. Fix-Corp, with the
acquisition of the Heath Resource Recovery plant, adopted SFAS No.121 and
determined that no impairment provision of the carrying cost of the plant was
necessary.
(F.) Organizational Costs
Organizational costs are being amortized over a period of 60 months and is
presented net of accumulated amortization of $16,300 and $32,600 in 1995 and
1996, respectively. Amortization expense charged against operations for the
years ended December 31, 1995 and 1996 $16,300 and $16,300, respectively.
(G.) Investment in Life Insurance
In December 1995, the Company obtained certain life insurance policies on
the life of an unrelated third party as partial settlement for certain factored
purchase order financing contracts. At December 31, 1995 and 1996, the
investments in the policies was $9,676 and $9,676 respectively, with no policy
loans thereon. The ongoing policy premiums are paid out of the cash surrender
value of the policies. life insurance expense of $-0- and $-0- in 1995 and 1996
respectively, was included in other expense.
(H.) Deferred Taxes and Income Taxes
During 1995 and effective with the reverse merger, more fully described in
Notes 1 and 4, the Company adopted Financial Accounting Standards No. 109,
"Accounting for Income Taxes" and all years presented reflect the adoption of
this method. The Company has restated 1995 financial statements for comparative
purposes. The effect of this restatement is the recording of a deferred tax
asset of $359,300, net of a valuation allowance of $120,000, which arises solely
from the estimated future benefit of the net operating loss carry-forward of
approximately $1,114,000. The effect of this restatement was to reduce the net
loss for the year ended December 31, 1995 by $359,300 and to reduce the net
loss per common share by $.059 per share.
In prior years, the Company had elected to be taxed under Subchapter S of
the Internal Revenue Code. Effective with reverse merger and reincorporation
this election was discontinued and all adjustments, which were minor in nature
were included as a capital adjustment "Effect of Merger with Fix-Corp
International, Inc." in the Statement of Stockholders' Equity.
-8-
<PAGE>
FIX-CORP INTERNATIONAL, INC.
(FORMERLY LIFECHOICE, INC.)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
(I.) Revenue Recognition
Revenue from merchandise sales is generally recognized upon shipment,
provided that no significant vendor obligations remain and collection of the
resulting receivable is deemed probable. Fees on purchase order contract
financing, commissions and shared finance fees are recognized upon finalization
and collection of the related financing project.
(J.) Loss per Common Share
As of December 31, 1995 and 1996, loss per common share and common share
equivalent were computed by dividing the net loss by the weighted average number
of shares of common stock and common stock equivalents outstanding during the
year.
NOTE 3 - INVESTMENT IN MARKETABLE SECURITIES
Effective in 1996, the Fix-Corp adopted Statement of Financial Accounting
Standards No. 115, "Accounting for Certain Investments in Debt and Equity
Securities." Under Statement No. 115, debt and marketable equity securities
are required to be classified in one of three categories: trading,
available-for-sale, or held to maturity. Fix-Corp's equity securities qualify
under the provisions of Statement No. 115 as available-for-sale. Such
securities are recorded at fair value, unrealized holding gains and losses,
net of the related tax effect, are not reflected in earnings but are reported
as a separate component of stockholders' equity until realized. A decline in
the market value of an available-for-sale security below cost that is deemed
other than temporary is charged to earnings and results in the establishment
of a new cost basis for the security. During 1996 an $68,673 unrealized
holding loss on investments was charged directly to capital.
NOTE 4 - PLANT PURCHASE AND SALE AGREEMENT
On December 16, 1996 the Company acquired, subject to a certain Purchase
and Sale Agreement, a plant in Central Ohio, hereinafter referred to as the
"Resource Recovery" plant. The assets consist of a post-consumer plastic
recycling operation involving two parallel recycling lines under a single roofed
structure on its own plot of ground with a permanent easement for ingress and
egress to an adjoining railroad spur and truck scale and various other support
equipment permitting this business to function as an independent entity. The
purchase price, and allocation thereof, is summarized as follows:
AMOUNT
- -------------------------------------------------------------------------------
Land & Land Held for Development $750,000
Buildings 2,000,000
Plant Equipment 6,550,000
Office Furniture & Fixtures 100,000
---------
Total Purchase Price $9,400,000
---------
---------
As more fully described in Note 7, included in the acquisition of the
Resource Recovery plant was a Track Lease Agreement for 200' of railroad siding
(including land) for the sole purpose of the storage of railroad cars owned,
leased or consigned to the Company. The term of the lease is for a period of ten
(10) years beginning August 14, 1996 and expiring August 14, 2006, with an
option for an additional ten (10) years expiring August 14, 2016. Annual
rentals, paid in advance, are $1,000 per year. The price was paid as follows
AMOUNT
- -------------------------------------------------------------------------------
CASH $900,000
SECURED EQUIPMENT LOAN 2,500,000
COMMON STOCK (8,000,000 RESTRICTED SHARES) 6,000,000
---------
TOTAL PAYMENTS $9,400,000
---------
---------
-9-
<PAGE>
FIX-CORP INTERNATIONAL, INC.
(FORMERLY LIFECHOICE, INC.)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
At closing, the Company received a general warranty deed (fee simple
title) for the ground and its improvements (i.e. the physical plant), and a
bill of sale for the remainder of the assets. The seller extended no express
or implied warranties for the equipment transferred and disclaimed any
implied warranty of merchantability and implied warranty of fitness for a
particular purpose. The seller did stipulate however, that the plant was not
subject to any contract or agreement with any labor union or linked to any
collective bargaining agreement, and that the plant was not subject to any
employee benefit or retirement programs. In addition, the seller agreed to
provide personnel to consult with Fix-Corp for up to one year and assist in
re-starting the facility. In addition, all blueprints, customer lists,
drawings and equipment specifications were made available.
NOTE 5 - OTHER ASSETS AND DEFERRED CHARGES
<TABLE>
<CAPTION>
OTHER ASSETS AND DEFERRED CHARGES CONSIST OF THE FOLLOWING: 1996 1995
- --------------------------------------------------------------------------------------
<S> <C> <C>
Note Receivable from Affiliated Company $ 26,000 $ -0-
Disputed Finance Deposit Claim 90,000 -0-
Deferred Preoperating Plant Startup Costs 36,750 -0-
Organizational Costs 48,900 65,200
Investment in Life Insurance 9,676 9,676
Deposits 900 950
--------- -------
$212,226 $75,826
--------- -------
--------- -------
</TABLE>
The note receivable from affiliated company results from a loan to
Fix-Sports, Inc., a company partially owned by the Company's President. The
note bears interest at 10% and is signed personally by the president and
collateralized by 52,000 shares of the Company's Common Stock.
The Disputed Finance Deposit Claim results from a deposit that the
Company placed with a finance company in order to obtain financing for the
Resource Recovery acquisition. No consideration was received and the Company
intends to pursue action to recover the deposit. The Company's counsel
believes that they have a legitimate collectible claim .
Deferred preoperating plant startup costs consists of certain consulting,
labor and maintenance costs incurred by the Company subsequent to the
acquisition of the Resource Recovery plant, more fully described in Note 4. The
deferred costs will be amortized over a three (3) year (36 month) period
starting on the date that the plant became fully operational in February, 1997.
Additional deferred preoperating plant startup costs were incurred subsequent to
the balance sheet date, however, these costs are considered minor in nature.
As discussed in Note 2, in December 1995, the Company obtained certain
life insurance policies on the life of an unrelated third party as partial
settlement for certain factored purchase order financing contracts. The ongoing
policy premiums are paid out of the cash surrender value of the policies. Life
insurance expense of $-0- and $-0- in 1995 and 1996 respectively, was included
in other expense.
NOTE 6 - DEFERRED TAXES AND INCOME TAXES
During 1995 and effective with the reverse merger, more fully described in
Notes 1 and 2, the Company adopted Financial Accounting Standards No. 109,
"Accounting for Income Taxes" and all years presented reflect the adoption of
this method. The Company has restated 1995 financial statements for comparative
purposes. The effect of this restatement is the recording of a deferred tax
asset of $359,300, net of a valuation allowance of $120,000, which arises solely
from the estimated future benefit of the net operating loss carry-forward of
approximately $1,114,000. The effect of this restatement was to reduce the net
loss for the year ended December 31, 1995 by $359,300 and to reduce the net
loss per common share by $.059 per share.
-10-
<PAGE>
FIX-CORP INTERNATIONAL, INC.
(FORMERLY LIFECHOICE, INC.)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
THE COMPONENTS OF THE DEFERRED TAX ASSET ARE AS FOLLOWS: 1996 1995
- --------------------------------------------------------------------------------
Tax asset arising form net operating loss carryforward:
Federal $447,375 $390,125
State 102,275 89,175
Total Deferred Tax Asset 549,650 479,300
Less valuation for deferred tax assets (137,500) (120,000)
--------- ---------
Deferred Taxes - net $412,150 $359,300
--------- ---------
--------- ---------
In prior years, the Company had elected to be taxed under Subchapter S of
the Internal Revenue Code. Effective with reverse merger and reincorporation,
this election was discontinued and all adjustments, which were minor in
nature, were included as a capital adjustment "Effect of Merger with Fix-Corp
International, Inc." in the Statement of Stockholders' Equity. The components
of the provision for taxes were as follows:
1996 1995
- -------------------------------------------------------------------------------
Provision for Deferred Taxes:
Federal $57,250 $390,125
State 13,100 89,175
Valuation Allowance (17,500) (120,000)
--------- ---------
Total $52,850 $359,300
--------- ---------
--------- ---------
The amounts and expiration dates of the net operating loss carryforward
available to the Company at December 31, 1996 are as follows:
AMOUNT EXPIRATION DATE
- -------------------------------------------------------------------------------
Loss for the year ended December 31, 1995 $1,114,642 2010
Loss for the year ended December 31, 1996 163,674 2011
-----------
Total Net Operating Loss Carryforward $1,278,316
-----------
-----------
NOTE 7 - SECURED EQUIPMENT LOAN PAYABLE
The Company is a party to a Loan and Security Agreement with Gordon
Brothers Capital Corporation, a Delaware company, and Mark Fixler, a principal
shareholder, President and CEO, personally. The loan is for $2,500,000 bearing
interest at 12 1/2% and is secured by an Open-End Mortgage to the premises
located at 1835 James Parkway, Heath, Ohio, namely the post consumer plastics
recycling facility or Resource Recovery plant.
In addition to this Open-End Mortgage, Gordon Brothers has been granted a
security interest, including a lien on and a pledge of all inventory, all
accounts and accounts receivables, contract rights, and all customer lists and
goodwill. Mr. Fixler has been required to sign as a guarantor for Fix-Corp
International. The schedule of payments required under the Loan portion of this
agreement is skewed so as to allow a modest initial payment, then a payment of
approximately $79,734 for the next five months, followed by a payment of
$123,000, then $250,000, then $394,000 for the final four months.
The contract contains a number of Negative Covenants, including but not
limited to, certain limitations on the issuance any additional evidences of
indebtedness; the creation, assumption, guarantee of indebtedness in addition
to the indebtedness of the lender; there can be no sale or transfer of
ownership without the Lender's prior written consent; and
-11-
<PAGE>
FIX-CORP INTERNATIONAL, INC.
(FORMERLY LIFECHOICE, INC.)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
the borrower is barred from making any loans or advances to any individual or
officer of the Borrower. In addition, the Company is prohibited from paying
Dividends without the prior written permission of the Lender and may not make
any investments without the lender's prior written permission; the Borrower
may not merge or consolidate with or into any other corporation; the Borrower
may not sell, lease or dispose of its assets without the lender's prior
written consent and the Borrower may not grant any security interest in or
mortgage of any of its properties that are included in the lender's
collateral. Finally, the Borrower is barred from engaging in any business
other then the business in which it is currently engaged or a business
reasonably allied thereto.
NOTE 8 - BRIDGE FINANCING NOTES PAYABLE
1996 1995
- -------------------------------------------------------------------------------
Bridge Notes Payable to shareholders (5 individuals) $250,000 $ -0-
Bridge Notes Payable to others (1 individual) 200,000 -0-
------- -----
Total $450,000 $ -0-
-------- ------
-------- ------
Subject to a certain "Confidential Private Placement Memorandum", more
fully described in Note 10, the Company has sold $450,000 in Bridge Notes to
qualified accredited investors. The proceeds of Bridge Notes was used for the
purpose of acquiring the Resource Recovery Plant. The note holders are
entitled to a twenty-two (22%) percent return on investment as well as an
stock dividend of eighteen (18%) percent of monies invested at $.50 per share
or 18,000 shares of common stock, which was issued and held in escrow. The
Company retains the right to "repurchase" the shares upon payment of the
notes. The term of the loan is generally 120 to 180 days from closing.
In addition, The Company has communicated its intention to spin the
plant off in a public offering within a year. Should that plan become a
reality the Bridge note holders would receive 15,000 warrants at a price to
be set by the Underwriter.
Subsequent to the balance sheet date, $150,000 representing three (3)
Bridge Notes were retired in full. The corresponding stock was reacquired
from escrow at that time.
NOTE 9 - NOTES PAYABLE
1996 1995
- --------------------------------------------------------------------------------
Notes Payable to shareholders (3 individuals) $418,000 $190,000
12% Note Payable 80,000 -0-
Notes Payable to others (4 individuals) 100,000 310,000
------- -------
Total $598,000 $500,000
-------- --------
-------- --------
The proceeds of the notes have generally been used for working capital
and purchase order financing contracts. The notes are generally short-term
renewable notes bearing interest at from 1% to 4% per month. All notes are
current.
Interest Expense on the notes, including all contract financing, is
included as a separate line item in the Statements of Operations under Cost
of Sales and Contract Financing Operations, and totaled $398,087 and $250,822
for the years ended 1995 and 1996, respectively.
NOTE 10 - LEASE COMMITMENTS
On December 9, 1996, the Company entered into a one (1) year renewal
lease for office space that houses the corporate offices, purchase order and
merchandise sales segments of the business. Rent expense under prior lease
arrangements amounted to $10,800 and $10,800 for the years ended December 31,
1996 and 1995, respectively. Monthly rentals through December 31, 1997 are
$900 per month.
-12-
<PAGE>
FIX-CORP INTERNATIONAL, INC.
(FORMERLY LIFECHOICE, INC.)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Pursuant to that certain Purchase and Sale Agreement, more fully
described in Note 4, involving the acquisition of the Resource Recovery Plant
in Heath, Ohio, the Company entered into a Track Lease Agreement for 200' of
railroad siding (including land) for the sole purpose of the storage of
railroad cars owned, leased or consigned to the Company. The term of the
lease is for a period of ten (10) years beginning August 14, 1996 and
expiring August 14, 2006, with an option for an additional ten (10) years
expiring August 14, 2016. Annual rentals, paid in advance, are $1,000 per
year.
NOTE 11 - COMMITMENTS AND CONTINGENCIES
(A.) Bridge Note Financing
In conjunction with the $450,000 in Bridge Note financing, more fully
described in Note 8 , the note holders are entitled to a twenty-two (22%)
percent return on investment as well as a stock dividend of eighteen (18%)
percent of monies invested at $.50 per share or 18,000 shares of common
stock, which was issued and held in escrow. The Company has retained the
right to "repurchase" the shares upon payment of the notes. The term of the
loan is generally 120 to 180 days from closing.
In addition to the above, the Company has communicated its intention to
spin the plant and the related operations off in a public offering within a
year. Should that plan become a reality the Bridge note holders would receive
15,000 warrants at a price to be set by the Underwriter.
(B.) Merger with Lifechoice, Inc.
As indicated in Note 1, on or about October 23, 1995, Fix-Corp
International was acquired by Lifechoice, Inc., preparatory to a reverse
merger in which Fix-Corp assumed control over Lifechoice, Inc. and imbued
Lifechoice, Inc. with its operations and management. Lifechoice, Inc. was a
publicly traded company listed on the NASD Bulletin Board and possessed no
assets and no liabilities, in effect a shell corporation.
Lifechoice, Inc. was brought to the attention of Fix-Corp. by a business
in Florida called LBI Group, Inc. and by a firm in New York called the Accord
Group, Inc. These parties relied upon representations made by the seller of
the shell, namely a firm called the Worthington Company. Lifechoice, Inc. had
previously filed an Issuer Information Statement with NASD in compliance with
Rule 15c2-11 of Securities and Exchange Commission's rules. This Issuer
Information Statement was never rescinded and this permitted Lifechoice, Inc.
to remain listed with the NASD Bulletin Board and possess all of the overt
characteristics of a public company.
In actuality, the charter of Lifechoice, Inc. had previously been
canceled by the State of Utah and the seller had created a new Lifechoice,
Inc. under a different charter number and represented this new company as the
same entity listed on the NASD Bulletin Board. In the State of Utah, the
corporation, as defined by its charter number, is viewed as the owner of the
registration when this registration is procured. Consequently, the company
represented by the seller did not own any registration statement.
When the State of Utah opened an active investigation into this practice,
the seller recommended a redomiciling of the company from Utah to Delaware.
The movement of a company from one domicile to another does not cure the
defect consisting of a charter that cannot be linked to a registration
statement. As a consequence of this action, the seller has been barred by the
Securities and Exchange Commission from the securities business.
The State of Utah has reviewed the merger between Fix-Corp. and
Lifechoice, Inc. and they have determined that Fix-Corp is a victim of this
fraud. Accordingly, the State of Utah has opted to take no action against
Fix-Corp International.
The Company is aware of this flaw in its shell and has taken steps to
remedy the situation. The Company has filed two registration statements in
the State of New York, thus aligning registrations with its current charter.
The Company has also procured a secondary trading exemption from Standard &
Poor's. The Company further intends to file a registration statement in Utah
and thereby rectify the flaw which the Company unknowingly acquired when it
entered into this merger transaction with Lifechoice, Inc.
-13-
<PAGE>
FIX-CORP INTERNATIONAL, INC.
(FORMERLY LIFECHOICE, INC.)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
NOTE 12 - STOCKHOLDER'S EQUITY
Common Stock and Incorporation - On or about October 23, 1995, Fix-Corp
International, Inc. (Fix-Corp), a newly-formed Delaware corporation, was
acquired by Lifechoice preparatory to a reverse merger in which Fix-Corp
assumed control over Lifechoice, a publicly traded company listed on the NASD
Bulletin Board. Lifechoice possessed no assets and no liabilities and, was in
effect, a shell corporation. The Company assumed the name of Fix-Corp
International, Inc. and was redomiciled to Delaware. See Note 11.
Preferred Stock - The Company's Articles of Incorporation authorize the
issuance, upon resolution of the Board of Directors and without further
shareholder approval, of up to 2,000,000 shares of Preferred Stock with a par
value of $.001 per share, including any terms of one or more of the classes
or series of Preferred Stock, including dividend rights, conversion prices as
stipulated by the Board.
Stock Dividend and Shares Held in Escrow - In conjunction with the Bridge
Notes, more fully described in Note 11, the Company has committed to a stock
dividend of eighteen (18%) percent of monies invested at $.50 per share or
18,000 shares of common stock, which was issued and held in escrow. The
Company retains the right to "repurchase" the shares upon payment of the
notes.
Additional Equity Commitments - In addition to the above, the Company has
communicated its intention to spin the plant and the related operations off
in a public offering within a year. Should that plan become a reality the
Bridge note holders would receive 15,000 warrants at a price to be set by the
Underwriter.
Stock Option - An employment agreement was executed on January 3, 1997
with Mark Fixler, the Company's President, CEO and principal shareholder
that includes, among other provisions, an Option to the Employee to purchase
four million shares of stock at the fixed price of fifty cents per share.
This Option can be exercised at any time during the employment period. The
Company is similarly obligated to purchase $2 million dollars of Key Man
Insurance.
NOTE 13 - SEGMENT INFORMATION
As discussed in Note 1, the Company operates in three (3) major segments
of business: Recycled plastic, merchandise sales and purchase order contract
financing. Information concerning operations in these businesses at December
31, 1996 and 1995, and for the years then ended, is presented below:
For the year ended
December 31, Contract Product Recycled
1996 Financing Sales Plastic Total
- -------------------------------------------------------------------------------
Net Revenue $510,780 $232,823 $-0- $743,603
Cost of Sales and
Financing 293,761 126,153 -0- 419,914
------- ------- ----- -------
Gross Profit $217,019 $106,670 $-0- $323,689
------- ------- ----- -------
------- ------- -----
Other Costs & Expenses 434,512
-------
Net Loss ($110,823)
----------
----------
Capital Expenditures $-0- $-0- $9,492,000 $9,492,000
----- ----- --------- ----------
----- ----- --------- ----------
Deferred Plant
Startup Costs $-0- $-0- $36,750 $36,750
----- ----- ------- -------
----- ----- ------- -------
Depreciation &
Amortization $9,757 $9,757 $-0- $19,514
------- ------- ----- -------
------- ------- ----- -------
-14-
<PAGE>
FIX-CORP INTERNATIONAL, INC.
(FORMERLY LIFECHOICE, INC.)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
FOR THE YEAR ENDED CONTRACT PRODUCT RECYCLED
DECEMBER 31, 1995 FINANCING SALES PLASTIC TOTAL
- -------------------------------------------------------------------------------
Net Revenue $663,752 $91,812 $-0- $755,564
Cost of Sales
and Financing 1,495,738 47,340 -0- 1,543,078
--------- ------ --- ---------
Gross Profit ($831,986) $44,472 $-0- ($787,514)
---------- ------- ----- ----------
---------- ------- ----- ----------
Other Costs & Expenses 327,128
-------
Net Loss ($1,114,642)
-----------
-----------
Capital Expenditures $11,250 $11,250 $-0- $22,500
------- ------- ----- -------
------- ------- ----- -------
Depreciation &
Amortization $9,757 $9,757 $-0- $19,514
------- ------- ----- -------
------- ------- ----- -------
NOTE 14 - SUBSEQUENT EVENTS
(A.) Bridge Notes Payable
Subsequent to the balance sheet date, $150,000 representing three (3)
Bridge Notes were retired in full. The corresponding stock was reacquired
from escrow at that time.
(B.) EMPLOYMENT AGREEMENTS
An employment agreement was executed on January 3, 1997 with Mark
Fixler, the Company's President, CEO and principal shareholder that
contemplates a three year term. Mr. Fixler's annual base salary was set at
$200,000 for 1997, $250,000 for the second year and $300,000 for the third
year. If the full term of the employment agreement is not honored, then the
Company is obligated to a $2,000,000 severance payment. The contract provides
for a $20,000 allowance for reasonable travel and other out-of-pocket
expenses, to be supported by bills and receipts, a $750 per month automobile
allowance plus reasonable car phone expenses and reasonable car maintenance
expenses, plus Health and Dental insurance and three weeks of paid vacation.
In addition, the contract provides for an Option to the Employee to
purchase four million shares of stock at the fixed price of fifty cents per
share. This Option can be exercised at any time during the employment period.
The Company is similarly obligated to purchase $2 million dollars of Key Man
Insurance.
-15-
<PAGE>
FIX-CORP INTERNATIONAL, INC.
FIXCOR, INC.
CONSOLIDATED BALANCE SHEET
NINE MONTHS TWELVE MOS.
9/30/97 12/31/96
ASSETS (UNAUDITED) (AUDITED)
CURRENT ASSETS
CASH $2,398,541 $224,539
INVESTMENT IN MARKETABLE SECURITIES 128,287 130,692
TRADE ACCOUNTS RECEIVABLE-NET 1,236,177 88,763
SPECIAL TRADE ACCOUNT 300,000 0
PURCHASE ORDER FINANCING CONTRACTS 215,500 221,672
INVENTORIES 877,876 96,002
OTHER CURRENT ASSETS 75,367 0
TOTAL CURRENT ASSETS 5,231,748 761,668
PROPERTY PLANT AND EQUIPMENT
LAND AND LAND HELD FOR DEVELOPMENT 750,000 750,000
BUILDINGS 2,000,000 2,000,000
EQUIPMENT 10,595,431 6,764,500
------- -------
13,345,431 9,514,500
LESS ACCUMULATED DEPRE/AMORT (550,000) (6,428)
PROPERTY, PLANT AND EQUIPMENT-NET 12,795,431 9,508,072
---------- ----------
OTHER ASSETS
LICENSING AGREEMENTS 30,000 0
DEFERRED INCOME TAXES 491,121 412,150
OTHERS ASSETS AND DEFERRED CHARGES 193,750 212,226
------- -------
TOTAL OTHER ASSETS 714,871 624,376
TOTAL ASSETS $18,742,050 $10,894,116
----------- -----------
----------- -----------
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
NOTES PAYABLE $1,748,582 $598,000
ACCOUNTS PAYABLE AND ACCRUED EXPENSES 1,415,478 112,325
LINE OF CREDIT 1,037,843 2,950,000
--------- ---------
TOTAL CURRENT LIABILITIES 4,201,903 3,660,325
--------- ---------
LONG-TERM DEBT 3,383,347 0
---------
SHAREHOLDERS' EQUITY
PREFERRED STOCK, $.001 par value,
2,000,000 shares authorized, -0- shares
issued or outstanding
COMMON STOCK, $.001 par value. 2,646 2,097
100,000,000 shares
authorized and 22,465,010 issued
and outstanding as of September 30,1997
ADDITIONAL PAID-IN CAPITAL 12,997,332 8,246,406
UNREALIZED LOSS ON INVESTMENTS (68,673) (68,673)
RETAINED EARNINGS (DEFICIT) (1,774,505) (946,039)
TOTAL SHAREHOLDERS' EQUITY 11,156,800 7,233,791
----------
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY $18,742,050 $10,894,116
----------- -----------
----------- -----------
NOTE: All adjustments, in management's opinion, have been made that are
necessary in order to make the financial statements not misleading.
<PAGE>
FIXCORP INTERNATIONAL, INC.
FIXCOR, INC.
CONSOLIDATED INCOME STATEMENT AND
RETAINED EARNINGS
NINE MONTHS TWELVE MOS.
9/30/97 12/31/96
(UNAUDITED) (AUDITED)
INCOME STATEMENT
REVENUE
FEES ON PURCHASE ORDER FINANCING $191,795 $510,779
MERCHANDISE SALES 5,629,189 232,824
SPECIAL ACCOUNT 500,000 0
-------
TOTAL REVENUE 6,320,984 743,603
---------
COST OF SALES
COST OF MERCHANDISE SALES 4,236,567 126,153
-------
GROSS PROFIT 2,084,417 617,450
-------
OPERATING EXPENSES
SALARIES, WAGES AND RELATED COSTS 240,998 277,317
LEGAL, PROFESSIONAL, AND CONSULTING FEES 170,338 98,513
OTHER GENERAL AND ADMINISTRATIVE 1,744,337 353,049
--------- -------
TOTAL OPERATING EXPENSES 2,155,673 728,879
OPERATING INCOME (LOSS) (71,256) (111,429)
-------- --------
OTHER INCOME (EXPENSE)
INTEREST EXPENSE AND FINANCING COSTS (205,710) (32,730)
DEPRECIATION AND AMORTIZATION (551,500) (19,514)
-------- --------
(757,210) (52,244)
--------- -------
NET INCOME (LOSS) BEFORE INCOME TAXES (828,466) (163,673)
PROVISION FOR INCOME TAXES 0 (52,850)
NET INCOME (LOSS) ($828,466) ($110,823)
RETAINED EARNINGS (DEFICIT) BEGINNING (946,038) (835,216)
RETAINED EARNINGS (DEFICIT) END ($1,774,505) ($946,039)
------------ ----------
------------ ----------
NOTE: All adjustments, in management's opinion, have been made that are
necessary in order to make the financial statements not misleading.
<PAGE>
PART III - INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NAME OF NAMES OF DATE OF
NUMBER DOCUMENT PARTIES TO DOCUMENT DOCUMENT
- ------ -------- ------------------- --------
<S> <C> <C> <C>
* 1 Amended and Restated Fix-Corp International, Inc. 05/27/97
Articles of Incorporation
* 2 Bylaws Fix-Corp International, Inc. 11/14/95
3 Acquisition Agreement Fix-Corp, Inc. and Lifechoice, Inc. 10/95
4 Purchase and Sale Agreement Quantum Chemical Corporation and 08/14/96
Fix-Corp International, Inc.
5 Amendment No. 1 to Quantum Chemical Corporation and 10/29/96
Purchase and Sale Agreement Fix-Corp International, Inc.
* 6 Employment Contract Fix-Corp International, Inc. and Mark 01/01/97
Fixler
* 7 Employment Agreement Fix-Corp International, Inc. and Gary 01/01/97
DeLaurentiis
8 Acquisition Agreement Fix-Corp International, Inc., Fixcor 04/16/97
Industries, Inc. and Mark Fixler
9 Loan and Security Agreement NationsCredit Commercial 05/14/97
Corporation through its NationsCredit
Commercial Funding Division, Lender
and Fixcor Industries, Inc., Borrower
10 Guaranty NationsCredit Commercial 05/14/97
Corporation through its NationsCredit
Commercial Funding Division, Lender
and Fixcor Industries, Inc., Borrower,
and Mark Fixler, Guarantor
26
<PAGE>
11 First Amendment to Loan and NationsCredit Commercial 07/16/97
Security Agreement Corporation through its NationsCredit
Commercial Funding Division, Lender
and Fixcor Industries, Inc., Borrower
</TABLE>
<TABLE>
<CAPTION>
EXHIBIT NAME OF NAMES OF DATE OF
NUMBER DOCUMENT PARTIES TO DOCUMENT DOCUMENT
- ------ -------- ------------------- --------
<S> <C> <C> <C>
12 Term Note Palletech Inc., Fixcor Industries, Inc. 07/09/97
and Fix-Corp International, Inc.,
Borrowers and Gordon Brothers
Capital Corporation, Lender
13 Loan and Security Agreement Palletech Inc., Fixcor Industries, Inc. 07/09/97
and Fix-Corp International, Inc.,
Borrowers and Gordon Brothers
Capital Corporation, Lender
14 Purchase Warrant and Fix-Corp International, Inc. and 07/09/97
Agreement Gordon Brothers Capital Corporation
15 Intercreditor Agreement Gordon Brothers Capital Corporation 07/09/97
and NationsCredit Commercial
Corporation, through its NationsCredit
Commercial Funding Division
* 16 License and Marketing Nitro Plastics Technologies of Israel 07/07/97
Agreement and Palletech Inc.
17 Patent License Agreement Fixcor Industries, Inc. and 09/25/97
AlliedSignal, Inc.
18 Convertible Debenture Fix-Corp International, Inc., JNC 10/24/97
Purchase Agreement Opportunity Fund Ltd. and Diversified
Strategies Fund, L.P.
19 6% Convertible Debenture Fix-Corp International, Inc. and 10/24/97
Due October 24, 2000 Holder
20 Registration Rights Fix-Corp International, Inc., JNC 10/24/97
Agreement Opportunity fund Ltd., and Diversified
Strategies Fund, L.P.
21 Escrow Agreement Fix-Corp International, Inc., JNC 10/24/97
Opportunity Fund Ltd., Diversified
27
<PAGE>
Strategies Fund, L.P. and Robinson
Silverman Pearce Aronsohn & Berman
LLP
22 Warrant Fix-Corp International, Inc. and 10/24/97
Holder
* Filed Herewith
</TABLE>
28
<PAGE>
Exhibit 1
AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
FIX-CORP INTERNATIONAL, INC.
On April 30, 1997, the following Amended and Restated Articles were duly
adopted by the Board of Directors of Fix-Corp International, Inc., a Delaware
corporation (the "Corporation") originally incorporated on October 27, 1995
pursuant to Sections 101, 104 and 245 of the General Corporation Law of Delaware
and approved that same day by a majority vote of the Shareholders.
ARTICLE I
NAME
The name of the Corporation is and remains Fix-Corp International, Inc.
ARTICLE II
REGISTERED OFFICE AND AGENT
The registered office and agent of the Corporation in Delaware is Harvard
Business Services, Inc. at 25 Greystone Manor, Lewes, Delaware 19958-9776 in the
County of Sussex.
ARTICLE III
PRINCIPAL OFFICE
The principal office and mailing address of the principal office of the
Corporation is 27040 Cedar Road, Suite 218, Beachwood, Ohio 44122.
ARTICLE IV
The total number of shares of capital stock which the Corporation shall
have authority to issue is 102,000,000 shares. Of said shares, l00,000,000
shares shall be of a class designated as Common Stock with $0.001 par value per
share; and 2,000,000 shares of preferred stock with a par value of $0.001 per
share. Except as may otherwise be provided by the Board of Directors, no holder
of any shares of stock of this Corporation shall have any preemptive right to
purchase, subscribe for, or otherwise acquire any shares of stock of the
Corporation of any class now or hereafter authorized, or any securities
exchangeable for or convertible into such shares, or any warrants or other
instruments evidencing rights or options to subscribe for, purchase or otherwise
acquire such shares.
<PAGE>
The description of the Common Stock and the Preferred Stock, and the
relative rights, preferences and limitations thereof, or the method of fixing
and establishing the same are hereinafter set forth in this Article IV:
SECTION A
PREFERRED STOCK
(i) The Board of Directors of the Corporation shall be authorized, without
action by the stockholders to issue such Preferred Stock, from time to time, in
one or more series, and each series shall be known and designated by such
designations as may be stated and expressed in a resolution or resolutions
adopted by the Board of Directors of the Corporation and as shall have been set
forth in a certificate made, executed, acknowledged, filed and recorded in the
manner required by the laws of the State of Delaware in order to make the same
effective. Each series shall consist of such number of shares as shall be
stated and expressed in such resolution or resolutions providing for the Issue
of Preferred Stock of such series together with such additional number of shares
as the Board of Directors by resolution or resolutions may from time to time
determine to issue as a part of such series. All shares of any one series of
such Preferred Stock shall be alike in every particular except that shares
issued at different times may accumulate dividends from different dates. The
Board of Directors shall have power and authority to state and determine in the
resolution or resolutions providing for the issue of each series of Preferred
Stock the number of shares of each such series authorized to be issued, the
voting powers (if any) and the designations, preferences and relative,
participating, optional or other rights appertaining to each such series, and
the qualifications limitations or restrictions thereof (including, but not by
way of limitation, full power and authority to determine as to the Preferred
Stock of each such series, the rate or rates of dividends payable thereon, the
times of payments of such dividends, the prices and manner upon which the unit
may be redeemed, the amount or amounts payable thereon in the event of
liquidation, dissolution or winding up of the Corporation or in the event of any
merger or consolidation of or sale of assets by the Corporation, the rights (if
any) to convert the same into, and/or to purchase, stock of any other class or
series, the terms of any sinking fund or redemption or purchase account (if any)
to be provided for shares of such series of the Preferred Stock, restrictions on
ownership and transfer to preserve tax benefits, and the voting powers (if any)
of the holders of any series of Preferred Stock generally or with respect to any
particular matter, which may be less than, equal to or greater than one vote per
share, and which may, without limiting the generality of the foregoing, include
the right, voting as a series by Itself or together with the holders of any
other series of Preferred Stock or all series of Preferred Stock as a class, to
elect one or more directors of the Corporation generally or under such specific
circumstances and on such conditions, as shall be provided in the resolution or
resolutions of the Board of Directors adopted pursuant hereto, including,
without limitation, in the event there shall have been a default in the payment
of dividends on or redemption of any one or more series of Preferred Stock. The
Board of Directors may from time to time decrease the number of shares of any
series of Preferred Stock (but not below the number thereof outstanding) by
providing that any unissued shares previously assigned to such series shall no
longer constitute part thereof and may assign such unissued shares to an
existing or newly created series. The foregoing provisions
2
<PAGE>
of this Section A with respect to the creation or issuance of series of
Preferred Stock shall be subject to any additional conditions with respect
thereto which may be contained in any resolutions then in effect which shall
have theretofore been adopted in accordance with the foregoing provisions of
this Paragraph A with respect to any then existing series of Preferred Stock.
(b) The Convertible Preferred Stock shall have the following preferences,
limitations and relative rights.
1. CERTAIN DEFINITIONS.
Unless the context otherwise requires, the terms defined in this paragraph
1 shall have, for all purposes hereof, the meanings herein specified:
"Board of Directors" shall mean the Board of Directors of the Corporation
and, to the extent permitted by law, any committee of the Board of Directors
authorized to exercise the powers of the Board of Directors.
"Preferred Stock" shall mean the two million (2,000,000) authorized shares
of the Convertible Preferred Stock, par value $0.001 per share, of the
Corporation.
"Common Stock" shall mean the 100 Million (100,000,000) authorized shares
of Common Stock, $0.001 par value per share, of the Corporation and all shares
hereafter authorized of any additional class (or classes) of common stock of the
Corporation.
"Conversion Rate" shall have the meaning set forth in paragraph 6(b) of
this Section.
"Distribution on Common Stock" shall have the meaning set forth in
paragraph 2 of this section.
"Dividend Payment Date" shall mean January 20, April 20, June 20 and
October 20 of each year, or the immediately preceding business day if any such
date is a Saturday, Sunday or legal holiday in the State of Delaware,
"Event of Noncompliance" shall mean the occurrence of any of the following
events:
(i) Failure of the Corporation to pay the full amount of dividends
accrued if cumulative accrued dividends on the Preferred Stock, in the
aggregate, are equal to $1.00 per share in arrears (not including $.20 per annum
of the dividend which accrues but only increases the Liquidation Price); or
(ii) The Corporation shall not have made, in full, or set apart the
consideration sufficient for the payment thereof and no other purpose, any
redemption payment with respect to the Preferred Stock which it is obligated to
make, whether or not such payment is legally permissible, within 30 days of the
date specified for such redemption.
3
<PAGE>
"Issue Date" shall mean the date on which shares of the Preferred Stock are
issued to any holder thereof.
"Junior Stock" shall mean Common Stock and any other class or series of
stock of the Corporation authorized after the issue date not entitled to receive
any assets upon liquidation, dissolution or winding up of affairs of the
Corporation until the Preferred Stock and any Parity stock shall have received
the entire amount to which such stock is entitled upon such liquidation,
dissolution or winding up of affairs.
"Liquidation Price" measured per share of the Preferred Stock as of any
particular date shall mean the sum of (i) $10.00 plus (ii) all dividends accrued
on that share through the Dividend Payment Date immediately preceding the date
on which the Liquidation Price is being determined to the extent not paid in
full on or before such Dividend Payment Date, plus (iii) (A) for purposes of
determining amount payable pursuant to paragraphs 3 and 4 of this Section, all
unpaid dividends accrued on the sum of the amounts specified in Clauses (i) and
(ii) above, to the date as of which the Liquidation Price is being paid, and (B)
for purposes of determining the amount of dividends to be paid on a date other
than a Dividend Payment Date as contemplated by paragraph 2(c) of this Section,
all unpaid dividends accrued on the amounts specified in Clause (ii) above, to
the date as of which such dividends are being paid.
"Parity Stock" shall mean any class or series of stock of the Corporation
authorized after the Issue Date entitled to receive assets upon liquidation,
dissolution or winding up of the affairs of the Corporation on a parity with the
Liquidation Price of the Preferred Stock.
"Senior Stock" shall mean any class or series of stock of the Corporation
authorized after the Issue Date ranking senior to the Preferred Stock and any
Parity Stock in respect of the right to participate in any distribution upon
liquidation, dissolution or winding up of the affairs of the Corporation.
2. DIVIDENDS AND OTHER DISTRIBUTIONS.
(a) Subject to the prior preferences and other rights of any Senior
Stock, the holders of the Preferred Stock shall be entitled to receive, when and
as declared by the Board of Directors, out of funds legally available therefor,
preferential dividends which shall accrue as provided herein. Dividends on each
share of Preferred Stock will accrue cumulatively on a daily basis at the rate
of twelve percent (12%) per annum of the Liquidation Price of such share from
and including the Issue Date applicable to such share to and including the date
on which the redemption price of such share is paid whether of not such
dividends have been declared and whether or not there are any funds of the
Corporation legally available for the payment of dividends. Accrued dividends on
each share of the Preferred Stock shall be paid quarterly on each Dividend
Payment Date, commencing on the second Dividend Payment Date after the Issue
Date applicable to such share, or the immediately preceding business day, if any
such date is a Saturday, Sunday or legal holiday in the State of Delaware, to
the holders of record of the applicable shares of Preferred Stock as of the
close of business on the record date. For purposes
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of determining the amount of dividends "accrued" as of the second Dividend
Payment Date and as of any date which is not a Dividend Payment Date, such
amount shall be calculated on the basis of the foregoing rates per annum for
actual days elapsed from and including the Issue Date (in the case of the second
Dividend Payment Date) or the last preceding Dividend Payment Date (in the case
of any other date) to and including the date as of which such determination is
to be made, based on a 360 day year.
(b) Dividends shall be payable in cash; PROVIDED, HOWEVER, that it on
any Dividend Payment Date, the Corporation, pursuant to applicable law or the
terms of any Debt Instrument, shall be prohibited or restricted from paying In
cash the full dividends to which holders of the Preferred Stock and any Parity
Stock shall be entitled, the amount of cash available pursuant to applicable law
and which is not restricted by the terms of any Debt Instrument shall be
distributed among the holders of the Preferred Stock and such Parity Stock
ratably in proportion so the full amount to which they would otherwise be
entitled. Two percent (2%) of the dividend shall accrue but not be currently
paid and shall be added to the Liquidation Price. The per share amounts to be
distributed pursuant to this Section 2(b) shall, in each case, be adjusted by
rounding down to the nearest whole cent and such adjusted amount is hereinafter
referred to as the "Cash Dividend Payment."
(c) To the extent not paid in full on each Dividend Payment Date in the
manner provided in this paragraph 2, all dividends which have accrued on each
share of Preferred Stock during the dividend period ending on such Dividend
Payment Date will be added to the Liquidation Price of such share and will
remain a part thereof until such dividends, together with all dividends which
have accrued to the date of such payment with respect to that portion of the
Liquidation Price which consists of such accrued unpaid dividends, are paid in
full. Such accrued unpaid dividends, together with all dividends accrued
thereon, may be declared and paid at any time, without reference to any regular
Dividend Payment Date, to holders of record as of the close or business on such
date, not more than fifty (50) days nor less than ten (10) days preceding the
payment date thereof, as may be fixed by the Board of Directors (the "Special
Record Date"). If declared, such accrued unpaid dividends, together with all
dividends accrued thereon, shall be paid in cash.
(d) Notice of such Special Record Date shall be mailed, in the manner
provided in paragraph 4(c) of this section, to the holders of record of the
Preferred Stock not less than fifteen (15) days prior thereto.
(e) So long as any shares of Preferred Stock shall be outstanding, the
Corporation shall not declare or pay on any Junior Stock any dividend
whatsoever, whether in cash, property or otherwise, nor shall the Corporation
make any distribution on any Junior Stock, or set aside any assets for any such
purposes, nor shall any Junior Stock be purchased, redeemed or otherwise
acquired by the Corporation or any of its subsidiaries, nor shall any monies be
paid, set aside for payment or made available for a sinking fund for the
purchase or redemption of any Junior Stock, unless and until (i) all dividends
to which the holders of the Preferred Stock and any Parity Stock shall have been
entitled for all current and all previous Dividend Periods shall have been paid
or declared and the consideration sufficient for the payment thereof in full set
apart so as to be
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available for the payment thereof and for no other purpose (whether or not such
payment is then legally permissible) and (ii) the Corporation shall have made,
in full, or set apart the consideration sufficient for the payment thereof, and
for no other purpose, all redemption payments with respect to the Preferred
Stock which it is then obligated to make (whether or not such payment is then
legally permissible); PROVIDED, HOWEVER, that nothing contained in this
paragraph 2(d) shall prevent the payment of dividends solely in Junior Stock or
the repurchase, redemption or other acquisition of Junior Stock solely through
the Issuance of Junior Stock (together with a cash adjustment for fractional
shares if any).
3. DISTRIBUTIONS UPON LIQUIDATION, DISSOLUTION OR WINDING UP.
Subject to the prior payment in full of the preferential amounts to which
any Senior Stock is entitled, in the event of any liquidation, dissolution or
winding up of the Corporation, whether voluntary or involuntary, the holders of
shares of the Preferred Stock shall be entitled to receive from the assets of
the Corporation available for distribution to the shareholders an amount in cash
or property at its fair market value, as determined by the Board of Directors in
good faith, or a combination thereof, per share equal to the Liquidation Price,
before any payment or distribution shall be made to the holders at any Junior
Stock of the Corporation, which payment shall be made PARI PASSU to any such
payment made to the holders, if any, of any Parity Stock. If, upon distribution
of the Corporation's assets in liquidation, dissolution or winding up, the
assets of the Corporation to be distributed among the holders of Preferred Stock
and to all holders of any Parity Stock shall be insufficient to permit payment
in full to such holders of the preferential amounts to which they are entitled,
then the entire assets of the corporation to be distributed to holders of the
Preferred Stock and such Parity Stock shall be distributed pro rata to such
holders based upon the aggregate of the full preferential amounts to which the
shares of Preferred Stock and such Parity Stock would otherwise respectively be
entitled. Neither the consolidation or merger of the Corporation with or into
any other corporation or corporations nor the sale, transfer, or lease of all or
substantially all the assets of the Corporation shall itself be deemed to be a
liquidation, dissolution or winding up of the Corporation within the meaning of
this paragraph 3. Notice of the liquidation, dissolution or winding up of the
Corporation shall be mailed, in the manner provided in paragraph 4(c) of this
Section, to the holders of the Preferred Stock less than twenty (20) days prior
to the date on which such liquidation, dissolution and winding up is expected to
take place or become effective.
4. REDEMPTION.
(a) Subject to the rights of any Senior Stock and the provisions of
paragraph 4(g) of this Section, the shares of Preferred Stock may be redeemed at
the option of the Company by action of the Board of Directors in whole or from
time to time in part, at any time after December 31, 19__, at the Redemption
Price per share. If less than all outstanding shares of Preferred Stock are to
be redeemed, the shares of Preferred Stock to be redeemed shall be chosen by lot
or pro rata in such manner as the Board of Directors may determine.
(b) Notice of the redemption shall be mailed, first class, postage
prepaid, not lass than fifteen (15) days and no more than sixty (60) days prior
to the Redemption Date, to the holders of
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record of the shares of Preferred Stock to be redeemed, at their respective
addresses as the same appear on the books of the Corporation or supplied by them
in writing to the Corporation for the purpose of such notice; but no failure to
mail such notice of any defect therein, or in the mailing thereof shall affect
the validity of the proceedings for the redemption of any shares of the
Preferred Stock. In addition to any information required by law or by the
applicable rules of any national stock exchange on which the Preferred Stock may
be listed or admitted to trading, such notice shall set forth the Redemption
Price, the Redemption Date, the number of shares to be redeemed and the place at
which the shares called for redemption will, upon presentation and surrender of
the stock certificates evidencing such shares, be redeemed, and shall state the
name and address of any redemption agent selected by the Corporation in
accordance with paragraph 4(d) of this Section. In case fewer than the total
number of shares of Preferred Stock represented by any certificates are
redeemed, a new certificate representing the number of unredeemed shares will be
issued to the holder thereof without cost to such holder.
(c) If notice of any redemption by the Corporation pursuant to this
paragraph 4 shall have been mailed as provided in paragraph 4(c) of this
Section, and if on or before the Redemption Date specified in such notice the
consideration necessary for such redemption shall have been set apart so as to
be available therefor and on therefor, then on and after the close of business
on the Redemption Date, the shares of Preferred Stock called for redemption,
notwithstanding that any certificates therefor shall not have been surrendered
for cancellation, shall no longer be deemed outstanding, and all rights with
respect to such shares shall forthwith cease and terminate, except the rights of
the holders thereof to receive upon surrender of their certificates the
consideration payable upon redemption thereof. If on or prior to the Redemption
Date (but no earlier than sixty days prior to such Redemption Date), the
Corporation shall deposit, in a trust fund, with any bank or trust company
organized under the laws or the United States of America or any state thereof
having capital, undivided profits and surplus aggregating at least $50,000,000
(the "Redemption Agent"), the consideration sufficient to redeem on such
Redemption Date the shares of Preferred Stock to be redeemed, with irrevocable
instructions and authority to the Redemption Agent, on behalf and at the expense
of the Corporation, to mail the notice of redemption as soon as practicable
after receipt of such irrevocable instructions (or to complete such mailing
previously commenced, if it has not already been completed) and to pay, on and
after the Redemption Date or prior thereto, the Redemption Price of the shares
of Preferred Stock to be redeemed to their respective holders upon the surrender
of their share certificates, then, from and after the date of such deposit
(although prior to the Redemption Date) the shares of Preferred Stock to be
redeemed shall be deemed to be redeemed and dividends on those shares shall
cease to accrue after the Redemption Date. The deposit shall be deemed to
constitute full payment for shares of Preferred Stock to be redeemed to their
holders and from and after the date of such deposit, the shares shall be deemed
to be no longer outstanding and the holders thereof shall cease to be
shareholders with respect to such shares and shall no rights with respect
thereto, except the right to receive payment of consideration sufficient to pay
the Redemption Price of the shares, calculated through the Redemption Date, upon
surrender of their certificates therefor.
(d) Any funds so deposited by the Corporation and unclaimed for one year
from the Redemption Date shall be paid to the Corporation after which repayment
the holders of shares of
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Preferred Stock so called for redemption shall look to the Corporation for the
payment thereof, without interest, unless an applicable abandoned property law
designates another person.
(e) All shares of Preferred Stock redeemed, retired, purchased or
otherwise acquired by the Corporation shall be retired and shall not be
reissued. The Corporation will not redeem any shares of Preferred Stock, except
as expressly authorized therein.
(f) If at any time the Corporation shall have failed to apply, or
declare and set apart the consideration sufficient to pay all dividends accrued
up to and including the immediately preceding dividend payment date on the
Preferred Stock and any Parity Stock, and until all dividends accrued up to and
including the immediately preceding Dividend Payment Date on the Preferred Stock
and any Parity Stock shall have been paid or declared and set apart so as to be
available for the payment in full therefor, and for no other purpose, the
Corporation shall not redeem, pursuant to a sinking fund or otherwise, any
shares of Preferred Stock, Parity Stock or Junior Stock, unless all then
outstanding shares of Preferred Stock and Parity Stock are redeemed, and shall
not purchase or otherwise acquire any shares of Preferred Stock, Parity Stock or
Junior Stock.
5. VOTING.
(a) The holders of Preferred Stock shall have no right to vote for any
purpose, except as specifically required by the General Corporation Law of
Delaware and except as described below.
(b) Without the consent of the holders of at least 66 2/3% of the number
of shares of Preferred Stock at the time outstanding, the Corporation may not
(i) effect any change in the rights, privileges or preferences of the Preferred
Stock, (ii) create or designate any additional class or series of Senior Stock,
or (iii) enter into any agreement which, in the absence of default under such
agreement, would by its terms prevent the Corporation from paying on any
Dividend Payment Date the full dividends to which holders of the Preferred Stock
are then entitled or from otherwise fully performing its obligations pursuant to
this Section. Without the consent of the holders of at least a majority of the
number of shares of Preferred Stock at the time outstanding, the Corporation may
not create any class of Parity Stock. Such consents shall be given in writing or
by vote at a meeting called for that purpose at which the holders of the
Preferred Stock shall vote as a class.
(c) The Corporation shall promptly notify the holders of the Preferred
Stock, in the manner provided in this paragraph 4(c), of the occurrence of the
Event of Noncompliance. Upon the occurrence and during the continuation of an
Event of Noncompliance, the holders of shares of the Preferred Stock voting
separately as a class, shall have the exclusive right to elect two directors of
the Board of Directors. Directors so elected shall thereupon become additional
directors of the Corporation and the authorized directors of the Corporation
shall thereupon be automatically increased by such number. The Corporation will
not take any action which would impair its ability, in conformity with the
Articles of Incorporation and the By-laws of the Corporation, to increase
automatically the number of its directors as provided herein. During such
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times that the holders of Preferred Stock, voting as a class, shall be entitled
to elect such additional directors, the remaining directors shall he elected by
the holders of the otter shares of capital stock of the Corporation entitled to
vote for the election of directors, without right in the holders of Preferred
Stock to participate in the election of such remaining directors.
Such right of the holders of Preferred Stock, as such holders, to elect
such directors shall continue only until all then existing Events of
Noncompliance have been cured in full, at which time the terms of office of the
directors elected as such by the holders of shares of the Preferred Stock shall
forthwith terminate and the number or directors constituting the entire Board of
Directors of the Corporation shall be reduced correspondingly (subject always to
the same provisions for the vesting of such voting rights on the occurrence of
any other or future Event of Noncompliance). The fact that an Event of
Noncompliance has been cured and that no other Events of Noncompliance have
occurred and are continuing shall be evidenced by a certificate executed by the
President of the Corporation and delivered to the Board of Directors.
At any time after such voting rights shall so have vested in the holders of
the shares of the Preferred Stock, the Secretary of the Corporation may, and
upon the written request of the holders of record of not less than 5% of the
Preferred Stock, addressed to him at the principal office of the Corporation,
shall within ten days after delivery of such request, call a special meeting of
the holders of shares of the Preferred Stock for the purpose of electing the
directors to be elected by them, such meeting to be held within 15 days after
such call at the place and upon the notice provided by the By-laws of the
Corporation for the holding of meetings of shareholders; PROVIDED, HOWEVER, that
if the Secretary of the Corporation shall fail to call any such meeting within
ten days after delivery of any such request, such meeting may be called by any
holder or holders of record of 5% or more of the Preferred Stock.
Notwithstanding the foregoing, the Secretary of the Corporation shall not be
required, and the holders of the Preferred Stock shall not be entitled, to call
such a special meeting if the request for such call is received less than sixty
days prior to the date fixed for the next annual meeting of shareholders, and if
in such case such special meeting is not called, the holders of the Preferred
Stock shall be entitled to vote (as a class) at such annual meeting to elect
such directors. Any vacancy in the office of a director elected by the holders
of the Preferred Stock shall be filled by a vote of such holders as a separate
class or by the remaining director elected by such holders. Except as
hereinbefore provided, the directors elected by the holders of the Preferred
Stock shall serve until the next annual meeting of the shareholders and until
their successors shall have been elected and qualified and may be otherwise
removed only by the holders of at least a majority of the then outstanding
shares of Preferred Stock at the time of such removal.
At any meeting having as a purpose the election of directors by holders of
the Preferred Stock, the presence, in person or by proxy, of the holders of a
majority of the shares of Preferred Stock then outstanding shall be required and
be sufficient to constitute a quorum of such class for the election of any
director by such holders. At any such meeting or adjournment thereof, (i) the
absence of a quorum of such holders of the Preferred Stock shall not prevent the
election of the directors to be elected by the holders of shares other than the
Preferred Stock, and the absence of a quorum, either of holders of the Preferred
Stock or of shares other than the Preferred Stock, or both, a majority of the
holders, present in person or by proxy, of the class or classes of stock
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which lack a quorum shall have power to adjourn the meeting for the election of
directors which they are entitled to elect, from time to time, without notice
other than announcement at the meeting, until a quorum shall be present.
(d) With respect to actions by the holders of the Preferred Stock upon
those matters on which such holders are entitled to vote as a separate class,
such actions may be taken without a shareholders meeting by the written consent
of holders of the Preferred Stock who would be entitled to vote at a meeting
those shares having voting power to cast not less than the minimum number of
votes that would be necessary to authorize or take such action at a meeting at
which all shares of Preferred Stock entitled to vote were present and voted.
Notice shall be given in accordance with the applicable provisions of the
General Corporation Law of Delaware for the taking of corporate action without a
meeting by less than unanimous written consent to those holders of Preferred
Stock on the record date whose shares were not represented on the written
consent.
6. CONVERSION.
(a) CONVERSION RIGHT. Unless previously redeemed as provided in
paragraph 4 hereof, the Preferred Stock may be converted prior to redemption
thereof at such time, in such manner and upon such terms and conditions as
hereinafter provided in this paragraph 6 into fully paid and non-assessable full
shares of Common Stock. In the event the Corporation shall call for redemption
the shares of Preferred Stock pursuant to paragraph 7 hereof, the conversion
right provided by this paragraph 6 shall terminate at the close of business on
the date fixed for redemption. In case cash, securities or property other than
Common Stock shall be payable, deliverable or issuable upon conversion as
provided herein, then all references to Common Stock in this paragraph 6 shall
be deemed to apply, so far as appropriate and as nearly as may be, to such cash,
property or other securities.
(b) CONVERSION RATE. Subject to the provisions for adjustments
hereinafter set forth in this paragraph 6, the Preferred Stock may be converted
into Common Stock at the Initial conversion rate of one fully paid and
non-assessable shares of Common Stock for one share of Preferred Stock. (This
conversion rate as from time to time adjusted cumulatively pursuant to the
provisions of paragraph 6(d) of this Section is hereinafter referred to as the
"Conversion Rate.")
(c) CONVERSION DATE. Unless previously redeemed as provided in paragraph
7 hereof, the Preferred Stock shall be convertible at any time and from time to
time at the option of the holder(s) thereof.
(d) ADJUSTMENTS
(i) Stock Dividends, Subdivisions, Combinations. In case the
corporation shall (A) pay a dividend or make a distribution on its
outstanding shares of Common Stock, (B) subdivided the then outstanding
shares of its Common Stock into a greater number of shares of Common Stock,
(C) combine the ten outstanding shares of its Common Stock Into a smaller
number of shares of Common Stock, or (D) issue by reclassification of its
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shares of Common Stock any shares of capital stock of the Corporation
(including any such reclassification in connection with a consolidation or
merger in which the Corporation is the continuing corporation), then the
Conversion Rate in effect immediately prior to the opening of business on
the record date for such dividend or distribution or the effective date of
such subdivision, combination or reclassification shall be adjusted so that
the holder of each share of the Preferred Stock thereafter surrendered for
conversion shall be entitled to receive the number and kind of shares of
capital stock of the Corporation which it would have owned or been entitled
to receive immediately following such action had such shares of Preferred
Stock been converted immediately prior to such time. An adjustment made
pursuant to this paragraph 6(d)(i) for a dividend or distribution shall
become effective immediately after the record date for the dividend or
distribution and an adjustment made pursuant to this paragraph 6(d)(i) for
a subdivision, combination or reclassification. Such adjustment shall be
made successively whenever any action listed above shall be taken. In any
case in which this paragraph 6(d)(i) shall require that an adjustment shall
become effective immediately after a record date for an event, the
Corporation may defer until the occurrence of such event (x) issuing to the
holder of any shares of Preferred Stock converted after such record date
and before the occurrence of such event the additional shares of Common
Stock Issuable upon such conversion by reason of the adjustment required by
such event over and above the shares of Common Stock issuable upon such
conversion before giving effect to such adjustment and (y) paying to such
holder cash in lieu of any fractional interest to which such holder is
entitled pursuant to paragraph 6(i) of this Section; PROVIDED, HOWEVER,
that the Corporation shall deliver to such holder a due bill or other
appropriate instrument evidencing such holder's right to receive such
additional shares of Common Stock, and such cash, upon the occurrence of
the event requiring such adjustment.
(ii) RECLASSIFICATIONS, CONSOLIDATIONS OR MERGER. In case of any
reclassification or change of outstanding Common Stock (other than those
referred to in paragraph 6(d)(i) of this Section and other than a change in
par value), or case of any consolidation of the Corporation with any other
corporation or any merger of the corporation into another corporation or of
another corporation into the Corporation (other than a consolidation or
merger in which the Corporation is the continuing corporation and which
does not result in any reclassification of, or change (other than a change
in par value, or as a result of a subdivision or combination to which
paragraph 6(d)(i) hereof is applicable in, the outstanding Common Stock),
or in case of any sale or transfer to another corporation or entity (other
than by mortgage or pledge) of all or substantially all of the properties
and assets of the Corporation, the Corporation (or its successor in such
consolidation or merger) or the purchase of such properties and assets
shall make appropriate provision so that the holder of each share of
Preferred Stock then outstanding shall have the right thereafter to convert
such share into the kind and amount of shares of stock and other securities
and property receivable upon such reclassification, change, consolidation,
merger, sale or transfer by a holder of the number of shares of Common
Stock into which such Preferred Stock might have been converted immediately
prior to such reclassification, change, consolidation, merger, sale or
transfer, and the holders of the Preferred Stock shall have no other
conversion rights under these provisions; provided,
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that effective provision shall be made, in the Articles or Certificate of
Incorporation of the resulting or surviving corporation or otherwise or in
any contracts of sale or transfer, so that the provisions set forth herein
for the protection of the conversion rights of Preferred Stock shall
thereafter be made applicable, as nearly as reasonably may be, to any such
other shares of stock and other securities and property deliverable upon
conversion of the Preferred Stock remaining outstanding or other
convertible preferred stock or other securities received by the holders of
Preferred Stock or purchaser shall expressly assume the obligation to
deliver, upon the exercise of the conversion privilege, such shares,
securities or property as the holders of the Preferred Stock remaining
outstanding, or other convertible preferred stock or other securities
received by the holders in place thereof, shall be entitled to receive
pursuant to the provisions hereof, and to make provisions for the
protection of the conversion rights as above provided.
(iii) NOTICE OF ADJUSTMENT. Whenever the Conversion Rate shall be
adjusted as provided in this paragraph 7(d), the Corporation shall promptly
(A) file with the transfer agent for the Preferred Stock a statement signed
by the President or the Vice President of the Corporation and by its
Treasurer, disclosing the nature of such event, the Conversion Rate in
effect immediately thereafter and the kind and amount of stock or other
securities or property into which Preferred Stock shall be convertible
after such event, and (B) cause a notice containing a summary of the
information set forth in said statement to be mailed to the holders of
record of Preferred Stock. Where appropriate, such notice may be given in
advance and included as a part of a notice required to be mailed under the
provisions of paragraph 7(e) of this Section.
(iv) DE MINIMIS ADJUSTMENT. The Corporation may, but shall not be
required to, make any adjustment of the Conversion Rate if such adjustment
would require an increase or decrease of less than 1% in such Conversion
Rate; PROVIDED, HOWEVER, that any adjustments which by reason of this
paragraph 6(d)(iv) are not required to be made shall be carried forward and
taken into account in any subsequent adjustment.
(e) ADVANCE NOTICE OF CERTAIN EVENTS. In case at any time:
(i) the Corporation shall take any action which would require an
adjustment in the Conversion Rate pursuant to paragraph 7(d)(i) of this
Section;
(ii) the Corporation shall authorize the granting to the holders of
its Common Stock of any Distributions on Common Stock or shall have
declared any other dividend or distribution on its Common Stock and notice
thereof shall be given to holders of Common Stock;
(iii) there shall be any capital reorganization or reclassification
of the Common Stock (other than a change in par value), or any
consolidation or merger to which the Corporation is a party and for which
approval of any shareholders of the Corporation is required, or any sale or
transfer of all or substantially all of the properties and assets of the
Corporation, or a tender offer for at least a majority of the Common Stock
which has been
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recommended by the Board of Directors as being in the best interests of the
holders of the Common Stock; or
(iv) there shall be a voluntary or involuntary dissolution,
liquidation or winding up of the Corporation:
then, in any such event, the Corporation shall give written notice, in the
manner provided in paragraph 7(b) of this Section, to the holders of the
Preferred Stock at their respective addresses as the same appear upon the books
of the Corporation, at least twenty days (or ten days in the case of a
recommended tender offer as specified in clause (iii) above) prior to any record
date or other date set for definitive action if there shall be no record date,
of the date on which such action, dividend, distribution, reorganization,
reclassification, consolidation, merger, sale, transfer, tender offer,
dissolution, liquidation or winding up is expected to take place or become
effective, and the date as of which it is expected that holders of the Common
Stock of record shall be entitled to exchange their shares of Common Stock for
securities or other property, if any, deliverable upon such reorganization,
reclassification, consolidation, merger, sale, transfer, tender offer,
dissolution, liquidation or winding up; PROVIDED, HOWEVER, that any notice
required by clause (ii) above shall be given in the manner and at the time that
such notice is given to the holders of the Common Stock. Without limiting the
obligation of the Corporation to provide notice of corporate actions hereunder,
the failure to give the notice required by this paragraph 6(e) or any defect
therein shall not affect the legality or validity of any such corporate action
of the Corporation or the vote upon such action.
(f) METHOD OF CONVERSION. Before any holder of Preferred Stock shall be
entitled to convert the same into Common Stock, it shall surrender the
certificate or certificates for such Preferred Stock at the office of the
Corporation or at the office of the Transfer Agent for the Preferred Stock, if
any, which certificate or certificates, if the Corporation shall so request,
shall be duly endorsed to the Corporation or in blank or accompanied by proper
instruments of transfer to the Corporation or in blank (such endorsements or
instruments of transfer to be in form satisfactory to the Corporation), and
shall give written notice to the Corporation at said office that it elects to
convert all or a part of the shares of Preferred Stock represented by said
certificate or certificates in accordance with the terms of this paragraph 6,
and shall state in writing therein the name or names in which it wishes the
certificate or certificates for Common Stock to be issued. Every such notice of
election to convert shall constitute a contract between the holder of such
Preferred Stock and the Corporation, whereby the holder of such Preferred Stock
shall be deemed to subscribe for the amount of Common Stock which it shall be
entitled to receive upon conversion of the number of shares of Preferred Stock
to be converted, and, in satisfaction of such subscription, to deposit the
shares of Preferred Stock to be converted, and thereby the Corporation shall be
deemed to agree that the surrender of the shares of Preferred Stock to be
converted shall constitute full payment of such subscription for Common Stock to
be issued upon such conversion. The Corporation will as soon as practicable
after such deposit of a certificate or certificates for Preferred Stock,
accompanied by the written notice and statements above prescribed, issue and
deliver at the office of the Corporation or of said transfer agent to the person
for whose account such Preferred Stock was so surrendered, or to its nominee(s)
or, subject to compliance with applicable law, transferee(s), a certificate or
certificates for the number
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of full shares of Common Stock to which it shall be entitled, together with cash
in lieu of any fraction of a share as hereinafter provided. If surrendered
certificates for Preferred Stock are converted only in part, the Corporation
will issue and deliver to the holder, or to its nominee(s), without charge
therefor, a new certificate or certificates representing the aggregate of the
unconverted share of Preferred Stock. Such conversion shall be deemed to have
been made as of the date of such surrender of the Preferred Stock to be
converted; and the person or persons entitled to receive the Common Stock
issuable upon conversion of such Preferred Stock shall be treated for all
purposes as the record holder or holders of such Common Stock on such date.
The issuance of certificates for shares of Common Stock upon conversion of
shares of Preferred Stock shall be made without charge for any issue, stamp or
other similar tax in respect of such issuance, PROVIDED, HOWEVER, if any such
certificate is to be issued in a name other than that of the holder of the share
or shares of Preferred Stock converted, the person or persons requesting the
issuance thereof shall pay to the Corporation the amount of any tax which may be
payable in respect of any transfer involved in such issuance or shall establish
to the satisfaction of the Corporation that such tax has been paid.
The Corporation shall not be required to convert Preferred Stock, and no
surrender of Preferred Stock shall be effective for that purpose, while the
stock transfer books of the Corporation are closed for any purpose; but the
surrender of Preferred Stock for conversion during any period which such books
are so closed shall become effective for conversion immediately upon the
reopening of such books, as if the conversion had been made on the date such
Preferred Stock was surrendered.
(g) SHARES RESERVED FOR CONVERSION. The Corporation shall at all times
reserve and keep available solely for the purpose of issuance upon conversion of
the outstanding shares of Preferred Stock, such number of shares of Common Stock
as shall be issuable upon the conversion of all such outstanding shares,
provided that nothing contained herein shall be construed to preclude the
Corporation from satisfying the obligations in respect of the conversion of the
outstanding shares of Preferred Stock by delivery of shares of Common Stock
which are held in the treasury of the Corporation. The Corporation shall take
all such corporate and other actions as from time to time may be necessary to
insure that all shares of Common Stock issuable upon conversion of shares of
Preferred Stock at the Conversion Rate in effect from time to tune will, upon
issue, be duly and validly authorized and issued, fully paid and nonassessable
and free of any preemptive or similar rights. In order that the Corporation may
issue shares of Common Stock upon conversion of the Preferred Stock, the
Corporation will endeavor to comply with all applicable federal and state
securities laws.
(h) STATUS OF SHARES CONVERTED. All shares of Preferred Stock received by
the Corporation upon conversion thereof into Common Stock shall be retired and
shall not be reissued.
(i) FRACTIONS UPON CONVERSION. The Corporation shall not be required to
issue fractional shares of Common Stock or script upon conversion of the
Preferred Stock. As to any final fractions of a share of Common Stock which a
holder of one or more shares of Preferred
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Stock would otherwise be entitled to receive upon conversion of such shares in
the same transaction, the Corporation shall pay a cash adjustment in respect of
such final fraction in an amount equal to the same fraction of the market value
of a full share of the Common Stock. For purpose of this paragraph 6(i), the
market value of a share of the Common Stock shall be the last reported sale
price regular way on the business day immediately preceding the date of
conversion, or, in case no such reported sale takes place on such day, the
average of the reported closing bid and asked prices regular way on such day, in
either case on the composite tape, or if the shares of Common Stock are not
quoted on the composite tape, on the principal United States Securities Exchange
registered under the Securities Exchange Act of 1934, as amended, on which the
share of Common Stock are listed or admitted to trading, or if the shares of
Common Stock are not listed or admitted to trading on any exchange, the closing
sale price (or the average of the quoted closing bid and asked prices if there
are no reported sales) as reported on the National Association of Securities
Dealers Automated Quoting System (NASDAQ) of any comparable system, the average
of the closing bid and asked prices as furnished by any member of the National
Association of Securities Dealers, Inc. selected from time to time by the
Corporation for that purpose or, in the absence of such quotations, such other
method of determining market value as the Board of Directors shall from time to
time deem to be fair.
7. PREEMPTIVE RIGHTS. The holders of the Preferred Stock will not have
any preemptive rights to subscribe for or purchase any shares of stock or any
other securities which may be issued by the Corporation. However, the holders of
Preferred Stock shall have a fifteen day right of first refusal to acquire, in
the aggregate, up to 5% of any securities in the Corporation which are offered
pursuant to a private offering exemption under federal and applicable state law.
Each holder of Preferred Stock shall be entitled to his pro rata share of the
aggregate 5% of such securities. The right of first refusal shall be exercised
within fifteen days after a holder of Preferred Stock is deemed to have received
the offering materials prepared by the Corporation in connection with the
offering via regular U.S. mail. Deemed receipt of the materials shall be
established three days after mailing via U.S. regular mail to the address of
each bolder of Preferred Stock as shown on the records of the Corporation as of
the date of mailing. Each holder of Preferred Stock desiring to exercise his
right of first refusal shall do so by fulfilling all instructions provided in
the offering materials and notification from the Corporation including returning
the fully executed and completed subscription agreement required to subscribe
for the securities offered and a check for the amount subscribed within fifteen
days after the deemed receipt. This right of first refusal shall terminate and
be of no effect 30 clays prior to the effective date of any registration
statement filed with the Securities and Exchange Commission registering any of
the Company's securities or the effective date of any registration statement
flied with any state securities regulatory agency registering any of the
Company's securities.
8. EXCLUSION OF OTHER RIGHTS. Except as may otherwise be required by law
and for the equitable rights and remedies which may otherwise be available to
holders of Preferred Stock, the shares of Preferred Stock shall not have any
designations, preferences, limitations or relative rights, other than those
specifically set forth in these Amended and Restated Articles of incorporation.
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9. HEADINGS OF SUBDIVISIONS. The headings of the various subdivisions of
this Section are for the convenience of reference only and shall not affect the
interpretation of any of the provisions of this Section.
SECTION B
THE COMMON STOCK
The Common Stock shall consist of 100,000,000 shares, $0.001 par value per
share.
1. DIVIDENDS. Subject to the rights of holders of stock of the
Corporation senior to the Common Stock with respect to the declaration and
payment of dividends, holders of Common Stock shall be entitled to receive such
dividends and other distributions in cash, stock or property of the Corporation
as may be declared thereon by the Board of Directors from time to time out of
assets or funds of the Corporation legally available therefor.
2. PROXIES AND VOTING. At every meeting of the shareholders of the
Corporation, every holder of Common Stock shall be entitled to one vote in
person or by proxy for each share of Common Stock standing in his name on the
transfer books of the Corporation. Every stockholder entitled to vote may vote
in person or by proxy authorized by an instrument in writing filed in accordance
with the procedure established for the meeting.
3. STOCKHOLDER ACTIONS BY WRITTEN CONSENT. Any vote, consent, approval,
ratification or disapproval required by these by-laws may be given as follows:
(a) by a written Consent executed by the Consenting Stockholder, provided
such Consent shall not have been withdrawn by the Consenting Stockholder by
notification to the Company at or prior to the time of the doing of such act or
thing; or
(b) by the affirmative vote by the Consenting Stockholder to the doing of
the act or thing for which the Consent is solicited at any meeting called and
held pursuant to these by-laws to consider the doing of such act or thing.
(c) by failing to respond, within the rime set forth in a Notice which
specifies (i) the specific act or proposal for which Consent is being requested
by the Company, (ii) that the Company intends to rely on the provisions of
Article IV, Section B, subparagraph 3 herein and find that a failure to object
or to dissent may constitute a form of consent and authorization and,
accordingly, the Company will tally all proxies which have not been returned and
shall consider all such unreturned proxies as consents and authorizations with
the same legal validity as a consent which has been returned, UNLESS 10% of the
Company's outstanding shares of stock object to this provision in writing prior
to or on the date in which a meeting is to be convened, in which case the
failure the return a proxy or dissent shall not he construed as a form of
consent and authorization.
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QUORUM. In accord with Section 216 of the General Corporation Law of
Delaware, a stockholders meeting and a special meeting of stockholders may be
convened, but no business may be conducted without at least one-third of the
shares entitled to vote are present In person or by proxy at the meeting.
ARTICLE V
Responsibility for the management of the business and conduct of the
affairs of the Corporation shall he vested in the Board of Directors. In
furtherance and not in limitation of the powers conferred by the laws of the
State of Delaware, the Board of Directors is expressly authorized:
(a) to make, alter, amend and repeal the By-Laws, subject to the power of
the shareholders to alter or repeal the By-Laws; and
(b) to adopt a corporate seal.
ARTICLE VI
The Corporation may, upon adoption of a resolution by its Board of
Directors, purchase its own shares to the extent of unreserved and unrestricted
capital surplus available therefor. The Board of Directors of the Corporation
may, from tune to time, in its discretion and without the prior approval of the
shareholders of the Corporation, distribute a portion of its assets to the
shareholders out of capital surplus of the Corporation.
ARTICLE VII
Subject to the provisions hereof, the Corporation reserves the right at any
time, and from time to time, to amend, alter, repeal, or rescind any provision
contained herein, in the manner now or hereafter prescribed by law, and other
provisions authorized by the laws of the State of Delaware at the time in force
may be added or inserted, in the manner now or hereafter prescribed by law; and
all rights, preferences and privileges of whatsoever nature conferred upon
stockholders, directors or any other persons whomsoever by and pursuant to these
Articles of Incorporation in its present form or as hereafter amended are
granted subject to this reservation.
ARTICLE VIII
DESIGNATION OF COMMITTEES
In furtherance and not in limitation or the powers conferred by statute,
the Board of Directors is expressly authorized by a majority of the whole Board
of Directors, to designate one or more committees, each committee to consist of
one or more of the directors of the Corporation. The Board of Directors may
designate one or more directors as alternate members of any committee, who may
replace any absent or disqualified member at any meeting of the
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committee. Any such committee, to the extent provided in the resolution or in
the By-Laws of the Corporation, shall have and may exercise the powers of the
Board of Directors in the management of the business and affairs of the
Corporation, and may authorize the seal of the Corporation to be affixed to all
papers which may require it; PROVIDED, HOWEVER, the By-Laws may provide that in
the absence or disqualification of any member of such committee or committees,
the member or members thereof present at any meeting and not disqualified from
voting, whether or not he or they constitute a quorum, may unanimously appoint
another member of the Board of Directors to act at the meeting in the place of
such absent or disqualified member.
ARTICLE IX
RIGHTS TO PURCHASE SECURITIES AND OTHER PROPERTY
The Board of Directors is expressly authorized to create and issue rights
entitling the holders of such rights to purchase from the Corporation shares of
capital stock or other securities or property. The Board of Directors shall
have, in its sole discretion, the authority to determine the time at which and
terms upon which such rights are to be issued and set forth in the contracts or
instruments that evidence such rights.
ARTICLE X
DIRECTOR LIABILITY INDEMNIFICATION
A director of the Corporation shall not be personally liable to the
Corporation or its stockholders for monetary damages for breach of duty or care
or other duty as a director, except for liability (i) for any appropriation, in
violation of his duties, of any business opportunity of the Corporation, (ii)
for acts or omissions not in good faith or which involve intentional misconduct
or a knowing violation of law, (iii) for any type of liability not contemplated
by Section 145 of the General Corporation Law of Delaware, or (iv) for any
transaction from which the director derived an improper personal benefit. If the
General Corporation Law of Delaware is hereafter amended to authorize further
elimination or limitation of the liability of the directors, then the liability
of the director shall be eliminated or limited to the fullest extent permitted
by the General Corporation Law of Delaware, as amended. In addition to the
limitation on personal liability of directors provided herein, the Corporation
shall, to the fullest extent permitted by the General Corporation Law of
Delaware, (x) indemnify its officers and directors and (y) advance expenses
incurred by such officers or directors in relation to any action, suit or
proceeding. Any repeal or modification of this Article VI by the stockholders of
the Corporation shall be prospective only, and shall not adversely affect any
limitation on the personal liability or right to indemnification or advancement
of expenses hereunder existing at the time of such repeal or modification.
IN WITNESS WHEREOF, Fix-Corp International, Inc., through its designated
nominee and pursuant to Section 103(a)(2)c of the General Corporation Law of
Delaware, has caused these Amended and Restated Articles of Incorporation to be
executed and its corporate seal to be affixed as of this 30th day of April,
1997.
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FIX-CORP INTERNATIONAL, INC.
By
--------------------------------------
Mark Fixler, President
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Exhibit 2
BYLAWS
OF
FIX-CORP INTERNATIONAL, INC.
ARTICLE I - SHAREHOLDERS
Section 1.1 Annual Meeting. The annual meeting of the Shareholders for
the election of Directors and for the transaction of such other business as may
properly come before the meeting shall be held at such place, either within or
without the State of Ohio, on such date and at such time as the Board of
Directors may by resolution provide, or if the Board of Directors fails to
provide, then such meeting shall be held at the principal office of the
Corporation at 27040 Cedar Road, Suite #218, Beachwood, Ohio 44122 on the first
Tuesday of December of each year, or, if such date is a legal holiday, on the
next succeeding business day. The Board of Directors may specify by resolution
prior to any special meeting of Shareholders held within the year that such
meeting shall be in lieu of the annual meeting.
Section 1.2 Special Meetings: Call and Notice of Meetings. Special
meetings of the Shareholders may be called at any time by the Board of
Directors, the President, or upon written request of the holder(s) of at least
twenty-five percent (25%) of the outstanding common stock. Such meetings shall
be held at such place, either within or without the State of Ohio, as is stated
in the call and notice thereof. Written notice of such meeting of Shareholders,
stating the time and place of the meeting, and the purpose of any special
meeting shall be mailed to each Shareholder entitled to vote at or to notice of
such meeting at his or her address shown on the books of the Corporation not
less than ten (10) nor more than sixty (60) days prior to such meeting unless
such Shareholder waives notice of the meeting. Any Shareholder may execute a
waiver of notice, in person or by proxy, either before or after any meeting, and
shall be deemed to have waived notice if he is present at such meeting in person
or by proxy. Neither the business transacted at nor the purpose of any meeting
need be stated in the waiver of notice of such meeting.
Notice of any meeting may be given by the President, the Secretary or by
the person(s) calling such meeting. No notice need be given of the time and
place of reconvening of any adjourned meeting, if the time and place to which
the meeting is adjourned are announced at the adjourned meeting.
Section 1.3 Quorum: Required Shareholder Vote. A quorum for the
transaction of business at any annual or special meeting of Shareholders shall
exist when the holders of a majority of the outstanding shares entitled to vote
are represented either in person or by proxy at such meeting. If a quorum is
present, the affirmative vote of the majority of the shares represented at the
meeting and entitled to vote on the special matter shall be the act of the
Shareholders unless a greater vote is required by law, by the Articles of
Incorporation or by these Bylaws. When a quorum is once present to organize a
meeting, the Shareholders present may continue to do business at the meeting or
at any adjournment thereof, notwithstanding the withdrawal of enough
Shareholders to leave less than a quorum. The holders of a majority of the
voting shares
<PAGE>
represented at a meeting, whether or not a quorum is present, may adjourn such
meeting from time to time.
Section 1.4 Proxies. A Shareholder may vote either in person or by a
proxy which he has duly executed in writing. No proxy shall be valid after
eleven (11) months from the date of its execution unless a longer period is
expressly provided in the proxy.
Section 1.5 Action of Shareholders Without Meeting. Any action required
to be or which may be taken at a meeting of the Shareholders, may be taken
without a meeting if written consent, setting forth the actions so taken shall
be signed by all of the Shareholders entitled to vote with respect to the
subject matter thereof. Such consent shall have the same force and effect as
unanimous affirmative vote of the Shareholders and shall be filed with the
minutes of the proceedings of the Shareholders.
ARTICLE II - DIRECTORS
Section 2.1 Power of Directors. The Board of Directors shall manage the
business of the Corporation and may exercise all the powers of the Corporation,
subject to any restrictions imposed by law, by the Articles of Incorporation or
by the Bylaws.
Section 2.2 Composition of the Board. The Board of Directors of the
Corporation shall consist of between one and five natural persons of the age of
eighteen years or over. Directors need not be residents of the State of Ohio or
Shareholders of the Corporation. At each annual meeting the Shareholders shall
fix the number of Directors and elect the Directors, who shall serve until their
successors are elected and qualified; provided that the Shareholders may, by the
affirmative vote of the holders of a majority of the shares entitled to vote at
an election of Directors increase or reduce the number of Directors and add or
remove Directors with or without cause at any time.
Section 2.3 Meeting of the Board: Notice of Meeting; Waiver of Notice.
The annual meeting of the Board of Directors for the purpose of electing
officers and transacting such other business as may be brought before the
meeting shall he held each year immediately following the annual meeting of
Shareholders. The Board of Directors may by resolution provide for the time and
place of other regular meetings and no notice of such regular meeting need be
given, except as provided in Article VII of these Bylaws, in which case notice
shall be given. Special meetings of the Board of Directors may be called by the
President. or by two (2) Directors, and written notice of the time and place of
such meetings shall be given to each Director by telephone, telegraph,
cablegram, Federal Express or in person at least two (2) days before the
meeting. Any Director may execute a waiver of notice, either before or after any
meeting, and shall be deemed to have waived notice if he is present at such
meeting. Neither the business to be transacted at, nor the purpose of, any
meeting of the Board of Directors need be stated in the notice or waiver of
notice of such meeting. Any meeting may be held at any place within or without
the State of Florida.
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Section 2.4 Quorum: Vote Requirement. A majority of the Directors in
office at any time shall constitute a quorum for the transaction of business at
any meeting. When a quorum is present, the vote of a majority of the Directors
present shall be the act of the Board of Directors, unless a greater vote is
required by the Articles of Incorporation or by these Bylaws.
Section 2.5 Action of the Board Without Meeting. Any action required or
permitted to be taken at a meeting of the Board of Directors or any committee
thereof may be taken without a meeting if written consent setting forth the
action so taken. is signed by all the Directors or committee members and filed
with the minutes of the proceedings of the Board of Directors or committee.
Such consent shall have the same force and effect as an unanimous affirmative
vote of the Board of Directors or committee, as the case may be.
Section 2.6 Committees. The Board of Directors, by resolution adopted by
a majority of all of the Directors, may designate from among its members an
Executive Committee, and/or other committees, each composed of two (2) or more
Directors, which may exercise such authority as is delegated by the Board of
Directors, provided that no committee shall have the authority of the Board of
Directors in reference to (a) an amendment to the Articles of Incorporation or
the Bylaws of the corporation, (b) the adoption of a plan of merger or
consolidation, (c) the sale, lease, exchange or other disposition of all or
substantially all of the property and assets of the Corporation, or (d) a
voluntary dissolution of the Corporation or a revocation thereof.
Section 2.7 Vacancies. A vacancy occurring in the Board of Directors by
reason of the removal of a Director by the Shareholders shall be filled by the
Shareholders, or, if authorized by the Shareholders, by the remaining Directors.
Any other vacancy occurring in the Board of Directors may be filled by the
affirmative vote of a majority of the remaining Directors through less than a
quorum of the Board of Directors, or by the sole remaining Director, as the case
may be, or, if the vacancy is not so filled, or if no Director remains, by the
Shareholders. A Director elected to fill a vacancy shall serve for the unexpired
term of his predecessor in office.
ARTICLE III - OFFICERS
Section 3.1 Executive Structure of the Corporation. The officers of the
Corporation shall consist of a President, a Secretary, a Treasurer and such
other officers as may be elected by the Board of Directors. Each officer shall
hold office for the term for which he has been elected until he is removed or
his successor has been elected and qualified. The same individual may
simultaneously hold more than one office in the Corporation. The Board of
Directors may designate a Vice President as an Executive Vice President and may
designate the order in which other Vice Presidents may act.
Section 3.2 President. The President shall be the chief executive
officer of the Corporation and shall give general supervision and direction to
the affairs of the Corporation, subject to the direction of the Board of
Directors. He shall preside at all meetings of the Shareholders.
3
<PAGE>
Section 3.3 Vice President. The Vice President shall act in the case of
absence or disability of the President.
Section 3.4 Secretary. The Secretary shall keep the minutes of the
proceedings of the Shareholders and of the Board of Directors, and shall have
custody of and attest to the seal of the Corporation.
Section 3.5 Treasurer. The Treasurer shall be responsible for the
maintenance of proper financial books and records of the Corporation.
Section 3.6 Other Duties and Authority. Each officer, employee and agent
of the Corporation shall have such other duties and authority as may be
conferred upon him by the Board of Directors or delegated to him by the
President.
Section 3.7 Removal of Officers. Any officer may be removed at any time
by the Board of Directors, and such vacancy may be filled by the Board of
Directors. This provision shall not prevent the making of a contract of
employment for a definite term with any officer and shall have no effect upon
any cause of action which any officer may have as a result of removal in breach
of a contract of employment.
Section 3.8 Salaries. The salaries of the officers of the Corporation
shall be fixed from time to time by the Board of Directors. No officer shall be
prevented from receiving such salary by reason of the fact that he is also a
Director of the Corporation.
ARTICLE IV - STOCK
Section 4.1 Stock Certificates. The shares of stock of the Corporation
shall be represented by certificates in such form as may be approved by the
Board of Directors, which certificates shall be issued to the Shareholders of
the Corporation in numerical order from the stock book of the Corporation, and
each of which shall bear the name of the Shareholder, the number of shares
represented and the date of issue; and which shall be signed by the President
and which shall be sealed with the seal of the Corporation. No share
certificate shall be issued until the consideration for the share represented
thereby has been fully paid.
Section 4.2 Transfer of Stock. Shares of stock of the Corporation shall
be transferred only on the books of the Corporation upon surrender to the
Corporation of the certificate(s) representing the shares to be transferred,
accompanied by an assignment in writing of such shares properly executed by the
shareholder of record or his or her duly authorized attorney-in-fact, and with
all taxes on the transfer having been paid. The Corporation may refuse any
requested transfer until furnished evidence satisfactory to it that such
transfer is proper. Upon the surrender of a certificate for transfer of stock,
such certificate shall at once be conspicuously marked on its face "cancelled"
and filed with the permanent stock records of the Corporation. The Board of
Directors may make such additional rules concerning the issuance, transfer and
registration of stock and requirements regarding the establishment of lost,
destroyed or wrongfully taken stock
4
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certificates (including any requirement of an indemnity bond prior to issuance
of any replacement certificate) as it deems appropriate.
Section 4.3 Registered Stockholders. The Corporation may deem and treat
the holder of record of stock as the absolute owner for all purposes and shall
not be required to take any notice of any right or claim of right of any other
person.
Section 4.4 Record Date. For the purpose of determining Shareholders
entitled to notice of or to vote at any meeting of Shareholders or any
adjournment hereof, or entitled to receive payment of any dividend, or in order
to make a determination of Shareholders for any other purpose, the Board of
Directors of the Corporation may fix in advance a date as the record date for
any such determination of Shareholders, such date in any case to be not more
than sixty (60) days and, in the case of a meeting of Shareholders, not less
than ten (10) days prior to the date on which the particular action requiring
such determination of Shareholders is to be taken.
ARTICLE V - DEPOSITORIES, SIGNATURES, SEAL
Section 5.1 Depositories. All funds of the Corporation shall be
deposited in the name of the Corporation in such bank(s) or other financial
institutions as the Board of Directors may from time to time designate and shall
be drawn down on checks, drafts or other orders signed on behalf of the
Corporation by such person(s) as the Board of Directors may from time to time
designate.
Section 5.2 Contracts and Deeds. All contracts, deeds and other
instruments shall be signed on behalf of the corporation by the President or by
such other officer(s) or agent(s) as the Board of Directors may from time to
time by resolution provide.
Section 5.3 If the seal is affixed to a document, the signature of the
Secretary shall attest the seal. The seal and its attestation may be
lithographed or otherwise printed on any documents and shall have, to the extent
permitted by law, the same force and effect as if it had been affixed and
attested manually.
ARTICLE VI - INDEMNITY
Any person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative, including any action by or in the
right of the Corporation, by reason of the fact that he or she is or was a
Director or Officer of the Corporation, or is or was serving at the request of
the Corporation as a Director or Officer of another corporation, partnership,
joint venture, trust or other enterprise, shall be indemnified by the
Corporation against expenses, including reasonable attorney fees, judgments,
fines and amounts paid in settlement actually and reasonably incurred by him in
connection with such action, suit or proceeding, unless that person failed to
meet the standards of conduct set forth in the General Corporation Law of
Delaware.
ARTICLE VII - AMENDMENT OF BYLAWS
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The Board of Directors shall have the power to alter, amend or repeal the
Bylaws or adopt new Bylaws, but any Bylaws adopted by the Board of Directors may
be altered, amended or repealed and new Bylaws adopted by the Shareholders. The
Shareholders may prescribe that any Bylaws adopted by them shall not be altered,
amended or repealed by the Board of Directors. Action by the Directors with
respect to the Bylaws shall be taken by an affirmative vote of a majority of all
of the Directors then in office. Action by the Shareholders with respect to the
Bylaws shall be taken by an affirmative vote of a majority of all shares
outstanding and entitled to vote. Prior to any action under this Article, seven
(7) days written notice (in accordance with the requirements of Article II,
Section 2.3) shall be given to the Directors, and ten (10) days written notice
(in accordance with the requirements of Article I, Section 1.2) shall be given
to the Shareholders.
I, Mark Fixler, President of Fix-Corp International, Inc., certify that the
foregoing are the By-Laws of said Company, adopted November 14, 1995.
--------------------
Mark Fixler
President
6
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Exhibit 6
EMPLOYMENT CONTRACT
THIS AGREEMENT, executed on the date (or dates) set forth below, by and
between:
FIX-CORP. INTERNATIONAL, INC., a Delaware corporation with its
principal place of business located at 27040 Cedar Road, Suite 218,
Beachwood, Ohio 44122, acting through its authorized officer Andy Press,
and hereafter referred to as either as the Company or Fix-Corp.;
- and -
Mark Fixler, an individual residing at 6758 Bramblewood Lane, Mayfield
Village, Ohio 44143, acting on his own behalf and hereafter referred to as Mark
Fixler or Employee;
Declare as their mutual intent and purpose as follows.
RECITALS:
WHEREAS, the Company desires to engage Mark Fixler to perform services for
the Company, Fix-Corp., as well as its present subsidiary Fix-Corp Industries,
Inc., or any future parent or subsidiary company of Fix-Corp., or any affiliate
of Fix-Corp International, Inc. and Fix-Corp Industries, Inc.; and
WHEREAS, Mark Fixler ["Employee" herein] desires to perform such services
on the terms and conditions hereinafter set forth.
NOW, THEREFORE, in exchange for the above covenants and with both parties
intending to be legally bound, Mark Fixler agrees to become an Employee of
Fix-Corp. pursuant to the terms and conditions set forth below.
1. TERM
(a) The Company agrees to employ Employee, and the Employee agrees to
serve, pursuant to the terms and conditions of this Agreement for a period
commencing on 1/1/97 and ending three years thereafter, or such shorter
period as may be provided for herein. The period during which Employee is
employed hereunder is hereafter referred to as the "Employment Period."
2. DUTIES AND SERVICES
(a) During the Employment Period, Employee shall be employed in the
business of the Company and shall also perform services in a responsible
executive or managerial capacity for any
<PAGE>
of the other subsidiaries or affiliates of the Company, or by any of its
subsidiaries or affiliates. In performance of his duties, Employee shall be
subject to the direction of the Board of Directors of the Company and of the
Board of its subsidiaries and/or affiliates. Employee agrees to his employment
as described in this Section 2 and agrees to devote all of his time and efforts
to the performance of his duties under this Agreement. Employee shall make
himself available to travel as the needs of the business require.
(b) It is agreed that the Employee will serve on the Board of Directors of
Fix-Corp. with the title of President and Chief Executive Officer.
(c) It is further agreed that the employee will serve on the Board of
Directors of every subsidiary and affiliate of the Company, both presently
existing and to be acquired in the future, with such responsibilities and duties
as the Board of Directors of every subsidiary and affiliate of the Company shall
formulate and determine, along with such job titles.
3. COMPENSATION
(a) As full compensation for his services hereunder, the Company shall pay
Employee, during the Employment Period, a salary payable in equal [SEMI-MONTHLY
OR MONTHLY] installments at the annual rate of $200,000 for the first year,
$250,000 for the second year and $300,000 for the third year. Nothing contained
herein shall preclude Employee from participating in the present or future
employee benefit plans of the Company or of its subsidiaries or affiliates if he
meets the eligibility requirements therefor.
(b) If for any reason, the Company cannot or elects against honoring the
terms of this Employment Agreement for the full period of the Employment Period,
or if control of the Company should transfer through Merger, Consolidation or
Purchase of Assets to another company which elects to terminate this Employment
Agreement, then Mark Fixler shall be entitled to a $2,000,000 severance benefit,
payable upon premature termination of this Employment Agreement.
4. EXPENSES AND BENEFITS
(a) Employee shall be entitled to reimbursement up to a maximum of
$20,000 during each full year of the Employment Period for reasonable travel
and other out-of-pocket expenses necessarily incurred in the performance of
his duties hereunder, upon submission and approval of written statements and
bills in accordance with the then regular procedures of the Company and/or
its subsidiaries or affiliates.
(b) Employee shall be entitled to three weeks of paid vacations, three
weeks of sick leave, and entitled to paid holidays recognized by the U.S.
Government.
(c) Employee shall be entitled to receive health and dental insurance for
himself and for his family.
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(d) Employee shall receive a $750 per month automobile allowance, plus
reasonable car phone expenses and reasonable automotive repairs and maintenance
expenses.
(e) If the Employee should have to make cash contributions to the Company,
all such funds advanced shall be deemed a loan and payable upon demand with
interest at the rate of 10% per annum. If the Company, for any reason, cannot
meet the cash terms of this Employment Agreement, all such amounts not paid
shall be deemed a cash contribution and, by inference, a loan by the Employee to
the Company if the Employee continues to pursue his duties with the same care
and attention as when he was fully paid.
(f) Employee shall receive the option to purchase four million shares of
stock of Fix-Corp. at the fixed price of $0.50 [fifty cents] per share. This
option may be exercised by the Employee at any time during the Employment
Period.
5. REPRESENTATIONS AND WARRANTIES OF EMPLOYEE
Employee represents and warrants to the Company that he is under no
contractual or other restriction or obligation which is inconsistent with the
execution of this Agreement, the performance of his duties hereunder, or the
other rights of the Company hereunder and Employee is under no physical or
mental disability that would hinder his performance of duties under this
Agreement.
(b) Employee represents that he is not subject to any judgment or decree,
the effect of which would prohibit, limit or otherwise restrict the employment
of the Employee by the Company pursuant to the terms of this Agreement.
6. NONCOMPETITION
In view of the unique and valuable services it is expected Employee will
render to the Company, and Employee's industry contacts, knowledge of customers,
trade secrets and other proprietary information relating to the business of
Fix-Corp., and in consideration of the shares identified in the Stock
Acquisition Agreement and the Acquisition Agreement of Fix-Corp Industries
[formerly Quantum Chemical Company], and the compensation to be provided
hereunder, the Employee agrees:
(a) During the period Employee is employed by Fix-Corp. or any of the
related companies referenced under this Agreement, he will not otherwise engage
in, or otherwise directly or indirectly be employed by, or act as a consultant
or lender to, or be a director, officer, employee, owner, or partner of, any
other business or organization, whether or not such business or organization now
is or shall then be competing with Fix-Corp. or any of its related companies;
and
(b) For a period of one year after he ceases to be employed by Fix-Corp.
or any of its related companies pursuant to this Agreement or otherwise, the
Employee shall not directly or indirectly compete with or be engaged in the same
business as Fix-Corp. or any of its related
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companies, or be employed by, or act as consultant or lender to, or be a
director, officer, employee, owner, or partner of, any business or organization
which, at the time of such cessation, directly or indirectly competes with or is
engaged in the same business as Fix-Corp. or any of its related corporation.
(c) The provisions of this Section 6 will not be deemed breached merely
because Employee owns not more than 1 percent of the outstanding common stock of
a corporation if, at the time of its acquisition by Employee, such stock is
listed on a national securities exchange, is reported on NASDAQ, or is regularly
traded in the over-the-counter market by a member of a national securities
exchange.
(d) Upon the conclusion of the Employment Period, Employee shall be
allowed to convert this Employment Agreement into a Consultant Agreement, at
Employee's option and with the Company's consent. If so converted into a
consultant agreement, the provision set forth above wherein Employee is required
to devote his time solely to the affairs of Fix-Corp. shall not be applicable,
nor will Employee be barred from acting as a consultant or Director for other
businesses, provided the Employee makes a full disclosure of these affiliations.
7. PATENTS, COPYRIGHTS, TECHNOLOGICAL INVENTIONS
(a) Any interest in patents, patent applications, inventions, copyrights,
developments, and processes ("Such Inventions") which Employee now or hereafter
during the period Employee is employed by any of the Conglomerates corporations
under this Agreement or otherwise may own or develop relating to the fields in
which any of the Conglomerates Corporations may then be engaged shall belong to
the Company; and forthwith upon request of the Company Employee shall execute
all such assignments and other documents and take all such other action as the
Company may reasonably request in order to vest in the Company all his right,
title, and interest in and to Such Inventions free and clear of all liens,
charges, and encumbrances.
8. CONFIDENTIAL INFORMATION
(a) All confidential information which Employee may now possess, may
obtain during or after the Employment Period, or may create prior to the end of
the period Employee is employed by Fix-Corp.. or any of its related companies
under this Agreement or otherwise relating to the financial condition, results
of operations, business, properties, assets, liabilities, or future prospects of
Fix-Corp. or any of its related companies or of any customer or supplier of any
of them shall not be published, disclosed, or made accessible by him to any
other person or entity either during or after the termination of his employment
or used by him except during the Employment Period in the business and for the
benefit of the Company, in each case without prior written permission of the
Company or, at the election at any time of Fix-Corp., without the prior written
permission of Fix-Corp., Employee shall deliver to the Company all tangible
evidence of such confidential information prior to or at the termination of his
employment.
9. KEY MAN LIFE INSURANCE
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(a) The Company agrees to purchase a $2,000,000 term life insurance policy
on Employee ["key man life insurance"] and Employee shall submit to such
physical examinations and execute and deliver such documents as may reasonably
necessary to enable the Company, at its sole expense and for its own benefit, to
obtain key man life insurance on Employee. Employee has no reason to believe
that his life is not insurable with a reputable insurance company at rates now
prevailing in the City of Cleveland for healthy men of his age.
10. TERMINATION.
Notwithstanding anything herein contained, if on or after the date this
Agreement is executed and prior to the end of the Employment Period,
(a) Either (i) Employee shall be physically or mentally incapacitated or
disabled or otherwise unable fully to discharge his duties hereunder for a
period of three months, (ii) Employee shall be convicted of a crime, (iii)
Employee shall commit any act or omit to take any action in bad faith and to the
detriment of any of the companies, [or] (iv) Employee shall breach any term of
this Agreement and fail to correct such breach within ten days after commission
of the same, then, and in each such case, the Company shall have the right to
give notice of termination of Employee's services hereunder as of a date (not
earlier than ten days from such notice) to be specified in such notice and this
Agreement shall terminate on the date so specified; or
(b) Employee shall die, then this Agreement terminates on his death,
whereupon Employee or his estate, as the case may be, shall be entitled to
receive only his salary at the rate provided in Section 3 to the date on which
termination shall take effect. Nothing contained in this Section 10 shall be
deemed to limit any other right the Company may have to terminate Employee's
employment hereunder upon any ground permitted by law.
11. MERGER, CONSOLIDATION, SALE OF ASSETS
In the event of a future disposition of (or including) the properties and
business of the Company, substantially as an entirety, by merger, consolidation,
sale of assets, or otherwise, then the Company may elect:
(a) To assign this Agreement and all of its rights and obligations
hereunder to the acquiring or surviving corporation; provided that such
corporation shall assume in writing all of the obligations of the Company
hereunder; and provided, further, that the Company (if and so long as it remains
in business as an independent going enterprise) shall remain liable for the
performance of its obligations hereunder in the event of an unjustified failure
of the acquiring corporation to perform its obligations under this Agreement; or
(b) In addition to its other rights of termination, to terminate this
Agreement upon at least 30 days' written notice by paying Employee the
compensation at the rate provided in Section 3 to the date on which such
termination shall take effect.
12. SURVIVAL
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(a) The covenants, agreements, representations, and warranties contained
in or made pursuant to this Agreement shall survive Employee's termination of
employment.
13. MODIFICATION
(a) This Agreement sets forth the entire understanding of the parties with
respect to the subject matter hereof, and this agreement also supersedes all
existing agreements between Fix-Corp. and Mark Fixler concerning such subject
matter, and may be modified only by a written instrument duly executed by each
party.
14. NOTICES
(a) Any notice or other communication required or permitted to be given
hereunder shall be in writing and shall be mailed by certified mail, return
receipt requested, or delivered against receipt to the party to whom it is to be
given at the address of such party set forth in the preamble to this Agreement
(or to such other address as the party shall have furnished in writing in
accordance with the provisions of this Section 14). Any notice given to the
Company shall be addressed to the attention of the Corporate Secretary. Notice
to the estate of Employee shall be sufficient if addressed to Employee as
provided in this Section 14. Any notice or other communication given by
certified mail shall be deemed given at the time of certification thereof,
except for a notice changing a party's address which shall be deemed given at
the time of receipt thereof.
15. WAIVER
(a) Any waiver by either party of a breach of any provision of this
Agreement shall not operate as or be construed to be a waiver of any other
breach of that provision or of any breach of any other provision of this
Agreement. The failure of a party to insist upon strict adherence to any term of
this Agreement on one or more occasions shall not be considered a waiver or
deprive that party of the right thereafter to insist upon strict adherence to
that term or any other term of this Agreement. Any waiver must be in writing.
16. BINDING EFFECT
(a) Employee's rights and obligations under this Agreement shall not be
transferable by assignment or otherwise, and such rights shall not be subject to
commutation, encumbrance, or the claims of Employee's creditors, and any attempt
to do any of the foregoing shall be void. The provisions of this Agreement shall
be binding upon and inure to the benefit of Employee and his heirs and personal
representatives, and shall be binding upon and inure to the benefit of the
Company and its successors and those who are its assigns under Section 11.
17. NO THIRD PARTY BENEFICIARIES
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(a) This Agreement does not create, and shall not be construed as
creating, any rights enforceable by any person not a party to this Agreement
(except as provided in Section 16).
18. HEADINGS
(a) The headings in this Agreement are solely for the convenience of
reference and shall be given no effect in the construction or interpretation of
this Agreement.
19. COUNTERPARTS; GOVERNING LAW
(a) This Agreement may be executed in any number of counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument. It shall be governed by and construed in accordance
with the laws of the State of Delaware, without giving effect to the conflict of
laws.
IN WITNESS WHEREOF, the parties have duly executed this Agreement on the
date (or dates) set forth below.
FIX-CORP INTERNATIONAL, INC. MARK FIXLER
- ------------------------------------ -----------------------------
By: Sherry L. Durst/Asst. Secretary
Dated: Dated:
------------------------------ -----------------------
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Exhibit 7
EMPLOYMENT AGREEMENT
This Agreement is as of 1st day of January, 1997, between Fix-Corp
International, Inc. ("Company") and Gary DeLaurentiis, (the "Employee") declare
as their mutual intent and purpose as follows.
RECITALS
Whereas the Company desires to engage the Employee to perform services for the
Company, Fix-Corp., as well as its present subsidiary Fix-Cor Industries, Inc.,
or any future parent or subsidiary company of Fix-Corp., or any affiliate of
Fix-Corp International, Inc. And Fix-Cor Industries, Inc.; and
Whereas, the Employee desires to perform such services on the terms and
conditions hereinafter set forth.
Now, therefore, in exchange for the above covenants and with both parties
intending to be legally bound, the Gary DeLaurentiis agrees to become an
Employee of Fix-Corp. pursuant to the terms and conditions set forth below.
1. TERM
The Company agrees to employ Employee and the Employee agrees to serve, pursuant
to the terms and conditions of this Agreement for a period commencing on January
1, 1997, and ending five years thereafter, or such shorter period as may be
provided for herein. The period during which Employee is employed hereunder is
hereafter referred to as the "Employment Period."
2. DUTIES AND SERVICES
(a) During the Employment Period, Employee shall be employed in the business of
the Company and shall also perform services in a responsible executive or
managerial capacity for any of the other subsidiaries or affiliates of the
Company, or by any of its subsidiaries or affiliates. In performance of his
duties, Employee shall be subject to the direction of the Board of Directors of
the Company and of the Board of its subsidiaries and/or affiliates. Employee
agrees to his employment as described in this Section 2 and agrees to devote all
of his time and efforts to the performance of his duties under this Agreement.
Employee shall make himself available to travel as the needs of the business
require.
(b) It is agreed that Employee will serve on the Board of Directors of
Fix-Corp. And with the title of President of Fixcor, Inc.
(c) It is further agreed that the employee will serve on the Board of Directors
of every subsidiary and affiliate of the Company, both presently existing and to
be acquired in the future, with such responsibilities and duties as the Board of
Directors of every subsidiary and affiliate of the Company shall formulate and
determine, along with such job titles.
<PAGE>
3. COMPENSATION
As full compensation for the services hereunder, the Company shall pay Employee
during the employment period, a salary payable in equal semi-monthly or monthly
installments at the annual rate of $125,000 in the first, second, third, fourth,
and fifth years. In addition, subject to approval of the Company's Board of
Directors, the Employee shall receive a bonus each year on an annual or
quarterly basis.
4. FRINGE BENEFITS
a. The Employee shall be entitled to two weeks paid vacation during each
6 month period he is employed by the Company.
b. The Employee shall be entitled to two weeks paid sick leave during
each year he is employed by the Company.
c. The Employee shall be entitled to paid Holidays on those days
recognized by the United States Federal Government.
d. The Employee shall receive health and dental insurance for himself and
his family.
e. The Employee shall receive an automobile allowance in the amount of
$500.00 per month. The Employee will receive reasonable car phone
expenses and reasonable automotive repair and maintenance expenses.
5. REPRESENTATIONS AND WARRANTIES
(a) Employee represents and warrants to the Company that he is under no
contractual or other restriction or obligation which is inconsistent with the
execution of this Agreement, the performance of his duties hereunder, or the
other rights of the Company hereunder and Employee is under no physical or
mental disability that would hinder his performance of duties under this
Agreement.
(b) Employee represents that he is not subject to any judgement or decree, the
effect of which would prohibit, limit or otherwise restrict the employment of
the Employee by the Company pursuant to the terms of this Agreement.
6. NONCOMPETITION
In view of the unique and valuable services it is expected Employee will render
to the Company, and Employee's industry contacts, knowledge of customers, trade
secrets and other proprietary information relating to the business of Fix-Corp.,
the Employee agrees:
(a) During the period Employee is employed by Fix-Corp. or any of the related
companies referenced under this Agreement, he will not otherwise engage in, or
otherwise directly or indirectly be employed by, or act as a consultant or
lender to, or be a director, officer, employee,
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owner, or partner of, any other business or organization, whether or not such
business or organization now is or shall then be competing with Fix-Corp. Or any
of its related companies; and
(b) For a period of one year after he ceases to be employed by Fix-Corp. or any
of its related companies pursuant to this Agreement or otherwise, the Employee
shall not directly or indirectly compete with or be engaged in the same business
as Fix-Corp. or any of its related companies, or be employed by, or act as
consultant or lender to, or be a director, officer, employee, owner, or partner
of, any business or organization which, at the time of such cessation, directly
or indirectly competes with or is engaged in the same business as Fix-Corp. or
any of its related corporation.
7. PATENTS, COPYRIGHTS, TECHNOLOGICAL INVENTIONS
Any interest in patents, patent applications, inventions, copyrights,
developments, and processes ("Such Inventions") which Employee now or hereafter
during the period Employee is employed by any of the Conglomerates corporations
under this Agreement or otherwise may own or develop relating to the fields in
which any of the Conglomerates Corporations may then be engaged shall belong to
the Company, and forthwith upon request of the Company Employee shall execute
all such assignments and other documents and take all such other action as the
Company may reasonably request in order to vest in the Company all his right,
title, and interest in and to such inventions free and clear of all liens,
charges, and encumbrances.
8. CONFIDENTIAL INFORMATION
All confidential information which Employee may now possess, may obtain during
or after the Employment Period, or may create prior to the end of the period
Employee is employed by Fix-Corp., or any of its related companies under this
Agreement or otherwise relating to the financial condition, results of
operations, business, properties, assets, liabilities, or future prospects of
Fix-Corp. or any of its related companies or of any customer or supplier of any
other person or entity either during or after the termination of his employment
or used by him except during the Employment Period in the business and for the
benefit of the Company, in each case without prior written permission of the
Company or, at the election at any time of Fix-Corp., without the prior written
permission of Fix-Corp., Employee shall deliver to the Company all tangible
evidence of such confidential information prior to or at the termination of his
employment.
9. TERMINATION
Notwithstanding anything herein contained, if on or after the date this
Agreement is executed and prior to the end of the Employment Period,
(a) Either (i) Employee shall be physically or mentally incapacitated or
disable or otherwise unable fully to discharge his duties hereunder for a period
of three months, (ii) Employee shall be convicted of a crime, (iii) Employee
shall commit any act or omit to take any action in bad faith and to the
detriment of any of the companies, (or) (iv) Employee shall breach any term of
this Agreement and fail to correct such breach within ten days after commission
of the same, then, and in each such case, the Company shall have the right to
give notice of termination of Employee's
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services hereunder as of a date (not earlier than ten days from such notice) to
be specified in such notice and this Agreement shall terminate on the date so
specified; or
(b) Employee shall die, then this Agreement terminates on his death,
whereupon Employee or his estate, as the case may be, shall be entitled to
receive only his salary at the rate provided in Section 3 to the date on which
termination shall take effect. Nothing contained in this Section 10 shall be
deemed to limit any other right the Company may have to terminate Employee's
employment hereunder upon any ground permitted by law.
10. MERGER, CONSOLIDATION, SALE OF ASSETS
In the event of a future disposition of (or including) the properties and
business of the Company, substantially as an entirety, by merger, consolidation,
sale of assets, or otherwise, then the Company may elect:
(a) To assign this Agreement and all of its rights and obligations hereunder to
the acquiring or surviving corporation; provided that such corporation shall
assume in writing all of the obligations of the Company hereunder, and provided,
further, that the Company (if and so longer as it remains in business as an
independent going enterprise) shall remain liable for the performance of its
obligations hereunder in the event of an unjustified failure of the acquiring
corporation to perform its obligations under this Agreement; or
(b) In addition to its other rights of termination, to terminate this Agreement
upon at least 30 days' written notice by paying Employee the compensation at the
rate provided in Section 3 to the date on which such termination shall take
effect.
11. SURVIVAL
The covenants, agreements, representations and warranties contained in or made
pursuant to this Agreement shall survive Employee's termination of employment.
12. MODIFICATION
This agreement sets forth the entire understanding of the parties with respect
to the subject matter hereof, and this agreement also supersedes all existing
agreements with Fix-Corp. and Gary DeLaurentiis concerning such subject matter,
and may be modified only by a written instrument duly executed by each party.
13. NOTICES
Any notice or other communication required or permitted to be given hereunder
shall be in writing and shall be mailed by certified mail, return receipt
requested, or delivered against receipt to the party to whom it is to be given
at the address of such party set forth in the preamble to this Agreement (or
such other address as the party shall have furnished in writing in accordance
with the provision of Section 14). Any notice given to the Company shall be
sufficient if addressed to
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Employee as provided in this Section 14. Any notice or other communication
given by certified mail shall be deemed given at the time of certification
thereof, except for a notice changing a party's address which shall be deemed
given at the time of receipt thereof.
14. WAIVER
Any waiver by either party of a breach of any provision of this Agreement shall
not operate as or be construed to be a waiver of any other breach of that
provision or of any breach of any other provision of this Agreement. The
failure of a party to insist upon strict adherence to any term of this Agreement
on one or more occasions shall not be considered a wavier or deprive that party
of the right thereafter to insist upon strict adherence to that term or any
other term of this Agreement. Any waiver must be in writing.
15. BINDING EFFECT
Employee's rights and obligations under this Agreement shall not be transferable
by assignment or otherwise, and such rights shall not be subject to commutation,
encumbrance, or the claims of Employee's creditors, and any attempt to do any of
the foregoing shall be void. The provisions of this Agreement shall be binding
upon and inure to the benefit of Employee and his heirs and personal
representatives, and shall be binding upon and inure to the benefit of the
Company and its successors and those who are its assigns under Section 10.
16. NO THIRD PARTY BENEFICIARIES
This agreement does not create, and shall not be construed as creating, any
rights enforceable by any person not a party to this agreement (except as
provided in Section 15).
17. HEADINGS
The headings in this agreement are solely for the convenience of reference and
shall be given no effect in the construction or interpretation of this
agreement.
18. COUNTERPARTS; GOVERNING LAW
This agreement may be executed in any number of counterparts, each of which
shall be deemed an original but all of which together shall constitute one and
the same instrument. It shall be governed by and construed in accordance with
the laws of the State of Delaware, without giving effect to the conflict of
laws.
IN WITNESS WHEREOF, the parties have duly executed this agreement on the date
(or dates) set forth below.
FIX-CORP INTERNATIONAL, INC. GARY DELAURENTIIS
- ---------------------------- ----------------------------------------
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DATED: DATED:
---------------------------------- ------------------------
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Exhibit 16
LICENSING AND MARKETING AGREEMENT
Agreement made this 7 day of July 1997 by and between Nitro Plastics
Technologies of Israel, an Israel Corporation whose business address is 17
Ben Yehuda St. Netanya 42305 and Palletech Inc., a Delaware Corporation whose
business address is 1835 James Parkway, Heath, OH 43056 (hereinafter referred
to as "Palletech"). Franchise is to be operated in the Fix-Corp. plant,
located at 1835 James Parkway, Heath, OH 43506.
WITNESSETH
WHEREAS, Palletech is a manufacturer of plastic
WHEREAS, Nitro Plastics Technologies of Israel is the licensee of a proprietary
injection molding technology especially suited for the manufacturing of plastic
pallets and other products from recycled plastics; and,
WHEREAS, Nitro Plastics Technologies of Israel wishes Palletech to manufacture
plastic pallets, and Palletech wishes to manufacture pallets utilizing the
technology to be supplied by Nitro Plastics Technologies of Israel.
NOW THEREFORE, in consideration of the mutual covenants, terms and conditions
contained herein, the parties agree as follows:
1. RECITATIONS: The above recitations are true and correct.
2. CONDITIONS PRECEDENT:
2.1. Palletech will purchase an injection molding machine and appropriate
molds and equipment for the purpose of manufacturing plastic pallets. Said
machines is described as a 750 ton form molding machine, with gas assist
technology and proprietary configuration, and said machine shall be physically
located on the premises of Palletech no later than January 1998.
2.2. Nitro Plastics Technologies of Israel shall sub-license Palletech to
utilize the subject technology for the specific purpose of manufacture of
plastic pallets (or such other products as shall be mutually agreed by the
parties) for a period of ten (10) years, commencing with the date that the
subject machine is installed and operational. After the ten (10) year period of
time, Palletech Inc. owns the sub-licensing agreement free and clear. Product
manufactured pursuant to this agreement shall be sold in the areas generally
identified as the Midwest and Northeastern regions of the United States. Those
above mentioned territories will be the exclusive territories to Palletech
unless Palletech does not have the ability to build new facilities as they are
needed. If Palletech Inc. is not able to perform, they have a reasonable period
of time to satisfy Nitro Plastics Technologies of Israel increase demand of
production, then Palletech Inc. will go on a first write of refusal to open and
establishing a manufacturing and distribution plant and have the right to
produce sales in the state of California. Before Nitro Plastics Technologies of
Israel
<PAGE>
makes an agreement with an additional third party for other territories in the
United States, Nitro Plastics Technologies of Israel will give the same
opportunity to Palletech Inc.
3. RESPECTIVE DUTIES, RESPONSIBILITIES AND OBLIGATIONS OF THE PARTIES:
3.1. Duties of Nitro Plastics Technologies of Israel:
3.1.1. Nitro Plastics Technologies of Israel shall provide supervisory
and technical personnel to effect the installation of the subject machine and
train personnel of Palletech in the use and operation of said machine; and,
Nitro Plastics Technologies of Israel shall continue to provide technical
support for a period of one (1) year commencing with the date that the machine
is operational.
3.1.2. Nitro Plastics Technologies of Israel shall provide sales
personnel who will undertake the sale of all pallets produced, at a price
determined by Palletech.
3.1.3. Nitro Plastics Technologies of Israel shall perform such other
sales and marketing functions as it deems necessary or desirable, providing
however that Palletech shall bear the expense of an annual advertising
allowance, such an amount to be determined by the agreement of the parties.
3.2. Duties of Palletech
3.2.1. Palletech shall, at its own cost and expense, provide all
production facilities, equipment, raw materials, supplies, maintenance, repair,
personnel and any and all other items, including also freight and installation
costs, as shall be necessary to accomplish the manufacture of plastic pallets.
4. FEES AND PAYMENTS
4.1. Palletech shall pay to Nitro Plastics Technologies of Israel a
licensing fee in the amount of $250,000.00, payable in three equal installments
as follows: (1) $83,333.33 upon execution of this Agreement, and the remaining
to be paid, in pallets at Palletech Inc.'s wholesale price, after production
begins in Ohio.
4.2. During the first five (5) years of the term of this Agreement,
Palletech shall pay to Nitro Plastics Technologies of Israel, in exchange for
all services to be rendered by Nitro Plastics Technologies of Israel, a total
fee in the amount of $2.10 per pallet sold, and a royalty for the licensed
technology in the amount of 50 CENTS per pallet. During the second five (5)
years of the term of the Agreement, the royalty portion of the payment per
pallet shall reduce from 50 CENTS to 25 CENTS per pallet. Payment shall be
made to Nitro Plastics Technologies of Israel by Palletech within seven (7)
business days after receipt, and clearance of funds, by Palletech.
4.3. During years two through five of the term of this agreement,
contingent upon Nitro Plastics Technologies of Israel selling in excess of
950,000 pallets in each year, Nitro
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Plastics Technologies of Israel shall be entitled to receive from Palletech
100,000 common stock warrants, per year, for Fix-Corp. International, Inc.,
common stock, at 75% face value.
4.4. At the end of each year of the term of the agreement, in addition to
all the above fees, Palletech shall pay to Nitro Plastics Technologies of Israel
a lump sum fee of $50,000.00 for ongoing research and development. Palletech
will have the right to the new technology that it is paying for on an annual
basis.
5. MISCELLANEOUS PROVISIONS
5.1. DEFAULT
5.1.1. Default by Palletech: It is understood and agreed that the
technology licensed herein is proprietary to Nitro Plastics Technologies of
Israel pursuant to its licensing agreement with the owner of the technology.
Nitro Plastics Technologies of Israel agrees to indemnify Palletech Inc., or its
affiliates in the event that Nitro Plastics Technologies of Israel does not own
the proprietary technology that it has claimed it owns. Any attempt by Palletech
to utilize this technology for its own purposes, outside of the terms and
provisions of the agreement shall immediately terminate this agreement. In such
event Palletech shall be liable for payment to Nitro Plastics Technologies of
Israel for an amount equal to double the fees and royalties that would be
payable to Nitro Plastics Technologies of Israel based upon the anticipated
annual sales, which are anticipated and agree to be 950,000 pallets. In
addition, Nitro Plastics Technologies of Israel shall be entitled to such
equitable relief, including injunction, as shall be appropriate. Nitro Plastics
Technologies of Israel agrees that Palletech Inc. has the right to sell the
pallets through their own organization or an affiliates organization provided
that Nitro Plastics Technologies of Israel receives its royalties on those
sales. Nitro Plastics Technologies of Israel acknowledges that is the equipment
or reasons beyond Palletech Inc.'s control is not able to produce 950,000
pallets on an annual basis that this would not constitute a default by Palletech
Inc.
5.1.2. In the event of default by Palletech, including but not limited
to failure to produce or other attempted termination of the agreement, Palletech
shall be liable for payments to Nitro Plastics Technologies of Israel for the
accelerated payment of all fees that would be due to Nitro Plastics Technologies
of Israel under this agreement, including all sales, commissions and royalties
based upon the anticipated annual production of 950,000 plastic pallets. There
will be a 120 day cure period given to Palletech Inc. in the event of a default.
5.2. NO PARTNERSHIP: Nothing contained herein shall be construed or
interpreted to create a partnership relationship between the parties. Neither
party shall have any authority to obligate or bind the other for any debt to a
third party.
5.3. NOTICE: Any notice required by this agreement shall be given by
certified mail to the address of the party involved as shown at the beginning of
this agreement.
5.4. ARBITRATION: No civil action concerning any dispute arising under
this agreement shall be instituted before any court and all such disputes shall
be submitted to final and
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binding arbitration by a three man panel. Each party shall select one
arbitrator, who will in turn select a third arbitrator. All costs and expenses
of the arbitration, including actual attorney's fees, shall be allocated among
the parties according to the arbitrator's discretion. The arbitrator's award
resulting from such arbitration may be confirmed and entered as a final judgment
in any court of competent jurisdiction and enforced accordingly. Further, the
parties hereto expressly agree that proceeding to arbitration and obtaining an
award thereunder shall be a condition precedent to the bringing or maintaining
of any action in any court with respect to any dispute arising under this
agreement, except for the institution of a civil action to maintain the status
quo during the pendency of any arbitration proceeding.
5.5. ATTORNEYS FEES: In the event of any litigation (arbitration) caused
by a dispute arising from this agreement, the prevailing party shall be entitled
to reimbursement from the losing party for attorney's fees (including those on
appeal) and costs incurred during each dispute.
5.6. SUCCESSORS IN INTEREST: Although it is understood and agreed that
this agreement is not assignable by Palletech to any third party without the
prior written consent of Nitro Plastics Technologies of Israel the provisions,
conditions, terms and covenants herein contained shall bind and the benefits and
advantages shall inure to, the respective successors, assigns, trustees,
receivers, heirs and personal representative of the parties hereto.
5.7. LAWS CONTROLLING: This agreement shall be construed, enforced and
interpreted in accordance with the laws of the State of Florida, whose
jurisdiction is acceptable to both parties.
5.8. CAPTIONS: The captions of sections of this agreement are for
convenient reference only, and shall not affect the construction of
interpretations of any of the terms and provisions set forth herein.
5.9. SEVERABILITY: In the event any provision of this agreement are found
to be in violation of any law, or are determined to be unenforceable for any
reason, this shall not serve to invalidate the remainder of this agreement.
6. ASSIGNMENTS
6.1. Nitro Plastics Technologies of Israel will take total production of
pallets from Palletech for distribution and selling purposes. Palletech Inc.
will determine the price of the pallets.
6.2. Nitro Plastics Technologies of Israel reserves the right to assign
this licensing and marketing agreement at any time without notification.
In WITNESS WHEREOF, the parties hereto have executed this agreement on the
day and year first above written.
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All documents, blue prints, machine blue prints, and operating techniques will
be placed in a safety deposit box.
Definition of a reasonable period of time is 24 months.
Palletech INC. Nitro Plastics Technologies of Israel
By: By: Yoram Aisenberg
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Title: Title: President
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Witness: Witness:
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Notary Public:
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