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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 16, 1998
REGISTRATION NO. 33-
--------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
FIX-CORP INTERNATIONAL, INC.
(NAME OF SMALL BUSINESS ISSUER IN ITS CHARTER)
Delaware 4953 34-1783774
(State or jurisdiction of (Primary standard (I.R.S. Employer
incorporation or organization) classification code number) Identification No.)
3637 SOUTH GREEN ROAD / SUITE 201 / BEACHWOOD, OHIO 44122 / (216) 292-3182
(Address and telephone number of principal executive offices)
MARK FIXLER, PRESIDENT / FIX-CORP INTERNATIONAL, INC.
3637 SOUTH GREEN ROAD / SUITE 201 / BEACHWOOD, OHIO 44122 / (216) 292-3182
(Name, address, and telephone number of agent for service)
Copies to: STEVEN R. KERBER, ESQ.
BRICKER & ECKLER LLP
100 SOUTH THIRD STREET
COLUMBUS, OHIO 43215-4291
(614) 227-2300
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time to
time after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, as amended (the "Securities Act") [DEFINE HERE OR BELOW?] check the
following box. [X]
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [__]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [__]
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If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [__]
CALCULATION OF REGISTRATION FEE
TITLE OF EACH DOLLAR PROPOSED PROPOSED
CLASS OF AMOUNT MAXIMUM MAXIMUM AMOUNT OF
SECURITIES TO BE TO BE OFFERING PRICE AGGREGATE REGISTRATION
REGISTERED REGISTERED(1) PER UNIT(2) OFFERING PRICE(2) FEE
- ---------- ------------- ----------- -------- ---
Common Stock, $24,032,997 $3.1875 $24,032,997 $7,089.73
$.001 par value
(1) In accordance with Rule 416 under the Securities Act, Common Stock
offered hereby shall also be deemed to cover additional securities to be
offered or issued to prevent dilution resulting from stock splits, stock
dividends or similar transactions.
(2) Estimated solely for the purpose of calculating the amount of the
registration fee pursuant to Rules 457(g) and 457(c), based on the average
of the high and low reported price of the Company's Common Stock on January
12, 1998.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE
SECURITIES ACT OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON
SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(a), MAY DETERMINE.
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED JANUARY 16, 1998
PRELIMINARY PROSPECTUS
FIX-CORP INTERNATIONAL, INC.
7,539,764 SHARES
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COMMON STOCK
$.001 PAR VALUE
This prospectus ("Prospectus") relates to 7,539,764 shares (the
"Shares") of common stock, $.001 par value (the "Common Stock"), of Fix-Corp
International, Inc., a Delaware corporation ("Fix-Corp", the "Company", the
"Small Business Issuer" or the "Registrant"). This Prospectus is filed with
the United States Securities and Exchange Commission (the "Commission" or the
"SEC") and relates to a Registration Statement on Form SB-2 (the
"Registration Statement") also filed with the SEC. The Shares will be
outstanding shares of Common Stock acquired upon exercise of warrants or the
conversion of convertible debt securities, owned by the persons named in this
Prospectus under the caption "SELLING STOCKHOLDERS" or by pledgees, donees,
transferees or other successors in interest and permitted assigns of such
selling stockholders (the "Selling Stockholders"). The Shares were acquired
by the Selling Stockholders in connection with the exercise of warrants
("Warrants") by certain of the Selling Stockholders and the conversion of
convertible debentures ("Debentures") held by certain of the Selling
Stockholders, all of which Warrants, Debentures and Shares, as and when
issued to the Selling Stockholders, were exempt from the registration
provisions of the Securities Act.
The Company will not receive any of the proceeds from the sale of the
Shares; however, in consideration of issuing the Debentures and Warrants, the
Company received $8,000,000 which was used for working capital, expansion and
commencement of its principal lines of business and other general corporate
purposes.
The Company has not made any underwriting arrangements with respect to the
Shares. The Common Stock is traded on the over the counter ("OTC") electronic
bulletin board maintained by the National Association of Securities Dealers (the
"Bulletin Board") under the symbol "FIXC" On January 12, 1998, the closing bid
and asked prices of the Common Stock as reported on the OTC Bulletin Board were
$3.20 and $3.25, respectively.
This Prospectus is to be used in connection with the sale of the Shares
from time to time by the Selling Stockholders. The Shares may be sold from
time to time by the Selling Stockholders, directly or through underwriters,
dealers or agents, in market transactions on the OTC Bulletin Board, on any
other national securities exchange or automated quotation system on which the
Common Stock may be listed or traded, including block trades or ordinary
brokers transactions or in privately negotiated transactions. The price at
which any of the Shares may be sold, and the commissions, if any, paid in
connection with any sale, may be privately negotiated, may be based on then
prevailing market prices and may vary from transaction to transaction and as
a result are not currently known. See "PLAN OF DISTRIBUTION."
The Selling Stockholders and any broker-dealers participating in the
distribution of the Shares may be deemed to be "underwriters" within the meaning
of the 1933 Act, and any
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commissions or discounts given to any such broker-dealer may be regarded as
underwriting commissions or discounts under the 1933 Act. The Shares have not
been registered for sale by the Selling Stockholders under the securities laws
of any state as of the date of this Prospectus. Brokers or dealers effecting
transactions in the Shares should confirm the registration thereof under the
securities laws of the states in which transactions occur or the existence of
any exemption from registration.
The Company will pay certain of the legal and other expenses of this
offering (estimated to be $25,590), except that the Selling Stockholders
will bear the cost of any brokerage commissions or discounts or other selling
expenses incurred by the Selling Stockholders in connection with the sale of
its Shares. The Company has agreed to indemnify the Selling Stockholders
against certain liabilities, including liabilities arising under the
Securities Act. See "PLAN OF DISTRIBUTION."
No dealer, salesperson or other person has been authorized to give any
information or to make any representations not contained, or incorporated by
reference, in this Prospectus and, if given or made, such information or
representation must not be relied upon as having been authorized by the
Company or the Selling Stockholders. This Prospectus does not constitute an
offer to sell or the solicitation of any offer to buy any of the securities
offered hereby in any jurisdiction to any person to whom it is unlawful to
make such offer in such jurisdiction. Neither the delivery of this
Prospectus nor any sale made hereunder shall, under any circumstances, create
any implication that the information herein is correct as of any time
subsequent to the date hereof or that there has been no change in the affairs
of the Company since such date.
THE SHARES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK.
(SEE "RISK FACTORS" BEGINNING ON PAGE 6.)
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
THE DATE OF THIS PROSPECTUS IS JANUARY 16, 1998.
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AVAILABLE INFORMATION AND
INFORMATION INCORPORATED BY REFERENCE
The Company incorporates herein by reference the Company's Form 10-SB,
General Form for Registration of Securities of Small Business Issuers under
Section 12(b) or (g) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), filed November 13, 1997 (effective January 12, 1998), as
amended November 17, 1997 and December 22, 1997, with the Commission (File No.
000-23369) pursuant to the Exchange Act (the "Form 10-SB").
This Prospectus constitutes a part of the Registration Statement filed by
the Company with the Commission under the Securities Act with respect to the
Shares offered hereby. In accordance with the rules and regulations of the
Commission, this Prospectus omits certain of the information contained in the
Registration Statement. Reference is hereby made to the Registration Statement
and related exhibits and the documents incorporated herein by reference for
further information with respect to the Company and the Company's Common Stock.
Statements contained herein or incorporated herein by reference concerning the
provisions of any document are not necessarily complete and, in each instance,
reference is made to the copy of such document filed as an exhibit to the
Registration Statement or otherwise filed with the Commission. Each such
statement is qualified in its entirety by such reference.
All documents and reports subsequently filed by the Company pursuant to
Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this
Prospectus and prior to the termination of the offering of the Shares shall be
deemed to be incorporated herein by reference and to be a part hereof from the
date of filing of such documents. Any statement contained herein or in a
document incorporated or deemed to be incorporated by reference herein shall be
deemed to be modified or superseded for purposes of this Prospectus to the
extent that a statement contained herein or in any other subsequently filed
document that also is or is deemed to be incorporated by reference herein
modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus.
Prior to the effective date of the Form 10-SB (January 12, 1998), the
Company was not required to file reports with the Commission under the Exchange
Act. Upon the effective date of the Form 10-SB, the Company is required to file
with the Commission reports, proxy statements and other information under the
Exchange Act. While not required to file an annual report with the Commission
for fiscal year 1997, the Company intends to provide audited financial
statements to its stockholders, along with proxy materials, in anticipation of
the annual meeting of stockholders to be held during 1998. With respect to
fiscal years in which the Company is required to file an annual report with the
Commission, the Company will furnish annual reports to its stockholders which
include audited financial statements. The audited financial statements provided
to stockholders are reported on by its independent auditors. Quarterly reports
containing unaudited condensed financial information for the first three
quarters of each fiscal year are also provided. The Company also furnishes such
other reports from time to time as it may determine or as may be required by
law.
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The Company will furnish without charge to each person, including any
beneficial owner, to whom this Prospectus is delivered, upon the written or oral
request of such person, a copy of any or all the documents incorporated herein
by reference, other than exhibits to such documents unless such exhibits are
specifically incorporated by reference in such documents, and any other
documents specifically identified herein as incorporated by reference into the
Registration Statement to which this Prospectus relates or into such other
documents. Requests should be addressed to: Investor Relations, 3637 South
Green Road, Suite 201, Beachwood, Ohio 44122; telephone: (216) 292-3182.
Reports, proxy statements and other information filed by the Company may be
inspected and copied at the public reference facilities maintained by the SEC at
Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549 and at the Regional
Offices of the SEC at Seven World Trade Center, Suite 1300, New York, New York
and at Suite 1400, 500 West Madison Street, Chicago, Illinois. Copies of such
information can be obtained by mail from the Public Reference Section of the SEC
at 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed rates.
Filings with the Commission made by the Company electronically through the
EDGAR system, such as the Registration Statement and the Form 10-SB (including
certain exhibits), are also available on the Commission's site on the World Wide
Web, by pointing a browser to (http://www.sec.gov/cgi-bin/srch-edgar), inserting
in the search box the phrase "fix corp international inc" and selecting the
documents identified under "Company name" as "FIX CORP INTERNATIONAL INC".
The Company's executive offices are located at 3637 South Green Road, Suite
201, Beachwood, Ohio 44122, and its telephone number is (216) 292-3182.
RISK FACTORS
In addition to the other information in this Prospectus, the following
factors should be carefully considered in evaluating an investment in the Shares
offered by this Prospectus:
DEVELOPMENT STAGE. The Company was incorporated in October 1995 and was
engaged in corporate awards jewelry marketing and receivables financing for
small businesses until late 1996. In December 1996, the Company purchased
the Heath Resource Recovery Plant in Heath, Ohio (the "Facility") and its
principal business changed to plastics recycling. The Company has operated
profitably, but there can be no assurance that such profitability will be
sustained. See "DESCRIPTION OF BUSINESS" and "MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS."
LIMITED EXPERIENCE. The Company's business strategy relies primarily on
its success in manufacturing and marketing recycled plastic resin and plastic
resin products, an area in which the Company has limited experience. The
success of its business strategy should be considered in light of the risks,
expenses and difficulties frequently encountered in entering into industries
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characterized by intense competition. There can be no assurance that the
Company will be able to manufacture or market its products or proposed
products, maintain or expand its market share or achieve commercial revenues
from its products or proposed products in the future. In addition, certain
aspects of the Company's business strategy can only be implemented if the
Pallet Technologies becomes fully operational. Some of the foregoing factors
are not within the Company's control and there can be no assurance that the
Company will be able to implement its business strategy, that Pallet
Technologies will become fully operational or that its business strategy will
result in profitability. See "MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS," "DESCRIPTION OF BUSINESS" and
the Company's financial statements and notes thereto.
DEPENDENCE ON SIGNIFICANT CUSTOMERS. No customer of the Company's
subsidiaries purchases more than 30% of production, and the one customer that
does approach 30% is a distributor. If that customer is lost, the Company
believes that there is adequate demand for the Company's products so that the
loss of that customer would not have a material adverse effect on the Company.
However, there can be no assurances that the demand will be adequate or the that
lost distributor-customer could be replaced by other distributors or customers.
The loss of this distributor-customer or any other significant customer could
have a material adverse effect on the Company. See "DESCRIPTION OF BUSINESS."
DEPENDENCE ON KEY SUPPLIERS. Raw materials for the Company's recycling
operations, that is, HDPE, generally are currently readily available. This may
change for various reasons. If the Company relies on a limited number of
suppliers of HDPE because, for example, the market demand for HDPE increases,
the Company's reliance on a limited number of suppliers would involve several
risks, including obtaining an adequate supply of raw materials and components in
order to manufacture or market products, increased raw material or component
costs and reduced control over pricing, quality and timely delivery. Any
interruption in the supply of raw materials or components could have a material
adverse effect on the Company. Furthermore, certain potential alternative
suppliers may have pre-existing exclusive relationships with competitors of the
Company and others which may preclude the Company from manufacturing certain of
its proposed products. See "DESCRIPTION OF BUSINESS--RAW MATERIALS."
PRICE SENSITIVITY. The Company's principal operations involve the
recycling of HDPE plastics. 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.
UNCERTAINTY OF MARKET ACCEPTANCE OF CERTAIN PROPOSED PRODUCTS. Although
the Company currently markets plastic resin, it has not sold any plastic pallet
manufactured at its facilities and does not anticipate manufacturing plastic
pallet products until the first quarter of 1998. Any unexpected developmental,
regulatory or manufacturing problems could delay the
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commercialization of the Company's proposed products and have a material
adverse effect on the Company and its prospects. In addition, the market
acceptance of any of the Company's proposed products, such as plastic
pallets, will be substantially dependent on the ability of the Company to
demonstrate to the business community the capabilities and perceived benefits
of the Company's proposed products as well as to sell commercial quantities
of the proposed products at acceptable prices. There can be no assurance
that the Company will be able to ultimately successfully develop plastic
pallets or that it will be able to gain market acceptance for its plastic
pallets. See "DESCRIPTION OF BUSINESS--PALLET TECHNOLOGIES."
LEVERAGE. The Company is significantly leveraged. It has entered into
security agreements with a lender which substantially encumber all of the
Company's assets. In addition, under the terms of the Debentures, the
Company is required to make quarterly interest payments and satisfy the
principal amount of $8,000,000 in less than three years. 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 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. See "DESCRIPTION OF BUSINESS; --ACQUISITION OF THE FACILITY;
- --PALLET TECHNOLOGIES;" and "MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS."
NEED FOR ADDITIONAL FINANCING. The Company has funded its operations to
date primarily through equity and debt financings. The Company anticipates that
its current funds from such financings, together with cash flow from operations
(if any), should be sufficient to fund the Company's operations, including its
proposed expansion, for approximately six months. However, there can be no
assurance that events affecting the Company's operations will not result in the
Company depleting its funds before that time. The Company may need to raise
substantial additional funds to continue to fund operating expenses or its
expansion strategy. There can be no assurance that additional financing will be
available, or, if available, that such financing will be on terms favorable to
the Company. Failure to obtain such additional financing would have a material
adverse effect on the Company. See "MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS--LIQUIDITY
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AND CAPITAL RESOURCES AS OF SEPTEMBER 30, 1997" and the Company's financial
statements and notes thereto.
SUBSTANTIAL INDEBTEDNESS DUE AFTER OCTOBER 31, 1997. At December 31,
1997, the Company had an aggregate of $13,549,064 in outstanding
indebtedness, including $1,878,848 of accounts payable to equipment vendors
which the Company intends to pay with the proceeds of its existing credit
facilities. In the event the Company is not successful in generating revenue
to service this indebtedness or in renegotiating the terms of the loans,
there can be no assurance that the loans will not become due. In addition,
there can be no assurance that the Company will be able to service this
indebtedness or to renegotiate the terms of indebtedness on favorable terms
to the Company or at all. The failure of the Company to service this
indebtedness or to renegotiate the indebtedness would have a material adverse
effect upon the Company. See "MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATION--PHASE 2; --PHASE 3;
- --CONVERTIBLE DEBENTURES" and "DESCRIPTION OF BUSINESS; --ACQUISITION OF THE
FACILITY; -- PALLET TECHNOLOGIES."
COMPETITION AND RAPID TECHNOLOGICAL CHANGE. The recycling and recycled
plastics industries are subject to intense competition and rapid and significant
technological change. The Company faces competition from other recycling and
plastics companies, many of which have substantially greater financial and other
resources than the Company and, therefore, are able to spend more than the
Company in areas such as product development, manufacturing and marketing.
Although a company with greater resources will not necessarily be able to bring
a new product to market before its smaller competitors, substantial resources
enable a company to support many new products simultaneously, thereby improving
the likelihood of at least some of its new products being among the first to
make it to market. Furthermore, certain of the Company's competitors are
significantly smaller than the Company and may, therefore, have lower fixed
costs and greater operating flexibility. Since the recycling process used by
the Company involves technology in the public domain, other firms would not need
to invest in licenses or development of new technology to compete with the
Company's recycling operations. The Company's revenues and profitability could
be adversely affected by technological change. Competitors may develop products
which may render the Company's products or proposed products uneconomical or
result in products being commercialized that may be superior to the Company's
products. In addition, alternatives to recycled plastics could be developed,
which would have a material adverse effect on the Company. See "DESCRIPTION OF
BUSINESS."
UNCERTAIN PROTECTION OF PATENTS AND PROPRIETARY RIGHTS. The Company relies
on a combination of licenses and trade secrets to protect its proprietary
technology, rights and know-how. There can be no assurance that such license
rights will not be infringed upon, that the
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Company's trade secrets will not otherwise become known to or independently
developed by competitors, that non-disclosure agreements will not be breached,
or that the Company would have adequate remedies for any such infringement or
breach. Litigation may be necessary to enforce proprietary rights of the
Company or to defend the Company against third-party claims of infringement.
Such litigation could result in substantial cost to, and a diversion of effort
by, the Company and its management and may have a material adverse effect on the
Company. The Company currently is an exclusive and non-exclusive licensee of
various technologies and may in the future desire or be required to obtain other
licenses to develop, manufacture and market commercially viable products. The
Company's success and potential competitive advantage is dependent upon its
ability to exploit the technology under these licenses. There can be no
assurance that the Company will be able to exploit the technology covered by
these license agreements or that it will be able to do so exclusively. In
addition, there can be no assurance that any patents or patent applications
pursuant to which the Company has obtained licenses are valid and enforceable,
or that any licenses required to be obtained by the Company in the future will
be valid and enforceable or obtainable on commercially reasonable terms, if at
all.
There can be no assurance that patent applications which underlie the
Company's licenses will result in patents being issued, or that, if issued,
the patents will afford protection against competitors with similar
technology. Although the Company is not aware of any claim against it for
infringement, the Company's ability to commercialize its products and
proposed products depends on its not infringing the proprietary rights of
competitors. Laws regarding the enforceability of intellectual property vary
from jurisdiction to jurisdiction. There can be no assurance that
intellectual property issues will be uniformly resolved, or that local laws
will provide the Company with consistent rights and benefits. In addition,
there can be no assurance that competitors will not be issued patents which
may prevent the manufacturing or marketing of the Company's products or
proposed products or require licensing and the payment of fees or royalties
by the Company in order for the Company to be able to manufacture or market
certain products. See "DESCRIPTION OF BUSINESS--PATENTS, TRADEMARKS AND
LICENSES."
ENVIRONMENTAL MATTERS. 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 and local 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 off-site 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,
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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. See "DESCRIPTION OF
BUSINESS--ENVIRONMENTAL MATTERS AND GOVERNMENTAL REGULATIONS."
POTENTIAL PRODUCT LIABILITY; AVAILABILITY OF INSURANCE. The testing,
manufacturing, and marketing of the Company's products and proposed products
involve the inherent risks of product liability claims or similar legal theories
against the Company, some of which may cause the Company to incur significant
defense costs. Although the Company currently maintains product liability
insurance coverage which it believes is adequate, there can be no assurance that
the coverage limits of its insurance are adequate or that all such claims will
be covered by insurance. In addition, these policies generally must be renewed
every year. While the Company has been able to obtain product liability
insurance in the past, there can be no assurance it will be able to obtain
insurance in the future on its products or proposed products. Product liability
insurance varies in cost, is difficult to obtain and may not be available in the
future on terms acceptable to the Company, if it is available at all. A
successful product liability claim or other judgment against the Company in
excess of its insurance coverage could have a material adverse effect upon the
Company or its reputation. See "DESCRIPTION OF BUSINESS."
YEAR 2000 COMPLIANCE. The year 2000 compliance issue, which is common
to most companies, concerns the inability of computerized information systems
to properly recognize and process date sensitive information as the year 2000
approaches. The Company currently is working to address and resolve this
issue with respect to its computerized information systems, but has not yet
assessed the total costs. However, based on preliminary information available
to the Company, in part because the Company does not believe that its
recycling and manufacturing operations use date sensitive systems in any
material respect, such costs are not currently expected to have a material
adverse impact on the Company's financial position or results of operations
in the future.
DEPENDENCE ON KEY PERSONNEL. The Company is dependent on the experience,
abilities and continued services of its current management personnel. In
particular, Mr. Fixler, its Chairman of the Board, President and Chief Executive
Officer, has played a significant role in the development and management of the
Company. The Company has entered into a three-year employment agreement with
Mr. Fixler commencing January 1, 1997 and has obtained a $1,000,000 key man life
insurance policy on the life of Mr. Fixler, for the benefit of the Company. The
Company has also entered into a five-year employment agreement with Mr.
DeLaurentiis. The loss or reduction of services of Mr. Fixler, Mr. DeLaurentiis
or any other key employee could have a material adverse effect on the Company.
There is no assurance that additional managerial assistance will not be
required. The Company's future success depends in large part upon its ability
to attract and retain highly qualified personnel. The Company faces competition
for such personnel from other companies and organizations, many of which have
significantly greater resources than the Company. There can be no assurance
that the Company will be able to attract and retain the necessary personnel on
acceptable terms or at all. See "DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND
CONTROL PERSONS," "SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT," "DESCRIPTION OF BUSINESS--EMPLOYMENT AGREEMENTS," CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS," and "EXECUTIVE COMPENSATION."
11
<PAGE>
ABSENCE OF PUBLIC MARKET; VOLATILITY. There has been a limited public
trading market for the Company's Common Stock and there can be no assurance
that an active trading market will be sustained. There can be no assurance
that the Common Stock will trade in the public market at or above its current
or any particular price. The trading price of the Common Stock could be
subject to significant fluctuations in response to variations in quarterly
operating results, even mild expressions of interest on a given day (being
traded on the OTC Bulletin Board), and other factors and such fluctuations
could cause the market price of the Common Stock to fluctuate substantially.
Accordingly, the Common Stock should be expected to experience substantial
price changes in short periods of time, owing to the vagaries of the Bulletin
Board. Even if the Company is performing according to its plan and there is
no legitimate Company-specific financial basis 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. In addition, the stock
markets in the United States have, from time to time, experienced significant
price and volume fluctuations that are unrelated or disproportionate to the
operating performance of individual companies. Such fluctuations may
adversely affect the price of the Common Stock. See "MANAGEMENT'S DISCUSSION
AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS."
POSSIBLE ADVERSE EFFECTS OF ISSUANCE OF PREFERRED STOCK; ANTI-TAKEOVER
PROVISIONS. The Company's Amended and Restated Certificate of Incorporation
authorizes the issuance of a maximum of 2,000,000 shares of preferred stock,
par value $.001 per share ("Preferred Stock"), with designations, rights and
preferences as set forth in the Company's Amended and Restated Certificate of
Incorporation. As a result of the foregoing, the Board of Directors can
issue, without further stockholder approval, Preferred Stock with dividend,
liquidation, conversion, voting or other rights that would adversely affect
the voting power or other rights of the holders of the Common Stock. The
issuance of Preferred Stock could, under certain circumstances, discourage,
delay or prevent a change in control of the Company. In addition, the
issuance of Preferred Stock could dilute the rights of holders of the Common
Stock and the market price of the Common Stock. Although the Company has no
plans to issue any shares of Preferred Stock, there can be no assurance that
it will not issue Preferred Stock at some future date. The Company is
subject to Delaware General Corporation Law provisions that prohibit the
Company from entering into certain business combinations without the approval
of its stockholders and, as such, could prohibit or delay mergers or other
transactions or changes in control with respect to the Company. Such
provisions, accordingly, may discourage attempts to acquire the Company. See
"Description of Securities."
SHARES ELIGIBLE FOR FUTURE SALE; EXERCISE OF REGISTRATION RIGHTS. Certain
of the outstanding shares of Common Stock are "restricted securities" under Rule
144 under the Securities Act, and (except for shares purchased by "affiliates"
of the Company as such term is defined in Rule 144) would be eligible for sale
as the applicable holding periods expire. In the future, these shares may be
sold only pursuant to a registration statement under the Securities Act or an
applicable exemption, including pursuant to Rule 144. Under Rule 144, a person
who has owned Common Stock for at least one year may, under certain
circumstances, sell within any three-month period a number of shares of Common
Stock that does not exceed the greater of 1%
12
<PAGE>
of the then outstanding shares of Common Stock or the average weekly trading
volume during the four calendar weeks prior to such sale. In addition, a
person who is not deemed to have been an affiliate of the Company at any time
during the three months preceding a sale, and who has beneficially owned the
restricted securities for the last two years is entitled to sell all such
shares without regard to the volume limitations, current public information
requirements, manner of sale provisions and notice requirements. Sales or
the expectation of sales of a substantial number of shares of Common Stock in
the public market by the Selling Stockholders could adversely affect the
prevailing market price of the Common Stock, possibly having a depressive
effect on any trading market for the Common Stock, and may impair the
Company's ability to raise capital at that time through additional sale of
its equity securities.
The holders of the Warrants have been granted registration rights with
respect to the 530,240 shares issuable upon exercise of the Warrants. The
sale, or availability for sale, of the outstanding Common Stock underlying
the Warrants in the public market by the Selling Stockholders could adversely
affect the prevailing market price of the Common Stock and could impair the
Company's ability to raise additional capital. See "DESCRIPTION OF
SECURITIES."
NO DIVIDENDS ANTICIPATED. 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. See
"DESCRIPTION OF SECURITIES."
SECONDARY TRADING RESTRICTIONS. The Common Stock is governed by a
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.
13
<PAGE>
SPECIAL NOTE--FORWARD-LOOKING STATEMENTS
Certain statements contained in this Registration Statement, including,
without limitation, statements containing the words "believes,"
"anticipates," "expects," "estimates," "intends" and words of similar import,
are intended to identify such expressions as "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 Prospectus. Certain of these factors are discussed in more detail
elsewhere in "RISK FACTORS." Given these uncertainties, readers of this
Registration Statement and investors are cautioned to consider carefully
these factors in addition to the other information set forth in this
Prospectus, and 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's actual results, performance or achievements
could differ materially from the results expressed in or implied by these
forward-looking statements.
SELLING STOCKHOLDERS
The following table sets forth certain information regarding the
beneficial ownership of Common Stock by the Selling Stockholders as of
January 16, 1998, and the number of shares of Common Stock covered by this
Prospectus.
<TABLE>
<CAPTION>
NUMBER OF
SHARES NUMBER OF
BENEFICIALLY MAXIMUM SHARES
OWNED PRIOR NUMBER OF BENEFICIALLY
TO SHARES OWNED AFTER PERCENT OF
SELLING STOCKHOLDER OFFERING(1) OFFERED(2) OFFERING OUTSTANDING
----------- ---------- -------- -----------
<S> <C> <C> <C> <C>
JNC Opportunity Fund 3,130,626 6,597,293 0 0
Ltd.
</TABLE>
14
<PAGE>
Diversified Strategies
Fund, L.P. 447,232 942,471 0 0
(1) Includes (i) the number of shares of Common Stock issuable upon
conversion of Debentures assuming conversion at the conversion
formula price in effect on January 16, 1998 (which price will
fluctuate from time to time based on changes in the market price
of the Common Stock and provisions in the formula for determining
the conversion price) and (ii) the number of shares of Common
Stock issuable upon exercise in full of the Warrants. The Debentures
and the Warrants were issued by the Company to the following Selling
Stockholders in October, 1997 and November, 1997 in transactions
exempt from the registration requirements of the Securities Act. The
Warrants were issued to the Selling Stockholders for the following
number of shares of Common Stock: JNC Opportunity Fund Ltd. -
463,960; and Diversified Strategies Fund, L.P. - 66,280. The shares
to be sold shall include, in addition to the numbers indicated, any
additional shares of Common Stock of the Company that become issuable
in connection with the Shares by reason of any stock divided, stock
split, recapitalization or other similar transaction effected without
the receipt of consideration that results in an increase in the number
of outstanding shares of the Company's Common Stock.
(2) In order to provide for (i) fluctuations in the market price of the
Common Stock, (ii) provisions in the formula for determining the
conversion price of the Debentures provided for therein, and (iii)
shares of Common Stock which may be issued for payment of interest on
the Debentures, the aggregate number of shares of Common Stock
registered hereby exceeds the aggregate number of such shares issuable
upon conversion of Debentures at the conversion price in effect on
the date hereof. For each Selling Stockholder, the number in this
column represents the sum of (i) such Selling Stockholder's pro rata
portion of the aggregate number of shares of Common Stock registered
hereby, after subtracting the aggregate number of shares of Common
Stock issuable upon exercise of the Warrants and (ii) the number of
shares of Common Stock issuable upon exercise of the Warrants issued
to such Selling Stockholder.
PLAN OF DISTRIBUTION
The Selling Stockholders may, from time to time, sell all or a
portion of the Shares on the OTC Bulletin Board, in privately
negotiated transactions or otherwise, at fixed prices that may be
changed, at market prices prevailing at the time of sale, at prices
related to such market prices or at negotiated prices. The Shares
may be sold by the Selling Stockholders by one or more of the
following methods, without limitation: (a) block trades in which
the broker or dealer so engaged will attempt to sell the Shares as
agent but may position and resell a portion of the block as
principal to facilitate the transaction, (b) purchases by a broker
or dealer as principal and resale by such broker or dealer for its
account pursuant to this Prospectus, (c) an exchange distribution
in accordance with the rules of such exchange, (d) ordinary
brokerage transactions and transactions in which the broker
solicits purchasers, (e) privately negotiated transactions, (f)
short sales and (g) a combination of any such methods of sale. In
effecting sales, brokers and dealers engaged by the Selling
Stockholders may arrange for other brokers or dealers to
participate. Brokers or dealers may receive commissions or
discounts from the Selling Stockholders (or, if any such
broker-dealer acts as agent for the purchaser of such shares, from
such purchaser) in amounts to be negotiated which are not expected
to exceed those customary in the types of transactions involved.
Broker-dealers may agree with the Selling Stockholders to sell a
specified number of such Shares at a stipulated price per share,
and, to the extent such broker-dealer is unable to do so acting as
agent for a Selling Stockholder, to purchase as principal any
unsold Shares at the price required to fulfill the broker-dealer
commitment to the Selling Stockholders. Broker-dealers who acquire
Shares as principal may thereafter resell such Shares from time to
time in transactions (which may involve block transactions and
sales to and through other broker-dealers, including transactions
of the nature described above) in the over-the-counter market or
otherwise at prices and on terms then prevailing at the time of
sale, at prices then related to the then-current market price or in
negotiated transactions and, in connection with such resales, may
pay to or receive from the purchasers of such Shares commissions as
described above. The Selling Stockholders may also sell the Shares
in accordance with Rule 144 under the Securities Act, rather than
pursuant to this Prospectus.
The Selling Stockholders and any broker-dealers or agents that
participate with the Selling Stockholders in sales of the Shares may be
deemed to be "underwriters" within the meaning of the Securities Act in
connection with such sales. In such event, any commissions received by such
broker-dealers or agents and any profit on the resale of the Shares purchased
by them may be deemed to be underwriting commissions or discounts under the
Securities Act.
From time to time the Selling Stockholders may engage in short sales,
short sales against the box, puts and calls and other transactions in
securities of the Company or derivatives thereof, and may sell and deliver
the Shares in connection therewith or in settlement of securities loans. If
the Selling Stockholders engage in such transactions, the conversion price
may be affected. From time to time the Selling Stockholders may pledge their
Shares pursuant to the margin provisions of its customer agreements with its
brokers. Upon a default by the Selling Stockholders, the broker may offer
and sell the pledged Shares from time to time.
The Company is required to pay all fees and expenses incident to the
registration of the Shares, including fees and disbursements (not to exceed
an aggregate of $5,000) of counsel to the Selling Stockholders. The Company
has agreed to indemnify the Selling Stockholders against certain losses,
claims, damages and liabilities, including liabilities under the Securities
Act.
15
<PAGE>
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 proceeding began on approximately July 9, 1997 when the Company
was served with a Third Party Complaint filed by 3DM, Limited Liability Co.
("3DM") on May 12, 1997. This case arises out of the relationship between
the Company and 3DM, which the Company believes has been terminated and
settled, and the relationship between 3DM and Quantum Chemical Corporation
("Quantum") in connection with the acquisition of the Facility (See
"DESCRIPTION OF BUSINESS," and "DESCRIPTION OF BUSINESS, ACQUISITION OF THE
FACILITY".) The latter relationship was the subject of prior litigation in
which the Company was also joined as a party defendant with 3DM. 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 and its principals on the matter of its breach of its
agreement with Quantum. In its claim against the Company, 3DM seeks
compensatory damages in excess of $25,000 and attorney fees in each of Counts
I through VII of the Third Party Complaint and punitive damages in excess of
$25,000 and attorney fees in Count VIII. The Company does not believe that
the pending litigation involving 3DM will have a material adverse effect on
the Company or its operations.
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 President of the Village Council of his home community,
Mayfield Village, Ohio. See "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,
16
<PAGE>
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.
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.
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.
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 who own five percent or more of the
Common Stock, as of January 16, 1998.
COMMON STOCK
Amount and
Name and Address Amount and Nature
of Beneficial Owner of Beneficial Owner Percent of Class
Mark Fixler 9,905,725* 29.08%
3637 South Green Road
Suite 201
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.
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.
17
<PAGE>
COMMON STOCK
Amount and
Name and Address Amount and Nature
of Beneficial Owner of Beneficial Owner Percent of Class
Mark Fixler 9,905,725* 29.08%
3637 South Green Road
Suite 201
Beachwood, Ohio 44122
All Directors and
Officers as a Group 10,035,725* 29.47%
* 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.
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
30,058,289 shares of Common Stock were issued and outstanding as of January
16, 1998.
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. The Company's Amended and Restated Certificate of
Incorporation and Bylaws which are attached as exhibits to the Form 10-SB are
incorporated by reference, and, together with the applicable statutes of the
State of Delaware, provide a more complete description concerning the rights and
liabilities of stockholders.
18
<PAGE>
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 include
cumulative voting rights, the holders of more than 50% of the shares voting for
the election of directors can elect all the directors 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 January 16, 1998. Shares of Preferred Stock were
issued during the second and third quarters of fiscal year 1997, but all were
converted to Common Stock by the holders thereof prior to the end of the third
quarter. 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.
DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION FOR
SECURITIES ACT LIABILITIES.
Officers and directors of the Company are indemnified by the Company in
accordance with Article X of its Amended and Restated Certificate of
Incorporation, and Article VI of its Bylaws, under each, to the maximum extent
permissible by law. Insofar as indemnification for liabilities arising under
the Securities Act may be permitted to directors, officers and controlling
persons of the Company pursuant to the Delaware General Corporation Law or the
provisions of the Company's Amended and Restated Certificate of Incorporation or
Bylaws, or otherwise, the Company has been advised that in the opinion of the
Commission such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim for
the indemnification against such liabilities (other than the payment by the
Company of expenses incurred or paid by a director, officer or controlling
person of the Company in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Company will, unless in the
opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
DESCRIPTION OF BUSINESS
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
19
<PAGE>
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 during the first quarter of fiscal year 1998
to commence the manufacturing of plastic pallets from recycled resin through its
wholly-owned subsidiary, Pallet Technologies, Inc. ("Pallet Technologies"), 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 Management's
Discussion and Analysis or Plan of Operations.)
In December, 1996, the Company acquired the Facility, a recycling plant in
Heath, Ohio, also known as the Heath Resource Recovery Plant, from 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 (the certificate of incorporation of which was amended in December,
1997 to change its name to "Pallet Technologies, Inc.) 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 Pallet Technologies 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.
The Company has two wholly-owned subsidiaries, Fixcor and Pallet
Technologies. Fixcor owns and operates the Facility, located in the Mid-Ohio
Industrial Park at 1835 James Parkway in Heath, Ohio 43056. Pallet
Technologies' 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.
ACQUISITION OF THE FACILITY
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<PAGE>
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 Form 10-SB. 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 additional financing from NationsCredit
Commercial Corporation. This consisted of revolving loans up to $7,000,000
for inventory and accounts receivable financing, permanent financing, and
equipment acquisition, and included a mortgage security agreement which
encumbered substantially all of the assets of the Facility. Mr. Fixler was
the guarantor of this facility in an amount up to $750,000 plus expenses. All
financing from NationsCredit Commercial Corporation was refinanced through
Gordon Brothers Capital, LLC in December, 1997.
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 expects to produce through approximately the end of the
first quarter of fiscal year 1998) is sold out. With
21
<PAGE>
the third line operating since 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 expand
its operations during fiscal year 1998, and has ordered equipment for that
expansion. 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 at the Facility. Fixcor owns its own substation that regulates
and supplies the power needed at the Facility. 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.
PALLET TECHNOLOGIES
Pallet Technologies is a subsidiary which specializes in the production
of plastic pallets. Pallet Technologies has installed in the Facility 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 typically used for pallets: plastic is
more durable, has historically been less expensive, possesses greater
strength, will serve for a much longer term of service and, when its useful
life is over, can itself be recycled.
22
<PAGE>
In July, 1997, the Company, Fixcor and Pallet Technologies, 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 Pallet Technologies. This facility is
secured by substantially all of the assets of the Company and its
subsidiaries. Mr. Fixler is the guarantor of this line of credit in an amount
up to $1,000,000. All financing from NationsCredit Commercial Corporation
was refinanced through Gordon Brothers Capital, LLC (successor to Gordon
Brothers Capital Corp.) in December, 1997. This resulted in the Company,
FixCor and Pallet Technologies being the borrowers on a revolving credit
facility in the principal amount of $7,000,000, $3,500,000 of which principal
matures in October, 1998.
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
Pallet Technologies' operations will commence and be fully operational, during
the first quarter of fiscal year 1998. At that time, the Company expects Pallet
Technologies to use approximately 25% of Fixcor's output.
Management expects that the customers of Pallet Technologies 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. Pallet Technologies has not yet entered into
agreements for the sale of its products. The Company expects to ship Pallet
Technologies' 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
23
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availability of raw materials was adequate in 1996 and 1997 and management
expects it to remain adequate throughout 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.
PATENTS, TRADEMARKS AND LICENSES
Pallet Technologies has entered into a Licensing and Marketing Agreement
with Nitro Plastics Technologies of Israel. Under that agreement, Pallet
Technologies 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 it and its subsidiaries have all
other 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 ALLIEDSIGNAL 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. In September, 1997, Fixcor entered into a license
agreement with The Federal Manufacturing & Technologies business unit of
AlliedSignal Inc. ("AlliedSignal") under which AlliedSignal has licensed 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.
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 "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 the Form 10-SB.
COMPETITION
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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 Pallet Technologies' 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. See "Risk
Factors." 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 Pallet Technologies expects to make none in connection
with its operations, at the Facility.
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. To the Company's knowledge, its customers do not use the resin
produced by the Fixcor for packaging for products for human consumption.
EMPLOYEES
As of January 16, 1998, the Company and its subsidiaries had a total of
91 employees, all of whom were full-time employees. Of these, Fixcor had 78
production personnel and a support staff of seven at the Facility. The
Company had another six 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.
MANAGEMENT'S DISCUSSION AND ANALYSIS AND RESULTS OF OPERATIONS
DEVELOPMENT STAGE ACTIVITIES
25
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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.
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. In December, 1997, the Company replaced the financing from
NationsCredit Commercial Corporation with permanent financing from Gordon
Brothers Capital Corp. The principal documents for this December, 1997
financing are attached to the Registration Statement of which this Prospectus is
a part. See "DESCRIPTION OF BUSINESS; ACQUISITION OF THE FACILITY."
PHASE 3
On July 7, 1997, the Company formed another wholly-owned subsidiary, Pallet
Technologies. The original name of this subsidiary was Palletech, Inc., but its
certificate of incorporation was amended to change its name to Pallet
Technologies, Inc. in December, 1997. The purpose of this subsidiary is to
specialize in the production of plastic pallets. Pallet Technologies, has
ordered a specialized, state-of-the-art, injection molding machine which will
transform resin pellets, produced by Fixcor, into plastic pallets. Installation
of this equipment was
26
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completed during December, 1997 and January, 1998 and management expects to have
it operating at full capacity by February, 1998. The Company conservatively
estimates that Pallet Technologies revenues for 1998 will be $13.0 million.
Permanent financing for this equipment has been secured from Gordon
Brothers Capital Corp. See "DESCRIPTION OF BUSINESS."
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.
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 Pallet Technologies 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
27
<PAGE>
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 Pallet Technologies 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.
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
Debentures bearing interest at the rate of 6% per annum, payable quarterly in
arrears, and due October 24, 2000 (the "October Debentures"). On November
25, 1997, pursuant to an Amended and Restated Convertible Debenture Purchase
Agreement and collateral documents, the interest rate to the October
Debentures was reduced to 5% (retaining the original October 24, 1997
effective date of the October Debentures), and the Company issued new
Debentures in the principal amount of $3,000,000 to one of the October, 1997
investors, bearing a rate of 5% per annum, payable quarterly in arrears, and
due November 25, 2000. The Company expects to use the net proceeds of the
transactions primarily for the acquisition of equipment for the start-up and
expansion of Pallet Technologies 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) 84% (previously 85% under the
October documents) 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. One of the
purchasers also received warrants to purchase an aggregate 198,840 shares of
Common Stock at that same price, exercisable at any time through November 25,
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)
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<PAGE>
and the exercise of the warrants, and is required to effect and maintain for
three years the Registration Statement of which this Prospectus is a part, under
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 October 24, 1997 debenture transaction documents, attached to the
Form 10-SB, are incorporated by reference, and the principal November 25, 1997
debenture transaction documents are attached to the Registration Statement of
which this Prospectus is a part.
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. Pallet Technologies' operations will utilize
approximately 10,000 square feet of the Facility.
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.
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 Pallet Technologies
operations. The approximate cost of this improvement was approximately
$4,000,000, and the Company is examining several options to finance this
cost, including but not limited to using certain of the proceeds of the
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
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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 1,147 sq. ft. of office space at 3637 South Green
Road, Suite 201, Beachwood, Ohio 44122 at a lease rate of $1,383 per month.
The lease has a term of one year commencing November 15, 1997. Beachwood is a
suburb of Cleveland, Ohio.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During 1996, the Company loaned $26,000 to Fix-Sports, Inc., a company
partially owned by Mr. Fixler which loan is evidenced by a promissory note.
The note bears interest at 10% per year and is collateralized by 52,000
shares of the Company's Common Stock pledged by Mr. Fixler. 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. This guarantee was
confirmed to Gordon Brothers Capital, LLC in connection with the December,
1997 financing.
MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND OTHER
SHAREHOLDER MATTERS
The Company's Common Stock is traded on the OTC Bulletin Board under the
symbol "FIXC."
As of January 16, 1998, 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
"Description of Securities.") Mr. Fixler holds certain options to purchase
shares of Common Stock under his employment agreement with the Company. (See
"EXECUTIVE COMPENSATION.")
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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 years
1996 and 1997.
Quarter Ending High Low
12/31/97 4-5/8 2-11/16
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.
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.
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, which 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.
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<PAGE>
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.
FINANCIAL STATEMENTS
The audited financial statements of the Company as of December 31, 1996
included in the Prospectus have been audited by Harmon & Company, CPA, Inc.,
Columbus, Ohio, an independent public accounting firm, as indicated in its
report with respect thereto, and are included herein in reliance upon the
authority of Harmon & Company, CPA, Inc. as an expert in accounting and
auditing and in giving said reports.
LEGAL MATTERS
The validity of the securities offered by the Prospectus is being passed
upon for the Company by Bricker & Eckler LLP, 100 South Third Street, Columbus,
Ohio 43215-4291.
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 the Form 10-SB. The Company has had no material disagreements
with its accountants.
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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
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<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
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<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>
TABLE OF CONTENTS
PAGE NO.
--------
Available Information and
Information Incorporated by Reference 5
Risk Factors 6
Special Note--Forward-Looking Statements 14
Selling Stockholders 14
Plan of Distribution 15
Legal Proceedings 16
Directors, Executive Officers, Promoters and Control Persons 16
Security Ownership of Certain Beneficial Owners and Management 17
Description of Securities 18
Disclosure of Commission Position of Indemnification for
Securities Act Liabilities 19
Description of Business 19
Management's Discussion and Analysis or Plan of Operation 25
Description of Property 29
Certain Relationship and Related Transactions 30
Market Price of and Dividends on the Registrant's Common
Equity and Other Shareholder Matters 30
Executive Compensation 31
Financial Statements 32
Legal Matters 32
Changes in and Disagreements with Accountants 32
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
INDEMNIFICATION OF DIRECTORS AND OFFICERS
On May 16, 1997, at the Company's Annual Meeting, the stockholders adopted
Amended and Restated Certificate of Incorporation. Article X of that
Certificate provides, in accordance with Section 145 of the General Corporation
Law of Delaware, that a director shall not be
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<PAGE>
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 Amended and Restated 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 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
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<PAGE>
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 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.
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<PAGE>
(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).
OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The expenses in connection with the issuance and distribution of the
securities being registered, other than underwriting compensation, are:
[POMEROY TO CALCULATE FILING FEE THURSDAY EVENING; POMEROY AND KERBER TO
ESTIMATE LEGAL AND MISC. FEES; POMEROY TO GET ACCOUNTING FEES FROM HARMON]
SEC Filing Fee for Registration Statement. . . . . . . . . . . . .$ 7,090
----------
Accounting Fees. . . . . . . . . . . . . . . . . . . . . . . . . .$ 500*
----------
Legal Fees and Expenses. . . . . . . . . . . . . . . . . . . . . .$ 16,000*
----------
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<PAGE>
Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . . . .$ 2,000*
----------
TOTAL. . . . . . . . . . . . . . . . . . . . . . . . . .$ 25,590*
----------
*Estimated Amount
All of the expenses listed above will be borne by the Company.
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 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
II-5
<PAGE>
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 and November, 1997, pursuant to Rule 506 of Regulation D,
the Company issued to two institutional investors $8,000,000 aggregate principal
amount of 5% 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) 84% 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 of 530,240 shares of Common Stock at
an exercise price equal to $3.91 per share. 331,400 of the Warrants are
exercisable at any time through October 24, 2000, and 198,840 through November
25, 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.
INDEX TO EXHIBITS
PAGE NO. IN
EXHIBIT NO. DESCRIPTION THIS FILING
- ----------- ----------- -----------
3.1 Restated and Amended Certificate
of Incorporation*
3.2 Bylaws*
4.1 Articles IV, VI and IX of the Company's
Restated and Amended Certificate of
Incorporation*
4.2 Articles I and IV of the Company's Bylaws*
4.3 Amended and Restated Convertible Debenture
Purchase Agreement, dated as of November 25,
1997, among Fix-Corp, JNC Opportunity Fund Ltd.
("JNC") and Diversified Strategies Fund, L.P. ("DSF")
4.4 Amended and Restated Registration Rights
Agreement, dated as of November 25, 1997,
among Fix-Corp, JNC and DSF
4.5 Escrow Agreement, dated as of November 26, 1997,
among Fix-Corp, JNC, DSF and Robinson,
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<PAGE>
Silverman, Pearce Aronsohn & Berman LLP
5.1 Opinion of Bricker & Eckler LLP regarding the
legality of the securities being registered]
10.1 Purchase and Sale Agreement, dated August 14, 1996,
between the Company and Quantum Chemical
Corporation*
10.2 Amendment No. 1 to Purchase and Sale Agreement,
dated October 29, 1996, between the Company
and Quantum Chemical Corporation*
10.3 Employment Contract, dated January 1, 1997,
between the Company and Mark Fixler*
10.4 Employment Agreement, dated January 1, 1997,
between the Company and Gary DeLaurentiis*
10.5 Acquisition Agreement, dated April 16, 1997,
between the Company, Fixcor and Mark Fixler*
10.6 Amended and Restated Promissory Note from
the Company to Gordon Brothers dated
December 19, 1997
10.7 Modification Agreement between the Company
and Gordon Brothers dated December 19, 1997
10.8 Confirmation of Guarantee from Mr. Fixler to
Gordon Brothers dated December 19, 1997
21 Subsidiaries (name, state of incorporation,
names under which each does business)
23.1 Consent of Harmon & Company, CPA, Inc.
22.2 Consent of Bricker & Eckler LLP (included
in Exhibit 5)
24 Powers of Attorney (included on the
Signature Page of this Registration Statement)
27 Financial Data Schedule
* Incorporated by reference from the Registrant's Form 10-SB filed November 13,
1997, effective January 12, 1998 (File No. 000-23369).
UNDERTAKINGS
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act;
(ii) To reflect in the prospectus any facts or events which,
individually or together, represent a fundamental change in the
information in the registration statement;
II-7
<PAGE>
and notwithstanding the forgoing, any increase or decrease in volume
of securities offered (if the total dollar value of securities offered
would not exceed that which was registered) and any deviation from the
low or high end of the estimated maximum offering range may be
reflected in the form of prospects filed with the Commission pursuant
to Rule 424(b) if, in the aggregate, the changes in the volume and
price represent no more than a 20% change in the maximum aggregate
offering price set forth in the "Calculation of Registration Fee"
table in the effective registration statement; and
(iii) To include any additional or changed material information on
the plan of distribution.
(2) For the purpose of determining any liability under the Securities Act,
to treat each post-effective amendment as a new registration statement of
the securities offered, and the offering of such securities at that time to
be the initial bona fide offering.
(3) To file a post-effective amendment to remove from registration any of
the securities that remain unsold at the termination of the offering.
(b) The undersigned Registrant, hereby requesting acceleration of the effective
date of the registration statement under Rule 461 under the Securities Act,
hereby undertakes to include the following:
Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling
persons of the Company pursuant to the provisions of the Delaware
General Corporation Law or of the Amended and Restated Certificate of
Incorporation or Bylaws of the Company, or otherwise, the Company has
been advised that in the opinion of the Commission such
indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by the small business issuer of expenses incurred
or paid by a director, officer or controlling person of the Company in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities
being registered, the Company will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be
governed by the final adjudication of such issue.
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THE REGISTRANT CERTIFIES
THAT IT HAS REASONABLE GROUNDS TO BELIEVE
II-8
<PAGE>
THAT IT MEETS ALL OF THE REQUIREMENTS FOR FILING ON FORM SB-2 AND HAS DULY
CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF BEACHWOOD, STATE OF
OHIO, ON JANUARY 14, 1998.
FIX-CORP INTERNATIONAL, INC.
BY: /s/ Mark Fixler
-----------------------------------------
MARK FIXLER
CHAIRMAN OF THE BOARD OF DIRECTORS AND
CHIEF EXECUTIVE OFFICER
(PRINCIPAL EXECUTIVE OFFICER)
THE UNDERSIGNED OFFICERS AND DIRECTORS OF FIX-CORP INTERNATIONAL, INC., HEREBY
SEVERALLY CONSTITUTE AND APPOINT MARK FIXLER AND ANDREW I. PRESS, AND EACH OF
THEM SINGLY, OUR TRUE AND LAWFUL ATTORNEYS AND AGENTS, WITH FULL POWER TO THEM,
AND EACH OF THEM, TO SIGN FOR US AND IN OUR NAMES IN THE CAPACITIES INDICATED
BELOW, THE REGISTRATION STATEMENT ON FORM SB-2 FILED HEREWITH AND ANY AND ALL
PRE-EFFECTIVE AND POST-EFFECTIVE AMENDMENTS TO SAID REGISTRATION STATEMENT, AND
GENERALLY TO DO ALL SUCH THINGS IN OUR NAMES AND ON OUR BEHALF IN OUR CAPACITIES
AS OFFICERS AND DIRECTORS TO ENABLE FIX-CORP INTERNATIONAL, INC. TO COMPLY WITH
THE PROVISIONS OF THE SECURITIES ACT AND ALL REQUIREMENTS OF THE SECURITIES AND
EXCHANGE COMMISSION, HEREBY RATIFYING AND CONFIRMING OUR SIGNATURES AS THEY MAY
BE SIGNED BY OUR SAID ATTORNEYS, OR ANY OF THEM, TO SAID REGISTRATION STATEMENT
AND ANY AND ALL AMENDMENTS THERETO.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THIS REGISTRATION STATEMENT
HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS IN THE CAPACITIES AND ON THE
DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE CAPACITY DATE
- --------- -------- ----
<S> <C> <C>
/s/ Mark Fixler Chairman of the Board of Directors, January 14, 1998
- ----------------------------------- President and Chief Executive Officer
MARK FIXLER (Principal Executive Officer)
Treasurer and Secretary January 14, 1998
II-9
<PAGE>
/s/ Andrew I. Press (Principal Accounting and Financial
- ----------------------------------- Officer)
ANDREW I. PRESS
/s/ Gary M. DeLaurentiis Vice President and Director January 14, 1998
- -----------------------------------
GARY M. DELAURENTIIS
/s/ Lawrence C. Schmelzer Director January 14, 1998
- -----------------------------------
LAWRENCE C. SCHMELZER
</TABLE>
II-10
<PAGE>
Exhibit 4.3
THIS AMENDED AND RESTATED CONVERTIBLE DEBENTURE PURCHASE AGREEMENT,
dated as of November 25, 1997 (this "AGREEMENT"), among Fix-Corp
International, Inc., a Delaware corporation (the "COMPANY"), JNC Opportunity
Fund Ltd., a corporation organized under the laws of the Cayman Islands
("JNC"), and Diversified Strategies Fund, L.P., an Illinois limited
partnership ("DSF"). Each of JNC and DSF is a "PURCHASER" and, collectively
JNC and DSF are the "PURCHASERS."
WHEREAS, the parties previously have entered into a certain
Convertible Debenture Purchase Agreement dated October 24, 1997 (the
"ORIGINAL AGREEMENT") pursuant to which JNC and DSF purchased an aggregate
principal amount of $5,000,000 of the company's 6% Convertible Debentures,
due October 24, 1997 (the "ORIGINAL DEBENTURES") together with warrants for
an aggregate 331,400 shares of Common Stock; and
WHEREAS, subject to the terms and conditions set forth in this
Agreement, the Company desires to reissue to the Purchasers, in exchange for
their Original Debentures, the Company's 5% Convertible Debentures due
October 24, 2000 in the aggregate principal amount of $5,000,000 (the
"OCTOBER DEBENTURES"), and to issue and sell to JNC, and JNC desires to
purchase, an aggregate principal amount of $3,000,000 of the Company's 5%
Convertible Debentures, due November 25, 2000 (the "NOVEMBER DEBENTURES"),
which are convertible into shares of the Company's common stock, par value
$.001 per share (the "COMMON STOCK") (the October Debentures and the November
Debentures are sometimes hereinafter referred to as the "DEBENTURES"); and
WHEREAS, the parties desire to amend and restate in its entirety the
Original Agreement and to cancel the Original Debentures.
IN CONSIDERATION of the mutual covenants and agreements set forth
herein and for good and valuable consideration, the receipt and adequacy of
which are hereby acknowledged, the parties agree as follows:
ARTICLE I
PURCHASE AND SALE OF DEBENTURES; CLOSING
1.1 THE CLOSING.
(a) THE CLOSING. (i) Subject to the terms and conditions set
forth in this Agreement, the Company shall reissue to the Purchasers the October
Debentures in exchange for the Original Debentures, and issue and sell to JNC,
and JNC shall purchase, the November Debentures for an aggregate purchase price
of $3,000,000. The closing of the purchase and sale of the Debentures (the
"CLOSING") shall take place at the offices of Robinson Silverman Pearce Aronsohn
& Berman LLP (the "ESCROW AGENT"), 1290 Avenue of the Americas, New York, New
York 10104, immediately following the execution hereof or such later date as the
parties shall agree. The date of the Closing is hereinafter referred to as the
"Closing Date."
(ii) The parties acknowledge and agree that pursuant to
the Original Agreement there was distributed for the benefit of the Company
$1,000,000 of the purchase price paid by DSF and $4,000,000 of the purchase
price paid by JNC. Prior to the Closing the parties
<PAGE>
shall deliver to the Escrow Agent such items as are required to be delivered
by them in accordance with and subject to the terms and conditions of the
Escrow Agreement, dated as of the date hereof, by and among the Company, the
Purchasers and the Escrow Agent and attached as EXHIBIT E, (the "ESCROW
AGREEMENT"), including the following: (i) the Company shall deliver or cause
to be delivered (A) October Debentures in aggregate principal amount equal to
$1,000,000, registered in the name of DSF, (B) October Debentures in
aggregate principal amount equal to $5,000,000, registered in the name of
JNC, (C) November Debentures in the aggregate principal amount of $3,000,000,
registered in the name of JNC, (D) the Warrants (as defined in Section
3.16), and (E) the legal opinions of Bricker & Eckler LLP substantially in
the form of EXHIBIT C ("LEGAL OPINION") addressed to each Purchaser; (ii) JNC
shall deliver or cause to be delivered $3,000,000 in United States dollars;
(iii) each of JNC and DSF shall deliver the Original Debentures which shall
be canceled by the Company; and (iv) each party hereto shall deliver or cause
to be delivered all other executed instruments, agreements and certificates
as are required to be delivered by or on their behalf at the Closing.
1.2 FORM OF DEBENTURES. The Debentures shall be in the form of EXHIBIT A.
1.3 CERTAIN DEFINITIONS. For purposes of this Agreement, "CONVERSION
PRICE," "ORIGINAL ISSUE DATE," "CONVERSION DATE", "TRADING DAY", "BUSINESS
DAY " and "PER SHARE MARKET VALUE" shall have the meanings set forth in the
October Debentures; and "MARKET PRICE" as at any date shall mean the average
Per Share Market Value for the five (5) Trading Days immediately preceding
such date.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
2.1 REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF THE COMPANY. The
Company hereby makes the following representations and warranties to the
Purchasers:
(a) ORGANIZATION AND QUALIFICATION. The Company is a
corporation, duly incorporated, validly existing and in good standing under the
laws of the jurisdiction of its incorporation, with the requisite corporate
power and authority to own and use its properties and assets and to carry on its
business as currently conducted. The Company has no subsidiaries other than as
set forth in SCHEDULE 2.1(a) attached hereto (collectively, the "SUBSIDIARIES").
Each of the Subsidiaries is a corporation, duly incorporated, validly existing
and in good standing under the laws of the jurisdiction of its incorporation,
with the full corporate power and authority to own and use its properties and
assets and to carry on its business as currently conducted. Each of the Company
and the Subsidiaries is duly qualified to do business and is in good standing as
a foreign corporation in each jurisdiction in which the nature of the business
conducted or property owned by it makes such qualification necessary, except
where the failure to be so qualified or in good standing, as the case may be,
could not, individually or in the aggregate, (x) adversely affect the legality,
validity or enforceability of this Agreement, the Debentures, the Escrow
Agreement, the Warrants or the Amended and Restated Registration Rights
Agreement, dated the date hereof, among the Company and the Purchasers (the
"REGISTRATION RIGHTS AGREEMENT" and, together with this Agreement, the
Debentures and the Warrants, the "TRANSACTION DOCUMENTS"), (y) have a material
adverse effect on the results of operations, assets, prospects, or condition
(financial or otherwise) of the Company and the Subsidiaries, taken as a whole,
or (z) adversely impair the Company's ability to perform fully on a timely basis
its obligations under any Transaction
<PAGE>
Document (any of the foregoing, a "MATERIAL ADVERSE EFFECT").
(b) AUTHORIZATION; ENFORCEMENT. The Company has the requisite
corporate power and authority to enter into and to consummate the transactions
contemplated by the Transaction Documents and otherwise to carry out its
obligations thereunder. The execution and delivery of each of the Transaction
Documents by the Company and the consummation by it of the transactions
contemplated thereby have been duly authorized by all necessary action on the
part of the Company. Each of the Transaction Documents has been duly executed
by the Company and when delivered in accordance with the terms hereof shall
constitute the legal, valid and binding obligation of the Company enforceable
against the Company in accordance with its terms, except as such enforceability
may be limited by applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation or similar laws relating to, or affecting generally the enforcement
of, creditors' rights and remedies or by other equitable principles of general
application. Neither the Company nor any Subsidiary is in violation of any of
the provisions of its respective certificate of incorporation, by-laws or other
charter documents.
(c) CAPITALIZATION. The authorized, issued and outstanding
capital stock of the Company is set forth in SCHEDULE 2.1(c). No shares of
Common Stock are entitled to preemptive or similar rights, nor is any holder of
the Common Stock entitled to preemptive or similar rights arising out of any
agreement or understanding with the Company by virtue of any of the Transaction
Documents. Except as disclosed in SCHEDULE 2.1(c), there are no outstanding
options, warrants, script rights to subscribe to, calls or commitments of any
character whatsoever relating to, or, except as a result of the purchase and
sale of the Debentures and Warrants hereunder, securities, rights or obligations
convertible into or exchangeable for, or giving any person any right to
subscribe for or acquire any shares of Common Stock, or contracts, commitments,
understandings, or arrangements by which the Company or any Subsidiary is or may
become bound to issue additional shares of Common Stock, or securities or rights
convertible or exchangeable into shares of Common Stock. To the knowledge of
the Company, except as specifically disclosed in the Disclosure Materials (as
defined below) or SCHEDULE 2.1(c), no Person (as defined below) beneficially
owns (as determined pursuant to Rule 13d-3 promulgated under the Securities
Exchange Act of 1934, as amended (the "EXCHANGE ACT")) or has the right to
acquire by agreement with or by obligation binding upon the Company, beneficial
ownership of in excess of 5% of the Common Stock. A "PERSON" means an
individual or corporation, partnership, trust, incorporated or unincorporated
association, joint venture, limited liability company, joint stock company,
government (or an agency or subdivision thereof) or other entity of any kind.
(d) ISSUANCE OF DEBENTURES AND WARRANTS. The Debentures and
the Warrants are duly authorized, and, when issued in accordance with the terms
hereof, shall be validly issued, fully paid and nonassessable, free and clear of
all liens, encumbrances and rights of first refusals of any kind (collectively,
"LIENS"). The Company has and at all times while the Debentures and the
Warrants are outstanding will maintain an adequate reserve of duly authorized
shares of Common Stock to enable it to perform its conversion, exercise and
other obligations under this Agreement, the Warrants and the Debentures and in
no circumstances shall such reserved and available shares of Common Stock be
less than the sum of (i) 200% of (A) the number of shares of Common Stock as
would be issuable upon conversion in full of the Debentures, assuming such
conversion were effected on the Original Issue Date and (B) the number of shares
of Common Stock as are issuable as payment of interest on the Debentures, and
(ii) the number of shares of Common Stock as are issuable upon exercise in full
of the Warrants (the "INITIAL RESERVE"). If at any time the sum of the number
of shares of Common Stock issuable (a) upon conversion in full of the then
outstanding Debentures, (b) as the payment of interest on the Debentures
(assuming all such interest is to be paid in Common Stock) and (c) upon exercise
in full of the Warrants exceeds 85% of the Initial
<PAGE>
Reserve, the Company shall duly reserve 200% of the number of shares of
Common Stock equal to such excess to fulfill such obligations. The
obligation shall similarly apply to successive excesses. The shares of
Common Stock issuable upon conversion of the Debentures, as payment of
interest in respect thereof and upon exercise of the Warrants are sometimes
referred to herein as the "UNDERLYING SHARES," and the Debentures, Warrants
and Underlying Shares are, collectively, the "SECURITIES." When issued in
accordance with the terms of the Debentures and the Warrants, the Underlying
Shares will be duly authorized, validly issued, fully paid and nonassessable,
and free and clear of all Liens.
(e) NO CONFLICTS. The execution, delivery and performance of
the Transaction Documents by the Company and the consummation by the Company of
the transactions contemplated thereby do not and will not (i) conflict with or
violate any provision of its certificate of incorporation, bylaws or other
charter documents (each as amended through the date hereof) or (ii) subject to
obtaining the consents referred to in Section 2.1(f), conflict with, or
constitute a default (or an event which with notice or lapse of time or both
would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, any agreement, indenture or
instrument (evidencing a Company debt or otherwise) to which the Company is a
party or by which any property or asset of the Company is bound or affected, or
(iii) result in a violation of any law, rule, regulation, order, judgment,
injunction, decree or other restriction of any court or governmental authority
to which the Company is subject (including federal and state securities laws and
regulations), or by which any property or asset of the Company is bound or
affected, except in the case of each of clauses (ii) and (iii), as could not,
individually or in the aggregate, have or result in a Material Adverse Effect.
The business of the Company is not being conducted in violation of any law,
ordinance or regulation of any governmental authority, except for violations
which, individually and in the aggregate, could not have or result in a Material
Adverse Effect.
(f) CONSENTS AND APPROVALS. Except as specifically set forth
in SCHEDULE 2.1(f), neither the Company nor any Subsidiary is required to obtain
any consent, waiver, authorization or order of, or make any filing or
registration with, any court or other federal, state, local or other govern
mental authority or other Person in connection with the execution, delivery and
performance by the Company of the Transaction Documents other than (i) the
filing of a registration statement covering the resale of the Underlying Shares
by the Purchasers (the "UNDERLYING SECURITIES REGISTRATION STATEMENT") with the
Securities and Exchange Commission (the "COMMISSION"), (ii) the application for
the listing of the Underlying Shares on the OTC Bulletin Board (and with any
other national securities exchange, market or trading facility on which the
Common Stock is then listed), (iii) state blue sky laws, and (iv) other than, in
all other cases, where the failure to obtain such consent, waiver, authorization
or order, or to give or make such notice or filing, could not have or result in,
individually or in the aggregate, a Material Adverse Effect (together with the
consents, waivers, authorizations, orders, notices and filings referred to in
SCHEDULE 2.1(f), the "REQUIRED APPROVALS").
(g) LITIGATION; PROCEEDINGS. Except as specifically disclosed
in the Disclosure Materials (as hereinafter defined), there is no action, suit,
notice of violation, proceeding or investigation pending or, to the best
knowledge of the Company, threatened against or affecting the Company or any of
its Subsidiaries or any of their respective properties before or by any court,
governmental or administrative agency or regulatory authority (federal, state,
county, local or foreign) which (i) adversely affects or challenges the
legality, validity or enforceability of any of the Transaction Documents or the
Securities or (ii) could, individually or in the aggregate, have or result in a
Material Adverse Effect.
<PAGE>
(h) NO DEFAULT OR VIOLATION. Neither the Company nor any
Subsidiary (i) is in default under or in violation of (or has received notice of
a claim that it is in default under or that it is in violation of) any
indenture, promissory note, loan or credit agreement or any other agreement or
instrument to which it is a party or by which it or any of its properties is
bound, (ii) is in violation of any order of any court, arbitrator or
governmental body, or (iii) is in violation of any statute, rule or regulation
of any governmental authority, except as could not individually or in the
aggregate, have or result in, individually or in the aggregate, a Material
Adverse Effect.
(i) PRIVATE OFFERING. Subject in part to the truth and
accuracy of the Purchasers' representations set forth in Section 2.2, the offer,
sale and issuance of the Securities as contemplated by this Agreement are exempt
for the registration requirement of the Securities Act, and neither the Company
nor any Person acting on its behalf has taken or will take any action which
might subject the offering, issuance or sale of the Securities to the
registration requirements of Section 5 of the Securities Act.
(j) DISCLOSURE MATERIALS. The financial statements of the
Company dated December 31, 1996, July 31, 1997 and any other financial
statements delivered by the Company to the Purchasers (the "FINANCIAL
STATEMENTS" and, together with the Schedules to this Agreement and other
documents and information furnished by or on behalf of the Company at any time
prior to the Closing, the "DISCLOSURE MATERIALS") comply in all material
respects with applicable accounting requirements. Such Financial Statements
have been prepared in accordance with generally accepted accounting principles
applied on a consistent basis during the periods involved, except as may be
otherwise specified in such Financial Statements or the notes thereto, and
fairly present in all material respects the financial position of the Company as
of and for the dates thereof and the results of operations and cash flows for
the periods then ended, subject, in the case of unaudited statements, to normal
year-end audit adjustments. There are no liabilities, contingent or otherwise,
of the Company involving material amounts not disclosed in said Financial
Statements. The Disclosure Materials do not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading. Since July 31, 1997, there has been
no event, occurrence or development that has had or that could have or result in
a Material Adverse Effect.
(k) INVESTMENT COMPANY. The Company is not, and is not an
"affiliate person" of, an "investment company" within the meaning of the
Investment Company Act of 1940, as amended.
(l) CERTAIN FEES. Except for fees payable to CDC Consulting,
Inc., no fees or commissions will be payable by the Company to any broker,
financial advisor, finder, investment banker, placement agent, or bank with
respect to the transactions contemplated hereby. The Purchasers shall have no
obligation with respect to such fees or with respect to any claims made by or on
behalf of other Persons for fees of a type contemplated in this Section that may
be due in connection with the transactions contemplated hereby. The Company
shall indemnify and hold harmless each Purchaser, its respective employees,
officers, directors, agents, and partners, and their respective Affiliates (as
such term is defined under Rule 405 promulgated under the Securities Act), from
and against all claims, losses, damages, costs (including the costs of
preparation and attorney's fees) and expenses suffered in respect of any such
claimed or existing fees, as and when incurred.
(m) SOLICITATION MATERIALS. The Company has not (i)
distributed any offering materials in connection with the offering and sale of
the Securities other than the Disclosure
<PAGE>
Materials and any amendments and supplements thereto or (ii) solicited any
offer to buy or sell the Securities by means of any form of general
solicitation or advertising.
(n) FORM SB-2 ELIGIBILITY. The Company is, and at the Closing
Date will be, eligible to register securities for resale with the Commission
under Form SB-2 promulgated under the Securities Act.
(o) EXCLUSIVITY. The Company shall not issue and sell
Debentures to any Person other than the Purchasers.
(p) LISTING AND MAINTENANCE REQUIREMENTS COMPLIANCE. The
Company has not in the two years preceding the date hereof received written
notice from any stock exchange, market or trading facility on which the Common
Stock is or has been listed (or on which it has been quoted) to the effect that
the Company is not in compliance with the listing or maintenance requirements of
such exchange, market or trading facility. The Company has no reason to believe
that it does not now or will not in the future meet any such maintenance
requirements.
(q) PATENTS AND TRADEMARKS. The Company has, or has rights to
use, all patents, patent applications, trademarks, trademark applications,
service marks, trade names, copyrights, licenses and rights which are necessary
for use in connection with its business and which the failure to so have would
have a Material Adverse Effect (collectively, the "INTELLECTUAL PROPERTY
RIGHTS"). To the best knowledge of the Company, there is no existing
infringement on any of the Intellectual Property Rights.
(r) DISCLOSURE. All information relating to or concerning the
Company set forth in the Transaction Documents or provided to the Purchasers or
their respective representatives, agents and counsel in connection with the
transactions contemplated hereby is true and correct in all material respects
and does not fail to state any material fact necessary in order to make the
statements herein or therein, in light of the circumstances under which they
were made, not misleading. The Company confirms that it has not provided to any
of the Purchasers or any of their representatives or agents any information that
constitutes or might constitute material non-public information other than
information that has specifically been identified to the recipient as material
non-public information in writing. The Company understands and confirms that
the Purchasers shall be relying on the foregoing representation in effecting
transactions in securities of the Company.
(s) REGISTRATION RIGHTS. Except as provided in the
Registration Rights Agreement, the Company has not granted or agreed to grant
any registration rights, including piggy-back registration rights, to any
Person.
2.2 REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS. Each Purchaser
hereby, severally and not jointly, makes the following representations and
warranties to the Company.
(a) ORGANIZATION; AUTHORITY. Such Purchaser is an entity
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization with the requisite power and authority to enter
into and to consummate the transactions contemplated by the Transaction
Documents and to carry out its obligations thereunder. The acquisition of the
Securities to be acquired hereunder by such Purchaser has been duly authorized
by all necessary action on the part of such Purchaser. Each of this Agreement,
the Registration Rights Agreement and the Escrow Agreement has been duly
executed by such Purchaser and, when delivered by such Purchaser in accordance
with the terms hereof and the Escrow Agreement constitutes the valid and
<PAGE>
legally binding obligation of such Purchaser, enforceable against it in
accordance with its terms, subject to bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium and similar laws of general
applicability relating to or affecting creditors' rights generally and to
general principles of equity.
(b) INVESTMENT INTENT. Such Purchaser is acquiring the
Securities to be acquired hereunder by such Purchaser for its own account for
investment purposes only and not with a view to or for distributing or reselling
such Securities or any part thereof or interest therein, without prejudice,
however, to such Purchaser's right, subject to the provisions of this Agreement
and the Registration Rights Agreement, at all times to sell or otherwise dispose
of all or any part of such Securities pursuant to an effective registration
statement under the Securities Act and in compliance with applicable state
securities laws or under an exemption from such registration.
(c) PURCHASER STATUS. At the time such Purchaser was offered
the Securities to be acquired hereunder by such Purchaser, it was, at the date
hereof, it is, and at the Closing Date, it will be, an "accredited investor" as
defined in Rule 501(a) under the Securities Act.
(d) EXPERIENCE OF PURCHASER. Such Purchaser either alone or
together with its representatives, has such knowledge, sophistication and
experience in business and financial matters so as to be capable of evaluating
the merits and risks of the prospective investment in the Securities, and has so
evaluated the merits and risks of such investment.
(e) ABILITY OF PURCHASER TO BEAR RISK OF INVESTMENT. Such
Purchaser acknowledges that an investment in the Securities is speculative and
involves a high degree of risk. Such Purchaser is able to bear the economic
risk of an investment in the Securities to be acquired hereunder by such
Purchaser, and, at the present time, is able to afford a complete loss of such
investment.
(f) ACCESS TO INFORMATION. Such Purchaser acknowledges receipt
of the Disclosure Materials and further acknowledges that it has been afforded
(i) the opportunity to ask such questions as it has deemed necessary of, and to
receive answers from, representatives of the Company concerning the terms and
conditions of the offering of the Securities, and the merits and risks of
investing in the Securities, (ii) access to information about the Company and
the Company's financial condition, results of operations, business, properties,
management and prospects sufficient to enable it to evaluate its investment and
(iii) the opportunity to obtain such additional information which the Company
possesses or can acquire without unreasonable effort or expense that is
necessary to make an informed investment decision with respect to the investment
and to verify the accuracy and completeness of the information contained in the
Disclosure Materials. Neither such inquiries nor any other investigation
conducted by or on behalf of such Purchaser or its representatives, agents or
counsel shall modify, amend or affect such Purchaser's right to rely on the
truth, accuracy and completeness of the Disclosure Materials and the Company's
representations and warranties contained in the Transaction Documents.
(g) RELIANCE. Such Purchaser understands and acknowledges that
(i) the Securities to be acquired by it hereunder are being offered and sold to
it without registration under the Securities Act in a private placement that is
exempt from the registration provisions of the Securities Act and (ii) the
availability of such exemption, depends in part on, and the Company will rely
upon the accuracy and truthfulness of, the foregoing representations and such
Purchaser hereby consents to such reliance.
The Company acknowledges and agrees that the Purchasers make no
representations
<PAGE>
or warranties with respect to the transactions contemplated hereby other than
those specifically set forth in this Section 2.2.
ARTICLE III
OTHER AGREEMENTS OF THE PARTIES
3.1 TRANSFER RESTRICTIONS. (a) Securities may only be disposed of
pursuant to an effective registration statement under the Securities Act, to the
Company or pursuant to an available exemption from or in a transaction not
subject to the registration requirements thereof. In connection with any
transfer of any Securities other than pursuant to an effective registration
statement or to the Company, the Company may require the transferor thereof to
provide to the Company an opinion of counsel selected by the transferor, the
form and substance of which opinion shall be reasonably satisfactory to the
Company, to the effect that such transfer does not require registration under
the Securities Act. Notwithstanding the foregoing, the Company hereby consents
to and agrees to register on the books and records of the Company or on the
register of any transfer agent for the Securities (i) any transfer of Securities
by one Purchaser to another Purchaser, and agrees that no documentation other
than executed transfer documents shall be required for any such transfer, and
(ii) any transfer by any Purchaser to an Affiliate (as such term is defined
under Rule 405 promulgated under the Securities Act) of such Purchaser or to an
Affiliate of another Purchaser, or any transfers among any such Affiliates
provided the transferee certifies to the Company that it is an "accredited
investor" as defined in Rule 501(a) under the Securities Act and makes the
appropriate investment representations. Any such Purchaser or Affiliate
transferee shall have the rights of a Purchaser under this Agreement and the
Registration Rights Agreement.
(b) The Purchasers agree to the imprinting, so long as is
required by this Section 3.1(b), of the following legend on the Securities:
NEITHER THESE SECURITIES NOR THE SECURITIES INTO WHICH THESE
SECURITIES ARE [CONVERTIBLE] [EXERCISABLE] HAVE BEEN REGISTERED WITH THE
SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY
STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT
BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN
A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS.
[FOR DEBENTURES ONLY] THIS DEBENTURE IS SUBJECT TO CERTAIN RESTRICTIONS ON
CONVERSION SET FORTH IN SECTION 3.8 OF THE CONVERTIBLE DEBENTURE PURCHASE
AGREEMENT, DATED AS OF OCTOBER 24, 1997, AMONG FIX-CORP INTERNATIONAL, INC.
(THE "COMPANY") AND THE ORIGINAL HOLDER HEREOF. A COPY OF THAT AGREEMENT
IS ON FILE AT THE PRINCIPAL OFFICE OF THE COMPANY.
Underlying Shares shall not contain the legend set forth above if
the conversion of Debentures, exercise of Warrants or other issuances of
Underlying Shares, as the case may be,
<PAGE>
occurs at any time while an Underlying Securities Registration Statement is
effective under the Securities Act or, in the event there is not an effective
Underlying Securities Registration Statement at such time, if in the opinion
of counsel to the Company such legend is not required under applicable
requirements of the Securities Act (including judicial interpretations and
pronouncements issued by the staff of the Commission). The Company agrees
that it will provide each Purchaser, upon request, with a certificate or
certificates representing Underlying Shares, free from such legend at such
time as such legend is no longer required hereunder. The Company may not
make any notation on its records or give instructions to any transfer agent
of the Company which enlarge the restrictions of transfer set forth in this
Section 3.1(b).
3.2 ACKNOWLEDGEMENT OF DILUTION. The Company acknowledges that the
issuance of Underlying Shares upon (i) conversion of the Debentures and as
payment of interest thereon and (ii) exercise of the Warrants may result in
dilution of the outstanding shares of Common Stock, which dilution may be
substantial under certain market conditions. The Company further acknowledges
that its obligation to issue Underlying Shares in accordance with the Debentures
and the Warrants is unconditional and absolute regardless of the effect of any
such dilution.
3.3 FURNISHING OF INFORMATION. As long as the Purchasers own
Securities, the Company covenants to timely file (or obtain extensions in
respect thereof and file within the applicable grace period) all reports
required to be filed by the Company after the Filing Date (as defined in the
Registration Rights Agreement) pursuant to Section 13(a) or 15(d) of the
Exchange Act. If at any time prior to the date on which the Purchasers may
resell all of their Underlying Shares without volume restrictions pursuant to
Rule 144(k) promulgated under the Securities Act (as determined by counsel to
the Company pursuant to a written opinion letter to such effect, addressed and
acceptable to the Company's transfer agent for the benefit of and enforceable by
the Purchasers) the Company is not required to file reports pursuant to such
sections, it will prepare and furnish to the Purchasers and make publicly
available in accordance with Rule 144(c) promulgated under the Securities Act
annual and quarterly financial statements, together with a discussion and
analysis of such financial statements in form and substance substantially
similar to those that would otherwise be required to be included in reports
required by Section 13(a) or 15(d) of the Exchange Act in the time period that
such filings would have been required to have been made under the Exchange Act.
The Company further covenants that it will take such further action as any
holder of Securities may reasonably request, all to the extent required from
time to time to enable such Person to sell Securities without registration under
the Securities Act within the limitation of the exemptions provided by Rule 144
promulgated under the Securities Act, including the legal opinion referenced
above in this Section. Upon the request of any such Person, the Company shall
deliver to such Person a written certification of a duly authorized officer as
to whether it has complied with such requirements.
3.4 USE OF DISCLOSURE MATERIALS. The Company consents to the use of
the Disclosure Materials and any information provided by or on behalf of the
Company pursuant to Section 3.3, and any amendments and supplements thereto, by
the Purchasers in connection with resales of the Securities other than pursuant
to an effective registration statement; PROVIDED, THAT the Company shall have a
reasonable opportunity to update such information.
3.5 BLUE SKY LAWS. In accordance with the Registration Rights
Agreement, the Company shall qualify the Underlying Shares under the securities
or Blue Sky laws of such jurisdictions as the Purchasers may request and shall
continue such qualification at all times during the Effectiveness Period (as
defined in the Registration Rights Agreement); PROVIDED, HOWEVER, that neither
the Company nor its Subsidiaries shall be required in connection therewith to
qualify as a foreign corporation where they are not now so qualified or to take
any action that would subject the
<PAGE>
Company to general service of process in any such jurisdiction where it is
not then so subject.
3.6 INTEGRATION. The Company shall not and shall use its best efforts
to ensure that no Affiliate shall sell, offer for sale or solicit offers to buy
or otherwise negotiate in respect of any security (as defined in Section 2 of
the Securities Act) that would be integrated with the offer or sale of the
Securities in a manner that would require the registration under the Securities
Act of the issue or sale of the Securities to the Purchasers.
3.7 INCREASE IN AUTHORIZED SHARES. At such time as the Company would
be, if a notice of conversion or exercise (as the case may be) were to be
delivered on such date, precluded from (a) converting the full outstanding
principal amount of Debentures (and paying any accrued but unpaid interest in
respect thereof in shares of Common Stock) that remain unconverted at such date
or (b) honoring the exercise in full of the Warrants due to the unavailability
of a sufficient number of shares of authorized but unissued or re-acquired
Common Stock, the Board of Directors of the Company shall promptly (and in any
case within 30 Business Days from such date) prepare and mail to the
shareholders of the Company proxy materials requesting authorization to amend
the Company's restated certificate of incorporation to increase the number of
shares of Common Stock which the Company is authorized to issue to at least a
number of shares equal to the sum of (i) all shares of Common Stock then
outstanding, (ii) the number of shares of Common Stock issuable on account of
all outstanding warrants, options and convertible securities (other than the
Debentures and the Warrants) and on account of all shares reserved under any
stock option, stock purchase, warrant or similar plan, (iii) 200% of the number
of Underlying Shares as would then be issuable upon a conversion in full of the
then outstanding Debentures and as payment of all future interest thereon in
shares of common Stock in accordance with the terms of this Agreement and the
Debentures and (iv) such number of Underlying Shares as would then be issuable
upon the exercise in full of the warrants. In connection therewith, the Board
of Directors shall (x) adopt proper resolutions authorizing such increase, (y)
recommend to and otherwise use its best efforts to promptly and duly obtain
stockholder approval to carry out such resolutions (and hold a special meeting
of the shareholders no later than the 60th day after delivery of the proxy
materials relating to such meeting) and (z) within 5 Business Days of obtaining
such shareholder authorization, file an appropriate amendment to the Company's
certificate of incorporation to evidence such increase.
3.8 PURCHASER OWNERSHIP OF COMMON STOCK. In no event shall a
Purchaser be permitted to use its ability to convert Debentures or exercise its
Warrants to the extent that such conversion or exercise would result in that
Purchaser beneficially owning (for purposes of Rule 13d-3 under the Exchange Act
and the rules thereunder) in excess of 4.999% of the then issued and outstanding
shares of Common Stock, including shares issuable upon conversion of the
Debentures held by such Purchaser after application of this Section. To the
extent that the limitation contained in this Section applies, the determination
of whether Debentures are convertible (in relation to other securities owned by
a Purchaser) and of which Debentures are convertible shall be in the sole
discretion of such Purchaser, and the submission of Debentures for conversion
shall be deemed to be such Purchaser's determination of whether such Debentures
are convertible (in relation to other securities owned by a Purchaser) and of
which Debentures are convertible, in each case subject to such aggregate
percentage limitation, and the Company shall have no obligation to verify or
confirm the accuracy of such determination. Nothing contained herein shall be
deemed to restrict the right of a Purchaser to convert Debentures at such time
as such conversion will not violate the provisions of this Section.
Notwithstanding anything to the contrary contained herein, if ten days have
elapsed since a Purchaser has declared an event of default under any Transaction
Document and such event shall not have been cured to such Purchaser's
satisfaction prior to the expiration of such ten-day period, the provisions of
this Section 3.8 shall be null and void AB INITIO.
<PAGE>
3.9 LISTING OF UNDERLYING SHARES. (a) The Company shall (1) not later
than the fifth Business Day following the Closing Date prepare and file with the
OTC Bulletin Board (as well as any other national securities exchange, market or
trading facility on which the Common Stock is then listed) an additional shares
listing application covering at least the sum of (i) two times the number of
Underlying Shares as would be issuable upon a conversion in full of (and as
payment of interest in respect of) the Debentures, assuming such conversion
occurred on the Original Issue Date and (ii) the Underlying Shares issuable upon
exercise in full of the Warrants (2) take all steps necessary to cause the such
shares to be approved for listing on the OTC Bulletin Board (as well as on any
other national securities exchange or market on which the Common Stock is then
listed) as soon as possible thereafter, and (3) provide to the Purchasers
evidence of such listing, and the Company shall maintain the listing of its
Common Stock on such exchange or market. In addition, if at any time the number
of shares of Common Stock issuable on conversion of all then outstanding
Debentures, on account of accrued and unpaid interest thereon and upon exercise
in full of the Warrants is greater than the number of shares of Common Stock
theretofore listed with the OTC Bulletin Board (and any such other national
securities exchange, market or trading facility), the Company shall promptly
take such action (including the actions described in the preceding sentence) to
file an additional shares listing application with the OTC Bulletin Board (and
any such other national securities exchange, market or trading facility)
covering at least a number of shares equal to the sum of (x) 200% of (A) the
number of Underlying Shares as would then be issuable upon a conversion in full
of the Debentures, and (B) the number of Underlying Shares as would be issuable
as payment of interest on the Debentures and (y) the number of Underlying Shares
as would be issuable upon exercise in full of the Warrants.
(b) The Company will use its commercially reasonable efforts to
list the Common Stock for trading on either the Nasdaq SmallCap Market or Nasdaq
National Market as soon as possible after the Closing Date and immediately
thereafter shall list the shares referenced in Section 3.9(a) thereon, and
maintain such listing thereafter as long as Underlying Shares are outstanding.
3.10 CONVERSION PROCEDURES. EXHIBIT F sets forth the procedures with
respect to the conversion of the Debentures, including the form of legal
opinion, if necessary, that shall be rendered to the Company's transfer agent
and such other information and instructions as may be reasonably necessary to
enable the Purchasers to exercise its right of conversion smoothly and
expeditiously which are not set forth in the Debentures.
3.11 PURCHASERS' RIGHTS IF TRADING IN COMMON STOCK IS SUSPENDED OR
DELISTED. If at any time while any Purchaser (or any assignee thereof) owns any
Securities, trading in the shares of the Common Stock is suspended on or
delisted from the OTC Bulletin Board or any other principal market or exchange
for such shares (other than as a result of the suspension of trading in
securities on such market or exchange generally, or temporary suspensions
pending the release of material information) for more than three (3) Trading
Days, then, notwithstanding anything to the contrary contained in any
Transaction Document, at a Purchaser's option exercisable by ten Business Days
prior written notice to the Company, the Company shall, PROVIDED, THAT trading
has not been reinstated within such period, repay the entire principal amount of
then outstanding Debentures and redeem all then outstanding Underlying Shares
then held by such Purchaser, at an aggregate purchase price equal to the sum of
(I) the aggregate outstanding principal amount of Debentures then held by such
Purchaser divided by the Conversion Price on (a) the day prior to the date of
such suspension or delisting, (b) the day of such notice or (c) the date of
payment in full of the repurchase price calculated under this Section, whichever
is less, and multiplied by the Market Price preceding (x) the day prior to the
date of such suspension or delisting, (y) the day of such notice and (z) the
date of payment in full of the repurchase price calculated under this Section,
whichever is greater, (II) the aggregate of all accrued but unpaid interest and
other non-principal
<PAGE>
amounts (including liquidated damages, if any) then payable in respect of all
Debentures to be repaid, (III) the number of Underlying Shares then held by
such Purchaser multiplied by the Market Price immediately preceding (x) the
day prior to the date of such suspension or delisting, (y) the date of the
notice or (z) the date of payment in full by the Company of the repurchase
price calculated under this Section, whichever is greater, and (IV) interest
on the amounts set forth in I - III above accruing from the 10th Business Day
after such notice until the repurchase price under this Section is paid in
full at the rate of 18% per annum. If after the Original Issue Date the
Common Stock shall be listed for trading or quoted on the Nasdaq SmallCap
Market, Nasdaq National Market or any other national securities exchange or
market, this provision shall similarly apply to any delistings or suspensions
therefrom.
3.12 USE OF PROCEEDS. The Company shall use all of the proceeds from
the sale of the Securities for working capital purposes and not for the
satisfaction of any portion of Company debt or to redeem Company equity or
equity-equivalent securities. Pending application of the proceeds of this
placement in the manner permitted hereby the Company will invest such proceeds
in money market funds, interest bearing accounts and/or short-term, investment
grade interest bearing securities.
3.13 NOTICE OF BREACHES. Each of the Company and each Purchaser shall
give prompt written notice to the other of any breach by it of any
representation, warranty or other agreement contained in any Transaction
Document, as well as any events or occurrences arising after the date hereof,
which would reasonably be likely to cause any representation or warranty or
other agreement of such party, as the case may be, contained in the Transaction
Document to be incorrect or breached as of such Closing Date. However, no
disclosure by either party pursuant to this Section shall be deemed to cure any
breach of any representation, warranty or other agreement contained in any
Transaction Document.
Notwithstanding the generality of the foregoing, the Company shall
promptly notify the Purchasers of any notice or claim (written or oral) that it
receives from any lender of the Company to the effect that the consummation of
the transactions contemplated by the Transaction Documents violates or would
violate any written agreement or understanding between such lender and the
Company, and the Company shall promptly furnish by facsimile to the holders of
the Debentures a copy of any written statement in support of or relating to such
claim or notice.
3.14 CONVERSION OBLIGATIONS OF THE COMPANY. The Company shall honor
conversions of the Debentures and exercises of the Warrants and shall deliver
Underlying Shares in accordance with the respective terms and conditions and
time periods set forth in the Debentures and the Warrants.
3.15 RIGHT OF FIRST REFUSAL; SUBSEQUENT REGISTRATIONS; CERTAIN
CORPORATE ACTIONS. (a) The Company shall not, directly or indirectly, without
the prior written consent of the Encore Capital Management, L.L.C. ("Encore") on
behalf of the Purchasers, offer, sell, grant any option to purchase, or
otherwise dispose (or announce any offer, sale, grant or any option to purchase
or other disposition) of any of its or its Affiliates equity, equity-equivalent
or derivative securities (a "SUBSEQUENT FINANCING") for a period of 180 days
after the Original Issue Date (as defined in the October Debentures), except (i)
the granting of options or warrants to employees, officers and directors, and
the issuance of shares upon exercise of options granted, under any stock option
plan heretofore or hereinafter duly adopted by the Company, (ii) shares issued
upon exercise of any currently outstanding warrants and upon conversion of any
currently outstanding convertible preferred stock in each case disclosed in
SCHEDULE 3.1(c), and (iii) shares of Common Stock issued upon conversion of the
Debentures, as payment of interest thereon, or upon exercise of the
<PAGE>
Warrants in accordance with their respective terms, unless (A) the Company
delivers to Encore a written notice (the "SUBSEQUENT FINANCING NOTICE") of
its intention to effect such Subsequent Financing, which Subsequent Financing
Notice shall describe in reasonable detail the proposed terms of such
Subsequent Financing, the amount of proceeds intended to be raised
thereunder, the Person with whom such Subsequent Financing shall be affected,
and a term sheet or similar document relating thereto shall be attached to
such Subsequent Financing Notice and (B) Encore shall not have notified the
Company by 5:00 p.m. (New York City Time) on the tenth (10th) Trading Day
after its receipt of the Subsequent Financing Notice of its willingness to
cause either or both of the Purchasers to provide (or to cause its sole
designee to provide), subject to completion of mutually acceptable
documentation, financing to the Company on substantially the terms set forth
in the Subsequent Financing Notice. If Encore shall fail to notify the
Company of its intention to enter into such negotiations within such time
period, the Company may effect the Subsequent Financing substantially upon
the terms and to the Persons (or Affiliates of such Persons) set forth in the
Subsequent Financing Notice; PROVIDED, that the Company shall provide Encore
with a second Subsequent Financing Notice, and Encore shall again have the
right of first refusal set forth above in this paragraph (a), if the
Subsequent Financing subject to the initial Subsequent Financing Notice shall
not have been consummated for any reason on the terms set forth in such
Subsequent Financing Notice within thirty (30) Trading Days after the date of
the initial Subsequent Financing Notice with the Person (or an Affiliate of
such Person) identified in the Subsequent Financing Notice.
(b) Except Underlying Shares and other "Registrable Securities"
(as such term is defined in the Registration Rights Agreement) to be registered
in accordance with the Registration Rights Agreement, securities to be
registered pursuant to Schedule 6(c) to the Registration Rights Agreement, and
other than Company securities to be registered for resale in connection with
financings permitted pursuant to paragraph (a)(i) through (iii) of this Section,
the Company shall not, without the prior written consent of Encore, (i) issue or
sell any of its or any of its Affiliates' equity or equity-equivalent securities
pursuant to Regulation S promulgated under the Securities Act, or (ii) register
for resale any securities of the Company for a period of not less than 90
Trading Days after the date that the Underlying Securities Registration
Statement is declared effective by the Commission. Any days that a Purchaser is
not permitted to sell Underlying Shares under the Underlying Securities
Registration Statement shall be added to such 90 Trading Day period for the
purposes of (i) and (ii) above.
(c) As long as there are Debentures outstanding, the
Company shall not and shall cause the Subsidiaries not to, without the consent
of the holders of the Debentures, (i) amend its certificate of incorporation,
bylaws or other charter documents so as to adversely affect any rights of the
holders of Debentures; (ii) repay, repurchase or offer to repay, repurchase or
otherwise acquire shares of its Common Stock other than as to the Underlying
Shares; or (iii) enter into any agreement with respect to any of the foregoing.
3.16 THE WARRANTS. (a) Prior to the Closing, the Company shall issue
and deliver to the Escrow Agent for delivery at the closing (a) a Common Stock
purchase warrant, in the form of EXHIBIT D and registered in the name of JNC
(the "JNC WARRANT"), pursuant to which JNC shall have the right at any time and
from time to time thereafter through the third anniversary of the date of
issuance thereof, to acquire 198,840 shares of Common Stock at an exercise price
per share equal to $3.91.
(b) Pursuant to the Original Agreement, the Company previously has delivered to
JNC a Warrant to acquire 265,120 shares and to DFS a Warrant to acquire 66,280
shares of Common Stock upon the same terms as of the JNC Warrant (the JNC
Warrant and such other Warrants referred to
<PAGE>
collectively as the "WARRANTS").
3.17 TRANSFER OF INTELLECTUAL PROPERTY RIGHTS. Except in connection
with the sale of all or substantially all of the assets of the Company, the
Company shall not transfer, sell or otherwise dispose of, any Intellectual
Property Rights, or allow the Intellectual Property Rights to become subject to
any Liens, or fail to renew such Intellectual Property Rights (if renewable and
would otherwise expire), without the prior written consent of the Purchasers.
3.18 FORM 10-SB. On November 13, 1997, the Company filed with the
Commission a Form 10-SB registration statement pursuant to the Exchange Act, and
shall (a) take all commercially reasonable steps necessary to cause such
Form 10-SB registration statement to be declared effective as soon as possible
thereafter, and (b) provide to the Purchasers evidence of such filing and
effectiveness.
ARTICLE IV
MISCELLANEOUS
4.1 FEES AND EXPENSES. The Company shall pay at Closing $7,500 to
the Escrow Agent for the legal fees and disbursements incurred by the
Purchasers in connection with the preparation and negotiation of the
Transaction Documents. Except as set forth in the preceding sentence and in
the Registration Rights Agreement, each party shall pay the fees and expenses
of its advisers, counsel, accountants and other experts, if any, and all
other expenses incurred by such party incident to the negotiation,
preparation, execution, delivery and performance of this Agreement. The
Company shall pay all stamp and other taxes and duties levied in connection
with the issuance of the Debentures pursuant hereto. The Purchasers shall be
responsible for their own respective tax liability that may arise as a result
of the investment hereunder or the transactions contemplated by this
Agreement.
4.2 ENTIRE AGREEMENT; AMENDMENTS. This Agreement, together with the
Exhibits and Schedules hereto, the Debentures and the Warrants contain the
entire understanding of the parties with respect to the subject matter hereof
and supersede all prior agreements and understandings, oral or written, with
respect to such matters.
4.3 NOTICES. Any and all notices or other communications or
deliveries required or permitted to be provided hereunder shall be in writing
and shall be deemed given and effective on the earliest of (i) the date of
transmission, if such notice or communication is delivered via facsimile at
the facsimile telephone number specified in this Section prior to 7:00 p.m.
(New York City time) on a Business Day, (ii) the Business Day after the date
of transmission, if such notice or communication is delivered via facsimile
at the facsimile telephone number specified in the Purchase Agreement later
than 7:00 p.m. (New York City time) on any date and earlier than 11:59 p.m.
(New York City time) on such date, (iii) the Business Day following the date
of mailing, if sent by nationally recognized overnight courier service, or
(iv) upon actual receipt by the party to whom such notice is required to be
given. The address for such notices and communications shall be as follows:
If to the Company: Fix-Corp International, Inc.
27040 Cedar Rd. Suite 218
Beachwood, OH 44122
Facsimile No.: (216) 292-6187
<PAGE>
Attn: Chief Financial Officer
With copies to: Bricker & Eckler LLP
100 South Third Street
Columbus, OH 43215
Facsimile No.: (614) 227-2390
Attn: Steven Kerber
If to JNC: JNC Opportunity Fund Ltd.
Olympia Capital (Cayman) Ltd.
c/o Olympia Capital (Bermuda) Ltd.
Williams House
20 Reid Street
Hamilton HM11
Bermuda
Facsimile No.: (441) 295-2305
Attn: Philip Pedro
If to DSF: Diversified Strategies Fund, L.P.
c/o Encore Capital Management, L.L.C.
12007 Sunrise Valley Drive
Suite 460
Reston, VA 20191
Facsimile No.: (703) 476-7711
Attn: Neil T. Chau
With copies to (for Encore Capital Management, L.L.C.
communications to 12007 Sunrise Valley Drive
either Purchaser): Suite 460
Reston, VA 20191
Facsimile No.: (703) 476-7711
Attn: Neil T. Chau
-and-
Robinson Silverman Pearce Aronsohn &
Berman LLP
1290 Avenue of the Americas
New York, NY 10104
Facsimile No.: (212) 541-4630
Attn: Eric L. Cohen
or such other address as may be designated in writing hereafter, in the same
manner, by such Person.
4.4 AMENDMENTS; WAIVERS. No provision of this Agreement may be
waived or amended except in a written instrument signed, in the case of an
amendment, by both the Company and the Purchasers; or, in the case of a
waiver, by the party against whom enforcement of any such waiver is sought.
No waiver of any default with respect to any provision, condition or
requirement of this Agreement shall be deemed to be a continuing waiver in
the
<PAGE>
future or a waiver of any other provision, condition or requirement hereof,
nor shall any delay or omission of either party to exercise any right
hereunder in any manner impair the exercise of any such right accruing to it
thereafter.
4.5 HEADINGS. The headings herein are for convenience only, do not
constitute a part of this Agreement and shall not be deemed to limit or
affect any of the provisions hereof.
4.6 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon
and inure to the benefit of the parties and their successors and permitted
assigns, including any Persons to whom any Purchaser transfers Debentures or
Warrants. The assignment by a party of this Agreement or any rights
hereunder shall not affect the obligations of such party under this Agreement.
4.7 NO THIRD-PARTY BENEFICIARIES. This Agreement is intended for
the benefit of the parties hereto and their respective permitted successors
and assigns and, other than with respect to permitted assignees under Section
4.6, is not for the benefit of, nor may any provision hereof be enforced by,
any other Person. The obligations of the Purchasers under this Agreement and
the other Transaction Documents are several and not joint and no Purchaser
shall be responsible for any obligations of any other Purchaser.
4.8 GOVERNING LAW. This Agreement shall be governed by and
construed and enforced in accordance with the internal laws of the State of
New York without regard to the principles of conflicts of law thereof.
4.9 SURVIVAL. The representations, warranties, agreements and
covenants contained in this Agreement shall survive the Closing and the and
conversion of the Debentures and exercise of the Warrants.
4.10 EXECUTION. This Agreement may be executed in two or more
counterparts, all of which when taken together shall be considered one and
the same agreement and shall become effective when counterparts have been
signed by each party and delivered to the other parties, it being understood
that all parties need not sign the same counterpart. In the event that any
signature is delivered by facsimile transmission, such signature shall create
a valid and binding obligation of the party executing (or on whose behalf
such signature is executed) the same with the same force and effect as if
such facsimile signature page were an original thereof.
4.11 PUBLICITY. The Company and the Purchasers shall consult with
each other in issuing any press releases or otherwise making public
statements with respect to the transactions contemplated hereby and no party
shall issue any such press release or otherwise make any such public
statement without the prior written consent of the other, which consent shall
not be unreasonably withheld or delayed, except that no prior consent shall
be required if such disclosure is required by law, in which such case the
disclosing party shall provide the other party with prior notice of such
public statement.
4.12 SEVERABILITY. In case any one or more of the provisions of
this Agreement shall be invalid or unenforceable in any respect, the validity
and enforceability of the remaining terms and provisions of this Agreement
shall not in any way be affected or impaired thereby and the parties will
attempt to agree upon a valid and enforceable provision which shall be a
reasonable substitute therefor, and upon so agreeing, shall incorporate such
<PAGE>
substitute provision in this Agreement.
4.13 REMEDIES. Each of the parties to this Agreement acknowledges
and agrees that the other parties would be damaged irreparably in the event
any of the provisions of this Agreement are not performed in accordance with
their specific terms or otherwise are breached. Accordingly, each of the
parties hereto agrees that the other parties shall be entitled to an
injunction or injunctions to prevent breaches of the provisions of this
Agreement and to enforce specifically this Agreement and the terms and
provisions of this Agreement in any action instituted in any court of the
United States of America or any state thereof having jurisdiction over the
parties to this Agreement and the matter, in addition to any other remedy to
which they may be entitled, at law or in equity.
4.14 LIQUIDATED DAMAGES. Each of the parties to this Agreement
acknowledges and agrees that the any and all liquidated damage provisions set
forth in the Transaction Documents express a reasonable pre-estimate of the
damages which would be incurred.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGE FOLLOWS]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amended
and Restated Convertible Debenture Purchase Agreement to be duly executed by
their respective authorized persons as of the date first indicated above.
FIX-CORP INTERNATIONAL, INC.
By: /s/ Mark Fixler
------------------------
Mark Fixler
President
JNC OPPORTUNITY FUND LTD.
By: /s/ Philip C. Pedro
------------------------
Name: Philip C. Pedro
Title: Director
By: /s/ James Q. Chau
------------------------
Name: James Q. Chau
Title: Director
DIVERSIFIED STRATEGIES FUND, L.P.
By: Encore Capital Management, L.L.C.
By: /s/ James Q. Chau
--------------------
Name: James Q. Chau
Title: Director
<PAGE>
AMENDED AND RESTATED
REGISTRATION RIGHTS AGREEMENT
This Amended and Restated Registration Rights Agreement (this
"AGREEMENT") is made and entered into as of November 25, 1997, by and among
Fix-Corp International, Inc. a Delaware corporation (the "COMPANY"), JNC
Opportunity Fund Ltd., a corporation organized under the laws of the Cayman
Islands ("JNC"), and Diversified Strategies Fund, L.P., an Illinois limited
partnership ("DSF"). JNC and DSF are each a "PURCHASER" and are, collectively
the "PURCHASERS."
This Agreement is made pursuant to the Amended and Restated
Convertible Debenture Purchase Agreement, dated as of the date hereof among the
Company and the Purchasers (the "PURCHASE AGREEMENT"). This Agreement shall
supersede and replace in its entirety that certain Registration Rights Agreement
dated as of October 24, 1997 among the parties hereto.
The Company and the Purchasers hereby agree as follows:
1. DEFINITIONS
Capitalized terms used and not otherwise defined herein that are
defined in the Purchase Agreement shall have the meanings given such terms in
the Purchase Agreement. As used in this Agreement, the following terms shall
have the following meanings:
"ADVICE" shall have meaning set forth in Section 3(o).
"AFFILIATE" means, with respect to any Person, any other Person that
directly or indirectly controls or is controlled by or under common control with
such Person. For the purposes of this definition, "CONTROL," when used with
respect to any Person, means the possession, direct or indirect, of the power to
direct or cause the direction of the management and policies of such Person,
whether through the ownership of voting securities, by contract or otherwise;
and the terms of "AFFILIATED," "CONTROLLING" and "CONTROLLED" have meanings
correlative to the foregoing.
"BUSINESS DAY" means any day except Saturday, Sunday and any day which
shall be a legal holiday or a day on which banking institutions in the State of
New York are authorized or required by law or other government actions to close.
"CLOSING DATE" means October 24, 1997.
"COMMISSION" means the Securities and Exchange Commission.
"COMMON STOCK" means the Company's Common Stock, par value $.001 per
share.
"DEBENTURES" means the Company's 5% Convertible Debentures due October
24,
<PAGE>
2000 in the aggregate principal amount of $5,000,000 and the Company's 5%
Convertible Debentures due November 25, 2000 in the aggregate amount of
$3,000,000, issued to the Purchasers pursuant to the Purchase Agreement.
"EFFECTIVENESS DATE" means the 105th day following the Closing Date.
"EFFECTIVENESS PERIOD" shall have the meaning set forth in Section
2(a).
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"FILING DATE" means the fifth day following the day the Commission has
approved the Company's Registration Statement on Form 10-SB filed with the
Commission.
"HOLDER" or "HOLDERS" means the holder or holders, as the case may be,
from time to time of Registrable Securities.
"INDEMNIFIED PARTY" shall have the meaning set forth in Section 5(c).
"INDEMNIFYING PARTY" shall have the meaning set forth in Section 5(c).
"LOSSES" shall have the meaning set forth in Section 5(a).
"NEW YORK COURTS" shall have the meaning set forth in Section 7(j).
"PERSON" means a corporation, an association, a partnership,
organization, government , a business, an individual, a political subdivision
thereof or a governmental agency.
"PROCEEDING" means an action, claim, suit, investigation or proceeding
(including, without limitation, an investigation or partial proceeding, such as
a deposition), whether commenced or threatened.
"PROSPECTUS" means the prospectus included in the Registration
Statement (including, without limitation, a prospectus that includes any
information previously omitted from a prospectus filed as part of an effective
registration statement in reliance upon Rule 430A promulgated under the
Securities Act), as amended or supplemented by any prospectus supplement, with
respect to the terms of the offering of any portion of the Registrable
Securities covered by the Registration Statement, and all other amendments and
supplements to the Prospectus, including post-effective amendments, and all
material incorporated by reference or deemed to be incorporated by reference in
such Prospectus.
"REGISTRABLE SECURITIES" means the shares of Common Stock issuable
upon (a) conversion in full of the Debentures, (b) exercise in full of the
Warrants and (c) payment of interest in respect of the Debentures; PROVIDED,
HOWEVER that in order to account for the fact that the number of shares of
Common Stock that are issuable upon conversion of Debentures is determined in
part upon the market price of the Common Stock at the time of conversion,
Registrable Securities contemplated by clause (a) of this definition shall be
deemed to include not less than 200% of the number of shares of Common Stock
into which the Debentures are convertible, assuming such conversion occurred
on the Closing Date or the Filing Date (whichever date yields a lower
Conversion Price, as such term is defined in the Debentures). The initial
Registration Statement shall cover at least such number of shares of Common
Stock as equals the sum of (x) 200% of the number of shares of Common Stock
into which the Debentures
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<PAGE>
are convertible, assuming such conversion occurred on the Closing Date or the
Filing Date (whichever date yields a lower Conversion Price), (y) interest
thereon and (z) 530,240 shares of Common Stock in respect of the Warrants.
The Company shall be required to file additional Registration Statements to
the extent the actual number of shares of Common Stock into which Debentures
are convertible (together with interest thereon) and Warrants are exercisable
exceeds the number of shares of Common Stock initially registered in
accordance with the immediately prior sentence (the Company shall have 10
Business Days to file such additional Registration Statement after notice of
the requirement thereof, which the Holders may give at such time when the
number of shares of Common Stock as are issuable upon conversion of
Debentures exceeds 185% of the number of shares of Common Stock into which
Debentures are convertible, assuming such conversion occurred on the Closing
Date or the Filing Date (whichever yields a lower Conversion Price.)
"REGISTRATION STATEMENT" means the registration statement contemplated
by Section 2(a) (covering such number of Registrable Securities and any
additional Registration Statements contemplated in the definition of Registrable
Securities), including (in each case) the Prospectus, amendments and supplements
to such registration statement or Prospectus, including pre- and post-effective
amendments, all exhibits thereto, and all material incorporated by reference or
deemed to be incorporated by reference in such registration statement.
"RULE 158" means Rule 158 promulgated by the Commission pursuant to
the Securities Act, as such Rule may be amended from time to time, or any
similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such Rule.
"RULE 415" means Rule 415 promulgated by the Commission pursuant to
the Securities Act, as such Rule may be amended from time to time, or any
similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such Rule.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SPECIAL COUNSEL" means one law firm acting as counsel to the Holders,
for which the Holders will be reimbursed by the Company pursuant to Section 4.
"UNDERWRITTEN REGISTRATION OR UNDERWRITTEN OFFERING" means a
registration in connection with which securities of the Company are sold to an
underwriter for reoffering to the public pursuant to an effective registration
statement.
"WARRANTS" means the Common Stock purchase warrants issued to the
Purchasers on the Closing Date.
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<PAGE>
2. SHELF REGISTRATION
(a) On or prior to the Filing Date the Company shall prepare and file
with the Commission a "Shelf" Registration Statement covering all Registrable
Securities for an offering to be made on a continuous basis pursuant to Rule
415. The Registration Statement shall be on Form SB-2 (or, if the Company is
not permitted to register the resale of the Registrable Securities on Form SB-2,
the Registration Statement shall be on such other appropriate form in accordance
herewith as the Holders of a majority in interest of the Registrable Securities
may consent). The Company shall use its best efforts to cause the Registration
Statement to be declared effective under the Securities Act as promptly as
possible after the filing thereof, but in any event prior to the Effectiveness
Date, and shall use its best efforts to keep such Registration Statement
continuously effective under the Securities Act until the date which is three
years after the date that such Registration Statement is declared effective by
the Commission or such earlier date when all Registrable Securities covered by
such Registration Statement have been sold or may be sold without volume
restrictions pursuant to Rule 144(k) promulgated under the Securities Act, as
determined by the counsel to the Company pursuant to a written opinion letter to
such effect, addressed and acceptable to the Company's transfer agent (the
"EFFECTIVENESS PERIOD"); PROVIDED, HOWEVER, that the Company shall not be deemed
to have used its best efforts to keep the Registration Statement effective
during the Effectiveness Period if it voluntarily takes any action that would
result in the Holders not being able to sell the Registrable Securities covered
by such Registration Statement during the Effectiveness Period, unless such
action is required under applicable law or the Company has filed a
post-effective amendment to the Registration Statement and the Commission has
not declared it effective.
(b) If the Holders of a majority of the Registrable Securities so
elect, an offering of Registrable Securities pursuant to the Registration
Statement may be effected in the form of an Underwritten Offering. In such
event, and if the managing underwriters advise the Company and such Holders in
writing that in their opinion the amount of Registrable Securities proposed to
be sold in such Underwritten Offering exceeds the amount of Registrable
Securities which can be sold in such Underwritten Offering, there shall be
included in such Underwritten Offering the amount of such Registrable Securities
which in the opinion of such managing underwriters can be sold, and such amount
shall be allocated PRO RATA among the Holders proposing to sell Registrable
Securities in such Underwritten Offering.
(c) If any of the Registrable Securities are to be sold in an
Underwritten Offering, the investment banker in interest that will administer
the offering will be selected by the Holders of a majority of the Registrable
Securities included in such offering upon consultation with the Company. No
Holder may participate in any Underwritten Offering hereunder unless such Person
(i) agrees to sell its Registrable Securities on the basis provided in any
underwriting agreements approved by the Persons entitled hereunder to approve
such arrangements and (ii) completes and executes all questionnaires, powers of
attorney, indemnities, underwriting agreements and other documents required
under the terms of such arrangements.
3. REGISTRATION PROCEDURES
In connection with the Company's registration obligations hereunder,
the Company shall:
(a) Prepare and file with the Commission on or prior to the Filing
Date, a Registration Statement (and any additional Registration Statements as
may be required) in accordance with Section 2(a), and cause the Registration
Statement to become effective and
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<PAGE>
remain effective as provided herein; PROVIDED, HOWEVER, that not less than five
(5) Business Days prior to the filing of the Registration Statement or any
related Prospectus or any amendment or supplement thereto (including any
document that would be incorporated or deemed to be incorporated therein by
reference), the Company shall (i) furnish to the Holders, their Special Counsel
and any managing underwriters, copies of all such documents proposed to be
filed, which documents (other than those incorporated or deemed to be
incorporated by reference) will be subject to the review of such Holders, their
Special Counsel and such managing underwriters, and (ii) cause its officers and
directors, counsel and independent certified public accountants to respond to
such inquiries as shall be necessary, in the opinion of respective counsel to
such Holders and such underwriters, to conduct a reasonable investigation within
the meaning of the Securities Act. The Company shall not file the Registration
Statement or any such Prospectus or any amendments or supplements thereto to
which the Holders of a majority of the Registrable Securities, their Special
Counsel, or any managing underwriters, shall reasonably object on a timely
basis.
(b) (i) Prepare and file with the Commission such amendments,
including post-effective amendments, to the Registration Statement as may be
necessary to keep the Registration Statement continuously effective as to the
applicable Registrable Securities for the Effectiveness Period and prepare and
file with the Commission such additional Registration Statements in order to
register for resale under the Securities Act all of the Registrable Securities;
(ii) cause the related Prospectus to be amended or supplemented by any required
Prospectus supplement, and as so supplemented or amended to be filed pursuant to
Rule 424 (or any similar provisions then in force) promulgated under the
Securities Act; (iii) respond as promptly as practicable to any comments
received from the Commission with respect to the Registration Statement or any
amendment thereto and promptly provide the Holders true and complete copies of
all correspondence from and to the Commission relating to the Registration
Statement; and (iv) comply with the provisions of the Securities Act and the
Exchange Act with respect to the disposition of all Registrable Securities
covered by the Registration Statement during the applicable period in accordance
with the intended methods of disposition by the Holders thereof set forth in the
Registration Statement as so amended or in such Prospectus as so supplemented.
(c) Notify the Holders of Registrable Securities to be sold, their
Special Counsel and any managing underwriters immediately (and, in the case of
(i)(A) below, not less than five (5) days prior to such filing) and (if
requested by any such Person) confirm such notice in writing no later than one
(1) Business Day following the day (i)(A) when a Prospectus or any Prospectus
supplement or post-effective amendment to the Registration Statement is proposed
to be filed; (B) when the Commission notifies the Company whether there will be
a "review" of such Registration Statement and whenever the Commission comments
in writing on such Registration Statement (the Company shall provide true and
complete copies thereof and all written responses thereto to each of the
Holders) and (C) with respect to the Registration Statement or any
post-effective amendment, when the same has become effective; (ii) of any
request by the Commission or any other Federal or state governmental authority
for amendments or supplements to the Registration Statement or Prospectus or for
additional information; (iii) of the issuance by the Commission of any stop
order suspending the effectiveness of the Registration Statement covering any or
all of the Registrable Securities or the initiation of any Proceedings for that
purpose; (iv) if at any time any of the representations and warranties of the
Company contained in any agreement (including any underwriting agreement)
contemplated hereby ceases to be true and correct in all material respects; (v)
of the receipt by the Company of any notification with respect to the suspension
of the qualification or exemption from qualification of any of the Registrable
Securities for sale in any jurisdiction, or the initiation or threatening of any
Proceeding for such purpose; and (vi) of the occurrence of any event that makes
any statement made in the
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<PAGE>
Registration Statement or Prospectus or any document incorporated or deemed to
be incorporated therein by reference untrue in any material respect or that
requires any revisions to the Registration Statement, Prospectus or other
documents so that, in the case of the Registration Statement or the Prospectus,
as the case may be, it will not contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading.
(d) Use its best efforts to avoid the issuance of, or, if issued,
obtain the withdrawal of (i) any order suspending the effectiveness of the
Registration Statement or (ii) any suspension of the qualification (or exemption
from qualification) of any of the Registrable Securities for sale in any
jurisdiction, at the earliest practicable moment.
(e) If requested by any managing underwriter or the Holders of a
majority in interest of the Registrable Securities to be sold in connection with
an Underwritten Offering, (i) promptly incorporate in a Prospectus supplement or
post-effective amendment to the Registration Statement such information as such
managing underwriters and such Holders reasonably agree should be included
therein and (ii) make all required filings of such Prospectus supplement or such
post-effective amendment as soon as practicable after the Company has received
notification of the matters to be incorporated in such Prospectus supplement or
post-effective amendment; PROVIDED, HOWEVER, that the Company shall not be
required to take any action pursuant to this Section 3(e) that would, in the
opinion of counsel for the Company, violate applicable law or be materially
detrimental to the business prospects of the Company.
(f) Furnish to each Holder, their Special Counsel and any managing
underwriters, without charge, at least one conformed copy of each Registration
Statement and each amendment thereto, including financial statements and
schedules, all documents incorporated or deemed to be incorporated therein by
reference, and all exhibits to the extent reasonably requested by such Person
(including those previously furnished or incorporated by reference) promptly
after the filing of such documents with the Commission.
(g) Promptly deliver to each Holder, their Special Counsel, and any
underwriters, without charge, as many copies of the Prospectus or Prospectuses
(including each form of prospectus) and each amendment or supplement thereto as
such Persons may reasonably request; and the Company hereby consents to the use
of such Prospectus and each amendment or supplement thereto by each of the
selling Holders and any underwriters in connection with the offering and sale of
the Registrable Securities covered by such Prospectus and any amendment or
supplement thereto.
(h) Prior to any public offering of Registrable Securities, use its
best efforts to register or qualify or cooperate with the selling Holders, any
underwriters and their Special Counsel in connection with the registration or
qualification (or exemption from such registration or qualification) of such
Registrable Securities for offer and sale under the securities or Blue Sky laws
of such jurisdictions as any Holder or underwriter requests in writing, to keep
each such registration or qualification (or exemption therefrom) effective
during the Effectiveness Period and to do any and all other acts or things
necessary or advisable to enable the disposition in such jurisdictions of the
Registrable Securities covered by a Registration Statement; PROVIDED, HOWEVER,
that the Company shall not be required to qualify generally to do business in
any jurisdiction where it is not then so qualified or to take any action that
would subject it to general service of process in any such jurisdiction where it
is not then so subject or subject the Company to any material tax in any such
jurisdiction where it is not then so subject.
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(i) Cooperate with the Holders and any managing underwriters to
facilitate the timely preparation and delivery of certificates representing
Registrable Securities to be sold pursuant to a Registration Statement, which
certificates shall be free of all restrictive legends, and to enable such
Registrable Securities to be in such denominations and registered in such names
as any such managing underwriters or Holders may request at least three Business
Days prior to any sale of Registrable Securities.
(j) Upon the occurrence of any event contemplated by Section
3(c)(vi), as promptly as practicable, prepare a supplement or amendment,
including a post-effective amendment, to the Registration Statement or a
supplement to the related Prospectus or any document incorporated or deemed to
be incorporated therein by reference, and file any other required document so
that, as thereafter delivered, neither the Registration Statement nor such
Prospectus will contain an untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
(k) Use its best efforts to cause all Registrable Securities relating
to such Registration Statement to be listed on the OTC Bulletin Board and any
other securities exchange, quotation system, market or over-the-counter bulletin
board, if any, on which similar securities issued by the Company are then listed
as and when required pursuant to the Purchase Agreement.
(l) In the case of an Underwritten Offering, enter into such
agreements (including an underwriting agreement in form, scope and substance as
is customary in Underwritten Offerings) and take all such other actions in
connection therewith (including those reasonably requested by any managing
underwriters and the Holders of a majority of the Registrable Securities being
sold) in order to expedite or facilitate the disposition of such Registrable
Securities, and whether or not an underwriting agreement is entered into, (i)
make such representations and warranties to such Holders and such underwriters
as are customarily made by issuers to underwriters in underwritten public
offerings, and confirm the same if and when requested; (ii) obtain and deliver
copies thereof to each Holder and the managing underwriters, if any, of opinions
of counsel to the Company and updates thereof addressed to each selling Holder
and each such underwriter, in form, scope and substance reasonably satisfactory
to any such managing underwriters and Special Counsel to the selling Holders
covering the matters customarily covered in opinions requested in Underwritten
Offerings and such other matters as may be reasonably requested by such Special
Counsel and underwriters; (iii) immediately prior to the effectiveness of the
Registration Statement or at the time of delivery of any Registrable Securities
sold pursuant thereto (at the option of the underwriters), obtain and deliver
copies to the Holders and the managing underwriters, if any, of "cold comfort"
letters and updates thereof from the independent certified public accountants of
the Company (and, if necessary, any other independent certified public
accountants of any subsidiary of the Company or of any business acquired by the
Company for which financial statements and financial data is, or is required to
be, included in the Registration Statement), addressed to each Person and in
such form and substance as are customary in connection with Underwritten
Offerings; (iv) if an underwriting agreement is entered into, the same shall
contain indemnification provisions and procedures no less favorable to the
selling Holders and the underwriters, if any, than those set forth in Section 7
(or such other provisions and procedures acceptable to the managing
underwriters, if any, and holders of a majority of Registrable Securities
participating in such Underwritten Offering; and (v) deliver such documents and
certificates as may be reasonably requested by the Holders of a majority of the
Registrable Securities being sold, their Special Counsel and any managing
underwriters to evidence the continued validity of the representations and
warranties made pursuant to clause 3(l)(i) above and to evidence compliance with
any
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customary conditions contained in the underwriting agreement or other agreement
entered into by the Company.
(m) Make available for inspection by the selling Holders, a
representative of such Holders, an underwriter participating in any disposition
of Registrable Securities, and an attorney or accountant retained by such
selling Holders or underwriters, at the offices where normally kept, during
reasonable business hours, all financial and other records, pertinent corporate
documents and properties of the Company and its subsidiaries, and cause the
officers, directors, agents and employees of the Company and its subsidiaries to
supply all information in each case requested by any such Holder,
representative, underwriter, attorney or accountant in connection with the
Registration Statement; PROVIDED, HOWEVER, that any information that is
determined in good faith by the Company in writing to be of a confidential
nature at the time of delivery of such information shall be kept confidential by
such Persons, unless (i) disclosure of such information is required by court or
administrative order or is necessary to respond to inquiries of regulatory
authorities; (ii) disclosure of such information, in the opinion of counsel to
such Person, is required by law; (iii) such information becomes generally
available to the public other than as a result of a disclosure or failure to
safeguard by such Person; or (iv) such information becomes available to such
Person from a source other than the Company and such source is not known by such
Person to be bound by a confidentiality agreement with the Company.
(n) Comply with all applicable rules and regulations of the
Commission and make generally available to its security holders earning
statements satisfying the provisions of Section 11(a) of the Securities Act and
Rule 158 not later than 45 days after the end of any 12 month period (or 90 days
after the end of any 12 month period if such period is a fiscal year) (i)
commencing at the end of any fiscal quarter in which Registrable Securities are
sold to underwriters in a firm commitment or best efforts Underwritten Offering
and (ii) if not sold to underwriters in such an offering, commencing on the
first day of the first fiscal quarter of the Company after the effective date of
the Registration Statement, which statement shall cover said 12 month period, or
end shorter periods as is consistent with the requirements of Rule 158.
(o) The Company may require each selling Holder to furnish to the
Company such information regarding the distribution of such Registrable
Securities and the beneficial ownership of Common Stock held by such selling
Holder as is required by law to be disclosed in the Registration Statement and
the Company may exclude from such registration the Registrable Securities of any
such Holder who unreasonably fails to furnish such information within a
reasonable time after receiving such request.
If the Registration Statement refers to any Holder by name or
otherwise as the holder of any securities of the Company, then such Holder shall
have the right to require (if such reference to such Holder by name or otherwise
is not required by the Securities Act or any similar Federal statute then in
force) the deletion of the reference to such Holder in any amendment or
supplement to the Registration Statement filed or prepared subsequent to the
time that such reference ceases to be required.
Each Holder agrees by its acquisition of such Registrable Securities
that (i) it will not offer or sell any Registrable Securities under the
Registration Statement until it has received copies of the Prospectus as then
amended or supplemented as contemplated in Section 3(g) and notice from the
Company that such Registration Statement and any post-effective amendments
thereto have become effective as contemplated by Section 3(c) and (ii) it will
comply with the prospectus delivery requirements of the Securities Act as
applicable to it in connection with sales
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of Registrable Securities pursuant to the Registration Statement.
Each Holder agrees by its acquisition of such Registrable Securities
that, upon receipt of a notice from the Company of the occurrence of any event
of the kind described in Section 3(c)(ii), 3(c)(iii), 3(c)(iv), 3(c)(v) or
3(c)(vi), such Holder will forthwith discontinue disposition of such Registrable
Securities until such Holder's receipt of the copies of the supplemented
Prospectus and/or amended Registration Statement contemplated by Section 3(j),
or until it is advised in writing (the "ADVICE") by the Company that the use of
the applicable Prospectus may be resumed, and, in either case, has received
copies of any additional or supplemental filings that are incorporated or deemed
to be incorporated by reference in such Prospectus or Registration Statement.
4. REGISTRATION EXPENSES
(a) All fees and expenses incident to the performance of or
compliance with this Agreement by the Company shall, except as and to the extent
specified in Section 4(b), be borne by the Company whether or not pursuant to an
Underwritten Offering and whether or not the Registration Statement is filed or
becomes effective and whether or not any Registrable Securities are sold
pursuant to the Registration Statement. The fees and expenses referred to in
the foregoing sentence shall include, without limitation, (i) all registration
and filing fees (including, without limitation, fees and expenses (A) with
respect to filings required to be made with the OTC Bulletin Board and each
other securities exchange or market on which Registrable Securities are required
hereunder to be listed and (B) in compliance with state securities or Blue Sky
laws (including, without limitation, fees and disbursements of counsel for the
underwriters or Holders in connection with Blue Sky qualifications of the
Registrable Securities and determination of the eligibility of the Registrable
Securities for investment under the laws of such jurisdictions as the managing
underwriters, if any, or the Holders of a majority of Registrable Securities may
designate)), (ii) printing expenses (including, without limitation, expenses of
printing certificates for Registrable Securities and of printing prospectuses if
the printing of prospectuses is requested by the managing underwriters, if any,
or by the holders of a majority of the Registrable Securities included in the
Registration Statement), (iii) messenger, telephone and delivery expenses, (iv)
fees and disbursements of counsel for the Company and Special Counsel for the
Holders, in the case of the Special Counsel, to a maximum amount of $5,000, (v)
Securities Act liability insurance, if the Company so desires such insurance,
and (vi) fees and expenses of all other Persons retained by the Company in
connection with the consummation of the transactions contemplated by this
Agreement. In addition, the Company shall be responsible for all of its
internal expenses incurred in connection with the consummation of the
transactions contemplated by this Agreement (including, without limitation, all
salaries and expenses of its officers and employees performing legal or
accounting duties), the expense of any annual audit, the fees and expenses
incurred in connection with the listing of the Registrable Securities on any
securities exchange as required hereunder.
(b) If the Holders require an Underwritten Offering pursuant to the
terms hereof, the Company shall be responsible for all costs, fees and expenses
in connection therewith, except for the fees and disbursements of the
Underwriters (including any underwriting commissions and discounts) and their
legal counsel and accountants. By way of illustration which is not intended to
diminish from the provisions of Section 4(a), the Holders shall not be
responsible for, and the Company shall be required to pay the fees or
disbursements incurred by the Company (including by its legal counsel and
accountants) in connection with, the preparation and filing of a Registration
Statement and related Prospectus for such offering, the maintenance of such
Registration Statement in accordance with the terms hereof, the listing of the
Registrable
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<PAGE>
Securities in accordance with the requirements hereof, and printing expenses
incurred to comply with the requirements hereof.
5. INDEMNIFICATION
(a) INDEMNIFICATION BY THE COMPANY. The Company shall,
notwithstanding any termination of this Agreement, indemnify and hold harmless
each Holder, the officers, directors, agents (including any underwriters
retained by such Holder in connection with the offer and sale of Registrable
Securities), brokers (including brokers who offer and sell Registrable
Securities as principal as a result of a pledge or any failure to perform under
a margin call of Common Stock), investment advisors and employees of each of
them, each Person who controls any such Holder (within the meaning of Section 15
of the Securities Act or Section 20 of the Exchange Act) and the officers,
directors, agents and employees of each such controlling Person, to the fullest
extent permitted by applicable law, from and against any and all losses, claims,
damages, liabilities, costs (including, without limitation, costs of preparation
and attorneys' fees) and expenses (collectively, "LOSSES"), as incurred, arising
out of or relating to any untrue or alleged untrue statement of a material fact
contained in the Registration Statement, any Prospectus or any form of
prospectus or in any amendment or supplement thereto or in any preliminary
prospectus, or arising out of or relating to any omission or alleged omission of
a material fact required to be stated therein or necessary to make the
statements therein (in the case of any Prospectus or form of prospectus or
supplement thereto, in light of the circumstances under which they were made)
not misleading, except to the extent, but only to the extent, that such untrue
statements or omissions are based solely upon information regarding such Holder
furnished in writing to the Company by or on behalf of such Holder expressly for
use therein, or to the extent that such information relates to such Holder or
such Holder's proposed method of distribution of Registrable Securities and was
reviewed and expressly approved in writing by such Holder expressly for use in
the Registration Statement, such Prospectus or such form of Prospectus or in any
amendment or supplement thereto. The Company shall notify the Holders promptly
of the institution, threat or assertion of any Proceeding of which the Company
is aware in connection with the transactions contemplated by this Agreement.
(b) INDEMNIFICATION BY HOLDERS. Each Holder shall, severally and not
jointly, indemnify and hold harmless the Company, its directors, officers,
agents and employees, each Person who controls the Company (within the meaning
of Section 15 of the Securities Act and Section 20 of the Exchange Act), and the
directors, officers, agents or employees of such controlling Persons, to the
fullest extent permitted by applicable law, from and against all Losses (as
determined by a court of competent jurisdiction in a final judgment not subject
to appeal or review) arising solely out of or based solely upon any untrue
statement of a material fact contained in the Registration Statement, any
Prospectus, or any form of prospectus, or arising solely out of or based solely
upon any omission of a material fact required to be stated therein or necessary
to make the statements therein not misleading to the extent, but only to the
extent, that such untrue statement or omission is contained in any information
so furnished in writing by such Holder to the Company specifically for inclusion
in the Registration Statement or such Prospectus or to the extent that such
information relates to such Holder or such Holder's proposed method of
distribution of Registrable Securities and was reviewed and expressly approved
in writing by such Holder expressly for use in the Registration Statement, such
Prospectus or such form of Prospectus. In no event shall the liability of any
selling Holder hereunder be greater in amount than the dollar amount of the net
proceeds received by such Holder upon the sale of the Registrable Securities
giving rise to such indemnification obligation.
(c) CONDUCT OF INDEMNIFICATION PROCEEDINGS. If any Proceeding shall
be
10
<PAGE>
brought or asserted against any Person entitled to indemnity hereunder (an
"INDEMNIFIED PARTY"), such Indemnified Party promptly shall notify the Person
from whom indemnity is sought (the "INDEMNIFYING PARTY") in writing, and the
Indemnifying Party shall assume the defense thereof, including the employment of
counsel reasonably satisfactory to the Indemnified Party and the payment of all
fees and expenses incurred in connection with defense thereof; provided, that
the failure of any Indemnified Party to give such notice shall not relieve the
Indemnifying Party of its obligations or liabilities pursuant to this Agreement,
except (and only) to the extent that it shall be finally determined by a court
of competent jurisdiction (which determination is not subject to appeal or
further review) that such failure shall have proximately and materially
adversely prejudiced the Indemnifying Party.
An Indemnified Party shall have the right to employ separate counsel
in any such Proceeding and to participate in the defense thereof, but the fees
and expenses of such counsel shall be at the expense of such Indemnified Party
or Parties unless: (1) the Indemnifying Party has agreed in writing to pay such
fees and expenses; or (2) the Indemnifying Party shall have failed promptly to
assume the defense of such Proceeding and to employ counsel reasonably
satisfactory to such Indemnified Party in any such Proceeding; or (3) the named
parties to any such Proceeding (including any impleaded parties) include both
such Indemnified Party and the Indemnifying Party, and such Indemnified Party
shall have been advised by counsel that a conflict of interest is likely to
exist if the same counsel were to represent such Indemnified Party and the
Indemnifying Party (in which case, if such Indemnified Party notifies the
Indemnifying Party in writing that it elects to employ separate counsel at the
expense of the Indemnifying Party, the Indemnifying Party shall not have the
right to assume the defense thereof and such counsel shall be at the expense of
the Indemnifying Party). The Indemnifying Party shall not be liable for any
settlement of any such Proceeding effected without its written consent, which
consent shall not be unreasonably withheld. No Indemnifying Party shall,
without the prior written consent of the Indemnified Party, effect any
settlement of any pending Proceeding in respect of which any Indemnified Party
is a party, unless such settlement includes an unconditional release of such
Indemnified Party from all liability on claims that are the subject matter of
such Proceeding.
All fees and expenses of the Indemnified Party (including reasonable
fees and expenses to the extent incurred in connection with investigating or
preparing to defend such Proceeding in a manner not inconsistent with this
Section) shall be paid to the Indemnified Party, as incurred, within 10 Business
Days of written notice thereof to the Indemnifying Party (regardless of whether
it is ultimately determined that an Indemnified Party is not entitled to
indemnification hereunder; PROVIDED, that the Indemnifying Party may require
such Indemnified Party to undertake to reimburse all such fees and expenses to
the extent it is finally judicially determined that such Indemnified Party is
not entitled to indemnification hereunder).
(d) CONTRIBUTION. If a claim for indemnification under Section 5(a)
or 5(b) is unavailable to an Indemnified Party because of a failure or refusal
of a governmental authority to enforce such indemnification in accordance with
its terms (by reason of public policy or otherwise), then each Indemnifying
Party, in lieu of indemnifying such Indemnified Party, shall contribute to the
amount paid or payable by such Indemnified Party as a result of such Losses, in
such proportion as is appropriate to reflect the relative fault of the
Indemnifying Party and Indemnified Party in connection with the actions,
statements or omissions that resulted in such Losses as well as any other
relevant equitable considerations. The relative fault of such Indemnifying
Party and Indemnified Party shall be determined by reference to, among other
things, whether any action in question, including any untrue or alleged untrue
statement of a material fact or omission or alleged omission of a material fact,
has been taken or made by, or relates to information supplied by, such
Indemnifying Party or Indemnified Party, and the parties'
11
<PAGE>
relative intent, knowledge, access to information and opportunity to correct or
prevent such action, statement or omission. The amount paid or payable by a
party as a result of any Losses shall be deemed to include, subject to the
limitations set forth in Section 5(c), any reasonable attorneys' or other
reasonable fees or expenses incurred by such party in connection with any
Proceeding to the extent such party would have been indemnified for such fees or
expenses if the indemnification provided for in this Section was available to
such party in accordance with its terms.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 5(d) were determined by PRO RATA
allocation or by any other method of allocation that does not take into account
the equitable considerations referred to in the immediately preceding paragraph.
Notwithstanding the provisions of this Section 5(d), the Purchasers shall not be
required to contribute, in the aggregate, any amount in excess of the amount by
which the proceeds actually received by the Purchasers from the sale of the
Registrable Securities subject to the Proceeding exceeds the amount of any
damages that the Purchasers have otherwise been required to pay by reason of
such untrue or alleged untrue statement or omission or alleged omission. No
Person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any Person
who was not guilty of such fraudulent misrepresentation.
The indemnity and contribution agreements contained in this Section
are in addition to any liability that the Indemnifying Parties may have to the
Indemnified Parties.
6. MISCELLANEOUS
(a) REMEDIES. In the event of a breach by the Company or by a
Holder, of any of their obligations under this Agreement, each Holder or the
Company, as the case may be, in addition to being entitled to exercise all
rights granted by law and under this Agreement, including recovery of damages,
will be entitled to specific performance of its rights under this Agreement.
The Company and each Holder agree that monetary damages would not provide
adequate compensation for any losses incurred by reason of a breach by it of any
of the provisions of this Agreement and hereby further agrees that, in the event
of any action for specific performance in respect of such breach, it shall waive
the defense that a remedy at law would be adequate.
(b) NO INCONSISTENT AGREEMENTS. Except as and to the extent
specifically set forth in SCHEDULE 6(B) attached hereto, neither the Company nor
any of its subsidiaries has, as of the date hereof, nor shall the Company or any
of its subsidiaries, on or after the date of this Agreement, enter into any
agreement with respect to its securities that is inconsistent with the rights
granted to the Holders in this Agreement or otherwise conflicts with the
provisions hereof. Except as and to the extent specifically set forth in
SCHEDULE 6(B) attached hereto, neither the Company nor any of its subsidiaries
has previously entered into any agreement granting any registration rights with
respect to any of its securities to any Person. Without limiting the generality
of the foregoing, without the written consent of the Holders of a majority of
the then outstanding Registrable Securities, the Company shall not grant to any
Person the right to request the Company to register any securities of the
Company under the Securities Act unless the rights so granted are subject in all
respects to the prior rights in full of the Holders set forth herein, and are
not otherwise in conflict or inconsistent with the provisions of this Agreement.
(c) NO PIGGYBACK ON REGISTRATIONS. Except as and to the extent
specifically set forth in SCHEDULE 6(C) attached hereto, neither the Company nor
any of its security holders (other than the Holders in such capacity pursuant
hereto) may include securities of the Company in the
12
<PAGE>
Registration Statement other than the Registrable Securities, and the Company
shall not enter into any agreement providing any such right to any of its
security holders.
(d) PIGGY-BACK REGISTRATIONS. If at any time during the
Effectiveness Period there is not an effective Registration Statement covering
all of the Registrable Securities and the Company shall determine to prepare and
file with the Commission a registration statement relating to an offering for
its own account or the account of others under the Securities Act of any of its
equity securities, other than on Form S-4 or Form S-8 (each as promulgated under
the Securities Act) or their then equivalents relating to equity securities to
be issued solely in connection with any acquisition of any entity or business or
equity securities issuable in connection with stock option or other employee
benefit plans, then the Company shall send to each holder of Registrable
Securities written notice of such determination and, if within twenty (20) days
after receipt of such notice, any such holder shall so request in writing, the
Company shall include in such registration statement all or any part of the
Registrable Securities such holder requests to be registered. No right to
registration of Registrable Securities under this Section shall be construed to
limit any registration otherwise required hereunder.
(e) AMENDMENTS AND WAIVERS. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given, unless the same shall be in writing and signed by the Company
and the Holders of at least a majority of the then outstanding Registrable
Securities; PROVIDED, HOWEVER, that, for the purposes of this sentence,
Registrable Securities that are owned, directly or indirectly, by the Company,
or an Affiliate of the Company are not deemed outstanding. Notwithstanding the
foregoing, a waiver or consent to depart from the provisions hereof with respect
to a matter that relates exclusively to the rights of Holders and that does not
directly or indirectly affect the rights of other Holders may be given by
Holders of at least a majority of the Registrable Securities to which such
waiver or consent relates; PROVIDED, HOWEVER, that the provisions of this
sentence may not be amended, modified, or supplemented except in accordance with
the provisions of the immediately preceding sentence.
(f) NOTICES. Any and all notices or other communications or
deliveries required or permitted to be provided hereunder shall be in writing
and shall be deemed given and effective on the earliest of (i) the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile telephone number specified in this Section prior to 7:00 p.m. (New
York City time) on a Business Day, (ii) the Business Day after the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile telephone number specified in the Purchase Agreement later than 7:00
p.m. (New York City time) on any date and earlier than 11:59 p.m. (New York City
time) on such date, (iii) the Business Day following the date of mailing, if
sent by nationally recognized overnight courier service, or (iv) upon actual
receipt by the party to whom such notice is required to be given. The address
for such notices and communications shall be as follows:
If to the Company: Fix-Corp International, Inc.
27040 Cedar Rd. Suite 218
Beachwood, OH 44122
Facsimile No.: (216) 292-6187
Attn: Chief Financial Officer
With copies to: Bricker & Eckler LLP
100 South Third Street
Columbus, OH 43215
13
<PAGE>
Facsimile No.: (614) 227-2390
Attn: Steven Kerber
If to JNC: JNC Opportunity Fund Ltd.
Olympia Capital (Cayman) Ltd.
c/o Olympia Capital (Bermuda) Ltd.
Williams House
20 Reid Street
Hamilton HM11
Bermuda
Facsimile No.: (441) 295-2305
Attn: Philip Pedro
If to DSF: Diversified Strategies Fund, L.P.
c/o Encore Capital Management, L.L.C.
12007 Sunrise Valley Drive
Suite 460
Reston, VA 20191
Facsimile No.: (703) 476-7711
Attn: Neil T. Chau
With copies to (for Encore Capital Management, L.L.C.
communications to 12007 Sunrise Valley Drive
either Purchaser): Suite 460
Reston, VA 20191
Facsimile No.: (703) 476-7711
Attn: Neil T. Chau
-and-
Robinson Silverman Pearce Aronsohn &
Berman LLP
1290 Avenue of the Americas
New York, NY 10104
Facsimile No.: (212) 541-4630
Attn: Eric L. Cohen
If to any other Person who is then the registered Holder:
To the address of such Holder as it appears
in the stock transfer books of the Company
or such other address as may be designated in writing hereafter, in the same
manner, by such Person.
(g) SUCCESSORS AND ASSIGNS. This Agreement shall inure to the
benefit of and be binding upon the successors and permitted assigns of each of
the parties and shall inure to the benefit of each Holder. The Company may not
assign its rights or obligations hereunder without the prior written consent of
each Holder. Each Holder may assign its rights hereunder in the manner and to
the Persons as permitted under the Purchase Agreement.
14
<PAGE>
(h) ASSIGNMENT OF REGISTRATION RIGHTS. The rights of a Purchaser
hereunder, including the right to have the Company register for resale
Registrable Securities in accordance with the terms of this Agreement, shall be
automatically assignable by such Purchaser to any assignee or transferee of all
or a portion of the Debentures, the Warrants and other Common Stock warrants
referenced in the definition of Registrable Securities or Registrable Securities
without the consent of the Company if: (i) such Purchaser agrees in writing with
the transferee or assignee to assign such rights, and a copy of such agreement
is furnished to the Company within a reasonable time after such assignment, (ii)
the Company is, within a reasonable time after such transfer or assignment,
furnished with written notice of (a) the name and address of such transferee or
assignee, and (b) the securities with respect to such registration rights are
being transferred or assigned, (iii) at or before the time the Company receives
the written notice contemplated by clause (ii) of this Section, the transferee
or assignee agrees in writing with the Company to be bound by all of the
provisions of this Agreement, and (iv) such transfer shall have been made in
accordance with the applicable requirements of the Purchase Agreement. The
rights to assignment shall apply to the Purchasers' (and to subsequent)
successors and assigns.
(i) COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which when so executed shall be deemed to be an original
and, all of which taken together shall constitute one and the same Agreement.
In the event that any signature is delivered by facsimile transmission, such
signature shall create a valid binding obligation of the party executing (or on
whose behalf such signature is executed) the same with the same force and effect
as if such facsimile signature were the original thereof.
(j) GOVERNING LAW; SUBMISSION TO JURISDICTION. This Agreement shall
be governed by and construed in accordance with the laws of the State of New
York, without regard to principles of conflicts of law. Each party hereby
irrevocably submits to the non-exclusive jurisdiction of any New York state
court sitting in the Borough of Manhattan, the state and federal courts sitting
in the City of New York or any federal court sitting in the Borough of Manhattan
in the City of New York (collectively, the "NEW YORK COURTS") in respect of any
Proceeding arising out of or relating to this Agreement, and irrevocably accepts
for itself and in respect of its property, generally and unconditionally,
jurisdiction of the New York Courts. The Company irrevocably waives to the
fullest extent it may effectively do so under applicable law any objection that
it may now or hereafter have to the laying of the venue of any such proceeding
brought in any New York Court and any claim that any such Proceeding brought in
any New York Court has been brought in an inconvenient forum. Nothing herein
shall affect the right of any Holder. Each party hereby irrevocably waives
personal service of process and consents to process being served in any such
suit, action or proceeding by receiving a copy thereof sent to such party at the
address in effect for notices to it under this Agreement and agrees that such
service shall constitute good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to limit in any way any right
to serve process in any manner permitted by law.
(k) CUMULATIVE REMEDIES. The remedies provided herein are cumulative
and not exclusive of any remedies provided by law.
(l) SEVERABILITY. If any term, provision, covenant or restriction of
this Agreement is held by a court of competent jurisdiction to be invalid,
illegal, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions set forth herein shall remain in full force and
effect and shall in no way be affected, impaired or invalidated, and the parties
hereto shall use their reasonable efforts to find and employ an alternative
means to achieve the same or substantially the same result as that contemplated
by such term, provision,
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<PAGE>
covenant or restriction. It is hereby stipulated and declared to be the
intention of the parties that they would have executed the remaining terms,
provisions, covenants and restrictions without including any of such that may be
hereafter declared invalid, illegal, void or unenforceable.
(m) HEADINGS. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(n) SHARES HELD BY THE COMPANY AND ITS AFFILIATES. Whenever the
consent or approval of Holders of a specified percentage of Registrable
Securities is required hereunder, Registrable Securities held by the Company or
its Affiliates (other than the Purchasers or transferees or successors or
assigns thereof if such Persons are deemed to be Affiliates solely by reason of
their holdings of such Registrable Securities) shall not be counted in
determining whether such consent or approval was given by the Holders of such
required percentage.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the parties have executed this Amended and
Restated Registration Rights Agreement as of the date first written above.
FIX-CORP INTERNATIONAL, INC.
By: /s/ Mark Fixler
---------------------------------------
Mark Fixler
President
JNC OPPORTUNITY FUND LTD.
By: /s/ Philip C. Pedro
---------------------------------------
Name: Philip C. Pedro
Title: Director
By: /s/ James Q. Chau
---------------------------------------
Name: James Q. Chau
Title: Director
DIVERSIFIED STRATEGIES FUND, L.P.
By: Encore Capital Management, L.L.C.
By: /s/ James Q. Chau
---------------------------------
Name: James Q. Chau
Title: Director
<PAGE>
Exhibit 4.5
ESCROW AGREEMENT
ESCROW AGREEMENT (this "AGREEMENT"), dated as of November 26, 1997, by and
among Fix-Corp International, Inc. (the "COMPANY"), JNC Opportunity Fund Ltd.
("JNC"), Diversified Strategies Fund, L.P. ("DSF"), and Robinson Silverman
Pearce Aronsohn & Berman LLP (the "ESCROW AGENT"). DSF and JNC are each
sometimes hereinafter referred to as a "PURCHASER" and collectively as the
"PURCHASERS."
RECITALS
A. Simultaneously with the execution of this Agreement, the Company and
the Purchasers have entered into an Amended and Restated Convertible Debenture
Purchase Agreement, dated as of the date hereof (the "PURCHASE AGREEMENT"),
pursuant to which the Company is reissuing to the Purchasers certain of its 5%
Convertible Debentures Due October 24, 2000 (the "OCTOBER DEBENTURES") and
selling to JNC certain of its 5% Convertible Debenture due November 26, 2000
(the "NOVEMBER DEBENTURES") and selling to JNC certain common stock purchase
warrants (the "NOVEMBER JNC WARRANTS"). The October Debentures and the November
Debentures are sometimes hereinafter referred to as the "DEBENTURES".
Capitalized terms that are used but not defined in this Agreement that are
defined in the Purchase Agreement shall have the meanings set forth in the
Purchase Agreement.
B. The Escrow Agent is willing to act as escrow agent pursuant to the
terms of this Agreement with respect to the receipt and then delivery of the
aggregate purchase price (as described in Section 1.1(a) of the Purchase
Agreement) to be paid by the Purchasers for the Debentures and the Warrants
(the "PURCHASE PRICE") and the receipt and then delivery of the Debentures and
the Warrants, together with the Ancillary Closing Documents (as defined below)
and the Purchase Price, the "CONSIDERATION").
C. Upon the closing of the transaction contemplated by the Purchase
Agreement (the "CLOSING") and the occurrence of an event described in Section 2
below, the Escrow Agent shall cause the distribution of the Consideration in
accordance with the terms of this Agreement.
NOW, THEREFORE, IT IS AGREED:
1. DEPOSIT OF CONSIDERATION.
a. Concurrently with the execution hereof, JNC shall deposit with
the Escrow Agent the portion of the Purchase Price due for the November
Debentures and the November JNC Warrant to be purchased by it at the Closing and
Purchasers shall deliver to the Escrow Agent the 6% Convertible Debentures due
October 24, 2000 (the "6% DEBENTURES") in accordance with Section 1.1(a)(ii) of
the Purchase Agreement, and the Company shall deliver to the Escrow Agent the
Debentures and the November JNC Warrant in accordance with Section 1.1(a)(ii) of
the Purchase Agreement, and wiring instructions for the transfer of amounts to
be paid to the Company in accordance with Section 2(b). In addition, the
Purchasers and the
<PAGE>
Company shall each deposit with the Escrow Agent all other certificates and
other documents required under the Purchase Agreement to be delivered by them at
the Closing (such certificates and other documents being hereinafter referred to
as the "ANCILLARY CLOSING DOCUMENTS").
(i) The Purchase Price shall be delivered by the Purchasers to
the Escrow Agent by wire transfer to the following account:
Citibank, N.A.
153 East 53rd Street
New York, NY 10043
ABA No.: 021-000-089
For the Account of
Robinson Silverman Pearce Aronsohn
& Berman LLP
Attorney Business Account
Account No.: 37-204-162
Attention: Alexis Laurenceau
Reference: Fix-Corp International (10849-10)
(ii) The Debentures, Warrants and the Ancillary Documents shall
be delivered to the Escrow Agent at its address for notice indicated in Section
5(a).
b. Until termination of this Agreement as set forth in Section 2,
all additional Consideration paid by or which becomes payable between the
Company and the Purchasers shall be deposited with the Escrow Agent.
c. The Purchasers and the Company understand that all Consideration
delivered to the Escrow Agent pursuant to Section 1(a) shall be held in escrow
in the Escrow Agent's interest bearing business account until the Closing After
the Purchase Price has been received by the Escrow Agent and all other
conditions of Closing are met, the parties hereto hereby authorize and instruct
the Escrow Agent to promptly effect the Closing.
d. At the Closing, the Escrow Agent is authorized and directed to
deduct from the Purchase Price $7,500 which will be retained by the Escrow Agent
pursuant to Section 5.1 of the Purchase Agreement. In addition, the portion of
the Purchase Price released to the Company hereunder shall be reduced by all
wire transfer fees incurred thereupon.
2. TERMS OF ESCROW.
a. The Escrow Agent shall hold the Consideration in escrow until the
earlier to occur of (i) the receipt by the Escrow Agent of the Purchase Price,
the Debentures, the Warrants and the Ancillary Closing Documents and a writing
instructing the Closing and (ii) the receipt by the Escrow Agent of a written
notice, executed by the Company or the Purchasers, stating that the Purchase
Agreement has been terminated in accordance with its terms and
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<PAGE>
instructing the Escrow Agent with respect to the Purchase Price, the Debentures,
the Warrants and the Ancillary Closing Documents.
b. If the Escrow Agent receives the items referenced in clause (i)
of Section 2(a) prior to its receipt of the notice referenced in clause (ii) of
Section 2(a), then, promptly thereafter, the Escrow Agent shall deliver (i) to
JNC (A) October Debentures in aggregate principal amount of $4,000,000 and
November Debentures in the amount of $3,000,000, (B) the November JNC Warrant
and (C) any interest earned on account of the portion of the Purchase Price paid
by JNC that shall have accrued through the Closing; (ii) to DSF, October
Debentures in aggregate principal amount of $1,000,000, (iii) to the Company the
Purchase Price (net of amounts described under Section 1(d)) and the 6%
Debentures; (iv); and (iv) to the appropriate party, the Ancillary Closing
Documents. In addition, the Escrow Agent shall retain $7,500 of the Purchase
Price on account of its fees pursuant to the Purchase Agreement and Section
1(d).
c. If the Escrow Agent receives the notice referenced in clause (ii)
of Section 2(a) prior to its receipt of the items referenced in clause (i) of
Section 2(a), then the Escrow Agent shall promptly upon receipt of such notice
return (i) the Purchase Price (together with any interest earned thereon through
such date) to the Purchasers in such amounts as shall have been delivered to and
received by prior thereto, (ii) the Debentures and Warrants to the Company and
(iii) the Ancillary Closing Documents to the party that delivered the same.
d. If the Escrow Agent, prior to delivering or causing to be
delivered the Consideration in accordance herewith, receives notice of
objection, dispute, or other assertion in accordance with any of the provisions
of this Agreement, the Escrow Agent shall continue to hold the Consideration
until such time as the Escrow Agent shall receive (i) written instructions
jointly executed by the Purchasers and the Company, directing distribution of
such Consideration, or (ii) a certified copy of a judgment, order or decree of a
court of competent jurisdiction, final beyond the right of appeal, directing the
Escrow Agent to distribute said Consideration to any party hereto or as such
judgment, order or decree shall otherwise specify (including any such order
directing the Escrow Agent to deposit the Consideration into the court rendering
such order, pending determination of any dispute between any of the parties).
In addition, the Escrow Agent shall have the right to deposit any of the
Consideration with a court of competent jurisdiction pursuant to Section 1006 of
the New York Civil Practice Law and Rules without liability to any party if said
dispute is not resolved within 30 days of receipt of any such notice of
objection, dispute or otherwise.
3. DUTIES AND OBLIGATIONS OF THE ESCROW AGENT.
a. The parties hereto agree that the duties and obligations of the
Escrow Agent are only such as are herein specifically provided and no other.
The Escrow Agent's duties are as a depository only, and the Escrow Agent shall
incur no liability whatsoever, except as a direct result of its willful
misconduct.
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<PAGE>
b. The Escrow Agent may consult with counsel of its choice, and
shall not be liable for any action taken, suffered or omitted by it in
accordance with the advice of such counsel.
c. The Escrow Agent shall not be bound in any way by the terms of
any other agreement to which the Purchasers and the Company are parties, whether
or not it has knowledge thereof, and the Escrow Agent shall not in any way be
required to determine whether or not any other agreement has been complied with
by the Purchasers and the Company, or any other party thereto. The Escrow Agent
shall not be bound by any modification, amendment, termination, cancellation,
rescission or supersession of this Agreement unless the same shall be in writing
and signed by each of the Purchasers and the Company, and agreed to in writing
by the Escrow Agent.
d. In the event that the Escrow Agent shall be uncertain as to its
duties or rights hereunder or shall receive instructions, claims or demands
which, in its opinion, are in conflict with any of the provisions of this
Agreement, it shall be entitled to refrain from taking any action, other than to
keep safely, all Considerations held in escrow until it shall jointly be
directed otherwise in writing by the Purchasers and the Company or by a final
judgment of a court of competent jurisdiction.
e. The Escrow Agent shall be fully protected in relying upon any
written notice, demand, certificate or document which it, in good faith,
believes to be genuine. The Escrow Agent shall not be responsible for the
sufficiency or accuracy of the form, execution, validity or genuineness of
documents or securities now or hereafter deposited hereunder, or of any
endorsement thereon, or for any lack of endorsement thereon, or for any
description therein; nor shall the Escrow Agent be responsible or liable in any
respect on account of the identity, authority or rights of the persons executing
or delivering or purporting to execute or deliver any such document, security or
endorsement.
f. The Escrow Agent shall not be required to institute legal
proceedings of any kind and shall not be required to defend any legal
proceedings which may be instituted against it or in respect of the
Consideration.
g. If the Escrow Agent at any time, in its sole discretion, deems it
necessary or advisable to relinquish custody of the Consideration, it may do so
by giving five (5) days written notice to the parties of its intention and
thereafter delivering the consideration to any other escrow agent mutually
agreeable to the Purchasers and the Company and, if no such escrow agent shall
be selected within three days of the Escrow Agent's notification to the
purchasers and the Company of its desire to so relinquish custody of the
Consideration, then the Escrow Agent may do so by delivering the Consideration
(a) to any bank or trust company in the Borough of Manhattan, City and State of
New York, which is willing to act as escrow agent thereunder in place and
instead of the Escrow Agent, or (b) to the clerk or other proper officer of a
court of competent jurisdiction as may be permitted by law within the State,
County and City of New York. The fee of any such bank or trust company or court
officer shall be borne one-half by the Purchasers and one-half by the Company.
Upon such delivery, the Escrow Agent shall be
4
<PAGE>
discharged from any and all responsibility or liability with respect to the
Consideration and the Company and the Purchasers shall promptly pay to the
Escrow Agent all monies which may be owed it for its services hereunder,
including, but not limited to, reimbursement of its out-of-pocket expenses
pursuant to paragraph (i) below.
h. This Agreement shall not create any fiduciary duty on the Escrow
Agent's part to the Purchasers or the Company, nor disqualify the Escrow Agent
from representing either party hereto in any dispute with the other, including
any dispute with respect to the Consideration. The Company understands that the
Escrow Agent has acted and will continue to act as counsel to the Purchasers.
i. The reasonable out-of-pocket expenses paid or incurred by the
Escrow Agent in the administration of its duties hereunder, including, but not
limited to, all counsel and advisors' and agents' fees and all taxes or other
governmental charges, if any, shall be paid by one-half by the Purchasers and
one-half by the Company.
4. INDEMNIFICATION. The Purchasers and the Company, jointly and
severally, hereby indemnify and hold the Escrow Agent harmless from and against
any and all losses, damages, taxes, liabilities and expenses that may be
incurred, directly or indirectly, by the Escrow Agent, arising out of or in
connection with its acceptance of appointment as the Escrow Agent hereunder
and/or the performance of its duties pursuant to this Agreement, including, but
not limited to, all legal costs and expenses of the Escrow Agent incurred
defending itself against any claim or liability in connection with its
performance hereunder and the costs of recovery of amounts pursuant to this
Section 4.
5. MISCELLANEOUS.
a. All notices, requests, demands and other communications hereunder
shall be in writing, with copies to all the other parties hereto, and shall be
deemed to have been duly given when (i) if delivered by hand, upon receipt, (ii)
if sent by facsimile, upon receipt of proof of sending thereof, (iii) if sent by
nationally recognized overnight delivery service (receipt requested), the next
business day or (iv) if mailed by first-class registered or certified mail,
return receipt requested, postage prepaid, four days after posting in the U.S.
mails, in each case if delivered to the following addresses:
5
<PAGE>
If to the Company: Fix-Corp International, Inc.
27040 Cedar Rd. Suite 212
Beachwood, OH 44122
Facsimile No.: (216) 292-6187
Attn: Chief Financial Officer
With copies to: Bricker & Eckler, LLP
100 South Third Street
Columbus, OH 43215
Facsimile No.: (614) 227-2390
Attn: Steven Kerber
If to JNC: JNC Opportunity Fund Ltd.
Olympia Capital (Cayman) Ltd.
c/o Olympia Capital (Bermuda) Ltd.
Williams House
20 Reid Street
Hamilton HM11
Bermuda
Facsimile No.: (441) 295-2305
Attn: Philip C. Pedro
If to DSF: Diversified Strategies Fund, L.P.
c/o Encore Capital Management, L.L.C.
12007 Sunrise Valley Drive
Suite 460
Reston, VA 20191
Facsimile No.: (703) 476-7711
Attn: Neil T. Chau
With copies to (for Encore Capital Management, L.L.C.
communications to 12007 Sunrise Valley Drive
either Purchaser): Suite 460
Reston, VA 20191
Facsimile No.: (703) 476-7711
Attn: Neil T. Chau
If to the Escrow Agent Robinson Silverman Pearce Aronsohn &
(the Escrow Agent shall Berman LLP
receive copies of all 1290 Avenue of the Americas
communications under New York, NY 10104
this Agreement) Facsimile No.: (212) 541-4630
Attn: Eric L. Cohen, Esq.
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or at such other address as any of the parties to this Agreement may hereafter
designate in the manner set forth above to the others.
b. This Agreement shall be construed and enforced in accordance with
the law of the State of New York applicable to contracts entered into and
performed entirely within New York.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the parties hereto have caused this Escrow Agreement to
be signed the day and year first above written.
FIX-CORP INTERNATIONAL, INC.
By: /s/ Mark Fixler
------------------------------------
Name: Mark Fixler
Title: President
JNC OPPORTUNITY FUND LTD.
By: /s/ Philip C. Pedro
------------------------------------
Name: Philip C. Pedro
Title: Director
By: /s/ James Q. Chau
------------------------------------
Name: James Q. Chau
Title: Director
DIVERSIFIED STRATEGIES FUND, L.P.
By: Encore Capital Management, L.L.C.
By: /s/ James Q. Chau
-------------------------------
Name: James Q. Chau
Title: Director
ROBINSON SILVERMAN PEARCE
ARONSOHN & BERMAN LLP
By: /s/
------------------------------------
A Member of the Firm
<PAGE>
[LETTERHEAD]
EXHIBIT 5.1
January 16, 1998
Board of Directors
Fix-Corp International, Inc.
3637 South Green Road, Suite 201
Beachwood, Ohio 44122
Gentlemen:
Reference is made to the filing by Fix-Corp International, Inc., a Delaware
corporation (the "Company"), of a Registration Statement on Form SB-2 (the
"Registration Statement") with the Securities and Exchange Commission pursuant
to the provisions of the Securities Act of 1933, as amended, covering the
registration of 7,539,764 shares of the Company's Common Stock, $.001 par value
per share (the "Common Stock").
We have examined the Company's corporate records, including its Restated
and Amended Certificate of Incorporation, as amended, By-Laws, its corporate
minutes, the form of its Common Stock certificates and such other documents and
information as we have deemed necessary or relevant under the circumstances.
Based upon the foregoing, we are of the opinion that the Company is a duly
incorporated and legally existing corporation under the laws of the State of
Delaware. We are also of the opinion, based on the foregoing and assuming
compliance with applicable federal and state securities laws, that the Common
Stock issuable upon conversion of the Debentures and exercise of the Warrants
described in the Registration Statement will be, when converted or exercised
pursuant to their terms, validly issued and outstanding, fully paid and
non-assessable.
<PAGE>
Board of Directors
Fix-Corp International, Inc.
January 16, 1998
Page 2
We hereby consent to be named in the Registration Statement and in the
Prospectus which constitutes a part thereof as counsel of the Company, and we
hereby consent to the filing of this opinion as Exhibit 5.1 to the Registration
Statement.
Very truly yours,
BRICKER & ECKLER LLP
/s/ BRICKER & ECKLER LLP
<PAGE>
Exhibit 10.6
AMENDED AND RESTATED
PROMISSORY NOTE
$7,000,000 December 19, 1997
For value received, the undersigned (the "Borrower"), jointly and
severally, promises to pay to Gordon Brothers Capital, LLC ("Lender"), or order,
the principal amount of Seven Million Dollars and Zero Cents ($7,000,000) on or
before June 30, 1999, with interest from the date hereof on the said principal
balance from time to time outstanding. The aggregate principal balance
outstanding shall bear interest thereon at a per annum rate equal to twelve
(12.0%) percent, payable monthly in arrears on the 1st business day of each
month, commencing January 2, 1998.
This note is an amendment and restatement of that certain note dated July
9, 1997, (the "Original Note"), by the undersigned in favor of the Gordon
Brothers Capital Corporation, the predecessor in interest of the Lender, in the
original principal amount of $3,500,00.00, and shall be secured to the same
extent and with the same priority as the Original Note.
Principal and interest shall be payable at the Lender's main office in
lawful money of the United States of America without set-off, deduction or
counterclaim. Interest shall be calculated on the basis of actual number of
days elapsed and a 360-day year.
This Note is a revolving note and subject to the foregoing the Borrower
may, at its option, at any time prior to demand borrow, pay, prepay and reborrow
hereunder, all in accordance with the provisions hereof and of any and all other
agreements between the Borrower and the Lender related hereto; provided,
however, that the principal balance outstanding shall at no time exceed the face
amount of the Note.
At the option of the holder, this Note shall become immediately due and
payable without notice or demand upon the occurrence at any time of any of the
following events of default: (1) default of any liability, obligation or
undertaking of the Borrower to the Lender, hereunder or otherwise, including
failure to pay in full and when due any installment of principal or interest, or
of any endorser or guarantor of any liability, obligation or undertaking,
hereunder or otherwise, to the Lender continuing for five (5) business days with
respect to any monetary obligations or continuing for five (5) business days
after the giving of notice by the Lender with respect to all other obligations;
(2) failure of the Borrower to maintain aggregate collateral security value
satisfactory to the Lender; (3) default of any material liability, obligation
or undertaking of the Borrower to any other party continuing for five (5)
business days after the giving of notice by the Lender; (4) if any statement,
representation or warranty heretofore, now or hereafter made in connection with
the loan evidenced by this Note, or in any supporting financial statement of the
Borrower or of any endorser or guarantor hereof shall be determined by Lender to
have been false in any material respect when made continuing for five (5)
business days after the giving of notice by the Lender; (5) if the Borrower or
any endorser or guarantor is a corporation, trust or partnership, the
liquidation, termination or dissolution of any such organization, or the merger
or consolidation of such organization into another entity, or its ceasing to
carry on actively its present business or the appointment of a receiver for its
property; (6) the death of the Borrower or of any endorser or guarantor hereof
and, if any of the Borrower or any endorser or guarantor hereof is a
partnership, the death of any partner; (7) the institution by or against the
Borrower or any endorser or guarantor hereof of any proceedings under the
Bankruptcy Code 11 USC Section 101 ET SEQ. or any other law in which the
Borrower or any endorser or guarantor hereof is alleged to be insolvent or
unable to pay their respective debts as they mature, or the making by the
Borrower or endorser or guarantor hereof of an
<PAGE>
assignment for the benefit of creditors or the granting by the Borrower or
endorser or guarantor hereof of a trust mortgage for the benefit of creditors;
(8) the service upon the holder hereof of a writ in which the holder is named
as trustee of the Borrower or of any endorser or guarantor hereof; (9) a
judgment or judgments for the payment of money shall be rendered against the
Borrower or endorser or guarantor hereof, and any such judgment shall remain
unsatisfied and in effect for any period of thirty (30) consecutive days without
a stay of execution; (10) any levy, seizure, attachment, execution or similar
process shall be issued or levied on any of the property of the Borrower or any
endorser or guarantor hereof; (11) the termination of any guaranty hereof; or
(12) the occurrence of such a change in the condition or affairs (financial or
otherwise) of the Borrower or of any endorser, guarantor or other surety for any
obligation of the Borrower to the Lender or the occurrence of any event or
circumstance such that the holder, in its sole discretion, deems that it is
insecure or that the prospects for timely or full payment or performance of any
obligation of the Borrower to holder has been or may be impaired.
Any payments received by the Lender on account of this Note prior to demand
shall be applied first, to any costs, expenses or charges then owed to the
Lender by the Borrower; second, to accrued and unpaid interest; and third, to
the unpaid principal balance hereof. Any payments so received after demand
shall be applied in such manner as the Lender may determine. The Borrower
hereby authorizes the Lender to charge any deposit account which the Borrower
may maintain with the Lender for any payment required hereunder.
The Borrower represents to the Lender that the proceeds of this Note will
not be used for personal, family or household purposes.
Any and all deposits or other sums at any time credited by or due to the
undersigned or any endorser or guarantor hereof from the Lender or any of its
Lendering or lending affiliates, or any Lender acting as a participant under any
loan arrangement between the Lender and the Borrower, any endorser or guarantor
hereof, and any cash, securities, instruments or other property of the
undersigned in the possession of the Lender or any of its Lendering or lending
affiliates, or any Lender acting as a participant under any loan arrangement
between the Lender and the Borrower, any endorser or guarantor hereof, whether
for safekeeping or otherwise, or in transit to or from the Lender or any of its
Lendering or lending affiliates or any such participant, or in the possession of
any third party acting on the Lender's behalf (regardless of the reason the
Lender had received same or whether the Lender has conditionally released the
same) shall at all times constitute security for all of the liabilities and
obligations of the undersigned and any endorser and guarantor hereof to the
Lender and may be applied or set off against such liabilities and obligations of
the undersigned or any endorser or guarantor hereof to the Lender at any time,
whether or not such are then due, whether or not demand has been made and
whether or not other collateral is then available to the Lender.
No delay or omission on the part of the holder in exercising any right
hereunder shall operate as a waiver of such right or of any other right of such
holder, nor shall any delay, omission or waiver on any one occasion be deemed a
bar to or waiver of the same or any other right on any future occasion. The
Borrower and every other maker and every endorser or guarantor of this Note,
regardless of the time, order or place of signing, waives presentment, demand,
protest and notices of every kind and assents to any extension or postponement
of the time of payment or any other indulgence, to any substitution, exchange or
release of collateral, and to the addition or release of any other party or
person primarily or secondarily liable. The Borrower and each endorser and
guarantor of this Note waive any rights to any homestead exemptions on record as
of the date of this Note respecting any premises.
The Borrower and each endorser and guarantor of this Note shall indemnify,
defend and hold the Lender and its directors, officers, employees, agents and
attorneys harmless against any claim brought or threatened against the Lender by
the Borrower, by any endorser or guarantor, or by any other person (as well as
from attorneys' reasonable fees and expenses in connection therewith) on account
of the Lender's relationship with the Borrower or any endorser or guarantor
hereof (each of which may be defended, compromised, settled or pursued by the
Lender with counsel of the Lender's selection, but at the expense of the
Borrower and any endorser and/or guarantor), except for any claim arising out of
the gross negligence or willful misconduct of the Lender.
The Borrower and each endorser and guarantor of this Note agree to pay,
upon demand, costs of collection of the principal of and interest on this Note,
including without limitation reasonable attorneys'
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<PAGE>
fees. After demand, interest shall accrue at a rate per annum equal to the
aggregate of Four (4%) percent plus the rate provided for herein. If any
payment due under this Note is unpaid for 10 days or more, the Borrower shall
pay, in addition to any other sums due under this Note (and without limiting the
holder's other remedies on account thereof), a late charge equal to 5% of such
unpaid amount.
This Note shall be binding upon the Borrower and each endorser and
guarantor hereof and upon their respective heirs, successors, assigns and legal
representatives, and shall inure to the benefit of the Lender and its
successors, endorsees and assigns.
The liabilities of the Borrower and any endorser or guarantor of this Note
are joint and several; provided, however, the release by the Lender of the
Borrower or any one or more endorser or guarantor shall not release any other
person obligated on account of this Note. Any and all present and future debts
of the Borrower to any endorser or guarantor of this Note are subordinated to
the full payment and performance of all present and future debts and obligations
of the Borrower to the Lender. Each reference in this Note to the Borrower, any
endorser, and any guarantor, is to such person individually and also to all such
persons jointly. No person obligated on account of this Note may seek
contribution from any other person also obligated, unless and until all
liabilities, obligations and indebtedness to the Lender of the person from whom
contribution is sought have been satisfied in full. The release or compromise
by the Lender of any collateral shall not release any person obligated on
account of this Note.
The Borrower and each endorser and guarantor hereof each authorizes the
Lender to complete this Note if delivered incomplete in any respect. A
photographic or other reproduction of this Note may be made by the Lender, and
any such reproduction shall be admissible in evidence with the same effect of
the original itself in any judicial or administrative proceeding, whether or not
the original is in existence.
This Note is delivered to the Lender at one of its offices in
Massachusetts, shall be governed by the laws of the Commonwealth of
Massachusetts, and shall take effect as a sealed instrument.
The Borrower and each endorser and guarantor of this Note each irrevocably
submits to the nonexclusive jurisdiction of any federal or state court sitting
in Massachusetts, over any suit, action or proceeding arising out of or relating
to this Note. Each Borrower, endorser or guarantor irrevocably waives, to the
fullest extent it may effectively do so under applicable law, any objection it
may now or hereafter have to the laying of the venue of any such suit, action or
proceeding brought in any such court and any claim that the same has been
brought in an inconvenient forum. Each Borrower, endorser or guarantor
irrevocably appoints the Secretary of State of the Commonwealth of Massachusetts
as its authorized agent to accept and acknowledge on its behalf any and all
process which may be served in any such suit, action or proceeding, consents to
such process being served (i) by mailing a copy thereof by registered or
certified mail, postage prepaid, return receipt requested, to such Borrower's,
endorser's or guarantor's address shown below or as notified to the Lender and
(ii) by serving the same upon such agent, and agrees that such service shall in
every respect be deemed effective service upon such Borrower, endorser or
guarantor.
EACH BORROWER, ENDORSER AND GUARANTOR AND LENDER EACH HEREBY KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY, AND AFTER AN OPPORTUNITY TO CONSULT WITH LEGAL
COUNSEL, WAIVE ANY AND ALL RIGHTS TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING
IN CONNECTION WITH THIS NOTE, ALL OF THE OBLIGATIONS OF EACH BORROWER TO THE
LENDER, AND ALL MATTERS CONTEMPLATED HEREBY AND DOCUMENTS EXECUTED IN CONNECTION
HEREWITH. EACH BORROWER, ENDORSER AND GUARANTOR CERTIFIES THAT NEITHER THE
LENDER NOR ANY OF ITS REPRESENTATIVES, AGENTS OR COUNSEL HAS REPRESENTED,
EXPRESSLY OR OTHERWISE, THAT THE LENDER WOULD NOT IN THE EVENT OF ANY SUCH
PROCEEDING SEEK TO ENFORCE THIS WAIVER OF RIGHT TO TRIAL BY JURY.
Executed as an instrument under seal as of December 19, 1997.
3
<PAGE>
Witness Borrower:
Fix-Corp. International, Inc.
/s/ Andrew I. Press By: /s/ Mark Fixler
- ----------------------------------- --------------------------------
Mark Fixler, President & CEO
1835 James Parkway
Heath, Ohio 43056
Witness Borrower:
Palletech, Inc.
/s/ Andrew I. Press By: /s/ Gary DeLaurentiis
- ----------------------------------- -------------------------------
Gary DeLaurentiis, President
1835 James Parkway
Heath, Ohio 43056
Witness Borrower:
Fixcor Industries, Inc.
/s/ Andrew I. Press By: /s/ Gary DeLaurentiis
- ----------------------------------- -------------------------------
Gary DeLaurentiis, President
1835 James Parkway
Heath, Ohio 43056
4
<PAGE>
Exhibit 10.7
MODIFICATION AGREEMENT
This MODIFICATION AGREEMENT entered into at Boston, Massachusetts, as of
December 19, 1997, between Fix-Corp. International, Inc., a Delaware
corporation, with an address of 1835 James Parkway, Heath, Ohio 43056,
Palletech, Inc., a Delaware corporation, with an address of 1835 James Parkway,
Heath, Ohio 43056 and Fixcor Industries, Inc., a Delaware corporation, with an
address of 1835 James Parkway, Heath, Ohio 43056 (collectively, the "Borrowers"
and each a "Borrower") and Gordon Brothers Capital, LLC a Delaware limited
liability company with an address of 40 Broad Street, Boston, Massachusetts
02109 (the "Lender").
WHEREAS, the Lender has made a loan to the Borrowers in the original
principal amount of $3,500,000 (the "Loan") evidenced by that certain Note,
dated July 9, 1997 (the "Note"), by the Borrowers in favor of the Gordon
Brothers Capital Corporation ("GBCC"), the predecessor in interest of the
Lender, in the original principal amount of $3,500,000 which matures on October
31, 1998 (the "Maturity Date"). In addition the Borrowers executed and
delivered to GBCC a certain Loan and Security Agreement, dated July 9, 1997 (the
"Loan Agreement") in connection with the Loan. The Note, the Loan Agreement and
any and all other documents, agreements, instruments, certificates, amendments
or renewals, including without limitation all guarantys, security agreements and
mortgages, executed and delivered to the GBCC or Lender in connection with the
Note are collectively hereinafter referred to as the "Loan Documents".
WHEREAS, to secure the Borrowers' obligations under the Note and the other
Loan Documents, the Borrowers pledged to and granted in favor of the Lender a
security interest and/or mortgage in certain property (hereinafter collectively
referred to as the "Collateral"), all more fully described in the Loan
Documents;
WHEREAS, the Borrowers have requested the Lender increase the amount of the
Loan to $7,000,000 and to modify the terms of the Loan as set forth herein; and
WHEREAS, subject to the terms, and conditions in this Agreement, the Lender
is willing to increase the amount of the Loan to $7,000,000 and to modify the
terms of the Loan as set forth herein.
NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Lender and the Borrower
mutually agree as follows:
1. RATIFICATION. All of the terms, covenants, provisions,
representations, warranties, and conditions of the Loan Documents, as
amended or modified hereby, are ratified, acknowledged, confirmed, and
continued in full force and effect as if fully restated herein.
2. COLLATERAL. Each Borrower confirms and ratifies its continuing
mortgage, pledge, assignment, and/or grant of security interest in the
Collateral to and in favor of the Lender as set forth in the Loan
Documents.
<PAGE>
3. INCREASE AND MODIFICATION. The Borrowers and the Lender hereby agree
to increase the Loan to $7,000,000 and to modify the terms of the Note
in accordance with an amended and restated note (the "Amended Note")
in the form attached hereto as Exhibit A. The Amended Note shall be
secured by the same collateral to the same extent and with the same
priority as the Note.
4. MODIFICATION OF LOAN AGREEMENT. The Borrowers and the Lender hereby
agree to modify the terms of the Loan Agreement as follows:
(a) Section 1 of the Loan Agreement is hereby deleted and replaced
with the following:
1.1 LOAN. Lender agrees to lend to Borrowers at Lender's
discretion upon any Borrower's request up to Seven Million
Dollars and Zero Cents ($7,000,000) (the "Revolving Loan Amount")
or such other amounts as may from time to time be established by
Lender, subject to the terms and conditions set forth herein, but
in no event more than the Borrowing Base, as such term is
hereinafter defined and as calculated in a borrowing base
certificate in the form of Exhibit A, attached hereto, and
delivered to the Lender prior to each advance under the Revolving
Loan as hereafter defined or as otherwise required by the Lender.
The Revolving Loan made pursuant to this Agreement (the
"Revolving Loan") shall be evidenced by that certain Revolving
Term Note, dated as of December 19, 1997 (the "Note") in the
amount of the Revolving Loan Amount. This Agreement, the Note,
and any and all other documents, amendments or renewals executed
and delivered in connection with any of the foregoing are
collectively hereinafter referred to as the "Loan Documents".
1.2 LOAN ACCOUNT. At the option of the Lender, an account shall
be opened on the books of Lender which shall be designated on
Lender's books and records as Borrowers' "Loan Account" in which
account a record will be kept of all loans and other advances
made by Lender to Borrowers under or pursuant to this Agreement,
and all payments thereon and other appropriate debits and credits
as provided by this Agreement. Each advance made hereunder may
be credited by Lender to any deposit account of any Borrower with
Lender or with any other Lender with which any Borrower maintains
a deposit account, or may be paid to any Borrower or may be
applied to any Obligations, as Lender may in each instance elect.
1.3 INTEREST. Interest will be charged to Borrower on the
principal amount from time to time outstanding at the rate
specified in the Note in accordance with the terms of the Note.
If not specified in the Note interest will be charged at the
highest rate per annum charged by Lender to Borrower on any other
Obligation based on a 360-day year.
1.4 ADDITIONAL LOANS. Any loans, advances and credits to the
Borrowers that are made in excess of the Revolving Loan Amount
for the line of credit established hereunder shall not affect the
2
<PAGE>
obligations of Borrowers or any of the Lender's rights or
remedies hereunder or under the Loan Documents or otherwise, such
loans and all loans hereunder to be secured by the Collateral, as
hereinafter defined, and to be due and payable to the Lender upon
the same terms as the Revolving Loan pursuant to the Note, and
shall bear interest at the rate set forth in the Note. All
checks or other items paid by Lender which cause an overdraft in
any deposit account maintained by Borrowers with Lender shall
constitute an advance to Borrowers pursuant to this Agreement,
repayable on demand, and shall be secured by all Collateral at
any time pledged by Borrowers to Lender.
1.5 AUTHORIZED PERSONS. Any person duly authorized by a general
borrowing resolution of any Borrower, or in the absence of such a
resolution, the President, Treasurer or any Vice President of any
Borrower, may request discretionary loans hereunder, either
orally or otherwise, but the Lender at its option may require
that all requests for loans hereunder shall be in writing. The
Lender shall incur no liability to the Borrowers in acting upon
any request referred to herein which the Lender believes in good
faith to have been made by an authorized person or persons.
1.6 MONTHLY STATEMENT. At the option of the Lender, after the
end of each month, Lender will render to Borrowers a statement of
Borrowers' Loan Account with Lender, showing all applicable
credits and debits. Each statement shall be considered correct
and to have been accepted by each Borrower and shall be
conclusively binding upon each Borrower in respect of all
charges, debits and credits of whatsoever nature contained
therein under or pursuant to this Agreement, and the closing
balance shown therein, unless any Borrower notifies Lender in
writing of any discrepancy within twenty (20) days from the
mailing by Lender to Borrowers of any such monthly statement.
(b) The following definitions shall be added to Section 2.2 of the Loan
Agreement:
"Accounts Receivable" means all each Borrower's accounts,
accounts receivable, contract rights, notes, bills, drafts,
acceptances, instruments, documents, chattel paper and all other
debts, obligations and liabilities in whatever form owing to such
Borrower from any Person (as defined below) for goods sold by it
or for services rendered by it, or however otherwise established
or created, all guaranties and security therefor, all right,
title and interest of each Borrower in the goods or services
which gave rise thereto, including rights to reclamation and
stoppage in transit and all rights of any unpaid seller of goods
or services; whether any of the foregoing be now existing or
hereafter arising, now or hereafter received by or owing or
belonging to such Borrower.
"Borrowing Base" as used in this Agreement means the sum of the
3
<PAGE>
following (as shown on Lender's records at any time) and as
reported by Borrower at the time of each loan request and at
least monthly in a Borrowing Base Certificate as required by this
Agreement:
(i) 80% of the unpaid face amount of all Eligible Accounts (as
defined herein), PLUS
(ii) 50% of the cost or market value, which ever is lower, of
all Eligible Inventory (as such term is defined herein), PLUS
(iii) 70% of the appraised orderly liquidation value of
Equipment, as determined in an appraisal acceptable to Lender in
its sole discretion, PLUS
(iv) 100% of cash on deposit in any account subject to a blocked
account agreement in favor of Lender and in form acceptable to
Lender in its sole discretion.
(c) "Eligible Account" means an Account Receivable which initially and at
all times until collected in full:
(i) is not more than 90 days from the date of invoice;
(ii) arose in the ordinary course of business from the domestic
performance of services or the outright sale of goods (excluding
conditional sale or sale and return); such services have been
performed or such goods have been shipped to the account debtor;
and in the case of goods, any Borrower has possession of or has
delivered to Lender shipping and delivery receipts evidencing
shipment;
(iii) is not owed by an account debtor who is a supplier,
employee or parent, subsidiary or other affiliate of any
Borrower;
(iv) is not evidenced by a promissory note or other instrument,
is subject to a perfected security interest in favor of Lender
and is not subject to any other lien;
(v) is not owed by an account debtor whose principal place of
business is located outside of the United States of America;
provided, however, that such Account may constitute an Eligible
Account (i) if foreign credit insurance (satisfactory to Lender
in all respects) is obtained for such Account Receivable listing
the Lender as an additional insured, or (ii) if it is supported
by letter(s) of credit issued to any Borrower by financial
institution(s) acceptable to Lender;
(vi) is a non-contingent obligation that is not subject to
set-off, credit, defense, warranty claim, allowance or adjustment
by the account debtor except normal discount allowed in the
ordinary course for prompt payment, and such account debtor has
not complained as to its liability thereon nor returned any of
the subject goods;
(vii) did not arise out of any sale made on an advanced billing,
bill
4
<PAGE>
and hold, dating or delayed shipment basis;
(viii) is owed by an account debtor as to which Borrowers have
received no notice and have no knowledge of Bankruptcy,
insolvency or other facts which make collection doubtful, and has
not been turned over to a collection agency or attorney;
(ix) respecting which the account debtor is not located in the
Sate of New Jersey, or the State of Minnesota or any other state
denying creditors access to its courts in the absence of such
creditor's qualification to conduct business as a foreign
corporation in such state or complying with other filing or
reporting requirements unless Borrowers have filed all legally
required filings and reports, obtained any necessary authorities
or certificates to do business, and paid any applicable taxes
and/or fees to the applicable state agency in such state;
(x) if owed by the United States of America, has upon Lender's
request therefor, been properly assigned to the Lender pursuant
to the Federal Assignment of Claims Act, and is not subject to
any right of offset or other claims; and
(xi) has not been designated by Lender in its reasonable
discretion as unacceptable for any reason by notice to any
Borrower setting forth the reason for such designation; provided,
however, that this subsection shall not apply to any Account
Receivable that is insured by credit insurance.
(d) "Eligible Inventory" means any Borrower's Inventory (including raw
materials or finished goods) which initially and at all times until
sold is:
(i) new and unused (except, with Lender's written approval, used
equipment held for sale or lease), in first-class condition,
merchantable and salable through normal trade channels;
(ii) at a location which has been identified in writing to
Lender;
(iii) subject to a perfected security interest in favor of
Lender and owned by such Borrower free and clear of any lien
except in favor of Lender;
(iv) not obsolete; not scrap, waste, defective goods and the
like;
(v) and has been produced by such Borrower in accordance with
the Federal Fair Labor Standards Act of 1938, as amended, and all
rules, regulations and orders promulgated thereunder;
(vi) not stored with a bailee, warehouseman, processor or
similar party unless Lender has given its prior written consent
thereto and such Borrower has caused each such bailee,
warehouseman, processor or similar party to issue and deliver to
Lender warehouse receipts and lien waivers in Lender's name for
such inventory, and in the case of processors, unless such are
goods segregated and labeled as belonging to such Borrower or
such Borrower has
5
<PAGE>
perfected its interest therein by retaining a security interest
therein and filing financing statements against such processor
pursuant to the Uniform Commercial Code;
(vii) and has not been designated by Lender in its reasonable
discretion as unacceptable for any reason by notice to such
Borrower provided that such notice shall specify the reason for
such designation;
(viii) and has been since the date of this Agreement valued for
financial reporting purposes on a basis consistent with the basis
applied for prior financial periods; and
(ix) not held on consignment by a customer unless such Borrower
has perfected its interest therein by filing financing statements
against such customer and by prior notification of secured
parties of such customer as required by Section 2-326(3)(c) and
9-114 of the Uniform Commercial Code.
5. RELEASE OF LENDER. Each Borrower further acknowledges that the Note
is a valid and legal binding obligation of such Borrower, enforceable
in accordance with its terms, and is not subject to any defenses,
counterclaims, or offsets of any kind, and to the extent any such
defenses, counterclaims or offsets exist, notwithstanding the
representation to the contrary contained in this paragraph, such
defenses, counterclaims and offsets are hereby waived by such Borrower
and all other parties obligated to the Lender on account of the Note
or the Loan Documents.
6. FACILITY FEE. The Borrowers agree to pay the Lender a monthly
facility fee in the amount of $17,500 payable monthly in addition to
all amounts due respecting the Note.
7. EXIT FEE. In addition to all other amounts due respecting the Loan,
the Borrower shall pay to the Lender an exit fee at the time (the
"Payoff Time") all amounts outstanding respecting the Loan are paid in
full equal to the greater of (i) $600,000; or (ii) an amount
calculated by multiplying (x) the average daily balance of the amount
outstanding respecting the Loan from the date of this Agreement until
the Payoff time, as calculated by Lender in its reasonable discretion,
by (y) the number of actual days from the date of this Agreement until
the Payoff time, and by (z) a percentage equal to twenty (20%) percent
divided by 360.
8. SET-OFF. Any deposits, balances or other sums credited by or due from
the Lender or any of its affiliates to any Borrower may, at any time,
whether or not an event of default has occurred or demand has been
made, without notice to any Borrower, or compliance with any other
condition precedent now or hereafter imposed by statute, rule of law
or otherwise (all of which are hereby expressly waived), be set off,
appropriated and applied by Lender against any and all of the
obligations of Borrowers to the Lender in such manner as the Lender in
its sole discretion may determine.
6
<PAGE>
9. COUNSEL FEES AND EXPENSES. Each Borrower will, upon demand, pay all
counsel fees and expenses reasonably incurred by the Lender in
connection with this Agreement, as well as fees and expenses of
counsel which the Lender may hereafter incur in revising,
interpreting, protecting or enforcing any of the Lender's rights as
against any Borrower, any security held by the Lender or which result
from any claim or action by any third person against the Lender that
would not have been asserted were it not for the Lender's relationship
with Borrowers hereunder. Each Borrower specifically authorizes the
Lender to pay all such fees and expenses and charge the same to its
loan account with the Lender.
10. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be an original, but all of which
shall constitute but one agreement.
11. BINDING EFFECT OF AGREEMENT. All covenants, agreements,
representations and warranties contained herein shall bind and inure
to the benefit of the respective successors and assigns of the parties
hereto, whether expressed or not; provided that Borrowers may not
assign or transfer its rights hereunder.
12. FURTHER ASSURANCES. Each Borrower will from time to time execute and
deliver to the Lender, and take or cause to be taken, all such other
further action as the Lender may request in order to effect and
confirm or vest more securely in the Lender all rights contemplated
hereunder.
13. AMENDMENTS AND WAIVERS. This Agreement may be amended and any
Borrower may take any action herein prohibited, or omit to perform any
act herein required to be performed by it, if such Borrower shall
obtain the Lender's prior written consent to each such amendment,
action or omission to act. No delay or omission on the part of Lender
in exercising any right hereunder shall operate as a waiver of such
right or any other right and waiver on any one or more occasions shall
not be construed as a bar to or waiver of any right or remedy of
Lender on any future occasion.
14. TERMS OF AGREEMENT. This Agreement shall continue in force and effect
so long as any obligation of any Borrower to Lender shall be
outstanding and is supplementary to each and every other agreement
between each Borrower and Lender and shall not be so construed as to
limit or otherwise derogate from any of the rights or remedies of
Lender or any of the liabilities, obligations or undertakings of each
Borrower under any such agreement, nor shall any contemporaneous or
subsequent agreement between any Borrower and the Lender be construed
to limit or otherwise derogate from any of the rights or remedies of
Lender or any of the liabilities, obligations or undertakings of such
Borrower hereunder, unless such other agreement specifically refers to
this Agreement and expressly so provides.
15. NOTICES. Any notices under or pursuant to this Agreement shall be
deemed duly received by each Borrower and Lender and effective if
delivered in hand to any officer or agent of any Borrower or Lender or
if mailed by registered or certified mail, return receipt requested,
addressed to a Borrower or Lender at the
7
<PAGE>
address set forth above or as any party shall provide by written
notice to the other party.
16. MASSACHUSETTS LAW. This Agreement is intended to take effect as a
sealed instrument and has been executed or completed and is to be
performed in Massachusetts, and it and all transactions thereunder or
pursuant thereto shall be governed as to interpretation, validity,
effect, rights, duties and remedies of the parties thereunder and in
all other respects by the domestic laws of Massachusetts.
17. REPRODUCTIONS. This Agreement and all documents which have been or
may be hereinafter furnished by any Borrower to the Lender may be
reproduced by the Lender by any photographic, photostatic, microfilm,
xerographic or similar process, and any such reproduction shall be
admissible in evidence as the original itself in any judicial or
administrative proceeding (whether or not the original is in existence
and whether or not such reproduction was made in the regular course of
business).
18. VENUE. Each Borrower irrevocably submits to the nonexclusive
jurisdiction of any federal or state court sitting in Massachusetts,
over any suit, action or proceeding arising out of or relating to this
Agreement. Each Borrower irrevocably waives to the fullest extent it
may effectively do so under applicable law, any objection it may now
or hereafter have to the laying of the venue of any such suit, action
or proceeding brought in any such court and any claim that the same
has been brought in an inconvenient forum. Each Borrower irrevocably
appoints the Secretary of State of the Commonwealth of Massachusetts
as its authorized agent to accept and acknowledge on its behalf any
and all process which may be served in any such suit, action or
proceeding, consents to such process being served (i) by mailing a
copy thereof by registered or certified mail, postage prepaid, return
receipt requested, to such Borrower's address shown above or as
notified to the Lender and (ii) by serving the same upon such agent,
and agrees that such service shall in every respect be deemed
effective service upon such Borrower.
19. JURY WAIVER. THE BORROWERS AND LENDER EACH HEREBY KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY, AND AFTER AN OPPORTUNITY TO CONSULT
WITH LEGAL COUNSEL, WAIVE ANY AND ALL RIGHTS TO A TRIAL BY JURY IN ANY
ACTION OR PROCEEDING IN CONNECTION WITH THIS AGREEMENT, THE
OBLIGATIONS, ALL MATTERS CONTEMPLATED HEREBY AND DOCUMENTS EXECUTED IN
CONNECTION HEREWITH. EACH BORROWER CERTIFIES THAT NEITHER THE LENDER
NOR ANY OF ITS REPRESENTATIVES, AGENTS OR COUNSEL HAS REPRESENTED,
EXPRESSLY OR OTHERWISE, THAT THE LENDER WOULD NOT IN THE EVENT OF ANY
SUCH PROCEEDING SEEK TO ENFORCE THIS WAIVER OF RIGHT TO TRIAL BY JURY.
INTENTIONALLY LEFT BLANK
8
<PAGE>
Executed under seal as of the date written above.
Witness Borrower:
Fix-Corp. International, Inc.
/s/ Andrew I. Press By: /s/ Mark Fixler
- ----------------------------------- ------------------------------------
Mark Fixler, President & CEO
1835 James Parkway
Heath, Ohio 43056
Witness Borrower:
Palletech, Inc.
/s/ Andrew I. Press By: /s/ Gary DeLaurentiis
- ----------------------------------- ------------------------------------
Gary DeLaurentiis, President
1835 James Parkway
Heath, Ohio 43056
Witness Borrower:
Fixcor Industries, Inc.
/s/ Andrew I. Press By: /s/ Gary DeLaurentiis
- ----------------------------------- ------------------------------------
Gary DeLaurentiis, President
1835 James Parkway
Heath, Ohio 43056
Accepted: Gordon Brothers Capital, LLC
By: /s/ Warren H. Feder
--------------------------------------
Name: Warren H. Feder, President
9
<PAGE>
Exhibit 10.8
CONFIRMATION OF GUARANTY
For good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the undersigned guarantor hereby irrevocably and
unconditionally acknowledges and confirms to the Lender that its limited
guaranty of the obligations of Fix-Corp. International, Inc., Palletech, Inc.,
Fixcor Industries, Inc. (the "Borrowers") including without limitation
respecting the Note continues in full force and effect and is a valid and
binding obligation of the undersigned guarantor in accordance with its terms,
that no defenses, offsets, claims, counterclaims exist with respect to such
guaranty, and that such guaranty is enforceable in accordance with its terms,
and guarantees and shall continue to guarantee in accordance with its terms the
performance of all amounts guaranteed thereby including without limitation in
addition to all other liabilities and obligations guaranteed thereby, all
liabilities and obligations of the Borrower to the Lender respecting the Note
and the other Loan Documents as affected hereby, including without limitation
pursuant to that certain Amended and Restated Term Note, dated of even date,
herewith by the Borrowers in favor of the Lender in the original principal
amount of $7,000,000. Notwithstanding anything contained herein to the
contrary, the obligations of the undersigned guarantor under its guarantees to
you shall be limited to $1,000,000.
Executed under seal as of the date written above.
Witness Guarantor:
/s/ Andrew I. Press /s/ Mark Fixler
- ----------------------------------- -----------------------------------
Mark Fixler
<PAGE>
Exhibit 21
LIST OF SUBSIDIARIES
NAME STATE OF INCORPORATION DOING BUSINESS AS
Fixcor Industries, Inc. Delaware Fixcor
Fixcor Industries
Pallet Technologies, Inc. Delaware Palletech
Palletech Inc. (former
corporate name)*
Pallet Technologies
*Certificate of Amendment of Certificate of Incorporation filed December 15,
1997
<PAGE>
[LETTERHEAD]
INDEPENDENT AUDITOR'S CONSENT
We consent to the use in this Form SB 2 Registration Statement of Fix-Corp
International, Inc. of the Financial Statements and Independent Auditor's Report
for fiscal years ending December 31, 1995 and December 31, 1996 of Fix-Corp
International, Inc.
HARMON & COMPANY, CPA, INC.
/s/ Harmon & Company, CPA, Inc.
By: Nicola R. Harmon
Title: President
Date: January 15, 1998
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated balance sheets and consolidated statements of income at
Sept. 30, 1997 and the balance sheets and statements of income at
Dec. 31, 1996 and 1995 of the Company's 1996 Annual Report to Stockholders
and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C> <C> <C>
<PERIOD-TYPE> 9-MOS YEAR YEAR
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1998 DEC-31-1998
<PERIOD-END> SEP-30-1997 DEC-31-1996 DEC-31-1995
<CASH> 2,398,541 224,539 33,860
<SECURITIES> 128,287 130,692 0
<RECEIVABLES> 1,751,677 310,435 132,236
<ALLOWANCES> 0 0 0
<INVENTORY> 877,876 96,002 0
<CURRENT-ASSETS> 5,231,748 761,668 166,096
<PP&E> 13,345,431 9,514,500 22,500
<DEPRECIATION> (550,000) (6,428) (3,214)
<TOTAL-ASSETS> 18,742,050 10,894,116 620,508
<CURRENT-LIABILITIES> 4,201,903 3,660,325 653,783
<BONDS> 3,383,347 0 160,000
0 0 0
0 0 0
<COMMON> 2,646 2,097 711
<OTHER-SE> 11,154,154 7,231,694 (193,986)
<TOTAL-LIABILITY-AND-EQUITY> 18,742,050 10,894,116 620,508
<SALES> 5,629,189 232,824 91,812
<TOTAL-REVENUES> 6,320,984 743,603 755,564
<CGS> (4,236,567) (126,153) (47,340)
<TOTAL-COSTS> (7,149,450) (907,276) (1,870,206)
<OTHER-EXPENSES> 0 0 0
<LOSS-PROVISION> 0 0 0
<INTEREST-EXPENSE> (205,710) (32,730) (30,149)
<INCOME-PRETAX> (828,466) (163,673) (1,114,642)
<INCOME-TAX> 0 52,850 359,300
<INCOME-CONTINUING> (828,466) (110,823) (755,342)
<DISCONTINUED> 0 0 0
<EXTRAORDINARY> 0 0 0
<CHANGES> 0 0 0
<NET-INCOME> (828,466) (110,823) (755,342)
<EPS-PRIMARY> (0.037) (0.008) (0.124)
<EPS-DILUTED> (0.031) (0.008) (0.124)
</TABLE>
