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U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-SB/A
GENERAL FORM FOR REGISTRATION OF SECURITIES OF
SMALL BUSINESS ISSUERS
UNDER SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
FIX-CORP INTERNATIONAL, INC.
(Name of Small Business Issuer in its charter)
DELAWARE 34-1783774
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
3637 SOUTH GREEN ROAD / SUITE 201
BEACHWOOD, OHIO 44122
(Address of principal executive offices) (Zip Code)
Issuer's telephone number (216) 292-3182
Securities to be registered under Section 12(b) of the Act:
Title of each class Name of each exchange on which
to be so registered each class is to be registered
NONE NONE
Securities to be registered under Section 12(g) of the Act:
COMMON STOCK, PAR VALUE $ 0.001 PER SHARE
(Title of class)
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PART I
ITEM 1. DESCRIPTION OF BUSINESS
Fix-Corp International, Inc. (the "Company") was organized under the laws
of the state of Delaware on October 27, 1995. A predecessor of the Company was
initially incorporated on August 11, 1995 under the laws of the state of Utah
and under the name Lifechoice, Inc. The acquisition by the Company of a company
organized by Mark Fixler, the Company's Chief Executive Officer, President
and Chairman of its Board of Directors, involved several events in or about
October, 1995, including the following: (i) the Company changed its name from
Lifechoice, Inc. to Fix-Corp International, Inc.; (ii) Mr. Fixler assumed
control of the Company with 90% of its then-outstanding common stock; (iii) the
Company was redomiciled from being a corporation organized under Utah law to one
organized in Delaware; and (iv) the Company was transformed, from being a public
shell (under its prior name) with shareholders but no operations or assets, to a
corporation with the operations described below. (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 incorporated on December 17, 1996. During January, 1998 the Company
commenced the manufacturing of plastic pallets from recycled resin through its
wholly-owned subsidiary, Pallet Technologies, Inc. ("Pallet Technologies"), a
Delaware corporation, incorporated on July 7, 1997. Pallet Technologies was
originally incorporated under the name Palletech, Inc. but amended its
certificate of incorporation on December 15, 1997 to change its name.
The Company also markets jewelry products for corporate awards and gifts
and extends financing to small businesses collateralized by purchase orders.
These two businesses constituted substantially all of the businesses of the
Company prior to the end of fiscal year 1996. During the first nine months of
fiscal year 1997, however, revenues from these businesses constituted less than
10% of the Company's total revenues, with more than 90% of its revenues
generated by the manufacturing of recycled plastic resin. (See Part I, Item 2,
"MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS.")
In December, 1996, the Company acquired a recycling plant in Heath, Ohio,
also known as the Heath Resource Recovery Plant (the "Facility"), from Quantum
Chemical Corporation ("Quantum"). In connection with this acquisition, in
December, 1996, the Company formed Fixcor to own and operate the Facility. On
January 8, 1997, the first processing line at the Facility became operational.
During July, 1997, the Company formed Pallet Technologies 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.
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RECENT DEVELOPMENTS
All equipment ordered for Pallet Technologies' operations at the
Facility was delivered in December, 1997 and installation commenced within
the first week after delivery. Installation was complete and limited
production began during January, 1998. Production was substantially at full
capacity by the end of February, 1998, with the date of first revenue
expected to occur in March, 1998. As of February 10, 1998, Pallet
Technologies had approximately $5 million in advance orders. Instead of
purchasing the recycled plastic resin pellets from Fixcor as previously
disclosed, Pallet Technologies, at commencement of its operations, is
purchasing resin pellets from unaffiliated third parties at market rates.
These resin pellets are currently readily available and Pallet Technologies
believes that they will continue to be readily available for the foreseeable
future.
The Company's corporate awards jewelry marketing business activity is still
continuing on a limited basis. Revenues from corporate awards jewelry marketing
business for fiscal year 1997 were approximately 3.9% of the Company's revenue,
on an unaudited basis. The purchase order financing business is being phased
out. As of September 30, 1997 the aggregate principal of the purchase order
financing contracts was approximately $800,000, and as of December 31, 1997 this
amount was reduced to approximately $30,000, and the Company is not entering and
does not intend to enter into any additional purchase order financing
arrangements. Revenues from purchase order financing business for fiscal year
1997 were approximately 2.2% of the Company's revenue, on an unaudited basis.
The Company has no current plans to spin-off the Facility's operations in
an initial public offering. Discussion of a spin-off in the notes to the
Financial Statements was based on long-range options considered by the Company.
Management views a spin-off as an alternative for the future consideration, but
has no present plan to pursue that alternative. (See note 8 to the Financial
Statements.)
There has been a material change in the cost of raw material since the date
of the interim financial statements. The per pound cost of raw material has
decreased for both mixed and natural raw material. For mixed raw material, the
decrease has been from a range of $0.24 to $0.32 during the first nine months of
fiscal year 1997 to a range of $0.23 to $0.28 during the last three months of
fiscal year 1997. For natural raw material, the decrease has been from a range
of $0.35 to $0.42 during the first nine months to a range of $0.30 to $0.35
during the last three months. Management believes that this change is
attributable to a decline in demand. (Fixcor's resin prices have declined
correspondingly, so that its margins have remained relatively consistent.)
In February, 1998, the Company entered into an agreement (the "UV
Agreement") on February 3, 1998 with Universal Vinyl Corp. ("UV"), a Florida
corporation, as seller, and Yoram Aisenberg and Avraham Weinstein, jointly
and severally as guarantors of UV's obligations. Under the UV Agreement,
certain conditions having been satisfied, on February 28, 1998, the Company
acquired the assets of UV, whose operations are located at a plant in Medley,
Florida, a suburb of Miami. The purchase price of these assets is $1.04
million. The source of funds for this acquisition is cash on hand, arising
from the various capital raising activities of the Company.
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The Company intends to utilize the assets acquired under the UV
Agreement through its wholly-owned subsidiary, Poly Style Industries, Inc.
("Poly Style"), incorporated under Delaware law on February 18, 1998. The
Company intends that Poly Style will move and operate those assets to and at
space (the "Florida Plant") identified and to be leased in Medley, Florida.
That lease and relocation is not expected to be finalized until approximately
the end of April, 1998.
The operations, as to which the assets acquired from UV relate, consist
of the manufacturing of plastic vertical blinds from extruded polyvinyl
chloride ("PVC"). PVC is expected to be purchased from third party suppliers
at market rates, averaging approximately $0.80 per pound, a price that has
not recently materially fluctuated according to Mr. Aisenberg. The Company
believes that this raw material is readily available. Poly Style's customers
are expected to be wholesale fabricators. Its competition consists primarily
of Hunter-Douglas Corp, Laserlight Inc. and Graber Inc. The Company does not
believe that the Florida Plant will be subject any environmental regulations
the annual cost of compliance with which would be material. Mr. Aisenberg is
expected to be named President of Poly Style.
In addition to being the President of UV, Mr. Aisenberg is a director
of Nitro Plastic Technologies of Israel ("Nitro"). Nitro owns the
proprietary injection molding process licensed to and used by Pallet
Technologies in manufacturing pallets. In February, 1998, Nitro, Mr.
Aisenberg and Pallet Technologies entered into the First Amended Licensing
and Marketing Agreement under which the the royalty rate of $2.50 per pallet
sold under Pallet Technologies' original agreement with Nitro is reduced to
$0.50 during the first five years and $0.25 during the next five years.
Pallet Technologies, in addition to continuing its operations at the
Facility, has ordered (at an aggregate installed cost of approximately $4.0
million) and, during approximately the third quarter of fiscal 1998 expects
install at the Florida Plant equipment, and to commence the production of
pallets from plastic resin pellets acquired from third party suppliers. See
Part I, Item 1, "DESCRIPTION OF BUSINESS--PATENTS, TRADEMARKS AND LICENSES"
and Part I, Item 2, "MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF
OPERATION--PHASE 3."
SPECIAL NOTE--FORWARD-LOOKING STATEMENTS
Certain statements contained in this Registration Statement, including,
without limitation, statements containing the words "believes," "anticipates,"
"expects" and words of similar import, constitute "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act of 1995.
Such forward-looking statements involve known and unknown risks, uncertainties
and other factors that may cause the actual results, performance or achievements
of the Company, or industry results, to be materially different from any future
results, performance or achievements expressed or implied by such
forward-looking statements. Such factors include, among others, the following:
international, national and local general economic and market conditions;
demographic changes; the size and growth of the plastic packaging markets for
both consumer and industrial uses; the ability of the Company to sustain, manage
or forecast its growth; the ability of the Company to successfully make and
integrate acquisitions; raw material costs and availability; new product
development and introduction; existing government regulations and changes in, or
the failure to comply with, government regulations; adverse publicity;
competition; the loss of significant customers or suppliers; fluctuations and
difficulty in
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forecasting operating results; changes in business strategy or development
plans; business disruptions; the ability to attract and retain qualified
personnel; the ability to protect technology; and other factors referenced in
this Registration Statement. Certain of these factors are discussed in more
detail elsewhere in this Registration Statement. Given these uncertainties,
readers of this Registration Statement and investors are cautioned not to place
undue reliance on such forward-looking statements. The Company disclaims any
obligation to update any such factors or to publicly announce the result of any
revisions to any of the forward-looking statements contained herein to reflect
future events or developments.
THE COMPANY
The Company has three wholly-owned subsidiaries, Fixcor, Pallet
Technologies and Poly Style. Fixcor owns and operates the Facility, located
in the Mid-Ohio Industrial Park at 1835 James Parkway in Heath, Ohio 43056.
The Company currently leases the UV Plant, located at 9200 N.W. 102nd Street
in Medley, Florida 33170. Pallet Technologies' operations take place at the
Facility, and in the future will take place also at the Florida Plant.
PolyStyles' operations take place at the Florida Plant. The closest major
metropolitan area to the Facility is Columbus, Ohio, about 30 miles away.
The closest major metropolitan area to the Florida Plant is Miami, Florida,
of which Medley is a suburb. 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 recycled plastic resin
pellets and fabricate a value-added plastic end product. Management has
contemplated from time to time a spin-off of certain of its operations.
However, the Company has taken no material action to pursue a spin-off, does
not currently contemplate a spin-off, and no assurances can be made that a
spin-off or similar transaction will occur. (See note 8 to the Financial
Statements.)
ACQUISITION OF THE FACILITY
In December, 1996, the Company consummated the acquisition of the Facility
pursuant to the Purchase and Sale Agreement (the "Quantum Agreement"), a copy
of which is attached to this Registration Statement. The Facility was acquired
from Quantum, a Virginia corporation with its principal place of business
located in Cincinnati, Ohio. The Facility includes a stand-alone post-consumer
plastic recycling operation involving two parallel recycling lines inside a
50,000 square foot building on its own plot of ground with access to an
adjoining railroad spur and truck scale, plus various other support equipment.
In connection with the acquisition of the Facility, the Company obtained
bridge financing from Gordon Brothers Capital Corp., a commercial lender with
its principal place of business located in Boston, Massachusetts. This bridge
financing was in the amount of $2,500,000 and was secured by a first mortgage on
the Facility and a security interest in all inventory, accounts receivables and
contracts with customers. Mr. Fixler also guaranteed the Company's obligations
under the bridge financing agreement. (Copies of the principal documents
evidencing this financing and guarantee are attached to this Registration
Statement.)
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
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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 a
non-written option to purchase the Facility. He waived his option to purchase
and this waiver 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 5,000,000 shares of common stock of the Company (the
"Common Stock"), valued at $6,000,000, or $1.20 per share, all of which were
restricted shares. Mr. Fixler was principally responsible for representing the
Company in these transactions.
In May, 1997, Fixcor secured financing for the Facility from NationsCredit
Commercial Corporation. This consisted of revolving loans up to $7,000,000 for
inventory and account receivable financing, permanent financing, and equipment
acquisition. This financing included a mortgage security agreement which
encumbered substantially all of the assets of the Facility. Mr. Fixler is the
guarantor of this facility in an amount up to $750,000 plus expenses.
OPERATIONS AT THE FACILITY
The Facility produces post-consumer high density polyethylene (HDPE)
plastic resin pellets. The Facility has three recycling lines which are capable
of producing approximately 66,000,000 to 72,000,000 pounds of post-consumer
plastic resin per year. The Company expects that the average selling price of
this resin can be maintained for the foreseeable future 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 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, and while it has no current plans to do so, the Company believes
that it may be advantageous in the future to expand by opening plants in other
regions of the United States to be closer to suppliers and customers. The
Company expects, and has made plans, to expand the Facility during fiscal year
1998. Fixcor currently has no sales to foreign customers. Its customers are
generally companies with annual sales revenue of between $50,000,000 and
$250,000,000. In addition, management believes that Fixcor enjoys a competitive
advantage over its competitors due to an advantageous rate for electric power
from Ohio Power. Fixcor owns its own substation that regulates and supplies its
power. The national rate charged to commercial customers is $0.09 per kilowatt
hour. Fixcor pays $0.032 per kilowatt hour for use at the Facility. This
differential translates into a cost of $0.011 per pound of plastic produced. In
addition, the Facility has its own waste water treatment plant. This permits
the Facility to recycle 50% to 75% of the water that it consumes per day and
aids in lowering the cost of producing resin pellets.
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The Facility is designed to produce recycled HDPE. HDPE is a constituent
ingredient of many consumer packaging plastic products. The prices of raw
materials are a function of, among other things, the manufacturing capacity for
such raw materials of such consumer products. In the event of cost increases
for raw materials, failure to achieve corresponding sales price increases in a
timely manner, sales price erosion without a corresponding reduction in raw
material costs or failure to renegotiate favorable raw material supply contracts
could have a material adverse effect on the Company.
PALLET TECHNOLOGIES
Pallet Technologies, a subsidiary formed in July, 1997, specializes in the
production of plastic pallets. Pallet Technologies has installed in the
Facility a specialized, state-of-the-art injection molding machine which
transforms 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 obtained from third parties at market
rates. Pallet Technologies completed engineering work, ordered, received, and
installed equipment at the Facility, and operations commenced in
January, 1998. See Part I, Item 1, "DESCRIPTION OF BUSINESS--RECENT
DEVELOPMENTS" for more information regarding Pallet Technologies. The Company
believes that plastic possesses numerous advantages over wood, the material
currently used for pallets: plastic is extremely durable, has historically been
less expensive, possesses greater strength, will serve for a much longer term of
service and, when its life is over, can itself be recycled.
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.
LEVERAGE
As discussed above, the Company is significantly leveraged. It has entered
into security agreements with two lenders which substantially encumber all of
the Company's assets. The Company's future operating performance and ability to
service or refinance its indebtedness will be subject to future economic
conditions and to financial, business and other factors, many of which are
beyond its control, and consequently the Company may be unable to service all of
its debt in the future. There can be no assurance that the Company's future
operating performance will be sufficient to service such indebtedness or that
the Company will be able to refinance its indebtedness in whole or in part.
The degree to which the Company is leveraged can have significant effects
on the Company, including the following: (i) the Company's ability to obtain
additional financing in the
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future for working capital, capital expenditures, acquisitions, general
corporate purposes or other purposes may be limited; (ii) a substantial portion
of the Company's cash flow from operations will be dedicated to the payment of
the principal of and interest on its existing indebtedness, thereby reducing
funds available for operations; (iii) the agreements governing the Company's
indebtedness and convertible debentures contain certain restrictive covenants.
The Company's ability to make scheduled payments of the principal of, or
interest on, or to refinance, its indebtedness will depend on its future
operating performance and cash flow, which are subject to prevailing economic
conditions, primarily interest rate levels and financial, competitive, business
and other factors, many of which are beyond its control.
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. Pallet Technologies' operations
commenced during January, 1998, and the Company expects its revenues to commence
during the first quarter of fiscal year 1998. The Company sells its production
through purchase orders. These purchase orders are solicited or received from
interested parties by representatives of the Company making direct and indirect
contact with potential consumers of resin and pallet products.
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. No customer purchases, or has placed a purchase
order in a quantity that would make that customer a purchaser of 10% or more of
Pallet Technologies' production. Pallet Technologies has received advance
purchase orders for pallets produced by Pallet Technologies in amounts in excess
of $5,000,000. 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
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materials, which are available from a wide variety of suppliers, including but
not limited to major waste haulers and landfills. Costs for these raw materials
used by Fixcor tend to fluctuate with various economic factors which generally
affect the Company and its competitors. The availability of raw materials was
adequate in 1996 and 1997 and management expects it to remain adequate
throughout 1998. Since Fixcor had not operations during 1996, it has no direct
information with respect to the price of raw materials during that year. Based
on discussions with current suppliers, it appears that the cost of raw materials
was approximately the same as the cost that the Company incurred during 1997.
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. See Part I, Item 1, "DESCRIPTION OF BUSINESS--RECENT
DEVELOPMENTS."
PATENTS, TRADEMARKS AND LICENSES
Pallet Technologies has entered into a Licensing and Marketing Agreement
with Nitro, a copy of which is attached to this Registration Statement. 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 otherwise it and its
subsidiaries have all rights necessary to carry on their operations. In
particular, in connection with the acquisition of the Facility from Quantum, the
Company purchased equipment and other tangible assets that it believes are
necessary for Fixcor's operations. The Company is not the holder of any letters
patent, trademark or copyright registrations, and has not applied for any of the
foregoing. Pallet Technologies uses the trademark "POWER-PAL 2000" with respect
to its pallets, but has not registered or applied for registration of that
trademark.
CALIFORNIA GRANT AND ALLIED SIGNAL AGREEMENT
In June, 1997, the Company was awarded a $256,868 research grant from the
Integrated Waste Management Board of the State of California to develop a
solution to the problems associated with non-recyclable HDPE motor oil
containers, which have historically been sent to landfills. The solution will
involve the separation of the remaining oil from the "empty" container, and then
the recycling of the HDPE container and the separate recycling of the remaining
oil. To do this, in September, 1997, Fixcor entered into a license agreement
with The Federal Manufacturing & Technologies business unit of AlliedSignal Inc.
("AlliedSignal") under which AlliedSignal licenses to Fixcor certain technology
and Fixcor pays a license fee and ongoing royalties based principally on sales
of products sold arising out of use of the licensed technology. The Company
expects that a prototype of equipment using this technology will be available
for limited use by the end of the second quarter of fiscal year 1998. A copy of
the license agreement between Fixcor and AlliedSignal is attached to this
Registration Statement.
The Company has not spent significant amounts on research and development
in the past and, except for the grant from the State of California, does not
expect its research and development budget in the future to be material.
EMPLOYMENT AGREEMENTS
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Mr. Fixler has entered into a written employment agreement with the Company
with a term of three years commencing January 1, 1997 and Gary M. DeLaurentiis
has entered into an employment agreement with the Company with a term of five
years commencing January 1, 1997. See Part I, Item 6, "Executive
Compensation." No other employees have written employment or collective
bargaining agreements with the Company or any of its subsidiaries. A copy of
each employment agreement is attached to this Registration Statement. Neither
the Company nor any of its subsidiaries has an employment agreement with Mr.
Aisenberg, but the Company expects to formalize that employment relationship in
a written agreement in the future.
COMPETITION
Fixcor sells a commodity (recycled HDPE plastic) in a commodity market. As
is true with all commodity markets, this market is highly competitive, although
Fixcor has experienced no difficulty in running at full capacity and selling its
full production. Nevertheless, many of its competitors are considerably larger
than the Company and have substantially greater financial and other resources
than the Company, while others are significantly smaller with lower fixed costs
and greater operating flexibility. The Company has approximately 15
competitors. With the addition of 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 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. Management believes that the Company is in
compliance with all applicable environmental laws and regulations, and no change
with respect to this compliance has occurred since the date of the interim
Financial Statements included in this Registration Statement. As is the case
with manufacturers in general, if a release of hazardous substances occurs on or
from the Company's properties or any associated offsite disposal location, or if
contamination from prior activities is discovered at any of the Company's
properties, the Company may be held liable. From time to time, the Company is
involved in inquiries relating to compliance with environmental laws, permits
and other environmental matters. In the future, the Company may be identified
as a potentially responsible party and be subject to liability under applicable
law. No assurances can be given that additional environmental issues will not
require future expenditures.
The plastics industry, in general, and the Company also are subject to
existing and potential federal, state, local and foreign legislation designed to
reduce solid wastes by requiring, among other things, plastics to be degradable
in landfills, minimum levels of recycled content, various recycling
requirements, disposal fees and limits on the use of plastic products. In
addition, various consumer and special interest groups have lobbied from time to
time for the implementation of these and other such similar measures. Although
the Company believes that the legislation promulgated to date and such
initiatives to date have not had a material adverse
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effect on the Company, there can be no assurance that any such future
legislative or regulatory efforts or future initiatives would not have a
material adverse effect on the Company.
Fixcor's current expenses for compliance with environmental laws and
regulations is approximately $300,000 per year, primarily the cost of water
treatment. Two environmental "Phase I" examinations were done in connection
with the purchase of the Facility and the reports from those examinations did
not reveal any contamination.
Fixcor has made no material capital expenditures, and expects to make none,
for environmental control facilities in connection with the recently installed
third operating line, and 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.
EMPLOYEES
As of February 20, 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 expects Poly Style to have approximately 15 employees at the
Florida Plant. The Company has no collective bargaining agreement with its
employees and no union represents them. There have been no interruptions or
curtailments of operations due to labor disputes and the Company believes
that relations with its and its subsidiaries' employees are good.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
DEVELOPMENT STAGE ACTIVITIES
In December, 1996, the Company formed Fixcor, a wholly-owned subsidiary.
This entity acquired the Facility, a stand-alone post-consumer plastic recycling
operation. The acquisition significantly changed the focus of the Company from
corporate awards jewelry marketing and financing to the manufacturing of plastic
resin.
With this acquisition, the Company's business plan may be divided into four
phases based upon the services performed, the products produced, and the
products and services to be performed and produced.
Note 2(C.) to the December 31, 1996 audited financial statements
indicates that for the year ended December 31, 1995, the Company incurred a
bad debt of $962,471. This charge to earnings related to the Company's
Purchase Order Financing business. As a result of an uncollectible financing,
the Company incurred this expense. After incurring this loss, the Company
changed the procedures it utilized to secure its interest in these
transactions to preclude any future losses. In fact, no losses have been
incurred in these transactions since 1995.
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For the year 1996, and 1997, no bad debt provision was deemed necessary
since, in the opinion of management, all trade receivables are collectible
including the insignificant amount of purchase order financing receivables
outstanding as of December 31, 1997, $30,000.
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 5,000,000 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. 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. See Part I, Item 1, "DESCRIPTION OF BUSINESS--THE COMPANY,
- --ACQUISITION OF THE FACILITY and --PALLET TECHNOLOGIES."
PHASE 3
On July 7, 1997, the Company formed another wholly-owned subsidiary,
Pallet Technologies. 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 transforms
resin pellets, produced by Fixcor, into plastic pallets. Installation of
this equipment was completed during January, 1998 and management expects to
have it operating at full capacity by the end of the first quarter of fiscal
year 1998. The approximate cost of the equipment, molds, transportation and
installation of the equipment for Pallet Technologies' operation at the
Facility is $4.0 million, and the approximate cost of equipment,
transportation and installation at the Florida Plant is expected to be
$3,000,000, in addition to approximately $1.0 million, the cost of molds.
Not taking into consideration Pallet Technologies'
11
<PAGE>
operations at the Florida Plant, which the Company expects to commence during
the third quarter of fiscal year 1998, the Company conservatively estimates that
Pallet Technologies revenues for 1998 will be $13.0 million. With Pallet
Technologies operations running at the Florida Plant, the Company estimates that
1998 revenues will be $20.0 million. Permanent financing for the Pallet
Technologies equipment for installation at the Facility was secured from Gordon
Brothers Capital Corp. See Part I, Item 1, "DESCRIPTION OF BUSINESS."
PHASE 4
During September, 1997, the Company's wholly-owned subsidiary, Fixcor
entered into an agreement with AlliedSignal. Under this licensing agreement,
Fixcor is entitled to utilize technology owned by AlliedSignal 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 AlliedSignal based upon the volume of
recycling performed by Fixcor under these licenses.
PHASE 5
During February, 1998, the Company's wholly-owned subsidiary, Poly Style
entered into the UV Agreement, under which Poly Style acquired substantially
all of the assets of UV initially for operation at the Florida Plant, for a
purchase price of approximately $1.04 million. Poly Style will manufacture
plastic vertical window blinds from extruded PVC. The Company expects that
Poly Style's operations will commence during the second quarter of fiscal
year 1998. See Part I, Item 1, "DESCRIPTION OF BUSINESS--RECENT
DEVELOPMENTS."
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 Palletech operations.
Revenues for the twelve months in fiscal year 1996 from the purchase
order financing were $510,779 versus $191,795 for the nine months ended
September 30, 1997, an annualized decrease of 50 percent. The reduction in
revenues reflects a change in the orientation of the Company from financing
sales to manufacture of resin and, ultimately resin products. During the
fourth quarter of 1997, financing of purchase orders declined to the point
that only one receivable was outstanding related to this activity as of
December 31, 1997, and that balance was only $30,000.
Revenues from merchandise sales for the year ended December 31, 1996,
were $232,824. These revenues for the first nine months of 1997 were $187,964
resulting in an annualized increase in sales of 7.6%. This increase in
volume is expected to continue into 1998. Although the Company is expending
limited time and resources in this operation, as a result of contacts
developed in prior years, the revenues from these sales continue to have
limited growth.
12
<PAGE>
For the nine months ended September 30, 1997, the revenues of Fixcor were
$5,441,225. Cost of goods sold on these sales was $4,089,419 resulting in a
gross margin of 24.8 percent. This operation was the primary focus of the
Company for the fourth quarter of 1997. With the addition of another resin
processing line during October, 1997, and future expansion plans, it is expected
that revenues in 1998 will be substantially higher than those in 1997.
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. This increase is a result of gearing up the Fixcor operations. It
includes salaries and direct compensation related to the production and
operation of the Heath facility; fees and expenses incurred related to third
party borrowings and the sale of equity shares in the Company; and, the
professional fees necessary to meet regulatory commitments.
The Company believes that the reported trends in the recycled plastic
resin business will continue to grow since demand exceeds supply and as Fixcor
has increased its capacity it has still been unable to meet all demand. The
Company also does not believe that any of its competitors will be able to
meet that demand in the foreseeable future.
LIQUIDITY AND CAPITAL RESOURCES AS OF SEPTEMBER 30, 1997
The Company's cash balance increased by $2,174,002 to $2,398,541 from
December 31, 1996 to September 30, 1997 and working capital increased by
$4,473,009 to $11,706,800 from December 31, 1996 to September 30, 1997. The
increases are the result of three occurrences. First, funds were generated by
internal operations and formula borrowings on inventories (up to 55%) and
receivables (up to 85%).
The second source of funds was from the issuance of capital stock. During
the nine months ended September 30, 1997, 3,490,986 shares were issued resulting
in additional funds of $4,751,475. These monies were used to acquire additional
equipment and fund working capital needs in Fixcor's operations.
As of September 30, 1997, other than ordering and installing equipment
for use by Fixcor at the Facility in capital expenditures and commitments
therefor were minimal. As of that date Pallet Technologies ordered its
equipment, making a commitment of approximately $4.0 million. Since that
date, the only substantial capital expenditures have been the ordering of
additional equipment for Pallet Technologies' operations at the Florida Plant
(estimated to cost $4.0 million and to be installed during the third quarter
of fiscal year 1998), and the acquisition of business assets from UV for
approximately $1.04 million for Poly Style'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 in connection with
their commencement during the first three quarters of fiscal year 1998, and in
connection with the commencement of Poly Style's operations during that period.
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
13
<PAGE>
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) and the exercise of the warrants, and is required to effect
and maintain for three years a registration statement 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.
In January, 1998, the Company issued to the same two purchasers $2,500,000
aggregate principal amount of three-year, 4% convertible debentures, convertible
(together with interest thereon) at any time into shares of Common Stock at a
conversion price equal to the lesser of (i) $3.34, or (ii) 83% of the average of
the 5 lowest closing bid prices for the 10 trading days preceding conversion.
The purchasers also received warrants to purchase an aggregate 198,413 shares of
Common Stock at an exercise price equal to $3.34 per share. The warrants are
exercisable at any time through January 22, 2001. The Company is required to
amend the Registration Statement on Form SB-2 to include resale by the holders
of shares issuable upon conversion of such debentures and exercise of such
warrants
The debenture transaction documents include additional representations,
warranties, covenants and default provisions not atypical for such
financings. The principal October 24, 1997, November 25, 1997 and January 22,
1998 debenture transaction documents are attached to this Registration
Statement.
ITEM 3. DESCRIPTION OF PROPERTY
The Facility is located in an industrial park which is about three miles
from Interstate 70 and two miles from U.S. Highway 40, within the city limits of
Heath (Licking County), Ohio. The closest metropolitan area is Columbus, Ohio,
about 30 miles away. There is vacant land to the north which has been zoned for
additional industrial buildings. The site is approximately 10 acres.
14
<PAGE>
The Facility was constructed in 1991 and includes 48,000 square feet of
space for manufacturing and an additional 1,643 square feet for a finished
office area. In connection with the third operating line, Fixcor put into
service 7,000 of these 48,000 square feet. There is also a concrete slab in the
rear with a portion of it covered by a canopy. The site is served by a railroad
spur to the south.
Fixcor holds the title to the real estate and real estate improvements
constituting the Facility. To secure its permanent financing, Fixcor granted
the lender a continuing security interest in all of Fixcor's property, including
the Facility.
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
estimated cost of this improvement was approximately $4,000,000, financed by
cash on hand, primarily using certain of the proceeds of the convertible
debentures. The Company believes that the value of the real estate and
improvements at the Facility are subject to general economic conditions. In the
opinion of management, the Facility is adequately covered by insurance. The
Company has no current plans to lease out any portion of the Facility. With
respect to each component of the Facility upon which depreciation is taken, the
following table sets forth the projected federal tax basis, life claimed and
method for purposes of depreciation.
<TABLE>
<CAPTION>
BASIS LIFE CLAIMED METHOD
<S> <C> <C> <C>
Building $2,000,000 39 years Straight-line
Equipment $12,500,000 10 years Straight-line
</TABLE>
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.
The Company expects to lease the Florida Plant from a third party, but
that lease has not been finalized. The UV Plant and the Florida Plant are
located in Medley, Florida, a suburb of Miami, Florida. The Company intends
to allocate space at the Florida Plant between the operations of Poly Style
and Pallet Technologies.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The following table sets forth the beneficial ownership of the Company's
principal stockholders, defined as parties that own five percent or more of the
common stock, as of February 20, 1998.
15
<PAGE>
COMMON STOCK
<TABLE>
<CAPTION>
<S> <C> <C>
Amount and Name and Address Amount and Nature of
Beneficial Owner of Beneficial Owner Percent of Class
Mark Fixler 9,968,725* 29.27%
3637 South Green Road
Suite 201
Beachwood, Ohio 44122
</TABLE>
- --------------
* 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.
COMMON STOCK
<TABLE>
<CAPTION>
<S> <C> <C>
Amount and Name and Address Amount and Nature of
Beneficial Owner of Beneficial Owner Percent of Class
Mark Fixler 9,968,725* 29.27%
3637 South Green Road
Suite 201
Beachwood, Ohio 44122
All Directors and Officers
as a Group 10,098,725* 29.66%
</TABLE>
* Includes 4,000,000 shares which are subject to options granted by the Company
to Mr. Fixler, which are exercisable during the term of his current employment
agreement with the Company.
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
MARK FIXLER, 41, is the Company's Chief Executive Officer and President and
the Chairman of its Board of Directors. Prior to founding Fix-Corp
International, Inc., Mr. Fixler served as President of several retail businesses
chiefly engaged in the jewelry business. He was President of Richard's
Jewelers, Inc. from November, 1989 until October, 1994. From October, 1994 to
October, 1995 Mr. Fixler was President of Fix-Corp International, Inc., an Ohio
corporation and a predecessor of the Company. He is currently President of the
Village Counsel of his home community, Mayfield Village, Ohio. See Part I, Item
6, "EXECUTIVE COMPENSATION."
16
<PAGE>
GARY M. DELAURENTIIS, 53, is the President of Fixcor and a Vice President
of the Company. Mr. DeLaurentiis joined the Company after it acquired the
Facility. Mr. DeLaurentiis has 21 years of management experience and 10 years
of experience in the plastic resin industry. Prior to joining the Company, he
operated his own consulting firm, GMD & Associates, from June, 1995 to December,
1996. Prior to being a consultant, from 1991 to June, 1995, Mr. DeLaurentiis
developed another start-up company in the plastic resin field, ANEW Corporation,
which was subsequently sold. Mr. DeLaurentiis also negotiated with the Chinese
government to develop a plastic recycling plant as part of a pilot project in a
Free Trade Zone of Southern China. This occurred when he was employed by RPX
Resins, Inc., another firm which he founded and managed from 1987 to 1992.
BOARD OF DIRECTORS
The Board of Directors is composed of three individuals, Mr. Fixler, Mr.
DeLaurentiis and Lawrence Schmelzer. A brief biography of Mr. Schmelzer
follows. Each of the directors is serving a one-year term expiring at the
annual meeting of the Company's stockholders in 1998.
LAWRENCE C. SCHMELZER, 61, is the Chairman of 1st Cleveland Securities,
Inc., a full service brokerage firm in Cleveland, Ohio, and has held that
position since 1991. He is a graduate of the Wharton School of Finance and he
has also studied at the New York Institute of Finance, the London School of
Economics and New York University. Mr. Schmelzer has been active in the
securities industry since 1959, with experience in venture capital funding,
portfolio management, mergers and acquisitions. Through family partnership, he
is also active in commercial real estate investment and management.
None of the directors currently receives compensation from the Company for
his service in such capacity.
DEPENDENCE ON MANAGEMENT
The Company's success is principally dependent on its current management
personnel for the operation of its business. In particular, Mr. Fixler, its
President and Chief Executive Officer and Chairman of its Board of Directors,
has played a significant role in the development and management of the Company.
There is no assurance that additional managerial assistance will not be
required. The Company has entered into an employment agreement with each of Mr.
Fixler and Mr. DeLaurentiis. If the Company should lose the services of either
Mr. Fixler or Mr. DeLaurentiis, the Company may be significantly affected.
ITEM 6. EXECUTIVE COMPENSATION
Mr. Fixler is party to a three year employment contract with the Company
dated January 1, 1997. Under this agreement, the Company pays him a salary of
$200,000 during the first year, $250,000 during the second year and $300,000
during the final year. In addition, Mr. Fixler receives a car allowance and
reasonable car phone expenses, plus other benefits customarily given to
executive officers. Under this agreement, Mr. Fixler is also granted an option
to purchase 4,000,000 shares of common stock of the Company at a fixed price of
$.50 per share and this
17
<PAGE>
option may be exercised at any time during the employment period. Finally, in
the event of a consolidation or purchase of assets to another company or
termination of employment for any other reason, Mr. Fixler is entitled to a
$2,000,000 severance benefit. Prior to 1997, Mr. Fixler was not subject to a
written employment agreement with the Company. He was paid a salary of $119,000
in 1996 and $64,000 in 1995.
Mr. DeLaurentiis is party to a five year employment contract with the
Company dated January 1, 1997. Under this agreement, the Company pays him a
salary of $125,000 per year. He is also eligible for annual bonuses subject to
the approval of the Board of Directors of the Company. In addition, Mr.
DeLaurentiis receives a car allowance and other benefits customarily given to
executive officers. He is President of Fixcor and Vice President of the
Company. He was not employed by the Company or Fixcor during fiscal year 1996.
The Company currently has no stock appreciation rights, long-term
incentive, stock option plans or similar benefit plans for its executives or
other employees.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During 1996, the Company loaned to Fix-Sports, Inc., a company partially
owned by Mr. Fixler $26,000. This note bears interest at 10% per year and is
collateralized by 52,000 shares of the Company's Common Stock. Otherwise, no
director, officer, promoter or control person is, or has been, in debt to the
Company. Mr. Fixler has guaranteed certain bridge and permanent financing of
the Company.
Upon consummation of the purchase of the Facility and prior to the securing
of permanent financing, the Company entered into a formal Acquisition Agreement
(the "Acquisition Agreement") under which the Company conveyed the Facility to
Fixcor in connection with its original subscription to all of the shares of
common stock of Fixcor. Mr. Fixler was also a party to this Acquisition
Agreement. Before the Company acquired the Facility under the Quantum
Agreement, he had a non-written option to purchase the Facility. He waived his
option to purchase and this waiver 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 6,063,036 shares of Common Stock
(valued at $6,000,000 or $1.01 per share), all of which were restricted shares.
Mr. Fixler also has guaranteed up to $1,000,000 of the July, 1997 financing from
Gordon Brothers Capital Corp.
ITEM 8. DESCRIPTION OF SECURITIES
The authorized capital stock of the Company consists of 100,000,000 shares
of Common Stock with a par value of $0.001 per share, and 2,000,000 shares of
Preferred Stock with a par value of $0.001 per share.
COMMON STOCK
30,053,289 shares of Common Stock were issued and outstanding as of
February 20, 1998.
18
<PAGE>
Holders of the Common Stock do not have preemptive rights to purchase
additional shares of Common Stock or other subscription rights. The Common
Stock carries no conversion rights and is not subject to redemption or to any
sinking fund provisions. All shares of Common Stock are entitled to share
equally in dividends from sources legally available therefor when, as and if
declared by the Board of Directors and, upon liquidation or dissolution of the
Company, whether voluntary or involuntary, to share equally in the assets of the
Company available for distribution to stockholders. The Board of Directors is
authorized to issue additional shares of Common Stock on such terms and
conditions and for such consideration as the Board may deem appropriate without
further stockholder action. Reference is made to the Company's Amended and
Restated Certificate of Incorporation and Bylaws which are attached as exhibits
to this Registration Statement, as well as to the applicable statutes of the
State of Delaware for a more complete description concerning the rights and
liabilities of stockholders.
Each holder of Common Stock is entitled to one vote per share, either in
person or by proxy, on all matters that may be voted on by the owners thereof at
meetings of the stockholders. Since the shares of Common Stock do not have
cumulative voting rights, the holders of more than 50% of the shares voting for
the election of directors can elect all the directors and, in such event, the
holders of the remaining shares will not be able to elect any person to the
Board of Directors. At the Company's annual meeting held in May, 1997, the
stockholders approved a provision whereby a quorum shall be deemed present for
the conduct of business at either an annual meeting of the stockholders or at a
special meeting of the stockholders with only one-third of the outstanding
shares represented, either in person or through proxy.
PREFERRED STOCK
No shares of preferred stock of the Company (the "Preferred Stock") were
issued and outstanding as of October 1, 1997. Shares of Preferred Stock were
issued during the second and third quarters of fiscal year 1997, but all have
been converted to Common Stock by the holders thereof.
Subject to the Company's Amended and Restated Certificate of Incorporation
and the Delaware General Corporation Law, the terms of one or more classes or
series of Preferred Stock, including dividend rights, conversion prices, voting
rights, redemption prices and similar matters will be determined by the Board of
Directors.
TRANSFER AGENT
The registrar and transfer agent for the Common Stock is CDR Transfer Inc.,
located at 412 Main Street, Old Saybrook, Connecticut 06475.
PART II
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND
OTHER SHAREHOLDER MATTERS
19
<PAGE>
The Company's Common Stock is traded over-the-counter ("OTC") on the
Electronic Bulletin Board (the "Bulletin Board") maintained by the National
Association of Securities Dealers ("NASD") under the Symbol "FIXC."
As of February 20, 1998, 30,058,289 shares of Common Stock were issued and
outstanding, and there were approximately 478 record holders of Common Stock.
As of that date, no shares of Preferred Stock were issued and outstanding. (See
Part I, Item 8, "Description of Securities.") Mr. Fixler holds certain options
to purchase shares of Common Stock under his employment agreement with the
Company. (See Part I, Item 6, "EXECUTIVE COMPENSATION.")
The following table sets forth the range of high and low sales prices for
the Common Stock on the OTC Bulletin Board for each quarter for fiscal years
1996 and 1997.
<TABLE>
<CAPTION>
<S> <C> <C>
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
</TABLE>
The source of this information is America Online quotation services. These
prices reflect inter-dealer prices, without retail markup, mark-down or
commission and may not represent actual transactions.
RESTRICTED SECURITIES
A significant portion of the Company's Common Stock is held by insiders and
persons who acquired shares in private offerings. These are "restricted
securities," as that term is defined in Rule 144 promulgated under the
Securities Act. In general, Rule 144 provides that, during any three-month
period, each person holding restricted securities can sell an amount of such
securities equal to the greater of (a) 1% of the number of outstanding shares,
or (b) the average weekly reported trading volume of those securities during the
preceding four calendar week period, provided that certain conditions are met.
One of these conditions is that the stock must be purchased for investment
purposes and held for a minimum period of one year, and in some instances even
longer. Sales of these restricted securities under Rule 144 or otherwise by
current stockholders of the Company could have a depressive effect on any
trading market for Common Stock. No predictions can be made of the effect, if
any, that market sales of shares or the availability of shares for sale will
have on the market price prevailing from time to time. Nevertheless, sales of
significant amounts of the Common Stock of the Company in the public
20
<PAGE>
market may adversely affect market prices, and may impair the Company's ability
to raise capital at that time through additional sale of its equity securities.
NO DIVIDENDS
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 only (i) out of the Company's capital surplus (the excess of
net assets over stated capital) or (ii) out of the net income of the Company for
the fiscal year in which the dividend is declared and/or the preceding fiscal
year.
SECONDARY TRADING RESTRICTIONS
The Common Stock is governed by a Securities and Exchange Commission rule
for "penny stocks" (defined as stocks that cost $5.00 or less per share) that
imposes additional sales practice burdens and requirements upon broker-dealers
which sell such securities to persons other than established customers and
accredited investors (generally institutions with assets in excess of $5,000,000
or individuals with a net worth in excess of $1,000,000 or annual income
exceeding $200,000 or $300,000 jointly with their spouse). For transactions
covered by this penny stock rule, broker-dealers must make a special suitability
determination for the unaccredited purchaser and receive the purchaser's written
agreement to the transaction prior to the sale. Consequently, the penny stock
rule may affect the ability of broker-dealers to sell the Company's securities
and also may affect the ability of persons now owning or subsequently acquiring
the Company's securities to resell such securities in any trading market that
may develop. Although the Company's goal is to have its securities included in
the National Association of Securities Dealers Automated Quotation System
("NASDAQ"), which would exempt such securities from the above rule, there is no
assurance that the Company will meet the NASDAQ listing requirements. Based
on discussions with broker-dealers, the Company believes that there are
numerous market makers for the Common Stock, with the following being
principal market makers: Fahnestock & Co.; Financial America Securities, Inc.;
Herzog, Heine, Geduld, Inc; Mayer & Schweitzer, Inc.; M.H. Meyerson & Co.;
Nash Weiss Division Shatkin; Paragon Capital Corp.; Sharp Capital, Inc.;
Troster, Singer, Stevens, Roth; and Wien Securities Corp. Other market makers
of which the Company is aware are: Comprehensive Capital Corp.; GVR Co.;
Hill, Thompson, Magid & Co.; Mercer Bokert Buckman & Reid, Inc.; NAIB Trading
Co.; National Financial; North American Investment; Northeast Securities
Corp.; Olsen Payne & Co.; Ryan S.W. & Co.; Sherwood Securities Corp.; Wall
Street Equities; Wm. M. Frankel & Co.; and the third market makers known by
the codes FMLY, GMFI and HJMC.
PRICE VOLATILITY OF THE COMPANY'S SHARES
21
<PAGE>
The Common Stock is traded on the NASD OTC Electronic Bulletin Board.
Because of the limited market for Bulletin Board stocks, even mild expressions
of interest may have a profound impact upon the stock's price on any given day.
Accordingly, Bulletin Board stock customarily experience above average price
fluctuations and volatility. Accordingly, the Company's common stock should be
expected to experience substantial price changes in short periods of time, owing
to the vagaries of the Bulletin Board exchange for stocks. Even if the Company
is performing according to its plan and there is no legitimate financial
component for this volatility, it must still be expected that substantial
percentage price swings will occur in these securities for the foreseeable
future, and percentage changes in stock indices (such as the Dow Jones
Industrial Average) could be magnified, particularly in downward movements of
the markets.
In March and April, 1996, a person purporting to represent an entity
known as AMR Group ("AMR") approached the Company had represented they could
assist the company with private placements of its securities. As a result
thereof, certain non-exclusive memorandum type agreements were entered to by
and between the Company and AMR, one being an Investor Agreement (the
"Investor Agreement") and the other being a Consulting Agreement (the
"Consulting Agreement"). The terms of the Investor Agreement are vague. The
understanding of the Company was that AMR would provide assistance in financial
structuring, debt and/or equity funding, Private and Public Placements and
negotiation strategies, in consideration for which AMR was to be granted
warrants for 2 million shares (500,000 shares at each of the following
exercise prices: $0.05, $1.00; $3.00; and $5.00). Under the Consulting
Agreement, AMR was to receive a fee based on financing from a source
originated by AMR. AMR did not provide any of the services for which the
Company contracted and the agreements were deemed to be terminated by the
Company. After virtually no contact in two (2) years, in January and
February, 1998, AMR contacted the Company and asserted a right to exercise
certain warrants. The Company maintained its position that any agreements with
AMR had terminated due to non-performance. In addition, a check of the
records of the Ohio Secretary of State's indicates that no entity, trade name
or fictitious name has ever been registered under the name "AMR Group".
ITEM 2. LEGAL PROCEEDINGS
The Company is from time to time made a party to legal proceedings arising
in the ordinary course of business. The Company does not believe that the
results of such legal proceedings, even if unfavorable to the Company, will have
a materially adverse impact on its financial condition or the results of its
operations.
The Company is a third party defendant in a lawsuit pending in the Common
Pleas Court of Cuyahoga County, Ohio, GLOBAL INVESTMENTS & ADVISORY GROUP, INC.
V. 3DM, LIMITED LIABILITY CO., ET AL. V. FIX-CORP INTERNATIONAL, ET AL. This
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 in connection with the acquisition of the Facility (See
Part I, Item 1, "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. On February 2, 1998 the Company filed
a motion to dismiss the third party complaint filed against the Company for
failure to state a claim and for the reason that the Company is not a proper
subject of a third party complaint under the applicable rules of civil
procedure. The Company expects that this motion will be granted. The Company
does not believe that the pending litigation involving 3DM will have a material
adverse effect on the Company or its operations.
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
The Company did not engage an independent accountant until during fiscal
year 1997, when it engaged Harmon & Company, CPA, Inc., Columbus, Ohio,
generally, and in particular
22
<PAGE>
for purposes of preparing the Financial Statements included with this
Registration Statement. The Company has had no material disagreements with its
accountants.
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES
In October, 1995, pursuant to the reorganization involving the Company and
following a reverse stock split and other transactions, the outstanding shares
of Common Stock of the Company were held as follows: 3,600,000 restricted
shares held by Mr. Fixler, 204,020 restricted shares held by an affiliate and
consultant of the Company's predecessor, and 195,980 shares held by the public
shareholders of the Company's predecessor.
During the period November, 1995 through August, 1996, pursuant to Rule 504
of Regulation D, the Company offered and sold to approximately 160 purchasers
2,000,000 shares of Common Stock at $.50 per share.
During the period November, 1996 through May, 1997, the Company issued
approximately 4,000,000 additional shares of Common Stock for various purposes
and consideration. The Company treated all such issuances as exempt from
registration under Rule 504 of Regulation D, and the transactions reflected
therein included the following:
- 750,000 shares sold at $.50 per share.
- 125,000 shares issued in consideration of services provided by a
non-affiliated party.
- 655,000 shares sold to approximately 30 purchasers at $.60 to $.65
per share.
- 1,000,000 shares issued to secure certain bridge financing from
Generation Capital Associates (such financing was subsequently
converted into 550,000 of such shares, with the balance of the shares
returned to the Company).
- 1,363,000 shares issued to BLB Financing Co. in connection with
certain financing in the amount of $485,000 (such financing was
finally converted into shares at $.355 per share)
The Company has been advised that it apparently did not satisfy all
requirements of the Rule 504 exemption from registration with respect to the
share issuances described above.
In January, 1996, 350,000 shares of Common Stock were issued to Mr. Fixler
pursuant to Section 4(2) of the Securities Act, at a value of $.50 per share,
upon conversion of certain indebtedness of the Company to Mr. Fixler.
During the period July, 1996 through September, 1997, pursuant to Section
4(2) of the Securities Act, the Company issued approximately 2,400,000 shares of
Common Stock to various consulting firms (and individuals affiliated therewith)
in consideration of consulting services. The valuation of the shares varied
principally with market values at the times of the transactions, with discounts
due to the restricted nature of the shares.
23
<PAGE>
In September, 1996, pursuant to Section 4(2) of the Securities Act the
Company sold to six purchasers 575,000 shares of Common Stock at a purchase
price of $.50 per share.
In December, 1996 in connection with certain bridge financing in the amount
of $200,000, 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, which were eventually
exercised at that price.
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 $0.125
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.
In April, 1997, pursuant to the Acquisition Agreement, the Company issued
to Mr. Fixler 6,063,036 shares of Common Stock (at a value of $1.01 per share)
in a transaction exempt from registration under Section 4(2) of the Securities
Act.
From June, 1997 to October 1, 1997, pursuant to an offering under Section
4(2) of the Securities Act, the Company sold 1,925,000 shares of Preferred Stock
at $1.00 per share. Each share of Preferred Stock was convertible into one
share of Common Stock, and as of October 1, 1997 all of the Preferred Stock had
been converted into 1,925,000 shares of Common Stock. In addition, holders of
Preferred Stock were granted rights to acquire additional shares of Common Stock
at $1.00 per share, and 1,100,000 shares of Common Stock were issued pursuant to
exercise of such rights.
In August, 1997, pursuant to Section 4(2) of the Securities Act the Company
issued 471,000 shares of Common Stock (at a value of $1.24 per share) in
consideration of an equipment purchase from a commercial enterprise.
In July through September, 1997, pursuant to various private placement
transactions under Section 4(2) of the Securities Act, the Company sold
approximately 2,000,000 shares of Common Stock to 33 purchasers at prices
ranging from $.35 to $1.30 per share.
All of the share transactions summarized above were made directly by the
Company without use of an underwriter or placement agent and without payment of
commissions or other remuneration. In each case the aggregate sales proceeds,
after payment of offering expenses in immaterial amounts, were applied to the
working capital of the Company or to specific equipment purchases.
With respect to the exemption from registration of issuance of securities
claimed under Section 4(2) of the Securities Act, neither the Company nor any
person acting on its behalf offered or sold the securities by means of any form
of general solicitation or advertising. Prior to making any offer or sale, the
Company had reasonable grounds to believe and believed that each prospective
investor was capable of evaluating the merits and risks of the investment and
was able
24
<PAGE>
to bear the economic risk of the investment. Each purchaser represented in
writing that he was acquiring the securities for investment for his own account,
and agreed that the securities would not be sold without registration under the
Securities Act or exemption therefrom. Except for securities issued under Rule
504, the certificates of which bear no restrictive legend, a legend was placed
on each certificate stating that the securities have not been registered under
the Securities Act and setting forth the restrictions on their transferability.
In November, 1997, pursuant to Rule 506 of Regulation D, the Company issued
to two institutional investors $8,000,000 aggregate principal amount of
three-year 5% convertible debentures. The transaction reflected a reissuance of
$5,000,000 convertible debentures in exchange for similar debentures issued to
the same purchasers in October, 1997, and a new issuance of $3,000,000
convertible debentures to one of such purchasers. 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 530,240 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 (as to 331,400 shares) and
November 25, 2000 (as to 198,840 shares). Pursuant to the terms of the
debentures and warrants, the Company has filed with the SEC a Registration
Statement on Form SB-2 with respect to resale by the holders of shares of Common
Stock issuable upon conversion of the debentures and exercise of the warrants.
In January, 1998, pursuant to Rule 506 of Regulation D, the Company issued
to the same two purchasers $2,500,000 aggregate principal amount of three-year,
4% convertible debentures, convertible (together with interest thereon) at any
time into shares of Common Stock at a conversion price equal to the lesser of
(i) $3.34, or (ii) 83% of the average of the 5 lowest closing bid prices for the
10 trading days preceding conversion. The purchasers also received warrants to
purchase an aggregate 198,413 shares of Common Stock at an exercise price equal
to $3.34 per share. The warrants are exercisable at any time through January
22, 2001. The Company is required to amend the Registration Statement on Form
SB-2 to include resale by the holders of shares issuable upon conversion of such
debentures and exercise of such warrants.
The Company is subject to an administrative 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. The Company was
ordered to "cease and desist" from acts and practices found to violate Section
1707.44(C)(1), Ohio Revised Code (sales of securities not registered or exempt
from registration), and Section 1707.44(B)(1) (false representations in a
registration application). There were no further restrictions imposed pursuant
to the Order. The Company believes that such violations resulted principally
from miscommunication between the Company and its legal counsel at the time as
to certain information communicated to the Ohio Division of Securities in
connection with an application for registration by description filed in
December, 1995 with respect to sales of the Company's common stock in Ohio. The
Company believes that it is in compliance with the Order.
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS
25
<PAGE>
On May 16, 1997, at the Company's Annual Meeting, the stockholders adopted
Amended and Restated Certificate of Incorporation. Article X of those Articles
provides, in accordance with Section 145 of the General Corporation Law of
Delaware, that a director shall not be personally liable to the Company or its
stockholders for breach of duty or care or other duty as a director, except for
liability for acts not in good faith or which involve intentional misconduct, or
any transaction in which the director derived an improper personal benefit or
for any type of liability not contemplated by Section 145 of the General
Corporation Law of Delaware. As a result of the Company's Certificate of
Incorporation and Delaware law, stockholders may have more limited rights to
recover against directors for breach of fiduciary duty than as compared to the
standard of care imposed upon a director in the state where the investor
resides. In addition, to the fullest extent permitted by Delaware law, the
Company shall indemnify its corporate officers. Section 145 of the General
Corporation Law of Delaware reads as follows:
Section 145 Indemnification of officers, directors, employees and agents;
insurance.
(a) A corporation shall have power to indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation) by
reason of the fact that the person is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by the person in connection with such action, suit or proceeding if the
person acted in good faith and in a manner the person reasonably believed to be
in or not opposed to the best interests of the corporation, and, with respect to
any criminal action or proceeding, had no reasonable cause to believe the
person's conduct was unlawful. The termination of any action, suit or
proceeding by judgment, order, settlement, conviction, or upon a plea of nolo
contendere or its equivalent, shall not, of itself, create a presumption that
the person did not act in good faith and in a manner which the person reasonably
believed to be in or not opposed to the best interests of the corporation, and,
with respect to any criminal action or proceeding, had reasonable cause to
believe that the person's conduct was unlawful.
(b) A corporation shall have power to indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the corporation to procure a
judgment in its favor by reason of the fact that the person is or was a
director, officer, employee or agent of the corporation, or is or was serving at
the request of the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise
against expenses (including attorneys' fees) actually and reasonably incurred by
the person in connection with the defense or settlement of such action or suit
if the person acted in good faith and in a manner the person reasonably believed
to be in or not opposed to the best interests of the corporation and except that
no indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable to the corporation
unless and only to the extent that the Court of Chancery or the court in which
such action or suit was brought shall determine upon application that, despite
the adjudication of liability but in view of all the circumstances of the
26
<PAGE>
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.
(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,
27
<PAGE>
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).
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934, the
registrant has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized.
FIX-CORP INTERNATIONAL, INC.
By /s/ Andrew I. Press
---------------------------------------
Andrew I. Press,
Chief Financial Officer
Date: February 26, 1998
28
<PAGE>
PART F/S
The Company's Financial Statements and Independent Auditor's Report for
the fiscal years ending December 31, 1996 and December 31, 1995, and
unaudited consolidated balance sheet and consolidated income statement
and statement of retained earnings for the nine month period ending
September 30, 1997, are included.
-----------------------------
-----------------------------
Fix-Corp International, Inc.
(formerly Lifechoice, Inc.)
Financial Statements
&
Independent Auditor's Report
December 31, 1996 & 1995
-----------------------------
-----------------------------
<PAGE>
---------------------------
Harmon & Company, CPA, Inc.
Columbus, Ohio
---------------------------
<PAGE>
-----------------------------
Fix-Corp International, Inc.
(formerly Lifechoice, Inc.)
-----------------------------
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Independent Auditors' Report . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Balance Sheet. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Statements of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
Statement of Changes in Stockholders' Equity . . . . . . . . . . . . . . . . . . . .5
Statements of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
Notes to the Financial Statements. . . . . . . . . . . . . . . . . . . . . . . . . 7
</TABLE>
-1-
<PAGE>
Harmon & Company, CPA, Inc.
2000 Henderson Road, Suite 140
Columbus, Ohio 43220
(614)326-3822
Fax (614) 326-3824
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.
/S/ Harmon & Company, CPA, Inc.
Harmon & Company, CPA, Inc.
COLUMBUS, OHIO
April 16, 1997, except as to Notes 2, 4 & 8,
WHICH ARE DATED FEBRUARY 20, 1998
-2-
<PAGE>
FIX-CORP INTERNATIONAL, INC.
(FORMERLY LIFECHOICE, INC.)
BALANCE SHEETS
DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
12/31/96 12/31/95
------------ ------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash $ 224,539 $ 33,860
Investment in Marketable Securities 130,692 -0-
Trade Accounts Receivable, net 88,763 59,436
Purchase Order Financing Contracts 221,672 72,800
Inventory 96,002 -0-
----------- -----------
Total Current Assets 761,668 166,096
----------- -----------
PROPERTY, PLANT & EQUIPMENT
(at cost less accumulated depreciation
and amortization)
Land & Land Held for Development 750,000 -0-
Buildings 2,000,000 -0-
Plant Equipment 6,642,000 -0-
Office Furniture & Fixtures 122,500 22,500
----------- -----------
9,514,500 22,500
Less Accumulated Depreciation and
Amortization (6,428) (3,214)
----------- -----------
Total Property, Plant & Equipment 9,508,072 19,286
----------- -----------
DEFERRED INCOME TAXES 412,150 359,300
----------- -----------
OTHER ASSETS & DEFERRED CHARGES 212,226 75,826
----------- -----------
Total Assets $10,894,116 $ 620,508
----------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Secured Equipment Loan Payable $ 2,500,000 $ -0-
Bridge Financing Notes Payable 450,000 -0-
Notes Payable 598,000 500,000
Accounts Payable 68,008 113,183
Accrued Interest Payable 44,317 40,600
----------- -----------
Total Current Liabilities 3,660,325 653,783
----------- -----------
LONG-TERM DEBT
Notes Payable to Officers -0- 160,000
----------- -----------
STOCKHOLDERS' EQUITY
Preferred stock, $.001 par value,
2,000,000 shares authorized, -0-
shares issued or outstanding - -
Common Stock, $.0001 par value,
100,000,000 shares authorized,
7,106,056 and 20,974,024 issued and
outstanding in 1995 and 1996 2,097 711
Additional Paid in Capital 8,246,406 641,230
Unrealized Holding Loss on Investments (68,673) -0-
Retained Earnings (Deficit) (946,039) (835,216)
----------- -----------
Total Stockholders' Equity 7,233,791 (193,275)
----------- -----------
Total Liabilities and Stockholders'
Equity $10,894,116 $ 620,508
----------- -----------
</TABLE>
The accompanying notes are an integral part
of these financial statements.
-3-
<PAGE>
FIX-CORP INTERNATIONAL, INC.
(FORMERLY LIFECHOICE, INC.)
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
12/31/96 12/31/95
------------ ------------
<S> <C> <C>
REVENUE
Fees on Purchase Order Contract Financing $ 408,337 $ 530,629
Commission & Shared Finance Fees 102,442 133,123
Merchandise Sales 232,824 91,812
------------ ------------
Total Revenue 743,603 755,564
------------ ------------
COST OF SALES AND CONTRACT FINANCING OPERATIONS
Interest Expense, Contract Financing 250,822 398,087
Bad Debts -0- 962,471
Consulting Fees & Shared Commissions 42,939 135,180
Cost of Merchandise Sales, Including Freight 126,153 47,340
------------ ------------
Cost of Sales and Contract Financing
Operations 419,914 1,543,078
------------ ------------
Gross Profit 323,689 (787,514)
------------ ------------
OPERATING EXPENSES
Salaries, Wages and Related Costs 277,317 114,447
Depreciation & Amortization 19,514 19,514
Legal & Professional, Including Consulting
Fees 98,513 91,454
Other General & Administrative 96,038 71,564
Deferred Preoperating Plant Startup Costs (36,750) -0-
------------ ------------
Total Expenses 454,632 296,979
------------ ------------
Operating Income (Loss) (130,943) (1,084,493)
------------ ------------
OTHER INCOME (EXPENSE)
Interest Expense and Financing Costs, Other 32,730 30,149
------------ ------------
Net (Loss) Before Income
Taxes (163,673) (1,114,642)
LESS PROVISION FOR DEFERRED INCOME TAXES
Federal (43,000) (292,500)
------------ ------------
State (9,850) (66,800)
------------ ------------
Total Deferred Income Taxes (52,850) (359,300)
------------ ------------
Net Loss $ (110,823) $ (755,342)
------------ ------------
Net Loss Per Common Share (0.008) (0.124)
------------ ------------
Weighted Average Common Shares Outstanding 14,040,040 6,084,546
------------ ------------
</TABLE>
The accompanying notes are an integral part
of these financial statements.
-4-
<PAGE>
FIX-CORP INTERNATIONAL, INC.
(FORMERLY LIFECHOICE, INC.)
STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL RETAINED TOTAL
--------------------- PAID-IN EARNINGS STOCKHOLDERS'
SHARES AMOUNT CAPITAL (DEFICIT) EQUITY
--------- --------- ------------ ----------- -------------
<S> <C> <C> <C> <C> <C>
Balances at January 1, 1995, as
originally reported 400,000 $ 40 $1,960 $(100) $ 1,900
Conversion of Notes Payable 250,000 25 124,975 125,000
Effect of Merger With
Fix-Corp International, Inc
(a Delaware corporation) 4,413,036 441 -0- (79,774) (79,333)
---------- -------- ---------- -------- ----------
Balances at January 1, 1995,
as restated 5,063,036 506 126,935 (79,874) 47,567
---------- -------- ---------- -------- ----------
Private Placement of Common
Stock, net of issuance cost 1,249,000 125 461,875 462,000
Issuance of Common Stock for
payment of Professional Fees 599,020 60 149,940 150,000
Loss on Stock Subscriptions 195,000 20 (97,520) (97,500)
Net loss for the period (755,342) (755,342)
---------- -------- ---------- -------- ----------
Balances at December 31, 1995 7,106,056 711 641,230 (835,216) (193,275)
---------- -------- ---------- -------- ----------
Acquisition of Ohio Resources
Recovery Plant 8,000,000 800 5,999,200 6,000,000
Private Placement of Common
Stock, net of issuance cost 4,267,968 426 1,605,976 1,606,402
Issuance of shares to secure
bridge financing, held in
escrow subject to loan
agreements 1,600,000 160 -0- 160
Net loss for the period (110,823) (110,823)
---------- -------- ---------- ---------
Balances at December 31, 1996 20,974,024 $2,097 $8,246,406 $(946,039) $7,302,464
---------- -------- ---------- ---------
Unrealized Holding Loss
on Investments (68,673)
----------
Total Stockholders' Equity $7,233,791
----------
----------
</TABLE>
The accompanying notes are an integral part
of these financial statements.
-5-
<PAGE>
FIX-CORP INTERNATIONAL, INC.
(FORMERLY LIFECHOICE, INC.)
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
12/31/96 12/31/95
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income (loss) $ (110,823) $ (755,342)
ADJUSTMENTS TO RECONCILE NET
INCOME TO NET CASH PROVIDED BY
OPERATING ACTIVITIES
Depreciation & Amortization Expense 19,514 19,514
Investment in Marketable Securities (199,365) -0-
(Increase) Decrease in Trade Accounts Receivable (29,327) 3,064
(Increase) Decrease in Purchase Order
Financing Contracts (148,872) 456,636
(Increase) in Inventory (96,002) -0-
(Increase) in Deferred Tax Asset (52,850) (359,300)
Increase (Decrease) in Accounts Payable (45,176) 31,659
Increase in Accrued Interest Payable 3,717 40,600
------------ -----------
Net Cash Provided (Used) by Operating
Activities (659,184) (563,169)
------------ -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of Land & Land Held for Development (500,000) -0-
Purchase of Buildings (1,000,000) -0-
Purchase of Plant Equipment (1,992,000) -0-
Purchase of Office Furniture & Fixtures (100,000) (22,500)
Additions to Other Assets (152,700) (95,203)
------------ -----------
Net Cash Provided (Used) by Investing
Activities (3,744,700) (117,703)
------------ -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from Sale of Stock 1,606,402 612,000
Proceeds from Secured Equipment Loan Payable 2,500,000 -0-
Proceeds from Bridge Financing Notes Payable 450,000 -0-
Proceeds from Notes Payable, net 198,161 36,777
Payments on long-term debt (160,000) (500)
------------ -----------
Net Cash Provided (Used) by Financing
Activities 4,594,563 648,277
------------ -----------
Net Income Increase (Decrease) in Cash $ 190,679 $ (32,595)
------------ -----------
Cash at Beginning of Period $ 33,860 $ 66,454
------------ -----------
Cash at End of Period $ 224,539 $ 33,860
------------ -----------
SUPPLEMENTAL DISCLOSURES
INTEREST PAID, EXCLUDING PURCHASE
ORDER CONTRACT FINANCING $ 32,730 $ 30,149
------------ -----------
ISSUANCE OF COMMON STOCK FOR:
Professional Fees & Services -0- 150,000
-----------
Conversion of Notes Payable -0- 125,000
-----------
ACQUISITION OF OHIO RESOURCES
RECOVERY PLANT, HEATH, OHIO FOR
COMMON STOCK AND ALLOCATED AS FOLLOWS:
Land & Land Held for Development 250,000 -0-
Buildings 1,000,000 -0-
Plant Equipment 4,650,000 -0-
Office Furniture & Fixtures 100,000 -0-
------------ -----------
6,000,000 -0-
------------ -----------
</TABLE>
The accompanying notes are an integral part
of these financial statements.
-6-
<PAGE>
Fix-Corp International, Inc.
(formerly Lifechoice, Inc.)
Notes to Financial Statements
December 31, 1996 & 1995
NOTE 1 - ORGANIZATION AND DESCRIPTION OF THE BUSINESS
Lifechoice, Inc. (Lifechoice) was incorporated on August 11, 1995 under
the laws of the State of Utah. On or about October 23, 1995, Fix-Corp
International, Inc. (Fix-Corp), a newly-formed Delaware corporation was
acquired by Lifechoice preparatory to a reverse merger in which Fix-Corp
assumed control over Lifechoice, a publicly traded company listed on the
NASD Bulletin Board. Lifechoice possessed no assets and no liabilities and
was, in effect, a shell corporation. The COMPANY assumed the name of
Fix-Corp International, Inc. and was redomiciled to Delaware.
Effective with the COMPANY'S $9,400,000 acquisition of the Heath
Resource Recovery plant and manufacturing facility, more fully described in
Note 4, the Company's primary business will be plastic resin recycling. The
Company's business, therefor, consists of three (3) distinct segments: the
recycling of post consumer polyethylene and other plastic resins, merchandise
or product sales and purchase order contract financing. Prior to December
1996, the Company was in the business of extending financing to small
businesses, collateralized by a Purchase Order issued by a reputable
business. In effect, the Company funds a portion of this Purchase Order in
advance, then stands in the place of its client, the Vendor, and becomes the
owner of this Purchase Order and its requisite proceeds.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed
in the preparation of these financial statements. The financial statements
and notes are the representation of the Company's Management, who is
responsible for their integrity and objectivity. The policies conform to
generally accepted accounting principles and have been consistently applied.
(A.) Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
(B.) Effect of New Accounting Pronouncements
Effective in 1996, Fix-Corp adopted Statement of Financial Accounting
Standards No. 115, "Accounting for Certain Investments in Debt and Equity
Securities." Under Statement No. 115, debt and marketable equity securities
are required to be classified in one of three categories: trading,
available-for-sale, or held to maturity. Fix-Corp's equity securities qualify
under the provisions of Statement No. 115 as available-for-sale. Such
securities are recorded at fair value, unrealized holding gains and losses,
net of the related tax effect, are not reflected in earnings but are reported
as a separate component of stockholders' equity until realized. A decline in
the market value of an available-for-sale security below cost that is deemed
other than temporary is charged to earnings and results in the establishment
of a new cost basis for the security.
Statement of Financial Accounting Standards No. 121 "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of"
requires that long-lived assets held and used by a company be reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. SFAS No. 121 also
establishes the procedures for review of recoverability, and measurement of
impairment, if necessary, of long-lived assets. Fix-Corp, with the
acquisition of the Heath Resource Recovery plant, adopted SFAS No.121 and
determined that no impairment provision of the carrying cost of the plant was
necessary.
(C.) Allowance for Doubtful Accounts
It is the opinion of Management that all accounts receivable are
collectible, therefore an allowance for doubtful accounts is not necessary.
The Company incurred a bad debt of $962,471 charged against current
operations in 1995.
-7-
<PAGE>
Fix-Corp International, Inc.
(formerly Lifechoice, Inc.)
Notes to Financial Statements - Continued
(D.) Inventory
Inventory is stated at the lower of cost or market, using the First-in,
First-out, (FIFO), method of accounting, and consists of plastic recycled
products.
(E.) Property and Equipment
Property and equipment are stated at cost. Costs of maintenance and
repairs are charged to expense as incurred. Major improvements and renewals,
in general, are capitalized. Acquisitions to fixed assets are depreciated on
the straight-line method. The estimated useful lives used in computing
depreciation were changed subsequent to the issuance of this report. The
dollar effect of the change is minor in nature, as substantially all assets
affected were acquired in late December, 1996, not placed in service during
the year and therefor no depreciation expense was recorded. The following is
a summary as follows:
<TABLE>
<CAPTION>
LIFE IN YEARS LIFE IN YEARS
DESCRIPTION AS PREVIOUSLY REPORTED AS CHANGED
- ----------- ---------------------- -------------
<S> <C> <C>
Buildings 10-25 years 39 years
Plant Machinery and Equipment 5-10 years 10 years
Office Furniture and Fixtures 5-7 years 10 years
</TABLE>
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:
<TABLE>
<CAPTION>
AMOUNT
- ---------------------------------------------------------------------
<S> <C>
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
----------
----------
</TABLE>
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 purchase price was paid as follows
<TABLE>
<CAPTION>
AMOUNT
- ---------------------------------------------------------------------
<S> <C>
Cash $900,000
Secured Equipment Loan 2,500,000
Common Stock (6,521,740 restricted shares) 6,000,000
----------
Total Payments $9,400,000
----------
----------
</TABLE>
-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
<TABLE>
<CAPTION>
THE COMPONENTS OF THE DEFERRED TAX ASSET ARE AS FOLLOWS: 1996 1995
- --------------------------------------------------------------------------------------
<S> <C> <C>
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
-------- --------
-------- --------
</TABLE>
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:
<TABLE>
<CAPTION>
1996 1995
- --------------------------------------------------------------------------------------
<S> <C> <C>
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
------- --------
------- --------
</TABLE>
The amounts and expiration dates of the net operating loss carryforward
available to the Company at December 31, 1996 are as follows:
<TABLE>
<CAPTION>
AMOUNT EXPIRATION DATE
- --------------------------------------------------------------------------------------
<S> <C> <C>
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
----------
----------
</TABLE>
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.
Gordon Brothers is entitled to purchase from the Company after December
16, 1997 but before December 16, 1999 (the expiration date), five hundred
thousand (500,000) shares of the Company's $.0001 value common stock at a
price of twenty-five cents ($0.25) per share (the Purchase Price). Such
shares under option are restricted shares.
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
<TABLE>
<CAPTION>
1996 1995
- --------------------------------------------------------------------------------------
<S> <C> <C>
Bridge Notes Payable to shareholders (5 individuals) $250,000 $- 0 -
6.07% Convertible Bridge Note Payable 200,000 - 0 -
-------- ------
Total $450,000 $- 0 -
-------- ------
-------- ------
</TABLE>
Subject to a certain "Confidential Private Placement Memorandum", more
fully described in Note 10, the Company has sold $250,000 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.
On December 11, 1996, for value received, the Company promised to pay to
the order of Generation Capital Associates, a non affiliated New York limited
partnership or its assigns the principal amount of two hundred thousand
dollars ($200,000). The principal thereof and any unpaid accrued interest
thereon shall be due and payable on June 31,1997 The note bears interest at
the rate of 6.07% percent per annum on the outstanding principal balance, to
be payable quarterly commencing January 1,1997.
This Note was issued by the Company in accordance with the
provisions of Rule 504 ("Rule 504") of Regulation D of the rules and
regulations promulgated under the provisions of the Securities Act of 1933,
as amended, and the issuance of the Note and the shares of common stock of
like Company (the "Common Stock") issuable upon conversion of the Note (the
"Conversion Shares") The Note and the Conversion Shares shall be issued under
the Act without any restrictive legend regarding the transfer of this Note or
the Conversion Shares.
In connection with any conversion of the Note into any Common Stock, the
Company has placed into escrow an aggregate of 1,000,000 shares of Common Stock
issued in accordance with Rule 504 hereunder, pursuant to the terms of an Escrow
Agreement.
The Purchaser of this Note is entitled, at its option. at any time and in
whole or in part, until maturity hereof (as extended by Purchaser) to convert
the principal) amount of the Note or any portion of the principal amount hereof
into Shares of Common Stock at a conversion price for each share of Common Stock
equal to Fifty Percent (50%) of the Closing Bid Price of the Common Stock on the
business date immediately preceding the conversion date. For purposes of this
Section 1, the Closing Bid Pace shall be the closing bid price of the Common
Stock as reported by the National Association of Securities Dealers Automated
Quotation System ("NASDAQ"), or the closing bid price in the over-the-counter
market or, in the event the Common Stock is listed on a stock exchange, the
closing bid price value per share shall be the closing price on the exchange as
reported in the Wall Street Journal.
Fix-Corp International, for value received, Gordon Brothers is entitled to
purchase from the Company after December 16, 1997 but before December 16, 1999
(the expiration date), five hundred thousand (500,000) shares of the Company's
$.0001 value common stock at a price of twenty-five cents ($0.25) per share
(the Purchase Price). Such shares under option are restricted shares.
In addition, The Company has communicated it's 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
<TABLE>
<CAPTION>
1996 1995
- -----------------------------------------------------------------------------
<S> <C> <C>
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
-------- --------
-------- --------
</TABLE>
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 it's 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 - STOCKHOLDERS' 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 it's 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:
<TABLE>
<CAPTION>
CONTRACT PRODUCT RECYCLED
FOR THE YEAR ENDED DECEMBER 31, 1996 FINANCING SALES PLASTIC TOTAL
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
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
-------- -------- ---------- ----------
-------- -------- ---------- ----------
</TABLE>
-14-
<PAGE>
Fix-Corp International, Inc.
(formerly Lifechoice, Inc.)
Notes to Financial Statements - Continued
<TABLE>
<CAPTION>
CONTRACT PRODUCT RECYCLED
FOR THE YEAR ENDED DECEMBER 31, 1995 FINANCING SALES PLASTIC TOTAL
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
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
--------- -------- ---------- -----------
--------- -------- ---------- -----------
</TABLE>
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. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 1997 AND DECEMBER 31, 1996
<TABLE>
<CAPTION>
09/30/97 12/31/96
(UNAUDITED) (AUDITED)
----------- ----------
<S> <C> <C>
ASSETS
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
Inventory 877,876 96,002
Other Current Assets 75,367 -0-
----------- -----------
Total Current Assets 5,231,748 761,668
----------- -----------
PROPERTY, PLANT & EQUIPMENT
(at cost less accumulated depreciation and
amortization)
Land & Land Held for Development 750,000 750,000
Buildings 2,000,000 2,000,000
Plant Equipment 10,472,931 6,642,000
Office Furniture & Fixtures 122,500 122,500
----------- -----------
13,345,431 9,514,500
Less Accumulated Depreciation and Amortization (550,000) (6,428)
----------- -----------
Total Property, Plant & Equipment 12,795,431 9,508,072
----------- -----------
OTHER ASSETS
Licensing Agreements 30,000 -0-
Deferred Income Taxes 491,121 412,150
Other Assets & Deferred Charges 193,750 212,226
----------- -----------
Total Other Assets 714,871 624,376
----------- -----------
Total Assets $18,742,050 $10,894,116
----------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Secured Equipment Loan Payable $-0- $2,500,000
Bridge Financing Notes Payable -0- 450,000
Line of Credit 1,037,843 -0-
Notes Payable 1,748,582 598,000
Accounts Payable and Accrued Expenses 1,415,478 112,325
----------- -----------
Total Current Liabilities 4,201,903 3,660,325
----------- -----------
LONG-TERM DEBT
Notes Payable 3,383,347 -0-
----------- -----------
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, 20,974,024 and 26,465,010
issued and outstanding in 1996 and 1997 2,646 2,097
Additional Paid in Capital 12,997,332 8,246,406
Unrealized Holding Loss on Investments (68,673) (68,673)
Retained Earnings (Deficit) (1,774,505) (946,039)
----------- -----------
Total Stockholders' Equity 11,156,800 7,233,791
----------- -----------
Total Liabilities and Stockholders' Equity $18,742,050 $10,894,116
----------- -----------
</TABLE>
The accompanying notes are an integral part
of these financial statements.
1
<PAGE>
FIX-CORP INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996 AND THE NINE MONTH
PERIOD ENDED SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
09/30/97 12/31/96
(UNAUDITED) (AUDITED)
----------- ---------
<S> <C> <C>
REVENUE
Fees and Commissions Purchase Order
Contract 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 AND CONTRACT FINANCING
OPERATIONS 4,236,567 419,914
---------- ----------
Gross Profit 2,084,417 323,689
---------- ----------
OPERATING EXPENSES
Salaries, Wages and Related Costs 240,998 277,317
Depreciation and Amortization 551,500 19,514
Legal & Professional, including Consulting
Fees 170,338 98,513
Other General & Administrative 1,823,308 96,039
Deferred Preoperating Plant Startup Costs -0- (36,750)
---------- ----------
Total Expenses 2,786,144 454,633
---------- ----------
Operating Income (Loss) (701,727) (130,944)
---------- ----------
OTHER INCOME (EXPENSE)
Interest Expense and Financing Costs 205,710 32,730
---------- ----------
Net (Loss) Before Income Taxes (907,437) (163,674)
LESS PROVISION FOR DEFERRED INCOME TAXES
Federal (64,253) (43,000)
State (14,718) (9,850)
---------- ----------
Total Deferred Income Taxes (78,971) (52,850)
---------- ----------
Net Loss ($828,466) ($110,824)
---------- ----------
PRIMARY LOSS PER COMMON SHARE
Net Loss per common share (0.035) (0.008)
Weighted average common shares outstanding 23,719,517 14,040,040
---------- ----------
FULLY DILUTED LOSS PER COMMON SHARE
Net Loss per common share (0.030) (0.006)
---------- ----------
Weighted average common shares outstanding 27,719,517 18,040,040
---------- ----------
</TABLE>
The accompanying notes are an integral part
of these financial statements.
2
<PAGE>
FIX-CORP INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE YEAR ENDED DECEMBER 31, 1996 AND THE NINE MONTH
PERIOD ENDED SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL RETAINED TOTAL
------------------- PAID-IN EARNINGS STOCKHOLDERS'
SHARES AMOUNT CAPITAL (DEFICIT) EQUITY
--------- ------ ----------- --------- -------------
<S> <C> <C> <C> <C> <C>
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
-----------------------------------------------------------------
Private Placement of Common
Stock, net of issuance cost 5,490,986 549 4,750,926 4,751,475
Net loss for the period (828,466) (828,466)
-----------------------------------------------------------------
Balances at September 30,
1997 26,465,010 $2,646 $12,997,332 ($1,774,505) $11,225,473
-----------------------------------------------------------------
Unrealized Holding Loss on
Investments (68,673)
-----------
Total Stockholders' Equity $11,156,800
-----------
-----------
</TABLE>
The accompanying notes are an integral part
of these financial statements.
3
<PAGE>
FIX-CORP INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE YEAR ENDED DECEMBER 31, 1996 AND THE NINE MONTH
PERIOD ENDED SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
09/30/97 12/31/96
(UNAUDITED) (AUDITED)
----------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income (Loss) ($828,466) ($110,823)
ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH PROVIDED
BY OPERATING ACTIVITIES
Depreciation & Amortization Expense 551,500 19,514
Investment in Marketable Securities 2,405 (199,365)
(Increase) Decrease in Trade Accounts Receivable (1,147,414) (29,327)
(Increase) Decrease in Special Trade Account (300,000) -0-
(Increase) Decrease in Purchase Order Financing Contracts 6,172 (148,872)
(Increase) in Inventory (781,874) (96,002)
(Increase) in Other Current Assets (75,367) -0-
(Increase) in Deferred Tax Asset (78,971) (52,850)
Increase (Decrease) in Accounts Payable 1,303,153 (41,459)
---------- ---------
Net Cash Provided (Used) by Operating Activities (1,348,861) (659,184)
---------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of Land & Land Held for Development -0- (500,000)
Purchase of Buildings -0- (1,000,000)
Purchase of Plant Equipment (3,830,931) (1,992,000)
Purchase of Office Furniture & Fixtures -0- (100,000)
Additions to Other Assets (30,000) (152,700)
---------- ---------
Net Cash Provided (Used) by Investing Activities (3,860,931) (3,744,700)
---------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from Sale of Stock 4,751,475 1,606,402
Change in Short Term Borrowings 286,425 2,950,000
Proceeds from Notes Payable, net 2,345,894 38,161
---------- ---------
Net Cash Provided (Used) by Financing Activities 7,383,794 4,594,563
---------- ---------
Net Income Increase (Decrease) in Cash $2,174,002 $190,679
---------- ---------
Cash at Beginning of Period $224,539 $33,860
---------- ---------
Cash at End of Period $2,398,541 $224,539
---------- ---------
SUPPLEMENTAL DISCLOSURES
INTEREST PAID, EXCLUDING PURCHASE ORDER CONTRACT FINANCING $205,710 $32,730
---------- ---------
ACQUISITION OF OHIO RESOURCES RECOVERY PLANT, HEATH, OHIO
FOR COMMON STOCK AND ALLOCATED AS FOLLOWS:
Land & Land Held for Development -0- 250,000
Buildings -0- 1,000,000
Plant Equipment -0- 4,650,000
Office Furniture & Fixtures -0- 100,000
---------- ---------
-0- 6,000,000
---------- ---------
</TABLE>
The accompanying notes are an integral part
of these financial statements.
4
<PAGE>
FIX-CORP INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1997 & DECEMBER 31, 1996
The financial Information presented as of any date other than December
31 has been prepared from the books and records without audit. Financial
Information as of December 31 has been derived from the audited financial
statements of the Company, but does not include all disclosures required by
generally accepted accounting principles. In the opinion of management, all
adjustments, consisting only of normal recurring adjustments, necessary for a
fair presentation of the financial information for the periods indicated
have been included. For further information regarding the Company's
accounting policies, refer to the Financial Statements and related notes
included in the Company's Annual Report for the year ended December 31, 1996.
Note 1 - Organization and Description of the 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 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.
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.
In December, 1996, the Company acquired a recycling plant in Heath,
Ohio, also known as the Heath Resource Recovery Plant. 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
5
<PAGE>
FIX-CORP INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CONTINUED
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.
Note 2 - 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 otherwise it and its subsidiaries
have all rights necessary to carry on their operations. In particular, in
connection with the acquisition of the Facility from Quantum, the Company
purchased equipment and other tangible assets that it believes are necessary
for Fixcor's operations. The Company is not the holder of any letters patent,
trademark or copyright registrations, and has not applied for any of the
foregoing.
Note 3 - 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 HI)PE motor oil
containers, which have historically been sent to landfills. The solution will
involve the separation of the remaining oil from the "empty" container, and
then the recycling of the HDPE container and the separate recycling of the
remaining oil. To do this, in September, 1997, Fixcor entered into a license
agreement with The Federal Manufacturing & Technologies business unit of
AlliedSignal Inc. ("AlliedSignal") under which AlliedSignal licenses to
Fixcor certain technology and Fixcor pays a license fee and ongoing royalties
based principally on sales of products sold arising out of use of the
licensed technology. A copy of the license agreement between Fixcor and
AlliedSignal is attached to the Form 10-SB.
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.
Note 4 - Secured Equipment Loan Payable
In May, 1997, Fixcor secured financing for the Facility from
NationsCredit Commercial Corporation. This consisted of revolving loans up to
$7,000,000 for inventory and accounts receivable financing, permanent
financing, and equipment acquisition. This financing included a mortgage
security agreement which encumbered substantially all of the assets of the
Facility. Mr. Fixier 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 Corp. in December,
1997.
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
6
<PAGE>
Technologies. Like the facility from NationsCredit Commercial Corporation,
this facility is secured by substantially all of the assets of the Company
and its subsidiaries. The two lenders entered into an Intercreditor Agreement
with respect to their respective security interests. Mr. Fixler is the
guarantor of this line of credit in an amount up to $1,000,000. All financing
from NationsCredit Commercial Corporation was refinanced through Gordon
Brothers Capital Corp. in December, 1997.
Note 5 - 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.
Note 6 - Commitments and Contingencies
Mr. Fixler is party to a three year employment contract with the Company
dated January 1, 1997. Under this agreement, the Company pays him a salary of
$200,000 during the first year, $250,000 during the second year and $300,000
during the final year. In addition, Mr. Fixler receives a car allowance and
reasonable car phone expenses, plus other benefits customarily given to
executive officers. Under this agreement, Mr. Fixler is also granted an
option to purchase 4,000,000 shares of common stock of the Company at a fixed
price of $.50 per share and this option may be exercised at any time during
the employment period. Finally, in the event of a consolidation or purchase
of assets to another company or termination of employment for any other
reason, Mr. Fixler is entitled to a $2,000,000 severance benefit. Prior to
1997, Mr. Fixler was not subject to a written employment agreement with the
Company. He was paid a salary of $119,000 in 1996..
Mr. DeLaurentus 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.
DeLaurentus receives a car allowance and other benefits customarily
7
<PAGE>
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 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.
Note 7 - Stockholders' Equity
In December, 1996 in connection with certain bridge financing, the
Company granted to Generation Capital Associates, a New York limited
partnership, warrants for the purchase of an aggregate of 100,000 shares of
Common Stock at an exercise price of $.65 per share.
In December, 1996 and July, 1997 in connection with debt financings from
Gordon Brothers Capital Corporation and pursuant to Section 4(2) of the
Securities Act, the Company granted to the lender warrants for the purchase
of an aggregate of 1,000,000 shares of Common Stock at an exercise price of
$1.25 per share, which the lender exercised in November, 1997. Certain
"piggyback" and other registration rights with respect to the warrant shares
were also granted to Gordon Brothers Capital Corporation.
From June, 1997 to October 1, 1997, pursuant to an offering under Rule
506 of Regulation D, the Company sold 1,925,000 shares of Preferred Stock at
$1.00 per share. Each share of Preferred Stock was convertible into one share
of Common Stock, and as of October 1, 1997 all of the Preferred Stock had
been converted into 1,925,000 shares of Common Stock. In addition, holders of
Preferred Stock were granted rights to acquire additional shares of Common
Stock at $1.00 per share, and 1,100,000 shares of Common Stock were issued
pursuant to exercise of such rights.
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 8 - Subsequent Events
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
8
<PAGE>
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.
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. On November 25, 1997, pursuant to an
Amended and Restated Convertible Debenture Purchase Agreement. Under this and
collateral documents, the interest rate was reduced to 5% (retaining the
original October 24, 1997 effective date of the Debentures), the principal
amount was increased to $8,000,000, with the additional $3,000,000 principal
amount of Debentures, issued 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
such things as 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 S 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 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) 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.
9
<PAGE>
PART III - INDEX TO EXHIBITS
<TABLE>
Exhibit Names of Date of
No. Name of Document Parties to Document Document
<C> <S> <C> <C>
* 1. Amended and Restated Fix-Corp International, Inc. 05/27/97
Articles of Incorporation
* 2. Bylaws Fix-Corp International, Inc. 11/14/95
* 3. Acquisition Agreement Fix-Corp, Inc. and Lifechoice, 10/95
Inc.
* 4. Purchase and Sale Quantum Chemical Corporation 08/14/96
Agreement and Fix-Corp International,
Inc.
* 5. Amendment No. 1 to Quantum Chemical Corporation 10/29/96
Purchase and Sale and Fix-Corp International,
Agreement Inc.
* 6. Employment Contract Fix-Corp International, Inc. 01/01/97
and Mark Fixler
* 7. Employment Agreement Fix-Corp International, Inc. 01/01/97
and Gary DeLaurentiis
* 8. Acquisition Agreement Fix-Corp International, Inc., 04/16/97
Fixcor Industries, Inc. and
Mark Fixler
* 9. Loan and Security NationsCredit Commercial 05/14/97
Agreement Corporation through its
NationsCredit Commercial
Funding Division, Lender and
Fixcor Industries, Inc.,
Borrower
*10. Guaranty NationsCredit Commercial 05/14/97
Corporation through its
NationsCredit Commercial
Funding Division, Lender and
Fixcor Industries, Inc.,
Borrower, and Mark Fixler,
Guarantor
<PAGE>
*11. First Amendment to Loan NationsCredit Commercial 07/16/97
and Security Agreement Corporation through its
NationsCredit Commercial
Funding Division, Lender and
Fixcor Industries, Inc.,
Borrower
*12. Term Note Palletech Inc., Fixcor 07/09/97
Industries, Inc. and Fix-Corp
International, Inc., Borrowers
and Gordon Brothers Capital
Corporation, Lender
*13. Loan and Security Palletech Inc., Fixcor 07/09/97
Agreement Industries, Inc. and Fix-Corp
International, Inc., Borrowers
and Gordon Brothers Capital
Corporation, Lender
*14. Purchase Warrant and Fix-Corp International, Inc. 07/09/97
Agreement and Gordon Brothers Capital
Corporation
*15. Intercreditor Agreement Gordon Brothers Capital 07/09/97
Corporation and NationsCredit
Commercial Corporation,
through its NationsCredit
Commercial Funding Division
*16. License and Marketing Nitro Plastics Technologies of 07/07/97
Agreement Israel and Palletech Inc.
*17. Patent License Agreement Fixcor Industries, Inc. and 09/25/97
AlliedSignal, Inc.
*18. Convertible Debenture Fix-Corp International, Inc., 10/24/97
Purchase Agreement JNC Opportunity Fund Ltd. and
Diversified Strategies Fund,
L.P.
*19. 6% Convertible Debenture Fix-Corp International, Inc. 10/24/97
Due October 24, 2000 and Holder
*20. Registration Rights Fix-Corp International, Inc., 10/24/97
Agreement JNC Opportunity Fund Ltd., and
Diversified Strategies Fund,
L.P.
<PAGE>
*21. Escrow Agreement Fix-Corp International, Inc., 10/24/97
JNC Opportunity Fund Ltd.,
Diversified Strategies Fund,
L.P. and Robinson Silverman
Pearce Aronsohn & Berman LLP
*22. Warrant Fix-Corp International, Inc. 10/24/97
and Holder
*23. Original Certificate of Fix-Corp International, Inc. 10/24/95
Incorporation of the
Company
*24. Loan and Security Gordon Brothers Capital 12/16/96
Agreement Corporation and Fix-Corp
International, Inc.
*25. Amended and Restated Fix-Corp International, Inc., 11/25/97
Convertible Debenture JNC Opportunity Fund Ltd. and
Purchase Agreement Diversified Strategies Fund,
L.P.
*26. Amended and Restated Fix-Corp International, Inc., 11/25/97
Registration Rights JNC Opportunity Fund Ltd. and
Agreement Diversified Services Fund L.P.
*99.27 Escrow Agreement Fix-Corp, JNC Opportunity Fund 11/25/97
Ltd., Diversified Strategies
Fund L.P. and Robinson,
Silverman, Pearce, Aronsohn &
Berman LLP
*99.28 Convertible Debenture Fix-Corp International, Inc., 1/22/98
Purchase Agreement JNC Opportunity Fund Ltd. and
Diversified Strategies Fund,
L.P.
*99.29 $2,000,000 4% Convertible Fix-Corp International, Inc. 1/22/98
Debenture Due January 22, and JNC Opportunity Fund Ltd.
2001
*99.30 $500,000 4% Convertible Fix-Corp International, Inc. 1/22/98
Debenture Due January 22, and Diversified Strategies
2001 Fund, L.P.
*99.31 Registration Rights Fix-Corp International, Inc., 1/22/98
Agreement JNC Opportunity Fund Ltd. and
Diversified Strategies Fund,
L.P.
<PAGE>
*99.32 Warrant Fix-Corp International, Inc. 1/22/98
and JNC Opportunity Fund Ltd.
*99.33 Warrant Fix-Corp International, Inc. 1/22/98
and Diversified Strategies
Fund, L.P.
*99.34 Escrow Agreement Fix-Corp International, Inc., 1/22/98
Diversified Strategies Fund,
L.P., JNC Opportunity Fund
Ltd. and Robinson Silverman
Pearce Aronsohn & Berman
*99.35 Agreement for Sale of Universal Vinyl Corp., Yoram 2/3/98
Business Assets Aisenberg, Avraham Weinstein
and Fix-Corp International,
Inc.
*99.36 First Amended Licensing Nitro Plastics Technologies of 2/98
and Marketing Agreement Israel, Yoram Aisenberg and
Pallet Technology, Inc.
</TABLE>
<PAGE>
Exhibit 1
AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
FIX-CORP INTERNATIONAL, INC.
On April 30, 1997, the following Amended and Restated Articles were duly
adopted by the Board of Directors of Fix-Corp International, Inc., a Delaware
corporation (the "Corporation") originally incorporated on October 27, 1995
pursuant to Sections 101, 104 and 245 of the General Corporation Law of Delaware
and approved that same day by a majority vote of the Shareholders.
ARTICLE I
NAME
The name of the Corporation is and remains Fix-Corp International, Inc.
ARTICLE II
REGISTERED OFFICE AND AGENT
The registered office and agent of the Corporation in Delaware is Harvard
Business Services, Inc. at 25 Greystone Manor, Lewes, Delaware 19958-9776 in the
County of Sussex.
ARTICLE III
PRINCIPAL OFFICE
The principal office and mailing address of the principal office of the
Corporation is 27040 Cedar Road, Suite 218, Beachwood, Ohio 44122.
ARTICLE IV
The total number of shares of capital stock which the Corporation shall
have authority to issue is 102,000,000 shares. Of said shares, l00,000,000
shares shall be of a class designated as Common Stock with $0.001 par value per
share; and 2,000,000 shares of preferred stock with a par value of $0.001 per
share. Except as may otherwise be provided by the Board of Directors, no holder
of any shares of stock of this Corporation shall have any preemptive right to
purchase, subscribe for, or otherwise acquire any shares of stock of the
Corporation of any class now or hereafter authorized, or any securities
exchangeable for or convertible into such shares, or any warrants or other
instruments evidencing rights or options to subscribe for, purchase or otherwise
acquire such shares.
<PAGE>
The description of the Common Stock and the Preferred Stock, and the
relative rights, preferences and limitations thereof, or the method of fixing
and establishing the same are hereinafter set forth in this Article IV:
SECTION A
PREFERRED STOCK
(i) The Board of Directors of the Corporation shall be authorized, without
action by the stockholders to issue such Preferred Stock, from time to time, in
one or more series, and each series shall be known and designated by such
designations as may be stated and expressed in a resolution or resolutions
adopted by the Board of Directors of the Corporation and as shall have been set
forth in a certificate made, executed, acknowledged, filed and recorded in the
manner required by the laws of the State of Delaware in order to make the same
effective. Each series shall consist of such number of shares as shall be
stated and expressed in such resolution or resolutions providing for the Issue
of Preferred Stock of such series together with such additional number of shares
as the Board of Directors by resolution or resolutions may from time to time
determine to issue as a part of such series. All shares of any one series of
such Preferred Stock shall be alike in every particular except that shares
issued at different times may accumulate dividends from different dates. The
Board of Directors shall have power and authority to state and determine in the
resolution or resolutions providing for the issue of each series of Preferred
Stock the number of shares of each such series authorized to be issued, the
voting powers (if any) and the designations, preferences and relative,
participating, optional or other rights appertaining to each such series, and
the qualifications limitations or restrictions thereof (including, but not by
way of limitation, full power and authority to determine as to the Preferred
Stock of each such series, the rate or rates of dividends payable thereon, the
times of payments of such dividends, the prices and manner upon which the unit
may be redeemed, the amount or amounts payable thereon in the event of
liquidation, dissolution or winding up of the Corporation or in the event of any
merger or consolidation of or sale of assets by the Corporation, the rights (if
any) to convert the same into, and/or to purchase, stock of any other class or
series, the terms of any sinking fund or redemption or purchase account (if any)
to be provided for shares of such series of the Preferred Stock, restrictions on
ownership and transfer to preserve tax benefits, and the voting powers (if any)
of the holders of any series of Preferred Stock generally or with respect to any
particular matter, which may be less than, equal to or greater than one vote per
share, and which may, without limiting the generality of the foregoing, include
the right, voting as a series by Itself or together with the holders of any
other series of Preferred Stock or all series of Preferred Stock as a class, to
elect one or more directors of the Corporation generally or under such specific
circumstances and on such conditions, as shall be provided in the resolution or
resolutions of the Board of Directors adopted pursuant hereto, including,
without limitation, in the event there shall have been a default in the payment
of dividends on or redemption of any one or more series of Preferred Stock. The
Board of Directors may from time to time decrease the number of shares of any
series of Preferred Stock (but not below the number thereof outstanding) by
providing that any unissued shares previously assigned to such series shall no
longer constitute part thereof and may assign such unissued shares to an
existing or newly created series. The foregoing provisions
2
<PAGE>
of this Section A with respect to the creation or issuance of series of
Preferred Stock shall be subject to any additional conditions with respect
thereto which may be contained in any resolutions then in effect which shall
have theretofore been adopted in accordance with the foregoing provisions of
this Paragraph A with respect to any then existing series of Preferred Stock.
(b) The Convertible Preferred Stock shall have the following preferences,
limitations and relative rights.
1. CERTAIN DEFINITIONS.
Unless the context otherwise requires, the terms defined in this paragraph
1 shall have, for all purposes hereof, the meanings herein specified:
"Board of Directors" shall mean the Board of Directors of the Corporation
and, to the extent permitted by law, any committee of the Board of Directors
authorized to exercise the powers of the Board of Directors.
"Preferred Stock" shall mean the two million (2,000,000) authorized shares
of the Convertible Preferred Stock, par value $0.001 per share, of the
Corporation.
"Common Stock" shall mean the 100 Million (100,000,000) authorized shares
of Common Stock, $0.001 par value per share, of the Corporation and all shares
hereafter authorized of any additional class (or classes) of common stock of the
Corporation.
"Conversion Rate" shall have the meaning set forth in paragraph 6(b) of
this Section.
"Distribution on Common Stock" shall have the meaning set forth in
paragraph 2 of this section.
"Dividend Payment Date" shall mean January 20, April 20, June 20 and
October 20 of each year, or the immediately preceding business day if any such
date is a Saturday, Sunday or legal holiday in the State of Delaware,
"Event of Noncompliance" shall mean the occurrence of any of the following
events:
(i) Failure of the Corporation to pay the full amount of dividends
accrued if cumulative accrued dividends on the Preferred Stock, in the
aggregate, are equal to $1.00 per share in arrears (not including $.20 per annum
of the dividend which accrues but only increases the Liquidation Price); or
(ii) The Corporation shall not have made, in full, or set apart the
consideration sufficient for the payment thereof and no other purpose, any
redemption payment with respect to the Preferred Stock which it is obligated to
make, whether or not such payment is legally permissible, within 30 days of the
date specified for such redemption.
3
<PAGE>
"Issue Date" shall mean the date on which shares of the Preferred Stock are
issued to any holder thereof.
"Junior Stock" shall mean Common Stock and any other class or series of
stock of the Corporation authorized after the issue date not entitled to receive
any assets upon liquidation, dissolution or winding up of affairs of the
Corporation until the Preferred Stock and any Parity stock shall have received
the entire amount to which such stock is entitled upon such liquidation,
dissolution or winding up of affairs.
"Liquidation Price" measured per share of the Preferred Stock as of any
particular date shall mean the sum of (i) $10.00 plus (ii) all dividends accrued
on that share through the Dividend Payment Date immediately preceding the date
on which the Liquidation Price is being determined to the extent not paid in
full on or before such Dividend Payment Date, plus (iii) (A) for purposes of
determining amount payable pursuant to paragraphs 3 and 4 of this Section, all
unpaid dividends accrued on the sum of the amounts specified in Clauses (i) and
(ii) above, to the date as of which the Liquidation Price is being paid, and (B)
for purposes of determining the amount of dividends to be paid on a date other
than a Dividend Payment Date as contemplated by paragraph 2(c) of this Section,
all unpaid dividends accrued on the amounts specified in Clause (ii) above, to
the date as of which such dividends are being paid.
"Parity Stock" shall mean any class or series of stock of the Corporation
authorized after the Issue Date entitled to receive assets upon liquidation,
dissolution or winding up of the affairs of the Corporation on a parity with the
Liquidation Price of the Preferred Stock.
"Senior Stock" shall mean any class or series of stock of the Corporation
authorized after the Issue Date ranking senior to the Preferred Stock and any
Parity Stock in respect of the right to participate in any distribution upon
liquidation, dissolution or winding up of the affairs of the Corporation.
2. DIVIDENDS AND OTHER DISTRIBUTIONS.
(a) Subject to the prior preferences and other rights of any Senior
Stock, the holders of the Preferred Stock shall be entitled to receive, when and
as declared by the Board of Directors, out of funds legally available therefor,
preferential dividends which shall accrue as provided herein. Dividends on each
share of Preferred Stock will accrue cumulatively on a daily basis at the rate
of twelve percent (12%) per annum of the Liquidation Price of such share from
and including the Issue Date applicable to such share to and including the date
on which the redemption price of such share is paid whether of not such
dividends have been declared and whether or not there are any funds of the
Corporation legally available for the payment of dividends. Accrued dividends on
each share of the Preferred Stock shall be paid quarterly on each Dividend
Payment Date, commencing on the second Dividend Payment Date after the Issue
Date applicable to such share, or the immediately preceding business day, if any
such date is a Saturday, Sunday or legal holiday in the State of Delaware, to
the holders of record of the applicable shares of Preferred Stock as of the
close of business on the record date. For purposes
4
<PAGE>
of determining the amount of dividends "accrued" as of the second Dividend
Payment Date and as of any date which is not a Dividend Payment Date, such
amount shall be calculated on the basis of the foregoing rates per annum for
actual days elapsed from and including the Issue Date (in the case of the second
Dividend Payment Date) or the last preceding Dividend Payment Date (in the case
of any other date) to and including the date as of which such determination is
to be made, based on a 360 day year.
(b) Dividends shall be payable in cash; PROVIDED, HOWEVER, that it on
any Dividend Payment Date, the Corporation, pursuant to applicable law or the
terms of any Debt Instrument, shall be prohibited or restricted from paying In
cash the full dividends to which holders of the Preferred Stock and any Parity
Stock shall be entitled, the amount of cash available pursuant to applicable law
and which is not restricted by the terms of any Debt Instrument shall be
distributed among the holders of the Preferred Stock and such Parity Stock
ratably in proportion so the full amount to which they would otherwise be
entitled. Two percent (2%) of the dividend shall accrue but not be currently
paid and shall be added to the Liquidation Price. The per share amounts to be
distributed pursuant to this Section 2(b) shall, in each case, be adjusted by
rounding down to the nearest whole cent and such adjusted amount is hereinafter
referred to as the "Cash Dividend Payment."
(c) To the extent not paid in full on each Dividend Payment Date in the
manner provided in this paragraph 2, all dividends which have accrued on each
share of Preferred Stock during the dividend period ending on such Dividend
Payment Date will be added to the Liquidation Price of such share and will
remain a part thereof until such dividends, together with all dividends which
have accrued to the date of such payment with respect to that portion of the
Liquidation Price which consists of such accrued unpaid dividends, are paid in
full. Such accrued unpaid dividends, together with all dividends accrued
thereon, may be declared and paid at any time, without reference to any regular
Dividend Payment Date, to holders of record as of the close or business on such
date, not more than fifty (50) days nor less than ten (10) days preceding the
payment date thereof, as may be fixed by the Board of Directors (the "Special
Record Date"). If declared, such accrued unpaid dividends, together with all
dividends accrued thereon, shall be paid in cash.
(d) Notice of such Special Record Date shall be mailed, in the manner
provided in paragraph 4(c) of this section, to the holders of record of the
Preferred Stock not less than fifteen (15) days prior thereto.
(e) So long as any shares of Preferred Stock shall be outstanding, the
Corporation shall not declare or pay on any Junior Stock any dividend
whatsoever, whether in cash, property or otherwise, nor shall the Corporation
make any distribution on any Junior Stock, or set aside any assets for any such
purposes, nor shall any Junior Stock be purchased, redeemed or otherwise
acquired by the Corporation or any of its subsidiaries, nor shall any monies be
paid, set aside for payment or made available for a sinking fund for the
purchase or redemption of any Junior Stock, unless and until (i) all dividends
to which the holders of the Preferred Stock and any Parity Stock shall have been
entitled for all current and all previous Dividend Periods shall have been paid
or declared and the consideration sufficient for the payment thereof in full set
apart so as to be
5
<PAGE>
available for the payment thereof and for no other purpose (whether or not such
payment is then legally permissible) and (ii) the Corporation shall have made,
in full, or set apart the consideration sufficient for the payment thereof, and
for no other purpose, all redemption payments with respect to the Preferred
Stock which it is then obligated to make (whether or not such payment is then
legally permissible); PROVIDED, HOWEVER, that nothing contained in this
paragraph 2(d) shall prevent the payment of dividends solely in Junior Stock or
the repurchase, redemption or other acquisition of Junior Stock solely through
the Issuance of Junior Stock (together with a cash adjustment for fractional
shares if any).
3. DISTRIBUTIONS UPON LIQUIDATION, DISSOLUTION OR WINDING UP.
Subject to the prior payment in full of the preferential amounts to which
any Senior Stock is entitled, in the event of any liquidation, dissolution or
winding up of the Corporation, whether voluntary or involuntary, the holders of
shares of the Preferred Stock shall be entitled to receive from the assets of
the Corporation available for distribution to the shareholders an amount in cash
or property at its fair market value, as determined by the Board of Directors in
good faith, or a combination thereof, per share equal to the Liquidation Price,
before any payment or distribution shall be made to the holders at any Junior
Stock of the Corporation, which payment shall be made PARI PASSU to any such
payment made to the holders, if any, of any Parity Stock. If, upon distribution
of the Corporation's assets in liquidation, dissolution or winding up, the
assets of the Corporation to be distributed among the holders of Preferred Stock
and to all holders of any Parity Stock shall be insufficient to permit payment
in full to such holders of the preferential amounts to which they are entitled,
then the entire assets of the corporation to be distributed to holders of the
Preferred Stock and such Parity Stock shall be distributed pro rata to such
holders based upon the aggregate of the full preferential amounts to which the
shares of Preferred Stock and such Parity Stock would otherwise respectively be
entitled. Neither the consolidation or merger of the Corporation with or into
any other corporation or corporations nor the sale, transfer, or lease of all or
substantially all the assets of the Corporation shall itself be deemed to be a
liquidation, dissolution or winding up of the Corporation within the meaning of
this paragraph 3. Notice of the liquidation, dissolution or winding up of the
Corporation shall be mailed, in the manner provided in paragraph 4(c) of this
Section, to the holders of the Preferred Stock less than twenty (20) days prior
to the date on which such liquidation, dissolution and winding up is expected to
take place or become effective.
4. REDEMPTION.
(a) Subject to the rights of any Senior Stock and the provisions of
paragraph 4(g) of this Section, the shares of Preferred Stock may be redeemed at
the option of the Company by action of the Board of Directors in whole or from
time to time in part, at any time after December 31, 19__, at the Redemption
Price per share. If less than all outstanding shares of Preferred Stock are to
be redeemed, the shares of Preferred Stock to be redeemed shall be chosen by lot
or pro rata in such manner as the Board of Directors may determine.
(b) Notice of the redemption shall be mailed, first class, postage
prepaid, not lass than fifteen (15) days and no more than sixty (60) days prior
to the Redemption Date, to the holders of
6
<PAGE>
record of the shares of Preferred Stock to be redeemed, at their respective
addresses as the same appear on the books of the Corporation or supplied by them
in writing to the Corporation for the purpose of such notice; but no failure to
mail such notice of any defect therein, or in the mailing thereof shall affect
the validity of the proceedings for the redemption of any shares of the
Preferred Stock. In addition to any information required by law or by the
applicable rules of any national stock exchange on which the Preferred Stock may
be listed or admitted to trading, such notice shall set forth the Redemption
Price, the Redemption Date, the number of shares to be redeemed and the place at
which the shares called for redemption will, upon presentation and surrender of
the stock certificates evidencing such shares, be redeemed, and shall state the
name and address of any redemption agent selected by the Corporation in
accordance with paragraph 4(d) of this Section. In case fewer than the total
number of shares of Preferred Stock represented by any certificates are
redeemed, a new certificate representing the number of unredeemed shares will be
issued to the holder thereof without cost to such holder.
(c) If notice of any redemption by the Corporation pursuant to this
paragraph 4 shall have been mailed as provided in paragraph 4(c) of this
Section, and if on or before the Redemption Date specified in such notice the
consideration necessary for such redemption shall have been set apart so as to
be available therefor and on therefor, then on and after the close of business
on the Redemption Date, the shares of Preferred Stock called for redemption,
notwithstanding that any certificates therefor shall not have been surrendered
for cancellation, shall no longer be deemed outstanding, and all rights with
respect to such shares shall forthwith cease and terminate, except the rights of
the holders thereof to receive upon surrender of their certificates the
consideration payable upon redemption thereof. If on or prior to the Redemption
Date (but no earlier than sixty days prior to such Redemption Date), the
Corporation shall deposit, in a trust fund, with any bank or trust company
organized under the laws or the United States of America or any state thereof
having capital, undivided profits and surplus aggregating at least $50,000,000
(the "Redemption Agent"), the consideration sufficient to redeem on such
Redemption Date the shares of Preferred Stock to be redeemed, with irrevocable
instructions and authority to the Redemption Agent, on behalf and at the expense
of the Corporation, to mail the notice of redemption as soon as practicable
after receipt of such irrevocable instructions (or to complete such mailing
previously commenced, if it has not already been completed) and to pay, on and
after the Redemption Date or prior thereto, the Redemption Price of the shares
of Preferred Stock to be redeemed to their respective holders upon the surrender
of their share certificates, then, from and after the date of such deposit
(although prior to the Redemption Date) the shares of Preferred Stock to be
redeemed shall be deemed to be redeemed and dividends on those shares shall
cease to accrue after the Redemption Date. The deposit shall be deemed to
constitute full payment for shares of Preferred Stock to be redeemed to their
holders and from and after the date of such deposit, the shares shall be deemed
to be no longer outstanding and the holders thereof shall cease to be
shareholders with respect to such shares and shall no rights with respect
thereto, except the right to receive payment of consideration sufficient to pay
the Redemption Price of the shares, calculated through the Redemption Date, upon
surrender of their certificates therefor.
(d) Any funds so deposited by the Corporation and unclaimed for one year
from the Redemption Date shall be paid to the Corporation after which repayment
the holders of shares of
7
<PAGE>
Preferred Stock so called for redemption shall look to the Corporation for the
payment thereof, without interest, unless an applicable abandoned property law
designates another person.
(e) All shares of Preferred Stock redeemed, retired, purchased or
otherwise acquired by the Corporation shall be retired and shall not be
reissued. The Corporation will not redeem any shares of Preferred Stock, except
as expressly authorized therein.
(f) If at any time the Corporation shall have failed to apply, or
declare and set apart the consideration sufficient to pay all dividends accrued
up to and including the immediately preceding dividend payment date on the
Preferred Stock and any Parity Stock, and until all dividends accrued up to and
including the immediately preceding Dividend Payment Date on the Preferred Stock
and any Parity Stock shall have been paid or declared and set apart so as to be
available for the payment in full therefor, and for no other purpose, the
Corporation shall not redeem, pursuant to a sinking fund or otherwise, any
shares of Preferred Stock, Parity Stock or Junior Stock, unless all then
outstanding shares of Preferred Stock and Parity Stock are redeemed, and shall
not purchase or otherwise acquire any shares of Preferred Stock, Parity Stock or
Junior Stock.
5. VOTING.
(a) The holders of Preferred Stock shall have no right to vote for any
purpose, except as specifically required by the General Corporation Law of
Delaware and except as described below.
(b) Without the consent of the holders of at least 66 2/3% of the number
of shares of Preferred Stock at the time outstanding, the Corporation may not
(i) effect any change in the rights, privileges or preferences of the Preferred
Stock, (ii) create or designate any additional class or series of Senior Stock,
or (iii) enter into any agreement which, in the absence of default under such
agreement, would by its terms prevent the Corporation from paying on any
Dividend Payment Date the full dividends to which holders of the Preferred Stock
are then entitled or from otherwise fully performing its obligations pursuant to
this Section. Without the consent of the holders of at least a majority of the
number of shares of Preferred Stock at the time outstanding, the Corporation may
not create any class of Parity Stock. Such consents shall be given in writing or
by vote at a meeting called for that purpose at which the holders of the
Preferred Stock shall vote as a class.
(c) The Corporation shall promptly notify the holders of the Preferred
Stock, in the manner provided in this paragraph 4(c), of the occurrence of the
Event of Noncompliance. Upon the occurrence and during the continuation of an
Event of Noncompliance, the holders of shares of the Preferred Stock voting
separately as a class, shall have the exclusive right to elect two directors of
the Board of Directors. Directors so elected shall thereupon become additional
directors of the Corporation and the authorized directors of the Corporation
shall thereupon be automatically increased by such number. The Corporation will
not take any action which would impair its ability, in conformity with the
Articles of Incorporation and the By-laws of the Corporation, to increase
automatically the number of its directors as provided herein. During such
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times that the holders of Preferred Stock, voting as a class, shall be entitled
to elect such additional directors, the remaining directors shall he elected by
the holders of the otter shares of capital stock of the Corporation entitled to
vote for the election of directors, without right in the holders of Preferred
Stock to participate in the election of such remaining directors.
Such right of the holders of Preferred Stock, as such holders, to elect
such directors shall continue only until all then existing Events of
Noncompliance have been cured in full, at which time the terms of office of the
directors elected as such by the holders of shares of the Preferred Stock shall
forthwith terminate and the number or directors constituting the entire Board of
Directors of the Corporation shall be reduced correspondingly (subject always to
the same provisions for the vesting of such voting rights on the occurrence of
any other or future Event of Noncompliance). The fact that an Event of
Noncompliance has been cured and that no other Events of Noncompliance have
occurred and are continuing shall be evidenced by a certificate executed by the
President of the Corporation and delivered to the Board of Directors.
At any time after such voting rights shall so have vested in the holders of
the shares of the Preferred Stock, the Secretary of the Corporation may, and
upon the written request of the holders of record of not less than 5% of the
Preferred Stock, addressed to him at the principal office of the Corporation,
shall within ten days after delivery of such request, call a special meeting of
the holders of shares of the Preferred Stock for the purpose of electing the
directors to be elected by them, such meeting to be held within 15 days after
such call at the place and upon the notice provided by the By-laws of the
Corporation for the holding of meetings of shareholders; PROVIDED, HOWEVER, that
if the Secretary of the Corporation shall fail to call any such meeting within
ten days after delivery of any such request, such meeting may be called by any
holder or holders of record of 5% or more of the Preferred Stock.
Notwithstanding the foregoing, the Secretary of the Corporation shall not be
required, and the holders of the Preferred Stock shall not be entitled, to call
such a special meeting if the request for such call is received less than sixty
days prior to the date fixed for the next annual meeting of shareholders, and if
in such case such special meeting is not called, the holders of the Preferred
Stock shall be entitled to vote (as a class) at such annual meeting to elect
such directors. Any vacancy in the office of a director elected by the holders
of the Preferred Stock shall be filled by a vote of such holders as a separate
class or by the remaining director elected by such holders. Except as
hereinbefore provided, the directors elected by the holders of the Preferred
Stock shall serve until the next annual meeting of the shareholders and until
their successors shall have been elected and qualified and may be otherwise
removed only by the holders of at least a majority of the then outstanding
shares of Preferred Stock at the time of such removal.
At any meeting having as a purpose the election of directors by holders of
the Preferred Stock, the presence, in person or by proxy, of the holders of a
majority of the shares of Preferred Stock then outstanding shall be required and
be sufficient to constitute a quorum of such class for the election of any
director by such holders. At any such meeting or adjournment thereof, (i) the
absence of a quorum of such holders of the Preferred Stock shall not prevent the
election of the directors to be elected by the holders of shares other than the
Preferred Stock, and the absence of a quorum, either of holders of the Preferred
Stock or of shares other than the Preferred Stock, or both, a majority of the
holders, present in person or by proxy, of the class or classes of stock
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which lack a quorum shall have power to adjourn the meeting for the election of
directors which they are entitled to elect, from time to time, without notice
other than announcement at the meeting, until a quorum shall be present.
(d) With respect to actions by the holders of the Preferred Stock upon
those matters on which such holders are entitled to vote as a separate class,
such actions may be taken without a shareholders meeting by the written consent
of holders of the Preferred Stock who would be entitled to vote at a meeting
those shares having voting power to cast not less than the minimum number of
votes that would be necessary to authorize or take such action at a meeting at
which all shares of Preferred Stock entitled to vote were present and voted.
Notice shall be given in accordance with the applicable provisions of the
General Corporation Law of Delaware for the taking of corporate action without a
meeting by less than unanimous written consent to those holders of Preferred
Stock on the record date whose shares were not represented on the written
consent.
6. CONVERSION.
(a) CONVERSION RIGHT. Unless previously redeemed as provided in
paragraph 4 hereof, the Preferred Stock may be converted prior to redemption
thereof at such time, in such manner and upon such terms and conditions as
hereinafter provided in this paragraph 6 into fully paid and non-assessable full
shares of Common Stock. In the event the Corporation shall call for redemption
the shares of Preferred Stock pursuant to paragraph 7 hereof, the conversion
right provided by this paragraph 6 shall terminate at the close of business on
the date fixed for redemption. In case cash, securities or property other than
Common Stock shall be payable, deliverable or issuable upon conversion as
provided herein, then all references to Common Stock in this paragraph 6 shall
be deemed to apply, so far as appropriate and as nearly as may be, to such cash,
property or other securities.
(b) CONVERSION RATE. Subject to the provisions for adjustments
hereinafter set forth in this paragraph 6, the Preferred Stock may be converted
into Common Stock at the Initial conversion rate of one fully paid and
non-assessable shares of Common Stock for one share of Preferred Stock. (This
conversion rate as from time to time adjusted cumulatively pursuant to the
provisions of paragraph 6(d) of this Section is hereinafter referred to as the
"Conversion Rate.")
(c) CONVERSION DATE. Unless previously redeemed as provided in paragraph
7 hereof, the Preferred Stock shall be convertible at any time and from time to
time at the option of the holder(s) thereof.
(d) ADJUSTMENTS
(i) Stock Dividends, Subdivisions, Combinations. In case the
corporation shall (A) pay a dividend or make a distribution on its
outstanding shares of Common Stock, (B) subdivided the then outstanding
shares of its Common Stock into a greater number of shares of Common Stock,
(C) combine the ten outstanding shares of its Common Stock Into a smaller
number of shares of Common Stock, or (D) issue by reclassification of its
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shares of Common Stock any shares of capital stock of the Corporation
(including any such reclassification in connection with a consolidation or
merger in which the Corporation is the continuing corporation), then the
Conversion Rate in effect immediately prior to the opening of business on
the record date for such dividend or distribution or the effective date of
such subdivision, combination or reclassification shall be adjusted so that
the holder of each share of the Preferred Stock thereafter surrendered for
conversion shall be entitled to receive the number and kind of shares of
capital stock of the Corporation which it would have owned or been entitled
to receive immediately following such action had such shares of Preferred
Stock been converted immediately prior to such time. An adjustment made
pursuant to this paragraph 6(d)(i) for a dividend or distribution shall
become effective immediately after the record date for the dividend or
distribution and an adjustment made pursuant to this paragraph 6(d)(i) for
a subdivision, combination or reclassification. Such adjustment shall be
made successively whenever any action listed above shall be taken. In any
case in which this paragraph 6(d)(i) shall require that an adjustment shall
become effective immediately after a record date for an event, the
Corporation may defer until the occurrence of such event (x) issuing to the
holder of any shares of Preferred Stock converted after such record date
and before the occurrence of such event the additional shares of Common
Stock Issuable upon such conversion by reason of the adjustment required by
such event over and above the shares of Common Stock issuable upon such
conversion before giving effect to such adjustment and (y) paying to such
holder cash in lieu of any fractional interest to which such holder is
entitled pursuant to paragraph 6(i) of this Section; PROVIDED, HOWEVER,
that the Corporation shall deliver to such holder a due bill or other
appropriate instrument evidencing such holder's right to receive such
additional shares of Common Stock, and such cash, upon the occurrence of
the event requiring such adjustment.
(ii) RECLASSIFICATIONS, CONSOLIDATIONS OR MERGER. In case of any
reclassification or change of outstanding Common Stock (other than those
referred to in paragraph 6(d)(i) of this Section and other than a change in
par value), or case of any consolidation of the Corporation with any other
corporation or any merger of the corporation into another corporation or of
another corporation into the Corporation (other than a consolidation or
merger in which the Corporation is the continuing corporation and which
does not result in any reclassification of, or change (other than a change
in par value, or as a result of a subdivision or combination to which
paragraph 6(d)(i) hereof is applicable in, the outstanding Common Stock),
or in case of any sale or transfer to another corporation or entity (other
than by mortgage or pledge) of all or substantially all of the properties
and assets of the Corporation, the Corporation (or its successor in such
consolidation or merger) or the purchase of such properties and assets
shall make appropriate provision so that the holder of each share of
Preferred Stock then outstanding shall have the right thereafter to convert
such share into the kind and amount of shares of stock and other securities
and property receivable upon such reclassification, change, consolidation,
merger, sale or transfer by a holder of the number of shares of Common
Stock into which such Preferred Stock might have been converted immediately
prior to such reclassification, change, consolidation, merger, sale or
transfer, and the holders of the Preferred Stock shall have no other
conversion rights under these provisions; provided,
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that effective provision shall be made, in the Articles or Certificate of
Incorporation of the resulting or surviving corporation or otherwise or in
any contracts of sale or transfer, so that the provisions set forth herein
for the protection of the conversion rights of Preferred Stock shall
thereafter be made applicable, as nearly as reasonably may be, to any such
other shares of stock and other securities and property deliverable upon
conversion of the Preferred Stock remaining outstanding or other
convertible preferred stock or other securities received by the holders of
Preferred Stock or purchaser shall expressly assume the obligation to
deliver, upon the exercise of the conversion privilege, such shares,
securities or property as the holders of the Preferred Stock remaining
outstanding, or other convertible preferred stock or other securities
received by the holders in place thereof, shall be entitled to receive
pursuant to the provisions hereof, and to make provisions for the
protection of the conversion rights as above provided.
(iii) NOTICE OF ADJUSTMENT. Whenever the Conversion Rate shall be
adjusted as provided in this paragraph 7(d), the Corporation shall promptly
(A) file with the transfer agent for the Preferred Stock a statement signed
by the President or the Vice President of the Corporation and by its
Treasurer, disclosing the nature of such event, the Conversion Rate in
effect immediately thereafter and the kind and amount of stock or other
securities or property into which Preferred Stock shall be convertible
after such event, and (B) cause a notice containing a summary of the
information set forth in said statement to be mailed to the holders of
record of Preferred Stock. Where appropriate, such notice may be given in
advance and included as a part of a notice required to be mailed under the
provisions of paragraph 7(e) of this Section.
(iv) DE MINIMIS ADJUSTMENT. The Corporation may, but shall not be
required to, make any adjustment of the Conversion Rate if such adjustment
would require an increase or decrease of less than 1% in such Conversion
Rate; PROVIDED, HOWEVER, that any adjustments which by reason of this
paragraph 6(d)(iv) are not required to be made shall be carried forward and
taken into account in any subsequent adjustment.
(e) ADVANCE NOTICE OF CERTAIN EVENTS. In case at any time:
(i) the Corporation shall take any action which would require an
adjustment in the Conversion Rate pursuant to paragraph 7(d)(i) of this
Section;
(ii) the Corporation shall authorize the granting to the holders of
its Common Stock of any Distributions on Common Stock or shall have
declared any other dividend or distribution on its Common Stock and notice
thereof shall be given to holders of Common Stock;
(iii) there shall be any capital reorganization or reclassification
of the Common Stock (other than a change in par value), or any
consolidation or merger to which the Corporation is a party and for which
approval of any shareholders of the Corporation is required, or any sale or
transfer of all or substantially all of the properties and assets of the
Corporation, or a tender offer for at least a majority of the Common Stock
which has been
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recommended by the Board of Directors as being in the best interests of the
holders of the Common Stock; or
(iv) there shall be a voluntary or involuntary dissolution,
liquidation or winding up of the Corporation:
then, in any such event, the Corporation shall give written notice, in the
manner provided in paragraph 7(b) of this Section, to the holders of the
Preferred Stock at their respective addresses as the same appear upon the books
of the Corporation, at least twenty days (or ten days in the case of a
recommended tender offer as specified in clause (iii) above) prior to any record
date or other date set for definitive action if there shall be no record date,
of the date on which such action, dividend, distribution, reorganization,
reclassification, consolidation, merger, sale, transfer, tender offer,
dissolution, liquidation or winding up is expected to take place or become
effective, and the date as of which it is expected that holders of the Common
Stock of record shall be entitled to exchange their shares of Common Stock for
securities or other property, if any, deliverable upon such reorganization,
reclassification, consolidation, merger, sale, transfer, tender offer,
dissolution, liquidation or winding up; PROVIDED, HOWEVER, that any notice
required by clause (ii) above shall be given in the manner and at the time that
such notice is given to the holders of the Common Stock. Without limiting the
obligation of the Corporation to provide notice of corporate actions hereunder,
the failure to give the notice required by this paragraph 6(e) or any defect
therein shall not affect the legality or validity of any such corporate action
of the Corporation or the vote upon such action.
(f) METHOD OF CONVERSION. Before any holder of Preferred Stock shall be
entitled to convert the same into Common Stock, it shall surrender the
certificate or certificates for such Preferred Stock at the office of the
Corporation or at the office of the Transfer Agent for the Preferred Stock, if
any, which certificate or certificates, if the Corporation shall so request,
shall be duly endorsed to the Corporation or in blank or accompanied by proper
instruments of transfer to the Corporation or in blank (such endorsements or
instruments of transfer to be in form satisfactory to the Corporation), and
shall give written notice to the Corporation at said office that it elects to
convert all or a part of the shares of Preferred Stock represented by said
certificate or certificates in accordance with the terms of this paragraph 6,
and shall state in writing therein the name or names in which it wishes the
certificate or certificates for Common Stock to be issued. Every such notice of
election to convert shall constitute a contract between the holder of such
Preferred Stock and the Corporation, whereby the holder of such Preferred Stock
shall be deemed to subscribe for the amount of Common Stock which it shall be
entitled to receive upon conversion of the number of shares of Preferred Stock
to be converted, and, in satisfaction of such subscription, to deposit the
shares of Preferred Stock to be converted, and thereby the Corporation shall be
deemed to agree that the surrender of the shares of Preferred Stock to be
converted shall constitute full payment of such subscription for Common Stock to
be issued upon such conversion. The Corporation will as soon as practicable
after such deposit of a certificate or certificates for Preferred Stock,
accompanied by the written notice and statements above prescribed, issue and
deliver at the office of the Corporation or of said transfer agent to the person
for whose account such Preferred Stock was so surrendered, or to its nominee(s)
or, subject to compliance with applicable law, transferee(s), a certificate or
certificates for the number
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of full shares of Common Stock to which it shall be entitled, together with cash
in lieu of any fraction of a share as hereinafter provided. If surrendered
certificates for Preferred Stock are converted only in part, the Corporation
will issue and deliver to the holder, or to its nominee(s), without charge
therefor, a new certificate or certificates representing the aggregate of the
unconverted share of Preferred Stock. Such conversion shall be deemed to have
been made as of the date of such surrender of the Preferred Stock to be
converted; and the person or persons entitled to receive the Common Stock
issuable upon conversion of such Preferred Stock shall be treated for all
purposes as the record holder or holders of such Common Stock on such date.
The issuance of certificates for shares of Common Stock upon conversion of
shares of Preferred Stock shall be made without charge for any issue, stamp or
other similar tax in respect of such issuance, PROVIDED, HOWEVER, if any such
certificate is to be issued in a name other than that of the holder of the share
or shares of Preferred Stock converted, the person or persons requesting the
issuance thereof shall pay to the Corporation the amount of any tax which may be
payable in respect of any transfer involved in such issuance or shall establish
to the satisfaction of the Corporation that such tax has been paid.
The Corporation shall not be required to convert Preferred Stock, and no
surrender of Preferred Stock shall be effective for that purpose, while the
stock transfer books of the Corporation are closed for any purpose; but the
surrender of Preferred Stock for conversion during any period which such books
are so closed shall become effective for conversion immediately upon the
reopening of such books, as if the conversion had been made on the date such
Preferred Stock was surrendered.
(g) SHARES RESERVED FOR CONVERSION. The Corporation shall at all times
reserve and keep available solely for the purpose of issuance upon conversion of
the outstanding shares of Preferred Stock, such number of shares of Common Stock
as shall be issuable upon the conversion of all such outstanding shares,
provided that nothing contained herein shall be construed to preclude the
Corporation from satisfying the obligations in respect of the conversion of the
outstanding shares of Preferred Stock by delivery of shares of Common Stock
which are held in the treasury of the Corporation. The Corporation shall take
all such corporate and other actions as from time to time may be necessary to
insure that all shares of Common Stock issuable upon conversion of shares of
Preferred Stock at the Conversion Rate in effect from time to tune will, upon
issue, be duly and validly authorized and issued, fully paid and nonassessable
and free of any preemptive or similar rights. In order that the Corporation may
issue shares of Common Stock upon conversion of the Preferred Stock, the
Corporation will endeavor to comply with all applicable federal and state
securities laws.
(h) STATUS OF SHARES CONVERTED. All shares of Preferred Stock received by
the Corporation upon conversion thereof into Common Stock shall be retired and
shall not be reissued.
(i) FRACTIONS UPON CONVERSION. The Corporation shall not be required to
issue fractional shares of Common Stock or script upon conversion of the
Preferred Stock. As to any final fractions of a share of Common Stock which a
holder of one or more shares of Preferred
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Stock would otherwise be entitled to receive upon conversion of such shares in
the same transaction, the Corporation shall pay a cash adjustment in respect of
such final fraction in an amount equal to the same fraction of the market value
of a full share of the Common Stock. For purpose of this paragraph 6(i), the
market value of a share of the Common Stock shall be the last reported sale
price regular way on the business day immediately preceding the date of
conversion, or, in case no such reported sale takes place on such day, the
average of the reported closing bid and asked prices regular way on such day, in
either case on the composite tape, or if the shares of Common Stock are not
quoted on the composite tape, on the principal United States Securities Exchange
registered under the Securities Exchange Act of 1934, as amended, on which the
share of Common Stock are listed or admitted to trading, or if the shares of
Common Stock are not listed or admitted to trading on any exchange, the closing
sale price (or the average of the quoted closing bid and asked prices if there
are no reported sales) as reported on the National Association of Securities
Dealers Automated Quoting System (NASDAQ) of any comparable system, the average
of the closing bid and asked prices as furnished by any member of the National
Association of Securities Dealers, Inc. selected from time to time by the
Corporation for that purpose or, in the absence of such quotations, such other
method of determining market value as the Board of Directors shall from time to
time deem to be fair.
7. PREEMPTIVE RIGHTS. The holders of the Preferred Stock will not have
any preemptive rights to subscribe for or purchase any shares of stock or any
other securities which may be issued by the Corporation. However, the holders of
Preferred Stock shall have a fifteen day right of first refusal to acquire, in
the aggregate, up to 5% of any securities in the Corporation which are offered
pursuant to a private offering exemption under federal and applicable state law.
Each holder of Preferred Stock shall be entitled to his pro rata share of the
aggregate 5% of such securities. The right of first refusal shall be exercised
within fifteen days after a holder of Preferred Stock is deemed to have received
the offering materials prepared by the Corporation in connection with the
offering via regular U.S. mail. Deemed receipt of the materials shall be
established three days after mailing via U.S. regular mail to the address of
each bolder of Preferred Stock as shown on the records of the Corporation as of
the date of mailing. Each holder of Preferred Stock desiring to exercise his
right of first refusal shall do so by fulfilling all instructions provided in
the offering materials and notification from the Corporation including returning
the fully executed and completed subscription agreement required to subscribe
for the securities offered and a check for the amount subscribed within fifteen
days after the deemed receipt. This right of first refusal shall terminate and
be of no effect 30 clays prior to the effective date of any registration
statement filed with the Securities and Exchange Commission registering any of
the Company's securities or the effective date of any registration statement
flied with any state securities regulatory agency registering any of the
Company's securities.
8. EXCLUSION OF OTHER RIGHTS. Except as may otherwise be required by law
and for the equitable rights and remedies which may otherwise be available to
holders of Preferred Stock, the shares of Preferred Stock shall not have any
designations, preferences, limitations or relative rights, other than those
specifically set forth in these Amended and Restated Articles of incorporation.
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9. HEADINGS OF SUBDIVISIONS. The headings of the various subdivisions of
this Section are for the convenience of reference only and shall not affect the
interpretation of any of the provisions of this Section.
SECTION B
THE COMMON STOCK
The Common Stock shall consist of 100,000,000 shares, $0.001 par value per
share.
1. DIVIDENDS. Subject to the rights of holders of stock of the
Corporation senior to the Common Stock with respect to the declaration and
payment of dividends, holders of Common Stock shall be entitled to receive such
dividends and other distributions in cash, stock or property of the Corporation
as may be declared thereon by the Board of Directors from time to time out of
assets or funds of the Corporation legally available therefor.
2. PROXIES AND VOTING. At every meeting of the shareholders of the
Corporation, every holder of Common Stock shall be entitled to one vote in
person or by proxy for each share of Common Stock standing in his name on the
transfer books of the Corporation. Every stockholder entitled to vote may vote
in person or by proxy authorized by an instrument in writing filed in accordance
with the procedure established for the meeting.
3. STOCKHOLDER ACTIONS BY WRITTEN CONSENT. Any vote, consent, approval,
ratification or disapproval required by these by-laws may be given as follows:
(a) by a written Consent executed by the Consenting Stockholder, provided
such Consent shall not have been withdrawn by the Consenting Stockholder by
notification to the Company at or prior to the time of the doing of such act or
thing; or
(b) by the affirmative vote by the Consenting Stockholder to the doing of
the act or thing for which the Consent is solicited at any meeting called and
held pursuant to these by-laws to consider the doing of such act or thing.
(c) by failing to respond, within the rime set forth in a Notice which
specifies (i) the specific act or proposal for which Consent is being requested
by the Company, (ii) that the Company intends to rely on the provisions of
Article IV, Section B, subparagraph 3 herein and find that a failure to object
or to dissent may constitute a form of consent and authorization and,
accordingly, the Company will tally all proxies which have not been returned and
shall consider all such unreturned proxies as consents and authorizations with
the same legal validity as a consent which has been returned, UNLESS 10% of the
Company's outstanding shares of stock object to this provision in writing prior
to or on the date in which a meeting is to be convened, in which case the
failure the return a proxy or dissent shall not he construed as a form of
consent and authorization.
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QUORUM. In accord with Section 216 of the General Corporation Law of
Delaware, a stockholders meeting and a special meeting of stockholders may be
convened, but no business may be conducted without at least one-third of the
shares entitled to vote are present In person or by proxy at the meeting.
ARTICLE V
Responsibility for the management of the business and conduct of the
affairs of the Corporation shall he vested in the Board of Directors. In
furtherance and not in limitation of the powers conferred by the laws of the
State of Delaware, the Board of Directors is expressly authorized:
(a) to make, alter, amend and repeal the By-Laws, subject to the power of
the shareholders to alter or repeal the By-Laws; and
(b) to adopt a corporate seal.
ARTICLE VI
The Corporation may, upon adoption of a resolution by its Board of
Directors, purchase its own shares to the extent of unreserved and unrestricted
capital surplus available therefor. The Board of Directors of the Corporation
may, from tune to time, in its discretion and without the prior approval of the
shareholders of the Corporation, distribute a portion of its assets to the
shareholders out of capital surplus of the Corporation.
ARTICLE VII
Subject to the provisions hereof, the Corporation reserves the right at any
time, and from time to time, to amend, alter, repeal, or rescind any provision
contained herein, in the manner now or hereafter prescribed by law, and other
provisions authorized by the laws of the State of Delaware at the time in force
may be added or inserted, in the manner now or hereafter prescribed by law; and
all rights, preferences and privileges of whatsoever nature conferred upon
stockholders, directors or any other persons whomsoever by and pursuant to these
Articles of Incorporation in its present form or as hereafter amended are
granted subject to this reservation.
ARTICLE VIII
DESIGNATION OF COMMITTEES
In furtherance and not in limitation or the powers conferred by statute,
the Board of Directors is expressly authorized by a majority of the whole Board
of Directors, to designate one or more committees, each committee to consist of
one or more of the directors of the Corporation. The Board of Directors may
designate one or more directors as alternate members of any committee, who may
replace any absent or disqualified member at any meeting of the
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committee. Any such committee, to the extent provided in the resolution or in
the By-Laws of the Corporation, shall have and may exercise the powers of the
Board of Directors in the management of the business and affairs of the
Corporation, and may authorize the seal of the Corporation to be affixed to all
papers which may require it; PROVIDED, HOWEVER, the By-Laws may provide that in
the absence or disqualification of any member of such committee or committees,
the member or members thereof present at any meeting and not disqualified from
voting, whether or not he or they constitute a quorum, may unanimously appoint
another member of the Board of Directors to act at the meeting in the place of
such absent or disqualified member.
ARTICLE IX
RIGHTS TO PURCHASE SECURITIES AND OTHER PROPERTY
The Board of Directors is expressly authorized to create and issue rights
entitling the holders of such rights to purchase from the Corporation shares of
capital stock or other securities or property. The Board of Directors shall
have, in its sole discretion, the authority to determine the time at which and
terms upon which such rights are to be issued and set forth in the contracts or
instruments that evidence such rights.
ARTICLE X
DIRECTOR LIABILITY INDEMNIFICATION
A director of the Corporation shall not be personally liable to the
Corporation or its stockholders for monetary damages for breach of duty or care
or other duty as a director, except for liability (i) for any appropriation, in
violation of his duties, of any business opportunity of the Corporation, (ii)
for acts or omissions not in good faith or which involve intentional misconduct
or a knowing violation of law, (iii) for any type of liability not contemplated
by Section 145 of the General Corporation Law of Delaware, or (iv) for any
transaction from which the director derived an improper personal benefit. If the
General Corporation Law of Delaware is hereafter amended to authorize further
elimination or limitation of the liability of the directors, then the liability
of the director shall be eliminated or limited to the fullest extent permitted
by the General Corporation Law of Delaware, as amended. In addition to the
limitation on personal liability of directors provided herein, the Corporation
shall, to the fullest extent permitted by the General Corporation Law of
Delaware, (x) indemnify its officers and directors and (y) advance expenses
incurred by such officers or directors in relation to any action, suit or
proceeding. Any repeal or modification of this Article VI by the stockholders of
the Corporation shall be prospective only, and shall not adversely affect any
limitation on the personal liability or right to indemnification or advancement
of expenses hereunder existing at the time of such repeal or modification.
IN WITNESS WHEREOF, Fix-Corp International, Inc., through its designated
nominee and pursuant to Section 103(a)(2)c of the General Corporation Law of
Delaware, has caused these Amended and Restated Articles of Incorporation to be
executed and its corporate seal to be affixed as of this 30th day of April,
1997.
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FIX-CORP INTERNATIONAL, INC.
By /s/ Mark Fixler
--------------------------------------
Mark Fixler, President
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Exhibit 2
BYLAWS
OF
FIX-CORP INTERNATIONAL, INC.
ARTICLE I - SHAREHOLDERS
Section 1.1 Annual Meeting. The annual meeting of the Shareholders for
the election of Directors and for the transaction of such other business as may
properly come before the meeting shall be held at such place, either within or
without the State of Ohio, on such date and at such time as the Board of
Directors may by resolution provide, or if the Board of Directors fails to
provide, then such meeting shall be held at the principal office of the
Corporation at 27040 Cedar Road, Suite #218, Beachwood, Ohio 44122 on the first
Tuesday of December of each year, or, if such date is a legal holiday, on the
next succeeding business day. The Board of Directors may specify by resolution
prior to any special meeting of Shareholders held within the year that such
meeting shall be in lieu of the annual meeting.
Section 1.2 Special Meetings: Call and Notice of Meetings. Special
meetings of the Shareholders may be called at any time by the Board of
Directors, the President, or upon written request of the holder(s) of at least
twenty-five percent (25%) of the outstanding common stock. Such meetings shall
be held at such place, either within or without the State of Ohio, as is stated
in the call and notice thereof. Written notice of such meeting of Shareholders,
stating the time and place of the meeting, and the purpose of any special
meeting shall be mailed to each Shareholder entitled to vote at or to notice of
such meeting at his or her address shown on the books of the Corporation not
less than ten (10) nor more than sixty (60) days prior to such meeting unless
such Shareholder waives notice of the meeting. Any Shareholder may execute a
waiver of notice, in person or by proxy, either before or after any meeting, and
shall be deemed to have waived notice if he is present at such meeting in person
or by proxy. Neither the business transacted at nor the purpose of any meeting
need be stated in the waiver of notice of such meeting.
Notice of any meeting may be given by the President, the Secretary or by
the person(s) calling such meeting. No notice need be given of the time and
place of reconvening of any adjourned meeting, if the time and place to which
the meeting is adjourned are announced at the adjourned meeting.
Section 1.3 Quorum: Required Shareholder Vote. A quorum for the
transaction of business at any annual or special meeting of Shareholders shall
exist when the holders of a majority of the outstanding shares entitled to vote
are represented either in person or by proxy at such meeting. If a quorum is
present, the affirmative vote of the majority of the shares represented at the
meeting and entitled to vote on the special matter shall be the act of the
Shareholders unless a greater vote is required by law, by the Articles of
Incorporation or by these Bylaws. When a quorum is once present to organize a
meeting, the Shareholders present may continue to do business at the meeting or
at any adjournment thereof, notwithstanding the withdrawal of enough
Shareholders to leave less than a quorum. The holders of a majority of the
voting shares
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represented at a meeting, whether or not a quorum is present, may adjourn such
meeting from time to time.
Section 1.4 Proxies. A Shareholder may vote either in person or by a
proxy which he has duly executed in writing. No proxy shall be valid after
eleven (11) months from the date of its execution unless a longer period is
expressly provided in the proxy.
Section 1.5 Action of Shareholders Without Meeting. Any action required
to be or which may be taken at a meeting of the Shareholders, may be taken
without a meeting if written consent, setting forth the actions so taken shall
be signed by all of the Shareholders entitled to vote with respect to the
subject matter thereof. Such consent shall have the same force and effect as
unanimous affirmative vote of the Shareholders and shall be filed with the
minutes of the proceedings of the Shareholders.
ARTICLE II - DIRECTORS
Section 2.1 Power of Directors. The Board of Directors shall manage the
business of the Corporation and may exercise all the powers of the Corporation,
subject to any restrictions imposed by law, by the Articles of Incorporation or
by the Bylaws.
Section 2.2 Composition of the Board. The Board of Directors of the
Corporation shall consist of between one and five natural persons of the age of
eighteen years or over. Directors need not be residents of the State of Ohio or
Shareholders of the Corporation. At each annual meeting the Shareholders shall
fix the number of Directors and elect the Directors, who shall serve until their
successors are elected and qualified; provided that the Shareholders may, by the
affirmative vote of the holders of a majority of the shares entitled to vote at
an election of Directors increase or reduce the number of Directors and add or
remove Directors with or without cause at any time.
Section 2.3 Meeting of the Board: Notice of Meeting; Waiver of Notice.
The annual meeting of the Board of Directors for the purpose of electing
officers and transacting such other business as may be brought before the
meeting shall he held each year immediately following the annual meeting of
Shareholders. The Board of Directors may by resolution provide for the time and
place of other regular meetings and no notice of such regular meeting need be
given, except as provided in Article VII of these Bylaws, in which case notice
shall be given. Special meetings of the Board of Directors may be called by the
President. or by two (2) Directors, and written notice of the time and place of
such meetings shall be given to each Director by telephone, telegraph,
cablegram, Federal Express or in person at least two (2) days before the
meeting. Any Director may execute a waiver of notice, either before or after any
meeting, and shall be deemed to have waived notice if he is present at such
meeting. Neither the business to be transacted at, nor the purpose of, any
meeting of the Board of Directors need be stated in the notice or waiver of
notice of such meeting. Any meeting may be held at any place within or without
the State of Florida.
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Section 2.4 Quorum: Vote Requirement. A majority of the Directors in
office at any time shall constitute a quorum for the transaction of business at
any meeting. When a quorum is present, the vote of a majority of the Directors
present shall be the act of the Board of Directors, unless a greater vote is
required by the Articles of Incorporation or by these Bylaws.
Section 2.5 Action of the Board Without Meeting. Any action required or
permitted to be taken at a meeting of the Board of Directors or any committee
thereof may be taken without a meeting if written consent setting forth the
action so taken. is signed by all the Directors or committee members and filed
with the minutes of the proceedings of the Board of Directors or committee.
Such consent shall have the same force and effect as an unanimous affirmative
vote of the Board of Directors or committee, as the case may be.
Section 2.6 Committees. The Board of Directors, by resolution adopted by
a majority of all of the Directors, may designate from among its members an
Executive Committee, and/or other committees, each composed of two (2) or more
Directors, which may exercise such authority as is delegated by the Board of
Directors, provided that no committee shall have the authority of the Board of
Directors in reference to (a) an amendment to the Articles of Incorporation or
the Bylaws of the corporation, (b) the adoption of a plan of merger or
consolidation, (c) the sale, lease, exchange or other disposition of all or
substantially all of the property and assets of the Corporation, or (d) a
voluntary dissolution of the Corporation or a revocation thereof.
Section 2.7 Vacancies. A vacancy occurring in the Board of Directors by
reason of the removal of a Director by the Shareholders shall be filled by the
Shareholders, or, if authorized by the Shareholders, by the remaining Directors.
Any other vacancy occurring in the Board of Directors may be filled by the
affirmative vote of a majority of the remaining Directors through less than a
quorum of the Board of Directors, or by the sole remaining Director, as the case
may be, or, if the vacancy is not so filled, or if no Director remains, by the
Shareholders. A Director elected to fill a vacancy shall serve for the unexpired
term of his predecessor in office.
ARTICLE III - OFFICERS
Section 3.1 Executive Structure of the Corporation. The officers of the
Corporation shall consist of a President, a Secretary, a Treasurer and such
other officers as may be elected by the Board of Directors. Each officer shall
hold office for the term for which he has been elected until he is removed or
his successor has been elected and qualified. The same individual may
simultaneously hold more than one office in the Corporation. The Board of
Directors may designate a Vice President as an Executive Vice President and may
designate the order in which other Vice Presidents may act.
Section 3.2 President. The President shall be the chief executive
officer of the Corporation and shall give general supervision and direction to
the affairs of the Corporation, subject to the direction of the Board of
Directors. He shall preside at all meetings of the Shareholders.
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Section 3.3 Vice President. The Vice President shall act in the case of
absence or disability of the President.
Section 3.4 Secretary. The Secretary shall keep the minutes of the
proceedings of the Shareholders and of the Board of Directors, and shall have
custody of and attest to the seal of the Corporation.
Section 3.5 Treasurer. The Treasurer shall be responsible for the
maintenance of proper financial books and records of the Corporation.
Section 3.6 Other Duties and Authority. Each officer, employee and agent
of the Corporation shall have such other duties and authority as may be
conferred upon him by the Board of Directors or delegated to him by the
President.
Section 3.7 Removal of Officers. Any officer may be removed at any time
by the Board of Directors, and such vacancy may be filled by the Board of
Directors. This provision shall not prevent the making of a contract of
employment for a definite term with any officer and shall have no effect upon
any cause of action which any officer may have as a result of removal in breach
of a contract of employment.
Section 3.8 Salaries. The salaries of the officers of the Corporation
shall be fixed from time to time by the Board of Directors. No officer shall be
prevented from receiving such salary by reason of the fact that he is also a
Director of the Corporation.
ARTICLE IV - STOCK
Section 4.1 Stock Certificates. The shares of stock of the Corporation
shall be represented by certificates in such form as may be approved by the
Board of Directors, which certificates shall be issued to the Shareholders of
the Corporation in numerical order from the stock book of the Corporation, and
each of which shall bear the name of the Shareholder, the number of shares
represented and the date of issue; and which shall be signed by the President
and which shall be sealed with the seal of the Corporation. No share
certificate shall be issued until the consideration for the share represented
thereby has been fully paid.
Section 4.2 Transfer of Stock. Shares of stock of the Corporation shall
be transferred only on the books of the Corporation upon surrender to the
Corporation of the certificate(s) representing the shares to be transferred,
accompanied by an assignment in writing of such shares properly executed by the
shareholder of record or his or her duly authorized attorney-in-fact, and with
all taxes on the transfer having been paid. The Corporation may refuse any
requested transfer until furnished evidence satisfactory to it that such
transfer is proper. Upon the surrender of a certificate for transfer of stock,
such certificate shall at once be conspicuously marked on its face "cancelled"
and filed with the permanent stock records of the Corporation. The Board of
Directors may make such additional rules concerning the issuance, transfer and
registration of stock and requirements regarding the establishment of lost,
destroyed or wrongfully taken stock
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certificates (including any requirement of an indemnity bond prior to issuance
of any replacement certificate) as it deems appropriate.
Section 4.3 Registered Stockholders. The Corporation may deem and treat
the holder of record of stock as the absolute owner for all purposes and shall
not be required to take any notice of any right or claim of right of any other
person.
Section 4.4 Record Date. For the purpose of determining Shareholders
entitled to notice of or to vote at any meeting of Shareholders or any
adjournment hereof, or entitled to receive payment of any dividend, or in order
to make a determination of Shareholders for any other purpose, the Board of
Directors of the Corporation may fix in advance a date as the record date for
any such determination of Shareholders, such date in any case to be not more
than sixty (60) days and, in the case of a meeting of Shareholders, not less
than ten (10) days prior to the date on which the particular action requiring
such determination of Shareholders is to be taken.
ARTICLE V - DEPOSITORIES, SIGNATURES, SEAL
Section 5.1 Depositories. All funds of the Corporation shall be
deposited in the name of the Corporation in such bank(s) or other financial
institutions as the Board of Directors may from time to time designate and shall
be drawn down on checks, drafts or other orders signed on behalf of the
Corporation by such person(s) as the Board of Directors may from time to time
designate.
Section 5.2 Contracts and Deeds. All contracts, deeds and other
instruments shall be signed on behalf of the corporation by the President or by
such other officer(s) or agent(s) as the Board of Directors may from time to
time by resolution provide.
Section 5.3 If the seal is affixed to a document, the signature of the
Secretary shall attest the seal. The seal and its attestation may be
lithographed or otherwise printed on any documents and shall have, to the extent
permitted by law, the same force and effect as if it had been affixed and
attested manually.
ARTICLE VI - INDEMNITY
Any person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative, including any action by or in the
right of the Corporation, by reason of the fact that he or she is or was a
Director or Officer of the Corporation, or is or was serving at the request of
the Corporation as a Director or Officer of another corporation, partnership,
joint venture, trust or other enterprise, shall be indemnified by the
Corporation against expenses, including reasonable attorney fees, judgments,
fines and amounts paid in settlement actually and reasonably incurred by him in
connection with such action, suit or proceeding, unless that person failed to
meet the standards of conduct set forth in the General Corporation Law of
Delaware.
ARTICLE VII - AMENDMENT OF BYLAWS
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The Board of Directors shall have the power to alter, amend or repeal the
Bylaws or adopt new Bylaws, but any Bylaws adopted by the Board of Directors may
be altered, amended or repealed and new Bylaws adopted by the Shareholders. The
Shareholders may prescribe that any Bylaws adopted by them shall not be altered,
amended or repealed by the Board of Directors. Action by the Directors with
respect to the Bylaws shall be taken by an affirmative vote of a majority of all
of the Directors then in office. Action by the Shareholders with respect to the
Bylaws shall be taken by an affirmative vote of a majority of all shares
outstanding and entitled to vote. Prior to any action under this Article, seven
(7) days written notice (in accordance with the requirements of Article II,
Section 2.3) shall be given to the Directors, and ten (10) days written notice
(in accordance with the requirements of Article I, Section 1.2) shall be given
to the Shareholders.
I, Mark Fixler, President of Fix-Corp International, Inc., certify that the
foregoing are the By-Laws of said Company, adopted November 14, 1995.
/s/ Mark Fixler
--------------------
Mark Fixler
President
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Exhibit 3
ACQUISITION AGREEMENT
Whereas Fix-Corp, Inc., a corporation which is registered in Ohio,
hereinafter referred to as "FIXX", and Lifechoice, Inc., a Utah corporation, to
become a Delaware corporation, hereinafter referred to as "MUNO", wish to effect
a stock purchase and reorganization; thereupon the said corporations agree as
follows:
I
MUNO, is a Utah corporation in good standing with the Secretary of State.
It is a public company and is currently trading on the NASD-OTC Bulletin Board.
There are no assets or liabilities with regard to said corporation's financial
status, and it is therefore commonly referred to as a "public shell". The
present capitalization consists of 9,798,990 free trading shares currently in
the ownership among approximately 291 shareholders. Said current shareholder
list will be presented to FIXX upon completion of the asset purchase herein. In
addition, there are 10,201,010 restricted shares owned by the Worthington
Company (DBA by Paul Parshall, wholly owned proprietorship entity).
II
All of the currently issued and outstanding shares of FIXX shall be
transferred into ownership by MUNO. Simultaneously, MUNO shall issue to the
current shareholders of FIXX new and additional shares, which shall be
restricted, so as to effect a 90% ownership by the current FIXX shareholders of
the total shares outstanding of MUNO. Prior to said issuance, the current total
number of MUNO shares shall be reverse split by a ratio of 50 to 1. Thereupon,
after said split and after said merger completion, the following resultant
number of shares shall be outstanding:
A. Current FIXX corporation shall own a total of 3,600,000 restricted
shares;
B. Worthington Company shall own a total of 204,020 restricted shares;
C. The 291 public stockholders of MUNO shall own a total of 195,980 free
trading shares ;
D. The resulting total outstanding and issued shares shall thereupon be
4,000,000.
III
In consideration of the transfer of said 90% controlling interest to FIXX,
the cash sum of $U.S. 125,000 shall be paid by FIXX by certified check to the
Worthington Company, for consulting fees, and 100,000 shares of restricted
common stock, with $125,000 payable upon the signing of this agreement.
<PAGE>
IV
The closing of said acquisition shall consist of both corporations
effecting signed resolutions by the respective Boards of Directors,
authorizing said acquisition, reverse split of shares, and said transfer
of shares. Paul Parshall agrees to travel to a mutually agreed on time and
place to carry out consulting activities to effect said acquisition. This shall
include the necessary documents to effect any required name changes, obtaining
a new CUSIP number, Standard and Poor's application, printing and issuance of
stock certificates, issuing press releases, verifying the minutes, books and
records of both corporations, and such other duties as he deems necessary to
effect the said acquisition. Upon the consolidation, all current officers and
directors of MUNO shall resign and the current shareholders of FIXX shall elect
new officers and directors.
In consideration for Paul Parshall offering the above-mentioned services,
which is contemplated to require approximately 3 full days in Florida or
Missouri, FIXX shall prepay Paul Parshall's air fare, travel expenses, and all
out-of-pocket expenses for food & lodging. However, prior to the said
consolidation being effected, FIXX and its current shareholders are requested to
obtain independent legal Counsel to advise them as to the consequences and
liability with regard to said consolidation. Any fees in connection with Paul
Parshall's services payable to outside third parties, or regulating agencies,
shall be paid by FIXX.
V
MUNO, represents to FIXX that it is a Utah corporation, in good standing
with said Secretary of State. There are no assets or liabilities within said
corporation. There is no pending litigation, either civil, criminal or
regulatory against MUNO, nor are there any current claims that Paul Parshall has
knowledge of that is reasonably expected to lead to such litigation in the
future, due to any past deeds or acts of MUNO, its past officers or past
directors, or shareholders. Upon the completion of this acquisition, FIXX's
assets shall become the property of MUNO, with 90% of MUNO's current outstanding
shares becoming owned by FIXX. In the event that within three (3) months of the
closing date of this acquisition, there are any substantial liabilities of
claims against MUNO which are discovered by FIXX within said three months time
period, thereupon FIXX shall have the right to rescind this agreement and effect
a transfer of its assets back to its current shareholders. However, said
rescission must be done in good faith and only in the event that said claims or
liabilities would have a significant impact upon the continuing operations of
FIXX. By way of an example, if a creditor asserts a claim for $500.00 due to a
past debt, and this is the only liability found, Paul Parshall shall have the
option to reimburse FIXX to avoid the rescission.
VI
FIXX assumes all liability and responsibility for any and all problems,
expenses, litigation, regulatory expenses and actions, in connection with MUNO
continued existence and operation, after the date of said acquisition. Paul
Parshall shall not be liable or assume any responsibility for any failure or
problems in connection with such matters as stock trading, liquidity, lack of
market
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makers, lack of regulatory permission to issue new stock for consideration,
which FIXX and MUNO may or may not be able to complete or comply with in the
future.
VII
This agreement is conditioned upon the financial statement and records and
business plan information of FIXX being physically mailed or presented to Paul
Parshall for his review and approval. Said records shall be presented to Paul
Parshall on or before October 06, 1995, and he shall thereupon have 72 hours to
approve or disapprove of said material. Said approval is being carried out as
part of a "due diligence" review on behalf of the current shareholders of MUNO.
VIII
It is contemplated that the name of MUNO, shall be changed to "Fix-Corp,
Inc.", upon the effective date of said acquisition, and Paul Parshall shall
assist with said name change.
IX
It is contemplated that the current transfer agent for MUNO is Transamerica
Securities Inc., an SEC approved transfer agent. FIXX agrees to continue to use
said transfer agent for a minimum of (2) years. By way of full disclosure, Paul
Parshall is a shareholder and director of said transfer agent. The fees to be
charged to effect any stock transfers shall be the usual and customary fees
currently being charged by similar transfer agents.
X
In the event that FIXX fails to complete this consolidation agreement,
unless extended by mutual consent, and MUNO is ready, willing and able to
complete said consolidation by said date, thereupon the aforesaid $125,000
deposit sum shall be retained by Paul Parshall as liquidated damages.
XI
This agreement shall be governed by the laws of Nevada, and in the event of
any dispute, the parties agree to binding arbitration, pursuant to the rules of
the American Arbitration Association, with the prevailing party to be awarded
attorney fees and all court costs in the event of any litigation.
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Wherefore the parties agree and co sent to the above.
/s/ Mark Fixler /s/ Paul Parshall
- ----------------------------------- ----------------------------------
Fix-Corp, Inc. Lifechoice, Inc.
Mark Fixler Paul L. Parshall
President Chief Executive Officer
DATED DATED
------------------------------ -----------------------------
Mark Fixler Paul L. Parshall
27040 Cedar Rd., STE 104 115 Park Rd.
Beachwood, OH 44122 Worthington, OH 43085
Tel: (216) 292-3182 Tel: (614) 888-6200
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Exhibit 4
PURCHASE AND SALE AGREEMENT
THIS AGREEMENT made this 14th day of August, 1996, by and between QUANTUM
CHEMICAL CORPORATION, a Virginia corporation having its principal offices at
11500 Northlake Drive, Cincinnati, Ohio 45249 ("Quantum"), and FIX-CORP
INTERNATIONAL, INC., an Ohio Corporation, having its principal offices at 27040
Cedar Road, Suite 218, Cleveland, OH 44122 ("Buyer");
WITNESSETH:
WHEREAS, Quantum owns and has operated facilities at
Heath, Ohio, for the recycling of post consumer
polyethylene and other plastic resins; and,
WHEREAS, Quantum desires to sell such facilities and
portions of its post-consumer recycling business
associated therewith to Buyer; and
WHEREAS, Buyer desires to purchase such facilities and
portions of the post-consumer recycling from Quantum
upon the terms and conditions set forth in this
Agreement.
NOW, THEREFORE, in consideration of the mutual agreements set forth in this
Agreement, the parties hereto do hereby agree as follows:
1. ASSETS TO BE ACQUIRED. Subject to the terms and conditions set
forth in this Agreement, at Closing (as later defined) Quantum agrees to sell,
convey, transfer, assign and deliver to Buyer and Buyer agrees to purchase and
accept, as hereinafter provided, the following assets, rights and property (i)
constituting Quantum's Resource Recovery plant at Heath. Ohio and (ii) relating
to portions of Quantum's post-consumer plastic recycling business (collectively
referred to as the "Assets").
1.01. A parcel of land and all buildings and improvements upon it (the
"Premises") as described more full described in Schedule 1.01A, subject to the
reservations, easements, and
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exceptions set forth in Schedule 1.01B and the existing or potential claims,
litigation, suits, charges, actions, governmental investigations or other
proceedings set forth in Schedule 5.08.
1.02. Personal property consisting of two parallel plastics recycling
lines (known as Line 7 and Line 8) composed of three primary processing areas
(dry processing, wet processing and finishing); bulk blending; truck scale;
office and shipping facilities; and other machinery and equipment. A listing of
the machinery and equipment for Line 7 and Line 8, plant support and obsolete
machinery and equipment to be sold and purchased is set forth in Schedule 1.02A.
Those assets attributable to that portion of Quantum's post consumer plastics
recycling business which is to be acquired by Buyer are set forth in Schedule
1.02B. Notwithstanding those items set forth on Schedule 1.02A, it is the
intention of the parties that all personal property, fixtures, equipment and
improvements located in the facility as of August 12, 1996 shall be included in
the personal property being sold to Buyer as set forth in Schedule 1.02A and
1.02B.
1.03. Buyer shall not purchase or acquire from Quantum pursuant to this
Agreement:
(a) Quantum's accounts receivable or notes receivable attributable to
Quantum's post-consumer plastics recycling business;
(b) Any of Quantum's covered hopper rail cars and vehicles not listed in
Schedule 1.02A;
(c) Any trade name of Quantum or any right to use any trade name of
Quantum;
(d) Any trademarks of Quantum or any right to use any trademarks of
Quantum;
(e) Any portion of Quantum's post consumer plastics recycling business
not set forth in Schedule 1.02B;
(C) Any finished goods inventories not located upon the Premises at
Closing;
(g) Any office equipment (including, but not limited to, personal
computers, Telephones and copy machines) located upon the Premises
at Closing and covered under master leases held by Quantum or owned
by Quantum which is not listed in Schedule 1.02A; and,
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(h) Any records or documents related to the operation of the Assets
which are not located on the Premises at Closing.
2. PURCHASE PRICE. Buyer shall pay to Quantum for the Assets a total
purchase price of THREE MILLION FOUR HUNDRED THOUSAND DOLLARS ($3,400,000.00)
(the "Purchase Price").
2.01. The parties have agreed to allocate the purchase price among the
Assets on the basis set forth in Schedule 2.01.
2.02. The Purchase Price shall be paid as follows:
(a) TWO HUNDRED FIFTY THOUSAND DOLLARS ($250,000.00) to be paid upon the
signing of this Agreement and to be held and administered in
accordance with the terms and conditions of this Agreement;
(b) THREE MILLION ONE HUNDRED FIFTY THOUSAND DOLLARS ($3,150,000.00) to
be paid at Closing;
2.03. The payment specified in Sections 2.02(a) shall be allocated as
follows:
(a) FIFTY THOUSAND DOLLARS ($50,000.00) shall be deemed to be a
non-refundable deposit, subject only to Section 2.03(c), required by
Quantum in order to remove sale of the facility from the market
pending the Closing of this transaction.
(b) TWO HUNDRED THOUSAND DOLLARS ($200,000.00) to be held in trust by
Quantum's attorney subject to release of Buyer's contingencies.
(c) In addition to the other terms and conditions set forth in this
agreement, the deposits referred to Section 2.03(a) and (b) above
shall be refunded to Buyer if Quantum fails to perform any of the
terms or provisions of this agreement and/or any representation of
Quantum as set forth in this agreement is not true or accurate.
3. CLOSING.
3.01. The consummation of the sale and acquisition of the Assets pursuant
to this Agreement ("Closing") shall take place at the offices of Quantum at
11500 Northlake Drive, Cincinnati, Ohio, during normal banking hours, Eastern
Standard Time, at a mutually convenient
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and agreeable date and as soon as practical after Buyer has been satisfied with
respect to or has waived the due diligence contingencies set forth in Section
9.04, but in no event later than sixty-six (66) days after the execution of this
Agreement. In the event the transaction does not close within said sixty-six
(66) day period, subject to the conditions precedent set forth in this
Agreement, this Agreement shall terminate in accordance with Section 11.03 or
any other provision dealing with termination based up failure to release
contingencies.
3.02. At Closing Quantum will deliver to Buyer a general warranty deed in
the form of Exhibit A to this Agreement for the Plant, a bill of sale in the
form of Exhibit B to this Agreement for the remainder of the Assets and such
other documents as specified in Section 9 of this Agreement or as mutually
agreed by the parties or as reasonably required by Buyer.
3.03. At Closing Buyer will deliver to Quantum all documents to be
delivered by Buyer to Quantum pursuant to Article 10 of this Agreement.
3.04. All documents to be delivered at Closing by either party to the
other shall have been reviewed and approved by the parties and their respective
legal counsel prior to Closing and as a condition precedent to Closing, subject
to the sixty-six day limit for Closing in Section 3.01.
4. TAXES. ASSESSMENTS. UTILITIES. TRANSFER TAXES AND FEES
4.01. Real estate and personal property taxes ("Tax" or "Taxes") imposed
upon the Assets for tax year 1995 have been or will be paid by Quantum. Quantum
shall give to Buyer at Closing a credit to the Purchase Price sufficient for
that portion of the 1996 Taxes representing Quantum's proportionate ownership of
the Plant during tax year 1996.
4.02. Any other similar ad valorem tax, tax or any special assessment
imposed on the real or personal property of the Plant shall be prorated between
Quantum and Buyer on the basis of the portion of the assessment period falling
before and after Closing, respectively.
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4.03. The parties shall make all reasonable efforts to change the billing
for water, electricity, sewer, telephone and other utilities from Quantum to
Buyer as of the date of Closing. All charges for water, electricity, sewage,
telephone and other utilities for the billing period encompassing Closing shall
be prorated between Buyer and Quantum as of Closing.
4.04. Any payments by either party to the other pursuant to Sections 4.02
and 4.03, or the prorations therein prescribed, shall be made within ten (10)
business days after receipt of invoices from the payee.
4.05. Buyer will pay or reimburse Quantum for all taxes, fees or other
charges payable to any federal, state or local governmental entity, except taxes
on or measured by the net income of either party or taxes imposed upon Quantum
as a result of any gain on this transaction, as a result of the sale or transfer
of the assets and business pursuant to this Agreement or any documents executed,
filed or recorded in connection with this Agreement.
5. REPRESENTATIONS AND WARRANTIES OF QUANTUM
Quantum represents and warrants as follows:
5.01. Quantum is a corporation duly organized, validly existing and in
good standing under the laws of the Commonwealth of Virginia and is qualified
and in good standing as a foreign corporation in the State of Ohio.
5.02. Quantum has full corporate power and authority to make and perform
this Agreement and to transfer and vest in Buyer title to all of the Assets.
5.03. The execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated by this Agreement by Quantum have
been or will have been, prior to Closing, duly authorized by all requisite
corporate action.
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5.04. The execution of this Agreement by Quantum and the performance of
its obligations under this Agreement will not violate any contract, mortgage,
indenture or similar agreement or restriction to which Quantum is a party or
constitute a default under any collective bargaining agreement or other
agreement to which Quantum is a party and which pertains to the Plant.
5.05. Quantum has and will convey to Buyer fee simple title to all of
the real estate and appurtenances set forth in Schedule 1.01 A free and clear
of all liens, encumbrances or other charges, except as disclosed in Schedule
1.01B with possession of the Premises and Assets to take place immediately
after Closing.
5.06. Quantum is the sole and exclusive title owner of all the personal
and other tangible property to be transferred to Buyer as set forth in Schedule
1.02A and Schedule 1.02B. Quantum shall transfer such assets to Buyer in the
same condition they were in on June 5, 1996, ordinary wear and tear excepted,
free and clear of all liens, encumbrances and/or claims by any other person or
entity except those listed on Schedule 5.08.
5.07. Quantum's facility is in compliance in all material respects with
all laws, regulations, ordinances, decrees and orders relating to health and
environmental controls, including but not limited to sprinkler system and
pollution control equipment relating to health and environmental controls.
5.08. Except with respect to the matters listed in Schedule 5.08 or to
which Quantum has given or shall give notice to Buyer in writing, there are (a)
no litigation, suits, charges, actions, findings, governmental investigations,
reports or orders or other proceedings of any kind or nature threatened or
pending against Quantum which would materially effect Quantum's right to convey
the real and personal property required by this Agreement. (Such governmental
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investigations and reports as referred to above shall include the Department of
Labor, OSHA and any EPA agency; the plant, facility and assets are not subject
to any contract or agreement with any labor union, organization or collective
bargaining agreement which would be subject to of materially effect transfer of
the assets as contemplated by this agreement; that none of the restrictions and
matters set forth in Schedule 1.01B, materially affect the use and operation of
the facility and assets), and (b) no administrative or judicial proceedings
arising under any federal, state or local law or provision relating to the
regulation of the discharge of materials into the environment or otherwise
relating to the protection of health and environment, whether initiated by a
third party or by Quantum, pending or, to the knowledge, information and belief
of Quantum, threatened against or relating to or involving the Premises or
Assets or the business to be sold to Buyer pursuant to this Agreement, or the
transaction contemplated by this Agreement.
5.09 EXCEPT AS OTHERWISE PROVIDED HEREIN, THERE ARE NO EXPRESS OR IMPLIED
WARRANTIES THAT APPLY TO THE TRANSACTIONS CONTEMPLATED HEREIN AND QUANTUM
SPECIFICALLY DISCLAIMS ANY IMPLIED WARRANTY OF MERCHANTABILITY AND ANY IMPLIED
WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE.
5.10 That the plant, facility and assets are not subject to any contract
or agreement with any labor union, organization or collective bargaining
agreement.
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5.11 That the plant, facility and assets are not subject to any employee
or employment contracts, employment benefit or retirement programs of any kind
or nature as such relate to this Agreement.
5.11A That Quantum's Resource Recovery plant located at Heath, Ohio when
shut down in October, 1995 was fully operational and would produce the goods
and/or products for which it was intended and which it has in the past produced
and sold and no modifications or changes to the equipment, plant and facility
have been made since October, 1995 which, to the best of Quantum's knowledge,
would prevent the facility from starting up and becoming operational. Further
that operation of the facility in its current condition which is consistent with
its operation in October, 1995 will not violate any Environmental statute,
regulation or order. Any previous additions or modifications to the plant and
facility by 3DM are not being warranted by Quantum as to their environmental
qualifications or acceptability.
5.12 All inventories, buildings, and fixed assets owned or leased by
Quantum located at the facility in Heath, Ohio are and will be adequately
insured against fire to the closing date and valid policies therefore are and
will be outstanding and duly in force and the premiums will be paid prior to the
closing date.
5.13 That Quantum will make available after Closing for a period of one
(1) year as time permits and with reasonable notice from Buyer, personnel to
consult with Buyer and to assist Buyer in re-starting the plant and equipment to
the extent that Quantum employs such personnel. Quantum will also make available
to Buyer any and all records, manuals, permits, drawings, blueprints,
specifications, etc. which deal with equipment specifications and operation,
overall operation of the facility and building layout, design and construction.
During the period of time from the Closing until 90 days thereafter, Buyer will
not be charged by Quantum for any expenses
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incurred by Quantum in sending its personnel to the facility to assist and
consult with the Buyer. Thereafter, Buyer will be responsible for paying Quantum
for expenses incurred by Quantum's personnel in travel to and from the facility.
6. REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants as follows:
6.01. Buyer is a corporation duly organized and validly existing under the
laws of the State of Ohio and is in good standing therewith.
6.02 Buyer has full corporate power and authority to make and perform
this Agreement and to acquire title to the Assets Buyer is purchasing under this
Agreement.
6.03. The execution, delivery and performance of this Agreement and the
documents contemplated by this Agreement due from Buyer at Closing have been or
will have been, prior to Closing, duly authorized by all requisite corporate
action.
6.04. Buyer will complete its due diligence (including, but not limited
to, physical inspection of the Premises, the personal property and machinery and
equipment) prior to Closing based upon the fact that Buyer is not fully aware of
the condition of the Premises and machinery and equipment, and does not have
sufficient knowledge and awareness of any potential claims which it may need to
assume or resolve.
7. SURVIVAL OF REPRESENTATIONS
The representations and warranties of Quantum and Buyer contained in this
Agreement shall survive Closing in accordance with the applicable statutes of
limitations.
8. COVENANTS AND AGREEMENTS
8.01. Except as provided elsewhere in this Agreement, Buyer shall assume
no liabilities of Quantum including, without limiting the foregoing, any
accounts payable relating to the
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Premises, the Assets and the portions of the business to be acquired or any
liability of Quantum arising from acts or events occurring prior to Closing.
8.02. Except as provided elsewhere in this Agreement, Quantum agrees to
defend, indemnify and hold harmless Buyer, its officers, directors and employees
against and in respect of any and all claims, losses, costs, expenses,
obligations and liabilities (including without limiting the foregoing, and
subject to the provisions of Section 8.05, below, costs and expenses of
litigation and reasonable attorneys' fees) to the extent they arise or result
from or relate to (i) any breach by Quantum of any of its representations,
warranties, guarantees, agreements, commitments or covenants in this Agreement,
(ii) the operations at or upon the Premises and Quantum's plastics recycling
business prior to Closing which shall include, but not be limited to, any
liability arising out of or associated with any product, goods or processes
sold, delivered or distributed by Quantum, or (iii) any obligation, debt or
liability which Quantum shall have agreed to pay, perform or discharge pursuant
to this Agreement and/or any undisclosed debt, liability or obligation which
occurred, arose or accrued prior to Closing. This Section 8.02 shall not apply
to nor include any and all claims, losses, costs, expenses, obligations and
liabilities related to environmental damage, contamination, pollution, toxic or
hazardous chemicals which claims, losses, costs, expenses, obligations and
liabilities are the subject matter of a separate environmental indemnification
agreement between the parties in the form of Exhibit C to this Agreement.
8.03. Buyer agrees to and does hereby indemnify, defend and hold Quantum,
its officers, directors and employees harmless against and in respect of any and
all claims, losses, costs, expenses, obligations and liabilities (including
without limiting the foregoing, and subject to the provisions of Section 8.05
hereof, costs and expenses of litigation and reasonable attorneys' fees)
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to the extent they arise or result from or relate to (i) any breach by Buyer of
any of its representations, warranties, guarantees, commitments or covenants in
this Agreement, (ii) the operations at or upon the Premises and Buyer's plastics
recycling business on and after Closing to the extent unrelated to the items set
forth in Section 8.02(iii) above, or (iii) any obligation, debt or liability
which Buyer shall have agreed to pay, perform or discharge pursuant to this
Agreement. This Section 8.02 shall not apply to nor include any and all claims,
losses, costs, expenses, obligations and liabilities related to environmental
damage, contamination, pollution, toxic or hazardous chemicals which claims,
losses, costs, expenses, obligations and liabilities are the subject matter of a
separate environmental indemnification agreement between the parties in the form
of Exhibit C to this Agreement.
8.04. The indemnification provided for in Sections 8.02 and 8.03 shall
include any and all claims of liability of any type or nature against the
Indemnitee (as this term is defined in Section 8.05, below), except for claims
of gross negligence or willful misconduct against the Indemnitee.
8.05. With respect to any claim for which indemnification is sought
pursuant to this Agreement, the party seeking indemnification ("Indemnitee")
shall promptly after knowledge of such claim, notify in writing the party from
whom indemnification is sought or is owed ("Indemnitor"), in as much detail as
is feasible, of the existence and nature of the claim. At its sole cost and
expense, and with counsel of its choosing, Indemnitor shall defend against any
claim of a third party and shall pay any resulting settlements, judgments or
decrees. Indemnitee must have taken reasonable steps to mitigate any damages
resulting from any such third party claim. In its notice to the Indemnitor,
Indemnitee must grant to Indemnitor the full power, authority and right on
Indemnitee's behalf to control the defense or settlement of any such claim, so
long as
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Indemnitor diligently prosecutes the defense of the claim or suit. Indemnitor
shall keep Indemnitee informed at all times as to the status of the claim, and
Indemnitee may, at its own election and expense, participate in the defense of
any such claim. Should the Indemnitor, after the Indemnitee has fulfilled its
obligations under this Section, fail to defend or to prosecute diligently the
defense of any claim of a third party, the Indemnitee, without waiving any
rights against the Indemnitor, may defend or settle any such claim and shall be
entitled to recover from the Indemnitor the amount of any settlement or judgment
or decree and all costs and expenses, including, without limitation, reasonable
attorneys' fees. Each of the parties to this Agreement shall extend reasonable
cooperation to the other parties in connection with such defense or settlement.
The right of the Indemnitor to defend against any such claim shall be limited by
the right of an insurance company to defend against the claim if the claim
involves an insured risk.
8.06. After Closing Quantum shall give Buyer, its counsel, accountants,
engineers and other representatives access to the Assets' operational records,
including customer lists, which had been stored and/or were available prior to
Closing either at the adjacent compounding plant or off site of the Plant.
Access to such records shall be granted at reasonable times during the regular
daytime work hours of the facility or facilities in which the records and
documents are stored. Representatives of Buyer inspecting these records and
documents must upon request of Quantum execute confidentiality agreements and
must comply with the safety and security regulations of the facility in which
such inspections are made. Quantum shall have the right to have representatives
present at all times during such inspections. Buyer shall have the right to make
copies of such records and documents and shall reimburse Quantum for its costs
in making any such copies.
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8.07. Buyer recognizes that Quantum has shared operations and operating
systems between the Premises and the adjacent compounding plant. Buyer will
grant access to the Premises to Quantum, its employees, agents and contractors
for the purpose of utilizing, repairing, replacing, maintaining or disconnecting
shared operations and operating systems for which Quantum shall be financially
responsible. With respect to the shared operations or operating systems, Quantum
and Buyer agree that:
(a) Within twelve (12) months after Closing, Quantum shall disconnect
its adjacent compounding plant from the Premises' fire pump system
at Quantum's sole expense;
(b) Buyer shall grant to Quantum an easement, in the form of Exhibit D
to this Agreement, for the purpose of ingress and egress to and
utilization of the truck scale and the rail car unloading area;
(c) Quantum will maintain and repair the unloading ramps for the rail
car unloading area within the easement granted to it by Buyer at its
sole expense; and
(d) Buyer will maintain and repair the truck scale upon the Premises so
as to keep its operation in accordance with the standards of the
State of Ohio for certified scales at its sole expense.
8.08. Quantum shall lease to Buyer, in the form of Exhibit E to this
Agreement, sufficient linear footage for three (3) rail car spots on the
railroad spur located upon the premise of Quantum's adjacent compounding plant.
8.08A. This agreement is contingent upon Buyer's due diligence and
approval of Sections 8.07 and 8.08 above prior to Closing. Should Buyer after
completion of its due diligence find the provisions of Sections 8.07 and/or
8.08 to interfere with operation of the equipment, plant or facility or cause
excessive expense, the parties shall first endeavor to negotiate a resolution
thereof. If they cannot resolve their differences, then this agreement shall
terminate,
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Buyers full deposit shall be returned and each of the parties shall be released
from the terms and conditions of this agreement.
8.09. Without Quantum's prior approval, Buyer shall not accept any return
of products purchased by Quantum's post-consumer plastic resin customers from
Quantum. In the event any customer attempts to return product or notifies Buyer
that it intends to return product sold by Quantum, Buyer shall immediately
notify Quantum and shall inform Quantum of any reasons stated by a customer for
the return of product. Quantum shall then deal directly with the customer
concerning such return of product and any credits or refund associated therewith
and shall defend, save harmless and indemnify Buyer in regard to any matters
associated therewith.
8.10. Buyer shall not use "Quantum", "Quantum Chemical" or any other
similar name for the Premises or the business operated at the Premises which
might create the false or erroneous appearance or impression that the Premises
is owned or operated by Quantum after the Closing without specific written
consent from Quantum, although Buyer shall be entitled to retain as its own and
use the telephone number(s) which Quantum used during its ownership of the
facility.
8.11. Quantum agrees to immediately cease any further attempts to market,
sell or dispose of the Assets and/or Premises to, and to solicit offers for the
purchase or transfer of the Assets and/or Premises from, any prospective third
party purchasers or transferee unless or until this Agreement is terminated.
8.12. For the period between the execution of this Agreement and Closing,
Buyer shall have the right to limited, escorted access to the Premises in order
to complete its due diligence and/or to show the Premises and machinery and
equipment to lenders, investors and employees and to determine how to operate
the facility and Buyer's obligation pursuant to this agreement is
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contingent upon completion of such due diligence to Buyer's satisfaction prior
to Closing. In no event will Buyer be permitted to operate the machinery or
equipment without Quantum's written consent and without a representative of
Quantum present or to make improvements, modifications or repairs to the
Premises or the machinery and equipment prior to Closing without Quantum's
written consent. Buyer shall make prior arrangements with Quantum's designee for
access to the Premises.
9. CONDITIONS PRECEDENT TO BUYER'S OBLIGATION TO CLOSE. The obligation
of Buyer to proceed with Closing are, at Buyer's option, subject to the
satisfaction, waiver or release of the following conditions on or before
Closing.
9.01. All of the representations and warranties made by Quantum in this
Agreement shall be true and correct as of the time of Closing.
9.02. Quantum shall have delivered to Buyer an opinion of Quantum's
counsel, dated as of Closing, to the effect that:
(a) Quantum is a corporation duly organized, validly existing and in
good standing under the laws of the Commonwealth of Virginia and is
qualified and in good standing as a foreign corporation in the State
of Ohio.
(b) All proceedings required by law or by the provisions of this
Agreement or by Quantum's certificate of incorporation or by-laws,
or any other document binding upon Quantum, to be taken by Quantum
in connection with the due consummation of the transactions
contemplated by this Agreement have been duly and validly taken.
(c) Quantum has complete and unrestricted power to sell, convey,
transfer, assign and deliver to Buyer all of the assets to be sold
by Quantum to Buyer under this Agreement.
(d) The sale, conveyances, transfers, and deliveries under this
Agreement to Buyer are not in contravention of any applicable
federal, state or local law, or of any contract, indenture or other
instrument or document to which Quantum is a party or is bound.
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9.03. The Assets and the intended use thereof are not or have not been
adversely affected in a material way by a casualty or other event, whether
insured or uninsured, between the date of this Agreement and Closing. If such a
casualty or other event occurs, Buyer shall have the option: (i) proceed with
Closing according to the terms of this Agreement, (ii) proceed with Closing
except that the Purchase Price shall be reduced by the dollar amount of the cost
of repair or replacement of the assets affected, providing the parties to this
Agreement can agree on said dollar amount, or (iii) terminate this Agreement, in
which event the parties shall have no further obligation under this Agreement
and Buyer's entire deposit as set forth in Section 2.02(a) shall be immediately
returned to Buyer. Buyer may elect course (ii) and then select course (i) or
(iii) in the event the parties are unable to agree on the cost of repair or
replacement. For purposes of this Section 9.03 only, "adversely affected in a
material way" shall mean an estimated cost of $250,000.00 or more.
9.03A. Buyer makes a good faith effort to complete its financing of this
transaction by obtaining a firm commitment from its lender or lenders within
sixty-six (66) days after the date this Agreement is executed. If Buyer does not
obtain a firm commitment for financing satisfactory to Buyer or if this
financing contingency is not waived and/or released by Buyer in writing prior to
Closing, then all but $50,000.00 of Buyer's deposit as described in Section
2.02(a) shall be promptly returned to Buyer and the parties shall each be
released from further liability on this Agreement and Quantum shall be entitled
to retain $50,000.00 of Buyer's deposit free and clear of any claim by Buyer.
9.04 Buyer's obligation to Close this transaction is further contingent
upon Buyer's completion of its due diligence within twenty one (21) days after
execution of this Agreement by all parties and further that the results of the
Buyer's due diligence is satisfactory to Buyer. Such
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due diligence shall include but not be limited to the following: (a) Buyer
verifying and being satisfied that the assets being purchased are sufficient to
currently startup and operate the facility and are of the quality represented;
(b) Buyer being satisfied that Quantum's shutting down of the shared operation
as described in Section 8.05 and those matters described in Sections 8.07 and
8.08 above will not interfere with Buyer's operation of the facility or cause
Buyer to incur additional expenses associated with the shut down and/or the
operation of its facility thereafter; (c) Buyer being satisfied that the
facility as shut down and when started up and operated after the Closing is in
conformance with all Environmental laws, statutes, regulations and orders and
has not been notified of any violation in regards thereto and all equipment
located in the facility used to comply with Environmental laws, statutes,
regulations and orders is operating and in good order and repair; (d) Buyer
being satisfied that the plant and facility can be operated and will manufacture
the products as represented by Quantum; (e) Buyer being satisfied that it will
be able to obtain assistance from Quantum in putting the plant and facility back
into operation; and (f) review of Quantum's financials relating to this
transaction as described on Schedule 5.08A. This contingency must be released in
writing by notice from the Buyer to Quantum within Twenty one (21) days after
execution of this Agreement as provided above, otherwise should Buyer fail to
release this contingency in writing, each of the parties' obligations pursuant
to this Agreement shall terminate and each shall be released therefrom with
Buyer's payment/deposit as described in Section 2.02(a) being returned to Buyer
within five (5) days thereafter.
10. CONDITIONS PRECEDENT TO QUANTUM'S OBLIGATION TO CLOSE. The
obligation of Quantum to proceed with Closing are, at Quantum's option, subject
to the satisfaction, waiver or release of the following conditions on or before
Closing.
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10.01. Quantum have received the consideration to be paid at or before
Closing by Buyer to Quantum pursuant to Sections 2.02(a) and 2.02(b).
10.02. Buyer shall have delivered to Quantum an opinion of Buyer's counsel
dated as of Closing, to the effect that:
(a) Buyer is a corporation duly organized and validly existing under the
laws of the State of Ohio and in good standing therewith.
(b) All proceedings required by law or by the provisions of this
Agreement or by Buyer's articles of organization or operating
agreement, or any other document binding upon Buyer, to be taken by
Buyer in connection with the due consummation of the transactions
contemplated by this Agreement have been duly and validly taken.
(c) Buyer has complete and unrestricted power to purchase and accept all
of the assets sold by Quantum to Buyer under this Agreement and the
specific power and authority to execute the promissory note and
mortgage contemplated by this Agreement.
(d) That the purchase and receipt of the Assets from Quantum are not in
contravention of any applicable federal, state or local law, or of
any contract, indenture or other instrument or document to which
Buyer is a party or is bound.
11. MISCELLANEOUS.
11.01. BROKER'S. Quantum and Buyer each represents to the other that it has
not retained any broker or finder and that no fee, commission or other
compensation is payable to any broker or finder in connection with the
transactions contemplated by this Agreement as a result of each one's respective
actions.
11.02. PUBLICITY. Buyer agrees that it will make no public statements,
press releases or announcements regarding this transaction until Closing. Should
the Buyer breach this provision, then Quantum shall have the right, at its sole
discretion, to retain the payment made pursuant to Section 2.02(a) and to
terminate this Agreement without recourse by Buyer.
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11.03. SURVIVAL OF TERMS. In the event this Agreement is terminated by
either party, Sections 8.02 (Quantum's Indemnification of Buyer), 8.03 (Buyer's
Indemnification of Quantum), 8.04 (Exceptions to Indemnification), 8.05 (Claims
for Indemnification) and 11.02 (Publicity) shall survive such termination and
shall be effective in accordance with their respective terms.
11.04. PARTIES. This Agreement shall inure to the benefit of and be binding
upon the parties to this Agreement and their respective successors and assigns.
11.05. ENTIRE AGREEMENT. This Agreement contains the full and complete
agreement between the parties with respect to the sale by Quantum and purchase
by Buyer of the assets which are the subject matter of this Agreement. This
Agreement may only be modified or amended by written instrument signed by both
parties.
11.06. NOTICES. All notices, requests, demands and other communications
either required or given under this Agreement shall be in writing and shall be
deemed to have been duly given on the date of delivery in person to the officers
named below or three (3) days after mailing by certified or registered mail,
postage prepaid, return receipt requested to the following address:
IF TO QUANTUM: IF TO BUYER:
Quantum Chemical Company Fix-Corp International, Inc.
11500 Northlake Drive 27040 Cedar Road, Suite 218
Cincinnati, OH 45249 Cleveland, OH 44122
Attention: President Attention: President
or such other address or person as the parties may designate from time to time.
11.07. APPLICABLE LAW. This Agreement shall be construed and enforced in
accordance with the laws of the State of Ohio.
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11.08. SCHEDULES AND EXHIBITS. All schedules and exhibits referred to in
this Agreement are incorporated into and made a part of this Agreement.
11.09. BULK SALES. Quantum and Buyer agree that the Uniform Commercial Code
and other statutes relating to the bulk sale or transfer of property are not
applicable to the transactions contemplated by this Agreement.
11.10. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original. This Agreement and any
counterpart so executed shall be deemed to be one and the same instrument. It
shall not be necessary in making proof of this Agreement or any counterpart of
this Agreement to produce or account for any of the other counterparts.
11.11. INVALIDITY. In the event any provision is held invalid or
unenforceable, the Parties shall attempt to agree on a valid or enforceable
provision which shall be a reasonable substitute for such invalid or
unenforceable provision in light of the tenor of the Agreement and, on so
agreeing, shall incorporate such substitute provision into this Agreement.
11.12. EXPENSES. Except as the parties may otherwise agreed, the parties
shall bear their respective fees, costs and expenses in connection with the
transactions contemplated by this Agreement.
11.13. WAIVER. No waiver by any party, whether express or implied, of any
right under any provision of the Agreement shall constitute a waiver of such
party's right at any other time or a waiver of such party's rights under any
other provision of the Agreement unless it is made in writing and signed by the
President or a Vice President of the party waiving the condition. No failure by
any party to this Agreement to take any action with respect to any breach of the
Agreement or default by another party shall constitute a waiver of the former
party's right to
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enforce any provision of the Agreement or to take action with respect to such
breach or default or any subsequent breach or default by such other party.
11.14. SECTION HEADINGS. The section and subsection headings in this
Agreement are for convenience of reference only.
11.15. LIQUIDATED DAMAGES. In the event Buyer fails to consummate the
transaction for any reason other than the failure of the contingencies set forth
in this Agreement, Quantum will be entitled to retain as liquidated damages, in
lieu of any other damages, liabilities, cost or expenses incurred by Quantum and
in complete satisfaction of the Buyer's liabilities to Quantum on account of
such failure or action, Buyer's payment in the amount of TWO HUNDRED FIFTY
THOUSAND DOLLARS ($250,000.00) pursuant to Section 2.02(a).
11.16. TIME OF ESSENCE. The parties to this Agreement agree that time is of
the essence in the performance of duties and obligations required of or pursuant
to this Agreement.
11.17. RELEASE; TERMINATION. Upon execution of this Agreement, Quantum
hereby releases and discharges Buyer and Buyer's officers and directors from any
claims, demands or liabilities associated with Case No. A-96-2928 pending in the
Common Pleas Court of Hamilton County, Ohio. Furthermore, prior to the
completion of Closing, in the event that any legal action is commenced against
Buyer by any person or entity not a party to this transaction which has as a
basis for the claim alleged therein Buyer's proposed purchase of Quantum's
Heath, Ohio facility and/or any of the assets being set forth in this agreement,
then Buyer shall have the option of terminating this agreement and receiving an
immediate return of its payment/deposit made to Quantum as set forth in Section
2.02(a) above.
IN WITNESS WHEREOF, the parties to this Agreement have caused this
Agreement to be duly executed by their authorized representatives as of the day
and year first set forth above.
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QUANTUM CHEMICAL CORPORATION FIX-CORP INTERNATIONAL, INC.
[Signatures -See Page 24]
By: By:
---------------------------- -----------------------------
Attest: Attest:
----------------------- -------------------------
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IN WITNESS WHEREOF, the parties to this Agreement have caused this
Agreement to duly executed by their authorized representatives as of the day and
year first set forth above.
QUANTUM CHEMICAL CORPORATION FIX-CORP INTERNATIONAL, INC.
By: /s/ Dale H. Spiess By: /s/ Mark Fixler, Pres/CEO
---------------------------- -----------------------------
Attest: Attest:
----------------------- -------------------------
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SCHEDULE 1.01A
DESCRIPTION OF REAL PROPERTY
A single parcel situated in the State of Ohio, County of Licking and City of
Heath of 9.5 acres more or less being more fully bounded and described as
follows:
BEING IN T-1, R-12 OF THE UNITED STATES MILITARY LANDS, AND IN THE
MID-OHIO INDUSTRIAL PARK, ADDITION NO. 3, AS RECORDED IN PLAT BOOK
13, PAGE 51, IN THE LICKING COUNTY DEED RECORDS, AND BEING MORE FULLY
BOUNDED AND DESCRIBED AS FOLLOWS:
BEING ALL OF RESERVE "A", LOT 40 AND THE FOLLOWING PORTION OF LOT 41;
BEGINNING IN THE WESTERLY RIGHT OF WAY LINE OF JAMES PARKWAY, SAID
POINT BEING THE SOUTHEAST CORNER OF SAID LOT 41;
THENCE SOUTH 89 DEG. 25'37" WEST, ALONG THE SOUTH LINE OF LOT 41,
662.49 FEET TO THE SOUTHWEST CORNER LOT 41;
THENCE NORTH 0 DEG. 45 '14" WEST, ALONG THE EASTERLY LINE OF THE NEW
YORK CENTRAL RAILWAY COMPANY, 243.50 FEET, TO A POINT;
THENCE SOUTH 89 DEG. 25'37" EAST, PASSING THROUGH LOT 41, A DISTANCE
OF 663.41 FEET TO A POINT;
THENCE SOUTH 0 DEG. 31 '52" EAST, PASSING ALONG THE WESTERLY RIGHT OF
WAY LINE OF JAMES PARKWAY, 243.50 FEET TO THE PLACE OF BEGINNING;
THE ABOVE 10.00 ACRE SURVEY INCLUDES 0.79 ACRES IN RESERVE "A", 5.504
ACRES IN LOT 40 AND 3.706 ACRES IN LOT 41.
SUBJECT TO ALL LEGAL HIGHWAYS, ALL LIMITATIONS OF ACCESS TO PUBLIC
ROADS OR HIGHWAYS, LEASES AND RIGHTS OF WAY, ZONING REGULATIONS,
EASEMENTS OF RECORD AND RESTRICTIVE COVENANTS.
THE ABOVE DESCRIPTION WAS PREPARED AS THE RESULT OF A SURVEY BY
WILLIAM B. HENDERSON, REGISTERED SURVEYOR NO. 5242, DATED JULY 6,
1989.
BEING PART OF THE SAME REAL ESTATE CONVEYED BY HERBERT J. MURPHY, JR.
AND PATRICIA A. MURPHY, HIS WIFE, TO MID-OHIO DEVELOPMENT CORPORATION
BY DEED DATED DECEMBER 3, 1971, AND RECORDED IN VOLUME 681, PAGE 608,
DEED RECORDS, LICKING COUNTY, OHIO.
THIS PROPERTY IS SUBJECT TO THE RESTRICTIVE COVENANTS FOR MID-OHIO
INDUSTRIAL PARK ADDITION NO. 3, FILED FOR RECORD WITH THE LICKING
COUNTY RECORDER ON JULY 30, 1976, IN VOLUME 750, PAGE 363, DEED
RECORDS, LICKING COUNTY, OHIO.
<PAGE>
SCHEDULE 1.01B
DESCRIPTION OF RESERVATIONS, EASEMENTS, RESTRICTIONS AND EXCEPTIONS
TO REAL PROPERTY
RESERVATIONS, EASEMENTS, RESTRICTIONS AND EXCEPTIONS OF RECORD
1. Mid-Ohio Industrial Park No. 3 is subject to those restrictive covenants
filed for record on July 30, 1976 at 11:00 A.M., in Volume 750, page 363 of
the Deed Records, Licking County, Ohio.
2. Mid-Ohio Development Corporation gave to Ohio Power Company an easement by
instrument dated August 4, 1976, and recorded in Volume 751, page 462, Deed
Records, Licking County, Ohio.
3. Herbert J. Murphy, Jr. and Patricia R. Murphy, his wife, gave to Ohio Power
Company an easement by instrument dated January 22, 1969, and recorded in
Volume 643, page 670, Deed Records, Licking County, Ohio.
4. Phillip S. Phillips and Ida L. Phillips gave to the State of Ohio an
easement for highway purposes by instrument dated March 17, 1930, and
recorded in Volume 1, page 159 of the Highway Easement Records in the
Office of the Recorder of Licking County, Ohio.
5. Roscoe Hoskinson and Ida Hoskinson, his wife, gave to the Ohio Power
Company an easement by instrument dated January 17, 1934, and recorded in
Volume 307, page 278, Deed Records, Licking County, Ohio.
6. Margaret Cass, unmarried, gave to Columbus & Southern Ohio Electric Company
an easement by instrument dated May 9, 1957, and recorded in Volume 495,
page 376 of the Deed Records, Licking County, Ohio.
7. P.S. Phillips gave to Newark Heat & Light Co. an easement by instrument
dated May 24, 1910 and recorded in Volume 57, page 297, Lease Records,
Licking County, Ohio.
8. P.S. Phillips and Ida L. Phillips gave to The Hopewell Fuel & Gas Co. an
easement by instrument dated June 7, 1930, and recorded in Volume 58, page
274, Lease Records, Licking County, Ohio.
9. P.S. Phillips and Ida L. Phillips gave to A.H. Heisey & Co. an easement by
instrument dated July 22, 1930, and recorded in Volume 58, page 368, Lease
Records, Licking County, Ohio.
<PAGE>
10. There is an affidavit filed by Quantum Chemical Corporation stating that it
is the direct successor to Northern Petrochemical Company, dated January
20, 1989, and recorded in Volume 254 page 26, Official Records, Licking
County, Ohio.
11. Mid-Ohio Industrial Park Addition No. 3 is recorded in Plat Book 13, page
51, et seq. in the office of the Recorder of Licking County, Ohio. This
property is subject to those restrictions, reservations and easements as
shown on the plat of said subdivision. Said plat calls for minimum setback
of 50 feet from James Parkway unless local regulations require a greater
setback. Utilities are 10 feet in width along all rear and side lot lines.
No septic tanks shall be used in the addition. All sanitary effluent shall
be processed through sewage treatment plants meeting the approval of the
Health Department.
12. Mid-Ohio Development Corporation gave to the City of Heath an easement for
the construction, operation, maintenance, and repair of a water line by
instrument dated October 13, 1989 and recorded in Volume 295, page 174,
Official Records, Licking County, Ohio.
13. Mid-Ohio Development Corporation gave to the City of Heath an easement for
the construction, operation, maintenance, and repair of a water line by
instrument dated October 13, 1989 and recorded in Volume 295, page 180,
Official Records, Licking County, Ohio.
14. Mechanics' Lien of Brezina Constructions Services dated June 10, 1996 and
recorded as document number 66466 in volume unknown at pages 217 through
224, Official Records, Licking County, Ohio.
RESERVATIONS EASEMENTS. RESTRICTIONS AND EXCEPTIONS TO BE GIVEN
15. Fix-Corp International, Inc. to give to Quantum Chemical Corporation an
easement for the purpose of loading, weighing and transferring products by
and between motor and rail modes of transportation and for the maintenance
and repair of railroad car loading and unloading ramps.
3 of 3
<PAGE>
SCHEDULE 1.02A
PERSONAL PROPERTY SOLD TO BUYER
<PAGE>
SCHEDULE 1.02B
PERSONAL PROPERTY ASSOCIATED WITH
THAT PORTION OF QUANTUM'S PLASTICS RECYCLING BUSINESS
SOLD TO BUYER
o Raw Material Supplier List (1994 & 1995)
o Parts Suppliers and Service Vendors List (current)
o Raw Materials Purchasing Records
o Plant Operating Procedures
o Quality Control Procedures
<PAGE>
SCHEDULE 5.08
EXISTING OR POTENTIAL CLAIMS, LITIGATION, SUITS, CHARGES,
ACTIONS, GOVERNMENTAL INVESTIGATIONS OR OTHER PROCEEDINGS
1. General Safe & Lock - potential claim for equipment ordered by 3DM LLC and
delivered to the Premises
2. Vendor Unknown - potential claim for office furniture ordered by 3DM LLC
and delivered to the Premises
3. Vendor Unknown - potential claim for granulators ordered by 3DM LLC and
delivered to the Premises
4. Newark Business Equipment - potential claim for fax machine and copier
ordered by 3DM LLC and delivered to the Premises
5. Vendor Unknown - potential claim for telephone system ordered by 3DM LLC
and installed on the Premises
6. Vendor Unknown - potential claims for process equipment improvements
ordered by 3DM LLC and partial completed
7. Glen Clarke - potential materialman's lien for materials ordered by 3DM LLC
and delivered to and installed on the Premises
8. Unknown Individuals - potential claim for personal property left upon the
Premises
9. Ohio Power Co. - potential claims for utility service ordered by 3DM LLC
10. Producers Gas Sales - potential claims for utility service ordered by 3DM
LLC
11. City of Heath, OH - potential claims for water and sewerage services
ordered by 3DM LLC
12. Rumpke - potential claims for refuse disposal services ordered by 3DM LLC
13. United Telephone - potential claims for telephone service ordered by 3DM
LLC
14. ADT - potential claim for equipment and services ordered by 3DM LLC and
installed upon the Premises
<PAGE>
SCHEDULE 5.08 (con't)
15. Litigation pending in the Court of Common Pleas for Hamilton County, Ohio
and styled QUANTUM CHEMICAL CORPORATION V. 3DM LLC, ET AL., case number
A-96-2928
3 of 3
<PAGE>
EXHIBIT A
GENERAL WARRANTY DEED
KNOW ALL MEN BY THESE PRESENTS THAT, QUANTUM CHEMICAL CORPORATION, a Corporation
incorporated under the laws of the State of Virginia (the "Grantor"), for the
consideration of $10.00 and other valuable considerations, received to its full
satisfaction of FIX-CORP INTERNATIONAL, INC., a Corporation incorporated under
the laws of the State of Ohio (the "Grantee"), does GIVE, GRANT, BARGAIN, SELL
AND CONVEY unto the said Grantee, its successors and assigns, the following
described premises, situated in the City of Heath, County of Licking and State
of Ohio:
SITUATED IN THE STATE OF OHIO, COUNTY OF LICKING AND CITY OF
HEATH, AND BOUNDED AND DESCRIBED AS FOLLOWS:
BEING IN T-1, R-12 OF THE UNITED STATES MILITARY LANDS, AND IN
THE MID-OHIO INDUSTRIAL PARK, ADDITION NO. 3, AS RECORDED IN PLAT
BOOK 13, PAGE 51, IN THE LICKING COUNTY DEED RECORDS, AND BEING
MORE FULLY BOUNDED AND DESCRIBED AS FOLLOWS:
BEING ALL OF RESERVE "A", LOT 40 AND THE FOLLOWING PORTION OF LOT
41;
BEGINNING IN THE WESTERLY RIGHT OF WAY LINE OF JAMES PARKWAY,
SAID POINT BEING THE SOUTHEAST CORNER OF SAID LOT 41;
THENCE SOUTH 89 DEG. 25'37" WEST, ALONG THE SOUTH LINE OF LOT 41,
662.49 FEET TO THE SOUTHWEST CORNER OF LOT 41;
THENCE NORTH 0 DEG. 45'14" WEST, ALONG THE EASTERLY LINE OF THE
NEW YORK CENTRAL RAILWAY COMPANY, 243.50 FEET, TO A POINT;
THENCE SOUTH 89 DEG. 25'37" EAST, PASSING THROUGH LOT 41, A
DISTANCE OF 663.41 FEET TO A POINT;
THENCE SOUTH 0 DEG. 31'52" EAST, PASSING ALONG THE WESTERLY RIGHT
OF WAY LINE OF JAMES PARKWAY, 243.50 FEET TO THE PLACE OF
BEGINNING;
THE ABOVE 10.00 ACRE SURVEY INCLUDES 0.79 ACRES IN RESERVE "A",
5.504 ACRES IN LOT 40 AND 3.706 ACRES IN LOT 41.
SUBJECT TO ALL LEGAL HIGHWAYS, ALL LIMITATIONS OF ACCESS TO
PUBLIC ROADS OR HIGHWAYS, LEASES AND RIGHTS OF WAY, ZONING
REGULATIONS, EASEMENTS OF RECORD AND RESTRICTIVE COVENANTS.
THE ABOVE DESCRIPTION WAS PREPARED AS THE RESULT OF A SURVEY BY
WILLIAM B. HENDERSON, REGISTERED SURVEYOR NO. 5242, DATED JULY 6,
1989.
BEING PART OF THE SAME REAL ESTATE CONVEYED BY HERBERT J. MURPHY,
JR. AND PATRICIA R. MURPHY, HIS WIFE, TO MID-OHIO DEVELOPMENT
CORPORATION BY DEED DATED DECEMBER 3, 1971, AND RECORDED IN
VOLUME 681, PAGE 608, DEED RECORDS, LICKING COUNTY, OHIO.
THIS PROPERTY IS SUBJECT TO THE RESTRICTIVE COVENANTS FOR
MID-OHIO INDUSTRIAL PARK ADDITION NO. 3, FILED FOR RECORD WITH
THE LICKING COUNTY RECORDER ON JULY 30, 1976, IN VOLUME 750,
PAGE 363, DEED RECORDS, LICKING COUNTY, OHIO.
Be the same more or less, but subject to all legal highways.
1 of 3
<PAGE>
Exhibit A
To have and to hold the above granted and bargained premises,
with the appurtenances thereunto belonging, unto the said Grantee, its
successors and assigns forever.
The Grantor, does for itself and its successors and assigns, covenant with the
Grantee its successors and assigns, that at and until the ensealing of these
presents, it is well seized of the above described premises, as a good and
indefeasible estate in FEE SIMPLE and has good right to bargain and sell the
same in manner and form as above written, and that the same are free and
clear from all incumbrances whatsoever, except those existing restrictions,
conditions and easements of record and that it will Warrant and Defend said
premises, with the appurtenances thereunto belonging, to the said Grantee, its
successors and assigns, forever, against all lawful claims and demands
whatsoever.
Subject to a Purchase and Sale Agreement between Quantum Chemical Corporation
and Fix-Corp International, Inc. dated August 14, 1996 and an Environmental
Indemnification Agreement dated August 14, 1996 Grantee covenants and agrees
that it will not directly or indirectly attempt to compel Grantor, its parent,
affiliates, subsidiaries, successors or assigns to clean up or remove any
underground petroleum or other hazardous substance or pollutant or any
contamination of tile soil or groundwater and any effect related thereto, or
seek damages for same. This shall be a covenant running with the land, and
shall be binding on any successor to or assignee of Grantee or subsequent
owners.
IN WITNESS WHEREOF, said corporation sets its hand and corporate
seal, by___________________________, its _____________________ this ________ day
of ___________________, 1996.
Signed and acknowledged in presence of: QUANTUM CHEMICAL CORPORATION
- -------------------------------------- By:-------------------------------
- -------------------------------------- -------------------------------
TYPED NAME
-------------------------------
TITLE
2 of 3
<PAGE>
EXHIBIT A
THE STATE OF OHIO )
) SS.
COUNTY OF HAMILTON )
Before me, a notary public, in and for said County, personally
appeared the above named by ___________________, its __________________, who
acknowledged that he did sign the foregoing instrument and that the same is
the free act and deed of said Corporation, and the free act and deed of him
personally as such officer.
IN TESTIMONY WHEREOF, I have hereunto set my hand and official
seal, at Cincinnati, County of Hamilton, State of Ohio, this _____ day of
________________, A.D. 1996.
------------------------------
Notary Public
THIS INSTRUMENT PREPARED BY MICHAEL P. FERRO, ATTORNEY.
<PAGE>
EXHIBIT B
GENERAL BILL OF SALE
GENERAL BILL OF SALE, dated ____________, 1996 from QUANTUM
CHEMICAL CORPORATION, a Virginia corporation ("Quantum"), to Fix-Corp
International, Inc., an Ohio corporation ("Buyer").
WITNESSETH:
WHEREAS, Quantum and Buyer are parties to a Purchase and Sale
Agreement dated August 14, 1996 (the "Agreement"), which provides, among
other things, for the sale by Quantum to Buyer of assets, machinery and
equipment, personal property and a portion of Quantum's post-consumer plastic
recycling business (as defined in the Agreement).
NOW, THEREFORE, for and in consideration of the premises and
other good and valuable consideration, the receipt and adequacy of which are
acknowledged by Quantum:
1. Quantum does hereby sell, transfer, assign, convey, set
over and deliver to Buyer all of Quantum's right, title and interest in and
to assets set forth in Schedules 1.02A and 1.02B of the Agreement.
2. Quantum hereby conveys to Buyer good and marketable title
to the assets being conveyed hereby, free and clear of all liens, security
interests or any other encumbrances of any kind whatsoever.
3. Quantum, for itself, its successors and assigns, hereby
covenants that, from time to time after the delivery of this instrument, at
Buyer's request and without further consideration, Quantum will do, execute,
acknowledge and deliver, or will cause to be done, executed, acknowledged and
delivered, all such further acts, conveyances, transfers, assignments, powers
of attorney and assurances as Buyer reasonably may require to more
effectively convey, transfer to and vest in Buyer, and to put Buyer in
possession of, any of the assets.
4. This instrument shall be binding upon Quantum and its
successors and assigns and shall inure to the benefit of Buyer and its
successors and assigns.
5. This instrument shall be governed by and construed in
accordance with the laws of the State of Ohio.
IN WITNESS WHEREOF, Quantum has caused this General Bill of
Sale to be duly executed as of the date first above written.
QUANTUM CHEMICAL CORPORATION
BY: -------------------------------------
NAME (PRINTED): -------------------------
TITLE: ----------------------------------
<PAGE>
EXHIBIT C
ENVIRONMENTAL INDEMNIFICATION AGREEMENT
THIS AGREEMENT, made August 14, 1996 is among QUANTUM CHEMICAL
CORPORATION, a Virginia corporation ("Quantum"), and Fix-Corp International,
Inc., an Ohio corporation ("Buyer").
WHEREAS, simultaneously with the execution and delivery of this
Environmental Indemnification Agreement (this "Agreement"), Quantum and Buyer
are consummating the transactions contemplated by that certain Purchase and Sale
Agreement, dated August 14, 1996 (the "Purchase Agreement"); and
WHEREAS, in connection with the Purchase agreement, the
parties desire to set forth their understandings with respect to certain
environmental matters which, by the terms of the Purchase agreement, are
specifically excluded from the scope of that agreement.
NOW, THEREFORE, Quantum and Buyer agree as follows:
SECTION 1. DEFINITIONS:
(a) The terms defined in the Purchase Agreement and otherwise
not defined in this Agreement are being used as defined in the Purchase
agreement.
(b) "Environmental Claims" shall mean any claim or demand by any
governmental authority or any person for personal injury (including sickness,
disease or death), property damage or damage to the environment resulting from
the release of any chemical, material or emission into the environment at or in
the vicinity of the Plant.
<PAGE>
(c) "Environmental Matter" means any pollution or disposal of
materials at or in the vicinity of the Plant in connection with the operation
of the Plant.
(d) "Exposed Person" shall mean (i) any employee or former
employee, (ii) any contractor or former contractor, or (iii) any employee of
any contractor or former contractor in each case of Quantum and Buyer who
works or has worked or performs or has performed work at the Plant.
(e) "Shared Environmental Claim" shall mean an Environmental
Claim arising out of any operations conducted, commitment made, product
manufactured or any action taken or omitted to be taken by Quantum or Buyer
in respect of the Assets (including but not limited to the business
operations, transactions or conduct of the business directly or indirectly
related thereto) during periods both prior to and after the Closing Date.
SECTION 2. INDEMNIFICATION AGAINST ENVIRONMENTAL CLAIMS.
(a) BY QUANTUM FOR PRE-CLOSING ACTIVITY. On and after the
Closing Date, Quantum shall fully and promptly pay, perform, discharge,
defend, indemnify and hold harmless Buyer, its parent and subsidiaries and
affiliates, and their respective directors, officers and employees from and
against any claim, demand, action or suit, loss, cost, damage, fine, penalty
or expense (including reasonable attorneys' fees) resulting from any
Environmental Claim arising out of any operations conducted, commitment made,
product manufactured or any action taken or omitted solely by Quantum with
respect to the Assets (including but not limited to the business operations,
transactions or conduct of the business directly or indirectly related
thereto) during periods prior to and including the Closing Date.
<PAGE>
(b) BY BUYER FOR POST-CLOSING ACTIVITY. On and after the Closing Date,
Buyer shall fully and promptly pay, perform and discharge, defend, indemnify
and hold harmless Quantum its parent, subsidiaries and affiliates and their
respective directors, officers and employees from and against any claim,
demand, action or suit, loss, cost, damage, fine, penalty or expense
(including reasonable attorneys' fees) resulting from any Environmental Claim
arising out of any operations conducted, commitment made, product
manufactured or any action taken or omitted solely by Buyer with respect to
the Assets (including but not limited to business operations, transactions or
conduct of the business directly or indirectly related thereto) during
periods after the Closing Date other than any action taken by Buyer, in good
faith exercising reasonable care, following the Closing Date on behalf or at
the direction of Quantum pursuant to this Agreement.
(c) CERTAIN SHARED ENVIRONMENTAL CLAIMS OF EXPOSED PERSONS.
All liabilities or obligations of Quantum or Buyer arising out of any Shared
Environmental Claim for personal injury (including sickness, disease or
death) made by an Exposed Person (including workmen's compensation claims)
shall be apportioned between Buyer and quantum in the proportion that such
Exposed Person's length of service (x) prior to and including the Closing
Date, in the case of Quantum and (y) after the Closing Date, in the case of
Buyer, bears to such Exposed Person's total length of service both prior to
and after the Closing Date. For the purposes of this provision, with respect
to (A) any contractor or employee of any contractor, the term "length of
service" means the period or periods of time during which such person was
actually exposed to such chemical, material or emission, that is the basis of
the Shared Environmental Claim, while working at the Plant or the Facility,
irrespective of the period of time during which such person was otherwise
employed by such contractor, and (B) any employee of Quantum or Buyer, the
<PAGE>
term "length of service" means that period or periods of time when such
employee was actually exposed to the chemical, material or emission while
working for Quantum or Buyer. The calculations required in this agreement
shall be rounded to the nearest month.
(d) ENVIRONMENTAL CLAIMS OTHER THAN OF EXPOSED PERSONS.
Except as otherwise provided in subsection (c) above, all liabilities or
obligations of Quantum or Buyer arising out of Environmental Claims not
solely attributable to either Buyer's or Quantum's operation of the Plant
shall be born as follows:
(i) Any such claim asserted prior to January 1, 2001 shall
be the sole responsibility of Quantum.
(ii) Any such claim asserted on or after January 1, 2001
will be the sole responsibility of the Buyer.
For the purposes of subparagraphs (i) and (ii) above, a claim shall be deemed to
have been asserted at such time as a summons and complaint (or their equivalent)
is served on either Buyer or Quantum.
(e) BUSINESS INTERRUPTION, CESSATION, SHUTDOWN. Any claim
for losses arising out of a business interruption, cessation or shutdown at
the Plant shall be included in subsection (a) of this Section 2 above only if
the business interruption, cessation or shutdown is directly caused by a
lawful governmental or judicial order to cease or reduce operations of the
Plant for reasons directly relating to an Environmental Matter which occurred
solely on or before the Closing Date. Except as expressly provided in this
subsection (e), Buyer shall not be entitled to any indemnification under this
Agreement for any losses arising out of any business interruption, cessation
or shutdown of the Plant.
<PAGE>
Losses for the purpose of this subsection shall consist only of
Buyer's out-of-pocket expenses, which include only the following costs:
maintenance, insurance, labor, utilities and taxes. Buyer shall use its best
efforts to minimize such losses. Quantum shall not be responsible for loss of
profits, revenues, business advantage, or business opportunity or any
consequential loss or damage. The maximum amount for which Quantum shall be
liable under this subsection shall never exceed, in the aggregate, $250,000 for
all such business interruptions, cessations or shutdowns.
SECTION 3. INDEMNIFICATION PROCEDURES.
(a) NOTICE OF CLAIMS. Promptly following receipt by Buyer or
Quantum of any claim, determination, suit, action or proceeding which is
subject to the provisions of Section 2 (an "Action"), such party shall give
written notice of such action to the other party hereto, accompanied by
copies of any written documentation with respect thereto received by the
notifying party and stating the basis upon which indemnification is being
sought pursuant to this Agreement (whether pursuant to subsections (a), (b),
(c) or (d) of Section 2). Such notice shall constitute a claim for
indemnification under this Agreement (hereinafter referred to as "Claim").
(b) DEFENSE OF CLAIMS. (i) ONE PARTY SOLELY RESPONSIBLE.
With respect to Claims asserted under subsection (a), (b), (d)(i) or (d)(ii)
of Section 2 in respect of which Buyer or Quantum, as the case may be, is
solely responsible, the party required to provide indemnification under this
Agreement (the "Indemnifying Party") shall have the right, at its option, to
compromise or defend, at its own expense and with its own counsel, any such
Action. The other party (the "Indemnified Party") shall have the right, at
its option, to participate in the
<PAGE>
settlement or defense of any such Action, with its own counsel and at its own
expense, but the Indemnifying Party shall have the right to control such
settlement or defense. Notwithstanding the foregoing, should any such action
have the potential for materially and adversely affecting the operations at
the Plant, Buyer shall have the right to jointly participate and approve the
settlement or defense thereof without waiving any rights to indemnification
under this Agreement. The parties agree to cooperate in any such settlement
or defense and to give each other full access to all information relevant to
any Claim. In the event that the Indemnifying Party fails to notify the
Indemnified Party of its intent to take any action within 15 days after
receipt of a Claim, the Indemnified Party (without waiving any rights to
indemnification under this Agreement) may defend such Action and may enter
into any good faith settlement of such Claim without the prior written
consent of the Indemnifying Party.
(ii) BOTH PARTIES RESPONSIBLE. With respect to Claims
asserted under subsection (c) of Section 2 in respect of which responsibility
is apportioned between Buyer and Quantum, Buyer and Quantum shall be
represented by joint counsel selected by the party who, as of the date the
Claim is made, would bear more than 50% of the liability therefore
(determined in accordance with the applicable apportionment provisions
contained in such subsections), which counsel shall be reasonably acceptable
to the other party. The fees and expenses of such counsel shall be shared by
Buyer and Quantum in the same proportion as their respective liability
(determined in accordance with the applicable apportionment provisions). The
parties agree to cooperate with each other in the defense and settlement of
such Action, to give each other full access to all information relevant
thereto, and, so long as the other party hereto complies with the terms of
this Agreement, not to file a cross-claim against the other. Either party
shall have the right, at its
<PAGE>
option, to participate in the settlement or defense of such Action with its
own counsel, at its own expense, but joint counsel shall have the right to
control such settlement or defense.
In the event that either party receives a settlement offer
from, or desires to make a settlement offer to, the plaintiff(s) in any such
Action (as the case may be, a "Settlement Offer"), such party shall promptly
give written notice to the other party, describing in reasonable detail the
proposed terms of the Settlement Offer. The following provisions shall
govern with respect any such Settlement Offer:
(A) Each party shall have 15 days after receipt of a
Settlement Offer within which to notify the other party of its
intention to accept or reject the Settlement Offer.
(B) (i) Neither party may make or accept a Settlement
Offer unless the Settlement Offer is made (x) jointly available
to or on behalf of, both parties or (y) an identical Settlement
Offer is made to or on behalf of, each party; provided, however,
(ii) where a settlement offer originates with one Defendant,
that Defendant shall advise the other Defendant of its
intention to make an offer to the Plaintiff(s). If both
Defendants agree on an offer then such offer shall be
communicated to the Plaintiff(s). Where only one Defendant
wants to offer to settle, it may proceed individually to
settle, but must keep the other defendant advised of the
negotiations, and give the other Defendant the opportunity to
join in a settlement offer.
(C) In the event that any party unilaterally makes or
accepts a Settlement Offer in violation of subparagraph (B),
the provisions of Section 2 shall not apply to such Action and
the settling party shall be solely liable for the entire
amount of any judgment rendered
<PAGE>
against the non-settling party and for all costs incurred by
the non-settling party in defending such Action.
(D) In the event that both parties settle the Action,
the settlement shall be apportioned between Buyer and Quantum
in accordance with the applicable provisions of Section 2.
(E) In the event that only one party settles the Action
(under circumstances not prohibited by subparagraph (B), such
party shall have no further liability under Section 2, and all
costs incurred by the non-settling party subsequent to such
settlement shall be born entirely by the non-settling party.
Notwithstanding such settlement, however, the settling party
will continue to cooperate with the non-settling party in the
defense of such action, at the non-settling party's expense,
and shall give the non-settling party full access to all
information relevant thereto.
(F) In the event that one party desires to settle the
action, but the Plaintiff will not settle with only one
Defendant, and the matter goes to judgment against both
Defendants, then the Defendant which refused to settle shall
be liable for the entire judgment in excess of the amount for
which the party desiring to settle could have settled the
claims against it.
SECTION 4. ADDITIONAL AGREEMENTS.
(a) COOPERATION. Buyer agrees to cooperate in good faith
with Quantum to provide Quantum and their representatives (including
employees and independent contractors) access during normal business hours to
such facilities, employees, records, documents, including copies
<PAGE>
thereof, office space to the extent reasonably necessary to permit Quantum to
discharge, on a timely basis, their obligations under this Agreement or under
any consent decree entered into with the EPA. Except as otherwise provided
in this Agreement, Quantum will reimburse Buyer for its cost in providing
such utilities and services.
(b) FURTHER ASSURANCE. Quantum agree to cooperate with Buyer,
in discharging their obligations under this Agreement, and not to
unreasonably interfere with the operation of the Plant in doing so and to use
all best efforts to insure that discharging Quantum's obligations does not
materially interfere with the operation of the Plant.
(c) COSTS. Except as otherwise provided, the costs of
testing, assessment and remediations shall be paid by Quantum.
(d) SCOPE OF UNDERTAKINGS. Except as otherwise provided in
this Agreement, the obligation of Quantum to perform assessment or remedial
actions contemplated hereby shall be conducted as Quantum deems in good faith
to be necessary. Quantum shall, to the exclusion of Buyer, undertake all
contacts, discussions, negotiations, decisions and any other dealings of like
nature or kind relating to any of the environmental matters which are
Quantum's responsibility under this Agreement with any federal, state or
local governmental matters which are Quantum's responsibility under this
Agreement with any federal, state or local governmental or judicial authority
having jurisdiction with respect thereto. Notwithstanding the foregoing
should any such action have the potential for materially and adversely
affecting the operations of the Plant, Buyer shall have the right to jointly
participate in any such dealings.
(e) PURPOSES OF AGREEMENT. It is expressly understood and
agreed that Quantum's entering into this Agreement with Buyer for the purpose
of facilitating the Closing of
<PAGE>
the transaction contemplated by the Purchase Agreement and that this
Agreement does not constitute any admission, express or implied, by Quantum
of any violation, liability or wrongdoing by Quantum. This Agreement shall
inure to the benefit of and be binding on Quantum and Buyer and their
respective successors and assigns, nothing in this agreement, express or
implied, being intended to confer upon any other person any rights or
remedies under this Agreement. In consideration of the undertaking of
Quantum contained in this agreement, Buyer agrees to use its reasonable
efforts not to disclose the terms and provisions of this Agreement to any
third party, except as is necessary to carry out the purposes of this
Agreement or pursuant to applicable legal requirements.
(f) COMPLIANCE WITH LAWS. The parties agree to comply, in
good faith, with all applicable laws relating to the subject matter of this
Agreement. Each party will obey the terms of any final judgment or decree of
any court of competent jurisdiction rendered against it or any final order of
the EPA or any governmental or judicial authority with jurisdiction with
respect to the subject matter of this Agreement (PROVIDED, HOWEVER, that no
such party shall be required to obey any judgment, decree or order being
protested or appealed, in good faith, by such party by appropriate
proceedings).
(g) GENERAL. This Agreement sets forth the entire
understanding of the parties with respect to the environmental matters and
supersedes all prior and contemporaneous agreements, arrangements and
understandings relating to the subject matter hereof, whether oral or written
and whether consistent or inconsistent. No representation, promise,
inducement or statement of intention has been made by the parties hereto
which is not embodied in this agreement, and no party shall be bound by or
liable for any alleged representation, promise,
<PAGE>
inducement or statement of intention not so set forth. To the extent that
any provision of this Agreement is inconsistent with the provisions of the
Purchase Agreement, the provisions of this Agreement shall govern. This
Agreement may be amended or modified only by a written instrument executed by
Buyer and Quantum or by their successors and assigns. All notices, requests,
demands and other communications under this Agreement shall be in writing and
shall be deemed to have been duly given if given in manner provided in the
Purchase Agreement. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of Ohio, without giving
effect to the conflict of law principles of the State of Ohio.
SECTION 5. COVENANT-NOT-TO-SUE.
Buyer covenants and agrees that it will not directly or
indirectly, attempt to compel Quantum, its parents, affiliates, successors or
assigns to clean up or remove any underground petroleum or other hazardous
substance or pollutant or any contamination of the soil or groundwater and
any effect related thereto, or seek damages therefor, and Buyer further
agrees that the foregoing covenant-not-to-sue will be inserted in the deeds
of conveyance for the Plant site, shall be a covenant running with the land,
and shall be binding on any successor to or assignee of Buyer or subsequent
owners; PROVIDED, HOWEVER, that this covenant is conditioned on Quantum's
compliance with the terms of this Agreement.
SECTION 6. TERM OF AGREEMENT.
The liabilities and obligations contained in this Agreement
shall survive the Closing and shall be effective and enforceable until the
expiration of any liability or obligation provided in this
<PAGE>
agreement, by discharge, performance or otherwise; PROVIDED, HOWEVER, that
nothing in this agreement shall constitute any waiver by any party of any
defense based on laches or any similar legal or equitable grounds for
estoppel relating to the failure of a party to have asserted its rights on a
timely basis.
IN WITNESS WHEREOF, the parties have caused their authorized
representatives to execute this Agreement effective this 14th day of August,
1996.
QUANTUM CHEMICAL CORPORATION FIX-CORP INTERNATIONAL, INC.
By: By:
-------------------------- ----------------------------
Title: Title:
----------------------- -------------------------
ATTEST: ATTEST:
---------------------- ------------------------
By: By:
-------------------------- ----------------------------
<PAGE>
EXHIBIT D
EASEMENT
KNOW ALL MEN BY THESE PRESENTS, That FIX-CORP INTERNATIONAL,
INC., an Ohio corporation, ("Grantor") for and in consideration of the sum of
One Dollar ($1.00) and for other good and valuable consideration paid by
QUANTUM CHEMICAL CORPORATION, a Virginia corporation, ("Grantee") the receipt
of which is acknowledged, do by this instrument remise, release, grant and
convey to Grantee, its successors and assigns forever, an easement in and to
a certain plot of land 145 feet wide by 465.30 feet on the longest side, as
shown by the attached plat and described as follows:
Situated in the State of Ohio, County of Licking, City of
Heath, in part of Reserve "A" and in part of Lot No. 40 in
Mid-Ohio Industrial Park, Addition No. 3, as shown of record
in Plat Book 13, Pages 51 and 52, said Reserve "A" and Lot
No. 40 having been conveyed to Quantum Chemical Corporation
by deed of record in Official Record 314, Page 867, all
references to Recorder's Office, Licking County, Ohio, said
easement bounded and described as follows;
Beginning at a point in the curved westerly right-of-way of
James Parkway (50-feet wide), at the northeast corner of Lot
No. 39 and at the southeast corner of Reserve "A" in said
Mid-Ohio Industrial Park, Addition No. 3;
thence S 89DEG. 25' 27" W along a portion of the south line
of said Reserve "A" and along a portion of the north line of
said Lot No. 39 a distance of 465.30 feet to a point;
thence N 0DEG. 31' 52" W crossing said Reserve "A" and
crossing a portion of said Lot No. 40 a distance of 145.00
feet to a point;
thence N 89DEG. 25' 37" E parallel with and 145.00 feet
northerly by perpendicular measurement from the south line of
said Reserve "A" and crossing a portion of said Lot No. 40 a
distance of 433.09 feet to a point in the curved westerly
right-of-way of James Parkway and in the curved easterly line
of said Lot No. 40;
thence southerly along a portion of the curved westerly line
of James Parkway, along a portion of the curved easterly line
of said Lot No. 40 and along the curved easterly line of said
Reserve "A" and with a curve to the left, data of which is:
radius = 625.00 feet and sub-delta = 13DEG. 38' 48" a
sub-chord distance of 148.51 feet bearing S 13DEG. 03' 23" E
to the place of beginning;
containing 64,695 square feet (= 1.485 acres) of land more or
less.
<PAGE>
It is the intention of the Grantor to grant this easement in the plot of land
along the line described giving Grantee the right and privilege of ingress and
egress to and use of the plot of land for the purpose of the loading, unloading,
weighing and transferring products by and between motor and rail modes of
transportation.
It is further understood in addition to the easement conveyed by this
instrument, Grantee shall have the right to go in and upon the premises of
the Grantor along the sides of the easement as may be necessary for the
loading, unloading, weighting, transfer of products by and between motor and
rail modes of transportation and the maintenance and repair of the railroad
car loading and unloading ramps.
Grantor has the full power to convey this easement, and warrants and will
defend the same against all claims by any persons.
IN WITNESS WHEREOF, the Grantor sets its hand and corporate seal
by____________________________, its ____________________________ and by
____________________________, its ____________________________ this 14th day of
August, 1996.
FIX-CORP INTERNATIONAL, INC.
By:
------------------------------------
By:
------------------------------------
Signed and acknowledged in the presence of:
- -------------------------------------------
- -------------------------------------------
<PAGE>
STATE OF OHIO )
) SS:
COUNTY OF HAMILTON )
BEFORE ME, a Notary Public in and for the County, personally
appeared the above-named FIX-CORP INTERNATIONAL, INC. by
_____________________, its ___________________ and _____________________, its
_______________, who acknowledge that they did sign the foregoing instrument
and that the same is the free act and deed of said company and the free act
and deed of each of them personally and as such officers.
IN TESTIMONY WHEREOF I have set my hand and official seal at
Cincinnati, Ohio, this 14th day of August, 1996.
--------------------------------------
Notary Public
THIS DOCUMENT WAS PREPARED BY MICHAEL P. FERRO, ATTORNEY.
<PAGE>
EXHIBIT E
TRACK LEASE AGREEMENT
THIS AGREEMENT, made as of August 14th, 1996 by and between Quantum Chemical
Corporation, a Virginia corporation, with its office and principal place of
business at 11500 Northlake Drive, Cincinnati, OH 45249 ("Landlord"), and
Fix-Corp International, Inc. an Ohio corporation, with a place of business at
27040 Cedar Road, Suite 218, Cleveland, OH 43056 ("Tenant"):
WITNESSETH:
1. LEASE: Landlord leases to Tenant and Tenant hires from Landlord
for the term and according to the covenants and conditions
contained in this Lease certain land at 1835 James Parkway,
Heath, OH, consisting of a railroad siding of Two Hundred
linear feet (200') of track including all land under said
tracks, as described and as outlined in red in the attached
Exhibit A, which is made a part of this Agreement,
("Premises"), for the sole purpose of the storage of railcars
owned, leased or consigned to Tenant containing plastics,
other than liquid, and for no other purpose whatsoever.
Landlord specifically reserves the right, at any time during
this Lease, to substitute other track of the same length or
aggregate length. Tenant shall have the right of ingress and
egress to the Premises over the Landlord's property which lies
between the Premises and the Tenant's property.
2. TERM: The tenancy of this Lease shall be for a period of ten
(10) years beginning August 14, 1996 and ending August 14,
2006, with an option for an additional period of ten (10)
years beginning August 14, 2006 and ending August 14, 2016.
The term of this Lease is subject to termination at any time
by Tenant upon 90 days advance written notice to Landlord.
3. RENT: Tenant shall pay to Landlord or its
agent an annual rent in advance in the amount of One Thousand
Dollars ($1,000.00) each year or part thereof this Lease
continues in effect subject to annual adjustment not to
exceed the regional cost-of-living index for the preceding
twelve month period. Rent payments, unless Tenant is
otherwise notified in writing, shall be delivered to:
Quantum Chemical Corporation
11500 Northlake Drive
MSN 24
Cincinnati, OH 45249
Attn: Logistics Contracts Administrator
FAX: (513) 530-6661
<PAGE>
4. UTILITIES: Tenant shall pay the cost of
utilities consumed by it on the Premises, including but not
limited to gas, electricity, water, sewer, power, and
telephone service. Any utility accounts shall be maintained
in Tenant's own name.
5. RISK OF LOSS: Notwithstanding any other term
or provision herein, Tenant shall bear all risk of injury or
loss to any person or property upon the Premises, except as
may be the result of any the intentional or willful act or
omission by or the gross negligence of Landlord.
6. INDEMNIFICATION OF LANDLORD: Tenant agrees to
pay, and to protect, indemnify, defend and hold harmless
Landlord from and against all liability, damages, costs and
expenses from causes of action, suits, claims, demands and
judgments of any nature whatever arising out of or in any way
connected with Tenant's occupancy of the Premises. Tenant
expressly acknowledges that it agrees to indemnify Landlord
for its own negligence, except to the extent that the causes
of action, suits, claims, demands and judgments of any nature
are the result of Landlord's gross or sole negligence.
7. USE: The Premises shall be used and occupied
by Tenant as a spur line for the spotting, loading and
off-loading of rail cars. Tenant shall be responsible to
obtain any Certificate of Occupancy or any other license or
permit as may be required by law.
8. CONDITION AND MAINTENANCE OF PREMISES: Tenant
accepts the Premises in their "as is" condition. Landlord
shall be responsible performing routine maintenance and
repair to keep the premises in a well maintained safe, clean
and sightly condition. Tenant agrees to reimburse Landlord
for Twenty-five percent (25%) of the actual cost of
maintenance and repair for the benefit of the entire spur
track and One Hundred Percent (100%) of the actual costs of
maintenance and repair for the sole benefit of the Tenant or
the Premises. Tenant shall not use, store, generate, treat
or dispose of any hazardous substance on the Premises without
the prior written consent of the Landlord. Such consent
shall not be unreasonably withheld.
8.01. In the event that any hazardous
substance is discovered to have been released upon or from
the Premises during the term of this Lease and such release
is due to any act or omission of Tenant, Landlord shall, at
its sole discretion, take all steps necessary to remove and
properly dispose of such hazardous substance and clean-up or
repair any contamination or damage resulting therefrom, in
full compliance with all applicable laws and regulations.
The actual costs of such removal, disposal, clean-up or
repair shall be for the account of Tenant and Tenant shall
reimburse Landlord for these costs within thirty days after
demand is made by the Landlord. Tenant agrees to defend,
indemnify and hold Landlord harmless from and against any
liabilities, including judgments, court costs, and reasonable
attorney fees claimed or asserted against or sustained by
Landlord resulting from Tenant's failure to fully comply with
the provisions of this Section.
9. ALTERATIONS AND IMPROVEMENTS: Tenant may with
Landlord's written consent make improvements to the Premises
at its sole cost and expense as may be required by Tenant's
<PAGE>
business. Such improvements and installations shall become
the property of Landlord to the extent affixed to the
Premises at any time during the term of Tenant's occupancy
under this Lease. Any damage caused by removal of any item
retained by Tenant shall be repaired by Tenant. Tenant
agrees that any and all alterations or additions shall be
made in compliance with the building codes and ordinances,
laws and regulations applicable to the Premises including,
but not limited to, the rules and regulations of the American
Association of Railroads ("AAR") and the railroad providing
rail transportation and switching service to the spur track.
Should a building or other permit be required by Tenant to
accomplish any improvement, Landlord agrees to execute all
documents required to obtain such permit if Landlord has
consent to the improvements.
10. ASSIGNMENT AND SUBLETTING: Tenant may not sublet the Premises or
assign this Lease.
11. TAXES AND ASSESSMENT: During the term of this
Lease, Tenant shall pay on or prior to the due date all City,
County, State and Federal taxes or assessments as may accrue
based on Tenant's activities or improvements made by Tenant,
if any, and penalties imposed, assessed or levied upon the
same. Landlord will provide Tenant with timely written notice
of the above-referenced taxes so as to enable Tenant to pay
same when due. Landlord shall otherwise pay general real
estate taxes as levied upon the Premises.
12. DEFAULT BY TENANT: If Tenant defaults in any of the covenants or
agreements on its part to be performed under this Lease, and
if Tenant fails to cure any such default within ten (10) days
after receipt of written notice from Landlord or after the
expiration of a reasonable time from receipt of such notice
if such default could not be cured within ten (10) days by
Tenant's diligent efforts, then Landlord may at its option at
any time afterwards declare this Lease and all rights under
it immediately terminated, re-enter and take possession of
the Premises pursuant to a applicable provision of law, and
remove all persons and all Tenant's property from the
Premises.
13. HOLDING OVER: Unless otherwise agreed in
writing, any holding over by Tenant after expiration or
termination of the term of this Lease shall be construed as a
default of this Lease and rents shall be assessed at the rate
of Fifty Dollars ($50.00) per day or portion of a day.
14. SURRENDER: At the expiration or termination
of this Lease, Tenant agrees to quit and surrender possession
of the Premises to Landlord in its original condition,
reasonable wear and tear expected, with all of Tenant's
property removed, except as may be provided in Article 9,
ALTERATIONS AND IMPROVEMENTS.
15. RIGHTS OF PARTIES: Either Landlord or Tenant
may from time to time at its option exercise all rights and
remedies which any may have at law or in equity and nothing
in this Lease shall be construed as in any way abridging or
waiving any such rights or remedies. Any consent, waiver,
compromise or indulgence by one party of or under any of the
provisions of this Lease, or as to any breach or default
under this Lease committed by any other
<PAGE>
party, shall not constitute or be construed as a waiver of
the that party's right to enforce strict interpretations and
performance of the conditions and terms of this Lease at any
other times.
16. NOTICES: Any written notice required or given
under this Lease to Landlord shall be given to Landlord at
the above address in Article 3 and any notice given to Tenant
at the above address, or any other address as the parties may
designate from time to time.
17. RIGHT OF ENTRY: Landlord may enter the
Premises for the purpose of making inspection, in connection
with any portion of the Premises during regular business
hours, or at any time in the event of emergency.
18. QUIET ENJOYMENT: Subject to the terms of this
Lease, Landlord covenants and agrees that Tenant, so long as
it shall not be in default under this Lease, shall peacefully
and quietly hold, occupy and enjoy the Premises during this
Lease.
19. BINDING FUTURE PARTIES: Each and all of the
terms and agreements contained in this Lease shall be binding
upon and inure to the benefit of the Landlord and the Tenant,
their successors and assigns.
20. PARAGRAPH HEADINGS: Paragraph headings
contained in this Lease shall in no way limit or restrict the
interpretation to be placed upon any word or phrase following
such heading.
21. NO ORAL MODIFICATION: This instrument
contains the entire agreement made between the parties and
may not be modified orally or in any manner other than by an
agreement in writing signed by the Landlord and the Tenant or
their respective successor in interest.
IN WITNESS WHEREOF, the Landlord and the Tenant have duly executed this Lease on
the day and year first above written. Individuals signing on behalf of a
principal warrant that they have the authority to bind their principals.
LANDLORD TENANT
QUANTUM CHEMICAL CORPORATION FIX-CORP INTERNATIONAL, INC.
By: By:
------------------------------ ------------------------------------
Title: Title:
--------------------------- ---------------------------------
Date: Date:
---------------------------- ----------------------------------
<PAGE>
LINE 7 EQUIPMENT AND MACHINERY LIST
<TABLE>
<CAPTION>
ASSET ID ASSET NAME MAKE MODEL NOTE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CY1001 BALE CONVEYOR HUSTLER B2677 (SER.#) 72" W x 27' L 1/4" PLATE
STEEL BELT
B81002 BALE BREAKER HUSTLER B2679 (SER #) 72" W x 72' L w/ 30 HP - EDDY
CURRENT DRIVE
CY1003 VIBRATORY CONVEYOR & PUNCH-PLATE SCREEN HUSTLER B2680 (SER. #) 60" W x 23' L PUNCH-PLATE
2" x 10 ROWS - CONVEYOR BED
CY1004 FLAT-BELT, REFUSE CONVEYOR HUSTLER B2682 (SER. #) 12" W x 6' L FLAT BELT w/
CLEATS
CY1005 INCLINED, CLEATED, WASTE CONVEYOR HUSTLER B2684 (SER. #) 12" x 12' L FLAT BELT WITH
CLEATS
CY1006 MANUAL SORTING CONVEYOR HUSTLER B2686 (SER. #) 36" W x 30' L FLAT BELT
CY1007 INCLINED, CLEATED CONVEYOR HUSTLER B2689 (SER. #) 36" W x 20' l FLAT BELT
w/ MAG. HEAD PULLEY
CY1007A SLIDE CONVEYOR CUSTOM BRIDGES INCLINED CLEATED
CONVEYORS
CY1011 INCLINED, CLEATED CONVEYOR HUSTLER B2692 (SER. #) 36" W x 19'6" L FLAT BELT w/
CLEATS & MAG. HEAD PULLEY
GR1013 GRANULATOR CUMBERLAND 50B 100 HP MOTOR - 3 BLADE
ROTOR - 1/2" BED-SCREEN
BL1014 PRIMARY ELUTRIATOR BLOWER STERLING SYSTEMS 7075FV (CCWUD) COMPONENT OF STERLING'S
3210EL SYSTEM
FS1015 ELUTRIATION VESSEL STERLING SYSTEMS EL32C IBID - SS - 7" OD INLET ON
146" STAND
BL1016 SECONDARY ELUTRIATOR BLOWER STERLING SYSTEMS 1115 FV (CCWUD) IBID - PROVIDES FLUIDIZATION
IN ELUTRIATOR - DISCHARGES
TO CYCLONE
FS1017 AIR CYCLONE STERLING SYSTEMS #13 IBID - SS #13 CYCLONE
w/ SIDE-MOUNTED FILTER HEAD
- 16" D x 144" LONG
VS1019 DIRTY-FLAKE PICK-UP BIN AND FEED AUGER CUSTOM SS - 6"D x 13' L INCLINED
AUGER - MARTIN VIBRATOR
CD 36-250
VS1021 COLD WASH TANK CUSTOM SS - 500 GAL. - 6-SECTION
PRE-WASH
MXM1021A,B,C COLD WASH TANK MIXERS PHILADELPHIA MIXER PG 13 1/3 HP
MXP1021A,B,C,D COLD WASH TANK PULLERS CUSTOM PNEUMATIC MIXERS
FS1023 COLD-WASH, DEEP-BED FILTER CUSTOM SS - 270 GAL - INDEXING,
REUSABLE FILTER MEDIUM
P1024 COLD WASH FEED PUMP CARVER 1-1/4" x 1-1/2" x 7" SS
IMPELLER
FS1022 COLD WASH DEWATERING DRYER CARTER DAY D312 10 HP DRYER MOTOR - SS
FRAME AND ROTOR -
STELLITED ROTOR
VS1027 INTERMEDIATE FLAKE HOPPER AND AUGER CUSTOM SS - 3.5 CU YD BIN - 6"D x
22'L INCLINED AUGER AND
LEVEL CONTROL
VS1030 HOT WASH TANK (1 OF 2) CUSTOM SS - 390 GAL - STEAM-
JACKETED - INSULATED
VS1031 HOT WASH TANK (2 OF 2) CUSTOM SS - 390 GAL - STEAM-
JACKETED - INSULATED
MXM1030 HOT WASH TANK MIXER (1 OF 2) PHILADELPHIA MIXER PG 13 5 HP - SS SHAFT & IMPELLERS
MXM1031 HOT WASH TANK MIXER (2 OF 2) PHILADELPHIA MIXER PG 13 5 HP - SS SHAFT & IMPELLERS
FS1032 HOT WASH DEWATERING DRYER CARTER DAY D312 SS FRAME AND ROTOR - 10 HP
MOTOR
FS1042 HOT WASH-WATER, DEEP-BED FILTER CUSTOM SS - 270 GAL. - INDEXING,
REUSABLE, FILTER MEDIUM
P1043 HOT WASH, DEEP-BED FILTER, SUMP PUMP CARVER SS HOUSING AND IMPELLER -
70 GPM - 5 HP
VS1044 HOT WASH-WATER HEATING RESERVOIR TANK CUSTOM 4' W x 6' H x 10' L - SS -
STEAM-HEATED - INSULATED -
1200 GAL.
P1044&47 HOT WATER PUMPS WEMCO FL 3" x 5-1/4" - SS HOUSINGS
AND IMPELLERS - 60 GMP -
5 HP DRIVE MOTORS
VS1033 HOT-WASH, CLEAN-FLAKE BIN CUSTOM SS - 1.5 CU YD
CY1034 HOT-WASH, CLEAN-FLAKE AUGER CUSTOM SS - 6"D x 8'L - 2500 LB/
HR - 1 HP MOTOR
</TABLE>
<PAGE>
LINE 7 EQUIPMENT AND MACHINERY LIST
<TABLE>
<CAPTION>
ASSET ID ASSET NAME MAKE MODEL NOTE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
VS1035 RINSE/SEPARATION TANK CUSTOM SS - 225 GAL.
MXM1035A&B RINSE/SEPARATION TANK MIXERS PHILADELPHIA MIXER PG 13 SS SHAFTS AND IMPELLERS -
1 HP DRIVE MOTORS
P1038&39 HYDROCYCLONE PUMPS WEMCO FL 3" x 5-1/5" w/ SS IMPELLERS
FS1036 HYDROCYCLONE SEPARATOR KREBS ENGINEERING D10B-841
FS1037 HYDROCYCLONE SEPARATOR KREBS ENGINEERING D10B-841
FS1040 VIBRATORY FILTER SWECO LS30S66
FS1041 PRIMARY CLEAN FLAKE SPIN DRYER CARTER DAY D512 SS FRAME AND ROTOR - 10 HP
DRIVE MOTOR
FS1048 FINAL CLEAN FLAKE SPIN DRYER - AIR ASSISTED CARTER DAY D532 SS FRAME AND ROTOR - 20 HP
DRIVE MOTOR
BL1049 EXHAUST BLOWER TWIN CITY FAN BC-SW SIZE 165 - 4800 CFM - 3 HP
DRIVE MOTOR
FS1049 DRYER BLOWER EXHAUST FILTERS CUSTOM 4 - 15" DIA. FILTER SOCKS
VS1050 INTERMEDIATE DRY FLAKE BIN w/ VIBRATOR & AIRVEYOR STERLING SYSTEMS SGB-03080 COMPONENT OF STERLING'S
3210EL SYSTEM - AL -
30 CU FT
BL1051 CLEAN FLAKE ELUTRIATOR BLOWER STERLING SYSTEMS 7075FV (CCWUD) IBID - 7.5 HP MOTOR
FS1052 CLEAN FLAKE ELUTRIATOR STERLING SYSTEMS EL32C IBID - SS - 7" INLET NOZZLE
BL1054 CYCLONE BLOWER STERLING SYSTEMS 1115FV IBID - 15 HP MOTOR
FS1055 ELUTRIATED-WASTE CYCLONE STERLING SYSTEMS #13 IBID - SS - #13 CYCLONE
w/SIDE MOUNTED FILTER HEAD
FS1056 CYCLONE EXHAUST FILTER STERLING SYSTEMS IBID - 6 - 16"d x 144" LONG
FILTER BAGS
VS1053 ELUTRIATED FLAKE RECEIVER L - 4 SYSTEMS AL - 4W x 4'L x 4' DEEP
(2.2 CU YD) - w/ LEVEL
CONTROL & VIBRATOR
FR1099 ELUTRIATED, CLEAN-FLAKE VACUUM TRANSFER SYSTEM L - R SYSTEMS VL-500 10 HP w/L-R 36FR003C FILTERS
VS1057 ELUTRIATED, CLEAN-FLAKE SURGE BIN L - R SYSTEMS 7' x 7' x 14'H (5000 LB) -
AL - HIGH LEVEL SENSOR -
SIGHT GLASS
FR1100 BLENDING-STATION, VACUUM TRANSFER SYSTEM L - R SYSTEMS VL-500 20 HP VACUUM BLOWER
w/SOUND ENCLOSURE
VS1077A WEIGH BLENDER - CLEAN FLAKE BIN L - R SYSTEMS WSB-2000 4 L-R ENGR SYSTEM, 36" x 36"
x 70" AL BIN w/ LEVEL SENSOR
& 2 CU FT RCVR
VS1077B,C,D WEIGH BLENDER - ADDITIVE BINS (3) L - R SYSTEMS STOCK 14" x 14" x 48"
SF1079A,B,C,D VIBRATORY FEEDERS SYNTRON FMC #8F-01 8 X 20 AND FMC
#F-10C VIBRATORY FEEDERS
VS1076 WEIGH HOPPER L - R SYSTEMS WBS-2000 150 LB CAP-PROGRAMMABLE
WEIGH SCALE BLENDER
BD1060 CLEAN FLAKE & ADDITIVES RIBBON BLENDER L - R SYSTEMS CUSTOM 200 # CAP - AL MIXING
BARREL w/ 2 HP GEAR DRIVE
AND MIXING PADDLE
FR1101 EXTRUDER-FEED, VACUUM TRANSFER SYSTEM L - R SYSTEMS VL-500 20 HP VACUUM BLOWER
VS1063 EXTRUDER FEED HOPPER EGAN CUSTOM 13 CU FT w/ L-R SYSTEMS
VPW-500 POWDER RECEIVER
EXM1060 EXTRUDER MOTOR EMERSON 508AT 400 HP DC w/ COOLING BLOWER
ATTACHMENT
GB1061 EXTRUDER GEAR-BOX EGAN 6H-6026 RH 20 6.1 GEAR RATIO
EX1060 EXTRUDER EGAN 6"D - 36 1L/D -
VACUUM-VENTED
SP1074 SCREEN CHANGER KREYENBORG SWE-200-88/RS 2 BOLT, AUTO-BACKFLUSHING
TYPE - 206 mm SCREENS
PZ1069 PELLETIZER BERINGER WRP-12V WATER-RING TYPE - VARIABLE
SPEED - 2HP/3600 RPM, MAX
VS1072 PELLET WATER DEWATERING TROUGH BERINGER PART OF WRP-12V SYSTEM
</TABLE>
2
<PAGE>
LINE 7 EQUIPMENT AND MACHINERY LIST
<TABLE>
<CAPTION>
ASSET ID ASSET NAME MAKE MODEL NOTE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FS1071 PELLET DRYER - AIR ASSISTED BERINGER SS FRAME AND ROTOR -
2HP/1200 RPM - PART OF
WRP-12V SYSTEM
VS1085 PELLETIZER SURGE BIN L - R SYSTEMS 30"x30"x36" AL - 1/2" SCREEN - MAGNEETIC
SCREEN - LEVEL CONTROLLED
</TABLE>
<PAGE>
LINE 8 EQUIPMENT AND MACHINERY LIST
<TABLE>
<CAPTION>
ASSET ID ASSET NAME MAKE MODEL NOTE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CY2001 BALE CONVEYOR HUSTLER B2676 (SER.#) 72" W x 27' L 1/4" plate
steel belt
BB2002 BALE BRAKER HUSTLER B2678 (SER. #) 72" W x 72' L
CY2003 VIBRATORY CONVEYOR & PUNCH PLATE SCREEN HUSTLER B2681 (SER. #) 60" W x 23' L BED - PUNCH-
PLATE: 2x10 ROWS
CY2004 RESIDUE SLIDE CONVEYOR HUSTLER B2683 (SER. #) 12" W x 6' L FLAT BELT
w/ CLEATS
CY2005 CLEATED, INCLINED, RESIDUE CONVEYOR HUSTLER B2685 (SER. #) 12" W x 12' L FLAT BELT
w/ CLEATS
CY2006 INCLINED, CLEATED, SORTING STATION FEED CONVEYOR HUSTLER B2687 (SER. #) 36" W x 20' L BELT w/ MAG.
HEAD PULLEY
CY2007 SORTING CONVEYOR HUSTLER B2688 (SER. #) 36" W x 15' L FLAT SLIDE
BELT - TWO THROW-OUT SHUTES
CY2008 WASTE/BY-PRODUCT SLIDE CONVEYOR HUSTLER B2691 (SER #) 24" W x 20' L FLAT BELT
(REVERSIBLE)
CY2009 WASTE/BY-PRODUCT BALER FEED CONVEYOR VALLEY FORGE 700 18" W x 15' L FLAT BELT
w/ CLEATS
BA2011 WASTE/BY-PRODUCT BALER PIQUA 54-40 HD HYDRAULIC VERTICAL BALER
CY2012 SORTING-LINE TAKE-AWAY CONVEYOR (INCLINED, CLEATED) HUSTLER B2690 (SER. #) 36" W x 15' L FLAT BELT
w/ MAG. HEAD PULLEY
CY2012A SLIDE CONVEYOR CUSTOM BRIDGES INCLINED, CLEATED
CONVEYORS
CY2016 GRANULATOR FEED CONVEYOR (INCLINED, CLEATED) HUSTLER B2693 (SER. #) 36" W x 19'-6" L FLAT BELT
w/ CLEATS
GR2018 GRANULATOR CUMBERLAND 508 100 HP - 1/2" BED-SCREEN -
3-BLADE ROTOR -
SOUND-PROOFED
BL2019 DIRTY FLAKE ELUTRIATOR BLOWER STERLING SYSTEMS 7075FV (CCWUD) A COMPONENT OF STERLING'S
3210EL SYSTEM
FS2020 DIRTY FLAKE ELUTRIATION VESSEL STERLING SYSTEMS EL32C IBID - SS - 7" OD INLET,
146" STAND
BL2021 CYCLONE BLOWER STERLING SYSTEMS 1115FV (CCWUD) IBID - 15 HP BLOWER MOTOR
FS2022 AIR CYCLONE & BAG FILTER STERLING SYSTEMS #13 SS - #13 CYCLONE w/ SIDE
MOUNTED FILTER HEAD
VS2023 DIRTY FLAKE PICK-UP BIN AND FEED AUGER CUSTOM SS - 3.5 CU YD CAPACITY
w/ 6"D x 13' L INCLINED
AUGER
VS2027 HOT WATER WASH TANK (1 OF 2) CUSTOM SS - 390 GAL. - STEAM
JACKETED - INSULATED
VS2026 HOT WATER WASH TANK (2 OF 2) CUSTOM SS - 390 GAL. - STEAM
JACKETED - INSULATED
MXM2027&28 HOT WATER WASH TANK MIXERS PHILADELPHIA MIXER PG 13 SS SHAFT AND IMPELLERS -
5 HP DRIVE MOTORS
FS2029 HOT WASH DEWATERING DRYER CARTER DAY D312 SS ROTOR AND FRAME -
STELLITED ROTOR - 10 HP
DRIVE
FS2045 HOT WASH-WATER, DEEP-BED FILTER CUSTOM SS - 270 GAL. - INDEXING,
REUSABLE FILTER MEDIUM
P2046 HOT WASH, DEEP-BED FILTER, SUMP PUMP CARVER 70 GPM PUMP - 5 HP MOTOR -
SS HOUSING & IMPELLER
VS2047 HOT WASH WATER HEATING TANK CUSTOM SS - STEAM-HEATED -
INSULATED - 1200 GAL.
P2047&50 HOT WASH WATER PUMPS CARVER FL 3" x 5-1/4" 60 GPM - 5 HP
MOTOR - SS HOUSING &
IMPELLER
VS2030 HOT WASH CLEAN FLAKE BIN CUSTOM SS - 1.5 CU YD
CY2031 HOT WASH CLEAN FLAKE BIN AUGER CUSTOM SS - 6"D x 8' L - 2500
LB/HR
VS2032 PRIMARY CLEAN FLAKE RINSE TANK CUSTOM 3' W x 6' L x 3 H, SS -
260 GAL. - 3 COMP. STATIC-
SCREEN SEPARATOR
MXM2032A,B,C PRIMARY RINSE TANK MIXERS PHILADELPHIA MIXER PG-13 SS SHAFT AND IMPELLER -
1/4 HP
P2038 RINSE TANK SUMP PUMP (COMPARTMENT C) WEMCO FL 190 GPM - 10 HP - SS HOUSING
AND IMPELLER
FS2037 HYDROCYCLONE SEPARATOR (COMPARTMENT C) KREBS ENGINEERING D108-841
</TABLE>
<PAGE>
LINE 8 EQUIPMENT AND MACHINERY LIST
<TABLE>
<CAPTION>
ASSET ID ASSET NAME MAKE MODEL NOTE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FS2044 PRIMARY RINSE SYSTEM SPIN DRYER CARTER DAY D512 SS FRAME AND ROTOR - 10 HP
P2034&36 PRIMARY RINSE SYSTEM SUMP PUMPS (COMPARTMENTS A&B) WEMCO FL 190 GPM - 10 HP MOTOR - SS
HOUSING & IMPELLER
FS2033&35 HYDROCYCLONE SEPARATORS (COMPARTMENTS A&B) KREBS ENGINEERING D108-841
FS2039 HEAVIES SPIN DRYER CARTER DAY D312 SS FRAME AND ROTOR - 10 HP
DRYER MOTOR
VS2040 SECONDARY, CLEAN-FLAKE RINSE TANK CUSTOM SS - 200 GAL.
MXM2040 SECONDARY RINSE TANK MIXER PHILADELPHIA MIXER PC-13 SS SHAFT AND IMPELLER -
1/4 HP
P2041 SECONDARY RINSE TANK SUMP PUMP WEMCO FL 190 G PM - 10 HP - SS
HOUSING AND IMPELLER
FS2042 HYDROCYCLONE SEPARATOR KREBS ENGINEERING D108-841
FS2043 VIBRATORY FILTER SWECO LS30S66
FS2051 FIRST-STAGE DEWATERING DRYER CARTER DAY D312 SS FRAME AND ROTOR- 10 HP
MOTOR
FS2052 SECOND-STAGE DEWATERING DRYER CARTER DAY D312 SS FRAME AND ROTOR - 10 HP
MOTOR
FS2053 FINAL DEWATERING DRYER WITH AIR-ASSIST CARTER DAY D532 SS HOUSING AND ROTOR - 15 HP
MOTOR
BL2053 EXHAUST BLOWER TWIN CITY FAN BC-SW SIZE 165; 4800 CFM - 3HP
w/ 4-15" DIA. FILTER SOCKS
VS2057 INTERMEDIATE DRY FLAKE BIN w/ VIBRATOR & AIRVEYOR STERLING SYSTEMS SGB-03060 COMPONENT OF STERLING'S
3210EL SYSTEM - AL - 30
CU FT
BL2058 ELUTRIATOR BOWER STERLING SYSTEMS 7075FV (CCWUD) IBID - 7.5 HP BLOWER MOTOR
FS2059 CLEAN FLAKE ELUTRIATION VESSEL STERLING SYSTEMS EL32C IBID - SS
BL2060 CYCLONE BLOWER STERLING SYSTEMS 1115FV (CCWUD) IBID - 15 HP BLOWER
FS2061 ELUTRIATED WASTE CYCLONE STERLING SYSTEMS #13 IBID - SS - #13 CYCLONE
w/ SIDE MOUNTED FILTER HEAD
FS2062 CYCLONE EXHAUST FILTER STERLING SYSTEMS IBID - 6 - 16" D x 114"
LONG FILTER BAGS
VS2063 ELUTRAITED FLAKE RECEIVER L - R SYSTEMS STOCK AL - 4W x 4'L x 4' DEEP -
WITH LEVEL CONTROLLERS
FR2104 ELUTRIATED, CLEAN-FLAKE VACUUM TRANSFER SYSTEM L - R SYSTEMS VL-500 15 HP VACUUM BLOWER w/ L-R
36FR003C RCVR
VS2065 ELUTRIATED, CLEAN-FLAKE SURGE BIN L - R SYSTEMS CUSTOM AL - 7' x 7' x 14' H
(5000 LB) - HIGH LEVEL
SENSOR - SIGHT GLASS
FR2105 BLENDING STATION VACUUM TRANSFER SYSTEM L - R SYSTEMS VL-500 20 HP VACUUM BLOWER
VS2065A WEIGH BLENDER - CLEAN FLAKE BIN L - R SYSTEMS CUSTOM 36 CU FT AL HOPPER
w/ L-R VL-4500/02 VACUUM
RECVR
VS2065B,C,D WEIGH BLENDER - ADDITIVE BINS (3) L - R SYSTEMS STOCK 14" x 14" x 48" AL BIN w/
L-R VPW-400 POWDER RECEIVER
SF2067A,B,C,D VIBRATORY FEEDERS SYNTRON BF-01C FMC #8F-01 8 x 20 AND FMC
#F-10C VIBRATORY FEEDERS
VS2067 WEIGH HOPPER L - R SYSTEMS WSB-2000 4 150 LB CAPACITY -
PROGRAMMABLE
BD2068 CLEAN FLAKE & ADDITIVES RIBBON BLENDER L - R SYSTEMS STOCK 200 # CAP - AL MIXING BARREL
w/ 2 HP GEAR DRIVE & MIXING
PADDLE
FR2106 EXTRUDER FEED VACUUM TRANSFER SYSTEM L - R SYSTEMS VL-500 20 HP VACUUM BLOWER
VS2091 EXTRUDER FEED HOPPER EGAN CUSTOM 13 CU FT CAP w/L-R VPW -
500 POWDER RECEIVER
EXM2068 EXTRUDER MOTOR EMERSON 508AT 400 HP DC w/ COOLING BLOWER
GB2069 EXTRUDER GEAR-BOX EGAN 6:H-6026 RH 20.6 1 GEAR RATIO
EX2068 EXTRUDER EGAN 6: - 36 1 LL/D - VACUUM
VENTED
</TABLE>
2
<PAGE>
LINE 8 EQUIPMENT AND MACHINERY LIST
<TABLE>
<CAPTION>
ASSET ID ASSET NAME MAKE MODEL NOTE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SP2082 SCREEN CHANGER KREYENBORG SWE-200-88/RS 2-BOLT - AUTO BACKFLUSHING
TYPE - 205 mm SCREENS
PZ2082 PELLETIZER BERINGER WRP-12V WATER RING-TYPE - 2 HP,
VARIABLE SPEED MOTOR, 3600
RPM, MAX.
VS2080 PELLET WATER DEWATERING TROUGH BERINGER COMPONENT OF WRP-12V PACKAGE
FS2079 PELLET DRYER - AIR ASSISTED BERINGER IBID - SS FRAME AND ROTOR -
2 HP, 1200 RPM
VS2083 PELLETIZER SURGE BIN L - R SYSTEMS 30"x30"x36"H AL - 1/2" SCREEN - MAGNETIC
SCREEN - LEVEL CONTROLLED
FS2045A HOT FILTRATE SIEVE HYCOR HS36/A44 SS CONSTRUCTION
VENTED
</TABLE>
3
<PAGE>
PLANT SUPPORT EQUIPMENT AND MACHINERY LIST
<TABLE>
<CAPTION>
ASSET ID ASSET NAME MAKE MODEL NOTE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
F-2 AUTO BACK-FLUSH FILTER YARDNEY MM3660-3A (3) 200 GPM MULTI-MEDIA
FILTERS w/AUTO CONTROLS
F-101 FILTER PRESS PAC PRESS MODEL P800E132A-10/15; 15
CU FT CAP
FLOWMETER SPARLING MODEL FM 621-031-401-0
SIZE 3
P-103 PROCESS FEED PUMPS MCM 3 x 4 x 11
P-109 RECYCLE PUMP BARNES 10 ICU - 1 100GPM 5HP
P-105 FILTER PRESS FEED PUMP WARREN RUPP SA2-A SANDPIPER TYPE 5; 50 GPM,
AIR POWERED, DOUBLE
DIAGRAM PUMP
P-112 SKIM TRANSFER PUMP WARREN RUPP SA2-A SANDPIPER TYPE 5; 50 GPM,
AIR POWERED, DOUBLE DIAGRAM
PUMP
RE-USE WATER PUMP (2) WEINMAN 3G5-4 250 GPM @ 42 TDH
P-101/2 FEED PUMP GORMAN RUPP T3A80-B SELF PRIMING CENTRIFUGAL
PUMP
T-111 SAMPLE TANK NORWESCO STOCK 550 GAL. 67" D x 42" H
POLETHYLENE
T-107 DAF CELL TANK PCE 120 DISSOLVED AIR FILTER
w/ SKIMMER AND MIXERS MFG
1/95
HILLSIDE SCREEN GALA 160 FRS
SCREW PRESS HYCOR SPR 260 HELIXPRESS UNIT, SPR 260,
HYCOR S/N H-0011096
T-101 EQUALIZATION TANK NORWESCO STOCK 5000 GAL. POLY TANK 102"
D x 152" H w/ MIXER
A-101 EQ TANK MIXER 3/4 HP GEAR DRIVE MIXER
FITS INTO EQ TANK
T-102 EQUALIZATION TANK NORWESCO STOCK 5000 GAL. POLY TANK 102" D
x 152" H
T-103 SKIM HOLDING TANK NORWESCO STOCK 1700 GAL. POLY TANK 87"D x
72" H
FACILITY BOILER CLEAVOR BROOKS C8-700-1505 150 PSI PACKAGED BOILER
SYSTEM
FLOOR SCALE GSE 550 PORTABLE FLOOR SCALE
REFUSE COMPACTOR McCLAIN 40067 HYDRAULIC COMPACTOR FOR A
42 CU FT REFUSE BOX
TRUCK SCALE FAIRBANKS 90-161-1 35 TON SCALE
PLANT AIR SUPPLY COMPRESSOR SULLAIR SRF (2) SRF 1/4000 AIR
COMPRESSORS FOR PLANT AIR
BALE WIRE DICER SWEED 510 CUTS BALE WIRES
FLOOR SWEEPER POWERBOSS TSS/80-HD DRIVING FLOOR MACHINE
FORK LIFTS (2) TCM FCG 18N7T
FORK LIFT TCM FG20N3T
FIRE WATER AND SPRINKLER PUMP PEERLESS 6AEF14G 13" D IMP 100 HP w/ JOSLYN
CLARK CONTROL C 38204-4J
SYSTEM
COOLING TOWER MARLEY 28144
FR1103 SILO VACUUM TRANSFER SYSTEM L - R SYSTEMS VL-500 15 HP BLOWER MOTOR
w/ FILTERS
VS1066 15000 LB PELLET SILO PEABODY TECHTANK CUSTOM 12' D x 16' H AL CONST
RA1068 15000 LB SILO ROTARY AIR LOCK MEYER & SONS HD SIZE 10" x 10" - 1 HP DRIVE
MOTOR
VS1069 50000 LB PELLET BLENDING SILO PEABODY TECHTANK CUSTOM 11' D x 29' H - AL CONST
w/ BLENDING TUBE & LEVEL
SENSOR
FR1102 VACUUM, PELLET RECIRCULATING L - R SYSTEMS VL-500 w/ AIR FILTERS
</TABLE>
<PAGE>
PLANT SUPPORT EQUIPMENT AND MACHINERY LIST
<TABLE>
<CAPTION>
ASSET ID ASSET NAME MAKE MODEL NOTE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
RA1092 ROTARY AIR LOCK - 50000 LB MEYER & SONS HD SIZE 10" x 10" - 1 HP DRIVE
MOTOR
WH1096 PACKAGING SCALE - 50000 LB SILO SYNTEST SP320 BLENDING SILO FITTED WITH
HI AND LO OUTPUT SLIDE
VALVES
BL1095 BLOWER - BULK LOADING SYSTEMS L - R SYSTEMS LSP400-30 30 HP MOTOR
FS1107 TRUCK LOADING CYCLONE L - R SYSTEMS 750 SS - 3 CU FT CAPACITY
TL1108 RAILCAR LOADING LINES (2) CUSTOM 4" LINES - PEENED
FR2108 SILO VACUUM TRANSFER SYSTEM L - R SYSTEMS VL-500 15 HP VACUUM BLOWER
VS2094 15000 LB PELLET SILO PEABODY TECH TANK CUSTOM AL CONST - 12' D 16' H
RA2109 15000 LB SILO ROTARY AIR LOCK MEYER & SONS HD SIZE 10 x 10 1 HP DRIVE
MOTOR
VS2097 50000 LB PELLET BLENDING SILO PEABODY TECHTANK CUSTOM 11' D x 29' H - AL CONST -
w/ BLENDING TUBE & LEVEL
SENSOR
FR2107 VACUUM, PELLET RECIRCULATING L - R SYSTEMS VL-500 15 HP VACUUM BLOWER
RA2100 ROTARY AIR-LOCK - 50000 LB MEYER & SONS HD 1 HP DRIVE MOTOR
WC2103 PACKAGING SCALE - 50000 LB SILO SYNTEST SP320 BLENDING SILO FITTED WITH
HI AND LO OUTPUT SLIDE
VALVES
</TABLE>
2
<PAGE>
LIST OF OBSOLETE EQUIPMENT AND MACHINERY
<TABLE>
<CAPTION>
ASSET ID ASSET NAME MAKE MODEL NOTE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FS2055 FLAKE DRYER - AIR ASSISTED CARTER DAY D532 SS FRAME & ROTOR - 15 HP
MOTOR - NEEDS NEW ROTOR
VS2054 METAL DETECTOR & DIVERTER ERIEZ EZ TEC III REJECTS AL FROM CLEAN PET
SERIES FLAKE
SP-1074 (OLD) SLDE-PLATE SCREEN-CHANGER BERINGER RSL-60 6" BREAKER PLAT - HYDRAULIC
UNIT - NEEDS NEW INLET
ADAPTOR
SP-2062 (OLD) SLDE-PLATE SCREEN-CHANGER BERINGER RSL-60 6" BREAKER PLAT - HYDRAULIC
UNIT - NEEDS NEW INLET
ADAPTOR
VS2112 PET FLAKE POLISHING TANK & AUGER CUSTOM SS - APPROX. 100 GAL. CAP.
SH1009 SHREDDER SHRED TECH ST-50 2 x 30 HP DRIVE MOTORS -
NEEDS NEW ROTORS &
PNEUMATIC CRAMMER
SH2014 SHREDDER SHRED TECH ST.50 2 x 30 HP DRIVE MOTORS -
NEEDS NEW MOTORS &
PNEUMATIC CRAMMER
DM1010 DRUM MAGNET DINGS MAGNETIC 12 x 36 FC DRUM SCAVENGES FERROMAGNETICS
FROM SHREDDER OUTPUT
DM2015 DRUM MAGNET DINGS MAGNETIC 12 x 36 FC DRUM SCAVENGES FERROMAGNETICS
FROM SHREDDER OUTPUT
</TABLE>
<PAGE>
Exhibit 5
AMENDMENT NO. 1
TO
PURCHASE AND SALE AGREEMENT
THIS AGREEMENT made and to be effective as of October 29, 1996, by and
between QUANTUM CHEMICAL CORPORATION, a Virginia corporation having its
principal offices at 11500 Northlake Drive, Cincinnati, Ohio 45249 ("Quantum"),
and FIX-CORP INTERNATIONAL, INC., an Ohio Corporation, having its principal
offices at 27040 Cedar Road, Suite 218, Cleveland, Ohio 44122 ("Buyer");
WITNESSETH:
WHEREAS, Quantum and Buyer have entered into a Purchase and Sale Agreement
dated August 14, 1996 (the "Agreement") for the sale and purchase of the
Assets, as that term is defined in the Agreement; and
WHEREAS, Quantum and Buyer now wish to amend the Agreement so as to extend
the time for Closing.
NOW, THEREFORE, in consideration of the mutual agreements set forth in this
Amendment No. 1 and other good and valuable consideration, the parties to the
Agreement and this Amendment agree as follows.
1. EXTENSION OF TIME FOR CLOSING.
1.01. Quantum agrees to extend the Closing, as that term is defined in
the Agreement, for thirty (30) days commencing from November 1, 1996 in exchange
for Buyer paying Quantum the sum of Seventy-five Thousand Dollars ($75,000.00)
via wire transfer. This wire transfer must be made by Buyer prior to 3:00 p.m.
EST on Wednesday, October 30, 1996 or this Amendment and the Agreement will
terminate as of 5:00 p.m. EST Wednesday, October 30, 1996.
1.02. If so requested in writing by Buyer, Quantum will agree to a
second extension of the Closing for thirty one (31) days commencing from
December 1, 1996 in exchange for Buyer paying Quantum the sum of Seventy-five
Thousand Dollars ($75,000.00) via wire transfer.
<PAGE>
Receipt of this wire transfer must be confirmed by Quantum by 3:00 p.m. EST on
or before November 30, 1996, or this Amendment and the Agreement will terminate
as set forth in Section 3, below.
1.03. If so requested in writing by Buyer, Quantum will agree to a
third extension of the Closing for thirty one (31) days commencing from January
1, 1997 in exchange for Buyer paying Quantum the sum of One Hundred Thousand
Dollars ($100,000.00) via wire transfer. Receipt of this wire transfer must be
confirmed by Quantum by 3.00 p.m. EST on or before December 31, 1996, or this
Amendment and the Agreement will terminate as set forth in Section 3, below.
1.04. After the third extension of the Closing, no further extensions
of the Closing may be requested by Buyer, none shall be granted by Quantum and
all sums paid by Buyer to Quantum shall be retained by Quantum in accordance
with Section 3, below.
2. CREDITS TOWARD CLOSING. In the event Closing takes place prior to the
expiration of any extension period, all payments made by Buyer to Quantum
pursuant to Sections 1.01, 1.02 and 1.03, above, shall be credited towards the
Purchase Price and shall reduce the amount due to Quantum from Buyer at Closing
pursuant to Section 2.02(b) of the Agreement.
3. FAILURE TO CLOSE. In the event the Buyer fails to Close through no
fault of Quantum prior to the expiration of an extension period or Buyer fails
to timely request a second or third extension of the Closing or Buyer fails to
wire transfer payments for extensions of time to Close by the dates set forth in
Sections 1.01, 1.02 or 1.03, above, the Agreement shall immediately terminate.
In such event, Quantum shall retain, without any recourse by Buyer whatsoever,
all sums paid to it by Buyer pursuant to Section 2.02(a) of the Agreement and
Sections 1.01, 1.02 and 1.03 of this Amendment as liquidated damages and not as
a penalty.
4.0 This Amendment may be executed in two counterparts each of which shall
be deemed an original. This Amendment and any counterpart so executed shall be
deemed to be one and the same instrument.
2
<PAGE>
IN WITNESS WHEREOF, the parties to this Agreement have caused this
Agreement to be duly executed by their authorized representatives as of the day
and year first set forth above.
QUANTUM CHEMICAL CORPORATION FIX-CORP INTERNATIONAL, INC.
By: /s/ Dale H. Spiess By: /s/ Mark Fixler, Pres.
---------------------- ---------------------------
Attest: /s/ Michael D. Ferro Attest: /s/ Sherry L. Durst,
---------------------- Assisant Secretary
Michael D. Ferro, -----------------------
Attorney at Law
Notary Public-State of Ohio
My commission has no expiration
date Section 147.03 ORC
3
<PAGE>
Exhibit 6
EMPLOYMENT CONTRACT
THIS AGREEMENT, executed on the date (or dates) set forth below, by and
between:
FIX-CORP. INTERNATIONAL, INC., a Delaware corporation with its
principal place of business located at 27040 Cedar Road, Suite 218,
Beachwood, Ohio 44122, acting through its authorized officer Andy Press,
and hereafter referred to as either as the Company or Fix-Corp.;
- and -
Mark Fixler, an individual residing at 6758 Bramblewood Lane, Mayfield
Village, Ohio 44143, acting on his own behalf and hereafter referred to as Mark
Fixler or Employee;
Declare as their mutual intent and purpose as follows.
RECITALS:
WHEREAS, the Company desires to engage Mark Fixler to perform services for
the Company, Fix-Corp., as well as its present subsidiary Fix-Corp Industries,
Inc., or any future parent or subsidiary company of Fix-Corp., or any affiliate
of Fix-Corp International, Inc. and Fix-Corp Industries, Inc.; and
WHEREAS, Mark Fixler ["Employee" herein] desires to perform such services
on the terms and conditions hereinafter set forth.
NOW, THEREFORE, in exchange for the above covenants and with both parties
intending to be legally bound, Mark Fixler agrees to become an Employee of
Fix-Corp. pursuant to the terms and conditions set forth below.
1. TERM
(a) The Company agrees to employ Employee, and the Employee agrees to
serve, pursuant to the terms and conditions of this Agreement for a period
commencing on 1/1/97 and ending three years thereafter, or such shorter
period as may be provided for herein. The period during which Employee is
employed hereunder is hereafter referred to as the "Employment Period."
2. DUTIES AND SERVICES
(a) During the Employment Period, Employee shall be employed in the
business of the Company and shall also perform services in a responsible
executive or managerial capacity for any
<PAGE>
of the other subsidiaries or affiliates of the Company, or by any of its
subsidiaries or affiliates. In performance of his duties, Employee shall be
subject to the direction of the Board of Directors of the Company and of the
Board of its subsidiaries and/or affiliates. Employee agrees to his employment
as described in this Section 2 and agrees to devote all of his time and efforts
to the performance of his duties under this Agreement. Employee shall make
himself available to travel as the needs of the business require.
(b) It is agreed that the Employee will serve on the Board of Directors of
Fix-Corp. with the title of President and Chief Executive Officer.
(c) It is further agreed that the employee will serve on the Board of
Directors of every subsidiary and affiliate of the Company, both presently
existing and to be acquired in the future, with such responsibilities and duties
as the Board of Directors of every subsidiary and affiliate of the Company shall
formulate and determine, along with such job titles.
3. COMPENSATION
(a) As full compensation for his services hereunder, the Company shall pay
Employee, during the Employment Period, a salary payable in equal [SEMI-MONTHLY
OR MONTHLY] installments at the annual rate of $200,000 for the first year,
$250,000 for the second year and $300,000 for the third year. Nothing contained
herein shall preclude Employee from participating in the present or future
employee benefit plans of the Company or of its subsidiaries or affiliates if he
meets the eligibility requirements therefor.
(b) If for any reason, the Company cannot or elects against honoring the
terms of this Employment Agreement for the full period of the Employment Period,
or if control of the Company should transfer through Merger, Consolidation or
Purchase of Assets to another company which elects to terminate this Employment
Agreement, then Mark Fixler shall be entitled to a $2,000,000 severance benefit,
payable upon premature termination of this Employment Agreement.
4. EXPENSES AND BENEFITS
(a) Employee shall be entitled to reimbursement up to a maximum of
$20,000 during each full year of the Employment Period for reasonable travel
and other out-of-pocket expenses necessarily incurred in the performance of
his duties hereunder, upon submission and approval of written statements and
bills in accordance with the then regular procedures of the Company and/or
its subsidiaries or affiliates.
(b) Employee shall be entitled to three weeks of paid vacations, three
weeks of sick leave, and entitled to paid holidays recognized by the U.S.
Government.
(c) Employee shall be entitled to receive health and dental insurance for
himself and for his family.
2
<PAGE>
(d) Employee shall receive a $750 per month automobile allowance, plus
reasonable car phone expenses and reasonable automotive repairs and maintenance
expenses.
(e) If the Employee should have to make cash contributions to the Company,
all such funds advanced shall be deemed a loan and payable upon demand with
interest at the rate of 10% per annum. If the Company, for any reason, cannot
meet the cash terms of this Employment Agreement, all such amounts not paid
shall be deemed a cash contribution and, by inference, a loan by the Employee to
the Company if the Employee continues to pursue his duties with the same care
and attention as when he was fully paid.
(f) Employee shall receive the option to purchase four million shares of
stock of Fix-Corp. at the fixed price of $0.50 [fifty cents] per share. This
option may be exercised by the Employee at any time during the Employment
Period.
5. REPRESENTATIONS AND WARRANTIES OF EMPLOYEE
Employee represents and warrants to the Company that he is under no
contractual or other restriction or obligation which is inconsistent with the
execution of this Agreement, the performance of his duties hereunder, or the
other rights of the Company hereunder and Employee is under no physical or
mental disability that would hinder his performance of duties under this
Agreement.
(b) Employee represents that he is not subject to any judgment or decree,
the effect of which would prohibit, limit or otherwise restrict the employment
of the Employee by the Company pursuant to the terms of this Agreement.
6. NONCOMPETITION
In view of the unique and valuable services it is expected Employee will
render to the Company, and Employee's industry contacts, knowledge of customers,
trade secrets and other proprietary information relating to the business of
Fix-Corp., and in consideration of the shares identified in the Stock
Acquisition Agreement and the Acquisition Agreement of Fix-Corp Industries
[formerly Quantum Chemical Company], and the compensation to be provided
hereunder, the Employee agrees:
(a) During the period Employee is employed by Fix-Corp. or any of the
related companies referenced under this Agreement, he will not otherwise engage
in, or otherwise directly or indirectly be employed by, or act as a consultant
or lender to, or be a director, officer, employee, owner, or partner of, any
other business or organization, whether or not such business or organization now
is or shall then be competing with Fix-Corp. or any of its related companies;
and
(b) For a period of one year after he ceases to be employed by Fix-Corp.
or any of its related companies pursuant to this Agreement or otherwise, the
Employee shall not directly or indirectly compete with or be engaged in the same
business as Fix-Corp. or any of its related
3
<PAGE>
companies, or be employed by, or act as consultant or lender to, or be a
director, officer, employee, owner, or partner of, any business or organization
which, at the time of such cessation, directly or indirectly competes with or is
engaged in the same business as Fix-Corp. or any of its related corporation.
(c) The provisions of this Section 6 will not be deemed breached merely
because Employee owns not more than 1 percent of the outstanding common stock of
a corporation if, at the time of its acquisition by Employee, such stock is
listed on a national securities exchange, is reported on NASDAQ, or is regularly
traded in the over-the-counter market by a member of a national securities
exchange.
(d) Upon the conclusion of the Employment Period, Employee shall be
allowed to convert this Employment Agreement into a Consultant Agreement, at
Employee's option and with the Company's consent. If so converted into a
consultant agreement, the provision set forth above wherein Employee is required
to devote his time solely to the affairs of Fix-Corp. shall not be applicable,
nor will Employee be barred from acting as a consultant or Director for other
businesses, provided the Employee makes a full disclosure of these affiliations.
7. PATENTS, COPYRIGHTS, TECHNOLOGICAL INVENTIONS
(a) Any interest in patents, patent applications, inventions, copyrights,
developments, and processes ("Such Inventions") which Employee now or hereafter
during the period Employee is employed by any of the Conglomerates corporations
under this Agreement or otherwise may own or develop relating to the fields in
which any of the Conglomerates Corporations may then be engaged shall belong to
the Company; and forthwith upon request of the Company Employee shall execute
all such assignments and other documents and take all such other action as the
Company may reasonably request in order to vest in the Company all his right,
title, and interest in and to Such Inventions free and clear of all liens,
charges, and encumbrances.
8. CONFIDENTIAL INFORMATION
(a) All confidential information which Employee may now possess, may
obtain during or after the Employment Period, or may create prior to the end of
the period Employee is employed by Fix-Corp.. or any of its related companies
under this Agreement or otherwise relating to the financial condition, results
of operations, business, properties, assets, liabilities, or future prospects of
Fix-Corp. or any of its related companies or of any customer or supplier of any
of them shall not be published, disclosed, or made accessible by him to any
other person or entity either during or after the termination of his employment
or used by him except during the Employment Period in the business and for the
benefit of the Company, in each case without prior written permission of the
Company or, at the election at any time of Fix-Corp., without the prior written
permission of Fix-Corp., Employee shall deliver to the Company all tangible
evidence of such confidential information prior to or at the termination of his
employment.
9. KEY MAN LIFE INSURANCE
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(a) The Company agrees to purchase a $2,000,000 term life insurance policy
on Employee ["key man life insurance"] and Employee shall submit to such
physical examinations and execute and deliver such documents as may reasonably
necessary to enable the Company, at its sole expense and for its own benefit, to
obtain key man life insurance on Employee. Employee has no reason to believe
that his life is not insurable with a reputable insurance company at rates now
prevailing in the City of Cleveland for healthy men of his age.
10. TERMINATION.
Notwithstanding anything herein contained, if on or after the date this
Agreement is executed and prior to the end of the Employment Period,
(a) Either (i) Employee shall be physically or mentally incapacitated or
disabled or otherwise unable fully to discharge his duties hereunder for a
period of three months, (ii) Employee shall be convicted of a crime, (iii)
Employee shall commit any act or omit to take any action in bad faith and to the
detriment of any of the companies, [or] (iv) Employee shall breach any term of
this Agreement and fail to correct such breach within ten days after commission
of the same, then, and in each such case, the Company shall have the right to
give notice of termination of Employee's services hereunder as of a date (not
earlier than ten days from such notice) to be specified in such notice and this
Agreement shall terminate on the date so specified; or
(b) Employee shall die, then this Agreement terminates on his death,
whereupon Employee or his estate, as the case may be, shall be entitled to
receive only his salary at the rate provided in Section 3 to the date on which
termination shall take effect. Nothing contained in this Section 10 shall be
deemed to limit any other right the Company may have to terminate Employee's
employment hereunder upon any ground permitted by law.
11. MERGER, CONSOLIDATION, SALE OF ASSETS
In the event of a future disposition of (or including) the properties and
business of the Company, substantially as an entirety, by merger, consolidation,
sale of assets, or otherwise, then the Company may elect:
(a) To assign this Agreement and all of its rights and obligations
hereunder to the acquiring or surviving corporation; provided that such
corporation shall assume in writing all of the obligations of the Company
hereunder; and provided, further, that the Company (if and so long as it remains
in business as an independent going enterprise) shall remain liable for the
performance of its obligations hereunder in the event of an unjustified failure
of the acquiring corporation to perform its obligations under this Agreement; or
(b) In addition to its other rights of termination, to terminate this
Agreement upon at least 30 days' written notice by paying Employee the
compensation at the rate provided in Section 3 to the date on which such
termination shall take effect.
12. SURVIVAL
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(a) The covenants, agreements, representations, and warranties contained
in or made pursuant to this Agreement shall survive Employee's termination of
employment.
13. MODIFICATION
(a) This Agreement sets forth the entire understanding of the parties with
respect to the subject matter hereof, and this agreement also supersedes all
existing agreements between Fix-Corp. and Mark Fixler concerning such subject
matter, and may be modified only by a written instrument duly executed by each
party.
14. NOTICES
(a) Any notice or other communication required or permitted to be given
hereunder shall be in writing and shall be mailed by certified mail, return
receipt requested, or delivered against receipt to the party to whom it is to be
given at the address of such party set forth in the preamble to this Agreement
(or to such other address as the party shall have furnished in writing in
accordance with the provisions of this Section 14). Any notice given to the
Company shall be addressed to the attention of the Corporate Secretary. Notice
to the estate of Employee shall be sufficient if addressed to Employee as
provided in this Section 14. Any notice or other communication given by
certified mail shall be deemed given at the time of certification thereof,
except for a notice changing a party's address which shall be deemed given at
the time of receipt thereof.
15. WAIVER
(a) Any waiver by either party of a breach of any provision of this
Agreement shall not operate as or be construed to be a waiver of any other
breach of that provision or of any breach of any other provision of this
Agreement. The failure of a party to insist upon strict adherence to any term of
this Agreement on one or more occasions shall not be considered a waiver or
deprive that party of the right thereafter to insist upon strict adherence to
that term or any other term of this Agreement. Any waiver must be in writing.
16. BINDING EFFECT
(a) Employee's rights and obligations under this Agreement shall not be
transferable by assignment or otherwise, and such rights shall not be subject to
commutation, encumbrance, or the claims of Employee's creditors, and any attempt
to do any of the foregoing shall be void. The provisions of this Agreement shall
be binding upon and inure to the benefit of Employee and his heirs and personal
representatives, and shall be binding upon and inure to the benefit of the
Company and its successors and those who are its assigns under Section 11.
17. NO THIRD PARTY BENEFICIARIES
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(a) This Agreement does not create, and shall not be construed as
creating, any rights enforceable by any person not a party to this Agreement
(except as provided in Section 16).
18. HEADINGS
(a) The headings in this Agreement are solely for the convenience of
reference and shall be given no effect in the construction or interpretation of
this Agreement.
19. COUNTERPARTS; GOVERNING LAW
(a) This Agreement may be executed in any number of counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument. It shall be governed by and construed in accordance
with the laws of the State of Delaware, without giving effect to the conflict of
laws.
IN WITNESS WHEREOF, the parties have duly executed this Agreement on the
date (or dates) set forth below.
FIX-CORP INTERNATIONAL, INC. MARK FIXLER
/s/ Sherry L. Durst, Asst. Secretary /s/ Mark Fixler
- ------------------------------------ -----------------------------
By: Sherry L. Durst/Asst. Secretary
Dated: 1/3/97 Dated: Jan 3 97
------------------------------ -----------------------
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Exhibit 7
EMPLOYMENT AGREEMENT
This Agreement is as of 1st day of January, 1997, between Fix-Corp
International, Inc. ("Company") and Gary DeLaurentiis, (the "Employee") declare
as their mutual intent and purpose as follows.
RECITALS
Whereas the Company desires to engage the Employee to perform services for the
Company, Fix-Corp., as well as its present subsidiary Fix-Cor Industries, Inc.,
or any future parent or subsidiary company of Fix-Corp., or any affiliate of
Fix-Corp International, Inc. And Fix-Cor Industries, Inc.; and
Whereas, the Employee desires to perform such services on the terms and
conditions hereinafter set forth.
Now, therefore, in exchange for the above covenants and with both parties
intending to be legally bound, the Gary DeLaurentiis agrees to become an
Employee of Fix-Corp. pursuant to the terms and conditions set forth below.
1. TERM
The Company agrees to employ Employee and the Employee agrees to serve, pursuant
to the terms and conditions of this Agreement for a period commencing on January
1, 1997, and ending five years thereafter, or such shorter period as may be
provided for herein. The period during which Employee is employed hereunder is
hereafter referred to as the "Employment Period."
2. DUTIES AND SERVICES
(a) During the Employment Period, Employee shall be employed in the business of
the Company and shall also perform services in a responsible executive or
managerial capacity for any of the other subsidiaries or affiliates of the
Company, or by any of its subsidiaries or affiliates. In performance of his
duties, Employee shall be subject to the direction of the Board of Directors of
the Company and of the Board of its subsidiaries and/or affiliates. Employee
agrees to his employment as described in this Section 2 and agrees to devote all
of his time and efforts to the performance of his duties under this Agreement.
Employee shall make himself available to travel as the needs of the business
require.
(b) It is agreed that Employee will serve on the Board of Directors of
Fix-Corp. And with the title of President of Fixcor, Inc.
(c) It is further agreed that the employee will serve on the Board of Directors
of every subsidiary and affiliate of the Company, both presently existing and to
be acquired in the future, with such responsibilities and duties as the Board of
Directors of every subsidiary and affiliate of the Company shall formulate and
determine, along with such job titles.
<PAGE>
3. COMPENSATION
As full compensation for the services hereunder, the Company shall pay Employee
during the employment period, a salary payable in equal semi-monthly or monthly
installments at the annual rate of $125,000 in the first, second, third, fourth,
and fifth years. In addition, subject to approval of the Company's Board of
Directors, the Employee shall receive a bonus each year on an annual or
quarterly basis.
4. FRINGE BENEFITS
a. The Employee shall be entitled to two weeks paid vacation during each
6 month period he is employed by the Company.
b. The Employee shall be entitled to two weeks paid sick leave during
each year he is employed by the Company.
c. The Employee shall be entitled to paid Holidays on those days
recognized by the United States Federal Government.
d. The Employee shall receive health and dental insurance for himself and
his family.
e. The Employee shall receive an automobile allowance in the amount of
$500.00 per month. The Employee will receive reasonable car phone
expenses and reasonable automotive repair and maintenance expenses.
5. REPRESENTATIONS AND WARRANTIES
(a) Employee represents and warrants to the Company that he is under no
contractual or other restriction or obligation which is inconsistent with the
execution of this Agreement, the performance of his duties hereunder, or the
other rights of the Company hereunder and Employee is under no physical or
mental disability that would hinder his performance of duties under this
Agreement.
(b) Employee represents that he is not subject to any judgement or decree, the
effect of which would prohibit, limit or otherwise restrict the employment of
the Employee by the Company pursuant to the terms of this Agreement.
6. NONCOMPETITION
In view of the unique and valuable services it is expected Employee will render
to the Company, and Employee's industry contacts, knowledge of customers, trade
secrets and other proprietary information relating to the business of Fix-Corp.,
the Employee agrees:
(a) During the period Employee is employed by Fix-Corp. or any of the related
companies referenced under this Agreement, he will not otherwise engage in, or
otherwise directly or indirectly be employed by, or act as a consultant or
lender to, or be a director, officer, employee,
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owner, or partner of, any other business or organization, whether or not such
business or organization now is or shall then be competing with Fix-Corp. Or any
of its related companies; and
(b) For a period of one year after he ceases to be employed by Fix-Corp. or any
of its related companies pursuant to this Agreement or otherwise, the Employee
shall not directly or indirectly compete with or be engaged in the same business
as Fix-Corp. or any of its related companies, or be employed by, or act as
consultant or lender to, or be a director, officer, employee, owner, or partner
of, any business or organization which, at the time of such cessation, directly
or indirectly competes with or is engaged in the same business as Fix-Corp. or
any of its related corporation.
7. PATENTS, COPYRIGHTS, TECHNOLOGICAL INVENTIONS
Any interest in patents, patent applications, inventions, copyrights,
developments, and processes ("Such Inventions") which Employee now or hereafter
during the period Employee is employed by any of the Conglomerates corporations
under this Agreement or otherwise may own or develop relating to the fields in
which any of the Conglomerates Corporations may then be engaged shall belong to
the Company, and forthwith upon request of the Company Employee shall execute
all such assignments and other documents and take all such other action as the
Company may reasonably request in order to vest in the Company all his right,
title, and interest in and to such inventions free and clear of all liens,
charges, and encumbrances.
8. CONFIDENTIAL INFORMATION
All confidential information which Employee may now possess, may obtain during
or after the Employment Period, or may create prior to the end of the period
Employee is employed by Fix-Corp., or any of its related companies under this
Agreement or otherwise relating to the financial condition, results of
operations, business, properties, assets, liabilities, or future prospects of
Fix-Corp. or any of its related companies or of any customer or supplier of any
other person or entity either during or after the termination of his employment
or used by him except during the Employment Period in the business and for the
benefit of the Company, in each case without prior written permission of the
Company or, at the election at any time of Fix-Corp., without the prior written
permission of Fix-Corp., Employee shall deliver to the Company all tangible
evidence of such confidential information prior to or at the termination of his
employment.
9. TERMINATION
Notwithstanding anything herein contained, if on or after the date this
Agreement is executed and prior to the end of the Employment Period,
(a) Either (i) Employee shall be physically or mentally incapacitated or
disable or otherwise unable fully to discharge his duties hereunder for a period
of three months, (ii) Employee shall be convicted of a crime, (iii) Employee
shall commit any act or omit to take any action in bad faith and to the
detriment of any of the companies, (or) (iv) Employee shall breach any term of
this Agreement and fail to correct such breach within ten days after commission
of the same, then, and in each such case, the Company shall have the right to
give notice of termination of Employee's
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services hereunder as of a date (not earlier than ten days from such notice) to
be specified in such notice and this Agreement shall terminate on the date so
specified; or
(b) Employee shall die, then this Agreement terminates on his death,
whereupon Employee or his estate, as the case may be, shall be entitled to
receive only his salary at the rate provided in Section 3 to the date on which
termination shall take effect. Nothing contained in this Section 10 shall be
deemed to limit any other right the Company may have to terminate Employee's
employment hereunder upon any ground permitted by law.
10. MERGER, CONSOLIDATION, SALE OF ASSETS
In the event of a future disposition of (or including) the properties and
business of the Company, substantially as an entirety, by merger, consolidation,
sale of assets, or otherwise, then the Company may elect:
(a) To assign this Agreement and all of its rights and obligations hereunder to
the acquiring or surviving corporation; provided that such corporation shall
assume in writing all of the obligations of the Company hereunder, and provided,
further, that the Company (if and so longer as it remains in business as an
independent going enterprise) shall remain liable for the performance of its
obligations hereunder in the event of an unjustified failure of the acquiring
corporation to perform its obligations under this Agreement; or
(b) In addition to its other rights of termination, to terminate this Agreement
upon at least 30 days' written notice by paying Employee the compensation at the
rate provided in Section 3 to the date on which such termination shall take
effect.
11. SURVIVAL
The covenants, agreements, representations and warranties contained in or made
pursuant to this Agreement shall survive Employee's termination of employment.
12. MODIFICATION
This agreement sets forth the entire understanding of the parties with respect
to the subject matter hereof, and this agreement also supersedes all existing
agreements with Fix-Corp. and Gary DeLaurentiis concerning such subject matter,
and may be modified only by a written instrument duly executed by each party.
13. NOTICES
Any notice or other communication required or permitted to be given hereunder
shall be in writing and shall be mailed by certified mail, return receipt
requested, or delivered against receipt to the party to whom it is to be given
at the address of such party set forth in the preamble to this Agreement (or
such other address as the party shall have furnished in writing in accordance
with the provision of Section 14). Any notice given to the Company shall be
sufficient if addressed to
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Employee as provided in this Section 14. Any notice or other communication
given by certified mail shall be deemed given at the time of certification
thereof, except for a notice changing a party's address which shall be deemed
given at the time of receipt thereof.
14. WAIVER
Any waiver by either party of a breach of any provision of this Agreement shall
not operate as or be construed to be a waiver of any other breach of that
provision or of any breach of any other provision of this Agreement. The
failure of a party to insist upon strict adherence to any term of this Agreement
on one or more occasions shall not be considered a wavier or deprive that party
of the right thereafter to insist upon strict adherence to that term or any
other term of this Agreement. Any waiver must be in writing.
15. BINDING EFFECT
Employee's rights and obligations under this Agreement shall not be transferable
by assignment or otherwise, and such rights shall not be subject to commutation,
encumbrance, or the claims of Employee's creditors, and any attempt to do any of
the foregoing shall be void. The provisions of this Agreement shall be binding
upon and inure to the benefit of Employee and his heirs and personal
representatives, and shall be binding upon and inure to the benefit of the
Company and its successors and those who are its assigns under Section 10.
16. NO THIRD PARTY BENEFICIARIES
This agreement does not create, and shall not be construed as creating, any
rights enforceable by any person not a party to this agreement (except as
provided in Section 15).
17. HEADINGS
The headings in this agreement are solely for the convenience of reference and
shall be given no effect in the construction or interpretation of this
agreement.
18. COUNTERPARTS; GOVERNING LAW
This agreement may be executed in any number of counterparts, each of which
shall be deemed an original but all of which together shall constitute one and
the same instrument. It shall be governed by and construed in accordance with
the laws of the State of Delaware, without giving effect to the conflict of
laws.
IN WITNESS WHEREOF, the parties have duly executed this agreement on the date
(or dates) set forth below.
FIX-CORP INTERNATIONAL, INC. GARY DELAURENTIIS
/s/ Gary Delaurentiis
- ---------------------------- ----------------------------------------
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DATED: DATED: 1-1-97
---------------------------------- ------------------------
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Exhibit 8
ACQUISITION AGREEMENT
PURCHASE OF QUANTUM CHEMICAL COMPANY'S ASSETS
FOR FIX-CORP INTERNATIONAL'S STOCK
THIS AGREEMENT, executed on the date (or dates) set forth below, by and
between:
FIX-CORP INTERNATIONAL, Inc., a Delaware corporation with its principal
place of business located at 27040 Cedar Road, Suite 218, Beachwood, Ohio 44122,
acting through its authorized agent Sherry Durst, and hereafter referred to as
interchangeably as "Fix-Corp International, Inc." or "Purchaser";
- and -
FIX-COR INDUSTRIES, Inc., a Delaware corporation with offices at 27040
Cedar Road, Suite 218, Beachwood, Ohio 44122, and with a plastics recycling
plant located at Mid-Ohio Industrial Part, 1835 James Parkway, Heath, Ohio
43065, formerly known as Quantum Chemical Company, acting through its authorized
agent Gary DeLorentis and hereafter referred to as "Fix-Cor";
- and -
Mark Fixler, an individual residing at 6758 Bramblewood Lane, Mayfield,
Village 44143, acting on his behalf and hereafter referred to as the
"Stockholder";
Declare as their mutual intent and purpose as follows.
RECITALS:
WHEREAS, Fix-Corp International, Inc. and Quantum Chemical Corporation, a
Virginia corporation with its principal offices at 11500 Northlake Drive,
Cincinnati, Ohio 45249 entered into a Purchase and Sale Agreement for the
Quantum Resource Recovery plant located at Heath, Ohio, involving Quantum's
post-consumer plastic recycling business and said Purchase and Sale Agreement
was consummated on December 16, 1996. A copy of said Purchase and Sale Agreement
is hereby attached and labeled Exhibit A.; and
WHEREAS, Fix-Corp International lacked the financial capacity to consummate
this transaction by itself and, because of this lack of capacity, Mark Fixler,
Stockholder herein and the President of Fix-Corp International, was engaged in a
personal capacity and was asked to sign and in fact did sign as Guarantor on a
Loan and Security Agreement with Gordon Brothers Capital Corporation, a Delaware
corporation with its principal office located at 40 Broad Street, Boston,
Massachusetts 02109 and, without Mr. Fixler's signature on this Loan and
Security Agreement, the transaction between Fix-Corp International, Inc. and
Quantum Chemical Corporation would not have been consummated. A copy of the Loan
and Security Agreement is attached and labeled Exhibit B; and
<PAGE>
WHEREAS, Fix-Corp International, Inc. has established a wholly owned
subsidiary called Fix-Cor Industries, Inc. and Fix-Cor Industries purpose for
existing is to operate the assets and the business acquired from Quantum
Chemical Corporation on behalf of Fix-Corp International, Inc.; and
WHEREAS, Fix-Corp International, Inc. desires to compensate Mark Fixler,
Stockholder herein, for his assistance in the procurement of financing for the
acquisition of Quantum Chemical Company assets and, in addition to providing
compensation for Stockholder's guarantee, Purchaser further desires to acquire
all legal and equitable interest acquired by Stockholder in said Quantum
Chemical Company assets, thereby vesting full legal and equitable title in said
Quantum Chemical Company with Fix-Corp International, Inc., Purchaser herein;
and
WHEREAS, Purchaser further desires to transfer all assets acquired from
Quantum Chemical Company and place said assets with Fix-Cor Industries, Inc.;
WHEREAS, Purchaser further desires to accomplish its acquisition of all
legal and equitable interest held by Stockholder, Mark Fixler, through a noncash
transaction involving an exchange of restricted Common Stock with par value of
$0.001 per share; and
WHEREAS, Stockholder is also amenable to accepting a block of Restricted
Common Stock with par value of $0.001 and with market value, calculated pursuant
to the terms set forth below, of six million dollars ($6,000,000); and
WHEREAS; Fix-Cor is agreeable to accepting all assets acquired from Quantum
Chemical Corporation and operating said assets on behalf of Purchaser and for
Purchaser's benefit, pursuant to the terms and conditions set forth below;
NOW, THEREFORE, in exchange for the above covenants and with all Parties
intending to be legally bound, Purchaser hereby agrees to convey, transfer and
vest Fix-Cor Industries with all assets acquired by Purchaser from Quantum
Chemical Company and Purchaser further agrees to acquire all legal and equitable
interest held by Stockholder in said Quantum Chemical Company assets in exchange
for the Purchaser's restricted voting common stock, pursuant to the terms and
conditions which follow.
REPRESENTATIONS AND WARRANTIES
OF FIX-COR AND STOCKHOLDER
Section One : Fix-Cor and Stockholder represent and warrant to Purchaser as
follows:
Section 1.01 Organization and Qualification
(a) Fix-Cor possesses the requite personnel and knowledge to operate all
the assets and properties formerly known and referred to as Quantum Resource
Recovery plant and acquired from Quantum Chemical Company, and said assets and
properties are listed in Exhibit C.
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Other than the assets of Quantum Chemical Company, Fix-Cor is operating and
engaging in no other business or economic enterprise of any nature whatsoever
and Fix-Cor further warrants that it has no subsidiaries or affiliates
(excluding Purchaser) which are engaging in any other enterprise or business
activity.
(b) Fix-Cor is a corporation duly organized, validly existing, and in good
standing under the laws of Delaware, with all requisite power and authority, and
all necessary consents, authorizations, approvals, orders, licenses,
certificates, and permits of and from, and declarations and filings with, all
pertinent governmental authorities to own, lease, license, and use its
properties and assets, and to carry on the business in which it is now engaged
and the business in which it contemplates engaging. Fix-Cor is duly qualified to
transact the business in which it is engaged and is in the process of applying
for good standing as a foreign corporation in Ohio, and it is further warranted
that said application of good standing from Ohio will be perfunctorily granted
once a Franchise Tax return is filed.
Section 1.02 Capitalization
(a) The authorized capital stock of Fix-Cor consists of one thousand
(1,000) shares of common stock, par value $0.001 per share ("Fix-Cor Common
Stock"), of which one thousand shares are outstanding. Each outstanding share of
Fix-Cor Common Stock is validly authorized, validly issued, fully paid, and
subject to any liability imposed by Section 630 of the New York Business
Corporation Law, nonassessable, has not been issued and is not owned or held in
violation of any preemptive right of stockholders, and is owned of record and
beneficially by Purchaser in accordance with the following table:
NAME OF STOCKHOLDER NUMBER OF SHARES
Fix-Corp International, Inc. 1,000
(b) There is no commitment, plan, or arrangement to issue, and no
outstanding option, warrant, or other right calling for the issuance of, any
share of capital stock of Fix-Cor, or any security or other instrument
convertible into, exercisable for, or exchangeable for capital stock of Fix-Cor.
There is outstanding no security or other instrument convertible into or
exchangeable for capital stock of Fix-Cor.
Section 1.03 Financial Worth
(a) The following appraisals of the Quantum Chemical Company are hereby
attached and labeled as set forth below.
(1) An appraisal prepared for Quantum Chemical Company by Selvage &
Associates, a firm located on 1506 White Road in Grove City, Ohio 43123, signed
by Butch Selvage and dated February 8, 1996 (Exhibit D); and
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(2) An appraisal prepared for Purchaser by Wilber W. Wilson, real estate
appraiser whose business is located at 25 South Park Place, Suite 105, Newark,
Ohio 43055 signed by Wilber Wilson and Kerry Progtor, and dated December 23,
1996 (Exhibit E).
(b) Since January 8, 1997, during which time Fix-Cor operated the assets
and properties of Quantum Chemical Company on behalf of Purchaser in a de facto
capacity, Fix-Cor warrants that:
(1) There has been no material adverse change in the financial condition,
results of operations, business, properties, assets, liabilities, or future
prospects of Fix-Cor; and the plastics recycling business has operated
profitably.
(2) Fix-Cor has not authorized, declared, paid, or effected any dividend,
or liquidating or other distribution, in respect of its capital stock, or any
direct or indirect redemption, purchase, or other acquisition of any of that
stock.
(3) The operations and business of Fix-Cor have been conducted in all
respects only in the ordinary course.
(4) Management of Fix-Cor reasonably believes that the plastic recycling
operations will meet or exceed the pro forma statements and, further, management
of Fix-Cor is not aware of any purchase order or quotation for the future sale
of the plastic products produced by Fix-Cor which will not be profitable.
(5) Fix-Cor has not suffered an extraordinary loss (whether or not covered
by insurance) or waived any right of substantial value.
(6) Management of Fix-Cor further asserts that there are no known facts to
Fix-Cor which would materially affects in an adverse manner, the financial
condition, results of operations, business, properties, assets, liabilities, or
future prospects of Fix-Cor; provided, however, that Fix-Cor expresses no
opinion as to political or economic matters of general applicability.
Section 1.04 Tax and Other Liabilities
(a) Fix-Cor has no liability of any nature, accrued or contingent,
including, without limitation, liabilities for federal, state, local, or foreign
taxes and liabilities to customers or suppliers, other than the following:
(1) Liabilities for which full provision has been made on the last interim
balance sheet ("Last Balance Sheet") as of February 29, 1997 (hereafter referred
to as the "Last Balance Sheet Date"); and
(2) Other liabilities arising since the Last Balance Sheet Date and prior
to the Closing in the ordinary course of business (which shall not include
liabilities to customers on account of
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defective products or services) which are not inconsistent with the
representations and warranties of Fix-Cor or Stockholder or any other provision
of this Agreement.
Section 1.05 Litigation and Claims
(a) There is no litigation, arbitration, claim, governmental or other
proceeding (formal or informal), or investigation pending, threatened, or in
prospect or any basis therefor known to Fix-Cor or to Stockholder with respect
to the assets and properties formerly known as Quantum Chemical Company. Fix-Cor
is not affected by any present or threatened strike or other labor disturbance
nor, to the knowledge of Fix-Cor, is any union attempting to represent any
employee of Fix-Cor as collective bargaining agent. Fix-Cor is not in violation
of, or in default with respect to, any law, rule, regulation, order, judgment,
or decree; nor is Fix-Cor required to take any action in order to avoid such a
violation or default.
Section 1.06 Properties
(b) Quantum Chemical Company has passed good and marketable title in fee
simple absolute to Fix-Cor for all real properties and good title to all other
properties and assets used in their business or formerly owned by them, except
for permanent easements to a railroad siding and access to a truck scale plus
other properties (if any) operated pursuant to a license, free and clear of all
liens, mortgages, security interests, pledges, charges, and encumbrances.
(a) All accounts and notes receivable reflected on the Last Balance Sheet,
or arising since the Last Balance Sheet Date, have been collected, or are and
will be good and collectible, in each case at the aggregate recorded amounts
thereof without right of recourse, defense, deduction, return of goods,
counterclaim, offset, or set off on the part of the obligor, and, if not
collected, can reasonably be anticipated to be paid within 90 days of the date
incurred.
(b) All inventory of raw materials and work in process of Fix-Cor is
usable, and all inventory of finished goods is good and marketable, on a normal
basis in the existing product lines of Fix-Cor, as the case may be. In no event
do the inventories represent more than a 1 month supply measured by the
projected volume of sales or use for the year ended December 31, 1997,
predicated upon the pro forma operating statements referenced herein. All
inventory is merchantable and fit for the particular purpose for which it is
intended.
(c) Attached as Exhibit F is a true and complete list of all real and
other properties and assets owned, leased, or licensed to Fix-Cor (including
inventory but not including Intangibles, as defined in Section 1.09), including,
with respect to properties and assets owned by Fix-Cor, a statement of cost,
book value and (except for land) reserve for depreciation of each item for tax
purposes, and net book value of each item for financial reporting purposes, and,
with respect to properties and assets leased or licensed by Fix-Cor, a
description of that lease or license. All real and other properties and assets
(including Intangibles) owned by Fix-Cor are reflected on the Last Balance Sheet
(except for acquisitions subsequent to the Last Balance Sheet Date and prior to
the Closing which are either noted on Exhibit B or C or are approved in writing
by the Purchaser). All real and other tangible properties and assets owned,
leased, or licensed by Fix-Cor are in good
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and usable condition (which is herein defined as reflecting reasonable wear and
tear which does not adversely affect the operation of the business of Acquired
Corporation or of that Subsidiary excepted).
(d) No real property owned, leased, licensed, or used by Fix-Cor is, or to
the knowledge of Fix-Cor will be subject to zoning, use, or building code
restrictions which would prohibit its use in the commercial business in which
Fix-Cor is engaged, and no state of facts relating to the actions or inaction of
another person or entity or his or its ownership, leasing, licensing, or use of
any real or personal property exists or will exist which would prevent, the
continued effective ownership, leasing, licensing, or use of that real property
in the business in which Fix-Cor is now engaged or the business in which it
contemplates engaging.
(e) The real and other properties and assets (including Intangibles)
owned, leased or licensed by Fix-Cor constitute all properties and assets which
are necessary to the business of recycling plastic as presently conducted and as
it is contemplated conducting in the foreseeable future.
Section 1.07 Contracts and Other Instruments
(a) Exhibit G, titled List of Contracts, Agreements and Instruments and
Arrangements, accurately and completely sets forth the information required to
be contained therein with respect to Fix-Cor, identifying whether the matter
disclosed therein relates to Fix-Cor or to Stockholder.
(1) The certificate of incorporation (or other charter document) and
By-laws of Fix-Cor and all amendments thereto, as presently in effect, certified
by the Secretary of the corporation, and
(b) The following, initialed by the chief executive officer of Fix-Cor:
(i) true and correct copies of all contracts, agreements, and instruments
referred to in Exhibit G;
(ii) true and correct copies of all leases and licenses (if any); and
(iii)true and correct written descriptions of all supply, distribution,
agency, financing, or other arrangements or understandings referred to in
Exhibit G.
(c) Neither Fix-Cor, nor to the knowledge of Fix-Cor or Stockholder, any
other party to any of those contracts, agreements, instruments, leases, or
licenses is now or expects in the future to be in violation of, or in default
with respect to complying with, any material provision thereof, and each
contract, agreement, instrument, lease, or license is in full force and
constitutes the legal, valid, and binding obligation of the parties and is
enforceable in accordance with its terms.
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(d) Each supply, distribution, agency, financing, or other arrangement or
understanding is a valid and continuing arrangement or understanding; neither
Fix-Cor, nor any other party to any arrangement or understanding has given
notice of termination or taken any action inconsistent with the continuance of
that arrangement or understanding; and the execution, delivery, and performance
of this Agreement will not prejudice any of those arrangements or understandings
in any way.
(e) Fix-Cor enjoys peaceful and undisturbed possession under all leases
and licenses under which it is operating. Fix-Cor is not a party to or bound by
any contract, agreement, instrument, lease, license, arrangement, or
understanding, or subject to any charter or other restriction, which has had, or
to the knowledge of Fix-Cor or Stockholder may in the future have, a material
adverse effect on the financial condition, results of operations, business,
properties, assets, liabilities, or future prospects of Fix-Cor.
Fix-Cor has not engaged nor is it engaging in, nor does it intend to
engage in any transaction with any Stockholder, any director, officer, or
employee of Fix-Cor, any relative or affiliate of any Stockholder or of any
director, officer, or employee, or any other corporation or enterprise in
which any Stockholder, any director, officer, or employee, or any relative or
affiliate then had or now has a 5 percent [5 %] or greater equity or voting
or other substantial interest, other than contracts and agreements listed and
so specified in Exhibit D.
Fix-Cor is not in violation or breach of, or in default with respect to any
term of its certificate of incorporation (or other charter document) or Bylaws.
Section 1.08 Questionable Payments
Neither Fix-Cor, nor any director, officer, agent, employee, or other
person associated with or acting on behalf of Fix-Cor, nor any Stockholder has,
directly or indirectly:
(a) Used any corporate funds for unlawful contributions, gifts,
entertainment, or other unlawful expenses relating to political activity;
(b) Made any unlawful payment to foreign or domestic government officials
or employees, or to foreign or domestic political parties or campaigns, from
corporate funds;
(c) Violated any provision of the Foreign Corrupt Practices Act of 1977;
(d) Established or maintained any unlawful or unrecorded fund of corporate
monies or other assets;
(e) Made any false or fictitious entry on the books or records of Fix-Cor;
(f) Made any bribe, rebate, payoff, influence payment, kickback, or other
unlawful payment;
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(g) Given any favor or gift which is not deductible for federal income tax
purposes; or
(h) Made any bribe, kickback, or other payment of a similar or comparable
nature, whether lawful or not, to any person or entity, private or public,
regardless of form, whether in money, property, or services, to obtain favorable
treatment in securing business or to obtain special concessions, or to pay for
favorable treatment for business secured or for special concessions already
obtained.
Section 1.09 Authority to Sell
(a) Fix-Cor and Stockholder have all requisite power and authority to
execute, deliver, and perform this Agreement. All necessary corporate
proceedings of Fix-Cor have been duly taken to authorize the execution,
delivery, and performance of this Agreement by Fix-Cor. This Agreement has been
duly authorized, executed, and delivered by Fix-Cor, and it has been duly
executed and delivered by Stockholder, and this Agreement constitutes the legal,
valid, and binding obligation of Fix-Cor and Stockholder, and is enforceable in
accordance with its terms.
(b) No consent, authorization, approval, order, license, certificate, or
permit of or from, or declaration or filing with, any federal, state, local, or
other governmental authority or any court or other tribunal is required by
Fix-Cor, or by Stockholder for the execution, delivery, or performance of this
Agreement by Fix-Cor and Stockholder. No consent of any party to any contract,
agreement, instrument, lease, license, arrangement, or understanding to which
Fix-Cor or Stockholder is a party, or to which any of its or his properties or
assets are subject, is required for the execution, delivery, or performance of
this Agreement; and the execution, delivery, and performance of this Agreement
will not violate, result in a breach of, conflict with, or (with or without the
giving of notice or the passage of time or both) entitle any party to terminate
or call a default under any contract, agreement, instrument, lease, license,
arrangement, or understanding, or violate or result in a breach of any term of
the certificate of incorporation (or other charter document) or By-laws of
Fix-Cor, or violate, result in a breach of, or conflict with any law, rule,
regulation, order, judgment, or decree binding on Fix-Cor or any Stockholder, or
to which any of its or his operations, business, properties, or assets are
subject. Upon the Closing, Purchaser will pass to Fix-Cor good and marketable
title in fee simple absolute to all the real properties and good title to all
other properties and assets used in the business of Fix-Cor (except real and
other properties and assets held pursuant to leases or permanent easements
described in Exhibits B and C), free and clear of all liens, mortgages, security
interests, pledges, charges, and encumbrances (except those listed in Exhibit
D).
Section 1.10 Nondistributive Intent
Stockholder is acquiring the shares of Purchaser Common Stock to be issued
hereunder for his own account for investment and not with a view to the
distribution thereof. Stockholder will not sell or otherwise dispose of those
shares (whether pursuant to a liquidating dividend or otherwise) for at least
two years and then, only when such sale shall become eligible for an exemption
from registration. The certificate or certificates representing the shares will
contain a legend to the foregoing effect. By virtue of its position, Stockholder
has access to the kind of
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financial and other information about the Purchaser as would be contained in a
registration statement filed under the Securities Act of 1933. Stockholder
understands that he cannot sell or otherwise dispose of the shares for at least
two years and, after two years, Stockholder must still procure an exemption from
the registration provisions of the Securities Act of 1933.
Section 1.11 Completeness of Disclosure
No representation or warranty by Fix-Cor or Stockholder in this Agreement
contains any untrue statement of material fact, or omits to state a material
fact necessary to make the statements made herein not misleading.
II. Representations and Warranties of Purchaser: Purchaser represents and
warrants to Fix-Cor and Stockholder as follows:
Section 2.01 Organization
Purchaser is a corporation duly organized, validly existing, and in good
standing under the laws of its jurisdiction of incorporation, with all requisite
power and authority to own, lease, license, and use its properties and assets,
and to carry on the business in which it is now engaged and the business in
which it contemplates engaging.
Section 2.02 Validity of Shares
The shares of Purchaser Common Stock delivered to Stockholder pursuant to
this Agreement are validly authorized, validly issued, fully paid, and subject
to any liability imposed by Section 630 of the New York Business Corporation Law
nonassessable.
Section 2.03 Authority to Buy
Purchaser has all requisite power and authority to execute, deliver, and
perform this Agreement. All necessary corporate proceedings of the Purchaser
have been duly taken to authorize the execution, delivery, and performance of
this Agreement by the Purchaser. This Agreement has been duly authorized,
executed, and delivered by the Purchaser. This Agreement further constitutes the
legal, valid, and binding obligation of the Purchaser and is enforceable in
accordance with its terms.
III. Exchange
Section 3.01 Terms of Exchange
On the basis of the representations, warranties, covenants, and
agreements contained in this Agreement and subject to the terms and
conditions of this Agreement:
(a) Purchaser shall sell, assign, transfer, and convey as a going concern
to Fix-Cor at the Closing all properties and assets of the business formerly
known as Quantum Chemical
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Company at the date of the Closing of every kind and nature whatsoever,
including the names, trademarks, contractual rights, books and records and
business and goodwill of the business formerly known as Quantum Chemical
Company; and, in consideration therefor, Purchaser shall:
(i) Deliver at the Closing to Stockholder, a stock certificate registered
in his name for the equivalent of six million dollars worth of Purchaser's
Stock, determined to be 8,000,000 shares, and
(ii) Purchaser shall assume at the Closing all obligations and liabilities
of a certain loan agreement tided Loan and Security Agreement, previously
executed by Stockholder whose signature appears thereon as a party personally
liable and responsible for the obligations contained therein, and Purchaser
shall further indemnify and hold Stockholder harmless from the obligations
contained therein.
(b) Except as set forth in Section 3.01(a)(ii), neither the Stockholder
nor Fix-Cor shall assume or be responsible for any obligation or liability of
Quantum Chemical Company of any nature, accrued or contingent.
(c) With respect to any properties or assets sold hereunder that cannot be
physically delivered to Fix-Cor because they are in the possession of third
parties or otherwise, Purchaser shall give irrevocable instructions to the party
in possession thereof, if such be the case, with copies to Fix-Cor, that all
right, title, and interest therein have been vested in Fix-Cor, and that the
same are to be held for Fix-Cor's exclusive use and benefit.
Section 3.02 Closing
(a) The closing of the transaction contemplated by Sections 3.01(a)(i) and
3.01(a)(ii) shall take place at the offices of Fix-Corp International, 27040
Cedar Road - Suite 218, Beachwood, Ohio 44122, at :00 _.M., local time, on
[ , 19 ]. The closing of the transaction contemplated by Sections 3.01(a)(i)
and 3.01(a)(ii) is herein called the "Closing."
Section 3.03 Transactions at Closing
(a) The following transactions shall take place at the Closing
(1) Fix-Cor shall deliver to Purchaser all such documents representing all
the outstanding shares of capital stock of Fix-Cor.
(b) Purchaser shall deliver to Stockholder a stock certificate registered
in Stockholders name for six million dollars ($6,000,000) worth of shares of
Purchaser Common Stock, and all said shares shall bear a Restrictive Legend,
stating that these shares are not registered and that these shares are being
exchanged pursuant to the Private Offering Exemption, under Section 4(2) of the
Securities Act of 1933.
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(c) Purchaser shall deliver to Stockholder an instrument of assumption of
the obligations and liabilities of Stockholder which Purchaser has agreed to
assume pursuant to Section 3.01(a)(ii).
(d) Purchaser shall deliver to Fix-Cor an undertaking to transfer the
title of all properties held by Purchaser to Fix-Cor, immediately upon payment
of all incumbent indebtedness or upon the transition to permanent financing of
said properties, whichever should occur first in time.
Section 3.04 Right of Purchaser to Withhold Future Payments
(a) If, prior to the time all shares of Purchaser's Common Stock are
delivered pursuant to Section 3.01(a)(i), Purchaser has learned of a breach of
any representation, warranty, covenant, or agreement of Fix-Cor or Stockholder
contained in this Agreement, Purchaser, in its discretion by written notice to
Stockholder, can deduct from the number of shares of Purchaser's Common Stock
otherwise deliverable by Purchaser, a number of shares whose aggregate value is
equal to the aggregate of
(i) the amount necessary to cure or make whole that breach; and
(ii) the amount of losses, deficiencies, damages, and legal and other
expenses (including legal fees and expenses of attorneys chosen by any
Indemnitee) incurred or demonstrably in prospect of being incurred by any
Indemnitee in connection with claims, suits, actions, proceedings (formal or
informal), investigations, judgments, or settlements as a result of, or to
remedy a situation or circumstance caused by, the breach.
(b) Shares of Purchaser's Common Stock shall be valued for purposes of
this Section 3.04 as follows:
(i) If shares of Purchaser Common Stock are traded on a national
securities exchange, at the average closing price per share during the period
commencing 40 days prior to the date of the Closing and ending 10 days prior to
the date of the Closing ("Valuation Period") on the principal securities
exchange on which those shares are traded.
(ii) If the shares are traded in the over-the-counter market, at the
average closing asked price per share during the Valuation Period.
(c) If no public market exists for Purchaser Common Stock, at a price
equal to the fair market value per share of the shares, as determined by an
independent appraiser selected by the Purchaser.
IV. Conditions to Obligations of Purchaser
The obligations of Purchaser under this Agreement are subject, at the
option of Purchaser to the following conditions:
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Section 4.01 Accuracy of Representations and Compliance With Conditions
(a) All representations and warranties of Fix-Cor and Stockholder
contained in this Agreement shall be accurate when made and, in addition, shall
be accurate as of the Closing, as though the representations and warranties were
then made in exactly the same language by Fix-Cor or Stockholder and regardless
of knowledge or lack thereof on the part of Fix-Cor or Stockholder or changes
beyond its or his control; as of the Closing, Fix-Cor and Stockholder shall have
performed and complied with all covenants and agreements and satisfied all
conditions required to be performed and complied with by any of them at or
before that time by this Agreement; and Purchaser shall have received
certificates signed by the chief executive officer of Fix-Cor and by Stockholder
dated the date of the Closing to that effect, substantially in the form of
Exhibits I and J, respectively.
Section 4.02 Opinion of Counsel
(a) Fix-Cor and Stockholder shall have delivered to Purchaser on the date
this Agreement is executed and on the date of the Closing the opinion of counsel
to Fix-Cor and Stockholder, dated as of those dates, in form and substance
satisfactory to counsel for the Purchaser, that:
(1) Fix-Cor is a corporation validly existing and in good standing under
the laws of the State of Delaware, with all requisite corporate power and
authority to own its properties and to carry on the business in which it is now
engaged.
(b) Fix-Cor is duly qualified to transact the business in which it is
engaged and is in the process of applying for good standing as a foreign
corporation in the Ohio. Furthermore, Ohio is the only jurisdiction in which the
real or personal property owned or leased, or business conducted by the former
Quantum Chemical Company is material to the operations of its plastics recycling
business taken as a whole.
(c) The authorized and outstanding capital stock of Fix-Cor is as set
forth in Section 1.02 of this Agreement; and all outstanding shares of capital
stock of Fix-Cor are validly authorized and issued, fully paid, and
nonassessable.
(d) All necessary corporate proceedings of Fix-Cor have been duly taken to
authorize the execution, delivery. and performance of this Agreement by Fix-Cor
and the consummation of the transactions contemplated by this Agreement.
(f) Fix-Cor has corporate power and authority to execute, deliver, and
perform this Agreement, and the Stockholder has power and authority to execute,
deliver, and perform this Agreement, and this Agreement has been duly
authorized, executed, and delivered by Fix-Cor, and this Agreement has been duly
executed and delivered by Stockholder, and this Agreement constitutes the legal,
valid, and binding obligation of Fix-Cor and Stockholder, and (subject to
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applicable bankruptcy, insolvency, and other laws affecting the enforceability
of creditors' rights) is enforceable as to Fix-Cor and Stockholder in accordance
with its terms.
(g) The execution, delivery, and performance of this Agreement will not
violate or result in a breach of any term of Fix-Cor's certificate of
incorporation (or other charter document) or of Fix-Cor's by-laws; and the
execution, delivery, and performance of this Agreement by Fix-Cor and
Stockholder will not violate, result in a breech of, or constitute a default
under any term of any of the following agreements: Loan and Security Agreement
with Gordon Brothers Capital Corporation, and the Purchase and Sale Agreement
with Quantum Chemical Corporation.
(h) After reasonable investigation, counsel has no actual knowledge of any
consent of, or declaration or filing with, any governmental authority which is
required of Fix-Cor for execution or performance of this Agreement by Fix-Cor.
(i) After reasonable investigation, such counsel has no actual knowledge
of any action, suit, or proceeding pending or threatened against Fix-Cor at law
or in equity, or before any federal, state, municipal, or other governmental
department, commission, board, bureau, agency, or instrumentality that
(i) Can reasonably be expected to result in any materially adverse change
in the business, properties, operations, prospects, or assets, or in the
condition, financial or otherwise, of Fix-Cor, or
(ii) Seeks to prohibit or otherwise challenge the consummation of the
transaction contemplated by this Agreement.
Section 4.03 Accountants' Letter
(a) Fix-Cor and Stockholder shall deliver to the Purchaser on the date of
Closing, a letter from a Certified Public Accountant addressed to Purchaser in
form and substance satisfactory to Purchaser, stating, in effect:
(1) They are, and during the period covered by their report relating to
the financial statements referred to in Section 1.03 they were, certified public
accountants with respect to Fix-Cor.
(2) On the basis of procedures (but not an examination made in accordance
with generally accepted auditing standards) consisting of a reading of the
latest available unaudited consolidated interim financial statements of Fix-Cor
(with an indication of the date of the latest available unaudited interim
financial statements), a reading of the latest available minutes of the
stockholders and Boards of Directors of Fix-Cor, inquiries to certain officers
and other employees of Fix-Cor responsible for financial and accounting matters,
and other specified procedures and inquiries, nothing has come to their
attention that caused them to believe that
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(i) There was any change in the capital stock or debt of Fix-Cor or any
decrease in the net current assets or stockholders' equity of Fix-Cor as of the
date of the latest available consolidated monthly financial statements of
Fix-Cor or as of a specified date not more than five business days prior to the
date of that letter, each as compared with the amounts shown in the Last Balance
Sheet, other than as disclosed in this Agreement or any change or decrease
(which shall be set forth in that letter) which the Purchaser in its sole
discretion shall accept, or
Section 4.04 Review of Proceedings
(a) All actions, proceedings, instruments, and documents required to carry
out this Agreement or incidental thereto and all other related legal matters
shall be subject to the reasonable approval of counsel to the Purchaser, and
Fix-Cor and Stockholder shall have furnished that counsel those documents
counsel may have reasonably requested for the purpose of enabling him to pass
upon such matters.
Section 4.05 Legal Action
(a) There shall not have been instituted or threatened any legal
proceeding relating to, or seeking to prohibit or otherwise challenge the
consummation of, the transaction contemplated by this Agreement, or to obtain
substantial damages with respect thereto.
(b) There shall not have been any action taken, or any law, rule,
regulation, order, or decree proposed, promulgated, enacted, entered, enforced,
or deemed applicable to the transaction contemplated by this Agreement by any
federal, state, local, or other governmental authority, or by any court or other
tribunal, including the entry of a preliminary or permanent injunction, which,
in the sole judgment of Purchaser,
(i) Makes any of the transactions contemplated by this Agreement illegal,
(ii) Results in a delay in the ability of Purchaser to consummate the
transaction contemplated by this Agreement,
(iii)Imposes material limitations on the ability of Purchaser to
effectively to exercise full rights of ownership with respect to the properties
and assets purported to be sold pursuant to this Agreement, or
(iv) Otherwise prohibits, restricts, or delays consummation of the
transaction contemplated by this Agreement, or impairs the contemplated benefits
to Purchaser of the transaction contemplated by this Agreement.
Section 4.06 Title Insurance
(a) Purchaser shall have received, at or prior to the Closing, a
commitment for title insurance by a title insurance company or companies
designated by the Purchaser to issue an American Land Title Association Owner's
Policy Form B-1976 (or a policy Purchaser considers
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its equivalent), and, if requested by Purchaser, a current survey certified to
Purchaser and to that title insurance company showing all improvements,
rights-of-way, and easements and no encroachments, all at Purchaser's expense,
with respect to the real property owned by Purchaser, that commitment to show to
the satisfaction of Fix-Cor that immediately prior to the time of the Closing,
Purchaser had good and marketable title in fee simple absolute to the real
property, free and clear of all liens, mortgages, security interests, pledges,
charges, and encumbrances (except those listed in Exhibit _).
Section 4.07 Release of Guarantee
(a) In so far as Purchaser is concerned and, by inference, in so far as
the stockholders of Purchaser are concerned (but not with regard to any
third-party lender), Stockholder shall be released at or prior to the Closing
from the guarantee of an obligation of Purchaser listed in Exhibit _ and, if any
suit or action of any kind should be initiated by any officer or stockholder of
Purchaser against Stockholder, the Purchaser shall defend Stockholder and hold
Stockholder harmless from any ensuing litigation which should arise, including
all attorney fees.
V. Conditions to Obligations of Fix-Cor and Stockholder
The obligations of Purchaser under this Agreement are subject, at the
option of Fix-Cor and Stockholder, to the following conditions:
Section 5.01 Accuracy of Representations and Compliance With Conditions
(a) All representations and warranties of Purchaser contained in this
Agreement shall be accurate when made and, in addition, shall be accurate as of
the Closing, as though the representations and warranties were then made in
exactly the same language by Purchaser and regardless of knowledge or lack
thereof on the part of Purchaser or changes beyond its control; as of the
Closing, Purchaser shall have performed and complied with all covenants and
agreements and satisfied all conditions required to be performed and complied
with by any of them at or before that time by this Agreement; and Fix-Cor and
Stockholder shall have received written assurances signed by an authorized
executive officer of Purchaser dated the date of the Closing to that effect.
Section 5.02 Review of Proceedings
(a) All actions, proceedings, instruments, and documents required to carry
out this Agreement or incidental thereto and all other related legal matters
shall be subject to the reasonable approval of counsel to Fix-Cor and
Stockholder, and Purchaser shall have furnished that counsel those documents
counsel may have reasonably requested for the purpose of enabling him to pass
upon such matters.
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5.03 Legal Action
(a) There shall not have been instituted or threatened any legal
proceeding relating to, or seeking to prohibit or otherwise challenge the
consummation of, the transaction contemplated by this Agreement, or to obtain
substantial damages with respect thereto.
(b) There shall not have been any action taken, or any law, rule,
regulation, order, or decree proposed, promulgated, enacted, entered, enforced,
or deemed applicable to the transaction contemplated by this Agreement by any
federal, state, local, or other governmental authority, or by any court or other
tribunal, including the entry of a preliminary or permanent injunction, which,
in the sole judgment of Purchaser,
(i) Makes any of the transactions contemplated by this Agreement illegal,
(ii) Results in a delay in the ability of Fix-Cor and Stockholder to
consummate the transaction contemplated by this Agreement,
(iii) Imposes material limitations on the ability of Purchaser to
effectively to exercise full rights of ownership with respect to the
properties and assets purported to be transferred pursuant to this Agreement,
or
(iv) Otherwise prohibits, restricts, or delays consummation of the
transaction contemplated by this Agreement, or impairs the contemplated
benefits to Fix-Cor and Stockholder of the transaction contemplated by this
Agreement.
VI. Covenants and Agreements of Fix-Cor and Stockholder
Acquired Corporation and Stockholders covenant and agree as follows:
Section 6.01 Access
(a) Fix-Cor will afford the officers, employees, attorneys, agents,
investment bankers, accountants, and other representatives of Purchaser free and
full access to the plants, properties, books, and records of Fix-Cor, and will
permit them to make extracts from and copies of such books and records, and
will, from time to time, furnish Purchaser with additional financial and
operating data and other information as to the financial condition, results of
operations, business, properties, assets, liabilities, or future prospects of
Fix-Cor that Purchaser from time to time may request. Fix-Cor will cause its
independent certified public accountants to make available to Purchaser and its
independent certified public accountants the work papers relating to the audits
of Fix-Cor.
Section 6.02 Conduct of Business
(a) Fix-Cor will conduct their affairs so that at the Closing no
representation or warranty of Fix-Cor will be inaccurate, no covenant or
agreement of Fix-Cor will he breached,
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and no condition in this Agreement will remain unfulfilled by reason of the
actions or omissions of Fix-Cor. Except as otherwise requested by Purchaser in
writing, until the Closing or the earlier rightful termination of this
Agreement, Fix-Cor will use its best efforts to preserve the business operations
of the former Quantum Chemical Company intact, and to the extent feasible (given
the fact that the plant did not operate for approximately one year) keep
available the services of their present personnel, to preserve in full force and
effect the contracts, agreements, instruments, leases, licenses, arrangements,
and understandings of the former Quantum Chemical Company, and to preserve the
goodwill of their suppliers, customers, and others having business relations
with any of them. Until the Closing or earlier rightful termination of this
Agreement, Fix-Cor will conduct the business and operations of the former
Quantum Chemical Company, in all respects, only in the ordinary course.
Section 6.03 Advise of Changes
(a) Until the Closing or the earlier rightful termination of this
Agreement, Fix-Cor and Stockholder will immediately advise Purchaser, in a
detailed written notice, of any fact or occurrence or any pending or threatened
occurrence of which any of them obtains knowledge and which (a) (if existing and
known at the date of the execution of this Agreement) would have been required
to be set forth or disclosed in or pursuant to this Agreement or an Exhibit
hereto, (b) (if existing and known at any time prior to or at the Closing) would
make the performance by any party of a covenant contained in this Agreement
impossible or make that performance materially more difficult than in the
absence of that fact or occurrence, or (c) (if existing and known at the time of
the Closing) would cause a condition to any party's obligations under this
Agreement not to be fully satisfied.
Section 6.04 Confidentiality
(a) Fix-Cor shall insure that all confidential information which it has
acquired directly or indirectly through Quantum Chemical Company, or through any
of its respective officers, directors, employees, attorneys, agents, investment
bankers, or accountants, or any former employees, attorneys, agents, investment
bankers, or accountants of Quantum Chemical Company, or any of its attorneys,
agents, investment bankers, or accountants may now possess or may hereafter
create or obtain relating to the financial condition, results of operations,
business, properties, assets, liabilities, or future prospects of Fix-Cor shall
not be published, disclosed, except as required in duly issued reports to
stockholders, or made accessible by any of them to any other person or entity at
any time or used by any of them except for the benefit of Purchaser.
Section 6.05 Public Statements
(a) Before Fix-Cor releases any information concerning this Agreement or
the transactions contemplated by this Agreement which is intended for or may
result in public dissemination thereof, Fix-Cor shall cooperate with Purchaser,
shall furnish drafts of all documents or proposed oral statements to Purchaser
for comments, and shall not release any information without the written consent
of Purchaser. Nothing contained herein shall prevent Fix-
17
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Cor or Stockholder from furnishing any information to any governmental authority
if required to do so by law.
VII. Covenants and Agreements of Purchaser
Purchaser covenants and agrees as follows.
Section 7.01 Conduct of Business
(a) Purchaser will conduct its affairs so that at the Closing no
representation or warranty of Purchaser will be inaccurate, no covenant or
agreement of Purchaser will be breached, and no condition in this Agreement will
remain unfulfilled by reason of the actions or omissions of Purchaser. Except as
otherwise requested by Fix-Cor in writing, until the Closing or the earlier
rightful termination of this Agreement, Purchaser will use its best efforts to
preserve the business operations of its company and preserve in full force and
effect the contracts, agreements, instruments, leases, licenses, arrangements,
and understandings of the Purchaser's business, in all respects, only in the
ordinary course.
Section 7.02 Advise of Changes
(a) Until the Closing or the earlier rightful termination of this
Agreement, Purchaser will immediately advise Fix-Cor and Stockholder, in a
detailed written notice, of any fact or occurrence or any pending or threatened
occurrence of which any of them obtains knowledge and which (a) (if existing and
known at the date of the execution of this Agreement) would have been required
to be set forth or disclosed in or pursuant to this Agreement or an Exhibit
hereto, (b) (if existing and known at any time prior to or at the Closing) would
make the performance by any party of a covenant contained in this Agreement
impossible or make that performance materially more difficult than in the
absence of that fact or occurrence, or (c) (if existing and known at the time of
the Closing) would cause a condition to any party's obligations under this
Agreement not to be fully satisfied.
Section 7.03 Confidentiality
(a) Purchaser shall insure that all confidential information which it has
acquired directly or indirectly or may now possess or may hereafter create or
obtain relating to the financial condition, results of operations, business,
properties, assets, liabilities, or future prospects of Purchaser shall not be
published, disclosed, except as required in duly issued reports to stockholders,
or made accessible by any of them to any other person or entity at any time or
used by any of them except for the benefit of Fix-Cor and Stockholder.
Section 7.04 Public Statements
(a) Before Purchaser releases any information concerning this Agreement or
the transactions contemplated by this Agreement which is intended for or may
result in public dissemination thereof, Purchaser shall cooperate with Fix-Cor,
shall furnish drafts of all
18
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documents or proposed oral statements to Fix-Cor for comments, and shall not
release any information without the written consent of Fix-Cor. Nothing
contained herein shall prevent Purchaser from furnishing any information to any
governmental authority if required to do so by law.
VIII. Miscellaneous
Section 8.01 Brokerage Fees
(a) If any person shall assert a claim to a fee, commission, or other
compensation on account of alleged employment as a broker or finder, or alleged
performance of services as a broker or finder, in connection with or as a result
of the transaction contemplated by this Agreement, Fix-Cor and Stockholder shall
indemnify and hold harmless the Purchaser against and in respect of any and all
claims, suits, actions, and proceedings (formal or informal), investigations,
judgments, deficiencies, damages, settlements, liabilities, and legal and other
expenses (including legal fees and expenses of attorneys chosen by any
Indemnitee) as and when incurred arising out of or based upon that claim by that
person, and Fix-Cor and Stockholder shall, at their sole expense, defend any and
all suits, actions, proceedings (formal or informal), or investigations
involving the claim that may at any time be brought against any Indemnitee and
satisfy promptly any settlement or judgment arising therefrom; but, if Fix-Cor
and Stockholder fail to defend that suit, action, proceeding, or investigation
in a timely manner, Purchaser or any Indemnitee made a defendant therein or a
party thereto shall have the right to defend and settle the same and pay any
judgment or settlement pertaining thereto, as it or he may reasonably deem
appropriate, at the cost and expense of Fix-Cor and Stockholder. If, however, it
is ultimately determined in any suit, action, or proceeding (in which Purchaser
and all Indemnitees made a defendant therein or a party thereto were afforded
the opportunity to have their counsel participate in the defense) that Purchaser
or any Indemnitee made a defendant therein or a party thereto was the sole
employer of the broker or finder, or services were performed solely for
Purchaser or any Indemnitee made a defendant therein or a party thereto, then
Fix-Cor and Stockholder shall not be responsible under this Section 8.01 and
amounts theretofore paid by them by reason of this Section 8.01 shall be
reimbursed by Purchaser or the Indemnitee, as the case may be, who was the sole
employer.
Section 8.02 Further Actions
(a) At any time and from time to time, each party agrees, at its or his
expense, to take actions and to execute and deliver documents as may be
reasonably necessary to effectuate the purposes of this Agreement.
Section 8.03 Availability of Equitable Remedies
Since a breach of the provisions of this Agreement could not adequately be
compensated by money damages, any party shall be entitled, either before or
after the Closing, in addition to any other right or remedy available to it, to
an injunction restraining the breach or threatened breach and to specific
performance of any provision of this Agreement, and, in either case, no
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bond or other security shall be required in connection therewith, and the
parties hereby consent to the issuance of such an injunction and to the ordering
of specific performance.
8.04 Survival
(a) The covenants, agreements, representations, and warranties contained
in or made pursuant to this Agreement shall survive the Closing and any delivery
of shares of Purchaser's Common Stock by Purchaser, irrespective of any
investigation made by or on behalf of any party.
8.05 Modification
(a) This Agreement and the Exhibits hereto set forth the entire
understanding of the parties with respect to the subject matter hereof (except
as provided in Section 8.04), supersede all existing agreements among them
concerning the subject matter, and may be modified only by a written instrument
duly executed by each party with the approval of the Board of Directors of each
corporate party.
Section 8.06 Notices
(a) Any notice or other communication required or permitted to be given
hereunder shall be in writing and shall be mailed by certified mail, return
receipt requested or by the most nearly comparable method if mailed from or to a
location outside of the United States, or delivered against receipt to the party
to whom it is to be given at the address of that party set forth in the preamble
to this Agreement (or to another address the party shall have furnished in
writing in accordance with the provisions of this Section 8.07) with a copy to
each of the other parties hereto. Any notice given to any corporate party shall
be addressed to the attention of the Corporate Secretary. Notice to the estate
of any party shall be sufficient if addressed to the party as provided in this
Section 8.07. Any notice or other communication given by certified mail shall be
deemed given at the time of certification thereof, except for a notice changing
a party's address which will be deemed given at the time of receipt thereof.
Section 8.07 Waiver
(a) Any waiver by any party of a breach of any provision of this Agreement
shall not operate as or be construed to be a waiver of any other breach of that
provision or of any breach of any other provision of this Agreement. The failure
of a party to insist upon strict adherence to any term of this Agreement on one
or more occasions will not be considered a waiver or deprive that party of the
right thereafter to insist upon strict adherence to that term or any other term
of this Agreement. Any waiver must be in writing and, in the case of a corporate
party, be authorized by a resolution of the Board of Directors or by an officer
of the waiving patty.
Section 8.08 Binding Effect
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(a) The provisions of this Agreement shall be binding upon and inure to
the benefit of Stockholder, Purchaser, and Fix-Cor, and their respective
successors and assigns, and each Stockholder, and his assigns, heirs, and
personal representatives.
Section 8.09 No Third-Party Beneficiaries
(a) This Agreement does not create, and shall not be construed as
creating, any rights enforceable by any person not a party to this Agreement.
Section 8.10 Separability
(a) If any provision of this Agreement is invalid, illegal, or
unenforceable, the balance of this Agreement shall remain in effect, and if any
provision is inapplicable to any person or circumstance, it shall nevertheless
remain applicable to all other persons and circumstances.
Section 8.11 Headings
(a) The headings in this Agreement are solely for convenience of reference
and shall be given no effect in the construction or interpretation of this
Agreement.
Section 8.14 Counterparts; Governing Law
(a) This Agreement may be executed in any number of counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument. It shall be governed by and construed in
accordance with the laws of Delaware, without giving effect to conflict of laws.
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the
date (or dates) set forth below.
Purchaser Fix-Cor Industries, Inc.
/s/ Sherry L. Durst /s/ Gary DeLaurentiis
- ----------------------------------- -------------------------------------
By: Sherry Durst By:
Title: Assistant Secretary Title: President
Dated: 4-16-97 Dated: 4-16-97
----------------------------- -------------------------------
Stockholder
/s/ Mark Fixler
- -----------------------------------
Mark Fixler
Dated: 4-16-97
-----------------------------
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NOTARY PUBLIC
SUBSCRIBED AND SWORN TO before me, __________________, a duly licensed
officer of the Court and administer of oaths, by Mark Fixler, Sherry Durst and
Gary DeLorentis, all of whom were personally identified and all of whom further
averred that their signatures above have been duly authorized by their
respective corporate bodies and said signatures appear hereon by each party's
own free will.
/s/ H. Kay
--------------------------------------------------
My Commission Expires
-----------------------------
H. Kay
Notary Public, State of Ohio,
My Commission Expires
Dec. 28, 2000
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Exhibit A to Exhibit 8
PURCHASE AND SALE AGREEMENT
THIS AGREEMENT made this 14th day of August, 1996, by and between QUANTUM
CHEMICAL CORPORATION, a Virginia corporation having its principal offices at
11500 Northlake Drive, Cincinnati, Ohio 45249 ("Quantum"), and FIX-CORP
INTERNATIONAL, INC., an Ohio Corporation, having its principal offices at 27040
Cedar Road, Suite 218, Cleveland, OH 44122 ("Buyer");
WITNESSETH:
WHEREAS, Quantum owns and has operated facilities at
Heath, Ohio, for the recycling of post consumer
polyethylene and other plastic resins; and,
WHEREAS, Quantum desires to sell such facilities and
portions of its post-consumer recycling business
associated therewith to Buyer; and
WHEREAS, Buyer desires to purchase such facilities and
portions of the post-consumer recycling from Quantum
upon the terms and conditions set forth in this
Agreement.
NOW, THEREFORE, in consideration of the mutual agreements set forth in this
Agreement, the parties hereto do hereby agree as follows:
1. ASSETS TO BE ACQUIRED. Subject to the terms and conditions set
forth in this Agreement, at Closing (as later defined) Quantum agrees to sell,
convey, transfer, assign and deliver to Buyer and Buyer agrees to purchase and
accept, as hereinafter provided, the following assets, rights and property (i)
constituting Quantum's Resource Recovery plant at Heath. Ohio and (ii) relating
to portions of Quantum's post-consumer plastic recycling business (collectively
referred to as the "Assets").
1.01. A parcel of land and all buildings and improvements upon it (the
"Premises") as described more full described in Schedule 1.01A, subject to the
reservations, easements, and
<PAGE>
exceptions set forth in Schedule 1.01B and the existing or potential claims,
litigation, suits, charges, actions, governmental investigations or other
proceedings set forth in Schedule 5.08.
1.02. Personal property consisting of two parallel plastics recycling
lines (known as Line 7 and Line 8) composed of three primary processing areas
(dry processing, wet processing and finishing); bulk blending; truck scale;
office and shipping facilities; and other machinery and equipment. A listing of
the machinery and equipment for Line 7 and Line 8, plant support and obsolete
machinery and equipment to be sold and purchased is set forth in Schedule 1.02A.
Those assets attributable to that portion of Quantum's post consumer plastics
recycling business which is to be acquired by Buyer are set forth in Schedule
1.02B. Notwithstanding those items set forth on Schedule 1.02A, it is the
intention of the parties that all personal property, fixtures, equipment and
improvements located in the facility as of August 12, 1996 shall be included in
the personal property being sold to Buyer as set forth in Schedule 1.02A and
1.02B.
1.03. Buyer shall not purchase or acquire from Quantum pursuant to this
Agreement:
(a) Quantum's accounts receivable or notes receivable attributable to
Quantum's post-consumer plastics recycling business;
(b) Any of Quantum's covered hopper rail cars and vehicles not listed in
Schedule 1.02A;
(c) Any trade name of Quantum or any right to use any trade name of
Quantum;
(d) Any trademarks of Quantum or any right to use any trademarks of
Quantum;
(e) Any portion of Quantum's post consumer plastics recycling business
not set forth in Schedule 1.02B;
(C) Any finished goods inventories not located upon the Premises at
Closing;
(g) Any office equipment (including, but not limited to, personal
computers, Telephones and copy machines) located upon the Premises
at Closing and covered under master leases held by Quantum or owned
by Quantum which is not listed in Schedule 1.02A; and,
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(h) Any records or documents related to the operation of the Assets
which are not located on the Premises at Closing.
2. PURCHASE PRICE. Buyer shall pay to Quantum for the Assets a total
purchase price of THREE MILLION FOUR HUNDRED THOUSAND DOLLARS ($3,400,000.00)
(the "Purchase Price").
2.01. The parties have agreed to allocate the purchase price among the
Assets on the basis set forth in Schedule 2.01.
2.02. The Purchase Price shall be paid as follows:
(a) TWO HUNDRED FIFTY THOUSAND DOLLARS ($250,000.00) to be paid upon the
signing of this Agreement and to be held and administered in
accordance with the terms and conditions of this Agreement;
(b) THREE MILLION ONE HUNDRED FIFTY THOUSAND DOLLARS ($3,150,000.00) to
be paid at Closing;
2.03. The payment specified in Sections 2.02(a) shall be allocated as
follows:
(a) FIFTY THOUSAND DOLLARS ($50,000.00) shall be deemed to be a
non-refundable deposit, subject only to Section 2.03(c), required by
Quantum in order to remove sale of the facility from the market
pending the Closing of this transaction.
(b) TWO HUNDRED THOUSAND DOLLARS ($200,000.00) to be held in trust by
Quantum's attorney subject to release of Buyer's contingencies.
(c) In addition to the other terms and conditions set forth in this
agreement, the deposits referred to Section 2.03(a) and (b) above
shall be refunded to Buyer if Quantum fails to perform any of the
terms or provisions of this agreement and/or any representation of
Quantum as set forth in this agreement is not true or accurate.
3. CLOSING.
3.01. The consummation of the sale and acquisition of the Assets pursuant
to this Agreement ("Closing") shall take place at the offices of Quantum at
11500 Northlake Drive, Cincinnati, Ohio, during normal banking hours, Eastern
Standard Time, at a mutually convenient
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and agreeable date and as soon as practical after Buyer has been satisfied with
respect to or has waived the due diligence contingencies set forth in Section
9.04, but in no event later than sixty-six (66) days after the execution of this
Agreement. In the event the transaction does not close within said sixty-six
(66) day period, subject to the conditions precedent set forth in this
Agreement, this Agreement shall terminate in accordance with Section 11.03 or
any other provision dealing with termination based up failure to release
contingencies.
3.02. At Closing Quantum will deliver to Buyer a general warranty deed in
the form of Exhibit A to this Agreement for the Plant, a bill of sale in the
form of Exhibit B to this Agreement for the remainder of the Assets and such
other documents as specified in Section 9 of this Agreement or as mutually
agreed by the parties or as reasonably required by Buyer.
3.03. At Closing Buyer will deliver to Quantum all documents to be
delivered by Buyer to Quantum pursuant to Article 10 of this Agreement.
3.04. All documents to be delivered at Closing by either party to the
other shall have been reviewed and approved by the parties and their respective
legal counsel prior to Closing and as a condition precedent to Closing, subject
to the sixty-six day limit for Closing in Section 3.01.
4. TAXES. ASSESSMENTS. UTILITIES. TRANSFER TAXES AND FEES
4.01. Real estate and personal property taxes ("Tax" or "Taxes") imposed
upon the Assets for tax year 1995 have been or will be paid by Quantum. Quantum
shall give to Buyer at Closing a credit to the Purchase Price sufficient for
that portion of the 1996 Taxes representing Quantum's proportionate ownership of
the Plant during tax year 1996.
4.02. Any other similar ad valorem tax, tax or any special assessment
imposed on the real or personal property of the Plant shall be prorated between
Quantum and Buyer on the basis of the portion of the assessment period falling
before and after Closing, respectively.
4
<PAGE>
4.03. The parties shall make all reasonable efforts to change the billing
for water, electricity, sewer, telephone and other utilities from Quantum to
Buyer as of the date of Closing. All charges for water, electricity, sewage,
telephone and other utilities for the billing period encompassing Closing shall
be prorated between Buyer and Quantum as of Closing.
4.04. Any payments by either party to the other pursuant to Sections 4.02
and 4.03, or the prorations therein prescribed, shall be made within ten (10)
business days after receipt of invoices from the payee.
4.05. Buyer will pay or reimburse Quantum for all taxes, fees or other
charges payable to any federal, state or local governmental entity, except taxes
on or measured by the net income of either party or taxes imposed upon Quantum
as a result of any gain on this transaction, as a result of the sale or transfer
of the assets and business pursuant to this Agreement or any documents executed,
filed or recorded in connection with this Agreement.
5. REPRESENTATIONS AND WARRANTIES OF QUANTUM
Quantum represents and warrants as follows:
5.01. Quantum is a corporation duly organized, validly existing and in
good standing under the laws of the Commonwealth of Virginia and is qualified
and in good standing as a foreign corporation in the State of Ohio.
5.02. Quantum has full corporate power and authority to make and perform
this Agreement and to transfer and vest in Buyer title to all of the Assets.
5.03. The execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated by this Agreement by Quantum have
been or will have been, prior to Closing, duly authorized by all requisite
corporate action.
5
<PAGE>
5.04. The execution of this Agreement by Quantum and the performance of
its obligations under this Agreement will not violate any contract, mortgage,
indenture or similar agreement or restriction to which Quantum is a party or
constitute a default under any collective bargaining agreement or other
agreement to which Quantum is a party and which pertains to the Plant.
5.05. Quantum has and will convey to Buyer fee simple title to all of
the real estate and appurtenances set forth in Schedule 1.01 A free and clear
of all liens, encumbrances or other charges, except as disclosed in Schedule
1.01B with possession of the Premises and Assets to take place immediately
after Closing.
5.06. Quantum is the sole and exclusive title owner of all the personal
and other tangible property to be transferred to Buyer as set forth in Schedule
1.02A and Schedule 1.02B. Quantum shall transfer such assets to Buyer in the
same condition they were in on June 5, 1996, ordinary wear and tear excepted,
free and clear of all liens, encumbrances and/or claims by any other person or
entity except those listed on Schedule 5.08.
5.07. Quantum's facility is in compliance in all material respects with
all laws, regulations, ordinances, decrees and orders relating to health and
environmental controls, including but not limited to sprinkler system and
pollution control equipment relating to health and environmental controls.
5.08. Except with respect to the matters listed in Schedule 5.08 or to
which Quantum has given or shall give notice to Buyer in writing, there are (a)
no litigation, suits, charges, actions, findings, governmental investigations,
reports or orders or other proceedings of any kind or nature threatened or
pending against Quantum which would materially effect Quantum's right to convey
the real and personal property required by this Agreement. (Such governmental
6
<PAGE>
investigations and reports as referred to above shall include the Department of
Labor, OSHA and any EPA agency; the plant, facility and assets are not subject
to any contract or agreement with any labor union, organization or collective
bargaining agreement which would be subject to of materially effect transfer of
the assets as contemplated by this agreement; that none of the restrictions and
matters set forth in Schedule 1.01B, materially affect the use and operation of
the facility and assets), and (b) no administrative or judicial proceedings
arising under any federal, state or local law or provision relating to the
regulation of the discharge of materials into the environment or otherwise
relating to the protection of health and environment, whether initiated by a
third party or by Quantum, pending or, to the knowledge, information and belief
of Quantum, threatened against or relating to or involving the Premises or
Assets or the business to be sold to Buyer pursuant to this Agreement, or the
transaction contemplated by this Agreement.
5.09 EXCEPT AS OTHERWISE PROVIDED HEREIN, THERE ARE NO EXPRESS OR IMPLIED
WARRANTIES THAT APPLY TO THE TRANSACTIONS CONTEMPLATED HEREIN AND QUANTUM
SPECIFICALLY DISCLAIMS ANY IMPLIED WARRANTY OF MERCHANTABILITY AND ANY IMPLIED
WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE.
5.10 That the plant, facility and assets are not subject to any contract
or agreement with any labor union, organization or collective bargaining
agreement.
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<PAGE>
5.11 That the plant, facility and assets are not subject to any employee
or employment contracts, employment benefit or retirement programs of any kind
or nature as such relate to this Agreement.
5.11A That Quantum's Resource Recovery plant located at Heath, Ohio when
shut down in October, 1995 was fully operational and would produce the goods
and/or products for which it was intended and which it has in the past produced
and sold and no modifications or changes to the equipment, plant and facility
have been made since October, 1995 which, to the best of Quantum's knowledge,
would prevent the facility from starting up and becoming operational. Further
that operation of the facility in its current condition which is consistent with
its operation in October, 1995 will not violate any Environmental statute,
regulation or order. Any previous additions or modifications to the plant and
facility by 3DM are not being warranted by Quantum as to their environmental
qualifications or acceptability.
5.12 All inventories, buildings, and fixed assets owned or leased by
Quantum located at the facility in Heath, Ohio are and will be adequately
insured against fire to the closing date and valid policies therefore are and
will be outstanding and duly in force and the premiums will be paid prior to the
closing date.
5.13 That Quantum will make available after Closing for a period of one
(1) year as time permits and with reasonable notice from Buyer, personnel to
consult with Buyer and to assist Buyer in re-starting the plant and equipment to
the extent that Quantum employs such personnel. Quantum will also make available
to Buyer any and all records, manuals, permits, drawings, blueprints,
specifications, etc. which deal with equipment specifications and operation,
overall operation of the facility and building layout, design and construction.
During the period of time from the Closing until 90 days thereafter, Buyer will
not be charged by Quantum for any expenses
8
<PAGE>
incurred by Quantum in sending its personnel to the facility to assist and
consult with the Buyer. Thereafter, Buyer will be responsible for paying Quantum
for expenses incurred by Quantum's personnel in travel to and from the facility.
6. REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants as follows:
6.01. Buyer is a corporation duly organized and validly existing under the
laws of the State of Ohio and is in good standing therewith.
6.02 Buyer has full corporate power and authority to make and perform
this Agreement and to acquire title to the Assets Buyer is purchasing under this
Agreement.
6.03. The execution, delivery and performance of this Agreement and the
documents contemplated by this Agreement due from Buyer at Closing have been or
will have been, prior to Closing, duly authorized by all requisite corporate
action.
6.04. Buyer will complete its due diligence (including, but not limited
to, physical inspection of the Premises, the personal property and machinery and
equipment) prior to Closing based upon the fact that Buyer is not fully aware of
the condition of the Premises and machinery and equipment, and does not have
sufficient knowledge and awareness of any potential claims which it may need to
assume or resolve.
7. SURVIVAL OF REPRESENTATIONS
The representations and warranties of Quantum and Buyer contained in this
Agreement shall survive Closing in accordance with the applicable statutes of
limitations.
8. COVENANTS AND AGREEMENTS
8.01. Except as provided elsewhere in this Agreement, Buyer shall assume
no liabilities of Quantum including, without limiting the foregoing, any
accounts payable relating to the
9
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Premises, the Assets and the portions of the business to be acquired or any
liability of Quantum arising from acts or events occurring prior to Closing.
8.02. Except as provided elsewhere in this Agreement, Quantum agrees to
defend, indemnify and hold harmless Buyer, its officers, directors and employees
against and in respect of any and all claims, losses, costs, expenses,
obligations and liabilities (including without limiting the foregoing, and
subject to the provisions of Section 8.05, below, costs and expenses of
litigation and reasonable attorneys' fees) to the extent they arise or result
from or relate to (i) any breach by Quantum of any of its representations,
warranties, guarantees, agreements, commitments or covenants in this Agreement,
(ii) the operations at or upon the Premises and Quantum's plastics recycling
business prior to Closing which shall include, but not be limited to, any
liability arising out of or associated with any product, goods or processes
sold, delivered or distributed by Quantum, or (iii) any obligation, debt or
liability which Quantum shall have agreed to pay, perform or discharge pursuant
to this Agreement and/or any undisclosed debt, liability or obligation which
occurred, arose or accrued prior to Closing. This Section 8.02 shall not apply
to nor include any and all claims, losses, costs, expenses, obligations and
liabilities related to environmental damage, contamination, pollution, toxic or
hazardous chemicals which claims, losses, costs, expenses, obligations and
liabilities are the subject matter of a separate environmental indemnification
agreement between the parties in the form of Exhibit C to this Agreement.
8.03. Buyer agrees to and does hereby indemnify, defend and hold Quantum,
its officers, directors and employees harmless against and in respect of any and
all claims, losses, costs, expenses, obligations and liabilities (including
without limiting the foregoing, and subject to the provisions of Section 8.05
hereof, costs and expenses of litigation and reasonable attorneys' fees)
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to the extent they arise or result from or relate to (i) any breach by Buyer of
any of its representations, warranties, guarantees, commitments or covenants in
this Agreement, (ii) the operations at or upon the Premises and Buyer's plastics
recycling business on and after Closing to the extent unrelated to the items set
forth in Section 8.02(iii) above, or (iii) any obligation, debt or liability
which Buyer shall have agreed to pay, perform or discharge pursuant to this
Agreement. This Section 8.02 shall not apply to nor include any and all claims,
losses, costs, expenses, obligations and liabilities related to environmental
damage, contamination, pollution, toxic or hazardous chemicals which claims,
losses, costs, expenses, obligations and liabilities are the subject matter of a
separate environmental indemnification agreement between the parties in the form
of Exhibit C to this Agreement.
8.04. The indemnification provided for in Sections 8.02 and 8.03 shall
include any and all claims of liability of any type or nature against the
Indemnitee (as this term is defined in Section 8.05, below), except for claims
of gross negligence or willful misconduct against the Indemnitee.
8.05. With respect to any claim for which indemnification is sought
pursuant to this Agreement, the party seeking indemnification ("Indemnitee")
shall promptly after knowledge of such claim, notify in writing the party from
whom indemnification is sought or is owed ("Indemnitor"), in as much detail as
is feasible, of the existence and nature of the claim. At its sole cost and
expense, and with counsel of its choosing, Indemnitor shall defend against any
claim of a third party and shall pay any resulting settlements, judgments or
decrees. Indemnitee must have taken reasonable steps to mitigate any damages
resulting from any such third party claim. In its notice to the Indemnitor,
Indemnitee must grant to Indemnitor the full power, authority and right on
Indemnitee's behalf to control the defense or settlement of any such claim, so
long as
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Indemnitor diligently prosecutes the defense of the claim or suit. Indemnitor
shall keep Indemnitee informed at all times as to the status of the claim, and
Indemnitee may, at its own election and expense, participate in the defense of
any such claim. Should the Indemnitor, after the Indemnitee has fulfilled its
obligations under this Section, fail to defend or to prosecute diligently the
defense of any claim of a third party, the Indemnitee, without waiving any
rights against the Indemnitor, may defend or settle any such claim and shall be
entitled to recover from the Indemnitor the amount of any settlement or judgment
or decree and all costs and expenses, including, without limitation, reasonable
attorneys' fees. Each of the parties to this Agreement shall extend reasonable
cooperation to the other parties in connection with such defense or settlement.
The right of the Indemnitor to defend against any such claim shall be limited by
the right of an insurance company to defend against the claim if the claim
involves an insured risk.
8.06. After Closing Quantum shall give Buyer, its counsel, accountants,
engineers and other representatives access to the Assets' operational records,
including customer lists, which had been stored and/or were available prior to
Closing either at the adjacent compounding plant or off site of the Plant.
Access to such records shall be granted at reasonable times during the regular
daytime work hours of the facility or facilities in which the records and
documents are stored. Representatives of Buyer inspecting these records and
documents must upon request of Quantum execute confidentiality agreements and
must comply with the safety and security regulations of the facility in which
such inspections are made. Quantum shall have the right to have representatives
present at all times during such inspections. Buyer shall have the right to make
copies of such records and documents and shall reimburse Quantum for its costs
in making any such copies.
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8.07. Buyer recognizes that Quantum has shared operations and operating
systems between the Premises and the adjacent compounding plant. Buyer will
grant access to the Premises to Quantum, its employees, agents and contractors
for the purpose of utilizing, repairing, replacing, maintaining or disconnecting
shared operations and operating systems for which Quantum shall be financially
responsible. With respect to the shared operations or operating systems, Quantum
and Buyer agree that:
(a) Within twelve (12) months after Closing, Quantum shall disconnect
its adjacent compounding plant from the Premises' fire pump system
at Quantum's sole expense;
(b) Buyer shall grant to Quantum an easement, in the form of Exhibit D
to this Agreement, for the purpose of ingress and egress to and
utilization of the truck scale and the rail car unloading area;
(c) Quantum will maintain and repair the unloading ramps for the rail
car unloading area within the easement granted to it by Buyer at its
sole expense; and
(d) Buyer will maintain and repair the truck scale upon the Premises so
as to keep its operation in accordance with the standards of the
State of Ohio for certified scales at its sole expense.
8.08. Quantum shall lease to Buyer, in the form of Exhibit E to this
Agreement, sufficient linear footage for three (3) rail car spots on the
railroad spur located upon the premise of Quantum's adjacent compounding plant.
8.08A. This agreement is contingent upon Buyer's due diligence and
approval of Sections 8.07 and 8.08 above prior to Closing. Should Buyer after
completion of its due diligence find the provisions of Sections 8.07 and/or
8.08 to interfere with operation of the equipment, plant or facility or cause
excessive expense, the parties shall first endeavor to negotiate a resolution
thereof. If they cannot resolve their differences, then this agreement shall
terminate,
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Buyers full deposit shall be returned and each of the parties shall be released
from the terms and conditions of this agreement.
8.09. Without Quantum's prior approval, Buyer shall not accept any return
of products purchased by Quantum's post-consumer plastic resin customers from
Quantum. In the event any customer attempts to return product or notifies Buyer
that it intends to return product sold by Quantum, Buyer shall immediately
notify Quantum and shall inform Quantum of any reasons stated by a customer for
the return of product. Quantum shall then deal directly with the customer
concerning such return of product and any credits or refund associated therewith
and shall defend, save harmless and indemnify Buyer in regard to any matters
associated therewith.
8.10. Buyer shall not use "Quantum", "Quantum Chemical" or any other
similar name for the Premises or the business operated at the Premises which
might create the false or erroneous appearance or impression that the Premises
is owned or operated by Quantum after the Closing without specific written
consent from Quantum, although Buyer shall be entitled to retain as its own and
use the telephone number(s) which Quantum used during its ownership of the
facility.
8.11. Quantum agrees to immediately cease any further attempts to market,
sell or dispose of the Assets and/or Premises to, and to solicit offers for the
purchase or transfer of the Assets and/or Premises from, any prospective third
party purchasers or transferee unless or until this Agreement is terminated.
8.12. For the period between the execution of this Agreement and Closing,
Buyer shall have the right to limited, escorted access to the Premises in order
to complete its due diligence and/or to show the Premises and machinery and
equipment to lenders, investors and employees and to determine how to operate
the facility and Buyer's obligation pursuant to this agreement is
14
<PAGE>
contingent upon completion of such due diligence to Buyer's satisfaction prior
to Closing. In no event will Buyer be permitted to operate the machinery or
equipment without Quantum's written consent and without a representative of
Quantum present or to make improvements, modifications or repairs to the
Premises or the machinery and equipment prior to Closing without Quantum's
written consent. Buyer shall make prior arrangements with Quantum's designee for
access to the Premises.
9. CONDITIONS PRECEDENT TO BUYER'S OBLIGATION TO CLOSE. The obligation
of Buyer to proceed with Closing are, at Buyer's option, subject to the
satisfaction, waiver or release of the following conditions on or before
Closing.
9.01. All of the representations and warranties made by Quantum in this
Agreement shall be true and correct as of the time of Closing.
9.02. Quantum shall have delivered to Buyer an opinion of Quantum's
counsel, dated as of Closing, to the effect that:
(a) Quantum is a corporation duly organized, validly existing and in
good standing under the laws of the Commonwealth of Virginia and is
qualified and in good standing as a foreign corporation in the State
of Ohio.
(b) All proceedings required by law or by the provisions of this
Agreement or by Quantum's certificate of incorporation or by-laws,
or any other document binding upon Quantum, to be taken by Quantum
in connection with the due consummation of the transactions
contemplated by this Agreement have been duly and validly taken.
(c) Quantum has complete and unrestricted power to sell, convey,
transfer, assign and deliver to Buyer all of the assets to be sold
by Quantum to Buyer under this Agreement.
(d) The sale, conveyances, transfers, and deliveries under this
Agreement to Buyer are not in contravention of any applicable
federal, state or local law, or of any contract, indenture or other
instrument or document to which Quantum is a party or is bound.
15
<PAGE>
9.03. The Assets and the intended use thereof are not or have not been
adversely affected in a material way by a casualty or other event, whether
insured or uninsured, between the date of this Agreement and Closing. If such a
casualty or other event occurs, Buyer shall have the option: (i) proceed with
Closing according to the terms of this Agreement, (ii) proceed with Closing
except that the Purchase Price shall be reduced by the dollar amount of the cost
of repair or replacement of the assets affected, providing the parties to this
Agreement can agree on said dollar amount, or (iii) terminate this Agreement, in
which event the parties shall have no further obligation under this Agreement
and Buyer's entire deposit as set forth in Section 2.02(a) shall be immediately
returned to Buyer. Buyer may elect course (ii) and then select course (i) or
(iii) in the event the parties are unable to agree on the cost of repair or
replacement. For purposes of this Section 9.03 only, "adversely affected in a
material way" shall mean an estimated cost of $250,000.00 or more.
9.03A. Buyer makes a good faith effort to complete its financing of this
transaction by obtaining a firm commitment from its lender or lenders within
sixty-six (66) days after the date this Agreement is executed. If Buyer does not
obtain a firm commitment for financing satisfactory to Buyer or if this
financing contingency is not waived and/or released by Buyer in writing prior to
Closing, then all but $50,000.00 of Buyer's deposit as described in Section
2.02(a) shall be promptly returned to Buyer and the parties shall each be
released from further liability on this Agreement and Quantum shall be entitled
to retain $50,000.00 of Buyer's deposit free and clear of any claim by Buyer.
9.04 Buyer's obligation to Close this transaction is further contingent
upon Buyer's completion of its due diligence within twenty one (21) days after
execution of this Agreement by all parties and further that the results of the
Buyer's due diligence is satisfactory to Buyer. Such
16
<PAGE>
due diligence shall include but not be limited to the following: (a) Buyer
verifying and being satisfied that the assets being purchased are sufficient to
currently startup and operate the facility and are of the quality represented;
(b) Buyer being satisfied that Quantum's shutting down of the shared operation
as described in Section 8.05 and those matters described in Sections 8.07 and
8.08 above will not interfere with Buyer's operation of the facility or cause
Buyer to incur additional expenses associated with the shut down and/or the
operation of its facility thereafter; (c) Buyer being satisfied that the
facility as shut down and when started up and operated after the Closing is in
conformance with all Environmental laws, statutes, regulations and orders and
has not been notified of any violation in regards thereto and all equipment
located in the facility used to comply with Environmental laws, statutes,
regulations and orders is operating and in good order and repair; (d) Buyer
being satisfied that the plant and facility can be operated and will manufacture
the products as represented by Quantum; (e) Buyer being satisfied that it will
be able to obtain assistance from Quantum in putting the plant and facility back
into operation; and (f) review of Quantum's financials relating to this
transaction as described on Schedule 5.08A. This contingency must be released in
writing by notice from the Buyer to Quantum within Twenty one (21) days after
execution of this Agreement as provided above, otherwise should Buyer fail to
release this contingency in writing, each of the parties' obligations pursuant
to this Agreement shall terminate and each shall be released therefrom with
Buyer's payment/deposit as described in Section 2.02(a) being returned to Buyer
within five (5) days thereafter.
10. CONDITIONS PRECEDENT TO QUANTUM'S OBLIGATION TO CLOSE. The
obligation of Quantum to proceed with Closing are, at Quantum's option, subject
to the satisfaction, waiver or release of the following conditions on or before
Closing.
17
<PAGE>
10.01. Quantum have received the consideration to be paid at or before
Closing by Buyer to Quantum pursuant to Sections 2.02(a) and 2.02(b).
10.02. Buyer shall have delivered to Quantum an opinion of Buyer's counsel
dated as of Closing, to the effect that:
(a) Buyer is a corporation duly organized and validly existing under the
laws of the State of Ohio and in good standing therewith.
(b) All proceedings required by law or by the provisions of this
Agreement or by Buyer's articles of organization or operating
agreement, or any other document binding upon Buyer, to be taken by
Buyer in connection with the due consummation of the transactions
contemplated by this Agreement have been duly and validly taken.
(c) Buyer has complete and unrestricted power to purchase and accept all
of the assets sold by Quantum to Buyer under this Agreement and the
specific power and authority to execute the promissory note and
mortgage contemplated by this Agreement.
(d) That the purchase and receipt of the Assets from Quantum are not in
contravention of any applicable federal, state or local law, or of
any contract, indenture or other instrument or document to which
Buyer is a party or is bound.
11. MISCELLANEOUS.
11.01. BROKER'S. Quantum and Buyer each represents to the other that it has
not retained any broker or finder and that no fee, commission or other
compensation is payable to any broker or finder in connection with the
transactions contemplated by this Agreement as a result of each one's respective
actions.
11.02. PUBLICITY. Buyer agrees that it will make no public statements,
press releases or announcements regarding this transaction until Closing. Should
the Buyer breach this provision, then Quantum shall have the right, at its sole
discretion, to retain the payment made pursuant to Section 2.02(a) and to
terminate this Agreement without recourse by Buyer.
18
<PAGE>
11.03. SURVIVAL OF TERMS. In the event this Agreement is terminated by
either party, Sections 8.02 (Quantum's Indemnification of Buyer), 8.03 (Buyer's
Indemnification of Quantum), 8.04 (Exceptions to Indemnification), 8.05 (Claims
for Indemnification) and 11.02 (Publicity) shall survive such termination and
shall be effective in accordance with their respective terms.
11.04. PARTIES. This Agreement shall inure to the benefit of and be binding
upon the parties to this Agreement and their respective successors and assigns.
11.05. ENTIRE AGREEMENT. This Agreement contains the full and complete
agreement between the parties with respect to the sale by Quantum and purchase
by Buyer of the assets which are the subject matter of this Agreement. This
Agreement may only be modified or amended by written instrument signed by both
parties.
11.06. NOTICES. All notices, requests, demands and other communications
either required or given under this Agreement shall be in writing and shall be
deemed to have been duly given on the date of delivery in person to the officers
named below or three (3) days after mailing by certified or registered mail,
postage prepaid, return receipt requested to the following address:
IF TO QUANTUM: IF TO BUYER:
Quantum Chemical Company Fix-Corp International, Inc.
11500 Northlake Drive 27040 Cedar Road, Suite 218
Cincinnati, OH 45249 Cleveland, OH 44122
Attention: President Attention: President
or such other address or person as the parties may designate from time to time.
11.07. APPLICABLE LAW. This Agreement shall be construed and enforced in
accordance with the laws of the State of Ohio.
19
<PAGE>
11.08. SCHEDULES AND EXHIBITS. All schedules and exhibits referred to in
this Agreement are incorporated into and made a part of this Agreement.
11.09. BULK SALES. Quantum and Buyer agree that the Uniform Commercial Code
and other statutes relating to the bulk sale or transfer of property are not
applicable to the transactions contemplated by this Agreement.
11.10. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original. This Agreement and any
counterpart so executed shall be deemed to be one and the same instrument. It
shall not be necessary in making proof of this Agreement or any counterpart of
this Agreement to produce or account for any of the other counterparts.
11.11. INVALIDITY. In the event any provision is held invalid or
unenforceable, the Parties shall attempt to agree on a valid or enforceable
provision which shall be a reasonable substitute for such invalid or
unenforceable provision in light of the tenor of the Agreement and, on so
agreeing, shall incorporate such substitute provision into this Agreement.
11.12. EXPENSES. Except as the parties may otherwise agreed, the parties
shall bear their respective fees, costs and expenses in connection with the
transactions contemplated by this Agreement.
11.13. WAIVER. No waiver by any party, whether express or implied, of any
right under any provision of the Agreement shall constitute a waiver of such
party's right at any other time or a waiver of such party's rights under any
other provision of the Agreement unless it is made in writing and signed by the
President or a Vice President of the party waiving the condition. No failure by
any party to this Agreement to take any action with respect to any breach of the
Agreement or default by another party shall constitute a waiver of the former
party's right to
20
<PAGE>
enforce any provision of the Agreement or to take action with respect to such
breach or default or any subsequent breach or default by such other party.
11.14. SECTION HEADINGS. The section and subsection headings in this
Agreement are for convenience of reference only.
11.15. LIQUIDATED DAMAGES. In the event Buyer fails to consummate the
transaction for any reason other than the failure of the contingencies set forth
in this Agreement, Quantum will be entitled to retain as liquidated damages, in
lieu of any other damages, liabilities, cost or expenses incurred by Quantum and
in complete satisfaction of the Buyer's liabilities to Quantum on account of
such failure or action, Buyer's payment in the amount of TWO HUNDRED FIFTY
THOUSAND DOLLARS ($250,000.00) pursuant to Section 2.02(a).
11.16. TIME OF ESSENCE. The parties to this Agreement agree that time is of
the essence in the performance of duties and obligations required of or pursuant
to this Agreement.
11.17. RELEASE; TERMINATION. Upon execution of this Agreement, Quantum
hereby releases and discharges Buyer and Buyer's officers and directors from any
claims, demands or liabilities associated with Case No. A-96-2928 pending in the
Common Pleas Court of Hamilton County, Ohio. Furthermore, prior to the
completion of Closing, in the event that any legal action is commenced against
Buyer by any person or entity not a party to this transaction which has as a
basis for the claim alleged therein Buyer's proposed purchase of Quantum's
Heath, Ohio facility and/or any of the assets being set forth in this agreement,
then Buyer shall have the option of terminating this agreement and receiving an
immediate return of its payment/deposit made to Quantum as set forth in Section
2.02(a) above.
IN WITNESS WHEREOF, the parties to this Agreement have caused this
Agreement to be duly executed by their authorized representatives as of the day
and year first set forth above.
21
<PAGE>
QUANTUM CHEMICAL CORPORATION FIX-CORP INTERNATIONAL, INC.
[Signatures -See Page 24]
By: By:
---------------------------- -----------------------------
Attest: Attest:
----------------------- -------------------------
22
<PAGE>
IN WITNESS WHEREOF, the parties to this Agreement have caused this
Agreement to duly executed by their authorized representatives as of the day and
year first set forth above.
QUANTUM CHEMICAL CORPORATION FIX-CORP INTERNATIONAL, INC.
By: /s/ Dale H. Spiess By: /s/ Mark Fixler, Pres/CEO
---------------------------- -----------------------------
Attest: Attest:
----------------------- -------------------------
23
<PAGE>
SCHEDULE 1.01A
DESCRIPTION OF REAL PROPERTY
A single parcel situated in the State of Ohio, County of Licking and City of
Heath of 9.5 acres more or less being more fully bounded and described as
follows:
BEING IN T-1, R-12 OF THE UNITED STATES MILITARY LANDS, AND IN THE
MID-OHIO INDUSTRIAL PARK, ADDITION NO. 3, AS RECORDED IN PLAT BOOK
13, PAGE 51, IN THE LICKING COUNTY DEED RECORDS, AND BEING MORE FULLY
BOUNDED AND DESCRIBED AS FOLLOWS:
BEING ALL OF RESERVE "A", LOT 40 AND THE FOLLOWING PORTION OF LOT 41;
BEGINNING IN THE WESTERLY RIGHT OF WAY LINE OF JAMES PARKWAY, SAID
POINT BEING THE SOUTHEAST CORNER OF SAID LOT 41;
THENCE SOUTH 89 DEG. 25'37" WEST, ALONG THE SOUTH LINE OF LOT 41,
662.49 FEET TO THE SOUTHWEST CORNER LOT 41;
THENCE NORTH 0 DEG. 45 '14" WEST, ALONG THE EASTERLY LINE OF THE NEW
YORK CENTRAL RAILWAY COMPANY, 243.50 FEET, TO A POINT;
THENCE SOUTH 89 DEG. 25'37" EAST, PASSING THROUGH LOT 41, A DISTANCE
OF 663.41 FEET TO A POINT;
THENCE SOUTH 0 DEG. 31 '52" EAST, PASSING ALONG THE WESTERLY RIGHT OF
WAY LINE OF JAMES PARKWAY, 243.50 FEET TO THE PLACE OF BEGINNING;
THE ABOVE 10.00 ACRE SURVEY INCLUDES 0.79 ACRES IN RESERVE "A", 5.504
ACRES IN LOT 40 AND 3.706 ACRES IN LOT 41.
SUBJECT TO ALL LEGAL HIGHWAYS, ALL LIMITATIONS OF ACCESS TO PUBLIC
ROADS OR HIGHWAYS, LEASES AND RIGHTS OF WAY, ZONING REGULATIONS,
EASEMENTS OF RECORD AND RESTRICTIVE COVENANTS.
THE ABOVE DESCRIPTION WAS PREPARED AS THE RESULT OF A SURVEY BY
WILLIAM B. HENDERSON, REGISTERED SURVEYOR NO. 5242, DATED JULY 6,
1989.
BEING PART OF THE SAME REAL ESTATE CONVEYED BY HERBERT J. MURPHY, JR.
AND PATRICIA A. MURPHY, HIS WIFE, TO MID-OHIO DEVELOPMENT CORPORATION
BY DEED DATED DECEMBER 3, 1971, AND RECORDED IN VOLUME 681, PAGE 608,
DEED RECORDS, LICKING COUNTY, OHIO.
THIS PROPERTY IS SUBJECT TO THE RESTRICTIVE COVENANTS FOR MID-OHIO
INDUSTRIAL PARK ADDITION NO. 3, FILED FOR RECORD WITH THE LICKING
COUNTY RECORDER ON JULY 30, 1976, IN VOLUME 750, PAGE 363, DEED
RECORDS, LICKING COUNTY, OHIO.
<PAGE>
SCHEDULE 1.01B
DESCRIPTION OF RESERVATIONS, EASEMENTS, RESTRICTIONS AND EXCEPTIONS
TO REAL PROPERTY
RESERVATIONS, EASEMENTS, RESTRICTIONS AND EXCEPTIONS OF RECORD
1. Mid-Ohio Industrial Park No. 3 is subject to those restrictive covenants
filed for record on July 30, 1976 at 11:00 A.M., in Volume 750, page 363 of
the Deed Records, Licking County, Ohio.
2. Mid-Ohio Development Corporation gave to Ohio Power Company an easement by
instrument dated August 4, 1976, and recorded in Volume 751, page 462, Deed
Records, Licking County, Ohio.
3. Herbert J. Murphy, Jr. and Patricia R. Murphy, his wife, gave to Ohio Power
Company an easement by instrument dated January 22, 1969, and recorded in
Volume 643, page 670, Deed Records, Licking County, Ohio.
4. Phillip S. Phillips and Ida L. Phillips gave to the State of Ohio an
easement for highway purposes by instrument dated March 17, 1930, and
recorded in Volume 1, page 159 of the Highway Easement Records in the
Office of the Recorder of Licking County, Ohio.
5. Roscoe Hoskinson and Ida Hoskinson, his wife, gave to the Ohio Power
Company an easement by instrument dated January 17, 1934, and recorded in
Volume 307, page 278, Deed Records, Licking County, Ohio.
6. Margaret Cass, unmarried, gave to Columbus & Southern Ohio Electric Company
an easement by instrument dated May 9, 1957, and recorded in Volume 495,
page 376 of the Deed Records, Licking County, Ohio.
7. P.S. Phillips gave to Newark Heat & Light Co. an easement by instrument
dated May 24, 1910 and recorded in Volume 57, page 297, Lease Records,
Licking County, Ohio.
8. P.S. Phillips and Ida L. Phillips gave to The Hopewell Fuel & Gas Co. an
easement by instrument dated June 7, 1930, and recorded in Volume 58, page
274, Lease Records, Licking County, Ohio.
9. P.S. Phillips and Ida L. Phillips gave to A.H. Heisey & Co. an easement by
instrument dated July 22, 1930, and recorded in Volume 58, page 368, Lease
Records, Licking County, Ohio.
<PAGE>
10. There is an affidavit filed by Quantum Chemical Corporation stating that it
is the direct successor to Northern Petrochemical Company, dated January
20, 1989, and recorded in Volume 254 page 26, Official Records, Licking
County, Ohio.
11. Mid-Ohio Industrial Park Addition No. 3 is recorded in Plat Book 13, page
51, et seq. in the office of the Recorder of Licking County, Ohio. This
property is subject to those restrictions, reservations and easements as
shown on the plat of said subdivision. Said plat calls for minimum setback
of 50 feet from James Parkway unless local regulations require a greater
setback. Utilities are 10 feet in width along all rear and side lot lines.
No septic tanks shall be used in the addition. All sanitary effluent shall
be processed through sewage treatment plants meeting the approval of the
Health Department.
12. Mid-Ohio Development Corporation gave to the City of Heath an easement for
the construction, operation, maintenance, and repair of a water line by
instrument dated October 13, 1989 and recorded in Volume 295, page 174,
Official Records, Licking County, Ohio.
13. Mid-Ohio Development Corporation gave to the City of Heath an easement for
the construction, operation, maintenance, and repair of a water line by
instrument dated October 13, 1989 and recorded in Volume 295, page 180,
Official Records, Licking County, Ohio.
14. Mechanics' Lien of Brezina Constructions Services dated June 10, 1996 and
recorded as document number 66466 in volume unknown at pages 217 through
224, Official Records, Licking County, Ohio.
RESERVATIONS EASEMENTS. RESTRICTIONS AND EXCEPTIONS TO BE GIVEN
15. Fix-Corp International, Inc. to give to Quantum Chemical Corporation an
easement for the purpose of loading, weighing and transferring products by
and between motor and rail modes of transportation and for the maintenance
and repair of railroad car loading and unloading ramps.
3 of 3
<PAGE>
SCHEDULE 1.02A
PERSONAL PROPERTY SOLD TO BUYER
<PAGE>
SCHEDULE 1.02B
PERSONAL PROPERTY ASSOCIATED WITH
THAT PORTION OF QUANTUM'S PLASTICS RECYCLING BUSINESS
SOLD TO BUYER
o Raw Material Supplier List (1994 & 1995)
o Parts Suppliers and Service Vendors List (current)
o Raw Materials Purchasing Records
o Plant Operating Procedures
o Quality Control Procedures
<PAGE>
SCHEDULE 5.08
EXISTING OR POTENTIAL CLAIMS, LITIGATION, SUITS, CHARGES,
ACTIONS, GOVERNMENTAL INVESTIGATIONS OR OTHER PROCEEDINGS
1. General Safe & Lock - potential claim for equipment ordered by 3DM LLC and
delivered to the Premises
2. Vendor Unknown - potential claim for office furniture ordered by 3DM LLC
and delivered to the Premises
3. Vendor Unknown - potential claim for granulators ordered by 3DM LLC and
delivered to the Premises
4. Newark Business Equipment - potential claim for fax machine and copier
ordered by 3DM LLC and delivered to the Premises
5. Vendor Unknown - potential claim for telephone system ordered by 3DM LLC
and installed on the Premises
6. Vendor Unknown - potential claims for process equipment improvements
ordered by 3DM LLC and partial completed
7. Glen Clarke - potential materialman's lien for materials ordered by 3DM LLC
and delivered to and installed on the Premises
8. Unknown Individuals - potential claim for personal property left upon the
Premises
9. Ohio Power Co. - potential claims for utility service ordered by 3DM LLC
10. Producers Gas Sales - potential claims for utility service ordered by 3DM
LLC
11. City of Heath, OH - potential claims for water and sewerage services
ordered by 3DM LLC
12. Rumpke - potential claims for refuse disposal services ordered by 3DM LLC
13. United Telephone - potential claims for telephone service ordered by 3DM
LLC
14. ADT - potential claim for equipment and services ordered by 3DM LLC and
installed upon the Premises
<PAGE>
SCHEDULE 5.08 (con't)
15. Litigation pending in the Court of Common Pleas for Hamilton County, Ohio
and styled QUANTUM CHEMICAL CORPORATION V. 3DM LLC, ET AL., case number
A-96-2928
<PAGE>
EXHIBIT A
GENERAL WARRANTY DEED
KNOW ALL MEN BY THESE PRESENTS THAT, QUANTUM CHEMICAL CORPORATION, a Corporation
incorporated under the laws of the State of Virginia (the "Grantor"), for the
consideration of $10.00 and other valuable considerations, received to its full
satisfaction of FIX-CORP INTERNATIONAL, INC., a Corporation incorporated under
the laws of the State of Ohio (the "Grantee"), does GIVE, GRANT, BARGAIN, SELL
AND CONVEY unto the said Grantee, its successors and assigns, the following
described premises, situated in the City of Heath, County of Licking and State
of Ohio:
SITUATED IN THE STATE OF OHIO, COUNTY OF LICKING AND CITY OF
HEATH, AND BOUNDED AND DESCRIBED AS FOLLOWS:
BEING IN T-1, R-12 OF THE UNITED STATES MILITARY LANDS, AND IN
THE MID-OHIO INDUSTRIAL PARK, ADDITION NO. 3, AS RECORDED IN PLAT
BOOK 13, PAGE 51, IN THE LICKING COUNTY DEED RECORDS, AND BEING
MORE FULLY BOUNDED AND DESCRIBED AS FOLLOWS:
BEING ALL OF RESERVE "A", LOT 40 AND THE FOLLOWING PORTION OF LOT
41;
BEGINNING IN THE WESTERLY RIGHT OF WAY LINE OF JAMES PARKWAY,
SAID POINT BEING THE SOUTHEAST CORNER OF SAID LOT 41;
THENCE SOUTH 89 DEG. 25'37" WEST, ALONG THE SOUTH LINE OF LOT 41,
662.49 FEET TO THE SOUTHWEST CORNER OF LOT 41;
THENCE NORTH 0 DEG. 45'14" WEST, ALONG THE EASTERLY LINE OF THE
NEW YORK CENTRAL RAILWAY COMPANY, 243.50 FEET, TO A POINT;
THENCE SOUTH 89 DEG. 25'37" EAST, PASSING THROUGH LOT 41, A
DISTANCE OF 663.41 FEET TO A POINT;
THENCE SOUTH 0 DEG. 31'52" EAST, PASSING ALONG THE WESTERLY RIGHT
OF WAY LINE OF JAMES PARKWAY, 243.50 FEET TO THE PLACE OF
BEGINNING;
THE ABOVE 10.00 ACRE SURVEY INCLUDES 0.79 ACRES IN RESERVE "A",
5.504 ACRES IN LOT 40 AND 3.706 ACRES IN LOT 41.
SUBJECT TO ALL LEGAL HIGHWAYS, ALL LIMITATIONS OF ACCESS TO
PUBLIC ROADS OR HIGHWAYS, LEASES AND RIGHTS OF WAY, ZONING
REGULATIONS, EASEMENTS OF RECORD AND RESTRICTIVE COVENANTS.
THE ABOVE DESCRIPTION WAS PREPARED AS THE RESULT OF A SURVEY BY
WILLIAM B. HENDERSON, REGISTERED SURVEYOR NO. 5242, DATED JULY 6,
1989.
BEING PART OF THE SAME REAL ESTATE CONVEYED BY HERBERT J. MURPHY,
JR. AND PATRICIA R. MURPHY, HIS WIFE, TO MID-OHIO DEVELOPMENT
CORPORATION BY DEED DATED DECEMBER 3, 1971, AND RECORDED IN
VOLUME 681, PAGE 608, DEED RECORDS, LICKING COUNTY, OHIO.
THIS PROPERTY IS SUBJECT TO THE RESTRICTIVE COVENANTS FOR
MID-OHIO INDUSTRIAL PARK ADDITION NO. 3, FILED FOR RECORD WITH
THE LICKING COUNTY RECORDER ON JULY 30, 1976, IN VOLUME 750,
PAGE 363, DEED RECORDS, LICKING COUNTY, OHIO.
Be the same more or less, but subject to all legal highways.
1 of 3
<PAGE>
Exhibit A
To have and to hold the above granted and bargained premises,
with the appurtenances thereunto belonging, unto the said Grantee, its
successors and assigns forever.
The Grantor, does for itself and its successors and assigns, covenant with the
Grantee its successors and assigns, that at and until the ensealing of these
presents, it is well seized of the above described premises, as a good and
indefeasible estate in FEE SIMPLE and has good right to bargain and sell the
same in manner and form as above written, and that the same are free and
clear from all incumbrances whatsoever, except those existing restrictions,
conditions and easements of record and that it will Warrant and Defend said
premises, with the appurtenances thereunto belonging, to the said Grantee, its
successors and assigns, forever, against all lawful claims and demands
whatsoever.
Subject to a Purchase and Sale Agreement between Quantum Chemical Corporation
and Fix-Corp International, Inc. dated August 14, 1996 and an Environmental
Indemnification Agreement dated August 14, 1996 Grantee covenants and agrees
that it will not directly or indirectly attempt to compel Grantor, its parent,
affiliates, subsidiaries, successors or assigns to clean up or remove any
underground petroleum or other hazardous substance or pollutant or any
contamination of tile soil or groundwater and any effect related thereto, or
seek damages for same. This shall be a covenant running with the land, and
shall be binding on any successor to or assignee of Grantee or subsequent
owners.
IN WITNESS WHEREOF, said corporation sets its hand and corporate
seal, by___________________________, its _____________________ this ________ day
of ___________________, 1996.
Signed and acknowledged in presence of: QUANTUM CHEMICAL CORPORATION
- -------------------------------------- By:-------------------------------
- -------------------------------------- -------------------------------
TYPED NAME
-------------------------------
TITLE
2 of 3
<PAGE>
EXHIBIT A
THE STATE OF OHIO )
) SS.
COUNTY OF HAMILTON )
Before me, a notary public, in and for said County, personally
appeared the above named by ___________________, its __________________, who
acknowledged that he did sign the foregoing instrument and that the same is
the free act and deed of said Corporation, and the free act and deed of him
personally as such officer.
IN TESTIMONY WHEREOF, I have hereunto set my hand and official
seal, at Cincinnati, County of Hamilton, State of Ohio, this _____ day of
________________, A.D. 1996.
------------------------------
Notary Public
THIS INSTRUMENT PREPARED BY MICHAEL P. FERRO, ATTORNEY.
<PAGE>
EXHIBIT B
GENERAL BILL OF SALE
GENERAL BILL OF SALE, dated ____________, 1996 from QUANTUM
CHEMICAL CORPORATION, a Virginia corporation ("Quantum"), to Fix-Corp
International, Inc., an Ohio corporation ("Buyer").
WITNESSETH:
WHEREAS, Quantum and Buyer are parties to a Purchase and Sale
Agreement dated August 14, 1996 (the "Agreement"), which provides, among
other things, for the sale by Quantum to Buyer of assets, machinery and
equipment, personal property and a portion of Quantum's post-consumer plastic
recycling business (as defined in the Agreement).
NOW, THEREFORE, for and in consideration of the premises and
other good and valuable consideration, the receipt and adequacy of which are
acknowledged by Quantum:
1. Quantum does hereby sell, transfer, assign, convey, set
over and deliver to Buyer all of Quantum's right, title and interest in and
to assets set forth in Schedules 1.02A and 1.02B of the Agreement.
2. Quantum hereby conveys to Buyer good and marketable title
to the assets being conveyed hereby, free and clear of all liens, security
interests or any other encumbrances of any kind whatsoever.
3. Quantum, for itself, its successors and assigns, hereby
covenants that, from time to time after the delivery of this instrument, at
Buyer's request and without further consideration, Quantum will do, execute,
acknowledge and deliver, or will cause to be done, executed, acknowledged and
delivered, all such further acts, conveyances, transfers, assignments, powers
of attorney and assurances as Buyer reasonably may require to more
effectively convey, transfer to and vest in Buyer, and to put Buyer in
possession of, any of the assets.
4. This instrument shall be binding upon Quantum and its
successors and assigns and shall inure to the benefit of Buyer and its
successors and assigns.
5. This instrument shall be governed by and construed in
accordance with the laws of the State of Ohio.
IN WITNESS WHEREOF, Quantum has caused this General Bill of
Sale to be duly executed as of the date first above written.
QUANTUM CHEMICAL CORPORATION
BY: -------------------------------------
NAME (PRINTED): -------------------------
TITLE: ----------------------------------
<PAGE>
EXHIBIT C
ENVIRONMENTAL INDEMNIFICATION AGREEMENT
THIS AGREEMENT, made August 14, 1996 is among QUANTUM CHEMICAL
CORPORATION, a Virginia corporation ("Quantum"), and Fix-Corp International,
Inc., an Ohio corporation ("Buyer").
WHEREAS, simultaneously with the execution and delivery of this
Environmental Indemnification Agreement (this "Agreement"), Quantum and Buyer
are consummating the transactions contemplated by that certain Purchase and Sale
Agreement, dated August 14, 1996 (the "Purchase Agreement"); and
WHEREAS, in connection with the Purchase agreement, the
parties desire to set forth their understandings with respect to certain
environmental matters which, by the terms of the Purchase agreement, are
specifically excluded from the scope of that agreement.
NOW, THEREFORE, Quantum and Buyer agree as follows:
SECTION 1. DEFINITIONS:
(a) The terms defined in the Purchase Agreement and otherwise
not defined in this Agreement are being used as defined in the Purchase
agreement.
(b) "Environmental Claims" shall mean any claim or demand by any
governmental authority or any person for personal injury (including sickness,
disease or death), property damage or damage to the environment resulting from
the release of any chemical, material or emission into the environment at or in
the vicinity of the Plant.
<PAGE>
(c) "Environmental Matter" means any pollution or disposal of
materials at or in the vicinity of the Plant in connection with the operation
of the Plant.
(d) "Exposed Person" shall mean (i) any employee or former
employee, (ii) any contractor or former contractor, or (iii) any employee of
any contractor or former contractor in each case of Quantum and Buyer who
works or has worked or performs or has performed work at the Plant.
(e) "Shared Environmental Claim" shall mean an Environmental
Claim arising out of any operations conducted, commitment made, product
manufactured or any action taken or omitted to be taken by Quantum or Buyer
in respect of the Assets (including but not limited to the business
operations, transactions or conduct of the business directly or indirectly
related thereto) during periods both prior to and after the Closing Date.
SECTION 2. INDEMNIFICATION AGAINST ENVIRONMENTAL CLAIMS.
(a) BY QUANTUM FOR PRE-CLOSING ACTIVITY. On and after the
Closing Date, Quantum shall fully and promptly pay, perform, discharge,
defend, indemnify and hold harmless Buyer, its parent and subsidiaries and
affiliates, and their respective directors, officers and employees from and
against any claim, demand, action or suit, loss, cost, damage, fine, penalty
or expense (including reasonable attorneys' fees) resulting from any
Environmental Claim arising out of any operations conducted, commitment made,
product manufactured or any action taken or omitted solely by Quantum with
respect to the Assets (including but not limited to the business operations,
transactions or conduct of the business directly or indirectly related
thereto) during periods prior to and including the Closing Date.
<PAGE>
(b) BY BUYER FOR POST-CLOSING ACTIVITY. On and after the Closing Date,
Buyer shall fully and promptly pay, perform and discharge, defend, indemnify
and hold harmless Quantum its parent, subsidiaries and affiliates and their
respective directors, officers and employees from and against any claim,
demand, action or suit, loss, cost, damage, fine, penalty or expense
(including reasonable attorneys' fees) resulting from any Environmental Claim
arising out of any operations conducted, commitment made, product
manufactured or any action taken or omitted solely by Buyer with respect to
the Assets (including but not limited to business operations, transactions or
conduct of the business directly or indirectly related thereto) during
periods after the Closing Date other than any action taken by Buyer, in good
faith exercising reasonable care, following the Closing Date on behalf or at
the direction of Quantum pursuant to this Agreement.
(c) CERTAIN SHARED ENVIRONMENTAL CLAIMS OF EXPOSED PERSONS.
All liabilities or obligations of Quantum or Buyer arising out of any Shared
Environmental Claim for personal injury (including sickness, disease or
death) made by an Exposed Person (including workmen's compensation claims)
shall be apportioned between Buyer and quantum in the proportion that such
Exposed Person's length of service (x) prior to and including the Closing
Date, in the case of Quantum and (y) after the Closing Date, in the case of
Buyer, bears to such Exposed Person's total length of service both prior to
and after the Closing Date. For the purposes of this provision, with respect
to (A) any contractor or employee of any contractor, the term "length of
service" means the period or periods of time during which such person was
actually exposed to such chemical, material or emission, that is the basis of
the Shared Environmental Claim, while working at the Plant or the Facility,
irrespective of the period of time during which such person was otherwise
employed by such contractor, and (B) any employee of Quantum or Buyer, the
<PAGE>
term "length of service" means that period or periods of time when such
employee was actually exposed to the chemical, material or emission while
working for Quantum or Buyer. The calculations required in this agreement
shall be rounded to the nearest month.
(d) ENVIRONMENTAL CLAIMS OTHER THAN OF EXPOSED PERSONS.
Except as otherwise provided in subsection (c) above, all liabilities or
obligations of Quantum or Buyer arising out of Environmental Claims not
solely attributable to either Buyer's or Quantum's operation of the Plant
shall be born as follows:
(i) Any such claim asserted prior to January 1, 2001 shall
be the sole responsibility of Quantum.
(ii) Any such claim asserted on or after January 1, 2001
will be the sole responsibility of the Buyer.
For the purposes of subparagraphs (i) and (ii) above, a claim shall be deemed to
have been asserted at such time as a summons and complaint (or their equivalent)
is served on either Buyer or Quantum.
(e) BUSINESS INTERRUPTION, CESSATION, SHUTDOWN. Any claim
for losses arising out of a business interruption, cessation or shutdown at
the Plant shall be included in subsection (a) of this Section 2 above only if
the business interruption, cessation or shutdown is directly caused by a
lawful governmental or judicial order to cease or reduce operations of the
Plant for reasons directly relating to an Environmental Matter which occurred
solely on or before the Closing Date. Except as expressly provided in this
subsection (e), Buyer shall not be entitled to any indemnification under this
Agreement for any losses arising out of any business interruption, cessation
or shutdown of the Plant.
<PAGE>
Losses for the purpose of this subsection shall consist only of
Buyer's out-of-pocket expenses, which include only the following costs:
maintenance, insurance, labor, utilities and taxes. Buyer shall use its best
efforts to minimize such losses. Quantum shall not be responsible for loss of
profits, revenues, business advantage, or business opportunity or any
consequential loss or damage. The maximum amount for which Quantum shall be
liable under this subsection shall never exceed, in the aggregate, $250,000 for
all such business interruptions, cessations or shutdowns.
SECTION 3. INDEMNIFICATION PROCEDURES.
(a) NOTICE OF CLAIMS. Promptly following receipt by Buyer or
Quantum of any claim, determination, suit, action or proceeding which is
subject to the provisions of Section 2 (an "Action"), such party shall give
written notice of such action to the other party hereto, accompanied by
copies of any written documentation with respect thereto received by the
notifying party and stating the basis upon which indemnification is being
sought pursuant to this Agreement (whether pursuant to subsections (a), (b),
(c) or (d) of Section 2). Such notice shall constitute a claim for
indemnification under this Agreement (hereinafter referred to as "Claim").
(b) DEFENSE OF CLAIMS. (i) ONE PARTY SOLELY RESPONSIBLE.
With respect to Claims asserted under subsection (a), (b), (d)(i) or (d)(ii)
of Section 2 in respect of which Buyer or Quantum, as the case may be, is
solely responsible, the party required to provide indemnification under this
Agreement (the "Indemnifying Party") shall have the right, at its option, to
compromise or defend, at its own expense and with its own counsel, any such
Action. The other party (the "Indemnified Party") shall have the right, at
its option, to participate in the
<PAGE>
settlement or defense of any such Action, with its own counsel and at its own
expense, but the Indemnifying Party shall have the right to control such
settlement or defense. Notwithstanding the foregoing, should any such action
have the potential for materially and adversely affecting the operations at
the Plant, Buyer shall have the right to jointly participate and approve the
settlement or defense thereof without waiving any rights to indemnification
under this Agreement. The parties agree to cooperate in any such settlement
or defense and to give each other full access to all information relevant to
any Claim. In the event that the Indemnifying Party fails to notify the
Indemnified Party of its intent to take any action within 15 days after
receipt of a Claim, the Indemnified Party (without waiving any rights to
indemnification under this Agreement) may defend such Action and may enter
into any good faith settlement of such Claim without the prior written
consent of the Indemnifying Party.
(ii) BOTH PARTIES RESPONSIBLE. With respect to Claims
asserted under subsection (c) of Section 2 in respect of which responsibility
is apportioned between Buyer and Quantum, Buyer and Quantum shall be
represented by joint counsel selected by the party who, as of the date the
Claim is made, would bear more than 50% of the liability therefore
(determined in accordance with the applicable apportionment provisions
contained in such subsections), which counsel shall be reasonably acceptable
to the other party. The fees and expenses of such counsel shall be shared by
Buyer and Quantum in the same proportion as their respective liability
(determined in accordance with the applicable apportionment provisions). The
parties agree to cooperate with each other in the defense and settlement of
such Action, to give each other full access to all information relevant
thereto, and, so long as the other party hereto complies with the terms of
this Agreement, not to file a cross-claim against the other. Either party
shall have the right, at its
<PAGE>
option, to participate in the settlement or defense of such Action with its
own counsel, at its own expense, but joint counsel shall have the right to
control such settlement or defense.
In the event that either party receives a settlement offer
from, or desires to make a settlement offer to, the plaintiff(s) in any such
Action (as the case may be, a "Settlement Offer"), such party shall promptly
give written notice to the other party, describing in reasonable detail the
proposed terms of the Settlement Offer. The following provisions shall
govern with respect any such Settlement Offer:
(A) Each party shall have 15 days after receipt of a
Settlement Offer within which to notify the other party of its
intention to accept or reject the Settlement Offer.
(B) (i) Neither party may make or accept a Settlement
Offer unless the Settlement Offer is made (x) jointly available
to or on behalf of, both parties or (y) an identical Settlement
Offer is made to or on behalf of, each party; provided, however,
(ii) where a settlement offer originates with one Defendant,
that Defendant shall advise the other Defendant of its
intention to make an offer to the Plaintiff(s). If both
Defendants agree on an offer then such offer shall be
communicated to the Plaintiff(s). Where only one Defendant
wants to offer to settle, it may proceed individually to
settle, but must keep the other defendant advised of the
negotiations, and give the other Defendant the opportunity to
join in a settlement offer.
(C) In the event that any party unilaterally makes or
accepts a Settlement Offer in violation of subparagraph (B),
the provisions of Section 2 shall not apply to such Action and
the settling party shall be solely liable for the entire
amount of any judgment rendered
<PAGE>
against the non-settling party and for all costs incurred by
the non-settling party in defending such Action.
(D) In the event that both parties settle the Action,
the settlement shall be apportioned between Buyer and Quantum
in accordance with the applicable provisions of Section 2.
(E) In the event that only one party settles the Action
(under circumstances not prohibited by subparagraph (B), such
party shall have no further liability under Section 2, and all
costs incurred by the non-settling party subsequent to such
settlement shall be born entirely by the non-settling party.
Notwithstanding such settlement, however, the settling party
will continue to cooperate with the non-settling party in the
defense of such action, at the non-settling party's expense,
and shall give the non-settling party full access to all
information relevant thereto.
(F) In the event that one party desires to settle the
action, but the Plaintiff will not settle with only one
Defendant, and the matter goes to judgment against both
Defendants, then the Defendant which refused to settle shall
be liable for the entire judgment in excess of the amount for
which the party desiring to settle could have settled the
claims against it.
SECTION 4. ADDITIONAL AGREEMENTS.
(a) COOPERATION. Buyer agrees to cooperate in good faith
with Quantum to provide Quantum and their representatives (including
employees and independent contractors) access during normal business hours to
such facilities, employees, records, documents, including copies
<PAGE>
thereof, office space to the extent reasonably necessary to permit Quantum to
discharge, on a timely basis, their obligations under this Agreement or under
any consent decree entered into with the EPA. Except as otherwise provided
in this Agreement, Quantum will reimburse Buyer for its cost in providing
such utilities and services.
(b) FURTHER ASSURANCE. Quantum agree to cooperate with Buyer,
in discharging their obligations under this Agreement, and not to
unreasonably interfere with the operation of the Plant in doing so and to use
all best efforts to insure that discharging Quantum's obligations does not
materially interfere with the operation of the Plant.
(c) COSTS. Except as otherwise provided, the costs of
testing, assessment and remediations shall be paid by Quantum.
(d) SCOPE OF UNDERTAKINGS. Except as otherwise provided in
this Agreement, the obligation of Quantum to perform assessment or remedial
actions contemplated hereby shall be conducted as Quantum deems in good faith
to be necessary. Quantum shall, to the exclusion of Buyer, undertake all
contacts, discussions, negotiations, decisions and any other dealings of like
nature or kind relating to any of the environmental matters which are
Quantum's responsibility under this Agreement with any federal, state or
local governmental matters which are Quantum's responsibility under this
Agreement with any federal, state or local governmental or judicial authority
having jurisdiction with respect thereto. Notwithstanding the foregoing
should any such action have the potential for materially and adversely
affecting the operations of the Plant, Buyer shall have the right to jointly
participate in any such dealings.
(e) PURPOSES OF AGREEMENT. It is expressly understood and
agreed that Quantum's entering into this Agreement with Buyer for the purpose
of facilitating the Closing of
<PAGE>
the transaction contemplated by the Purchase Agreement and that this
Agreement does not constitute any admission, express or implied, by Quantum
of any violation, liability or wrongdoing by Quantum. This Agreement shall
inure to the benefit of and be binding on Quantum and Buyer and their
respective successors and assigns, nothing in this agreement, express or
implied, being intended to confer upon any other person any rights or
remedies under this Agreement. In consideration of the undertaking of
Quantum contained in this agreement, Buyer agrees to use its reasonable
efforts not to disclose the terms and provisions of this Agreement to any
third party, except as is necessary to carry out the purposes of this
Agreement or pursuant to applicable legal requirements.
(f) COMPLIANCE WITH LAWS. The parties agree to comply, in
good faith, with all applicable laws relating to the subject matter of this
Agreement. Each party will obey the terms of any final judgment or decree of
any court of competent jurisdiction rendered against it or any final order of
the EPA or any governmental or judicial authority with jurisdiction with
respect to the subject matter of this Agreement (PROVIDED, HOWEVER, that no
such party shall be required to obey any judgment, decree or order being
protested or appealed, in good faith, by such party by appropriate
proceedings).
(g) GENERAL. This Agreement sets forth the entire
understanding of the parties with respect to the environmental matters and
supersedes all prior and contemporaneous agreements, arrangements and
understandings relating to the subject matter hereof, whether oral or written
and whether consistent or inconsistent. No representation, promise,
inducement or statement of intention has been made by the parties hereto
which is not embodied in this agreement, and no party shall be bound by or
liable for any alleged representation, promise,
<PAGE>
inducement or statement of intention not so set forth. To the extent that
any provision of this Agreement is inconsistent with the provisions of the
Purchase Agreement, the provisions of this Agreement shall govern. This
Agreement may be amended or modified only by a written instrument executed by
Buyer and Quantum or by their successors and assigns. All notices, requests,
demands and other communications under this Agreement shall be in writing and
shall be deemed to have been duly given if given in manner provided in the
Purchase Agreement. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of Ohio, without giving
effect to the conflict of law principles of the State of Ohio.
SECTION 5. COVENANT-NOT-TO-SUE.
Buyer covenants and agrees that it will not directly or
indirectly, attempt to compel Quantum, its parents, affiliates, successors or
assigns to clean up or remove any underground petroleum or other hazardous
substance or pollutant or any contamination of the soil or groundwater and
any effect related thereto, or seek damages therefor, and Buyer further
agrees that the foregoing covenant-not-to-sue will be inserted in the deeds
of conveyance for the Plant site, shall be a covenant running with the land,
and shall be binding on any successor to or assignee of Buyer or subsequent
owners; PROVIDED, HOWEVER, that this covenant is conditioned on Quantum's
compliance with the terms of this Agreement.
SECTION 6. TERM OF AGREEMENT.
The liabilities and obligations contained in this Agreement
shall survive the Closing and shall be effective and enforceable until the
expiration of any liability or obligation provided in this
<PAGE>
agreement, by discharge, performance or otherwise; PROVIDED, HOWEVER, that
nothing in this agreement shall constitute any waiver by any party of any
defense based on laches or any similar legal or equitable grounds for
estoppel relating to the failure of a party to have asserted its rights on a
timely basis.
IN WITNESS WHEREOF, the parties have caused their authorized
representatives to execute this Agreement effective this 14th day of August,
1996.
QUANTUM CHEMICAL CORPORATION FIX-CORP INTERNATIONAL, INC.
By: By:
-------------------------- ----------------------------
Title: Title:
----------------------- -------------------------
ATTEST: ATTEST:
---------------------- ------------------------
By: By:
-------------------------- ----------------------------
<PAGE>
EXHIBIT D
EASEMENT
KNOW ALL MEN BY THESE PRESENTS, That FIX-CORP INTERNATIONAL,
INC., an Ohio corporation, ("Grantor") for and in consideration of the sum of
One Dollar ($1.00) and for other good and valuable consideration paid by
QUANTUM CHEMICAL CORPORATION, a Virginia corporation, ("Grantee") the receipt
of which is acknowledged, do by this instrument remise, release, grant and
convey to Grantee, its successors and assigns forever, an easement in and to
a certain plot of land 145 feet wide by 465.30 feet on the longest side, as
shown by the attached plat and described as follows:
Situated in the State of Ohio, County of Licking, City of
Heath, in part of Reserve "A" and in part of Lot No. 40 in
Mid-Ohio Industrial Park, Addition No. 3, as shown of record
in Plat Book 13, Pages 51 and 52, said Reserve "A" and Lot
No. 40 having been conveyed to Quantum Chemical Corporation
by deed of record in Official Record 314, Page 867, all
references to Recorder's Office, Licking County, Ohio, said
easement bounded and described as follows;
Beginning at a point in the curved westerly right-of-way of
James Parkway (50-feet wide), at the northeast corner of Lot
No. 39 and at the southeast corner of Reserve "A" in said
Mid-Ohio Industrial Park, Addition No. 3;
thence S 89DEG. 25' 27" W along a portion of the south line
of said Reserve "A" and along a portion of the north line of
said Lot No. 39 a distance of 465.30 feet to a point;
thence N 0DEG. 31' 52" W crossing said Reserve "A" and
crossing a portion of said Lot No. 40 a distance of 145.00
feet to a point;
thence N 89DEG. 25' 37" E parallel with and 145.00 feet
northerly by perpendicular measurement from the south line of
said Reserve "A" and crossing a portion of said Lot No. 40 a
distance of 433.09 feet to a point in the curved westerly
right-of-way of James Parkway and in the curved easterly line
of said Lot No. 40;
thence southerly along a portion of the curved westerly line
of James Parkway, along a portion of the curved easterly line
of said Lot No. 40 and along the curved easterly line of said
Reserve "A" and with a curve to the left, data of which is:
radius = 625.00 feet and sub-delta = 13DEG. 38' 48" a
sub-chord distance of 148.51 feet bearing S 13DEG. 03' 23" E
to the place of beginning;
containing 64,695 square feet (= 1.485 acres) of land more or
less.
<PAGE>
It is the intention of the Grantor to grant this easement in the plot of land
along the line described giving Grantee the right and privilege of ingress and
egress to and use of the plot of land for the purpose of the loading, unloading,
weighing and transferring products by and between motor and rail modes of
transportation.
It is further understood in addition to the easement conveyed by this
instrument, Grantee shall have the right to go in and upon the premises of
the Grantor along the sides of the easement as may be necessary for the
loading, unloading, weighting, transfer of products by and between motor and
rail modes of transportation and the maintenance and repair of the railroad
car loading and unloading ramps.
Grantor has the full power to convey this easement, and warrants and will
defend the same against all claims by any persons.
IN WITNESS WHEREOF, the Grantor sets its hand and corporate seal
by____________________________, its ____________________________ and by
____________________________, its ____________________________ this 14th day of
August, 1996.
FIX-CORP INTERNATIONAL, INC.
By:
------------------------------------
By:
------------------------------------
Signed and acknowledged in the presence of:
- -------------------------------------------
- -------------------------------------------
<PAGE>
STATE OF OHIO )
) SS:
COUNTY OF HAMILTON )
BEFORE ME, a Notary Public in and for the County, personally
appeared the above-named FIX-CORP INTERNATIONAL, INC. by
_____________________, its ___________________ and _____________________, its
_______________, who acknowledge that they did sign the foregoing instrument
and that the same is the free act and deed of said company and the free act
and deed of each of them personally and as such officers.
IN TESTIMONY WHEREOF I have set my hand and official seal at
Cincinnati, Ohio, this 14th day of August, 1996.
--------------------------------------
Notary Public
THIS DOCUMENT WAS PREPARED BY MICHAEL P. FERRO, ATTORNEY.
<PAGE>
EXHIBIT E
TRACK LEASE AGREEMENT
THIS AGREEMENT, made as of August 14th, 1996 by and between Quantum Chemical
Corporation, a Virginia corporation, with its office and principal place of
business at 11500 Northlake Drive, Cincinnati, OH 45249 ("Landlord"), and
Fix-Corp International, Inc. an Ohio corporation, with a place of business at
27040 Cedar Road, Suite 218, Cleveland, OH 43056 ("Tenant"):
WITNESSETH:
1. LEASE: Landlord leases to Tenant and Tenant hires from Landlord
for the term and according to the covenants and conditions
contained in this Lease certain land at 1835 James Parkway,
Heath, OH, consisting of a railroad siding of Two Hundred
linear feet (200') of track including all land under said
tracks, as described and as outlined in red in the attached
Exhibit A, which is made a part of this Agreement,
("Premises"), for the sole purpose of the storage of railcars
owned, leased or consigned to Tenant containing plastics,
other than liquid, and for no other purpose whatsoever.
Landlord specifically reserves the right, at any time during
this Lease, to substitute other track of the same length or
aggregate length. Tenant shall have the right of ingress and
egress to the Premises over the Landlord's property which lies
between the Premises and the Tenant's property.
2. TERM: The tenancy of this Lease shall be for a period of ten
(10) years beginning August 14, 1996 and ending August 14,
2006, with an option for an additional period of ten (10)
years beginning August 14, 2006 and ending August 14, 2016.
The term of this Lease is subject to termination at any time
by Tenant upon 90 days advance written notice to Landlord.
3. RENT: Tenant shall pay to Landlord or its
agent an annual rent in advance in the amount of One Thousand
Dollars ($1,000.00) each year or part thereof this Lease
continues in effect subject to annual adjustment not to
exceed the regional cost-of-living index for the preceding
twelve month period. Rent payments, unless Tenant is
otherwise notified in writing, shall be delivered to:
Quantum Chemical Corporation
11500 Northlake Drive
MSN 24
Cincinnati, OH 45249
Attn: Logistics Contracts Administrator
FAX: (513) 530-6661
<PAGE>
4. UTILITIES: Tenant shall pay the cost of
utilities consumed by it on the Premises, including but not
limited to gas, electricity, water, sewer, power, and
telephone service. Any utility accounts shall be maintained
in Tenant's own name.
5. RISK OF LOSS: Notwithstanding any other term
or provision herein, Tenant shall bear all risk of injury or
loss to any person or property upon the Premises, except as
may be the result of any the intentional or willful act or
omission by or the gross negligence of Landlord.
6. INDEMNIFICATION OF LANDLORD: Tenant agrees to
pay, and to protect, indemnify, defend and hold harmless
Landlord from and against all liability, damages, costs and
expenses from causes of action, suits, claims, demands and
judgments of any nature whatever arising out of or in any way
connected with Tenant's occupancy of the Premises. Tenant
expressly acknowledges that it agrees to indemnify Landlord
for its own negligence, except to the extent that the causes
of action, suits, claims, demands and judgments of any nature
are the result of Landlord's gross or sole negligence.
7. USE: The Premises shall be used and occupied
by Tenant as a spur line for the spotting, loading and
off-loading of rail cars. Tenant shall be responsible to
obtain any Certificate of Occupancy or any other license or
permit as may be required by law.
8. CONDITION AND MAINTENANCE OF PREMISES: Tenant
accepts the Premises in their "as is" condition. Landlord
shall be responsible performing routine maintenance and
repair to keep the premises in a well maintained safe, clean
and sightly condition. Tenant agrees to reimburse Landlord
for Twenty-five percent (25%) of the actual cost of
maintenance and repair for the benefit of the entire spur
track and One Hundred Percent (100%) of the actual costs of
maintenance and repair for the sole benefit of the Tenant or
the Premises. Tenant shall not use, store, generate, treat
or dispose of any hazardous substance on the Premises without
the prior written consent of the Landlord. Such consent
shall not be unreasonably withheld.
8.01. In the event that any hazardous
substance is discovered to have been released upon or from
the Premises during the term of this Lease and such release
is due to any act or omission of Tenant, Landlord shall, at
its sole discretion, take all steps necessary to remove and
properly dispose of such hazardous substance and clean-up or
repair any contamination or damage resulting therefrom, in
full compliance with all applicable laws and regulations.
The actual costs of such removal, disposal, clean-up or
repair shall be for the account of Tenant and Tenant shall
reimburse Landlord for these costs within thirty days after
demand is made by the Landlord. Tenant agrees to defend,
indemnify and hold Landlord harmless from and against any
liabilities, including judgments, court costs, and reasonable
attorney fees claimed or asserted against or sustained by
Landlord resulting from Tenant's failure to fully comply with
the provisions of this Section.
9. ALTERATIONS AND IMPROVEMENTS: Tenant may with
Landlord's written consent make improvements to the Premises
at its sole cost and expense as may be required by Tenant's
<PAGE>
business. Such improvements and installations shall become
the property of Landlord to the extent affixed to the
Premises at any time during the term of Tenant's occupancy
under this Lease. Any damage caused by removal of any item
retained by Tenant shall be repaired by Tenant. Tenant
agrees that any and all alterations or additions shall be
made in compliance with the building codes and ordinances,
laws and regulations applicable to the Premises including,
but not limited to, the rules and regulations of the American
Association of Railroads ("AAR") and the railroad providing
rail transportation and switching service to the spur track.
Should a building or other permit be required by Tenant to
accomplish any improvement, Landlord agrees to execute all
documents required to obtain such permit if Landlord has
consent to the improvements.
10. ASSIGNMENT AND SUBLETTING: Tenant may not sublet the Premises or
assign this Lease.
11. TAXES AND ASSESSMENT: During the term of this
Lease, Tenant shall pay on or prior to the due date all City,
County, State and Federal taxes or assessments as may accrue
based on Tenant's activities or improvements made by Tenant,
if any, and penalties imposed, assessed or levied upon the
same. Landlord will provide Tenant with timely written notice
of the above-referenced taxes so as to enable Tenant to pay
same when due. Landlord shall otherwise pay general real
estate taxes as levied upon the Premises.
12. DEFAULT BY TENANT: If Tenant defaults in any of the covenants or
agreements on its part to be performed under this Lease, and
if Tenant fails to cure any such default within ten (10) days
after receipt of written notice from Landlord or after the
expiration of a reasonable time from receipt of such notice
if such default could not be cured within ten (10) days by
Tenant's diligent efforts, then Landlord may at its option at
any time afterwards declare this Lease and all rights under
it immediately terminated, re-enter and take possession of
the Premises pursuant to a applicable provision of law, and
remove all persons and all Tenant's property from the
Premises.
13. HOLDING OVER: Unless otherwise agreed in
writing, any holding over by Tenant after expiration or
termination of the term of this Lease shall be construed as a
default of this Lease and rents shall be assessed at the rate
of Fifty Dollars ($50.00) per day or portion of a day.
14. SURRENDER: At the expiration or termination
of this Lease, Tenant agrees to quit and surrender possession
of the Premises to Landlord in its original condition,
reasonable wear and tear expected, with all of Tenant's
property removed, except as may be provided in Article 9,
ALTERATIONS AND IMPROVEMENTS.
15. RIGHTS OF PARTIES: Either Landlord or Tenant
may from time to time at its option exercise all rights and
remedies which any may have at law or in equity and nothing
in this Lease shall be construed as in any way abridging or
waiving any such rights or remedies. Any consent, waiver,
compromise or indulgence by one party of or under any of the
provisions of this Lease, or as to any breach or default
under this Lease committed by any other
<PAGE>
party, shall not constitute or be construed as a waiver of
the that party's right to enforce strict interpretations and
performance of the conditions and terms of this Lease at any
other times.
16. NOTICES: Any written notice required or given
under this Lease to Landlord shall be given to Landlord at
the above address in Article 3 and any notice given to Tenant
at the above address, or any other address as the parties may
designate from time to time.
17. RIGHT OF ENTRY: Landlord may enter the
Premises for the purpose of making inspection, in connection
with any portion of the Premises during regular business
hours, or at any time in the event of emergency.
18. QUIET ENJOYMENT: Subject to the terms of this
Lease, Landlord covenants and agrees that Tenant, so long as
it shall not be in default under this Lease, shall peacefully
and quietly hold, occupy and enjoy the Premises during this
Lease.
19. BINDING FUTURE PARTIES: Each and all of the
terms and agreements contained in this Lease shall be binding
upon and inure to the benefit of the Landlord and the Tenant,
their successors and assigns.
20. PARAGRAPH HEADINGS: Paragraph headings
contained in this Lease shall in no way limit or restrict the
interpretation to be placed upon any word or phrase following
such heading.
21. NO ORAL MODIFICATION: This instrument
contains the entire agreement made between the parties and
may not be modified orally or in any manner other than by an
agreement in writing signed by the Landlord and the Tenant or
their respective successor in interest.
IN WITNESS WHEREOF, the Landlord and the Tenant have duly executed this Lease on
the day and year first above written. Individuals signing on behalf of a
principal warrant that they have the authority to bind their principals.
LANDLORD TENANT
QUANTUM CHEMICAL CORPORATION FIX-CORP INTERNATIONAL, INC.
By: By:
------------------------------ ------------------------------------
Title: Title:
--------------------------- ---------------------------------
Date: Date:
---------------------------- ----------------------------------
<PAGE>
LINE 7 EQUIPMENT AND MACHINERY LIST
<TABLE>
<CAPTION>
ASSET ID ASSET NAME MAKE MODEL NOTE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CY1001 BALE CONVEYOR HUSTLER B2677 (SER.#) 72" W x 27' L 1/4" PLATE
STEEL BELT
B81002 BALE BREAKER HUSTLER B2679 (SER #) 72" W x 72' L w/ 30 HP - EDDY
CURRENT DRIVE
CY1003 VIBRATORY CONVEYOR & PUNCH-PLATE SCREEN HUSTLER B2680 (SER. #) 60" W x 23' L PUNCH-PLATE
2" x 10 ROWS - CONVEYOR BED
CY1004 FLAT-BELT, REFUSE CONVEYOR HUSTLER B2682 (SER. #) 12" W x 6' L FLAT BELT w/
CLEATS
CY1005 INCLINED, CLEATED, WASTE CONVEYOR HUSTLER B2684 (SER. #) 12" x 12' L FLAT BELT WITH
CLEATS
CY1006 MANUAL SORTING CONVEYOR HUSTLER B2686 (SER. #) 36" W x 30' L FLAT BELT
CY1007 INCLINED, CLEATED CONVEYOR HUSTLER B2689 (SER. #) 36" W x 20' l FLAT BELT
w/ MAG. HEAD PULLEY
CY1007A SLIDE CONVEYOR CUSTOM BRIDGES INCLINED CLEATED
CONVEYORS
CY1011 INCLINED, CLEATED CONVEYOR HUSTLER B2692 (SER. #) 36" W x 19'6" L FLAT BELT w/
CLEATS & MAG. HEAD PULLEY
GR1013 GRANULATOR CUMBERLAND 50B 100 HP MOTOR - 3 BLADE
ROTOR - 1/2" BED-SCREEN
BL1014 PRIMARY ELUTRIATOR BLOWER STERLING SYSTEMS 7075FV (CCWUD) COMPONENT OF STERLING'S
3210EL SYSTEM
FS1015 ELUTRIATION VESSEL STERLING SYSTEMS EL32C IBID - SS - 7" OD INLET ON
146" STAND
BL1016 SECONDARY ELUTRIATOR BLOWER STERLING SYSTEMS 1115 FV (CCWUD) IBID - PROVIDES FLUIDIZATION
IN ELUTRIATOR - DISCHARGES
TO CYCLONE
FS1017 AIR CYCLONE STERLING SYSTEMS #13 IBID - SS #13 CYCLONE
w/ SIDE-MOUNTED FILTER HEAD
- 16" D x 144" LONG
VS1019 DIRTY-FLAKE PICK-UP BIN AND FEED AUGER CUSTOM SS - 6"D x 13' L INCLINED
AUGER - MARTIN VIBRATOR
CD 36-250
VS1021 COLD WASH TANK CUSTOM SS - 500 GAL. - 6-SECTION
PRE-WASH
MXM1021A,B,C COLD WASH TANK MIXERS PHILADELPHIA MIXER PG 13 1/3 HP
MXP1021A,B,C,D COLD WASH TANK PULLERS CUSTOM PNEUMATIC MIXERS
FS1023 COLD-WASH, DEEP-BED FILTER CUSTOM SS - 270 GAL - INDEXING,
REUSABLE FILTER MEDIUM
P1024 COLD WASH FEED PUMP CARVER 1-1/4" x 1-1/2" x 7" SS
IMPELLER
FS1022 COLD WASH DEWATERING DRYER CARTER DAY D312 10 HP DRYER MOTOR - SS
FRAME AND ROTOR -
STELLITED ROTOR
VS1027 INTERMEDIATE FLAKE HOPPER AND AUGER CUSTOM SS - 3.5 CU YD BIN - 6"D x
22'L INCLINED AUGER AND
LEVEL CONTROL
VS1030 HOT WASH TANK (1 OF 2) CUSTOM SS - 390 GAL - STEAM-
JACKETED - INSULATED
VS1031 HOT WASH TANK (2 OF 2) CUSTOM SS - 390 GAL - STEAM-
JACKETED - INSULATED
MXM1030 HOT WASH TANK MIXER (1 OF 2) PHILADELPHIA MIXER PG 13 5 HP - SS SHAFT & IMPELLERS
MXM1031 HOT WASH TANK MIXER (2 OF 2) PHILADELPHIA MIXER PG 13 5 HP - SS SHAFT & IMPELLERS
FS1032 HOT WASH DEWATERING DRYER CARTER DAY D312 SS FRAME AND ROTOR - 10 HP
MOTOR
FS1042 HOT WASH-WATER, DEEP-BED FILTER CUSTOM SS - 270 GAL. - INDEXING,
REUSABLE, FILTER MEDIUM
P1043 HOT WASH, DEEP-BED FILTER, SUMP PUMP CARVER SS HOUSING AND IMPELLER -
70 GPM - 5 HP
VS1044 HOT WASH-WATER HEATING RESERVOIR TANK CUSTOM 4' W x 6' H x 10' L - SS -
STEAM-HEATED - INSULATED -
1200 GAL.
P1044&47 HOT WATER PUMPS WEMCO FL 3" x 5-1/4" - SS HOUSINGS
AND IMPELLERS - 60 GMP -
5 HP DRIVE MOTORS
VS1033 HOT-WASH, CLEAN-FLAKE BIN CUSTOM SS - 1.5 CU YD
CY1034 HOT-WASH, CLEAN-FLAKE AUGER CUSTOM SS - 6"D x 8'L - 2500 LB/
HR - 1 HP MOTOR
</TABLE>
<PAGE>
LINE 7 EQUIPMENT AND MACHINERY LIST
<TABLE>
<CAPTION>
ASSET ID ASSET NAME MAKE MODEL NOTE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
VS1035 RINSE/SEPARATION TANK CUSTOM SS - 225 GAL.
MXM1035A&B RINSE/SEPARATION TANK MIXERS PHILADELPHIA MIXER PG 13 SS SHAFTS AND IMPELLERS -
1 HP DRIVE MOTORS
P1038&39 HYDROCYCLONE PUMPS WEMCO FL 3" x 5-1/5" w/ SS IMPELLERS
FS1036 HYDROCYCLONE SEPARATOR KREBS ENGINEERING D10B-841
FS1037 HYDROCYCLONE SEPARATOR KREBS ENGINEERING D10B-841
FS1040 VIBRATORY FILTER SWECO LS30S66
FS1041 PRIMARY CLEAN FLAKE SPIN DRYER CARTER DAY D512 SS FRAME AND ROTOR - 10 HP
DRIVE MOTOR
FS1048 FINAL CLEAN FLAKE SPIN DRYER - AIR ASSISTED CARTER DAY D532 SS FRAME AND ROTOR - 20 HP
DRIVE MOTOR
BL1049 EXHAUST BLOWER TWIN CITY FAN BC-SW SIZE 165 - 4800 CFM - 3 HP
DRIVE MOTOR
FS1049 DRYER BLOWER EXHAUST FILTERS CUSTOM 4 - 15" DIA. FILTER SOCKS
VS1050 INTERMEDIATE DRY FLAKE BIN w/ VIBRATOR & AIRVEYOR STERLING SYSTEMS SGB-03080 COMPONENT OF STERLING'S
3210EL SYSTEM - AL -
30 CU FT
BL1051 CLEAN FLAKE ELUTRIATOR BLOWER STERLING SYSTEMS 7075FV (CCWUD) IBID - 7.5 HP MOTOR
FS1052 CLEAN FLAKE ELUTRIATOR STERLING SYSTEMS EL32C IBID - SS - 7" INLET NOZZLE
BL1054 CYCLONE BLOWER STERLING SYSTEMS 1115FV IBID - 15 HP MOTOR
FS1055 ELUTRIATED-WASTE CYCLONE STERLING SYSTEMS #13 IBID - SS - #13 CYCLONE
w/SIDE MOUNTED FILTER HEAD
FS1056 CYCLONE EXHAUST FILTER STERLING SYSTEMS IBID - 6 - 16"d x 144" LONG
FILTER BAGS
VS1053 ELUTRIATED FLAKE RECEIVER L - 4 SYSTEMS AL - 4W x 4'L x 4' DEEP
(2.2 CU YD) - w/ LEVEL
CONTROL & VIBRATOR
FR1099 ELUTRIATED, CLEAN-FLAKE VACUUM TRANSFER SYSTEM L - R SYSTEMS VL-500 10 HP w/L-R 36FR003C FILTERS
VS1057 ELUTRIATED, CLEAN-FLAKE SURGE BIN L - R SYSTEMS 7' x 7' x 14'H (5000 LB) -
AL - HIGH LEVEL SENSOR -
SIGHT GLASS
FR1100 BLENDING-STATION, VACUUM TRANSFER SYSTEM L - R SYSTEMS VL-500 20 HP VACUUM BLOWER
w/SOUND ENCLOSURE
VS1077A WEIGH BLENDER - CLEAN FLAKE BIN L - R SYSTEMS WSB-2000 4 L-R ENGR SYSTEM, 36" x 36"
x 70" AL BIN w/ LEVEL SENSOR
& 2 CU FT RCVR
VS1077B,C,D WEIGH BLENDER - ADDITIVE BINS (3) L - R SYSTEMS STOCK 14" x 14" x 48"
SF1079A,B,C,D VIBRATORY FEEDERS SYNTRON FMC #8F-01 8 X 20 AND FMC
#F-10C VIBRATORY FEEDERS
VS1076 WEIGH HOPPER L - R SYSTEMS WBS-2000 150 LB CAP-PROGRAMMABLE
WEIGH SCALE BLENDER
BD1060 CLEAN FLAKE & ADDITIVES RIBBON BLENDER L - R SYSTEMS CUSTOM 200 # CAP - AL MIXING
BARREL w/ 2 HP GEAR DRIVE
AND MIXING PADDLE
FR1101 EXTRUDER-FEED, VACUUM TRANSFER SYSTEM L - R SYSTEMS VL-500 20 HP VACUUM BLOWER
VS1063 EXTRUDER FEED HOPPER EGAN CUSTOM 13 CU FT w/ L-R SYSTEMS
VPW-500 POWDER RECEIVER
EXM1060 EXTRUDER MOTOR EMERSON 508AT 400 HP DC w/ COOLING BLOWER
ATTACHMENT
GB1061 EXTRUDER GEAR-BOX EGAN 6H-6026 RH 20 6.1 GEAR RATIO
EX1060 EXTRUDER EGAN 6"D - 36 1L/D -
VACUUM-VENTED
SP1074 SCREEN CHANGER KREYENBORG SWE-200-88/RS 2 BOLT, AUTO-BACKFLUSHING
TYPE - 206 mm SCREENS
PZ1069 PELLETIZER BERINGER WRP-12V WATER-RING TYPE - VARIABLE
SPEED - 2HP/3600 RPM, MAX
VS1072 PELLET WATER DEWATERING TROUGH BERINGER PART OF WRP-12V SYSTEM
</TABLE>
2
<PAGE>
LINE 7 EQUIPMENT AND MACHINERY LIST
<TABLE>
<CAPTION>
ASSET ID ASSET NAME MAKE MODEL NOTE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FS1071 PELLET DRYER - AIR ASSISTED BERINGER SS FRAME AND ROTOR -
2HP/1200 RPM - PART OF
WRP-12V SYSTEM
VS1085 PELLETIZER SURGE BIN L - R SYSTEMS 30"x30"x36" AL - 1/2" SCREEN - MAGNEETIC
SCREEN - LEVEL CONTROLLED
</TABLE>
<PAGE>
LINE 8 EQUIPMENT AND MACHINERY LIST
<TABLE>
<CAPTION>
ASSET ID ASSET NAME MAKE MODEL NOTE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CY2001 BALE CONVEYOR HUSTLER B2676 (SER.#) 72" W x 27' L 1/4" plate
steel belt
BB2002 BALE BRAKER HUSTLER B2678 (SER. #) 72" W x 72' L
CY2003 VIBRATORY CONVEYOR & PUNCH PLATE SCREEN HUSTLER B2681 (SER. #) 60" W x 23' L BED - PUNCH-
PLATE: 2x10 ROWS
CY2004 RESIDUE SLIDE CONVEYOR HUSTLER B2683 (SER. #) 12" W x 6' L FLAT BELT
w/ CLEATS
CY2005 CLEATED, INCLINED, RESIDUE CONVEYOR HUSTLER B2685 (SER. #) 12" W x 12' L FLAT BELT
w/ CLEATS
CY2006 INCLINED, CLEATED, SORTING STATION FEED CONVEYOR HUSTLER B2687 (SER. #) 36" W x 20' L BELT w/ MAG.
HEAD PULLEY
CY2007 SORTING CONVEYOR HUSTLER B2688 (SER. #) 36" W x 15' L FLAT SLIDE
BELT - TWO THROW-OUT SHUTES
CY2008 WASTE/BY-PRODUCT SLIDE CONVEYOR HUSTLER B2691 (SER #) 24" W x 20' L FLAT BELT
(REVERSIBLE)
CY2009 WASTE/BY-PRODUCT BALER FEED CONVEYOR VALLEY FORGE 700 18" W x 15' L FLAT BELT
w/ CLEATS
BA2011 WASTE/BY-PRODUCT BALER PIQUA 54-40 HD HYDRAULIC VERTICAL BALER
CY2012 SORTING-LINE TAKE-AWAY CONVEYOR (INCLINED, CLEATED) HUSTLER B2690 (SER. #) 36" W x 15' L FLAT BELT
w/ MAG. HEAD PULLEY
CY2012A SLIDE CONVEYOR CUSTOM BRIDGES INCLINED, CLEATED
CONVEYORS
CY2016 GRANULATOR FEED CONVEYOR (INCLINED, CLEATED) HUSTLER B2693 (SER. #) 36" W x 19'-6" L FLAT BELT
w/ CLEATS
GR2018 GRANULATOR CUMBERLAND 508 100 HP - 1/2" BED-SCREEN -
3-BLADE ROTOR -
SOUND-PROOFED
BL2019 DIRTY FLAKE ELUTRIATOR BLOWER STERLING SYSTEMS 7075FV (CCWUD) A COMPONENT OF STERLING'S
3210EL SYSTEM
FS2020 DIRTY FLAKE ELUTRIATION VESSEL STERLING SYSTEMS EL32C IBID - SS - 7" OD INLET,
146" STAND
BL2021 CYCLONE BLOWER STERLING SYSTEMS 1115FV (CCWUD) IBID - 15 HP BLOWER MOTOR
FS2022 AIR CYCLONE & BAG FILTER STERLING SYSTEMS #13 SS - #13 CYCLONE w/ SIDE
MOUNTED FILTER HEAD
VS2023 DIRTY FLAKE PICK-UP BIN AND FEED AUGER CUSTOM SS - 3.5 CU YD CAPACITY
w/ 6"D x 13' L INCLINED
AUGER
VS2027 HOT WATER WASH TANK (1 OF 2) CUSTOM SS - 390 GAL. - STEAM
JACKETED - INSULATED
VS2026 HOT WATER WASH TANK (2 OF 2) CUSTOM SS - 390 GAL. - STEAM
JACKETED - INSULATED
MXM2027&28 HOT WATER WASH TANK MIXERS PHILADELPHIA MIXER PG 13 SS SHAFT AND IMPELLERS -
5 HP DRIVE MOTORS
FS2029 HOT WASH DEWATERING DRYER CARTER DAY D312 SS ROTOR AND FRAME -
STELLITED ROTOR - 10 HP
DRIVE
FS2045 HOT WASH-WATER, DEEP-BED FILTER CUSTOM SS - 270 GAL. - INDEXING,
REUSABLE FILTER MEDIUM
P2046 HOT WASH, DEEP-BED FILTER, SUMP PUMP CARVER 70 GPM PUMP - 5 HP MOTOR -
SS HOUSING & IMPELLER
VS2047 HOT WASH WATER HEATING TANK CUSTOM SS - STEAM-HEATED -
INSULATED - 1200 GAL.
P2047&50 HOT WASH WATER PUMPS CARVER FL 3" x 5-1/4" 60 GPM - 5 HP
MOTOR - SS HOUSING &
IMPELLER
VS2030 HOT WASH CLEAN FLAKE BIN CUSTOM SS - 1.5 CU YD
CY2031 HOT WASH CLEAN FLAKE BIN AUGER CUSTOM SS - 6"D x 8' L - 2500
LB/HR
VS2032 PRIMARY CLEAN FLAKE RINSE TANK CUSTOM 3' W x 6' L x 3 H, SS -
260 GAL. - 3 COMP. STATIC-
SCREEN SEPARATOR
MXM2032A,B,C PRIMARY RINSE TANK MIXERS PHILADELPHIA MIXER PG-13 SS SHAFT AND IMPELLER -
1/4 HP
P2038 RINSE TANK SUMP PUMP (COMPARTMENT C) WEMCO FL 190 GPM - 10 HP - SS HOUSING
AND IMPELLER
FS2037 HYDROCYCLONE SEPARATOR (COMPARTMENT C) KREBS ENGINEERING D108-841
</TABLE>
<PAGE>
LINE 8 EQUIPMENT AND MACHINERY LIST
<TABLE>
<CAPTION>
ASSET ID ASSET NAME MAKE MODEL NOTE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FS2044 PRIMARY RINSE SYSTEM SPIN DRYER CARTER DAY D512 SS FRAME AND ROTOR - 10 HP
P2034&36 PRIMARY RINSE SYSTEM SUMP PUMPS (COMPARTMENTS A&B) WEMCO FL 190 GPM - 10 HP MOTOR - SS
HOUSING & IMPELLER
FS2033&35 HYDROCYCLONE SEPARATORS (COMPARTMENTS A&B) KREBS ENGINEERING D108-841
FS2039 HEAVIES SPIN DRYER CARTER DAY D312 SS FRAME AND ROTOR - 10 HP
DRYER MOTOR
VS2040 SECONDARY, CLEAN-FLAKE RINSE TANK CUSTOM SS - 200 GAL.
MXM2040 SECONDARY RINSE TANK MIXER PHILADELPHIA MIXER PC-13 SS SHAFT AND IMPELLER -
1/4 HP
P2041 SECONDARY RINSE TANK SUMP PUMP WEMCO FL 190 G PM - 10 HP - SS
HOUSING AND IMPELLER
FS2042 HYDROCYCLONE SEPARATOR KREBS ENGINEERING D108-841
FS2043 VIBRATORY FILTER SWECO LS30S66
FS2051 FIRST-STAGE DEWATERING DRYER CARTER DAY D312 SS FRAME AND ROTOR- 10 HP
MOTOR
FS2052 SECOND-STAGE DEWATERING DRYER CARTER DAY D312 SS FRAME AND ROTOR - 10 HP
MOTOR
FS2053 FINAL DEWATERING DRYER WITH AIR-ASSIST CARTER DAY D532 SS HOUSING AND ROTOR - 15 HP
MOTOR
BL2053 EXHAUST BLOWER TWIN CITY FAN BC-SW SIZE 165; 4800 CFM - 3HP
w/ 4-15" DIA. FILTER SOCKS
VS2057 INTERMEDIATE DRY FLAKE BIN w/ VIBRATOR & AIRVEYOR STERLING SYSTEMS SGB-03060 COMPONENT OF STERLING'S
3210EL SYSTEM - AL - 30
CU FT
BL2058 ELUTRIATOR BOWER STERLING SYSTEMS 7075FV (CCWUD) IBID - 7.5 HP BLOWER MOTOR
FS2059 CLEAN FLAKE ELUTRIATION VESSEL STERLING SYSTEMS EL32C IBID - SS
BL2060 CYCLONE BLOWER STERLING SYSTEMS 1115FV (CCWUD) IBID - 15 HP BLOWER
FS2061 ELUTRIATED WASTE CYCLONE STERLING SYSTEMS #13 IBID - SS - #13 CYCLONE
w/ SIDE MOUNTED FILTER HEAD
FS2062 CYCLONE EXHAUST FILTER STERLING SYSTEMS IBID - 6 - 16" D x 114"
LONG FILTER BAGS
VS2063 ELUTRAITED FLAKE RECEIVER L - R SYSTEMS STOCK AL - 4W x 4'L x 4' DEEP -
WITH LEVEL CONTROLLERS
FR2104 ELUTRIATED, CLEAN-FLAKE VACUUM TRANSFER SYSTEM L - R SYSTEMS VL-500 15 HP VACUUM BLOWER w/ L-R
36FR003C RCVR
VS2065 ELUTRIATED, CLEAN-FLAKE SURGE BIN L - R SYSTEMS CUSTOM AL - 7' x 7' x 14' H
(5000 LB) - HIGH LEVEL
SENSOR - SIGHT GLASS
FR2105 BLENDING STATION VACUUM TRANSFER SYSTEM L - R SYSTEMS VL-500 20 HP VACUUM BLOWER
VS2065A WEIGH BLENDER - CLEAN FLAKE BIN L - R SYSTEMS CUSTOM 36 CU FT AL HOPPER
w/ L-R VL-4500/02 VACUUM
RECVR
VS2065B,C,D WEIGH BLENDER - ADDITIVE BINS (3) L - R SYSTEMS STOCK 14" x 14" x 48" AL BIN w/
L-R VPW-400 POWDER RECEIVER
SF2067A,B,C,D VIBRATORY FEEDERS SYNTRON BF-01C FMC #8F-01 8 x 20 AND FMC
#F-10C VIBRATORY FEEDERS
VS2067 WEIGH HOPPER L - R SYSTEMS WSB-2000 4 150 LB CAPACITY -
PROGRAMMABLE
BD2068 CLEAN FLAKE & ADDITIVES RIBBON BLENDER L - R SYSTEMS STOCK 200 # CAP - AL MIXING BARREL
w/ 2 HP GEAR DRIVE & MIXING
PADDLE
FR2106 EXTRUDER FEED VACUUM TRANSFER SYSTEM L - R SYSTEMS VL-500 20 HP VACUUM BLOWER
VS2091 EXTRUDER FEED HOPPER EGAN CUSTOM 13 CU FT CAP w/L-R VPW -
500 POWDER RECEIVER
EXM2068 EXTRUDER MOTOR EMERSON 508AT 400 HP DC w/ COOLING BLOWER
GB2069 EXTRUDER GEAR-BOX EGAN 6:H-6026 RH 20.6 1 GEAR RATIO
EX2068 EXTRUDER EGAN 6: - 36 1 LL/D - VACUUM
VENTED
</TABLE>
2
<PAGE>
LINE 8 EQUIPMENT AND MACHINERY LIST
<TABLE>
<CAPTION>
ASSET ID ASSET NAME MAKE MODEL NOTE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SP2082 SCREEN CHANGER KREYENBORG SWE-200-88/RS 2-BOLT - AUTO BACKFLUSHING
TYPE - 205 mm SCREENS
PZ2082 PELLETIZER BERINGER WRP-12V WATER RING-TYPE - 2 HP,
VARIABLE SPEED MOTOR, 3600
RPM, MAX.
VS2080 PELLET WATER DEWATERING TROUGH BERINGER COMPONENT OF WRP-12V PACKAGE
FS2079 PELLET DRYER - AIR ASSISTED BERINGER IBID - SS FRAME AND ROTOR -
2 HP, 1200 RPM
VS2083 PELLETIZER SURGE BIN L - R SYSTEMS 30"x30"x36"H AL - 1/2" SCREEN - MAGNETIC
SCREEN - LEVEL CONTROLLED
FS2045A HOT FILTRATE SIEVE HYCOR HS36/A44 SS CONSTRUCTION
VENTED
</TABLE>
3
<PAGE>
PLANT SUPPORT EQUIPMENT AND MACHINERY LIST
<TABLE>
<CAPTION>
ASSET ID ASSET NAME MAKE MODEL NOTE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
F-2 AUTO BACK-FLUSH FILTER YARDNEY MM3660-3A (3) 200 GPM MULTI-MEDIA
FILTERS w/AUTO CONTROLS
F-101 FILTER PRESS PAC PRESS MODEL P800E132A-10/15; 15
CU FT CAP
FLOWMETER SPARLING MODEL FM 621-031-401-0
SIZE 3
P-103 PROCESS FEED PUMPS MCM 3 x 4 x 11
P-109 RECYCLE PUMP BARNES 10 ICU - 1 100GPM 5HP
P-105 FILTER PRESS FEED PUMP WARREN RUPP SA2-A SANDPIPER TYPE 5; 50 GPM,
AIR POWERED, DOUBLE
DIAGRAM PUMP
P-112 SKIM TRANSFER PUMP WARREN RUPP SA2-A SANDPIPER TYPE 5; 50 GPM,
AIR POWERED, DOUBLE DIAGRAM
PUMP
RE-USE WATER PUMP (2) WEINMAN 3G5-4 250 GPM @ 42 TDH
P-101/2 FEED PUMP GORMAN RUPP T3A80-B SELF PRIMING CENTRIFUGAL
PUMP
T-111 SAMPLE TANK NORWESCO STOCK 550 GAL. 67" D x 42" H
POLETHYLENE
T-107 DAF CELL TANK PCE 120 DISSOLVED AIR FILTER
w/ SKIMMER AND MIXERS MFG
1/95
HILLSIDE SCREEN GALA 160 FRS
SCREW PRESS HYCOR SPR 260 HELIXPRESS UNIT, SPR 260,
HYCOR S/N H-0011096
T-101 EQUALIZATION TANK NORWESCO STOCK 5000 GAL. POLY TANK 102"
D x 152" H w/ MIXER
A-101 EQ TANK MIXER 3/4 HP GEAR DRIVE MIXER
FITS INTO EQ TANK
T-102 EQUALIZATION TANK NORWESCO STOCK 5000 GAL. POLY TANK 102" D
x 152" H
T-103 SKIM HOLDING TANK NORWESCO STOCK 1700 GAL. POLY TANK 87"D x
72" H
FACILITY BOILER CLEAVOR BROOKS C8-700-1505 150 PSI PACKAGED BOILER
SYSTEM
FLOOR SCALE GSE 550 PORTABLE FLOOR SCALE
REFUSE COMPACTOR McCLAIN 40067 HYDRAULIC COMPACTOR FOR A
42 CU FT REFUSE BOX
TRUCK SCALE FAIRBANKS 90-161-1 35 TON SCALE
PLANT AIR SUPPLY COMPRESSOR SULLAIR SRF (2) SRF 1/4000 AIR
COMPRESSORS FOR PLANT AIR
BALE WIRE DICER SWEED 510 CUTS BALE WIRES
FLOOR SWEEPER POWERBOSS TSS/80-HD DRIVING FLOOR MACHINE
FORK LIFTS (2) TCM FCG 18N7T
FORK LIFT TCM FG20N3T
FIRE WATER AND SPRINKLER PUMP PEERLESS 6AEF14G 13" D IMP 100 HP w/ JOSLYN
CLARK CONTROL C 38204-4J
SYSTEM
COOLING TOWER MARLEY 28144
FR1103 SILO VACUUM TRANSFER SYSTEM L - R SYSTEMS VL-500 15 HP BLOWER MOTOR
w/ FILTERS
VS1066 15000 LB PELLET SILO PEABODY TECHTANK CUSTOM 12' D x 16' H AL CONST
RA1068 15000 LB SILO ROTARY AIR LOCK MEYER & SONS HD SIZE 10" x 10" - 1 HP DRIVE
MOTOR
VS1069 50000 LB PELLET BLENDING SILO PEABODY TECHTANK CUSTOM 11' D x 29' H - AL CONST
w/ BLENDING TUBE & LEVEL
SENSOR
FR1102 VACUUM, PELLET RECIRCULATING L - R SYSTEMS VL-500 w/ AIR FILTERS
</TABLE>
<PAGE>
PLANT SUPPORT EQUIPMENT AND MACHINERY LIST
<TABLE>
<CAPTION>
ASSET ID ASSET NAME MAKE MODEL NOTE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
RA1092 ROTARY AIR LOCK - 50000 LB MEYER & SONS HD SIZE 10" x 10" - 1 HP DRIVE
MOTOR
WH1096 PACKAGING SCALE - 50000 LB SILO SYNTEST SP320 BLENDING SILO FITTED WITH
HI AND LO OUTPUT SLIDE
VALVES
BL1095 BLOWER - BULK LOADING SYSTEMS L - R SYSTEMS LSP400-30 30 HP MOTOR
FS1107 TRUCK LOADING CYCLONE L - R SYSTEMS 750 SS - 3 CU FT CAPACITY
TL1108 RAILCAR LOADING LINES (2) CUSTOM 4" LINES - PEENED
FR2108 SILO VACUUM TRANSFER SYSTEM L - R SYSTEMS VL-500 15 HP VACUUM BLOWER
VS2094 15000 LB PELLET SILO PEABODY TECH TANK CUSTOM AL CONST - 12' D 16' H
RA2109 15000 LB SILO ROTARY AIR LOCK MEYER & SONS HD SIZE 10 x 10 1 HP DRIVE
MOTOR
VS2097 50000 LB PELLET BLENDING SILO PEABODY TECHTANK CUSTOM 11' D x 29' H - AL CONST -
w/ BLENDING TUBE & LEVEL
SENSOR
FR2107 VACUUM, PELLET RECIRCULATING L - R SYSTEMS VL-500 15 HP VACUUM BLOWER
RA2100 ROTARY AIR-LOCK - 50000 LB MEYER & SONS HD 1 HP DRIVE MOTOR
WC2103 PACKAGING SCALE - 50000 LB SILO SYNTEST SP320 BLENDING SILO FITTED WITH
HI AND LO OUTPUT SLIDE
VALVES
</TABLE>
2
<PAGE>
LIST OF OBSOLETE EQUIPMENT AND MACHINERY
<TABLE>
<CAPTION>
ASSET ID ASSET NAME MAKE MODEL NOTE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FS2055 FLAKE DRYER - AIR ASSISTED CARTER DAY D532 SS FRAME & ROTOR - 15 HP
MOTOR - NEEDS NEW ROTOR
VS2054 METAL DETECTOR & DIVERTER ERIEZ EZ TEC III REJECTS AL FROM CLEAN PET
SERIES FLAKE
SP-1074 (OLD) SLDE-PLATE SCREEN-CHANGER BERINGER RSL-60 6" BREAKER PLAT - HYDRAULIC
UNIT - NEEDS NEW INLET
ADAPTOR
SP-2062 (OLD) SLDE-PLATE SCREEN-CHANGER BERINGER RSL-60 6" BREAKER PLAT - HYDRAULIC
UNIT - NEEDS NEW INLET
ADAPTOR
VS2112 PET FLAKE POLISHING TANK & AUGER CUSTOM SS - APPROX. 100 GAL. CAP.
SH1009 SHREDDER SHRED TECH ST-50 2 x 30 HP DRIVE MOTORS -
NEEDS NEW ROTORS &
PNEUMATIC CRAMMER
SH2014 SHREDDER SHRED TECH ST.50 2 x 30 HP DRIVE MOTORS -
NEEDS NEW MOTORS &
PNEUMATIC CRAMMER
DM1010 DRUM MAGNET DINGS MAGNETIC 12 x 36 FC DRUM SCAVENGES FERROMAGNETICS
FROM SHREDDER OUTPUT
DM2015 DRUM MAGNET DINGS MAGNETIC 12 x 36 FC DRUM SCAVENGES FERROMAGNETICS
FROM SHREDDER OUTPUT
</TABLE>
<PAGE>
Exhibit B to Exhibit 8
LOAN AND SECURITY AGREEMENT
This LOAN AND SECURITY AGREEMENT dated as of December 16, 1996, between
Fix-Corp International, Inc., an Ohio corporation, with an address of 27040
Cedar Road, Suite 218, Beachwood, Ohio 44122 (the "Borrower") and Gordon
Brothers Capital Corporation, a Delaware corporation, with an address of 40
Broad Street, Boston, Massachusetts 02109 (the "Lender").
FOR VALUE RECEIVED, and in consideration of the granting by the Lender of
financial accommodations to Borrower, Borrower represents and agrees with the
Lender, as of the date hereof and as of the date of each credit and/or other
financial accommodation, as follows.
1. THE LOAN
1.1 LOAN. Subject to the terms and conditions of this Agreement, the Lender
hereby agrees to make a loan to the Borrower in the original principal amount of
$2,500,000.00 (the "Loan") to Borrower. The Loan shall be evidenced by that
certain Note, of even date herewith, (the "Note") by the Borrower in favor of
the lender in the original principal amount of $2,500,000.00, and is secured,
without limitation, by that certain Open-End Mortgage, dated of even date
herewith (the Mortgage"), by the Borrower in favor of the Lender in and to the
premises located at 1835 James Parkway, Heath, Ohio 43056 (the "Real Property").
This Agreement, the Note, the Mortgage 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".
2. GRANT OF SECURITY INTEREST
2.1 GRANT OF SECURITY INTEREST. In consideration of the Lender's extending
credit and other financial accommodations to the Borrower, the Borrower
hereby grants to the Lender a security interest in (including, without
limitation, a lien on and pledge of) all of the Borrowers Collateral (as
hereinafter defined). The security interest granted by this Agreement is
given to and shall be held by the Lender as security for the payment and
performance of all Obligations.
2.2 DEFINITIONS. The following definitions shall apply.
(a) "Code" shall mean the Massachusetts Uniform Commercial Code
(General Law, Chapter 106) as amended from time to time.
(b) "Collateral" shall mean all the Borrower's present and future
right, title and interest in and to any and all of the following property,
whether such property is now existing or hereafter created.
(i) All goods including without limitation all Inventory (as
hereinafter defined), farm products, Equipment (as
hereinafter defined), including without limitation
machinery, furniture, trade fixtures;
<PAGE>
(ii) All accounts, accounts receivable, contract rights and
chattel paper, regardless of whether or not they constitute
proceeds of other Collateral;
(iii) All general intangibles, regardless of whether or not
they constitute proceeds of other Collateral, including,
without limitation, all of the Borrower's rights to tax
refunds and all the Borrowers rights (which the Lender may
exercise or not as it in its sole discretion may determine)
to acquire or obtain goods and/or services with respect to
the manufacture, processing, storage, sale, shipment,
delivery or installation of any of the Borrower's inventory
or other Collateral;
(iv) All products of and accessions to any of the Collateral;
(v) All liens, guaranties, securities, rights, remedies and
privileges pertaining to any of the Collateral, including
the right of stoppage in transit;
(vi) All obligations owing to the Borrower of every kind and
nature, and all choses in action;
(vii) All goodwill, trade secrets, computer programs,
customer lists, trade names, trademarks and patents;
(viii) All documents and instruments (whether negotiable or
nonnegotiable, and regardless of their being attached to
chattel paper);
(ix) All proceeds of Collateral of every kind and nature in
whatever form, including, without limitation, both cash and
noncash proceeds resulting or arising from the rendering of
services by the Borrower or the sale or other disposition by
the Borrower of the Inventory or other Collateral;
(x) All books and records relating to the conduct of the
Borrower's business including, without in any way limiting
the generality of the foregoing, those relating to its
accounts; and
(xi) All deposit accounts maintained by the Borrower with any
Lender, trust company, investment firm or fund, or any
similar institution or organization.
2
<PAGE>
(c) "Contract Rights" or "contract rights" means rights of the
Borrower to payment under contracts not yet earned by performance and not
evidenced by instruments or chattel paper.
(d) "Debtors" shall mean the Borrower's customers who are indebted to
the Borrower.
(e) "Equipment" shall mean and include all the Borrower's machinery,
equipment, furniture, trade fixtures and motor vehicles and intending to
include all tangible personal property, or goods, utilized in the conduct
of the Borrower's business, but excluding therefrom inventory, as that term
is defined in the Code, and all replacements or substitutions therefor and
all accessions thereto.
(f) "Inventory" means all inventory of whatever name, nature, kind or
description, all goods held for sale or lease or to be furnished under
contracts of service, finished goods, work in process, raw materials,
materials used or consumed by Borrower, parts, supplies, all wrapping,
packaging, advertising labeling, and shipping materials, devices, names and
marks, all contract rights and documents relating to any of the foregoing,
whether any of the foregoing be now existing or hereafter arising, wherever
located, now owned or hereafter acquired by Borrower.
(g) "Obligation(s)" shall mean, without limitation, all loans,
advances, indebtedness, notes, liabilities and amounts, liquidated or
unliquidated, owing by the Borrower to the Lender at any time, of each and
every kind, nature and description, whether arising under this Agreement or
otherwise, and whether secured or unsecured, direct or indirect (that is,
whether the same are due directly by the Borrower to the Lender, or are due
indirectly by the Borrower to the lender as endorser, guarantor or other
surety, or as Borrower of obligations due third persons which have been
endorsed or assigned to the Lender, or otherwise), absolute or contingent,
due or to become due, now existing or hereafter contracted. Said term shall
also include all interest and other charges chargeable to the Borrower or
due from the Borrower to the Lender from time to time and all costs and
expenses referred to in this Agreement.
(h) "Person or "party" shall include individuals, firms, corporations
and all other entities.
All words and terms used in this Agreement other than those specifically
defined herein shall have the meanings accorded to them in the Code.
2.3 ORDINARY COURSE OF BUSINESS. The Lender hereby authorizes and permits the
Borrower to hold, process, sell, use or consume in the manufacture or processing
of finished goods, or otherwise dispose of the Inventory for fair consideration,
all in the ordinary course of the Borrower's business, excluding, without
limitation, sales to creditors or in bulk or sales or other dispositions
occurring under circumstances which would or could create any lien or interest
adverse to the Lender's security interest or other right hereunder in the
proceeds resulting
3
<PAGE>
therefrom. The Lender also hereby authorizes and permits the Borrower to
receive from the Debtors all amounts due as proceeds of the Collateral at the
Borrower's own cost and expense, and also liability, if any, subject to the
direction and control of the Lender at all times, and the Lender may at any
time, without cause or notice, and whether or not a default has occurred or
demand has been made, terminate all or any part of the authority and
permission herein or elsewhere in this Agreement granted to the Borrower with
reference to the Collateral.
Until the Lender shall otherwise notify the Borrower, all proceeds of
and collections of Collateral shall be retained by the Borrower and used
solely for the ordinary and usual operation of the Borrower's business, from
and after notice by the Lender to the Borrower, all proceeds of and
collections of the Collateral shall be held in trust by the Borrower for the
Lender and shall not be commingled with the Borrowers other funds or
deposited in any Lender account of the Borrower; and the Borrower agrees to
deliver to the Lender on the dates of receipt thereof by the Borrower, duly
endorsed to the Lender or to bearer, or assigned to the Lender, as may be
appropriate, all proceeds of the Collateral in the identical form received by
the Borrower.
2.4 ALLOWANCES. The Borrower may grant such allowances or other adjustments
to Debtors (exclusive of extending the time for payment of any item which
shall not be done without first obtaining the Lender's written consent in
each instance) as the Borrower may reasonably deem to accord with sound
business practice, including, without limiting the generality of the
foregoing, accepting the return of all or any part of the Inventory (subject
to the provisions set forth in this Agreement with reference to returned
Inventory).
2.5 RECORDS. The Borrower shall hold its books and records relating to the
collateral segregated from all the Borrower's other books and records in a
manner satisfactory to the Lender; and shall deliver to the Lender from time
to time promptly at its request all invoices, original documents of title,
contracts, chattel paper, instruments and any other writings relating
thereto, and other evidence of performance of contracts, or evidence of
shipment or delivery of the merchandise or of the rendering of services; and
the Borrower will deliver to the Lender promptly at the Lender's request from
time to time additional copies of any or all such papers or writings, and
such other information with respect to any of the Collateral and such
schedules of Inventory, schedules of accounts and such other writings as the
Lender may in its sole discretion deem to be necessary or effectual to
evidence any loan hereunder or the Lender's security interest in the
Collateral.
2.6 LEGENDS. The Borrower shall promptly make, stamp or record such entries
or legends on the Borrower's books and records or on any of the Collateral as
the Lender shall request from time to time, to indicate and disclose that the
Lender has a security interest in such Collateral.
2.7 INSPECTION. The Lender, or its representative, at any time and from
time to time, shall have the right and the Borrower will permit it and them:
(a) to examine, check, make copies of or tracts from any of the
Borrower's books, records and files (including, without limitation, orders
and original correspondence);
4
<PAGE>
(b) to inspect and examine the Collateral and to check and test the
same as to quality, quantity, value and condition; and the Borrower agrees
to reimburse the Lender for its reasonable costs and expenses in so doing;
and
(c) to verify the Collateral or any portion or portions thereof or
the Borrower's compliance with the provisions of this Agreement.
3. REPRESENTATIONS AND WARRANTIES
3.1 ORGANIZATION AND QUALIFICATION. The Borrower is a duly organized and
existing corporation under the laws of the State of its incorporation, as
indicated above, in good standing under the laws of said state, and is duly
qualified to do business under the laws of each state where the nature of the
business done or property owned requires such qualification.
3.2 SUBSIDIARIES. The Borrower has no subsidiaries other than those listed
on Schedule 3.2, if any, and the Borrower has never consolidated, merged or
acquired substantially all of the assets of any other entity or person other
than those listed on Schedule 3.2, if any.
3.3 CORPORATE RECORDS. The Borrower's Corporate Charter, Articles of
Organization or Incorporation and all amendments thereto have been duly filed
and are in proper order. All outstanding capital stock issued by the Borrower
was and is properly issued and all books and records of the Borrower,
including but not limited to its minute books, bylaws and books of account,
are accurate and up to date and will be so maintained.
3.4 TITLE TO PROPERTIES; ABSENCE OF LIENS. Borrower has good and clear
record and marketable title to all of its properties and assets, and all of
its properties and assets including the Collateral are free and clear of all
mortgages, liens, pledges, charges, encumbrances, setoffs, except (a) the
mortgages and security interests as set forth on Schedule 3.4a if any, and
(b) the leases of personal property as set forth on Schedule 3.4b, if any.
3.5 PLACES OF BUSINESS. Borrower's chief executive office is correctly
stated in the preamble to this Agreement, and Borrower shall, during the term
of this Agreement, keep the Lender currently and accurately informed in
writing of each of its other places of business, and shall not change the
location of such chief executive office or open or close, move or change any
existing or new place of business without giving the Lender at least thirty
(30) days prior written notice thereof.
3.6 VALID OBLIGATIONS. The execution, delivery and performance of the Loan
Documents have been duly authorized by all necessary corporate action and
each represents a legal, valid and binding obligation of Borrower and is
fully enforceable according to its terms, except as limited by laws relating
to the enforcement of creditors' rights.
5
<PAGE>
3.7 CONFLICTS WITH OTHER AGREEMENTS. There is no provision in any
indenture, contract or agreement to which Borrower is a party which prohibits
the execution, delivery or performance of the Loan Documents.
3.8 GOVERNMENTAL APPROVALS. The execution, delivery and performance of the
Loan Documents does not require any approval of any governmental agency or
authority.
3.9 LITIGATION. There are no actions, suits or proceedings pending or to
the knowledge of Borrower threatened against Borrower which might materially
adversely affect the ability of Borrower to perform its obligations under the
Loan Documents.
3.10 FINANCIAL STATEMENTS. The Borrower has furnished to the Lender the
following Financial Statements (the "Financial Statements") balance sheet as
of September 30, 1996, and statement of profit and loss for the period ending
September 30, 1996. The balance sheet fairly presents the condition of the
Borrower at the date thereof and the statement of profit and loss fairly
presents the results of the operations of the Borrower for the period
indicated, all in conformity with generally accepted accounting principles,
consistently applied.
3.11 ACCOUNTS AND CONTRACT RIGHTS. All accounts arise out of legally
enforceable and existing contracts; and represent unconditional and
undisputed bonafide indebtedness by the Debtor for sales or leases of
Inventory shipped and delivered or services rendered by the Borrower to a
Debtor, and are not and will not be subject to any discount (except such cash
or trade discount as may be shown on any invoice, contract or other writing
delivered to the Lender). No contract right, account, general intangible or
chattel paper is, or will be represented by any note or other instrument, and
no contract right, account or general intangible is, or will be represented
by any conditional or installment sales obligation or other chattel paper,
except such instruments or chattel paper as have been immediately upon
receipt by the Borrower will be delivered to the Lender (duly endorsed or
assigned), such delivery, in the case of chattel paper, to include all
executed copies except those in the possession of the installment buyer and
any security for or guaranty of any of the Collateral shall be delivered to
the Lender immediately upon receipt thereof by the Borrower, with such
assignments and endorsements thereof as the Lender may request.
3.12 TITLE TO COLLATERAL. At the date hereof the Borrower is (and as to
Collateral that the Borrower may acquire after the date hereof, will be) the
lawful owner of the Collateral, and that the Collateral and each item thereof
is, will be and shall continue to be free of all restrictions, liens,
encumbrances or other rights, title or interests (other than the security
interest therein granted to the Lender hereby), credits, defenses, recoupments,
set-offs or counterclaims whatsoever; that the Borrower has and will have full
power and authority to grant to the Lender a security interest therein, and that
the Borrower has not transferred, assigned, sold, pledged, encumbered, subjected
to lien or granted any security interest in, and will not transfer, assign, sell
(except sales or other dispositions in the ordinary course of business in
respect to inventory as expressly permitted in this Agreement), pledge,
encumber, subject to lien or grant any security interest in any of the
Collateral (or any of the Borrower's right, title or interest therein), to any
person other than the Lender; that the Collateral is and will be valid and
genuine in all respects;
6
<PAGE>
that all accounts arise out of legally enforceable and existing contracts in
accordance with their tenor; and that upon the Borrower's acquisition of any
interest in contract rights, it shall in writing immediately notify the
Lender thereof, specifically identifying the same as contract rights, and,
except for such contract rights, no part of the Collateral (or the validity
or enforceability by the Lender thereof) is or shall be contingent upon the
fulfillment of any agreement or condition whatsoever and that the Collateral,
other than Inventory and equipment, shall represent unconditional and
undisputed bona fide indebtedness by the Debtor for sales or leases of
Inventory shipped and delivered or services rendered by the Borrower to
Debtor, and is not and will not be subject to any discount (except such cash
or trade discount as may be shown on any invoice, contract or other writing
delivered to the Lender); and that the Borrower will warrant and defend the
Lender's right to and interest in the Collateral against all claims and
demands of all persons whatsoever.
3.13 LOCATION OF COLLATERAL. Except for sale, processing, use, consumption
or other disposition in the ordinary course of business, the Borrower will
keep all Inventory and Equipment only at locations specified in this
Agreement; that the Borrower shall, during the term of this Agreement, keep
the Lender currently and accurately informed in writing of each location
where the Borrower's records relating to its accounts and contract rights,
respectively, are kept, and shall not remove such records or any of them to
another state without giving the Lender at least thirty (30) days prior
written notice thereof.
3.14 THIRD PARTIES. The Lender shall not be deemed to have assumed any
liability or responsibility to the Borrower or any third person for the
correctness, validity or genuineness of any instruments or documents that may
be released or endorsed to the Borrower by the Lender (which shall
automatically be deemed to be without recourse to the Lender in any event) or
for the existence, character, quantity, quality, condition, value or delivery
of any goods purporting to be represented by any such documents; and that the
Lender, by accepting such security interest in the Collateral, or by
releasing any Collateral to the Borrower, shall not be deemed to have assumed
any obligation or liability to any supplier or Debtor or to any other third
party, and the Borrower agrees to indemnify and defend the Lender and hold it
harmless in respect to any claim or proceeding arising out of any matter
referred to in this paragraph.
3.15 PAYMENT OF ACCOUNTS. Each account or other item of Collateral, other
than Inventory and Equipment, will be paid in full on or before the date
shown as its due date in the schedule of Collateral, in the copy of the
invoice(s) relating to the account or other Collateral or in contracts
relating thereto, that upon any suspension of business, assignment or trust
mortgage for the benefit of creditors, dissolution, petition in receivership
or under any chapter of the Bankruptcy Code as amended from time to time by
or against any Debtor, any Debtor becoming insolvent or unable to pay its
debts as they mature or any other act of the same or different nature
amounting to a business failure, the Borrower will forthwith notify the
Lender thereof.
3.16 NOTIFICATION OF DAMAGE. The Borrower will immediately notify the Lender of
any loss or damage to, or material diminution in or any occurrence that would
adversely affect the value of the Inventory, the Equipment of other Collateral.
7
<PAGE>
3.17 CHANGES. Since the date of the Financial Statements, there have been no
changes in the assets, liabilities, financial condition or business of the
Borrower, other than changes in the ordinary course of business, the effect
of which have, in the aggregate, been materially adverse.
3.18 TAXES. Borrower has filed all Federal, state and other tax returns
required to be filed (except for such returns for which current and valid
extensions have been filed), and all taxes, assessments and other
governmental charges due from the Borrower have been fully paid. Borrower
has established on its books reserves adequate for the payment of all
Federal, state and other tax liabilities (if any).
3.19 USE OF PROCEEDS. No portion of any Loan is to be used for the purpose
of purchasing or carrying any "margin security" or "margin stock" as such
terms are used in Regulations G and U of the Board of Governors of the
Federal Reserve System, 12 C.F.R. 207 and 221.
4. AFFIRMATIVE COVENANTS
4.1 PAYMENTS. Borrower will duly and punctually pay all interest and
principal becoming due the Lender and will duly and punctually perform all
things on its part to be done or performed under this Agreement.
4.2 FACILITY COLLATERAL MONITORING FEE. In addition to all amounts due and
payable respecting the Loan pursuant to the Note and the other Loan
Documents, Borrower hereby agrees to pay to Lender a "Facility/Collateral
Monitoring Fee" equal to $7,500 per month payable in advance, the first such
payment due on December ___, 1996 and each subsequent payment due on the
first business day of every calendar month commencing January 2, 1997 so long
as any amounts are outstanding respecting the Loan and the Note.
4.3 APPRAISAL OF REAL ESTATE. On or before January 1, 1997, the Lender
shall have received a satisfactory written appraisal by an appraiser
acceptable to Lender and Borrower for the Real Property, which appraisal
shall be paid for by Borrower and addressed to the Lender. Such appraisal
shall be acceptable to the Lender in its sole discretion and confirm that the
value of the Real Property must be at least $1,400,000 based upon an orderly
liquidation. In the event the value of the Real Property in such appraisal is
less than $1,400,000 on a quick sale basis, Borrower hereby agrees to (i)
provide additional collateral acceptable to Lender in Lender's sole
discretion to cover the difference between $1,400,000 and such appraised
value of the Real Property (the "Shortfall"); or (ii) to make an immediate
payment to Lender in the amount of the Shortfall to reduce the principal
balance of the Loan.
4.4 SUBORDINATION OF SECURITY INTEREST BY LENDER. Lender hereby agrees to
subordinate its security interest in the Collateral upon payment to Lender of
an amount equal to $1,500,000 (the "Collateral Prepayment") plus 60% of the
Exit Fee (as such term is defined in the Note) which would be due and payable
at the time the Collateral Prepayment is paid if all amounts outstanding
respecting the Note had been paid at such time. In the, event 60% of the
Exit Fee (the "Collateral Exit Fee Amount") is paid to Lender in accordance
with this paragraph the amount of the Exit Fee due at the time all amounts
outstanding respecting the Note are paid in full shall be reduced by the
Collateral Exit Fee Amount. The Lender shall subordinate its lien in the
Collateral only to the
8
<PAGE>
extent of amounts actually paid to Lender and upon execution and delivery of
a Subordination and Intercreditor Agreement between Lender and such parties
funding the repayment of amounts paid to Lender containing terms reasonably
acceptable to Lender.
4.5 SUBORDINATION OF MORTGAGE BY LENDER. Lender hereby agrees to
subordinate its Mortgage in the Real Property upon payment to Lender of an
amount equal to $1,000,000 (the "Real Estate Prepayment") plus 40% of the
Exit Fee (as such term is defined in the Note) which would be due and payable
at the time the Real Estate Prepayment is paid if all amounts outstanding
respecting the Note had been paid at such time. In the event 40% of the Exit
Fee (the "Real Estate Exit Fee Amount') is paid to Lender in accordance with
this paragraph the amount of the Exit Fee due at the time all amounts
outstanding respecting the Note are paid in full shall be reduced by the Real
Estate Exit Fee Amount. The Lender shall subordinate its Mortgage only to
the extent of amounts actually paid to Lender and upon execution and delivery
of a Subordination and Intercreditor Agreement between Lender and such
parties funding the repayment of amounts paid to Lender containing terms
reasonably acceptable to Lender.
4.6 BOOKS AND RECORDS; INSPECTION. Borrower will at all times keep proper
books of account in which full, true and correct entries will be made of its
transactions in accordance with generally accepted accounting principles,
consistently applied and which are, in the opinion of a Certified Public
Accountant acceptable to Lender, adequate to determine fairly the financial
condition and the results of operations of Borrower. Borrower will at all
reasonable times make its books and records available in its offices for
inspection and examination by the Lender and the Lender's representatives and
will permit inspection of the Collateral and all of its properties by the
Lender and the Lender's representatives. Borrower will from time to time
furnish the Lender with such information and statements as the Lender may
request in its sole discretion with respect to the Obligations or the
Lender's security interest in the Collateral. Borrower shall, during the
term or this Agreement, keep the Lender currently and accurately informed in
writing of each location where the Borrower's records relating to its
accounts and contract rights are kept, and shall not remove such records to
another state without giving the Lender at least thirty (30) days prior
written notice thereof.
4.7 FINANCIAL STATEMENTS. Borrower will furnish to Lender:
(a) as soon as available to Borrower, but in any event within 15 days
after the close of each month, a full and complete signed copy of financial
statements, which shall include a balance sheet of the Borrower, as at the
end of such month, and statement of profit and loss of the Borrower
reflecting the results of its operations during such month and shall be
prepared by the Borrower and certified by Borrower's chief financial
officer as to correctness in accordance with generally accepted accounting
principles, consistently applied, subject to year-end adjustments;
(b) as soon as available to Borrower, but in any event within 30 days
after the close of each quarterly period of its fiscal year, a full and
complete signed copy of financial statements, prepared by certified public
accountants acceptable to Lender, which shall include a balance sheet of
the Borrower, as at the end of such quarter, and statement of
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profit and loss of the Borrower reflecting the results of its operations
during such quarter, bearing the opinion of such certified public
accountants and prepared on a compiled basis in accordance with generally
accepted accounting principles, consistently applied, subject to year-end
adjustments;
(c) as soon as available to Borrower, but in any event within 90 days
after the close of each fiscal year, a full and complete signed copy of
financial statements, prepared by certified public accountants acceptable
to Lender, which shall include a balance sheet of the Borrower, as at the
end of such year, and statement of profit and loss of the Borrower
reflecting the results of its operations during such year, bearing the
opinion of such certified public accountants and prepared on an audited
basis in accordance with generally accepted accounting principles,
consistently applied together with any so-called management letter;
(d) on or before May 1 of each year or such other date approved by
the Lender, Borrower's filed federal and state tax returns for the prior
year;
(e) from time to time, such financial data and information about
Borrower as Lender may reasonably request; and
(f) any financial data and information about any guarantors of the
Obligations as Lender may reasonably request.
4.8 CONDUCT OF BUSINESS. The Borrower will maintain its corporate existence
in good standing and comply with all laws and regulations of the United
States and of any state or states thereof and of any political subdivision
thereof, and of any governmental authority which may be applicable to it or
to its business; provided that this covenant shall not apply to any tax,
assessment or charge which is being contested in good faith and with respect
to which reserves have been established and are being maintained.
4.9 NOTICE TO ACCOUNT DEBTORS. The Borrower agrees, at the request of the
Lender, to notify all or any of the Debtors in writing of the Lender's
security interest in the Collateral in whatever manner the Lender requests
and, if the Lender so requests, to permit the Lender to notify all or any of
the Debtors at the Borrower's expense.
4.10 TAXES. Borrower will promptly pay all real and personal property taxes,
assessments and charges and all franchise, income, unemployment, old age
benefits, withholding, sales and other taxes assessed against it or payable
by it before delinquent; provided that this covenant shall not apply to any
tax assessment or charge which is being contested in good faith and with
respect to which reserves have been established and are being maintained.
The Lender may, at its option, from time to time, discharge any taxes, liens
or encumbrances of any of the Collateral, and the Borrower will pay to the
Lender on demand or the Lender in its sole discretion may charge to the
Borrower all amounts so paid or incurred by it.
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4.11 MAINTENANCE. Borrower will keep and maintain the Collateral and its
other properties, if any, in good repair, working order and condition. The
Borrower will immediately notify the Lender of any loss or damage to or any
occurrence which would adversely affect the value of any Collateral. The
Lender may, at its option, from time to time, take any other action that the
Lender may deem proper to repair, maintain or preserve any of the Collateral,
and the Borrower will pay to the Lender on demand or the Lender in its sole
discretion may charge to the Borrower all amounts so paid or incurred by it.
4.12 INSURANCE. Borrower will maintain in force casualty insurance on all
Collateral and any property of the Borrower, if any, against risks
customarily insured against by companies engaged in businesses similar to
that of the Borrower containing such terms and written by such companies as
may be satisfactory to the Lender, such insurance to be payable to the Lender
as its interest may appear in the event of loss; no loss shall be adjusted
thereunder without the Lender's approval; and all such policies shall provide
that they may not be canceled without first giving at least ten (10) days'
written notice of cancellation to the Lender. In the event that the Borrower
fails to provide evidence of such insurance, the Lender may, at is option,
secure such insurance and charge the cost thereof to the Borrower. At the
option of the Lender, all insurance proceeds received from any loss or damage
to any of the Collateral shall be applied either to the replacement or repair
thereof or as a payment on account of the Obligations. From and after the
occurrence of an Event of Default, the Lender is authorized to cancel any
insurance maintained hereunder and apply any returned or unearned premiums,
all of which are hereby assigned to the Lender, as a payment on account of
the Obligations.
4.13 NOTIFICATION OF DEFAULT. Within five (5) days of becoming aware of the
existence of any condition or event which constitutes an Event of Default, or
any condition or event which would upon notice or lapse of time, or both,
constitute an Event of Default, Borrower shall give Lender written notice
thereof specifying the nature and duration thereof and the action being or
proposed to be taken with respect thereto.
4.14 NOTIFICATION OF MATERIAL LITIGATION. Borrower will promptly notify the
Lender in writing of any litigation or of any investigative proceedings of a
governmental agency or authority commenced or threatened against it which
would or might be materially adverse to the financial condition of Borrower.
4.15 PENSION PLANS. With respect to any pension or benefit plan maintained
by Borrower, or to which Borrower contributes (Plan"), the benefits under
which are guarantied, in whole or in part, by the Pension Benefit Guaranty
Corporation created by the Employee Retirement Income Security Act of 1974,
P. L. 93-406, or any governmental authority succeeding to any or all of the
functions of the Pension Benefit Guaranty Corporation ("Pension Benefit
Guaranty Corporation"), Borrower will (a) fund each Plan as required by the
provisions of Section 412 of the Internal Revenue Code of 1986, as amended;
(b) cause each Plan to pay all benefits when due; (c) furnish Lender (i)
promptly with a copy of any notice of each Plan's termination sent to the
Pension Benefit Guaranty Corporation and (ii) no later than the date of
submission to the Department of Labor or to the Internal Revenue Service, as
the case may be, a copy of any request for waiver from the funding standards
or extension of the amortization periods required
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by Section 412 of the Internal Revenue Code of 1954, as amended; and (d)
subscribe to any contingent liability insurance provided by the Pension
Benefit Guaranty Corporation to protect against employer liability upon
termination of a guarantied pension plan, if available to Borrower.
4.16 ENVIRONMENTAL. As of the date hereof neither the Borrower nor any of
Borrower's agents, employees or independent contractors (1) have caused or
are aware of a release or threat of release of Materials (as defined herein)
on any of the premises or personal property owned or controlled by Borrower,
or any abutting property, which could give rise to liability under any
Superfund and Hazardous Waste Laws (as defined herein) or any other federal,
state or local law, rule or regulation; (2) have arranged for the transport
of or transported any Materials in a manner as to violate, or result in
potential liabilities under, any Superfund and Hazardous Waste Laws; (3) have
received any notice, order or demand from the Environmental Protection Agency
or the Ohio Department of Environmental Protection under any Superfund and
Hazardous Waste Laws; (4) have incurred any liability under any Superfund and
Hazardous Waste Laws in connection with the mismanagement, improper disposal
or release of Materials; (5) are aware of any inspection or investigation of
any of the premises or personal property owned or controlled by Borrower or
abutting property by any federal, state or local agency for possible
violations of the Superfund and Hazardous Waste Laws.
To the best of Borrower's knowledge, no prior owner or tenant of any
premises or property presently controlled or owned by Borrower committed or
omitted any act which caused the release of Materials on such premises or
property which could give rise to a lien thereon by any federal, state or
local government. No notice or statement of claim or lien affecting any
property or premises owned or controlled by Borrower has been recorded or
filed in any public records by any federal, stale or local government for
costs, penalties, fines or other charges as to such property.
Borrower agrees to indemnify and hold Lender harmless from all
liability, loss, cost, damage and expense, including attorney fees and costs
of litigation, arising from any and all of its violations of the Superfund
and Hazardous Waste Laws including those arising from any lien on any
premises or property owned or controlled by Borrower by any federal, state
and local government arising from the presence of Materials. Borrower
further agrees to reimburse Lender upon demand for any costs incurred by
Lender in connection with the foregoing. Borrower agrees its obligations
hereunder shall be continuous and shall survive the repayment of all debts to
Lender including repayment of all Obligations.
The term "Materials" means any "oil," "hazardous material," "hazardous
wastes" or "hazardous substances" as defined under the Comprehensive
Environmental Response, Compensation, and Liability Act, 42 U.S.C. Section
9601 ET SEQ., as amended, the Resource Conservation and Recovery Act of 1976,
42 U.S.C. Section 6901 ET SEQ., as amended, and Ohio hazardous waste laws and
regulations, and the foregoing are collectively the "Superfund and Hazardous
Waste Laws."
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5. NEGATIVE COVENANTS
5.1 NET OPERATING INCOME. Borrower hereby agrees to pay to Lender, in
addition to all other amounts due respecting the Note, $100,000 of the
outstanding principal balance of the Note within 20 days of the start of any
calendar month following any period of two consecutive months in which
Borrower fails to maintain monthly net operating income before income taxes,
as defined in accordance with generally accepted accounting principles,
consistently applied. equal to at least the amount shown on Schedule 5.1 for
the calendar months indicated on Schedule 5.1.
5.2 LIMITATIONS ON INDEBTEDNESS. Borrower will not issue any evidence of
indebtedness or create, assume, guarantee, become contingently liable for, or
suffer to exist indebtedness in addition to indebtedness to the Lender,
except indebtedness or liabilities of Borrower, other than for money
borrowed, incurred or arising in the ordinary course of business.
5.3 SALE OF INTEREST. There shall not be any sale or transfer of ownership
of any interest in the Borrower without the Bank's prior written consent.
5.4 LOANS OR ADVANCES. Borrower will not make any loans or advances to any
individual, firm or corporation, including without limitation its officers
and employees; provided, however, that Borrower may make advances to its
employees, including its officers, with respect to expenses incurred or to be
incurred by such employees which expenses are reimbursable by Borrower; and
provided further, however, that Borrower may extend credit in the ordinary
course of business in accordance with customary trade practices.
5.5 DIVIDENDS AND DISTRIBUTIONS. Borrower will not, without prior written
permission of the Lender, pay any dividends on or make any distribution on
account of any class of Borrower's capital stock in cash or in property
(other than additional shares of such stock), or redeem, purchase or
otherwise acquire, directly or indirectly, any of such stock, except if
Borrower is a Subchapter S corporation, under the regulations of the Internal
Revenue Service of the United States, in which event, so long as Borrower is
not in default hereunder, Borrower may distribute to the stockholders of
Borrower such amounts as are necessary to pay the tax liability of such
stockholders due as a result of such stockholders interest in the Borrower.
5.6 INVESTMENTS. Without the prior written consent of Lender, which shall
not be unreasonably withheld, the Borrower will not (i) make investments in,
or advances to, any individual, partnership, corporation, limited liability
company, trust or other organization or person; or (ii) purchase or otherwise
invest in or hold securities, nonoperating real estate or other nonoperating
assets or purchase all or substantially all the assets of any entity.
5.7 MERGER. Borrower will not merge or consolidate or be merged or
consolidated with or into any other corporation.
SALE OF ASSETS. Borrower will not without Lender's prior written consent
sell, lease or otherwise dispose of any of its assets, except in the ordinary
and usual course of business and
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except for the purpose of replacing machinery, equipment or other personal
property which, as a consequence of wear, duplication or obsolescence, is no
longer used or necessary in the Borrower's business, provided that fair
consideration is received therefor; provided, however, the Lender shall not
unreasonably withhold consent in the event Borrower proposes to transfer any
assets to a corporation (a "Subsidiary") for which one hundred percent of the
issued and outstanding capital stock is owned by Borrower, provided such
Subsidiary executes and delivers such guarantees, security agreements and
other agreements reasonably requested by Lender to perfect and preserve
Lender's rights under this Agreement and the other Loan Documents.
5.9 RESTRICTION ON LIENS. Borrower will not grant any security interest in,
or mortgage of, any of its properties or assets including the Collateral.
5.10 OTHER BUSINESS. Borrower will not engage in any business other than the
business in which it is currently engaged or a business reasonably allied
thereto.
6. DEFAULT
6.1 DEFAULT. "Event of Default" shall mean the occurrence of one or more of
any of the following events:
(a) 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 continuing for 5
business days with respect to any monetary obligation or continuing for 5
business days after the giving of notice by the Lender with respect to all
other obligations.
(b) Failure of the Borrower to maintain aggregate collateral security
value satisfactory to the Lender continuing for 5 business days after the
giving of notice by the Lender.
(c) Default of any material liability, obligation or undertaking of
the Borrower to any other party continuing for 5 business days after the
giving of notice by the Lender.
(d) If any statement, representation or warranty heretofore, now or
hereafter made in connection with this Agreement or in any supporting
financial statement of the Borrower shall be determined by Lender to have
been false in any material respect when made continuing for 5 business days
after the giving of notice by the Lender.
(e) The liquidation, termination or dissolution of, or the merger
consolidation of the Borrower, into another entity or the Borrower ceasing
to carry on actively its present business or the appointment of a receiver
for the Borrower.
(f) The liquidation, termination or dissolution of any guarantor of
the Obligations or if a corporation, the merger or consolidation of any
such guarantor into
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another entity, or any guarantor of the Obligations ceasing to carry on
actively its present business, or the appointment of a receiver for any
guarantor of the Obligations or the death of any guarantor of the
Obligations or any partner or trustee of any guarantor of the Obligations.
(g) The institution by or against the Borrower or guarantor of the
Obligations of any proceedings under the Bankruptcy Code 11 U.S.C. Section
101 ET SEQ. or any other law in which the Borrower any guarantor of the
Obligations is alleged to be insolvent or unable to pay their respective
debts as they mature, or the making by the Borrower or any guarantor of the
Obligations of an assignment for the benefit of creditors or the granting
of a trust mortgage for the benefit of creditors.
(h) The service upon the Lender hereof of a writ in which the Lender
is named as trustee of the Borrower or of any guarantor of the Obligations.
(i) A judgment or judgments for the payment of money shall be
rendered against the Borrower and any such judgment shall remain
unsatisfied and in effect for any period of thirty (30) consecutive days
without a stay of execution.
(j) Any levy, seizure, attachment, execution or similar process shall
be issued or levied on any of the property of the Borrower.
(k) The termination of any guaranty of the Obligations.
(l) The occurrence of such a change in the condition or affairs
(financial or otherwise) of the Borrower or any guarantor or other surety
for any of the obligations, or the occurrence of any event or circumstance
such that the Lender, in its sole discretion, deems that it is insecure or
that the prospects for timely or full payment or performance of any of the
Obligations have been or may be impaired.
6.2 DEFAULT. If an Event of Default shall occur, at the election of the
Lender, all Obligations shall become immediately due and payable without
notice or demand, except with respect to Obligations payable on DEMAND, which
shall be due and payable on DEMAND, whether or not an Event of Default has
occurred.
The Lender is hereby authorized, at its election, after an Event of Default
or after Demand, without any further demand or notice except to such extent as
notice may be required by applicable law, to take possession and/or sell or
otherwise dispose of all or any of the Collateral at public or private sale; and
the Lender may also exercise any and all other rights and remedies of a secured
party under the Code or which are otherwise accorded to it by applicable law,
all as the Lender may determine. If notice of a sale or other action by the
Lender is required by applicable law, unless the Collateral is perishable or
threatens to decline speedily in value or is of a type customarily sold on a
recognized market, the Borrower agrees that five (5) days' written notice to the
Borrower, or the shortest period of written notice permitted by such law,
whichever is larger, shall be sufficient notice; and that to the extent
permitted by law, the Lender, its officers, attorneys and agents may bid and
become purchasers at any such sale, if public, and may purchase
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at any private sale any of the Collateral that is or a type customarily sold
on a recognized market or which is the subject of widely distributed standard
price quotations. Any sale (public or private) shall be free from any right
of redemption, which the Borrower hereby waives and releases. No purchaser
at any sale (public or private) shall be responsible for the application of
the purchase money. Any balance of the net proceeds of sale remaining after
paying all Obligations of the Borrower to the Lender shall be returned to the
Borrower or to such other party as may be legally entitled thereto; and if
there is a deficiency, the Borrower shall be responsible for the same, with
interest. Upon demand by the Lender, the Borrower shall assemble the
Collateral and make it available to the Lender at a place designated by the
Lender which is reasonably convenient to the Lender and the Borrower. The
Borrower hereby acknowledges that the Lender has extended credit and other
financial accommodations to the Borrower upon reliance of the Borrower's
granting the Lender the rights and remedies contained in this Agreement
including without limitation, the right to take immediate possession of the
Collateral upon the occurrence of an Event of Default or after DEMAND with
respect to Obligations payable on DEMAND and the Borrower hereby acknowledges
that the Lender is entitled to equitable and injunctive relief to reinforce
any of its rights and remedies hereunder or under the Code and the Borrower
hereby waives any defense to such equitable or injunctive relief based upon
any allegation of the absence of irreparable harm to the Lender.
6.3 POWER OF ATTORNEY. The Borrower hereby irrevocably constitutes and
appoints the Lender as the Borrower's true and lawful attorney, with full
power of substitution, at the sole cost and expense of the Borrower but for
the sole benefit of the Lender, upon the occurrence of an Event of Default or
after DEMAND with respect to Obligations payable on DEMAND, to convert the
Collateral into cash, including, without limitation, completing the
manufacture or processing of work in process, and the sale (either public or
private) of all or any portion or portions of the Inventory and other
Collateral; to enforce collection of the Collateral, either in its own name
or in the name of the Borrower, including, without limitation, executing
releases, compromising or settling with any Debtors and prosecuting,
defending, compromising or releasing any action relating to the Collateral;
to receive, open and dispose of all mail addressed to the Borrower and to
take therefrom any remittances or proceeds of Collateral in which the Lender
has a security interest; to notify Post Office authorities to change the
address for delivery of mail addressed to the Borrower to such address as the
Lender shall designate to endorse the name of the Borrower in favor of the
Lender upon any and all checks, drafts, money orders, notes, acceptances or
other instruments of the same or different nature; to sign and endorse the
name of the Borrower on and to receive as secured party any of the
Collateral, any invoices schedules of Collateral, freight or express
receipts, or bills of lading, storage receipts, warehouse receipts, or other
documents of title of the same or different nature relating to the
Collateral; to sign the name of the Borrower on any notice of the Debtors or
on verification of the Collateral; and to sign and file or record on behalf
of the Borrower any financing or other statement in order to perfect or
protect the Lender's security interest. The Lender shall not be obliged to
do any of the acts or exercise any of the powers hereinabove authorized, but
if the Lender elects to do any such act or exercise any such power, it shall
not be accountable for more than it actually receives as a result of such
exercise of power, and it shall not be responsible to the Borrower except for
willful misconduct in bad faith. All powers conferred upon the Lender by this
Agreement, being coupled with an interest, shall be irrevocable so long as
any Obligation of the Borrower to the Lender shall remain unpaid.
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6.4 NONEXCLUSIVE REMEDIES. All of the Lender's rights and remedies not only
under the provisions of this Agreement but also under any other agreement or
transaction shall be cumulative and not alternative or exclusive, and may be
exercised by the Lender at such time or times and in such order of preference
as the Lender in its sole discretion may determine.
6.5 REASSIGNMENT TO BORROWER. Whenever the Lender deems it desirable that
any legal action he instituted with respect to any Collateral or that any
other action be taken in any attempt to effectuate collection of any
Collateral, the Lender may reassign the item in question to the Borrower (and
if the Lender shall execute any such reassignment, it shall automatically be
deemed to be without recourse to the Lender in any event) and require the
Borrower to proceed with such legal or other action at the Borrower's sole
liability, cost and expense, in which event all amounts collected by the
Borrower on such item shall nevertheless be subject to the Lender's security
interest.
7. MISCELLANEOUS
7.1 WAIVERS. The Borrower waives notice of nonpayment, demand, presentment,
protest or notice of protest of the Collateral, and all other notices,
consents to any renewals or extensions of time of payment thereof, and
generally waives any and all suretyship defenses and defenses in the nature
thereof.
7.2 SEVERABILITY. If any provision of this Agreement or portion of such
provision or the application thereof to any person or circumstance shall to
any extent be held invalid or unenforceable, the remainder of this Agreement
(or the remainder of such provision) and the application thereof to other
persons or circumstances shall not be affected thereby.
7.3 SET-OFF. Any deposits, balances or other sums credited by or due from
the Lender or any of its affiliates to Borrower and any security or other
property of the Borrower in the possession of the Lender, whether for
safekeeping or otherwise, may, at any time whether or not an Event of Default
has occurred or demand has been made, without notice to 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 in such manner as the Lender in its sole discretion may determine.
7.4 INDEMNIFICATION. The Borrower shall indemnify, defend and hold the
Lender harmless of and from any claim brought or threatened against the
Lender by Borrower, any guarantor or endorser of the Obligations, or 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 guarantor or endorser of the Obligations (each of which may
be defended, compromised, settled or pursued by the Lender with counsel of
the Lender's election, but at the expense of the Borrower), except for any
claim arising out of the gross negligence or willful misconduct of the
Lender. The within indemnification shall survive payment of the Obligations,
and/or any termination, release or discharge executed by the Lender in favor
of the Borrower.
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7.5 COSTS AND EXPENSES. The Borrower shall pay to the Lender any and all
costs and expenses (including, without limitation, reasonable attorneys'
fees, court costs, litigation and other expenses) incurred or paid by the
Lender in establishing, maintaining, protecting or enforcing any of the
Lender's rights or the Obligations, including, without limitation, any and
all such costs and expenses incurred or paid by the Lender in defending the
Lender's security interest in, title or right to the Collateral or in
collecting or attempting to collect or enforcing or attempting to enforce
payment of the Collateral.
7.6 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.
7.7 BINDING EFFECT OF AGREEMENT. This Agreement shall be binding upon and
inure to the benefit of the respective heirs, executors, administrators,
legal representatives. successors and assigns of the parties hereto, and
shall remain in full force and effect (and the Lender shall be entitled to
rely thereon) until terminated as to future transactions by written notice
from either Party to the other party of the termination hereof; provided that
any such termination shall not release or affect any Collateral in which the
Lender already has a security interest or any Obligations incurred or rights
accrued hereunder prior to the effective date of such notice (as hereinafter
defined) of such termination. Notwithstanding any such termination, the
Lender shall have a security interest in all Collateral to secure the payment
and performance of Obligations arising after such termination as a result of
commitments of undertakings made or entered into by the Lender prior to such
termination. The Lender may transfer and assign this Agreement and deliver
the Collateral to the assignee, who shall thereupon have all of the rights of
the Lender; and the Lender shall then be relieved and discharged of any
responsibility or liability with respect to this Agreement and the Collateral.
7.8 FURTHER ASSURANCES. 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 or to vest more fully in or
assure to the Lender the security interest in the Collateral granted to the
Lender by this Agreement or to comply with applicable statute or law and to
facilitate the collection of the Collateral.
7.9 AMENDMENTS AND WAIVERS. This Agreement may be amended and Borrower may
take any action herein prohibited, or omit to perform any act herein required
to be performed by it, if 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.
7.10 TERMS OF AGREEMENT. This Agreement shall continue in force and effect so
long as any Obligations or obligation of Borrower to Lender shall be outstanding
and is supplementary to each and every other agreement between Borrower and
Lender and shall not be so construed as to
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limit or otherwise derogate from any of the rights or remedies of Lender or
any of the liabilities, obligations or undertakings of Borrower under any
such agreement, nor shall any contemporaneous or subsequent agreement between
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 Borrower hereunder, unless such other agreement specifically
refers to this Agreement and expressly so provides.
7.11 NOTICES. Any notices under or pursuant to this Agreement shall be
deemed duly received and effective if delivered in hand to any officer of
agent of the Borrower or Lender, or if mailed by registered or certified
mail, return receipt requested, addressed to the Borrower or Lender at
address set forth in this Agreement or as any Party may from time to time
designate by written notice to the other party.
7.12 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.
7.13 REPRODUCTIONS. This Agreement and all documents which have been or may
be hereinafter furnished by 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).
7.14 VENUE. 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. 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.
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 Borrower and (ii) by serving the same upon such agent, and
agrees that such service shall in every respect be deemed effective service
upon Borrower.
7.15 JURY WAIVER. THE BORROWER AND LENDER EACH HEREBY KNOWINGLY, VOLUNTARILY
AND INTENTIONALLY, AND AFTER AN OPPORTUNITY T0 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. THE BORROWER CERTIFIES THAT NEITHER
THE LENDER NOR
19
<PAGE>
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.
Witness Borrower
Fix-Corp International, Inc.
/s/ Sherry Durst By: /s/ Mark Fixler
- ---------------------------- ---------------------------
Mark Fixler, President
Accepted at Boston, Massachusetts: Gordon Brothers Capital Corporation
By:/s/ Warren H. Feder
-----------------------
Name: Warren H. Feder
Title: President
20
<PAGE>
SCHEDULE 5.1
<TABLE>
<CAPTION>
<S> <C>
February 1997 $ 20,907
March 1997 84,271
April 1997 79,734
May 1997 79,734
June 1997 79,734
July 1997 79,734
August l997 123,122
September 1997 250,517
October 1997 394,198
November 1997 394,198
December 1997 394,198
January 1998 394,198
</TABLE>
21
<PAGE>
_________________________________________________Quantum Exhibit C to Exhibit 8
SCHEDULE 1.02A
PERSONAL PROPERTY SOLD TO BUYER
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
LINE 7 EQUIPMENT AND MACHINERY LIST
ASSET ID ASSET NAME MAKE MODEL NOTE
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CY1001 BALE CONVEYOR HUSTLER B2677 (SER.#) 72" W x 27' L 1/4" PLATE STEEL BELT
B81002 BALE BREAKER HUSTLER B2679 (SER #) 72" W x 72' L w/ 30 HP - EDDY CURRENT
DRIVE
CY1003 VIBRATORY CONVEYOR &
PUNCH-PLATE SCREEN HUSTLER B2680 (SER. #) 60" W x 23' L PUNCH-PLATE
2"x10 ROWS - CONVEYOR BED
CY1004 FLAT-BELT, REFUSE CONVEYOR HUSTLER B2682 (SER. #) 12" W x 6' L FLAT BELT w/ CLEATS
CY1005 INCLINED, CLEATED, WASTE
CONVEYOR HUSTLER B2684 (SER. #) 12" x 12' L FLAT BELT WITH CLEATS
CY1006 MANUAL SORTING CONVEYOR HUSTLER B2686 (SER. #) 36" W x 30' L FLAT BELT
CY1007 INCLINED, CLEATED CONVEYOR HUSTLER B2689 (SER. #) 36" W x 20' l FLAT BELT
w/ MAG. HEAD PULLEY
CY1007A SLIDE CONVEYOR CUSTOM BRIDGES INCLINED CLEATED CONVEYORS
CY1011 INCLINED, CLEATED CONVEYOR HUSTLER B2692 (SER. #) 36" W x 19'6" L FLAT BELT
w/ CLEATS & MAG. HEAD PULLEY
GR1013 GRANULATOR CUMBERLAND 50B 100 HP MOTOR - 3 BLADE ROTOR -
1/2" BED-SCREEN
BL1014 PRIMARY ELUTRIATOR BLOWER STERLING SYSTEMS 7075FV (CCWUD) COMPONENT OF STERLING'S 3210EL SYSTEM
FS1015 ELUTRIATION VESSEL STERLING SYSTEMS EL32C IBID - SS - 7" OD INLET ON 146" STAND
BL1016 SECONDARY ELUTRIATOR BLOWER STERLING SYSTEMS 1115 FV (CCWUD) IBID - PROVIDES FLUIDIZATION IN
ELUTRIATOR - DISCHARGES TO CYCLONE
FS1017 AIR CYCLONE STERLING SYSTEMS #13 IBID - SS #13 CYCLONE w/ SIDE-MOUNTED
FILTER HEAD - 16" D x 144" LONG
VS1019 DIRTY-FLAKE PICK-UP BIN AND
FEED AUGER CUSTOM SS - 6"D x 13' L INCLINED AUGER -
MARTIN VIBRATOR CD 36-250
VS1021 COLD WASH TANK CUSTOM SS - 500 GAL. - 6-SECTION PRE-WASH
MXM1021A,B,C COLD WASH TANK MIXERS PHILADELPHIA MIXER PG 13 1/3 HP
MXP1021A,B,C,D COLD WASH TANK PULLERS CUSTOM PNEUMATIC MIXERS
FS1023 COLD-WASH, DEEP-BED FILTER CUSTOM SS - 270 GAL - INDEXING, REUSABLE
FILTER MEDIUM
P1024 COLD WASH FEED PUMP CARVER 1-1/4" x 1-1/2" x 7" SS IMPELLER
FS1022 COLD WASH DEWATERING DRYER CARTER DAY D312 10 HP DRYER MOTOR - SS FRAME AND
ROTOR - STELLITED ROTOR
VS1027 INTERMEDIATE FLAKE HOPPER AND
AUGER CUSTOM SS - 3.5 CU YD BIN - 6"D x 22'L
INCLINED AUGER AND LEVEL CONTROL
VS1030 HOT WASH TANK (1 OF 2) CUSTOM SS - 390 GAL - STEAM-JACKETED -
INSULATED
VS1031 HOT WASH TANK (2 OF 2) CUSTOM SS - 390 GAL - STEAM-JACKETED -
INSULATED
MXM1030 HOT WASH TANK MIXER (1 OF 2) PHILADELPHIA MIXER PG 13 5 HP - SS SHAFT & IMPELLERS
MXM1031 HOT WASH TANK MIXER (2 OF 2) PHILADELPHIA MIXER PG 13 5 HP - SS SHAFT & IMPELLERS
FS1032 HOT WASH DEWATERING DRYER CARTER DAY D312 SS FRAME AND ROTOR - 10 HP MOTOR
FS1042 HOT WASH-WATER, DEEP-BED FILTER CUSTOM SS - 270 GAL. - INDEXING, REUSABLE,
FILTER MEDIUM
P1043 HOT WASH, DEEP-BED FILTER,
SUMP PUMP CARVER SS HOUSING AND IMPELLER -
70 GPM - 5 HP
VS1044 HOT WASH-WATER HEATING
RESERVOIR TANK CUSTOM 4' W x 6' H x 10' L - SS -
STEAM-HEATED - INSULATED - 1200 GAL.
P1044&47 HOT WATER PUMPS WEMCO FL 3" x 5-1/4" - SS HOUSINGS AND
IMPELLERS - 60 GMP - 5 HP DRIVE
MOTORS
VS1033 HOT-WASH, CLEAN-FLAKE BIN CUSTOM SS - 1.5 CU YD
CY1034 HOT-WASH, CLEAN-FLAKE AUGER CUSTOM SS - 6"D x 8'L - 2500 LB/HR -
1 HP MOTOR
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
LINE 7 EQUIPMENT AND MACHINERY LIST
ASSET ID ASSET NAME MAKE MODEL NOTE
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
VS1035 RINSE/SEPARATION TANK CUSTOM SS - 225 GAL.
MXM1035A&B RINSE/SEPARATION TANK MIXERS PHILADELPHIA MIXER PG 13 SS SHAFTS AND IMPELLERS - 1 HP DRIVE
MOTORS
P1038&39 HYDROCYCLONE PUMPS WEMCO FL 3" x 5-1/5" w/ SS IMPELLERS
FS1036 HYDROCYCLONE SEPARATOR KREBS ENGINEERING D10B-841
FS1037 HYDROCYCLONE SEPARATOR KREBS ENGINEERING D10B-841
FS1040 VIBRATORY FILTER SWECO LS30S66
FS1041 PRIMARY CLEAN FLAKE SPIN DRYER CARTER DAY D512 SS FRAME AND ROTOR - 10 HP
DRIVE MOTOR
FS1048 FINAL CLEAN FLAKE SPIN
DRYER - AIR ASSISTED CARTER DAY D532 SS FRAME AND ROTOR - 20 HP
DRIVE MOTOR
BL1049 EXHAUST BLOWER TWIN CITY FAN BC-SW SIZE 165 - 4800 CFM - 3 HP
DRIVE MOTOR
FS1049 DRYER BLOWER EXHAUST FILTERS CUSTOM 4 - 15" DIA. FILTER SOCKS
VS1050 INTERMEDIATE DRY FLAKE BIN
w/ VIBRATOR & AIRVEYOR STERLING SYSTEMS SGB-03080 COMPONENT OF STERLING'S 3210EL
SYSTEM - AL - 30 CU FT`
BL1051 CLEAN FLAKE ELUTRIATOR BLOWER STERLING SYSTEMS 7075FV (CCWUD) IBID - 7.5 HP MOTOR
FS1052 CLEAN FLAKE ELUTRIATOR STERLING SYSTEMS EL32C IBID - SS - 7" INLET NOZZLE
BL1054 CYCLONE BLOWER STERLING SYSTEMS 1115FV IBID - 15 HP MOTOR
FS1055 ELUTRIATED-WASTE CYCLONE STERLING SYSTEMS #13 IBID - SS - #13 CYCLONE w/ SIDE
MOUNTED FILTER HEAD
FS1056 CYCLONE EXHAUST FILTER STERLING SYSTEMS IBID - 6 - 16" d x 144" LONG
FILTER BAGS
VS1053 ELUTRIATED FLAKE RECEIVER L - 4 SYSTEMS AL - 4W x 4'L x 4' DEEP (2.2 CU YD) -
w/ LEVEL CONTROL & VIBRATOR
FR1099 ELUTRIATED, CLEAN-FLAKE VACUUM
TRANSFER SYSTEM L - R SYSTEMS VL-500 10 HP w/ L-R 36FR003C FILTERS
VS1057 ELUTRIATED, CLEAN-FLAKE SURGE BIN L - R SYSTEMS 7' x 7' x 14'H (5000 LB) - AL - HIGH
LEVEL SENSOR - SIGHT GLASS
FR1100 BLENDING-STATION, VACUUM
TRANSFER SYSTEM L - R SYSTEMS VL-500 20 HP VACUUM BLOWER w/ SOUND
ENCLOSURE
VS1077A WEIGH BLENDER - CLEAN FLAKE BIN L - R SYSTEMS WSB-2000 4 L-R ENGR SYSTEM, 36" x 36" x 70" AL
BIN w/ LEVEL SENSOR & 2 CU FT RCVR
VS1077B,C,D WEIGH BLENDER - ADDITIVE
BINS (3) L - R SYSTEMS STOCK 14" x 14" x 48"
SF1079A,B,C,D VIBRATORY FEEDERS SYNTRON FMC #8F-01 8 X 20 AND FMC #F-10C
VIBRATORY FEEDERS
VS1076 WEIGH HOPPER L - R SYSTEMS WBS-2000 150 LB CAP-PROGRAMMABLE WEIGH SCALE
BLENDER
BD1060 CLEAN FLAKE & ADDITIVES
RIBBON BLENDER L - R SYSTEMS CUSTOM 200 # CAP - AL MIXING BARREL w/ 2 HP
GEAR DRIVE AND MIXING PADDLE
FR1101 EXTRUDER-FEED, VACUUM
TRANSFER SYSTEM L - R SYSTEMS VL-500 20 HP VACUUM BLOWER
VS1063 EXTRUDER FEED HOPPER EGAN CUSTOM 13 CU FT w/ L-R SYSTEMS VPW-500
POWDER RECEIVER
EXM1060 EXTRUDER MOTOR EMERSON 508AT 400 HP DC w/ COOLING BLOWER ATTACHMENT
GB1061 EXTRUDER GEAR-BOX EGAN 6"H-6026 RH 20 6.1 GEAR RATIO
EX1060 EXTRUDER EGAN 6"D - 36 1L/D - VACUUM-VENTED
SP1074 SCREEN CHANGER KREYENBORG SWE-200-88/RS 2 BOLT, AUTO-BACKFLUSHING
TYPE - 206 mm SCREENS
PZ1069 PELLETIZER BERINGER WRP-12V WATER-RING TYPE - VARIABLE SPEED -
2HP/3600 RPM, MAX
VS1072 PELLET WATER DEWATERING TROUGH BERINGER PART OF WRP-12V SYSTEM
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
LINE 7 EQUIPMENT AND MACHINERY LIST
ASSET ID ASSET NAME MAKE MODEL NOTE
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FS1071 ELLET DRYER - AIR ASSISTED BERINGER SS FRAME AND ROTOR - 2HP/1200 RPM -
PART OF WRP-12V SYSTEM
VS1085 ELLETIZER SURGE BIN L - R SYSTEMS 30"x30"x36"H AL - 1/2" SCREEN - MAGNEETIC SCREEN -
LEVEL CONTROLLED
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
LINE 8 EQUIPMENT AND MACHINERY LIST
ASSET ID ASSET NAME MAKE MODEL NOTE
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CY2001 BALE CONVEYOR HUSTLER B2676 (SER.#) 72" W x 27' L 1/4" plate steel belt
BB2002 BALE BRAKER HUSTLER B2678 (SER. #) 72" W x 72' L
CY2003 VIBRATORY CONVEYOR & PUNCH
PLATE SCREEN HUSTLER B2681 (SER. #) 60" W x 23' L BED - PUNCH-PLATE:
2"x10 ROWS
CY2004 RESIDUE SLIDE CONVEYOR HUSTLER B2683 (SER. #) 12" W x 6' L FLAT BELT w/ CLEATS
CY2005 CLEATED, INCLINED, RESIDUE
CONVEYOR HUSTLER B2685 (SER. #) 12" W x 12' L FLAT BELT w/ CLEATS
CY2006 INCLINED, CLEATED, SORTING
STATION FEED CONVEYOR HUSTLER B2687 (SER. #) 36" W x 20' L BELT w/ MAG. HEAD PULLEY
CY2007 SORTING CONVEYOR HUSTLER B2688 (SER. #) 36" W x 15' L FLAT SLIDE BELT - TWO
THROW-OUT SHUTES
CY2008 WASTE/BY-PRODUCT SLIDE CONVEYOR HUSTLER B2691 (SER #) 24" W x 20' L FLAT BELT (REVERSIBLE)
CY2009 WASTE/BY-PRODUCT BALER
FEED CONVEYOR VALLEY FORGE 700 18" W x 15' L FLAT BELT w/ CLEATS
BA2011 WASTE/BY-PRODUCT BALER PIQUA 54-40 HD HYDRAULIC VERTICAL BALER
CY2012 SORTING-LINE TAKE-AWAY CONVEYOR
(INCLINED, CLEATED) HUSTLER B2690 (SER. #) 36" W x 15' L FLAT BELT w/ MAG.
HEAD PULLEY
CY2012A SLIDE CONVEYOR CUSTOM BRIDGES INCLINED, CLEATED CONVEYORS
CY2016 GRANULATOR FEED CONVEYOR
(INCLINED, CLEATED) HUSTLER B2693 (SER. #) 36" W x 19'-6" L FLAT BELT w/ CLEATS
GR2018 GRANULATOR CUMBERLAND 508 100 HP - 1/2" BED-SCREEN - 3-BLADE
ROTOR - SOUND-PROOFED
BL2019 DIRTY FLAKE ELUTRIATOR BLOWER STERLING SYSTEMS 7075FV (CCWUD) A COMPONENT OF STERLING'S
3210EL SYSTEM
FS2020 DIRTY FLAKE ELUTRIATION VESSEL STERLING SYSTEMS EL32C IBID - SS - 7" OD INLET, 146" STAND
BL2021 CYCLONE BLOWER STERLING SYSTEMS 1115FV (CCWUD) IBID - 15 HP BLOWER MOTOR
FS2022 AIR CYCLONE & BAG FILTER STERLING SYSTEMS #13 SS - #13 CYCLONE w/ SIDE MOUNTED
FILTER HEAD
VS2023 DIRTY FLAKE PICK-UP BIN AND
FEED AUGER CUSTOM SS - 3.5 CU YD CAPACITY
w/ 6"D x 13' L INCLINED AUGER
VS2027 HOT WATER WASH TANK (1 OF 2) CUSTOM SS - 390 GAL. - STEAM JACKETED -
INSULATED
VS2026 HOT WATER WASH TANK (2 OF 2) CUSTOM SS - 390 GAL. - STEAM JACKETED -
INSULATED
MXM2027&28 HOT WATER WASH TANK MIXERS PHILADELPHIA MIXER PG 13 SS SHAFT AND IMPELLERS - 5 HP
DRIVE MOTORS
FS2029 HOT WASH DEWATERING DRYER CARTER DAY D312 SS ROTOR AND FRAME - STELLITED
ROTOR - 10 HP DRIVE
FS2045 HOT WASH-WATER, DEEP-BED FILTER CUSTOM SS - 270 GAL. - INDEXING, REUSABLE
FILTER MEDIUM
P2046 HOT WASH, DEEP-BED FILTER,
SUMP PUMP CARVER 70 GPM PUMP - 5 HP MOTOR -
SS HOUSING & IMPELLER
VS2047 HOT WASH WATER HEATING TANK CUSTOM SS - STEAM-HEATED - INSULATED -
1200 GAL.
P2047&50 HOT WASH WATER PUMPS CARVER FL 3" x 5-1/4" 60 GPM - 5 HP MOTOR -
SS HOUSING & IMPELLER
VS2030 HOT WASH CLEAN FLAKE BIN CUSTOM SS - 1.5 CU YD
CY2031 HOT WASH CLEAN FLAKE BIN AUGER CUSTOM SS - 6" D x 8' L - 2500 LB/HR
VS2032 PRIMARY CLEAN FLAKE RINSE TANK CUSTOM 3' W x 6' L x 3 H, SS - 260 GAL. -
3 COMP. STATIC-SCREEN SEPARATOR
MXM2032A,B,C PRIMARY RINSE TANK MIXERS PHILADELPHIA MIXER PG-13 SS SHAFT AND IMPELLER - 1/4 HP
P2038 RINSE TANK SUMP PUMP
(COMPARTMENT C) WEMCO FL 190 GPM - 10 HP - SS HOUSING AND
IMPELLER
FS2037 HYDROCYCLONE SEPARATOR
(COMPARTMENT C) KREBS ENGINEERING D108-841
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
LINE 8 EQUIPMENT AND MACHINERY LIST
ASSET ID ASSET NAME MAKE MODEL NOTE
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FS2044 PRIMARY RINSE SYSTEM
SPIN DRYER CARTER DAY D512 SS FRAME AND ROTOR - 10 HP
P2034&36 PRIMARY RINSE SYSTEM SUMP
PUMPS (COMPARTMENTS A&B) WEMCO FL 190 GPM - 10 HP MOTOR - SS HOUSING &
IMPELLER
FS2033&35 HYDROCYCLONE SEPARATORS
(COMPARTMENTS A&B) KREBS ENGINEERING D108-841
FS2039 "HEAVIES" SPIN DRYER CARTER DAY D312 SS FRAME AND ROTOR - 10 HP DRYER MOTOR
VS2040 SECONDARY, CLEAN-FLAKE
RINSE TANK CUSTOM SS - 200 GAL.
MXM2040 SECONDARY RINSE TANK MIXER PHILADELPHIA MIXER PC-13 SS SHAFT AND IMPELLER - 1/4 HP
P2041 SECONDARY RINSE TANK
SUMP PUMP WEMCO FL 190 GPM - 10 HP - SS HOUSING AND
IMPELLER
FS2042 HYDROCYCLONE SEPARATOR KREBS ENGINEERING D108-841
FS2043 VIBRATORY FILTER SWECO LS30S66
FS2051 FIRST-STAGE DEWATERING DRYER CARTER DAY D312 SS FRAME AND ROTOR- 10 HP MOTOR
FS2052 SECOND-STAGE DEWATERING DRYER CARTER DAY D312 SS FRAME AND ROTOR - 10 HP MOTOR
FS2053 FINAL DEWATERING DRYER
WITH AIR-ASSIST CARTER DAY D532 SS HOUSING AND ROTOR - 15 HP MOTOR
BL2053 EXHAUST BLOWER TWIN CITY FAN BC-SW SIZE 165; 4800 CFM - 3HP
w/ 4-15" DIA. FILTER SOCKS
VS2057 INTERMEDIATE DRY FLAKE BIN
w/ VIBRATOR & AIRVEYOR STERLING SYSTEMS SGB-03060 COMPONENT OF STERLING'S 3210EL
SYSTEM - AL - 30 CU FT
BL2058 ELUTRIATOR BOWER STERLING SYSTEMS 7075FV (CCWUD) IBID - 7.5 HP BLOWER MOTOR
FS2059 CLEAN FLAKE ELUTRIATION VESSEL STERLING SYSTEMS EL32C IBID - SS
BL2060 CYCLONE BLOWER STERLING SYSTEMS 1115FV (CCWUD) IBID - 15 HP BLOWER
FS2061 ELUTRIATED WASTE CYCLONE STERLING SYSTEMS #13 IBID - SS - #13 CYCLONE w/ SIDE
MOUNTED FILTER HEAD
FS2062 CYCLONE EXHAUST FILTER STERLING SYSTEMS IBID - 6 - 16" D x 114" LONG
FILTER BAGS
VS2063 ELUTRAITED FLAKE RECEIVER L - R SYSTEMS STOCK AL - 4W x 4'L x 4' DEEP - WITH
LEVEL CONTROLLERS
FR2104 ELUTRIATED, CLEAN-FLAKE VACUUM
TRANSFER SYSTEM L - R SYSTEMS VL-500 15 HP VACUUM BLOWER w/ L-R 36FR003C
RCVR
VS2065 ELUTRIATED, CLEAN-FLAKE
SURGE BIN L - R SYSTEMS CUSTOM AL - 7' x 7' x 14' H (5000 LB) -
HIGH LEVEL SENSOR - SIGHT GLASS
FR2105 BLENDING STATION VACUUM
TRANSFER SYSTEM L - R SYSTEMS VL-500 20 HP VACUUM BLOWER
VS2065A WEIGH BLENDER - CLEAN FLAKE BIN L - R SYSTEMS CUSTOM 36 CU FT AL HOPPER
w/ L-R VL-4500/02 VACUUM RECVR
VS2065B,C,D WEIGH BLENDER - ADDITIVE
BINS (3) L - R SYSTEMS STOCK 14" x 14" x 48" AL BIN
w/ L-R VPW-400 POWDER RECEIVER
SF2067A,B,C,D VIBRATORY FEEDERS SYNTRON BF-01C FMC #8F-01 8 x 20 AND FMC #F-10C
VIBRATORY FEEDERS
VS2067 WEIGH HOPPER L - R SYSTEMS WSB-2000 4 150 LB CAPACITY - PROGRAMMABLE
BD2068 CLEAN FLAKE & ADDITIVES
RIBBON BLENDER L - R SYSTEMS STOCK 200 # CAP - AL MIXING BARREL w/ 2 HP
GEAR DRIVE & MIXING PADDLE
FR2106 EXTRUDER FEED VACUUM
TRANSFER SYSTEM L - R SYSTEMS VL-500 20 HP VACUUM BLOWER
VS2091 EXTRUDER FEED HOPPER EGAN CUSTOM 13 CU FT CAP w/L-R VPW - 500
POWDER RECEIVER
EXM2068 EXTRUDER MOTOR EMERSON 508AT 400 HP DC w/ COOLING BLOWER
GB2069 EXTRUDER GEAR-BOX EGAN 6:H-6026 RH 20.6 1 GEAR RATIO
EX2068 EXTRUDER EGAN 6: - 36 1 LL/D - VACUUM VENTED
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
LINE 8 EQUIPMENT AND MACHINERY LIST
ASSET ID ASSET NAME MAKE MODEL NOTE
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SP2082 SCREEN CHANGER KREYENBORG SWE-200-88/RS 2-BOLT - AUTO BACKFLUSHING TYPE -
205 mm SCREENS
PZ2082 PELLETIZER BERINGER WRP-12V WATER RING-TYPE - 2 HP, VARIABLE
SPEED MOTOR, 3600 RPM, MAX.
VS2080 PELLET WATER DEWATERING TROUGH BERINGER COMPONENT OF WRP-12V PACKAGE
FS2079 PELLET DRYER - AIR ASSISTED BERINGER IBID - SS FRAME AND ROTOR - 2 HP,
1200 RPM
VS2083 PELLETIZER SURGE BIN L - R SYSTEMS 30"x30"x36"H AL - 1/2" SCREEN - MAGNETIC SCREEN -
LEVEL CONTROLLED
FS2045A HOT FILTRATE SIEVE HYCOR HS36/A44 SS CONSTRUCTION
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
PLANT SUPPORT EQUIPMENT AND MACHINERY LIST
ASSET ID ASSET NAME MAKE MODEL NOTE
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
F-2 AUTO BACK-FLUSH FILTER YARDNEY MM3660-3A (3) 200 GPM MULTI-MEDIA FILTERS
w/AUTO CONTROLS
F-101 FILTER PRESS PAC PRESS MODEL P800E132A-10/15; 15 CU FT CAP
FLOWMETER SPARLING MODEL FM 621-031-401-0 SIZE 3
P-103 PROCESS FEED PUMPS MCM 3 x 4 x 11
P-109 RECYCLE PUMP BARNES 10 ICU - 1 100GPM 5HP
P-105 FILTER PRESS FEED PUMP WARREN RUPP SA2-A SANDPIPER TYPE 5; 50 GPM, AIR POWERED,
DOUBLE DIAGRAM PUMP
P-112 SKIM TRANSFER PUMP WARREN RUPP SA2-A SANDPIPER TYPE 5; 50 GPM, AIR POWERED,
DOUBLE DIAGRAM PUMP
RE-USE WATER PUMP (2) WEINMAN 3G5-4 250 GPM @ 42 TDH
P-101/2 FEED PUMP GORMAN RUPP T3A80-B SELF PRIMING CENTRIFUGAL PUMP
T-111 SAMPLE TANK NORWESCO STOCK 550 GAL. 67" D x 42" H POLETHYLENE
T-107 DAF CELL TANK PCE 120 DISSOLVED AIR FILTER w/ SKIMMER AND
MIXERS MFG 1/95
HILLSIDE SCREEN GALA 160 FRS
SCREW PRESS HYCOR SPR 260 HELIXPRESS UNIT, SPR 260, HYCOR
S/N H-0011096
T-101 EQUALIZATION TANK NORWESCO STOCK 5000 GAL. POLY TANK 102" D x 152" H
w/ MIXER
A-101 EQ TANK MIXER 3/4 HP GEAR DRIVE MIXER FITS INTO
EQ TANK
T-102 EQUALIZATION TANK NORWESCO STOCK 5000 GAL. POLY TANK 102" D x 152" H
T-103 SKIM HOLDING TANK NORWESCO STOCK 1700 GAL. POLY TANK 87"D x 72" H
FACILITY BOILER CLEAVOR BROOKS C8-700-1505 150 PSI PACKAGED BOILER SYSTEM
FLOOR SCALE GSE 550 PORTABLE FLOOR SCALE
REFUSE COMPACTOR McCLAIN 40067 HYDRAULIC COMPACTOR FOR A
42 CU FT REFUSE BOX
TRUCK SCALE FAIRBANKS 90-161-1 35 TON SCALE
PLANT AIR SUPPLY COMPRESSOR SULLAIR SRF (2) SRF 1/4000 AIR COMPRESSORS
FOR PLANT AIR
BALE WIRE DICER SWEED 510 CUTS BALE WIRES
FLOOR SWEEPER POWERBOSS TSS/80-HD DRIVING FLOOR MACHINE
FORK LIFTS (2) TCM FCG 18N7T
FORK LIFT TCM FG20N3T
FIRE WATER AND SPRINKLER PUMP PEERLESS 6AEF14G 13" D IMP 100 HP w/ JOSLYN CLARK
CONTROL C 38204-4J SYSTEM
COOLING TOWER MARLEY 28144
FR1103 SILO VACUUM TRANSFER SYSTEM L - R SYSTEMS VL-500 15 HP BLOWER MOTOR w/ FILTERS
VS1066 15000 LB PELLET SILO PEABODY TECHTANK CUSTOM 12' D x 16' H AL CONST
RA1068 15000 LB SILO ROTARY AIR LOCK MEYER & SONS HD SIZE 10" x 10" - 1 HP DRIVE MOTOR
VS1069 50000 LB PELLET BLENDING SILO PEABODY TECHTANK CUSTOM 11' D x 29' H - AL CONST w/ BLENDING
TUBE & LEVEL SENSOR
FR1102 VACUUM, PELLET RECIRCULATING L - R SYSTEMS VL-500 w/ AIR FILTERS
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
PLANT SUPPORT EQUIPMENT AND MACHINERY LIST
ASSET ID ASSET NAME MAKE MODEL NOTE
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
RA1092 ROTARY AIR LOCK - 50000 LB MEYER & SONS HD SIZE 10" x 10" - 1 HP DRIVE MOTOR
WH1096 PACKAGING SCALE - 50000 LB SILO SYNTEST SP320 BLENDING SILO FITTED WITH HI AND
LO OUTPUT SLIDE VALVES
BL1095 BLOWER - BULK LOADING SYSTEMS L - R SYSTEMS LSP400-30 30 HP MOTOR
FS1107 TRUCK LOADING CYCLONE L - R SYSTEMS 750 SS - 3 CU FT CAPACITY
TL1108 RAILCAR LOADING LINES (2) CUSTOM 4" LINES - PEENED
FR2108 SILO VACUUM TRANSFER SYSTEM L - R SYSTEMS VL-500 15 HP VACUUM BLOWER
VS2094 15000 LB PELLET SILO PEABODY TECH TANK CUSTOM AL CONST - 12' D 16' H
RA2109 15000 LB SILO ROTARY AIR LOCK MEYER & SONS HD SIZE 10 x 10 1 HP DRIVE MOTOR
VS2097 50000 LB PELLET BLENDING SILO PEABODY TECHTANK CUSTOM 11' D x 29' H - AL CONST -
w/ BLENDING TUBE & LEVEL SENSOR
FR2107 VACUUM, PELLET RECIRCULATING L - R SYSTEMS VL-500 15 HP VACUUM BLOWER
RA2100 ROTARY AIR-LOCK - 50000 LB MEYER & SONS HD 1 HP DRIVE MOTOR
WC2103 PACKAGING SCALE - 50000 LB SILO SYNTEST SP320 BLENDING SILO FITTED WITH HI AND
LO OUTPUT SLIDE VALVES
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
LIST OF OBSOLETE EQUIPMENT AND MACHINERY
ASSET ID ASSET NAME MAKE MODEL NOTE
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FS2055 FLAKE DRYER - AIR ASSISTED CARTER DAY D532 SS FRAME & ROTOR - 15 HP MOTOR -
NEEDS NEW ROTOR
VS2054 METAL DETECTOR & DIVERTER ERIEZ EZ TEC III SERIES REJECTS AL FROM CLEAN PET FLAKE
SP-1074 (OLD) SLDE-PLATE SCREEN-CHANGER BERINGER RSL-60 6" BREAKER PLAT - HYDRAULIC UNIT -
NEEDS NEW INLET ADAPTOR
SP-2062 (OLD) SLDE-PLATE SCREEN-CHANGER BERINGER RSL-60 6" BREAKER PLAT - HYDRAULIC UNIT -
NEEDS NEW INLET ADAPTOR
VS2112 PET FLAKE POLISHING
TANK & AUGER CUSTOM SS - APPROX. 100 GAL. CAP.
SH1009 SHREDDER SHRED TECH ST-50 2 x 30 HP DRIVE MOTORS - NEEDS NEW
ROTORS & PNEUMATIC CRAMMER
SH2014 SHREDDER SHRED TECH ST.50 2 x 30 HP DRIVE MOTORS - NEEDS NEW
MOTORS & PNEUMATIC CRAMMER
DM1010 DRUM MAGNET DINGS MAGNETIC 12 x 36 FC DRUM SCAVENGES FERROMAGNETICS FROM
SHREDDER OUTPUT
DM2015 DRUM MAGNET DINGS MAGNETIC 12 x 36 FC DRUM SCAVENGES FERROMAGNETICS FROM
SHREDDER OUTPUT
</TABLE>
<PAGE>
Exhibit D to Exhibit 8
[SELVAGE & ASSOCIATES LETTERHEAD]
February 8, 1996
Fix-Corp International, Inc.
27040 Cedar Road
Suite 218
Beachwood, Ohio 44124
RE: APPRAISAL
Per your request, I inspected the equipment and related items located in the Mid
Ohio Corporate Park, Heath, Ohio, for the purpose of estimating the current
value of the property.
I have provided you with "Fair Market" value, in place for continuation of the
present operations.
The total value of all appraised property is $6,850,500.00 (Six Million Eight
Hundred Fifty Thousand Five Hundred Dollars).
The "Liquidation" value of the equipment and related items would be
approximately 68% (sixty-eight percent) of the total "Fair Market" evaluation.
This appraisal is a disinterested statement prepared by our company evaluating
the property on the date of this document. We assume no responsibility as to
the ownership of the items listed in this appraisal, not having examined
property titles.
If you have any questions, or need any additional assistance, please do not
hesitate to contact me.
Yours truly,
/s/ Butch Selvage
Butch Selvage
SELVAGE & ASSOCIATES
Enclosures:
<PAGE>
[SELVAGE & ASSOCIATES LETTERHEAD]
February 8, 1996
QUANTUM PLASTICS, INC.
MID OHIO CORPORATE PARK
STATE ROUTE 79
HEATH, OHIO
RE: APPRAISAL
Equipment and machinery "IN PLACE AND OPERATIONS", FOR CONTINUED
USAGE" in the reclamation and reprocessing of plastic materials.
QUANTUM PROCESSING LINE #7 consisting of: bale conveyor, bale breaker,
vibratory conveyor & punch-plate screen, flat belt refuse conveyor, inclined
cleated waste conveyor, manual sorting conveyor, inclined cleated conveyor,
slide conveyor, inclined cleated conveyor, granulator, primary elutriator
blower, elutriation vessel, secondary elutriator blower, air cyclone, dirty
flake pickup bin and feed auger, cold wash tank, cold wash tank mixers, cold
wash tank pullers, cold wash deep bed filter, cold wash feed pump, cold wash
dewatering dryer, intermediate flake hopper and auger, hot wash tank (1 of 2) ,
hot wash tank (2 of 2), hot wash tank mixer (1 of 2), hot wash tank mixer (2 of
2), hot wash dewatering dryer, hot wash deep bed filter, hot wash deep bed
filter, sump pump, hot wash water heating reservoir tank, hot water pumps, hot
wash clean flake bin, hot wash clean flake auger, rinse/separation tank,
rinse/separation tank mixers, hydrocyclone pumps, hydrocyclone separator,
hydrocyclone separator, vibratory filter, primary clean flake spin dryer, final
clean flake spin dryer-air assisted, exhaust blower, dryer blower exhaust
filters, intermediate dry flake bin w/vibrator & airveyor, clean flake
elutriator blower, clean flake elutriator, cyclone blower, elutriated waste
cyclone, cyclone exhaust filter, elutriated flake receiver, elutriated clean
flake vacuum transfer system, elutriated clean flake surge bin, blending
station, vacuum transfer system, weigh blender clean flake bin, weight blender
additive bins (3), vibratory feeders, weigh hopper, clean flake & additives
ribbon blender, extruder feed vacuum transfer system, extruder feed hopper,
extruder motor, extruder gear box, extruder, screen changer, pelletizer, pellet
water dewatering trough, pellet dryer-air assisted, pelletizer surge bin, silo
vacuum transfer system, 15,000 lb. pellet silo, 15,000 lb. silo rotary air lock,
50,000 lb. pellet blending silo, vacuum pellet recirculating system, rotary air
lock-50,000 lb. blending silo, packaging scale-50,000 lb. silo, blower-bulk
loading system, truck loading cyclone, rail car loading lines (2)
VALUE .................................................. $2,963,000.00
QUANTUM LINE #8 consisting of: bale conveyor, bale breaker, vibratory conveyor
& punch plate screen, residue slide conveyor, cleated incline residue conveyor,
inclined cleated sorting station feed conveyor, sorting conveyor, waste/by
product slide conveyor, waste/by product baler
<PAGE>
feed conveyor, waste/by product baler, sorting line take away conveyor
(inclined, cleated), slide conveyor, granulator feed conveyor (inclined,
cleated), granulator, dirty flake elutriator blower, dirty flake elutriation
vessel, cyclone blower, air cyclone & bag filter, dirty flake pickup bin &
feed auger, hot water wash tank (1 of 2), hot water wash tank (2 of 2), hot
water wash tank mixers, hot wash dewatering dryer, hot wash water deep bed
filter, hot wash deep bed filter sump pump, hot wash water heating tank, hot
wash water pumps, hot wash clean flake bin, hot wash clean flake bin auger,
primary clean flake rinse tank, primary rinse-tank mixers, rinse tank sump
pump (compartment C), hydrocyclone separator (compartment C), primary rinse
system spin dryer, primary rinse system sump pumps (compartments A & B),
"heavies" spin dryer, secondary clean flake rinse tank, secondary rinse tank
mixer, secondary rinse tank sump pump, hydrocyclone separator, vibratory
filter, first stage dewatering dryer, second stage dewatering dryer, final
dewatering dryer with air assist, exhaust blower, intermediate dry flake bin
w/vibrator & airveyor, elutriator blower, clean flake elutriation vessel,
cyclone blower, elutriated waste cyclone, cyclone exhaust filter, elutriated
flake receiver, elutriated clean flake vacuum transfer system, elutriated
clean flake surge bin, blending station vacuum transfer system, weigh
blender-clean flake bin, weigh blender-additive bins (3), vibratory feeders,
weight hopper, clean flake & additives ribbon blender, extruder feed vacuum
transfer system, extruder feed hopper, extruder motor, extruder gear box,
extruder, screen changer, pelletizer, pellet water dewatering trough, pellet
drier-air assisted, pelletizer surge bin, silo vacuum transfer system, 15,000
lb. pellet silo, 15,000 lb. silo rotary air lock, 50,000 pellet blending
silo, vacuum pellet recirculating system-50,000 lb. silo, rotary air
lock-50,000 blending silo, packaging scale-50,000 lb. silo, hot filtrate
sieve.
VALUE ................................................... $2,875,000.00
PLANT SUPPORT EQUIPMENT & MACHINERY consisting of: auto back flush filter,
filter press, flow meter, process feed pumps, recycle pump, filter press feed
pump, skim transfer pump, reuse water pump (2), feed pump, sample tank, daf cell
tank, hillside screen, screw press, equalization tank, eq tank mixer,
equalization tank, skim holding tank, facility boiler, floor scale, refuse
compactor, truck scale, plant air supply compressor, bale wire dicer, floor
sweeper, forklifts (2), forklift, fire water & sprinkler, cooling tower, water
treatment plant, 6000 amp electrical substation & switch gear.
VALUE ................................................... $920,000.00
OBSOLETE EQUIPMENT & MACHINERY consisting of: flake dryer-air assisted, metal
detector & diverter, slide plate screen changers (2), pet flake polishing tank &
auger, shredders (2), drum magnets (2).
VALUE ................................................... $92,500.00
*****PLEASE SEE ATTACHED DOCUMENTS*****
<PAGE>
REFERENCES
Mr. Otto Lindenbolt Mr. Larry Seward
Star Bank, Central Ohio Bank One, Columbus, NA
501 W. Schrock Road 100 East Broad Street
Columbus, OH 43226 Columbus, OH 43271
(614) 794-5423 (614) 248-5897
Mr. Ronald Siefert Mr. James W. Everson
The Huntington National Bank The Citizens Savings Bank
P.O. Box 1558 Fourth at Walnut Street
Columbus, OH 43260 Martins Ferry, OH 43935
(614) 465-4650 (614) 633-0445
Mr. Lawrence Duncan Mr. Paul Cokson
Huntington Leasing Company Kingston National bank
P.O. Box 2558 P.O. Box 615
Columbus, OH 43260 Kingston, OH 43644
(614) 463-4710 (614) 642-2191
Ms. Pat Cash Mr. Daniel Hunter
BancOhio National Bank Attorney-at-Law
155 East Broad Street 100 East Broad Street
Columbus, OH 43251 Columbus, OH 43215
(614) 463-8872 (614) 469-7209
Mr. William C. Lucas, Jr. Mr. Thomas H. Grace
BancOhio National Bank Attorney-at-Law
155 East Broad Street One E. Livingston Avenue
Columbus, OH 43251 Columbus, OH 43215
(614) 463-8067 (614) 221-0922
Mr. Wayne Carter Mr. Robert A. Pope
BancOhio National Bank Attorney-at-Law
155 East Broad Street 52 West Whittier Street
Columbus, OH 43251 Columbus, OH 43206
(614) 463-8102 (614) 445-8416
Mr. Peter Lynch Mr. Michael Schaeffer
Star Bank, Central Ohio Kemp, Schaeffer & Rowe
501 West Schrock Road 88 West Mound Street
Columbus, OH 43226 Columbus, OH 43215
(614) 794-5492 (614) 224-2678
<PAGE>
Mr. Jim Ruck
U.S. Small Business Adm.
85 Marconi Blvd.
Columbus, OH 43215
(614) 465-6860
Ms. Sara J. Daneman
Attorney-at-Law
17 S. High Street
Columbus, OH 43215
(614) 221-4000
<PAGE>
Exhibit E to Exhibit 8
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
A SUMMARY APPRAISAL REPORT
OF
A COMPLETE APPRAISAL
OF
1835 JAMES PARKWAY
HEATH, OHIO
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
PREPARED FOR
FIX-CORP INTERNATIONAL, INC.
27040 CEDAR ROAD SUITE 218
BEACHWOOD, OHIO 44122
AS OF
DECEMBER 23, 1996
ESTIMATED MARKET VALUE - $2,100,000.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
PREPARED BY
WILBER W. WILSON, MSA, CSI, BCBA, CPA
STATE CERTIFIED GENERAL REAL ESTATE APPRAISER
25 SOUTH PARK PLACE, SUITE 105
NEWARK, OHIO 43055-5505
614-345-0574
FAX-349-7386
#C612042F
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
TABLE OF CONTENTS
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<TABLE>
<S> <C>
DESCRIPTIONS
Property Identification - Appraisal Engagement........................... 01
Three Year Ownership History - Environmental Issues...................... 02
Area Map - Area Description & Economic Data.............................. 03
Neighborhood Map......................................................... 04
Neighborhood Description................................................. 05
Site Description......................................................... 06
Description of Improvements.............................................. 07
Highest & Best Use - Valuations Methods Selected......................... 08
VALUATION
Cost Approach - Land..................................................... 09
Cost Approach - Improvements............................................. 10
Income Approach.......................................................... 11
Sales Comparison Approach................................................ 12
Reconciliation & Final Value Estimate.................................... 13
Definition of Market Value - Certification............................... 14
Contingent and Limiting Conditions....................................... 15
Appraiser Requirements Mandated by FIRREA................................ 16
EXHIBITS
Building Sketch.......................................................... 17
Subject Photographs...................................................... 18
Rental Comparable Photographs............................................ 19
Comparable Sales Photographs............................................. 20
Location Map............................................................. 21
Legal Description & Restrictive Covenants................................ 22
Engineers Map............................................................ 23
Appraiser Disclosure Statement........................................... 24
Qualifications Of Appraiser.............................................. 25
</TABLE>
<PAGE>
PAGE 01
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
PROPERTY IDENTIFICATION
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
THE GENERAL LOCATION OF THE SUBJECT IS IN THE STATE OF OHIO, THE COUNTY OF
LICKING AND THE CITY OF HEATH. THE SUBJECT IS ON THE WEST SIDE OF JAMES
PARKWAY AT 1835. THE SUBJECT IS DESCRIBED IN OFFICIAL RECORD VOLUME 861 PAGE
39. A COPY OF THE LEGAL DESCRIPTION IS ONE OF THE EXHIBITS. THE COUNTY
AUDITOR'S PARCEL NUMBER IS 80-330108-07. THE SUBJECT IS ON THE COUNTY
ENGINEER'S TAX MAP OF HEATH NUMBER 7. A PARTIAL COPY IS ONE OF THE EXHIBITS.
SEE SUBJECT PROPERTY PHOTOGRAPHS EXHIBITS.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
APPRAISAL ENGAGEMENT
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
THE PURPOSE OF THIS APPRAISAL IS TO ESTIMATE THE MARKET VALUE OF THE SUBJECT.
THE USE OF THIS APPRAISAL REPORT IS FOR LENDING PURPOSES.
THE SCOPE OF THIS APPRAISAL IS A COMPLETE APPRAISAL ACCORDING TO THE UNIFORM
STANDARDS OF PROFESSIONAL APPRAISAL PRACTICE AS PUBLISHED BY THE APPRAISAL
FOUNDATION.
THE PROPERTY RIGHTS TO BE APPRAISED ARE FEE SIMPLE.
<PAGE>
PAGE 02
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
THREE YEAR OWNERSHIP HISTORY
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
THERE HAS BEEN A CHANGE OF OWNERSHIP OF THE SUBJECT DURING THE PAST THREE
YEARS. THE GENERAL WARRANTY DEED RECORDED AT OFFICIAL RECORD VOLUME 861 PAGE
39 INDICATES THAT THE SUBJECT WAS TRANSFERRED FROM QUANTUM CHEMICAL
CORPORATION TO FIX-CORP INTERNATIONAL, INC. ON DECEMBER 16, 1996. THE
TRANSFER TAX AMOUNT OF $4,200. INDICATES THAT OF THE PURCHASE PRICE FOR REAL
ESTATE, FIXTURES AND EQUIPMENT, $2,100,000. WAS ALLOCATED TO THE SUBJECT REAL
ESTATE.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
ENVIRONMENTAL ISSUES
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
I KNOW OF NO ENVIRONMENTAL ISSUES THAT WOULD ADVERSELY AFFECT THE VALUE OF
THE SUBJECT. HOWEVER, THE PREVIOUS OWNER OF THE SUBJECT WAS QUANTUM CHEMICAL.
THE CLIENT HAS ORDERED AN ENVIRONMENTAL INSPECTION. I ASSUME THAT THIS REPORT
WILL NOT AFFECT THE ESTIMATED MARKET VALUE.
<PAGE>
MID-OHIO APPRAISAL SERVICES CO., LTD
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
PAGE 3
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
AREA MAP
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
BLACK AND WHITE 60-MILE RADIUS ROAD MAP OF AREA WITH AN ARROW POINTING TO
SUBJECT AREA.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
MID-OHIO APPRAISAL SERVICES CO., LTD 3A
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
AREA DESCRIPTION AND ECONOMIC DATA
- -------------------------------------------------------------------------------
Identification: LICKING COUNTY
----------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Population Data Source: NEWARK AREA CHAMBER OF COMMERCE
-------------------------------
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Area Year 1990 Year 1995 Total % Chg. Ann. % Chg. Est. Yr. Total % Chg. Ann. % Chg.
---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
128,300 159,000 23,93 4.38
- ----- -------- --------- ------------ ------------ ------------ ------------ -----------
- ----- -------- --------- ------------ ------------ ------------ ------------ -----------
</TABLE>
- -------------------------------------------------------------------------------
Per Capital Income Data Source: NEWARK AREA CHAMBER OF COMMERCE
-------------------------------
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Area Year 1987 Year 1990 Total % Chg. Ann. % Chg. Est. Yr. 2010 Total % Chg. Ann. % Chg.
---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
10,910 12,864 17,91 5.645
- ----- -------- --------- ------------ ------------ ------------ ------------ -----------
- ----- -------- --------- ------------ ------------ ------------ ------------ -----------
</TABLE>
- -------------------------------------------------------------------------------
New Construction Area Data Source:
-------------------- ------------------------
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Building Type Year Square Feet # Permits Year Square Feet # Permits
<S> <C> <C> <C> <C> <C> <C>
- ------------------ ------ ---------------- ---------- ----- ----------------- -----------
- ------------------ ------ ---------------- ---------- ----- ----------------- -----------
</TABLE>
- -------------------------------------------------------------------------------
Analysis/Comments:
LICKING COUNTY IS GROWING IN POPULATION AND IN PER CAPITA INCOME.
THERE IS MUCH NEW CONSTRUCTION IN PROGRESS.
THE AUGUST 1995 UNEMPLOYMENT RATE WAS 4.1%.
LABOR MARKET INFORMATION, STATE OF OHIO
- -------------------------------------------------------------------------------
Employment Area LICKING COUNTY Date Source: OHIO BUREAU OF EMPLOYMENT SERVICES
--------------- ----------------------------------
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
Employment Type Year 1974 % Total Year 1994 % Total Total Change % Change
----- ------
<S> <C> <C> <C> <C> <C> <C>
Agricultural 81 .26 711 1.62 630 4.86
---------- ------------ ---------- ------------- ---------------- ----------------
Mining 321 1.04 153 .35 -168 -1.29
---------- ------------ ---------- ------------- ---------------- ----------------
Manufacturing 11,253 36.49 10,482 23.93 -771 -5.94
---------- ------------ ---------- ------------- ---------------- ----------------
Transportation 1,683 5.46 1,478 3.37 -205 -1.58
---------- ------------ ---------- ------------- ---------------- ----------------
Wholesale 747 2.42 1.385 3.16 638 4.92
---------- ------------ ---------- ------------- ---------------- ----------------
Retail 6,110 19.82 10,727 24.49 4,617 35.59
---------- ------------ ---------- ------------- ---------------- ----------------
Fin / Ins / RE 1,351 4.38 2,875 6.56 1,524 11.75
---------- ------------ ---------- ------------- ---------------- ----------------
Services 4,160 13.49 9,990 22.80 5,830 44.94
---------- ------------ ---------- ------------- ---------------- ----------------
GOVERNMENT 5,129 16.63 6,008 13.71 879 6.78
---------- ------------ ---------- ------------- ---------------- ----------------
---------- ------------ ---------- ------------- ---------------- ----------------
Total 30,835 99.99 43,809 99.99 12,974 100.03
- ----------------------------------------------------------------------------------------------------------
Unemployment Rate % 4.8 %
---------- ----------
- ----------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C> <C> <C> <C>
Change in Economic Base: Undersupply Balanced Oversupply
/X/ Unlikely / / Likely / / Taking Place
From: Single Family / / /X/ / /
--------------------------------------- Multifamily / / /X/ / /
To: Office / / /X/ / /
--------------------------------------- Retail / / /X/ / /
Impact on Value: Industrial / / /X/ / /
/ / Positive / / None / / Negative
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
BLACK AND WHITE ENLARGED NEIGHBORHOOD MAP OF SUBJECT AREA AND SURROUNDING
AREAS WITHIN A 20-MILE RADIUS.
<PAGE>
05
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NEIGHBORHOOD DESCRIPTION
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
THE SUBJECT IS LOCATED IN MID-OHIO INDUSTRIAL PARK. TO THE WEST IS THE
RAILROAD TRACK AND VACANT LAND. TO THE SOUTH IS THE QUANTUM CHEMICAL
INDUSTRIAL BUILDING. ACROSS THE STREET IS THE LABEL GRAPHIX INDUSTRIAL
BUILDING. TO THE NORTH IS VACANT LAND WHICH IS AVAILABLE FOR ADDITIONAL
INDUSTRIAL BUILDINGS.
IN THIS INDUSTRIAL PARK THERE ARE SEVERAL INDUSTRIAL BUILDINGS AND
WAREHOUSES. THIS INDUSTRIAL PARK FRONTS ON SR 79. IT IS ABOUT 3 MILES FROM I
70 AND ABOUT 2 MILES FROM US 40. IT IS IN THE SOUTHERN PART OF THE CITY OF
HEATH. THE CITY OF NEWARK IS JUST A FEW MILES NORTH. IT IS THE COUNTY SEAT OF
LICKING COUNTY. THE CITY OF COLUMBUS IS ABOUT 30 MILES WEST. IT IS THE
CAPITAL OF THE STATE OF OHIO. THE COLUMBUS AIRPORT IS ABOUT 25 MILES WEST.
THE NEWARK OHIO INDUSTRIAL PARK IS ABOUT 1 MILE SOUTH OF THE MID-OHIO
INDUSTRIAL PARK.
<PAGE>
PAGE 06
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SITE DESCRIPTION
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
THE SUBJECT SITE SIZE IS 10 ACRES. IT INCLUDES 0.79 ACRES IN RESERVE "A",
5.504 ACRES IN LOT 40 AND 3.706 ACRES IN LOT 41. THE SITE DIMENSIONS ARE
657.07 X 606.12 X 653.57 X 663.41. THE STREET FRONTAGE IS 657.07. THE LEGAL
DESCRIPTION IS ONE OF THE EXHIBITS. ALSO, SEE THE COUNTY ENGINEER'S MAP
EXHIBIT. THE SITE IS LEVEL AND IS SLIGHTLY ABOVE STREET LEVEL.
OFF SITE IMPROVEMENTS
JAMES PARKWAY IS PAVED AND IS MAINTAINED BY THE CITY OF HEATH. THE CITY OF
HEATH PROVIDES WATER, SANITARY AND STORM SEWERS. LOCAL UTILITIES PROVIDE
NATURAL GAS AND ELECTRIC POWER. RAIL SERVICE IS AT THE REAR OF THE SITE. SEE
THE SUBJECT PROPERTY PHOTOGRAPHS OF THE RAILROAD SPUR THAT IS USEABLE BY THIS
SITE.
FLOOD ZONE
THE FLOOD MAP #390328-0200B DATED 12/1/83 INDICATES THAT THE SUBJECT IS IN
ZONE C. THE FEDERAL EMERGENCY MANAGEMENT AGENCY HAS MANDATED THAT FEMA FORM
81-93 BE COMPLETED BY THE LENDER FOR EVERY FEDERALLY RELATED LOAN. WE HAVE
ANSWERED THE QUESTIONS CONCERNING FEMA SPECIAL FLOOD HAZARD AREA. THE
ACCURACY OF THIS INFORMATION IS NOT GUARANTEED BY US. WE HAVE NOT COMPLETED
THE FEMA FORM 81-93.
SOIL CONDITION, EASEMENTS AND ENCROACHMENTS
WE DO NOT KNOW OF ANY OF THE ABOVE THAT WOULD ADVERSELY AFFECT THE VALUE OF
THE SUBJECT. WE DO NOT KNOW OF ANY EASEMENTS OR ENCROACHMENTS.
ZONING
THE SUBJECT LAND IS ZONED M-2 HEAVY MANUFACTURING. THE SUBJECT IS LEGALLY
CONFORMING. IT IS NOT LIKELY THAT THE ZONING WILL BE CHANGED.
REAL ESTATE TAXES
THE AMOUNT OF THE 1995 REAL ESTATE TAXES IS $3,348.80. THE SUBJECT IS IN AN
ENTERPRISE ZONE. THERE IS A TAX ABATEMENT FOR THE BUILDING. THE TAX CARD
INDICATES THAT THE TRUE VALUE FOR THE SUBJECT LAND IS $250,000. AND FOR THE
BUILDINGS $2,086,900. FOR A TOTAL TRUE VALUE OF $2,336,900.
RESTRICTIVE COVENANTS
SEE EXHIBIT. IT IS RECORDED IN DEED RECORD 750-363.
<PAGE>
PAGE 07
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
DESCRIPTION OF IMPROVEMENTS
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SEE THE SUBJECT PROPERTY PHOTOGRAPHS IN THE EXHIBITS. THIS BUILDING WAS
CONSTRUCTED IN 1991. SEE THE SKETCH OF THE IMPROVEMENTS IN THE EXHIBITS. THE
PLANT PORTION OF THE BUILDING HAS A TOTAL SQUARE FOOTAGE OF 48,000. THE
FINISHED OFFICE AREA IS 1,643 SQUARE FEET. THERE IS A CONCRETE SLAB IN THE
REAR WITH A PORTION OF IT COVERED BY A CANOPY. THE CEILING HEIGHT IN THE
PLANT IS ABOUT 22 FEET. THERE IS A PARKING LOT IN FRONT OF THE BUILDING WITH
ABOUT 20 PARKING SPACES. THERE IS A RAILROAD SPUR TO THE SOUTH OF THE
BUILDING. THERE ARE FOUR DOCKING BAYS ON THE SOUTH SIDE OF THE BUILDING AND
TWO ADDITIONAL 12 X 12 OVERHEAD DOORS FOR ACCESS TO THE REAR CANOPY COVERED
AREA.
THE QUALITY OF CONSTRUCTION IS GOOD. THE CONDITION OF THE IMPROVEMENTS IS
GOOD.
THE FIXTURES AND EQUIPMENT ARE NOT INCLUDED IN THIS APPRAISAL.
BUILDING DESCRIPTION
FOUNDATION - CONCRETE
FRAME - METAL & CONCRETE
EXTERIOR WALLS - METAL
ROOF COVER - METAL
PLUMBING - COPPER & GALVANIZED
HEATING - 14 SUSPENDED HEATERS IN PLANT - CFA IN OFFICES
AIR CONDITIONING - OFFICES ONLY
ELECTRICAL - VARIOUS 3 PHASE
ELEVATORS - NONE
PARKING - ASPHALT
INSULATION - ADEQUATE
SPRINKLER - WET SYSTEM
ROOF SUPPORT - METAL TRUSSES
<PAGE>
08
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
HIGHEST AND BEST USE
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
LEGALLY PERMISSIBLE USES - ANY USES PERMITTED IN M-2 HEAVY MANUFACTURING
PHYSICALLY POSSIBLE USES - ANY LEGALLY PERMISSIBLE USES SUBJECT TO SITE AND
IMPROVEMENT SIZES.
FEASIBLE AND MARKETABLE USES - MANUFACTURING
HIGHEST AND BEST USE AS IF THE SITE WERE VACANT - MANUFACTURING & COMMERCIAL
HIGHEST AND BEST USE AS CURRENTLY IMPROVED - MANUFACTURING
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
VALUATION METHODS SELECTED
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
COST APPROACH, INCOME APPROACH, AND THE SALES COMPARISON APPROACH.
<PAGE>
09
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
COST APPROACH
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
THE PRINCIPLE OF SUBSTITUTION STATES THAT THE PRUDENT BUYER WILL PAY NO MORE
FOR A PARCEL OF REAL PROPERTY THAN THE COST OF ACQUIRING AN EQUALLY DESIRABLE
SUBSTITUTE IN THE OPEN MARKET.
LAND VALUE INDICATION
THE TRUE VALUE OF THE SITE PER THE COUNTY AUDITOR'S APPRAISERS IS $250,000.
OR $25,000. PER ACRE.
IN APRIL 1996 BAYER PURCHASED 11.81 ACRES ON ENTERPRISE DRIVE FOR $531,315.
OR $44,989. PER ACRE. THIS PARCEL IS LOCATED IN THE NEWARK OHIO INDUSTRIAL
PARK WHICH IS ABOUT 1 MILE SOUTH OF MID-OHIO INDUSTRIAL PARK.
IN FEBRUARY 1996 MID-OHIO GOLF PURCHASED 3.7 ACRES AT HEBRON RD AND JAMES
PARKWAY FOR $127,520. OR $34,465. PER ACRE. THIS MAY BE A BETTER LOCATION
THAN THE SUBJECT. IF WE MAKE A MINUS ADJUSTMENT OF 10% FOR LOCATION THE
INDICATED MARKET VALUE WOULD BE $31,019.
IN MAY 1995 ECOLAB PURCHASED 10 ACRES ON HEBRON ROAD FOR $400,000. OR
$40,000. PER ACRE. THIS PARCEL IS LOCATED IN THE NEWARK OHIO INDUSTRIAL PARK.
THE NEWARK OHIO INDUSTRIAL PARK IS A LITTLE CLOSER TO INTERSTATE 70 AND MAY
BE PERCEIVED BY BUYERS TO BE A BETTER LOCATION THAN THE MID-OHIO INDUSTRIAL
PARK.
IN APRIL 1991 FUNN ENTERPRISES PURCHASED 4.33 ACRES ON JAMES PARKWAY FOR
$100,000. OR $23,095. PER ACRE. IF WE MAKE A PLUS ADJUSTMENT OF 5% PER YEAR
FOR TIME, THE INDICATED MARKET VALUE WOULD BE $30,950. PER ACRE.
IN FEBRUARY 1991 LABEL GRAPHIX PURCHASED 3.95 ACRES ON JAMES PARKWAY ACROSS
THE STREET FROM THE SUBJECT FOR $89,505. OR $22,659. PER ACRE. IF WE MAKE A
PLUS ADJUSTMENT OF 5% PER YEAR FOR TIME, THE INDICATED MARKET VALUE WOULD BE
$30,365. PER ACRE.
IN MARCH 1990 QUANTUM CHEMICAL PURCHASED 9.26 ACRES ON JAMES PARKWAY FOR
$200,000. OR $21,598. PER ACRE. IF WE MAKE A PLUS ADJUSTMENT OF 5% PER YEAR
FOR TIME, THE INDICATED MARKET VALUE WOULD BE $30,391, PER ACRE.
IT IS MY OPINION THAT THE ESTIMATED MARKET VALUE OF THE SUBJECT IS $30,000.
PER ACRE FOR A TOTAL ESTIMATED MARKET VALUE OF $300,000.
<PAGE>
PAGE 10
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- -------------------------------------------------------------------------------
COST APPROACH
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- -------------------------------------------------------------------------------
THE PRINCIPLE OF SUBSTITUTION STATES THAT THE PRUDENT BUYER WILL PAY NO MORE
FOR A PARCEL OF REAL PROPERTY THAN THE COST OF ACQUIRING AN EQUALLY DESIRABLE
SUBSTITUTE IN THE OPEN MARKET.
THE COST SOURCE FOR THIS APPRAISAL IS THE MARSHALL & SWIFT COMMERCIAL COST
VALUATION SERVICE. REPLACEMENT COST WILL BE USED FOR A BUILDING OF SIMILAR
UTILITY. REPRODUCTION COST IS NOT USED.
<TABLE>
<S> <C>
CLASS S - AVG 49,643 SF @ 53.79 X 1.02 = $2,723,703.
WET SPRINKLER 49,643 SF @ 1.38 X 1.02 = 69,877.
STEEL CANOPY 7,171 SF @ 19.25 = 138,042.
SITE PREP 56,814 SF @ .16 = 9,090.
CONCRETE 13,990 SF @ 2.50 = 34,975.
ASPHALT PAV 43,000 SF @ 2.00 = 86,000.
MISC 3,500.
TOTAL COSTS $3,065,187.
PHYSICAL DEPRECIATION - 5% $ 153,259.
FUNCTIONAL OBSOLESCENCE - 5% $ 145,596.
DEPRECIATED VALUE OF IMPROVEMENTS $2,766,332.
ESTIMATED MARKET VALUE OF THE LAND $ 300,000.
ESTIMATED MARKET VALUE BY THE COST APPROACH $3,066,332.
ROUNDED $3,000,000.
</TABLE>
THE IMPROVEMENTS WERE BUILT ABOUT 1991. THE ACTUAL AGE IS 5 YEARS. THE
IMPROVEMENTS ARE IN GOOD CONDITION. THE EFFECTIVE AGE IS 3 YEARS. THE
ECONOMIC LIFE IS 60 YEARS. THE REMAINING ECONOMIC LIFE IS 57 YEARS. THE
PHYSICAL DEPRECIATION PERCENTAGE IS 5%. NO EXTERNAL OBSOLESCENCE WAS
OBSERVED. BECAUSE A BUYER WOULD LIKELY REMOVE SOME OF THE FIXTURES TO BETTER
UTILIZE THE PLANT A FUNCTIONAL OBSOLESCENCE OF 5% IS TAKEN.
<PAGE>
PAGE 11
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- -------------------------------------------------------------------------------
INCOME APPROACH
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- -------------------------------------------------------------------------------
THE PRINCIPLE OF SUBSTITUTION STATES THAT THE PRUDENT BUYER WILL PAY NO MORE
FOR A PARCEL OF REAL PROPERTY THAN THE COST OF ACQUIRING AN EQUALLY DESIRABLE
SUBSTITUTE IN THE OPEN MARKET. SUBSTITUTION MAY TAKE THE FORM OF THE
ACQUISITION OF AN INVESTMENT WHICH WILL PRODUCE AN INCOME STREAM OF THE SAME
QUANTITY, QUALITY AND DURABILITY AS THAT OF THE SUBJECT PROPERTY.
ADJUSTMENTS FOR THE DIFFERENCE BETWEEN HEAVY MANUFACTURING AND LIGHT
MANUFACTURING IS BASED UPON MARSHALL SWIFT COSTS AS OF JUNE 1995. HEAVY
MANUFACTURING CLASS S AVERAGE TYPE COST AS OF JUNE 1995 WAS $53.79. PER
SQUARE FOOT. LIGHT MANUFACTURING CLASS S AVERAGE TYPE COST AS OF JUNE 1995
WAS $23.95. $53.79 IS 225% OF $23.95. I WILL MAKE AN ADJUSTMENT OF 50% OF
THIS 125% INCREASE OR 62.5%.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
RENTAL COMPARABLES
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
1. ABOUT 1988 THE BUNDY CORPORATION WAS LEASING A MANUFACTURING BUILDING OF
ABOUT 50,000 SQUARE FEET FOR $3.72 PER SQUARE FOOT. THIS WAS A TRIPLE NET
LEASE. AN ADJUSTMENT OF 3% PER YEAR FOR TIME WOULD INDICATE A RENTAL OF $4.71
PER SQUARE FOOT. THIS BUILDING IS LOCATED AT 3600 HEBRON ROAD IN THE NEWARK
OHIO INDUSTRIAL PARK. THIS IS THE BEST RENTAL COMPARABLE THAT I HAVE FOUND.
MOST HEAVY MANUFACTURING BUILDINGS ARE NOT RENTED.
2. GENERAL FASTENERS IS RENTING A LIGHT MANUFACTURING BUILDING WITH 20,000
SQUARE FEET FOR $3.50 PER SQUARE FOOT. THIS LEASE IS TRIPLE NET. THIS
BUILDING IS LOCATED AT 130 RELIANCE DRIVE IN THE NEWARK OHIO INDUSTRIAL PARK.
THE PLUS ADJUSTED VALUE FOR TYPE OF BUILDING IS 162.5% X $3.50 OR $5.69 PER
SQUARE FOOT. I WILL MAKE A MINUS ADJUSTMENT OF 20% FOR SIZE. THE INDICATED
MARKET RENT FOR THE SUBJECT IS $5.69 X 80% OR $4.55 PER SQUARE FOOT. I WILL
NOT GIVE MUCH WEIGHT TO THIS COMPARABLE BECAUSE OF THE LARGE ADJUSTMENTS.
HOWEVER IT SUPPORTS THE MARKET RENT IN #1 OF $4 .71 PER SQUARE FOOT.
3. HENDRICKSON IS RENTING A LIGHT MANUFACTURING BUILDING WITH 20,000 SQUARE
FEET FOR $3.50 PER SQUARE FOOT. THIS LEASE IS TRIPLE NET. THIS BUILDING IS
LOCATED AT 199 MILLIKEN DRIVE IN THE NEWARK OHIO INDUSTRIAL PARK. THE PLUS
ADJUSTED VALUE FOR TYPE OF BUILDING IS 162.5% X $3.50 OR $5.69 PER SQUARE
FOOT. I WILL MAKE A MINUS ADJUSTMENT OF 20% FOR SIZE. THE INDICATED MARKET
RENT FOR THE SUBJECT IS $5.69 X 80% OR $4.55 PER SQUARE FOOT. I WILL NOT GIVE
MUCH WEIGHT TO THIS COMPARABLE BECAUSE OF THE LARGE ADJUSTMENTS.
<PAGE>
11A
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- -------------------------------------------------------------------------------
INCOME APPROACH - CONTINUED
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
4. MAIDWARE IS RENTING A LIGHT MANUFACTURING BUILDING WITH 72,000 SQUARE
FEET FOR $3.00 PER SQUARE FOOT. THIS LEASE IS TRIPLE NET. THIS BUILDING IS
LOCATED ON HEBRON ROAD AT 277 N HIGH STREET IN THE NEWARK OHIO INDUSTRIAL
PARK. THE PLUS ADJUSTED VALUE FOR TYPE OF BUILDING IS 162.5% X $3.00 OR $4.88
PER SQUARE FOOT.]
THE BUSINESS FIRST RENTAL SUPPLEMENT FOR THE COLUMBUS AREA DATED 2/26/96 DOES
NOT PROVIDE USEFUL DATA CONCERNING RENTAL OF HEAVY MANUFACTURING REAL ESTATE
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
RECONCILIATION AND FINAL ESTIMATED MARKET RENT
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
THE INDICATED ESTIMATED MARKET RENTS ARE:
<TABLE>
<S> <C> <C> <C>
1. BUNDY CORPORATION $4.71 PER SQUARE FOOT.
2. GENERAL FASTENERS $4.55 PER SQUARE FOOT.
3. HENDRICKSON $4.55 PER SQUARE FOOT.
4. MAIDWARE $4.88 PER SQUARE FOOT.
</TABLE>
#1 IS THE MOST RELIABLE INDICATOR OF THE ESTIMATED MARKET RENT FOR THE
SUBJECT. *4 IS THE NEXT BEST INDICATOR.
IT IS MY OPINION THAT $4.71 IS THE ESTIMATED MARKET RENT FOR THE SUBJECT.
THE INDICATED ESTIMATED MARKET RENT IS $4.71 X 49,643 = $233,819. THIS RENTAL
IS TRIPLE NET. HOWEVER, THE BUILDING AT THE END OF 57 YEARS IS ASSUMED TO
HAVE NO VALUE. A SINKING FUND RESERVE WILL BE PROVIDED FOR $2,000,000. @ 6%
FOR 57 YEARS WHICH WOULD REQUIRE AN ANNUAL DEPOSIT OF $4,495.
THE ESTIMATED NET OPERATING INCOME WOULD BE $233,819. MINUS $4,495. OR
$229,324.
CAPITALIZATION OF NET OPERATING INCOME
ASSUMING AN 80% LOAN AT AN INTEREST RATE OF 9.75% AND THE OWNER REQUIRING A
14% RETURN THE OVERALL CAPITALIZATION RATE WOULD BE 10.6.
INDICATED VALUE BY THE INCOME APPROACH: $229,324. DIVIDED BY 10.6 EQUALS
$2,163,435. I WILL ROUND TO $2,163,000.
<PAGE>
PAGE 12
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- -------------------------------------------------------------------------------
DIRECT SALES COMPARISON APPROACH
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
THE DIRECT SALES COMPARISON APPROACH TO VALUE IS BASED ON THE ECONOMIC
PRINCIPLE OF SUBSTITUTION. THE PRINCIPLE OF SUBSTITUTION STATES THAT THE
PRUDENT BUYER WILL PAY NO MORE FOR A PARCEL OF REAL PROPERTY THAN THE COST OF
ACQUIRING AN EQUALLY DESIRABLE SUBSTITUTE IN THE OPEN MARKET.
SALES SELECTED MUST EITHER BE COMPARABLE TO THE SUBJECT OR THE SALES PRICE OF
THE COMPARABLE MUST BE ADJUSTED FOR DIFFERENCES IN ORDER FOR THE VALUE TO BE
AN INDICATION OF THE VALUE OF THE SUBJECT.
ALL SALES REPORTED BY PACE OF HEAVY AND LIGHT MANUFACTURING REAL ESTATE
LOCATED IN LICKING COUNTY HAVE BEEN CONSIDERED. MOST SUCH SALES ARE OF LIGHT
MANUFACTURING.
ADJUSTMENTS FOR TIME OF SALE ARE BASED UPON MARSHALL SWIFT "DISTRICT
COMPARATIVE COST MULTIPLIERS" FOR THE CENTRAL DISTRICT.
ADJUSTMENTS FOR THE DIFFERENCE BETWEEN HEAVY MANUFACTURING AND LIGHT
MANUFACTURING IS BASED UPON MARSHALL SWIFT COSTS AS OF JUNE 1995. HEAVY
MANUFACTURING CLASS S AVERAGE TYPE COST AS OF JUNE 1995 WAS $53.79 PER SQUARE
FOOT. LIGHT MANUFACTURING CLASS S AVERAGE TYPE COST AS OF JUNE 1995 WAS
$23.95. $53.79 IS 225% OF $23.95. I WILL MAKE AN ADJUSTMENT OF 50% OF THIS
125% INCREASE OR 62.5%.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
COMPARABLE SALES
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
1. IN JANUARY 1992 BUNDY CORPORATION PURCHASED MANUFACTURING REAL ESTATE
LOCATED AT 3600 HEBRON ROAD IN THE NEWARK OHIO INDUSTRIAL PARK FOR
$3,972,249. THIS BUILDING HAS 107,956 SQUARE FEET. THE SQUARE FOOT SELLING
PRICE WAS $36.80 PER SQUARE FOOT. THE PLUS ADJUSTED VALUE FOR TIME IS 1.14 X
$36.80 WHICH IS $41.95. THE INDICATED ADJUSTED VALUE PER SQUARE FOOT WOULD BE
$41.95
2. IN SEPTEMBER 1992 ENGLEFIELD'S PURCHASED WAREHOUSE REAL ESTATE LOCATED AT
447 JAMES PARKWAY IN THE MID-OHIO INDUSTRIAL PARK FOR $1,241,610. THIS
BUILDING HAS 54,400 SQUARE FEET. THE SELLING PRICE WAS $22.82 PER SQUARE
FOOT. THE PLUS ADJUSTED VALUE FOR TIME IS 1.129 X $22.82 WHICH IS $25.76. THE
PLUS ADJUSTED VALUE FOR TYPE OF BUILDING IS 162.5% X $25.76 WHICH IS $41.86.
I WILL NOT GIVE MUCH WEIGHT TO THIS COMPARABLE BECAUSE OF THE LARGE
ADJUSTMENT FOR TYPE OF BUILDING. HOWEVER, IT SUPPORTS THE VALUE IN #1 OF
$41.95.
<PAGE>
12A
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- -------------------------------------------------------------------------------
DIRECT SALES COMPARISON APPROACH - CONTINUED
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
3. IN OCTOBER 1993 PARRY CORPORATION PURCHASED THE BUCKEYE WELDING BUILDING
LOCATED AT 2070 JAMES PARKWAY IN THE MID-OHIO INDUSTRIAL PARK FOR $143,000.
THIS BUILDING HAS 4,557 SQUARE FEET. THE SELLING PRICE WAS $31.38 PER SQUARE
FOOT. THE PLUS ADJUSTED VALUE FOR TIME IS 1.097 X $31.38 WHICH IS $34.42. THE
PLUS ADJUSTED VALUE FOR TYPE OF BUILDING IS 162.5% X $34.42 WHICH IS $55.93.
A MINUS ADJUSTMENT SHOULD BE MADE FOR SIZE. I WILL NOT GIVE MUCH WEIGHT TO
THIS COMPARABLE BECAUSE OF THE LARGE ADJUSTMENTS. HOWEVER, IT SUPPORTS THE
VALUE IN #1 OF $41.95.
4. IN DECEMBER 1995 SUBURBAN STEEL SUPPLY CO. PURCHASED TWO BUILDINGS AND
FIVE STORAGE SHEDS LOCATED AT 202 WILLOW ST, AKA TOWNSHIP ROAD, PATASKALA,
OHIO FOR $712,690.67. THE SQUARE FOOTAGE OF THE TWO BUILDINGS IS 13,588. THE
SQUARE FOOTAGE OF THE FIVE STORAGE SHEDS IS 9,868. I WILL MAKE A MINUS
ADJUSTMENT OF $98,680. FOR THE STORAGE SHEDS REDUCING THE PURCHASE PRICE TO
$614,010.67. THIS COMPARABLE HAS 16.904 ACRES OF LAND. I WILL MAKE A MINUS
ADJUSTMENT OF $185,382. FOR 13.904 ACRES OF EXCESS LAND AT $13,333. PER ACRE.
THIS LEAVES A PURCHASE PRICE OF $428,628.67. DIVIDED BY 13,588 SQUARE FEET OR
A PURCHASE PRICE OF $31.54 PER SQUARE FOOT. THE PLUS ADJUSTED VALUE FOR TYPE
OF BUILDING IS 162.5% X $31.54 OR $51.25 PER SQUARE FOOT. I WILL NOT GIVE
MUCH WEIGHT TO THIS COMPARABLE BECAUSE OF THE MANY AND LARGE ADJUSTMENTS.
HOWEVER, IT SUPPORTS THE VALUE IN #1 OF $41.95.
5. IN SEPTEMBER 1996 DOERMANS D/B/A EVCO INDUSTRIES PURCHASED TWO BUILDINGS
LOCATED AT 12477 & 12531 BROAD ST WEST OF PATASKALA, OHIO FOR $875,000. THE
BUILDING AT 12477 BROAD STREET, I WILL USE AS A COMPARABLE. I WILL REDUCE THE
PURCHASE PRICE $350,410. WHICH IS THE AMOUNT ALLOCATED BY THE COUNTY AUDITORS
APPRAISERS FOR THE BUILDING AT 12531 BROAD STREET. THE AMOUNT OF THE PURCHASE
PRICE OF $875,000. ALLOCATED TO THIS COMPARABLE IS $524,590. THIS BUILDING
HAS 14,708 SQUARE FEET. THE ALLOCATED PURCHASE PRICE IS $35.67 PER SQUARE
FOOT. A MINUS ADJUSTMENT IS MADE FOR LOCATION AND LAND VALUE OF $1.35 WHICH
REDUCES THE VALUE TO $34.32 PER SQUARE FOOT. THIS COMPARABLE HAS 2,708 SQUARE
FEET OF FINISHED OFFICE AREA COMPARED TO 1,643 SQUARE FEET FOR THE SUBJECT. I
WILL MAKE A MINUS ADJUSTMENT OF $7.15 PER SQUARE FOOT FOR THIS DIFFERENCE
REDUCING THE ADJUSTED VALUE TO $27.17 PER SQUARE FOOT. THE PLUS ADJUSTED
VALUE FOR THE TYPE OF BUILDING IS 162.5% X $27.17 OR $44.15 PER SQUARE FOOT.
I WILL NOT GIVE MUCH WEIGHT TO THIS COMPARABLE BECAUSE OF THE MANY AND LARGE
ADJUSTMENTS. HOWEVER, IT SUPPORTS THE VALUE IN #1 OF $41.95 PER SQUARE FOOT.
<PAGE>
PAGE 13
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- -------------------------------------------------------------------------------
RECONCILIATION & FINAL VALUE ESTIMATES
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
INDICATED VALUES
<TABLE>
<S> <C>
BY THE COST APPROACH.......................................... $3,000,000.
BY THE INCOME APPROACH........................................ $2,163,000.
BY THE SALES COMPARISON APPROACH.............................. $2,083,000.
</TABLE>
THE INCOME AND THE SALES COMPARISON APPROACHES ARE THE BETTER INDICATORS OF
THE ESTIMATED MARKET VALUE. THE COST APPROACH INDICATOR OF VALUE SUPPORTS
THESE TWO VALUES AND IS AN INDICATOR OF THE UPPER LIMIT OF VALUE.
IN MY OPINION, AS OF DECEMBER 23, 1996 THE ESTIMATED MARKET VALUE OF THE
SUBJECT PROPERTY IS:
[$2,100,000.]
/s/ Wilber W. Wilson 12/30/96
- ------------------------------------------
WILBER W. WILSON, MSA, CSI, BCBA, CPA
CERTIFIED GENERAL REAL ESTATE APPRAISER
/s/ Kerry L. Proctor 12/30/96
- ------------------------------------------
KERRY L. PROCTOR
LICENSED RESIDENTIAL REAL ESTATE APPRAISER
<PAGE>
MID-OHIO APPRAISAL SERVICES CO., LTD
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Page 14
- -------------------------------------------------------------------------------
PURPOSE OF THE APPRAISAL
- -------------------------------------------------------------------------------
It is to estimate the current market value of the subject property.
- -------------------------------------------------------------------------------
DEFINITION OF MARKET VALUE
- -------------------------------------------------------------------------------
The most probable price which a property should bring in a competitive
and open market under all conditions requisite to a fair sale, the
buyer and seller each acting prudently and knowledgeably and assuming
the price is not affected by undue stimulus. Implicit in this
definition is the consummation of a sale as of a specified date and
the passing of title from seller to buyer under conditions whereby:
(1) buyer and seller are typically motivated; (2) both parties are
well informed or well advised, and each acting in what they consider
their own best interest; (3) a reasonable time is allowed for exposure
in the open market; (4) payment is made in terms of cash in U. S.
Dollars or in terms of financial arrangements comparable thereto; and
(5) the price represents the normal consideration for the property
sold unaffected by special or creative financing or sales concessions*
granted by anyone associated with the sale.
*Adjustments to the comparables must be made for special or creative
financing or sales concessions. No adjustments are necessary for those
costs which are normally paid by sellers as a result of tradition or
law in a market area; these costs are readily identifiable since the
seller pays these costs in virtually all sales transactions. Special
or creative financing adjustments can be made to the comparable
property by comparisons to financing terms offered by a third party
institutional lender that is not already involved in the property or
transaction. Any adjustment should not be calculated on a mechanical
dollar for dollar cost of the financing or concession but the dollar
amount of any adjustments should approximate the market's reaction to
the financing or concessions based on the appraiser's judgment.
- -------------------------------------------------------------------------------
CERTIFICATION
- -------------------------------------------------------------------------------
I certify that, to the best of my knowledge and belief:
1. The statements of fact contained in this report are true and correct.
The appraiser has not knowingly withheld any pertinent information.
2. The reported analysis, opinions, and conclusions are limited only by
the reported assumptions and limiting conditions, and are my personal,
unbiased professional analysis, opinions and conclusions.
3. I have no present or prospective interest in the property that is the
subject of this report, and I have no personal interest or bias with
respect to the parties involved.
4. My compensation is not contingent upon the reporting of a predetermined
value or direction in value that favors the cause of the client, the
amount of the value estimate, the attainment of a stipulated result, or
the occurrence of a subsequent event.
5. My analysis, opinions, and conclusions were developed, and this report
has been prepared, in conformity with the Uniform Standards of
Professional Appraisal Practice.
6. I have (or have not) made a personal inspection of the property that is
the subject of this report. (If more than one person signs the report,
this certification must clearly specify which individuals did, and
which individuals did not make a personal inspection of the appraised
property).
7. No one provided significant professional assistance to the person
signing this report. (If there are exceptions, the name of each
individual providing significant professional assistance must be
stated).
8. The 'Estimate of Market Value' in the appraisal report is not based in
whole or in part upon the race, color or national origin of the
prospective owners or occupants of the property appraised or of the
properties in the vicinity of the property appraised.
9. All contingent and limiting conditions are contained herein (imposed by
the terms of the assignment or by the undersigned affecting the
analysis, opinions, and conclusions contained in this report).
10. All conclusions and opinions concerning the real estate that are set
forth in the appraisal report were prepared by the appraiser whose
signature appears on the appraisal report. No change of any item in the
appraisal report shall be made by anyone other than the appraiser, and
the appraiser shall have no responsibility for any such unauthorized
change.
11. This form has not been altered, except for the possible expansion of
the analysis/comments areas.
12. The appraiser has read and understands the instruction manual that
accompanies this form.
13. The appraisal assignment was not based on a requested minimum
valuation, a specific valuation, or the approval of a loan.
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<PAGE>
MID-OHIO APPRAISAL SERVICES CO., LTD
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Page 15
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STATEMENT OF CONTINGENT AND LIMITING CONDITIONS
- -------------------------------------------------------------------------------
This appraisal report is subject to the following Assumptions and
Limiting Conditions.
1. The Appraiser assumes no responsibility for matters of a legal nature
affecting the property appraised or the title thereto, nor does the
Appraiser render any opinion as to the title, which is assumed to be
good and marketable. The property is appraised as though under
responsible ownership.
2. Any sketch in the report may show approximate dimensions and is included
to assist the reader in visualizing the property. The Appraiser has made
no survey of the property.
3. The Appraiser is not required to give testimony or appear in court
because of having made the appraisal with reference to the property in
question, unless arrangements have been previously made therefor.
4. Any distribution of the valuation in the report between land and
improvements applies only under the existing program of utilization. The
separate valuations for land and building must not be used in
conjunction with any other appraisal and are invalid if so used.
5. The Appraiser assumes that there are no hidden or unapparent conditions
of the property, subsoil, or structures, which would render it more or
less valuable. The Appraiser assumes no responsibility for such
conditions, or for engineering which might be required to discover such
factors.
6. Information, estimates, and opinions furnished to the Appraiser, and
contained in the report, were obtained from sources considered reliable
and believed to be true and correct. However, no responsibility for
accuracy of such items furnished the Appraiser can be assumed by the
Appraiser.
7. Disclosure of the contents of the appraisal report is governed by the
bylaws and regulations of the professional appraisal organizations with
which the Appraiser is affiliated.
8. Neither all, nor any part of the content of the report, or copy thereof
(including conclusions as to the property value, the identity of the
Appraiser, professional designations, reference to any professional
appraisal organizations, or the firm with which the appraisal is
connected), shall be used for any purposes by anyone but the client
specified in the report, the borrower if appraisal fee paid by same, the
mortgagee or its successors and assigns, mortgage insurers, consultants,
professional appraisal organizations, any state or federally approved
financial institution, any department, agency, or instrumentality of the
united states or any state or the District of Columbia, without the
previous written consent of the Appraiser; nor shall it be conveyed by
anyone to the public through advertising, public relations, news, sales,
or other media, without the written consent and approval of the
Appraiser.
9. On all appraisals, subject to satisfactory completion, repairs, or
alterations, the appraisal report and value conclusion are contingent
upon completion of the improvements in a workmanlike manner.
/ / See Attached
Date DECEMBER 30, 1996 DECEMBER 30, 1996
------------------------------- ---------------------------
Appraiser(S): /s/ Wilbur W. Wilson /s/ Kerry L. Proctor
------------------------------- ---------------------------
WILBER W. WILSON #385247 KERRY L. PROCTOR #420879
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- -------------------------------------------------------------------------------
<PAGE>
MID-OHIO APPRAISAL SERVICES CO., LTD
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
File No. C612042F
- -------------------------------------------------------------------------------
ADDENDUM TO APPRAISAL
- -------------------------------------------------------------------------------
APPRAISAL REQUIREMENTS
MANDATED BY FIRREA
I certify that the appraisal conforms to the Uniform Standards of
Professional Appraisal Practice (USPAP) promulgated by the Appraisal
Standards Board of the Appraisal Foundation.
The subject / / (is) /X/ (is not) listed for sale, the listing price is
$ _______________ . My estimate of the reasonable marketing period of
the subject property is 1 to 5 years.
------------
If an approach to value was not used, the following is an explanation
why it was not considered.
Cost:
------------------------------------------------------------------
--------------------------------------------------------------------------
Market:
------------------------------------------------------------------
--------------------------------------------------------------------------
Income:
------------------------------------------------------------------
The appraisal assignment / / (was) /X/ (was not) based on requested
minimum or specific valuation or on the approval of a loan.
I / / (have) /X/ (have no) financial interest in the loan transaction
and do not stand to benefit in any way from the value placed on the
property.
I / / (have) /X/ (have not) included a separate assessment of personal
property, fixtures, or intangible items which are attached to or located
on the real property. These items / / (do) /X/ (do not) affect the
market value of the real property.
Any creative financial or sales concessions that are known to the
appraiser have been adjusted in the comparables of this appraisal.
In performing this appraisal, I was not able to review the:
(insert N/A
if inapplicable)
-----------------------------------------------------------
N/A
-----------------------------------------------------------
The above items should be obtained by the lender when reviewing the
appraisal report.
This appraisal valuation of the subject property is in an "as is"
condition as of the date of inspection.
I certify that i have the appropriate knowledge and experience that was
necessary to complete this assignment.
/s/ Wilber W. Wilson December 30, 1996
-------------------------------- ----------------------------------
WILBER W. WILSON #385247 DATE
/s/ Kerry L. Proctor
KERRY L. PROCTOR #420879 DATE DECEMBER 30, 1996
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
SKETCH/AREA TABLE ADDENDUM
File No. C612042F
----------------------------------------------------------------------------
S Property Address 1835 JAMES PARKWAY
U ----------------------------------------------------------------------------
B City HEATH State OHIO County LICKING Zip Code 43056
J ----------------------------------------------------------------------------
E Borrower FIX-CORP INTERNATIONAL, INC.
C ----------------------------------------------------------------------------
T Lender/Client PARK NATIONAL BANK-COMMERCIAL
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<TABLE>
<CAPTION>
--------------------------------------------------- ----------------------------
AREA CALCULATIONS SUMMARY LIVING AREA CALCULATIONS
AREA NAME OF AREA SIZE TOTALS BREAKDOWN SUBTOTALS
--------------------------------------------------- ----------------------------
<S> <C> <C> <C> <C> <C>
GBA1 Unfinished Bldg Area 48000.00
Finished Office Area 1643.00 49643.00
DTH Canopy 7171.00
Concrete Slab 6819.00 13990.00
</TABLE>
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<PAGE>
SUBJECT
Our File No. C612042F Page
-------- ----
Client Ref. No.
-----------------
Date 12-23-96
---------------------------
PROPERTY PHOTOGRAPHS
There are 2 colored photographs on the page.
The top photograph is a picture of the front view of the outside of the
subject factory and office taken from the northeast. The building is white
and the section of the building to the front of the photograph is situated in
the middle of the larger potion of building, is two-thirds the height of the
rest of the building and appear to be the office area of the building. There
are at least three windows visible on this portion of the building and a door
with walk way in the middle of this portion of the building. There is a
parking lot in front of the building and there is a dark-colored truck in the
parking lot. The building is sitting in an open field and the photograph was
taken on a cloudy day in central Ohio. In the background are four blue
cylinder shaped buildings which appear to be silos.
The bottom photograph is a picture of the front view of the outside of the
subject factory and office taken from the southeast. There are electrical
boxes along the side of the building. From this view the paved area leading
to the building and parking area can be seen. The photograph was taken on a
cloudy day in central Ohio.
<PAGE>
SUBJECT
Our File No. C612042F Page
-------- ----
Client Ref. No.
-----------------
Date
---------------------------
PROPERTY PHOTOGRAPHS
There are 2 colored photographs on the page.
The top photograph is a picture of the rear view of the outside of the
subject factory and office taken from the northwest. The portion of the
building in the forefront of the photograph appears to be approximately
one-third the length of the entire building is an open area with a roof, no
windows and side walls that are one-third the height of the building from the
ground up. The other two-thirds of the building is enclosed and appears to
be sectioned off in at least 6 sections. The building is sitting in an open
field and the photograph was taken on a cloudy day in central Ohio.
The bottom photograph is a picture of the rear view of the outside of the
subject factory and office taken from the southwest. The portion of the
building in the forefront of the photograph appears to be approximately
one-third the length of the entire building is the loading dock area with
four separate garage doors. The is a trash compactor sitting outside the far
left load dock door. To the right of the loading dock area is a walkway that
leads to a door. The other two-thirds of the building is enclosed and
appears to be sectioned off in at least 6 sections. There is a paved area in
front of the building. The photograph was taken on a cloudy day in central
Ohio.
<PAGE>
SUBJECT
Our File No. C612042F Page
-------- ----
Client Ref. No.
-----------------
Date 12-23-96
---------------------------
PROPERTY PHOTOGRAPHS
There are 2 colored photographs on the page.
The top photograph is of the outside of the building and shows the ramp
access to the canopy area.
The bottom photograph is of the outside of the building and is a close up
photo of the loading dock. Outside of the loading dock door to the left
there is a trash compactor. In the background on the left side of the
picture part of the canopy area of the building can be seen.
<PAGE>
SUBJECT
Our File No. C612042F Page
-------- ----
Client Ref. No.
-----------------
Date 12-23-96
---------------------------
PROPERTY PHOTOGRAPHS
There are 2 colored photographs on the page.
The top photo is a north view of the street scene. To the upper right of the
picture is a portion of the parking area and there are 4 vehicles in the lot.
There is a dark colored truck on the street in the background of the picture.
The rest of the view is open fields and wooded area in the background.
The bottom photo is a south view of the street scene. In the background you
can see 2 buildings on each side of the photo. The building on the right has
cars parked in front of it. There are utility poles seen throughout the
picture and the asphalt is wet and has puddles of water throughout.
<PAGE>
SUBJECT
Our File No. C612042F Page
-------- ----
Client Ref. No.
-----------------
Date 12-23-96
---------------------------
PROPERTY PHOTOGRAPHS
There is 1 colored photograph on the page.
This is a photo of the railroad spur. In the upper left of the photograph
there are 4 blue cylinder shaped storage areas. To the right of these
storage areas are 3 railroad cars. In the upper right of the photo is a
building. The rest of the photo is open field, utility poles and trees.
<PAGE>
SUBJECT
Our File No. C612042F Page
-------- ----
Client Ref. No.
-----------------
Date 12-23-96
---------------------------
PROPERTY PHOTOGRAPHS
There are 2 colored photographs on the page.
The top photo is of the foyer entry to the office portion of the building.
The foyer has overhead lighting and a sprinkler sytems. One portion of the
wall in the background of the photo is brick. The other portion of the wall
is white. There is a fire alarm box on the wall. The door to the office area
is framed in steel with glass from top to bottom and a horizontal handle
across the middle. The door in the office area is wood. There is a burgundy
chair in the forefront of the photo.
The bottom photo is of the copier room. There is a copier, work table with
paper cutter, white 3-drawer filing cabinet, a white storage cabinet.
<PAGE>
SUBJECT
Our File No. C612042F Page
-------- ----
Client Ref. No.
-----------------
Date 12-23-96
---------------------------
PROPERTY PHOTOGRAPHS
There are 2 colored photographs on the page.
The top photo is of the northeast office area. The back office has a wooden
door and a window along the back wall. In the office are 3 duffle bags on
the floor and a chair. The outer office or hall has two cardboard boxes to
the right of the picture a black secretarial chair with arms and a gray
office chair with arms. There is a box leaning up against the wall to the
left of the photograph.
The bottom photo is of the south office area. In this photo there are 2
office entrances which can be seen. The office on the right has a window on
the back wall. There is a desk in the office and the office door is
completely opened. The door to the office on the left is slightly closed.
There is a window on the back wall. There is a desk and, gray chair with
arms and floor mat in this office. The area outside the offices has a desk
with storage area above it and there if a red chair in the right forefront of
the photo.
<PAGE>
SUBJECT
Our File No. C612042F Page
-------- ----
Client Ref. No.
-----------------
Date 12-23-96
---------------------------
PROPERTY PHOTOGRAPHS
There are 2 colored photographs on the page.
The top photo is of the production office and lunch room. The production
office and lunchroom are to the back of the photo and are sealed areas with
large glass windows from which the warehouse can be seen. In the production
office a computer and tack boards can be seen. In the lunchroom a
refrigerator and cabinets can be seen. In the warehouse is a forklift, a
chair, a broom and a 4-wheel dolly.
The bottom photo is of the shipping and receiving area. In this photo There
is a forklift, interior lighting, support poles holding up the roof, 4
overhead bay doors, three ceiling heat units, exit door, trash can, insulated
ceiling and painted concrete floor.
<PAGE>
SUBJECT
Our File No. C612042F Page
-------- ----
Client Ref. No.
-----------------
Date 12-23-96
---------------------------
PROPERTY PHOTOGRAPHS
There are 2 colored photographs on the page.
The top photo is the shipping office. There is an interior door to the
shipping office. In the office is a desk, three chairs, an easel, space
heater in the wall near the ceiling, a glass window with a view of the
interior of the building and window with a view of the outside. Outside the
office is a fire pole. The office is finished in concrete block.
The bottom photo is the maintenance machine shop. Along the left wall is
assorted bins filled with equipment. Along, the right wall is machinery,
including band saws and other various machine tools. There are 2 chairs to
the right forefront of the photo. There is overheard fluorescent lighting
and the walls are finished in concrete block and the floor is painted
concrete.
<PAGE>
SUBJECT
Our File No. C612042F Page
-------- ----
Client Ref. No.
-----------------
Date 12-23-96
---------------------------
PROPERTY PHOTOGRAPHS
There are 2 colored photographs on the page.
The top photo is the electrical room. Clean concreted floor, concrete block
walls, trash can, numerous panels boxes and electrical lines.
The bottom photo is the boiler room. There is a boiler and boiler system.
The walls and floor are concrete
<PAGE>
SUBJECT
Our File No. C612042F Page
-------- ----
Client Ref. No.
-----------------
Date 12-23-96
---------------------------
PROPERTY PHOTOGRAPHS
There are 2 colored photographs on the page.
The top photo is a close-up view of the inside of the production office.
There is a free standing desk with desk calendar and other office supplies on
it. There are two blue chairs in the office. The walls and floor are
concrete. There is a room air conditioner and what appears to be a steel door.
The bottom photo is a close-up view of the inside of the lunch room. There
is a rectangular table in the center of the room with 6 chairs around it.
There is drinking fountain, kitchen cabinets, refrigerator and microwave. In
the left forefront of the photo is a stand with a coffee maker, coffee and
cups on it. The walls and floor are concrete and there is fluorescent
lighting in the ceiling.
<PAGE>
SUBJECT
Our File No. C612042F Page
-------- ----
Client Ref. No.
-----------------
Date 12-23-96
---------------------------
PROPERTY PHOTOGRAPHS
There are 2 colored photographs on the page.
The top photo is a west view of the south wall of the inside of the
warehouse. The floors are concrete, insulated ceiling, interior lighting,
machinery, support poles and shipping palets.
The bottom photo is an east view of the south wall of the inside of the
warehouse. The floors are concrete, there are two forklifts, insulated
ceiling, interior lights, support poles, large machinery, and ceiling
heaters.
<PAGE>
SUBJECT
Our File No. C612042F Page
-------- ----
Client Ref. No.
-----------------
Date 12-23-96
---------------------------
PROPERTY PHOTOGRAPHS
There are 2 colored photographs on the page.
The top photo is an east view of the north wall of the inside of the
warehouse. In this photo there are concrete floors, rolling steel trash cans,
interior lighting, insulated ceilings, ceiling heaters, shelves with various
equipment on them, stairwell.
The bottom photo is a west view of the north wall of the inside of the
warehouse. In this photo there are concrete floors, interior lighting,
insulated ceilings, various machines and switches.
<PAGE>
SUBJECT
Our File No. C612042F Page
-------- ----
Client Ref. No.
-----------------
Date 12-23-96
---------------------------
PROPERTY PHOTOGRAPHS
There are 2 colored photographs on the page.
The top photo is the northwest access to outside canopy area. In this photo
are two overhead bay doors, concrete floors, ceiling heaters, insulated
ceiling, interior lighting, large machinery, steel walls and wall supports.
The bottom photo is a southeast view under the canopy area. In this photo
are two overhead bay doors, a steel entrance door, concrete floors, support
posts, and exterior lighting.
<PAGE>
IMPROVED SALES
Our File No. C612042F Page
-------- ----
Client Ref. No.
-----------------
Date
---------------------------
PROPERTY PHOTOGRAPHS
There is 1 colored photograph on the page.
This is a photo of the outside of a one-story office building located at
12477 Broad Street, Pataskala, Ohio. In the front of the building is an open
grassy area. To the right of the biulding is an asphalt driveway and parking
area.
<PAGE>
IMPROVED SALES
Our File No. C612042F Page
-------- ----
Client Ref. No.
-----------------
Date
---------------------------
PROPERTY PHOTOGRAPHS
There are 2 colored photographs on the page.
The top photo is the outside of an office building located at 2070 James
Parkway.
The bottom photo is the outside of an office building located at 202 Willow S
Township Road, Pataskala, Ohio.
<PAGE>
IMPROVED SALES
Our File No. C612042F Page
-------- ----
Client Ref. No.
-----------------
Date
---------------------------
PROPERTY PHOTOGRAPHS
There are 2 colored photographs on the page.
The top photo is the outside of an office building located at 3600 Hebron
Road.
The bottom photo is the outside of an office building located at 447 James
Parkway.
<PAGE>
IMPROVED SALES
Our File No. C612042F Page
-------- ----
Client Ref. No.
-----------------
Date
---------------------------
PROPERTY PHOTOGRAPHS
There are 2 colored photographs on the page.
The top photo is the outside of an office building located at 199 Milliken.
The bottom photo is the outside of an office building located at Hebron Rd,
277 N. High.
<PAGE>
Photocopy of a map with the words "LOCATION MAP" stamped at the top and
bottom of the page and read arrow stamps pointing to various areas to show
the exact location on the map of the subject area and comparison sites.
<PAGE>
81928
861-39
QUANTUM
- -----------------------------------------------------------------------------
GENERAL WARRANTY DEED
KNOW ALL MEN BY THESE PRESENTS THAT, QUANTUM CHEMICAL CORPORATION, a
Corporation incorporated under the laws of the State of Virginia (the
"Grantor") for the consideration of $10.00 and other valuable considerations,
received to its full satisfaction of FIX-CORP INTERNATIONAL, INC., a
corporation incorporated under the laws of the State of Delaware (the
"Grantee"), does GIVE, GRANT, BARGAIN, SELL AND CONVEY unto the said Grantee,
its successors and assigns, the following described premises, situated in the
City of Heath, County of Licking and State of Ohio:
SITUATED IN THE STATE OF OHIO, COUNTY OF LICKING AND CITY OF HEATH,
AND BOUNDED AND DESCRIBED A: FOLLOWS:
BEING IN T-1, R-12 OF THE UNITED STATES MILITARY LANDS, AND IN THE
MID-OHIO INDUSTRIAL PARK, ADDITION NO. 3, AS RECORDED IN PLAT BOOK
13, PAGE 51, IN THE LICKING COUNTY DEED RECORDS, AND BEING MORE FULLY
BOUNDED AND DESCRIBED AS FOLLOWS:
BEING ALL OF RESERVE "A", LOT 40 AND THE FOLLOWING PORTION OF LOT 41;
BEGINNING IN THE WESTERLY RIGHT OF WAY LINE OF JAMES PARKWAY, SAID
POINT BEING THE SOUTHEAST CORNER OF SAID LOT 41;
THENCE SOUTH 89 DEG. 25'37" WEST, ALONG THE SOUTH LINE OF LOT 41,
662.49 FEET TO THE SOUTHWEST CORNER OF LOT 41;
THENCE NORTH 0 DEG. 45'14" WEST, ALONG THE EASTERLY LINE OF THE NEW
YORK CENTRAL RAILWAY COMPANY, 243.50 FEET, TO A POINT;
THENCE SOUTH 89 DEG. 25'37" EAST, PASSING THROUGH LOT 41, A DISTANCE
OF 663.41 FEET TO A POINT;
THENCE SOUTH 0 DEG. 31'52" EAST, PASSING ALONG THE WESTERLY RIGHT OF
WAY LINE OF JAMES PARKWAY. 243.50 FEET TO THE PLACE OF BEGINNING;
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
THE ABOVE 10.00 ACRE SURVEY INCLUDES 0.79 ACRES IN RESERVE "A", 5.504
ACRES IN LOT 40 AND 3.706 ACRES IN LOT 41.
THE ABOVE DESCRIPTION WAS PREPARED AS THE RESULT OF A SURVEY BY
WILLIAM B. HENDERSON, REGISTERED SURVEYOR NO. 5242, DATED JULY 6,1989.
BEING PART OF THE SAME REAL ESTATE CONVEYED BY HERBERT J MURPHY, JR.
AND PATRICIA R. MURPHY, HIS WIFE, TO MID-OHIO DEVELOPMENT CORPORATION
BY DEED DATED DECEMBER 3, 1971, AND RECORDED IN VOLUME 681, PAGE 608,
DEED RECORDS, LICKING COUNTY, OHIO.
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
be the same more or less.
----------------------------
DESCRIPTION APPROVED
TIM LOLLO
1 OF 3 LICKING COUNTY ENGINEER
----------------------------
Tax Map Approved by:
Drawing No
7 /s/ AF
----------------------------
<PAGE>
81928
861-39
QUANTUM
- -----------------------------------------------------------------
To have and to hold the above granted and bargained premises, with the
appurtenances thereunto belonging, unto the said grantee, its successors and
assigns forever.
The grantor, does for itself and its successors and assigns, covenant with
the Grantee its successors and assigns, that at and until the ensealing of
these presents, it is well seized of the above described premises, as a good
and indefeasible estate in FEE SIMPLE and has good right to bargain and sell
the same in manner and form as above written, and that the same are free and
clear from all incumbrances whatsoever and that it will Warrant and Defend
said premises, with the appurtenances thereunto belonging, to the said
Grantee, its successors and assigns, forever, against all lawful claims and
demands whatsoever.
IN WITNESS WHEREOF, said corporation sets its hand and corporate seal, by
Ronald H. Yocum , its President , this 16 day of
- ---------------------------- -------------------- ---------
December, 1996.
- --------------
Signed and acknowledged in presence of: QUANTUM CHEMICAL CORPORATION
/s/ illegible By: /s/ Ronald H. Yocum
- ------------------------------------------ ----------------------------
/s/ illegible Ronald H. Yocum
- ------------------------------------------ ----------------------------
Typed Name
President
----------------------------
Title
TRANSFERRED
[SEAL
QUANTUM CHEMICAL CORPORATION] Date December 16, 1996
/s/ George D. Buchanan, as
--------------------------------
Licking County Auditor
SEC 3.9.202 COMPLIED WITH
GEORGE D. BUCHANAN, AUDITOR
BY /s/ as 4200.00 /s/ as
------------------------
2 OF 3
<PAGE>
750/363
61751
MID-OHIO INDUSTRIAL PARK ADDITION NO. 3
RESTRICTIVE COVENANTS
---------------------
1. These building and other restrictive covenants shall run with the
land and shall be binding on all parties and all persons claiming under them
until the year A. D. 2020.
2. Said real estate shall be used exclusively for all types of
commercial and industrial activity except those considered dangerous or
unsafe as to other property in the addition, or violative of applicable
federal or state standards regarding odor, dust, fumes, smoke or noise, as to
other property in the addition.
3. All buildings and other structures erected in the additions shall be
of substantial construction and design and comply with all existing building
codes.
4. No building or structure shall be erected, placed or suffered to
remain in said additions until the plans and specifications hereof and the
location thereof have been approved in writing by Herbert J. Murphy, Jr., as
long as he shall live and retain his mental competency, or by his assignee.
If Herbert J. Murphy, Jr. becomes mentally incompetent or dies, such approval
shall be obtained in writing from a majority of the owners of the Mid-Ohio
Industrial Park Additions Nos. 1, 2 and 3, unless the right to approve plans
has been previously assigned.
5. No building or structure shall be erected on any of said real
estate closer than 50 feet to the front lot line on James Parkway and closer
than 20 feet to the front lot line of any other street and to the side or
rear lines of any lot.
6. No building or structure on said real estate shall be allowed to
occupy more than fifty percent of the land in said lot. The term structure
is not intended to include parking lot areas.
7. No fences, masonry wall, hedge or mass planting shall be permitted
to extend beyond the building setback lines of said additions, except upon
written approval of Herbert J. Murphy, Jr., as long as he shall live and
retain his mental competency, or by his assignee. If Herbert J. Murphy, Jr.
becomes mentally incompetent or dies, such approval shall be obtained in
writing from a majority of the owners of the Mid-Ohio Industrial Park
Additions Nos. 1, 2 and 3, unless the right to approve plans has been
previously assigned.
8. All parking and loading areas shall be provided on each lot in
said additions and must be of a dust free surface. No loading docks may be
placed on James Parkway. Provision for handling all freight either by
railroad or truck shall be on those sides of any buildings which do not face
on James Parkway.
9. The owner of said real estate shall provide off-street parking
facilities for all employees and visitors. Sufficient parking facilities
shall be provided at a minimum rate of one parking space for each two
employees who are employed by the owner of said real estate at this site.<PAGE>
364
<PAGE>
364
61751
10. All outside storage shall be confined to the rear of the building
site and protected by screening. Outside storage refers to materials stored
in the open.
11. Where the owner of two or more adjacent lots or tracts uses two
or more of such lots or tracts for a single purpose, the front, side and rear
setback requirements and restrictions set forth in said restrictive covenants
shall apply to such lots or tracts as though said two or more adjacent lots
or tracts were a single lot or tract.
12. Further, where the owner of two or more adjacent lots or tracts
uses two or more of said lots or tracts for a single purpose, the easement
reserved for utility purposes in the dedication along the common line or
lines of said adjacent lots or tracts shall not be reserved but shall be
conveyed to said lot or tract owner.
Recorder's Office, Licking Co. Ohio
Received July 30, 1976
at 11:00 o'clock A.M.
In Vol 750 of Deeds
Page 363
--------------------
/s/ Robert E. Wise
------------------------------------
Robert E. WISE, Recorder
Fee $19.20
See Plat
recorded Vol. 13
Pages 51 & 52
<PAGE>
Photocopy of the engineers map showing the subject lot and parcel along with
surrounding lots and parcels.
<PAGE>
24
----------------------------
----------------------------
APPRAISER DISCLOSURE
STATEMENT
----------------------------
----------------------------
In compliance with Ohio Revised Code Section 4763.12 (C)
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
1. Name of Appraiser: Wilber W. Wilson
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
2. Class of Certification Licensure:
X Certified General
------
Certified Residential
------
Licensed Residential
------
Temporary General Licensed
------ ------ ------
Certification/Licensure Number: 385247
-----------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
3. Scope: this report X is within the scope of my certification/license
-----
is not within the scope of my certification/license
-----
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
4. Service provided by: X disinterested & unbiased third party
-----
interested & biased third party
-----
interested third party on contingent fee basis
-----
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
5. Signature of person preparing and reporting the appraisal
/s/ Wilber W. Wilson
-----------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
THIS FORM MUST BE INCLUDED IN CONJUNCTION WITH ALL APPRAISAL ASSIGNMENTS OR
SPECIALIZED SERVICES PERFORMED BY A STATE-CERTIFIED OR STATE-LICENSED REAL
ESTATE APPRAISER.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
State of Ohio
Department of Commerce
Division of Real Estate
Appraiser Section
Cleveland OH
(216)787-3100
<PAGE>
24A
----------------------------
----------------------------
APPRAISER DISCLOSURE
STATEMENT
----------------------------
----------------------------
In compliance with Ohio Revised Code Section 4763.12 (C)
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
1. Name of Appraiser: Wilber W. Wilson
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
2. Class of Certification Licensure:
Certified General
------
Certified Residential
------
X Licensed Residential
------
Temporary General Licensed
------ ------ ------
Certification/Licensure Number: 385247
-----------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
3. Scope: this report is within the scope of my certification/license
-----
X is not within the scope of my certification/license
-----
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
4. Service provided by: X disinterested & unbiased third party
-----
interested & biased third party
-----
interested third party on contingent fee basis
-----
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
5. Signature of person preparing and reporting the appraisal
/s/ Kerry L. Proctor
-----------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
THIS FORM MUST BE INCLUDED IN CONJUNCTION WITH ALL APPRAISAL ASSIGNMENTS OR
SPECIALIZED SERVICES PERFORMED BY A STATE-CERTIFIED OR STATE-LICENSED REAL
ESTATE APPRAISER.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
State of Ohio
Department of Commerce
Division of Real Estate
Appraiser Section
Cleveland OH
(216)787-3100
<PAGE>
25
QUALIFICATIONS OF APPRAISER - WILBER W WILSON
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
STATE CERTIFIED GENERAL REAL ESTATE APPRAISER #385247-EXPIRES 12/19/97
STATE LICENSED REAL ESTATE BROKER - #266512
APPRAISAL EDUCATION
12/85 - Real Estate Appraisal - Central Ohio Technical College
7/86 - Location & Market Analysis - Commercial Inv R E Institute
2/89 - Principles of R. E. Appraisal - Lincoln Graduate Center
3/89 - Practice of R. E. Appraisal - Lincoln Graduate Center
3/89 - Narrative Appraisal Report - Lincoln Graduate Center
3/89 - Farm And Land Appraisal - Lincoln Graduate Center
3/89 - Commercial Investment Appraisal - Lincoln Graduate Center
3/89 - Advanced Commercial Appraisal - Lincoln Graduate Center
10/90 - Effective Court Testimony - Lincoln Graduate Center
12/91 - Residential Appraisal Review - Ohio Assoc. of Realtors
12/91 - Commercial Appraisal Review - Ohio Assoc. of Realtors
2/93 - Manufactured Housing Appraisals - Lincoln Graduate Center
10/93 - Residential Construction - Ohio Association of Realtors
12/93 - Americans With Disabilities Act - Lincoln Graduate Center
1/94 - New URAR - Ohio Association of Realtors
10/94 - Property Inspection - Lincoln Graduate Center
1/95 - Small Investment Properties - Ohio Assoc of Realtors
1/95 - Evaluation Reports - Ohio Assoc of Realtors
2/95 - How To Appraise FHA Property - Appraisal Institute
4/95 - Commercial Secondary Market Securitization - OAR
5/95 - Electronic Data Interchange - OAR
5/95 - Business Appraisals - Lincoln Graduate Center
5/96 - Property Inspection - Lincoln Graduate Center
8/96 - HUD 203 (K) - M A Young & Co
PROFESSIONAL MEMBERSHIP
National Association of Master Appraisers - #6267
National Association of Realtors - Appraisal Section
Ohio Association of Realtors
Licking County Board of Realtors
National Association of Property Inspectors - #934
PROFESSIONAL DESIGNATIONS
MSA - Master Senior Appraiser - 1989
MFLA- Master Farm & Land Appraiser - 1989
MRA - Master Residential Appraiser - 1989
CPA - Certified Public Accountant - 1950
BCBA- Board Certified In Business Appraisals - 1994
CSI - Certified Senior Inspector - 1996
The foregoing is true to the best of my knowledge and belief
/s/ Wilber W. Wilson
- -------------------------------------------------------------
<PAGE>
25A
QUALIFICATIONS OF APPRAISER - KERRY L PROCTOR
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
STATE LICENSED RESIDENTIAL REAL ESTATE APPRAISER - #420879
EXPIRES - 07/01/97
COMMERCIAL APPRAISER APPRENTICE
APPRAISAL EDUCATION
8/94 - Permitted Departures From Specific Guidelines of USPAP-Ohio Assoc of
Realtors
8/94 - The Basics of Appraisal - Ohio Assoc of Realtors
9/94 - Real Estate Analysis - Ohio Assoc of Realtors
10/94 - Sales Comparison Approach - Ohio Assoc of Realtors
9/95 - Cost & Income Approaches/Valuation of Partial Interest - Ohio Assoc of
Realtors
10/95 - Appraisal Standards & Ethics - Ohio Assoc of Realtors
EMPLOYMENT HISTORY
7/95 To Date - Mid-Ohio Appraisal Services Co., LTD
3/94 - 6/95 - Glenn E Libby & Associates, Inc.
11/81 - 8/93 - Webcraft Technologies, Inc.
6/76 - 11/81 - Communicolor Division of Standard Register
The foregoing is true to the best of my knowledge and belief
/s/ Kerry L. Proctor
- -------------------------------------------------------------
<PAGE>
Exhibit F to Exhibit 8
- ----------------------------------------------------------Quantum
SCHEDULE 1.01A
DESCRIPTION OF REAL PROPERTY
A single parcel situated in the State of Ohio, County of Licking and City of
Heath of 9.5 acres more or less being more fully bounded and described as
follows:
BEING IN T-1, R-12 OF THE UNITED STATES MILITARY LANDS, AND IN THE
MID-OHIO INDUSTRIAL PARK, ADDITION NO. 3, AS RECORDED IN PLAT BOOK
13, PAGE 51, IN THE LICKING COUNTY DEED RECORDS, AND BEING MORE FULLY
BOUNDED AND DESCRIBED AS FOLLOWS:
BEING ALL OF RESERVE "A", LOT 40 AND THE FOLLOWING PORTION OF LOT 41;
BEGINNING IN THE WESTERLY RIGHT OF WAY LINE OF JAMES PARKWAY, SAID
POINT BEING THE SOUTHEAST CORNER OF SAID LOT 41;
THENCE SOUTH 89 DEG. 25'37" WEST, ALONG THE SOUTH LINE OF LOT 41,
662.49 FEET TO THE SOUTHWEST CORNER LOT 41;
THENCE NORTH 0 DEG. 45'14" WEST, ALONG THE EASTERLY LINE OF THE NEW
YORK CENTRAL RAILWAY COMPANY, 243.50 FEET, TO A POINT;
THENCE SOUTH 89 DEG. 25'37" EAST, PASSING THROUGH LOT 41, A DISTANCE
OF 663.41 FEET TO A POINT;
THENCE SOUTH 0 DEG. 31'52" EAST, PASSING ALONG THE WESTERLY RIGHT OF
WAY LINE OF JAMES PARKWAY, 243.50 FEET TO THE PLACE OF BEGINNING;
THE ABOVE 10.00 ACRE SURVEY INCLUDES 0.79 ACRES IN RESERVE "A", 5.504
ACRES IN LOT 40 AND 3.706 ACRES IN LOT 41.
SUBJECT TO ALL LEGAL HIGHWAYS, ALL LIMITATIONS OF ACCESS TO PUBLIC
ROADS OR HIGHWAYS, LEASES AND RIGHTS OF WAY, ZONING REGULATIONS,
EASEMENTS OF RECORD AND RESTRICTIVE COVENANTS.
THE ABOVE DESCRIPTION WAS PREPARED AS THE RESULT OF A SURVEY BY
WILLIAM B. HENDERSON, REGISTERED SURVEYOR NO. 5242, DATED JULY 6,
1989.
BEING PART OF THE SAME REAL ESTATE CONVEYED BY HERBERT J. MURPHY, JR.
AND PATRICIA A. MURPHY, HIS WIFE, TO MID-OHIO DEVELOPMENT CORPORATION
BY DEED DATED DECEMBER 3, 1971, AND RECORDED IN VOLUME 681, PAGE 608,
DEED RECORDS, LICKING COUNTY, OHIO.
THIS PROPERTY IS SUBJECT TO THE RESTRICTIVE COVENANTS FOR MID-OHIO
INDUSTRIAL PARK ADDITION NO. 3, FILED FOR RECORD WITH THE LICKING
COUNTY RECORDER ON JULY 30, 1976, IN VOLUME 750, PAGE 363, DEED
RECORDS, LICKING COUNTY, OHIO.
<PAGE>
Exhibit G to Exhibit 8
Contracts, Agreements, and Instruments and Arrangements
None.
<PAGE>
Exhibit 9
LOAN AND SECURITY AGREEMENT
This Loan and Security Agreement (as it may be amended, this "AGREEMENT")
is entered into on May 14, 1997 between NATIONSCREDIT COMMERCIAL CORPORATION,
THROUGH ITS NATIONSCREDIT COMMERCIAL FUNDING DIVISION ("LENDER"), having an
address at 1177 Avenue of the Americas, 36th Floor, New York, New York 10036 and
FIXCOR INDUSTRIES, INC. ("BORROWER"), whose chief executive office is located at
27040 Cedar Road, Suite 218, Beachwood, Ohio 44122 ("BORROWER'S ADDRESS"). The
Schedules to this Agreement are an integral part of this Agreement and are
incorporated herein by reference. Terms used, but not defined elsewhere, in this
Agreement are defined in Schedule B.
1. LOANS AND CREDIT ACCOMMODATIONS.
1.1 AMOUNT. Subject to the terms and conditions contained in this
Agreement, Lender will:
(a) REVOLVING LOANS AND CREDIT ACCOMMODATIONS. From time to time
during the Term at Borrower's request, make revolving loans to Borrower
("REVOLVING LOANS"), and make letters of credit, bankers acceptances and
other credit accommodations ("CREDIT ACCOMMODATIONS") available to Borrower,
in each case to the extent that there is sufficient Availability at the time
of such request to cover, dollar for dollar, the requested Revolving Loan or
Credit Accommodation; PROVIDED, that after giving effect to such Revolving
Loan or Credit Accommodation, (x) the outstanding balance of all monetary
Obligations (INCLUDING the principal balance of any Term Loan and, solely for
the purpose of determining compliance with this provision, the Credit
Accommodation Balance) will not exceed the Maximum Facility Amount set forth
in Section 1(a) of Schedule A and (y) none of the other Loan Limits set forth
in Section 1 of Schedule A will be exceeded. For this purpose, "AVAILABILITY"
means:
(i) the aggregate amount of Eligible Accounts (less maximum
existing or asserted taxes, discounts, credits and allowances) multiplied
by the Accounts Advance Rate set forth in Section 1(b)(i) of Schedule A but
not to exceed the Accounts Sublimit set forth in Section 1(c) of Schedule A
PLUS
(ii) the lower of cost or market value of Eligible Inventory
multiplied by the Inventory Advance Rate(s) set forth in Section l(b)(ii)
of Schedule A, but not to exceed the Inventory Sublimit(s) set forth in
Section 1(d) of Schedule A;
MINUS
(iii) all Reserves which Lender has established pursuant to
Section 1.2 (including those to be established in connection with the
requested Revolving Loan or Credit Accommodation);
<PAGE>
MINUS
(iv) the outstanding balance of all of the monetary Obligations
(excluding the Credit Accommodation Balance and the principal balance of
the Term Loan); and
PLUS
(v) the Overadvance Amount, if any, set forth in Section 1(g) of
Schedule A.
(b) TERM LOAN. On the date of this Agreement, make (i) an advance to
Borrower computed with respect to the value of Borrower's Eligible Equipment
(the ("EQUIPMENT ADVANCE") in the principal amount, if any, set forth in Section
2(a)(i) of Schedule A; and (ii) an advance to Borrower computed with respect to
the value of Borrower's Eligible Real Property (the ("REAL PROPERTY ADVANCE") in
the principal amount, if any, set forth in Section 2(a)(ii) of Schedule A. The
Equipment Advance and the Real Property Advance are collectively referred to as
the "TERM LOAN."
1.2 RESERVES. Lender may from time to time establish and revise such
reserves as Lender deems appropriate in its sole discretion ("RESERVES") to
reflect (i) events, conditions, contingencies or risks which affect or may
affect (A) the Collateral or its value, or the security interests and other
rights of Lender in the Collateral or (B) the assets, business or prospects of
Borrower or any Obligor, (ii) Lender's good faith concern that any Collateral
report or financial information furnished by or on behalf of Borrower or any
Obligor to Lender is or may have been incomplete, inaccurate or misleading in
any material respect, (iii) any fact or circumstance which Lender determines in
good faith constitutes, or could constitute, a Default or Event of Default or
(iv) any other events or circumstances which Lender determines in good faith
make the establishment or revision of a Reserve prudent. Without limiting the
foregoing, Lender shall (x) in the case of each Credit Accommodation issued for
the purchase of Inventory (a) which meets the criteria for Eligible Inventory
set forth in clauses (i), (ii), (iii), (v) and (vi) of the definition of
Eligible Inventory, (b) which is or will be in transit to one of the locations
set forth in Section 9(d) of Schedule A, (c) which is fully insured in a manner
satisfactory to Lender and (d) with respect to which Lender is in possession of
all bills of lading and all other documentation which Lender has requested, all
in form and substance satisfactory to Lender in its sole discretion, establish a
Reserve equal to the cost of such Inventory (plus all duties, freight, taxes,
insurance, costs and other charges and expenses relating to such Credit
Accommodation or such Eligible Inventory) multiplied by a percentage equal to
100% minus the Inventory Advance Rate applicable to Eligible Inventory and (y)
in the case of any other Credit Accommodation issued for any purpose, establish
a Reserve equal to the full amount of such Credit Accommodation plus all costs
and other charges and expenses relating to such Credit Accommodation. In
addition, (x) Lender shall establish a permanent Reserve in the amount set forth
in Section 1(f) of Schedule A, and (y) if the outstanding principal balance of
the Term Loan advance with respect to Eligible Equipment exceeds the percentage
set forth in Section 2(a)(i) of Schedule A of the appraised
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<PAGE>
value of such Eligible Equipment, Lender may establish an additional Reserve in
the amount of such excess (and, for this purpose, if payments of principal on
the Term Loan advances against Eligible Equipment and Real Property are not
calculated separately, payments of principal of the Term Loan made by Borrower
shall be deemed to apply to the Term Loan advance with respect to Eligible
Equipment and Real Property, respectively, in proportion to the original
principal amounts of such advances). Lender may, in its discretion, establish
and revise Reserves by deducting them in determining Availability or by
reclassifying Eligible Accounts or Eligible Inventory as ineligible. In no
event shall the establishment of a Reserve in respect of a particular actual or
contingent liability obligate Lender to make advances hereunder to pay such
liability or otherwise obligate Lender with respect thereto.
1.3 OTHER PROVISIONS APPLICABLE TO CREDIT ACCOMMODATIONS. Lender may, in
its sole discretion and on terms and conditions acceptable to Lender, make
Credit Accommodations available to Borrower either by issuing them, or by
causing other financial institutions to issue them supported by Lender's
guaranty or indemnification; provided, that after giving effect to each Credit
Accommodation, the Credit Accommodation Balance will not exceed the Credit
Accommodation Limit set forth in Section 1(e) of Schedule A. Any amounts paid by
Lender in respect of a Credit Accommodation will be treated for all purposes as
a Revolving Loan which shall be secured by the Collateral and bear interest, and
be payable, in the same manner as a Revolving Loan. Borrower agrees to execute
all documentation required by Lender or the issuer of any Credit Accommodation
in connection with any such Credit Accommodation.
1.4 REPAYMENT. Accrued interest on all monetary Obligations shall be
payable on the first day of each month. Principal of the Term Loan shall be
repaid as set forth in Section 2(b) of Schedule A. If at any time any of the
Loan Limits are exceeded, Borrower will immediately pay to Lender such amounts
(or provide cash collateral to Lender with respect to the Credit Accommodation
Balance in the manner set forth in Section 7.3), as shall cause Borrower to be
in full compliance with all of the Loan Limits. Notwithstanding the foregoing,
Lender may, in its sole discretion, make or permit Revolving Loans, the Term
Loan, any Credit Accommodations or any other monetary Obligations to be in
excess of any of the Loan Limits; PROVIDED, that Borrower shall, upon Lender's
demand, pay to Lender such amounts as shall cause Borrower to be in full
compliance with all of the Loan Limits. All unpaid monetary Obligations shall be
payable in full on the Maturity Date (as defined in Section 7.1) or, if earlier,
the date of any early termination pursuant to Section 7.2.
1.5 MINIMUM BORROWING. Subject to the terms and conditions of this
Agreement, Borrower agrees to (i) borrow sufficient amounts to cause the
outstanding principal balance of the Loans to equal or exceed, at all times
prior to the Maturity Date, the Minimum Loan Amount set forth in Section 4 of
Schedule A and (ii) maintain Availability sufficient to enable Borrower to do
so. However, Lender shall not be obligated to loan Borrower the Minimum Loan
Amount other than in accordance with all of the terms and conditions of this
Agreement.
3
<PAGE>
2. INTEREST AND FEES.
2.1 INTEREST. All Loans and other monetary Obligations shall bear interest
at the Interest Rate(s) set forth in Section 3 of Schedule A, except where
expressly set forth to the contrary in this Agreement or another Loan Document;
PROVIDED, that after the occurrence of an Event of Default, all Loans and other
monetary Obligations shall, at Lender's option, bear interest at a rate per
annum equal to two percent (2%) in excess of the rate otherwise applicable
thereto (the "DEFAULT RATE") until paid in full (notwithstanding the entry of
any judgment against Borrower or the exercise of any other right or remedy by
Lender), and all such interest shall be payable on demand. Changes in the
Interest Rate shall be effective as of the date of any change in the Prime Rate.
Notwithstanding anything to the contrary contained in this Agreement, the
aggregate of all amounts deemed to be interest hereunder and charged or
collected by Lender is not intended to exceed the highest rate permissible under
any applicable law, but if it should, such interest shall automatically be
reduced to the extent necessary to comply with applicable law and Lender will
refund to Borrower any such excess interest received by Lender.
2.2 FEES AND WARRANTS. Borrower shall pay Lender the following fees, and
issue Lender the following warrants, which are in addition to all interest and
other sums payable by Borrower to Lender under this Agreement, and are not
refundable:
(a) CLOSING FEE. A closing fee in the amount set forth in Section
6(a) of Schedule A, which shall be deemed to be fully earned as of, and payable
on, the date hereof.
(b) FACILITY FEES. A facility fee for the Initial Term in the amount
set forth in Section 6(b)(i) of Schedule A (which shall be fully earned as of
the date of this Agreement and shall be payable in equal installments due,
respectively, on each anniversary of the date of this Agreement during the
Initial Term), and a facility fee for each Renewal Term in the amount set forth
in Section 6(b)(ii) of Schedule A (which shall be fully earned as of the first
day of such Renewal Term and shall be payable in equal installments due,
respectively, on the first day of such Renewal Term and on each anniversary
thereof during such Renewal Term).
(c) SERVICING FEE. A monthly servicing fee in the amount set forth in
Section 6(c) of Schedule A, in consideration of Lender's administration and
other services for each month (or part thereof), which shall be fully earned as
of; and payable in advance on, the date of this Agreement and on the first day
of each month thereafter so long as any of the Obligations are outstanding.
(d) UNUSED LINE FEE. An unused line fee at a rate equal to the
percentage per annum set forth in Section 6(d) of Schedule A of the amount by
which the Maximum Facility Amount set forth in Section 1(a) of Schedule A
exceeds the average daily outstanding principal balance of the Loans and the
Credit Accommodation Balance during the immediately preceding month (or part
thereof), which fee shall be payable, in arrears, on the first day of each month
so long as any of the Obligations are outstanding and on the Maturity Date.
4
<PAGE>
(e) MINIMUM BORROWING FEE. A minimum borrowing fee equal to the
excess, if any, of (i) interest which would have been payable in respect of each
period set forth in Section 6(e)(i) of Schedule A if, at all times during such
period, the principal balance of the Loans was equal to the Minimum Loan Amount
over (ii) the actual interest payable in respect of such period, which fee shall
be fully earned as of the last day of such period and payable on the date set
forth in Section 6(e)(ii) of Schedule A and on the Maturity Date, commencing
with the immediately following period.
(f) SUCCESS FEE. A success fee in the amount set forth in Section
6(f) of Schedule A, which shall be fully earned as of the date of this Agreement
and payable as set forth in Section 6(f) of Schedule A.
(g) WARRANTS. Warrants to acquire the capital stock of Borrower, as
summarized in Section 6(g) of Schedule A and as more fully set forth in a
separate warrant agreement executed by Borrower contemporaneously with this
Agreement.
(h) CREDIT ACCOMMODATION FEES. All of the fees relating to Credit
Accommodations set forth in Section 6(i) of Schedule A.
2.3 COMPUTATION OF INTEREST AND FEES. All interest and fees shall be
calculated daily on the closing balances in the Loan Account based on the actual
number of days elapsed in a year of 360 days. For purposes of calculating
interest and fees, if the outstanding daily principal balance of the Revolving
Loans is a credit balance, such balance shall be deemed to be zero.
2.4 LOAN ACCOUNT; MONTHLY ACCOUNTINGS. Lender shall maintain a loan
account for Borrower reflecting all advances, charges, expenses and payments
made pursuant to this Agreement (the "Loan Account'), and shall provide Borrower
with a monthly accounting reflecting the activity in the Loan Account. Each
accounting shall be deemed correct, accurate and binding on Borrower and an
account stated (except for reverses and reapplications of payments made and
corrections of errors discovered by Lender), unless Borrower notifies Lender in
writing to the contrary within sixty days after such account is rendered,
describing the nature of any alleged errors or admissions. However, Lender's
failure to maintain the Loan Account or to provide any such accounting shall not
affect the legality or binding nature of any of the Obligations. Interest, fees
and other monetary Obligations due and owing under this Agreement (including
fees and other amounts paid by Lender to issuers of Credit Accommodations) may,
in Lender's discretion, be charged to the Loan Account, and will thereafter be
deemed to be Revolving Loans and will bear interest at the same rate as other
Revolving Loans.
3. SECURITY INTEREST.
3.1 To secure the full payment and performance of all of the Obligations
when due, Borrower hereby grants to Lender a continuing security interest in all
of Borrower's property and interests in property, whether tangible or
intangible, now owned or in existence or hereafter acquired or arising, wherever
located, including Borrower's interest in all of the following, whether or not
eligible for lending purposes: (i) all Accounts, Chattel Paper, Instruments,
5
<PAGE>
Documents, Goods (including Inventory, Equipment, farm products and consumer
goods), Investment Property, General Intangibles, Deposit Accounts and money,
(ii) all proceeds and products of all of the foregoing (including proceeds of
any insurance policies, proceeds of proceeds and claims against third parties
for loss or any destruction of any of the foregoing) and (iii) all books and
records relating to any of the foregoing.
4. ADMINISTRATION.
4.1 LOCK BOXES AND BLOCKED ACCOUNTS. Borrower will, at its expense,
establish (and revise from time to time as Lender may require) collection
procedures acceptable to Lender, in Lender's sole discretion, for the collection
of checks, wire transfers and other proceeds of Accounts ("ACCOUNT PROCEEDS"),
which may include (i) directing all Account Debtors to send all such proceeds
directly to a post office box designated by Lender either in the name of
Borrower (but as to which Lender has exclusive access) or, at Lender's option,
in the name of Lender (a "LOCK BOX") or (ii) depositing all Account Proceeds
received by Borrower into one or more bank accounts maintained in Lender's name
(each, a "BLOCKED ACCOUNT"), under an arrangement acceptable to Lender with a
depository bank acceptable to Lender, pursuant to which all funds deposited into
each Blocked Account are to be transferred to Lender in such manner, and with
such frequency, as Lender shall specify or (iii) a combination of the foregoing.
Borrower agrees to execute, and to cause its depository banks to execute, such
Lock Box and Blocked Account agreements and other documentation as Lender shall
require from time to time in connection with the foregoing.
4.2 REMITTANCE OF PROCEEDS. Except as provided in Section 4.1, all
proceeds arising from the sale or other disposition of any Collateral shall be
delivered, in kind, by Borrower to Lender in the original form in which received
by Borrower not later than the following Business Day after receipt by Borrower.
Until so delivered to Lender, Borrower shall hold such proceeds separate and
apart from Borrower's other funds and property in an express trust for Lender.
Nothing in this Section 4.2 shall limit the restrictions on disposition of
Collateral set forth elsewhere in this Agreement.
4.3 APPLICATION OF PAYMENTS. Lender may, in its sole discretion, apply,
reverse and re-apply all cash and non-cash proceeds of Collateral or other
payments received with respect to the Obligations, in such order and manner as
Lender shall determine, whether or not the Obligations are due, and whether
before or after the occurrence of a Default or an Event of Default. For purposes
of determining Availability, such amounts will be credited to the Loan Account
and the Collateral balances to which they relate upon Lender's receipt of advice
from Lender's Bank (set forth in Section 11 of Schedule A) that such items have
been credited to Lender's account at Lender's Bank (or upon Lender's deposit
thereof at Lender's Bank in the case of payments received by Lender in kind), in
each case subject to final payment and collection. However, for purposes of
computing interest on the Obligations, such items shall be deemed applied by
Lender three Business Days after Lender's receipt of advice of deposit thereof
at Lender's Bank.
4.4 NOTIFICATION; VERIFICATION. Lender or its designee may, from time to
time, whether or not a Default or Event of Default has occurred: (i) verify
directly with the Account Debtors the
6
<PAGE>
validity, amount and other matters relating to the Accounts and Chattel Paper,
by means of mail, telephone or otherwise, either in the name of Borrower or
Lender or such other name as Lender may choose; (ii) notify Account Debtors that
Lender has a security interest in the Accounts and that payment thereof is to be
made directly to Lender; and (iii) demand, collect or enforce payment of any
Accounts and Chattel Paper (but without any duty to do so).
4.5 POWER OF ATTORNEY. Borrower hereby grants to Lender an irrevocable
power of attorney, coupled with an interest, authorizing and permitting Lender
(acting through any of its officers, employees, attorneys or agents), at any
time (whether or not a Default or Event of Default has occurred and is
continuing, except as expressly provided below), at Lender's option, but without
obligation, with or without notice to Borrower, and at Borrower's expense, to do
any or all of the following, in Borrower's name or otherwise: (i) execute on
behalf of Borrower any documents that Lender may, in its sole discretion, deem
advisable in order to perfect and maintain Lender's security interests in the
Personal Property Collateral (including such financing statements and
continuation financing statements, and amendments thereto, as Lender shall deem
necessary or appropriate) and to file as a financing statement any copy of this
Agreement or any financing statement signed by Borrower, (ii) after the
occurrence of a Default or an Event of Default, execute on behalf of Borrower
any document exercising, transferring or assigning any option to purchase, sell
or otherwise dispose of or lease (as lessor or lessee) any personal property
which is part of the Personal Property Collateral or in which Lender has an
interest, in each case in connection with any disposition of such personal
property in accordance with the provisions of applicable law; (iii) execute on
behalf of Borrower any invoices relating to any Accounts, any draft against any
Account Debtor, any proof of claim in bankruptcy, any notice of Lien or claim,
and any assignment or satisfaction of mechanic's, materialman's or other Lien,
in each case to the extent necessary to protect Lender's Lien on, or the value
of; any of the Personal Property Collateral; (iv) execute on behalf of Borrower
any notice to any Account Debtor; (v) receive and otherwise take control in any
manner of any cash or non-cash items of payment or proceeds of Personal Property
Collateral, to the extent Lender is entitled to possession of the same pursuant
to this Agreement or applicable law; (vi) endorse Borrower's name on all checks
and other forms of remittances received by Lender; (vii) pay, contest or settle
any Lien, charge, encumbrance, security interest and adverse claim in or to any
of the Personal Property Collateral, or any judgment based thereon, or otherwise
take any action to terminate or discharge the same; provided, that Lender agrees
to use its best efforts to provide prior notice thereof to Borrower (but shall
have no liability for its failure to do so); (viii) after the occurrence of a
Default or Event of Default, grant extensions of time to pay, compromise claims
relating to, and settle Accounts, Chattel Paper and General Intangibles for less
than face value and execute all releases and other documents in connection
therewith; (ix) pay any sums required on account of Borrower's taxes or to
secure the release of any Liens therefor; (x) pay any amounts necessary to
obtain, or maintain in effect, any of the insurance described in Section 5.12;
(xi) in Lender's reasonable judgment, settle and adjust, and give releases of;
any insurance claim that relates to any of the Personal Property Collateral and
obtain payment therefor; (xii) instruct any third party having custody or
control of any Personal Property Collateral or books or records belonging to, or
relating to, Borrower to give Lender the same rights of access and other rights
with respect thereto as Lender has under this Agreement; and (xiii) after the
occurrence of a Default or Event of Default, change the address for delivery of
Borrower's mail and receive and open all mail
7
<PAGE>
addressed to Borrower. Any and all sums paid, and any and all costs, expenses,
liabilities, obligations and reasonable attorneys' fees incurred, by Lender with
respect to the foregoing shall be added to and become part of the Obligations,
shall be payable on demand, and shall bear interest at a rate equal to the
highest interest rate applicable to any of the Obligations. Borrower agrees that
Lender's rights under the foregoing power of attorney or any of Lender's other
rights under this Agreement or the other Loan Documents shall not be construed
to indicate that Lender is in control of the business, management or properties
of Borrower.
4.6 DISPUTES. Borrower shall promptly notify Lender of all disputes or
claims relating to Accounts and Chattel Paper. Borrower will not, without
Lender's prior written consent, compromise or settle any Account or Chattel
Paper for less than the full amount thereof; grant any extension of time of
payment of any Account or Chattel Paper, release (in whole or in part) any
Account Debtor or other person liable for the payment of any Account or Chattel
Paper or grant any credits, discounts, allowances, deductions, return
authorizations or the like with respect to any Account or Chattel Paper; except
that prior to the occurrence of an Event of Default, Borrower may take any of
such actions in the ordinary course of its business, provided that Borrower
promptly reports the same to Lender.
4.7 INVOICES. At Lender's request, Borrower will cause all invoices and
statements which it sends to Account Debtors or other third parties to be
marked, in a manner satisfactory to Lender, to reflect Lender's security
interest therein.
4.8 INVENTORY.
(a) RETURNS. Provided that no Event of Default has occurred and is
continuing, if any Account Debtor returns any Inventory to Borrower in the
ordinary course of its business, Borrower will promptly determine the reason for
such return and promptly issue a credit memorandum to the Account Debtor in the
appropriate amount (sending a copy to Lender). After the occurrence of an Event
of Default, Borrower will not accept any return without Lender's prior written
consent. Regardless of whether an Event of Default has occurred, Borrower will
(i) hold the returned Inventory in trust for Lender; (ii) segregate all returned
Inventory from all of Borrower's other property; (iii) conspicuously label the
returned Inventory as Lender's property; and (iv) immediately notify Lender of
the return of such Inventory, specifying the reason for such return, the
location and condition of the returned Inventory and, at Lender's request,
deliver such returned Inventory to Lender at an address specified by Lender.
(b) OTHER COVENANTS. Borrower will not, without Lender's prior
written consent, (i) store any Inventory with any warehouseman or other third
party other than as set forth in Section 9(d) of Schedule A or (ii) sell any
Inventory on a sale-or-return, guaranteed sale, consignment, or other contingent
basis. All of the Inventory has been produced only in accordance with the Fair
Labor Standards Act of 1938 and all rules, regulations and orders promulgated
thereunder.
4.9 ACCESS TO COLLATERAL, BOOKS AND RECORDS. At reasonable times, and on
one Business Day's notice, prior to the occurrence of a Default or an Event of
Default, and at any
8
<PAGE>
time and with or without notice after the occurrence of a Default or an Event of
Default, Lender or its agents shall have the right to inspect the Collateral,
and the right to examine and copy Borrower's books and records. Lender shall
take reasonable steps to keep confidential all information obtained in any such
inspection or examination, but Lender shall have the right to disclose any such
information to its auditors, regulatory agencies, attorneys and participants,
and pursuant to any subpoena or other legal process. Borrower agrees to give
Lender access to any or all of Borrower's premises to enable Lender to conduct
such inspections and examinations. Such inspections and examinations shall be at
Borrower's expense and the charge therefor shall be $650 per person per day (or
such higher amount as shall represent Lender's then current standard charge),
plus reasonable out-of-pocket expenses. Lender may, at Borrower's expense, use
Borrower's personnel, computer and other equipment, programs, printed output and
computer readable media, supplies and premises for the collection, sale or other
disposition of Collateral to the extent Lender, in its sole discretion, deems
appropriate. Borrower hereby irrevocably authorizes all accountants and third
parties to disclose and deliver to Lender, at Borrower's expense, all financial
information, books and records, work papers, management reports and other
information in their possession regarding Borrower. Borrower will not enter into
any agreement with any accounting firm, service bureau or third party to store
Borrower's books or records at any location other than Borrower's Address
without first obtaining Lender's written consent (which consent may be
conditioned upon such accounting firm, service bureau or other third party
agreeing to give Lender the same rights with respect to access to books and
records and related rights as Lender has under this Agreement).
5. REPRESENTATIONS, WARRANTIES AND COVENANTS.
To induce Lender to enter into this Agreement, Borrower represents,
warrants and covenants as follows (it being understood that (i) each such
representation and warranty will be deemed remade as of the date on which each
Loan is made and each Credit Accommodation is provided and shall not be affected
by any knowledge of; or any investigation by, Lender, and (ii) the accuracy of
each such representation, warranty and covenant will be a condition to each Loan
and Credit Accommodation):
5.1 EXISTENCE AND AUTHORITY. Borrower is duly organized, validly existing
and in good standing under the laws of the jurisdiction of its incorporation or
formation. Borrower is qualified and licensed to do business in all
jurisdictions in which any failure to do so would have a material adverse effect
on Borrower. The execution, delivery and performance by Borrower of this
Agreement and all of the other Loan Documents have been duly and validly
authorized, do not violate Borrower's articles or certificate of incorporation,
by-laws or other organizational documents, or any law or any agreement or
instrument or any court order which is binding upon Borrower or its property, do
not constitute grounds for acceleration of any indebtedness or obligation under
any agreement or instrument which is binding upon Borrower or its property, and
do not require the consent of any Person. This Agreement and such other Loan
Documents have been duly executed and delivered by, and are enforceable against,
Borrower, and all other Obligors who have signed them, in accordance with their
respective terms. Sections 9(g) and 9(h) of Schedule A set forth the ownership
of Borrower and the names and ownership of Borrower's Subsidiaries as of the
date of this Agreement.
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5.2 NAME; TRADE NAMES AND STYLES. The name of Borrower set forth in the
heading to this Agreement is its correct and complete legal name as of the date
hereof. Listed in Sections 9(a), 9(b) and 9(c) of Schedule A are all prior names
of Borrower and all of Borrower's present and prior trade names. Borrower shall
give Lender at least 30 days' prior written notice before changing its name or
doing business under any other name. Borrower has complied with all laws
relating to the conduct of business under a fictitious business name. Borrower
represents and warrants that (i) each trade name does not refer to another
corporation or other legal entity; (ii) all Accounts invoiced under any such
trade names are owned exclusively by Borrower and are subject to the security
interest of Lender and the other terms of this Agreement and (iii) all schedules
of Accounts, including any sales made or services rendered using any trade name
shall show Borrower's name as assignor.
5.3 TITLE TO COLLATERAL; PERMITTED LIENS. Borrower has good and marketable
title to the Collateral. The Collateral now is and will remain free and clear of
any and all liens, charges, security interests, encumbrances and adverse claims,
except for Permitted Liens. Lender now has, and will continue to have, a
first-priority perfected and enforceable security interest in all of the
Collateral, subject only to the Permitted Liens, and Borrower will at all times
defend Lender and the Collateral against all claims of others. None of the
Collateral which is Equipment is or will be affixed to any real property in such
a manner, or with such intent, as to become a fixture. Except for leases or
subleases as to which Borrower has delivered to Lender a landlord's waiver in
form and substance satisfactory to Lender, Borrower is not a lessee or sublessee
under any real property lease or sublease pursuant to which the lessor or
sublessor may obtain any rights in any of the Collateral, and no such lease or
sublease now prohibits, restrains, impairs or conditions, or will prohibit,
restrain, impair or condition, Borrower's right to remove any Collateral from
the premises. Whenever any Collateral is located upon premises in which any
third party has an interest (whether as owner, mortgagee, beneficiary under a
deed of trust, lien or otherwise), Borrower shall, whenever requested by Lender,
cause each such third party to execute and deliver to Lender, in form acceptable
to Lender, such waivers and subordinations as Lender shall specify, so as to
ensure that Lender's rights in the Collateral are, and will continue to be,
superior to the rights of any such third party. Borrower will keep in full force
and effect, and will comply with all the terms of; any lease of real property
where any of the Collateral now or in the future may be located.
5.4 ACCOUNTS AND CHATTEL PAPER. As of each date reported by Borrower, all
Accounts which Borrower has reported to Lender as being Eligible Accounts comply
in all respects with the criteria for eligibility established by Lender and in
effect at such time. All Accounts and Chattel Paper are genuine and in all
respects what they purport to be, arise out of a completed, bona fide and
unconditional and non-contingent sale and delivery of goods or rendition of
services by Borrower in the ordinary course of its business and in accordance
with the terms and conditions of all purchase orders, contracts or other
documents relating thereto, each Account Debtor thereunder had the capacity to
contract at the time any contract or other document giving rise to such Accounts
and Chattel Paper were executed, and the transactions giving rise to such
Accounts and Chattel Paper comply with all applicable laws and governmental
rules and regulations.
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5.5 INVESTMENT PROPERTY. Borrower will take any and all actions required
or requested by Lender, from time to time, to (i) cause Lender to obtain
exclusive control of any Investment Property in a manner acceptable to Lender
and (ii) obtain from any issuers of Investment Property and such other Persons
as Lender shall specify, for the benefit of Lender, written confirmation of
Lender's exclusive control over such Investment Property and take such other
actions as Lender may request to perfect Lender's security interest in such
Investment Property. For purposes of this Section 5.5, Lender shall have
exclusive control of Investment Property if (A) such Investment Property
consists of certificated securities and Borrower delivers such certificated
securities to Lender (with appropriate endorsements if such certificated
securities are in registered form); (B) such Investment Property consists of
uncertificated securities and either (x) Borrower delivers such uncertificated
securities to Lender or (y) the issuer thereof agrees, pursuant to documentation
in form and substance satisfactory to Lender, that it will comply with
instructions originated by Lender without further consent by Borrower, and (C)
such Investment Property consists of security entitlements and either (x) Lender
becomes the entitlement holder thereof or (y) the appropriate securities
intermediary agrees, pursuant to documentation in form and substance
satisfactory to Lender, that it will comply with entitlement orders originated
by Lender without further consent by Borrower.
5.6 PLACE OF BUSINESS; LOCATION OF COLLATERAL. Borrower's Address is
Borrower's chief executive office and the location of its books and records. In
addition, except as provided in the immediately following sentence, Borrower has
places of business and Collateral located only at the locations set forth on
Sections 9(d) and 9(e) of Schedule A. Borrower will give Lender at least 30
days' prior written notice before opening any additional place of business,
changing its chief executive office or the location of its books and records, or
moving any of the Collateral to a location other than Borrower's Address or one
of the locations set forth in Sections 9(d) and 9(e) of Schedule A, and will
execute and deliver all financing statements and other agreements, instruments
and documents which Lender shall require as a result thereof.
5.7 FINANCIAL CONDITION, STATEMENTS AND REPORTS. All financial statements
delivered to Lender by or on behalf of Borrower have been prepared in conformity
with GAAP and completely and fairly reflect the financial condition of Borrower,
at the times and for the periods therein stated. Between the last date covered
by any such financial statement provided to Lender and the date hereof (or, with
respect to the remaking of this representation in connection with the making of
any Loan or the providing of any Credit Accommodation, the date such Loan is
made or such Credit Accommodation is provided), there has been no material
adverse change in the financial condition or business of Borrower. Borrower is
solvent and able to pay its debts as they come due, and has sufficient capital
to carry on its business as now conducted and as proposed to be conducted. All
schedules, reports and other information and documentation delivered by Borrower
to Lender with respect to the Collateral are, or will be, when delivered, true,
correct and complete as of the date delivered or the date specified therein.
5.8 TAX RETURNS AND PAYMENTS; PENSION CONTRIBUTIONS. Borrower has timely
filed all tax returns and reports required by applicable law, has timely paid
all applicable taxes, assessments, deposits and contributions owing by Borrower
and will timely pay all such items in
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the future as they became due and payable. Borrower may, however, defer payment
of any contested taxes; PROVIDED, that Borrower (i) in good faith contests
Borrower's obligation to pay such taxes by appropriate proceedings promptly and
diligently instituted and conducted; (ii) notifies Lender in writing of the
commencement of; and any material development in, the proceedings; (iii) posts
bonds or takes any other steps required to keep the contested taxes from
becoming a Lien upon any of the Collateral and (iv) maintains adequate reserves
therefor in conformity with GAAP. Borrower is unaware of any claims or
adjustments proposed for any of Borrower's prior tax years which could result in
additional taxes becoming due and payable by Borrower. Borrower has paid, and
shall continue to pay, all amounts necessary to fund all present and future
pension, profit sharing and deferred compensation plans in accordance with their
terms, and Borrower has not withdrawn from participation in, permitted partial
or complete termination of; or permitted the occurrence of any other event with
respect to, any such plan which could result in any liability of Borrower,
including any liability to the Pension Benefit Guaranty Corporation or any other
governmental agency.
5.9 COMPLIANCE WITH LAWS. Borrower has complied in all material respects
with all provisions of all applicable laws and regulations, including those
relating to Borrower's ownership of real or personal property, the conduct and
licensing of Borrower's business, the payment and withholding of taxes, ERISA
and other employee matters, safety and environmental matters.
5.10 LITIGATION. Section 9(f) of Schedule A discloses all claims,
proceedings, litigation or investigations pending or (to the best of Borrower's
knowledge) threatened against Borrower. There is no claim, suit, litigation,
proceeding or investigation pending or (to the best of Borrower's knowledge)
threatened by or against or affecting Borrower in any court or before any
governmental agency (or any basis therefor known to Borrower) which may result,
either separately or in the aggregate, in any material adverse change in the
financial condition or business of Borrower, or in any material impairment in
the ability of Borrower to carry on its business in substantially the same
manner as it is now being conducted. Borrower will promptly inform Lender in
writing of any claim, proceeding, litigation or investigation in the future
threatened or instituted by or against Borrower.
5.11 USE OF PROCEEDS. All proceeds of all Loans will be used solely for
lawful business purposes.
5.12 INSURANCE. Borrower will at all times carry property, liability and
other insurance, with insurers acceptable to Lender, in such form and amounts,
and with such deductibles and other provisions, as Lender shall require, and
Borrower will provide evidence of such insurance to Lender, so that Lender is
satisfied that such insurance is, at all times, in full force and effect. Each
property insurance policy shall name Lender as loss payee and shall contain a
lender's loss payable endorsement in form acceptable to Lender, each liability
insurance policy shall name Lender as an additional insured, and each business
interruption insurance policy shall be collaterally assigned to Lender, all in
form and substance satisfactory to Lender. All policies of insurance shall
provide that they may not be cancelled or changed without at least thirty days'
prior written notice to Lender, shall contain breach of warranty coverage, and
shall otherwise be
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in form and substance satisfactory to Lender. Upon receipt of the proceeds of
any such insurance, Lender shall apply such proceeds in reduction of the
Obligations as Lender shall determine in its sole discretion. Borrower will
promptly deliver to Lender copies of all reports made to insurance companies.
5.13 FINANCIAL AND COLLATERAL REPORTS. Borrower has kept and will keep
adequate records and books of account with respect to its business activities
and the Collateral in which proper entries are made in accordance with GAAP
reflecting all its financial transactions, and will cause to be prepared and
furnished to Lender the following (all to be prepared in accordance with GAAP,
unless Borrower's certified public accountants concur in any change therein and
such change is disclosed to Lender):
(a) COLLATERAL REPORTS. On or before the fifteenth day of each month,
an aging of Borrower's Accounts, Chattel Paper and notes receivable, and weekly
Inventory physical counts, all in such form, and together with such additional
certificates, schedules and other information with respect to the Collateral or
the business of Borrower or any Obligor, as Lender shall request; provided, that
Borrower's failure to execute and deliver the same shall not affect or limit
Lender's security interests and other rights in any of the Accounts, nor shall
Lender's failure to advance or lend against a specific Account affect or limit
Lender's security interest and other rights therein. Together with each such
schedule, Borrower shall furnish Lender with copies (or, at Lender's request,
originals) of all contracts, orders, invoices, and other similar documents, and
all original shipping instructions, delivery receipts, bills of lading, and
other evidence of delivery, for any goods the sale or disposition of which gave
rise to such Accounts, and Borrower warrants the genuineness of all of the
foregoing. In addition, Borrower shall deliver to Lender the originals of all
Instruments, Chattel Paper, security agreements, guaranties and other documents
and property evidencing or securing any Accounts, immediately upon receipt
thereof and in the same form as received, with all necessary endorsements.
Lender may destroy or otherwise dispose of all documents, schedules and other
papers delivered to Lender pursuant to this Agreement (other than originals of
Instruments, Chattel Paper, security agreements, guaranties and other documents
and property evidencing or securing any Accounts) six months after Lender
receives them, unless Borrower requests their return in writing in advance and
arranges for their return to Borrower at Borrower's expense.
(b) ANNUAL STATEMENTS. Not later than 90 days after the close of each
fiscal year of Borrower, unqualified (except for a qualification for a change in
accounting principles with which the accountant concurs) audited financial
statements of Parent and its Subsidiaries as of the end of such year, on a
consolidated and consolidating basis, certified by a firm of independent
certified public accountants of recognized standing selected by Parent but
acceptable to Lender, together with a copy of any management letter issued in
connection therewith and a letter from such accountants acknowledging that
Lender is relying on such financial statements;
(c) INTERIM STATEMENTS. Not later than fifteen days after the end of
each month hereafter, including the last month of Parent's fiscal year,
unaudited interim financial statements of Parent and its Subsidiaries as of the
end of such month and of the portion of Parent's fiscal year then elapsed, on a
consolidated and consolidating basis, certified by the principal financial
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officer of Parent as prepared in accordance with GAAP and fairly presenting the
consolidated financial position and results of operations of Parent and its
Subsidiaries for such month and period subject only to changes from audit and
year-end adjustments and except that such statements need not contain notes;
(d) PROJECTIONS, ETC. Such business projections, Availability
projections, business plans, budgets and cash flow statements for Parent and its
Subsidiaries as Lender shall request from time to time;
(e) SHAREHOLDER REPORTS, ETC. Promptly after the sending or filing
thereof; as the case may be, copies of any proxy statements, financial
statements or reports which Parent has made available to its shareholders and
copies of any regular, periodic and special reports or registration statements
which Parent files with the Securities and Exchange Commission or any
governmental authority which may be substituted therefor, or any national
securities exchange;
(f) ERISA REPORTS. Upon request by Lender, copies of any annual
report to be filed pursuant to the requirements of ERISA in connection with each
plan subject thereto; and
(g) OTHER INFORMATION. Such other data and information (financial and
otherwise) as Lender, from time to time, may reasonably request, bearing upon or
related to the Collateral or Parent's and each of its Subsidiary's financial
condition or results of operations.
5.14 LITIGATION COOPERATION. Should any third-party suit or proceeding be
instituted by or against Lender with respect to any Collateral or in any manner
relating to Borrower, Borrower shall, without expense to Lender, make available
Borrower and its officers, employees and agents, and Borrower's books and
records, without charge, to the extent that Lender may deem them reasonably
necessary in order to prosecute or defend any such suit or proceeding.
5.15 MAINTENANCE OF COLLATERAL, ETC. Borrower will maintain all of its
Equipment in good working condition, ordinary wear and tear excepted, and
Borrower will not use the Collateral for any unlawful purpose. Borrower will
immediately advise Lender in writing of any material loss or damage to the
Collateral and of any investigation, action, suit, proceeding or claim relating
to the Collateral or which may result in an adverse impact upon Borrower's
business, assets or financial condition.
5.16 NOTIFICATION OF CHANGES. Borrower will promptly notify Lender in
writing of any change in its officers or directors, the opening of any new bank
account or other deposit account, or any material adverse change in the business
or financial affairs of Borrower or the existence of any circumstance which
would make any representation or warranty of Borrower untrue in any material
respect or constitute a material breach of any covenant of Borrower.
5.17 FURTHER ASSURANCES. Borrower agrees, at its expense, to take all
actions, and execute or cause to be executed and delivered to Lender all
promissory notes, security agreements, agreements with landlords, mortgagees and
processors and other bailees, subordination and intercreditor agreements and
other agreements, instruments and documents as
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Lender may request from time to time, to perfect and maintain Lender's security
interests in the Collateral and to fully effectuate the transactions
contemplated by this Agreement.
5.18 NEGATIVE COVENANTS. Except as set forth in Section 12 of Schedule A,
Borrower will not, without Lender's prior written consent (which will not be
unreasonably withheld), (i) merge or consolidate with another Person, form any
new Subsidiary or acquire any interest in any Person; (ii) acquire any assets
except in the ordinary course of business and as otherwise permitted by this
Agreement and the other Loan Documents; (iii) enter into any transaction outside
the ordinary course of business; (iv) sell or transfer any Collateral or other
assets, except that Borrower may sell finished goods Inventory in the ordinary
course of its business; (v) make any loans to, or investments in, any Affiliate
(including without limitation Parent) or other Person in the form of money or
other assets; (vi) incur any debt outside the ordinary course of business; (vii)
guaranty or otherwise become liable with respect to the obligations of another
party or entity; (viii) pay or declare any dividends or other distributions on
Borrower's stock, if Borrower is a corporation (except for dividends payable
solely in capital stock of Borrower) or with respect to any equity interests, if
Borrower is not a corporation; (ix) redeem, retire, purchase or otherwise
acquire, directly or indirectly, any of Borrower's capital stock or other equity
interests; (x) make any change in Borrower's capital structure; (xi) dissolve or
elect to dissolve; (xii) pay any principal or interest on any indebtedness owing
to an Affiliate (including without limitation Parent), (xiii) enter into any
transaction with an Affiliate (including without limitation Parent) other than
on arms-length terms; or (xiv) agree to do any of the foregoing.
5.19 FINANCIAL COVENANTS.
(a) CAPITAL EXPENDITURES. Borrower will not expend or commit to
expend, directly or indirectly, for capital expenditures (including capital
lease obligations) in excess of the amount set forth in Section 8(a) of Schedule
A as the Capital Expenditure Limitation in any fiscal year.
(b) NET WORTH. Borrower will at all times maintain a net worth of at
least the amount set forth in Section 8(b) of Schedule A.
(c) TANGIBLE NET WORTH. Borrower will at all times maintain a minimum
tangible net worth of at least the amount set forth in Section 8(c) of Schedule
A.
(d) WORKING CAPITAL. Borrower will at all times maintain working
capital of at least the amount set forth in Section 8(d) of Schedule A.
(e) NET LOSSES. Borrower will not permit its cumulative net loss to
exceed the amount set forth in Section 8(e) of Schedule A.
(f) NET INCOME. Borrower will not permit its cumulative net income to
be less than the amount set forth in Section 8(f) of Schedule A.
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(g) LEVERAGE. Borrower will not permit the ratio of its total
liabilities to its net worth to exceed, at any time, the ratio set forth in
Section 8(g) of Schedule A.
(h) OTHER FINANCIAL COVENANTS. Borrower will comply with any
additional financial covenants set forth in Section 8(j) of Schedule A.
5.20 OTHER COVENANTS. Borrower will comply with any additional covenants
set forth in Section 13 of Schedule A.
6. RELEASE AND INDEMNITY.
6.1 RELEASE. Borrower hereby releases Lender and its Affiliates and their
respective directors, officers, employees, attorneys and agents and any other
Person affiliated with or representing Lender (the "RELEASED PARTIES") from any
and all liability arising from acts or omissions under or pursuant to this
Agreement, whether based on errors of judgment or mistake of law or fact, except
for those arising from willful misconduct. However, in no circumstance will any
of the Released Parties be liable for lost profits or other special or
consequential damages. Such release is made on the date hereof and remade upon
each request for a Loan or Credit Accommodation by Borrower. Without limiting
the foregoing:
(a) Lender shall not be liable for (i) any shortage or discrepancy
in, damage to, or loss or destruction of; any goods, the sale or other
disposition of which gave rise to an Account; (ii) any error, act, omission, or
delay of any kind occurring in the settlement, failure to settle, collection or
failure to collect any Account; (iii) settling any Account in good faith for
less than the full amount thereof; or (iv) any of Borrower's obligations under
any contract or agreement giving rise to an Account; and
(b) In connection with Credit Accommodations or any underlying
transaction, Lender shall not be responsible for the conformity of any goods to
the documents presented, the validity or genuineness of any documents, delay,
default or fraud by Borrower, shippers and/or any other Person. Borrower agrees
that any action taken by Lender, if taken in good faith, or any action taken by
an issuer of any Credit Accommodation, under or in connection with any Credit
Accommodation, shall be binding on Borrower and shall not create any resulting
liability to Lender. In furtherance thereof; Lender shall have the full right
and authority to clear and resolve any questions of non-compliance of documents,
to give any instructions as to acceptance or rejection of any documents or
goods, to execute for Borrower's account any and all applications for steamship
or airway guaranties, indemnities or delivery orders, to grant any extensions of
the maturity of; time of payment for, or time of presentation of; any drafts,
acceptances or documents, and to agree to any amendments, renewals, extensions,
modifications, changes or cancellations of any of the terms or conditions of any
of the Credit Accommodations or applications and other documentation pertaining
thereto.
6.2 INDEMNITY. Borrower hereby agrees to indemnify the Released Parties
and hold them harmless from and against any and all claims, debts, liabilities,
demands, obligations, actions, causes of action, penalties, costs and expenses
(including attorneys' fees), of every
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nature, character and description, which the Released Parties may sustain or
incur based upon or arising out of any of the transactions contemplated by this
Agreement or the other Loan Documents or any of the Obligations, including any
transactions or occurrences relating to the issuance of any Credit
Accommodation, the Collateral relating thereto, any drafts thereunder and any
errors or omissions relating thereto (including any loss or claim due to any
action or inaction taken by the issuer of any Credit Accommodation) (and for
this purpose any charges to Lender by any issuer of Credit Accommodations shall
be conclusive as to their appropriateness and may be charged to the Loan
Account), or any other matter, cause or thing whatsoever occurred, done, omitted
or suffered to be done by Lender relating to Borrower or the Obligations (except
any such amounts sustained or incurred as the result of the willful misconduct
of the Released Parties). Notwithstanding any provision in this Agreement to the
contrary, the indemnity agreement set forth in this Section shall survive any
termination of this Agreement.
7. TERM.
7.1 MATURITY DATE. Lender's obligation to make Loans and to provide Credit
Accommodations under this Agreement shall initially continue in effect until the
Initial Maturity Date set forth in Section 7 of Schedule A (the "INITIAL TERM");
provided, that such date shall automatically be extended (the Initial Maturity
Date, as it may be so extended, being referred to as the "MATURITY DATE") for
successive additional terms of three years each (each a "RENEWAL TERM"), unless
one party gives written notice to the other, not less than sixty days prior to
the Maturity Date, that such party elects not to extend the Maturity Date. This
Agreement and the other Loan Documents and Lender's security interests in and
Liens upon the Collateral, and all representations, warranties and covenants of
Borrower contained herein and therein, shall remain in full force and effect
after the Maturity Date until all of the monetary Obligations are indefeasibly
paid in full.
7.2 EARLY TERMINATION. Lender's obligation to make Loans and to provide
Credit Accommodations under this Agreement may be terminated prior to the
Maturity Date as follows: (i) by Borrower, effective thirty business days after
written notice of termination is given to Lender or (ii) by Lender at any time
after the occurrence of an Event of Default, without notice, effective
immediately; PROVIDED, that if any Affiliate of Borrower is also a party to a
financing arrangement with Lender, no such early termination shall be effective
unless such Affiliate simultaneously terminates its financing arrangement with
Lender. If so terminated under this Section 7.2, Borrower shall pay to Lender
(i) an early termination fee (the "EARLY TERMINATION FEE") in the amount set
forth in Section 6(h) of Schedule A plus (ii) any earned but unpaid Facility
Fee. Such fee shall be due and payable on the effective date of termination and
thereafter shall bear interest at a rate equal to the highest rate applicable to
any of the Obligations. In addition, if Borrower so terminates and repays the
Obligations without having provided Lender with at least thirty days' prior
written notice thereof; an additional amount equal to thirty days of interest at
the applicable Interest Rate(s), based on the average outstanding amount of the
Obligations for the six month period immediately preceding the date of
termination.
7.3 PAYMENT OF OBLIGATIONS. On the Maturity Date or on any earlier
effective date of termination, Borrower shall pay in full all Obligations,
whether or not all or any part of such
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Obligations are otherwise then due and payable. Without limiting the generality
of the foregoing, if; on the Maturity Date or on any earlier effective date of
termination, there are any outstanding Credit Accommodations, then on such date
Borrower shall provide to Lender cash collateral in an amount equal to 110% of
the Credit Accommodation Balance to secure all of the Obligations (including
estimated attorneys' fees and other expenses) relating to said Credit
Accommodations or such greater percentage or amount as Lender reasonably deems
appropriate, pursuant to a cash pledge agreement in form and substance
satisfactory to Lender.
7.4 EFFECT OF TERMINATION. No termination shall affect or impair any right
or remedy of Lender or relieve Borrower of any of the Obligations until all of
the monetary Obligations have been indefeasibly paid in full. Upon indefeasible
payment and performance in full of all of the monetary Obligations (and the
provision of cash collateral with respect to any Credit Accommodation Balance as
required by Section 7.3) and termination of this Agreement, Lender shall
promptly deliver to Borrower termination statements, requests for reconveyances
and such other documents as may be reasonably required to terminate Lender's
security interests in the Collateral.
8. EVENTS OF DEFAULT AND REMEDIES.
8.1 EVENTS OF DEFAULT. The occurrence of any of the following events shall
constitute an "EVENT OF DEFAULT" under this Agreement, and Borrower shall give
Lender immediate written notice thereof: (i) if any warranty, representation,
statement, report or certificate made or delivered to Lender by Borrower or any
of Borrower's officers, employees or agents is untrue or misleading; (ii) if
Borrower fails to pay when due any principal or interest on any Loan or any
other monetary Obligation; (iii) if Borrower breaches any covenant or obligation
contained in (a) any of the first sentence of Section 5.1, Section 5.5, Section
5.8, Section 5.9, Section 5.12 or Section 5.14, of this Agreement and such
breach has not been cured to Lender's satisfaction within 10 days of the
occurrence thereof or (b) any Section of this Agreement other than those listed
in clause (a), or any section of any other Loan Document or fails to perform any
other non-monetary Obligation; (iv) if any levy, assessment, attachment,
seizure, lien or encumbrance (other than a Permitted Lien) is made or permitted
to exist on all or any part of the Collateral; (v) if one or more judgments
aggregating in excess of $25,000, or any injunction or attachment, is obtained
against Borrower or any Obligor or which remains unstayed for more than ten days
or is enforced; (vi) the occurrence of any default under any financing
agreement, security agreement or other agreement, instrument or document
executed and delivered by (A) Borrower with, or in favor of; any Person other
than Lender or (B) Borrower or any Affiliate of Borrower with, or in favor of;
Lender or any Affiliate of Lender; (vii) the dissolution, death, termination of
existence in good standing, insolvency or business failure or suspension or
cessation of business as usual of Borrower or any Obligor (or of any general
partner of Borrower or any Obligor if it is a partnership) or the appointment of
a receiver, trustee or custodian for all or any part of the property of; or an
assignment for the benefit of creditors by Borrower or any Obligor, or the
commencement of any proceeding by Borrower or any Obligor under any
reorganization, bankruptcy, insolvency, arrangement, readjustment of debt,
dissolution or liquidation law or statute of any jurisdiction, now or in the
future in effect, or if Borrower makes or sends a notice of a bulk transfer or
calls a meeting of its creditors; (viii) the commencement of any proceeding
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against Borrower or any Obligor under any reorganization, bankruptcy,
insolvency, arrangement, readjustment of debt, dissolution or liquidation law or
statute of any jurisdiction, now or in the future in effect; (ix) the actual or
attempted revocation or termination of; or limitation or denial of liability
upon, any guaranty of the Obligations, or any security document securing the
Obligations, by any Obligor; (x) if Borrower makes any payment on account of any
indebtedness or obligation which has been subordinated to the Obligations other
than as permitted in the applicable subordination agreement, or if any Person
who has subordinated such indebtedness or obligations attempts to limit or
terminate its subordination agreement; (xi) if there is any actual or threatened
indictment of Borrower or any Obligor under any criminal statute or commencement
or threatened commencement of criminal or civil proceedings against Borrower or
any Obligor, pursuant to which the potential penalties or remedies sought or
available include forfeiture of any property of Borrower or such Obligor; (xii)
if there is a change in the record or beneficial ownership of an aggregate of
more than 20% of the outstanding shares of stock of Borrower (or partnership or
membership interests if it is a partnership or limited liability company), in
one or more transactions, compared to the ownership of outstanding shares of
stock (or partnership or membership interests) of Borrower as of the date
hereof; without the prior written consent of Lender; (xiii) if there is any
change in the chief executive officer, chief operating officer or chief
financial officer of Borrower; (xiv) if an Event of Default occurs under any
Loan and Security Agreement between Lender and an Affiliate of Borrower; or (xv)
if Lender determines in good faith that the Collateral is insufficient to fully
secure the Obligations or that the prospect of payment of performance of the
Obligations is impaired.
8.2 REMEDIES. Upon the occurrence of any Default, and at any time
thereafter, Lender, at its option, may cease making Loans or otherwise extending
credit to Borrower under this Agreement or any other Loan Document. Upon the
occurrence of any Event of Default, and at any time thereafter, Lender, at its
option, and without notice or demand of any kind (all of which are hereby
expressly waived by Borrower), may do any one or more of the following: (i)
cease making Loans or otherwise extending credit to Borrower under this
Agreement or any other Loan Document; (ii) accelerate and declare all or any
part of the Obligations to be immediately due, payable and performable,
notwithstanding any deferred or installment payments allowed by any instrument
evidencing or relating to any of the Obligations; (iii) take possession of any
or all of the Collateral wherever it may be found, and for that purpose Borrower
hereby authorizes Lender, without judicial process, to enter onto any of
Borrower's premises without interference to search for, take possession of;
keep, store, or remove any of the Collateral, and remain (or cause a custodian
to remain) on the premises in exclusive control thereof; without charge for so
long as Lender deems it reasonably necessary in order to complete the
enforcement of its rights under this Agreement or any other agreement; PROVIDED,
that if Lender seeks to take possession of any of the Collateral by court
process, Borrower hereby irrevocably waives (A) any bond and any surety or
security relating thereto required by law as an incident to such possession, (B)
any demand for possession prior to the commencement of any suit or action to
recover possession thereof and (C) any requirement that Lender retain possession
of; and not dispose of; any such Collateral until after trial or final judgment;
(iv) require Borrower to assemble any or all of the Collateral and make it
available to Lender at one or more places designated by Lender which are
reasonably convenient to Lender and Borrower, and to remove the Collateral to
such locations as Lender may deem advisable; (v) complete the processing,
manufacturing or repair of any
19
<PAGE>
Collateral prior to a disposition thereof and, for such purpose and for the
purpose of removal, Lender shall have the right to use Borrower's premises,
vehicles and other Equipment and all other property without charge; (vi) sell,
lease or otherwise dispose of any of the Collateral, in its condition at the
time Lender obtains possession of it or after further manufacturing, processing
or repair, at one or more public or private sales, in lots or in bulk, for cash,
exchange or other property, or on credit (a "SALE"), and to adjourn any such
Sale from time to time without notice other than oral announcement at the time
scheduled for Sale (and, in connection therewith, (A) Lender shall have the
right to conduct such Sale on Borrower's premises without charge, for such times
as Lender deems reasonable, on Lender's premises, or elsewhere, and the
Collateral need not be located at the place of Sale; (B) Lender may directly or
through any of its Affiliates purchase or lease any of the Collateral at any
such public disposition, and if permissible under applicable law, at any private
disposition and (C) any Sale of Collateral shall not relieve Borrower of any
liability Borrower may have if any Collateral is defective as to title, physical
condition or otherwise at the time of sale); (vii) demand payment of and collect
any Accounts, Chattel Paper, Instruments and General Intangibles included in the
Collateral and, in connection therewith, Borrower irrevocably authorizes Lender
to endorse or sign Borrower's name on all collections, receipts, Instruments and
other documents, to take possession of and open mail addressed to Borrower and
remove therefrom payments made with respect to any item of Collateral or
proceeds thereof and, in Lender's sole discretion, to grant extensions of time
to pay, compromise claims and settle Accounts, General Intangibles and the like
for less than face value; and (viii) demand and receive possession of any of
Borrower's federal and state income tax returns and the books and records
utilized in the preparation thereof or relating thereto. In addition to the
foregoing remedies, upon the occurrence of any Event of Default resulting from a
breach of any of the financial covenants set forth in Section 5.19, Lender may,
at its option, upon not less than ten days' prior notice to Borrower, reduce any
or all of the Advance Rates set forth in Section 1(b) of Schedule A to the
extent Lender, in its sole discretion, deems appropriate. In addition to the
rights and remedies set forth above, Lender shall have all the other rights and
remedies accorded a secured party after default under the UCC and under all
other applicable laws, and under any other Loan Document, and all of such rights
and remedies are cumulative and non-exclusive. Exercise or partial exercise by
Lender of one or more of its rights or remedies shall not be deemed an election
or bar Lender from subsequent exercise or partial exercise of any other rights
or remedies. The failure or delay of Lender to exercise any rights or remedies
shall not operate as a waiver thereof; but all rights and remedies shall
continue in full force and effect until all of the Obligations have been fully
paid and performed. If notice of any sale or other disposition of Collateral is
required by law, notice at least seven days prior to the sale designating the
time and place of sale in the case of a public sale or the time after which any
private sale or other disposition is to be made shall be deemed to be reasonable
notice, and Borrower waives any other notice. If any Collateral is sold or
leased by Lender on credit terms or for future delivery, the Obligations shall
not be reduced as a result thereof until payment is collected by Lender.
8.3 APPLICATION OF PROCEEDS. Subject to any application required by law,
all proceeds realized as the result of any Sale shall be applied by Lender to
the Obligations in such order as Lender shall determine in its sole discretion.
Any surplus shall be paid to Borrower or other persons legally entitled thereto;
but Borrower shall remain liable to Lender for any deficiency. If
20
<PAGE>
Lender, in its sole discretion, directly or indirectly enters into a deferred
payment or other credit transaction with any purchaser at any Sale, Lender shall
have the option, exercisable at any time, in its sole discretion, of either
reducing the Obligations by the principal amount of the purchase price or
deferring the reduction of the Obligations until the actual receipt by Lender of
the cash therefor.
9. GENERAL PROVISIONS.
9.1 NOTICES. All notices to be given under this Agreement shall be in
writing and shall be given either personally, by reputable private delivery
service, by regular first-class mail or certified mail return receipt requested,
addressed to Lender or Borrower at the address shown in the heading to this
Agreement, or by facsimile to the facsimile number shown in Section 9(i) of
Schedule A, or at any other address (or to any other facsimile number)
designated in writing by one party to the other party in the manner prescribed
in this Section 9.1. All notices shall be deemed to have been given when
received or when delivery is refused by the recipient.
9.2 SEVERABILITY. If any provision of this Agreement, or the application
thereof to any party or circumstance, is held to be void or unenforceable by any
court of competent jurisdiction, such defect shall not affect the remainder of
this Agreement, which shall continue in full force and effect.
9.3 INTEGRATION. This Agreement and the other Loan Documents represent the
final, entire and complete agreement between Borrower and Lender and supersede
all prior and contemporaneous negotiations, oral representations and agreements,
all of which are merged and integrated into this Agreement THERE ARE NO ORAL
UNDERSTANDINGS, REPRESENTATIONS OR AGREEMENTS BETWEEN THE PARTIES WHICH ARE NOT
SET FORTH IN THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS.
9.4 WAIVERS. The failure of Lender at any time or times to require
Borrower to strictly comply with any of the provisions of this Agreement or any
other Loan Documents shall not waive or diminish any right of Lender later to
demand and receive strict compliance therewith. Any waiver of any default shall
not waive or affect any other default, whether prior or subsequent, and whether
or not similar. None of the provisions of this Agreement or any other Loan
Document shall be deemed to have been waived by any act or knowledge of Lender
or its agents or employees, but only by a specific written waiver signed by an
authorized officer of Lender and delivered to Borrower. Borrower waives demand,
protest, notice of protest and notice of default or dishonor, notice of payment
and nonpayment, release, compromise, settlement, extension or renewal of any
commercial paper, Instrument. Account, General Intangible, Document, Chattel
Paper, Investment Property or guaranty at any time held by Lender on which
Borrower is or may in any way be liable, and notice of any action taken by
Lender, unless expressly required by this Agreement, and notice of acceptance
hereof.
9.5 AMENDMENT. The terms and provisions of this Agreement may not be
amended or modified except in a writing executed by Borrower and a duly
authorized officer of Lender.
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<PAGE>
9.6 TIME OF ESSENCE. Time is of the essence in the performance by Borrower
of each and every obligation under this Agreement and the other Loan Documents.
9.7 ATTORNEYS FEES AND COSTS. Borrower shall reimburse Lender for all
reasonable attorneys' and paralegals' fees (including in-house attorneys and
paralegals employed by Lender) and all filing, recording, search, title
insurance, appraisal, audit, and other costs incurred by Lender, pursuant to, in
connection with, or relating to this Agreement, including all reasonable
attorneys' fees and costs Lender incurs to prepare and negotiate this Agreement
and the other Loan Documents; to obtain legal advice in connection with this
Agreement and the other Loan Documents or Borrower or any Obligor; to administer
this Agreement and the other Loan Documents (including the cost of periodic
financing statement, tax lien and other searches conducted by Lender); to
enforce, or seek to enforce, any of its rights; prosecute actions against, or
defend actions by, Account Debtors; to commence, intervene in, or defend any
action or proceeding; to initiate any complaint to be relieved of the automatic
stay in bankruptcy; to file or prosecute any probate claim, bankruptcy claim,
third-party claim, or other claim; to examine, audit, copy, and inspect any of
the Collateral or any of Borrower's books and records; to protect, obtain
possession of; lease, dispose of; or otherwise enforce Lender's security
interests in, the Collateral; and to otherwise represent Lender in any
litigation relating to Borrower. If either Lender or Borrower files any lawsuit
against the other predicated on a breach of this Agreement, the prevailing party
in such action shall be entitled to recover its reasonable costs and attorneys'
fees, including reasonable attorneys' fees and costs incurred in the enforcement
of, execution upon or defense of any order, decree, award or judgment. All
attorneys' fees and costs to which Lender may be entitled pursuant to this
Section shall immediately become part of the Obligations, shall be due on
demand, and shall bear interest at a rate equal to the highest interest rate
applicable to any of the Obligations.
9.8 BENEFIT OF AGREEMENT; ASSIGNABILITY. The provisions of this Agreement
shall be binding upon and inure to the benefit of the respective successors,
assigns, heirs, beneficiaries and representatives of Borrower and Lender;
provided, that Borrower may not assign or transfer any of its rights under this
Agreement without the prior written consent of Lender, and any prohibited
assignment shall be void. No consent by Lender to any assignment shall release
Borrower from its liability for any of the Obligations. Lender shall have the
right to assign all or any of its rights and obligations under the Loan
Documents, and to sell participating interests therein, to one or more other
Persons, and Borrower agrees to execute all agreements, instruments and
documents requested by Lender in connection with each such assignment and
participation.
9.9 HEADINGS; CONSTRUCTION. Section and subsection headings are used in
this Agreement only for convenience. Borrower and Lender acknowledge that the
headings may not describe completely the subject matter of the applicable
Sections or subsections, and the headings shall not be used in any manner to
construe, limit, define or interpret any term or provision of this Agreement.
This Agreement has been fully reviewed and negotiated between the parties and no
uncertainty or ambiguity in any term or provision of this Agreement shall be
construed strictly against Lender or Borrower under any rule of construction or
otherwise.
22
<PAGE>
9.10 GOVERNING LAW; CONSENT TO FORUM, ETC. THIS AGREEMENT HAS BEEN
NEGOTIATED, EXECUTED AND DELIVERED, AND SHALL BE DEEMED TO HAVE BEEN MADE, IN
NEW YORK, NEW YORK, AND SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF SUCH STATE. BORROWER HEREBY CONSENTS AND AGREES THAT THE STATE AND
FEDERAL COURTS IN NEW YORK, NEW YORK OR THE STATE IN WHICH ANY OF THE COLLATERAL
IS LOCATED SHALL HAVE NON-EXCLUSIVE JURISDICTION TO HEAR AND DETERMINE ANY
CLAIMS OR DISPUTES BETWEEN BORROWER AND LENDER PERTAINING TO THIS AGREEMENT, ANY
OTHER LOAN DOCUMENTS OR ANY MATTER ARISING OUT OF OR RELATED TO THIS AGREEMENT
OR THE OTHER LOAN DOCUMENTS. BORROWER EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE
TO SUCH JURISDICTION IN ANY ACTION OR SUIT COMMENCED IN ANY SUCH COURT, AND
WAIVES ANY OBJECTION WHICH BORROWER MAY HAVE BASED UPON LACK OF PERSONAL
JURISDICTION, IMPROPER VENUE OR FORUM NON CONVENIENS. BORROWER ALSO AGREES THAT
ANY CLAIM OR DISPUTE BROUGHT BY BORROWER AGAINST LENDER PURSUANT TO THIS
AGREEMENT, ANY OTHER LOAN DOCUMENT OR ANY MATTER ARISING OUT OF THIS AGREEMENT
OR ANY OTHER LOAN DOCUMENT SHALL BE BROUGHT EXCLUSIVELY IN THE STATE AND FEDERAL
COURTS OF NEW YORK. BORROWER HEREBY WAIVES PERSONAL SERVICE OF THE SUMMONS,
COMPLAINT AND OTHER PROCESS ISSUED IN ANY SUCH ACTION OR SUIT AND AGREES
THAT SERVICE OF SUCH SUMMONS, COMPLAINT AND OTHER PROCESS MAY BE MADE IN THE
MANNER AND SHALL BE DEEMED RECEIVED AS SET FORTH IN SECTION 9.1 FOR NOTICES, TO
THE EXTENT PERMITTED BY LAW. NOTHING IN THIS AGREEMENT SHALL BE DEEMED OR
OPERATE TO AFFECT THE RIGHT OF LENDER TO SERVE LEGAL PROCESS IN ANY OTHER MANNER
PERMITTED BY LAW, OR TO PRECLUDE THE ENFORCEMENT BY LENDER OF ANY JUDGMENT OR
ORDER OBTAINED IN SUCH FORUM OR THE TAKING OF ANY ACTION UNDER THIS AGREEMENT TO
ENFORCE THE SAME IN ANY OTHER APPROPRIATE FORUM OR JURISDICTION.
9.11 WAIVER OF JURY TRIAL, ETC. BORROWER WAIVES (i) THE RIGHT TO TRIAL BY
JURY (WHICH LENDER ALSO WAIVES) IN ANY ACTION, SUIT, PROCEEDING OR COUNTERCLAIM
OF ANY KIND ARISING OUT OF OR RELATED TO ANY OF THE LOAN DOCUMENTS, THE
OBLIGATIONS OR THE COLLATERAL OR ANY CONDUCT, ACTS OR OMISSIONS OF LENDER OR
BORROWER OR ANY OF THEIR RESPECTIVE DIRECTORS, OFFICERS, EMPLOYEES, ATTORNEYS OR
AGENTS OR ANY OTHER PERSONS AFFILIATED WITH LENDER OR BORROWER, WHETHER SOUNDING
IN CONTRACT, TORT OR OTHERWISE; (ii) THE RIGHT TO INTERPOSE ANY CLAIMS,
DEDUCTIONS, SETOFFS OR COUNTERCLAIMS OF ANY KIND IN ANY ACTION OR PROCEEDING
INSTITUTED BY LENDER WITH RESPECT TO THE LOAN DOCUMENTS OR ANY MATTER RELATING
THERETO, EXCEPT FOR COMPULSORY COUNTERCLAIMS; (iii) NOTICE PRIOR TO LENDER'S
TAKING POSSESSION OR CONTROL OF THE COLLATERAL OR ANY BOND OR SECURITY WHICH
MIGHT BE REQUIRED BY ANY COURT PRIOR TO ALLOWING LENDER TO EXERCISE ANY OF
23
<PAGE>
LENDER'S REMEDIES AND (iv) THE BENEFIT OF ALL VALUATION, APPRAISEMENT AND
EXEMPTION LAWS. BORROWER ACKNOWLEDGES THAT THE FOREGOING WAIVERS ARE A MATERIAL
INDUCEMENT TO LENDER'S ENTERING INTO THIS AGREEMENT AND THAT LENDER IS RELYING
UPON THE FOREGOING WAIVERS IN ITS FUTURE DEALINGS WITH BORROWER. BORROWER
WARRANTS AND REPRESENTS THAT IT HAS REVIEWED THE FOREGOING WAIVERS WITH ITS
LEGAL COUNSEL AND HAS KNOWINGLY AND VOLUNTARILY WAIVED ITS JURY TRIAL RIGHTS
FOLLOWING CONSULTATION WITH LEGAL COUNSEL. IN THE EVENT OF LITIGATION, THIS
AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.
IN WITNESS WHEREOF, Borrower and Lender have signed this Agreement as of
the date set forth in the heading.
BORROWER: LENDER:
FIXCOR INDUSTRIES, INC. NATIONSCREDIT COMMERCIAL
CORPORATION, THROUGH ITS
NATIONSCREDIT COMMERCIAL FUNDING
DIVISION
By /s/ Mark Fixler By /s/ Robert Beal
--------------------------------- -------------------------------------
Its CEO Its Authorized Signatory
------------------------------
24
<PAGE>
SCHEDULE A
DESCRIPTION OF CERTAIN TERMS
This Schedule is an integral part of the Loan and Security Agreement
between FIXCOR INDUSTRIES, INC. and NATIONSCREDIT COMMERCIAL CORPORATION,
THROUGH ITS NATIONSCREDIT COMMERCIAL FUNDING DIVISION (the "AGREEMENT").
1. Loan Limits for Revolving
Loans:
(a) Maximum Facility
Amount: $7,000,000
(b) Advance Rates:
(i) Accounts 85%; provided, that if the Dilution
Advance Rate: Percentage exceeds 4%, such advance
rate will be reduced by the number
of full or partial percentage
points of such excess
(ii) Inventory Advance
(A) Finished goods: 50%
(B) Raw materials: 50%
(C) Work in process: not applicable
(c) Accounts Sublimit not applicable
(d) Inventory Sublimit(s):
(i) Overall sublimit $1,000,000
on advances against
Eligible Inventory
A-1
<PAGE>
(ii) Sublimit on advances not applicable
against finished goods
(iii) Sublimit on advances not applicable
against raw materials
(iv) Sublimit on advances not applicable
against work in process
(e) Credit Accommodation Limit: not applicable
(f) Permanent Reserve Amount: not applicable
(g) Overadvance Amount: not applicable
2. Loan Limits for Term Loan:
(a) Principal Amount:
(i) Equipment Advance The lesser of $2,434,000 and 90%
of the appraised auction sale value
of Borrower's Eligible Equipment
(ii) Real Property $1,167,000
Advance:
(b) Repayment Schedule:
(i) Equipment Advance: The Equipment Advance shall be
repaid in equal consecutive
monthly installments amortized
over 72 months payable on the
first day of each calendar month
commencing June 1, 1997, with the
entire unpaid balance due and
payable on the Maturity Date
(ii) Real Property The Real Property Advance shall
Advance: be repaid in equal consecutive
monthly installments amortized
over 120 months payable on the
first day of each calendar month
commencing June 1, 1997, with the
entire unpaid balance due and
payable on the Maturity Date
A-2
<PAGE>
3. Interest Rates:
(a) Revolving Loans 1.50% per annum in excess of the
Prime Rate
(b) Term Loan: 1.50% per annum in excess of the
Prime Rate
4. Minimum Loan Amount: $2,000,000
5. Maximum Days:
(a) Maximum days after
original INVOICE DATE 90
for Eligible Accounts:
(b) Maximum days after
original INVOICE DUE
DATE for Eligible 60
Accounts:
6. Fees:
(a) Closing Fee: $70,000
(b) Facility Fee:
(i) Initial Term: $140,000
(ii) Renewal Term(s): $105,000
(c) Servicing Fee: $1,000 per month
(d) Unused Line Fee: 0.50% per annum
(e) Minimum Borrowing Fee:
(i) Applicable period: Each month
(ii) Date payable: The first day of each month
(f) Success Fee: not applicable
(g) Warrants: not applicable
A-3
<PAGE>
(h) Early Termination Fee: 2.00% of the Maximum Facility
Amount if terminated during the
first year of the Initial Term
and 1.00% of the Maximum Facility
Amount if terminated during the
second year of the Initial Term
(i) Fees for letters of not applicable
credit and other Credit
Accommodations (or
guaranties thereof by
Lender):
7. Initial Maturity Date: May 14, 2002
8. Financial Covenants:
(a) Capital Expenditure not applicable
Limitation:
(b) Minimum Net Worth not applicable
Requirement:
(c) Minimum Tangible not applicable
Net Worth:
(d) Minimum Working not applicable
Capital:
(e) Maximum Cumulative not applicable
Net Loss:
(f) Minimum Cumulative not applicable
Net Income:
(g) Maximum Leverage Ratio: not applicable
(h) Limitation on not applicable
Purchase Money Security
Interests:
(i) Limitation on Equipment not applicable
Leases:
(j) Additional Financial not applicable
A-4
<PAGE>
Covenants:
9. Borrower Information:
(a) Prior Names of None
Borrower:
(b) Prior Trade Names None
of Borrower:
(c) Existing Trade Names None
of Borrower:
(d) Inventory Locations: 1835 James Parkway
Heath, Ohio 43056
(e) Other Locations: None
(f) Litigation: None
(g) Ownership of 100% owned by Parent
Borrower:
(h) Subsidiaries (and None
ownership thereof):
(i) Facsimile Numbers:
Borrower: (216) 292-6187
Lender: (212) 597-1666
10. Description of Real See attached Exhibit A
Property:
11. Lender's Bank The First National Bank of Chicago
One First National Plaza
Chicago, Illinois 60670
12. Exceptions to Negative Borrower may from time to time (a)
Covenants: declare and pay dividends to Parent
and/or (b) make loans to Parent,
in each case in order to permit
Parent to make (i) payments of
interest in respect of Parent's
indebtedness for borrowed money
on the regularly scheduled
payment dates thereof, so long as
no Default or Event of Default has
A-5
<PAGE>
occurred and is then continuing,
and (ii) monthly payments of
principal in respect of Parent's
indebtedness for borrowed money
on any Payment Date, in such
amounts as Parent may from time
to time determine, so long as (i)
Availability is at least $250,000
immediately after making each
such payment, (ii) no Default or
Event of Default has occurred and
is then continuing and (iii) Net
Cashflow of Parent for the
applicable Determination Period,
as demonstrated by the interim or
audited financial statements
delivered to Lender for such
Determination Period pursuant to
this Agreement, as applicable,
would be positive after deducting
the amount of such payment and
all other payments of principal
in respect of Parent's
indebtedness for borrowed money
made or to be made on such
Payment Date.
13. Additional Covenants: (a) On or before September 14,
1997, Borrower will (i) establish
and implement accounting and
reporting systems and controls
with respect to its Accounts that
are satisfactory to Lender in its
sole discretion and (ii)
demonstrate to Lender's
satisfaction (in its sole
discretion) that its books and
records accurately and timely
reflect all available information
with respect to Borrower's
Accounts and Eligible Accounts
(b) One or before September 14,
1997, Borrower shall repay in full
all of its indebtedness to
Reservoir Capital Corporation and
terminate its financing
relationship with Reservoir
Capital Corporation and Borrower
will not thereafter incur any
indebtedness to Reservoir Capital
Corporation
A-6
<PAGE>
IN WITNESS WHEREOF, Borrower and Lender have signed this Schedule A as of
the date set forth in the heading to the Agreement.
BORROWER: LENDER:
FIXCOR INDUSTRIES, INC. NATIONSCREDIT COMMERCIAL CORPORATION,
THROUGH ITS NATIONSCREDIT COMMERCIAL
FUNDING DIVISION
By /s/ Mark Fixler By /s/ Robert Beal
--------------------------------- -------------------------------------
Its CEO Its Authorized Signatory
------------------------------
A-7
<PAGE>
SCHEDULE B
DEFINITIONS
This Schedule is an integral part of the Loan and Security Agreement
between FIXCOR INDUSTRIES, INC. and NATIONSCREDIT COMMERCIAL CORPORATION,
THROUGH ITS NATIONSCREDIT COMMERCIAL FUNDING DIVISION (the "AGREEMENT").
As used in the Agreement, the following terms have the following meanings:
"ACCOUNT" means any right to payment for Goods sold or leased or for
services rendered which is not evidenced by an Instrument or Chattel Paper,
whether or not it has been earned by performance.
"ACCOUNT DEBTOR" means the obligor on an Account or Chattel Paper.
"ACCOUNT PROCEEDS" has the meaning set forth in Section 4.1.
"AFFILIATE" means, with respect to any Person, a relative, partner,
shareholder, member, manager, director, officer, or employee of such Person, any
parent or subsidiary of such Person, or any Person controlling, controlled by or
under common control with such Person or any other Person affiliated, directly
or indirectly, by virtue of family membership, ownership, management or
otherwise.
"AGREEMENT" and "this Agreement" mean the Loan and Security Agreement
of which this Schedule B is a part and the Schedules thereto.
"AVAILABILITY" has the meaning set forth in Section 1.1(a)
"BANKRUPTCY CODE" means the United States Bankruptcy Code (11 U.S.C.
Section 101 et seq.).
"BLOCKED ACCOUNT" has the meaning set forth in Section 4.1.
"BORROWER" has the meaning set forth in the heading to the Agreement
"BORROWER ADDRESS" has the meaning set forth in the heading to the Agreement
"BUSINESS DAY" means a day other than a Saturday or Sunday or any
other day on which Lender or banks in New York are authorized to close.
"CHATTEL PAPER" has the meaning set forth in the UCC.
"COLLATERAL" means all property and interests in property in or upon
which a security interest or other Lien is granted pursuant to this Agreement or
the other Loan Documents.
B-1
<PAGE>
"CREDIT ACCOMMODATION" has the meaning set forth in Section 1.1(a).'
"CREDIT ACCOMMODATION BALANCE" means the sum of (i) the aggregate
undrawn face amount of all outstanding Credit Accommodations and (ii) all
interest, fees and costs due or, in Lender's estimation, likely to become due in
connection therewith.
"DEFAULT" means any event which with notice or passage of time, or
both, would constitute an Event of Default.
"DEFAULT RATE" has the meaning set forth in Section 2.1.
"DEPOSIT ACCOUNT" has the meaning set forth in the UCC.
"DETERMINATION PERIOD" means with respect to each Payment Date
relating to (i) any calendar month falling in calendar year 1997, the period
beginning on January 1, 1997 and ending on the last day of such month and (ii)
any calendar month falling after calendar year 1997, the period of twelve months
ending on the last day of such month.
"DILUTION PERCENTAGE" means the gross amount of all returns,
allowances, discounts, credits, write-offs and similar items relating to
Borrower's Accounts computed as a percentage of Borrower's gross sales,
calculated on a ninety (90) day rolling average.
"DOCUMENT" has the meaning set forth in the UCC.
"EASY TERMINATION FEE" has the meaning set forth in Section 7.2.
"ELIGIBLE ACCOUNT" means, at any time of determination, an Account
which satisfies the general criteria set forth below and which is otherwise
acceptable to Lender (provided, that Lender may, in its sole discretion, change
the general criteria for acceptability of Eligible Accounts upon at least
fifteen days prior notice to Borrower). An Account shall be deemed to meet the
current general criteria if (i) neither the Account Debtor nor any of its
Affiliates is an Affiliate, creditor or supplier of Borrower, (ii) it does not
remain unpaid more than the earlier to occur of (A) the number of days after the
original invoke date set forth in Section 5(a) of Schedule A or (B) the number
of days after the original invoice due date set forth in Section 5(b) of
Schedule A; (iii) the Account Debtor or its Affiliates are not past due on other
Accounts owing to Borrower comprising more than 50% of all of the Accounts owing
to Borrower by such Account Debtor or its Affiliates; (iv) all Accounts owing by
the Account Debtor or its Affiliates do not represent more than 20% of all
otherwise Eligible Accounts (provided, that Accounts which are deemed to be
ineligible solely by reason of this clause (iv) shall be considered Eligible
Accounts to the extent of the amount thereof which does not exceed 20% of all
otherwise Eligible Accounts); (v) no covenant, representation or warranty
contained in this Agreement with respect to such Account (including any of the
representations set forth in Section 5.4) has been breached; (vi) the Account is
not subject to any contra relationship, counterclaim, dispute or set-off
(provided, that Accounts which are deemed to be ineligible solely by reason of
this clause (vi) shall be considered Eligible Accounts to the extent of the
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amount thereof which is not affected by such contra relationships,
counterclaims, disputes or setoffs); (vii) the Account Debtor's chief executive
office or principal place of business is located in the United States or
Provinces of Canada which have adopted the Personal Property Security Act or a
similar act, unless (A) the sale is fully backed by a letter of credit, guaranty
or acceptance acceptable to Lender in its sole discretion, and if backed by a
letter of credit, such letter of credit has been issued or confirmed by a bank
satisfactory to Lender, is sufficient to cover such Account, and if required by
Lender, the original of such letter of credit has been delivered to Lender or
Lender's agent and the issuer thereof notified of the assignment of the proceeds
of such letter of credit to Lender or (B) such Account is subject to credit
insurance payable to Lender issued by an insurer and on terms and in an amount
acceptable to Lender; (viii) it is absolutely owing to Borrower and does not
arise from a sale on a bill-and-hold, guarantied sale, sale-or-return,
sale-on-approval, consignment, retainage or any other repurchase or return basis
or consist of progress billings; (ix) Lender shall have verified the Account in
a manner satisfactory to Lender; (x) the Account Debtor is not the United States
of America or any state or political subdivision (or any department, agency or
instrumentality thereof), unless Borrower has complied with the Assignment of
Claims Act of 1940 (31 U.S.C. Section 203 et seq.) or other applicable similar
state or local law in a manner satisfactory to Lender; (xi) it is at all times
subject to Lender's duly perfected, first priority security interest and to no
other Lien that is not a Permitted Lien, and the goods giving rise to such
Account (A) were not, at the time of sale, subject to any Lien except Permitted
Liens and (B) have been delivered to and accepted by the Account Debtor, or the
services giving rise to such Account have been performed by Borrower and
accepted by the Account Debtor; (xii) the Account is not evidenced by Chattel
Paper or an Instrument of any kind and has not been reduced to judgment; (xiii)
the Account Debtor's total indebtedness to Borrower does not exceed the amount
of any credit limit established by Borrower or Lender and the Account Debtor is
otherwise deemed to be creditworthy by Lender (provided, that Accounts which are
deemed to be ineligible solely by reason of this clause (xiii) shall be
considered Eligible Accounts to the extent the amount of such Accounts does not
exceed the lower of such credit limits); (xiv) there are no facts or
circumstances existing, or which could reasonably be anticipated to occur, which
might result in any adverse change in the Account Debtor's financial condition
or impair or delay the collectibility of all or any portion of such Account;
(xv) Lender has been furnished with all documents and other information
pertaining to such Account which Lender has requested, or which Borrower is
obligated to deliver to Lender, pursuant to this Agreement; (xvi) Borrower has
not made an agreement with the Account Debtor to extend the time of payment
thereof beyond the time periods set forth in clause (ii) above; and (xvii)
Borrower has not posted a surety or other bond in respect of the contract under
which such Account arose.
"ELIGIBLE EQUIPMENT" means, at any time of determination, Equipment
owned by Borrower which Lender, in its sole discretion, deems to be eligible for
borrowing purposes.
"ELIGIBLE INVENTORY" means, at any time of determination, Inventory
(other than work-in-process, packaging materials and supplies) which satisfies
the general criteria set forth below and which is otherwise acceptable to Lender
(provided, that Lender may, in its sole discretion, change the general criteria
for acceptability of Eligible Inventory upon at least fifteen days' prior
written notice to Borrower). Inventory shall be deemed to meet the current
general
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criteria if (i) it consists of raw materials or finished goods; (ii) it is in
good, new and saleable condition, (iii) it is not slow-moving, obsolete,
unmerchantable, returned or repossessed; (iv) it is not in the possession of a
processor, consignee or bailee, or located on premises leased or subleased to
Borrower, or on premises subject to a mortgage in favor of a Person other than
Lender, unless such processor, consignee, bailee or mortgagee or the lessor or
sublessor of such premises, as the case may be, has executed and delivered all
documentation which Lender shall require to evidence the subordination or other
limitation or extinguishment of such Person's rights with respect to such
Inventory and Lender's right to gain access thereto; (v) it meets all standards
imposed by any governmental agency or authority; (vi) it conforms in all
respects to any covenants, warranties and representations set forth in the
Agreement; (vii) it is at all times subject to Lender's duly perfected, first
priority security interest and no other Lien except a Permitted Lien, and (viii)
it is situated at an Inventory Location listed in Section 9(d) of Schedule A or
other location of which Lender has been notified as required by Section 5.6.
"ELIGIBLE REAL PROPERTY" means, at any time of determination, Real
Property owned by Borrower which Lender, in its sole discretion, deems to be
eligible for borrowing purposes.
"EQUIPMENT" means all Goods which are used or bought for use primarily
in business (including farming or a profession) or by a Person who is a
non-profit organization or governmental subdivision or agency and which are not
Inventory, farm products or consumer goads, including all machinery, molds,
machine tools, motors, furniture, equipment, furnishings, fixtures, trade
fixtures, motor vehicles, tools, parts, dies and jigs, and all attachments,
accessories, accessions, replacements, substitutions, additions or improvements
to, or spare parts for, any of the foregoing.
"EQUIPMENT ADVANCE" has the meaning set forth in Section 1.1(b).
"ERISA" means the Employee Retirement Income Security Act of 1974 and
all rules, regulations and orders promulgated thereunder.
"EVENT OF DEFAULT" has the meaning set forth in Section 8.1.
"GAAP" means generally accepted accounting principles as in effect
from time to time, consistently applied.
"GENERAL INTANGIBLES" has the meaning set forth in the UCC, and
includes all books and records pertaining to the Collateral and other business
and financial records in the possession of Borrower or any other Person,
inventions, designs, drawings, blueprints, patents, patent applications,
trademarks, trademark applications (other than "intent to use" applications
until a verified statement of use is filed with respect to such applications)
and the goodwill of the business symbolized thereby, names, trade names, trade
secrets, goodwill, copyrights, registrations, licenses, franchises, customer
lists, security and other deposits, causes of action and other rights in all
litigation presently or hereafter pending for any cause or claim (whether in
contract, tort or otherwise), and all judgments now or hereafter arising
therefrom, rights to
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purchase or sell real or personal property, rights as a licensor or licensee of
any kind, royalties, telephone numbers, internet addresses, proprietary
information, purchase orders, and all insurance policies and claims (including
life insurance, key man insurance, credit insurance, liability insurance,
property insurance and other insurance), tax refunds and claims, letters of
credit, banker's acceptances and guaranties, computer programs, discs, tapes and
tape files in the possession of Borrower or any other Person, claims under
guaranties, security interests or other security held by or granted to Borrower,
all rights to indemnification and all other intangible property of every kind
and nature.
"GOODS" means all things which are movable at the time the security
interest attaches or which are fixtures (other than money, Documents,
Instruments, Investment Property, Accounts, Chattel Paper, General Intangibles,
or minerals or the like (including oil and gas) before extraction), including
standing timber which is to be cut and removed under a conveyance or contract
for sale, the unborn young of animals, and growing crops.
"INITIAL TERM" has the meaning set forth in Section 7.1.
"INSTRUMENT" has the meaning set forth in the UCC.
"INVENTORY" means all Goods held for sale or lease or furnished or to
be furnished under contracts of service, including all raw materials, work in
process, finished goods, goods in transit and materials and supplies which are
or might be used or consumed in a business or used in connection with the
manufacture, packing, shipping, advertising, selling or finishing of such Goods,
and all products of the foregoing, and shall include interests in goods
represented by Accounts, returned, reclaimed or repossessed goods and rights as
an unpaid vendor.
"INVESTMENT PROPERTY" shall mean all of Borrower's securities, whether
certificated or uncertificated, securities entitlements, securities accounts,
commodity contracts and commodity accounts.
"LENDER" has the meaning set forth in the heading to the Agreement
"LIEN" means any interest in property securing an obligation owed to,
or a claim by, a Person other than the owner of the property, whether such
interest is based on common law, statute or contract, including rights of
sellers under conditional sales contracts or title retention agreements and
reservations, exceptions, encroachments, easements, rights-of-way, covenants,
conditions, restrictions, leases and other title exceptions and encumbrances
affecting property. For the purpose of this Agreement, Borrower shall be deemed
to be the owner of any property which it has acquired or holds subject to a
conditional sale agreement or other arrangement pursuant to which title to the
property has been retained by or vested in some other Person for security
purposes.
"LOAN ACCOUNT" has the meaning set forth in Section 2.4.
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<PAGE>
"LOAN DOCUMENTS" means the Agreement and all notes, guaranties,
security agreements, certificates, landlord's agreements, Lock Box and Blocked
Account agreements and all other agreements, documents and instruments now or
hereafter executed or delivered by Borrower or any Obligor in connection with,
or to evidence the transactions contemplated by, this Agreement.
"LOAN LIMITS" means, collectively, the Availability limits and all
other limits on the amount of Loans and Credit Accommodations set forth in this
Agreement.
"LOANS" means, collectively, the Revolving Loans and any Term Loan.
"LOCK BOX" has the meaning set forth in Section 4.1.
"MATURITY DATE" has the meaning set forth in Section 7.1.
"NET CASHFLOW" means net income during any period, plus depreciation
and amortization during such period, MINUS repayment of indebtedness for
borrowed money during such period, and minus capital expenditures during such
period, all determined for Parent and its subsidiaries on a consolidated basis
and in accordance with GAAP.
"OBLIGATIONS" means all present and future Loans, advances, debts,
liabilities, obligations, guaranties, covenants, duties and indebtedness at any
time owing by Borrower to Lender, whether evidenced by this Agreement or any
other Loan Document, whether arising from an extension of credit; opening of a
Credit Accommodation, guaranty, indemnification or otherwise (including all
fees, costs and other amounts which may be owing to issuers of Credit
Accommodations and all taxes, duties, freight, insurance, costs and other
expenses, costs or amounts payable in connection with Credit Accommodations or
the underlying goods), whether direct or indirect (including those acquired by
assignment and any participation by Lender in Borrower's indebtedness owing to
others), whether absolute or contingent, whether due or to become due, and
whether arising before or after the commencement of a proceeding under the
Bankruptcy Code or any similar statute, including all interest, charges,
expenses, fees, attorney's fees, expert witness fees, audit fees, letter of
credit fees, loan fees, Early Termination Fees, Minimum Borrowing Fees and any
other sums chargeable to Borrower under this Agreement or under any other Loan
Document.
"OBLIGOR" means any guarantor, endorser, acceptor, surety or other
person liable on, or with respect to, the Obligations or who is the owner of any
property which is security for the Obligations, other than Borrower.
"PARENT" means Fix-Corp International, Inc., a Delaware corporation
and an Affiliate of Borrower.
"PAYMENT DATE" means the date that is 10 days after the delivery of
interim financial statements for any month (other than the last month of any
fiscal year) pursuant to Section 5.13(c) hereof or, with respect to the last
month of any fiscal year, the date that is 10
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days after the delivery of audited financial statements for such fiscal year
pursuant to Section 5.13(b) hereof.
"PERMITTED LIENS" means: (i) purchase money security interests in
specific items of Equipment in an aggregate amount not to exceed the limit set
forth in Section 8(h) of Schedule A; (ii) leases of specific items of Equipment
in an aggregate amount not to exceed the limit set forth in Section 8(i) of
Schedule A; (iii) Liens for taxes not yet due and payable; (iv) additional Liens
which are fully subordinate to the security interests of Lender and are
consented to in writing by Lender, (v) security interests being terminated
concurrently with the execution of this Agreement; (vi) Liens of materialmen,
mechanics, warehousemen or carriers arising in the ordinary course of business
and securing obligations which are not delinquent, (vii) Liens incurred in
connection with the extension, renewal or refinancing of the indebtedness
secured by Liens of the type described in clause (i) or (ii) above; provided,
that any extension, renewal or replacement Lien is limited to the property
encumbered by the existing Lien and the principal amount of the indebtedness
being extended, renewed or refinanced does not increase; (viii) Liens in favor
of customs and revenue authorities which secure payment of customs duties in
connection with the importation of goods; (ix) security deposits posted in
connection with real property leases or subleases; and (x) until the earlier of
September __, 1997 and the date upon which Borrower repays in full its
indebtedness to Reservoir Capital Corporation and terminates its financing
relationship with Reservoir Capital Corporation, Liens on Borrower's Accounts
and the proceeds thereof in favor of Reservoir Capital Corporation. Lender will
have the right to require, as a condition to its consent under clause (iv)
above, that the holder of the additional Lien sign an intercreditor agreement in
form and substance satisfactory to Lender, in its sole discretion, acknowledging
that the Lien is subordinate to the security interests of Lender, and agreeing
not to take any action to enforce its subordinate Lien so long as any
Obligations remain outstanding, and that Borrower agree that any uncured default
in any obligation secured by the subordinate Lien shall also constitute an Event
of Default under this Agreement.
"PERSON" means any individual, sole proprietorship, partnership, joint
venture, limited liability company, trust, unincorporated organization,
association, corporation, government or any agency or political division
thereof, or any other entity.
"PERSONAL PROPERTY COLLATERAL" means all Collateral other then the
Real Property.
"PRIME RATE" means, at any given time, the prime rate as quoted in The
Wall Street Journal as the base rate on corporate loans posted as of such time
by at least 75% of the nation's 30 largest banks (which rate is not necessarily
the lowest rate offered by such banks).
"REAL PROPERTY" means the real property described in Section 10 of
Schedule A.
"REAL PROPERTY ADVANCE" has the meaning set forth in Section 1.1(b).
"RELEASED PARTIES" has the meaning set forth in Section 6.1.
"RENEWAL TERM" has the meaning set forth in Section 7.1.
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<PAGE>
"RESERVES" has the meaning set forth in Section 1.2.
"REVOLVING LOANS" has the meaning set forth in Section 1.1(b).
"SALE" has the meaning set forth in Section 8.2.
"SUBSIDIARY" means any corporation or other entity of which a Person
owns, directly or indirectly, through one or more intermediaries, more than 50%
of the capital stock or other equity interest at the time of determination.
"TERM" means the period commencing on the date of this Agreement and
ending on the Maturity Date.
"TERM LOAN" has the meaning set forth in Section 1.1(b).
"UCC" means, at any given time, the Uniform Commercial Code as adopted
and in effect at such time in the State of New York.
All accounting terms used in this Agreement, unless otherwise indicated,
shall have the meanings given to such terms in accordance with GAAP. All other
terms contained in this Agreement, unless otherwise indicated, shall have the
meanings provided by the UCC, to the extent such terms are defined therein. The
term "including," whenever used in this Agreement, shall mean "including but not
limited to." The singular form of any term shall include the plural form, and
vice versa, when the context so requires. References to Sections, subsections
and Schedules are to Sections and subsections of, and Schedules to, this
Agreement. All references to agreements and statutes shall include all
amendments thereto and successor statutes in the case of statutes.
IN WITNESS WHEREOF, Borrower and Lender have signed this Schedule B as of
the date set forth in the heading to the Agreement.
BORROWER: LENDER:
FIXCOR INDUSTRIES, INC. NATIONSCREDIT COMMERCIAL CORPORATION,
THROUGH ITS NATIONSCREDIT
COMMERCIAL FUNDING DIVISION
By /s/ Mark Fixler By /s/ Robert Beal
---------------------------------- ------------------------------------
Its CEO Its Authorized Signatory
-------------------------------
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<PAGE>
EXHIBIT A
REAL PROPERTY
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<PAGE>
EXHIBIT B TO
UCC FINANCING STATEMENT SHOWING
FIX-CORP INTERNATIONAL, INC. AS DEBTOR AND
NATIONSCREDIT COMMERCIAL CORPORATION,
THROUGH ITS NATIONSCREDIT COMMERCIAL FUNDING DIVISION. AS
SECURED PARTY
Record Owner: Fix-Corp International, Inc.
Legal Description:
Situated in the State of Ohio, County of Licking and City of Heath. and bounded
and described as follows:
Being in T-1. R-12 at the United States Military Lands, and in the Mid-Ohio
Industrial Park, Addition No. 3. as recorded in Plat Book 13, Page 51. in the
Licking County Deed Records. and being more fully bounded and described as
follows:
Being all of Reserve "A", Lot 40 and the following portion at Lot 41:
Beginning in the westerly right of way line of James Parkway, said point being
the southeast corner of said Lot 41;
Thence South 89 deg. 25' 37" West, along the south line at Lot 41, 662.49 feet
to the southwest corner of Lot 41:
Thence North 0 deg. 45' 14" West, along the easterly line at the New York
Central Railway Company, 243.50 feet, to a point;
Thence South 89 deg. 25' 37" East. passing through Lot 41, a distance of 663.41
feet to a point;
Thence South 0 deg. 31' 52" East. passing along the westerly right of way line
of James Parkway. 243.50 feet to the place of beginning;
The above 10.00 acre survey includes 0.79 acres in Reserve "A", 5.504 acres in
Lot 40 and 3.706 acres in Lot 41.
The above description was prepared as the result of a survey by William S.
Henderson, Registered Surveyor No. 5242. dated July 6, 1989.
<PAGE>
Being part of the 3 a.m. real estate conveyed by Herbert I. Murphy, Jr. and
Patricia R. Murphy, his wife, to Mid-Ohio Development Corporation by deed dated
December 3, 1971, and recorded in Volume 681. page 608. Deed Records. Licking
County. Ohio.
<PAGE>
Exhibit 10
GUARANTY
Borrower: FIXCOR Industries, Inc., a
Delaware corporation
Guarantor: Mark Fixler, an
individual
Borrower has requested that NationsCredit Commercial Corporation,
through its NationsCredit Commercial Funding Division ("Lender") provide
certain financial accommodations to Borrower pursuant to the terms of a Loan
and Security Agreement between Borrower and Lender dated of even date
herewith (as amended from time to time, the "Loan Agreement"). As one of the
conditions to providing financing, Lender has required that Mark Fixler
("Guarantor") guaranty all obligations of Borrower to Lender.
For value received and in consideration of any loan, advance or
financial accommodation of any kind whatsoever heretofore, now or hereafter
made, given or granted to Borrower by Lender pursuant to the Loan Agreement;
Guarantor unconditionally guaranties the full and prompt payment when due,
whether at maturity or earlier, by reason of acceleration or otherwise, and
at all times thereafter, of the indebtedness, liabilities and obligations of
every kind and nature of Borrower to Lender (including interest whether or
not permitted in bankruptcy), howsoever created, arising or evidenced,
whether direct or indirect, absolute or contingent, joint or several, now or
hereafter existing, or due or to become due, in each case arising under the
Loan Agreement and the other Loan Documents, plus all costs and expenses
(including, without limitation, all court costs and reasonable attorneys' and
paralegals' fees and expenses) paid or incurred by Lender in endeavoring to
collect all or any part of such indebtedness, liabilities and obligations
from, or in prosecuting any action against, Guarantor or any other guarantor
of all or any part of such indebtedness, liabilities and obligations (all
such indebtedness, liabilities, obligations, costs and expenses being
hereinafter referred to as "Borrower's Obligations"). All sums becoming due
under this Guaranty shall bear interest from the due date thereof until paid
at the highest rate charged with respect to any of Borrower's Obligations
under the Loan Agreement.
NOTWITHSTANDING ANYTHING IN THIS GUARANTY TO THE CONTRARY, (A) THE
LIABILITY OF GUARANTOR HEREUNDER SHALL NOT EXCEED $750,000.00, PLUS COSTS AND
EXPENSES OF COLLECTION AND PROSECUTION OF ACTIONS AGAINST GUARANTOR AND PLUS
INTEREST AS PROVIDED FOR IN THIS GUARANTY AND (B) LENDER SHALL NOT MAKE ANY
CLAIM FOR PAYMENT PURSUANT TO THIS GUARANTY UNTIL THE EXPIRATION OF THREE
MONTHS AFTER LENDER HAS DELIVERED TO GUARANTOR WRITTEN NOTICE OF LENDER'S
INTENT TO MAKE SUCH CLAIM.
<PAGE>
Guarantor agrees that his obligations under this Guaranty are
unconditional, irrespective of (i) the validity or enforceability of
Borrower's Obligations or any note or other instrument evidencing Borrower's
Obligations, (ii) the absence of any attempt by Lender to collect Borrower's
Obligations from Borrower or any other guarantor, (iii) Lender's waiver or
consent with respect to any provision of the Loan Documents, (iv) Lender's
failure to perfect or maintain its security interests in, or to preserve its
rights with respect to, any of the Collateral, (v) Lender's election, in any
proceeding under Chapter 11 of the Bankruptcy Code, of the application of
Section 1111(b)(2) of the Bankruptcy Code, (vi) any borrowing or grant of a
security interest by Borrower as debtor-in-possession under Section 364 of
the Bankruptcy Code, (vii) the disallowance, under Section 502 of the
Bankruptcy Code, of all or any of Lender's claims for repayment of Borrower's
Obligations or (viii) any other circumstance which might constitute a legal
or equitable discharge or defense of Borrower or a guarantor.
No payment made by or for the account or benefit of Guarantor
(including (i) a payment made by Borrower in respect of Borrower's
Obligations, (ii) a payment made by any person under any other guaranty of
Borrower's Obligations or (iii) a payment made by means of set off or other
application of funds by Lender) pursuant to this Guaranty shall entitle
Guarantor, by subrogation or otherwise, to any payment by Borrower or from or
out of any property of Borrower, and Guarantor shall not exercise any rights
or remedies against Borrower or any property of Borrower including any right
of contribution, indemnity or reimbursement by reason of any performance by
Guarantor under this Guaranty, all of such rights of subrogation,
contribution, indemnity and reimbursement being hereby waived by Guarantor.
The provisions of this paragraph shall survive the termination of this
Guaranty or the release or discharge of Guarantor from liability hereunder.
Guarantor and Lender hereby agree that Borrower is a third party beneficiary
of the provisions of this paragraph.
Guarantor hereby waives diligence, presentment, demand for payment,
filing of claims with a court in the event of receivership or bankruptcy of
Borrower, protest or notice with respect to Borrower's Obligations and all
demands whatsoever, and covenants that this Guaranty will not be discharged,
except by complete and irrevocable payment and performance of the obligations
and liabilities contained herein. No notice to any party, including
Guarantor, shall be required for Lender to make demand hereunder. Such demand
shall constitute a mature and liquidated claim against Guarantor. At any time
after maturity of Borrower's Obligations, whether by acceleration or
otherwise, Lender may, at its sole election, proceed directly and at once,
without notice, against Guarantor to collect and recover the full amount or
any portion of Borrower's Obligations, without first proceeding against
Borrower or any other person or against any of the Collateral. Lender shall
have the exclusive right to determine the application of payments and
credits, if any, from Guarantor, Borrower or any other person, on account of
Borrower's Obligations.
Lender is hereby authorized, without notice or demand to Guarantor
and without affecting or impairing the liability of Guarantor hereunder, to
from time to time (i) renew, extend, accelerate or otherwise change the time
for payment of, or other terms relating to, Borrower's Obligations or
otherwise modify, amend or change the terms of any promissory note or other
agreement, document or instrument now or hereafter executed by Borrower and
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<PAGE>
delivered to Lender, (ii) accept partial payments on Borrower's Obligations;
(iii) take and hold collateral for the payment of Borrower's Obligations, or for
the payment of this Guaranty, or for the payment of any other guaranties or
Borrower's Obligations or other liabilities of Borrower, and exchange, enforce,
waive and release any such security or collateral; (iv) apply such security or
collateral and direct the order or manner of sale thereof as in its sole
discretion it may determine; and (v) settle, release, compromise, collect or
otherwise liquidate Borrower's Obligations and any security or collateral
therefor in any manner.
At any time after maturity of Borrower's Obligations, Lender may, in
its sole discretion, without notice to Guarantor and regardless of the
acceptance of any security or collateral for the payment hereof, appropriate
and apply toward payments of Borrower's Obligations that remain unpaid, (i)
any indebtedness due or to become due from Lender to Guarantor and (ii) any
moneys, credits or other property belonging to Guarantor at any time held by
or coming into the possession of Lender or any affiliates of Lender, whether
for deposit or otherwise.
Guarantor assumes responsibility for keeping himself informed of the
financial condition of Borrower and all other guarantors of all or any of
Borrower's Obligations, and of all other circumstances bearing upon the risk
of nonpayment of Borrower's Obligations or any part thereof that diligent
inquiry might reveal, and Guarantor agrees that Lender shall have no duty to
advise Guarantor of information known to Lender regarding any of the
foregoing. Guarantor acknowledges familiarity with Borrower's financial
condition and represents that he has not relied on any statements made, or
information furnished, by Lender or its agents in obtaining such familiarity.
If Lender provides any such information to Guarantor, Lender shall be under
no obligation to (i) undertake any investigation not a part of its regular
business routine, (ii) disclose any information which, pursuant to accepted
or reasonable commercial finance practices, Lender wishes to maintain
confidential or (iii) make any other or future disclosures of any information
to Guarantor.
Notwithstanding any contrary provision of this Guaranty, it is
intended that neither this Guaranty nor any liens or security interests
securing this Guaranty constitute a "Fraudulent Conveyance" (as defined
below). Consequently, Guarantor agrees that if this Guaranty or any liens or
security interests securing this Guaranty, would, but for the application of
this sentence, constitute a Fraudulent Conveyance, this Guaranty and each
such lien and security interest shall be valid and enforceable only to the
maximum extent that would not cause this Guaranty or such lien or security
interest to constitute a Fraudulent Conveyance, and this Guaranty shall
automatically be deemed to have been amended accordingly at all relevant
times. For purposes hereof, a "Fraudulent Conveyance" means a fraudulent
conveyance under Section 548 of the Bankruptcy Code or a fraudulent
conveyance or fraudulent transfer under any applicable fraudulent conveyance
or fraudulent transfer law or similar law of any state or other governmental
unit as in effect from time to time.
Guarantor waives the right to assert the doctrine of marshaling with
respect to any collateral held by Lender to secure any of the Borrower's
Obligations. Guarantor further agrees that, to the extent Borrower makes one
or more payments to Lender, or Lender receives any
3
<PAGE>
proceeds of collateral which are subsequently invalidated, declared to be
fraudulent or preferential, set aside or required to be repaid to Borrower, its
estate, trustee, receiver or any other party under the Bankruptcy Code or other
law, that portion of Borrower's Obligations which has been paid, reduced or
satisfied by such payment shall be reinstated and continued in full force and
effect as of the date such initial payment, reduction or satisfaction occurred
and this Guaranty shall continue to be in existence and in full force and
effect, irrespective of whether any evidence of indebtedness or this Guaranty
has been surrendered or canceled.
Guarantor agrees that all payments hereunder shall be made without
setoff or counterclaims and Guarantor waives all presentments, demands for
performance, notices of nonperformance, protests, notices of protest, notices
of dishonor and notices of acceptance of this Guaranty. Guarantor further
waives all notices of the existence, creation or incurring of new or
additional indebtedness, arising either from additional loans extended to
Borrower or otherwise, and also waives all notices that the principal amount,
or any portion thereof, or any interest on any Instrument or document
evidencing all or any part of Borrower's Obligations is due, notices of any
and all proceedings to collect from the maker, any endorser or any other
guarantor of all or any part of Borrower's Obligations, or from anyone else,
and, to the extent permitted by law, notices of exchange, sale, foreclosure,
surrender or other handling of any security or collateral securing payment of
Borrower's Obligations.
No delay on the part of Lender in the exercise of any right or
remedy shall operate as a waiver thereof, and no single or partial exercise
by Lender of any right or remedy shall preclude any further exercise thereof
except as expressly set forth in a writing duly signed and delivered on
Lender's behalf by an authorized officer or agent of Lender; nor shall any
modification or waiver of any of the provisions of this Guaranty be binding
upon Lender, except as expressly set forth in a writing duly signed and
delivered on Lender's behalf by an authorized officer or agent of Lender.
Lender's failure at any time or times hereafter to require strict performance
by Borrower or Guarantor of any of the provisions, warranties, terms and
conditions contained in any promissory note, security agreement, agreement,
guaranty, instrument or document now or at any time or times hereafter
executed by Borrower or Guarantor and delivered to Lender, shall not waive,
affect or diminish any right of Lender at any time or times hereafter to
demand strict performance thereof and such right shall not be deemed to have
been waived by any act or knowledge of Lender, or its respective agents,
officers or employees, unless such waiver is contained in an instrument in
writing signed by an officer or agent of Lender, and directed to Borrower or
Guarantor, as applicable, specifying such waiver. No waiver by Lender of any
default shall operate as a waiver of any other default or the same default on
a future occasion, and no action by Lender permitted hereunder shall in any
way affect or impair Lender's rights or the obligations of Guarantor under
this Guaranty. Any determination by a court of competent jurisdiction of the
amount of any principal or interest owing by Borrower to Lender shall be
conclusive and binding on Guarantor irrespective of whether Guarantor was a
party to the suit or action in which such determination was made.
Guarantor hereby represents and warrants that (i) it is in
Guarantor's direct interest to assist Borrower in procuring credit, because
Borrower is an affiliate of Guarantor, (ii) this Guaranty has been duly and
validly executed and delivered and constitutes the valid and
4
<PAGE>
binding obligation of Guarantor, enforceable in accordance with its terms, and
(iii) the execution and delivery of this Guaranty does not violate or constitute
a default under (with or without the giving of notice, the passage of time, or
both) any order, judgment, decree, instrument or agreement to which Guarantor is
a party or by which it or its assets are affected or bound.
This Guaranty shall be binding upon Guarantor and upon the heirs,
legal representatives, successors and permitted assigns of Guarantor and
shall inure to the benefit of Lender and its successors and assigns. All
references herein to Borrower shall be deemed to include its successors and
permitted assigns and all references herein to Lender shall be deemed to
include its successors and assigns. Borrower's and Guarantor's heirs, legal
representatives, successors and permitted assigns shall include a receiver,
trustee, custodian or debtor in possession of or for Borrower or Guarantor or
any of their respective assets. All references to the singular shall be
deemed to include the plural where the context so requires.
GUARANTOR HEREBY CONSENTS AND AGREES THAT THE STATE AND FEDERAL
COURTS IN NEW YORK SHALL HAVE NONEXCLUSIVE JURISDICTION TO HEAR AND DETERMINE
ANY CLAIMS OR DISPUTES WITH RESPECT TO THIS GUARANTY AND WAIVES ANY OBJECTION
WHICH HE MAY HAVE BASED ON IMPROPER VENUE OR FORUM NON CONVENIENS TO THE
CONDUCT OF ANY PROCEEDING IN ANY SUCH COURT AND CONSENTS THAT ALL SERVICE OF
PROCESS UPON GUARANTOR BE MADE BY REGISTERED MAIL OR MESSENGER DIRECTED TO
GUARANTOR AT THE ADDRESS SET FORTH BELOW GUARANTOR'S SIGNATURE AND THAT
SERVICE SO MADE SHALL BE DEEMED TO BE COMPLETED UPON ACTUAL RECEIPT THEREOF.
GUARANTOR HEREBY AGREES THAT ANY CLAIM OR DISPUTE BROUGHT BY GUARANTOR
AGAINST LENDER OR ANY MATTER ARISING OUT OF THIS GUARANTY SHALL BE BROUGHT
EXCLUSIVELY IN THE STATE AND FEDERAL COURTS IN NEW YORK GUARANTOR AND LENDER
EACH HEREBY WAIVE, TO THE EXTENT PERMITTED BY LAW, TRIAL BY JURY. NOTHING
CONTAINED HEREIN SHALL AFFECT THE RIGHT OF LENDER TO SERVE LEGAL PROCESS IN
ANY OTHER MANNER PERMITTED BY LAW OR AFFECT THE RIGHT OF LENDER TO BRING ANY
ACTION OR PROCEEDING AGAINST GUARANTOR OR ITS PROPERTY IN THE COURTS OF ANY
OTHER JURISDICTION.
THIS GUARANTY SHALL BE GOVERNED IN ALL RESPECTS BY THE INTERNAL LAWS
OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO PRINCIPLES OF CONFLICTS OF
LAWS.
Wherever possible each provision of this Guaranty shall be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Guaranty shall be prohibited by or invalid under
such law, such provision shall be ineffective to the extent of such
prohibition or invalidity without invalidating the remainder of such
provision or the remaining provisions of this Guaranty.
5
<PAGE>
IN WITNESS WHEREOF, this Guaranty has been duly executed by
Guarantor this, 14th day of May, 1997.
/s/ Mark Fixler
----------------------------------
Mark Fixler
Address:
6758 Bramblewood Lane
Mayfield, Ohio 44143
6
<PAGE>
Exhibit 11
FIRST AMENDMENT TO
LOAN AND SECURITY AGREEMENT
THIS FIRST AMENDMENT (this "Amendment") is entered into as of July 16,
1997, between FIXCOR INDUSTRIES, a Delaware corporation ("Borrower"), and
NATIONSCREDIT COMMERCIAL CORPORATION, THROUGH ITS NATIONSCREDIT COMMERCIAL
FUNDING DIVISION ("Lender").
WHEREAS, Borrower has requested that Lender consent to the formation of
Palletech Inc. by Fix-Corp International, Inc. and certain financial
arrangements among Borrower, Fix-Corp International, Inc., Palletech Inc and
Gordon Brothers Capital Corporation, and Lender has agreed to do so on the
condition, among others, that Borrower agree to amend the Loan Agreement dated
May 14,1997 (the "Loan Agreement") as provided herein;
NOW THEREFORE, in consideration of the premises and mutual agreements
herein contained the parties hereto agree as follows:
1. DEFINED TERMS. Unless otherwise defined herein, capitalized terms
used herein shall have the meanings ascribed to such terms in the Loan
Agreement.
2. AMENDMENT TO LOAN AGREEMENT. The definition of "Eligible Account"
contained in Schedule B of the Loan Agreement is amended by (a) deleting the
word "and" immediately following clause (xvi) thereof and (b) inserting the
following immediately following clause (xvii) thereof, but prior to the period:
"; and (xviii) the Account Debtor for such Account is not also an Account Debtor
of Palletech Inc."
3. OTHER AMENDMENTS. This Amendment shall constitute an amendment to the
Loan Agreement and all of the other Loan Documents as appropriate to express the
agreement contained herein. In all other respects, the Loan Agreement and the
other Loan Documents shall remain unchanged and in full force and effect in
accordance with their original terms.
4. MISCELLANEOUS.
(a) WARRANTIES AND ABSENCE OF DEFAULTS. In order to induce Lender to
enter into this Amendment, Borrower hereby warrants, to Lender, as of the date
hereof, that:
(i) The representations and warranties of Borrower contained
in the Loan Agreement are true and correct as of the date hereof as if
made on the date hereof.
(ii) All information, reports and other papers and data
heretofore furnished to Lender by Borrower in connection with this
Amendment, the Loan Agreement and the other Loan Documents are
accurate and correct in all material respects and complete insofar as
may be necessary to give Lender true and accurate knowledge of the
subject matter thereof. Borrower has disclosed to
<PAGE>
Lender every fact of which it is aware which might adversely affect the
business, operations or financial condition of Borrower or the ability of
Borrower to perform its obligations under this Amendment, the Loan
Agreement or under any of the other Loan Documents. None of the information
furnished to Lender by or on behalf of Borrower contained any material
misstatement of fact or omitted to state a material fact or any fact
necessary to make the statements contained herein or therein not materially
misleading.
(iii) No Event of Default or Default exists as of the date
hereof.
(b) EXPENSES. Borrower agrees to pay on demand all costs and expenses of
Lender (including the reasonable fees and expenses of outside counsel for
Lender) in connection with the preparation, negotiation, execution, delivery and
administration of this Amendment and all other instruments or documents provided
for herein or delivered in connection herewith. In addition, Borrower agrees to
pay, and save Lender harmless from all liability for, any stamp or other taxes
which may be payable in connection with the execution or delivery of this
Amendment or the Loan Agreement, amended hereby, and the execution and delivery
of any instruments or documents provided for herein or delivered or to be
delivered hereunder or in connection herewith. All obligations provided in this
SECTION 4(b) shall survive any termination of this Amendment and the Loan
Agreement as amended hereby.
(c) GOVERNING LAW. This Amendment shall be a contract made under and
governed by the internal laws of the State of New York.
(d) COUNTERPARTS. This Amendment may be executed in any number of
counterparts, and by the parties hereto on the same or separate counterparts,
and each such counterpart, when executed and delivered, shall be deemed to be an
original, but all such counterparts shall together constitute but one and the
same Amendment.
(e) REFERENCE TO LOAN AGREEMENT. On and after the effectiveness of the
amendment to the Loan Agreement accomplished hereby, each reference in the Loan
Agreement to "this Agreement," "hereunder," "hereof" "herein" or words of like
import, and each reference to the Loan Agreement in any other Loan Documents, or
other agreements, documents or other instruments executed and delivered pursuant
to the Loan Agreement, shall mean and be a reference to the Loan Agreement, as
amended by this Amendment.
(f) SUCCESSORS. This Amendment shall be binding upon Borrower, Lender and
their respective successors and assigns, and shall inure to the benefit of
Borrower, Lender and the successors and assigns of Lenders.
2
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed by their respective officers thereunto duly authorized and delivered at
New York, New York as of the date first above written.
FIXCOR INDUSTRIES, INC.
By /s/ Mark Fixler
--------------------------------------
Its CEO
-------------------------------------
NATIONSCREDIT COMMERCIAL
CORPORATION, THROUGH ITS
NATIONSCREDIT COMMERCIAL FUNDING
DIVISION
By /s/ Robert Beal
--------------------------------------
Its Authorized Signatory
-------------------------------------
The undersigned gurantors hereby acknowledge the foregoing amendment and
ratify and reaffirm their respective guarantees of the obligations of FIXCOR
Industries, Inc.
FIX-CORP INTERNATIONAL, INC.
By: /s/ Mark Fixler
-------------------------------------
Its: Pres
------------------------------------
PALLETECH INC.
By: /s/ Mark Fixler
-------------------------------------
Its: CEO
------------------------------------
3
<PAGE>
Exhibit 12
TERM NOTE
$3,500,000.00 July 9, 1997
For value received, the undersigned (the "Borrower"), jointly and
severally, promises to pay to Gordon Brothers Capital Corporation ("Lender"),
or order, the principal amount of three million five hundred thousand dollars
and zero cents ($3,500,000.00) on or before October 31, 1998, 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 first business day of each month, commencing on August 1,
1997.
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.
In addition to all other amounts due respecting this Note, the Borrower
shall pay to the Lender an exit fee (the "Exit Fee") at the time (the "Payoff
Time") all amounts outstanding respecting this Note are paid in full equal to
the greater of (i) $250,000; or (ii) an amount calculated by multiplying (x) the
average daily balance of the amount outstanding respecting this Note from the
date of this Note until the Payoff Time, as calculated by Lender in its
reasonable discretion, by (y) the number of actual days from the date of this
Note until the Payoff Time, and by (z) a percentage equal to twenty-five (25%)
percent divided by 360.
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 5 business days with
respect to any monetary obligation or continuing for 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 continuing for 5 business days after the giving of
notice by the Lender; (3) default of any material liability, obligation or
undertaking of the Borrower to any other party continuing for 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 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
<PAGE>
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
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
banking 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 banking 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 other, or in transit to or from the Lender or any of its
banking or lending affiliates or any such participant, or in the possession of
any third party acting on the Lenders 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.
2
<PAGE>
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) excluding any claim arising out of
the gross negligence or willful misconduct of 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' 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 Ten (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 Five (5%) payment 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 lull. The release or compromise
by the Lender of any collateral shall not release any person obligated on
account of this Note.
3
<PAGE>
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 State of Ohio 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 severed (i) by mailing a copy thereof by registered or certified
mail, postage prepaid, return receipt requested, to such Borrowers, endorsers or
guarantors 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.
4
<PAGE>
Executed as an instrument under seal as of July 9, 1997.
Witness Borrower:
Palletech, Inc.
/s/ Karl Holland By: /s/ Gary DeLaurentiis
- ------------------------------ -----------------------------------
Gary DeLaurentiis, President
1835 James Parkway
Heath, Ohio
FIXCOR Industries, Inc.
/s/ Karl Holland By: /s/ Gary DeLaurentiis
- ------------------------------ -----------------------------------
Gary DeLaurentiis, President
1835 James Parkway
Heath, Ohio
Fix-Corp International, Inc.
/s/ Sherry L. Durst By: /s/ Mark Fixler
- ------------------------------ -----------------------------------
Mark Fixler, President
5
<PAGE>
Exhibit 13
LOAN AND SECURITY AGREEMENT
This LOAN AND SECURITY AGREEMENT dated as of July 9, 1997, between Palletech,
Inc., a Delaware Corporation, with an address of 1835 James Parkway, Heath, Ohio
43056 ("Palletech"); FIXCOR Industries, Inc., with an address of 1835 James
Parkway, Heath, Ohio 43056 ("FIXCOR"); Fix-Corp International, Inc., a Delaware
corporation, with an address of 27040 Cedar Road, Suite 218, Beachwood, Ohio
44122 ("Fix-Corp"; and collectively, along with Palletech and FIXCOR, the
"Borrowers"; and each a "Borrower") and Gordon Brothers Capital Corporation, a
Delaware corporation with an address of 40 Broad Street, Boston, Massachusetts
02109 (the "Lender").
FOR VALUE RECEIVED, and in consideration of the granting by the Lender of
financial accommodations to Borrowers, Borrowers represent and agree with the
Lender, as of the date hereof and as of the date of each credit and/or other
financial accommodation, as follows:
1. THE LOAN
1.1 LOAN. Lender agrees, subject to the terms and conditions set forth herein,
to establish an equipment acquisition line of credit (the "Equipment Line") for
Palletech and FIXCOR pursuant to which Lender agrees to Lend to Palletech and
FIXCOR upon Palletech's OR FIXCOR'S request up to three million five hundred
thousand dollars and zero cents ($3,500,000.00) (the "Equipment Loan Amount") to
assist Palletech's and FIXCOR'S purchase of capital equipment. All advances
shall be limited to a maximum of 80% of the Hard Costs (as hereinafter defined)
of all capital equipment purchased with the proceeds. Hard Costs shall mean the
invoice price of such equipment less delivery and installation costs and taxes.
Each request for financing will be reviewed by the Lender in its sole discretion
based upon invoices or other evidence acceptable to the Lender, indicating the
purchase, delivery and acceptance of capital equipment, and all advances shall
be approved by the Lender in its sole discretion. Lender may refuse to make any
advance in the event that Lender deems in its sole discretion that it does not
have adequate collateral for such advance. Advances may be made respecting this
Equipment Line from time to time from the date of this Agreement up to and
including October 31, 1998 (the "Maturity Date"). The amounts outstanding
respecting the Equipment Line are evidenced by that certain Term Note, of even
date herewith by Palletech and FIXCOR in favor of the Lender in the original
principal amount of the Equipment Loan Amount (the "Equipment Note") which is
due and payable in full on the Maturity Date. This Agreement, the Equipment
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".
2. GRANT OF SECURITY INTEREST
2.1 GRANT OF SECURITY INTEREST. In consideration of the Lender's extending
credit and other financial accommodations to the Borrowers, each Borrower hereby
grants to the Lender a security interest in (including, without limitation, a
lien on and pledge of) all of such Borrower's
<PAGE>
Collateral (as hereinafter defined). The security interest granted by this
Agreement is given to and shall be held by the Lender as security for the
payment and performance of all Obligations.
2.2 DEFINITIONS. The following definitions shall apply:
(a) "Code" shall mean the Massachusetts Uniform Commercial Code (General
Law, Chapter 106) as amended from time to time.
(b) "Collateral" shall mean all of each Borrower's present and future
right, title and interest in and to any and all of the following
property, whether such property is now existing or hereafter created:
(i) All goods including without limitation all Inventory (as
hereinafter defined), farm products, Equipment (as hereinafter
defined), including without limitation machinery, furniture, trade
fixtures;
(ii) All accounts, accounts receivable, contract rights and chattel
paper, regardless of whether or not they constitute proceeds of other
Collateral;
(iii) All general intangibles, regardless of whether or not they
constitute proceeds of other Collateral, including, without
limitation, all of such Borrower's rights to tax refunds and all of
such Borrower's rights (which the Lender may exercise or not as it in
its sole discretion may determine) to acquire or obtain goods and/or
services with respect to the manufacture, processing, storage, sale,
shipment, delivery or installation of any of such Borrower's inventory
or other Collateral:
(iv) All products of and accessions to any of the Collateral;
(v) All liens, guaranties, securities, rights, remedies and
privileges pertaining to any of the Collateral, including the right of
stoppage in transit;
(vi) All obligations owing to such Borrower of every kind and
nature; and all choses in action;
(vii) All goodwill, trade secrets, computer programs, customer
lists, trade names, trademarks and patents;
(viii) All documents and instruments (whether negotiable or
nonnegotiable, and regardless of their being attached to chattel
paper);
(ix) All proceeds of Collateral of every kind and nature in
whatever form, including, without limitation, both cash and noncash
proceeds resulting or arising from the rendering of services by such
Borrower or the sale or other disposition by such Borrower of the
Inventory or other Collateral;
2
<PAGE>
(x) All books and records relating to the conduct of such
Borrower's business including, without in any way limiting the
generality of the foregoing, those relating to its accounts; and
(xi) All deposit accounts maintained by such Borrower with any
Lender, trust company, investment firm or fund, or any similar
institution or organization.
(c) "Contract Rights" or "contract rights" means rights of each Borrower
to payment under contracts not yet earned by performance and not
evidenced by instruments or chattel paper.
(d) "Debtors" shall mean each Borrower's customers who are indebted to
such Borrower.
(e) "Equipment" shall mean and include all of each Borrower's machinery,
equipment, furniture, trade fixtures and motor vehicles and intending
to include all tangible personal property, or goods, utilized in the
conduct of each Borrower's business, but excluding therefrom
inventory, as that term is defined in the Code, and all replacements
or substitutions therefor and all accessions thereto.
(f) "Inventory" means all inventory of whatever name, nature, kind or
description, all goods held for sale or lease or to be furnished under
contracts of service, finished goods, work in process, raw materials,
materials used or consumed by each Borrower, parts, supplies, all
wrapping, packaging, advertising labeling, and shipping materials,
devices, names and marks, all contract rights and documents relating
to any of the foregoing, whether any of the foregoing be now existing
or hereafter arising, wherever located, now owned or hereafter
acquired by such Borrower.
(g) "Obligation(s)" shall mean, without limitation, all loans, advances,
indebtedness, notes, liabilities and amounts, liquidated or
unliquidated, owing by each Borrower to the Lender at any time, of
each and every kind, nature and description, whether arising under
this Agreement or otherwise, and whether secured or unsecured, direct
or indirect (that is, whether the same are due directly by such
Borrower to the Lender; or are due indirectly by such Borrower to the
Lender as endorser, guarantor or other surety, or as borrower of
obligations due third persons which have been endorsed or assigned to
the Lender, or otherwise), absolute or contingent, due or to become
due, now existing or hereafter contracted. Said term shall also
include all interest and other charges chargeable to each Borrower or
due from each Borrower to the Lender from time to time and all costs
and expenses referred to in this Agreement.
(h) "Person" or "party" shall include individuals, firms, corporations and
all other entities.
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All words and terms used in this Agreement other than those specifically
defined herein shall have the meanings accorded to them in the Code.
2.3 ORDINARY COURSE OF BUSINESS. The Lender hereby authorizes and permits the
Borrowers to hold, process, sell, use or consume in the manufacture or
processing of finished goods, or otherwise dispose of the Inventory for fair
consideration, all in the ordinary course of each Borrower's business,
excluding, without limitation, sales to creditors or in bulk or sales or other
dispositions occurring under circumstances which would or could create any lien
or interest adverse to the Lender's security interest or other right hereunder
in the proceeds resulting therefrom. The Lender also hereby authorizes and
permits the Borrowers to receive from the Debtors all amounts due as proceeds of
the Collateral at each Borrower's own cost and expense, and also liability, if
any, subject to the direction and control of the Lender at all times; and the
Lender may at any time, without cause or notice, and whether or not a default
has occurred or demand has been made, terminate all or any part of the authority
and permission herein or elsewhere in this Agreement granted to the Borrowers
with reference to the Collateral.
Until the Lender shall otherwise notify the Borrowers, all proceeds of and
collections of Collateral shall be retained by the Borrowers and used solely for
the ordinary and usual operation of each Borrower's business. From and after
notice by the Lender to any Borrower, all proceeds of and collections of the
Collateral shall be held in trust by such Borrower for the Lender and shall not
be commingled with such Borrower's other funds or deposited in any Lender
account of such Borrower; and such Borrower agrees to deliver to the Lender on
the dates of receipt thereof by such Borrower, duly endorsed to the Lender or to
bearer, or assigned to the Lender, as may be appropriate, all proceeds of the
Collateral in the identical form received by such Borrower.
2.4 ALLOWANCES. Each Borrower may grant such allowances or other adjustments to
Debtors (exclusive of extending the time for payment of any item which shall not
be done without first obtaining the Lender's written consent in each instance)
as such Borrower may reasonably deem to accord with sound business practice,
including, without limiting the generality of the foregoing, accepting the
return of all or any part of the Inventory (subject to the provisions set forth
in this Agreement with reference to returned Inventory).
2.5 RECORDS. Each Borrower shall hold its books and records relating to the
Collateral segregated from all such Borrower's other books and records in a
manner satisfactory to the Lender; and shall deliver to the Lender from time to
time promptly at its request all invoices, original documents of title,
contracts, chattel paper, instruments and any other writings relating thereto,
and other evidence of performance of contracts, or evidence of shipment or
delivery of the merchandise or of the rendering of services; and each Borrower
will deliver to the Lender promptly at the Lender's request from time to time
additional copies of any or all of such papers or writings, and such other
information with respect to any of the Collateral and such schedules of
Inventory, schedules of accounts and such other writings as the Lender may in
its sole discretion deem to be necessary or effectual to evidence any loan
hereunder or the Lender's security interest in the Collateral.
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2.6 LEGENDS. Each Borrower shall promptly make, stamp or record such entries or
legends on such Borrower's books and records or on any of the Collateral as the
Lender shall request from time to time, to indicate and disclose that the Lender
has a security interest in such Collateral.
2.7 INSPECTION. The Lender, or its representatives, at any time and from time
to time, shall have the right, and each Borrower will permit it and them:
(a) to examine, check, make copies of or extracts from any of such
Borrower's books, records and files (including, without limitation,
orders and original correspondence);
(b) to inspect and examine the Collateral and to check and test the same
as to quality, quantity, value and condition; and each Borrower agrees
to reimburse the Lender for its reasonable costs and expenses in so
doing; and
(c) to verify the Collateral or any portion or portions thereof or each
Borrower's compliance with the provisions of this Agreement.
3. REPRESENTATIONS AND WARRANTIES
3.1 ORGANIZATION AND QUALIFICATION. Each Borrower is a duly organized and
existing corporation under the laws of the State of its incorporation, as
indicated above, in good standing under the laws of said state, and is duly
qualified to do business under the laws of each state where the nature of the
business done or property owned requires such qualification.
3.2 SUBSIDIARIES. Each Borrower has no subsidiaries other than those listed on
Schedule 3.2, if any, and each Borrower has never consolidated, merged or
acquired substantially all of the assets of any other entity or person other
than those listed on Schedule 3.2, if any.
3.3 CORPORATE RECORDS. Each Borrower's Corporate Charter, Articles of
Organization or Incorporation and all amendments thereto have been duly filed
and are in proper order. All outstanding capital stock issued by each Borrower
was and is properly issued and all books and records of each Borrower, including
but not limited to its minute books, bylaws and books of account, are accurate
and up to date and will be so maintained.
3.4 TITLE TO PROPERTIES: ABSENCE OF LIENS. Each Borrower has good and clear
record and marketable title to all of its properties and assets, and all of its
properties and assets including the Collateral are free and clear of all
mortgages, liens, pledges, charges, encumbrances, setoffs, except (a) the
mortgages and security interests as set forth on Schedule 3.4a, if any, and (b)
the leases of personal property as set forth on Schedule 3.4b, if any.
3.5 PLACES OF BUSINESS. Each Borrower's chief executive office is correctly
stated in the preamble to this Agreement, and each Borrower shall, during the
term of this Agreement, keep the Lender currently and accurately informed in
writing of each of its other places of business, and shall not change the
location of such chief executive office or open or close, move or change any
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existing or new place of business without giving the Lender at least thirty (30)
days prior written notice thereof.
3.6 VALID OBLIGATIONS. The execution, delivery and performance of the Loan
Documents have been duly authorized by all necessary corporate action and each
represents a legal, valid and binding obligation of each Borrower and is fully
enforceable according to its terms, except as limited by laws relating to the
enforcement of creditors' rights.
3.7 CONFLICTS WITH OTHER AGREEMENTS. There is no provision in any indenture,
contract or agreement to which any Borrower is a party which prohibits the
execution, delivery or performance of the Loan Documents.
3.8 GOVERNMENTAL APPROVALS. The execution, delivery and performance of the Loan
Documents does not require any approval of any governmental agency or authority.
3.9 LITIGATION. There are no actions, suits or proceedings pending or to the
knowledge of any Borrower threatened against any Borrower which might materially
adversely affect the ability of any Borrower to perform its obligations under
the Loan Documents.
3.10 FINANCIAL STATEMENTS. Each Borrower has furnished to the Lender the
following Financial Statements (the "Financial Statements"): balance sheet as of
December 31, 1996 and statement of profit and loss for the period ending
December 31,1996. The balance sheet fairly presents the condition of each such
Borrower at the date thereof and the statement of profit and loss fairly
presents the results of the operations of each such Borrower for the period
indicated, all in conformity with generally accepted accounting principles,
consistently applied.
3.11 ACCOUNTS AND CONTRACT RIGHTS. All accounts arise out of legally
enforceable and existing contracts; and represent unconditional and
undisputed bona fide indebtedness by the Debtor for sales or leases of
Inventory shipped and delivered or services rendered by any Borrower to a
Debtor, and are not and will not be subject to any discount (except such cash
or trade discount as may be shown on any invoice, contract or other writing
delivered to the Lender). No contract right, account, general intangible or
chattel paper is or will be represented by any note or other instrument, and
no contract right, account or general intangible is, or will be represented
by any conditional or installment sales obligation or other chattel paper,
except such instruments or chattel paper as have been or immediately upon
receipt by a Borrower will be delivered to the Lender (duly endorsed or
assigned), such delivery, in the case of chattel paper, to include all
executed copies except those in the possession of the installment buyer and
any security for or guaranty of any of the Collateral shall be delivered to
the Lender immediately upon receipt thereof by a Borrower, with such
assignments and endorsements thereof as the Lender may request.
3.12 TITLE TO COLLATERAL. At the date hereof each Borrower is (and as to
Collateral that such Borrower may acquire after the date hereof, will be) the
lawful owner of the Collateral, and that the Collateral and each item thereof
is, will be and shall continue to be free of all restrictions, liens,
encumbrances or other rights, title or interests (other than the security
interest therein granted to the Lender hereby), credits, defenses, recoupments,
set-offs or counterclaims
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whatsoever; that each Borrower has and will have full power and authority to
grant to the Lender a security interest therein, and that each Borrower has not
transferred, assigned, sold, pledged, encumbered, subjected to lien or granted
any security interest in, and will not transfer, assign, sell (except sales or
other dispositions in the ordinary course of business in respect to Inventory as
expressly permitted in this Agreement), pledge, encumber, subject to lien or
grant any security interest in any of the Collateral (or any of such Borrower's
right, title or interest therein), to any person other than the Lender; that the
Collateral is and will be valid and genuine in all respects; that all accounts
arise out of legally enforceable and existing contracts in accordance with their
tenor; and that upon each Borrower's acquisition of any interest in contract
rights, it shall in writing immediately notify the Lender thereof, specifically
identifying the same as contract rights, and, except for such contract rights,
no part of the Collateral (or the validity or enforceability by the Lender
thereof) is or shall be contingent upon the fulfillment of any agreement or
condition whatsoever and that the Collateral, other than Inventory and
Equipment, shall represent unconditional and undisputed bona fide indebtedness
by the Debtor for sales or leases of Inventory shipped and delivered or services
rendered by a Borrower to Debtor, and is not and will not be subject to any
discount (except such cash or trade discount as may be shown on any invoice,
contract or other writing delivered to the Lender); and that each Borrower will
warrant and defend the Lender's right to and interest in the Collateral against
all claims and demands of all persons whatsoever.
3.13 LOCATION OF COLLATERAL. Except for sale, processing, use, consumption or
other disposition in the ordinary course of business, each Borrower will keep
all Inventory and Equipment only at locations specified in this Agreement; that
each Borrower shall, during the term of this Agreement, keep the Lender
currently and accurately informed in writing of each location where such
Borrower's records relating to its accounts and contract rights, respectively,
are kept, and shall not remove such records or any of them to another state
without giving the Lender at least thirty (30) days prior written notice
thereof. In addition Palletech and FIXCOR will keep all capital equipment
purchased with proceeds from the Loan at Palletech's and FIXCOR's facility
located at 1835 James Parkway, Heath, Ohio 43056.
3.14 THIRD PARTIES. The Lender shall not be deemed to have assumed any
liability or responsibility to any Borrower or any third person for the
correctness, validity or genuineness of any instruments or documents that may
be released or endorsed to a Borrower by the Lender (which shall
automatically be deemed to be without recourse to the Lender in any event) or
for the existence, character, quantity, quality, condition, value or delivery
of any goods purporting to be represented by any such documents; and that the
Lender, by accepting such security interest in the Collateral, or by
releasing any Collateral to a Borrower, shall not be deemed to have assumed
any obligation or liability to any supplier or Debtor or to any other third
party, and each Borrower agrees to indemnify and defend the Lender and hold
it harmless in respect to any claim or proceeding arising out of any matter
referred to in this paragraph.
3.15 PAYMENT OF ACCOUNTS. Each account or other item of Collateral, other than
Inventory and Equipment, will be paid in full on or before the date shown as its
due date in the schedule of Collateral, in the copy of the invoice(s) relating
to the account or other Collateral or in contracts relating thereto; that upon
any suspension of business, assignment or trust mortgage for the
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benefit of creditors, dissolution, petition in receivership or under any chapter
of the Bankruptcy Code as amended from time to time by or against any Debtor,
any Debtor becoming insolvent or unable to pay its debts as they mature or any
other act of the same or different nature amounting to a business failure, each
Borrower will forthwith notify the Lender thereof.
3.16 NOTIFICATION OF DAMAGE. Each Borrower will immediately notify the Lender
of any loss or damage to, or material diminution in or any occurrence that would
adversely affect the value of the Inventory, the Equipment or other Collateral.
3.17 CHANGES. Since the date of the Financial Statements, there have been no
changes in the assets, liabilities, financial condition or business of each
Borrower, other than changes in the ordinary course of business, the effect of
which have, in the aggregate, been materially adverse.
3.18 TAXES. Each Borrower has filed all Federal, state and other tax returns
required to be filed (except for such returns for which current and valid
extensions have been filed), and all taxes, assessments and other governmental
charges due from each Borrower have been fully paid. Each Borrower has
established on its books reserves adequate for the payment of all Federal, state
and other tax liabilities (if any).
3.19 USE OF PROCEEDS. No portion of any Loan is to be used for the purpose of
purchasing or carrying any "margin security" or "margin stock" as such terms are
used in Regulations G and U of the Board of Governors of the Federal Reserve
System, 12 C.F.R. 207 and 221.
4. AFFIRMATIVE COVENANTS
4.1 PAYMENTS. Each Borrower will duly and punctually pay all interest and
principal becoming due the Lender and will duly and punctually perform all
things on its part to be done or performed under this Agreement.
4.2 FACILITY/COLLATERAL MONITORING FEE. In addition to all amounts due and
payable respecting the Loan pursuant to the Equipment Note and the other Loan
Documents, Borrowers hereby agree to pay to Lender a "Facility/Collateral
Monitoring Fee" equal to $5,000 per month in advance on the first business day
of every calendar month commencing July 1, 1997 and on the first business day of
each month thereafter through and including December 1, 1997 and $10,000 per
month in advance on the first business day of every calendar month commencing
January 2, 1998 and on the first business day of each month thereafter so long
as any amounts are outstanding respecting the Loan and the Equipment Note.
4.3 BOOKS AND RECORDS: INSPECTION. Each Borrower will at all times keep proper
books of account in which full, true and correct entries will be made of its
transactions in accordance with generally accepted accounting principles,
consistently applied and which are, in the opinion of a Certified Public
Accountant acceptable to Lender, adequate to determine fairly the financial
condition and the results of operations of each Borrower. Each Borrower will at
all reasonable times make its books and records available in its offices for
inspection and examination by the
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Lender and the Lender's representatives and will permit inspection of the
Collateral and all of its properties by the Lender and the Lender's
representatives. Each Borrower will from time to time furnish the Lender with
such information and statements as the Lender may request in its sole discretion
with respect to the Obligations or the Lender's security interest in the
Collateral. Each Borrower shall, during the term of this Agreement, keep the
Lender currently and accurately informed in writing of each location where such
Borrower's records relating to its accounts and contract rights are kept, and
shall not remove such records to another state without giving the Lender at
least thirty (30) days prior written notice thereof.
4.4 FINANCIAL STATEMENTS. Each Borrower will furnish to Lender:
(a) as soon as available to such Borrower, but in any event within 15 days
after the close of each month, a full and complete signed copy of
financial statements, which shall include a balance sheet of such
Borrower, as at the end of such month, and statement of profit and
loss of such Borrower reflecting the results of its operations during
such month and shall be prepared by such Borrower and certified by
such Borrower's chief financial officer as to correctness in
accordance with generally accepted accounting principles, consistently
applied, subject to year-end adjustments;
(b) as soon as available to such Borrower, but in any event within 30 days
after the close of each quarterly period of its fiscal year, a full
and complete signed copy of financial statements, prepared by
certified public accountants acceptable to Lender, which shall include
a balance sheet of such Borrower, as at the end of such quarter, and
statement of profit and loss of such Borrower reflecting the results
of its operations during such quarter, bearing the opinion of such
certified public accountants and prepared on a compiled basis in
accordance with generally accepted accounting principles, consistently
applied, subject to year-end adjustments;
(c) as soon as available to such Borrower, but in any event within 90 days
after the close of each fiscal year, a full and complete signed copy
of financial statements, prepared by certified public accountants
acceptable to Lender, which shall include a balance sheet of such
Borrower, as at the end of such year, and statement of profit and loss
of such Borrower reflecting the results of its operations during such
year, bearing the opinion of such certified public accountants and
prepared on an audited basis in accordance with generally accepted
accounting principles, consistently applied together with any
so-called management letter;
(d) on or before May 1 of each year or such other date approved by the
Lender, such Borrower's filed federal and state tax returns for the
prior year;
(e) from time to time, such financial data and information about such
Borrower as Lender may reasonably request; and
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(f) any financial data and information about any guarantors of the
Obligations as Lender may reasonably request.
4.5 CONDUCT OF BUSINESS. Each Borrower will maintain its corporate existence in
good standing and comply with all laws and regulations of the United States and
of any state or states thereof and of any political subdivision thereof, and of
any governmental authority which may be applicable to it or to its business;
provided that this covenant shall not apply to any tax, assessment or charge
which is being contested in good faith and with respect to which reserves have
been established and are being maintained.
4.6 NOTICE TO ACCOUNT DEBTORS. Each Borrower agrees, at the request of the
Lender, to notify all or any of the Debtors in writing of the Lender's security
interest in the Collateral in whatever manner the Lender requests and, if the
Lender so requests, to permit the Lender to notify all or any of the Debtors at
the Borrowers' expense.
4.7 TAXES. Each Borrower will promptly pay all real and personal property
taxes, assessments and charges and all franchise, income, unemployment, old age
benefits, withholding, sales and other taxes assessed against it or payable by
it before delinquent; provided that this covenant shall not apply to any tax
assessment or charge which is being contested in good faith and with respect to
which reserves have been established and are being maintained. The Lender may,
at its option, from time to time, discharge any taxes, liens or encumbrances of
any of the Collateral, and the Borrowers will pay to the Lender on demand or the
Lender in its sole discretion may charge to the Borrowers all amounts so paid or
incurred by it.
4.8 MAINTENANCE. Each Borrower will keep and maintain the Collateral and its
other properties, if any, in good repair, working order and condition. Each
Borrower will immediately notify the Lender of any loss or damage to or any
occurrence which would adversely affect the value of any Collateral. The Lender
may, at its option, from time to time, take any other action that the Lender may
deem proper to repair, maintain or preserve any of the Collateral, and the
Borrowers will pay to the Lender on demand or the Lender in its sole discretion
may charge to the Borrowers all amounts so paid or incurred by it.
4.9 INSURANCE. Each Borrower will maintain in force casualty insurance on all
Collateral and any other property of such Borrower, if any, against risks
customarily insured against by companies engaged in businesses similar to that
of such Borrower containing such terms and written by such companies as may be
satisfactory to the Lender, such insurance to be payable to the Lender as its
interest may appear in the event of loss; no loss shall be adjusted thereunder
without the Lender's approval; and all such policies shall provide that they may
not be canceled without first giving at least ten (10) days' written notice of
cancellation to the Lender. In the event that any Borrower fails to provide
evidence of such insurance, the Lender may, at is option, secure such insurance
and charge the cost thereof to the Borrowers. At the option of the Lender, all
insurance proceeds received from any loss or damage to any of the Collateral
shall be applied either to the replacement or repair thereof or as a payment on
account of the Obligations. From and after the occurrence of an Event of
Default, the Lender is authorized to cancel any insurance maintained
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hereunder and apply any returned or unearned premiums, all of which are hereby
assigned to the Lender, as a payment on account of the Obligations.
4.10 NOTIFICATION OF DEFAULT. Within five (5) days of becoming aware of the
existence of any condition or event which constitutes an Event of Default, or
any condition or event which would upon notice or lapse of time, or both,
constitute an Event of Default, a Borrower shall give Lender written notice
thereof specifying the nature and duration thereof and the action being or
proposed to be taken with respect thereto.
4.11 NOTIFICATION OF MATERIAL LITIGATION. Each Borrower will promptly notify
the Lender in writing of any litigation or of any investigative proceedings of a
governmental agency or authority commenced or threatened against it which would
or might be materially adverse to the financial condition of such Borrower.
4.12 PENSION PLANS. With respect to any pension or benefit plan maintained by a
Borrower, or to which such Borrower contributes ("Plan"), the benefits under
which are guarantied, in whole or in part, by the Pension Benefit Guaranty
Corporation created by the Employee Retirement Income Security Act of 1974, P.L.
93-406, or any governmental authority succeeding to any or all of the functions
of the Pension Benefit Guaranty Corporation ("Pension Benefit Guaranty
Corporation"), such Borrower will (a) fund each Plan as required by the
provisions of Section 412 of the Internal Revenue Code of 1986, as amended; (b)
cause each Plan to pay all benefits when due; (c) furnish Lender (i) promptly
with a copy of any notice of each Plan's termination sent to the Pension Benefit
Guaranty Corporation and (ii) no later than the date of submission to the
Department of Labor or to the Internal Revenue Service, as the case may be, a
copy of any request for waiver from the funding standards or extension of the
amortization periods required by Section 412 of the Internal Revenue Code of
1954, as amended; and (d) subscribe to any contingent liability insurance
provided by the Pension Benefit Guaranty Corporation to protect against employer
liability upon termination of a guarantied pension plan, if available to
Borrower.
4.13 ENVIRONMENTAL. As of the date hereof neither the Borrowers nor any of
Borrowers' agents, employees or independent contractors (1) have caused or are
aware of a release or threat of release of Materials (as defined herein) on any
of the premises or personal property owned or controlled by Borrower, or any
abutting property, which could give rise to liability under any Superfund and
Hazardous Waste Laws (as defined herein) or any other federal, state or local
law, rule or regulation; (2) have arranged for the transport of or transported
any Materials in a manner as to violate, or result in potential liabilities
under, any Superfund and Hazardous Waste Laws; (3) have received any notice,
order or demand from the Environmental Protection Agency or the Ohio Department
of Environmental Protection under any Superfund and Hazardous Waste Laws; (4)
have incurred any liability under any Superfund and Hazardous Waste Laws in
connection with the mismanagement, improper disposal or release of Materials;
(5) are aware of any inspection or investigation of any of the premises or
personal property owned or controlled by Borrowers or abutting property by any
federal, state or local agency for possible violations of the Superfund and
Hazardous Waste Laws.
To the best of each Borrower's knowledge, no prior owner or tenant of any
premises or property presently controlled or owned by such Borrower committed or
omitted any act which caused the
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release of Materials on such premises or property which could give rise to a
lien thereon by any federal, state or local government. No notice or statement
of claim or lien affecting any property or premises owned or controlled by a
Borrower has been recorded or filed in any public records by any federal, state
or local government for costs, penalties, fines or other charges as to such
property.
Borrowers agree to indemnify and hold Lender harmless from all liability,
loss, cost, damage and expense, including attorney fees and costs of litigation,
arising from any and all of its violations of the Superfund and Hazardous Waste
Laws including those arising from any lien on any premises or property owned or
controlled by Borrowers by any federal, state and local government arising from
the presence of Materials. Borrowers further agree to reimburse Lender upon
demand for any costs incurred by Lender in connection with the foregoing.
Borrowers agree their obligations hereunder shall be continuous and shall
survive the repayment of all debts to Lender including repayment of all
Obligations.
The term "Materials" means any "oil," "hazardous material," "hazardous
wastes" or "hazardous substances" as defined under the Comprehensive
Environmental Response, Compensation, and Liability Act, 42 U.S.C. Section 9601
et seq., as amended, the Resource Conservation and Recovery Act of 1976, 42
U.S.C. Section 6901 et seq., as amended, and Ohio hazardous waste laws and
regulations, and the foregoing are collectively the "Superfund and Hazardous
Waste Laws."
5. NEGATIVE COVENANTS
5.1 EBIT. Palletech and FIXCOR each will not permit their earnings before
interest and taxes to be less than the amounts shown on Schedule 5.1 for the
periods indicated on Schedule 5.1.
5.2 EQUIPMENT PURCHASE. Equipment financed under this Agreement will not be
delivered more than seven (7) days after the scheduled delivery date (each a
"Scheduled Delivery Date") approved by Lender for each item of equipment ordered
unless Borrowers repay to Lender all advances made by Lender respecting any such
equipment within seven (7)days of the Scheduled Delivery Date for such item of
equipment.
5.3 LIMITATIONS ON INDEBTEDNESS. Each Borrower will not issue any evidence of
indebtedness or create, assume, guarantee, become contingently liable for, or
suffer to exist indebtedness in addition to Indebtedness to the Lender, except
indebtedness or liabilities of such Borrower, other than for money borrowed,
incurred or arising in the ordinary course of business or as approved in writing
by Lender, which approval will not be unreasonably withheld.
5.4 SALE OF INTEREST. There shall not be any sale or transfer of ownership of
any interest in any Borrower without the Bank's prior written consent.
5.5 LOANS OR ADVANCES. Each Borrower will not make any loans or advances to any
individual, firm or corporation, including without limitation its officers and
employees; provided, however,
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that a Borrower may make advances to its employees, including its officers, with
respect to expenses incurred or to be incurred by such employees which expenses
are reimbursable by such Borrower; and provided further, however, that such
Borrower may extend credit in the ordinary course of business in accordance with
customary trade practices.
5.6 DIVIDENDS AND DISTRIBUTIONS. Each Borrower will not, without prior written
permission of the Lender, which shall not be unreasonably withheld, pay any
dividends on or make any distribution on account of any class of such Borrower's
capital stock in cash or in property (other than additional shares of such
stock), or redeem, purchase or otherwise acquire, directly or indirectly, any of
such stock, except if such Borrower is a Subchapter S corporation, under the
regulations of the Internal Revenue Service of the United States, in which
event, so long as such Borrower is not in default hereunder, such Borrower may
distribute to the stockholders of such Borrower such amounts as are necessary to
pay the tax liability of such stockholders due as a result of such stockholders
interest in such Borrower.
5.7 INVESTMENTS. Without the prior written consent of Lender, which shall not
be unreasonably withheld, each Borrower will not (i) make investments in, or
advances to, any individual, partnership, corporation, limited liability
company, trust or other organization or person; or (ii) purchase or otherwise
invest in or hold securities, nonoperating real estate or other nonoperating
assets or purchase all or substantially all the assets of any entity.
5.8 MERGER. Each Borrower will not merge or consolidate or be merged or
consolidated with or into any other corporation.
5.9 SALE OF ASSETS. Each Borrower will not without Lender's prior written
consent sell, lease or otherwise dispose of any of its assets, except in the
ordinary and usual course of business and except for the purpose of replacing
machinery, equipment or other personal property which, as a consequence of wear,
duplication or obsolescence, is no longer used or necessary in such Borrower's
business, provided that fair consideration is received therefor; provided,
however, the Lender shall not unreasonably withhold consent in the event such
Borrower proposes to transfer any assets to a corporation (a "Subsidiary") for
which one hundred percent of the issued and outstanding capital stock is owned
by such Borrower, provided such Subsidiary executes and delivers such
guarantees, security agreements and other agreements reasonably requested by
Lender to perfect and preserve Lender's rights under this Agreement and the
other Loan Documents.
5.10 RESTRICTION ON LIENS. Each Borrower will not grant any security interest
in, or mortgage of, any of its properties or assets including the Collateral.
5.11 OTHER BUSINESS. Each Borrower will not engage in any business other than
the business in which it is currently engaged or a business reasonably allied
thereto.
6. DEFAULT
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6.1 DEFAULT. "Event of Default" shall mean the occurrence of one or more of any
of the following events:
(a) Default of any liability, obligation or undertaking of any Borrower to
the Lender, hereunder or otherwise, including failure to pay in full
and when due any installment of principal or interest continuing for 5
business days with respect to any monetary obligation or continuing
for 5 business days after the giving of notice by the Lender with
respect to all other obligations.
(b) Failure of any Borrower to maintain aggregate collateral security
value satisfactory to the Lender continuing for 5 business days after
the giving of notice by the Lender.
(c) Default of any material liability, obligation or undertaking of any
Borrower to any other party continuing for 5 business days after the
giving of notice by the Lender.
(d) If any statement, representation or warranty heretofore, now or
hereafter made in connection with this Agreement or in any supporting
financial statement of any Borrower shall be determined by Lender to
have been false in any material respect when made continuing for 5
business days after the giving of notice by the Lender.
(e) The liquidation, termination or dissolution of, or the merger
consolidation of any Borrower, into another entity, or any Borrower
ceasing to carry on actively its present business or the appointment
of a receiver for the Borrower.
(f) The liquidation, termination or dissolution of any guarantor of the
Obligations or if a corporation, the merger or consolidation of any
such guarantor into another entity, or any guarantor of the
Obligations ceasing to carry on actively its present business, or the
appointment of a receiver for any guarantor of the Obligations or the
death of any guarantor of the Obligations or any partner or trustee of
any guarantor of the Obligations.
(g) The institution by or against any Borrower or guarantor of the
Obligations of any proceedings under the Bankruptcy Code 11 USC
Section 101 et seq. or any other law in which such Borrower or any
guarantor of the Obligations is alleged to be insolvent or unable to
pay their respective debts as they mature, or the making by any
Borrower or any guarantor of the Obligations of an assignment for the
benefit of creditors or the granting of a trust mortgage for the
benefit of creditors.
(h) The service upon the Lender hereof of a writ in which the Lender is
named as trustee of any Borrower or of any guarantor of the
Obligations.
(i) A judgment or judgments for the payment of money shall be rendered
against any Borrower and any such judgment shall remain unsatisfied
and in effect for any period of thirty (30) consecutive days without a
stay of execution.
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(j) Any levy, seizure, attachment, execution or similar process shall be
issued or levied on any of the property of any Borrower.
(k) The termination of any guaranty of the Obligations.
(l) The occurrence of such a change in the condition or affairs (financial
or otherwise) of any Borrower or any guarantor or other surety for any
of the obligations, or the occurrence of any event or circumstance
such that the Lender, in its sole discretion, deems that it is
insecure or that the prospects for timely or full payment or
performance of any of the Obligations have been or may be impaired.
6.2 DEFAULT. If an Event of Default shall occur, at the election of the Lender,
all Obligations shall become immediately due and payable without notice or
demand, except with respect to Obligations payable on DEMAND, which shall be due
and payable on DEMAND, whether or not an Event of Default has occurred.
The Lender is hereby authorized, at its election, after an Event of Default
or after Demand, without any further demand or notice except to such extent as
notice may be required by applicable law, to take possession and/or sell or
otherwise dispose of all or any of the Collateral at public or private sale; and
the Lender may also exercise any and all other rights and remedies of a secured
party under the Code or which are otherwise accorded to it by applicable law,
all as the Lender may determine. If notice of a sale or other action by the
Lender is required by applicable law, unless the Collateral is perishable or
threatens to decline speedily in value or is of a type customarily sold on a
recognized market, each Borrower agrees that five (5) days' written notice to
such Borrower, or the shortest period of written notice permitted by such law,
whichever is larger, shall be sufficient notice; and that to the extent
permitted by law, the Lender, its officers, attorneys and agents may bid and
become purchasers at any such sale, if public, and may purchase at any private
sale any of the Collateral that is of a type customarily sold on a recognized
market or which is the subject of widely distributed standard price quotations.
Any sale (public or private) shall be free from any right of redemption, which
each Borrower hereby waives and releases. No purchaser at any sale (public or
private) shall be responsible for the application of the purchase money. Any
balance of the net proceeds of sale remaining after paying all Obligations of
the Borrowers to the Lender shall be returned to the Borrowers or to such other
party as may be legally entitled thereto; and if there is a deficiency, the
Borrowers shall be responsible for the same, with interest. Upon demand by the
Lender, each Borrower shall assemble the Collateral and make it available to the
Lender at a place designated by the Lender which is reasonably convenient to the
Lender and such Borrower. Each Borrower hereby acknowledges that the Lender has
extended credit and other financial accommodations to such Borrower upon
reliance of such Borrower's granting the Lender the rights and remedies
contained in this Agreement including without limitation the right to take
immediate possession of the Collateral upon the occurrence of an Event of
Default or after DEMAND with respect to Obligations payable on DEMAND and each
Borrower hereby acknowledges that the Lender is entitled to equitable and
injunctive relief to enforce any of its rights and remedies hereunder or under
the Code and each
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<PAGE>
Borrower hereby waives any defense to such equitable or injunctive relief based
upon any allegation of the absence of irreparable harm to the Lender.
6.3 POWER OF ATTORNEY. Each Borrower hereby irrevocably constitutes and
appoints the Lender as such Borrower's true and lawful attorney, with full power
of substitution, at the sole cost and expense of such Borrower but for the sole
benefit of the Lender, upon the occurrence of an Event of Default or after
DEMAND with respect to Obligations payable on DEMAND, to convert the Collateral
into cash, including, without limitation, completing the manufacture or
processing of work in process, and the sale (either public or private) of all or
any portion or portions of the Inventory and other Collateral; to enforce
collection of the Collateral, either in its own name or in the name of such
Borrower, including, without limitation, executing releases, compromising or
settling with any Debtors and prosecuting, defending, compromising or releasing
any action relating to the Collateral; to receive, open and dispose of all mail
addressed to such Borrower and to take therefrom any remittances or proceeds of
Collateral in which the Lender has a security interest; to notify Post Office
authorities to change the address for delivery of mail addressed to such
Borrower to such address as the Lender shall designate; to endorse the name of
such Borrower in favor of the Lender upon any and all checks, drafts, money
orders, notes, acceptances or other instruments of the same or different nature;
to sign and endorse the name of such Borrower on and to receive as secured party
any of the Collateral, any invoices schedules of Collateral, freight or express
receipts, or bills of lading, storage receipts, warehouse receipts, or other
documents of title of the same or different nature relating to the Collateral;
to sign the name of such Borrower on any notice of the Debtors or on
verification of the Collateral; and to sign and file or record on behalf of such
Borrower any financing or other statement in order to perfect or protect the
Lender's security interest. The Lender shall not be obliged to do any of the
acts or exercise any of the powers hereinabove authorized, but if the Lender
elects to do any such act or exercise any such power, it shall not be
accountable for more than it actually receives as a result of such exercise of
power, and it shall not be responsible to the Borrowers except for willful
misconduct in bad faith. All powers conferred upon the Lender by this Agreement,
being coupled with an interest, shall be irrevocable so long as any Obligation
of the Borrowers to the Lender shall remain unpaid.
6.4 NONEXCLUSIVE REMEDIES. All of the Lender's rights and remedies not only
under the provisions of this Agreement but also under any other agreement or
transaction shall be cumulative and not alternative or exclusive, and may be
exercised by the Lender at such time or times and in such order of preference as
the Lender in its sole discretion may determine.
6.5 REASSIGNMENT TO BORROWER. Whenever the Lender deems it desirable that any
legal action be instituted with respect to any Collateral or that any other
action be taken in any attempt to effectuate collection of any Collateral, the
Lender may reassign the item in question to the Borrowers (and if the Lender
shall execute any such reassignment, it shall automatically be deemed to be
without recourse to the Lender in any event) and require the Borrowers to
proceed with such legal or other action at the Borrowers' sole liability, cost
and expense, in which event all amounts collected by the Borrowers on such item
shall nevertheless be subject to the Lender's security interest.
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<PAGE>
7. MISCELLANEOUS
7.1 WAIVERS. Each Borrower waives notice of nonpayment, demand, presentment,
protest or notice of protest of the Collateral, and all other notices, consents
to any renewals or extensions of time of payment thereof, and generally waives
any and all suretyship defenses and defenses in the nature thereof.
7.2 SEVERABILITY. If any provision of this Agreement or portion of such
provision or the application thereof to any person or circumstance shall to any
extent be held invalid or unenforceable, the remainder of this Agreement (or the
remainder of such provision) and the application thereof to other persons or
circumstances shall not be affected thereby.
7.3 SET-OFF. Any deposits, balances or other sums credited by or due from the
Lender or any of its affiliates to any Borrower and any security or other
property of any Borrower in the possession of the Lender, whether for
safekeeping or otherwise, 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 in such manner as the Lender in its sole discretion may
determine.
7.4 INDEMNIFICATION. Each Borrower shall indemnify, defend and hold the Lender
harmless of and from any claim brought or threatened against the Lender by such
Borrower, any guarantor or endorser of the Obligations, or any other person (as
well as from attorneys' reasonable fees and expenses in connection therewith) on
account of the Lender's relationship with such Borrower, or any guarantor or
endorser of the Obligations (each of which may be defended, compromised, settled
or pursued by the Lender with counsel of the Lender's election, but at the
expense of the Borrowers), except for any claim arising out of the gross
negligence or willful misconduct of the Lender. The within indemnification shall
survive payment of the Obligations, and/or any termination, release or discharge
executed by the Lender in favor of the Borrowers.
7.5 COSTS AND EXPENSES. The Borrowers shall pay to the Lender any and all costs
and expenses (including, without limitation, reasonable attorneys' fees, court
costs, litigation and other expenses) incurred or paid by the Lender in
establishing, maintaining, protecting or enforcing any of the Lender's rights or
the Obligations, including, without limitation, any and all such costs and
expenses incurred or paid by the Lender in defending the Lender's security
interest in, title or right to the Collateral or in collecting or attempting to
collect or enforcing or attempting to enforce payment of the Collateral.
7.6 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.
7.7 BINDING EFFECT OF AGREEMENT. This Agreement shall be binding upon and
inure to the benefit of the respective heirs, executors, administrators, legal
representatives, successors and assigns of the parties hereto, and shall remain
in full force and effect (and the Lender shall be entitled to rely thereon)
until terminated as to future transactions by written notice from either
17
<PAGE>
party to the other party of the termination hereof; provided that any such
termination shall not release or affect any Collateral in which the Lender
already has a security interest or any Obligations incurred or rights accrued
hereunder prior to the effective date of such notice (as hereinafter defined) of
such termination. Notwithstanding any such termination, the Lender shall have a
security interest in all Collateral to secure the payment and performance of
Obligations arising after such termination as a result of commitments or
undertakings made or entered into by the Lender prior to such termination. The
Lender may transfer and assign this Agreement and deliver the Collateral to the
assignee, who shall thereupon have all of the rights of the Lender; and the
Lender shall then be relieved and discharged of any responsibility or liability
with respect to this Agreement and the Collateral.
7.8 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 or to vest more fully in or
assure to the Lender the security interest in the Collateral granted to the
Lender by this Agreement or to comply with applicable statute or law and to
facilitate the collection of the Collateral.
7.9 AMENDMENTS AND WAIVERS. This Agreement may be amended and each 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.
7.10 TERMS OF AGREEMENT. This Agreement shall continue in force and effect so
long as any Obligations or 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 each
Borrower hereunder, unless such other agreement specifically refers to this
Agreement and expressly so provides.
7.11 NOTICES. Any notices under or pursuant to this Agreement shall be deemed
duly received and effective if delivered in hand to any officer of agent of any
Borrower or Lender, or if mailed by registered or certified mail, return receipt
requested, addressed to a Borrower or Lender at address set forth in this
Agreement or as any party may from time to time designate by written notice to
the other party.
7.12 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,
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<PAGE>
rights, duties and remedies of the parties thereunder and in all other respects
by the domestic laws of Massachusetts.
7.13 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).
7.14 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 Borrow
irrevocably appoints the Secretary of State, at the State of Ohio 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 a Borrower and (ii) by
serving the same upon such agent, and agrees that such service shall in every
respect be deemed effective service upon a Borrower.
7.15 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. THE BORROWERS CERTIFY 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.
Witness Borrower:
Witness Borrower:
Palletech, Inc.
/s/ Karl Holland By: /s/ Gary DeLaurentiis
- ----------------------------------- --------------------------------
Gary DeLaurentiis, President
Witness Borrower:
FIXCOR Industries, Inc.
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By: /s/ Gary DeLaurentiis
- ----------------------------------- ---------------------------------
Gary DeLaurentiis, President
Fix-Corp International, Inc.
/s/ Sherry L. Durst By: /s/ Mark Fixler
- ----------------------------------- ---------------------------------
Mark Fixler, President
Accepted at Boston, Massachusetts: Gordon Brothers Capital Corporation
By: /s/ Warren H. Feder
------------------------------
Name: Warren H. Feder
Title: President
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SCHEDULE 5.1.
FIXCORP PALLETECH
------- ---------
August, 1997 -0-
September, 1997 -0-
October, 1997 307,440.00
November, 1997 307,440.00
December, 1997 307,440.00
January, 1998 307,440.00 382,905.00
February, 1998 307,440.00 382,905.00
March, 1998 307,440.00 382,905.00
April, 1998 307,440.00 382,905.00
May, 1998 307,440.00 382,905.00
June, 1998 307,440.00 382,905.00
21
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Exhibit 14
Right to purchase 500,000 shares
of Common Stock of Fix-Corp International,
Inc. (subject to adjustment as provided herein)
FIX-CORP INTERNATIONAL, INC.
PURCHASE WARRANT END AGREEMENT
JULY 9, 1997
Fix-Corp International, Inc., a Delaware corporation with principal offices
at 27040 Cedar Road, Suite 213, Beachwood, OH 44l22 (the "Company"), hereby
certifies that, for value received Gordon Brothers Capital Corporation
("Gordon"), a corporation with an office at 40 Broad Street, Boston,
Massachusetts 02109, is entitled, subject to the terms and conditions contained
herein, to purchase from the Company after July 9, 1997 but before 5:00 p.m.,
New York time, on July 9, 1999 (the "Expiration Date"), five hundred thousand
(500,000) shares of the Company's $.001 par value common stock at a purchase
price of twelve and one half cents ($.125) per share (the "Purchase Price").
The number and character of such shares of stock and the Purchase Price are
subject to adjustment as provided herein. Unless the common stock is registered
in accordance with Gordon's right under Section 6 of this Agreement such common
stock shall be unregistered.
1. CERTAIN DEFINITIONS. As used herein, the following terms shall have
the respective meaning ascribed thereto, unless the context otherwise requires;
(A) "COMPANY" shall mean Fix-Corp International, Inc. and any
corporation or other entity which shall succeed or assume the obligations of the
Company hereunder.
(B) "COMMON STOCK" shall mean the Company's $.001 par value common
stock, as authorized on the date hereof.
(C) "COMMON STOCK EQUIVALENTS" shall mean (i) any capital stock of
any class or classes (however designated) of the Company, authorized on or after
the date hereof, the holder of which shall have the right, without limitation as
to amount, either to all or to a share of the balance of current dividends and
liquidating dividends after the payment of dividends and distributions on any
shares entitled to preference, and (ii) any other securities into which or for
which the Common Stock and/or any of the securities described in (i) may be
converted or exchanged pursuant to a plan of recapitalization, reorganization,
merger, sale of assets or otherwise.
<PAGE>
(D) "CURRENT MARKET PRICE" means the per share price determined in
accordance with Section 3(E) of this Warrant.
(E) "REGISTRABLE SECURITIES" means any Warrant Shares issued to
Warrantholder and/or its designees or transferees and/or other securities that
may be or are issued by the Company upon exercise of the Warrant, including
those which may thereafter be issued by the Company in respect of any such
securities by means of any stock splits, stock dividends, recapitalizations,
reclassifications or the like, and as adjusted pursuant to Section 9 hereof.
(F) "REGISTRATION EXPENSES" means any and all expenses incurred in
connection with any registration or action incident to performance of or
compliance by the Company with Section 4 including, without limitation, (i) all
Securities and Exchange Commission, national securities exchange and NASD
registration and filing fees; all listing fees and all transfer agent fees; (ii)
all fees and expenses incurred in complying with state securities or blue sky
laws (including the fees and disbursements of counsel in connection with blue
sky qualifications of the Registrable Securities); (iii) all printing, mailing,
messenger and delivery expenses and (iv) all fees and disbursements of counsel
for the Company and the Warrantholder and their respective accountants,
including the expenses of any special audits and/or "cold comfort" letters
required by or incident to such performance and compliance, but excluding
underwriting discounts and commissions, brokerage fees and transfer taxes, if
any.
(G) "REGISTRATION STATEMENT" means any registration statement of the
Company filed or to be filed with the Securities and Exchange Commission which
covers any of the Registrable Securities pursuant to the provisions of this
Warrant, including all amendments (including post-effective amendments) and
supplements thereto, all exhibits thereto and all material incorporated therein
by reference.
(H) "SECURITIES LAWS" means the Securities Act of 1933, the
Securities Exchange Act of 1934, as they may be amended, any applicable state
securities laws and the rules and regulations of the Securities and Exchange
Commission (or of any other Federal or state agency administering any Securities
Laws, as then in effect).
(I) "WARRANT SHARES" means any capital stock, including Common Stock,
Common Stock Equivalents and other securities of the Company or any other person
(corporate or otherwise) which the holder of the Warrant (the "Warrantholder"),
shall at any time be entitled to receive, or shall have received, on the
exercise of this Warrant, in lieu of or in addition to Common Stock, or which at
any time shall be issuable or shall have been issued in exchange for or in
replacement of Common Stock pursuant to Section 5 of this warrant or otherwise.
2. EXERCISE OF WARRANT.
(A) EXERCISE. This Warrant may be exercised in full or in part by
the Warrantholder by surrender of this Warrant, with the form of subscription at
the end hereof duly executed by such Warrantholder, to the Company at its
principal office, accompanied by payment in a manner permitted by this Warrant,
in the amount obtained by multiplying the number of
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shares of Common Stock for which this Warrant is being exercised by the Purchase
Price then in effect. On any partial exercise the Company at its expense will
forthwith issue and deliver to or upon the order of the Warrantholder a new
Warrant or Warrants of like tenor, in the name of the Warrantholder or as such
Warrantholder may request (upon payment by such Warrantholder of any applicable
transfer taxes), calling in the aggregate on the face or faces thereof for the
number of shares of Common Stock for which such Warrant or Warrants may still be
exercised.
(B) PAYMENT. Payment of the Purchase Price may be made (i) in
immediately available funds in lawful money of the United States of America;
(ii) by exchange of or reduction in the outstanding principal balance due under
any note, each dollar of principal amount and/or each dollar of accrued interest
outstanding under such note to be applied to one dollar of the Purchase Price;
and/or (iii) by "Cashless Exercise". A "Cashless Exercise" permits the
Warrantholder to pay for the shares being purchased by delivering to the Company
a portion of the shares for which the Warrant is being exercised (the "Payment
Shares"), with the Warrantholder receiving the balance of the shares. The number
of Payment Shares shall equal a quotient, the NUMERATOR of which is the number
of shares for which the Warrant is being exercised, and the DENOMINATOR of which
equals another quotient, the NUMERATOR of which is the Current Market Price and
the DENOMINATOR of which is the Purchase Price.
(C) DELIVERY OF STOCK CERTIFICATES, ETC. ON EXERCISE. As soon as
practicable after the satisfaction by the Warrantholder of its obligations set
forth in Sections 2(A) and 2(B), the Company shall promptly (and in any event
within seven days), and at its expense (including the payment by it of any
applicable issue taxes), cause to be issued in the name of and delivered to the
Warrantholder, or as such Warrantholder may direct (upon payment of any
applicable transfer taxes), a certificate or certificates for the number of
fully paid and nonassessable Warrant Shares to which the Warrantholder shall be
entitled on such exercise, plus, in lieu of any fractional share to which such
Warrantholder would otherwise be entitled, one additional share, together with
any other stock or other securities and property (including cash, where
applicable) to which such Warrantholder is entitled upon such exercise. The
Company shall pay any and all documentary, transfer and similar federal, state
and other taxes which may be payable in respect of the issuance of this warrant
and/or any Warrant Shares or other property upon the exercise of the Warrant.
(D) STOCKHOLDER. The certificate(s) referenced in Section 2(C) shall
be deemed to be issued, and such Warrantholder or any other person so designated
to be named in such certificate(s) as the record holder thereof, shall be deemed
for all purposes to have become a holder of record of such Warrant Shares as of
the date on which the Warrantholder shall have satisfied its obligations set out
in Section 2(A) and 2(B) in respect to much exercise. Subject to the
immediately previous sentence, the Warrantholder shall be deemed to be the
holder of record of the Warrant Shares issuable upon such exercise,
notwithstanding that the stock transfer books of the Company shall then be
closed or that certificates representing such Warrant Shares shall not then be
actually delivered to the Warrantholder.
3. CONTINUATION OF TERMS. Upon any reorganization, consolidation, merger
or transfer (and any dissolution following any transfer) referred to in this
Section 3, this Warrant shall continue in full force and effect and the terms
hereof shall be applicable to the shares of stock and
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<PAGE>
other securities and property receivable on the exercise of this Warrant after
the consummation of such reorganization, consolidation or merger or the
effective date of dissolution following any such transfer, as the case may be,
and shall be binding upon the issuer of any such stock or other securities,
including, in the case of any such transfer, the person acquiring all or
substantially all of the properties or assets of the Company, whether or not
such person shall have expressly assumed the terms of this Warrant.
4. NOTICE OF RECORD DATE, ETC. The Company shall give written notice to
the Warrantholder if at any time prior to the Expiration Date or the exercise in
full of the Warrant, any of the following events shall occur:
(A) the Company shall authorize the issuance of any right to
subscribe for, purchase or otherwise acquire any shares of capital stock of any
class or any other securities or property, or to receive any other right;
(B) any capital reorganization of the Company, any reclassification
or recapitalization of the capital stock of the Company, or any transfer of all
or substantially all the assets of the Company to or consolidation or merger of
the Company with or into any other person; or
(C) any voluntary or involuntary dissolution, liquidation or
winding-up of the Company.
In each such event the Company's notice shall be given at least fifteen (15)
business days prior to the date fixed as a record date or effective date or the
date of closing of the Company's stock transfer books for the determination of
stockholders entitled to such dividend, distribution or subscription rights, or
for the determination of the stockholders entitled to vote on such proposed
merger, consolidation, sale, conveyance, dissolution, liquidation or winding-up.
The notice shall specify (i) the date on which any such record is to be taken
for the purpose of such dividend, distribution or right, and stating the amount
and character of such dividend, distribution or right, and (ii) the date on
which any such reorganization, reclassification, recapitalization, transfer,
consolidation, merger, dissolution, liquidation or winding-up is to take place,
and the time, if any is to be fixed, as of which the holders of record of Common
Stock or other securities shall be entitled to exchange their shares of Common
Stock or other securities for securities or other property deliverable on such
reorganization, reclassification, recapitalization, transfer, consolidation,
merger, dissolution, liquidation or winding-up. Failure to give such notice, or
any defect therein, shall not affect the legality or validity of any action
taken in connection with such dividend, distribution or subscription rights, or
proposed merger, consolidation, sale, conveyance, dissolution, liquidation or
winding-up.
5. RESERVATION OF SHARES. The Company covenants and agrees that it will
cause to be reserved and kept available, solely for issuance and delivery on the
exercise of the Warrant, that number of authorized and unissued shares of Common
Stock, or any authorized and issued shares of Common Stock held in its treasury,
the number of shares of Common Stock that will be sufficient to permit the
exercise in full of the warrant. The Company further covenants and agrees
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that it will take all such action as may be necessary to ensure that all shares
of Common Stock and/or other securities delivered upon exercise of the Warrant
shall, at the time of delivery of the certificate(s) for such shares or other
securities (subject to payment of the Purchase Price), be duly and validly
authorized and issued and fully paid and nonassessable shares or securities,
free and clear of all liens, security interests, charges and other encumbrances
or restrictions on sale and free and clear of all preemptive rights.
6. REGISTRATION RIGHTS.
(A) "PIGGY BACK" REGISTRATION. If at any time or from time to time
prior to the Expiration Date or the exercise in full of the Warrant the Company
proposes to register any of its securities under the Securities Act (including
pursuant to a demand of any stockholder of the Company exercising registration
rights and whether or not for its own account, but excluding a registration on
Form S-4 or Form S-8 or their respective equivalent), it shall as promptly as
reasonably possible notify the Warrantholder of such potential registration and
the Warrantholder's rights under this Section. If within thirty (30) days after
receipt of such notice, the Warrantholder shall so request in writing, the
Company shall include in such Registration Statement all or any part of the
Registrable Securities the Warrantholder requests to be registered. No
incidental right under this Section 6(A) shall be construed to limit any
registration required under Section 6(B).
If in connection with any piggy back registration being offered by or
through one or more underwriters, the managing underwriter shall in good faith
advise the Company and the Warrantholder that the offering will be materially
adversely affected without a limitation of the number of shares being included
in such offering, the Company shall not be required to include all Registrable
Securities in its Registration Statement therefore; PROVIDED, HOWEVER, that if
other selling stockholders, including directors, officers, employees and other
affiliates of the Company, have requested registration of securities in such
proposed offering, the Company shall reduce or eliminate such other selling
stockholders' securities from the offering on a PRO RATA basis to the
Registrable Securities the Warrantholder designated for registration. In such an
event, the Warrantholder may delay any offering by it of all Registrable
Securities requested to be included or that portion of such Registrable
Securities eliminated for such period not exceeding sixty (60) days, as the
managing underwriter shall request, and the Company shall file such supplements
and post-effective amendments and take such other action necessary under
applicable Securities Laws and regulations as may be necessary to permit the
Warrantholder to make its proposed offering for a period of ninety (90) days
following such period of delay.
(B) REGISTRATION ON FORM S-3. In addition to the foregoing
registration rights provided to Warrantholder, if the registration of
Registrable Securities can be effected on Form S-3 (or any similar form
promulgated by the Securities and Exchange Commission), the Company will so
notify the Warrantholder and thereafter will, as expeditiously as possible, use
its best efforts to effect qualification and registration on said Form S-3 of
all or such portion of the Registrable Securities as the Warrantholder shall
specify; PROVIDED HOWEVER, that no more than two (2) of such registration
statements need be filed in any twelve (12) month period.
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(C) EFFECTIVENESS. The company shall keep each Registration
Statement pursuant to which any of the Registrable Securities are being offered
in effect and maintain compliance with all applicable securities Laws for the
period necessary for the Warrantholder to effect the proposed sale or other
disposition of the Registrable Securities.
(D) INDEMNIFICATION OF WARRANTHOLDER. In the event that the Company
registers any of the Registrable Securities under the applicable Securities
Laws, the Company will indemnify and hold harmless the Warrantholder from and
against any and all losses, claims damages, expenses or liabilities, joint or
several, to which it becomes subject under the Securities Laws or under any
other statute or at common law or otherwise, and except as hereinafter provided,
will reimburse the Warrantholder for any legal or other expenses it reasonably
incurs in connection with investigating or defending any actions whether or not
resulting in any liability, insofar as such losses, claims, damages, expenses,
liabilities or actions arise out of or are based upon any untrue statement or
alleged untrue statement of a material fact contained in the registration
statement, in any preliminary or amended preliminary prospectus or in the
prospectus (or the Registration Statement or prospectus as from time to time
amended or supplemented by the Company), or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary in order to make the statements therein not
misleading or any violation by the Company of any rule or regulation promulgated
under the Securities Laws applicable to the Company and relating to action or
inaction required of the Company in connection with such registration, unless
such untrue statement or omission was made in such Registration Statement,
prospectus or preliminary prospectus, or such amendment or supplement, in
reliance upon and in conformity with information furnished in writing to the
Company in connection therewith by the Warrantholder expressly for use therein.
Promptly after receipt by the Warrantholder of notice of the commencement of any
action in respect of which indemnity may be sought against the Company, the
Warrantholder will notify the Company in writing of the commencement thereof
and, subject to the provision, hereinafter stated, the Company shall assume the
defense of such action (including the employment of counsel, who shall be
counsel satisfactory to the Warrantholder), and the payment of expenses insofar
as such action shall relate to any alleged liability in respect of which
indemnity may be sought against the Company. The Warrantholder shall have the
right to employ separate counsel in any such action and to participate in the
defense thereof but the fees and expenses of such counsel shall not be at the
expense of the Company unless the emplacement of such counsel and payment of
such fees and expenses by the Company has been specifically authorized by the
Company. The Company shall not be liable to indemnify any person for any
settlement of any such action effected without the Company's written consent.
(E) INDEMNIFICATION OF COMPANY. In the event that the Company
registers any of the Registrable Securities under the Securities Laws, the
Warrantholder will indemnify and hold harmless the Company, each of its
directors and each of its officers who have signed the Registration Statement
against any and all losses, claims, damages, expenses or liabilities, joint or
several, to which they or any of them may become subject under the Securities
Laws or under any other statute or at common law or otherwise, and, except as
hereinafter provided, will reimburse the Company and each such director or
officer for any legal or other expenses reasonably incurred by them in
connection with investigating or defending any actions whether or not resulting
in any
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liability, insofar as such losses, claims, damages, expenses, liabilities or
actions arise out of or are based upon any untrue statement of a material act
contained in the Registration Statement, the prospectus or preliminary
prospectus or any amendment thereof or supplement thereto, or arise out of or
are based upon the omission to state therein a material fact required to be
stated therein or necessary in order to make the statements therein not
misleading, but only insofar as any such statement or omission was made in
reliance upon and in conformity with information furnished in writing to the
Company in connection therewith by the Warrantholder expressly for use therein;
PROVIDED, HOWEVER, that the Warrantholder's obligations hereunder shall be
limited to an amount equal to the proceeds received by the Warrantholder on
account of the Registrable Securities sold in such registration. Promptly after
receipt of notice of the commencement of any action in respect or which
indemnity may be sought against the Warrantholder, the Company will notify the
Warrantholder in writing of the commencement thereof, and the Warrantholder
shall, subject to the provisions hereinafter stated, assume the defense of such
action (including the employment of counsel, who shall be counsel satisfactory
to the Company) and the payment of expenses insofar as such action shall relate
to the alleged liability in respect of which indemnity may be sought against the
Warrantholder. The Company and each such director and officer shall have the
right to employ separate counsel in any such action and to participate in the
defense thereof but the fees and expenses of such counsel shall not be at the
expense of the Warrantholder unless employment of such counsel and payment of
such fees and expenses by the Warrantholder has been specifically authorized by
the Warrantholder. The Warrantholder shall not be liable to indemnify any person
for any settlement of any such action effected without the Warrantholder's
written consent.
(F) FURTHER OBLIGATIONS OF THE COMPANY. Whenever under this Section
the Company is required to register any Registrable Securities, it agrees that
it shall also do the following:
(i) furnish to the Warrantholder such copies of each
preliminary and final prospectus and such other documents as the Warrantholder
may reasonably request to facilitate the public offering of its Registrable
Securities;
(ii) enter into such agreements (including an underwriting
agreement) and take all such other actions reasonably required in connection
therewith to expedite or facilitate the disposition of such Registrable
Securities and in such connection, if the registration is in connection with an
underwritten offering (1) make such representations and warranties to the
underwriters in such form, substance and scope as are customarily made by
issuers to underwriter, in underwritten offerings and confirm the same if and
when requested; (2) obtain opinions of counsel to the Company and updates
thereof (which counsel opinions in form, scope and substance shall be reasonably
satisfactory to the underwriters) addressed to the underwriters and the
Warrantholder covering the matters customarily covered in opinions requested in
underwritten offerings and such other matters as may be reasonably requested by
such underwriters; (3) obtain "cold comfort" letters and updates thereof from
the Company's accountants addressed to the underwriters, such letters to be in
customary form and covering matters of the type customarily covered in "cold
comfort" letters by underwriters and a holder of registrable securities in
connection with underwritten offerings; and (4) deliver such documents and
certificates as may be
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reasonably requested by the underwriters to evidence compliance with any
customary conditions contained in an underwriting agreement;
(iii) permit the Warrantholder and/or his counsel and other
representatives to inspect and copy such corporate documents, financial and
other Company records as may reasonably be requested by them, and cause the
company's directors, officers and employees, and, if possible, financial
analysts, to supply all reasonably requested information in connection with the
Company and the offering, and
(iv) furnish to the Warrantholder a copy of all documents filed
and all correspondence from or to the Securities and Exchange Commission in
connection with any such offering.
(G) EXPENSES. The Company shall bear all Registration Expenses for
each and every registration under this Section 6.
7. NO DILUTION OR IMPAIRMENT. The Company will not, by amendment of its
Certificate of Incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms of this Warrant, but will at all times and in good faith assist in the
carrying out of all such terms and in the taking of all such action as may be
necessary or appropriate in order to protect the rights of the holder of the
Warrant against dilution or other impairment. Without limiting the generality of
the foregoing, the Company (i) will not increase the par value of any shares of
stock receivable on the exercise of the Warrant above the amount payable
therefor on such exercise, (ii) will take all such action as may be necessary or
appropriate in order that the Company may validly and legally issue fully paid
and nonassessable shares of stock on the exercise of the warrant from time to
time, (iii) will not consolidate with or merge into any other person or permit
any such person to consolidate with or merge into the Company (if the Company is
not the surviving person), unless such other person shall expressly assume in
writing and will be bound by all the terms of the Warrant.
8. EXCHANGE OF WARRANTS. On surrender for exchange of any Warrant,
properly endorsed, to the Company, the Company at its expense will issue and
deliver to or on the order of the holder thereof a new Warrant or Warrants of
like tenor, in the name of such holder or as such holder (on payment by such
holder or any applicable transfer taxes) may direct, calling in the aggregate on
the face or faces thereof for the number of shares of Common Stock called for on
the face or faces of the Warrant or Warrants so surrendered. The Company shall
have the right to require the Warrantholder to pay a sum sufficient to cover any
tax or governmental charge that may be imposed in connection with any split up,
combination, exchange or transfer of this warrant.
9. REPLACEMENT OF WARRANTS. On receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of the
Warrant and, in the case of any such loss, theft or destruction of any Warrant,
on delivery of an indemnity agreement or security reasonably satisfactory in
form and amount to the Company or, in the case of any such mutilation,
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on surrender and cancellation of such Warrant, the Company at its expense will
execute and deliver, in lieu thereof, a new Warrant of like tenor.
10. WARRANT REGISTER. The Company will maintain a register containing the
names and addresses of the holder(s) of the Warrant(s). The "registered holder"
of any Warrant shall be the person in whose name such Warrant is registered in
said warrant register. Any registered holder of this Warrant may change its
address as shown on the Warrant registered by written notice to the Company
requesting such change.
11. REMEDIES. The Company acknowledges that the remedies at law of the
holder of this Warrant in the event of any default or threatened default by the
Company in the performance of or compliance with any of the terms of this
Warrant are not and will not be adequate, and that damages will not be readily
ascertainable. The Company therefore expressly agrees that such terms may be
specifically enforced by a decree for the specific performance of any agreement
contained herein or by an injunction against a violation of any of the terms
hereof or otherwise.
12. NEGOTIABILITY, ETC. Subject to applicable Securities Laws, title to
this Warrant may be transferred by endorsement (by the Warrantholder executing
the form of assignment attached hereto) and delivery in the same manner as in
the case of a negotiable instrument transferable by endorsement and delivery.
Any person in possession of this Warrant properly endorsed is authorized to
represent himself as absolute owner hereof and is empowered to transfer absolute
title hereto by endorsement and delivery hereof to a bone fide purchaser hereof
for value; each prior taker or owner waives and renounces all of his equities or
rights in this Warrant in favor of each such bone fide purchaser, and each such
bone fide purchaser shall acquire absolute title hereto and to all rights
represented hereby.
13. ACQUISITION FOR INVESTMENT. Unless a current Registration Statement
under the Securities Laws shall be in effect with respect to the Warrant Shares,
the Warrantholder, by accepting this Warrant, covenant, and agrees that, at the
time of exercise hereof, and at the time of any proposed transfer of securities
acquired upon exercise hereof, such holder will deliver to the Company a written
statement that the securities acquired by the holder upon exercise hereof are
for the account of the Warrantholder for investment and are not acquired with a
view to, or for sale in connection with, any distribution thereof (or any
portion thereof) and with no present intention (at any such time) of offering
and distributing such securities (or any portion thereof). The certificates
evidencing the Warrant Shares, if such Warrant Shares are not subject to a
current Registration Statement, shall bear a legend to the effect that shares
evidenced by such certificates have not been so registered and may not be
transferred except pursuant to an effective Registration Statement under the
Securities Laws, or an opinion of counsel satisfactory to the Company that such
registration is not required. Further, the Warrantholder shall comply with all
applicable provisions of the Securities Laws.
14. MISCELLANEOUS. This Warrant is being executed as an instrument under
seal and shall be construed and enforced in accordance with and governed by the
internal laws of the Commonwealth of Massachusetts. The invalidity or
enforceability of any provision of this Warrant shall not affect the other
provisions of this Warrant, but this Warrant shall be construed and
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reformed to the fullest extent possible. This Warrant shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns. This warrant cannot be modified or amended except by written agreement
executed by the party affected thereby. No term or provision hereof shall be
deemed waived and no breach hereof shall be deemed consented to or excused,
unless such waiver, consent or excuse shall be expressly made in writing and
signed by the party claimed to have so waived, consented or excused. Should
either party consent, waive or excuse a breach by the other party, such consent,
waiver or excuse shall not constitute a consent to, waiver of or excuse of any
other different or subsequent breach, whether or not of the same kind as the
original breach. The headings and captions contained in this Warrant shall not
be considered to be part hereof for purposes of interpreting or applying this
Warrant, but are for convenience of reference only. All notices, requests,
demands and other communications required or permitted under this Warrant shall
be deemed to have been duly delivered if (i) delivered by hand, (ii) deposited
in the United States mail, postage prepaid and registered or certified with
return receipt requested or (iii) delivered by prepaid courier service to the
address set forth on the first page of this Warrant or to such other address as
either party shall hereafter notify the other. Notice shall be deemed to have
been delivered upon receipt. This Warrant may be executed in one or more
counterparts, each of which shall be an original and all of which, when taken
together, shall constitute one and the same Agreement.
Dated: 7/15/97 FIX-CORP INTERNATIONAL, INC.
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(Corporate Seal)
By: /s/ Mark Fixler
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Title: Pres
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Attest: /s/ Karl Holland
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Exhibit 15
INTERCREDITOR AGREEMENT
THIS INTERCREDITOR AGREEMENT (the "Agreement"), dated as of this_____ day
of July, 1997, is made by Gordon Brothers Capital Corporation ("Creditor'), with
an office at 40 Broad Street, Boston, Massachusetts 02109 and NationsCredit
Commercial Corporation, through its NationsCredit Commercial Funding Division
("Nations"), with an office at 1177 Avenue of the Americas, 36th floor, New
York, New York 10036.
1. BACKGROUND.
(a) Fix-Corp International, Inc., a Delaware corporation ("Fix-Corp"),
FIXCOR Industries, Inc., a Delaware corporation ("FIXCOR"), and Palletech, Inc.,
a Delaware corporation ("Palletech"), have granted to Creditor liens upon, and
security interests in, the Collateral (as defined below) to secure loans and
advances that have been or hereafter may be made by Creditor to any of FIXCOR,
Fix-Corp and Palletech.
(b) Palletech, FIXCOR and Fix-Corp (individually each an "Obligor", and
collectively "Obligors") have granted to Nations liens upon, and security
interests in, the Collateral to secure loans and advances that have been or
hereafter may be made by Nations to FIXCOR and guaranties by Palletech and
Fix-Corp made in favor of Nations with respect to such loans and advances.
(c) Nations and Creditor desire to agree between themselves on their
relative rights, priorities and interests in the Collateral and certain other
matters as set forth herein.
Therefore, in consideration of the foregoing and the mutual covenants set
forth below, the parties hereby agree as follows.
2. DEFINITIONS. For purposes of this Agreement:
(a) "Collateral" means any existing or hereafter acquired property of each
Obligor, whether realty or personalty, and whether tangible or intangible,
including without limitation accounts, inventory, general intangibles,
equipment, documents, instruments and chattel paper, together with all proceeds
of the foregoing.
(b) "Creditor's Debt" means all obligations, liabilities and indebtedness
from time to time owing by each Obligor to Creditor under Creditor's Documents
or otherwise, including without limitation the outstanding balance of principal
and accrued interest (including without limitation any interest accruing after
the commencement of insolvency proceedings with respect to any Obligor, whether
or not such interest is allowed as a claim in such proceedings), fees and
premiums from time to time owing by each Obligor to Creditor pursuant to
Creditor's Documents and all costs and expenses (including reasonable attorneys'
fees) owing by each Obligor to Creditor under Creditor's Documents.
<PAGE>
(c) "Creditor's Documents" means any and all agreements, instruments and
documents, together with any amendments, renewals, extensions or supplements
thereto or replacements thereof, now or hereafter evidencing or securing a
financing arrangement or arrangements between Creditor and each Obligor,
including without limitation the Term Note of even date herewith executed by the
Obligors in favor of Gordon Brothers and the Loan and Security Agreement of even
date herewith executed by the Obligors in favor of Gordon Brothers.
(d) "Creditor Senior Collateral" means the Pallet Equipment, all proceeds
of the Pallet Equipment and any right to payment for the inventory created
solely through the use of the Pallet Equipment, which is not evidenced by an
instrument (as defined in the Uniform Commercial Code as adopted and in effect
at such time in the State of New York) or chattel paper (as defined in the
Uniform Commercial Code as adopted and in effect at such time in the State of
New York) ("Pallet Account Receivables"), PROVIDED THAT, if and when Nations
notifies Creditor in writing that either (i) the Pallet Account Receivables are
to be included in the definition of "Eligible Accounts" (pursuant to the Loan
Agreement (defined below)) or (ii) Nations intends to make loans to Palletech
directly under any circumstances, such Pallet Account Receivables shall
immediately cease to be Creditor Senior Collateral and shall become Nations
Senior Collateral (as defined below) indefinitely.
(e) "Nations' Debt" means all obligations, liabilities and indebtedness
from time to time owing by each Obligor to Nations under Nations' Documents or
otherwise, including without limitation the outstanding balance of principal and
accrued interest (including without limitation any interest accruing after the
commencement of insolvency proceedings with respect to any Obligor, whether or
not such interest is allowed as a claim in such proceedings), fees and premiums
from time to time owing by each Obligor to Nations pursuant to Nations'
Documents and all costs and expenses (including reasonable attorneys' fees)
owing by each Obligor to Nations under Nations' Documents.
(f) "Nations' Documents" means any and all agreements, instruments and
documents, together with any amendments, renewals, extensions or supplements
thereto or replacements thereof, evidencing or securing a financing arrangement
or arrangements between Nations and each Obligor, including without limitation
the Loan and Security Agreement dated as of May 14, 1997 between Nations and
FIXCOR (the "Loan Agreement"), the Security Agreement dated as of May 14, 1997
between Nations and Fix-Corp and the Security Agreement dated July ____ 1997
between Nations and Palletech, all as amended or supplemented from time to time.
(g) "Nations Senior Collateral" means all of the Collateral other than the
Pallet Equipment, the Pallet Account Receivables (pursuant to the proviso in (d)
above), together with all proceeds of the foregoing.
(h) "Pallet Equipment" means the equipment purchased with advances from
Creditor under the Creditor's Documents, including but not limited to the
equipment described on EXHIBIT A attached hereto.
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Each term used in this Agreement and not otherwise defined herein shall
have the meaning ascribed to such term in the Uniform Commercial Code of the
State of New York.
3. PRIORITIES: SUBORDINATION: PAYMENTS: STANDBY.
(a) Nations and Creditor each agree that regardless of the time or order
of attachment, or the time, order or manner of perfection, or the time or order
of filing or recording of financing statements or mortgages or deeds of trust,
Nations' lien on and security interest in the Nations Senior Collateral shall be
senior to that of Creditor in the Nations Senior Collateral. Creditor agrees to
subordinate, and does hereby subordinate, any security interests and liens it
now or hereafter has in and upon the Nations Senior Collateral under Creditor's
Documents or otherwise to the security interests and liens of Nations in and
upon the Nations Senior Collateral.
(b) Nations and Creditor each agree that regardless of the time or order
of attachment, or the time, order or manner of perfection, or the time or order
of filing or recording of financing statements or mortgages or deeds of trust,
Creditor's lien on and security interest in the Creditor Senior Collateral shall
be senior to that of Nations in the Creditor Senior Collateral. Nations agrees
to subordinate, and does hereby subordinate, any security interests and liens it
now or hereafter has in and upon the Creditor Senior Collateral under Nations'
Documents or otherwise to the security interests and liens of Creditor in and
upon the Creditor Senior Collateral.
(c) Regardless of whether a default exists under any of Creditor's
Documents, Creditor shall not, without the prior written consent of Nations: (i)
take any action to enforce any security interest in or lien on, or exercise any
other rights with respect to, the Nations Senior Collateral (including without
limitation any action to commence a foreclosure action with respect to the
Nations Senior Collateral or exercise any right Creditor may have to notify any
account debtor of any Obligor or otherwise attempt to collect payment from any
account debtor) until all of Nations' Documents have been terminated and all of
Nations' Debt has been fully paid and satisfied in cash; PROVIDED that, subject
to all of Nations' rights under this Agreement, including without limitation
Nations' prior right to all proceeds derived from the sale or other disposition
of the Nations Senior Collateral, in the event that Nations has instituted and
is then maintaining any proceeding or action to foreclose Nations' liens and
security interests with respect to any of the Nations Senior Collateral,
Creditor may foreclose Creditor's liens and security interests in such
Collateral in such proceeding initiated by Nations, so long as Creditor does not
in any event notify account debtors of any Obligor or interfere with or impede
such action or proceeding of Nations.
(d) Regardless of whether a default exists under any of Nations'
Documents, Nations shall not, without the prior written consent of Creditor,
take any action to enforce any security interest in or lien on, or exercise any
other rights with respect to, the Creditor Senior Collateral (including without
limitation any action to commence a foreclosure action with respect to the
Creditor Senior Collateral) until all of the Creditor's Documents have been
terminated and all of Creditor's Debt has been fully paid and satisfied in cash;
PROVIDED that, subject to all of Creditor's rights under this Agreement,
including without limitation Creditor's prior right to all proceeds derived from
the sale or other disposition of the Creditor Senior Collateral, in the event
that Creditor has instituted and is then maintaining any proceeding or action to
foreclose Creditor's
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liens and security interests with respect to any of the Creditor Senior
Collateral, Nations may foreclose Nations' liens and security interests in such
Collateral in such proceeding initiated by Creditor so long as Nations does not
in any event interfere with or impede such action or proceeding of Creditor.
(e) In the event of default by any Obligor in the payment or performance
of any of its liabilities or obligations to Nations, Creditor agrees not to
restrict or prohibit the use of the Pallet Equipment to complete the manufacture
of any Obligor's inventory; PROVIDED that Creditor can demand that such use
ceases no earlier than sixty (60) days following the institution of a
foreclosure action by Creditor permitted hereunder with respect to the Pallet
Equipment.
(f) In the event any Obligor desires to sell any of the Nations Senior
Collateral and Nations consents to such sale, such Obligor or Nations shall
endeavor to provide at least two (2) days' prior written notice of such sale to
Creditor and Creditor shall be deemed to have consented to such sale free and
clear of any liens and security interests of Creditor in such Nations Senior
Collateral and Creditor agrees that any purchaser of any Nations Collateral may
rely on this Agreement as evidence of Creditor's consent to such sale free and
clear of any liens and security interests of Creditor in such Nations Senior
Collateral; PROVIDED, that the proceeds of such sale shall be distributed as set
forth in Section 3(h) below. Creditor agrees to execute such releases with
respect to the Nations Senior Collateral to be sold as such Obligor or as
Nations requests; PROVIDED that the failure of Creditor to execute such releases
shall not affect the right of the purchaser of such Nations Senior Collateral to
rely on this Agreement. In the event Creditor receives any proceeds of Nations
Senior Collateral to which Nations is entitled under Nations' Documents,
Creditor shall hold such proceeds in trust and promptly remit such proceeds in
the same form received to Nations unless Nations has been paid in full in cash.
(g) In the event any Obligor desires to sell any of the Creditor Senior
Collateral and Creditor consents to such sale, such Obligor or Creditor shall
endeavor to provide at least two (2) days' prior written notice of such sale and
Nations shall be deemed to have consented to such sale free and clear of any
liens and security interests of Nations in such Creditor Senior Collateral and
Nations agrees that any purchaser of any Creditor Senior Collateral may rely on
this Agreement as evidence of Nations' consent to such sale free and clear of
any liens and security interests of Nations in such Creditor Senior Collateral;
PROVIDED, that the proceeds of such sale shall be distributed as set forth in
Section 3(h) below. Nations agrees to execute such releases with respect to the
Creditor Senior Collateral to be sold as such Obligor or as Creditor requests;
PROVIDED, that the failure of Nations to execute such releases shall not affect
the right of the purchasers of such Creditor Senior Collateral to rely on this
Agreement. In the event Nations receives any proceeds of Creditor Senior
Collateral to which Creditor is entitled under Creditor's Documents, Nations
shall hold such proceeds in trust and promptly remit such proceeds in the same
form received to Creditor unless Creditor has been paid in full in cash.
(h) All proceeds of the Nations Senior Collateral shall be applied first,
to Nations' Debt, and after the indefeasible payment in cash of Nations' Debt,
to Creditor's Debt. All proceeds of the Creditor Senior Collateral shall be
applied first, to Creditor's Debt, and after the indefeasible payment in full in
cash of Creditor's Debt, to Nations' Debt. If Creditor receives any
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<PAGE>
proceeds of Nations Senior Collateral which are to be applied to Nations' Debt
as provided above, Creditor shall hold such proceeds in trust, and deliver such
proceeds in the same form received to Nations, and if Nations receives any
proceeds of Creditor Senior Collateral which are to be applied to Creditor's
Debt as provided above, Nations shall hold such proceeds in trust and deliver
such proceeds in the same form received to Creditor.
(i) Neither party hereto shall contest the validity, perfection, priority
(as established pursuant to the terms of this Agreement) or enforceability of
any lien or security interest on or in the Collateral granted by each Obligor to
the other party hereto.
4. REPRESENTATIONS WARRANTIES AND COVENANTS. Nations and Creditor each
represent, warrant and covenant that it has not assigned or transferred, and
agrees that it will not assign or transfer at any time this Agreement remains in
effect, any right, claim or interest of any kind in or to the Collateral, unless
such right, claim and interest remains subject to this Agreement.
5. AMENDMENTS TO DOCUMENTS. Creditor agrees that Nations may at any time
or times, in its discretion, (i) renew or extend the time of payment of Nations'
Debt, (ii) waive or release any collateral or guaranties which may be held
therefor, or (iii) modify or amend Nations' Documents or Nations' Debt in any
manner, in each case without further consent from Creditor or any other party,
and without impairing or affecting this Agreement or any of Nations' rights
hereunder. Nations agrees that Creditor may at any time or times, in its
discretion, (i) renew or extend the time of payment of Creditor's Debt, (ii)
waive or release any collateral or guaranties which may be held therefor, or
(iii) modify or amend Creditor's Documents or Creditor's Debt in any manner, in
each case without further consent from Nations or any other party, and without
impairing or affecting this Agreement or any of Creditor's rights hereunder.
6. CREDITOR'S WAIVERS. Creditor expressly waives all notice of the
acceptance by Nations of the subordination and other provisions of this
Agreement and all the notices not specifically required pursuant to the terms of
this Agreement whatsoever and Creditor expressly waives reliance by Nations upon
the subordination and other agreements as herein provided. Creditor agrees that
Nations (i) has made no warranties or representations with respect to the
legality, validity, completeness, enforceability or the collectibility of
Nations' Debt or any liens or security interests securing Nations' Debt, and
(ii) shall be entitled to manage and supervise its loans to each Obligor in
accordance with applicable law and its usual practices with each Obligor without
affecting the validity or enforceability of this Agreement, modified from time
to time as it deems appropriate under the circumstances, without regard to the
existence of any rights that Creditor may now or hereafter have in or to any of
the assets of each Obligor. The validity and enforceability of this Agreement
shall not be affected by (a) any and all actions which Nations takes or omits to
take (including without limitation actions with respect to the creation,
perfection or continuation of liens or security interests in any Collateral,
actions with respect to the occurrence of an Event of Default under Nations'
Documents, actions with respect to the foreclosure upon, sale, release or
depreciation of, or failure to realize upon any of the Collateral), (b) Nations'
election, in any proceeding instituted under Chapter 11 of Title 11 of the
United States Code (11 U.S.C. Section 101 ET SEQ.) (the "Bankruptcy Code"), of
the application of Section 111l(b)(2) of the Bankruptcy Code, and/or (c) any
borrowing or grant of a security interest under
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Section 363 or 364 of the Bankruptcy Code by any Obligor, as debtor in
possession with respect to the Nations Senior Collateral. In that regard,
Creditor agrees that (A) if any Obligor desires to use cash collateral under
Section 363 of the Bankruptcy Code and Nations consents to such use, Creditor
will also consent to such use without asserting any objection of any kind
(including an objection on the grounds of failure to provide adequate protection
for Creditor's junior lien on such Nations Senior Collateral), and (B) if such
Obligor desires to obtain credit from Nations under Section 364 of the
Bankruptcy Code to be secured by the Nations Senior Collateral, Creditor will
consent to such credit without asserting any objection of any kind (including an
objection on the grounds of failure to provide adequate protection for
Creditor's junior lien on such Nations Senior Collateral).
7. NATIONS' WAIVERS. Nations expressly waives all notice of the
acceptance by Creditor of the subordination and other provisions of this
Agreement and all the notices not specifically required pursuant to the terms of
this Agreement whatsoever and Nations expressly waives reliance by Creditor upon
the subordination and other agreements as herein provided. Nations agrees that
Creditor (i) has made no warranties or representations with respect to the
legality, validity, completeness, enforceability or the collectibility of
Creditor's Debt or any liens or security interests securing Creditor's Debt, and
(ii) shall be entitled to manage and supervise its loans to each Obligor in
accordance with applicable law and its usual practices with each Obligor without
affecting the validity or enforceability of this Agreement, modified from time
to time as it deems appropriate under the circumstances, without regard to the
existence of any rights that Nations may now or hereafter have in or to any of
the assets of each Obligor. The validity and enforceability of this Agreement
shall not be affected by (a) any and all actions which Creditor takes or omits
to take (including without limitation actions with respect to the creation,
perfection or continuation of liens or security interests in any Collateral,
actions with respect to the occurrence of an Event of Default under Creditor's
Documents, actions with respect to the foreclosure upon, sale, release or
depreciation of, or failure to realize upon any of the Collateral), (b)
Creditor's election, in any proceeding instituted under Chapter 11 of Title 11
of the United States Code (11 U.S.C. Section 101 ET SEQ.) (the "Bankruptcy
Code"), of the application of Section 1111(b)(2) of the Bankruptcy Code, and/or
(c) any borrowing or grant of a security interest under Section 363 or 364 of
the Bankruptcy Code by any Obligor, as debtor in possession with respect to the
Creditor Senior Collateral. In that regard, Nations agrees that (A) if any
Obligor desires to use cash collateral under Section 363 of the Bankruptcy Code
and Creditor consents to such use, Nations will also consent to such use without
asserting any objection of any kind (including an objection on the grounds of
failure to provide adequate protection for Nations' junior lien on such Creditor
Senior Collateral), and (B) if such Obligor desires to obtain credit from
Creditor under Section 364 of the Bankruptcy Code to be secured by the Creditor
Senior Collateral, Nations will consent to such credit without asserting any
objection of any kind (including an objection on the grounds of failure to
provide adequate protection for Nations' junior lien on such Creditor Senior
Collateral).
8. MARSHALING. Creditor hereby waives any rights Creditor has or may have
in the future to require Nations to marshall the Nations Senior Collateral, and
agrees that Nations may proceed against the Nations Senior Collateral in any
order that it deems appropriate in the exercise of its absolute discretion.
Nations hereby waives any rights Nations has or may have in
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the future to require Creditor to marshall the Creditor Senior Collateral, and
agrees that Creditor may proceed against the Creditor Senior Collateral (subject
to the terms of this Agreement) in any order that it deems appropriate in the
exercise of its absolute discretion.
9. REPRESENTATIONS CONCERNING OBLIGORS: LIABILITY OF PARTIES. Neither of
the parties hereto, nor any of such party's directors, officers, agents or
employees, shall be responsible to any other party hereto or to any other person
for (i) any Obligor's solvency, financial condition or ability to repay its
indebtedness to any party hereto, (ii) any oral or written statements of any
Obligor, or (iii) the validity, sufficiency or enforceability of such
indebtedness, Creditor's Documents, Nations' Documents or the security interests
and liens granted by each Obligor to any party hereto. Each party hereto has
entered into its financing arrangement with each Obligor based upon such party's
own independent investigation, and makes no warranty or representation to any
other party hereto, nor does such party rely on any warranty or representation
of any other party hereto, with respect to the matters referred to in this
paragraph.
10. MISCELLANEOUS.
(a) THE VALIDITY OF THIS AGREEMENT, ITS CONSTRUCTION, INTERPRETATION, AND
ENFORCEMENT, AND THE RIGHTS OF THE PARTIES HERETO WITH RESPECT TO ALL MATTERS
ARISING HEREUNDER OR RELATED HERETO SHALL BE DETERMINED UNDER, GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING
EFFECT TO ITS CONFLICT OF LAWS PRINCIPLES. THE PARTIES AGREE THAT ALL ACTIONS OR
PROCEEDINGS ARISING IN CONNECTION WITH THIS AGREEMENT SHALL BE TRIED AND
LITIGATED ONLY IN THE STATE AND FEDERAL COURTS OF NEW YORK OR, AT THE SOLE
OPTION OF NATIONS, IN ANY OTHER COURT IN WHICH NATIONS SHALL INITIATE LEGAL OR
EQUITABLE PROCEEDINGS AND WHICH HAS SUBJECT MATTER JURISDICTION OVER THE MATTER
IN CONTROVERSY. EACH OF CREDITOR AND NATIONS WAIVES, TO THE EXTENT PERMITTED
UNDER APPLICABLE LAW, ANY RIGHT EACH MAY HAVE TO ASSERT THE DOCTRINE OF FORUM
NON CONVENIENS OR TO OBJECT TO VENUE TO THE EXTENT ANY PROCEEDING IS BROUGHT IN
ACCORDANCE WITH THIS SECTION 10. CREDITOR AND NATIONS HEREBY WAIVE THEIR
RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR
ARISING OUT OF THIS AGREEMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREIN,
INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER
COMMON LAW OR STATUTORY CLAIMS. CREDITOR AND NATIONS REPRESENT THAT EACH HAS
REVIEWED THIS WAIVER AND EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL
RIGHTS. IN THE EVENT OF LITIGATION, A COPY OF THIS AGREEMENT MAY BE FILED AS A
WRITTEN CONSENT TO A TRIAL BY THE COURT.
(b) Each party consents that any service of process may be made by
service upon Creditor or Nations, as applicable, or by certified or
registered mail directed to Creditor or
7
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Nations at its address set forth below; however, nothing contained herein shall
prevent service of process in any other manner permitted by applicable law. This
Agreement contains the entire agreement among the parties hereto with respect to
this subject, and may only be modified by a writing signed by each of the
parties hereto.
(c) Neither party's failure to exercise any right hereunder shall be
construed as a waiver of the right to exercise the same or any other right at
any other time and from time to time thereafter, and such rights shall be
cumulative and not exclusive.
(d) The knowledge by either party of any breach or other non-observance by
the other party of the terms of this Agreement shall not constitute a waiver
thereof or of any obligations to be performed by such party hereunder.
(e) Paragraph headings used herein are for convenience only, and shall not
affect the meaning of any provision of this Agreement.
(f) All notices or consents required under the terms and provisions of
this Agreement shall be in writing and sent to the following addresses:
If to Creditor: Gordon Brothers Capital Corporation
40 Broad Street
Boston, Massachusetts 02109
Attention: Warren Fater, President
With a copy to: Peter J. Antoszyk, Esq.
Strook & Strook & Lavan LLP
100 Federal Street
Boston, Massachusetts 02110
If to Nations: NationsCredit Commercial Corporation,
through its NationsCredit Commercial Funding
Division
1177 Avenue of the Americas, 36th Floor
New York, New York 10036
Attention: Nancy Kagan, Esq.
Notices shall be deemed to have been duly given (i) if delivered personally or
otherwise actually received, (ii) if sent by overnight delivery service, (iii)
if mailed by first class United States mail, postage prepaid, registered or
certified, with return receipt requested, or (iv) if sent by telex with telex
confirmation of receipt (with duplicate notice sent by United States mail as
provided above). Notice mailed as provided in clause (iii) above shall be
effective on the earlier of the date of actual receipt or three (3) business
days after its deposit. Notice given in any other manner described in this
paragraph shall be effective upon receipt by the addressee thereof, PROVIDED,
HOWEVER, that if any notice is tendered to an addressee and delivery thereof is
refused by such addressee, such notice shall be effective upon such tender.
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(g) This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective heirs, successors and permitted assigns. The
term "Obligor" shall include, without limitation, any successor or assign of
Obligor, including without limitation a receiver, trustee or debtor in
possession. This Agreement shall be a continuing agreement and shall remain in
full force and effect notwithstanding the insolvency, liquidation or dissolution
of any Obligor.
(h) Creditor hereby agrees that any party that refinances Nations' Debt
may rely on and enforce this Agreement as if it were Nations. Creditor further
hereby agrees that it will, at the request of Nations, enter into an agreement,
in the form of this Agreement, MUTATIS MUTANDIS, to subordinate any security
interests or liens it now or hereafter has in or upon the Nations Senior
Collateral, to the same extent as provided herein, to the party refinancing all
or a portion of Nations' Debt; provided that the failure of Creditor to execute
such an agreement shall not affect such party's right to rely on and enforce the
terms of this Agreement. Nations hereby agrees that any party that refinances
Creditor's Debt may rely on and enforce this Agreement as if it were Creditor.
Nations further hereby agrees that it will, at the request of Creditor, enter
into an agreement, in the form of this Agreement, MUTATIS MUTANDIS to
subordinate any security interests or liens it now or hereafter has in or upon
the Creditor Senior Collateral, to the same extent as provided herein, to the
party refinancing all or a portion of Creditor's Debt; provided that the failure
of Nations to execute such an agreement shall not affect such party's right to
rely on and enforce the terms of this Agreement.
IN WITNESS WHEREOF, the parties hereto have signed this Agreement as of the
date first written above.
GORDON BROTHERS
CAPITAL CORPORATION
By /s/ Warren H. Feder
--------------------------------------
Its President
-------------------------------------
NATIONSCREDIT COMMERCIAL
CORPORATION, THROUGH ITS
NATIONSCREDIT COMMERCIAL FUNDING
DIVISION
By /s/ Robert Beal
--------------------------------------
Its
-------------------------------------
CONSENT
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The undersigned hereby consents to the terms of the foregoing Intercreditor
Agreement and agrees to be bound by the terms thereof.
PALLETECH INC.
By /s/ Mark Fixler
--------------------------------------
Its CEO
--------------------------------------
FIXCOR INDUSTRIES, INC.
By /s/ Mark Fixler
--------------------------------------
Its CEO
--------------------------------------
FIX-CORP INTERNATIONAL. INC.
By /s/ Mark Fixler
--------------------------------------
Its Pres.
--------------------------------------
10
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EXHIBIT A
PALLET EQUIPMENT
11
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Exhibit 16
LICENSING AND MARKETING AGREEMENT
Agreement made this 7 day of July 1997 by and between Nitro Plastics
Technologies of Israel, an Israel Corporation whose business address is 17
Ben Yehuda St. Netanya 42305 and Palletech Inc., a Delaware Corporation whose
business address is 1835 James Parkway, Heath, OH 43056 (hereinafter referred
to as "Palletech"). Franchise is to be operated in the Fix-Corp. plant,
located at 1835 James Parkway, Heath, OH 43506.
WITNESSETH
WHEREAS, Palletech is a manufacturer of plastic
WHEREAS, Nitro Plastics Technologies of Israel is the licensee of a proprietary
injection molding technology especially suited for the manufacturing of plastic
pallets and other products from recycled plastics; and,
WHEREAS, Nitro Plastics Technologies of Israel wishes Palletech to manufacture
plastic pallets, and Palletech wishes to manufacture pallets utilizing the
technology to be supplied by Nitro Plastics Technologies of Israel.
NOW THEREFORE, in consideration of the mutual covenants, terms and conditions
contained herein, the parties agree as follows:
1. RECITATIONS: The above recitations are true and correct.
2. CONDITIONS PRECEDENT:
2.1. Palletech will purchase an injection molding machine and appropriate
molds and equipment for the purpose of manufacturing plastic pallets. Said
machines is described as a 750 ton form molding machine, with gas assist
technology and proprietary configuration, and said machine shall be physically
located on the premises of Palletech no later than January 1998.
2.2. Nitro Plastics Technologies of Israel shall sub-license Palletech to
utilize the subject technology for the specific purpose of manufacture of
plastic pallets (or such other products as shall be mutually agreed by the
parties) for a period of ten (10) years, commencing with the date that the
subject machine is installed and operational. After the ten (10) year period of
time, Palletech Inc. owns the sub-licensing agreement free and clear. Product
manufactured pursuant to this agreement shall be sold in the areas generally
identified as the Midwest and Northeastern regions of the United States. Those
above mentioned territories will be the exclusive territories to Palletech
unless Palletech does not have the ability to build new facilities as they are
needed. If Palletech Inc. is not able to perform, they have a reasonable period
of time to satisfy Nitro Plastics Technologies of Israel increase demand of
production, then Palletech Inc. will go on a first write of refusal to open and
establishing a manufacturing and distribution plant and have the right to
produce sales in the state of California. Before Nitro Plastics Technologies of
Israel
<PAGE>
makes an agreement with an additional third party for other territories in the
United States, Nitro Plastics Technologies of Israel will give the same
opportunity to Palletech Inc.
3. RESPECTIVE DUTIES, RESPONSIBILITIES AND OBLIGATIONS OF THE PARTIES:
3.1. Duties of Nitro Plastics Technologies of Israel:
3.1.1. Nitro Plastics Technologies of Israel shall provide supervisory
and technical personnel to effect the installation of the subject machine and
train personnel of Palletech in the use and operation of said machine; and,
Nitro Plastics Technologies of Israel shall continue to provide technical
support for a period of one (1) year commencing with the date that the machine
is operational.
3.1.2. Nitro Plastics Technologies of Israel shall provide sales
personnel who will undertake the sale of all pallets produced, at a price
determined by Palletech.
3.1.3. Nitro Plastics Technologies of Israel shall perform such other
sales and marketing functions as it deems necessary or desirable, providing
however that Palletech shall bear the expense of an annual advertising
allowance, such an amount to be determined by the agreement of the parties.
3.2. Duties of Palletech
3.2.1. Palletech shall, at its own cost and expense, provide all
production facilities, equipment, raw materials, supplies, maintenance, repair,
personnel and any and all other items, including also freight and installation
costs, as shall be necessary to accomplish the manufacture of plastic pallets.
4. FEES AND PAYMENTS
4.1. Palletech shall pay to Nitro Plastics Technologies of Israel a
licensing fee in the amount of $250,000.00, payable in three equal installments
as follows: (1) $83,333.33 upon execution of this Agreement, and the remaining
to be paid, in pallets at Palletech Inc.'s wholesale price, after production
begins in Ohio.
4.2. During the first five (5) years of the term of this Agreement,
Palletech shall pay to Nitro Plastics Technologies of Israel, in exchange for
all services to be rendered by Nitro Plastics Technologies of Israel, a total
fee in the amount of $2.10 per pallet sold, and a royalty for the licensed
technology in the amount of 50 CENTS per pallet. During the second five (5)
years of the term of the Agreement, the royalty portion of the payment per
pallet shall reduce from 50 CENTS to 25 CENTS per pallet. Payment shall be
made to Nitro Plastics Technologies of Israel by Palletech within seven (7)
business days after receipt, and clearance of funds, by Palletech.
4.3. During years two through five of the term of this agreement,
contingent upon Nitro Plastics Technologies of Israel selling in excess of
950,000 pallets in each year, Nitro
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Plastics Technologies of Israel shall be entitled to receive from Palletech
100,000 common stock warrants, per year, for Fix-Corp. International, Inc.,
common stock, at 75% face value.
4.4. At the end of each year of the term of the agreement, in addition to
all the above fees, Palletech shall pay to Nitro Plastics Technologies of Israel
a lump sum fee of $50,000.00 for ongoing research and development. Palletech
will have the right to the new technology that it is paying for on an annual
basis.
5. MISCELLANEOUS PROVISIONS
5.1. DEFAULT
5.1.1. Default by Palletech: It is understood and agreed that the
technology licensed herein is proprietary to Nitro Plastics Technologies of
Israel pursuant to its licensing agreement with the owner of the technology.
Nitro Plastics Technologies of Israel agrees to indemnify Palletech Inc., or its
affiliates in the event that Nitro Plastics Technologies of Israel does not own
the proprietary technology that it has claimed it owns. Any attempt by Palletech
to utilize this technology for its own purposes, outside of the terms and
provisions of the agreement shall immediately terminate this agreement. In such
event Palletech shall be liable for payment to Nitro Plastics Technologies of
Israel for an amount equal to double the fees and royalties that would be
payable to Nitro Plastics Technologies of Israel based upon the anticipated
annual sales, which are anticipated and agree to be 950,000 pallets. In
addition, Nitro Plastics Technologies of Israel shall be entitled to such
equitable relief, including injunction, as shall be appropriate. Nitro Plastics
Technologies of Israel agrees that Palletech Inc. has the right to sell the
pallets through their own organization or an affiliates organization provided
that Nitro Plastics Technologies of Israel receives its royalties on those
sales. Nitro Plastics Technologies of Israel acknowledges that is the equipment
or reasons beyond Palletech Inc.'s control is not able to produce 950,000
pallets on an annual basis that this would not constitute a default by Palletech
Inc.
5.1.2. In the event of default by Palletech, including but not limited
to failure to produce or other attempted termination of the agreement, Palletech
shall be liable for payments to Nitro Plastics Technologies of Israel for the
accelerated payment of all fees that would be due to Nitro Plastics Technologies
of Israel under this agreement, including all sales, commissions and royalties
based upon the anticipated annual production of 950,000 plastic pallets. There
will be a 120 day cure period given to Palletech Inc. in the event of a default.
5.2. NO PARTNERSHIP: Nothing contained herein shall be construed or
interpreted to create a partnership relationship between the parties. Neither
party shall have any authority to obligate or bind the other for any debt to a
third party.
5.3. NOTICE: Any notice required by this agreement shall be given by
certified mail to the address of the party involved as shown at the beginning of
this agreement.
5.4. ARBITRATION: No civil action concerning any dispute arising under
this agreement shall be instituted before any court and all such disputes shall
be submitted to final and
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binding arbitration by a three man panel. Each party shall select one
arbitrator, who will in turn select a third arbitrator. All costs and expenses
of the arbitration, including actual attorney's fees, shall be allocated among
the parties according to the arbitrator's discretion. The arbitrator's award
resulting from such arbitration may be confirmed and entered as a final judgment
in any court of competent jurisdiction and enforced accordingly. Further, the
parties hereto expressly agree that proceeding to arbitration and obtaining an
award thereunder shall be a condition precedent to the bringing or maintaining
of any action in any court with respect to any dispute arising under this
agreement, except for the institution of a civil action to maintain the status
quo during the pendency of any arbitration proceeding.
5.5. ATTORNEYS FEES: In the event of any litigation (arbitration) caused
by a dispute arising from this agreement, the prevailing party shall be entitled
to reimbursement from the losing party for attorney's fees (including those on
appeal) and costs incurred during each dispute.
5.6. SUCCESSORS IN INTEREST: Although it is understood and agreed that
this agreement is not assignable by Palletech to any third party without the
prior written consent of Nitro Plastics Technologies of Israel the provisions,
conditions, terms and covenants herein contained shall bind and the benefits and
advantages shall inure to, the respective successors, assigns, trustees,
receivers, heirs and personal representative of the parties hereto.
5.7. LAWS CONTROLLING: This agreement shall be construed, enforced and
interpreted in accordance with the laws of the State of Florida, whose
jurisdiction is acceptable to both parties.
5.8. CAPTIONS: The captions of sections of this agreement are for
convenient reference only, and shall not affect the construction of
interpretations of any of the terms and provisions set forth herein.
5.9. SEVERABILITY: In the event any provision of this agreement are found
to be in violation of any law, or are determined to be unenforceable for any
reason, this shall not serve to invalidate the remainder of this agreement.
6. ASSIGNMENTS
6.1. Nitro Plastics Technologies of Israel will take total production of
pallets from Palletech for distribution and selling purposes. Palletech Inc.
will determine the price of the pallets.
6.2. Nitro Plastics Technologies of Israel reserves the right to assign
this licensing and marketing agreement at any time without notification.
In WITNESS WHEREOF, the parties hereto have executed this agreement on the
day and year first above written.
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All documents, blue prints, machine blue prints, and operating techniques will
be placed in a safety deposit box.
Definition of a reasonable period of time is 24 months.
Palletech INC. Nitro Plastics Technologies of Israel
By: /s/ Mark Fixler By: Yoram Aisenberg
--------------------------------
Title: CEO Title: President
-----------------------------
/s/ Yoram Aisenberg
----------------------------------------
Witness: /s/ Sherryl Durst Witness: /s/ illegible
--------------------------- --------------------------------
Notary Public:
--------------------------
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Exhibit 17
PATENT LICENSE AGREEMENT
License Number: 97-1022LFA
THIS AGREEMENT, made effective on the 25th day September of 1997, by and
between The Federal Manufacturing & Technologies business unit of AlliedSignal
Inc. (hereinafter "AlliedSignal"), a corporation organized and existing under
the laws of the State of Delaware and having a place of business at 2000 East
95th Street, P.O. Box 419159, Kansas City, Missouri 64141-6159, and FIXCOR
Industries, Inc., (hereinafter "Licensee"), a corporation organized and existing
under the laws of the State of Delaware and having a place of business at 1835
James Parkway, Heath, Ohio 43056.
WITNESSETH:
WHEREAS, AlliedSignal, pursuant to Contract No. DE-AC04-76DP00613
(hereinafter "Prime Contract") with the United States Government, as represented
by the Department of Energy (hereinafter "DOE") has developed and/or obtained
rights to the Proprietary Rights, subject to the DOE nonexclusive,
nontransferable, irrevocable, paid-up license for the United States Government
and certain march-in rights and any other conditions of waivers granted by the
DOE; and
WHEREAS, Licensee desires to obtain non-exclusive rights in a limited field
of use in the Proprietary Rights.
NOW THEREFORE, in consideration of the foregoing premises, covenants, and
agreements contained herein, AlliedSignal and Licensee (collectively the
"Parties") hereto agree to be bound as follows:
1. DEFINITIONS
1.1. "Proprietary Rights" shall mean the patents and patent applications
listed in Exhibit A, which is attached to and incorporated into this Agreement.
1.2. "Products" shall mean any and all products manufactured, used, sold or
transferred by Licensee covered by one or more claims of the Proprietary Rights.
1.3. "Services" shall mean any and all services provided which utilize the
methods encompassed in one or more of the claims of the Proprietary Rights.
1.4. "Gross Sales" shall mean the total amounts invoiced to purchasers during
the accounting period in question for Products and/or Services sold by Licensee.
Gross Sales in the case of Products used or transferred or Services performed
shall mean the total amounts invoiced for such Products or Services, but not
less than the fair market value of Products and/or Services as if they were sold
to an unrelated third party in similar quantities. Gross Sales shall exclude
sales tax or similar tax shown on the invoice to be paid by buyer to Licensee.
<PAGE>
2. GRANTS
2.1. Subject to the terms and conditions of this Agreement, AlliedSignal
hereby grants to Licensee a non-exclusive, nontransferable, worldwide license to
practice the methods and to make, use, and sell, the Products and/or Services
covered by the Proprietary Rights limited to the field of use of separating and
recovering motor oil from high-density polyethylene plastic (HDPE). No license,
either express or implied, is granted by AlliedSignal to Licensee hereunder with
respect to any patent or information except as specifically provided herein.
AlliedSignal agrees not to grant any third party company a license in the
Proprietary Rights during the first 24 months of this Agreement and thereafter
an additional 36 months provided the milestones setforth in Exhibit D, which is
attached to and incorporated into this Agreement, have been accomplished.
2.2. No license, either express or implied, is granted hereunder to use as a
trademark or otherwise the words "AlliedSignal" or any other trademark or
product name of AlliedSignal or any word or mark similar thereto unless
otherwise specified herein.
2.3. Licensee may indicate the Products are made under license from
AlliedSignal by suitable legend, if the form of such legend and the extent of
Licensee's use thereof have received prior written approval of AlliedSignal.
AlliedSignal may amend or revoke prior approvals to use such legends at any time
during the term of this agreement, and all rights to use such legends shall
terminate with this agreement.
2.4. No rights to sublicense are granted Licensee under this agreement.
2.5. Licensee agrees that manufacture of Products for sale in the United
States shall occur substantially in the United States.
2.6. Nothing in this Agreement shall constitute, or be construed to be, a
limitation or restriction upon any right otherwise possessed by Licensee to
export or sale for export any Product, or parts therefor, in any country and on
which royalties shall be paid as provided in Section 3 and Exhibits B and C of
this Agreement.
2.7. Licensee agrees to observe all applicable United States and foreign
laws, regulations, rules and decrees with respect to the transfer of the
Proprietary Rights and related technical data to foreign countries. FAILURE TO
CONFORM TO SUCH LAWS, REGULATIONS, RULES AND DECREES MAY RESULT IN CRIMINAL
LIABILITY UNDER U.S. LAWS.
2.8. The grant hereunder is subject to the DOE nonexclusive, nontransferable,
irrevocable, paid-up license for the United States Government and certain
march-in rights and any other conditions of waivers granted to the Proprietary
Rights.
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3. CONSIDERATION
3.1. In consideration of the rights and licenses granted in this Agreement,
Licensee agrees to the provisions of Exhibit B and Exhibit C attached to and
incorporated into this Agreement.
3.2. No royalties shall be owed to AlliedSignal on any Products sold to
AlliedSignal its parent company and to their subsidiaries or affiliates, but
only to the extent that Licensee can show that AlliedSignal Inc. received a
discount on Licensed Product sales which discount is equivalent to or greater
than the amount of any such royalty that would otherwise be due.
3.3. Upon termination of this Agreement for any reason whatsoever, any
royalties that remain unpaid shall be properly reported and paid to AlliedSignal
within thirty (30) days of any such termination.
3.4. Payment of royalties due shall be made during the month following the
calendar quarter covered thereby in U.S. Dollars, payable to the order of
AlliedSignal Inc., Federal Manufacturing & Technologies, pursuant to the report
to be transmitted in accordance with section 4 below. All amounts paid in USA
currency are to be calculated at the official rate of exchange on the last day
of the calendar quarter for which the payment is due, or if more than one rate
of exchange is available, then at the most favorable rate to AlliedSignal for
such day.
3.5. Should Licensee fail to make any payment to AlliedSignal within the time
period prescribed for such payment, then the unpaid amount shall bear interest
at the rate of one and one-half percent (1.5%) per month from the date when
payment was due until payment in full is made with interest. The payment of such
interest shall not replace any of AlliedSignal's other rights under this
agreement resulting from Licensee's default by failure to pay any amounts due
hereunder.
3.6. Licensee grants and agrees to grant to AlliedSignal a free, irrevocable,
non-exclusive, nontransferable, worldwide license to make, have made, use, sell
and/or practice the Proprietary Rights and related products or services, under
any improvement patent rights or technical information relating to Proprietary
Rights as to which Licensee has the right, during the life of this agreement, to
make the grants herein provided. Licensee shall (a) provide AlliedSignal with a
copy of each patent and patent application licensed hereunder within sixty (60)
days after this agreement is executed or after the filing or acquisition by
Licensee, and (b) at AlliedSignal's expense provide in complete detail the
technical information licensed hereunder, and (c) execute any documents and
agreements AlliedSignal deems necessary to perfect its rights under this
section.
4. RECORDS AND REPORTS
4.1. Licensee agrees to keep adequate and sufficiently detailed records of
utilization of the Proprietary Rights to enable royalties payable hereunder to
be determined and to make such records available for inspection by authorized
representatives of AlliedSignal at any time during the regular business hours of
Licensee. Licensee agrees that any additional records of Licensee,
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as AlliedSignal may reasonably determine are necessary to verify the utilization
of Proprietary Rights, shall also be made available. All records required
pursuant to this Agreement shall be maintained during and for a minimum of three
(3) years following termination of this Agreement.
4.2. Within thirty (30) calendar days after the close of each calendar
quarter during the term of this Agreement, Licensee shall furnish AlliedSignal a
written report providing:
(a) a list of all separately identifiable types (i.e. by model
numbers or equivalent) of Products sold, leased or otherwise
utilized, or Services rendered,
(b) the quantity of each type of Product or Service,
(c) the Gross Sales for each type of Product or Service,
(d) sales to any governmental agency,
(e) a separate report shall be prepared for each country in which
Products or Services are sold, and
(f) amount of royalties due in U.S. Dollars for the preceding
calendar quarter pursuant to the provisions hereof.
5. TECHNICAL ASSISTANCE
5.1. AlliedSignal agrees, upon the written request of Licensee, to assist
Licensee in obtaining necessary approvals for technical assistance at
AlliedSignal's facilities under appropriate agreements. The cost of such
technical assistance shall be paid by the Licensee.
6. PATENT PROVISIONS
6.1. AlliedSignal agrees to incur the cost of filing the application for U.S.
Letters Patent, including expenses associated with prosecution.
6.2. Licensee agrees to pay domestic maintenance fees, including attorneys
fees, and any foreign application issuance and maintenance fees. AlliedSignal
agrees to file and prosecute patent applications in those foreign countries
mutually agreed upon by AlliedSignal and Licensee. Licensee shall bear all cost
and expenses assessable against or incurred by AlliedSignal in obtaining, owning
and maintaining patent protection in such designated countries; including
filing, prosecution, working and maintenance cost and taxes. Licensee shall pay
such costs and expenses within thirty (30) days after receiving an invoice
therefor from AlliedSignal.
6.3. Licensee shall place appropriate patent notices on Products which
incorporate any invention covered by any licensed Proprietary Rights.
6.4. Licensee shall give notice of any suspected or discovered third party
infringement to AlliedSignal. AlliedSignal may, in its sole discretion, take
appropriate action to stop or prevent such infringement, including the filing
and prosecution of patent litigation; and AlliedSignal shall have the right to
include Licensee as a party in such litigation where necessary for the conduct
thereof. If AlliedSignal and Licensee desire and agree to joint participation in
any
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infringement suit or other enforcement action with respect to any of the
Products or Services, the respective responsibilities of the parties, and their
contributions to the costs and participation in recoveries, will be agreed upon
in writing prior to undertaking such joint enforcement action.
6.5. Licensee and AlliedSignal agree to cooperate in the prosecution of any
such legal actions or settlement actions undertaken under this section and each
will provide to the other all pertinent data in its possession which may be
helpful in the prosecution of such actions.
6.6. In the event of any actual or threatened infringement suit against
Licensee or its customers which would affect the manufacture, use, or sale of
Products or Services, Licensee shall promptly give written notice of such actual
or threatened suit to AlliedSignal and AlliedSignal will make available to
Licensee free of charge and information on in its possession on which
AlliedSignal believes will assist Licensee in defending or otherwise dealing
with such suit.
6.7. Licensee is aware that DOE concurrence may be required in certain
situations including those involving litigation and/or changes to patent rights.
7. REPRESENTATIONS AND WARRANTIES
7.1. AlliedSignal represents and warrants that Exhibit A contains a complete
and accurate listing of all the Proprietary Rights licensed pursuant to this
Agreement and that AlliedSignal has the right to grant the rights, licenses, and
privileges granted herein.
7.2. AlliedSignal represents and warrants that it has received no notice of
any claim of infringement made to date against AlliedSignal for practicing the
Proprietary Rights anywhere in the world. AlliedSignal makes no representation
to Licensee regarding the scope or enforceability of the Proprietary Rights and
does not warrant that any Products manufactured or sold or Services performed
pursuant to this agreement will not infringe patents of others.
7.3. Except as set forth above, AlliedSignal makes NO REPRESENTATIONS AND
WARRANTIES, express or implied, with regard to the infringement of Proprietary
Rights of any third party.
7.4. Licensee is hereby put on notice that export of any goods or technical
data from the United States may require some form of license from the U.S.
Government. Failure to obtain necessary export licenses may result in criminal
liability of Licensee under U.S. laws.
8. Disclaimers
8.1. Neither AlliedSignal, DOE, nor persons acting on their behalf will be
responsible for any injury to or death of persons or other living things or
damage to or destruction of property or for any other loss, damage, or injury of
any kind whatsoever resulting from Licensee's manufacture, use, or sale of
materials, information, or Proprietary Rights hereunder.
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8.2 EXCEPT AS SET FORTH ABOVE, NEITHER AlliedSignal, DOE, NOR PERSONS ACTING
ON THEIR BEHALF MAKE ANY WARRANTY, EXPRESS OR IMPLIED: (1) WITH RESPECT TO THE
MERCHANTABILITY, ACCURACY, COMPLETENESS, OR USEFULNESS OF ANY SERVICES,
MATERIALS, OR INFORMATION FURNISHED HEREUNDER; (2) THAT THE USE OF ANY SUCH
SERVICES, MATERIALS, OR INFORMATION MAY NOT INFRINGE PRIVATELY OWNED RIGHTS; (3)
THAT THE SERVICES, MATERIALS, OR INFORMATION FURNISHED HEREUNDER WILL NOT RESULT
IN INJURY OR DAMAGE WHEN USED FOR ANY PURPOSE; OR (4) THAT THE SERVICES,
MATERIALS, OR INFORMATION FURNISHED HEREUNDER WILL ACCOMPLISH THE INTENDED
RESULTS OR ARE SAFE FOR ANY PURPOSE, INCLUDING THE INTENDED OR PARTICULAR
PURPOSE. FURTHERMORE, AlliedSignal, AND DOE HEREBY SPECIFICALLY DISCLAIM ANY
AND ALL WARRANTIES, EXPRESS OR IMPLIED, FOR ANY PRODUCTS OR SERVICES
MANUFACTURED, USED, OR SOLD BY LICENSEE. NEITHER AlliedSignal, NOR THE DOE SHALL
BE LIABLE FOR CONSEQUENTIAL OR INCIDENTAL DAMAGE IN ANY EVENT.
8.3. Except for patent infringement actions, Licensee agrees to indemnity
AlliedSignal, the DOE, and persons acting on their behalf for all damages,
costs, and expenses, including attorney's fees, arising from, but not limited
to, Licensee's making, using, selling or exporting of any Products or performing
Services, in whatever form furnished. Licensee warrants that it has sufficient
insurance to cover its indemnification and hold harmless liabilities under this
provision including coverage that recognizes this contractual liability.
Licensee cannot, without 30 days prior notification to AlliedSignal Inc., as
listed in section 12.1, materially alter or change its coverage respecting its
liabilities under this section of the Agreement. AlliedSignal shall have the
option within such 30 days to terminate Licensee's rights under this Agreement
or seek an alternative mutually satisfactory to the parties.
8.4. AlliedSignal shall provide Licensee with accurate technical information,
but AlliedSignal does not make any warranty and shall have no liability with
respect to the technical information, Proprietary Rights or the use thereof; nor
does AlliedSignal assume any responsibility or make any warranty with respect to
Products or Services, manufactured, sold or used under or as a result of this
agreement.
9. TERM OF AGREEMENT AND EARLY TERMINATION
9.1. This Agreement shall be in effect for a period often (10) years from the
effective date of this Agreement and shall automatically renew for one year
periods unless written notice is given by either party to the other party of
termination of this Agreement on the expiration of its original period or any of
such additional yearly periods, such notice of termination by either party to be
given at least 90 days prior to the effective termination date.
9.2. If either party defaults for any reason in any of its obligations
hereunder, the other party will have the right to terminate this Agreement by
giving written notice of termination at least sixty (60) days prior to the
effective date of such termination, such notice specifying the default;
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however, that such notice will be of no effect and termination will not occur if
the specified default is remedied prior to said effective date of termination.
9.3. AlliedSignal may terminate this Agreement forthwith in the event of the
bankruptcy or insolvency of Licensee, an assignment for the benefit of creditors
of Licensee, the nationalization of the industry with encompasses any of the
Products and/or Services, any suspension of payments hereunder by governmental
regulation, Licensee's failure to commence the manufacture of Products in
production quantities within two (2) years from the effective date of the
Agreement, a substantial change in ownership of Licensee (whether resulting from
merger, acquisition, consolidation or otherwise), another company or person
acquiring control of Licensee, or the existence of a state of war between the
United States of America and any country where the Licensee has a License to
manufacture Products and/or Services. Such termination shall be without
prejudice to any other rights or claims AlliedSignal may have against Licensee.
9.4. At least 30 days prior to filing a petition in bankruptcy, either party
must inform the other of its intention to file the petition or of another's
intention to file an involuntary petition in bankruptcy. Further, failure to
conform to this requirement shall be deemed a material, pre-petition, incurable
breach.
9.5. If this Agreement is for any reason terminated before all of the
payments herein provided for have been made (including minimum royalties for the
year in which the agreement is terminated), Licensee shall immediately submit a
terminal report and pay to AlliedSignal any remaining unpaid balance even though
the due date as provided herein has not been reached.
9.6. This Agreement shall automatically terminate upon any attempt by
Licensee to transfer its interest in whole or in part in this Agreement to any
other party not expressly authorized in writing by AlliedSignal.
10. RIGHTS OF PARTIES AFTER TERMINATION
10.1. Neither party shall be relieved of any obligation or liability under
this Agreement arising from any act or omission committed prior to the effective
date of such termination which obligation or liability accrued as of the date of
such termination.
10.2. From and after any termination of this Agreement, Licensee shall have
the right to sell any Products that Licensee had already manufactured prior to
termination, provided that all royalties and reports required above shall be
submitted to AlliedSignal.
10.3. From and after any termination of this Agreement, Licensee shall not
manufacture nor have manufactured any Products pursuant to this Agreement.
10.4. The rights and remedies granted herein, and any other rights or remedies
which the parties may have, either at law or in equity, are cumulative and not
exclusive of others. On any termination, Licensee shall duly account to
AlliedSignal and transfer to it all rights to which
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AlliedSignal may be entitled under this Agreement under any valid U.S. Patent
resulting from Proprietary Rights as set forth in Exhibit A. Licensee's duty to
pay outstanding royalties includes, but is not limited to royalty payments from
Products or Services provided pursuant to paragraph 10.2 or 10.3.
11. FORCE MAJEURE
11.1. No failure or omission by AlliedSignal or by Licensee in the performance
of any obligation under this Agreement shall be deemed a breach of this
Agreement or create any liability if the same shall arise from acts of God; acts
or omissions of any government or agency thereof, compliance with rules,
regulations, or orders of any governmental authority; fire; storm; flood;
earthquake; accident; acts of the public enemy; war; rebellion; insurrection;
riot; sabotage; invasion; quarantine; restriction; or failures or delays in
transportation.
12. NOTICES
12.1. All notices and reports shall be addressed to the parties hereto as
follows:
If to AlliedSignal:
Attn: Licensing Manager, D/28 1, El H6 Telephotocopy No.
AlliedSignal Inc. (816) 997-4013
2000 East 95th Street
Kansas City, MO 64141-6159 Verify No.
(816) 997-4597
If to Licensee:
Gary DeLaurentiis Telephotocopy No.
FIXCOR Industries, Inc. (614) 928-8902
1835 James Parkway Verify No.
Heath, OH 43056 (614) 928-8999
12.2. All payments due AlliedSignal shall be identified with the words
"Royalty Payment" and the License Agreement number, 97-1022R, and should be made
payable to "AlliedSignal Inc.," and mailed to the following address:
AlliedSignal Inc.,
Federal Manufacturing & Technologies
Attn: Office of Industrial Partnerships, Royalty Payments, D/281, E1H6
2000 East 95th Street
Kansas City, Missouri 64141-6159
12.3. All notices provided herein shall be in writing and shall be deemed to
have been duly given when received, if delivered personally, sent by
telephotocopy, or sent by First Class U.S. Mail, postage prepaid, to the party
entitled thereto at its above address or at such other address as designated in
writing by the party in accordance with the provisions of this section.
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13. NON-ABATEMENT OF ROYALTIES
13.1. AlliedSignal and Licensee acknowledge that certain of the Proprietary
Rights may expire prior to the conclusion of the term of this Agreement;
however, AlliedSignal and Licensee agree that the royalty rates provided for
above shall be uniform and undiminished, except pursuant to this Agreement.
14. WAIVERS
14.1. The failure of AlliedSignal at any time to enforce any provision of this
Agreement or to exercise any right or remedy shall not be construed to be a
waiver of such provisions or of such rights or remedy or the right of
AlliedSignal thereafter to enforce each and every provision, right, or remedy.
15. MODIFICATIONS
15.1. It is expressly understood and agreed by the parties hereto that this
instrument contains the entire agreement between the parties with respect to the
subject matter hereof and that all prior representations, warranties, or
agreements relating hereto have been merged into this document and are thus
superseded in totality by this Agreement. This Agreement may be amended or
modified only by a written instrument signed by the duly authorized
representatives of both of the parties.
16. HEADINGS
16.1. The headings for the sections set forth in this Agreement are strictly
for the convenience of the parties and shall not be used in any way to restrict
the meaning or interpretation of the substantive language of this Agreement.
17. LAW
17.1. This Agreement shall be construed according to the laws of the State of
Missouri and the United States of America.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed, in duplicate, in their respective names by their duly authorized
representatives.
ALLIEDSIGNAL INC., FEDERAL MANUFACTURING & TECHNOLOGIES
By: /s/ N. Byron Canady
----------------------------------------
Name: (typed) N. Byron Canady
------------------------------
Title: Licensing Manager
-------------------------------------
Date: 9/25/97
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LICENSEE
By: /s/ Gary M. DeLaurentiis
----------------------------------------
Name: (typed) Gary M. DeLaurentiis
------------------------------
Title: President
-------------------------------------
Date: 9-25-97
--------------------------------------
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Exhibt 18
- -------------------------------------------------------------------------------
CONVERTIBLE DEBENTURE PURCHASE AGREEMENT
Among
FIX-CORP INTERNATIONAL, INC.,
JNC OPPORTUNITY FUND LTD.
and
DIVERSIFIED STRATEGIES FUND, L.P.
--------------------------
October 24, 1997
--------------------------
- -------------------------------------------------------------------------------
<PAGE>
Exhibt 18
CONVERTIBLE DEBENTURE PURCHASE AGREEMENT, dated as of October 24, 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, subject to the terms and conditions set forth in this Agreement,
the Company desires to issue and sell to the Purchasers and the Purchasers
severally and not jointly desire to purchase an aggregate principal amount of
$5,000,000 of the Company's 6% Convertible Debentures, due October 24, 2000 (the
"DEBENTURES"), which are convertible into shares of the Company's common stock,
par value $.0001 per share (the "COMMON STOCK").
IN CONSIDERATION of the mutual covenants and agreements set forth herein
and for good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, the parties agree as follows:
ARTICLE I
PURCHASE AND SALE OF DEBENTURES; CLOSING
1.1 THE CLOSING.
(a) THE CLOSING. (i) Subject to the terms and conditions set
forth in this Agreement, the Company shall issue and sell to the Purchasers
and the Purchasers shall purchase the Debentures for an aggregate purchase
price of $5,000,000. 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) Prior to the Closing the parties shall deliver to the
Escrow Agent such items as are required to be delivered by them in accordance
with and subject to the terms and conditions of the Escrow Agreement, dated
as of the date hereof, by and among the Company, the Purchasers and the
Escrow Agent (the "ESCROW AGREEMENT"), including, the following: (i) the
Company shall deliver or cause to be delivered (A) Debentures in aggregate
principal amount equal to $1,000,000, registered in the name of DSF, (B)
Debentures in aggregate principal amount equal to $4,000,000, registered in
the name of JNC, (C) the Warrants (as defined in Section 3.16), and (D) the
legal opinions of Bricker & Eckler LLP substantially in the form of EXHIBIT C
("LEGAL OPINION")
<PAGE>
addressed to each Purchaser; (ii) DSF shall deliver or cause to be delivered
$1,000,000 in United States dollars; (iii) JNC shall deliver or cause to be
delivered $4,000,000 in United States dollars; 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
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 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 Document (any of the foregoing, a "MATERIAL
ADVERSE EFFECT").
(b) AUTHORIZATION; ENFORCEMENT. The Company has the requisite
corporate power
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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
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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 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
governmental authority or other Person in connection with the execution,
delivery and performance by the Company of the Transaction Documents other
than (i) the filing of a registration statement covering the resale of the
Underlying Shares by the 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,
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orders, notices and filings referred to in SCHEDULE 2.1(f), the "REQUIRED
APPROVALS").
(g) LITIGATION; PROCEEDINGS. Except as specifically disclosed in
the Disclosure Materials (as hereinafter defined), there is no action, suit,
notice of violation, proceeding or investigation pending or, to the best
knowledge of the Company, threatened against or affecting the Company or any
of its Subsidiaries or any of their respective properties before or by any
court, governmental or administrative agency or regulatory authority
(federal, state, county, local or foreign) which (i) adversely affects or
challenges the legality, validity or enforceability of any of the Transaction
Documents or the Securities or (ii) could, individually or in the aggregate,
have or result in a Material Adverse Effect.
(h) NO DEFAULT OR VIOLATION. Neither the Company nor any
Subsidiary (i) is in default under or in violation of (or has received notice
of a claim that it is in default under or that it is in violation of) any
indenture, promissory note, loan or credit agreement or any other agreement
or instrument to which it is a party or by which it or any of its properties
is bound, (ii) is in violation of any order of any court, arbitrator or
governmental body, or (iii) is in violation of any statute, rule or
regulation of any governmental authority, except as could not individually or
in the aggregate, have or result in, individually or in the aggregate, a
Material Adverse Effect.
(i) PRIVATE OFFERING. Subject in part to the truth and accuracy
of the 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.
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(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 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
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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 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
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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 or warranties with respect to the transactions contemplated
hereby other than those specifically set forth in this Section 2.2.
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ARTICLE III
OTHER AGREEMENTS OF THE PARTIES
3.1 TRANSFER RESTRICTIONS. (a) Securities may only be disposed of
pursuant to an effective registration statement under the Securities Act, to
the Company or pursuant to an available exemption from or in a transaction
not subject to the registration requirements thereof. In connection with any
transfer of any Securities other than pursuant to an effective registration
statement or to the Company, the Company may require the transferor thereof
to provide to the Company an opinion of counsel selected by the transferor,
the form and substance of which opinion shall be reasonably satisfactory to
the Company, to the effect that such transfer does not require registration
under the Securities Act. Notwithstanding the foregoing, the Company hereby
consents to and agrees to register on the books and records of the Company or
on the register of any transfer agent for the Securities (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 PURCHASE
PURCHASE "COMPANY") AND THE
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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, 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.
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3.4 USE OF DISCLOSURE MATERIALS. The Company consents to the use of
the Disclosure Materials and any information provided by or on behalf of the
Company pursuant to Section 3.3, and any amendments and supplements thereto,
by the 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
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
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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.
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
fthe 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
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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 E sets forth the procedures with
respect to the conversion of the Debentures, including the form of legal
opinion, if necessary, that shall be rendered to the Company's transfer agent
and such other information and instructions as may be reasonably necessary to
enable the 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
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
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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. (seq level2 \*alphabetica) 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 Closing Date,
except (i) the granting of options or warrants to employees, officers and
directors, and the issuance of shares upon exercise of options granted, under
any stock option plan heretofore or hereinafter duly adopted by the Company,
(ii) shares issued upon exercise of any currently outstanding warrants and
upon conversion of any currently outstanding convertible preferred stock in
each case disclosed in SCHEDULE 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 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
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<PAGE>
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. 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 265,120 shares of Common Stock at an exercise
price per share equal to $3.91 and (b) to DSF, a Common Stock purchase
warrant, in the form of EXHIBIT D and registered in the name of DSF (the "DSF
WARRANT," and, collectively with the JNC Warrant, the "WARRANTS"), pursuant
to which DSF 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 66,280 shares of Common Stock at an exercise price per share equal to
$3.91.
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<PAGE>
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. The Company shall (a) not later than November 15,
1997, prepare and file with the Commission a Form 10-SB registration
statement pursuant to the Exchange Act, (b) take all commercially reasonable
steps necessary to cause such Form 10-SB registration statement to be
declared effective as soon as possible thereafter, and (c) provide to the
Purchasers evidence of such filing and effectiveness.
ARTICLE IV
MISCELLANEOUS
4.1 FEES AND EXPENSES. The Company shall pay at the Closing (i)
$15,000 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 and (ii) $3,000 to Encore for the due diligence
expenses and disbursements incurred in connection with the transactions
contemplated hereby. Other than the amounts contemplated by the immediately
preceding sentence, and except as set forth in the Registration Rights
Agreement, each party shall pay the fees and expenses of its advisers,
counsel, accountants and other experts, if any, and all other expenses
incurred by such party incident to the negotiation, preparation, execution,
delivery and performance of this Agreement. The Company shall pay all stamp
and other taxes and duties levied in connection with the issuance of the
Debentures pursuant hereto. The 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
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<PAGE>
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
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
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<PAGE>
-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 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.
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<PAGE>
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 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
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SIGNATURE PAGE FOLLOWS]
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Exhibt 18
IN WITNESS WHEREOF, the parties hereto have caused this 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
----------------------------
Name:
Title:
JNC OPPORTUNITY FUND LTD.
By: [ILLEGIBLE]
-----------------------------
Name:
Title:
DIVERSIFIED STRATEGIES FUND, L.P.
By: Encore Capital Management, L.L.C.
By: /s/ Neil T. Chau
--------------------------
Name: Neil T. Chau
Title: Director
<PAGE>
Exhibit 19
SAMPLE
NEITHER THIS DEBENTURE NOR THE SECURITIES INTO WHICH THIS DEBENTURE
IS CONVERTIBLE 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.
THIS DEBENTURE IS SUBJECT TO CERTAIN RESTRICTIONS ON CONVERSION SET
FORTH IN SECTION 3.8 OF A 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.
THIS DEBENTURE IS SUBJECT TO CERTAIN RESTRICTIONS AS SET FORTH IN A
SUBORDINATION AGREEMENT, DATED AS OF OCTOBER 24, 1997. A COPY OF THAT
AGREEMENT IS ON FILE AT THE PRINCIPAL OFFICE OF THE COMPANY.
No. A-1 U.S. $500,000
FIX-CORP INTERNATIONAL, INC.
6% CONVERTIBLE DEBENTURE DUE OCTOBER 24, 2000
THIS DEBENTURE is one of a series of duly authorized issued
debentures of Fix-Corp International, Inc., a Delaware corporation having a
principal place of business at 27040 Cedar Rd. Suite 218, Beachwood, OH 44122
(the "COMPANY"), designated as its 6% Convertible Debentures, due October 24,
2000 (the "DEBENTURES"), in an aggregate principal amount of $5,000,000.
FOR VALUE RECEIVED, the Company promises to pay to JNC Opportunity
Fund Ltd., or registered assigns (the "HOLDER"), the principal sum of Five
Hundred Thousand Dollars ($500,000), on or prior to October 24, 2000 or such
earlier date as the Debentures are required to be repaid as provided
hereunder (the "MATURITY DATE") and to pay interest to the Holder on the
principal sum at the rate of 6% per annum, payable quarterly in arrears on
March 31, June 30, September 30 and December 31 of each year, commencing
December 31, 1997, and on each Conversion Date (as defined in Section
4(a)(i)). Interest shall accrue daily commencing on the Original Issue Date
(as defined in Section 6) until payment in full of the principal sum,
together with all accrued and unpaid interest and other
<PAGE>
amounts which may become due hereunder, has been made. Interest shall be
calculated on the basis of a 360-day year and for the actual number of days
elapsed. Interest hereunder will be paid to the Person (as defined in
Section 6) in whose name this Debenture is registered on the records of the
Company regarding registration and transfers of the Debentures (the
"DEBENTURE REGISTER"). All overdue, accrued and unpaid interest and other
amounts due hereunder shall bear interest at the rate of 18% per annum and
accrue daily from the date such interest is due hereunder through and
including the date of payment. The principal of, and interest on, this
Debenture are payable in such coin or currency of the United States of
America as at the time of payment is legal tender for payment of public and
private debts, at the address of the Holder last appearing on the Debenture
Register, except that interest due on the principal amount (but not overdue
interest) may, at the Company's option, be paid in shares of Common Stock (as
defined in Section 6) calculated based upon the Conversion Price (as defined
below) at the time such interest becomes due. All amounts due hereunder
other than interest shall be paid in cash. Notwithstanding anything to the
contrary contained herein, the Company may not issue shares of the Common
Stock in payment of interest on the principal amount if: (i) the number of
shares of Common Stock at the time authorized, unissued and unreserved for
all purposes, or held as treasury stock, is insufficient to pay interest
hereunder in shares of Common Stock; (ii) such shares are not either
registered for resale pursuant to an Underlying Securities Registration
Statement (as defined in Section 6) or freely transferable without volume
restrictions pursuant to Rule 144(k) promulgated under the Securities Act of
1933, as amended (the "SECURITIES ACT"), as determined by counsel to the
Company pursuant to a written opinion letter, addressed to and in form and
substance acceptable to the Company's transfer agent or other person or
entity performing similar functions thereto; (iii) such shares are not listed
on the OTC Bulletin Board (or the American Stock Exchange, Nasdaq National
Market, Nasdaq SmallCap Market or The New York Stock Exchange) and any other
exchange, market and trading facility on which the Common Stock is then
listed for trading; or (iv) the issuance of such shares would result in the
recipient thereof beneficially owning more than 4.999% of the issued and
outstanding shares of Common Stock as determined in accordance with Rule
13d-3 under the Securities Exchange Act of 1934, as amended. Payment of
interest on the principal amount in shares of Common Stock is further subject
to the provisions of Section 4(a)(ii).
This Debenture is subject to the following additional provisions:
SECTION 1. This Debenture is exchangeable for an equal aggregate
principal amount of Debentures of different authorized denominations, as
requested by the Holder surrendering the same but shall not be issuable in
denominations of less than integral multiplies of Fifty Thousand Dollars
($50,000) unless such amount represents the full principal balance of
Debentures outstanding to such Holder. No service charge will be made for
such registration of transfer or exchange.
SECTION 2. This Debenture has been issued subject to certain
investment representations of the original Holder set forth in the Purchase
Agreement and may be transferred or exchanged only in compliance with the
Purchase Agreement. Prior to due presentment to the Company for transfer of
this Debenture, the Company and any agent of the Company may treat the person
in whose name this Debenture is duly registered on the Debenture Register as
the owner hereof for the purpose of receiving payment as herein provided and
for all other purposes, whether or not this Debenture is overdue, and neither
the Company nor any such agent shall be affected by notice to the
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<PAGE>
contrary.
SECTION 3. EVENTS OF DEFAULT.
(a) "EVENT OF DEFAULT", wherever used herein, means any one of the
following events (whatever the reason and whether it shall be voluntary or
involuntary or effected by operation of law or pursuant to any judgment,
decree or order of any court, or any order, rule or regulation of any
administrative or governmental body):
(i) any default in the payment of the principal of, interest on
or liquidated damages in respect of, this Debenture, free of any claim of
subordination, as and when the same shall become due and payable (whether
on the applicable quarterly interest payment date, the Conversion Date or
the Maturity Date or by acceleration or otherwise);
(ii) the Company shall fail to observe or perform any other
covenant, agreement or warranty contained in, or otherwise commit any
breach of, this Debenture, the Purchase Agreement or the Registration
Rights Agreement, and such failure or breach shall not have been remedied
within 10 days after the date on which written notice of such failure or
breach shall have been given;
(iii) the Company or any of its subsidiaries shall commence, or
there shall be commenced against the Company or any such subsidiary a
case under any applicable bankruptcy or insolvency laws as now or
hereafter in effect or any successor thereto, or the Company commences
any other proceeding under any reorganization, arrangement, adjustment of
debt, relief of debtors, dissolution, insolvency or liquidation or
similar law of any jurisdiction whether now or hereafter in effect
relating to the Company or any subsidiary thereof or there is commenced
against the Company or any subsidiary thereof any such bankruptcy,
insolvency or other proceeding which remains undismissed for a period of
60 days; or the Company or any subsidiary thereof is adjudicated
insolvent or bankrupt; or any order of relief or other order approving
any such case or proceeding is entered; or the Company or any subsidiary
thereof suffers any appointment of any custodian or the like for it or
any substantial part of its property which continues undischarged or
unstayed for a period of 60 days; or the Company or any subsidiary
thereof makes a general assignment for the benefit of creditors; or the
Company shall fail to pay, or shall state that it is unable to pay, or
shall be unable to pay, its debts generally as they become due; or the
Company or any subsidiary thereof shall call a meeting of its creditors
with a view to arranging a composition or adjustment of its debts; or the
Company or any subsidiary thereof shall by any act or failure to act
indicate its consent to, approval of or acquiescence in any of the
foregoing; or any corporate or other action is taken by the Company or
any subsidiary thereof for the purpose of effecting any of the foregoing;
(iv) the Company shall default in any of its obligations or an
event shall occur, or shall fail to occur, which gives (or would give
after the passage of time or giving of notice or both) the payee of any
such obligation the right to accelerate the payment thereof under any
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<PAGE>
mortgage, credit agreement or other facility, indenture agreement,
promissory note or other instrument under which there may be issued, or
by which there may be secured or evidenced any indebtedness of the
Company in an amount exceeding one hundred thousand dollars ($100,000),
whether such indebtedness now exists or shall hereafter be created and
such default shall result in such indebtedness becoming or being declared
due and payable prior to the date on which it would otherwise become due
and payable;
(v) the Common Stock shall be delisted from the OTC Bulletin
Board or any other national securities exchange or market on which such
Common Stock is then listed for trading or suspended from trading thereon
without being relisted or having such suspension lifted, as the case may
be, within three (3) Trading Days (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 apply to any delistings or suspensions
therefrom);
(vi) the Company shall be a party to any merger or consolidation
pursuant to which the Company shall not be the surviving entity or shall
sell, transfer or otherwise dispose of all or substantially all of it
assets in one or more transactions, or shall redeem more than a de
minimis number of shares of Common Stock (other than redemptions of
Underlying Shares);
(vi) an Underlying Securities Registration Statement shall not
have been declared effective by the Securities and Exchange Commission
(the "COMMISSION") on or prior to the 210th day after the Original Issue
Date; or
(vi) an Event (as hereinafter defined) shall not have been cured
to the satisfaction of the Holder prior to the expiration of thirty (30)
days from the Event Date (as hereinafter defined) relating thereto (other
than an Event resulting from a failure of an Underlying Securities
Registration Statement to be declared effective by the Commission on or
prior to the 105th day after the Original Issue Date).
(b) If any Event of Default occurs and is continuing, the Holder
may, by notice to the Company, declare the full principal amount of this
Debenture (and, at such Holder's option, all other Debentures then held by
such Holder), together with interest and other amounts owing in respect
thereof, to the date of acceleration, to be, whereupon the same shall become,
immediately due and payable in cash. The aggregate amount payable in respect
of the Debentures shall be equal to the sum of (i) the Mandatory Repayment
Amount plus (ii) the product of (A) the number of Underlying Shares issued in
respect of conversions hereunder and then held by the demanding Holder and
(B) the Per Share Market Value on the date prepayment is demanded or the date
the full prepayment price is paid, whichever is greater. The demanding
Holder need not provide and the Company hereby waives any presentment,
demand, protest or other notice of any kind, and the Holder may immediately
and without expiration of any grace period enforce any and all of its rights
and remedies hereunder and all other remedies available to it under
applicable law. Such declaration may be rescinded and annulled by Holder at
any time prior to payment hereunder. No such rescission or annulment shall
affect any subsequent Event of Default or impair any right consequent
thereon.
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SECTION 4. CONVERSION.
(a)(i) This Debenture shall be convertible into shares of Common Stock
at the option of the Holder in whole or in part at any time and from time to
time after the Original Issue Date and prior to the close of business on the
Maturity Date. The number of shares of Common Stock as shall be issuable
upon a conversion hereunder shall be determined by dividing the outstanding
principal amount of this Debenture to be converted, plus all accrued but
unpaid interest thereon (which the Company does not elect to pay in cash), by
the Conversion Price (as defined below), each as subject to adjustment as
provided hereunder. The Holder shall effect conversions by surrendering the
Debentures (or such portions thereof) to be converted, together with the form
of conversion notice attached hereto as EXHIBIT A (the "CONVERSION NOTICE")
to the Company. Each Conversion Notice shall specify the principal amount of
Debentures to be converted and the date on which such conversion is to be
effected, which date may not be prior to the date such Conversion Notice is
deemed to have been delivered hereunder (the "CONVERSION DATE"). If no
Conversion Date is specified in a Conversion Notice, the Conversion Date
shall be the date that the Conversion Notice is deemed delivered hereunder.
Subject to Sections 4(a)(ii) and 4(b) hereof and Section 3.8 of the Purchase
Agreement, each Conversion Notice, once given, shall be irrevocable. If the
Holder is converting less than all of the principal amount represented by the
Debenture(s) tendered by the Holder with the Conversion Notice, or if a
conversion hereunder cannot be effected in full for any reason, the Company
shall honor such conversion to the extent permissible hereunder and shall
promptly deliver to such Holder (in the manner and within the time set forth
in Section 5(b)) a new Debenture for such principal amount as has not been
converted.
(ii) CERTAIN REGULATORY APPROVAL. If on any Conversion Date (A)
the Common Stock is listed for trading on the Nasdaq National Market, Nasdaq
SmallCap Market, New York Stock Exchange ("NYSE") or American Stock Exchange
("AMEX"), (B) the Conversion Price then in effect is such that the aggregate
number of shares of the Common Stock that would then be issuable upon
conversion of the entire outstanding principal amount of Debentures, together
with any shares of the Common Stock previously issued upon conversion of
Debentures and as payment of interest thereunder would equal or exceed 20% of
the number of shares of the Common Stock outstanding on the Original Issue
Date (such number of shares as would not equal or exceed such 20% limit, the
"ISSUABLE MAXIMUM"), and (C) the Company has not previously obtained the vote
of shareholders, if any, as may be required by the rules and regulations of
The Nasdaq Stock Market, the NYSE or the AMEX (as applicable) applicable to
approve the issuance of Common Stock in excess of the Issuable Maximum in a
private placement for less than the greater of book or fair market value of
the Common Stock, then the Company shall issue to any Holder so requesting
conversion of Debentures its pro rata portion of the Issuable Maximum in the
same ratio that the aggregate principal amount of Debentures then outstanding
and held by such Holder bears to the aggregate principal amount of Debentures
then outstanding and, with respect to the remainder of the aggregate
principal amount of Debentures then held by such Holder for which a
conversion in accordance with the Conversion Price would result in an
issuance of Common Stock in excess of such Holder's pro rata portion of the
Issuable Maximum, the Holder shall have the option to require the Company to
either
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(1) prepay the balance of the aggregate principal amount of the Debentures
then outstanding and held by such Holder at a price equal to the sum of the
Mandatory Prepayment Amount or (2)(i) issue and deliver to such Holder a
number of shares of Common Stock as equals (x) the principal amount of
Debentures (or such portions thereof) tendered for conversion in respect of
the Conversion Notice at issue but for which a conversion in accordance with
the other terms hereof would result in an issuance of Common Stock in excess
of such Holder's pro rata portion of the Issuable Maximum divided by (y) the
Average Price, and (ii) cash in an amount equal to the product of (x) the Per
Share Market Value on the Conversion Date and (y) the number of shares of
Common Stock in excess of such Holder's pro rata portion of the Issuable
Maximum that would have otherwise been issuable to the Holder in respect of
such conversion but for the provisions of this Section (such amount of cash
being hereinafter referred to as the "DISCOUNT EQUIVALENT"). Any failure by
the Company to pay the full Discount Equivalent or prepayment price for the
Dentures, as the case may be, pursuant to this Section within seven days
after the date payable, the Company will pay interest thereon at a rate of
18% per annum, which will accrue daily, to the converting Holder, accruing
from the Conversion Date until such amount, plus all such interest thereon,
is paid in full. Any failure to pay the prepayment price or Discount
Equivalent under this Section prior to the date that interest thereon
commences shall constitute a default under Section 3(a)(i). The entire
prepayment price or Equivalent Price, as the case may be, including interest
thereon, shall be paid in cash.
(b) Not later than three Trading Days after the Conversion Date,
the Company will deliver to the Holder (i) a certificate or certificates
which shall be free of restrictive legends and trading restrictions (other
than those required by Section 3.1(b) of the Purchase Agreement) representing
the number of shares of the Common Stock being acquired upon the conversion
of Debentures (subject to reduction pursuant to Section 4(a)(ii) hereof and
Section 3.8 of the Purchase Agreement), (ii) Debentures in a principal amount
equal to the principal amount of Debentures not converted; (iii) a bank check
in the amount of all accrued and unpaid interest (if the Company has elected
to pay accrued interest in cash), together with all other amounts then due
and payable in accordance with the terms hereof, in respect of Debentures
tendered for conversion and (iv) if the Company has elected to pay accrued
interest in shares of the Common Stock, certificates, which shall be free of
restrictive legends and trading restrictions (other than those required by
Section 3.1(b) of the Purchase Agreement), representing such number of shares
of the Common Stock as equals such interest divided by the Conversion Price
calculated on the Conversion Date; PROVIDED, HOWEVER, that the Company shall
not be obligated to issue certificates evidencing the shares of the Common
Stock issuable upon conversion of the principal amount of Debentures until
Debentures are delivered for conversion to the Company or the Holder notifies
the Company that such Debenture has been mutilated, lost, stolen or destroyed
and complies with Section 9 hereof. The Company shall, upon request of the
Holder, use its best efforts to deliver any certificate or certificates
required to be delivered by the Company under this Section electronically
through the Depository Trust Corporation or another established clearing
corporation performing similar functions. If in the case of any Conversion
Notice such certificate or certificates, including for purposes hereof, any
shares of the Common Stock to be issued on the Conversion Date on account of
accrued but unpaid interest hereunder, are not delivered to or as directed by
the applicable Holder by the third Trading Day after the Conversion Date, the
Holder shall be entitled by written notice to the Company at any time on or
before its receipt of such certificate or certificates thereafter, to rescind
such conversion, in which event the Company shall immediately return the
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Debentures tendered for conversion. If the Company fails to deliver to the
Holder such certificate or certificates pursuant to this Section, including
for purposes hereof, any shares of the Common Stock to be issued on the
Conversion Date on account of accrued but unpaid interest hereunder, prior to
the third Trading Day after the Conversion Date, the Company shall pay to
such Holder, in cash, as liquidated damages and not as a penalty, $1,500 for
each day thereafter until the Company delivers such certificates. If the
Company fails to deliver to the Holder such certificate or certificates
pursuant to this Section prior to the 20th day after the Conversion Date, the
Company shall, at the Holder's option (i) prepay, from funds legally
available therefor at the time of such prepayment, the aggregate of the
principal amount of Debentures then held by such Holder, as requested by such
Holder, and (ii) pay all accrued but unpaid interest on account of the
Debentures for which the Company shall have failed to issue the Common Stock
certificates hereunder, in cash. The prepayment price shall equal the
Mandatory Prepayment Amount for the Debentures to be prepaid. If the Holder
has required the Company to prepay Debentures pursuant to this Section and
the Company fails for any reason to pay the prepayment price within seven
days after such notice is deemed delivered hereunder, the Company will pay
interest on the prepayment price at a rate of 18% per annum (to accrue
daily), in cash to such Holder, accruing from such seventh day until the
prepayment price and any accrued interest thereon is paid in full.
(c) (i) The conversion price (the "CONVERSION PRICE") in effect
on any Conversion Date shall be the lesser of (A) $3.91 (the "INITIAL
CONVERSION PRICE") and (B) 85% multiplied by the average of the five lowest
Per Share Market Values during the ten (10) Trading Days immediately
preceding the Conversion Date; PROVIDED THAT, (a) if an Underlying Securities
Registration Statement is not filed on or prior to the Filing Date (as such
term is defined in the Registration Rights Agreement), or (b) if the Company
fails to file with the Commission a request for acceleration in accordance
with Rule 12d1-2 promulgated under the Securities Exchange Act of 1934, as
amended, within five (5) days of the date that the Company is notified
(orally or in writing, whichever is earlier) by the Commission that an
Underlying Securities Registration Statement will not be "reviewed" or is not
subject to further review or comment by the Commission, or (c) if the
Underlying Securities Registration Statement is not declared effective by the
Commission on or prior to the 105th day after the Original Issue Date, or (d)
if such Underlying Securities Registration Statement is filed with and
declared effective by the Commission but thereafter ceases to be effective as
to all Registrable Securities (as such term is defined in the Registration
Rights Agreement) at any time prior to the expiration of the "Effectiveness
Period" (as such term as defined in the Registration Rights Agreement),
without being succeeded by a subsequent Underlying Securities Registration
Statement filed with and declared effective by the Commission within ten (10)
days, or (e) if trading in the Common Stock shall be suspended, or if the
Common Stock shall be delisted from trading, on the OTC Bulletin Board or any
other national securities market or exchange on which the Common Stock is
then listed or quoted for trading for any reason for more than three (3)
Trading Days, or (f) if the conversion rights of the Holders of Debentures
are suspended for any reason or if the Holder is not permitted to resell
Registrable Securities under the Underlying Securities Registration
Statement, or (g) if an amendment to the Underlying Securities Registration
Statement is not filed by the Company with the Commission within ten (10)
days of the Commission's notifying the Company that such amendment is
required in order for the Underlying Securities Registration Statement to be
declared effective (any such failure being referred to as an "EVENT," and for
purposes of clauses (a), (c) and (f) the date on
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which such Event occurs, or for purposes of clause (b) the date on which such
five (5) days period is exceeded, or for purposes of clauses (d) and (g) the
date which such ten (10) day period is exceeded, or for purposes of clause
(e) the date on which such three (3) Trading Day period is exceeded, being
referred to as "EVENT DATE"), the Conversion Price shall be decreased by 2.5%
each month (i.e., the Conversion Price would decrease by 2.5% as of the Event
Date and additional 2.5% as of each monthly anniversary of the Event Date)
until the earlier to occur of the second month anniversary after the Event
Date and such time as the applicable Event is cured. Commencing the second
month anniversary after the Event Date, the Company shall pay to the holders
of the Debentures 2.5% of the aggregate principal amount of Debentures then
outstanding (each holder being entitled to receive such portion of such
amount as equals its pro rata portion of the Debentures then outstanding) in
cash as liquidated damages, and not as a penalty on the first day of each
monthly anniversary of the Event Date until such time as the applicable
Event, is cured. Any decrease in the Conversion Price pursuant to this
Section shall continue notwithstanding the fact that the Event causing such
decrease has been subsequently cured. The provisions of this Section are not
exclusive and shall in no way limit the Company's obligations under the
Registration Rights Agreement.
(ii) If the Company, at any time while any Debentures are
outstanding, (a) shall pay a stock dividend or otherwise make a distribution
or distributions on shares of its Common Stock or any other equity or equity
equivalent securities payable in shares of the Common Stock, (b) subdivide
outstanding shares of the Common Stock into a larger number of shares, (c)
combine outstanding shares of the Common Stock into a smaller number of
shares, or (d) issue by reclassification of shares of the Common Stock any
shares of capital stock of the Company, the Initial Conversion Price shall be
multiplied by a fraction of which the numerator shall be the number of shares
of the Common Stock (excluding treasury shares, if any) outstanding before
such event and of which the denominator shall be the number of shares of the
Common Stock outstanding after such event. Any adjustment made pursuant to
this Section shall become effective immediately after the record date for the
determination of stockholders entitled to receive such dividend or
distribution and shall become effective immediately after the effective date
in the case of a subdivision, combination or re-classification.
(iii) If the Company, at any time while any Debentures are
outstanding, shall issue rights or warrants to all holders of the Common
Stock (and not to Holders of Debentures) entitling them to subscribe for or
purchase shares of the Common Stock at a price per share less than the Per
Share Market Value of the Common Stock at the record date mentioned below,
the Initial Conversion Price shall be multiplied by a fraction, of which the
denominator shall be the number of shares of the Common Stock (excluding
treasury shares, if any) outstanding on the date of issuance of such rights
or warrants plus the number of additional shares of the Common Stock offered
for subscription or purchase, and of which the numerator shall be the number
of shares of the Common Stock (excluding treasury shares, if any) outstanding
on the date of issuance of such rights or warrants plus the number of shares
which the aggregate offering price of the total number of shares so offered
would purchase at such Per Share Market Value. Such adjustment shall be made
whenever such rights or warrants are issued, and shall become effective
immediately after the record date for the determination of stockholders
entitled to receive such rights or warrants. However, upon the expiration of
any right or warrant to purchase shares of the Common Stock the issuance of
which
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resulted in an adjustment in the Initial Conversion Price pursuant to this
Section, if any such right or warrant shall expire and shall not have been
exercised, the Initial Conversion Price shall immediately upon such
expiration be recomputed and effective immediately upon such expiration be
increased to the price which it would have been (but reflecting any other
adjustments in the Initial Conversion Price made pursuant to the provisions
of this Section 4 after the issuance of such rights or warrants) had the
adjustment of the Initial Conversion Price made upon the issuance of such
rights or warrants been made on the basis of offering for subscription or
purchase only that number of shares of the Common Stock actually purchased
upon the exercise of such rights or warrants actually exercised.
(iv) If the Company, at any time while Debentures are outstanding,
shall distribute to all holders of the Common Stock (and not to Holders of
Debentures) evidences of its indebtedness or assets or rights or warrants to
subscribe for or purchase any security, then in each such case the Initial
Conversion Price at which Debentures shall thereafter be convertible shall be
determined by multiplying the Initial Conversion Price in effect immediately
prior to the record date fixed for determination of stockholders entitled to
receive such distribution by a fraction of which the denominator shall be the
Per Share Market Value of the Common Stock determined as of the record date
mentioned above, and of which the numerator shall be such Per Share Market
Value of the Common Stock on such record date less the then fair market value
at such record date of the portion of such assets or evidence of indebtedness
so distributed applicable to one outstanding share of the Common Stock as
determined by the Board of Directors in good faith; PROVIDED, HOWEVER, that
in the event of a distribution exceeding ten percent (10%) of the net assets
of the Company, such fair market value shall be determined by a nationally
recognized or major regional investment banking firm or firm of independent
certified public accountants of recognized standing (which may be the firm
that regularly examines the financial statements of the Company) (an
"APPRAISER") selected in good faith by the holders of a majority in interest
of Debentures then outstanding; and PROVIDED, FURTHER, that the Company,
after receipt of the determination by such Appraiser shall have the right to
select an additional Appraiser, in good faith, in which case the fair market
value shall be equal to the average of the determinations by each such
Appraiser. In either case the adjustments shall be described in a statement
provided to the holders of Debentures of the portion of assets or evidences
of indebtedness so distributed or such subscription rights applicable to one
share of the Common Stock. Such adjustment shall be made whenever any such
distribution is made and shall become effective immediately after the record
date mentioned above.
(v) In case of any reclassification of the Common Stock or any
compulsory share exchange pursuant to which the Common Stock is converted
into other securities, cash or property, the Holder of this Debenture shall
have the right thereafter to, at its option, (A) convert the then outstanding
principal amount, together with all accrued but unpaid interest and any other
amounts then owing hereunder in respect of this Debenture only into the
shares of stock and other securities, cash and property receivable upon or
deemed to be held by holders of the Common Stock following such
reclassification or share exchange, and the Holders of the Debentures shall
be entitled upon such event to receive such amount of securities, cash or
property as the shares of the Common Stock of the Company into which the then
outstanding principal amount, together with all accrued but unpaid interest
and any other amounts then owing hereunder in respect of this Debenture could
have been converted immediately prior to such reclassification or share
exchange would have been entitled or (B)
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require the Company to prepay, from funds legally available therefor at the
time of such prepayment, the aggregate of its outstanding principal amount of
Debentures, plus all interest and other amounts due and payable thereon, at a
price determined in accordance with Section 3(b). The entire prepayment
price shall be paid in cash. This provision shall similarly apply to
successive reclassifications or share exchanges.
(vi) All calculations under this Section 4 shall be made to the
nearest cent or the nearest 1/100th of a share, as the case
may be.
(vii) Whenever the Initial Conversion Price is adjusted pursuant to
any of Section 4(c)(ii) - (v), the Company shall promptly mail
to each Holder of Debentures a notice setting forth the
Initial Conversion Price after such adjustment and setting
forth a brief statement of the facts requiring such adjustment.
(viii) If:
A. the Company shall declare a dividend (or any other
distribution) on its Common Stock; or
B. the Company shall declare a special nonrecurring cash
dividend on or a redemption of its Common Stock; or
C. the Company shall authorize the granting to all holders
of the Common Stock rights or warrants to subscribe for
or purchase any shares of capital stock of any class or
of any rights; or
D. the approval of any stockholders of the Company shall be
required in connection with any reclassification of the
Common Stock of the Company, any consolidation or merger
to which the Company is a party, any sale or transfer of
all or substantially all of the assets of the Company, of
any compulsory share of exchange whereby the Common Stock
is converted into other securities, cash or property; or
E. the Company shall authorize the voluntary or involuntary
dissolution, liquidation or winding up of the affairs of
the Company;
then the Company shall cause to be filed at each office or agency maintained
for the purpose of conversion of the Debentures, and shall cause to be mailed
to the Holders of Debentures at their last addresses as they shall appear
upon the stock books of the Company, at least 30 calendar days prior to the
applicable record or effective date hereinafter specified, a notice stating
(x) the date on which a record is to be taken for the purpose of such
dividend, distribution, redemption, rights or warrants, or if a record is not
to be taken, the date as of which the holders of the Common Stock of record
to be
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entitled to such dividend, distributions, redemption, rights or warrants are
to be determined or (y) the date on which such reclassification,
consolidation, merger, sale, transfer or share exchange is expected to become
effective or close, and the date as of which it is expected that holders of
the Common Stock of record shall be entitled to exchange their shares of the
Common Stock for securities, cash or other property deliverable upon such
reclassification, consolidation, merger, sale, transfer or share exchange;
PROVIDED, HOWEVER, that the failure to mail such notice or any defect therein
or in the mailing thereof shall not affect the validity of the corporate
action required to be specified in such notice. Holders are entitled to
convert Debentures during the 30-day period commencing the date of such
notice to the effective date of the event triggering such notice.
(d) The Company covenants that it will at all times reserve and
keep available out of its authorized and unissued shares of the Common Stock
solely for the purpose of issuance upon conversion of the Debentures and
payment of interest on the Debentures, each as herein provided, free from
preemptive rights or any other actual contingent purchase rights of persons
other than the Holders, not less than such number of shares of the Common
Stock as shall be required by the Purchase Agreement (taking into account the
adjustments and restrictions of Section 4(c).
(e) Upon a conversion hereunder the Company shall not be required
to issue stock certificates representing fractions of shares of the Common
Stock, but may if otherwise permitted, make a cash payment in respect of any
final fraction of a share based on the Per Share Market Value at such time.
If the Company elects not, or is unable, to make such a cash payment, the
holder shall be entitled to receive, in lieu of the final fraction of a
share, one whole share of Common Stock.
(f) The issuance of certificates for shares of the Common Stock on
conversion of the Debentures shall be made without charge to the Holders
thereof for any documentary stamp or similar taxes that may be payable in
respect of the issue or delivery of such certificate, provided that the
Company shall not be required to pay any tax that may be payable in respect
of any transfer involved in the issuance and delivery of any such certificate
upon conversion in a name other than that of the Holder of such Debentures so
converted and the Company shall not be required to issue or deliver such
certificates unless or until the person or persons requesting the issuance
thereof shall have paid to the Company the amount of such tax or shall have
established to the satisfaction of the Company that such tax has been paid.
(g) Any and all notices or other communications or deliveries to
be provided by the Holders of the Debentures hereunder, including, without
limitation, any Conversion Notice, shall be in writing and delivered
personally, by facsimile, sent by a nationally recognized overnight courier
service or sent by certified or registered mail, postage prepaid, addressed
to the Company, at 27040 Cedar Rd. Suite 218, Beachwood, OH 44122 (facsimile
number (216) 292-6187), attention Chief Financial Officer, or such other
address or facsimile number as the Company may specify for such purposes by
notice to the Holders delivered in accordance with this Section. Any and all
notices or other communications or deliveries to be provided by the Company
hereunder shall be in writing and delivered personally, by facsimile, sent by
a nationally recognized overnight courier service or sent by certified or
registered mail, postage prepaid, addressed to each Holder of the Debentures
at the facsimile telephone number or address of such Holder appearing on the
books of the Company, or if no
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such facsimile telephone number or address appears, at the principal place of
business of the holder. Any notice or other communication or deliveries
hereunder 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), (ii) the date after the date of transmission, if
such notice or communication is delivered via facsimile at the facsimile
telephone number specified in this Section 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) four days after deposit in the United States mail, (iv) the
Business Day following the date of mailing, if send by nationally recognized
overnight courier service, or (v) upon actual receipt by the party to whom
such notice is required to be given. For purposes of Section 4(c)(i), if a
Conversion Notice is delivered by facsimile prior to 7:00 p.m. (New York City
time) on any date, then the day prior to such date shall be the last Trading
Day calculated to determine the Conversion Price applicable to such
Conversion Notice, and the date of such delivery shall commence the counting
of days for purposes of Section 4(b).
SECTION 5. OPTIONAL PREPAYMENT.
(a) The Company shall have the right, exercisable at any time upon
twenty (20) Trading Days prior written notice to the Holders of the
Debentures to be prepaid (the "OPTIONAL PREPAYMENT NOTICE"), to prepay, from
funds legally available therefor at the time of such prepayment, all or any
portion of the outstanding principal amount of the Debentures which have not
previously been repaid or for which Conversion Notices have not previously
been delivered hereunder, at a price equal to the Optional Prepayment Price
(as defined below). Any such prepayment by the Company shall be in cash and
shall be free of any claim of subordination. The Holders shall have the
right to tender, and the Company shall honor, Conversion Notices delivered
prior to the expiration of the twentieth (20th) Trading Day after receipt by
the Holders of an Optional Prepayment Notice for such Debentures (such date,
the "OPTIONAL PREPAYMENT DATE").
(b) If any portion of the Optional Prepayment Price shall not be
paid by the Company by the Optional Prepayment Date, the Optional Prepayment
Price shall be increased by 18% per annum (to accrue daily) until paid (which
amount shall be paid as liquidated damages and not as a penalty). In
addition, if any portion of the optional Prepayment Price remains unpaid
through the expiration of the Optional Prepayment Date, the Holder subject to
such prepayment may elect by written notice to the Company to either (i)
demand conversion in accordance with the formula and the time period therefor
set forth in Section 4 of any portion of the principal amount of Debentures
for which the Optional Prepayment Price, plus accrued liquidated damages
thereof, has not been paid in full (the "UNPAID PREPAYMENT PRINCIPAL
AMOUNT"), in which event the applicable Per Share Market Value shall be the
lower of the Per Share Market Value calculated on the Optional Prepayment
Date and the Per Share Market Value as of the Holder's written demand for
conversion, or (ii) invalidate AB INITIO such optional redemption,
notwithstanding anything herein contained to the contrary. If the Holder
elects option (i) above, the Company shall within three (3) Trading Days such
election is deemed delivered hereunder to the Holder the shares of Common
Stock issuable upon conversion of the Unpaid Prepayment Amount subject to
such conversion demand and otherwise perform its obligations hereunder with
respect thereto; or, if the Holder elects option (ii) above, the Company
shall promptly, and in any event not later than three Trading Days from
receipt of notice of such election, return to the
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Holder new Debentures for the full Unpaid Prepayment Principal Amount. If,
upon an election under option (i) above, the Company fails to deliver the
shares of Common Stock issuable upon conversion of the Unpaid Prepayment
Principal Amount within the time period set forth in this Section, the
Company shall pay to the Holder in cash, as liquidated damages and not as a
penalty, $1,500 per day until the Company delivers such Common Stock to the
Holder.
(c) The "OPTIONAL PREPAYMENT PRICE" for any Debentures shall equal
the sum of (i) the principal amount of Debentures to be prepaid, plus all
accrued and unpaid interest thereon, divided by the Conversion Price on (x)
the Optional Prepayment Date or (y) the date the Optional Prepayment Price is
paid in full, whichever is less, multiplied by the Average Price on (x) the
Optional Prepayment Date or (y) the date the Optional Prepayment Price is
paid in full, whichever is greater, and (ii) all other amounts and liquidated
damages due in respect of such principal amount.
SECTION 6. DEFINITIONS. For the purposes hereof, the following
terms shall have the following meanings:
"AVERAGE PRICE" on any date means the average Per Share Market
Value for the five (5) Trading Days immediately preceding such date.
"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
action to close.
"COMMON STOCK" means the Company's common stock, $.0001 par value
per share, of the Company and stock of any other class into which such shares
may hereafter have been reclassified or changed.
"MANDATORY REPAYMENT AMOUNT" for any Debentures shall equal the sum
of (i) the principal amount of Debentures to be prepaid, plus all accrued and
unpaid interest thereon, divided by the Conversion Price on (x) the date the
Mandatory Prepayment Amount is demanded or (y) the date the Mandatory
Prepayment Amount is paid in full, whichever is less, multiplied by the Per
Share Market Value on (x) the date the Mandatory Prepayment Amount is
demanded or (y) the date the Mandatory Prepayment Amount is paid in full,
whichever is greater, and (ii) all other amounts, costs, expenses and
liquidated damages due in respect of such Debentures.
"ORIGINAL ISSUE DATE" shall mean the date of the first issuance of
any Debentures regardless of the number of transfers of any Debenture and
regardless of the number of instruments which may be issued to evidence such
Debenture.
"PER SHARE MARKET VALUE" on any particular date means (a) the
closing bid price per share of the Common Stock on such date on the Nasdaq
SmallCap Market or other stock exchange or quotation system on which the
Common Stock is listed for trading, or (b) if the Common Stock is not listed
on the Nasdaq SmallCap Market or any other stock exchange or market, the
closing bid price per share of the Common Stock on such date on the
over-the-counter market, as reported by the OTC
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Bulletin Board, or (c) if the Common Stock is not quoted on the OTC Bulletin
Board, the closing bid price per share of Common Stock on such date on the
over-the-counter market as reported by the National Quotation Bureau
Incorporated (or any similar organization or agency succeeding its functions
of reporting prices), or (d) if the Common Stock is no longer traded on the
over-the-counter market and reported by the National Quotation Bureau
Incorporated (or any similar organization or agency succeeding its functions
of reporting prices), such closing bid price shall be determined by reference
to "Pink Sheet" quotes for the relevant conversion period as determined in
good faith by the Holder or (c) if the Common Stock is not then publicly
traded, the fair market value of a share of Common Stock as determined by an
appraiser selected in good faith by the Holders of a majority in interest of
the Debentures (the Company, after receipt of the determination by such
appraiser, shall have the right to select an additional appraiser, in which
case, the fair market value shall be equal to the average of the
determinations by each such appraiser).
"PERSON" means a corporation, an association, a partnership,
organization, a business, an individual, a government or political
subdivision thereof or a governmental agency.
"PURCHASE AGREEMENT" means the Convertible Debenture Purchase
Agreement, dated as of the Original Issue Date, among the Company and the
original Holders of Debentures, as amended, modified or supplemented from
time to time in accordance with its terms.
"REGISTRATION RIGHTS AGREEMENT" means the Registration Rights
Agreement, dated as of the Original Issue Date, among the Company and the
original Holders of Debentures, as amended, modified or supplemented from
time to time in accordance with its terms.
"TRADING DAY" means (a) a day on which the Common Stock is traded
on the Nasdaq Stock Market or other stock exchange or market on which the
Common Stock has been listed, or (b) if the Common Stock is not then listed
on the Nasdaq Stock Market or any stock exchange or market, a day on which
the Common Stock is traded on the over-the-counter market, as reported by the
OTC Bulletin Board, or (c) if the Common Stock is not quoted on the OTC
Bulletin Board, a day on which the Common Stock is quoted on the
over-the-counter market as reported by the National Quotation Bureau
Incorporated (or any similar organization or agency succeeding its functions
of reporting prices).
"UNDERLYING SHARES" means the shares of Common Stock into which the
Debentures, and interest thereon, are convertible in accordance with the
terms hereof and the Purchase Agreement.
"UNDERLYING SECURITIES REGISTRATION STATEMENT" means a registration
statement meeting the requirements set forth in the Registration Rights
Agreement, covering among other things the resale of the Underlying Shares
and naming the Holders as a "selling stockholders" thereunder.
SECTION 7. Except as expressly provided herein, no provision of
this Debenture shall alter or impair the obligation of the Company, which is
absolute and unconditional, to pay the principal of, interest and liquidated
damages (if any) on, this Debenture at the time, place, and rate, and in the
coin or currency, herein prescribed. This Debenture is a direct obligation
of the Company. This
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Debenture ranks PARI PASSU with all other Debentures now or hereafter issued
under the terms set forth herein. The Company may only voluntarily prepay
the outstanding principal amount on the Debentures in accordance with Section
5 hereof.
SECTION 8. This Debenture shall not entitle the Holder to any of
the rights of a stockholder of the Company, including without limitation, the
right to vote, to receive dividends and other distributions, or to receive
any notice of, or to attend, meetings of stockholders or any other
proceedings of the Company, unless and to the extent converted into shares of
Common Stock in accordance with the terms hereof.
SECTION 9. If this Debenture shall be mutilated, lost, stolen or
destroyed, the Company shall execute and deliver, in exchange and
substitution for and upon cancellation of a mutilated Debenture, or in lieu
of or in substitution for a lost, stolen or destroyed debenture, a new
Debenture for the principal amount of this Debenture so mutilated, lost,
stolen or destroyed but only upon receipt of evidence of such loss, theft or
destruction of such Debenture, and of the ownership hereof, and indemnity, if
requested, all reasonably satisfactory to the Company.
SECTION 10. This Debenture shall be governed by and construed in
accordance with the laws of the State of New York, without giving effect to
conflicts of laws thereof. The Company hereby irrevocably submits to the
non-exclusive jurisdiction of the state and federal courts sitting in the
City of New York, borough of Manhattan, for the adjudication of any dispute
hereunder or in connection herewith or with any transaction contemplated
hereby or discussed herein, and hereby irrevocably waives, and agrees not to
assert in any suit, action or proceeding, any claim that it is not personally
subject to the jurisdiction of any such court, or that such suit, action or
proceeding is improper. The Company 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 the Company at the
address in effect for notices to it under this instrument 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.
SECTION 11. Any waiver by the Company or the Holder of a breach of
any provision of this Debenture shall not operate as or be construed to be a
waiver of any other breach of such provision or of any breach of any other
provision of this Debenture. The failure of the Company or the Holder to
insist upon strict adherence to any term of this Debenture on one or more
occasions shall not be considered a waiver or deprive that party of the right
thereafter to insist upon strict adherence to that term or any other term of
this Debenture. Any waiver must be in writing.
SECTION 12. If any provision of this Debenture is invalid, illegal
or unenforceable, the balance of this Debenture shall remain in effect, and
if any provision is inapplicable to any person or circumstance, it shall
nevertheless remain applicable to all other persons and circumstances.
SECTION 13. Whenever any payment or other obligation hereunder
shall be due on a day other than a Business Day, such payment shall be made
on the next succeeding Business Day (or, if such next succeeding Business Day
falls in the next calendar month, the preceding Business Day in the
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appropriate calendar month).
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Exhibit 19
SAMPLE
IN WITNESS WHEREOF, the Company has caused this Debenture to be
duly executed by a duly authorized officer as of the date first above
indicated.
FIX-CORP INTERNATIONAL, INC.
By: /s/ Mark Fixler
--------------------------------
Name:
Title:
Attest:
By: /s/ Gary DeLaurentis
---------------------------
Name:
Title:
<PAGE>
Exhibit 19
SAMPLE
EXHIBIT A
NOTICE OF CONVERSION
(To be Executed by the Registered Holder
in order to Convert the Debenture)
The undersigned hereby elects to convert Debenture No. A-1 into shares of
Common Stock, $.0001 par value per share (the "Common Stock"), of Fix-Corp
International, Inc. (the "Company") according to the conditions hereof, as of
the date written below. If shares are to be issued in the name of a person
other than undersigned, the undersigned will pay all transfer taxes payable
with respect thereto and is delivering herewith such certificates and
opinions as reasonably requested by the Company in accordance therewith. No
fee will be charged to the holder for any conversion, except for such
transfer taxes, if any.
Conversion calculations: ----------------------------------------------
Date to Effect Conversion
----------------------------------------------
Principal Amount of Debentures to be Converted
----------------------------------------------
Number of shares of Common Stock to be Issued
----------------------------------------------
Applicable Conversion Price
----------------------------------------------
Signature
----------------------------------------------
Name
----------------------------------------------
Address
<PAGE>
Exhibit 20
EXHIBIT B
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this "AGREEMENT") is made and
entered into as of October 24, 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 Convertible Debenture Purchase
Agreement, dated as of the date hereof among the Company and the Purchasers
(the "PURCHASE AGREEMENT").
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.
"COMMISSION" means the Securities and Exchange Commission.
<PAGE>
"COMMON STOCK" means the Company's Common Stock, par value $.0001
per share.
"DEBENTURES" means Company's 6% Convertible Debentures due October
24, 2000 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.
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<PAGE>
"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 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) 331,400 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.
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<PAGE>
"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.
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
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<PAGE>
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 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
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<PAGE>
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 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;
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<PAGE>
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.
(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
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<PAGE>
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 customary conditions contained in the underwriting agreement or other
agreement entered into by the Company.
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<PAGE>
(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
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<PAGE>
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 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.
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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 Securities in accordance with the requirements hereof, and
printing expenses incurred to comply with the requirements hereof.
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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
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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
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).
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<PAGE>
(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' 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.
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<PAGE>
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 Registration
Statement other than the Registrable Securities, and the Company shall not
enter into any agreement providing any such right to any of its
securityholders.
(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
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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
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
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<PAGE>
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-
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<PAGE>
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.
(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.
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<PAGE>
(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, 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.
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[SIGNATURE PAGE FOLLOWS]
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Exhibit 20
IN WITNESS WHEREOF, the parties have executed this Registration
Rights Agreement as of the date first written above.
FIX-CORP INTERNATIONAL, INC.
By: /s/ Mark Fixler
---------------------------
Name:
Title:
JNC OPPORTUNITY FUND LTD.
By: [ILLEGIBLE]
---------------------------
Name:
Title:
DIVERSIFIED STRATEGIES FUND, L.P.
By: Encore Capital Management, L.L.C.
By: /s/ Neil T. Chau
---------------------------
Name: Neil T. Chau
Title: Director
<PAGE>
Exhibit 21
EXHIBIT E
ESCROW AGREEMENT
ESCROW AGREEMENT (this "AGREEMENT"), dated as of October 24, 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 a Convertible Debenture Purchase
Agreement, dated as of the date hereof (the "PURCHASE AGREEMENT"), pursuant
to which the Company is selling to the Purchasers certain of its 6%
Convertible Debentures Due October 24, 2000 (the "DEBENTURES") and certain
common stock purchase warrants (the "WARRANTS"). 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, each Purchaser shall
deposit
<PAGE>
with the Escrow Agent the portion of the Purchase Price due for the
Debentures and Warrant to be purchased by it at the Closing 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 Warrants 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 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 (i) $15,000 which will be retained by the
Escrow Agent pursuant to Section 5.1 of the Purchase Agreement, (ii) $3,000,
which will be remitted to or as directed by Encore pursuant to Section 5.1 of
the Purchase Agreement and (iii) $500,000, which will be paid to CDC Consulting,
Inc. ("CDC") in accordance with the engagement letter between the
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Company and CDC relating to the transactions contemplated by the Purchase
Agreement (the "ENGAGEMENT LETTER"). 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 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) Debentures in aggregate principal amount of
$4,000,000, (B) the 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 (A) Debentures in aggregate principal amount of
$1,000,000, (B) the DSF Warrant and (C) any interest earned on account of the
portion of the Purchase Price paid by DSF that shall have accrued through the
Closing; (iii) to the Company the Purchase Price (net of amounts described
under Section 1(d)) to the Company; (iv) to or as directed by Encore, $3,000
in accordance with Section 1(d); (iv) to or as directed by CDC, $500,000 in
accordance with the Engagement Letter; and (v) to the appropriate party, the
Ancillary Closing Documents. In addition, the Escrow Agent shall retain
$15,000 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
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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 depositary only, and the Escrow
Agent shall incur no liability whatsoever, except as a direct result of its
willful misconduct.
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.
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<PAGE>
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 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.
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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:
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
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<PAGE>
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.
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.
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Exhibit 21
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:
Title:
JNC OPPORTUNITY FUND LTD.
By: /s/ Philip C. Pedro
-----------------------------
Name: Philip C. Pedro
Title: Director
DIVERSIFIED STRATEGIES FUND, L.P.
By: Encore Capital Management, L.L.C.
By: /s/ Neil T. Chau
-----------------------------
Name: Neil T. Chau
Title: Director
ROBINSON SILVERMAN PEARCE
ARONSOHN & BERMAN LLP
By: /s/ Kenneth L. Henderson
-----------------------------
A Member of the Firm
<PAGE>
Exhibit 22
SAMPLE
NEITHER THIS WARRANT NOR THE SECURITIES INTO WHICH THIS WARRANT IS
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 THE REGISTRATION REQUIREMENTS THEREUNDER AND IN
COMPLIANCE WITH APPLICABLE STATE SECURITIES OR BLUE SKY LAWS.
FIX-CORP INTERNATIONAL, INC.
WARRANT
Warrant No. 001 Dated October 24, 1997
FIX-CORP INTERNATIONAL, INC., a Delaware corporation (the "Company"),
hereby certifies that, for value received, JNC Opportunity Fund Ltd., or its
registered assigns ("Holder"), is entitled, subject to the terms set forth
below, to purchase from the Company up to a total of 265,120 shares of Common
Stock, $.0001 par value per share (the "Common Stock"), of the Company (each
such share, a "Warrant Share" and all such shares, the "Warrant Shares") at
an exercise price equal to $3.91 per share (as adjusted from time to time as
provided in Section 8, the "Exercise Price"), at any time and from time to
time from and after the date hereof and through and including October 24,
2000 (the "Expiration Date"), and subject to the following terms and
conditions:
1. REGISTRATION OF WARRANT. The Company shall register this
Warrant, upon records to be maintained by the Company for that purpose (the
"Warrant Register"), in the name of the record Holder hereof from time to
time. The Company may deem and treat the registered Holder of this Warrant as
the absolute owner hereof for the purpose of any exercise hereof or any
distribution to the Holder, and for all other purposes, and the Company shall
not be affected by notice to the contrary.
<PAGE>
2. REGISTRATION OF TRANSFERS AND EXCHANGES.
(a) The Company shall register the transfer of any
portion of this Warrant in the Warrant Register, upon surrender of this
Warrant, with the Form of Assignment attached hereto duly completed and
signed, to the Company at the office specified in or pursuant to Section
3(b). Upon any such registration or transfer, a new warrant to purchase
Common Stock, in substantially the form of this Warrant (any such new
warrant, a "New Warrant"), evidencing the portion of this Warrant so
transferred shall be issued to the transferee and a New Warrant evidencing
the remaining portion of this Warrant not so transferred, if any, shall be
issued to the transferring Holder. The acceptance of the New Warrant by the
transferee thereof shall be deemed the acceptance of such transferee of all
of the rights and obligations of a holder of a Warrant.
(b) This Warrant is exchangeable, upon the surrender
hereof by the Holder to the office of the Company specified in or pursuant to
Section 3(b) for one or more New Warrants, evidencing in the aggregate the
right to purchase the number of Warrant Shares which may then be purchased
hereunder. Any such New Warrant will be dated the date of such exchange.
3. DURATION AND EXERCISE OF WARRANTS.
(a) This Warrant shall be exercisable by the registered
Holder on any business day before 5:30 P.M., New York City time, at any time
and from time to time on or after the date hereof to and including the
Expiration Date. At 5:30 P.M., New York City time on the Expiration Date, the
portion of this Warrant not exercised prior thereto shall be and become void
and of no value. This Warrant may not be redeemed by the Company.
(b) Subject to Sections 2(b), 6 and 11, upon surrender of
this Warrant, with the Form of Election to Purchase attached hereto duly
completed and signed, to the Company at its address for notice set forth in
Section 11 and upon payment of the Exercise Price multiplied by the number of
Warrant Shares that the Holder intends to purchase hereunder, in lawful money
of the United States of America, in cash or by certified or official bank
check or checks, all as specified by the Holder in the Form of Election to
Purchase, the Company shall promptly (but in no event later than 3 business
days after the Date of Exercise (as defined herein)) issue or cause to be
issued and cause to be delivered to or upon the written order of the Holder
and in such name or names as the Holder may designate, a certificate for the
Warrant Shares issuable upon such exercise, free of restrictive legends other
than as required by the Purchase Agreement of even date herewith between the
Holder and the Company. Any person so designated by the Holder to receive
Warrant Shares shall be deemed to have become holder of record of such
Warrant Shares as of the Date of Exercise of this Warrant.
A "Date of Exercise" means the date on which the Company
shall have received (i) this Warrant (or any New Warrant, as applicable),
with the Form of Election to
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<PAGE>
Purchase attached hereto (or attached to such New Warrant) appropriately
completed and duly signed, and (ii) payment of the Exercise Price for the
number of Warrant Shares so indicated by the holder hereof to be purchased.
(c) This Warrant shall be exercisable, either in its
entirety or, from time to time, for a portion of the number of Warrant
Shares. If less than all of the Warrant Shares which may be purchased under
this Warrant are exercised at any time, the Company shall issue or cause to
be issued, at its expense, a New Warrant evidencing the right to purchase the
remaining number of Warrant Shares for which no exercise has been evidenced
by this Warrant.
4. PIGGYBACK REGISTRATION RIGHTS. During the term of this
Warrant, the Company may not file any registration statement with the
Securities and Exchange Commission (other than registration statements of the
Company filed on Form S-8 or Form S-4, each as promulgated under the
Securities Act of 1933, as amended, pursuant to which the Company is
registering securities pursuant to a Company employee benefit plan or
pursuant to a merger, acquisition or similar transaction including
supplements thereto, but not additionally filed registration statements in
respect of such securities) at any time when there is not an effective
registration statement covering the resale of the Warrant Shares and naming
the Holder as a selling stockholder thereunder, unless the Company provides
the Holder with not less than 20 days notice to each of the Holder and
Robinson Silverman Peace Aronsohn & Berman LLP, attention Eric L. Cohen,
notice of its intention to file such registration statement and provides the
Holder the option to include any or all of the applicable Warrant Shares
therein. The piggyback registration rights granted to the Holder pursuant to
this Section shall continue until all of the Holder's Warrant Shares have
been sold in accordance with an effective registration statement or upon the
Expiration Date. The Company will pay all registration expenses in
connection therewith.
5. PAYMENT OF TAXES. The Company will pay all documentary
stamp taxes attributable to the issuance of Warrant Shares upon the exercise
of this Warrant; provided, however, that the Company shall not be required to
pay any tax which may be payable in respect of any transfer involved in the
registration of any certificates for Warrant Shares or Warrants in a name
other than that of the Holder, and the Company shall not be required to issue
or cause to be issued or deliver or cause to be delivered the certificates
for Warrant Shares unless or until the person or persons requesting the
issuance thereof shall have paid to the Company the amount of such tax or
shall have established to the satisfaction of the Company that such tax has
been paid. The Holder shall be responsible for all other tax liability that
may arise as a result of holding or transferring this Warrant or receiving
Warrant Shares upon exercise hereof.
6. REPLACEMENT OF WARRANT. If this Warrant is mutilated,
lost, stolen or destroyed, the Company shall issue or cause to be issued in
exchange and substitution for and upon cancellation hereof, or in lieu of and
substitution for this Warrant, a New Warrant, but only upon receipt of
evidence reasonably satisfactory to the Company of such loss, theft or
destruction and indemnity, if reasonably satisfactory to it. Applicants for
a New Warrant under such
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<PAGE>
circumstances shall also comply with such other reasonable regulations and
procedures and pay such other reasonable charges as the Company may prescribe.
7. RESERVATION OF WARRANT SHARES. The Company covenants that
it will at all times reserve and keep available out of the aggregate of its
authorized but unissued Common Stock, solely for the purpose of enabling it
to issue Warrant Shares upon exercise of this Warrant as herein provided, the
number of Warrant Shares which are then issuable and deliverable upon the
exercise of this entire Warrant, free from preemptive rights or any other
actual contingent purchase rights of persons other than the Holders (taking
into account the adjustments and restrictions of Section 8). The Company
covenants that all Warrant Shares that shall be so issuable and deliverable
shall, upon issuance and the payment of the applicable Exercise Price in
accordance with the terms hereof, be duly and validly authorized, issued and
fully paid and nonassessable.
8. CERTAIN ADJUSTMENTS. The Exercise Price and number of
Warrant Shares issuable upon exercise of this Warrant are subject to
adjustment from time to time as set forth in this Section 8. Upon each such
adjustment of the Exercise Price pursuant to this Section 8, the Holder shall
thereafter prior to the Expiration Date be entitled to purchase, at the
Exercise Price resulting from such adjustment, the number of Warrant Shares
obtained by multiplying the Exercise Price in effect immediately prior to
such adjustment by the number of Warrant Shares issuable upon exercise of
this Warrant immediately prior to such adjustment and dividing the product
thereof by the Exercise Price resulting from such adjustment.
(a) If the Company, at any time while this Warrant is
outstanding, (i) shall pay a stock dividend or otherwise make a distribution
or distributions on shares of its Common Stock (as defined below) or on any
other class of capital stock (and not the Common Stock) payable in shares of
Common Stock, (ii) subdivide outstanding shares of Common Stock into a larger
number of shares, or (iii) combine outstanding shares of Common Stock into a
smaller number of shares, the Exercise Price shall be multiplied by a
fraction of which the numerator shall be the number of shares of Common Stock
(excluding treasury shares, if any) outstanding before such event and of
which the denominator shall be the number of shares of Common Stock
(excluding treasury shares, if any) outstanding after such event. Any
adjustment made pursuant to this Section shall become effective immediately
after the record date for the determination of stockholders entitled to
receive such dividend or distribution and shall become effective immediately
after the effective date in the case of a subdivision or combination, and
shall apply to successive subdivisions and combinations.
(b) In case of any reclassification of the Common Stock,
any consolidation or merger of the Company with or into another person, the
sale or transfer of all or substantially all of the assets of the Company in
which the consideration therefor is equity or equity equivalent securities or
any compulsory share exchange pursuant to which the Common Stock is converted
into other securities or property, then the Holder shall have the right
thereafter to exercise this Warrant only into the shares of stock and other
securities and property receivable
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<PAGE>
upon or deemed to be held by holders of Common Stock following such
reclassification, consolidation, merger, sale, transfer or share exchange,
and the Holder shall be entitled upon such event to receive such amount of
securities or property of the Company's business combination partner equal to
the amount of Warrant Shares such Holder would have been entitled to had such
Holder exercised this Warrant immediately prior to such reclassification,
consolidation, merger, sale, transfer or share exchange. The terms of any
such consolidation, merger, sale, transfer or share exchange shall include
such terms so as to continue to give to the Holder the right to receive the
securities or property set forth in this Section 8(b) upon any exercise
following any such reclassification, consolidation, merger, sale, transfer or
share exchange.
(c) If the Company, at any time while this Warrant is
outstanding, shall distribute to all holders of Common Stock (and not to
holders of this Warrant) evidences of its indebtedness or assets or rights or
warrants to subscribe for or purchase any security (excluding those referred
to in Sections 8(a), (b) and (d)), then in each such case the Exercise Price
shall be determined by multiplying the Exercise Price in effect immediately
prior to the record date fixed for determination of stockholders entitled to
receive such distribution by a fraction of which the denominator shall be the
Exercise Price determined as of the record date mentioned above, and of which
the numerator shall be such Exercise Price on such record date less the then
fair market value at such record date of the portion of such assets or
evidence of indebtedness so distributed applicable to one outstanding share
of Common Stock as determined by a nationally recognized or major regional
investment banking firm or firm of independent certified public accountants
of recognized standing (which may be the firm that regularly examines the
financial statements of the Company) (an "Appraiser") mutually selected in
good faith by the holders of a majority in interest of the Warrants then
outstanding and the Company. Any determination made by the Appraiser shall
be final.
(d) If, at any time while this Warrant is outstanding,
the Company shall issue or cause to be issued rights or warrants to acquire
or otherwise sell or distribute shares of Common Stock to all holders of
Common Stock for a consideration per share less than the Exercise Price then
in effect, then, forthwith upon such issue or sale, the Exercise Price shall
be reduced to the price (calculated to the nearest cent) determined by
dividing (i) an amount equal to the sum of (A) the number of shares of Common
Stock outstanding immediately prior to such issue or sale multiplied by the
Exercise Price, and (B) the consideration, if any, received or receivable by
the Company upon such issue or sale by (ii) the total number of shares of
Common Stock outstanding immediately after such issue or sale.
(e) For the purposes of this Section 8, the following
clauses shall also be applicable:
(i) RECORD DATE. In case the Company shall take a
record of the holders of its Common Stock for the purpose of entitling them
(A) to receive a dividend or other distribution payable in Common Stock or in
securities convertible or exchangeable into shares of Common Stock, or (B) to
subscribe for or purchase Common Stock or securities convertible or
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<PAGE>
exchangeable into shares of Common Stock, then such record date shall be
deemed to be the date of the issue or sale of the shares of Common Stock
deemed to have been issued or sold upon the declaration of such dividend or
the making of such other distribution or the date of the granting of such
right of subscription or purchase, as the case may be.
(ii) TREASURY SHARES. The number of shares of
Common Stock outstanding at any given time shall not include shares owned or
held by or for the account of the Company, and the disposition of any such
shares shall be considered an issue or sale of Common Stock.
(f) All calculations under this Section 8 shall be made
to the nearest cent or the nearest 1/100th of a share, as the case may be.
(g) If:
(i) the Company shall declare a dividend
(or any other distribution) on its
Common Stock; or
(ii) the Company shall declare a special
nonrecurring cash dividend on or a
redemption of its Common Stock; or
(iii) the Company shall authorize the granting
to all holders of the Common Stock rights
or warrants to subscribe for or purchase
any shares of capital stock of any class
or of any rights; or
(iv) the approval of any stockholders of the
Company shall be required in connection
with any reclassification of the Common
Stock of the Company, any consolidation
or merger to which the Company is a
party, any sale or transfer of all or
substantially all of the assets of the
Company, or any compulsory share exchange
whereby the Common Stock is converted
into other securities, cash or property;
or
(v) the Company shall authorize the voluntary
dissolution, liquidation or winding up
of the affairs of the Company,
then the Company shall cause to be mailed to each Holder at their last
addresses as they shall appear upon the Warrant Register, at least 30
calendar days prior to the applicable record or
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<PAGE>
effective date hereinafter specified, a notice stating (x) the date on which
a record is to be taken for the purpose of such dividend, distribution,
redemption, rights or warrants, or if a record is not to be taken, the date
as of which the holders of Common Stock of record to be entitled to such
dividend, distributions, redemption, rights or warrants are to be determined
or (y) the date on which such reclassification, consolidation, merger, sale,
transfer or share exchange is expected to become effective or close, and the
date as of which it is expected that holders of Common Stock of record shall
be entitled to exchange their shares of Common Stock for securities, cash or
other property deliverable upon such reclassification, consolidation, merger,
sale, transfer, share exchange, dissolution, liquidation or winding up;
PROVIDED, HOWEVER, that the failure to mail such notice or any defect therein
or in the mailing thereof shall not affect the validity of the corporate
action required to be specified in such notice.
9. PAYMENT OF EXERCISE PRICE. The Holder may pay the
Exercise Price in cash or, in the event that a registration statement
covering the resale of the Warrant Shares and naming the holder thereof as a
selling stockholder thereunder is not effective for the resale of the Warrant
Shares at any time during the term of this Warrant, pursuant to a cashless
exercise, as follows:
(a) CASH EXERCISE. The Holder shall deliver immediately
available funds;
(b) CASHLESS EXERCISE. The Holder shall surrender this
Warrant to the Company together with a notice of cashless exercise, in which
event the Company shall issue to the Holder the number of Warrant Shares
determined as follows:
X = Y (A-B)/A
where:
X = the number of Warrant Shares to be issued to
the Holder.
Y = the number of Warrant Shares with respect to
which this Warrant is being exercised.
A = the average of the closing sale prices of the Common
Stock for the five (5) Trading Days immediately
prior to (but not including) the Date of Exercise.
B = the Exercise Price.
For purposes of Rule 144 promulgated under the Securities Act, it is
intended, understood and acknowledged that the Warrant Shares issued in a
cashless exercise transaction shall be deemed to have been acquired by the
Holder, and the holding period for the Warrant Shares shall be deemed to have
been commenced, on the issue date.
10. FRACTIONAL SHARES. The Company shall not be required to
issue or cause to
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<PAGE>
be issued fractional Warrant Shares on the exercise of this Warrant. The
number of full Warrant Shares which shall be issuable upon the exercise of
this Warrant shall be computed on the basis of the aggregate number of
Warrant Shares purchasable on exercise of this Warrant so presented. If any
fraction of a Warrant Share would, except for the provisions of this Section
10, be issuable on the exercise of this Warrant, the Company shall, at its
option, (i) pay an amount in cash equal to the Exercise Price multiplied by
such fraction or (ii) round the number of Warrant Shares issuable, up to the
next whole number.
11. NOTICES. Any and all notices or other communications or
deliveries 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, (ii) the business day following the date of
mailing, if sent by nationally recognized overnight courier service, or (iii)
upon actual receipt by the party to whom such notice is required to be given.
The addresses for such communications shall be: (1) if to the Company, to
27040 Cedar Rd. Suite 218, Beachwood, OH 44122, or to Facsimile No.: (216)
292-6187 Attention: Chief Financial Officer, or (ii) if to the Holder, to the
Holder at the address or facsimile number appearing on the Warrant Register
or such other address or facsimile number as the Holder may provide to the
Company in accordance with this Section 11.
12. WARRANT AGENT.
(a) The Company shall serve as warrant agent under this
Warrant. Upon thirty (30) days' notice to the Holder, the Company may appoint
a new warrant agent.
(b) Any corporation into which the Company or any new
warrant agent may be merged or any corporation resulting from any
consolidation to which the Company or any new warrant agent shall be a party
or any corporation to which the Company or any new warrant agent transfers
substantially all of its corporate trust or shareholders services business
shall be a successor warrant agent under this Warrant without any further
act. Any such successor warrant agent shall promptly cause notice of its
succession as warrant agent to be mailed (by first class mail, postage
prepaid) to the Holder at the Holder's last address as shown on the Warrant
Register.
13. MISCELLANEOUS.
(a) This Warrant shall be binding on and inure to the
benefit of the parties hereto and their respective successors and permitted
assigns. This Warrant may be amended only in writing signed by the Company
and the Holder.
(b) Subject to Section 13(a), above, nothing in this
Warrant shall be construed to give to any person or corporation other than
the Company and the Holder any legal or equitable right, remedy or cause
under this Warrant; this Warrant shall be for the sole and exclusive benefit
of the Company and the Holder.
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<PAGE>
(c) This Warrant 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.
(d) The headings herein are for convenience only, do not
constitute a part of this Warrant and shall not be deemed to limit or affect
any of the provisions hereof.
(e) In case any one or more of the provisions of this
Warrant shall be invalid or unenforceable in any respect, the validity and
enforceability of the remaining terms and provisions of this Warrant shall
not in any way be affected or impaired thereby and the parties will attempt
in good faith to agree upon a valid and enforceable provision which shall be
a commercially reasonable substitute therefor, and upon so agreeing, shall
incorporate such substitute provision in this Warrant.
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Exhibit 22
SAMPLE
IN WITNESS WHEREOF, the Company has caused this Warrant to be duly
executed by its authorized officer as of the date first indicated above.
FIX-CORP INTERNATIONAL, INC.
By: /s/ Mark Fixler
-------------------------------
Name: Mark Fixler
-----------------------------
Title: President/CEO
----------------------------
<PAGE>
FORM OF ELECTION TO PURCHASE
(To be executed by the Holder to exercise the right to purchase shares of
Common Stock under the foregoing Warrant)
To FIX-CORP INTERNATIONAL, INC.:
In accordance with the Warrant enclosed with this Form of Election
to Purchase, the undersigned hereby irrevocably elects to purchase
[___________]shares of Common Stock ("Common Stock"), $.0001 par value per
share, of Fix-Corp International, Inc. and encloses herewith $________ in
cash or certified or official bank check or checks, which sum represents the
aggregate Exercise Price (as defined in the Warrant) for the number of shares
of Common Stock to which this Form of Election to Purchase relates, together
with any applicable taxes payable by the undersigned pursuant to the Warrant.
The undersigned requests that certificates for the shares of Common
Stock issuable upon this exercise be issued in the name of
PLEASE INSERT SOCIAL SECURITY
OR
TAX IDENTIFICATION NUMBER
______________________________________
______________________________________________________________________________
(Please print name and address)
______________________________________________________________________________
______________________________________________________________________________
If the number of shares of Common Stock issuable upon this exercise
shall not be all of the shares of Common Stock which the undersigned is
entitled to purchase in accordance with the enclosed Warrant, the undersigned
requests that a New Warrant (as defined in the Warrant) evidencing the right
to purchase the shares of Common Stock not issuable pursuant to the exercise
evidenced hereby be issued in the name of and delivered to:
_____________________________________________________________________________
(Please print name and address)
_____________________________________________________________________________
_____________________________________________________________________________
Dated: ____________, __ Name of Holder:
(Print)________________________________
(By:)__________________________________
(Name:)
(Title:)
<PAGE>
(Signature must conform in all respects
to name of holder as specified on the face
of the Warrant)
<PAGE>
[To be completed and signed only upon transfer of Warrant]
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto ________________________________ the right represented by the within
Warrant to purchase ____________ shares of Common Stock of Fix-Corp
International, Inc. to which the within Warrant relates and appoints
________________ attorney to transfer said right on the books of Fix-Corp
International, Inc. with full power of substitution in the premises.
Dated:
_______________, ____
_______________________________________
(Signature must conform in all respects to name of
holder as specified on the face of the Warrant)
_______________________________________
Address of Transferee
_______________________________________
_______________________________________
In the presence of:
__________________________
<PAGE>
EXHIBIT 23
STATE OF DELAWARE
SECRETARY OF STATE
DIVISION OF CORPORATIONS
FILED 09:00 AM 10/27/1995
950248706 - 2551354
CERTIFICATE OF INCORPORATION
OF
FIX-CORP INTERNATIONAL, INC.
FIRST: The name of the corporation is:
FIX-CORP INTERNATIONAL, INC.
SECOND: Its registered office in the State of Delaware is located at 25
Greystone Manor, Lewes, DE 19958-9776, County of Sussex. The registered agent
in charge thereof is HARVARD BUSINESS SERVICES, INC.
THIRD: The purpose of the corporation is to engage in any lawful activity
for which corporations may be organized under the General Corporation Law of
Delaware.
FOURTH: The total number of authorized shares which the corporation is
authorized to issue is 50,000,000 shares of common stock having a par value of
0.0001 per share and 2,000,000 shares of convertible preferred stock having a
par value of 0.001 per share.
The number of authorized shares of preferred stock or of common stock may
be raised by the affirmative vote of the holders of a majority of the
outstanding shares of the corporation entitled to vote thereon.
All shares of common stock shall be identical and each share of common
stock shall be entitled to one vote on all matters.
The board of directors is authorized, subject to limitations prescribed by
law and the provisions of this Article Fourth, to provide by resolution or
resolutions for the issuance of the shares of preferred stock in one or more
series, and by filing a certificate pursuant to the applicable law of the State
of Delaware, to establish from time to time the number of shares included in any
such series, and to fix the designation, powers, preferences and rights of the
shares of any such series and the qualifications, limitations or restrictions
thereof.
FIFTH: The business and affairs of the corporation shall be managed by or
under the direction of the board of directors, and the directors need not be
elected by ballot unless required by the bylaws of the corporation.
<PAGE>
Page Two.
SIXTH: In furtherance and not in limitation of the powers conferred by the
laws of Delaware, the board of directors is authorized to amend or repeal the
bylaws.
SEVENTH: The corporation reserves the right to amend or repeal any
provision in this Certificate of Incorporation in the manner prescribed by the
laws of Delaware.
EIGHTH: The incorporator is Harvard Business Services, Inc., whose mailing
address is 25 Greystone Manor, Lewes, DE 19958.
NINTH: To the fullest extent permitted by the Delaware General Corporation
Law a director of this corporation shall not be liable to the corporation or its
stockholders for monetary damages for breach of fiduciary duty as a director.
TENTH: This company will acquire the assets, liabilities and previous
shareholders subject to Directors approval of the previous with the same name
filed under corporation number originally incorporated on.
ELEVENTH: To redomicile FIX - CORP INTERNATIONAL, INC., under file number
182732, a Utah corporation.
I, Richard Bell, for the purpose of forming a corporation under the laws of
the State of Delaware do make and file this certificate, and do certify that the
facts herein stated are true; and have accordingly signed below, this 24th day
of October, 1995.
Signed and Attested to by: /s/ Richard H. Bell
---------------------------
RICHARD H. BELL
PRESIDENT & SECRETARY
<PAGE>
Exhibit 24
LOAN AND SECURITY AGREEMENT
This LOAN AND SECURITY AGREEMENT dated as of December 16, 1996, between
Fix-Corp International, Inc., an Ohio corporation, with an address of 27040
Cedar Road, Suite 218, Beachwood, Ohio 44122 (the "Borrower") and Gordon
Brothers Capital Corporation, a Delaware corporation, with an address of 40
Broad Street, Boston, Massachusetts 02109 (the "Lender").
FOR VALUE RECEIVED, and in consideration of the granting by the Lender of
financial accommodations to Borrower, Borrower represents and agrees with the
Lender, as of the date hereof and as of the date of each credit and/or other
financial accommodation, as follows.
1. THE LOAN
1.1 LOAN. Subject to the terms and conditions of this Agreement, the Lender
hereby agrees to make a loan to the Borrower in the original principal amount of
$2,500,000.00 (the "Loan") to Borrower. The Loan shall be evidenced by that
certain Note, of even date herewith, (the "Note") by the Borrower in favor of
the lender in the original principal amount of $2,500,000.00, and is secured,
without limitation, by that certain Open-End Mortgage, dated of even date
herewith (the Mortgage"), by the Borrower in favor of the Lender in and to the
premises located at 1835 James Parkway, Heath, Ohio 43056 (the "Real Property").
This Agreement, the Note, the Mortgage 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".
2. GRANT OF SECURITY INTEREST
2.1 GRANT OF SECURITY INTEREST. In consideration of the Lender's extending
credit and other financial accommodations to the Borrower, the Borrower
hereby grants to the Lender a security interest in (including, without
limitation, a lien on and pledge of) all of the Borrowers Collateral (as
hereinafter defined). The security interest granted by this Agreement is
given to and shall be held by the Lender as security for the payment and
performance of all Obligations.
2.2 DEFINITIONS. The following definitions shall apply.
(a) "Code" shall mean the Massachusetts Uniform Commercial Code
(General Law, Chapter 106) as amended from time to time.
(b) "Collateral" shall mean all the Borrower's present and future
right, title and interest in and to any and all of the following property,
whether such property is now existing or hereafter created.
(i) All goods including without limitation all Inventory (as
hereinafter defined), farm products, Equipment (as
hereinafter defined), including without limitation
machinery, furniture, trade fixtures;
<PAGE>
(ii) All accounts, accounts receivable, contract rights and
chattel paper, regardless of whether or not they constitute
proceeds of other Collateral;
(iii) All general intangibles, regardless of whether or not
they constitute proceeds of other Collateral, including,
without limitation, all of the Borrower's rights to tax
refunds and all the Borrowers rights (which the Lender may
exercise or not as it in its sole discretion may determine)
to acquire or obtain goods and/or services with respect to
the manufacture, processing, storage, sale, shipment,
delivery or installation of any of the Borrower's inventory
or other Collateral;
(iv) All products of and accessions to any of the Collateral;
(v) All liens, guaranties, securities, rights, remedies and
privileges pertaining to any of the Collateral, including
the right of stoppage in transit;
(vi) All obligations owing to the Borrower of every kind and
nature, and all choses in action;
(vii) All goodwill, trade secrets, computer programs,
customer lists, trade names, trademarks and patents;
(viii) All documents and instruments (whether negotiable or
nonnegotiable, and regardless of their being attached to
chattel paper);
(ix) All proceeds of Collateral of every kind and nature in
whatever form, including, without limitation, both cash and
noncash proceeds resulting or arising from the rendering of
services by the Borrower or the sale or other disposition by
the Borrower of the Inventory or other Collateral;
(x) All books and records relating to the conduct of the
Borrower's business including, without in any way limiting
the generality of the foregoing, those relating to its
accounts; and
(xi) All deposit accounts maintained by the Borrower with any
Lender, trust company, investment firm or fund, or any
similar institution or organization.
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<PAGE>
(c) "Contract Rights" or "contract rights" means rights of the
Borrower to payment under contracts not yet earned by performance and not
evidenced by instruments or chattel paper.
(d) "Debtors" shall mean the Borrower's customers who are indebted to
the Borrower.
(e) "Equipment" shall mean and include all the Borrower's machinery,
equipment, furniture, trade fixtures and motor vehicles and intending to
include all tangible personal property, or goods, utilized in the conduct
of the Borrower's business, but excluding therefrom inventory, as that term
is defined in the Code, and all replacements or substitutions therefor and
all accessions thereto.
(f) "Inventory" means all inventory of whatever name, nature, kind or
description, all goods held for sale or lease or to be furnished under
contracts of service, finished goods, work in process, raw materials,
materials used or consumed by Borrower, parts, supplies, all wrapping,
packaging, advertising labeling, and shipping materials, devices, names and
marks, all contract rights and documents relating to any of the foregoing,
whether any of the foregoing be now existing or hereafter arising, wherever
located, now owned or hereafter acquired by Borrower.
(g) "Obligation(s)" shall mean, without limitation, all loans,
advances, indebtedness, notes, liabilities and amounts, liquidated or
unliquidated, owing by the Borrower to the Lender at any time, of each and
every kind, nature and description, whether arising under this Agreement or
otherwise, and whether secured or unsecured, direct or indirect (that is,
whether the same are due directly by the Borrower to the Lender, or are due
indirectly by the Borrower to the lender as endorser, guarantor or other
surety, or as Borrower of obligations due third persons which have been
endorsed or assigned to the Lender, or otherwise), absolute or contingent,
due or to become due, now existing or hereafter contracted. Said term shall
also include all interest and other charges chargeable to the Borrower or
due from the Borrower to the Lender from time to time and all costs and
expenses referred to in this Agreement.
(h) "Person or "party" shall include individuals, firms, corporations
and all other entities.
All words and terms used in this Agreement other than those specifically
defined herein shall have the meanings accorded to them in the Code.
2.3 ORDINARY COURSE OF BUSINESS. The Lender hereby authorizes and permits the
Borrower to hold, process, sell, use or consume in the manufacture or processing
of finished goods, or otherwise dispose of the Inventory for fair consideration,
all in the ordinary course of the Borrower's business, excluding, without
limitation, sales to creditors or in bulk or sales or other dispositions
occurring under circumstances which would or could create any lien or interest
adverse to the Lender's security interest or other right hereunder in the
proceeds resulting
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<PAGE>
therefrom. The Lender also hereby authorizes and permits the Borrower to
receive from the Debtors all amounts due as proceeds of the Collateral at the
Borrower's own cost and expense, and also liability, if any, subject to the
direction and control of the Lender at all times, and the Lender may at any
time, without cause or notice, and whether or not a default has occurred or
demand has been made, terminate all or any part of the authority and
permission herein or elsewhere in this Agreement granted to the Borrower with
reference to the Collateral.
Until the Lender shall otherwise notify the Borrower, all proceeds of
and collections of Collateral shall be retained by the Borrower and used
solely for the ordinary and usual operation of the Borrower's business, from
and after notice by the Lender to the Borrower, all proceeds of and
collections of the Collateral shall be held in trust by the Borrower for the
Lender and shall not be commingled with the Borrowers other funds or
deposited in any Lender account of the Borrower; and the Borrower agrees to
deliver to the Lender on the dates of receipt thereof by the Borrower, duly
endorsed to the Lender or to bearer, or assigned to the Lender, as may be
appropriate, all proceeds of the Collateral in the identical form received by
the Borrower.
2.4 ALLOWANCES. The Borrower may grant such allowances or other adjustments
to Debtors (exclusive of extending the time for payment of any item which
shall not be done without first obtaining the Lender's written consent in
each instance) as the Borrower may reasonably deem to accord with sound
business practice, including, without limiting the generality of the
foregoing, accepting the return of all or any part of the Inventory (subject
to the provisions set forth in this Agreement with reference to returned
Inventory).
2.5 RECORDS. The Borrower shall hold its books and records relating to the
collateral segregated from all the Borrower's other books and records in a
manner satisfactory to the Lender; and shall deliver to the Lender from time
to time promptly at its request all invoices, original documents of title,
contracts, chattel paper, instruments and any other writings relating
thereto, and other evidence of performance of contracts, or evidence of
shipment or delivery of the merchandise or of the rendering of services; and
the Borrower will deliver to the Lender promptly at the Lender's request from
time to time additional copies of any or all such papers or writings, and
such other information with respect to any of the Collateral and such
schedules of Inventory, schedules of accounts and such other writings as the
Lender may in its sole discretion deem to be necessary or effectual to
evidence any loan hereunder or the Lender's security interest in the
Collateral.
2.6 LEGENDS. The Borrower shall promptly make, stamp or record such entries
or legends on the Borrower's books and records or on any of the Collateral as
the Lender shall request from time to time, to indicate and disclose that the
Lender has a security interest in such Collateral.
2.7 INSPECTION. The Lender, or its representative, at any time and from
time to time, shall have the right and the Borrower will permit it and them:
(a) to examine, check, make copies of or tracts from any of the
Borrower's books, records and files (including, without limitation, orders
and original correspondence);
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<PAGE>
(b) to inspect and examine the Collateral and to check and test the
same as to quality, quantity, value and condition; and the Borrower agrees
to reimburse the Lender for its reasonable costs and expenses in so doing;
and
(c) to verify the Collateral or any portion or portions thereof or
the Borrower's compliance with the provisions of this Agreement.
3. REPRESENTATIONS AND WARRANTIES
3.1 ORGANIZATION AND QUALIFICATION. The Borrower is a duly organized and
existing corporation under the laws of the State of its incorporation, as
indicated above, in good standing under the laws of said state, and is duly
qualified to do business under the laws of each state where the nature of the
business done or property owned requires such qualification.
3.2 SUBSIDIARIES. The Borrower has no subsidiaries other than those listed
on Schedule 3.2, if any, and the Borrower has never consolidated, merged or
acquired substantially all of the assets of any other entity or person other
than those listed on Schedule 3.2, if any.
3.3 CORPORATE RECORDS. The Borrower's Corporate Charter, Articles of
Organization or Incorporation and all amendments thereto have been duly filed
and are in proper order. All outstanding capital stock issued by the Borrower
was and is properly issued and all books and records of the Borrower,
including but not limited to its minute books, bylaws and books of account,
are accurate and up to date and will be so maintained.
3.4 TITLE TO PROPERTIES; ABSENCE OF LIENS. Borrower has good and clear
record and marketable title to all of its properties and assets, and all of
its properties and assets including the Collateral are free and clear of all
mortgages, liens, pledges, charges, encumbrances, setoffs, except (a) the
mortgages and security interests as set forth on Schedule 3.4a if any, and
(b) the leases of personal property as set forth on Schedule 3.4b, if any.
3.5 PLACES OF BUSINESS. Borrower's chief executive office is correctly
stated in the preamble to this Agreement, and Borrower shall, during the term
of this Agreement, keep the Lender currently and accurately informed in
writing of each of its other places of business, and shall not change the
location of such chief executive office or open or close, move or change any
existing or new place of business without giving the Lender at least thirty
(30) days prior written notice thereof.
3.6 VALID OBLIGATIONS. The execution, delivery and performance of the Loan
Documents have been duly authorized by all necessary corporate action and
each represents a legal, valid and binding obligation of Borrower and is
fully enforceable according to its terms, except as limited by laws relating
to the enforcement of creditors' rights.
5
<PAGE>
3.7 CONFLICTS WITH OTHER AGREEMENTS. There is no provision in any
indenture, contract or agreement to which Borrower is a party which prohibits
the execution, delivery or performance of the Loan Documents.
3.8 GOVERNMENTAL APPROVALS. The execution, delivery and performance of the
Loan Documents does not require any approval of any governmental agency or
authority.
3.9 LITIGATION. There are no actions, suits or proceedings pending or to
the knowledge of Borrower threatened against Borrower which might materially
adversely affect the ability of Borrower to perform its obligations under the
Loan Documents.
3.10 FINANCIAL STATEMENTS. The Borrower has furnished to the Lender the
following Financial Statements (the "Financial Statements") balance sheet as
of September 30, 1996, and statement of profit and loss for the period ending
September 30, 1996. The balance sheet fairly presents the condition of the
Borrower at the date thereof and the statement of profit and loss fairly
presents the results of the operations of the Borrower for the period
indicated, all in conformity with generally accepted accounting principles,
consistently applied.
3.11 ACCOUNTS AND CONTRACT RIGHTS. All accounts arise out of legally
enforceable and existing contracts; and represent unconditional and
undisputed bonafide indebtedness by the Debtor for sales or leases of
Inventory shipped and delivered or services rendered by the Borrower to a
Debtor, and are not and will not be subject to any discount (except such cash
or trade discount as may be shown on any invoice, contract or other writing
delivered to the Lender). No contract right, account, general intangible or
chattel paper is, or will be represented by any note or other instrument, and
no contract right, account or general intangible is, or will be represented
by any conditional or installment sales obligation or other chattel paper,
except such instruments or chattel paper as have been immediately upon
receipt by the Borrower will be delivered to the Lender (duly endorsed or
assigned), such delivery, in the case of chattel paper, to include all
executed copies except those in the possession of the installment buyer and
any security for or guaranty of any of the Collateral shall be delivered to
the Lender immediately upon receipt thereof by the Borrower, with such
assignments and endorsements thereof as the Lender may request.
3.12 TITLE TO COLLATERAL. At the date hereof the Borrower is (and as to
Collateral that the Borrower may acquire after the date hereof, will be) the
lawful owner of the Collateral, and that the Collateral and each item thereof
is, will be and shall continue to be free of all restrictions, liens,
encumbrances or other rights, title or interests (other than the security
interest therein granted to the Lender hereby), credits, defenses, recoupments,
set-offs or counterclaims whatsoever; that the Borrower has and will have full
power and authority to grant to the Lender a security interest therein, and that
the Borrower has not transferred, assigned, sold, pledged, encumbered, subjected
to lien or granted any security interest in, and will not transfer, assign, sell
(except sales or other dispositions in the ordinary course of business in
respect to inventory as expressly permitted in this Agreement), pledge,
encumber, subject to lien or grant any security interest in any of the
Collateral (or any of the Borrower's right, title or interest therein), to any
person other than the Lender; that the Collateral is and will be valid and
genuine in all respects;
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that all accounts arise out of legally enforceable and existing contracts in
accordance with their tenor; and that upon the Borrower's acquisition of any
interest in contract rights, it shall in writing immediately notify the
Lender thereof, specifically identifying the same as contract rights, and,
except for such contract rights, no part of the Collateral (or the validity
or enforceability by the Lender thereof) is or shall be contingent upon the
fulfillment of any agreement or condition whatsoever and that the Collateral,
other than Inventory and equipment, shall represent unconditional and
undisputed bona fide indebtedness by the Debtor for sales or leases of
Inventory shipped and delivered or services rendered by the Borrower to
Debtor, and is not and will not be subject to any discount (except such cash
or trade discount as may be shown on any invoice, contract or other writing
delivered to the Lender); and that the Borrower will warrant and defend the
Lender's right to and interest in the Collateral against all claims and
demands of all persons whatsoever.
3.13 LOCATION OF COLLATERAL. Except for sale, processing, use, consumption
or other disposition in the ordinary course of business, the Borrower will
keep all Inventory and Equipment only at locations specified in this
Agreement; that the Borrower shall, during the term of this Agreement, keep
the Lender currently and accurately informed in writing of each location
where the Borrower's records relating to its accounts and contract rights,
respectively, are kept, and shall not remove such records or any of them to
another state without giving the Lender at least thirty (30) days prior
written notice thereof.
3.14 THIRD PARTIES. The Lender shall not be deemed to have assumed any
liability or responsibility to the Borrower or any third person for the
correctness, validity or genuineness of any instruments or documents that may
be released or endorsed to the Borrower by the Lender (which shall
automatically be deemed to be without recourse to the Lender in any event) or
for the existence, character, quantity, quality, condition, value or delivery
of any goods purporting to be represented by any such documents; and that the
Lender, by accepting such security interest in the Collateral, or by
releasing any Collateral to the Borrower, shall not be deemed to have assumed
any obligation or liability to any supplier or Debtor or to any other third
party, and the Borrower agrees to indemnify and defend the Lender and hold it
harmless in respect to any claim or proceeding arising out of any matter
referred to in this paragraph.
3.15 PAYMENT OF ACCOUNTS. Each account or other item of Collateral, other
than Inventory and Equipment, will be paid in full on or before the date
shown as its due date in the schedule of Collateral, in the copy of the
invoice(s) relating to the account or other Collateral or in contracts
relating thereto, that upon any suspension of business, assignment or trust
mortgage for the benefit of creditors, dissolution, petition in receivership
or under any chapter of the Bankruptcy Code as amended from time to time by
or against any Debtor, any Debtor becoming insolvent or unable to pay its
debts as they mature or any other act of the same or different nature
amounting to a business failure, the Borrower will forthwith notify the
Lender thereof.
3.16 NOTIFICATION OF DAMAGE. The Borrower will immediately notify the Lender of
any loss or damage to, or material diminution in or any occurrence that would
adversely affect the value of the Inventory, the Equipment of other Collateral.
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3.17 CHANGES. Since the date of the Financial Statements, there have been no
changes in the assets, liabilities, financial condition or business of the
Borrower, other than changes in the ordinary course of business, the effect
of which have, in the aggregate, been materially adverse.
3.18 TAXES. Borrower has filed all Federal, state and other tax returns
required to be filed (except for such returns for which current and valid
extensions have been filed), and all taxes, assessments and other
governmental charges due from the Borrower have been fully paid. Borrower
has established on its books reserves adequate for the payment of all
Federal, state and other tax liabilities (if any).
3.19 USE OF PROCEEDS. No portion of any Loan is to be used for the purpose
of purchasing or carrying any "margin security" or "margin stock" as such
terms are used in Regulations G and U of the Board of Governors of the
Federal Reserve System, 12 C.F.R. 207 and 221.
4. AFFIRMATIVE COVENANTS
4.1 PAYMENTS. Borrower will duly and punctually pay all interest and
principal becoming due the Lender and will duly and punctually perform all
things on its part to be done or performed under this Agreement.
4.2 FACILITY COLLATERAL MONITORING FEE. In addition to all amounts due and
payable respecting the Loan pursuant to the Note and the other Loan
Documents, Borrower hereby agrees to pay to Lender a "Facility/Collateral
Monitoring Fee" equal to $7,500 per month payable in advance, the first such
payment due on December ___, 1996 and each subsequent payment due on the
first business day of every calendar month commencing January 2, 1997 so long
as any amounts are outstanding respecting the Loan and the Note.
4.3 APPRAISAL OF REAL ESTATE. On or before January 1, 1997, the Lender
shall have received a satisfactory written appraisal by an appraiser
acceptable to Lender and Borrower for the Real Property, which appraisal
shall be paid for by Borrower and addressed to the Lender. Such appraisal
shall be acceptable to the Lender in its sole discretion and confirm that the
value of the Real Property must be at least $1,400,000 based upon an orderly
liquidation. In the event the value of the Real Property in such appraisal is
less than $1,400,000 on a quick sale basis, Borrower hereby agrees to (i)
provide additional collateral acceptable to Lender in Lender's sole
discretion to cover the difference between $1,400,000 and such appraised
value of the Real Property (the "Shortfall"); or (ii) to make an immediate
payment to Lender in the amount of the Shortfall to reduce the principal
balance of the Loan.
4.4 SUBORDINATION OF SECURITY INTEREST BY LENDER. Lender hereby agrees to
subordinate its security interest in the Collateral upon payment to Lender of
an amount equal to $1,500,000 (the "Collateral Prepayment") plus 60% of the
Exit Fee (as such term is defined in the Note) which would be due and payable
at the time the Collateral Prepayment is paid if all amounts outstanding
respecting the Note had been paid at such time. In the, event 60% of the
Exit Fee (the "Collateral Exit Fee Amount") is paid to Lender in accordance
with this paragraph the amount of the Exit Fee due at the time all amounts
outstanding respecting the Note are paid in full shall be reduced by the
Collateral Exit Fee Amount. The Lender shall subordinate its lien in the
Collateral only to the
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extent of amounts actually paid to Lender and upon execution and delivery of
a Subordination and Intercreditor Agreement between Lender and such parties
funding the repayment of amounts paid to Lender containing terms reasonably
acceptable to Lender.
4.5 SUBORDINATION OF MORTGAGE BY LENDER. Lender hereby agrees to
subordinate its Mortgage in the Real Property upon payment to Lender of an
amount equal to $1,000,000 (the "Real Estate Prepayment") plus 40% of the
Exit Fee (as such term is defined in the Note) which would be due and payable
at the time the Real Estate Prepayment is paid if all amounts outstanding
respecting the Note had been paid at such time. In the event 40% of the Exit
Fee (the "Real Estate Exit Fee Amount') is paid to Lender in accordance with
this paragraph the amount of the Exit Fee due at the time all amounts
outstanding respecting the Note are paid in full shall be reduced by the Real
Estate Exit Fee Amount. The Lender shall subordinate its Mortgage only to
the extent of amounts actually paid to Lender and upon execution and delivery
of a Subordination and Intercreditor Agreement between Lender and such
parties funding the repayment of amounts paid to Lender containing terms
reasonably acceptable to Lender.
4.6 BOOKS AND RECORDS; INSPECTION. Borrower will at all times keep proper
books of account in which full, true and correct entries will be made of its
transactions in accordance with generally accepted accounting principles,
consistently applied and which are, in the opinion of a Certified Public
Accountant acceptable to Lender, adequate to determine fairly the financial
condition and the results of operations of Borrower. Borrower will at all
reasonable times make its books and records available in its offices for
inspection and examination by the Lender and the Lender's representatives and
will permit inspection of the Collateral and all of its properties by the
Lender and the Lender's representatives. Borrower will from time to time
furnish the Lender with such information and statements as the Lender may
request in its sole discretion with respect to the Obligations or the
Lender's security interest in the Collateral. Borrower shall, during the
term or this Agreement, keep the Lender currently and accurately informed in
writing of each location where the Borrower's records relating to its
accounts and contract rights are kept, and shall not remove such records to
another state without giving the Lender at least thirty (30) days prior
written notice thereof.
4.7 FINANCIAL STATEMENTS. Borrower will furnish to Lender:
(a) as soon as available to Borrower, but in any event within 15 days
after the close of each month, a full and complete signed copy of financial
statements, which shall include a balance sheet of the Borrower, as at the
end of such month, and statement of profit and loss of the Borrower
reflecting the results of its operations during such month and shall be
prepared by the Borrower and certified by Borrower's chief financial
officer as to correctness in accordance with generally accepted accounting
principles, consistently applied, subject to year-end adjustments;
(b) as soon as available to Borrower, but in any event within 30 days
after the close of each quarterly period of its fiscal year, a full and
complete signed copy of financial statements, prepared by certified public
accountants acceptable to Lender, which shall include a balance sheet of
the Borrower, as at the end of such quarter, and statement of
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profit and loss of the Borrower reflecting the results of its operations
during such quarter, bearing the opinion of such certified public
accountants and prepared on a compiled basis in accordance with generally
accepted accounting principles, consistently applied, subject to year-end
adjustments;
(c) as soon as available to Borrower, but in any event within 90 days
after the close of each fiscal year, a full and complete signed copy of
financial statements, prepared by certified public accountants acceptable
to Lender, which shall include a balance sheet of the Borrower, as at the
end of such year, and statement of profit and loss of the Borrower
reflecting the results of its operations during such year, bearing the
opinion of such certified public accountants and prepared on an audited
basis in accordance with generally accepted accounting principles,
consistently applied together with any so-called management letter;
(d) on or before May 1 of each year or such other date approved by
the Lender, Borrower's filed federal and state tax returns for the prior
year;
(e) from time to time, such financial data and information about
Borrower as Lender may reasonably request; and
(f) any financial data and information about any guarantors of the
Obligations as Lender may reasonably request.
4.8 CONDUCT OF BUSINESS. The Borrower will maintain its corporate existence
in good standing and comply with all laws and regulations of the United
States and of any state or states thereof and of any political subdivision
thereof, and of any governmental authority which may be applicable to it or
to its business; provided that this covenant shall not apply to any tax,
assessment or charge which is being contested in good faith and with respect
to which reserves have been established and are being maintained.
4.9 NOTICE TO ACCOUNT DEBTORS. The Borrower agrees, at the request of the
Lender, to notify all or any of the Debtors in writing of the Lender's
security interest in the Collateral in whatever manner the Lender requests
and, if the Lender so requests, to permit the Lender to notify all or any of
the Debtors at the Borrower's expense.
4.10 TAXES. Borrower will promptly pay all real and personal property taxes,
assessments and charges and all franchise, income, unemployment, old age
benefits, withholding, sales and other taxes assessed against it or payable
by it before delinquent; provided that this covenant shall not apply to any
tax assessment or charge which is being contested in good faith and with
respect to which reserves have been established and are being maintained.
The Lender may, at its option, from time to time, discharge any taxes, liens
or encumbrances of any of the Collateral, and the Borrower will pay to the
Lender on demand or the Lender in its sole discretion may charge to the
Borrower all amounts so paid or incurred by it.
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4.11 MAINTENANCE. Borrower will keep and maintain the Collateral and its
other properties, if any, in good repair, working order and condition. The
Borrower will immediately notify the Lender of any loss or damage to or any
occurrence which would adversely affect the value of any Collateral. The
Lender may, at its option, from time to time, take any other action that the
Lender may deem proper to repair, maintain or preserve any of the Collateral,
and the Borrower will pay to the Lender on demand or the Lender in its sole
discretion may charge to the Borrower all amounts so paid or incurred by it.
4.12 INSURANCE. Borrower will maintain in force casualty insurance on all
Collateral and any property of the Borrower, if any, against risks
customarily insured against by companies engaged in businesses similar to
that of the Borrower containing such terms and written by such companies as
may be satisfactory to the Lender, such insurance to be payable to the Lender
as its interest may appear in the event of loss; no loss shall be adjusted
thereunder without the Lender's approval; and all such policies shall provide
that they may not be canceled without first giving at least ten (10) days'
written notice of cancellation to the Lender. In the event that the Borrower
fails to provide evidence of such insurance, the Lender may, at is option,
secure such insurance and charge the cost thereof to the Borrower. At the
option of the Lender, all insurance proceeds received from any loss or damage
to any of the Collateral shall be applied either to the replacement or repair
thereof or as a payment on account of the Obligations. From and after the
occurrence of an Event of Default, the Lender is authorized to cancel any
insurance maintained hereunder and apply any returned or unearned premiums,
all of which are hereby assigned to the Lender, as a payment on account of
the Obligations.
4.13 NOTIFICATION OF DEFAULT. Within five (5) days of becoming aware of the
existence of any condition or event which constitutes an Event of Default, or
any condition or event which would upon notice or lapse of time, or both,
constitute an Event of Default, Borrower shall give Lender written notice
thereof specifying the nature and duration thereof and the action being or
proposed to be taken with respect thereto.
4.14 NOTIFICATION OF MATERIAL LITIGATION. Borrower will promptly notify the
Lender in writing of any litigation or of any investigative proceedings of a
governmental agency or authority commenced or threatened against it which
would or might be materially adverse to the financial condition of Borrower.
4.15 PENSION PLANS. With respect to any pension or benefit plan maintained
by Borrower, or to which Borrower contributes (Plan"), the benefits under
which are guarantied, in whole or in part, by the Pension Benefit Guaranty
Corporation created by the Employee Retirement Income Security Act of 1974,
P. L. 93-406, or any governmental authority succeeding to any or all of the
functions of the Pension Benefit Guaranty Corporation ("Pension Benefit
Guaranty Corporation"), Borrower will (a) fund each Plan as required by the
provisions of Section 412 of the Internal Revenue Code of 1986, as amended;
(b) cause each Plan to pay all benefits when due; (c) furnish Lender (i)
promptly with a copy of any notice of each Plan's termination sent to the
Pension Benefit Guaranty Corporation and (ii) no later than the date of
submission to the Department of Labor or to the Internal Revenue Service, as
the case may be, a copy of any request for waiver from the funding standards
or extension of the amortization periods required
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by Section 412 of the Internal Revenue Code of 1954, as amended; and (d)
subscribe to any contingent liability insurance provided by the Pension
Benefit Guaranty Corporation to protect against employer liability upon
termination of a guarantied pension plan, if available to Borrower.
4.16 ENVIRONMENTAL. As of the date hereof neither the Borrower nor any of
Borrower's agents, employees or independent contractors (1) have caused or
are aware of a release or threat of release of Materials (as defined herein)
on any of the premises or personal property owned or controlled by Borrower,
or any abutting property, which could give rise to liability under any
Superfund and Hazardous Waste Laws (as defined herein) or any other federal,
state or local law, rule or regulation; (2) have arranged for the transport
of or transported any Materials in a manner as to violate, or result in
potential liabilities under, any Superfund and Hazardous Waste Laws; (3) have
received any notice, order or demand from the Environmental Protection Agency
or the Ohio Department of Environmental Protection under any Superfund and
Hazardous Waste Laws; (4) have incurred any liability under any Superfund and
Hazardous Waste Laws in connection with the mismanagement, improper disposal
or release of Materials; (5) are aware of any inspection or investigation of
any of the premises or personal property owned or controlled by Borrower or
abutting property by any federal, state or local agency for possible
violations of the Superfund and Hazardous Waste Laws.
To the best of Borrower's knowledge, no prior owner or tenant of any
premises or property presently controlled or owned by Borrower committed or
omitted any act which caused the release of Materials on such premises or
property which could give rise to a lien thereon by any federal, state or
local government. No notice or statement of claim or lien affecting any
property or premises owned or controlled by Borrower has been recorded or
filed in any public records by any federal, stale or local government for
costs, penalties, fines or other charges as to such property.
Borrower agrees to indemnify and hold Lender harmless from all
liability, loss, cost, damage and expense, including attorney fees and costs
of litigation, arising from any and all of its violations of the Superfund
and Hazardous Waste Laws including those arising from any lien on any
premises or property owned or controlled by Borrower by any federal, state
and local government arising from the presence of Materials. Borrower
further agrees to reimburse Lender upon demand for any costs incurred by
Lender in connection with the foregoing. Borrower agrees its obligations
hereunder shall be continuous and shall survive the repayment of all debts to
Lender including repayment of all Obligations.
The term "Materials" means any "oil," "hazardous material," "hazardous
wastes" or "hazardous substances" as defined under the Comprehensive
Environmental Response, Compensation, and Liability Act, 42 U.S.C. Section
9601 ET SEQ., as amended, the Resource Conservation and Recovery Act of 1976,
42 U.S.C. Section 6901 ET SEQ., as amended, and Ohio hazardous waste laws and
regulations, and the foregoing are collectively the "Superfund and Hazardous
Waste Laws."
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5. NEGATIVE COVENANTS
5.1 NET OPERATING INCOME. Borrower hereby agrees to pay to Lender, in
addition to all other amounts due respecting the Note, $100,000 of the
outstanding principal balance of the Note within 20 days of the start of any
calendar month following any period of two consecutive months in which
Borrower fails to maintain monthly net operating income before income taxes,
as defined in accordance with generally accepted accounting principles,
consistently applied. equal to at least the amount shown on Schedule 5.1 for
the calendar months indicated on Schedule 5.1.
5.2 LIMITATIONS ON INDEBTEDNESS. Borrower will not issue any evidence of
indebtedness or create, assume, guarantee, become contingently liable for, or
suffer to exist indebtedness in addition to indebtedness to the Lender,
except indebtedness or liabilities of Borrower, other than for money
borrowed, incurred or arising in the ordinary course of business.
5.3 SALE OF INTEREST. There shall not be any sale or transfer of ownership
of any interest in the Borrower without the Bank's prior written consent.
5.4 LOANS OR ADVANCES. Borrower will not make any loans or advances to any
individual, firm or corporation, including without limitation its officers
and employees; provided, however, that Borrower may make advances to its
employees, including its officers, with respect to expenses incurred or to be
incurred by such employees which expenses are reimbursable by Borrower; and
provided further, however, that Borrower may extend credit in the ordinary
course of business in accordance with customary trade practices.
5.5 DIVIDENDS AND DISTRIBUTIONS. Borrower will not, without prior written
permission of the Lender, pay any dividends on or make any distribution on
account of any class of Borrower's capital stock in cash or in property
(other than additional shares of such stock), or redeem, purchase or
otherwise acquire, directly or indirectly, any of such stock, except if
Borrower is a Subchapter S corporation, under the regulations of the Internal
Revenue Service of the United States, in which event, so long as Borrower is
not in default hereunder, Borrower may distribute to the stockholders of
Borrower such amounts as are necessary to pay the tax liability of such
stockholders due as a result of such stockholders interest in the Borrower.
5.6 INVESTMENTS. Without the prior written consent of Lender, which shall
not be unreasonably withheld, the Borrower will not (i) make investments in,
or advances to, any individual, partnership, corporation, limited liability
company, trust or other organization or person; or (ii) purchase or otherwise
invest in or hold securities, nonoperating real estate or other nonoperating
assets or purchase all or substantially all the assets of any entity.
5.7 MERGER. Borrower will not merge or consolidate or be merged or
consolidated with or into any other corporation.
SALE OF ASSETS. Borrower will not without Lender's prior written consent
sell, lease or otherwise dispose of any of its assets, except in the ordinary
and usual course of business and
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except for the purpose of replacing machinery, equipment or other personal
property which, as a consequence of wear, duplication or obsolescence, is no
longer used or necessary in the Borrower's business, provided that fair
consideration is received therefor; provided, however, the Lender shall not
unreasonably withhold consent in the event Borrower proposes to transfer any
assets to a corporation (a "Subsidiary") for which one hundred percent of the
issued and outstanding capital stock is owned by Borrower, provided such
Subsidiary executes and delivers such guarantees, security agreements and
other agreements reasonably requested by Lender to perfect and preserve
Lender's rights under this Agreement and the other Loan Documents.
5.9 RESTRICTION ON LIENS. Borrower will not grant any security interest in,
or mortgage of, any of its properties or assets including the Collateral.
5.10 OTHER BUSINESS. Borrower will not engage in any business other than the
business in which it is currently engaged or a business reasonably allied
thereto.
6. DEFAULT
6.1 DEFAULT. "Event of Default" shall mean the occurrence of one or more of
any of the following events:
(a) 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 continuing for 5
business days with respect to any monetary obligation or continuing for 5
business days after the giving of notice by the Lender with respect to all
other obligations.
(b) Failure of the Borrower to maintain aggregate collateral security
value satisfactory to the Lender continuing for 5 business days after the
giving of notice by the Lender.
(c) Default of any material liability, obligation or undertaking of
the Borrower to any other party continuing for 5 business days after the
giving of notice by the Lender.
(d) If any statement, representation or warranty heretofore, now or
hereafter made in connection with this Agreement or in any supporting
financial statement of the Borrower shall be determined by Lender to have
been false in any material respect when made continuing for 5 business days
after the giving of notice by the Lender.
(e) The liquidation, termination or dissolution of, or the merger
consolidation of the Borrower, into another entity or the Borrower ceasing
to carry on actively its present business or the appointment of a receiver
for the Borrower.
(f) The liquidation, termination or dissolution of any guarantor of
the Obligations or if a corporation, the merger or consolidation of any
such guarantor into
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another entity, or any guarantor of the Obligations ceasing to carry on
actively its present business, or the appointment of a receiver for any
guarantor of the Obligations or the death of any guarantor of the
Obligations or any partner or trustee of any guarantor of the Obligations.
(g) The institution by or against the Borrower or guarantor of the
Obligations of any proceedings under the Bankruptcy Code 11 U.S.C. Section
101 ET SEQ. or any other law in which the Borrower any guarantor of the
Obligations is alleged to be insolvent or unable to pay their respective
debts as they mature, or the making by the Borrower or any guarantor of the
Obligations of an assignment for the benefit of creditors or the granting
of a trust mortgage for the benefit of creditors.
(h) The service upon the Lender hereof of a writ in which the Lender
is named as trustee of the Borrower or of any guarantor of the Obligations.
(i) A judgment or judgments for the payment of money shall be
rendered against the Borrower and any such judgment shall remain
unsatisfied and in effect for any period of thirty (30) consecutive days
without a stay of execution.
(j) Any levy, seizure, attachment, execution or similar process shall
be issued or levied on any of the property of the Borrower.
(k) The termination of any guaranty of the Obligations.
(l) The occurrence of such a change in the condition or affairs
(financial or otherwise) of the Borrower or any guarantor or other surety
for any of the obligations, or the occurrence of any event or circumstance
such that the Lender, in its sole discretion, deems that it is insecure or
that the prospects for timely or full payment or performance of any of the
Obligations have been or may be impaired.
6.2 DEFAULT. If an Event of Default shall occur, at the election of the
Lender, all Obligations shall become immediately due and payable without
notice or demand, except with respect to Obligations payable on DEMAND, which
shall be due and payable on DEMAND, whether or not an Event of Default has
occurred.
The Lender is hereby authorized, at its election, after an Event of Default
or after Demand, without any further demand or notice except to such extent as
notice may be required by applicable law, to take possession and/or sell or
otherwise dispose of all or any of the Collateral at public or private sale; and
the Lender may also exercise any and all other rights and remedies of a secured
party under the Code or which are otherwise accorded to it by applicable law,
all as the Lender may determine. If notice of a sale or other action by the
Lender is required by applicable law, unless the Collateral is perishable or
threatens to decline speedily in value or is of a type customarily sold on a
recognized market, the Borrower agrees that five (5) days' written notice to the
Borrower, or the shortest period of written notice permitted by such law,
whichever is larger, shall be sufficient notice; and that to the extent
permitted by law, the Lender, its officers, attorneys and agents may bid and
become purchasers at any such sale, if public, and may purchase
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at any private sale any of the Collateral that is or a type customarily sold
on a recognized market or which is the subject of widely distributed standard
price quotations. Any sale (public or private) shall be free from any right
of redemption, which the Borrower hereby waives and releases. No purchaser
at any sale (public or private) shall be responsible for the application of
the purchase money. Any balance of the net proceeds of sale remaining after
paying all Obligations of the Borrower to the Lender shall be returned to the
Borrower or to such other party as may be legally entitled thereto; and if
there is a deficiency, the Borrower shall be responsible for the same, with
interest. Upon demand by the Lender, the Borrower shall assemble the
Collateral and make it available to the Lender at a place designated by the
Lender which is reasonably convenient to the Lender and the Borrower. The
Borrower hereby acknowledges that the Lender has extended credit and other
financial accommodations to the Borrower upon reliance of the Borrower's
granting the Lender the rights and remedies contained in this Agreement
including without limitation, the right to take immediate possession of the
Collateral upon the occurrence of an Event of Default or after DEMAND with
respect to Obligations payable on DEMAND and the Borrower hereby acknowledges
that the Lender is entitled to equitable and injunctive relief to reinforce
any of its rights and remedies hereunder or under the Code and the Borrower
hereby waives any defense to such equitable or injunctive relief based upon
any allegation of the absence of irreparable harm to the Lender.
6.3 POWER OF ATTORNEY. The Borrower hereby irrevocably constitutes and
appoints the Lender as the Borrower's true and lawful attorney, with full
power of substitution, at the sole cost and expense of the Borrower but for
the sole benefit of the Lender, upon the occurrence of an Event of Default or
after DEMAND with respect to Obligations payable on DEMAND, to convert the
Collateral into cash, including, without limitation, completing the
manufacture or processing of work in process, and the sale (either public or
private) of all or any portion or portions of the Inventory and other
Collateral; to enforce collection of the Collateral, either in its own name
or in the name of the Borrower, including, without limitation, executing
releases, compromising or settling with any Debtors and prosecuting,
defending, compromising or releasing any action relating to the Collateral;
to receive, open and dispose of all mail addressed to the Borrower and to
take therefrom any remittances or proceeds of Collateral in which the Lender
has a security interest; to notify Post Office authorities to change the
address for delivery of mail addressed to the Borrower to such address as the
Lender shall designate to endorse the name of the Borrower in favor of the
Lender upon any and all checks, drafts, money orders, notes, acceptances or
other instruments of the same or different nature; to sign and endorse the
name of the Borrower on and to receive as secured party any of the
Collateral, any invoices schedules of Collateral, freight or express
receipts, or bills of lading, storage receipts, warehouse receipts, or other
documents of title of the same or different nature relating to the
Collateral; to sign the name of the Borrower on any notice of the Debtors or
on verification of the Collateral; and to sign and file or record on behalf
of the Borrower any financing or other statement in order to perfect or
protect the Lender's security interest. The Lender shall not be obliged to
do any of the acts or exercise any of the powers hereinabove authorized, but
if the Lender elects to do any such act or exercise any such power, it shall
not be accountable for more than it actually receives as a result of such
exercise of power, and it shall not be responsible to the Borrower except for
willful misconduct in bad faith. All powers conferred upon the Lender by this
Agreement, being coupled with an interest, shall be irrevocable so long as
any Obligation of the Borrower to the Lender shall remain unpaid.
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6.4 NONEXCLUSIVE REMEDIES. All of the Lender's rights and remedies not only
under the provisions of this Agreement but also under any other agreement or
transaction shall be cumulative and not alternative or exclusive, and may be
exercised by the Lender at such time or times and in such order of preference
as the Lender in its sole discretion may determine.
6.5 REASSIGNMENT TO BORROWER. Whenever the Lender deems it desirable that
any legal action he instituted with respect to any Collateral or that any
other action be taken in any attempt to effectuate collection of any
Collateral, the Lender may reassign the item in question to the Borrower (and
if the Lender shall execute any such reassignment, it shall automatically be
deemed to be without recourse to the Lender in any event) and require the
Borrower to proceed with such legal or other action at the Borrower's sole
liability, cost and expense, in which event all amounts collected by the
Borrower on such item shall nevertheless be subject to the Lender's security
interest.
7. MISCELLANEOUS
7.1 WAIVERS. The Borrower waives notice of nonpayment, demand, presentment,
protest or notice of protest of the Collateral, and all other notices,
consents to any renewals or extensions of time of payment thereof, and
generally waives any and all suretyship defenses and defenses in the nature
thereof.
7.2 SEVERABILITY. If any provision of this Agreement or portion of such
provision or the application thereof to any person or circumstance shall to
any extent be held invalid or unenforceable, the remainder of this Agreement
(or the remainder of such provision) and the application thereof to other
persons or circumstances shall not be affected thereby.
7.3 SET-OFF. Any deposits, balances or other sums credited by or due from
the Lender or any of its affiliates to Borrower and any security or other
property of the Borrower in the possession of the Lender, whether for
safekeeping or otherwise, may, at any time whether or not an Event of Default
has occurred or demand has been made, without notice to 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 in such manner as the Lender in its sole discretion may determine.
7.4 INDEMNIFICATION. The Borrower shall indemnify, defend and hold the
Lender harmless of and from any claim brought or threatened against the
Lender by Borrower, any guarantor or endorser of the Obligations, or 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 guarantor or endorser of the Obligations (each of which may
be defended, compromised, settled or pursued by the Lender with counsel of
the Lender's election, but at the expense of the Borrower), except for any
claim arising out of the gross negligence or willful misconduct of the
Lender. The within indemnification shall survive payment of the Obligations,
and/or any termination, release or discharge executed by the Lender in favor
of the Borrower.
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7.5 COSTS AND EXPENSES. The Borrower shall pay to the Lender any and all
costs and expenses (including, without limitation, reasonable attorneys'
fees, court costs, litigation and other expenses) incurred or paid by the
Lender in establishing, maintaining, protecting or enforcing any of the
Lender's rights or the Obligations, including, without limitation, any and
all such costs and expenses incurred or paid by the Lender in defending the
Lender's security interest in, title or right to the Collateral or in
collecting or attempting to collect or enforcing or attempting to enforce
payment of the Collateral.
7.6 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.
7.7 BINDING EFFECT OF AGREEMENT. This Agreement shall be binding upon and
inure to the benefit of the respective heirs, executors, administrators,
legal representatives. successors and assigns of the parties hereto, and
shall remain in full force and effect (and the Lender shall be entitled to
rely thereon) until terminated as to future transactions by written notice
from either Party to the other party of the termination hereof; provided that
any such termination shall not release or affect any Collateral in which the
Lender already has a security interest or any Obligations incurred or rights
accrued hereunder prior to the effective date of such notice (as hereinafter
defined) of such termination. Notwithstanding any such termination, the
Lender shall have a security interest in all Collateral to secure the payment
and performance of Obligations arising after such termination as a result of
commitments of undertakings made or entered into by the Lender prior to such
termination. The Lender may transfer and assign this Agreement and deliver
the Collateral to the assignee, who shall thereupon have all of the rights of
the Lender; and the Lender shall then be relieved and discharged of any
responsibility or liability with respect to this Agreement and the Collateral.
7.8 FURTHER ASSURANCES. 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 or to vest more fully in or
assure to the Lender the security interest in the Collateral granted to the
Lender by this Agreement or to comply with applicable statute or law and to
facilitate the collection of the Collateral.
7.9 AMENDMENTS AND WAIVERS. This Agreement may be amended and Borrower may
take any action herein prohibited, or omit to perform any act herein required
to be performed by it, if 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.
7.10 TERMS OF AGREEMENT. This Agreement shall continue in force and effect so
long as any Obligations or obligation of Borrower to Lender shall be outstanding
and is supplementary to each and every other agreement between Borrower and
Lender and shall not be so construed as to
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limit or otherwise derogate from any of the rights or remedies of Lender or
any of the liabilities, obligations or undertakings of Borrower under any
such agreement, nor shall any contemporaneous or subsequent agreement between
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 Borrower hereunder, unless such other agreement specifically
refers to this Agreement and expressly so provides.
7.11 NOTICES. Any notices under or pursuant to this Agreement shall be
deemed duly received and effective if delivered in hand to any officer of
agent of the Borrower or Lender, or if mailed by registered or certified
mail, return receipt requested, addressed to the Borrower or Lender at
address set forth in this Agreement or as any Party may from time to time
designate by written notice to the other party.
7.12 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.
7.13 REPRODUCTIONS. This Agreement and all documents which have been or may
be hereinafter furnished by 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).
7.14 VENUE. 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. 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.
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 Borrower and (ii) by serving the same upon such agent, and
agrees that such service shall in every respect be deemed effective service
upon Borrower.
7.15 JURY WAIVER. THE BORROWER AND LENDER EACH HEREBY KNOWINGLY, VOLUNTARILY
AND INTENTIONALLY, AND AFTER AN OPPORTUNITY T0 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. THE BORROWER CERTIFIES THAT NEITHER
THE LENDER NOR
19
<PAGE>
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.
Witness Borrower
Fix-Corp International, Inc.
/s/ Sherry Durst By: /s/ Mark Fixler
- ---------------------------- ---------------------------
Mark Fixler, President
Accepted at Boston, Massachusetts: Gordon Brothers Capital Corporation
By:/s/ Warren H. Feder
-----------------------
Name: Warren H. Feder
Title: President
20
<PAGE>
SCHEDULE 5.1
<TABLE>
<CAPTION>
<S> <C>
February 1997 $ 20,907
March 1997 84,271
April 1997 79,734
May 1997 79,734
June 1997 79,734
July 1997 79,734
August l997 123,122
September 1997 250,517
October 1997 394,198
November 1997 394,198
December 1997 394,198
January 1998 394,198
</TABLE>
21
<PAGE>
Exhibit 25
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>
Exhibit 26
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,
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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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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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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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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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<PAGE>
(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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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
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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
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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
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<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.
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<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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<PAGE>
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 26.2
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
2
<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:
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<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.
6
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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>
Exhibit 28
CONVERTIBLE DEBENTURE PURCHASE AGREEMENT, dated as of January 22,
1998 (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, subject to the terms and conditions set forth in this
Agreement, the Company desires to issue and sell to the Purchasers and the
Purchasers severally and not jointly desire to purchase an aggregate
principal amount of $2,500,000 of the Company's 4% Convertible Debentures,
due January 22, 2001 (the "DEBENTURES"), which are convertible into shares of
the Company's common stock, par value $.001 per share (the "COMMON STOCK").
IN CONSIDERATION of the mutual covenants and agreements set forth
herein and for good and valuable consideration, the receipt and adequacy of
which are hereby acknowledged, the parties agree as follows:
ARTICLE I
PURCHASE AND SALE OF DEBENTURES; CLOSING
1.1 THE CLOSING.
(a) THE CLOSING. (i) Subject to the terms and conditions
set forth in this Agreement, the Company shall issue and sell to the
Purchasers and the Purchasers shall purchase the Debentures for an aggregate
purchase price of $2,500,000. 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) Prior to the Closing the parties shall deliver to
the Escrow Agent such items as are required to be delivered by them in
accordance with and subject to the terms and conditions of the Escrow
Agreement, dated as of the date hereof, by and among the Company, the
Purchasers and the Escrow Agent (the "ESCROW AGREEMENT"), including, the
following: (i) the Company shall deliver or cause to be delivered (A)
Debentures in aggregate principal amount equal to $500,000, registered in the
name of DSF, (B) Debentures in aggregate principal amount equal to
$2,000,000, registered in the name of JNC, (C) the Warrants (as defined in
Section 3.16), and (D) the legal opinions of Bricker & Eckler LLP
substantially in the form of EXHIBIT C ("LEGAL OPINION") addressed to each
Purchaser; (ii) DSF shall deliver or cause to be delivered $500,000 in United
States dollars; (iii) JNC shall deliver or cause to be delivered $2,000,000
in United States
<PAGE>
dollars; 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 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 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 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
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<PAGE>
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
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<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
governmental authority or other Person in connection with the execution,
delivery and performance by the Company of the Transaction Documents other
than (i) the filing of a registration statement covering the resale of the
Underlying Shares by the 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
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<PAGE>
Company or any of its Subsidiaries or any of their respective properties
before or by any court, governmental or administrative agency or regulatory
authority (federal, state, county, local or foreign) which (i) adversely
affects or challenges the legality, validity or enforceability of any of the
Transaction Documents or the Securities or (ii) could, individually or in the
aggregate, have or result in a Material Adverse Effect.
(h) NO DEFAULT OR VIOLATION. Neither the Company nor any
Subsidiary (i) is in default under or in violation of (or has received notice
of a claim that it is in default under or that it is in violation of) any
indenture, promissory note, loan or credit agreement or any other agreement
or instrument to which it is a party or by which it or any of its properties
is bound, (ii) is in violation of any order of any court, arbitrator or
governmental body, or (iii) is in violation of any statute, rule or
regulation of any governmental authority, except as could not individually or
in the aggregate, have or result in, individually or in the aggregate, a
Material Adverse Effect.
(i) PRIVATE OFFERING. Subject in part to the truth and
accuracy of the 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
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<PAGE>
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 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
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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 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.
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<PAGE>
(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 or warranties with respect to the transactions
contemplated hereby other than those specifically set forth in this Section
2.2.
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ARTICLE III
OTHER AGREEMENTS OF THE PARTIES
3.1 TRANSFER RESTRICTIONS. (a) Securities may only be disposed
of pursuant to an effective registration statement under the Securities Act,
to the Company or pursuant to an available exemption from or in a transaction
not subject to the registration requirements thereof. In connection with any
transfer of any Securities other than pursuant to an effective registration
statement or to the Company, the Company may require the transferor thereof
to provide to the Company an opinion of counsel selected by the transferor,
the form and substance of which opinion shall be reasonably satisfactory to
the Company, to the effect that such transfer does not require registration
under the Securities Act. Notwithstanding the foregoing, the Company hereby
consents to and agrees to register on the books and records of the Company or
on the register of any transfer agent for the Securities (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 JANUARY 22,
1998, 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.
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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, 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
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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
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
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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.
3.9 LISTING OF UNDERLYING SHARES. If the Common Stock hereafter
is listed for trading on the Nasdaq National Market, Nasdaq SmallCap Market
(or on the American Stock Exchange or New York Stock Exchange, or any other
national securities market or exchange), then the Company shall (1) take all
necessary steps to list the Underlying Shares thereon, including the
preparation of any required additional listing application therefor covering
at least the sum of (i) two times the number of Underlying Shares as would be
issuable upon a conversion in full of the then outstanding principal amount
of Debentures (plus all Underlying Shares issuable as payment of interest
thereon, assuming all such interest were paid in shares of Common Stock) and
upon exercise in full of the then unexercised portion of the Warrants and (2)
provide to the Purchasers evidence of such listing, and the Company shall
thereafter maintain the listing of its Common Stock on such exchange or
market as long as Underlying Shares are issuable and/or outstanding. The
Company will use its commercially reasonable efforts to list the Common Stock
for trading on either the Nasdaq SmallCap Market or Nasdaq National Market as
soon as possible after the Closing Date.
3.10 CONVERSION PROCEDURES. EXHIBIT E sets forth the procedures
with respect to the conversion of the Debentures, including the form of legal
opinion, if necessary, that shall be rendered to the Company's transfer agent
and such other information and instructions as may be reasonably necessary to
enable the 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
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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 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.
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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 Closing Date, except (i) the granting of
options or warrants to employees, officers and directors, and the issuance of
shares upon exercise of options granted, under any stock option plan
heretofore or hereinafter duly adopted by the Company, (ii) shares issued
upon exercise of any currently outstanding warrants and upon conversion of
any currently outstanding convertible preferred stock in each case disclosed
in SCHEDULE 2.1(c), and (iii) shares of Common Stock issued upon conversion
of the Debentures, as payment of interest thereon, or upon exercise of the
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
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<PAGE>
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. 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 158,730 shares of Common Stock at an
exercise price per share equal to $3.34 and (b) to DSF, a Common Stock
purchase warrant, in the form of EXHIBIT D and registered in the name of DSF
(the "DSF WARRANT," and, collectively with the JNC Warrant, the "WARRANTS"),
pursuant to which DSF 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 39,683 shares of Common Stock at an exercise price per share equal to
$3.34.
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 SB-2. The Company has filed with the Commission on
January 20, 1998 a registration statement on Form SB-2 (the "FORM SB-2")
pursuant to the Exchange Act. The Company shall use its best efforts to
amend the Form SB-2 in order to include the resale of the Underlying
Securities thereunder as soon as possible but in no event later than the 20th
day after the Closing Date and shall take all commercially reasonable steps
necessary to cause such Form SB-2 to be declared effective as soon as
possible thereafter but in no event later than the 50th day after the Closing
Date, and shall provide to the Purchasers evidence of such filing and
effectiveness.
ARTICLE IV
MISCELLANEOUS
4.1 FEES AND EXPENSES. The Company shall pay at the Closing
$7,500 to the Escrow Agent for the legal fees and disbursements incurred by
the Purchasers in connection with the preparation and negotiation of the
Transaction Documents. Other than the amount
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contemplated by the immediately preceding sentence and except as set forth in
the Registration Rights Agreement, each party shall pay the fees and expenses
of its advisers, counsel, accountants and other experts, if any, and all
other expenses incurred by such party incident to the negotiation,
preparation, execution, delivery and performance of this Agreement. The
Company shall pay all stamp and other taxes and duties levied in connection
with the issuance of the Debentures pursuant hereto. The 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.
3637 South Green Road, Suite 201
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
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Bermuda
Facsimile No.: (441) 295-2305
Attn: Director
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 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
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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 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.
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Accordingly, each of the parties hereto agrees that the other parties shall
be entitled to an injunction or injunctions to prevent breaches of the
provisions of this Agreement and to enforce specifically this Agreement and
the terms and provisions of this Agreement in any action instituted in any
court of the United States of America or any state thereof having
jurisdiction over the parties to this Agreement and the matter, in addition
to any other remedy to which they may be entitled, at law or in equity.
4.14 LIQUIDATED DAMAGES. Each of the parties to this Agreement
acknowledges and agrees that the any and all liquidated damage provisions set
forth in the Transaction Documents express a reasonable pre-estimate of the
damages which would be incurred.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the parties hereto have caused this
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
---------------------------------
Name: Mark Fixler
Title: President/CEO
JNC OPPORTUNITY FUND LTD.
By: /s/ Thomas H. Davis
---------------------------------
Name: Thomas H. Davis
Title: Director
DIVERSIFIED STRATEGIES FUND, L.P.
By: Encore Capital Management, L.L.C.
By: /s/ Neil T. Chau
------------------------------
Name: Neil T. Chau
Title: Managing Member
<PAGE>
Exhibit 29
NEITHER THIS DEBENTURE NOR THE SECURITIES INTO WHICH THIS DEBENTURE
IS CONVERTIBLE 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.
THIS DEBENTURE IS SUBJECT TO CERTAIN RESTRICTIONS ON CONVERSION SET
FORTH IN SECTION 3.8 OF A CONVERTIBLE DEBENTURE PURCHASE AGREEMENT, DATED AS
OF JANUARY 22, 1998, 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.
THIS DEBENTURE IS SUBJECT TO CERTAIN RESTRICTIONS AS SET FORTH IN A
SUBORDINATION AGREEMENT, DATED AS OF JANUARY 22, 1998. A COPY OF THAT
AGREEMENT IS ON FILE AT THE PRINCIPAL OFFICE OF THE COMPANY.
No. A-11 U.S. $2,000,000
FIX-CORP INTERNATIONAL, INC.
4% CONVERTIBLE DEBENTURE DUE JANUARY 22, 2001
THIS DEBENTURE is one of a series of duly authorized issued
debentures of Fix-Corp International, Inc., a Delaware corporation having a
principal place of business at 3637 South Green Road, Suite 201, Beachwood,
OH 44122 (the ?COMPANY?), designated as its 4% Convertible Debentures, due
January 22, 2001 (the "DEBENTURES"), in an aggregate principal amount of
$2,000,000.
FOR VALUE RECEIVED, the Company promises to pay to JNC Opportunity
Fund Ltd., or registered assigns (the ?HOLDER?), the principal sum of Two
Million Dollars ($2,000,000), on or prior to January 22, 2001 or such earlier
date as the Debentures are required to be repaid as provided hereunder (the
?MATURITY DATE?) and to pay interest to the Holder on the principal sum at
the rate of 4% per annum, payable quarterly in arrears on March 31, June 30,
September 30 and December 31 of each year, commencing March 31, 1998, and on
each Conversion Date (as defined in Section 4(a)(i)). Interest shall accrue
daily commencing on the Original Issue Date (as defined in Section 6) until
payment in full of the principal sum, together with all accrued and unpaid
interest and other amounts which may become due hereunder, has been made.
Interest shall be calculated
<PAGE>
on the basis of a 360-day year and for the actual number of days elapsed.
Interest hereunder will be paid to the Person (as defined in Section 6) in
whose name this Debenture is registered on the records of the Company
regarding registration and transfers of the Debentures (the ?DEBENTURE
REGISTER?). All overdue, accrued and unpaid interest and other amounts due
hereunder shall bear interest at the rate of 18% per annum and accrue daily
from the date such interest is due hereunder through and including the date
of payment. The principal of, and interest on, this Debenture are payable in
such coin or currency of the United States of America as at the time of
payment is legal tender for payment of public and private debts, at the
address of the Holder last appearing on the Debenture Register, except that
interest due on the principal amount (but not overdue interest) may, at the
Company's option, be paid in shares of Common Stock (as defined in Section 6)
calculated based upon the Conversion Price (as defined below) at the time
such interest becomes due. All amounts due hereunder other than interest
shall be paid in cash. Notwithstanding anything to the contrary contained
herein, the Company may not issue shares of the Common Stock in payment of
interest on the principal amount if: (i) the number of shares of Common Stock
at the time authorized, unissued and unreserved for all purposes, or held as
treasury stock, is insufficient to pay interest hereunder in shares of Common
Stock; (ii) such shares are not either registered for resale pursuant to an
Underlying Securities Registration Statement (as defined in Section 6) or
freely transferable without volume restrictions pursuant to Rule 144(k)
promulgated under the Securities Act of 1933, as amended (the "SECURITIES
ACT"), as determined by counsel to the Company pursuant to a written opinion
letter, addressed to and in form and substance acceptable to the Company's
transfer agent or other person or entity performing similar functions
thereto; (iii) such shares are not listed on the OTC Bulletin Board (or the
American Stock Exchange, Nasdaq National Market, Nasdaq SmallCap Market or
The New York Stock Exchange) and any other exchange, market and trading
facility on which the Common Stock is then listed for trading; or (iv) the
issuance of such shares would result in the recipient thereof beneficially
owning more than 4.999% of the issued and outstanding shares of Common Stock
as determined in accordance with Rule 13d-3 under the Securities Exchange Act
of 1934, as amended. Payment of interest on the principal amount in shares
of Common Stock is further subject to the provisions of Section 4(a)(ii).
This Debenture is subject to the following additional provisions:
SECTION 1. This Debenture is exchangeable for an equal
aggregate principal amount of Debentures of different authorized
denominations, as requested by the Holder surrendering the same but shall not
be issuable in denominations of less than integral multiplies of Fifty
Thousand Dollars ($50,000) unless such amount represents the full principal
balance of Debentures outstanding to such Holder. No service charge will be
made for such registration of transfer or exchange.
SECTION 2. This Debenture has been issued subject to certain
investment representations of the original Holder set forth in the Purchase
Agreement and may be transferred or exchanged only in compliance with the
Purchase Agreement. Prior to due presentment to the Company for transfer of
this Debenture, the Company and any agent of the Company may treat the person
in whose name this Debenture is duly registered on the Debenture Register as
the owner hereof for the purpose of receiving payment as herein provided and
for all other purposes, whether or not this Debenture is overdue, and neither
the Company nor any such agent shall be affected by notice to the contrary.
<PAGE>
SECTION 3. EVENTS OF DEFAULT.
(a) "EVENT OF DEFAULT", wherever used herein, means any one of
the following events (whatever the reason and whether it shall be voluntary or
involuntary or effected by operation of law or pursuant to any judgment,
decree or order of any court, or any order, rule or regulation of any
administrative or governmental body):
(i) any default in the payment of the principal of, interest
on or liquidated damages in respect of, this Debenture, free of any
claim of subordination, as and when the same shall become due and
payable (whether on the applicable quarterly interest payment date,
the Conversion Date or the Maturity Date or by acceleration or
otherwise);
(ii) the Company shall fail to observe or perform any other
covenant, agreement or warranty contained in, or otherwise commit
any breach of, this Debenture, the Purchase Agreement or the
Registration Rights Agreement, and such failure or breach shall not
have been remedied within 10 days after the date on which written
notice of such failure or breach shall have been given;
(iii) the Company or any of its subsidiaries shall commence, or
there shall be commenced against the Company or any such subsidiary
a case under any applicable bankruptcy or insolvency laws as now or
hereafter in effect or any successor thereto, or the Company
commences any other proceeding under any reorganization,
arrangement, adjustment of debt, relief of debtors, dissolution,
insolvency or liquidation or similar law of any jurisdiction
whether now or hereafter in effect relating to the Company or any
subsidiary thereof or there is commenced against the Company or any
subsidiary thereof any such bankruptcy, insolvency or other
proceeding which remains undismissed for a period of 60 days; or
the Company or any subsidiary thereof is adjudicated insolvent or
bankrupt; or any order of relief or other order approving any such
case or proceeding is entered; or the Company or any subsidiary
thereof suffers any appointment of any custodian or the like for it
or any substantial part of its property which continues
undischarged or unstayed for a period of 60 days; or the Company or
any subsidiary thereof makes a general assignment for the benefit
of creditors; or the Company shall fail to pay, or shall state that
it is unable to pay, or shall be unable to pay, its debts generally
as they become due; or the Company or any subsidiary thereof shall
call a meeting of its creditors with a view to arranging a
composition or adjustment of its debts; or the Company or any
subsidiary thereof shall by any act or failure to act indicate its
consent to, approval of or acquiescence in any of the foregoing; or
any corporate or other action is taken by the Company or any
subsidiary thereof for the purpose of effecting any of the
foregoing;
(iv) the Company shall default in any of its obligations or an
event shall occur, or shall fail to occur, which gives (or would
give after the passage of time or giving of notice or both) the
payee of any such obligation the right to accelerate the payment
thereof under any mortgage, credit agreement or other facility,
indenture agreement, promissory note or other instrument under
which there may be issued, or by which there may be secured or
evidenced any indebtedness of the Company in an amount exceeding
one hundred thousand dollars ($100,000), whether such indebtedness
now exists or shall hereafter be created and such default shall
result in such indebtedness becoming or being declared due and
payable prior to the date on which it would otherwise become due
and
<PAGE>
payable;
(v) the Common Stock shall be delisted from the OTC Bulletin
Board or any other national securities exchange or market on which
such Common Stock is then listed for trading or suspended from
trading thereon without being relisted or having such suspension
lifted, as the case may be, within three (3) Trading Days (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 apply to any delistings or suspensions therefrom);
(vi) the Company shall be a party to any merger or
consolidation pursuant to which the Company shall not be the
surviving entity or shall sell, transfer or otherwise dispose of
all or substantially all of its assets in one or more transactions,
or shall redeem more than a de minimis number of shares of Common
Stock (other than redemptions of Underlying Shares);
(vii) an Underlying Securities Registration Statement
shall not have been declared effective by the Securities and
Exchange Commission (the "COMMISSION") on or prior to the 50th day
after the Original Issue Date; or
(viii) an Event (as hereinafter defined) shall not have
been cured to the satisfaction of the Holder prior to the
expiration of thirty (30) days from the Event Date (as hereinafter
defined) relating thereto.
(b) If any Event of Default occurs and is continuing, the
Holder may, by notice to the Company, declare the full principal amount of
this Debenture (and, at such Holder's option, all other Debentures then held
by such Holder), together with interest and other amounts owing in respect
thereof, to the date of acceleration, to be, whereupon the same shall become,
immediately due and payable in cash. The aggregate amount payable in respect
of the Debentures shall be equal to the sum of (i) the Mandatory Repayment
Amount plus (ii) the product of (A) the number of Underlying Shares issued in
respect of conversions hereunder and then held by the demanding Holder and
(B) the Per Share Market Value on the date prepayment is demanded or the date
the full prepayment price is paid, whichever is greater. The demanding
Holder need not provide and the Company hereby waives any presentment,
demand, protest or other notice of any kind, and the Holder may immediately
and without expiration of any grace period enforce any and all of its rights
and remedies hereunder and all other remedies available to it under
applicable law. Such declaration may be rescinded and annulled by Holder at
any time prior to payment hereunder. No such rescission or annulment shall
affect any subsequent Event of Default or impair any right consequent
thereon.
SECTION 4. CONVERSION.
(a) This Debenture shall be convertible into shares of Common
Stock at the option of the Holder in whole or in part at any time and from
time to time after the Original Issue Date and prior to the close of business
on the Maturity Date. The number of shares of Common Stock as shall be
issuable upon a conversion hereunder shall be determined by dividing the
outstanding principal amount of this Debenture to be converted, plus all
accrued but unpaid interest thereon
<PAGE>
(which the Company does not elect to pay in cash), by the Conversion Price
(as defined below), each as subject to adjustment as provided hereunder. The
Holder shall effect conversions by surrendering the Debentures (or such
portions thereof) to be converted, together with the form of conversion
notice attached hereto as EXHIBIT A (the "CONVERSION NOTICE") to the Company.
Each Conversion Notice shall specify the principal amount of Debentures to
be converted and the date on which such conversion is to be effected, which
date may not be prior to the date such Conversion Notice is deemed to have
been delivered hereunder (the "CONVERSION DATE"). If no Conversion Date is
specified in a Conversion Notice, the Conversion Date shall be the date that
the Conversion Notice is deemed delivered hereunder. Subject to Section 4(b)
hereof and Section 3.8 of the Purchase Agreement, each Conversion Notice,
once given, shall be irrevocable. If the Holder is converting less than all
of the principal amount represented by the Debenture(s) tendered by the
Holder with the Conversion Notice, or if a conversion hereunder cannot be
effected in full for any reason, the Company shall honor such conversion to
the extent permissible hereunder and shall promptly deliver to such Holder
(in the manner and within the time set forth in Section 5(b)) a new Debenture
for such principal amount as has not been converted.
(b) Not later than three Trading Days after the Conversion
Date, the Company will deliver to the Holder (i) a certificate or
certificates which shall be free of restrictive legends and trading
restrictions (other than those required by Section 3.1(b) of the Purchase
Agreement) representing the number of shares of the Common Stock being
acquired upon the conversion of Debentures (subject to reduction pursuant to
Section 3.8 of the Purchase Agreement), (ii) Debentures in a principal amount
equal to the principal amount of Debentures not converted; (iii) a bank check
in the amount of all accrued and unpaid interest (if the Company has elected
to pay accrued interest in cash), together with all other amounts then due
and payable in accordance with the terms hereof, in respect of Debentures
tendered for conversion and (iv) if the Company has elected to pay accrued
interest in shares of the Common Stock, certificates, which shall be free of
restrictive legends and trading restrictions (other than those required by
Section 3.1(b) of the Purchase Agreement), representing such number of shares
of the Common Stock as equals such interest divided by the Conversion Price
calculated on the Conversion Date; PROVIDED, HOWEVER, that the Company shall
not be obligated to issue certificates evidencing the shares of the Common
Stock issuable upon conversion of the principal amount of Debentures until
Debentures are delivered for conversion to the Company or the Holder notifies
the Company that such Debenture has been mutilated, lost, stolen or destroyed
and complies with Section 9 hereof. The Company shall, upon request of the
Holder, use its best efforts to deliver any certificate or certificates
required to be delivered by the Company under this Section electronically
through the Depository Trust Corporation or another established clearing
corporation performing similar functions. If in the case of any Conversion
Notice such certificate or certificates, including for purposes hereof, any
shares of the Common Stock to be issued on the Conversion Date on account of
accrued but unpaid interest hereunder, are not delivered to or as directed by
the applicable Holder by the third Trading Day after the Conversion Date, the
Holder shall be entitled by written notice to the Company at any time on or
before its receipt of such certificate or certificates thereafter, to rescind
such conversion, in which event the Company shall immediately return the
Debentures tendered for conversion. If the Company fails to deliver to the
Holder such certificate or certificates pursuant to this Section, including
for purposes hereof, any shares of the Common Stock to be issued on the
Conversion Date on account of accrued but unpaid interest hereunder, prior to
the third Trading Day after the Conversion Date, the Company shall pay to
such Holder, in cash, as liquidated damages and not as a penalty, $1,500 for
each day thereafter until the Company delivers such certificates. If the
Company fails to deliver to the Holder such certificate or certificates
pursuant to
<PAGE>
this Section prior to the 20th day after the Conversion Date, the Company
shall, at the Holder's option (i) prepay, from funds legally available
therefor at the time of such prepayment, the aggregate of the principal
amount of Debentures then held by such Holder, as requested by such Holder,
and (ii) pay all accrued but unpaid interest on account of the Debentures for
which the Company shall have failed to issue the Common Stock certificates
hereunder, in cash. The prepayment price shall equal the Mandatory
Prepayment Amount for the Debentures to be prepaid. If the Holder has
required the Company to prepay Debentures pursuant to this Section and the
Company fails for any reason to pay the prepayment price within seven days
after such notice is deemed delivered hereunder, the Company will pay
interest on the prepayment price at a rate of 18% per annum (to accrue
daily), in cash to such Holder, accruing from such seventh day until the
prepayment price and any accrued interest thereon is paid in full.
(c) (i) The conversion price (the "CONVERSION PRICE") in
effect on any Conversion Date shall be the lesser of (A) $3.34 (the "INITIAL
CONVERSION PRICE") and (B) 83% multiplied by the average of the five lowest
Per Share Market Values during the ten (10) Trading Days immediately
preceding the Conversion Date; PROVIDED THAT, (a) if an Underlying Securities
Registration Statement is not filed on or prior to the Filing Date (as such
term is defined in the Registration Rights Agreement), or (b) if the Company
fails to file with the Commission a request for acceleration in accordance
with Rule 12d1-2 promulgated under the Securities Exchange Act of 1934, as
amended, within five (5) days of the date that the Company is notified
(orally or in writing, whichever is earlier) by the Commission that an
Underlying Securities Registration Statement will not be "reviewed" or is not
subject to further review or comment by the Commission, or (c) if the
Underlying Securities Registration Statement is not declared effective by the
Commission on or prior to the Effectiveness Date (as defined in the
Registration Rights Agreement), or (d) if such Underlying Securities
Registration Statement is filed with and declared effective by the Commission
but thereafter ceases to be effective as to all Registrable Securities (as
such term is defined in the Registration Rights Agreement) at any time prior
to the expiration of the "Effectiveness Period" (as such term as defined in
the Registration Rights Agreement), without being succeeded by a subsequent
Underlying Securities Registration Statement filed with and declared
effective by the Commission within ten (10) days, or (e) if trading in the
Common Stock shall be suspended, or if the Common Stock shall be delisted
from trading, on the OTC Bulletin Board or any other national securities
market or exchange on which the Common Stock is then listed or quoted for
trading for any reason for more than three (3) Trading Days, or (f) if the
conversion rights of the Holders of Debentures are suspended for any reason
or if the Holder is not permitted to resell Registrable Securities under the
Underlying Securities Registration Statement, or (g) if an amendment to the
Underlying Securities Registration Statement is not filed by the Company with
the Commission within ten (10) days of the Commission's notifying the Company
that such amendment is required in order for the Underlying Securities
Registration Statement to be declared effective (any such failure being
referred to as an "EVENT," and for purposes of clauses (a), (c) and (f) the
date on which such Event occurs, or for purposes of clause (b) the date on
which such five (5) days period is exceeded, or for purposes of clauses (d)
and (g) the date which such ten (10) day period is exceeded, or for purposes
of clause (e) the date on which such three (3) Trading Day period is
exceeded, being referred to as "EVENT DATE"), the Conversion Price shall be
decreased by 2.5% each month (i.e., the Conversion Price would decrease by
2.5% as of the Event Date and additional 2.5% as of each monthly anniversary
of the Event Date) until the earlier to occur of the second month anniversary
after the Event Date and such time as the applicable Event is cured.
Commencing the second month anniversary after the Event Date, the Company
shall pay to the holders of the Debentures 2.5% of the aggregate principal
amount of Debentures then
<PAGE>
outstanding (each holder being entitled to receive such portion of such
amount as equals its pro rata portion of the Debentures then outstanding) in
cash as liquidated damages, and not as a penalty on the first day of each
monthly anniversary of the Event Date until such time as the applicable
Event, is cured. Any decrease in the Conversion Price pursuant to this
Section shall continue notwithstanding the fact that the Event causing such
decrease has been subsequently cured. The provisions of this Section are not
exclusive and shall in no way limit the Company's obligations under the
Registration Rights Agreement.
(ii) If the Company, at any time while any Debentures are
outstanding, (a) shall pay a stock dividend or otherwise make a distribution
or distributions on shares of its Common Stock or any other equity or equity
equivalent securities payable in shares of the Common Stock, (b) subdivide
outstanding shares of the Common Stock into a larger number of shares, (c)
combine outstanding shares of the Common Stock into a smaller number of
shares, or (d) issue by reclassification of shares of the Common Stock any
shares of capital stock of the Company, the Initial Conversion Price shall be
multiplied by a fraction of which the numerator shall be the number of shares
of the Common Stock (excluding treasury shares, if any) outstanding before
such event and of which the denominator shall be the number of shares of the
Common Stock outstanding after such event. Any adjustment made pursuant to
this Section shall become effective immediately after the record date for the
determination of stockholders entitled to receive such dividend or
distribution and shall become effective immediately after the effective date
in the case of a subdivision, combination or re-classification.
(iii) If the Company, at any time while any Debentures
are outstanding, shall issue rights or warrants to all holders of the Common
Stock (and not to Holders of Debentures) entitling them to subscribe for or
purchase shares of the Common Stock at a price per share less than the Per
Share Market Value of the Common Stock at the record date mentioned below,
the Initial Conversion Price shall be multiplied by a fraction, of which the
denominator shall be the number of shares of the Common Stock (excluding
treasury shares, if any) outstanding on the date of issuance of such rights
or warrants plus the number of additional shares of the Common Stock offered
for subscription or purchase, and of which the numerator shall be the number
of shares of the Common Stock (excluding treasury shares, if any) outstanding
on the date of issuance of such rights or warrants plus the number of shares
which the aggregate offering price of the total number of shares so offered
would purchase at such Per Share Market Value. Such adjustment shall be made
whenever such rights or warrants are issued, and shall become effective
immediately after the record date for the determination of stockholders
entitled to receive such rights or warrants. However, upon the expiration of
any right or warrant to purchase shares of the Common Stock the issuance of
which resulted in an adjustment in the Initial Conversion Price pursuant to
this Section, if any such right or warrant shall expire and shall not have
been exercised, the Initial Conversion Price shall immediately upon such
expiration be recomputed and effective immediately upon such expiration be
increased to the price which it would have been (but reflecting any other
adjustments in the Initial Conversion Price made pursuant to the provisions
of this Section 4 after the issuance of such rights or warrants) had the
adjustment of the Initial Conversion Price made upon the issuance of such
rights or warrants been made on the basis of offering for subscription or
purchase only that number of shares of the Common Stock actually purchased
upon the exercise of such rights or warrants actually exercised.
(iv) If the Company, at any time while Debentures are
outstanding, shall distribute to all holders of the Common Stock (and not to
Holders of Debentures) evidences of its
<PAGE>
indebtedness or assets or rights or warrants to subscribe for or purchase any
security, then in each such case the Initial Conversion Price at which
Debentures shall thereafter be convertible shall be determined by multiplying
the Initial Conversion Price in effect immediately prior to the record date
fixed for determination of stockholders entitled to receive such distribution
by a fraction of which the denominator shall be the Per Share Market Value of
the Common Stock determined as of the record date mentioned above, and of
which the numerator shall be such Per Share Market Value of the Common Stock
on such record date less the then fair market value at such record date of
the portion of such assets or evidence of indebtedness so distributed
applicable to one outstanding share of the Common Stock as determined by the
Board of Directors in good faith; PROVIDED, HOWEVER, that in the event of a
distribution exceeding ten percent (10%) of the net assets of the Company,
such fair market value shall be determined by a nationally recognized or
major regional investment banking firm or firm of independent certified
public accountants of recognized standing (which may be the firm that
regularly examines the financial statements of the Company) (an "APPRAISER")
selected in good faith by the holders of a majority in interest of Debentures
then outstanding; and PROVIDED, FURTHER, that the Company, after receipt of
the determination by such Appraiser shall have the right to select an
additional Appraiser, in good faith, in which case the fair market value
shall be equal to the average of the determinations by each such Appraiser.
In either case the adjustments shall be described in a statement provided to
the holders of Debentures of the portion of assets or evidences of
indebtedness so distributed or such subscription rights applicable to one
share of the Common Stock. Such adjustment shall be made whenever any such
distribution is made and shall become effective immediately after the record
date mentioned above.
(v) In case of any reclassification of the Common Stock
or any compulsory share exchange pursuant to which the Common Stock is
converted into other securities, cash or property, the Holder of this
Debenture shall have the right thereafter to, at its option, (A) convert the
then outstanding principal amount, together with all accrued but unpaid
interest and any other amounts then owing hereunder in respect of this
Debenture only into the shares of stock and other securities, cash and
property receivable upon or deemed to be held by holders of the Common Stock
following such reclassification or share exchange, and the Holders of the
Debentures shall be entitled upon such event to receive such amount of
securities, cash or property as the shares of the Common Stock of the Company
into which the then outstanding principal amount, together with all accrued
but unpaid interest and any other amounts then owing hereunder in respect of
this Debenture could have been converted immediately prior to such
reclassification or share exchange would have been entitled or (B) require
the Company to prepay, from funds legally available therefor at the time of
such prepayment, the aggregate of its outstanding principal amount of
Debentures, plus all interest and other amounts due and payable thereon, at a
price determined in accordance with Section 3(b). The entire prepayment
price shall be paid in cash. This provision shall similarly apply to
successive reclassifications or share exchanges.
(vi) All calculations under this Section 4 shall be made
to the nearest cent or the nearest 1/100th of a share, as the case may be.
(vii) Whenever the Initial Conversion Price is
adjusted pursuant to any of Section 4(c)(ii) - (v), the Company shall
promptly mail to each Holder of Debentures a notice setting forth the Initial
Conversion Price after such adjustment and setting forth a brief statement of
the facts requiring such adjustment.
(viii) If:
<PAGE>
A. the Company shall declare a dividend (or any other
distribution) on its Common Stock; or
B. the Company shall declare a special nonrecurring
cash dividend on or a redemption of its Common
Stock; or
C. the Company shall authorize the granting to all
holders of the Common Stock rights or warrants
to subscribe for or purchase any shares of
capital stock of any class or of any rights; or
D. the approval of any stockholders of the Company
shall be required in connection with any
reclassification of the Common Stock of the
Company, any consolidation or merger to which the
Company is a party, any sale or transfer of all
or substantially all of the assets of the Company,
of any compulsory share of exchange whereby the
Common Stock is converted into other securities,
cash or property; or
E. the Company shall authorize the voluntary or
involuntary dissolution, liquidation or winding up
of the affairs of the Company;
then the Company shall cause to be filed at each office or agency maintained
for the purpose of conversion of the Debentures, and shall cause to be mailed
to the Holders of Debentures at their last addresses as they shall appear
upon the stock books of the Company, at least 30 calendar days prior to the
applicable record or effective date hereinafter specified, a notice stating
(x) the date on which a record is to be taken for the purpose of such
dividend, distribution, redemption, rights or warrants, or if a record is not
to be taken, the date as of which the holders of the Common Stock of record
to be entitled to such dividend, distributions, redemption, rights or
warrants are to be determined or (y) the date on which such reclassification,
consolidation, merger, sale, transfer or share exchange is expected to become
effective or close, and the date as of which it is expected that holders of
the Common Stock of record shall be entitled to exchange their shares of the
Common Stock for securities, cash or other property deliverable upon such
reclassification, consolidation, merger, sale, transfer or share exchange;
PROVIDED, HOWEVER, that the failure to mail such notice or any defect therein
or in the mailing thereof shall not affect the validity of the corporate
action required to be specified in such notice. Holders are entitled to
convert Debentures during the 30-day period commencing the date of such
notice to the effective date of the event triggering such notice.
(d) The Company covenants that it will at all times reserve
and keep available out of its authorized and unissued shares of the Common
Stock solely for the purpose of issuance upon conversion of the Debentures
and payment of interest on the Debentures, each as herein provided, free from
preemptive rights or any other actual contingent purchase rights of persons
other than the Holders, not less than such number of shares of the Common
Stock as shall be required by the Purchase Agreement (taking into account the
adjustments and restrictions of Section 4(c).
<PAGE>
(e) Upon a conversion hereunder the Company shall not be
required to issue stock certificates representing fractions of shares of the
Common Stock, but may if otherwise permitted, make a cash payment in respect
of any final fraction of a share based on the Per Share Market Value at such
time. If the Company elects not, or is unable, to make such a cash payment,
the holder shall be entitled to receive, in lieu of the final fraction of a
share, one whole share of Common Stock.
(f) The issuance of certificates for shares of the Common
Stock on conversion of the Debentures shall be made without charge to the
Holders thereof for any documentary stamp or similar taxes that may be
payable in respect of the issue or delivery of such certificate, provided
that the Company shall not be required to pay any tax that may be payable in
respect of any transfer involved in the issuance and delivery of any such
certificate upon conversion in a name other than that of the Holder of such
Debentures so converted and the Company shall not be required to issue or
deliver such certificates unless or until the person or persons requesting
the issuance thereof shall have paid to the Company the amount of such tax or
shall have established to the satisfaction of the Company that such tax has
been paid.
(g) Any and all notices or other communications or deliveries
to be provided by the Holders of the Debentures hereunder, including, without
limitation, any Conversion Notice, shall be in writing and delivered
personally, by facsimile, sent by a nationally recognized overnight courier
service or sent by certified or registered mail, postage prepaid, addressed
to the Company, at 3637 Soouth Green Road, Suite 201, Beachwood, OH 44122
(facsimile number (216) 292-6187), attention Chief Financial Officer, or such
other address or facsimile number as the Company may specify for such
purposes by notice to the Holders delivered in accordance with this Section.
Any and all notices or other communications or deliveries to be provided by
the Company hereunder shall be in writing and delivered personally, by
facsimile, sent by a nationally recognized overnight courier service or sent
by certified or registered mail, postage prepaid, addressed to each Holder of
the Debentures at the facsimile telephone number or address of such Holder
appearing on the books of the Company, or if no such facsimile telephone
number or address appears, at the principal place of business of the holder.
Any notice or other communication or deliveries hereunder 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),
(ii) the date after the date of transmission, if such notice or communication
is delivered via facsimile at the facsimile telephone number specified in
this Section 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) four days
after deposit in the United States mail, (iv) the Business Day following the
date of mailing, if send by nationally recognized overnight courier service,
or (v) upon actual receipt by the party to whom such notice is required to be
given. For purposes of Section 4(c)(i), if a Conversion Notice is delivered
by facsimile prior to 7:00 p.m. (New York City time) on any date, then the
day prior to such date shall be the last Trading Day calculated to determine
the Conversion Price applicable to such Conversion Notice, and the date of
such delivery shall commence the counting of days for purposes of Section
4(b).
SECTION 5. OPTIONAL PREPAYMENT.
(a) The Company shall have the right, exercisable at any time
upon twenty (20) Trading Days prior written notice to the Holders of the
Debentures to be prepaid (the "OPTIONAL PREPAYMENT NOTICE"), to prepay, from
funds legally available therefor at the time of such
<PAGE>
prepayment, all or any portion of the outstanding principal amount of the
Debentures which have not previously been repaid or for which Conversion
Notices have not previously been delivered hereunder, at a price equal to the
Optional Prepayment Price (as defined below). Any such prepayment by the
Company shall be in cash and shall be free of any claim of subordination.
The Holders shall have the right to tender, and the Company shall honor,
Conversion Notices delivered prior to the expiration of the twentieth (20th)
Trading Day after receipt by the Holders of an Optional Prepayment Notice for
such Debentures (such date, the "OPTIONAL PREPAYMENT DATE").
(b) If any portion of the Optional Prepayment Price shall not
be paid by the Company by the Optional Prepayment Date, the Optional
Prepayment Price shall be increased by 18% per annum (to accrue daily) until
paid (which amount shall be paid as liquidated damages and not as a penalty).
In addition, if any portion of the optional Prepayment Price remains unpaid
through the expiration of the Optional Prepayment Date, the Holder subject to
such prepayment may elect by written notice to the Company to either (i)
demand conversion in accordance with the formula and the time period therefor
set forth in Section 4 of any portion of the principal amount of Debentures
for which the Optional Prepayment Price, plus accrued liquidated damages
thereof, has not been paid in full (the "UNPAID PREPAYMENT PRINCIPAL
AMOUNT"), in which event the applicable Per Share Market Value shall be the
lower of the Per Share Market Value calculated on the Optional Prepayment
Date and the Per Share Market Value as of the Holder's written demand for
conversion, or (ii) invalidate AB INITIO such optional redemption,
notwithstanding anything herein contained to the contrary. If the Holder
elects option (i) above, the Company shall within three (3) Trading Days such
election is deemed delivered hereunder to the Holder the shares of Common
Stock issuable upon conversion of the Unpaid Prepayment Amount subject to
such conversion demand and otherwise perform its obligations hereunder with
respect thereto; or, if the Holder elects option (ii) above, the Company
shall promptly, and in any event not later than three Trading Days from
receipt of notice of such election, return to the Holder new Debentures for
the full Unpaid Prepayment Principal Amount. If, upon an election under
option (i) above, the Company fails to deliver the shares of Common Stock
issuable upon conversion of the Unpaid Prepayment Principal Amount within the
time period set forth in this Section, the Company shall pay to the Holder in
cash, as liquidated damages and not as a penalty, $1,500 per day until the
Company delivers such Common Stock to the Holder.
(c) The "OPTIONAL PREPAYMENT PRICE" for any Debentures shall
equal the sum of (i) the principal amount of Debentures to be prepaid, plus
all accrued and unpaid interest thereon, divided by the Conversion Price on
(x) the Optional Prepayment Date or (y) the date the Optional Prepayment
Price is paid in full, whichever is less, multiplied by the Average Price on
(x) the Optional Prepayment Date or (y) the date the Optional Prepayment
Price is paid in full, whichever is greater, and (ii) all other amounts and
liquidated damages due in respect of such principal amount.
SECTION 6. DEFINITIONS. For the purposes hereof, the
following terms shall have the following meanings:
"AVERAGE PRICE" on any date means the average Per Share Market
Value for the five (5) Trading Days immediately preceding such date.
"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
<PAGE>
required by law or other government action to close.
"COMMON STOCK" means common stock, $.001 par value per share,
of the Company and stock of any other class into which such shares may
hereafter have been reclassified or changed.
"MANDATORY REPAYMENT AMOUNT" for any Debentures shall equal
the sum of (i) the principal amount of Debentures to be prepaid, plus all
accrued and unpaid interest thereon, divided by the Conversion Price on (x)
the date the Mandatory Prepayment Amount is demanded or (y) the date the
Mandatory Prepayment Amount is paid in full, whichever is less, multiplied by
the Per Share Market Value on (x) the date the Mandatory Prepayment Amount is
demanded or (y) the date the Mandatory Prepayment Amount is paid in full,
whichever is greater, and (ii) all other amounts, costs, expenses and
liquidated damages due in respect of such Debentures.
"ORIGINAL ISSUE DATE" shall mean the date of the first
issuance of any Debentures regardless of the number of transfers of any
Debenture and regardless of the number of instruments which may be issued to
evidence such Debenture.
"PER SHARE MARKET VALUE" on any particular date means (a) the
closing bid price per share of the Common Stock on such date on the Nasdaq
SmallCap Market or other stock exchange or quotation system on which the
Common Stock is listed for trading, or (b) if the Common Stock is not listed
on the Nasdaq SmallCap Market or any other stock exchange or market, the
closing bid price per share of the Common Stock on such date on the
over-the-counter market, as reported by the OTC Bulletin Board, or (c) if the
Common Stock is not quoted on the OTC Bulletin Board, the closing bid price
per share of Common Stock on such date on the over-the-counter market as
reported by the National Quotation Bureau Incorporated (or any similar
organization or agency succeeding its functions of reporting prices), or (d)
if the Common Stock is no longer traded on the over-the-counter market and
reported by the National Quotation Bureau Incorporated (or any similar
organization or agency succeeding its functions of reporting prices), such
closing bid price shall be determined by reference to "Pink Sheet" quotes for
the relevant conversion period as determined in good faith by the Holder or
(c) if the Common Stock is not then publicly traded, the fair market value of
a share of Common Stock as determined by an appraiser selected in good faith
by the Holders of a majority in interest of the Debentures (the Company,
after receipt of the determination by such appraiser, shall have the right to
select an additional appraiser, in which case, the fair market value shall be
equal to the average of the determinations by each such appraiser).
"PERSON" means a corporation, an association, a partnership,
organization, a business, an individual, a government or political
subdivision thereof or a governmental agency.
"PURCHASE AGREEMENT" means the Convertible Debenture Purchase
Agreement, dated as of the Original Issue Date, among the Company and the
original Holders of Debentures, as amended, modified or supplemented from
time to time in accordance with its terms.
"REGISTRATION RIGHTS AGREEMENT" means the Registration Rights
Agreement, dated as of the Original Issue Date, among the Company and the
original Holders of Debentures, as amended, modified or supplemented from
time to time in accordance with its terms.
<PAGE>
"TRADING DAY" means (a) a day on which the Common Stock is
traded on the Nasdaq Stock Market or other stock exchange or market on which
the Common Stock has been listed, or (b) if the Common Stock is not then
listed on the Nasdaq Stock Market or any stock exchange or market, a day on
which the Common Stock is traded on the over-the-counter market, as reported
by the OTC Bulletin Board, or (c) if the Common Stock is not quoted on the
OTC Bulletin Board, a day on which the Common Stock is quoted on the
over-the-counter market as reported by the National Quotation Bureau
Incorporated (or any similar organization or agency succeeding its functions
of reporting prices).
"UNDERLYING SHARES" means the shares of Common Stock into
which the Debentures, and interest thereon, are convertible in accordance
with the terms hereof and the Purchase Agreement.
"UNDERLYING SECURITIES REGISTRATION STATEMENT" means a
registration statement meeting the requirements set forth in the Registration
Rights Agreement, covering among other things the resale of the Underlying
Shares and naming the Holders as a "selling stockholders" thereunder.
SECTION 7. Except as expressly provided herein, no
provision of this Debenture shall alter or impair the obligation of the
Company, which is absolute and unconditional, to pay the principal of,
interest and liquidated damages (if any) on, this Debenture at the time,
place, and rate, and in the coin or currency, herein prescribed. This
Debenture is a direct obligation of the Company. This Debenture ranks PARI
PASSU with all other Debentures now or hereafter issued under the terms set
forth herein. The Company may only voluntarily prepay the outstanding
principal amount on the Debentures in accordance with Section 5 hereof.
SECTION 8. This Debenture shall not entitle the Holder to
any of the rights of a stockholder of the Company, including without
limitation, the right to vote, to receive dividends and other distributions,
or to receive any notice of, or to attend, meetings of stockholders or any
other proceedings of the Company, unless and to the extent converted into
shares of Common Stock in accordance with the terms hereof.
SECTION 9. If this Debenture shall be mutilated, lost,
stolen or destroyed, the Company shall execute and deliver, in exchange and
substitution for and upon cancellation of a mutilated Debenture, or in lieu
of or in substitution for a lost, stolen or destroyed debenture, a new
Debenture for the principal amount of this Debenture so mutilated, lost,
stolen or destroyed but only upon receipt of evidence of such loss, theft or
destruction of such Debenture, and of the ownership hereof, and indemnity, if
requested, all reasonably satisfactory to the Company.
SECTION 10. This Debenture shall be governed by and
construed in accordance with the laws of the State of New York, without
giving effect to conflicts of laws thereof. The Company hereby irrevocably
submits to the non-exclusive jurisdiction of the state and federal courts
sitting in the City of New York, borough of Manhattan, for the adjudication
of any dispute hereunder or in connection herewith or with any transaction
contemplated hereby or discussed herein, and hereby irrevocably waives, and
agrees not to assert in any suit, action or proceeding, any claim that it is
not personally subject to the jurisdiction of any such court, or that such
suit, action or proceeding is improper. The Company hereby irrevocably
waives personal service of process and consents to process being served in
any such suit, action or proceeding by receiving a
<PAGE>
copy thereof sent to the Company at the address in effect for notices to it
under this instrument 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.
SECTION 11. Any waiver by the Company or the Holder of a
breach of any provision of this Debenture shall not operate as or be
construed to be a waiver of any other breach of such provision or of any
breach of any other provision of this Debenture. The failure of the Company
or the Holder to insist upon strict adherence to any term of this Debenture
on one or more occasions shall not be considered a waiver or deprive that
party of the right thereafter to insist upon strict adherence to that term or
any other term of this Debenture. Any waiver must be in writing.
SECTION 12. If any provision of this Debenture is invalid,
illegal or unenforceable, the balance of this Debenture shall remain in
effect, and if any provision is inapplicable to any person or circumstance,
it shall nevertheless remain applicable to all other persons and
circumstances.
SECTION 13. Whenever any payment or other obligation
hereunder shall be due on a day other than a Business Day, such payment shall
be made on the next succeeding Business Day (or, if such next succeeding
Business Day falls in the next calendar month, the preceding Business Day in
the appropriate calendar month).
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
[SIGNATURE PAGE FOLLOWS]
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Debenture to
be duly executed by a duly authorized officer as of the date first above
indicated.
FIX-CORP INTERNATIONAL, INC.
By: /s/ Mark Fixler
-----------------------------------
Name: Mark Fixler
Title: President/CEO
Attest:
By: /s/ Sherry L. Durst
----------------------------------
Name: Sherry L. Durst
Title: Assistant Secretary
<PAGE>
EXHIBIT A
NOTICE OF CONVERSION
(To be Executed by the Registered Holder
in order to Convert the Debenture)
The undersigned hereby elects to convert Debenture No. A-11 into shares of
Common Stock, $.001 par value per share (the "Common Stock"), of Fix-Corp
International, Inc. (the "Company") according to the conditions hereof, as of
the date written below. If shares are to be issued in the name of a person
other than undersigned, the undersigned will pay all transfer taxes payable
with respect thereto and is delivering herewith such certificates and
opinions as reasonably requested by the Company in accordance therewith. No
fee will be charged to the holder for any conversion, except for such
transfer taxes, if any.
Conversion calculations:
Date to Effect Conversion
------------------------------------------------
Principal Amount of Debentures to be Converted
------------------------------------------------
Number of shares of Common Stock to be Issued
------------------------------------------------
Applicable Conversion Price
------------------------------------------------
Signature
------------------------------------------------
Name
------------------------------------------------
Address
<PAGE>
Exhibit 30
NEITHER THIS DEBENTURE NOR THE SECURITIES INTO WHICH THIS DEBENTURE IS
CONVERTIBLE 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.
THIS DEBENTURE IS SUBJECT TO CERTAIN RESTRICTIONS ON CONVERSION SET
FORTH IN SECTION 3.8 OF A CONVERTIBLE DEBENTURE PURCHASE AGREEMENT, DATED AS
OF JANUARY 22, 1998, 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.
THIS DEBENTURE IS SUBJECT TO CERTAIN RESTRICTIONS AS SET FORTH IN A
SUBORDINATION AGREEMENT, DATED AS OF JANUARY 22, 1998. A COPY OF THAT
AGREEMENT IS ON FILE AT THE PRINCIPAL OFFICE OF THE COMPANY.
No. A-12 U.S. $500,000
FIX-CORP INTERNATIONAL, INC.
4% CONVERTIBLE DEBENTURE DUE JANUARY 22, 2001
THIS DEBENTURE is one of a series of duly authorized issued debentures
of Fix-Corp International, Inc., a Delaware corporation having a principal
place of business at 3637 South Green Road, Suite 201 Beachwood, OH 44122
(the ?COMPANY?), designated as its 4% Convertible Debentures, due October 24,
2000 (the "DEBENTURES"), in an aggregate principal amount of $500,000.
FOR VALUE RECEIVED, the Company promises to pay to Diversified
Strategies Fund, L.P., or registered assigns (the ?HOLDER?), the principal
sum of Five Hundred Thousand Dollars ($500,000), on or prior to January 22,
2001 or such earlier date as the Debentures are required to be repaid as
provided hereunder (the ?MATURITY DATE?) and to pay interest to the Holder on
the principal sum at the rate of 4% per annum, payable quarterly in arrears
on March 31, June 30, September 30 and December 31 of each year, commencing
March 31, 1998, and on each Conversion Date (as defined in Section 4(a)(i)).
Interest shall accrue daily commencing on the Original Issue Date (as defined
in Section 6) until payment in full of the principal sum, together with all
accrued and unpaid interest and other amounts which may become due hereunder,
has been
<PAGE>
made. Interest shall be calculated on the basis of a 360-day year and for the
actual number of days elapsed. Interest hereunder will be paid to the Person
(as defined in Section 6) in whose name this Debenture is registered on the
records of the Company regarding registration and transfers of the Debentures
(the ?DEBENTURE REGISTER?). All overdue, accrued and unpaid interest and
other amounts due hereunder shall bear interest at the rate of 18% per annum
and accrue daily from the date such interest is due hereunder through and
including the date of payment. The principal of, and interest on, this
Debenture are payable in such coin or currency of the United States of
America as at the time of payment is legal tender for payment of public and
private debts, at the address of the Holder last appearing on the Debenture
Register, except that interest due on the principal amount (but not overdue
interest) may, at the Company's option, be paid in shares of Common Stock (as
defined in Section 6) calculated based upon the Conversion Price (as defined
below) at the time such interest becomes due. All amounts due hereunder
other than interest shall be paid in cash. Notwithstanding anything to the
contrary contained herein, the Company may not issue shares of the Common
Stock in payment of interest on the principal amount if: (i) the number of
shares of Common Stock at the time authorized, unissued and unreserved for
all purposes, or held as treasury stock, is insufficient to pay interest
hereunder in shares of Common Stock; (ii) such shares are not either
registered for resale pursuant to an Underlying Securities Registration
Statement (as defined in Section 6) or freely transferable without volume
restrictions pursuant to Rule 144(k) promulgated under the Securities Act of
1933, as amended (the "SECURITIES ACT"), as determined by counsel to the
Company pursuant to a written opinion letter, addressed to and in form and
substance acceptable to the Company's transfer agent or other person or
entity performing similar functions thereto; (iii) such shares are not listed
on the OTC Bulletin Board (or the American Stock Exchange, Nasdaq National
Market, Nasdaq SmallCap Market or The New York Stock Exchange) and any other
exchange, market and trading facility on which the Common Stock is then
listed for trading; or (iv) the issuance of such shares would result in the
recipient thereof beneficially owning more than 4.999% of the issued and
outstanding shares of Common Stock as determined in accordance with Rule
13d-3 under the Securities Exchange Act of 1934, as amended. Payment of
interest on the principal amount in shares of Common Stock is further subject
to the provisions of Section 4(a)(ii).
This Debenture is subject to the following additional provisions:
SECTION 1. This Debenture is exchangeable for an equal
aggregate principal amount of Debentures of different authorized
denominations, as requested by the Holder surrendering the same but shall not
be issuable in denominations of less than integral multiplies of Fifty
Thousand Dollars ($50,000) unless such amount represents the full principal
balance of Debentures outstanding to such Holder. No service charge will be
made for such registration of transfer or exchange.
SECTION 2. This Debenture has been issued subject to certain
investment representations of the original Holder set forth in the Purchase
Agreement and may be transferred or exchanged only in compliance with the
Purchase Agreement. Prior to due presentment to the Company for transfer of
this Debenture, the Company and any agent of the Company may treat the person
in whose name this Debenture is duly registered on the Debenture Register as
the owner hereof for the purpose of receiving payment as herein provided and
for all other purposes, whether or not this Debenture is overdue, and neither
the Company nor any such agent shall be affected by notice to the contrary.
<PAGE>
SECTION 3. EVENTS OF DEFAULT.
(a) "EVENT OF DEFAULT", wherever used herein, means any one of the
following events (whatever the reason and whether it shall be voluntary or
involuntary or effected by operation of law or pursuant to any judgment,
decree or order of any court, or any order, rule or regulation of any
administrative or governmental body):
(i) any default in the payment of the principal of, interest on
or liquidated damages in respect of, this Debenture, free of any claim
of subordination, as and when the same shall become due and payable
(whether on the applicable quarterly interest payment date, the
Conversion Date or the Maturity Date or by acceleration or otherwise);
(ii) the Company shall fail to observe or perform any other
covenant, agreement or warranty contained in, or otherwise commit
any breach of, this Debenture, the Purchase Agreement or the
Registration Rights Agreement, and such failure or breach shall not
have been remedied within 10 days after the date on which written
notice of such failure or breach shall have been given;
(iii) the Company or any of its subsidiaries shall commence, or
there shall be commenced against the Company or any such subsidiary
a case under any applicable bankruptcy or insolvency laws as now or
hereafter in effect or any successor thereto, or the Company
commences any other proceeding under any reorganization,
arrangement, adjustment of debt, relief of debtors, dissolution,
insolvency or liquidation or similar law of any jurisdiction
whether now or hereafter in effect relating to the Company or any
subsidiary thereof or there is commenced against the Company or any
subsidiary thereof any such bankruptcy, insolvency or other
proceeding which remains undismissed for a period of 60 days; or
the Company or any subsidiary thereof is adjudicated insolvent or
bankrupt; or any order of relief or other order approving any such
case or proceeding is entered; or the Company or any subsidiary
thereof suffers any appointment of any custodian or the like for it
or any substantial part of its property which continues
undischarged or unstayed for a period of 60 days; or the Company or
any subsidiary thereof makes a general assignment for the benefit
of creditors; or the Company shall fail to pay, or shall state that
it is unable to pay, or shall be unable to pay, its debts generally
as they become due; or the Company or any subsidiary thereof shall
call a meeting of its creditors with a view to arranging a
composition or adjustment of its debts; or the Company or any
subsidiary thereof shall by any act or failure to act indicate its
consent to, approval of or acquiescence in any of the foregoing; or
any corporate or other action is taken by the Company or any
subsidiary thereof for the purpose of effecting any of the
foregoing;
(iv) the Company shall default in any of its obligations or an
event shall occur, or shall fail to occur, which gives (or would
give after the passage of time or giving of notice or both) the
payee of any such obligation the right to accelerate the payment
thereof under any mortgage, credit agreement or other facility,
indenture agreement, promissory note or other instrument under
which there may be issued, or by which there may be secured or
evidenced any indebtedness of the Company in an amount exceeding
one hundred thousand dollars ($100,000), whether such indebtedness
now exists or shall hereafter be created and such default shall
result in such indebtedness becoming or being
<PAGE>
declared due and payable prior to the date on which it would
otherwise become due and payable;
(v) the Common Stock shall be delisted from the OTC Bulletin
Board or any other national securities exchange or market on which
such Common Stock is then listed for trading or suspended from
trading thereon without being relisted or having such suspension
lifted, as the case may be, within three (3) Trading Days (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 apply to any delistings or suspensions therefrom);
(vi) the Company shall be a party to any merger or
consolidation pursuant to which the Company shall not be the
surviving entity or shall sell, transfer or otherwise dispose of
all or substantially all of its assets in one or more transactions,
or shall redeem more than a de minimis number of shares of Common
Stock (other than redemptions of Underlying Shares);
(vii) an Underlying Securities Registration Statement shall not
have been declared effective by the Securities and Exchange
Commission (the "COMMISSION") on or prior to the 50th day after the
Original Issue Date; or
(viii) an Event (as hereinafter defined) shall not have been
cured to the satisfaction of the Holder prior to the expiration of
thirty (30) days from the Event Date (as hereinafter defined)
relating thereto.
(b) If any Event of Default occurs and is continuing, the
Holder may, by notice to the Company, declare the full principal amount of
this Debenture (and, at such Holder's option, all other Debentures then held
by such Holder), together with interest and other amounts owing in respect
thereof, to the date of acceleration, to be, whereupon the same shall become,
immediately due and payable in cash. The aggregate amount payable in respect
of the Debentures shall be equal to the sum of (i) the Mandatory Repayment
Amount plus (ii) the product of (A) the number of Underlying Shares issued in
respect of conversions hereunder and then held by the demanding Holder and
(B) the Per Share Market Value on the date prepayment is demanded or the date
the full prepayment price is paid, whichever is greater. The demanding
Holder need not provide and the Company hereby waives any presentment,
demand, protest or other notice of any kind, and the Holder may immediately
and without expiration of any grace period enforce any and all of its rights
and remedies hereunder and all other remedies available to it under
applicable law. Such declaration may be rescinded and annulled by Holder at
any time prior to payment hereunder. No such rescission or annulment shall
affect any subsequent Event of Default or impair any right consequent
thereon.
SECTION 4. CONVERSION.
(a) This Debenture shall be convertible into shares of Common
Stock at the option of the Holder in whole or in part at any time and from
time to time after the Original Issue Date and prior to the close of business
on the Maturity Date. The number of shares of Common Stock as shall be
issuable upon a conversion hereunder shall be determined by dividing the
outstanding
<PAGE>
principal amount of this Debenture to be converted, plus all accrued but
unpaid interest thereon (which the Company does not elect to pay in cash), by
the Conversion Price (as defined below), each as subject to adjustment as
provided hereunder. The Holder shall effect conversions by surrendering the
Debentures (or such portions thereof) to be converted, together with the form
of conversion notice attached hereto as EXHIBIT A (the "CONVERSION NOTICE")
to the Company. Each Conversion Notice shall specify the principal amount of
Debentures to be converted and the date on which such conversion is to be
effected, which date may not be prior to the date such Conversion Notice is
deemed to have been delivered hereunder (the "CONVERSION DATE"). If no
Conversion Date is specified in a Conversion Notice, the Conversion Date
shall be the date that the Conversion Notice is deemed delivered hereunder.
Subject to Section 4(b) hereof and Section 3.8 of the Purchase Agreement,
each Conversion Notice, once given, shall be irrevocable. If the Holder is
converting less than all of the principal amount represented by the
Debenture(s) tendered by the Holder with the Conversion Notice, or if a
conversion hereunder cannot be effected in full for any reason, the Company
shall honor such conversion to the extent permissible hereunder and shall
promptly deliver to such Holder (in the manner and within the time set forth
in Section 5(b)) a new Debenture for such principal amount as has not been
converted.
(b) Not later than three Trading Days after the Conversion
Date, the Company will deliver to the Holder (i) a certificate or
certificates which shall be free of restrictive legends and trading
restrictions (other than those required by Section 3.1(b) of the Purchase
Agreement) representing the number of shares of the Common Stock being
acquired upon the conversion of Debentures (subject to reduction pursuant to
Section 3.8 of the Purchase Agreement), (ii) Debentures in a principal amount
equal to the principal amount of Debentures not converted; (iii) a bank check
in the amount of all accrued and unpaid interest (if the Company has elected
to pay accrued interest in cash), together with all other amounts then due
and payable in accordance with the terms hereof, in respect of Debentures
tendered for conversion and (iv) if the Company has elected to pay accrued
interest in shares of the Common Stock, certificates, which shall be free of
restrictive legends and trading restrictions (other than those required by
Section 3.1(b) of the Purchase Agreement), representing such number of shares
of the Common Stock as equals such interest divided by the Conversion Price
calculated on the Conversion Date; PROVIDED, HOWEVER, that the Company shall
not be obligated to issue certificates evidencing the shares of the Common
Stock issuable upon conversion of the principal amount of Debentures until
Debentures are delivered for conversion to the Company or the Holder notifies
the Company that such Debenture has been mutilated, lost, stolen or destroyed
and complies with Section 9 hereof. The Company shall, upon request of the
Holder, use its best efforts to deliver any certificate or certificates
required to be delivered by the Company under this Section electronically
through the Depository Trust Corporation or another established clearing
corporation performing similar functions. If in the case of any Conversion
Notice such certificate or certificates, including for purposes hereof, any
shares of the Common Stock to be issued on the Conversion Date on account of
accrued but unpaid interest hereunder, are not delivered to or as directed by
the applicable Holder by the third Trading Day after the Conversion Date, the
Holder shall be entitled by written notice to the Company at any time on or
before its receipt of such certificate or certificates thereafter, to rescind
such conversion, in which event the Company shall immediately return the
Debentures tendered for conversion. If the Company fails to deliver to the
Holder such certificate or certificates pursuant to this Section, including
for purposes hereof, any shares of the Common Stock to be issued on the
Conversion Date on account of accrued but unpaid interest hereunder, prior to
the third Trading Day after the Conversion Date, the Company shall pay to
such Holder, in cash, as liquidated
<PAGE>
damages and not as a penalty, $1,500 for each day thereafter until the
Company delivers such certificates. If the Company fails to deliver to the
Holder such certificate or certificates pursuant to this Section prior to the
20th day after the Conversion Date, the Company shall, at the Holder's option
(i) prepay, from funds legally available therefor at the time of such
prepayment, the aggregate of the principal amount of Debentures then held by
such Holder, as requested by such Holder, and (ii) pay all accrued but unpaid
interest on account of the Debentures for which the Company shall have failed
to issue the Common Stock certificates hereunder, in cash. The prepayment
price shall equal the Mandatory Prepayment Amount for the Debentures to be
prepaid. If the Holder has required the Company to prepay Debentures pursuant
to this Section and the Company fails for any reason to pay the prepayment
price within seven days after such notice is deemed delivered hereunder, the
Company will pay interest on the prepayment price at a rate of 18% per annum
(to accrue daily), in cash to such Holder, accruing from such seventh day
until the prepayment price and any accrued interest thereon is paid in full.
(c) (i) The conversion price (the "CONVERSION PRICE") in
effect on any Conversion Date shall be the lesser of (A) $3.34 (the "INITIAL
CONVERSION PRICE") and (B) 83% multiplied by the average of the five lowest
Per Share Market Values during the ten (10) Trading Days immediately
preceding the Conversion Date; PROVIDED THAT, (a) if an Underlying Securities
Registration Statement is not filed on or prior to the Filing Date (as such
term is defined in the Registration Rights Agreement), or (b) if the Company
fails to file with the Commission a request for acceleration in accordance
with Rule 12d1-2 promulgated under the Securities Exchange Act of 1934, as
amended, within five (5) days of the date that the Company is notified
(orally or in writing, whichever is earlier) by the Commission that an
Underlying Securities Registration Statement will not be "reviewed" or is not
subject to further review or comment by the Commission, or (c) if the
Underlying Securities Registration Statement is not declared effective by the
Commission on or prior to the Effectiveness Date (as defined in the
Registration Rights Agreement), or (d) if such Underlying Securities
Registration Statement is filed with and declared effective by the Commission
but thereafter ceases to be effective as to all Registrable Securities (as
such term is defined in the Registration Rights Agreement) at any time prior
to the expiration of the "Effectiveness Period" (as such term as defined in
the Registration Rights Agreement), without being succeeded by a subsequent
Underlying Securities Registration Statement filed with and declared
effective by the Commission within ten (10) days, or (e) if trading in the
Common Stock shall be suspended, or if the Common Stock shall be delisted
from trading, on the OTC Bulletin Board or any other national securities
market or exchange on which the Common Stock is then listed or quoted for
trading for any reason for more than three (3) Trading Days, or (f) if the
conversion rights of the Holders of Debentures are suspended for any reason
or if the Holder is not permitted to resell Registrable Securities under the
Underlying Securities Registration Statement, or (g) if an amendment to the
Underlying Securities Registration Statement is not filed by the Company with
the Commission within ten (10) days of the Commission's notifying the Company
that such amendment is required in order for the Underlying Securities
Registration Statement to be declared effective (any such failure being
referred to as an "EVENT," and for purposes of clauses (a), (c) and (f) the
date on which such Event occurs, or for purposes of clause (b) the date on
which such five (5) days period is exceeded, or for purposes of clauses (d)
and (g) the date which such ten (10) day period is exceeded, or for purposes
of clause (e) the date on which such three (3) Trading Day period is
exceeded, being referred to as "EVENT DATE"), the Conversion Price shall be
decreased by 2.5% each month (i.e., the Conversion Price would decrease by
2.5% as of the Event Date and additional 2.5% as of each monthly anniversary
of the Event Date) until the earlier to occur of the second month anniversary
after the Event Date and such time as the applicable Event is
<PAGE>
cured. Commencing the second month anniversary after the Event Date, the
Company shall pay to the holders of the Debentures 2.5% of the aggregate
principal amount of Debentures then outstanding (each holder being entitled
to receive such portion of such amount as equals its pro rata portion of the
Debentures then outstanding) in cash as liquidated damages, and not as a
penalty on the first day of each monthly anniversary of the Event Date until
such time as the applicable Event, is cured. Any decrease in the Conversion
Price pursuant to this Section shall continue notwithstanding the fact that
the Event causing such decrease has been subsequently cured. The provisions
of this Section are not exclusive and shall in no way limit the Company's
obligations under the Registration Rights Agreement.
(ii) If the Company, at any time while any Debentures
are outstanding, (a) shall pay a stock dividend or otherwise make a
distribution or distributions on shares of its Common Stock or any other
equity or equity equivalent securities payable in shares of the Common Stock,
(b) subdivide outstanding shares of the Common Stock into a larger number of
shares, (c) combine outstanding shares of the Common Stock into a smaller
number of shares, or (d) issue by reclassification of shares of the Common
Stock any shares of capital stock of the Company, the Initial Conversion
Price shall be multiplied by a fraction of which the numerator shall be the
number of shares of the Common Stock (excluding treasury shares, if any)
outstanding before such event and of which the denominator shall be the
number of shares of the Common Stock outstanding after such event. Any
adjustment made pursuant to this Section shall become effective immediately
after the record date for the determination of stockholders entitled to
receive such dividend or distribution and shall become effective immediately
after the effective date in the case of a subdivision, combination or
re-classification.
(iii) If the Company, at any time while any
Debentures are outstanding, shall issue rights or warrants to all holders of
the Common Stock (and not to Holders of Debentures) entitling them to
subscribe for or purchase shares of the Common Stock at a price per share
less than the Per Share Market Value of the Common Stock at the record date
mentioned below, the Initial Conversion Price shall be multiplied by a
fraction, of which the denominator shall be the number of shares of the
Common Stock (excluding treasury shares, if any) outstanding on the date of
issuance of such rights or warrants plus the number of additional shares of
the Common Stock offered for subscription or purchase, and of which the
numerator shall be the number of shares of the Common Stock (excluding
treasury shares, if any) outstanding on the date of issuance of such rights
or warrants plus the number of shares which the aggregate offering price of
the total number of shares so offered would purchase at such Per Share Market
Value. Such adjustment shall be made whenever such rights or warrants are
issued, and shall become effective immediately after the record date for the
determination of stockholders entitled to receive such rights or warrants.
However, upon the expiration of any right or warrant to purchase shares of
the Common Stock the issuance of which resulted in an adjustment in the
Initial Conversion Price pursuant to this Section, if any such right or
warrant shall expire and shall not have been exercised, the Initial
Conversion Price shall immediately upon such expiration be recomputed and
effective immediately upon such expiration be increased to the price which it
would have been (but reflecting any other adjustments in the Initial
Conversion Price made pursuant to the provisions of this Section 4 after the
issuance of such rights or warrants) had the adjustment of the Initial
Conversion Price made upon the issuance of such rights or warrants been made
on the basis of offering for subscription or purchase only that number of
shares of the Common Stock actually purchased upon the exercise of such
rights or warrants actually exercised.
<PAGE>
(iv) If the Company, at any time while Debentures are
outstanding, shall distribute to all holders of the Common Stock (and not to
Holders of Debentures) evidences of its indebtedness or assets or rights or
warrants to subscribe for or purchase any security, then in each such case
the Initial Conversion Price at which Debentures shall thereafter be
convertible shall be determined by multiplying the Initial Conversion Price
in effect immediately prior to the record date fixed for determination of
stockholders entitled to receive such distribution by a fraction of which the
denominator shall be the Per Share Market Value of the Common Stock
determined as of the record date mentioned above, and of which the numerator
shall be such Per Share Market Value of the Common Stock on such record date
less the then fair market value at such record date of the portion of such
assets or evidence of indebtedness so distributed applicable to one
outstanding share of the Common Stock as determined by the Board of Directors
in good faith; PROVIDED, HOWEVER, that in the event of a distribution
exceeding ten percent (10%) of the net assets of the Company, such fair
market value shall be determined by a nationally recognized or major regional
investment banking firm or firm of independent certified public accountants
of recognized standing (which may be the firm that regularly examines the
financial statements of the Company) (an "APPRAISER") selected in good faith
by the holders of a majority in interest of Debentures then outstanding; and
PROVIDED, FURTHER, that the Company, after receipt of the determination by
such Appraiser shall have the right to select an additional Appraiser, in
good faith, in which case the fair market value shall be equal to the average
of the determinations by each such Appraiser. In either case the adjustments
shall be described in a statement provided to the holders of Debentures of
the portion of assets or evidences of indebtedness so distributed or such
subscription rights applicable to one share of the Common Stock. Such
adjustment shall be made whenever any such distribution is made and shall
become effective immediately after the record date mentioned above.
(v) In case of any reclassification of the Common
Stock or any compulsory share exchange pursuant to which the Common Stock is
converted into other securities, cash or property, the Holder of this
Debenture shall have the right thereafter to, at its option, (A) convert the
then outstanding principal amount, together with all accrued but unpaid
interest and any other amounts then owing hereunder in respect of this
Debenture only into the shares of stock and other securities, cash and
property receivable upon or deemed to be held by holders of the Common Stock
following such reclassification or share exchange, and the Holders of the
Debentures shall be entitled upon such event to receive such amount of
securities, cash or property as the shares of the Common Stock of the Company
into which the then outstanding principal amount, together with all accrued
but unpaid interest and any other amounts then owing hereunder in respect of
this Debenture could have been converted immediately prior to such
reclassification or share exchange would have been entitled or (B) require
the Company to prepay, from funds legally available therefor at the time of
such prepayment, the aggregate of its outstanding principal amount of
Debentures, plus all interest and other amounts due and payable thereon, at a
price determined in accordance with Section 3(b). The entire prepayment
price shall be paid in cash. This provision shall similarly apply to
successive reclassifications or share exchanges.
(vi) All calculations under this Section 4 shall be
made to the nearest cent or the nearest 1/100th of a share, as the case may
be.
(vii) Whenever the Initial Conversion Price is
adjusted pursuant to any of Section 4(c)(ii) - (v), the Company shall
promptly mail to each Holder of Debentures a notice setting forth the Initial
Conversion Price after such adjustment and setting forth a brief statement of
the facts requiring such adjustment.
<PAGE>
(viii) If:
A. the Company shall declare a dividend (or
any other distribution) on its Common
Stock; or
B. the Company shall declare a special
nonrecurring cash dividend on or a
redemption of its Common Stock; or
C. the Company shall authorize the granting to
all holders of the Common Stock rights or
warrants to subscribe for or purchase any
shares of capital stock of any class or of
any rights; or
D. the approval of any stockholders of
the Company shall be required in
connection with any reclassification
of the Common Stock of the Company,
any consolidation or merger to which
the Company is a party, any sale or
transfer of all or substantially all
of the assets of the Company, of any
compulsory share of exchange whereby
the Common Stock is converted into
other securities, cash or property; or
E. the Company shall authorize the
voluntary or involuntary dissolution,
liquidation or winding up of the
affairs of the Company;
then the Company shall cause to be filed at each office or agency maintained
for the purpose of conversion of the Debentures, and shall cause to be mailed
to the Holders of Debentures at their last addresses as they shall appear
upon the stock books of the Company, at least 30 calendar days prior to the
applicable record or effective date hereinafter specified, a notice stating
(x) the date on which a record is to be taken for the purpose of such
dividend, distribution, redemption, rights or warrants, or if a record is not
to be taken, the date as of which the holders of the Common Stock of record
to be entitled to such dividend, distributions, redemption, rights or
warrants are to be determined or (y) the date on which such reclassification,
consolidation, merger, sale, transfer or share exchange is expected to become
effective or close, and the date as of which it is expected that holders of
the Common Stock of record shall be entitled to exchange their shares of the
Common Stock for securities, cash or other property deliverable upon such
reclassification, consolidation, merger, sale, transfer or share exchange;
PROVIDED, HOWEVER, that the failure to mail such notice or any defect therein
or in the mailing thereof shall not affect the validity of the corporate
action required to be specified in such notice. Holders are entitled to
convert Debentures during the 30-day period commencing the date of such
notice to the effective date of the event triggering such notice.
(d) The Company covenants that it will at all times reserve
and keep available out of its authorized and unissued shares of the Common
Stock solely for the purpose of issuance upon conversion of the Debentures
and payment of interest on the Debentures, each as herein provided, free from
preemptive rights or any other actual contingent purchase rights of persons
other than the Holders, not less than such number of shares of the Common
Stock as shall be required by the Purchase Agreement (taking into account the
adjustments and restrictions of Section
<PAGE>
4(c).
(e) Upon a conversion hereunder the Company shall not be
required to issue stock certificates representing fractions of shares of the
Common Stock, but may if otherwise permitted, make a cash payment in respect
of any final fraction of a share based on the Per Share Market Value at such
time. If the Company elects not, or is unable, to make such a cash payment,
the holder shall be entitled to receive, in lieu of the final fraction of a
share, one whole share of Common Stock.
(f) The issuance of certificates for shares of the Common
Stock on conversion of the Debentures shall be made without charge to the
Holders thereof for any documentary stamp or similar taxes that may be
payable in respect of the issue or delivery of such certificate, provided
that the Company shall not be required to pay any tax that may be payable in
respect of any transfer involved in the issuance and delivery of any such
certificate upon conversion in a name other than that of the Holder of such
Debentures so converted and the Company shall not be required to issue or
deliver such certificates unless or until the person or persons requesting
the issuance thereof shall have paid to the Company the amount of such tax or
shall have established to the satisfaction of the Company that such tax has
been paid.
(g) Any and all notices or other communications or deliveries
to be provided by the Holders of the Debentures hereunder, including, without
limitation, any Conversion Notice, shall be in writing and delivered
personally, by facsimile, sent by a nationally recognized overnight courier
service or sent by certified or registered mail, postage prepaid, addressed
to the Company, at 3637 South Green Road, Suite 201, Beachwood, OH 44122
(facsimile number (216) 292-6187), attention Chief Financial Officer, or such
other address or facsimile number as the Company may specify for such
purposes by notice to the Holders delivered in accordance with this Section.
Any and all notices or other communications or deliveries to be provided by
the Company hereunder shall be in writing and delivered personally, by
facsimile, sent by a nationally recognized overnight courier service or sent
by certified or registered mail, postage prepaid, addressed to each Holder of
the Debentures at the facsimile telephone number or address of such Holder
appearing on the books of the Company, or if no such facsimile telephone
number or address appears, at the principal place of business of the holder.
Any notice or other communication or deliveries hereunder 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),
(ii) the date after the date of transmission, if such notice or communication
is delivered via facsimile at the facsimile telephone number specified in
this Section 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) four days
after deposit in the United States mail, (iv) the Business Day following the
date of mailing, if send by nationally recognized overnight courier service,
or (v) upon actual receipt by the party to whom such notice is required to be
given. For purposes of Section 4(c)(i), if a Conversion Notice is delivered
by facsimile prior to 7:00 p.m. (New York City time) on any date, then the
day prior to such date shall be the last Trading Day calculated to determine
the Conversion Price applicable to such Conversion Notice, and the date of
such delivery shall commence the counting of days for purposes of Section
4(b).
SECTION 5. OPTIONAL PREPAYMENT.
(a) The Company shall have the right, exercisable at any time
upon twenty (20)
<PAGE>
Trading Days prior written notice to the Holders of the Debentures to be
prepaid (the "OPTIONAL PREPAYMENT NOTICE"), to prepay, from funds legally
available therefor at the time of such prepayment, all or any portion of the
outstanding principal amount of the Debentures which have not previously been
repaid or for which Conversion Notices have not previously been delivered
hereunder, at a price equal to the Optional Prepayment Price (as defined
below). Any such prepayment by the Company shall be in cash and shall be free
of any claim of subordination. The Holders shall have the right to tender,
and the Company shall honor, Conversion Notices delivered prior to the
expiration of the twentieth (20th) Trading Day after receipt by the Holders
of an Optional Prepayment Notice for such Debentures (such date, the
"OPTIONAL PREPAYMENT DATE").
(b) If any portion of the Optional Prepayment Price shall not
be paid by the Company by the Optional Prepayment Date, the Optional
Prepayment Price shall be increased by 18% per annum (to accrue daily) until
paid (which amount shall be paid as liquidated damages and not as a penalty).
In addition, if any portion of the optional Prepayment Price remains unpaid
through the expiration of the Optional Prepayment Date, the Holder subject to
such prepayment may elect by written notice to the Company to either (i)
demand conversion in accordance with the formula and the time period therefor
set forth in Section 4 of any portion of the principal amount of Debentures
for which the Optional Prepayment Price, plus accrued liquidated damages
thereof, has not been paid in full (the "UNPAID PREPAYMENT PRINCIPAL
AMOUNT"), in which event the applicable Per Share Market Value shall be the
lower of the Per Share Market Value calculated on the Optional Prepayment
Date and the Per Share Market Value as of the Holder's written demand for
conversion, or (ii) invalidate AB INITIO such optional redemption,
notwithstanding anything herein contained to the contrary. If the Holder
elects option (i) above, the Company shall within three (3) Trading Days such
election is deemed delivered hereunder to the Holder the shares of Common
Stock issuable upon conversion of the Unpaid Prepayment Amount subject to
such conversion demand and otherwise perform its obligations hereunder with
respect thereto; or, if the Holder elects option (ii) above, the Company
shall promptly, and in any event not later than three Trading Days from
receipt of notice of such election, return to the Holder new Debentures for
the full Unpaid Prepayment Principal Amount. If, upon an election under
option (i) above, the Company fails to deliver the shares of Common Stock
issuable upon conversion of the Unpaid Prepayment Principal Amount within the
time period set forth in this Section, the Company shall pay to the Holder in
cash, as liquidated damages and not as a penalty, $1,500 per day until the
Company delivers such Common Stock to the Holder.
(c) The "OPTIONAL PREPAYMENT PRICE" for any Debentures shall
equal the sum of (i) the principal amount of Debentures to be prepaid, plus
all accrued and unpaid interest thereon, divided by the Conversion Price on
(x) the Optional Prepayment Date or (y) the date the Optional Prepayment
Price is paid in full, whichever is less, multiplied by the Average Price on
(x) the Optional Prepayment Date or (y) the date the Optional Prepayment
Price is paid in full, whichever is greater, and (ii) all other amounts and
liquidated damages due in respect of such principal amount.
SECTION 6. DEFINITIONS. For the purposes hereof, the
following terms shall have the following meanings:
"AVERAGE PRICE" on any date means the average Per Share Market
Value for the five (5) Trading Days immediately preceding such date.
<PAGE>
"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
action to close.
"COMMON STOCK" means common stock, $.001 par value per share,
of the Company and stock of any other class into which such shares may
hereafter have been reclassified or changed.
"MANDATORY REPAYMENT AMOUNT" for any Debentures shall equal
the sum of (i) the principal amount of Debentures to be prepaid, plus all
accrued and unpaid interest thereon, divided by the Conversion Price on (x)
the date the Mandatory Prepayment Amount is demanded or (y) the date the
Mandatory Prepayment Amount is paid in full, whichever is less, multiplied by
the Per Share Market Value on (x) the date the Mandatory Prepayment Amount is
demanded or (y) the date the Mandatory Prepayment Amount is paid in full,
whichever is greater, and (ii) all other amounts, costs, expenses and
liquidated damages due in respect of such Debentures.
"ORIGINAL ISSUE DATE" shall mean the date of the first
issuance of any Debentures regardless of the number of transfers of any
Debenture and regardless of the number of instruments which may be issued to
evidence such Debenture.
"PER SHARE MARKET VALUE" on any particular date means (a) the
closing bid price per share of the Common Stock on such date on the Nasdaq
SmallCap Market or other stock exchange or quotation system on which the
Common Stock is listed for trading, or (b) if the Common Stock is not listed
on the Nasdaq SmallCap Market or any other stock exchange or market, the
closing bid price per share of the Common Stock on such date on the
over-the-counter market, as reported by the OTC Bulletin Board, or (c) if the
Common Stock is not quoted on the OTC Bulletin Board, the closing bid price
per share of Common Stock on such date on the over-the-counter market as
reported by the National Quotation Bureau Incorporated (or any similar
organization or agency succeeding its functions of reporting prices), or (d)
if the Common Stock is no longer traded on the over-the-counter market and
reported by the National Quotation Bureau Incorporated (or any similar
organization or agency succeeding its functions of reporting prices), such
closing bid price shall be determined by reference to "Pink Sheet" quotes for
the relevant conversion period as determined in good faith by the Holder or
(c) if the Common Stock is not then publicly traded, the fair market value of
a share of Common Stock as determined by an appraiser selected in good faith
by the Holders of a majority in interest of the Debentures (the Company,
after receipt of the determination by such appraiser, shall have the right to
select an additional appraiser, in which case, the fair market value shall be
equal to the average of the determinations by each such appraiser).
"PERSON" means a corporation, an association, a partnership,
organization, a business, an individual, a government or political
subdivision thereof or a governmental agency.
"PURCHASE AGREEMENT" means the Convertible Debenture Purchase
Agreement, dated as of the Original Issue Date, among the Company and the
original Holders of Debentures, as amended, modified or supplemented from
time to time in accordance with its terms.
"REGISTRATION RIGHTS AGREEMENT" means the Registration Rights
Agreement, dated as of the Original Issue Date, among the Company and the
original Holders of Debentures, as
<PAGE>
amended, modified or supplemented from time to time in accordance with its
terms.
"TRADING DAY" means (a) a day on which the Common Stock is
traded on the Nasdaq Stock Market or other stock exchange or market on which
the Common Stock has been listed, or (b) if the Common Stock is not then
listed on the Nasdaq Stock Market or any stock exchange or market, a day on
which the Common Stock is traded on the over-the-counter market, as reported
by the OTC Bulletin Board, or (c) if the Common Stock is not quoted on the
OTC Bulletin Board, a day on which the Common Stock is quoted on the
over-the-counter market as reported by the National Quotation Bureau
Incorporated (or any similar organization or agency succeeding its functions
of reporting prices).
"UNDERLYING SHARES" means the shares of Common Stock into
which the Debentures, and interest thereon, are convertible in accordance
with the terms hereof and the Purchase Agreement.
"UNDERLYING SECURITIES REGISTRATION STATEMENT" means a
registration statement meeting the requirements set forth in the Registration
Rights Agreement, covering among other things the resale of the Underlying
Shares and naming the Holders as a "selling stockholders" thereunder.
SECTION 7. Except as expressly provided herein, no
provision of this Debenture shall alter or impair the obligation of the
Company, which is absolute and unconditional, to pay the principal of,
interest and liquidated damages (if any) on, this Debenture at the time,
place, and rate, and in the coin or currency, herein prescribed. This
Debenture is a direct obligation of the Company. This Debenture ranks PARI
PASSU with all other Debentures now or hereafter issued under the terms set
forth herein. The Company may only voluntarily prepay the outstanding
principal amount on the Debentures in accordance with Section 5 hereof.
SECTION 8. This Debenture shall not entitle the Holder to
any of the rights of a stockholder of the Company, including without
limitation, the right to vote, to receive dividends and other distributions,
or to receive any notice of, or to attend, meetings of stockholders or any
other proceedings of the Company, unless and to the extent converted into
shares of Common Stock in accordance with the terms hereof.
SECTION 9. If this Debenture shall be mutilated, lost,
stolen or destroyed, the Company shall execute and deliver, in exchange and
substitution for and upon cancellation of a mutilated Debenture, or in lieu
of or in substitution for a lost, stolen or destroyed debenture, a new
Debenture for the principal amount of this Debenture so mutilated, lost,
stolen or destroyed but only upon receipt of evidence of such loss, theft or
destruction of such Debenture, and of the ownership hereof, and indemnity, if
requested, all reasonably satisfactory to the Company.
SECTION 10. This Debenture shall be governed by and
construed in accordance with the laws of the State of New York, without
giving effect to conflicts of laws thereof. The Company hereby irrevocably
submits to the non-exclusive jurisdiction of the state and federal courts
sitting in the City of New York, borough of Manhattan, for the adjudication
of any dispute hereunder or in connection herewith or with any transaction
contemplated hereby or discussed herein, and hereby irrevocably waives, and
agrees not to assert in any suit, action or proceeding, any claim that it is
not personally subject to the jurisdiction of any such court, or that such
suit,
<PAGE>
action or proceeding is improper. The Company 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 the Company at
the address in effect for notices to it under this instrument 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.
SECTION 11. Any waiver by the Company or the Holder of a
breach of any provision of this Debenture shall not operate as or be
construed to be a waiver of any other breach of such provision or of any
breach of any other provision of this Debenture. The failure of the Company
or the Holder to insist upon strict adherence to any term of this Debenture
on one or more occasions shall not be considered a waiver or deprive that
party of the right thereafter to insist upon strict adherence to that term or
any other term of this Debenture. Any waiver must be in writing.
SECTION 12. If any provision of this Debenture is invalid,
illegal or unenforceable, the balance of this Debenture shall remain in
effect, and if any provision is inapplicable to any person or circumstance,
it shall nevertheless remain applicable to all other persons and
circumstances.
SECTION 13. Whenever any payment or other obligation
hereunder shall be due on a day other than a Business Day, such payment shall
be made on the next succeeding Business Day (or, if such next succeeding
Business Day falls in the next calendar month, the preceding Business Day in
the appropriate calendar month).
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
[SIGNATURE PAGE FOLLOWS]
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Debenture to
be duly executed by a duly authorized officer as of the date first above
indicated.
FIX-CORP INTERNATIONAL, INC.
By: /s/ Mark Fixler
-------------------------------------------
Name: Mark Fixler
Title: President/CEO
Attest:
By: /s/ Sherry L. Durst
-------------------------------------
Name: Sherry L. Durst
Title: Assistant Secretary
<PAGE>
EXHIBIT A
NOTICE OF CONVERSION
(To be Executed by the Registered Holder
in order to Convert the Debenture)
The undersigned hereby elects to convert Debenture No. A-12 into shares of
Common Stock, $.001 par value per share (the "Common Stock"), of Fix-Corp
International, Inc. (the "Company") according to the conditions hereof, as of
the date written below. If shares are to be issued in the name of a person
other than undersigned, the undersigned will pay all transfer taxes payable
with respect thereto and is delivering herewith such certificates and
opinions as reasonably requested by the Company in accordance therewith. No
fee will be charged to the holder for any conversion, except for such
transfer taxes, if any.
Conversion calculations:
Date to Effect Conversion
------------------------------------------------
Principal Amount of Debentures to be Converted
------------------------------------------------
Number of shares of Common Stock to be Issued
------------------------------------------------
Applicable Conversion Price
------------------------------------------------
Signature
------------------------------------------------
Name
------------------------------------------------
Address
<PAGE>
Exhibit 31
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this "AGREEMENT") is made and
entered into as of January 22, 1998, 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 Convertible Debenture Purchase
Agreement, dated as of the date hereof among the Company and the Purchasers (the
"PURCHASE AGREEMENT").
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 action to close.
"CLOSING DATE" shall have the meaning set forth in the Purchase
Agreement.
"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 4% Convertible Debentures due January
22,
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2001 issued to the Purchasers pursuant to the Purchase Agreement.
"EFFECTIVENESS DATE" means the 50th 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 20th day following the Closing Date.
"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
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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 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) 198,413 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, as amended,
pursuant to 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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2. AMENDMENT TO SHELF REGISTRATION
(a) On or prior to the Filing Date, the Company shall prepare and
file with the Commission an amendment to the Company's SB-2 Registration
Statement filed with the Commission on January 20, 1998, in order to provide for
the resale of the Registrable Securities. The Company shall use its best
efforts to cause the Registration Statement (as amended) 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, an
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amendment to the Registration Statement (and any additional
Registration Statements as may be required) in accordance with Section 2(a), and
cause the Registration Statement (as amended) to become effective and 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 additional
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
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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 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
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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.
(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
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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
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
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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 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.
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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 Securities in accordance with the requirements hereof, and printing
expenses incurred to comply with the requirements hereof.
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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.
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(c) CONDUCT OF INDEMNIFICATION PROCEEDINGS. If any Proceeding shall
be 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
12
<PAGE>
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' 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
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<PAGE>
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 Registration Statement
other than the Registrable Securities, and the Company shall not enter into any
agreement providing any such right to any of its securityholders.
(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.
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<PAGE>
(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.
3637 South Green Road, Suite 201
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: Director
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
15
<PAGE>
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.
(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
16
<PAGE>
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, 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 Registration Rights
Agreement as of the date first written above.
FIX-CORP INTERNATIONAL, INC.
By: /s/ MARK FIXLER
________________________________________
Name: Mark Fixler
Title: President/CEO
JNC OPPORTUNITY FUND LTD.
By: /s/ THOMAS H. DAVIS
________________________________________
Name: Thomas H. Davis
Title: Director
DIVERSIFIED STRATEGIES FUND, L.P.
By: Encore Capital Management, L.L.C.
By: /s/ NEIL T. CHAU
_____________________________________
Name: Neil T. Chau
Title: Managing Member
<PAGE>
Exhibit 32
NEITHER THIS WARRANT NOR THE SECURITIES INTO WHICH THIS WARRANT IS
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 THE REGISTRATION REQUIREMENTS THEREUNDER AND IN
COMPLIANCE WITH APPLICABLE STATE SECURITIES OR BLUE SKY LAWS.
FIX-CORP INTERNATIONAL, INC.
WARRANT
Warrant No. 004 Dated January 22, 1998
FIX-CORP INTERNATIONAL, INC., a Delaware corporation (the
"Company"), hereby certifies that, for value received, JNC Opportunity Fund
Ltd., or its registered assigns ("Holder"), is entitled, subject to the terms
set forth below, to purchase from the Company up to a total of 158,730 shares
of Common Stock, $.001 par value per share (the "Common Stock"), of the
Company (each such share, a "Warrant Share" and all such shares, the "Warrant
Shares") at an exercise price equal to $3.34 per share (as adjusted from time
to time as provided in Section 8, the "Exercise Price"), at any time and from
time to time from and after the date hereof and through and including January
22, 2001 (the "Expiration Date"), and subject to the following terms and
conditions:
1. REGISTRATION OF WARRANT. The Company shall register this
Warrant, upon records to be maintained by the Company for that purpose (the
"Warrant Register"), in the name of the record Holder hereof from time to
time. The Company may deem and treat the registered Holder of this Warrant as
the absolute owner hereof for the purpose of any exercise hereof or any
distribution to the Holder, and for all other purposes, and the Company shall
not be affected by notice to the contrary.
<PAGE>
2. REGISTRATION OF TRANSFERS AND EXCHANGES.
(a) The Company shall register the transfer of any
portion of this Warrant in the Warrant Register, upon surrender of this
Warrant, with the Form of Assignment attached hereto duly completed and
signed, to the Company at the office specified in or pursuant to Section
3(b). Upon any such registration or transfer, a new warrant to purchase
Common Stock, in substantially the form of this Warrant (any such new
warrant, a "New Warrant"), evidencing the portion of this Warrant so
transferred shall be issued to the transferee and a New Warrant evidencing
the remaining portion of this Warrant not so transferred, if any, shall be
issued to the transferring Holder. The acceptance of the New Warrant by the
transferee thereof shall be deemed the acceptance of such transferee of all
of the rights and obligations of a holder of a Warrant.
(b) This Warrant is exchangeable, upon the surrender
hereof by the Holder to the office of the Company specified in or pursuant to
Section 3(b) for one or more New Warrants, evidencing in the aggregate the
right to purchase the number of Warrant Shares which may then be purchased
hereunder. Any such New Warrant will be dated the date of such exchange.
3. DURATION AND EXERCISE OF WARRANTS.
(a) This Warrant shall be exercisable by the registered
Holder on any business day before 5:30 P.M., New York City time, at any time
and from time to time on or after the date hereof to and including the
Expiration Date. At 5:30 P.M., New York City time on the Expiration Date, the
portion of this Warrant not exercised prior thereto shall be and become void
and of no value. This Warrant may not be redeemed by the Company.
(b) Subject to Sections 2(b), 6 and 11, upon surrender
of this Warrant, with the Form of Election to Purchase attached hereto duly
completed and signed, to the Company at its address for notice set forth in
Section 11 and upon payment of the Exercise Price multiplied by the number of
Warrant Shares that the Holder intends to purchase hereunder, in lawful money
of the United States of America, in cash or by certified or official bank
check or checks, all as specified by the Holder in the Form of Election to
Purchase, the Company shall promptly (but in no event later than 3 business
days after the Date of Exercise (as defined herein)) issue or cause to be
issued and cause to be delivered to or upon the written order of the Holder
and in such name or names as the Holder may designate, a certificate for the
Warrant Shares issuable upon such exercise, free of restrictive legends other
than as required by the Purchase Agreement of even date herewith between the
Holder and the Company. Any person so designated by the Holder to receive
Warrant Shares shall be deemed to have become holder of record of such
Warrant Shares as of the Date of Exercise of this Warrant.
A "Date of Exercise" means the date on which the Company
shall have received (i) this Warrant (or any New Warrant, as applicable),
with the Form of Election to Purchase attached hereto (or attached to such
New Warrant) appropriately completed and duly signed, and (ii) payment of the
Exercise Price for the number of Warrant Shares so indicated by the holder
hereof to be purchased.
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<PAGE>
(c) This Warrant shall be exercisable, either in its
entirety or, from time to time, for a portion of the number of Warrant
Shares. If less than all of the Warrant Shares which may be purchased under
this Warrant are exercised at any time, the Company shall issue or cause to
be issued, at its expense, a New Warrant evidencing the right to purchase the
remaining number of Warrant Shares for which no exercise has been evidenced
by this Warrant.
4. PIGGYBACK REGISTRATION RIGHTS. During the term of this
Warrant, the Company may not file any registration statement with the
Securities and Exchange Commission (other than registration statements of the
Company filed on Form S-8 or Form S-4, each as promulgated under the
Securities Act of 1933, as amended, pursuant to which the Company is
registering securities pursuant to a Company employee benefit plan or
pursuant to a merger, acquisition or similar transaction including
supplements thereto, but not additionally filed registration statements in
respect of such securities) at any time when there is not an effective
registration statement covering the resale of the Warrant Shares and naming
the Holder as a selling stockholder thereunder, unless the Company provides
the Holder with not less than 20 days notice to each of the Holder and
Robinson Silverman Pearce Aronsohn & Berman LLP, attention Eric L. Cohen,
notice of its intention to file such registration statement and provides the
Holder the option to include any or all of the applicable Warrant Shares
therein. The piggyback registration rights granted to the Holder pursuant to
this Section shall continue until all of the Holder's Warrant Shares have
been sold in accordance with an effective registration statement or upon the
Expiration Date. The Company will pay all registration expenses in
connection therewith.
5. PAYMENT OF TAXES. The Company will pay all documentary
stamp taxes attributable to the issuance of Warrant Shares upon the exercise
of this Warrant; provided, however, that the Company shall not be required to
pay any tax which may be payable in respect of any transfer involved in the
registration of any certificates for Warrant Shares or Warrants in a name
other than that of the Holder, and the Company shall not be required to issue
or cause to be issued or deliver or cause to be delivered the certificates
for Warrant Shares unless or until the person or persons requesting the
issuance thereof shall have paid to the Company the amount of such tax or
shall have established to the satisfaction of the Company that such tax has
been paid. The Holder shall be responsible for all other tax liability that
may arise as a result of holding or transferring this Warrant or receiving
Warrant Shares upon exercise hereof.
6. REPLACEMENT OF WARRANT. If this Warrant is mutilated,
lost, stolen or destroyed, the Company shall issue or cause to be issued in
exchange and substitution for and upon cancellation hereof, or in lieu of and
substitution for this Warrant, a New Warrant, but only upon receipt of
evidence reasonably satisfactory to the Company of such loss, theft or
destruction and indemnity, if reasonably satisfactory to it. Applicants for
a New Warrant under such circumstances shall also comply with such other
reasonable regulations and procedures and pay such other reasonable charges
as the Company may prescribe.
7. RESERVATION OF WARRANT SHARES. The Company covenants
that it will at all times reserve and keep available out of the aggregate of
its authorized but unissued Common Stock, solely for the purpose of enabling
it to issue Warrant Shares upon exercise of this Warrant as herein
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<PAGE>
provided, the number of Warrant Shares which are then issuable and
deliverable upon the exercise of this entire Warrant, free from preemptive
rights or any other actual contingent purchase rights of persons other than
the Holders (taking into account the adjustments and restrictions of Section
8). The Company covenants that all Warrant Shares that shall be so issuable
and deliverable shall, upon issuance and the payment of the applicable
Exercise Price in accordance with the terms hereof, be duly and validly
authorized, issued and fully paid and nonassessable.
8. CERTAIN ADJUSTMENTS. The Exercise Price and number of
Warrant Shares issuable upon exercise of this Warrant are subject to
adjustment from time to time as set forth in this Section 8. Upon each such
adjustment of the Exercise Price pursuant to this Section 8, the Holder shall
thereafter prior to the Expiration Date be entitled to purchase, at the
Exercise Price resulting from such adjustment, the number of Warrant Shares
obtained by multiplying the Exercise Price in effect immediately prior to
such adjustment by the number of Warrant Shares issuable upon exercise of
this Warrant immediately prior to such adjustment and dividing the product
thereof by the Exercise Price resulting from such adjustment.
(a) If the Company, at any time while this Warrant is
outstanding, (i) shall pay a stock dividend or otherwise make a distribution
or distributions on shares of its Common Stock (as defined below) or on any
other class of capital stock (and not the Common Stock) payable in shares of
Common Stock, (ii) subdivide outstanding shares of Common Stock into a larger
number of shares, or (iii) combine outstanding shares of Common Stock into a
smaller number of shares, the Exercise Price shall be multiplied by a
fraction of which the numerator shall be the number of shares of Common Stock
(excluding treasury shares, if any) outstanding before such event and of
which the denominator shall be the number of shares of Common Stock
(excluding treasury shares, if any) outstanding after such event. Any
adjustment made pursuant to this Section shall become effective immediately
after the record date for the determination of stockholders entitled to
receive such dividend or distribution and shall become effective immediately
after the effective date in the case of a subdivision or combination, and
shall apply to successive subdivisions and combinations.
(b) In case of any reclassification of the Common Stock,
any consolidation or merger of the Company with or into another person, the
sale or transfer of all or substantially all of the assets of the Company in
which the consideration therefor is equity or equity equivalent securities or
any compulsory share exchange pursuant to which the Common Stock is converted
into other securities or property, then the Holder shall have the right
thereafter to exercise this Warrant only into the shares of stock and other
securities and property receivable upon or deemed to be held by holders of
Common Stock following such reclassification, consolidation, merger, sale,
transfer or share exchange, and the Holder shall be entitled upon such event
to receive such amount of securities or property of the Company's business
combination partner equal to the amount of Warrant Shares such Holder would
have been entitled to had such Holder exercised this Warrant immediately
prior to such reclassification, consolidation, merger, sale, transfer or
share exchange. The terms of any such consolidation, merger, sale, transfer
or share exchange shall include such terms so as to continue to give to the
Holder the right to receive the securities or property set forth in this
Section 8(b) upon any exercise following any such reclassification,
consolidation, merger, sale, transfer or share exchange.
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<PAGE>
(c) If the Company, at any time while this Warrant is
outstanding, shall distribute to all holders of Common Stock (and not to
holders of this Warrant) evidences of its indebtedness or assets or rights or
warrants to subscribe for or purchase any security (excluding those referred
to in Sections 8(a), (b) and (d)), then in each such case the Exercise Price
shall be determined by multiplying the Exercise Price in effect immediately
prior to the record date fixed for determination of stockholders entitled to
receive such distribution by a fraction of which the denominator shall be the
Exercise Price determined as of the record date mentioned above, and of which
the numerator shall be such Exercise Price on such record date less the then
fair market value at such record date of the portion of such assets or
evidence of indebtedness so distributed applicable to one outstanding share
of Common Stock as determined by a nationally recognized or major regional
investment banking firm or firm of independent certified public accountants
of recognized standing (which may be the firm that regularly examines the
financial statements of the Company) (an "Appraiser") mutually selected in
good faith by the holders of a majority in interest of the Warrants then
outstanding and the Company. Any determination made by the Appraiser shall
be final.
(d) If, at any time while this Warrant is outstanding,
the Company shall issue or cause to be issued rights or warrants to acquire
or otherwise sell or distribute shares of Common Stock to all holders of
Common Stock for a consideration per share less than the Exercise Price then
in effect, then, forthwith upon such issue or sale, the Exercise Price shall
be reduced to the price (calculated to the nearest cent) determined by
dividing (i) an amount equal to the sum of (A) the number of shares of Common
Stock outstanding immediately prior to such issue or sale multiplied by the
Exercise Price, and (B) the consideration, if any, received or receivable by
the Company upon such issue or sale by (ii) the total number of shares of
Common Stock outstanding immediately after such issue or sale.
(e) For the purposes of this Section 8, the following
clauses shall also be applicable:
(i) RECORD DATE. In case the Company shall take a
record of the holders of its Common Stock for the purpose of entitling them
(A) to receive a dividend or other distribution payable in Common Stock or in
securities convertible or exchangeable into shares of Common Stock, or (B) to
subscribe for or purchase Common Stock or securities convertible or
exchangeable into shares of Common Stock, then such record date shall be
deemed to be the date of the issue or sale of the shares of Common Stock
deemed to have been issued or sold upon the declaration of such dividend or
the making of such other distribution or the date of the granting of such
right of subscription or purchase, as the case may be.
(ii) TREASURY SHARES. The number of shares of
Common Stock outstanding at any given time shall not include shares owned or
held by or for the account of the Company, and the disposition of any such
shares shall be considered an issue or sale of Common Stock.
(f) All calculations under this Section 8 shall be made
to the nearest cent or the nearest 1/100th of a share, as the case may be.
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<PAGE>
(g) If:
(i) the Company shall declare a dividend (or
any other distribution) on its Common Stock;
or
(ii) the Company shall declare a special
nonrecurring cash dividend on or a redemption
of its Common Stock; or
(iii) the Company shall authorize the granting to
all holders of the Common Stock rights or
warrants to subscribe for or purchase any
shares of capital stock of any class or of
any rights; or
(iv) the approval of any stockholders of the
Company shall be required in connection
with any reclassification of the
Common Stock of the Company, any
consolidation or merger to which the Company
is a party, any sale or transfer of all or
substantially all of the assets of
the Company, or any compulsory share exchange
whereby the Common Stock is converted into
other securities, cash or property; or
(v) the Company shall authorize the voluntary
dissolution, liquidation or winding up of
the affairs of the Company,
then the Company shall cause to be mailed to each Holder at their last
addresses as they shall appear upon the Warrant Register, at least 30
calendar days prior to the applicable record or effective date hereinafter
specified, a notice stating (x) the date on which a record is to be taken for
the purpose of such dividend, distribution, redemption, rights or warrants,
or if a record is not to be taken, the date as of which the holders of Common
Stock of record to be entitled to such dividend, distributions, redemption,
rights or warrants are to be determined or (y) the date on which such
reclassification, consolidation, merger, sale, transfer or share exchange is
expected to become effective or close, and the date as of which it is
expected that holders of Common Stock of record shall be entitled to exchange
their shares of Common Stock for securities, cash or other property
deliverable upon such reclassification, consolidation, merger, sale,
transfer, share exchange, dissolution, liquidation or winding up; PROVIDED,
HOWEVER, that the failure to mail such notice or any defect therein or in the
mailing thereof shall not affect the validity of the corporate action
required to be specified in such notice.
9. PAYMENT OF EXERCISE PRICE. The Holder may pay the
Exercise Price in one of the following manners:
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<PAGE>
(a) CASH EXERCISE. The Holder shall deliver immediately
available funds; or
(b) CASHLESS EXERCISE. The Holder shall surrender this
Warrant to the Company together with a notice of cashless exercise, in which
event the Company shall issue to the Holder the number of Warrant Shares
determined as follows:
X = Y (A-B)/A
where:
X = the number of Warrant Shares to be issued to the
Holder.
Y = the number of Warrant Shares with respect to which
this Warrant is being exercised.
A = the average of the closing sale prices of the
Common Stock for the five (5) Trading Days immediately
prior to (but not including) the Date of Exercise.
B = the Exercise Price.
For purposes of Rule 144 promulgated under the Securities Act, it is
intended, understood and acknowledged that the Warrant Shares issued in a
cashless exercise transaction shall be deemed to have been acquired by the
Holder, and the holding period for the Warrant Shares shall be deemed to have
been commenced, on the issue date.
10. FRACTIONAL SHARES. The Company shall not be required to
issue or cause to be issued fractional Warrant Shares on the exercise of this
Warrant. The number of full Warrant Shares which shall be issuable upon the
exercise of this Warrant shall be computed on the basis of the aggregate
number of Warrant Shares purchasable on exercise of this Warrant so
presented. If any fraction of a Warrant Share would, except for the
provisions of this Section 10, be issuable on the exercise of this Warrant,
the Company shall, at its option, (i) pay an amount in cash equal to the
Exercise Price multiplied by such fraction or (ii) round the number of
Warrant Shares issuable, up to the next whole number.
11. NOTICES. Any and all notices or other communications or
deliveries 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, (ii) the business day following the date of
mailing, if sent by nationally recognized overnight courier service, or (iii)
upon actual receipt by the party to whom such notice is required to be given.
The addresses for such communications shall be: (1) if to the Company, to
3637 South Green Road, Suite 201, Beachwood, OH 44122, or to Facsimile No.:
(216) 292-6187 Attention: Chief Financial Officer, or (ii) if to the Holder,
to the Holder at the address or facsimile number appearing on the Warrant
Register or such other address or facsimile number as the Holder may provide
to the Company in accordance with this Section 11.
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<PAGE>
12. WARRANT AGENT.
(a) The Company shall serve as warrant agent under this
Warrant. Upon thirty (30) days' notice to the Holder, the Company may appoint
a new warrant agent.
(b) Any corporation into which the Company or any new
warrant agent may be merged or any corporation resulting from any
consolidation to which the Company or any new warrant agent shall be a party
or any corporation to which the Company or any new warrant agent transfers
substantially all of its corporate trust or shareholders services business
shall be a successor warrant agent under this Warrant without any further
act. Any such successor warrant agent shall promptly cause notice of its
succession as warrant agent to be mailed (by first class mail, postage
prepaid) to the Holder at the Holder's last address as shown on the Warrant
Register.
13. MISCELLANEOUS.
(a) This Warrant shall be binding on and inure to the
benefit of the parties hereto and their respective successors and permitted
assigns. This Warrant may be amended only in writing signed by the Company
and the Holder.
(b) Subject to Section 13(a), above, nothing in this
Warrant shall be construed to give to any person or corporation other than
the Company and the Holder any legal or equitable right, remedy or cause
under this Warrant; this Warrant shall be for the sole and exclusive benefit
of the Company and the Holder.
(c) This Warrant 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.
(d) The headings herein are for convenience only, do not
constitute a part of this Warrant and shall not be deemed to limit or affect
any of the provisions hereof.
(e) In case any one or more of the provisions of this
Warrant shall be invalid or unenforceable in any respect, the validity and
enforceability of the remaining terms and provisions of this Warrant shall
not in any way be affected or impaired thereby and the parties will attempt
in good faith to agree upon a valid and enforceable provision which shall be
a commercially reasonable substitute therefor, and upon so agreeing, shall
incorporate such substitute provision in this Warrant.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
[SIGNATURE PAGE FOLLOWS]
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<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant to be
duly executed by its authorized officer as of the date first indicated above.
FIX-CORP INTERNATIONAL, INC.
By: /s/ Mark Fixler
-------------------------------------
Name: Mark Fixler
-----------------------------------
Title: President
----------------------------------
<PAGE>
FORM OF ELECTION TO PURCHASE
(To be executed by the Holder to exercise the right to purchase shares of
Common Stock under the foregoing Warrant)
To FIX-CORP INTERNATIONAL, INC.:
In accordance with the Warrant enclosed with this Form of Election
to Purchase, the undersigned hereby irrevocably elects to purchase
[___________]shares of Common Stock ("Common Stock"), $.001 par value per
share, of Fix-Corp International, Inc. and encloses herewith $________ in
cash or certified or official bank check or checks, which sum represents the
aggregate Exercise Price (as defined in the Warrant) for the number of shares
of Common Stock to which this Form of Election to Purchase relates, together
with any applicable taxes payable by the undersigned pursuant to the Warrant.
The undersigned requests that certificates for the shares of Common
Stock issuable upon this exercise be issued in the name of
PLEASE INSERT SOCIAL SECURITY OR
TAX IDENTIFICATION NUMBER
--------------------------------------
- ------------------------------------------------------------------------------
(Please print name and address)
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
If the number of shares of Common Stock issuable upon this exercise
shall not be all of the shares of Common Stock which the undersigned is
entitled to purchase in accordance with the enclosed Warrant, the undersigned
requests that a New Warrant (as defined in the Warrant) evidencing the right
to purchase the shares of Common Stock not issuable pursuant to the exercise
evidenced hereby be issued in the name of and delivered to:
- ------------------------------------------------------------------------------
(Please print name and address)
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Dated: , Name of Holder:
----------------- -----
(Print)
-------------------------------
(By:)
---------------------------------
(Name:)
(Title:)
(Signature must conform in all respects to name
of holder as specified on the face of the Warrant)
<PAGE>
[To be completed and signed only upon transfer of Warrant]
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and
transfers unto ________________________________ the right represented by the
within Warrant to purchase ____________ shares of Common Stock of Fix-Corp
International, Inc. to which the within Warrant relates and appoints
________________ attorney to transfer said right on the books of Fix-Corp
International, Inc. with full power of substitution in the premises.
Dated:
- --------------- ,--------
---------------------------------------
(Signature must conform in all respects to name of
holder as specified on the face of the Warrant)
---------------------------------------
Address of Transferee
---------------------------------------
---------------------------------------
In the presence of:
- --------------------------
<PAGE>
Exhibit 33
NEITHER THIS WARRANT NOR THE SECURITIES INTO WHICH THIS WARRANT IS 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 THE REGISTRATION REQUIREMENTS THEREUNDER AND IN
COMPLIANCE WITH APPLICABLE STATE SECURITIES OR BLUE SKY LAWS.
FIX-CORP INTERNATIONAL, INC.
WARRANT
Warrant No. 005 Dated January 22, 1998
FIX-CORP INTERNATIONAL, INC., a Delaware corporation (the "Company"),
hereby certifies that, for value received, Diversified Strategies Fund, L.P.,
or its registered assigns ("Holder"), is entitled, subject to the terms set
forth below, to purchase from the Company up to a total of 39,683 shares of
Common Stock, $.001 par value per share (the "Common Stock"), of the Company
(each such share, a "Warrant Share" and all such shares, the "Warrant
Shares") at an exercise price equal to $3.34 per share (as adjusted from time
to time as provided in Section 8, the "Exercise Price"), at any time and from
time to time from and after the date hereof and through and including January
22, 2001 (the "Expiration Date"), and subject to the following terms and
conditions:
1. REGISTRATION OF WARRANT. The Company shall register this
Warrant, upon records to be maintained by the Company for that purpose (the
"Warrant Register"), in the name of the record Holder hereof from time to
time. The Company may deem and treat the registered Holder of this Warrant as
the absolute owner hereof for the purpose of any exercise hereof or any
distribution to the Holder, and for all other purposes, and the Company shall
not be affected by notice to the contrary.
<PAGE>
2. REGISTRATION OF TRANSFERS AND EXCHANGES.
(a) The Company shall register the transfer of any portion of
this Warrant in the Warrant Register, upon surrender of this Warrant, with
the Form of Assignment attached hereto duly completed and signed, to the
Company at the office specified in or pursuant to Section 3(b). Upon any
such registration or transfer, a new warrant to purchase Common Stock, in
substantially the form of this Warrant (any such new warrant, a "New
Warrant"), evidencing the portion of this Warrant so transferred shall be
issued to the transferee and a New Warrant evidencing the remaining portion
of this Warrant not so transferred, if any, shall be issued to the
transferring Holder. The acceptance of the New Warrant by the transferee
thereof shall be deemed the acceptance of such transferee of all of the
rights and obligations of a holder of a Warrant.
(b) This Warrant is exchangeable, upon the surrender hereof
by the Holder to the office of the Company specified in or pursuant to
Section 3(b) for one or more New Warrants, evidencing in the aggregate the
right to purchase the number of Warrant Shares which may then be purchased
hereunder. Any such New Warrant will be dated the date of such exchange.
3. DURATION AND EXERCISE OF WARRANTS.
(a) This Warrant shall be exercisable by the registered Holder
on any business day before 5:30 P.M., New York City time, at any time and from
time to time on or after the date hereof to and including the Expiration Date.
At 5:30 P.M., New York City time on the Expiration Date, the portion of this
Warrant not exercised prior thereto shall be and become void and of no value.
This Warrant may not be redeemed by the Company.
(b) Subject to Sections 2(b), 6 and 11, upon surrender of
this Warrant, with the Form of Election to Purchase attached hereto duly
completed and signed, to the Company at its address for notice set forth in
Section 11 and upon payment of the Exercise Price multiplied by the number of
Warrant Shares that the Holder intends to purchase hereunder, in lawful money
of the United States of America, in cash or by certified or official bank
check or checks, all as specified by the Holder in the Form of Election to
Purchase, the Company shall promptly (but in no event later than 3 business
days after the Date of Exercise (as defined herein)) issue or cause to be
issued and cause to be delivered to or upon the written order of the Holder
and in such name or names as the Holder may designate, a certificate for the
Warrant Shares issuable upon such exercise, free of restrictive legends other
than as required by the Purchase Agreement of even date herewith between the
Holder and the Company. Any person so designated by the Holder to receive
Warrant Shares shall be deemed to have become holder of record of such
Warrant Shares as of the Date of Exercise of this Warrant.
A "Date of Exercise" means the date on which the Company shall
have received (i) this Warrant (or any New Warrant, as applicable), with the
Form of Election to Purchase attached hereto (or attached to such New Warrant)
appropriately completed and duly signed, and (ii) payment of the Exercise Price
for the number of Warrant Shares so indicated by the holder hereof to be
purchased.
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<PAGE>
(c) This Warrant shall be exercisable, either in its entirety
or, from time to time, for a portion of the number of Warrant Shares. If less
than all of the Warrant Shares which may be purchased under this Warrant are
exercised at any time, the Company shall issue or cause to be issued, at its
expense, a New Warrant evidencing the right to purchase the remaining number of
Warrant Shares for which no exercise has been evidenced by this Warrant.
4. PIGGYBACK REGISTRATION RIGHTS. During the term of this
Warrant, the Company may not file any registration statement with the
Securities and Exchange Commission (other than registration statements of the
Company filed on Form S-8 or Form S-4, each as promulgated under the
Securities Act of 1933, as amended, pursuant to which the Company is
registering securities pursuant to a Company employee benefit plan or
pursuant to a merger, acquisition or similar transaction including
supplements thereto, but not additionally filed registration statements in
respect of such securities) at any time when there is not an effective
registration statement covering the resale of the Warrant Shares and naming
the Holder as a selling stockholder thereunder, unless the Company provides
the Holder with not less than 20 days notice to each of the Holder and
Robinson Silverman Pearce Aronsohn & Berman LLP, attention Eric L. Cohen,
notice of its intention to file such registration statement and provides the
Holder the option to include any or all of the applicable Warrant Shares
therein. The piggyback registration rights granted to the Holder pursuant to
this Section shall continue until all of the Holder's Warrant Shares have
been sold in accordance with an effective registration statement or upon the
Expiration Date. The Company will pay all registration expenses in
connection therewith.
5. PAYMENT OF TAXES. The Company will pay all documentary stamp
taxes attributable to the issuance of Warrant Shares upon the exercise of
this Warrant; provided, however, that the Company shall not be required to
pay any tax which may be payable in respect of any transfer involved in the
registration of any certificates for Warrant Shares or Warrants in a name
other than that of the Holder, and the Company shall not be required to issue
or cause to be issued or deliver or cause to be delivered the certificates
for Warrant Shares unless or until the person or persons requesting the
issuance thereof shall have paid to the Company the amount of such tax or
shall have established to the satisfaction of the Company that such tax has
been paid. The Holder shall be responsible for all other tax liability that
may arise as a result of holding or transferring this Warrant or receiving
Warrant Shares upon exercise hereof.
6. REPLACEMENT OF WARRANT. If this Warrant is mutilated, lost,
stolen or destroyed, the Company shall issue or cause to be issued in
exchange and substitution for and upon cancellation hereof, or in lieu of and
substitution for this Warrant, a New Warrant, but only upon receipt of
evidence reasonably satisfactory to the Company of such loss, theft or
destruction and indemnity, if reasonably satisfactory to it. Applicants for
a New Warrant under such circumstances shall also comply with such other
reasonable regulations and procedures and pay such other reasonable charges
as the Company may prescribe.
7. RESERVATION OF WARRANT SHARES. The Company covenants that it
will at all times reserve and keep available out of the aggregate of its
authorized but unissued Common Stock, solely for the purpose of enabling it to
issue Warrant Shares upon exercise of this Warrant as herein
-3-
<PAGE>
provided, the number of Warrant Shares which are then issuable and deliverable
upon the exercise of this entire Warrant, free from preemptive rights or any
other actual contingent purchase rights of persons other than the Holders
(taking into account the adjustments and restrictions of Section 8). The
Company covenants that all Warrant Share that shall be so issuable and
deliverable shall, upon issuance and the payment of the applicable Exercise
Price in accordance with the terms hereof, be duly and validly authorized,
issued and fully paid and nonassessable.
8. CERTAIN ADJUSTMENTS. The Exercise Price and number of Warrant
Shares issuable upon exercise of this Warrant are subject to adjustment from
time to time as set forth in this Section 8. Upon each such adjustment of
the Exercise Price pursuant to this Section 8, the Holder shall thereafter
prior to the Expiration Date be entitled to purchase, at the Exercise Price
resulting from such adjustment, the number of Warrant Shares obtained by
multiplying the Exercise Price in effect immediately prior to such adjustment
by the number of Warrant Shares issuable upon exercise of this Warrant
immediately prior to such adjustment and dividing the product thereof by the
Exercise Price resulting from such adjustment.
(a) If the Company, at any time while this Warrant is
outstanding, (i) shall pay a stock dividend or otherwise make a distribution
or distributions on shares of its Common Stock (as defined below) or on any
other class of capital stock (and not the Common Stock) payable in shares of
Common Stock, (ii) subdivide outstanding shares of Common Stock into a larger
number of shares, or (iii) combine outstanding shares of Common Stock into a
smaller number of shares, the Exercise Price shall be multiplied by a
fraction of which the numerator shall be the number of shares of Common Stock
(excluding treasury shares, if any) outstanding before such event and of
which the denominator shall be the number of shares of Common Stock
(excluding treasury shares, if any) outstanding after such event. Any
adjustment made pursuant to this Section shall become effective immediately
after the record date for the determination of stockholders entitled to
receive such dividend or distribution and shall become effective immediately
after the effective date in the case of a subdivision or combination, and
shall apply to successive subdivisions and combinations.
(b) In case of any reclassification of the Common Stock, any
consolidation or merger of the Company with or into another person, the sale
or transfer of all or substantially all of the assets of the Company in which
the consideration therefor is equity or equity equivalent securities or any
compulsory share exchange pursuant to which the Common Stock is converted
into other securities or property, then the Holder shall have the right
thereafter to exercise this Warrant only into the shares of stock and other
securities and property receivable upon or deemed to be held by holders of
Common Stock following such reclassification, consolidation, merger, sale,
transfer or share exchange, and the Holder shall be entitled upon such event
to receive such amount of securities or property of the Company's business
combination partner equal to the amount of Warrant Shares such Holder would
have been entitled to had such Holder exercised this Warrant immediately
prior to such reclassification, consolidation, merger, sale, transfer or
share exchange. The terms of any such consolidation, merger, sale, transfer
or share exchange shall include such terms so as to continue to give to the
Holder the right to receive the securities or property set forth in this
Section 8(b) upon any exercise following any such reclassification,
consolidation, merger, sale, transfer or share exchange.
-4-
<PAGE>
(c) If the Company, at any time while this Warrant is
outstanding, shall distribute to all holders of Common Stock (and not to
holders of this Warrant) evidences of its indebtedness or assets or rights or
warrants to subscribe for or purchase any security (excluding those referred
to in Sections 8(a), (b) and (d)), then in each such case the Exercise Price
shall be determined by multiplying the Exercise Price in effect immediately
prior to the record date fixed for determination of stockholders entitled to
receive such distribution by a fraction of which the denominator shall be the
Exercise Price determined as of the record date mentioned above, and of which
the numerator shall be such Exercise Price on such record date less the then
fair market value at such record date of the portion of such assets or
evidence of indebtedness so distributed applicable to one outstanding share
of Common Stock as determined by a nationally recognized or major regional
investment banking firm or firm of independent certified public accountants
of recognized standing (which may be the firm that regularly examines the
financial statements of the Company) (an "Appraiser") mutually selected in
good faith by the holders of a majority in interest of the Warrants then
outstanding and the Company. Any determination made by the Appraiser shall
be final.
(d) If, at any time while this Warrant is outstanding, the
Company shall issue or cause to be issued rights or warrants to acquire or
otherwise sell or distribute shares of Common Stock to all holders of Common
Stock for a consideration per share less than the Exercise Price then in
effect, then, forthwith upon such issue or sale, the Exercise Price shall be
reduced to the price (calculated to the nearest cent) determined by dividing
(i) an amount equal to the sum of (A) the number of shares of Common Stock
outstanding immediately prior to such issue or sale multiplied by the
Exercise Price, and (B) the consideration, if any, received or receivable by
the Company upon such issue or sale by (ii) the total number of shares of
Common Stock outstanding immediately after such issue or sale.
(e) For the purposes of this Section 8, the following clauses
shall also be applicable:
(i) RECORD DATE. In case the Company shall take a
record of the holders of its Common Stock for the purpose of entitling them
(A) to receive a dividend or other distribution payable in Common Stock or in
securities convertible or exchangeable into shares of Common Stock, or (B) to
subscribe for or purchase Common Stock or securities convertible or
exchangeable into shares of Common Stock, then such record date shall be
deemed to be the date of the issue or sale of the shares of Common Stock
deemed to have been issued or sold upon the declaration of such dividend or
the making of such other distribution or the date of the granting of such
right of subscription or purchase, as the case may be.
(ii) TREASURY SHARES. The number of shares of Common Stock
outstanding at any given time shall not include shares owned or held by or for
the account of the Company, and the disposition of any such shares shall be
considered an issue or sale of Common Stock.
(f) All calculations under this Section 8 shall be made to the
nearest cent or the nearest 1/100th of a share, as the case may be.
-5-
<PAGE>
(g) If:
(i) the Company shall declare a dividend (or any
other distribution) on its Common Stock; or
(ii) the Company shall declare a special
nonrecurring cash dividend on or a redemption of
its Common Stock; or
(iii)the Company shall authorize the granting
to all holders of the Common Stock rights or
warrants to subscribe for or purchase any shares
of capital stock of any class or of any rights;
or
(iv) the approval of any stockholders of the Company
shall be required in connection with any
reclassification of the Common Stock of the
Company, any consolidation or merger to which
the Company is a party, any sale or transfer of
all or substantially all of the assets of the
Company, or any compulsory share exchange
whereby the Common Stock is converted into other
securities, cash or property; or
(v) the Company shall authorize the voluntary
dissolution, liquidation or winding up of the
affairs of the Company,
then the Company shall cause to be mailed to each Holder at their last addresses
as they shall appear upon the Warrant Register, at least 30 calendar days prior
to the applicable record or effective date hereinafter specified, a notice
stating (x) the date on which a record is to be taken for the purpose of such
dividend, distribution, redemption, rights or warrants, or if a record is not to
be taken, the date as of which the holders of Common Stock of record to be
entitled to such dividend, distributions, redemption, rights or warrants are to
be determined or (y) the date on which such reclassification, consolidation,
merger, sale, transfer or share exchange is expected to become effective or
close, and the date as of which it is expected that holders of Common Stock of
record shall be entitled to exchange their shares of Common Stock for
securities, cash or other property deliverable upon such reclassification,
consolidation, merger, sale, transfer, share exchange, dissolution, liquidation
or winding up; PROVIDED, HOWEVER, that the failure to mail such notice or any
defect therein or in the mailing thereof shall not affect the validity of the
corporate action required to be specified in such notice.
9. PAYMENT OF EXERCISE PRICE. The Holder may pay the Exercise
Price in one of the following manners:
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<PAGE>
(a) CASH EXERCISE. The Holder shall deliver immediately
available funds; or
(b) CASHLESS EXERCISE. The Holder shall surrender this Warrant
to the Company together with a notice of cashless exercise, in which event the
Company shall issue to the Holder the number of Warrant Shares determined as
follows:
X = Y (A-B)/A
where:
X = the number of Warrant Shares to be issued to the Holder.
Y = the number of Warrant Shares with respect to which this
Warrant is being exercised.
A = the average of the closing sale prices of the Common
Stock for the five (5) Trading Days immediately prior to
(but not including) the Date of Exercise.
B = the Exercise Price.
For purposes of Rule 144 promulgated under the Securities Act, it is intended,
understood and acknowledged that the Warrant Shares issued in a cashless
exercise transaction shall be deemed to have been acquired by the Holder, and
the holding period for the Warrant Shares shall be deemed to have been
commenced, on the issue date.
10. FRACTIONAL SHARES. The Company shall not be required to issue
or cause to be issued fractional Warrant Shares on the exercise of this
Warrant. The number of full Warrant Shares which shall be issuable upon the
exercise of this Warrant shall be computed on the basis of the aggregate
number of Warrant Shares purchasable on exercise of this Warrant so
presented. If any fraction of a Warrant Share would, except for the
provisions of this Section 10, be issuable on the exercise of this Warrant,
the Company shall, at its option, (i) pay an amount in cash equal to the
Exercise Price multiplied by such fraction or (ii) round the number of
Warrant Shares issuable, up to the next whole number.
11. NOTICES. Any and all notices or other communications or
deliveries 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, (ii) the business day following the date of
mailing, if sent by nationally recognized overnight courier service, or (iii)
upon actual receipt by the party to whom such notice is required to be given.
The addresses for such communications shall be: (1) if to the Company, to
3637 South Green Road, Suite 201, Beachwood, OH 44122, or to Facsimile No.:
(216) 292-6187 Attention: Chief Financial Officer, or (ii) if to the Holder,
to the Holder at the address or facsimile number appearing on the Warrant
Register or such other address or facsimile number as the Holder may provide
to the Company in accordance with this Section 11.
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<PAGE>
12. WARRANT AGENT.
(a) The Company shall serve as warrant agent under this
Warrant. Upon thirty (30) days' notice to the Holder, the Company may appoint
a new warrant agent.
(b) Any corporation into which the Company or any new warrant
agent may be merged or any corporation resulting from any consolidation to
which the Company or any new warrant agent shall be a party or any
corporation to which the Company or any new warrant agent transfers
substantially all of its corporate trust or shareholders services business
shall be a successor warrant agent under this Warrant without any further
act. Any such successor warrant agent shall promptly cause notice of its
succession as warrant agent to be mailed (by first class mail, postage
prepaid) to the Holder at the Holder's last address as shown on the Warrant
Register.
13. MISCELLANEOUS.
(a) This Warrant shall be binding on and inure to the benefit
of the parties hereto and their respective successors and permitted assigns.
This Warrant may be amended only in writing signed by the Company and the
Holder.
(b) Subject to Section 13(a), above, nothing in this Warrant
shall be construed to give to any person or corporation other than the
Company and the Holder any legal or equitable right, remedy or cause under
this Warrant; this Warrant shall be for the sole and exclusive benefit of the
Company and the Holder.
(c) This Warrant 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.
(d) The headings herein are for convenience only, do not
constitute a part of this Warrant and shall not be deemed to limit or affect
any of the provisions hereof.
(e) In case any one or more of the provisions of this Warrant
shall be invalid or unenforceable in any respect, the validity and
enforceability of the remaining terms and provisions of this Warrant shall
not in any way be affected or impaired thereby and the parties will attempt
in good faith to agree upon a valid and enforceable provision which shall be
a commercially reasonable substitute therefor, and upon so agreeing, shall
incorporate such substitute provision in this Warrant.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
[SIGNATURE PAGE FOLLOWS]
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<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant to be
duly executed by its authorized officer as of the date first indicated above.
FIX-CORP INTERNATIONAL, INC.
By: /s/ Mark Fixler
-----------------------------------
Name: Mark Fixler
-----------------------------------
Title: President
-----------------------------------
<PAGE>
FORM OF ELECTION TO PURCHASE
(To be executed by the Holder to exercise the right to purchase shares of
Common Stock under the foregoing Warrant)
To FIX-CORP INTERNATIONAL, INC.:
In accordance with the Warrant enclosed with this Form of Election
to Purchase, the undersigned hereby irrevocably elects to purchase
[___________]shares of Common Stock ("Common Stock"), $.001 par value per
share, of Fix-Corp International, Inc. and encloses herewith $________ in
cash or certified or official bank check or checks, which sum represents the
aggregate Exercise Price (as defined in the Warrant) for the number of shares
of Common Stock to which this Form of Election to Purchase relates, together
with any applicable taxes payable by the undersigned pursuant to the Warrant.
The undersigned requests that certificates for the shares of Common
Stock issuable upon this exercise be issued in the name of
PLEASE INSERT SOCIAL SECURITY OR
TAX IDENTIFICATION NUMBER
---------------------
- ----------------------------------------------------------------------------
(Please print name and address)
- ----------------------------------------------------------------------------
- ----------------------------------------------------------------------------
If the number of shares of Common Stock issuable upon this exercise
shall not be all of the shares of Common Stock which the undersigned is
entitled to purchase in accordance with the enclosed Warrant, the undersigned
requests that a New Warrant (as defined in the Warrant) evidencing the right
to purchase the shares of Common Stock not issuable pursuant to the exercise
evidenced hereby be issued in the name of and delivered to:
- ----------------------------------------------------------------------------
(Please print name and address)
- ----------------------------------------------------------------------------
- ----------------------------------------------------------------------------
Dated: , Name of Holder:
------------ --------
(Print)
----------------------------
(By:)
----------------------------
(Name:)
----------------------------
(Title:)
----------------------------
(Signature must conform in all respects to name
of holder as specified on the face of the
Warrant)
<PAGE>
[To be completed and signed only upon transfer of Warrant]
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and
transfers unto ________________________________ the right represented by the
within Warrant to purchase ____________ shares of Common Stock of Fix-Corp
International, Inc. to which the within Warrant relates and appoints
________________ attorney to transfer said right on the books of Fix-Corp
International, Inc. with full power of substitution in the premises.
Dated:
_______________, ____
_______________________________________
(Signature must conform in all respects
to name of holder as specified on the
face of the Warrant)
_______________________________________
Address of Transferee
_______________________________________
_______________________________________
In the presence of:
__________________________
<PAGE>
EXHIBIT 34
ESCROW AGREEMENT
ESCROW AGREEMENT (this "AGREEMENT"), dated as of January 22, 1998,
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 a Convertible Debenture Purchase
Agreement, dated as of the date hereof (the "PURCHASE AGREEMENT"), pursuant
to which the Company is selling to the Purchasers certain of its 4%
Convertible Debentures Due January 22, 2001 (the "DEBENTURES") and certain
common stock purchase warrants (the "WARRANTS"). 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, each Purchaser
shall deposit with the Escrow Agent the portion of the Purchase Price due for
the Debentures and Warrant to be purchased by it at the Closing 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 Warrants 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
<PAGE>
and the 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 Closing
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 (i) $7,500 which will be retained
by the Escrow Agent pursuant to Section 5.1 of the Purchase Agreement and
(ii) $250,000 which will be paid to CDC Consulting, Inc. ("CDC") in
accordance with the engagement letter between the Company and CDC relating to
the transactions contemplated by the Purchase Agreement (the "ENGAGEMENT
LETTER"). In addition, the portion of the Purchase Price released to the
Company hereunder shall be reduced by all wire transfer fees incurred
thereupon.
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<PAGE>
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 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) Debentures in aggregate principal amount of
$2,000,000, (B) the 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 (A) Debentures in aggregate principal amount of
$500,000, (B) the DSF Warrant and (C) any interest earned on account of the
portion of the Purchase Price paid by DSF that shall have accrued through the
Closing; (iii) to the Company the Purchase Price (net of amounts described
under Section 1(d)) to the Company; (iv) to or as directed by CDC, $250,000
in accordance with the Engagement Letter; and (v) 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-
<PAGE>
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 depositary only, and the Escrow
Agent shall incur no liability whatsoever, except as a direct result of its
willful misconduct.
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
-4-
<PAGE>
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 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:
If to the Company: Fix-Corp International, Inc.
3637 South Green Road, Suite 201
Beachwood, OH 44122
Facsimile No.: (216) 292-6187
Attn: Chief Financial Officer
-5-
<PAGE>
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: Director
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.
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.
-6-
<PAGE>
(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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<PAGE>
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/CEO
JNC OPPORTUNITY FUND LTD.
By: /s/ Thomas H. Davis
-------------------------------------
Name: Thomas H. Davis
Title: Director
DIVERSIFIED STRATEGIES FUND, L.P.
By: Encore Capital Management, L.L.C.
By: /s/ Neil T. Chau
--------------------------------
Name: Neil T. Chau
Title: Managing Member
ROBINSON SILVERMAN PEARCE
ARONSOHN & BERMAN LLP
By: /s/ Kenneth L. Henderson
-------------------------------------
A Member of the Firm
<PAGE>
Exhibit 35
AGREEMENT FOR SALE OF BUSINESS ASSETS
THIS AGREEMENT entered into at Heath, Ohio on this 3RD day of February,
1998 by and between UNIVERSAL VINYL CORP., a Florida corporation (hereinafter
referred to as "Seller") and YORAM AISENBERG and AVRAHAM WEINSTEIN (jointly and
severally referred to as "Guarantors") and FLX-CORP INTERNATIONAL INC., an
Delaware corporation, (hereinafter referred to as "Buyer").
WITNESSETH:
WHEREAS, Seller is engaged in the business of designing,
manufacturing and selling vinyl window coverings from its
Facility located at 9200 Northwest 102nd Street, Medley,
Florida 33178; and,
WHEREAS, Seller desires to sell its assets to Buyer and
Buyer desires to purchase Seller's assets free and clear of
all claims and liabilities; and,
WHEREAS, Buyer has been induced to enter this transaction
based upon the representations, undertakings and guaranty of
Seller's obligations by Guarantors.
NOW THEREFORE, in consideration of the mutual promises hereinafter set
forth, the parties hereto agree as follows:
1. SALE OF ASSETS. The Seller shall sell and the Buyer shall purchase,
free and clear from all liens, liabilities, claims, causes of action and
encumbrances, the assets of Universal Vinyl Corp., a Florida corporation and the
stock-in-trade, furniture, fixtures, equipment, inventory, trade names, trade
marks, service marks, copyrights, patents, processes whether proprietary or
otherwise, telephone number(s), transferable insurance policies and all
contracts, licenses, deposits thereunder which have been made by or granted to
the Seller in connection with the business and all other tangible and intangible
assets and property (except cash and accounts receivables) owned and/or used by
the Seller in the business as more specifically enumerated in the attached
schedule of assets to be sold by the Seller attached hereto and marked EXHIBIT
"A". Seller will provide a corporate resolution satisfactory to Buyer at Closing
signed by a majority of all directors and shareholders of Seller authorizing the
sale of Sellers assets and approving and ratifying the terms and conditions of
this Agreement.
2. PURCHASE PRICE. The purchase price for all the assets referred to in
paragraph 1 and Exhibit "A" shall be ONE MILLION FORTY THOUSAND DOLLARS
($1,040,000.00).
3. PAYMENT OF PURCHASE PRICE. The entire purchase price shall, at the
time of closing, be deposited in an escrow account in accordance with the terms
and conditions of the
<PAGE>
escrow agreement, a copy of which is attached hereto as EXHIBIT "B" and
incorporated by reference into this Sale of Assets Agreement. The parties
acknowledge that virtually the entire purchase price shall be utilized for
the payment and retirement of obligations owed by Seller to various creditors
as hereinafter set forth.
4. BULK SALE REQUIREMENTS. Compliance with the Bulk Sale Requirements is
hereby waived by the parties hereto as the same has been repealed in the State
of Florida. In lieu thereof, contemporaneously with the closing of this
transaction the Seller shall do all of the following:
(a) Furnish the Buyer with a list of the Seller's then existing
creditors. The form of which is attached hereto and incorporated by
reference. Such list shall be signed and sworn to or affirmed by the Seller
and Guarantors and shall contain the names and business addresses of all of
the creditors of the Seller and whether general or secured, showing the
amount of indebtedness due and owing to each, when known, and also the names
of all persons who are known to the Seller to assert claims against him even
though such claims are disputed.
(b) Prepare and deliver as of the day of closing a schedule of the
property transferred including a detailed inventory, as of such date, of the
stock-in-trade, furniture, fixtures and equipment, and all other items of
personal property to be transferred hereunder, the form of which is attached
hereto.
5. REPRESENTATIONS BY SELLER. The Seller warrants and represents the
following as it relates to Seller and/or its business:
(a) Seller is a corporation duly organized and validly existing and in
good standing under the laws of the State of Florida and Seller has full power
and authority to execute and to deliver this Agreement and all related
documents, and to carry out the transaction contemplated herein. This Agreement
is valid, binding and enforceable against Seller and Guarantors in accordance
with its terms, except as such enforceability may be limited by creditors'
rights laws and applicable principles of equity. The execution of this
Agreement and the consummation of the transaction contemplated herein do not
result in a breach of the terms and conditions of nor constitute a default under
or violation of Seller's organizational documents or any law, regulation, court
order, mortgage, note, bond, indenture, agreement license or other instrument or
obligation to which Seller is now a party or by which Seller or any of the
assets of Seller may be bound or affected.
(b) That it is the owner of and has good and marketable title to all the
assets specifically enumerated in the attached scheduled of assets and/or
referred to herein, free and clear from all liens, debts, claims, liabilities
and/or encumbrances (except the debts and obligations to creditors to be set
forth in the list of creditors referred to in paragraph 5) and further that the
business of Seller is a going solvent business;
(c) It has entered into no contract relating to the business, except as
shown in the attached schedule of assets;
2
<PAGE>
(d) There are no judgments, liens, claims, actions, or proceedings
threatened or pending against it anywhere, except as specifically disclosed
in EXHIBIT "C" attached hereto;
(e) Seller is not in violation of any law, regulation, statute or
ordinance, whether threatened to pending, associated with its business and/or
the operation thereof, and including but not limited to any laws, regulations,
statutes or ordinances relating to consumer and/or environmental matters;
(f) It has not used any other business name or address within five (5)
years of the date of this agreement;
(g) The property to be transferred is now and at the time of closing will
be located at Seller's place of business and will not be removed therefrom
without the written consent of the Buyer and all equipment, fixtures and
tangible assets will be in good working order and repair and that any hidden
and/or latent defects associated therewith and known to Seller or Guarantors
will be to Buyer disclosed in Exhibit "A";
(h) That all of the books, records and financial statements and documents
relating to the business of the Seller, including but not limited to information
and documents relating to sales volume, accounts receivable and payable,
expenses, income and assets valuation are true and accurate and represent
additional inducement for the Buyer to enter into this transaction. Furthermore,
all of the books and records maintained by Seller with respect to its ownership
and/or operation of the Seller's Assets are true and correct in all material
respects;
(i) That the lease applicable to the location of the business will be will
be performed pursuant to its terms and conditions;
(j) All tax returns, reports and filings of any kind or nature required to
be filed by Seller prior to Closing with respect to all federal, state and local
income, payroll, withholding, excise, sales, use, real and personal property,
use and occupancy, business and occupation, mercantile, and franchise taxes in
connection with the Lease, Seller's operation of the Facility, and its ownership
of the Personal Property and Intellectual Property have been properly completed
and timely filed in material compliance with all applicable requirements and all
taxes or other similar obligations, which are due and payable by Seller have
been timely paid and/or will be timely filed when due in the case of such
filings which are due for year end. There are no tax liens on any of the
Seller's, Assets except liens with respect to real property taxes not yet due,
Seller has no knowledge of any audit, investigation or other proceeding which
could result in a tax lien on any of the Seller's Assets. If any tax returns or
filings have not been completed prior to closing, Seller will complete them
within 120 days after the closing.
(k) Except as disclosed in EXHIBIT "D", the employees of the Facility are
not members of a labor union nor subject to any collective bargaining agreement
with respect to their employment at the Facility nor has any notice of any kind
been received by the Seller relating to any vote to unionize Seller's business.
There are no labor disputes or grievances pending with
3
<PAGE>
respect to the operations at the Facility, except as otherwise provided in
EXHIBIT "D". For purposes hereof, a labor dispute or grievance shall be deemed
to be pending if the same has been served on Seller or Seller has otherwise been
advised either orally or in writing of the pendency thereof. There are no
employment contracts of any kind or nature involving the Seller and any officer,
director, shareholders and/or employee of Seller.
(l) No representation or warranty by Seller contained in this Agreement
and no statement contained in any certificate, list, exhibit, or other
instrument furnished or to be furnished to Buyer pursuant hereto, or in
connection with the transaction contemplated hereby, contains or will contain
any untrue statement of a material fact, or omits or will omit to state any
material facts which are necessary in order to make the statements contained
herein or therein not misleading.
6. COVENANTS OF SELLER. The Seller covenants with the Buyer as follows:
(a) The bill of sale and instruments of assignment to be delivered at the
closing will transfer all of the assets enumerated in the attached schedule and
referred to herein, free and clear of all liens, liabilities, claims and
encumbrances, and will contain the usual warranties and affidavits of title as
set forth in EXHIBIT "E";
(b) The business will be conducted up to the date of closing in
substantially the same manner as it has been conducted in the past, and in
accordance with all applicable laws and regulations;
(c) No judgments, liens, or security interests will be outstanding at the
time of the closing against the Seller or against the business or any assets
thereof, except as otherwise contained herein;
(d) That between the date hereof and the Closing Date, except as
contemplated by this Agreement or with the consent of Buyer:
i. Seller will file all tax returns, reports and filings of any kind
or nature then required to be filed by Seller and will timely pay all
taxes or other obligations which are due and payable with respect to
Seller's Assets, excepting that if Seller has not filed all tax
returns (including but not limited to payroll tax, franchise, property
tax, etc.) at the time of Closing, Seller will indicate in writing
which returns and filings have not been completed and Seller will
prepare and file same at Seller's sole costs and expense not later
than 120 days after the closing. In such event, Buyer may elect to
escrow and/or withhold the payment of funds sufficient to cover any
resulting tax liability, including penalties, assessments and
interest. Seller and Guarantors agree to defend, save harmless and
indemnify Buyer from and against any and all manner of claims,
demands, liabilities and damages associated with Seller's tax
liability;
4
<PAGE>
ii. Seller will not take any action inconsistent with its obligations
under this Agreement or which could hinder or delay the consummation
of the transactions contemplated by this Agreement and Seller will
continue until the Closing to fulfill any obligations which it may
have under the Existing Contracts;
iii. Seller will operate the Facility and business only in the ordinary
course and with due regard to the proper maintenance and repair of the
Facility and the Personal Property;
iv. Seller will take all reasonable action to preserve the goodwill of the
customers, including, but not limited to customers which are parties
to any of the Existing Contracts and customers which do not have any
contracts with Seller as of Closing;
v. Seller will not make any material change in the operation of the
Facility nor sell or agree to sell any of the items which comprise the
Seller's Assets nor otherwise enter into an agreement materially
affecting any of the Seller's Assets;
vi. Seller will use its best efforts to retain the services and goodwill
of employees located at or connected with the operation of the
Facility;
vii. Seller will maintain in force the existing hazard and liability
insurance policies, or comparable coverage, for the Seller's Assets as
now in effect;
viii. Seller will not increase the compensation or other benefits or bonuses
payable or to become payable to any of the Seller's employees, except
for increases, if any, substantially in accordance with existing
employment practices disclosed to Buyer, if any, or except for
increases which will not affect Buyer's operations at the Facility
after closing;
ix. Seller will not enter into any contract or commitment affecting the
Seller's Assets except in the ordinary course of business and Seller
will advise Buyer of any contracts or commitments which it enters,
whether in the ordinary course of business or otherwise;
x. During normal business hours, Seller will provide Buyer and its
agents with access (in the company of a representative of Seller) on
24 hours notice to the Real Property and the Facility, provided Buyer
does not interfere with the operation of the Facility, and provided
Buyer uses its best efforts not to disturb any residents of the
Facility during the course of such inspections and at such times
Seller shall permit Buyer to inspect the books and
5
<PAGE>
records and the physical and structural condition of the Facility,
the Real Property and the Personal Property;
xi. Seller will timely pay all obligations which are due and payable
with respect to the Seller's Assets:
xii. Seller will operate the Facility and business in substantial
compliance with all applicable municipal, county, state and federal
laws, regulations, ordinances, standards and orders as now in effect
(including without limitation, the building and zoning codes as
currently applied with respect thereto) and with the environmental
laws where the failure to comply therewith could have a material
adverse effect on the business, property, condition (financial or
otherwise) or operation of the Facility or on the Seller's Assets;
xiii. Seller will take all reasonable action to achieve
substantial compliance with any laws, regulations, ordinances,
standards and orders applicable to the Seller's Assets which are
enacted after execution of this Agreement and prior to Closing and
which require compliance prior to Closing;
xiv. Seller will proceed with all due diligence to secure any consents
which may be necessary for the assignment of the Lease' Existing
Contracts and Operating Contracts;
xv. As soon as practicable after the date hereof but in no event
later than twenty (20) days following full execution of this
Agreement, Seller will deliver to Buyer a UCC-1 search report (herein
so called):
xvi. Seller will cooperate with Buyer in any efforts which Buyer may
undertake to audit Seller's financial statements with respect to the
Facility for the periods prior to the Closing if and to the extent
such an audit is required for Buyer's compliance with applicable
securities laws provided that Buyer shall pay all costs thereof: and,
xvii. Seller shall disclose to Buyer all material information
regarding Seller's respective product warranties, claims handling
procedures, product repair practices, and warranty and liability
histories, including, without limitation, the existence of any
recurring defects.
7. REPRESENTATIONS AND COVENANT OF BUYER. The Buyer represents that it
has examined the premises in which the business is now being conducted by the
Seller and has inspected the physical condition of all the furniture, fixtures,
and equipment therein. The Buyer covenants that he will accept a conveyance of
such assets in their present state and condition, subject to reasonable use to
the date of closing and further subject to the requirements of paragraph 5(f)
above.
6
<PAGE>
8. CONTRACTS. All contracts enmerated in the attached schedule of
assets shall be assumed by the Buyer at the closing. The Seller shall
perform all such contracts insofar as they are required by their terms to be
performed by the Seller before the closing, and the Seller shall indemnity
the Buyer against any liability and expense arising out of any breach
occurring before the closing and/or after the Closing if associated with
Seller's acts and/or omissions. The Buyer shall indemnify the Seller against
any liability or expense arising out of any breach of such contracts occuring
after the closing unlesss any such breach is related to and/or associated
with Seller's acts or omissions.
9. SURVIVAL OF REPRESENTATIONS AND CONVENTS. All representations and
covenants made by each party shall survive the closing for the benefit of the
other party.
10. FIRE OR OTHER CASUALTY. The Seller assumes all risk of
destruction, loss, or damage due to fire, storm or flood or other casualty up
to the date of closing. If the destruction, loss or damage exceeds $500.00,
the Buyer shall have the right to terminate this agreement, in which event,
the deposit made by him shall be returned by the Seller and all obligations
under this agreement shall terminate.
11. CLOSING. The closing and transfer of title to and possession of
the business and assets shall take place on at the office of
_________________ on or before February 28, 1998 at Buyer's discretion as to
date and time. Each of the parties will execute and deliver at the Closing
all instruments reasonable required to carry out the terms and intent of this
agreement, including all instruments required by Buyer. All of Sellers
creditors shall be paid as part of the closing. In addition, all of those
persons, entities, governmental subdivisions, taxing authorities or agencies
having judgment(s), lien(s), security interest(s) and/or encumbrance(s) of
any kind or nature against the business and/or assets of Seller shall be paid
as part of the closing to Buyer's satisfaction. Possession of the business
and of the assets sold to the Buyer will be delivered to the Buyer at and
immediately after the Closing.
12. ENTIRE AGREEMENT. This agreement sets forth the entire
understanding of the parties, and it shall not be changed or terminated other
than in writing signed by an authorized representative of each party. Should
Seller and/or Guarantors be found to have breached any of their obligations
pursuant to this agreement and/or caused any misrepresentation of fact to be
made in this agreement, Seller and Guarantors shall be liable to Buyer for
the payment of all of Buyer's damages and expenses, including reasonable
attorney fees, associated with the breach and/or misrepresentation and the
damages associated therewith.
13. BINDING EFFECT; OBLIGATIONS OF GUARANTORS. All the terms and
provisions of this agreement shall be being upon and inure to the benefit of and
be enforceable by the legal representatives and assigns of the parties.
The Guarantors hereby irrevocably and unconditionally guaranty (a) that all
of the representations of Seller as contained herein are true and accurate; and
(b) that he shall be liable and responsible to Buyer for the full and complete
performance and/or accuracy of any and all
7
<PAGE>
obligations, representations, terms and covenants agreed to by the Seller
pursuant to this agreement. The obligation and liability of the Seller and
Guarantors to Buyer under this provision of the agreement shall be joint and
several.
14. NOTICES. Any notice, request or other communication to be given by any
party hereunder shall be in writing and shall be sent by registered or certified
mail, postage prepaid, by overnight courier guaranteeing overnight delivery or
by facsimile transmission (if confirmed in writing by mail as aforesaid), to the
following address:
TO SELLER:
Universal Vinyl Corp.
9200 N.W. 102 Street
Medley, Florida 33178
Phone: 305-888-7670
Facsimile: 305-885-9764
TO GUARANTORS:
Yoram Aisenberg
3401 Island Road
Cooper City, Florida 33330
Phone:
Facsimile:
Avraham Weinstein
12913 N.W. 22nd Manor
Pembroke Pines, Florida 33028
Phone:
Facsimile:
TO BUYER:
Fix Corp International, Inc.
Attention: Mark Fixler, President
3637 S. Green Road, Suite 201
Beachwood, Ohio 44122
Phone No.: 216-292-3182
FAX No.: 216-292-6187
8
<PAGE>
Notice shall be deemed given three (3) business days after deposit in the mail
on the next day if sent by overnight courier and on receipt if sent by facsimile
(and confirmed verbally or by mail as aforesaid).
15. CONDITIONS PRECEDENT. Buyer's obligation pursuant to this agreement
are contingent upon the following:
(a) Buyer's conduct and completion of its due diligence on or before
February 20, 1997 with the results thereof being satisfactory to Buyer. As part
of the conduct of Buyer's due diligence, Seller and Guarantors shall make its
business and Facility available to Buyer and Buyer's agents and representatives
for inspections and Seller shall make all books, records and documents relating
to the business available so that Buyer will have reasonable access thereto.
(b) Buyer's review and approval to its satisfaction of a list of Seller's
creditors as well as a list of those persons, entities, governmental
subdivisions, taxing authorities and/or agencies having judgment(s), lien(s),
security interest(s) and/or encumbrance(s) against the business and/or assets of
Seller. Seller will provide such list to Buyer within five (5) business days of
execution of this agreement and Seller will certify the accuracy of same at
closing with any additional information added thereto as a result of Buyer's due
diligence.
(c) Buyer's review and approval to its satisfaction of the inventory,
including its amount, value and quantities, which will be transferred to Buyer
as part of this transaction.
(d) Buyer's review and approval to its satisfaction at the time of Closing
of the condition of the business and assets of Seller being purchased.
(e) Buyer's review and approval to its satisfaction of an employment
contract to be executed by Buyer and Yoram Aisenberg at the time of closing,
including the execution thereof by Buyer and Yoram Aisenberg as part of the
Closing.
16. NONCOMPETITION; NONDISCLOSURE. Seller and Guarantors agree that they
will not, in any capacity and in any form of participation, enter into any
business which is competitive with the business of that being conducted by Buyer
with the assets being purchased from Seller for a period of five (5) years in
any market area or region in which the Seller is conducting business, and Seller
and Guarantors will not solicit as a part thereof any of the former customers of
Seller during that period. Furthermore, Seller and Guarantors agree that they
will not disclose to any person, business or other entity any information
relating to the business, assets, financial dealings, customer lists, customer
leads or proprietary information of Seller without Buyer's written consent which
shall be at the sole descretion of the Buyer.
17. GOVERNING LAW. This agreement shall be governed by the laws of the
State of Ohio and jurisdiction and venue shall be proper in Licking County,
Ohio. The remedies to any party to this agreement for the breach and/or
nonperformance by any other party shall be cumulative and all parties shall have
those remedies available at law or in equity.
9
<PAGE>
IN WITNESS WHEREOF, the parties hereto have hereunto set their hands on the
day and year first above written.
SELLER:
UNIVERSAL VINYL CORP.
By: /s/ Yoram Aisenberg
--------------------------
Its:
-------------------------
BUYER:
FIX CORP INTERNATIONAL, INC.
- -----------------------------
By: /s/ Mark Fixler
-------------------------
Its: President
------------------------
GUARANTORS:
/s/ Yoram Aisenberg
- -----------------------------
Yoram Aisenberg, Individually
/s/ Avraham Weinstein
- -----------------------------
Avraham Weinstein, Individually
10
<PAGE>
PRIMARY EQUIPMENT
-----------------
1 60mm extruder
1 60mm extruder
1 60mm extruder
1 60mm extruder
1 30mm extruder
1 30mm extruder
1 30mm extruder
1 10 hp Dayton compressor
2 emergency air system compressors
6 primary sizing tables
3 downstream cooling tables
1 valance traveling saw
4 4" belt pullers
1 valance v-belt puller
4 cutting guillotine
4 generators and counting systems
4 packaging tables
5 staple guns
3 wood staple guns
1 25 hp granulator
2 paper transfer machine
1 embossing machine
1 embossing machine cooling system
6 primary extruder dye holders
48 extrusion and co-extrusion dyes
2 complete extrusion systems for valance
3 vacuum loading hopper
8 embossing rollers
1 heavy duty scale for up to 30,000 pounds
Exhibit "A" Page One
<PAGE>
SUPPORT EQUIPMENT
-----------------
1 Mitsubishi fork lift
1 loading ramp
10 propane tanks
1 Isuzu NRR truck 24' van
1 GMC Step Van
2 floor jacks
1 milling machine bridge board
1 dye polishing machine
1 Haring grinding machine
1 sand blasting machine
1 floor belt saw
1 Miller welding machine
1 fabrication cutting and packaging table
1 wood cutting table
1 table drill
2 shop vacuum systems
1 granit level stone "Starrett"
2 bench grinders
1 hand held heat blower
2 tool boxes complete with tools and measuring equipment precession
SPARE PART AND EQUIPMENT
------------------------
6 spare electronic circuit boards for extruders
1 spare transfer box for extruder
1 spare transfer box for puller
2 spare main motors for extruders
2 spare power transfer boxes "transformers"
4 spare extruder screws
3 spare extruder barrels
1 spare set of tooling for bridge board
Exhibit "A" Page Two
<PAGE>
OFFICE EQUIPMENT AND INVENTORY
------------------------------
4 office desks
5 credenzas
1 Pinet Bow copy machine
1 AT&T Sprint telephone system
1 security and surveillance for warehouse and offices
2 computer 386
2 printers
11 file cabinets
3 floor fan blowers
CURRENT INVENTORY
-----------------
inventory of raw materials in all colors
PVC pearl materials
PVC clear approximately $222,000.00
finished goods inventory $157,000.00 current
paper transfer inventory of paper $52,500.00
packaging material $9,500.00
Exhibit "A" Page Three
<PAGE>
EXHIBIT B
(ESCROW AGREEMENT)
The parties agree that no escrow will be necessary, as all funds will be
disbursed at the time of Closing, except for any funds that are withheld by
Buyer to meet any contingencies or debts the amount of which are uncertain or
unknown.
<PAGE>
EXHIBIT C
(SECTION 5(d) REPRESENTATIONS)
1. State of Florida (Intangible tax)
$ 2,259.57
Date: July 26, 1994
2. LECTRO-FORM, INC. V. UNIVERSAL VINYL, INC.
Superior Court of New Jersey, Passaic County
Docket No. PAS-L-463-96
Filed Oct. 14, 1997
Judgment $18,932.56 plus interest
3. GEON COMPANY, ET AL. V. UNIVERSAL VINYL
U.S. District Court, Southern District of Florida (Miami)
Case No. 96-CV-36 and Case No. 95-CV-1074
Injunction
4. PROFILE INDUSTRIES V. UNIVERSAL VINYL
U.S. District Court, Southern District of Florida (Ft. Lauderdale)
Case No. 93-CV-6071
Filed January 28, 1993
Consent Judgment on May 12, 1993 (Copy of Consent Judgment to be provided
by Buyer to Seller at and/or prior to Closing for Sellers review and
approval)
<PAGE>
EXHIBIT D
(SECTION 5(k) REPRESENTATIONS)
The employees of the Facility are not members of a labor union nor subject to
any collective bargaining agreement with respect to their employment at the
Facility nor has any notice of any kind been received by the Seller relating to
any vote to unionize Seller's business. There are no labor disputes or
grievances pending with respect to the operations at the Facility. There are no
employment contracts of any kind or nature involving the Seller and any officer,
director, shareholders and/or employee of Seller.
<PAGE>
EXHIBIT E
(SECTION 6(a))
See Bill of Sale attached hereto
<PAGE>
RAMCO FORM 101
BILL OF SALE, ABSOLUTE
KNOW ALL MEN BY THESE PRESENTS, That
Universal Vinyl Corp.
of the City of Medley, in the County of Dade and the State of Florida of the
first part, for and in consideration of the sum of Ten and
No/100---------------------------------------------Dollars lawful money of
the United States, to it paid by Fix Corp. International Inc. of party of the
second part, the receipt whereof is hereby acknowledged, has granted,
bargained, sold, transferred and delivered, and by these presents does grant,
bargain, sell, transfer and deliver unto the said party of the second part,
its executors, administrators and assigns, the following goods and chattels:
See Exhibit "A" attached hereto.
TO HAVE AND TO HOLD the same unto the said party of the second part, its
executors, administrators and assigns forever.
AND we do, for us and our heirs, executors and administrators, covenant
to and with the said party of the second part, its executors, administrators
and assigns, that we the lawful owner of the said goods and chattels; that
they are free from all encumbrances; that we have good right to sell the same
aforesaid, and that we will warrant and defend the sale of the said property,
goods and chattels hereby made, unto the said party of the second part its
executors, administrators and assigns against the lawful claims and demands
of all persons whomsoever.
IN WITNESS WHEREOF, have hereunto set our hand and
seal this day of February, one thousand nine hundred and ninety eight
Signed, sealed and delivered in UNIVERSAL VINYL CORP.
the presence of us:
_______________________________________ ________________________(SEAL)
_______________________________________ BY:_____________________(SEAL)
STATE OF Florida I hereby Certify on this day, before me,
------------------------------ an officer duly authorized
COUNTY OF DADE Dade to administer oaths and take
----------------------- acknowledgments, personally appeared
_______________________________________________________________________________
known to me to be the person ____ described in and who executed the foregoing
instrument, who acknowledged before me that he executed the same, that I
relied upon the following form ____ of identification of the above-named
person __:_____________________________________
________________________________________________
NOTARY RUBBER STAMP SEAL Witness my hand and official seal in the
County and State last aforesaid this
_________ day of FEBRUARY A.D. 1998.
____________________________________________
Notary Signature
____________________________________________
Printed Notary Signature
<PAGE>
Exhibit 36
FIRST AMENDED LICENSING AND
MARKETING AGREEMENT
THIS FIRST AMENDED LICENSING AND MARKETING AGREEMENT made and entered
into at Heath, Ohio on this ____ day of February, 1998 by and between NITRO
PLASTICS TECHNOLOGIES OF ISRAEL, an Israel Corporation (referred to herein as
either "Nitro Plastics" and/or "Licensor"), 17 Ben Yobuda St. Notanya 43305
and ___________________ and YORAM AISENBERG and PALLETECH, INC. KNA PALLET
TECHNOLOGY, INC., (referred to hereinafter as either "Palletech" and/or
"Licensee") a Delaware corporation whose business address is 1835 James
Parkway, Heath, Ohio 43056.
WITNESSETH:
WHEREAS, Palletech is a manufacturer of virgin and
recycled plastic products; and
WHEREAS, Nitro Plastics and Yoram Aisenberg represent
that Nitro Plastics is the sole and exclusive owner and
Licensor of a proprietary injection molding technology
(the "Process" and/or "Information" and "proprietary
process") especially suited for the manufacturing of
plastic pallets and other products from recycled plastics;
and,
WHEREAS, Nitro Plastics desires to grant to Palletech the
exclusive right to use the Process and Information in the
manufacture of plastic pallets, and Palletech desires to
manufacture pallets utilizing the proprietary technology
(i.e. the Process and Information) to be supplied by Nitro
Plastics pursuant to this agreement as an amendment to the
parties prior written agreement dated July 7, 1997.
NOW THEREFORE, in consideration of the mutual covenants, terms and
conditions contained herein, the parties agree as follows:
1. LICENSE.
Nitro Plastics grants to the Palletech the exclusive, unlimited,
irrevocable, right and license in all fifty states of the United States of
America (the "Exclusive Territory"), with the right to
<PAGE>
grant sub-licenses to third parties within the Exclusive Territory, to use
and exploit the proprietary injection molding technology for the
manufacturing of plastic pallets of all kinds and sizes as well as any
products specifically developed by Palletech and to manufacture, have
manufactured, use, market, have marketed, sell and have sold plastic pallets
and/or other products developed by Palletech based on or relating to the
proprietary process. The exclusive right and license herein granted shall
apply to all inventions, improvements, patents, patent applications and
letters patent, which Nitro Plastics now owns or controls, or hereafter may
own or control, and which relate to the proprietary process and the
manufacturing and/or sale of plastic pallets resulting therefrom, and to all
information and documents, which Nitro Plastics now owns or controls, or
hereafter may own or control, and which relate to the proprietary process
hereinafter also referred to as the "Process" and/or "Information" and the
manufacturing and/or sale of pallets resulting therefrom. As to all other
products developed through use of the Process by Nitro Plastics and/or
Aisenberg, Palletech shall have the right to use the Process to manufacture,
sell, distribute, sub-license and exploit in all manner these other products
in all 50 states of the United States on a non-exclusive basis.
2. REPRESENTATIONS OF NITRO PLASTICS.
Nitro Plastics and Yoram Aisenberg warrant and represent the following:
(a) that the Process and Information (i.e. the proprietary injection
molding technology) is proprietary and is under the exclusive
ownership and control of Nitro Plastics and is available for use
in the fifty (50) United States by Palletech and the use thereof by
Palletech is not an infringement on any other same or similar
patent or proprietary process owned and/or controlled by persons or
entities other than Nitro Plastics;
(b) that Nitro Plastics is the exclusive owner and/or Licensor of all
rights to the Process and Information and that Nitro Plastics has
the right to grant this exclusive license applicable to the
Exclusive Territory and Non-exclusive Territory, and has not
granted to any other person, firm, entity or corporation any right,
license, shop right, or privilege thereunder to use the Process and
Information in such Territories other than Palletech;
(c) the Process and Information when combined with the equipment
recently installed by Palletech at its James Parkway location will
result in the manufacture of plastic pallets from recycled plastic
to the quality, strength and specifications as represented by Nitro
Plastics as set forth in Schedule 2(c) attached hereto and further
that the equipment ordered by Palletech to manufacture the plastic
pallets as described in Section 4.1 below will produce the plastic
pallets to the quality, strength and specifications as represented
by Nitro Plastics;
(d) that during the pendency of this agreement, and as to all rights of
Palletech which are granted herein, Nitro Plastics and Yoram
Aisenberg shall do all things necessary to maintain the
confidentiality of its proprietary process referred to
2
<PAGE>
herein and/or as well as its rights to such Process and
Information and Nitro Plastics shall not do anything which in any
way restricts, prohibits, limits, shortens and/or terminates any
rights acquired by Palletech under this agreement.
3. ASSISTANCE AND RELATED INFORMATION.
Upon request by Palletech at any time, Nitro Plastics shall cause to be
furnish to Palletech, its nominees, representatives or attorneys, within five
(5) business days after such request, all information and documents relating
to the Process and Information, including but not limited to copies of any
License Agreements and amendments thereto entered into by and between Nitro
Plastics and any other licensee, person and/or entity associated with
exploitation of the Process and/or manufacture of products using the Process.
Any such information provided to nominees, representatives or attorneys of
Palletech shall remain confidential.
4. CONDITIONS AND AGREEMENTS.
4.1. That based upon specifications and approvals of Nitro Plastics and
Yoram Aisenberg given in advance of such purchase, Palletech has purchased
and had installed at its facility located at 1835 James Parkway, Heath, Ohio
43056 an injection molding machine and appropriate mold and equipment for the
purpose of manufacturing plastic pallets. Said machines is described as a
750 ton form molding machine, with gas assist technology and proprietary
configuration, and said machine has been inspected and approved by the
representative of Nitro Plastics, Yoram Aisenberg, who has acknowledged that
said equipment is suitable in every way and necessary for the manufacture of
plastic pallets from recycled plastic using the Process and Information and
further that said equipment is of the kind an nature which when using the
Process will produce plastic pallets from recycled plastic at the rate of
______ pallets per hour.
4.2. Nitro Plastics hereby licenses Palletech to utilize the subject
technology for the specific purpose of manufacture of plastic pallets (or
such other products as shall be mutually agreed by the parties for a period
of ten (10) years, commencing with the date that the subject machine is
installed and operational (i.e. producing pallets at the rate per hour as set
forth in Section 4.1 above) at Palletech's location in Heath, Ohio. After
the ten (10) year period of time, Palletech shall have the right in
perpetuity to use, license and sub-license the Process and Information within
the Exclusive Territory, free and clear of any claim or interest of Nitro
Plastics.
5. RESPECTIVE DUTIES.
The respective duties, responsibilities and obligations of the parties,
in addition to those described in other sections of this agreement are as
follows:
5.1. Duties of Nitro Plastics:
5.1.1. Nitro Plastics and Yoram Aisenberg shall provide supervisory and
technical personnel to effect the installation of the subject machine and
train personnel of Palletech in the use and operation of said machine; and,
Nitro Plastics shall continue to provide technical support
3
<PAGE>
for a period of one (1) year commencing with the date that the machine
produces its first pallet ready for sale and delivery at the hourly rate
described in Section 4.1 above.
5.1.2. Nitro Plastics and Yoram Aisenberg shall provide sales personnel
who will undertake the non-exclusive sale of pallets produced by Palletech,
at a price determined by Palletech.
5.1.3. Nitro Plastics and Yoram Aisenberg shall perform such other sales
and marketing functions as it deems necessary or desirable, provided however
that Palletech shall bear the expense of an annual reasonable advertising
allowance, such an amount to be determined by the agreement of the parties
and with consideration to then production demands.
5.1.4. Palletech shall, at its own cost and expense, provide all
production facilities, equipment, raw materials, supplies, maintenance,
repair, personnel and any and all other items, as shall be necessary to
accomplish the manufacture of plastic pallets.
6. FEES AND PAYMENTS.
6.1. Palletech shall pay to Nitro Plastics an initial licensing fee in
the amount of $83,333.33, receipt in full of which is hereby acknowledged by
Nitro Plastics.
6.2. During the first five (5) years of the term of this agreement,
Palletech shall pay to Nitro Plastics a royalty fee in the amount of FIFTY
CENTS ($.50) per pallet sold, delivered and paid for by purchaser. During
the second five (5) years or the term of this agreement, the royalty per
pallet referred to above shall be reduced to Twenty-Five Cents ($.25) per
pallet. Payment of royalties shall be made to Nitro Plastics by Palletech
within seven (7) business days, after the end of each month on pallets sold,
delivered and paid for by the purchaser.
7. MISCELLANEOUS PROVISIONS.
7.1. DEFAULT
7.1.1. Default by Palletech: It is understood and agreed that the
technology licensed herein is proprietary to Nitro Plastics who is the owner
of the Process and Information. Nitro Plastics agrees to defend, save
harmless and indemnify Palletech, or it affiliates and/or sub-licensees in
the event that Nitro Plastics does not own, possess and/or exclusively
control the proprietary technology that it has claimed it owns. Any attempt
by Palletech to utilize this technology for its own purposes, outside of the
terms and provisions of this agreement shall be deemed to be an "event of
default" of this agreement and this agreement shall immediately terminate,
excepting however that an "event of default" shall not be deemed to have
occurred by Palletech unless and until Nitro Plastics has given written
notice by certified mail return requested to Palletech c/o Mr. Mark Fixler,
Vice-President, Pallet Technology, Inc., 3637 South Green Road, Suite 201,
Beachwood, Ohio 44122 specifically advising Palletech of the alleged breach
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and Palletech has not corrected and/or cured such alleged breach within one
hundred twenty (120) days (the "Cure Period") after receipt of the notice
from Nitro Plastics.
Until such time as the Cure Period has run, no conduct by Palletech as
referred to herein and/or as alleged as a breach shall be deemed to be an
"event of default". In the event of a default by Palletech, Nitro Plastics
shall be entitled to all legal and equitable relief, including injunction, as
shall be appropriate. Nitro Plastics agrees that Palletech has the right to
sell the pallets through its own efforts, organization, representatives,
sub-licensee(s) and/or affiliate organization(s) provided that Nitro Plastics
receives its royalties on those sales.
7.1.2. In the event of default by Palletech after the Cure Period has
run, and in addition to all remedies available to Nitro Plastic at law or in
equity, Palletech shall be liable to Nitro Plastics for the immediate payment
of all royalties then due from Palletech.
7.2. NO PARTNERSHIP: Nothing contained herein shall be construed or
interpreted to create a partnership relationship between the parties.
Neither party shall have any authority to obligate or bind the other for any
debt to a third party.
7.3. NOTICE: Any notice required by this agreement shall be given by
certified mail to the address(es) of the party involved as shown at the
beginning of this agreement.
7.4. ARBITRATION: No civil action concerning any dispute arising
regarding the payment of royalties under this agreement shall be instituted
before any court and all such disputes shall be submitted to final and
binding arbitration pursuant to the then pending rules of the American
Arbitration Association, with such arbitration to be conducted at 1335 James
Parkway, Heath Ohio or such other place as Palletech shall maintain its books
and records relating to production and sale of the pallets associated with
this agreement. The arbitrator's award resulting from such arbitration may
be confirmed and entered as a final judgment in any court of competent
jurisdiction and enforced accordingly. Otherwise, exclusive jurisdiction and
venue regarding any other matter(s) associated with this agreement shall be
in Licking County, Ohio unless agreed otherwise in writing by the parties
hereto.
7.5. ATTORNEYS FEES: In the event of any litigation and/or
arbitration caused by a dispute arising from this agreement, the prevailing
party shall be entitled to reimbursement from the losing party for attorney's
fees (including those on appeal) and costs incurred during each dispute.
7.6. SUCCESSORS IN INTEREST: Although it is understood and agreed
that this agreement is not assignable by Palletech to any third party without
the prior written consent of Nitro Plastics which shall not be unreasonably
withheld and/or unless under a specific provision of this agreement which
permits assignment or sub-licensing, the provisions, conditions, forms and
covenants herein contained shall bind, and the benefits and advantages shall
inure to, the respective successors, assigns, trustees, receivers, heirs and
personal representatives of the parties hereto.
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7.7 LAWS CONTROLLING: This agreement shall be construed, enforced
and interpreted in accordance with the laws of the State of Ohio, whose
jurisdiction is acceptable to both parties.
7.8. CAPTIONS: The captions of sections of this agreement are for
convenient reference only, and shall not affect the construction of
interpretations of any of the terms and provisions set forth herein.
7.9. SEVERABILITY: In the event any provision of this agreement are
found to be in violation of any law, or are determined to be unenforceable
for any reason, this shall not serve to invalidate the remainder of this
agreement.
7.10. INFRINGEMENT AND CONFIDENTIALITY: Nitro Plastics and Yoram
Aisenberg shall defend, at its own expense, all infringement suits that may
be brought against Palletech or its sub-licensees based on or related to the
manufacture, use, or sale of the pallets and products based on or using the
Process, Information and any other aspects of the proprietary information.
In the event any information is brought to the attention of Nitro Plastics
that others without benefit of license are infringing and/or using any of the
rights granted pursuant to this agreement to Palletech, Nitro Plastics and
Aisenberg shall, at its own expense, diligently prosecute all such
infringers. In any of the foregoing suits, Palletech may, at Palletech's
expense, be represented by counsel of its own choice. Nitro Plastics will do
all things necessary to protect the confidentiality of its proprietary
process during the term of this Agreement and thereafter as well as them
confidentiality of Palletech's business and the business of its patents and
affiliates including but not limited to Palletech's products, personnel,
suppliers, customers, customer lists and customer leads.
7.11. All documents, blue prints, machine blue prints, and operating
techniques will be placed in a safety deposit box.
8. ASSIGNMENTS AND AUTHORIZATION.
8.1. Nitro Plastics reserves the right to assign this licensing and
marketing agreement only with the written consent of Palletech, which consent
shall not be unreasonably withheld.
8.2. Nitro Plastics shall provide to Palletech prior to the execution
of this Agreement a resolution of the board of directors and/or authorized
officers of Nitro Plastics, being Yoram Aisenberg and Avraham Weinstein,
which authorizes and approves Yoram Aisenberg as a representative of Nitro
Plastics acting on behalf of Nitro Plastics, to agree to the provisions of
this agreement and execute this agreement on behalf of Nitro Plastics.
IN WITNESS WHEREOF, the parties hereto have executed this agreement on
the day and year first above written. This Agreement supercedes the written
agreement by and between Palletech and Nitro Plastics dated July 7, 1997 and
represent the entire Agreement of the parties.
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Witnessed in the Presence of: NITRO PLASTICS TECHNOLOGIES OF ISRAEL
- ---------------------------------- ------------------------------------
By: /s/ Yoram Aisenberg
--------------------------------
Its:
- ---------------------------------- --------------------------------
PALLETECH, INC. kna PALLET
TECHNOLOGY, INC.
- ---------------------------------- ------------------------------------
By: /S/ Mark Fixler
--------------------------------
Its: President
- ---------------------------------- --------------------------------
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