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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): January 21, 2000
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Security Asset Capital Corporation
(Exact Name of Registrant as Specified in Its Charter)
Nevada
(State or Other Jurisdiction of Incorporation)
000-29039 95-4729666
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(Commission File Number) (IRS Employer Identification No.)
701 "B" Street, Suite 1775, San Diego, California 92101
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(Address of Principal Executive Offices) (Zip Code)
(619) 232-9950
(Registrant's Telephone Number, Including Area Code)
UNIVERSAL VIEW CORPORATION
270 N. Canon Drive, Suite 203
Beverly Hills, California 90210
(Former Name or Former Address, if Changed Since Last Report)
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ITEM 1. CHANGES IN CONTROL OF REGISTRANT
Pursuant to a Stock Acquisition and Reorganization Agreement (the "Acquisition
Agreement") effective April 4, 2000, Security Asset Capital Corporation, a
Nevada corporation (the "Company"), acquired one hundred percent (100%) of all
the outstanding shares of voting securities (Common Stock) of Universal View
Corporation, a Nevada corporation ("Universal"), from Danilo Cacciamatta, Gary
Bryant and Suzanne Kerr Bryant, together representing all of the shareholders of
issued and outstanding common stock of Universal, for $125,000 and an aggregate
of 400,000 shares of common stock of the Company (the "Acquisition").
The Acquisition was approved by the unanimous consent of the Board of Directors
of Universal and the Company on April 4, 2000. The Acquisition is intended to
qualify as a reorganization within the meaning of Section 368(a)(1)(B) of the
Internal Revenue Code of 1986, as amended ("IRC").
Upon effectiveness of the Acquisition, pursuant to Rule 12g-3(a) of the General
Rules and Regulations of the Securities and Exchange Commission (the
"Commission"), the Company elected to become the successor issuer to Universal
for reporting purposes under the Securities Exchange Act of 1934 (the "Act") and
elects to report under the Act effective April 4, 2000.
As of the effective date of the Acquisition Agreement, Universal shall assume
the name of the Company. The Company's officers and directors will become the
officers and directors of Universal. As of the Effective Date, Mr. Cacciamatta
shall have resigned as an officer and director of Universal.
No subsequent changes in the officers, directors and five percent shareholders
of the Company are presently known. The following table sets forth information
regarding the beneficial ownership of the shares of the Common Stock (the only
class of shares previously issued by the Company) at April 4, 2000 by (i) each
person known by the Company to be the beneficial owner of more than five percent
(5%) of the Company's outstanding shares of Common Stock, (ii) each director of
the Company, (iii) the executive officers of the Company, and (iv) by all
directors and executive officers of the Company as a group, prior to and upon
completion of this Offering. Each person named in the table, excluding Cede &
Company, has sole voting and investment power with respect to all shares shown
as beneficially owned by such person and can be contacted at the address of the
Company.
<TABLE>
<CAPTION>
NAME OF SHARES OF
TITLE OF CLASS BENEFICIAL OWNER COMMON STOCK PERCENT OF CLASS(h)
-------------- ---------------- ------------ -------------------
<S> <C> <C> <C>
Common Cede & Company(a) 2,342,310 21.56%
Darrell Musick(b) 1,750,000 16.11%
David R. Walton(c) 1,100,000 10.13%
Kenneth Braid(d) 800,000 7.36%
David S. Walton 450,000 4.14%
Richard Gartrell 350,000 3.22%
Daniel Dallenbach(e) 250,000 2.30%
Daniel R. Smith(f) 250,000 2.30%
Michael Huffman(g) 200,000 1.84%
Daniel J. Hill 50,000 0.46%
DIRECTORS AND
OFFICERS AS A
GROUP 5,200,000 47.87%
</TABLE>
(a) Cede & Company is a holding company for private investors. Cede &
Company does not hold any shares of the Company's Common Stock for the benefit
of any of the Company's officers or directors.
(b) Mr. Musick and his wife, Marie A. Musick, are the beneficial owners of
Tonda Corporation, a Nevada corporation, that owns 1,400,000 shares of the
Company's Common Stock. Although Mr. Musick does not beneficially own more than
the shares listed, his son, Daniel Warren Musick, owns 883 shares, his mother,
Esther G. Musick, owns 333 shares, and his wife, Marie A. Musick, owns 333
additional shares.
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(c) Mr. David R. Walton is the beneficial owner of Jade Corporation, a
Nevada corporation, that owns 1,000,000 shares of the Company's Common Stock.
Although Mr. Walton does not beneficially own more than the shares listed, his
brother, Jeffrey Walton, owns 333 shares, his sister, Christina Walton, owns
333 shares, and his mother, Julianne Teichmann, owns 60,000 shares.
(d) Mr. Braid was the Company's past Chief Financial Officer. He is the
beneficial owner of Woody Enterprises, Inc., a Nevada corporation, that owns
800,000 shares of the Company's Common Stock.
(e) Mr. Dallenbach is the beneficial owner of the Dallenbach Family Limited
Partnership, a Nevada limited partnership, that owns 250,000 shares of the
Company's Common Stock.
(f) Mr. Smith is the beneficial owner of the Security Capital Limited
Partnership, a Nevada limited partnership, that owns 250,000 shares of the
Company's Common Stock.
(g) Mr. Huffman is the beneficial owner of Power Ventures Ltd., a Nevada
corporation, that owns 200,000 shares of the Company's Common Stock.
(h) Assumes no exercise of outstanding Options and Warrants.
The following is a biographical summary of the directors and officers of the
Company:
DAVID R. WALTON, ESQ., 51, has been the Co-Chairman of the Board and Chief
Executive Officer of the Company since 1993. From 1987 until 1993, Mr. Walton
was Executive Vice President of El Dorado Asset Management, a financial services
firm, and President of Desert Financial Services, Inc., a company that developed
over 3,000 condominiums in California. Mr. Walton received his bachelor's degree
from United States International University and Juris Doctorate from California
Western School of Law.
DARRELL MUSICK, 64, has been the Co-Chairman of the Board and President of the
Company since 1993. Since 1997, Mr. Musick has been on the Board of Directors of
the Debt Buyers Association, and maintains direct relationships with credit
grantors from the credit card, financing, banking and commercial industries.
Previously, Mr. Musick was Regional Manager of Fedmart, now known as Costco,
where he worked from 1958 through 1964. From 1964 to 1982, he was General
Manager of Crocker Capital Corporation, an investment company. Mr. Musick
received his bachelor's degree from San Diego State University.
DANIEL J. HILL, 47, has been a Director of the Company since 1998. Mr. Hill has
over 20 years management experience in the high technology electronics business.
From 1992 until 1995, Mr. Hill was the Chief Executive Officer of Micro
Component Technology, Inc. (MCTI). Since 1995, Mr. Hill has been the Executive
Director, Semiconductor Industry at PriceWaterhouseCoopers. From 1980 until
1992, Mr. Hill was Vice President and Division General Manager of National
Semiconductor, where he was responsible for over 6,000 employees. Mr. Hill is an
industry speaker and publisher in the semi-conductor field. He has served on 20
different boards of directors of technology companies in eight countries.
RICHARD GARTRELL, CPA, 53, has been the Chief Financial Officer and a Director
of the Company since 1999. Mr. Gartrell was a Senior Tax Accountant at Arthur
Andersen & Co from 1974 until 1978. He became a Certified Public Accountant in
the State of Colorado in 1975. From 1981 until 1989, Mr. Gartrell was the
Corporate Vice President of Operations and Finance of the Bill L. Walters
Company, Inc., with responsibilities including financial reporting and
management of 110 diverse entities. From 1991 and 1998, Mr. Gartrell was an
independent consultant to various companies in the real estate, investment,
banking and online business. Mr. Gartrell is a recognized expert in the
preparation and implementation of project feasibility plans, marketing,
financial controls, loan negotiations and joint venture structuring. Mr.
Gartrell has worked extensively as a forensic accountant in civil and family law
litigation and has been qualified in the California court system as an expert
witness in real estate, finance, and accounting. Mr. Gartrell received his
bachelor's degree from Colorado State University.
DAVID S. WALTON, 71, has been the Secretary, Treasurer and a Director of the
Company since 1996. Mr. Walton is David R. Walton's father. Mr. David S. Walton
has substantial experience in internal controls and auditing. Mr. Walton was
President of Transeastern Commodities, Inc., as well as the internal auditor and
a consultant for James Copley of the Copley newspaper chain. Additionally, Mr.
Walton consulted for the Loomis Armored Car and Courier Services, the James
White Oil Company, and the Eleventh Naval Headquarters in San Diego. Mr. Walton
is the founder and an owner of the San Diego Athletic Club. Mr. Walton received
his bachelor's degree from the University of Southern California.
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DANIEL J. DALLENBACH, 45, has been a Director of the Company since 1999. Mr.
Dallenbach provides the Company with 22 years of real estate experience,
specializing in acquisition, sales, rehabilitation and management of commercial
and residential properties. Mr. Dallenbach was a co-founder of the Four D
Corporation (now Security Asset Properties) which has acquired 35 residential
properties since 1993. Mr. Dallenbach has been a Licensed California Real Estate
Broker since 1978 and is a member of the National Association of Realtors and
the California Apartment Owners Association.
DANIEL R. SMITH, 46, has been a Director of the Company since 1999. Mr. Smith
was a co-founder of the Four D Corporation and has been a licensed real estate
broker in the State of California since 1978 and a member of the California
Board of Realtors since 1980. He is presently a member of the Navajo Planning
Board, a member of the Grantville Community Improvement Association, and a
member of the Dehesa Valley School Foundation. In 1997, San Diego Mayor Susan
Golding and the San Diego City Council appointed Mr. Smith to serve as a member
of the Zoning Appeals Board of San Diego.
MICHAEL HUFFMAN, 48, has been a Director of the Company since 1999. Mr. Huffman
is an experienced computer developer and is actively involved in the usage of
various Internet technologies in the financial services industry. Mr. Huffman is
the Managing Director of the Company's wholly-owned subsidiary,
TheDebtTrader.com, Inc., an online secondary debt warehouse.
The Directors named above will serve until the next annual meeting of the
shareholders of the Company in the year 2001. Directors will be elected for
one-year terms at each annual shareholder's meeting. Officers hold their
positions at the appointment of the Board of Directors.
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
Pursuant to the Acquisition Agreement the Company acquired one hundred percent
(100%) all of the issued and outstanding shares of voting securities (Common
Stock) of Universal from Danilo Cacciamatta, Gary Bryant and Suzanne Kerr
Bryant, together representing all of the shareholders of issued and outstanding
Common Stock of Universal, for $125,000 and an aggregate of 400,000 shares of
Common Stock of the Company. In evaluating the Acquisition, Universal used
criteria such as the value of the Company's debt portfolio assets, business
relationships, goodwill, the Company's ability to compete in the e-commerce and
technology, full motion direct on-line video industries, the asset acquisition
and liquidation marketplace, the real estate industry, the unique nature of the
Company's structure, the Company's current and anticipated business operations,
and the Company's business name and reputation in the debt buying industry. No
material relationship exists between the selling shareholders of Universal or
any of its affiliates, any director or officer, or any associate of any such
director or officer of Universal and the Company. The consideration exchanged
pursuant to the Acquisition Agreement was negotiated between Universal and the
Company at arm's-length. The consideration paid derived from the Company's cash
on hand and treasury stock.
THE COMPANY. The Company was founded on September 22, 1993 to build, through
acquisition and development, a team of vertically integrated companies
structured to achieve maximum economic advantage within the asset liquidation
industry. The asset liquidation industry is one of the fastest growing and most
lucrative arenas in American business today. Profits are earned in the industry
through the purchase of portfolios of both performing and non-performing loans
or assets, at low prices, and either collected at a high rate of return or sold
at the wholesale or retail level for immediate profits. Overall, management
estimates that current inventories available from financial institutions are
approximately above Six Trillion Dollars on their principal, face amount.
The Company has established itself over the past six years within the financial
community as a reputable portfolio purchaser. Management has created direct
relationships with most of the large and medium size financial institutions. The
Company communicates with over approximately 400 different institutional sellers
of credit card loan portfolios on a monthly basis. The Company is presently in
negotiations with several large credit unions and financial institutions to have
exclusive contracts to purchase their charged off credit card accounts on a
monthly flow forward basis. Forward flow contracts are contractual agreements to
purchase the financial institutions charged off receivables every month at a
fixed price.
The main purpose of the Company is to target debt assets for acquisition,
acquire those debt assets at the best possible price with funds generated by the
Company's fund raising efforts and internal capital. Then, with the services of
its strategically aligned collection firms, (i) collect the receivables, (ii)
restructure the debt assets into performing portfolios and resell them at a
substantial profit, or (iii) repackage the non-performing accounts and sell them
to the wholesale or retail markets for substantial present value profits.
The Company focuses its services on the major profit centers of the industry
that it believes it knows best, the asset liquidation industry. The services are
rendered through wholly owned subsidiaries and strategic alliances as identified
and discussed below.
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THE SECURITY ASSET COMPANIES
BROADBAND TECHNOLOGIES, INC. is a wholly-owned subsidiary of the Company
dedicated to bringing full-screen, on-demand video to consumers via the
Internet. Just as companies rely on express mail services to rapidly deliver
packages, business will soon rely on service providers to store and deliver
video content. Some industries that will benefit from the ability to cast video
content directly to consumers include:
- Movie and Pay Television
- Video Rental
- High-End Product Sales
- Corporate Advertising
- Infomercials
- Travel and Real Estate
- Auction Centers
- Corporate Training
The mission of Broadband Technologies, Inc. is to be an industry leader of
multimedia storage and delivery. The ultimate goals of Broadband Technologies,
Inc. are to service existing industries that would benefit from casting video to
their clients, to bring video on demand to the home through an alliance with an
established service provider, and to become the industry leader in multimedia
storage and delivery.
Broadband has thoroughly examined four industry roadblocks that currently impede
the delivery of full-motion, on-demand video to the consumer. They are:
1. THE HIGH COST OF POWER. In recent years, the power and speed of
home computing has increased exponentially, while the cost of personal computers
has dropped dramatically. Today's personal computer is capable of showing
full-length motion pictures on DVD, and as more consumers acquire this exciting
technology Broadband Technology Inc.'s opportunities to bring video content to
the masses grows even more. Broadband Technologies, Inc.'s ultimate objective is
to deliver stored video content effectively to a consumer base via standard
personal computer platforms without the need for additional hardware.
2. BANDWIDTH. Delivering dense content video over the Internet has
long been a problem. However, the introduction of cable and DSL computer linkups
to the marketplace has lessened the problem associated with bandwidth. Cable and
other telecommunications companies continue to expand their services and drop
their rates for both homes and businesses. During the next years, this expansion
of Internet speed and bandwidth will continue to provide the broadband highways
required to deliver content-rich information. Broadband Technologies, Inc.
desires to be at the forefront of exploiting these technology advances as they
continue to increase their presence in homes and businesses.
3. SERVER TECHNOLOGY. Video requires delivery that can match the
necessary frame rates that display movies seamlessly. The dense content, high
frame rates and increased client demand, create a challenge for the operation of
the current Internet server technology, which continues to gain power rapidly.
Broadband Technology Inc.'s scaled architectural approach could exploit the
power of these servers and allows us to grow as demand grows.
4. STORAGE. A major problem surrounding on-demand video delivery is
storage. As the quality of video increases almost on a daily basis, the required
storage requirements grow with it. We view solving this problem as a unique
challenge and a significant business opportunity. We believe Broadband
Technologies, Inc.'s patent-pending approach to storing media in multiple
locations, while at the same time addressing it from a central site, is the
cornerstone of effective warehousing of dense video content.
The challenge of bringing on-demand video to the consumer hinges mainly on the
storage of dense video content. Broadband Technology Inc.'s data warehousing
methods, combined with currently available technology, could allow us to scale
infinitely for the inventory demands of the future. Broadband Technologies, Inc.
has filed five patent applications, all of which have been granted a patent
pending status. These applications cover the key proprietary features of the
video delivery system. The following is a summary of these five patent
applications:
1. DISTRIBUTION NETWORK. This patent utilizes a very complex and
specific "Intranet" network configuration. It allows for complete redundancy of
the information contained within the network and contemplates "fail-proof"
communications.
2. HARDWARE AND SOFTWARE CONFIGURATIONS. The configuration of
hardware and software that the system employs in its viewing centers is both
specific and very unique. This combination of software provided allows for the
proper functionality of all hardware components.
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3. DUAL MPEG STREAMING. This patent pertains to the heart of the
system. It protects the actual process of delivering MPEG video streams. In
addition, it may implement the only method known to date for allowing a single
processor to stream two different MPEG files simultaneously.
4. GRAPHICAL USER INTERFACE. Under this patent, the "look and feel"
of the system is protected. The graphical user interface ("GUI") is created by a
unique combination of display device drivers, file types and formats, that
creates an environment extremely intricate in delivery, yet very intuitive and
user friendly.
5. DESIGN. This patent protects design and engineering of the
"viewing center."
We anticipate that the bulk of revenue will come from storage and delivery fees,
as these will be our primary services. Companies wishing to deliver
"infomercials" or training videos, as well as those that store product content
in video format, constitute our prospective industrial market. We foresee
industries such as real estate, education, travel and tourism all depending upon
technology and services, like those that Broadband Technologies, Inc. intends to
provide, for their success.
Consumers who want to watch movies on-demand and pay "per-view" fees comprise
the private market. We operate under the assumption that the movie-watching
consumer does not want to browse the Internet on their television, nor does the
average person want to watch full-length feature films on their PC. We believe
that consumers would, however, purchase or subscribe to an Internet service via
their television if they could watch movies on demand.
Broadband Technologies, Inc.'s short term objectives are to improve its existing
technologies through investment in qualified technical personnel. Hiring of
highly trained research and development staff to implement the capabilities of
the video delivery technology is imperative to our success.
THEDEBTTRADER.COM is a wholly-owned Nevada limited liability company
formed January 21, 2000 that trades charged-off debt portfolios and notes over
the Internet. Previously known to the asset liquidation industry as The Note and
Paper Trader.com, this innovative web site is an industry-recognized forum for
information and debt portfolio exchange. Over $40 million of debt was sold
through this site in 1999, its first year of operation. TheDebtTrader.Com made
history in February 2000 by hosting the debt trading industry's first online
chat session. Revenues are earned from service fees arising out of the online
sale of portfolios and notes.
TheDebtTrader.Com is a free-market exchange for debt buyers and sellers. By
incorporating much of Broadband Technologies, Inc.'s expertise, the Company is
situated to play an integral role within the soon-to-be formed "Debt Registry,"
an accreditation service presently in formation for the listing of debt
portfolios to be sold by many of the nation's largest financial institutions.
SECURITY ASSET MANAGEMENT, INC. is a wholly-owned California subsidiary
corporation. This company was founded in 1993 to manage debt receivable
portfolios, to buy and sell these portfolios at the wholesale and retail level,
and to joint venture portfolio acquisitions with accredited investors. Its
revenues come from management and service fees arising out of these activities.
This company attempts to target portfolios for acquisition, acquire them at the
best possible price, and aid in the collection of receivables. The company and
its joint venture partners fund all purchases. Security Asset Management, Inc.
then restructures the assets into performing portfolios and resells them at a
substantial profit at a wholesale or retail level.
SECURITY ASSET PROPERTIES, INC. is a wholly-owned Nevada subsidiary
corporation. This company was previously known as the "Four D Corporation."
Founded in 1993, Security Asset Properties, Inc. purchases cash-flowing
multifamily residential rental properties in San Diego and currently owns and
manages more than 20 such properties. The Company plans to expand its capital
base through exchanges and acquisitions to later convert this property portfolio
into a real estate investment trust (REIT). Revenues are earned from
income-producing rental properties and equity upon sale of the properties.
Security Asset Properties, Inc. has an experienced management team and creates
an ongoing profit center for the Company.
THE COMPANY'S BUSINESS CONCEPT. The Company's purchasing process is
designed to accomplish two major goals. The first goal is to purchase a highly
collectable portfolio directly from the credit grantors (financial
institutions), either on a private treaty or forward flow basis which is
suitable for our own collection needs. Second, the portfolio must be of
sufficient size and quality to be attractive to the secondary market (resale
value). The Company reviews potential portfolio purchases with this dual purpose
in mind. Revenues are derived from the purchase, collection and sale of
non-performing assets sold by banks and other financial companies.
Purchasing at a direct level allows the Company to accomplish its pricing goals
by buying at the best possible price for its own use and, at the same time,
leaving room to sell certain portions in the secondary marketplace for a more
rapid profit. By purchasing at cents on the dollar directly from the original
credit grantor, the Company positions itself to make significant profits on
re-sales. There are few companies in this
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industry that are able to buy "right" and be in control of its own destiny. We
believe this factor alone gives the Company a great advantage over our
competitors.
In order to assemble a potentially profitable portfolio, it is necessary to
determine an appropriate bid versus asking price for each debt portfolio package
through the systematic analysis of the underlying loans. The analyses undertaken
include attempts to ascertain the status of bankruptcies, judgments and
litigation, the amount of debtors' assets present, and the potential for
short-term capital returns versus long-term profitability. The Company and its
collectors maintain databases which track hundreds of leading indicators
including short interest ratios, price cycles, free credit balances, pricing
patterns, and money supply growth, among other factors.
Once a loan portfolio has been acquired, the Company, in association with its
Arizona-based collections partner, Regency Credit ("Regency"), forms teams of
"Asset Managers" to undertake the arduous process of negotiating with the
debtors. Typically, this includes a reduction in the principal amount due by the
debtor in exchange for a cash settlement, or an opportunity to restructure the
debt with lesser, ongoing payments in a "Rewrite Loan Program." Collectors are
provided with a minimum settlement amounts, or percentages, which they are
allowed to accept and giving them room to play with the figures, but not enough
room to play with the profits. If the debt is to be reshaped into a Rewrite
Loan, it is turned over to Regency's loan department where forms are completed
and the ultimate amount of the refinancing is determined. Once these loans are
considered to be of "performing" status (usually around six months), they will
be packaged and resold as performing portfolios for a larger profit.
During the period in which the Company retains ownership of the loan portfolios,
it will also begin servicing these accounts. This includes collection of the
loan payments. Regency holds responsibility for this servicing. However, in the
event of a sale, responsibility will be shared jointly between Regency and the
Company.
SALES AND MARKETING. The Company's staff continuously solicits business by
pursuing leads from existing relationships with financial institutions, industry
colleagues, affiliates, and promotional materials. Our officers regularly attend
industry seminars and conferences to promote the Company, secure business leads,
and strengthen existing relationships. The Company's recent purchase of its
Internet trading company, TheDebtTrader.Com, promises to stimulate a booming
secondary debt trading industry and to provide an expanding brokerage profit
center for the Company.
MARKET. In the early 1990s, certain banks, financial institutions, and credit
card issuers changed their approach in the management of their charged off
consumer receivable portfolios. These creditors began to sell a portion of their
charged off consumer receivable portfolios to certain delinquent debt recovery
firms and investment groups in lieu of third party placements. The practice
gained general acceptance from the major credit card issuers such that in 1997,
approximately 62 percent of the $31.29 billion dollars in charged off credit
card receivables were sold to a growing buyer market. This growth was largely
fueled by the availability of funds to finance the purchases of the charged off
credit card portfolios. Sources of such funds primarily came from investment
banks, insurance companies, and retirement fund managers who began to accept the
historical data and collection experience of certain accounts receivable
servicers as sufficient to establish the estimated collectible value embedded in
charged off credit card portfolios. Accordingly, charged off credit card
portfolios were regarded as acceptable collateral for asset-backed securities.
In 1995, the first of many private securitizations of charged off credit card
receivables was consummated. Through September 1998, over approximately $1
billion of relatively high yielding investment grade and non-investment grade
bonds have been sold in private securitizations to fund purchases of charged off
credit card receivable portfolios.
According to nilsonreport.com, "The value of all types of charged-off debt
purchases in 1999 totaled $39.05 billion, of which 78 percent ($30.31 billion)
was from credit cards. This year, the value of total debt purchases is expected
to reach $54.13 billion, of which 75 percent ($40.60 billion) will be from
credit cards." The present trend of the financial institutions originating the
credit card accounts that later become non-performing accounts is to either
outsource their collection effort or remove the non-performing accounts from
their balance sheets through bulk sales of portfolios of non-performing consumer
loan accounts. The secondary market for charged-off credit card portfolios has
expanded as a result of the significant growth in delinquent credit card
portfolios at major financial institutions and the increasing tendency for
financial institutions to sell their portfolios of non-performing consumer loans
to asset recovery specialists. Receivable debt portfolios are then purchased at
a discount from the aggregate principal value often at pennies on the dollar.
The financial institutions selling the portfolios can do so by auction or
through privately negotiated direct sales with reputable purchasers. Some
institutions are using "forward flow" contracts that provide for a single buyer
of its receivables over a period of time.
In February 1994, the Company began purchasing charged off credit card debt for
its own account. However, our management realized that the benefits associated
with purchasing and owning charged off credit card portfolios come with
significant risks. Charged off credit card portfolios, by their nature, are
exposed to liquidation risks. Consumer factors, as well as loan underwriting
and/or account data related factors, generally cause such risks. Consumer
related risk factors include, among other things, the consumers' deteriorating
economic condition caused by an unprecedented life event (e.g. divorce, illness,
death, and job loss), the consumers' inability to manage fiscal
responsibilities, or the consumers contemptuous attitude towards credit.
Underwriting risks could be inherent in, among other things, the credit issuer's
general underwriting policies as driven by certain market penetration
strategies. Data or account information risks are primarily caused by the
quality of the credit issuer's or its agents' servicing operations.
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In general, the availability of current and historic account information could
increase the probability of economically liquidating a portfolio's estimated
collectible value ("ECV").
The economic benefit of owning such portfolios therefore relies heavily on a
buyer's ability to properly quantify the remaining ECV in a charge off portfolio
and to profitably acquire such ECV. The Company has utilized its and its
strategic allies' extensive experience, vast knowledge base and access to pools
of data on delinquent consumer debt, to identify and segment the quantitative
and qualitative attributes of an account or debtor that are most relevant to a
successful recovery of a delinquent debt. These attributes are weighed according
to their degree of significance and convened into a pricing matrix. This matrix
is used to estimate the price that the Company would be willing to pay for a
portfolio based on the ECV. Based on historical data, the Company has been able
to maintain an ECV to price ratio of approximately 5.88 to 1 on its most
seasoned portfolios (i.e. portfolios purchased in February 1994).
The Company regards its and its strategic allies' pools of purchased portfolios
as a database which could include consumers who are in various stages of
reestablishing their credit. The Company's process basically allows the sorting
of potentially good borrowers from the pool of bad borrowers. The process then
allows the conversion of the accounts of potentially good borrowers, which have
not been settled in cash, to be transferred into a new installment contract that
would be more conducive towards the consumer's current financial position. The
goal is to find the least burdensome way for the consumer to be able to make
consistent payments on its obligation until full settlement. The Company
believes that the pools of accounts created by this process will be the primary
source for the assets sold in future securitizations. The Company also realizes
the importance of the consumer data accumulated on the performing loans; such
data could prove beneficial if and when the Company decides to expand its
services to this select pool of paying customers.
Management believes that the Company is one of the pioneers of the debt
collection industry. It has developed strong relationships with key financial
institutions from which it is a frequent buyer. The Company enjoys a preferred
buyer status among many selling financial institutions. These relationships
offer the Company the regular opportunity to be invited to bid on the best
portfolios.
As today's society becomes more and more dependent on technology to do business,
the Company intends to pursue the incorporation of the latest technologies into
its methods of operation. Management believes that only companies who anticipate
new market realities will be positioned at the forefront of emerging Internet
industries. Over the last century, civilization has witnessed rapid distribution
and acceptance of communications technologies such as telephones, fax machines,
and constantly evolving computer technology. The impact of these developments
has led to dramatic changes in the way the information is exchanged. These
changes have two things in common: each successive technology comes faster than
its predecessor; and, each new breakthrough comes out of developments that
preceded it. Technology advances, combined with population growth, have led to
massive market expansion in all forms of broadcast media. The personal computer
is rapidly becoming the vehicle of choice for delivery of all forms of media.
Through the acquisition of TheDebtTrader.Com, the Company has ensured a presence
on the World Wide Web and expanded it marketing and sales efforts to an
international level. The acquisition of Broadband Technologies, Inc. represents
a quantum leap by the Company into the cutting edge of communications through
the Internet.
COMPETITION. The competition for purchasing receivable debt portfolios is high
and is expected to intensify. The Company experiences competition in acquiring
receivable debt portfolios, including from purchasers with substantially greater
resources than the Company. The Company competes with a wide range of
third-party collection companies and other financial services companies, which
may have substantially greater personnel and financial resources than the
Company. In addition, certain of its competitors may have signed "forward flow"
contracts pursuant to which certain financial institutions have agreed to
transfer receivable debt in the future, which could restrict those financing
institutions from selling portfolios to the Company. The Company seeks to
compete with these companies on the basis of its superior relationships with key
personnel in the industry and its reputation for quality and trust. Moody's
reports that the charge off rate in January 2000 (i.e., the amount of bad loans
written off as uncollectible, as an annualized percentage of total loans) was
5.60 percent, a drop from 6.00 percent in January 1999. This represents the 23rd
consecutive month of improvement, compared with the year-earlier periods. The
Company believes that an improved payment record translates into a greater
ability for the consumer to pay off debts. As the consumer's ability to pay
improves, the Company expects the return on receivable debt to improve.
Therefore, the return on portfolios is anticipated to improve, which would make
the competition for purchasing portfolios even greater. Our competitors include
companies such as Asset Funding, Charge-Off Clearinghouse, First Teleservices
and ADA Business Credit Corp who were the top four purchasers of charged-off
debt portfolios for resale.
The Registrant intends to continue the use of its assets without change after
the Acquisition.
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<PAGE> 9
MANAGEMENT COMPENSATION. The following table sets forth the annualized base
salary that we have paid to David R. Walton, our Chief Executive Officer. All
other compensation for our executives or directors has not exceeded $100,000 on
an annualized basis. We reimburse our officers and directors for any reasonable
out-of-pocket expenses incurred on our behalf.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
-------------------------
ANNUAL COMPENSATION RESTRICTED SECURITIES
NAME AND PRINCIPAL --------------------- STOCK UNDERLYING
POSITION YEAR SALARY ($) AWARDS(a)(b) OPTIONS(c)
-------- ----- ---------- ------------ ----------
<S> <C> <C> <C> <C>
David R. Walton 1997 0 0 0
Chief Executive Officer and 1998 0 0 $18,000
Co-Chairman of the Board 1999 48,000 0 0
</TABLE>
(a) Mr. Walton is the sole shareholder of Jade Corporation, a Nevada
corporation, that owns 1,000,000 shares of the Company's Common Stock. 900,000
of the shares were issued on July 24, 1995. The additional 100,000 shares were
issued on February 21, 1997. These shares are unrestricted.
(b) No dividends will be paid on the restricted stock reported.
(c) Mr. Walton owns an option to purchase 225,000 shares of the Company at
$.08 per share expiring on December 4, 2008.
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<PAGE> 10
RISK FACTORS
LIMITED OPERATING HISTORY: Although the Company was founded in 1993, its
subsidiary, Broadband Technologies, Inc., is newly-organized, in its initial
stages of development, and lacks a substantial prior operating history.
Broadband Technologies, Inc.'s prospects must be considered in light of the
risks, expenses and difficulties frequently encountered by companies in early
stages of development, particularly companies in new and rapidly evolving
markets such as the delivery of video over the Internet. Such risks include, but
are not limited to, an evolving and unproven business model and the management
of growth. To address these risks, the Company must, among other things,
maintain and significantly increase its customer base, implement and
successfully execute its business and marketing strategy, continue to develop
and upgrade its technology, provide superior customer service, respond to
competitive developments, and attract, retain and motivate qualified personnel.
There is no assurance that the Company's business strategy will be successful,
or that additional capital will not be required to continue business operations.
As of April 4, 2000, the Company had limited working capital. The Company has
limited material tangible assets. To date, Broadband Technologies, Inc. has not
created any revenues and, as a result of the signification expenditures that the
Company plans to make in sales and marketing, research and development and
general and administrative activities over the near term, the Company expects
that Broadband Technologies, Inc. will continue to incur significant operating
losses and negative cash flows from operations on both a quarterly and annual
basis for the foreseeable future. For these and other reasons, there can be no
assurance that the Company or Broadband Technologies, Inc. will ever achieve or
be able to sustain profitability.
DEPENDENCE ON KEY MANAGEMENT. The Company is highly dependent on the
services of David R. Walton, Chief Executive Officer, Darrell Musick, President,
and the Daniel J. Hill, Chairman of the Board Of Directors of Broadband
Technologies, Inc., and Bernard Tyler, Chief Technical Advisor of Broadband
Technologies, Inc. The loss of their services could have a materially adverse
impact on the Company. The Company does not currently maintain any key-man life
insurance policy with respect to any of these key management personnel.
POSSIBLE DIFFICULTY IN RAISING ADDITIONAL EQUITY CAPITAL. There is no
assurance that the Company will be able to raise equity capital in an amount
which is sufficient to continue operations. In the event the Company requires
financing, the Company will seek such financing through bank borrowing, debt or
equity financing, corporate partnerships or otherwise. There can be no assurance
that such financing will be available to the Company on acceptable terms, if at
all. The Company does not presently have a credit line available with any
lending institution. Any additional equity financing may involve the sale of
additional shares of the Company's Common Stock or Preferred Stock on terms that
have not yet been established.
RISKS OF RAPID GROWTH. The Company anticipates a period of rapid growth,
which may place strains upon the Company's management and operational resources.
The Company's ability to manage growth effectively will require the Company to
integrate successfully its business and administrative operations into one
dynamic management structure.
POSSIBLE ISSUANCE OF ADDITIONAL SHARES. The Company has authorized
25,000,000 shares of Common Stock. The Company presently has outstanding
10,861,000 shares of Common Stock, the only class of stock of the Company for
which shares have been previously issued. As of the Effective Date, the Company
will have authorized, but un-issued, 14,139,000 shares of Common Stock which are
available for future issuance. The Company may issue shares of Common Stock
beyond those already issued for cash, services, or as further employee
incentives. To the extent that additional shares of Common Stock or Preferred
Stock are issued, the percentage of the Company's issued and outstanding shares
of stock shall be increased and the issuance may cause dilution in the book
value per share.
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<PAGE> 11
DIVIDENDS NOT LIKELY. No dividends on the Company's Common Stock have
been declared or paid by the Company to date. The Company does not presently
intend to pay dividends on shares for the foreseeable future, but intends to
retain all earnings, if any, for use in the Company's business. There can be no
assurance that dividends will ever be paid on the Common Stock of the Company.
RECEIVABLES MAY NOT BE COLLECTIBLE. The Company purchases, collects and
manages previously defaulted consumer receivables generated by consumer credit
card and other consumer credit transactions. These are obligations that the
individual consumer has failed to pay when due. We purchase the receivables from
credit grantors, including banks, finance companies, and other service
providers. Substantially all of the receivables consist of account balances that
the credit grantor has deemed uncollectable and has charged off from its balance
sheet. Before we purchase the receivables, the credit grantors generally make
numerous attempts to collect on the defaulted accounts. Credit grantors
typically use their in-house collection departments, as well as third-party
collection agencies to attempt to collect on the overdue payments. We purchase
the receivables at a significant discount to the amount the customer owes. We
believe we can successfully obtain recoveries on the receivables in amounts in
excess of the amount we pay for the receivables. Despite this belief, actual
recoveries on the receivables may vary as the result of a variety of factors
within and beyond our control and may be less than the amount we expect to
recover. We cannot assure the timing or amounts to be collected on our
receivables.
POSSIBLE SHORTAGE OF RECEIVABLES FOR PURCHASE. The Company's success
depends on the continued availability of receivables that meet our requirements.
The availability of portfolios of receivables for purchase at favorable prices
depends on a number of factors outside of our control, including the
continuation of the current growth trend in consumer debt and competitive
factors affecting potential purchasers and sellers of portfolios of receivables.
Any slowing of the consumer debt growth trend could result in less credit being
extended by credit grantors. Consequently, fewer receivables could be available
at prices that we find attractive. If new competitors enter our business, our
access to additional receivables may become limited. In addition, if our
competitors raise the prices they are willing to pay for portfolios of
receivables above those we wish to pay, we may be unable to buy receivables at
prices consistent with our historic return targets.
RISKS ASSOCIATED WITH NEW PRODUCTS AND NEW MARKETS. The market for
Internet video services is characterized by rapid technological changes,
changing customer requirements, frequent service and product enhancements and
introductions, and emerging industry standards. The introduction of services or
products embodying new technologies and the emergence of new industry standards
can render existing services or products obsolete and unmarketable. The
Company's and Broadband Technologies, Inc.'s future success will depend, in
part, on its ability to develop and use new technologies, respond to
technological advances, enhance its existing services and products and, develop
new services and products on a timely and cost-effective basis. There can be no
assurance that the Company will be successful in effectively developing or using
new technologies, responding to technological advances or developing,
introducing or marketing service and product enhancements or new services and
products. In addition, the Company may enter into new markets in connection with
enhancing its existing services and products and developing new services and
products. There can be no assurance that the Company will be successful in
pursuing new opportunities or will compete successfully in any new markets.
There can be no assurance that a market for Internet video delivery services
will develop or that any such market, if developed, will offer significant
revenue opportunities for specialized video delivery service providers such as
the Company. The Company's customers have only limited experience, if any, with
Internet video as a marketing, advertisement and entertainment medium, and
neither its customers nor their advertising agencies have devoted a significant
portion of their budgets to using Internet video. In order for the Company to
generate revenues, Web site owners, advertisers and entertainment companies must
direct a portion of their budgets to Internet-based content delivery, marketing
and advertising that incorporate video. If not, the Company's business,
prospects, financial condition and results of operations from Broadband
Technologies, Inc. would be materially adversely affected.
SUBSTANTIAL COMPETITION. A number of the Company's competitors have
significantly greater financial, technical, administrative, manufacturing,
marketing and other resources than the Company. Some of the our competitors also
offer a wider range of services and products than us and have greater name
recognition and more extensive customer bases than we do. These competitors may
be able to respond more quickly to new or changing opportunities, technologies
and customer requirements than we can and may be able to undertake more
extensive promotional activities, offer more attractive terms to customers and
adopt more aggressive pricing policies than we can. Moreover, current and
potential competitors have established or may establish cooperative
relationships among themselves or with third parties or may consolidate to
enhance their services and products. We expect that new competitors or alliances
among competitors will emerge and may acquire significant market share.
11
<PAGE> 12
The general financial success of companies within the debt collection and
Internet industries over the past several years has strengthened existing
competitors. We believe that such success will continue to attract new
competitors to these industries, such as software development companies,
insurance companies, providers of online financial and information services and
others. While it is not possible to predict the type and extent of competitive
services that other firms ultimately may offer or whether regulatory or
legislative barriers will be repealed or modified, firms such as the Company may
be adversely affected by such competition.
The bases of competition in markets for video delivery include transmission
speed, reliability of service, ease of access price/performance, ease-of-use,
content quality, quality of presentation, timeliness of content, customer
support, brand recognition, number of end-users directed to client Web sites,
data reporting and operating experience. Broadband Technologies, Inc. must
overcome significant barriers to entry into the video delivery market as a
result of its limited operation history and relatively untested operating system
on the market. Many of the Broadband Technologies, Inc.'s competitors have
substantially greater financial, technical, managerial and marketing resources,
longer operating histories, greater name recognition more established
relationships with customers and content providers. Such competitors may be able
to devote more resources to developing Internet services or online content than
Broadband Technologies, Inc. Our ability to achieve and maintain a leadership
position in the Internet video delivery market will depend, among other things,
on the Broadband Technologies, Inc.'s ability to provide high-speed,
high-quality video over the Internet, which cannot be assured. There can be no
assurance that the Company or Broadband Technologies, Inc. will be able to
compete effectively with current or future competitors or that the competitive
pressures faced by the Company or Broadband Technologies, Inc. will not have a
material adverse effect on the Company's or Broadband Technologies, Inc.'s
business, financial condition and operating results.
DEPENDENCE ON COMPUTER SYSTEMS. The Company and Broadband Technologies,
Inc. operate through a variety of electronic mediums, including the Internet,
automated touch-tone telephones, and personal computers. These methods are
heavily dependent on the integrity of the electronic systems supporting them.
Extraordinary user volumes could cause the Company's computer systems to operate
at an unacceptably low speed or even fail. Any significant degradation or
failure of the Company's computer systems or any other systems (e.g. online
service providers, record keeping and data processing functions performed by
third parties and third-party software, such as Internet browsers) could cause
customers to suffer delays in receiving services. Such delays could cause
substantial losses for customers and could subject the Company or Broadband
Technologies, Inc. to claims from customers for losses, including litigation
claiming fraud or negligence. There can be no assurance that the Company's or
Broadband Technologies, Inc's network structure will operate appropriately in
the event of a computer systems failure or that, in the event of a tornado, fire
or any other natural disaster, power or telecommunications failure, act of god
or war, the Company or Broadband Technologies, Inc. will be able to prevent an
extended computer systems failure. Any computer systems' failure that causes
interruptions in the Company's or Broadband Technologies, Inc.'s operations
could have a material adverse effect on the Company's or Broadband Technologies,
Inc.'s business, financial condition and operating results.
DEPENDENCE ON INCREASED USAGE AND STABILITY OF THE INTERNET. Critical
issues regarding the stability of the Internet's infrastructure remain
unresolved. The rapid rise in the number of Internet users and increased
transmission of audio, video, graphical and other multimedia content over the
Web has placed increasing strains on the Internet's communications and
transmission infrastructures. Continuation of such trends could lead to
significant deterioration in transmission speeds and reliability of the Internet
and could reduce the usage of the Internet by businesses and individuals. Any
failure of the Internet to support the ever-increasing number of users due to
inadequate infrastructure, or otherwise, could materially and adversely affect
the acceptance of the Company's products and services which would, in turn,
materially and adversely affect the Company's business, prospects, financial
condition and results of operations.
RISKS ASSOCIATED WITH STRATEGIC ACQUISITIONS AND RELATIONSHIPS. The Company
has pursued and may in the future pursue strategic acquisitions of complimentary
businesses and technologies. Acquisitions entail numerous risks, including
difficulties in the assimilation of acquired operations and products, diversion
of management's attention to other business concerns, amortization of acquired
intangible assets, and potential loss of key employees of acquired companies. To
date, the Company has experienced favorable results in connection with its
strategic acquisitions. Nevertheless, there can be no assurance that the Company
will be able to integrate successfully any operations, personnel, services or
products that might be acquired in the future or that any acquisition will
enhance the Company's business, financial condition or operating results. The
Company also has established a number of strategic relationships with debt
collectors. The Company's strategic relationships have been entered into only
recently and there can be no assurance that any such relationships will be
maintained, and that if such relationships are maintained, they will be
successful.
DEPENDENCE ON INTELLECTUAL PROPERTY RIGHTS; LACK OF REGISTRATION THEREOF.
The Company's and Broadband Technologies, Inc.'s success and ability to compete
are dependent to a significant degree on its proprietary technology. The Company
and Broadband Technologies, Inc. regard their technology as proprietary and
attempt to protect it with patents, copyrights, trademarks, trade secret laws,
restrictions on disclosure
12
<PAGE> 13
and other methods. The Company and Broadband Technologies, Inc. rely primarily
on state and federal copyright, trade secret and trademark common law to protect
their proprietary technology. The Company and Broadband Technologies, Inc. have
several unregistered trademarks and various unregistered copyrights. Broadband
Technologies, Inc. has patents pending with respect to its technology. There can
be no assurance that any patent will issue from these applications or that, if
issued, any claims allowed will be sufficiently broad to protect the technology.
In addition, there can be no assurance that any patent will not be challenged,
invalidated or circumvented, or that any rights granted thereunder would provide
proprietary protection. It is the Company's and Broadband Technologies, Inc.'s
policy to enter into confidentiality and non-competition agreements with their
associates and generally to control access to and distribution of its
proprietary technology. Notwithstanding the precautions taken by the Company and
Broadband Technologies, Inc. to protect their intellectual property rights, it
is possible that third parties may copy or otherwise obtain and use the
Company's and Broadband Technologies, Inc.'s proprietary technology without
authorization or otherwise infringe on the Company's and Broadband Technologies,
Inc.'s proprietary rights. It is also possible that third parties may
independently develop technologies similar to those of the Company or Broadband
Technologies, Inc. Policing unauthorized use of the Company's or Broadband
Technologies, Inc.'s intellectual property rights may be difficult, particularly
because it is difficult to control the ultimate destination or security of
information transmitted over the Internet. The Company and Broadband
Technologies, Inc. believe that due to the rapid pace of technological
innovation for Internet products and services, the Company's and Broadband
Technologies, Inc.'s ability to establish and maintain a position of technology
leadership in the industry depends more on the skills of its development
personnel than upon the legal protections afforded its existing technology. In
addition, the laws of foreign countries may afford inadequate protection of
intellectual property rights.
GOVERNMENT REGULATION. The Company is not a credit card issuer. Even
so, certain of its operations may be affected by laws and regulations applicable
to credit card issuers . The relationship of a customer and a creditor is
extensively regulated by federal and state consumer protection and related laws
and regulations. Significant laws include the Fair Debt Collection Practices Act
("FDCPA"), Federal Truth-In-Lending Act, Fair Credit Billing Act, as well as
applicable comparable statutes in the states in which customers reside or in
which the financing institutions who originated the credit account are located.
Failure to comply with applicable federal and state laws and regulations could
have a material adverse effect on the Company. Applicable laws and regulations
may limit the Company's ability to collect amounts owing with respect to
receivables, regardless of any act or omission on the part of the Company. No
assurance can be given that any indemnities received from the financial
institutions who originated the credit account will be adequate to protect the
Company from losses on the receivables or liabilities to customers. Any new laws
or rulings that may be adopted, and existing consumer protection laws may
adversely affect the Company's ability to collect the receivables. In addition,
the failure of the Company and its affiliates to comply with such requirements
could adversely affect the Company's ability to enforce the receivables and
result in liability.
The Company has carefully structured its corporate operations and business
activities in a manner which, to the degree possible, avoids the application of
United States or state securities laws. The securities industry in the United
States is subject to extensive regulation under both federal and state laws. In
addition, the SEC, the NASD, various stock exchanges, and other regulatory
bodies, such as state securities commissions, require strict compliance with
their rules and regulations. As a matter of public policy, regulatory bodies are
charged with safeguarding the integrity of the securities and other financial
markets and with protecting the interests of customers participating in those
markets, and not with protecting the interests of the Company's stockholders.
Persons functioning as broker-dealers are subject to regulations covering all
aspects of the securities business, including sales methods, trade practices
among broker-dealers, use and safekeeping of customers' funds and securities,
capital structure, record keeping and the conduct of directors, officers and
employees. Failure to comply with any of these laws, rules or regulations could
result in censure, fine, the issuance of cease-and-desist orders, or the
barring, suspension or expulsion of a broker-dealer or any of its officers or
employees, any of which could have a material adverse effect on the Company's
business, financial condition and operating results.
The Company conducts a significant portion of its business through the Internet
and other electronic mediums and intends to expand its use of such mediums. To
date, the use of the Internet has been relatively free from regulatory
restraints. The SEC and certain states, however, are beginning to address the
regulatory issues that may arise in connection with the use of the Internet.
Accordingly, new regulations or interpretations probably will be adopted that
constrain the Company's ability to transact business through the Internet or
other electronic mediums. Any additional regulation of the Company's use of
electronic mediums could render its business or operations more costly, less
efficient, or even impossible.
ITEM 3. BANKRUPTCY OR RECEIVERSHIP
No court or governmental agency has assumed jurisdiction over any substantial
part of the Company's business or assets.
ITEM 4. CHANGES IN REGISTRANT'S CERTIFYING ACCOUNTANT
There has been no change in accountants.
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<PAGE> 14
ITEM 5. OTHER EVENTS
SUCCESSOR ISSUER ELECTION. Pursuant to Rule 12g-3(a) of the General Rules and
Regulations of the Securities and Exchange Commission, the Company elected to
become the successor issuer to Universal View Corporation for reporting purposes
under the Securities Exchange Act of 1934 and elects to report under the Act
effective April 4, 2000.
ITEM 6. RESIGNATIONS OF DIRECTORS AND EXECUTIVE OFFICERS
No directors have resigned due to a disagreement with the Company since the date
of the last annual meeting of shareholders.
ITEM 7. FINANCIAL STATEMENTS
No financials are filed herewith. The financial statements required to be filed
by the Registrant no later than 60 days after the date that this Current Report
on Form 8-K is filed will be filed by amendment and are incorporated herein by
reference.
ITEM 8. CHANGE IN FISCAL YEAR
There has been no change in the Company's fiscal year.
Index to Exhibits
<TABLE>
<S> <C>
2.1 Stock Acquisition and Reorganization Agreement by and among Security
Asset Capital Corporation and Universal View Corporation, dated April 4,
2000.
3.1 Articles of Incorporation of Security Asset Capital Corporation, as amended.
3.2 By-Laws of Security Asset Capital Corporation.
17.1 Resignation Letter of DANILO CACCIAMATTA.
*27.1. Financial Data Schedule.
</TABLE>
- -----
*To be filed by amendment
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Security Asset Capital Corporation,
a Nevada corporation
DATED: April 4, 2000 /s/ DAVID R. WALTON
------------------------------------------
David R. Walton, Chief Executive Officer
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<PAGE> 1
EXHIBIT 2.1
STOCK ACQUISITION AND REORGANIZATION AGREEMENT
THIS STOCK ACQUISITION AND REORGANIZATION AGREEMENT (this "Agreement")
is made and entered into in duplicate effective the 4th day of April 2000
(the "Effective Date") by and among Security Asset Capital Corporation, a
Nevada corporation ("Security Asset"), on the one hand, and Universal View
Corporation, a Nevada corporation ("Universal"), Danilo Cacciamatta, an
individual, Gary Bryant, an individual, and Suzanne Kerr Bryant, an individual,
(the "Shareholders"), on the other hand.
RECITALS
A. The Shareholders own all of the issued and outstanding shares of
$.001 par value common stock of Universal ("Shares").
B. The Shareholders desire to exchange all of the Shares for $125,000
and 400,000 shares of $.001 par value common stock of Security Asset, on the
terms and subject to the conditions specified by the provisions of this
Agreement.
C. The Boards of Directors of Universal and Security Asset have
determined that it is advisable and appropriate and in the best interests of
those corporations and their respective shareholders that the exchange
contemplated by the provisions of recital B specified above occur, on the terms
and subject to the conditions specified by the provisions of this Agreement.
D. The parties to this Agreement desire that the transaction
contemplated by the provisions of this Agreement satisfy the requirements of
Section 368(a)(1)(B) of the Internal Revenue Code of 1986, as amended, and the
regulations promulgated pursuant thereto.
AGREEMENT
NOW, THEREFORE, in consideration of the recitals specified above that
shall be deemed to be a substantive part of this agreement, and the mutual
covenants, promises, undertakings, agreements, representations and warranties
specified in this agreement and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, with the intent to be
obligated legally and equitably, the parties do hereby covenant, promise, agree,
represent and warrant as follows:
ARTICLE I
DEFINITIONS
For purposes of this Agreement, the following terms have the meanings specified
or referred to in this Article 1:
"Applicable Contract" - any Contract (a) pursuant to which Universal has
or may acquire any rights, (b) pursuant to which Universal has or may become
subject to any obligation or liability, or (c) by which Universal or any of the
assets owned or used by Universal is or may become obligated.
"Best Efforts" - the efforts that a prudent Person desiring to achieve a
result would use in similar circumstances to ensure that such result is achieved
as expeditiously as possible.
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<PAGE> 2
"Breach" - a "Breach" of a representation, warranty, covenant,
obligation, or other provision of this Agreement or any instrument delivered
pursuant to this Agreement will be deemed to have occurred if there is or has
been (a) any inaccuracy in or breach of, or any failure to perform or comply
with, such representation, warranty, covenant, obligation, or other provision,
or (b) any claim (by any Person) or other occurrence or circumstance that is or
was inconsistent with such representation, warranty, covenant, obligation, or
other provision, and the term "Breach" means any such inaccuracy, breach,
failure, claim, occurrence, or circumstance.
"Consent" - any approval, consent, ratification, waiver, or other
authorization (including any Governmental Authorization).
"Contemplated Transactions" - all of the transactions contemplated by
this Agreement, including; but not limited to:
(a) the transfer of the Shares by Shareholders to Security Asset in
exchange for 400,000 shares of $.001 par value common stock of Security Asset;
(b) the execution, delivery, and performance of the Shareholders'
Release;
(c) the performance by Security Asset and Shareholders of their
respective covenants and obligations pursuant to this Agreement; and
(d) Security Asset's acquisition and ownership of the Shares and
assumption of control of Universal.
"Contract" - any agreement, contract, obligation, promise, or
undertaking (whether written or oral and whether express or implied) that is
legally obligating.
"Effective Date" - the date set forth in the preamble of this Agreement.
"Employee Benefit Plan" - any "Employee Pension Benefit Plan" (as
defined in Section 3(2) of ERISA), "Employee Welfare Benefit Plan" (as defined
in Section 3(l) of ERISA), "Multiemployer Plan" (as defined in Section 3(37) of
ERISA), plan of deferred compensation, medical plan, life insurance plan,
long-term disability plan, dental plan or other plan providing for the welfare
of any of employees or former employees of Universal or beneficiaries thereof
(as applicable), personnel policy (including, but not limited to, vacation time,
holiday pay, bonus programs, moving expense reimbursement programs and sick
leave), excess benefit plan, bonus or incentive plan (including, but not limited
to, stock options, restricted stock, stock bonus and deferred bonus plans),
salary reduction agreement, change-of-control agreement, employment agreement,
consulting agreement or any other benefit, program, agreement or contract.
"Encumbrance" - any charge, claim, community property interest,
condition, equitable interest, lien, option, pledge, Security Asset interest,
right of first refusal, or restriction of any nature whatsoever, including any
restriction on use, voting, transfer, receipt of income, or exercise of any
other attribute of ownership.
"Environment" - soil, land surface or subsurface strata, surface waters
(including navigable waters, ocean waters, streams, ponds, drainage basins, and
wetlands), groundwaters, drinking water
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<PAGE> 3
supply, stream sediments, ambient air (including indoor air), plant and animal
life, and any other environmental medium or natural resource.
"Environmental, Health, and Safety Liabilities" - any cost, damages,
expense, liability, obligation, or other responsibility arising from or pursuant
to Environmental Law or Occupational Safety and Health Law and consisting of or
relating to:
(a) any environmental, health, or safety matters or conditions
(including on-site or off-site contamination, occupational safety and health,
and regulation of chemical substances or products);
(b) fines, penalties, judgments, awards, settlements, legal or
administrative proceedings, damages, losses, claims, demands and response,
investigative, remedial, or inspection costs and expenses arising pursuant to
Environmental Law or Occupational Safety and Health Law, including consultant
and attorney fees;
(c) financial responsibility pursuant to Environmental Law or
Occupational Safety and Health Law for cleanup costs or corrective action,
including any investigation, cleanup, removal, containment, or other remediation
or response actions ("Cleanup") required by applicable Environmental Law or
Occupational Safety and Health Law (whether or not such Cleanup has been
required or requested by any Governmental Body or any other Person) and for any
natural resource damages; or
(d) any other compliance, corrective, investigative, or remedial
measures required pursuant to Environmental Law or Occupational Safety and
Health Law.
The terms "removal," "remedial," and "response action," include the
types of activities specified by the United States Comprehensive Environmental
Response, Compensation, and Liability Act, 42 U.S.C. Sections 9601 et seq., as
amended ("CERCLA").
"Environmental Law" - any Legal Requirement that requires or relates to:
(a) advising appropriate authorities, employees, and the public of
intended or actual releases of Hazardous Materials, violations of discharge
limits, or other prohibitions and of the commencements of activities, such as
resource extraction or construction, that could have significant impact on the
Environment;
(b) preventing or reducing to acceptable amounts the release of
Hazardous Materials into the Environment;
(c) reducing the quantities, preventing the release, or minimizing
the hazardous characteristics of wastes that are generated;
(d) assuring that products are designed, formulated, packaged, and
used so that these products do not present unreasonable risks to human health or
the Environment when used or disposed of;
(e) protecting resources, species, or ecological amenities;
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(f) reducing to acceptable amounts the risks inherent in the
transportation of Hazardous Materials;
(g) cleaning up Hazardous Materials that have been released,
preventing the threat of release, or paying the costs of such clean up or
prevention; or
(h) making responsible parties pay private parties, or groups of
them, for damages done to their health or the Environment, or permitting
self-appointed representatives of the public interest to recover for injuries
done to public assets.
"ERISA" - the Employee Retirement Income Security Asset Act of 1974, or
any successor law, and regulations and rules issued pursuant to that Act or any
successor law.
"Facilities" - any real property, leaseholds, or other interests
currently or formerly owned or operated by Universal and any buildings, plants,
structures, or equipment (including motor vehicles, aircraft, and rolling stock)
currently or formerly owned or operated by Universal.
"GAAP" - generally accepted United States accounting principles, applied
on a basis consistent with the basis on which the Universal Balance Sheet and
the other financial statements referred to in Section 3.4 were prepared.
"Governmental Authorization" - any approval, consent, license, permit,
waiver, or other authorization issued, granted, given, or otherwise made
available by or pursuant to the authority of any Governmental Body or pursuant
to any Legal Requirement.
"Governmental Body" - any:
(a) nation, state, commonwealth, county, city, town, village,
district, ward, or other jurisdiction of any nature;
(b) federal, state, local, municipal, foreign, or other government;
(c) governmental or quasi-governmental authority of any nature
whatsoever (including any governmental agency, branch, department, official, or
entity and any court or other tribunal);
(d) multi-national organization or body; or
(e) body exercising, or entitled to exercise, any administrative,
executive, judicial, legislative, police, regulatory, or taxing authority or
power of any nature whatsoever.
"Hazardous Activity" - the distribution, generation, handling,
importing, management, manufacturing, processing, production, refinement,
Release, storage, transfer, transportation, treatment, disposal or use
(including any withdrawal or other use of groundwater) of Hazardous Materials
in, on, under, about, or from the Facilities or any part thereof into the
Environment, and any other act, omission, business, operation, or thing that
increases the danger, or risk of danger, or poses an unreasonable risk of harm
to persons or property on or off the Facilities, or that may affect the value of
the Facilities or Universal.
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"Hazardous Materials" - any waste or other substance that is regulated,
listed, defined, designated, or classified as, or otherwise determined to be,
hazardous, radioactive, or toxic or a pollutant or a contaminant pursuant to any
Environmental Law, including any admixture or solution thereof, and specifically
including petroleum and all derivatives thereof or synthetic substitutes
therefor, polychlorinated biphenyls (TCBs") and asbestos or asbestos-containing
materials.
"IRC" - the Internal Revenue Code of 1986, or any successor law, and
regulations issued by the IRS pursuant to the Internal Revenue Code or any
successor law.
"IRS" - the United States Internal Revenue Service, or any successor
agency, and, to the extent relevant, the United States Department of the
Treasury.
"Knowledge" - an individual will be deemed to have "Knowledge" of a
particular fact or other matter if such individual should have been aware of
such fact or other matter, after reasonable investigation thereof.
A Person (other than an individual) will be deemed to have "Knowledge"
of a particular fact or other matter if any individual who is serving, or who
has at any time served, as a director, officer, partner, manager, executor, or
trustee of such Person (or in any similar capacity) has, or at any time had,
Knowledge of such fact or other matter.
"Legal Requirement" - any federal, state, local, municipal, foreign,
international, multinational, or other administrative order, constitution,
ordinance, principle of common law, regulation, statute, or treaty.
"Occupational Safety and Health Law" - any Legal Requirement designed to
provide safe and healthful working conditions and to reduce occupational safety
and health hazards, and any program, whether governmental or private (including
those promulgated or sponsored by industry associations and insurance
companies), designed to provide safe and healthful working conditions.
"Order" - any award, decision, injunction, judgment, order, ruling,
subpoena, or verdict entered, issued, made, or rendered by any court,
administrative agency, or other Governmental Body or by any arbitrator.
"Ordinary Course of Business" - an action taken by a Person will be
deemed to have been taken in the "Ordinary Course of Business" only if:
(a) such action is consistent with the past practices of such Person
and is taken in the ordinary course of the normal day-to-day operations of such
Person;
(b) such action is not required to be authorized by the Board of
Directors of such Person (or by any Person or group of Persons having similar
authority): and
(c) such action is similar in nature and magnitude to actions
customarily taken, without any authorization by the Board of Directors of such
Person (or by any Person or group of Persons exercising similar authority), in
the ordinary course of the normal day-to-day operations of other Persons that
are in the same business as such Person.
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"Organizational Documents" - (a) the articles or certificate of
incorporation and the bylaws of a corporation; (b) the partnership agreement and
any statement of partnership of a general partnership: (c) the limited
partnership agreement and the certificate of limited partnership of a limited
partnership; (d) the articles of organization and the operating agreement of a
limited liability company: (e) any charter or similar document adopted or filed
in connection with the creation, formation, or organization of a Person; and (f)
any amendment to any of the foregoing.
"Person" - any individual, corporation (including any non-profit
corporation), general or limited partnership, limited liability company,
fraternal organization, group, joint venture, estate, trust, association,
organization, labor union, or other entity or Governmental Body.
"Plan Affiliate" - with respect to any Person, any other person or
entity with whom the Person constitutes all or part of a controlled group, or
which would be treated with the Person as under common control or whose
employees would be treated as employed by the Person, pursuant to Section 414 of
the IRC and any regulations, administrative rulings and case law interpreting
the foregoing.
"Proceeding" - any action, arbitration, audit, hearing, investigation,
litigation, or suit (whether civil, criminal, administrative, investigative, or
informal) commenced, brought, conducted, or heard by or before, or otherwise
involving, any Governmental Body or arbitrator.
"Related Person"
a) with respect to a particular individual:
(i) each other member of such individual's Family;
(ii) any Person that is directly or indirectly controlled by such
individual or one or more members of such individual's Family;
(iii) any Person in which such individual or members of such
individual's Family hold (individually or in the aggregate) a Material Interest;
and
(iv) any Person with respect to which such individual or one or
more members of such individual's Family serves as a director, officer, partner,
executor, or trustee (or in a similar capacity).
(b) With respect to a specified Person other than an individual:
(i) any Person that directly or indirectly controls, is directly
or indirectly controlled by, or is directly or indirectly under common control
with such specified Person:
(ii) any Person that holds a Material Interest in such specified
Person;
(iii) each Person that serves as a director, officer, partner,
executor, or trustee of such specified Person (or in a similar capacity);
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(iv) any Person in which such specified Person holds a Material
Interest:
(v) any Person with respect to which such specified Person serves
as a general partner, manager or a trustee (or in a similar capacity); and
(vi) any Related Person of any individual described in clause
(ii) or (iii) of this Subsection (b).
For purposes of this definition, (a) the "Family" of an individual
includes (i) the individual, (H) the individual's spouse, (iii) any other
natural person who is related to the individual or the individual's spouse
within the second degree, and (iv) any other natural person who resides with
such individual, and (b) "Material Interest" means direct or indirect beneficial
ownership (as defined in Rule 13d-3 pursuant to the Securities Exchange Act of
1934) of voting securities or other voting interests representing at least 10%
of the outstanding voting power of a Person or equity securities or other equity
interests representing at least 10% of the outstanding equity securities or
equity interests in a Person.
"Release" - any spilling, leaking, emitting, discharging, depositing,
escaping, leaching, dumping, or other releasing into the Environment, whether
intentional or unintentional.
"Reorganization" - The exchange of Security Asset Common Stock for all
of the Shares, pursuant to Section 368(a)(1)(B) of the Code.
"Representative" - with respect to a particular Person, any director,
officer, manager, employee, agent, consultant, advisor, or other representative
of such Person, including legal counsel, accountants, and financial advisors.
"Securities Act" - the Securities Act of 1933, or any successor law, and
regulations and rules issued pursuant to that Act or any successor law.
"Security Asset" - Security Asset Capital Corporation, a Nevada
corporation, as defined in the preamble of this Agreement.
"Security Asset Common Stock" - common stock, $.001 par value per share,
of Security Asset.
"Shareholders" - the persons specified in Exhibit "A" of this Agreement.
"Shares" - as defined in recital A of this Agreement.
"Subsidiary" - with respect to any Person (the "Owner"), any corporation
or other Person of which securities or other interests having the power to elect
a majority of that corporation's or other Person's Board of Directors or similar
governing body, or otherwise having the power to direct the business and
policies of that corporation or other Person (other than securities or other
interests having such power only upon the happening of a contingency that has
not occurred) are held by the Owner or one or more of its Subsidiaries.
"Tax" - Any tax, charge, fee, levy, interest, penalty, addition to tax
or other assessment, including, but not limited to, income, provincial, excise,
property "real, tangible personal or intangible
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personal", sales, use, gross receipts, business and occupation, value added and
franchise tax, license, recording, documentation and registration fee and
customs duty, imposed by any Governmental Body and any payment with respect
there to required pursuant to any tax sharing agreement.
"Tax Return" - any return (including any information return), report,
statement, schedule, notice, form, or other document or information filed with
or submitted to, or required to be filed with or submitted to, any Governmental
Body in connection with the determination, assessment, collection, or payment of
any Tax or in connection with the administration, implementation, or enforcement
of or compliance with any Legal Requirement relating to any Tax.
"Threat of Release" - a substantial probability of a Release that may
require action in order to prevent or mitigate damage to the Environment that
may result from such Release.
"Threatened" - a claim, Proceeding, dispute, action, or other matter
will be deemed to have been "Threatened" if any demand or statement has been
made (orally or in writing) or any notice has been given (orally or in writing),
or if any other event has occurred or any other circumstances exist, that would
cause a prudent Person to conclude that such a claim, Proceeding, dispute,
action, or other matter probably will be asserted, commenced, taken, or
otherwise pursued in the future.
"Universal" - Universal View Corporation, a Nevada corporation, as
defined in the preamble of this Agreement.
"Universal Disclosure Letter" - the disclosure letter delivered by
Shareholders to Security Asset concurrently with the execution and delivery of
this Agreement.
ARTICLE II
REORGANIZATION AND REGISTRATION
2.1 Qualifying "B" Reorganization. Pursuant to the requirements of
Section 368(a)(1)(B) of the IRC and the regulations promulgated pursuant
thereto, Security Asset will issue and deliver to Shareholders 400,000 shares of
Security Asset Common Stock in exchange for the Shares. Immediately after that
exchange, Security Asset shall have control (as defined in Section 368(c) of the
IRC) of Universal.
2.2 Implementation of Reorganization. Shareholders shall cause Universal
to (i) take all corporate actions and obtain all approvals and consents
necessary to complete the Reorganization: (ii) secure the consent of any Person
(if such consent is necessary) to the consummation of such Reorganization; (iii)
file all necessary documents, returns, notices and applications with all
Governmental Bodies necessary or appropriate to complete the Reorganization;
(iv) deliver the Universal Disclosure Letter; and (v) deliver and transfer the
certificates representing and evidencing the Shares, together with stock powers
duly endorsed in blank with signatures guaranteed by Universal's transfer agent.
2.3 Obligations upon Execution. Upon the execution of this Agreement:
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(a) Shareholders will deliver to Security Asset:
(i) certificates representing the Shares, duly endorsed (or
accompanied by duly executed stock powers), for transfer to Security Asset;
(ii) releases in the form of Exhibit "B" executed by the
Shareholders ("Shareholders' Release"); and
(iii) the Universal Disclosure Letter in the form of Exhibit "C"
executed by the Shareholders;
(b) Security Asset will deliver to Shareholders:
(i) one or more certificates evidencing and representing 400,000
shares of Security Asset Common Stock: and
(ii) a check in the amount of $125,000 made payable to a
designee of the Shareholders.
2.4 Shareholders Representative. The Shareholders hereby irrevocably,
unconditionally and forever designate and appoint Danilo Cacciamatta, 2600
Michelson Drive, Suite 490, Irvine, California 92612, as their agent and
attorney in fact (the "Shareholders' Representative") with full and complete
power and authority to execute, deliver, and receive on their behalf all
notices, requests, and other communications pursuant to this Agreement; to
waive, amend, or modify any provisions of this Agreement, and to take such other
action on their behalf in connection with this Agreement and the Contemplated
Transactions as such agent deems appropriate; provided, however, that no such
waiver, amendment, or modification may be made if it would decrease the number
of shares of Security Asset Common Stock to be issued to the Shareholders
pursuant to this Agreement or increase the extent of their obligation.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF SHAREHOLDERS AND UNIVERSAL
Universal and Shareholders jointly and severally represent and warrant
to Security Asset as follows:
3.1 Organization and Good Standing.
(a) Part 3.1 of the Universal Disclosure Letter contains a complete
and accurate list for Universal, of its name, its jurisdiction of incorporation,
other jurisdictions in which it is authorized to do business, and its
capitalization (including the identity of each stockholder and the number of
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shares held by each). Universal is a corporation duly organized, validly
existing, and in good standing pursuant to the laws of its jurisdiction of
incorporation, with fill and complete corporate power and authority to conduct
its business as it is now being conducted, to own or use the properties and
assets that it purports to own or use, and to perform all its obligations
pursuant to Applicable Contracts. Universal is duly qualified to do business as
a foreign corporation and is in good standing pursuant to the laws of each state
or other jurisdiction in which either the ownership or use of the properties
owned or used by it, or the nature of the activities conducted by it, requires
such qualification.
(b) Universal has delivered to Security Asset true and correct
copies of the Organizational Documents of Universal, as currently in effect.
3.2 Authority; No Conflict.
(a) This Agreement constitutes the legal, valid, and binding
obligation of Shareholders, enforceable against Shareholders in accordance with
its terms. Upon the execution and delivery by Shareholders and Universal of the
Shareholders' Release ("Shareholders' Closing Documents"), the
Shareholders' Closing Documents will constitute the legal, valid and
binding obligations of Shareholder and Universal, enforceable against
Shareholders and Universal in accordance with their respective terms.
Shareholders have the absolute and unrestricted right, power, authority, and
capacity to execute and deliver this Agreement and to perform their obligations
pursuant to this Agreement, and Shareholders and Universal have the absolute and
unrestricted right, power, authority, and capacity to execute and deliver this
Agreement and to perform their obligations pursuant to the Shareholder' Closing
Documents.
(b) Except as set forth in Part 3.2 of the Universal Disclosure
Letter, neither the execution and delivery of this Agreement nor the
consummation or performance of any of the Contemplated Transactions will,
directly or indirectly (with or without notice or lapse of time):
(i) contravene, conflict with, or result in a violation of (A)
any provision of the Organizational Documents of Universal, or (B) any
resolution adopted by the Board of Directors or the stockholders of Universal;
(ii) contravene, conflict with, or result in a violation of,
or give any Governmental Body or other Person the right to challenge any of the
Contemplated Transactions or to exercise any remedy or obtain any relief under,
any Legal Requirement or any Order to which Universal or any Shareholder, or any
of the assets owned or used by Universal, may be subject;
(iii) contravene, conflict with, or result in a violation of
any of the terms or requirements of, or give any Governmental Body the right to
revoke, withdraw, suspend, cancel, terminate, or modify, any Governmental
Authorization that is held by Universal or that otherwise relates to the
business of, or any of the assets owned or used by, any Universal;
(iv) cause Security Asset or Universal to become subject to,
or to become liable for the payment of, any Tax;
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(v) cause any of the assets owned by Universal to be
reassessed or revalued by any taxing authority or other Governmental Body;
(vi) contravene, conflict with, or result in a violation or
breach of any provision of, or give any Person the right to declare a default or
exercise any remedy under, or to accelerate the maturity or performance of, or
to cancel, terminate, or modify, any Applicable Contract; or
(vii) result in the imposition or creation of any Encumbrance
upon or with respect to any of the assets owned or used by Universal.
Except as set forth in Part 3.2 of the Universal Disclosure Letter,
neither Universal nor any Shareholder is or will be required to give any notice
to or obtain any Consent from any Person in connection with the execution and
delivery of this Agreement or the consummation or performance of any of the
Contemplated Transactions.
(c) Shareholders are acquiring the Security Asset Common Stock for
their own accounts and not with an intention of distribution within the meaning
of Section 2 of the Securities Act.
3.3 Capitalization. The authorized equity securities of Universal
consist of 25,000,000 shares of $.001 par value Common Stock, of which 2,930,000
shares are issued and outstanding, all of which issued and outstanding shares
constitute the "Shares." Shareholders are the record and beneficial owners and
holders of the Shares, free and clear of all Encumbrances. Part 3.3 of the
Universal Disclosure Letter sets forth the ownership of the Shares. No legend or
other reference to any purported Encumbrance appears upon any certificate
representing the Shares. All of the Shares have been duly authorized and validly
issued and are fully paid and nonassessable. Except for this Agreement, there
are no Contracts relating to the issuance, sale, or transfer of any equity
securities or other securities of Universal. None of the Shares were issued in
violation of the Securities Act or any other Legal Requirement - Universal does
not own, or has any Contract to acquire, any equity securities or other
securities of any Person or any direct or indirect equity or ownership interest
in any other business.
3.4 Financial Statements. Universal has delivered to Security Asset (a)
audited balance sheets of Universal as at December 31 in each of the years 1997
through 1998, inclusive, and the related audited statement of income for each of
the fiscal years then ended, (b) an unaudited balance sheet of Universal as at
September 30, 1999 (the "Universal Balance Sheet"), and the related unaudited
statement of income for the nine (9) months then ended, and (c) an unaudited
balance sheet of Universal as at the date of this Agreement (the "Universal
Interim Balance Sheet") and the related unaudited statements of income, changes
in stockholders' equity, and cash flow for the nine (9) months then ended,
including in each case the notes thereto. Such financial statements and notes
fairly present the financial condition and the results of operations, changes in
stockholders' equity, and cash flow of Universal as at the respective dates of
and for the periods referred to in such financial statements, all in accordance
with GAAP, subject, in the case of interim financial statements, to normal
recurring year-end adjustments (the effect of which will not, individually or in
the aggregate, be materially adverse) and the absence of notes: the financial
statements referred to in this Section 3.4 present the consistent application of
such accounting principles throughout the
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periods involved. No financial statements of any Person other than Universal are
required by GAAP to be included in the financial statements of Universal.
3.5 Books and Records. The books of account, minute books, stock record
books, and other records of Universal, all of which have been delivered to
Security Asset, are complete and correct and have been maintained in accordance
with competent business practices, including the maintenance of an adequate
system of internal controls. The minute book of Universal contain accurate and
complete records of all meetings held of, and corporate actions taken by, the
stockholders, the Boards of Directors, and committees of the Boards of Directors
of Universal, and no meeting of any such stockholders, Board of Directors, or
committee has been held for which minutes have not been prepared and are not
contained in such minute books. Upon the execution of this Agreement, all of
those books and records will be in the possession of Universal.
3.6 Title to Properties; Encumbrances. Universal owns no real property
or any interest therein. Part 3.6 of the Universal Disclosure Letter contains a
complete and accurate list of all leaseholds of Universal. Universal owns all
the properties and assets (whether real, personal, or mixed and whether tangible
or intangible) that Universal purports to own, including all of the properties
and assets specified in the Universal Balance Sheet and the Universal Interim
Balance Sheet (except for assets held pursuant to capitalized leases disclosed
or not required to be disclosed in Part 3.6 of the Universal Disclosure Letter
and personal property sold since the date of the Universal Balance Sheet and the
Universal Interim Balance Sheet, as the case may be, in the Ordinary Course of
Business), and all of the properties and assets purchased or otherwise acquired
by Universal since the date of the Universal Balance Sheet (except for personal
property acquired and sold since the date of the Universal Balance Sheet in the
Ordinary Course of Business and consistent with past practice). All material
properties and assets specified in the Universal Balance Sheet and the Universal
Interim Balance Sheet are free and clear of all Encumbrances. Neither the whole
nor any portion of any property held by Universal is subject to any governmental
decree or Order to be sold or is being condemned, expropriated or otherwise
taken by any Governmental Body or any Person with or without payment
compensation therefor, nor, if any such condemnation, expropriation or taking
being proposed.
3.7 Condition and Sufficiency of Assets. The buildings, plants,
structures, and equipment of Universal are structurally sound, are in good
operating condition and repair, and are adequate for the uses to which they are
being put, and none of such buildings, plants, structures, or equipment is in
need of maintenance or repairs except for ordinary, routine maintenance and
repairs that are not material in nature or cost. The buildings, plants,
structures, and equipment of Universal are sufficient for the continued conduct
of Universal business after the Effective Date in substantially the same manner
as conducted prior to the Effective Date.
3.8 Accounts Receivable. All accounts receivable of Universal that are
specified on the Universal Balance Sheet or the Universal Interim Balance Sheet
or on the accounting records of Universal as of the Effective Date
(collectively, the "Universal Accounts Receivable") represent or will represent
valid obligations arising from sales actually made or services actually
performed in the Ordinary Course of Business. The Universal Accounts Receivable
are current and collectible net of the respective reserves shown on the
Universal Balance Sheet or the Universal Interim Balance Sheet or on the
accounting records of Universal as of the Effective Date (which reserves are
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adequate and calculated consistent with past practice and, in the case of the
reserve as of the Effective Date, will not represent a greater percentage of the
Universal Accounts Receivable as of the Effective Date than the reserve
specified in the Universal Balance Sheet represented of the Universal Accounts
Receivable specified therein and will not represent a material adverse change in
the composition of such Universal Accounts Receivable in terms of aging).
Subject to such reserves, each of the Universal Accounts Receivable either has
been or will be collected in full, without any set-off, within 90 days after the
day on which it first becomes due and payable. There is no contest, claim, or
right of set-off, other than returns in the Ordinary Course of Business,
pursuant to any Contract with any obligor of an Universal Accounts Receivable
relating to the amount or validity of such Universal Accounts Receivable. Part
3.8 of the Universal Disclosure Letter specifies a complete and accurate list of
all Universal Accounts Receivable as of the date of the Universal Interim
Balance Sheet sets and the aging of each Universal Accounts Receivable.
3.9 Inventory. All inventory of Universal, whether or not specified in
the Universal Balance Sheet or the Universal Interim Balance Sheet, consists of
a quality and quantity usable and salable in the Ordinary Course of Business,
except for obsolete items and items of below-standard quality, all of which have
been written off or written down to net realizable value in the Universal
Balance Sheet or the Universal Interim Balance Sheet or on the accounting
records of Universal as of the Effective Date, as the case may be. All
inventories not written off have been priced at the lower of cost or market on a
first in, first out basis. The quantities of each item of inventory (whether raw
materials, work-in-process, or finished goods) are not excessive, but are
reasonable in the present circumstances of Universal.
3.10 No Undisclosed Liabilities. Except as set forth in Part 3.10 of the
Universal Disclosure Letter, Universal has no liabilities or obligations of any
nature (whether known or unknown and whether absolute, accrued, contingent, or
otherwise) except for liabilities or obligations specified or reserved against
in the Universal Balance Sheet or the Universal Interim Balance Sheet and
current liabilities incurred in the Ordinary Course of Business since the
respective dates thereof.
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3.11 Taxes.
(a) Universal has filed or caused to be filed on a timely basis
all Tax Returns that are or were required to be filed by or with respect to any
of them, either separately or as a member of a group of corporations, pursuant
to applicable Legal Requirements Universal has delivered to Security Asset
copies of all such Tax Returns filed since January 1, 1997. Universal has paid,
or made provision for the payment of, all Taxes that have or may have become due
pursuant to those Tax Returns or otherwise, or pursuant to any assessment
received by Shareholders or Universal, except such Taxes, if any, as are listed
in Part 3.11 of the Universal Disclosure Letter and are being contested in good
faith and as to which adequate reserves (determined in accordance with GAAP)
have been provided in the Universal Balance Sheet and the Universal Interim
Balance Sheet.
(b) Part 3.11 of the Universal Disclosure Letter contains a
complete and accurate list of all audits of all such Tax Returns, including a
reasonably detailed description of the nature and outcome of each audit. All
deficiencies proposed as a result of such audits have been paid, reserved
against, settled, or, as described in Part 3.11 of the Universal Disclosure
Letter, are being contested in good faith by appropriate proceedings. Part 3.11
of the Universal Disclosure Letter describes all adjustments to the United
States federal income Tax Returns filed by Universal for all taxable years since
1997, and the resulting deficiencies proposed by the IRS. Except as described in
Part 3.11 of the Universal Disclosure Letter, neither Universal nor any
Shareholder has given or been requested to give waivers or extensions (or is or
would be subject to a waiver or extension given by any other Person) of any
statute of limitations relating to the payment of Taxes of Universal or for
which Universal may be liable
(c) The charges, accruals and reserves with respect to Taxes on the
books of Universal are adequate (determined in accordance with GAAP) and are at
least equal to Universal's liability for Taxes. There exists no proposed tax
assessment against Universal, except as disclosed in the Universal Balance Sheet
or in Part 3.11 of the Universal Disclosure Letter. No consent to the
application of Section 341(f)(2) of the IRC has been filed with respect to any
property or assets held, acquired, or to be acquired by Universal. All Taxes
that Universal is or was required by Legal Requirements to withhold or collect
have been duly withheld or collected and, to the extent required, have been paid
to the proper Governmental Body or other Person.
(d) All Tax Returns filed by (or that include on a consolidated
basis) Universal are true, correct, and complete. There is no tax sharing
agreement that will require any payment by Universal after the date of this
Agreement. Universal is not, nor during the 5 year period preceding the
Effective Date has been, an "S" corporation. During the consistency period (as
defined in Section 338(h)(4) of the IRC with respect to the sale of the Shares
to Security Asset), neither Universal nor target affiliate (as defined in
Section 338(h)(6) of the IRC with respect to the sale of the Shares to Security
Asset) has sold or will sell any property or assets to Security Asset or to any
member of the affiliated group (as defined in Section 338(h)(5) of the IRC) that
includes Security Asset. Part 3.11 of the Universal Disclosure Letter lists all
such target affiliates.
3.12 No Material Adverse Change. Since the date of the Universal Balance
Sheet, there has not been any material adverse change in the business,
operations, properties, prospects, assets, or condition of Universal, and no
event has occurred or circumstance exists that may result in such a material
adverse change.
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3.13 Employee Benefits. Except as set forth in Part 3.13 of the
Universal Disclosure Letter, neither Universal nor any Plan Affiliate of
Universal has maintained, sponsored, adopted, made contributions to or obligated
itself to make contributions to or to pay any benefits or grant rights pursuant
to or with respect to any Employee Benefit Plan, whether or not written, which
could give rise to or result in Universal or such Plan Affiliate having any
material debt, liability, claim or obligation of any kind or nature whatsoever,
whether accrued, absolute, contingent, direct, indirect, known or unknown,
perfected or inchoate or otherwise and whether or not due or to become due.
Correct and complete copies of all Employee Benefit Plans previously have been
furnished to Security Asset. The Employee Benefit Plans are in compliance in all
material respects with governing documents and agreements and with applicable
laws. There has not been any act or omission by Universal pursuant to ERISA or
the terms of the Employee Benefit Plans, or any other applicable law or
agreement which could give rise to any liability of Universal, whether pursuant
to ERISA, the IRC or other laws or agreements.
3.14 Compliance with Legal Requirements; Governmental Authorizations.
(a) Except as set forth in Part 3.14 of the Universal Disclosure
Letter:
(i) Universal is and has been in full compliance with each
Legal Requirement that is or was applicable to it or to the conduct or operation
of its business or the ownership or use of any of its assets,
(ii) no event has occurred or circumstance exists that (with
or without notice or lapse of time) (A) may constitute or result in a violation
by Universal of, or a failure on the part of Universal to comply with, any Legal
Requirement, or (B) may give result in any obligation on the part of Universal
to undertake, or to pay all or any portion of the cost of, any remedial action
of any nature, including pursuant to any Environmental, Health, and Safety
Liability; and
(iii) Universal has not received any notice or other
communication (whether oral or written) from any Governmental Body or any other
Person regarding (A) any actual, alleged, possible, or potential violation of,
or failure to comply with, any Legal Requirement, or (B) any actual, alleged,
possible, or potential obligation on the part of Universal to undertake, or to
pay all or any portion of the cost of, any remedial action of any nature,
including pursuant to any Environmental, Health, and Safety Liability.
(b) Part 3.14 of the Universal Disclosure Letter contains a
complete and accurate list of each Governmental Authorization that is held by
Universal or that otherwise relates to the business of, or to any of the assets
owned or used by, Universal. Each Governmental Authorization listed or required
to be listed in Part 3.14 of the Universal Disclosure Letter is valid and in
full force and effect. Except as set forth in Part 3.14 of the Universal
Disclosure Letter:
(i) Universal is and has been in full compliance with all of
the terms and requirements of each Governmental Authorization identified or
required to be identified in Part 3.14 of the Universal Disclosure Letter;
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(ii) no event has occurred or circumstance exists that may
(with or without notice or lapse of time) (A) constitute or result directly or
indirectly in a violation of or a failure to comply with any term or requirement
of any Governmental Authorization listed or required to be listed in Part 3.14
of the Universal Disclosure Letter, or (B) result directly or indirectly in the
revocation, withdrawal, suspension, cancellation, or termination of, or any
modification to, any Governmental Authorization listed or required to be listed
in Part 3.14 of the Universal Disclosure Letter;
(iii) Universal has not received any notice or other
communication (whether oral or written) from any Governmental Body or any other
Person regarding (A) any actual, alleged, possible, or potential violation of or
failure to comply with any term or requirement of any Governmental
Authorization, or (B) any actual, proposed, possible, or potential revocation,
withdrawal, suspension, cancellation, termination of, or modification to any
Governmental Authorization; and
(iv) all applications required to have been filed for the
renewal of the Governmental Authorizations listed or required to be listed in
Part 3.14 of the Universal Disclosure Letter have been duly filed on a timely
basis with the appropriate Governmental Bodies, and all other filings required
to have been made with respect to such Governmental Authorizations have been
duly made on a timely basis with the appropriate Governmental Bodies.
The Governmental Authorizations listed in Part 3.14 of the Universal
Disclosure Letter collectively constitute all of the Governmental Authorizations
necessary to permit Universal to conduct and operate its business lawfully in
the manner Universal currently conducts and operates such business and to permit
Universal to own and use its assets in the manner in which Universal currently
owns and uses such assets.
3.15 Legal Proceedings: Orders.
(a) Except as set forth in Part 3.15 of the Universal Disclosure
Letter, there is no pending Proceeding:
(i) that has been commenced by or against Universal or that
otherwise relates to or may affect the business of, or any of the assets owned
or used by, Universal; or
(ii) that challenges, or that may have the effect of
preventing, delaying, making illegal, or otherwise interfering with, any of the
Contemplated Transactions.
To the Knowledge of Shareholders and Universal, (1) no such Proceeding
has been Threatened, and (2) no event has occurred or circumstance exists that
may give result in or serve as a basis for the commencement of any such
Proceeding. Universal has delivered to Security Asset copies of all pleadings,
correspondence, and other documents relating to each Proceeding listed in Part
3.15 of the Universal Disclosure Letter. The Proceedings listed in Part 3-15 of
the Universal Disclosure Letter will not have a material adverse effect on the
business, operations, assets, condition, or prospects of Universal.
(b) Except as set forth in Part 3.15 of the Universal Disclosure
Letter:
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(i) there is no Order to which Universal, or any of the assets
owned or used by Universal, is subject;
(ii) no Universal Shareholder is subject to any Order that
relates to the business of, or any of the assets owned or used by, Universal;
and
(iii) no officer, director, agent, or employee of Universal is
subject to any Order that prohibits such officer, director, agent, or employee
from engaging in or continuing any conduct, activity, or practice relating to
the business of Universal.
(c) Except as set forth in Part 3.15 of the Universal Disclosure
Letter:
(i) Universal is and has been in full compliance with all of
the terms and requirements of each Order to which it, or any of the assets owned
or used by it, is or has been subject;
(ii) no event has occurred or circumstance exists that may
constitute or result in (with or without notice or lapse of time) a violation of
or failure to comply with any term or requirement of any Order to which
Universal, or any of the assets owned or used by Universal, is subject; and
(iii) Universal has not received any notice or other
communication (whether oral or written) from any Governmental Body or any other
Person regarding any actual, alleged, possible, or potential violation of, or
failure to comply with, any term or requirement of any Order to which Universal,
or any of the assets owned or used by Universal, is or has been subject.
3.16 Absence of Certain Changes and Events. Except as set forth in Part
3.16 of the Universal Disclosure Letter, since the date of the Universal Balance
Sheet, Universal has conducted Universal's business only in the Ordinary Course
of Business and there has not been any:
(a) change in Universal's authorized or issued capital stock; grant
of any stock option or right to purchase shares of capital stock of Universal;
issuance of any Security Asset convertible into such capital stock; grant of any
registration rights; purchase, redemption, retirement, or other acquisition by
Universal of any shares of any such capital stock; or declaration or payment of
any dividend or other distribution or payment in respect of shares of capital
stock;
(b) amendment to the Organizational Documents of Universal;
(c) payment or increase by Universal of any bonuses, salaries, or
other compensation to any stockholder, director, officer, or (except in the
Ordinary Course of Business) employee or entry into any employment, severance,
or similar Contract with any director, officer, or employee;
(d) adoption of, or increase in the payments to or benefits
pursuant to, any profit sharing, bonus, deferred compensation, savings,
insurance, pension, retirement, or other employee benefit plan for or with any
employees of Universal;
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(e) damage to or destruction or loss of any asset or property of
Universal, whether or not covered by insurance, materially and adversely
affecting the properties, assets, business, financial condition, or prospects of
Universal, taken as a whole;
(f) entry into, termination of, or receipt of notice of termination
of (i) any license, distributorship, dealer, sales representative, joint
venture, credit, or similar agreement, or (ii) any Contract or transaction
involving a total remaining commitment by or to Universal of at least
$10,000.00;
(g) sale (other than sales of inventory in the Ordinary Course of
Business), lease, or other disposition of any asset or property of Universal or
mortgage, pledge, or imposition of any lien or other encumbrance on any material
asset or property of Universal, including the sale, lease, or other disposition
of any of the Universal Intellectual Property Assets;
(h) cancellation or waiver of any claims or rights with a value to
Universal in excess of $10,000.00;
(i) material change in the accounting methods used by Universal; or
(j) agreement, whether oral or written, by Universal to do any of
the foregoing.
3.17 Contracts; No Defaults.
(a) Part 3.17(a) of the Universal Disclosure Letter contains a
complete and accurate list, and Universal has delivered to Security Asset true
and complete copies, of all the Contracts with a value of at least $10,000.00 of
Universal. Part 3.17(a) of the Universal Disclosure Letter sets forth reasonably
complete details concerning such Contracts, including the parties to the
Contracts, the amount of the remaining commitment of Universal pursuant to the
Contracts, and Universal's office where details relating to the Contracts are
located.
(b) Except as set forth in Part 3.17(b) of the Universal Disclosure
Letter:
(i) no Shareholder (and no Related Person of any Shareholder)
has or may acquire any rights pursuant to, and no Shareholder has or may become
subject to any obligation or liability pursuant to, any Contract that relates to
the business of, or any of the assets owned or used by, Universal: and
(ii) no officer, director, agent, employee, consultant, or
contractor of Universal is obligated by any Contract that purports to limit the
ability of such officer, director, agent, employee, consultant, or contractor to
(A) engage in or continue any conduct, activity, or practice relating to the
business of Universal, or (B) assign to Universal or to any other Person any
rights to any invention, improvement, or discovery.
(c) Except as set forth in Part 3.17(c) of the Universal Disclosure
Letter, each Contract identified or required to be identified in Part 3.17(a) of
the Universal Disclosure Letter is in full force and effect and is valid and
enforceable in accordance with its terms.
(d) Except as set forth in Part 3.17(d) of the Universal Disclosure
Letter:
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(i) Universal is and has been in full compliance with all
applicable terms and requirements of each Contract pursuant to which Universal
has or had any obligation or liability or by which Universal or any of the
assets owned or used by Universal is or was obligated;
(ii) each other Person that has or had any obligation or
liability pursuant to any Contract pursuant to which Universal has or had any
rights is and has been in full compliance with all applicable terms and
requirements of such Contract;
(iii) no event has occurred or circumstance exists that (with
or without notice or lapse of time) may contravene, conflict with, or result in
a violation or breach of, or give Universal or other Person the right to declare
a default or exercise any remedy pursuant to, or to accelerate the maturity or
performance of, or to cancel, terminate, or modify, any Applicable Contract; and
(iv) Universal has not given to or received from any other
Person any notice or other communication (whether oral or written) regarding any
actual, alleged, possible, or potential violation or breach of, or default
pursuant to, any Contract.
(e) There are no renegotiations of, attempts to renegotiate, or
outstanding rights to renegotiate any material amounts paid or payable to
Universal pursuant to current or completed Contracts with any Person and no such
Person has made written demand for such renegotiation.
(f) The Contracts relating to the sale, design, manufacture, or
provision of products or services by Universal have been entered into in the
Ordinary Course of Business and have been entered into without the commission of
any act alone or in concert with any other Person, or any consideration having
been paid or promised, that is or would be in violation of any Legal
Requirement.
3.18 Insurance.
(a) Universal has delivered to Security Asset:
(i) true and complete copies of all policies of insurance to
which Universal is a party, or any director of Universal, is or has been covered
at any time within the three (3) years preceding the date of this Agreement;
(ii) true and complete copies of all pending applications for
policies of insurance; and
(iii) any statement by the auditor of Universal's financial
statements with regard to the adequacy of such entity's coverage or of the
reserves for claims.
(b) Part 3.18(b) of the Universal Disclosure Letter describes:
(i) any self insurance arrangement by or affecting Universal,
including any reserves established pursuant thereto;
(ii) any contract or arrangement, other than a policy of
insurance, for the transfer or sharing of any risk by Universal; and
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(iii) all obligations of Universal to third parties with
respect to insurance (including such obligations under leases and service
agreements) and identifies the policy pursuant to which such coverage is
provided.
(c) Part 3.18(c) of the Universal Disclosure Letter sets forth, by
year, for the current policy year and each of the three (3) preceding policy
years:
(i) a summary of the loss experience pursuant to each policy;
(ii) a statement describing each claim pursuant to an
insurance policy for an amount in excess of $10,000.00, which sets forth:
(A) the name of the claimant;
(B) a description of the policy by insurer, type of
insurance, and period of coverage; and
(C) the amount and a brief description of the claim: and
(iii) a statement describing the loss experience for all
claims that were self insured, including the number and aggregate cost of such
claims.
(d) Except as set forth on Part 3.18(d) of the Universal Disclosure
Letter:
(i) All policies to which Universal is a party or that provide
coverage to Shareholder, Universal, or any director or officer of Universal:
(A) are valid, outstanding, and enforceable;
(B) are issued by an insurer that is financially sound and
reputable;
(C) taken together, provide adequate insurance coverage
for the assets and the operations of Universal for all risks normally insured
against by a Person carrying on the same business or businesses as Universal;
(D) are sufficient for compliance with all Legal
Requirements, Governmental Authorizations and Contracts to which Universal is a
party or by which Universal is obligated:
(E) will continue in full force and effect following the
consummation of the Contemplated Transactions; and
(F) do not provide for any retrospective premium
adjustment or other experienced-based liability on the part of Universal.
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(ii) Neither Universal nor any Shareholder has received (A)
any refusal of coverage or any notice that a defense will be afforded with
reservation of rights, or (B) any notice of cancellation or any other indication
that any insurance policy is not now in full force or effect or will not be
renewed or that the issuer of any policy is not willing or able to perform its
obligations pursuant thereto.
(iii) Universal has paid all premiums due, and have otherwise
performed all of its obligations, pursuant to each policy to which Universal is
a party or that provides coverage to Universal or director or officer thereof.
(iv) Universal has given notice to the insurer of all claims
that may be insured thereby.
3.19 Environmental Matters. Except as set forth in Part 3.19 of the
Universal Disclosure Letter.
(a) Universal is, and at all times has been, in full compliance
with, and has not been and is not in violation of or liable for Environmental,
Health, and Safety Liabilities pursuant to, any Environmental Law. Neither
Universal nor any Shareholder has any basis to expect, nor has any of them or
any other Person for whose conduct they are or may be held to be responsible
received, any actual or Threatened Order, notice, or other communication from
(i) any Governmental Body or private citizen, or (ii) the current or prior owner
or operator of any Facilities, of any actual or potential Release of Hazardous
Materials from any Facilities, or any violation or failure to comply with any
Environmental Law, or of any actual or Threatened obligation to undertake or pay
the cost of any Environmental, Health, and Safety Liabilities with respect to
any of the Facilities or any other properties or assets (whether real, personal,
or mixed) in which any Shareholder or Universal has had an interest, or with
respect to any property or Facility (A) at or to which Hazardous Materials were
generated, manufactured, refined, transferred, transported, disposed, imported,
used, or processed by or from any Shareholder, Universal, or any other Person
for whose conduct they are or may be held responsible, or (B) to or from which
Hazardous Materials from any Shareholder, Universal, or any other Person for
whose conduct they are or may be held responsible have been transported,
treated, stored, handled, transferred, disposed, recycled, or received.
(b) There are no pending or, to the Knowledge of Shareholders and
Universal, Threatened claims, Encumbrances, or other restrictions of any nature,
resulting from any Environmental, Health, and Safety Liabilities or arising
under or pursuant to any Environmental Law, with respect to or affecting any of
the Facilities or any other properties and assets (whether real, personal, or
mixed) in which any Shareholder or Universal has or had an interest
(c) Neither Universal nor any Shareholder has any basis to expect,
nor has any of them or any other Person for whose conduct they are or may be
held responsible, received, any citation, directive, inquiry, notice, Order,
summons, warning, or other communication that relates to Hazardous Activity,
Hazardous Materials, or any alleged, actual, or potential violation or failure
to comply with any Environmental Law, or of any alleged, actual, or potential
obligation to undertake or pay the cost of any Environmental, Health, and Safety
Liabilities with respect to any of the Facilities or any other properties or
assets (whether real, personal, or mixed) in which any Shareholder or Universal
had an interest, or with respect to any property or facility to which Hazardous
Materials generated, manufactured, refined, transferred, imported, treated,
used, or processed by any
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Shareholder, Universal, or any other Person for whose conduct they are or may be
held responsible, have been transported, treated, stored, handled, transferred,
disposed, recycled, or received.
(d) Neither Universal nor any Shareholder, nor any other Person for
whose conduct they are or may be held responsible, has any Environmental,
Health, and Safety Liabilities with respect to the Facilities or with respect to
any other properties and assets (whether real, personal, or mixed) in which any
Shareholder or Universal (or any predecessor), has or had an interest, or at any
property geologically or hydrologically adjoining the Facilities or any such
other property or assets.
(e) There are no Hazardous Materials present on or in the
Environment at the Facilities or at any geologically or hydrologically adjoining
property, including any Hazardous Materials contained in barrels, above or
underground storage tanks, landfills, land deposits, dumps, buildings, equipment
(whether moveable or fixed) or other containers, either temporary or permanent,
and deposited or located in land, water, sumps, or any other part of the
Facilities or such adjoining property, or incorporated into any structure
therein or thereon. Neither Universal nor any Shareholder, nor any other Person
for whose conduct they are or may be held responsible, or any other Person, has
permitted or conducted, or is aware of, any Hazardous Activity conducted with
respect to the Facilities or any other properties or assets (whether real,
personal, or mixed) in which any Shareholder or Universal has or had an
interest.
(f) There has been no Release or, to the Knowledge of any
Shareholder and Universal, Threat of Release, of any Hazardous Materials at or
from the Facilities or at any other locations where any Hazardous Materials were
generated, manufactured, refined, transferred, produced, imported, used, or
processed from or by the Facilities, or from or by any other properties and
assets (whether real, personal, or mixed) in which any Shareholder or Universal
has or had an interest, or any geologically or hydrologically adjoining
property, whether by any Shareholder, Universal, or any other Person, or with
respect to any property or facility to which Hazardous Materials generated,
manufactured, refined, transferred, imported, treated, used, or processed by any
Shareholder, Universal, or any other Person for whose conduct they are or may be
held responsible, have been transported, treated, stored, handled, transferred,
disposed, recycled, or received.
(g) Universal has delivered to Security Asset true and complete
copies and results of any reports, studies, analyses, tests, or monitoring
possessed or initiated by any Shareholder or Universal pertaining to Hazardous
Materials or Hazardous Activities in, on, or under the Facilities, or concerning
compliance by any Shareholder, Universal, or any other Person for whose conduct
they are or may be held responsible, with Environmental Laws.
3.20 Employees.
(a) Part 3.20 of the Universal Disclosure Letter contains a
complete and accurate list of the following information for each employee or
director of Universal, including each employee on leave of absence or layoff
status: employer; name: job title; current compensation paid or payable and any
change in compensation since January 1, 1997; vacation accrued: and service
credited for purposes of vesting and eligibility to participate pursuant to
Universal's pension, retirement, profit-sharing, thriftsavings, deferred
compensation, stock bonus, stock option, cash bonus, employee stock ownership
(including investment credit or payroll stock ownership), severance pay,
insurance, medical, welfare, or vacation plan, other Employee Pension Benefit
Plan or Employee Welfare Benefit Plan, or any other employee benefit plan or any
director plan.
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(b) No employee or director of Universal is a party to, or is
otherwise obligated by, any agreement or arrangement, including any
confidentiality, noncompetition, or proprietary rights agreement, between such
employee or director and any other Person ("Universal Proprietary Rights
Agreement") that in any way adversely affects or will affect (i) the performance
of his or her duties as an employee or director of Universal, or (ii) the
ability of Universal to conduct its business, including any Universal
Proprietary Rights Agreement with any Shareholder or Universal by any such
employee or director. To Shareholders' Knowledge, no director, officer, or other
key employee of Universal intends to terminate his or her employment with
Universal.
(c) Part 3.20 of the Universal Disclosure Letter also contains a
complete and accurate list of the following information for each retired
employee or director of Universal, or their dependents, receiving benefits or
scheduled to receive benefits in the future: name, pension benefit, pension
option election, retiree medical insurance coverage, retiree life insurance
coverage, and other benefits.
3.21 Labor Relations: Compliance. Universal has not been or is a party
to any collective bargaining or other labor Contract. There has not been, there
is not presently pending or existing, and there is not Threatened, (a) any
strike, slowdown, picketing, work stoppage, or employee grievance process, (b)
any Proceeding against or affecting Universal relating to the alleged violation
of any Legal Requirement pertaining to labor relations or employment matters,
including any charge or complaint filed by an employee or union with the
National Labor Relations Board, the Equal Employment Opportunity Commission, or
any comparable Governmental Body, organizational activity, or other labor or
employment dispute against or affecting Universal or its premises, or (c) any
application for certification of a collective bargaining agent. No event has
occurred or circumstance exists that could provide the basis for any work
stoppage or other labor dispute. There is no lockout of any employees by
Universal, and no such action is contemplated by Universal. Universal has
complied in all respects with all Legal Requirements relating to employment,
equal employment opportunity, nondiscrimination, immigration, wages, hours,
benefits, collective bargaining, the payment of social Security Asset and
similar taxes, occupational safety and health, and plant closing. Universal is
not liable for the payment of any compensation, damages, taxes, fines,
penalties, or other amounts, however designated, for failure to comply with any
of the foregoing Legal Requirements.
3.22 Intellectual Property.
(a) Universal (i) owns all the licenses, trademarks, tradenames,
copyrights, marks, patents and applications for patents listed and attributed to
it on Part 3.22(a) of the Universal Disclosure Letter (the "Universal
Intellectual Property Assets"), (ii) neither owns nor uses any such items which
are not listed in the Universal Disclosure Letter, (iii) pays no royalties to
any Person with respect to any such items, and (iv) has full, complete,
unfettered and lawful right to bring actions for the infringement thereof.
Universal owns, or possesses adequate and enforceable rights to use without
payment of royalties, all licenses, trademarks, tradenames, copyrights, patents,
trade secrets and processes necessary for the conduct of, or use in, its
business as the same is presently being conducted.
(b) Except as set forth on Part 3.22(b) of the Universal Disclosure
Letter, Universal has no Knowledge nor has received any notice to the effect
that any service or product it provides or sells, or any process, method, part
or material it employees in its business for the use by it or another
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of any such service, may infringe, or is in conflict with, any asserted right of
another Person. There is no pending or Threatened claim or litigation action
against Universal contesting its right to use or the validity of any of the
trademarks or tradenames listed on Part 3.22(a) of the Universal Disclosure
Letter or asserting its misuse of any of the foregoing, which would deprive it
of the right to assert its rights pursuant thereto or which would prevent the
sale of any service provided or sold by it.
3.23 Certain Payments. Neither Universal nor any director, officer,
agent, or employee of Universal, or to Shareholders' Knowledge any other Person
associated with or acting for or on behalf of Universal, has directly or
indirectly (a) made any contribution, gift, bribe, rebate, payoff, influence
payment, kickback, or other payment to any Person, private or public, regardless
of form, whether in money, property, or services (i) to obtain favorable
treatment in securing business, (ii) to pay for favorable treatment for business
secured, (iii) to obtain special concessions or for special concessions already
obtained, for or in respect of Universal or any Affiliate of Universal, or (iv)
in violation of any Legal Requirement, or (b) established or maintained any fund
or asset that has not been recorded in the books and records of Universal.
3.24 Disclosure.
(a) No representation or warranty of Shareholders in this Agreement
and no information specified in the Universal Disclosure Letter omits to specify
a material fact necessary to make the information specified herein or therein,
considering the circumstances in which that information was furnished, not
misleading.
(b) There is no fact known to any Shareholder that has specific
application to any Shareholder or Universal (other than general economic or
industry conditions) and that materially adversely affects or, as far as any
Shareholder can reasonably foresee, materially threatens, the assets, business,
prospects, financial condition, or results of operations of Universal that has
not been set forth in this Agreement or the Universal Disclosure Letter.
3.25 Relationships with Related Persons. Except as set forth on Part
3.25 of the Universal Disclosure Letter, no Shareholder or any Related Person of
Shareholders or of Universal has or has had any interest in any property
(whether real, personal, or mixed and whether tangible or intangible), used in
or pertaining to Universal's business. Except as set forth in Part 3.25 of the
Universal Disclosure Letter, no Shareholder or any Related Person of
Shareholders or of Universal is or has owned (of record or as a beneficial
owner) an equity interest or any other financial or profit interest in, a Person
that has (i) had business dealings or a material financial interest in any
transaction with Universal, or (ii) engaged in competition with Universal with
respect to any line of the products or services of Universal (a "Universal
Competing Business") in any market presently served by Universal. Except as set
forth in Part 3.25 of the Universal Disclosure Letter, no Shareholder or any
Related Person of Shareholders or of Universal is a party to any Contract with,
or has any claim or right against, Universal.
3.26 Brokers or Finders. Shareholders and their agents have incurred no
obligation or liability, contingent or otherwise, for brokerage or finders' fees
or agents' commissions or other similar payment in connection with this
Agreement.
3.27 Corporate Resolutions. Universal has delivered to Security Asset a
certified copy of the resolutions adopted by the Board of Directors of Universal
authorizing execution, delivery and performance of this Agreement and the
consummation of the Reorganization and a certificate of the
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Secretary of Universal, dated the Effective Date, to the effect that those
resolutions were duly adopted and are in full force and effect and with respect
to the authority and incumbency of the officers of Universal executing this
Agreement.
3.28 Take or Pay Contracts. Part 3.28 of the Universal Disclosure Letter
specifies all Contracts pursuant to which Universal is required to purchase a
minimum quantity of utilities, products or services or to make payment therefor.
Universal has utilized the minimum quantity of utilities, products or services
that Universal is required to utilize pursuant to such Contracts and Universal
has made no prepayments for utilities, products or services that Universal has
not utilized.
3.29 Banking Relationships. Part 3.29 of the Universal Disclosure Letter
specifies the names and locations of all banks, trust companies, savings and
loans associations and other financial institutions at which Universal maintains
its safe deposit boxes or accounts of any nature and the names of all persons
authorized to have access there to, draw thereon or make withdrawals therefrom.
Upon request, Universal and Shareholders will deliver to Security Asset copies
of all records, including all signatures or authorization cards and the keys
pertaining to safe deposit boxes.
3.30 Further Assurances. Each Shareholder shall cooperate with Security
Asset and provide such Shareholder's best efforts to assist Security Asset in
connection with the continuity and smooth transition of the Universal
businesses. At any time or from time to time, each Shareholder shall, at the
request of Security Asset, take any and all action necessary or appropriate to
put Security Asset in actual possession and control of Universal and shall
execute and deliver such further instruments of sale, conveyance, transfer,
assignment and consent and take such other action as Security Asset may request
in order to sale, convey, transfer, deliver, assign, and set over to Security
Asset all of the Shares and to confirm the title and possession thereto or to
assist Security Asset in exercising its rights with respect thereto.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF BUYER
Buyer represents and warrants to Universal and Shareholders, and each of
them, as follows:
4.1 Organization and Good Standing.
(a) Security Asset is a corporation duly organized, validly
existing, and in good standing pursuant to the laws of its jurisdiction of
incorporation, with full and complete corporate power and authority to conduct
its business as it is now being conducted, to own or use the properties and
assets that it purports to own or use, and to perform all its obligations
pursuant to Applicable Contracts. Security Asset is duly qualified to do
business as a foreign corporation and is in good standing pursuant to the laws
of each state or other jurisdiction in which either the ownership or use of the
properties owned or used by it, or the nature of the activities conducted by it,
requires such qualification.
(b) Security Asset has delivered to Universal true and correct
copies of the Organizational Documents of Security Asset, as currently in
effect.
4.2 Authority; No Conflict.
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(a) This Agreement constitutes the legal, valid, and binding obligation
of Security Asset, enforceable against Security Asset in accordance with its
terms. Security Asset has the absolute and unrestricted right, power, authority,
and capacity to execute and deliver this Agreement and to perform its
obligations pursuant to this Agreement, and Security Asset has the absolute and
unrestricted right, power, authority, and capacity to execute and deliver this
Agreement.
(b) Neither the execution and delivery of this Agreement nor the
consummation or performance of any of the Contemplated Transactions will,
directly or indirectly (with or without notice or lapse of time):
(i) contravene, conflict with, or result in a violation of (A)
any provision of the Organizational Documents of Security Asset, or (B) any
resolution adopted by the Board of Directors or the stockholders of Security
Asset;
(ii) contravene, conflict with, or result in a violation of, or
give any Governmental Body or other Person the right to challenge any of the
Contemplated Transactions or to exercise any remedy or obtain any relief
pursuant to, any Legal Requirement or any Order to which Security Asset, or any
of the assets owned or used by Security Asset, may be subject;
(iii) contravene, conflict with, or result in a violation of any
of the terms or requirements of, or give any Governmental Body the right to
revoke, withdraw, suspend, cancel, terminate, or modify, any Governmental
Authorization that is held by Security Asset or that otherwise relates to the
business of, or any of the assets owned or used by, Security Asset;
(iv) contravene, conflict with, or result in a violation or
breach of any provision of, or give any Person the right to declare a default or
exercise any remedy pursuant to, or to accelerate the maturity or performance
of, or to cancel, terminate, or modify, any Applicable Contract; or
Security Asset is not or will not be required to give any notice to or
obtain any Consent from any Person in connection with the execution and delivery
of this Agreement or the consummation or performance of any of the Contemplated
Transactions,
(c) Security Asset is acquiring the Shares for Security Asset's own
account and not with an intention of distribution within the meaning of Section
2(11) of the Securities Act. Security Asset is an "accredited investor" as such
term is defined in Rule 501(a) of Regulation D promulgated pursuant to the
Securities Act.
4.3 Capitalization. The authorized equity securities of Security Asset
consist of 25,000,000 shares of common stock, $.001 par value, of which
approximately 10,861,000 shares are issued and outstanding. No legend or other
reference to any purported Encumbrance appears upon any certificate representing
equity securities of Security Asset. All of the outstanding equity securities of
Security Asset have been duly authorized and validly issued and are fully paid
and nonassessable. There are no Contracts relating to the issuance, sale, or
transfer of any equity securities or other securities of Security Asset. None of
the outstanding equity securities or other securities of Security Asset was
issued in violation of the Securities Act or any other Legal Requirement.
Security Asset
26
<PAGE> 27
does not own, and except for this Agreement, Security Asset has no Contract to
acquire, any equity securities or other securities of any Person or any direct
or indirect equity or ownership interest in any other business.
4.4 Books and Records. The books of account, minute books, stock record
books, and other records of Security Asset, all of which have been delivered to
Universal, are complete and correct and have been maintained in accordance with
sound business practices, including the maintenance of an adequate system of
internal controls. The minute book of Security Asset contains accurate and
complete records of all meetings held of, and corporate actions taken by, the
stockholders, the Boards of Directors, and committees of the Boards of Directors
of Security Asset, and no meeting of any such stockholders, Board of Directors,
or committee has been held for which minutes have not been prepared and are not
contained in such minute book. Upon the execution of this Agreement, all of
those books and records will be in the possession of Security Asset.
4.5 Corporate Resolutions. Security Asset has delivered to Universal a
certified copy of the resolutions adopted by the Board Directors of Security
Asset authorizing execution, delivery and performance of this Agreement and the
consummation of the Reorganization and a certificate of the Secretary of
Security Asset, dated the Effective Date, to the effect that those resolutions
were duly adopted and are in full force and effect and with respect to the
authority and incumbency of the officers of Security Asset executing this
Agreement.
ARTICLE V
INDEMNIFICATION; REMEDIES
5.1 Survival; Right to Indemnification Not Affected by Knowledge. All
representations, warranties, covenants, and obligations in this Agreement, the
Disclosure Letter, the certificates delivered pursuant to Sections 2.3(a)(i) and
2.3(b)(i), and any other certificate or document delivered pursuant to this
Agreement will survive this Agreement. The right to indemnification, payment of
Damages or other remedy based on such representations, warranties, covenants,
and obligations will not be affected by any investigation conducted with respect
to, or any Knowledge acquired (or capable of being acquired) at any time,
whether before or after the execution and delivery of this Agreement, with
respect to the accuracy or inaccuracy of or compliance with, any such
representation, warranty, covenant, or obligation. The waiver of any condition
based on the accuracy of any representation or warranty, or on the performance
of or compliance with any covenant or obligation, will not affect the right to
indemnification, payment of Damages, or other remedy based on such
representations, warranties, covenants, and obligations.
5.2 Indemnification and Payment of Damages by Majority Shareholders.
Majority Shareholders, jointly and severally, will indemnify and hold harmless
Security Asset, and Security Asset's respective Representatives, stockholders,
controlling persons, and affiliates (collectively, the "Security Asset
Indemnified Persons") for, and will pay to the Indemnified Persons the amount
of, any loss, liability, claim, damage (including incidental and consequential
damages), expense (including reasonable costs of investigation and defense and
reasonable attorneys' fees) or diminution of value, whether or not involving a
third-party claim (collectively, "Damages"), arising, directly or indirectly,
from or in connection with:
27
<PAGE> 28
(a) any Breach of any representation or warranty made by Shareholders
or Universal in this Agreement, the Universal Disclosure Letter, or any other
certificate or document delivered by Shareholders or Universal pursuant to this
Agreement;
(b) any Breach by any Shareholder or Universal of any covenant or
obligation of such Shareholder or Universal in this Agreement; or
(c) any claim by any Person for brokerage or finder's fees or
commissions or similar payments based upon any agreement or understanding
alleged to have been made by any such Person with any Shareholder or Universal
(or any Person acting on their behalf) in connection with any of the
Contemplated Transactions.
The remedies provided in this Section 5.2 will not be exclusive of or
limit any other remedies that may be available to Security Asset or the Security
Asset Indemnified Persons.
5.3 Indemnification and Payment of Damages by Majority Shareholders and
Universal Environmental Matters. In addition to the provisions of Section 5.2,
Majority Shareholders and Universal, jointly and severally, will indemnify and
hold harmless Security Asset, and the Security Asset Indemnified Persons for,
and will pay to Security Asset, and the Security Asset Indemnified Persons the
amount of, any Damages (including response costs, costs of indemnification,
cleanup, containment, or other remediation) arising, directly or indirectly,
from or in connection with:
(a) any Environmental, Health, and Safety Liabilities arising out of
or relating to: (i) (A) the ownership, operation, or condition at any time on or
prior to the Effective Date of the Facilities or any other properties and assets
(whether real, personal, or mixed and whether tangible or intangible) in which
Majority Shareholders or Universal has or had an interest, or (B) any Hazardous
Materials or other contaminants that were present on the Facilities or such
other properties and assets at any time on or prior to the Effective Date; or
(ii) (A) any Hazardous Materials or other contaminants, wherever located, that
were, or were allegedly, generated, transported, stored, treated, Released,
dispersed or otherwise handled by Shareholders or Universal or by any other
Person for whose conduct they are or may be held responsible at any time on or
prior to the Effective Date, or (B) any Hazardous Activities that were, or were
allegedly, conducted by Shareholders or Universal or by any other Person for
whose conduct they are or may be held responsible; or
(b) any bodily injury (including illness, disability, and death, and
regardless of when any such bodily injury occurred, was incurred, or manifested
itself), personal injury, property damage (including trespass, nuisance,
wrongful eviction, and deprivation of the use of real property), or other damage
of or to any Person, including any employee or former employee of Shareholders
or Universal or any other Person for whose conduct they are or may be held
responsible, in any way arising from or allegedly arising from any Hazardous
Activity conducted or allegedly conducted with respect to the Facilities or the
operation of Universal prior to the Effective Date, or from Hazardous Material
that was (i) present or suspected to be present on or before the Effective Date
on or at the Facilities (or present or suspected to be present on any other
property, if such Hazardous Material emanated or allegedly emanated from any of
the Facilities and was present or suspected to be present on any of the
Facilities on or prior to the Effective Date) or (ii) Released or allegedly
Released by Shareholders or Universal or any other Person for whose conduct they
are or may be held responsible, at any time on or prior to the Effective Date,
whether or not from the Facilities.
28
<PAGE> 29
Security Asset will be entitled to direct or control any Cleanup, any
related Proceeding, and, except as provided in the following sentence, any other
Proceeding with respect to which indemnity may be sought pursuant to this
Section 5.3. The procedure described in Section 5.5 will apply to any claim
solely for monetary damages relating to a matter contemplated by this Section
5.3.
5.4 Indemnification and Payment of Damages by Security Asset. Security
Asset will indemnify and hold harmless Shareholders and Universal, and
Shareholders and Universal's respective Representatives, stockholders,
controlling persons, and affiliates (collectively, the "Shareholders and
Universal Indemnified Persons") for, and will pay to the Shareholders and
Universal Indemnified Persons the amount of, any loss, liability, claim, damage
(including incidental and consequential damages), expense (including reasonable
costs of investigation and defense and reasonable attorneys' fees) or diminution
of value, whether or not involving a third-party claim (collectively,
"Damages"), arising, directly or indirectly, from or in connection with:
(a) any Breach of any representation or warranty made by Security
Asset in this Agreement, the Disclosure Letter, or any other certificate or
document delivered by Security Asset pursuant to this Agreement;
(b) any Breach by Security Asset or Universal of any covenant or
obligation of Security Asset in this Agreement; or
(c) any claim by any Person for brokerage or finder's fees or
commissions or similar payments based upon any agreement or understanding
alleged to have been made by any such Person with Security Asset (or any Person
acting on their behalf) in connection with any of the Contemplated Transactions.
The remedies provided in this Section 5.4 will not be exclusive of or
limit any other remedies that may be available to Shareholders and Universal or
the Shareholders and Universal Indemnified Persons.
5.5 Procedure for Indemnification - Third Party Claims.
(a) Promptly after receipt by a Person indemnified pursuant to this
Article V of notice of the commencement of any Proceeding against it, such
indemnified Person will, if a claim is to be made against an indemnifying Person
pursuant to this Article V, give notice to the indemnifying Person of the
commencement of such claim, but the failure to notify the indemnifying Person
will not relieve the indemnifying Person of any liability that it may have to
any indemnified Person, except to the extent that the indemnifying Person
demonstrates that the defense of such claim is prejudiced by the indemnifying
Person's failure to give such notice.
(b) If any Proceeding referred to in Section 5.5(a) is brought
against an indemnified Person and it gives notice to the indemnifying Person of
the commencement of such Proceeding, the indemnifying Person will, unless the
claim involves Taxes, be entitled to participate in such Proceeding and, to the
extent that it desires (unless (1) the indemnifying Person is also a party to
such Proceeding and the indemnified Person determines in good faith that joint
representation would be inappropriate, or (ii) the indemnifying Person fails to
provide reasonable assurance to the indemnified Person of its financial capacity
to defend such Proceeding and provide indemnification with respect to such
Proceeding), to assume the defense of such Proceeding with counsel satisfactory
to the indemnified Person and, after notice from the indemnifying Person to the
29
<PAGE> 30
indemnified Person of its election to assume the defense of such Proceeding, the
indemnifying Person will not, as long as it diligently conducts such defense, be
liable to the indemnified Person pursuant to this Article V for any fees of
other counsel or any other expenses with respect to the defense of such
Proceeding, in each case subsequently incurred by the indemnified Person in
connection with the defense of such Proceeding, other than reasonable costs of
investigation. If an indemnifying Person assumes the defense of a Proceeding,
(I) it will be conclusively established for purposes of this Agreement that the
claims made in that Proceeding are within the scope of and subject to
indemnification; (ii) no compromise or settlement of such claims may be effected
by the indemnifying Person without the indemnified Person's consent, unless (A)
there is no finding or admission of any violation of Legal Requirements or any
violation of the rights of any Person and no effect on any other claims that may
be made against the indemnified Person, and (B) the sole relief provided is
monetary damages that are paid in full by the indemnifying Person; and (iii) the
indemnified Person will have no liability with respect to any compromise or
settlement of such claims effected without its consent. If notice is given to an
indemnifying Person of the commencement of any Proceeding and the indemnifying
Person does not, within 10 days after the indemnified Person's notice is given,
give notice to the indemnified Person of its election to assume the defense of
such Proceeding, the indemnifying Person will be obligated by any determination
made in such Proceeding or any compromise or settlement effected by the
indemnified Person.
(c) Notwithstanding the foregoing, if an indemnified Person
determines in good faith that there is a reasonable probability that a
Proceeding may adversely affect it or its affiliates other than as a result of
monetary damages for which it would be entitled to indemnification under this
Agreement, the indemnified Person may, by notice to the indemnifying Person,
assume the exclusive right to defend, compromise, or settle such Proceeding, but
the indemnifying Person will not be obligated by any determination of a
Proceeding so defended or any compromise or settlement effected without its
consent (which shall not be unreasonably withheld).
(d) Shareholders hereby consent to the non-exclusive jurisdiction of
any court in which a Proceeding is brought against any Security Asset
Indemnified Person for purposes of any claim that a Security Asset Indemnified
Person may have pursuant to this Agreement with respect to such Proceeding or
the matters alleged therein, and agree that process may be served on
Shareholders with respect to such a claim anywhere in the world.
5.6 Procedure for Indemnification - Other Claims. A claim for
indemnification for any matter not involving a third-party claim may be asserted
by notice to the party from whom indemnification is sought.
ARTICLE VI
GENERAL PROVISIONS
6.1 Expenses. Except as otherwise expressly provided in this Agreement,
each party shall pay all expenses, costs and fees (including attorneys' fees)
incurred by that party in connection with the Contemplated Transactions,
including the preparation, execution and delivery of this Agreement and the
ancillary agreements, schedules and documents related to the Contemplated
Transactions.
6.2 Public Announcements. Any public announcement or similar publicity
with respect to this Agreement or the Contemplated Transactions will be issued,
if at all, at such time and in such
30
<PAGE> 31
manner as Security Asset and Shareholders shall mutually determine. Shareholders
and Security Asset will consult with each other concerning the communication by
which Universal's employees, customers, and suppliers and other Persons having
dealings with Universal will be informed of the Contemplated Transactions, and
Security Asset will have the right to be present for any such communication.
6.3 Notices. All notices, consents, waivers, and other communications
pursuant to this Agreement must be in writing and will be deemed to have been
duly given when (a) delivered by hand (with written confirmation of receipt),
(b) sent by facsimile machine (with written confirmation of receipt), provided
that a copy is mailed by registered mail, return receipt requested, or (c) when
received by the addressee, if sent by a nationally recognized overnight delivery
service (receipt requested), in each case to the appropriate addresses and
facsimile machine numbers set forth below (or to such other addresses and
facsimile machine numbers as a party may designate by notice to the other
parties):
Shareholders:
Danilo Cacciamatta
2600 Michelson Drive, Suite 490
Irvine, California 92612
Universal:
Universal View Corporation
2600 Michelson Drive, Suite 490
Irvine, California 92612
Security Asset:
David R. Walton
Security Asset Capital Corporation
701 "B" Street, Suite 1775
San Diego, California 92101
6.4 Jurisdiction: Service of Process. Any action or proceeding seeking
to enforce any provision of, or based on any right resulting from, this
Agreement may be brought against any of the parties in the courts of the State
of California, County of San Diego, or, if it has or can acquire jurisdiction,
in the United States District Court for the Central District of California, and
each of the parties consents to the jurisdiction of such courts (and of the
appropriate appellate courts) in any such action or proceeding and waives any
objection to venue. Process in any action or proceeding referred to in the
preceding sentence may be served on any party anywhere in the world.
6.5 Further Assurances. The parties agree (a) to furnish upon request to
each other such additional information, (b) to execute and deliver to each other
such other documents, and (c) to do such other acts and things, all as the other
parties may reasonably request for the purpose of carrying out the intent of
this Agreement and the documents referred to in this Agreement.
31
<PAGE> 32
6.6 Waiver. The rights and remedies of the parties to this Agreement are
cumulative and not alternative. Neither the failure nor any delay by any party
in exercising any right, power, or privilege pursuant to this Agreement or the
documents referred to in this Agreement will operate as a waiver of such right,
power, or privilege, and no single or partial exercise of any such right, power,
or privilege will preclude any other or further exercise of such right, power,
or privilege or the exercise of any other right, power, or privilege. To the
maximum extent permitted by applicable law, (a) no claim or right resulting from
this Agreement or the documents referred to in this Agreement can be discharged
by one party, in whole or in part, by a waiver or renunciation of the claim or
right unless in writing signed by the other party; (b) no waiver that may be
given by a party will be applicable except in the specific instance for which it
is given; and (c) no notice to or demand on one party will be deemed to be a
waiver of any obligation of such party or of the right of the party giving such
notice or demand to take further action without notice or demand as provided in
this Agreement or the documents referred to in this Agreement.
6.7 Entire Agreement and Modification. This Agreement supersedes all
prior agreements between the parties with respect to its subject matter and
constitutes (along with the documents referred to in this Agreement) a complete
and exclusive statement of the terms of the Agreement between the parties with
respect to its subject matter. This Agreement may not be amended except by a
written Agreement executed by the party to be charged with any such amendment.
6.8 Universal Disclosure Letter.
(a) The disclosures in the Universal Disclosure Letter must relate
only to the representations and warranties in the section of the Agreement to
which it expressly relates and not to any other representation or warranty in
this Agreement.
(b) In the event of any inconsistency between the statements in this
Agreement and those in the Universal Disclosure Letter (other than an exception
expressly set forth as such in such Disclosure Letter with respect to a
specifically identified representation or warranty), the provisions of this
Agreement will prevail and control.
6.9 Assignments, Successors, and No Third-party Rights. No party may
assign any of its rights pursuant to this Agreement without the prior written
consent of the other parties, and any such assignment shall be null and void ab
initio; provided, however, that Security Asset may assign any of its rights
pursuant to this Agreement to any Subsidiary of Security Asset. Subject to the
preceding sentence, this Agreement will apply to, obligate in all respects, and
inure to the benefit of, the successors and permitted assigns of the parties.
Nothing expressed or referred to in this Agreement will be construed to give any
Person, other than the parties to this Agreement, any legal or equitable right,
remedy, or claim pursuant to or with respect to this Agreement or any provision
of this Agreement. This Agreement and all of its provisions and conditions are
for the sole and exclusive benefit of the parties to this Agreement and their
successors and assigns.
6.10 Severability. If any provision of this Agreement is determined to
be invalid or unenforceable by any court of competent jurisdiction, the other
provisions of this Agreement will
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<PAGE> 33
remain in full force and effect. Any provision of this Agreement determined to
be invalid or unenforceable only in part or degree will remain in full force and
effect to the extent not determined to be invalid or unenforceable.
6.11 Section Headings, Construction. The headings of sections in this
Agreement are provided for convenience only and will not affect its construction
or interpretation. All references to "section" or "sections" refer to the
corresponding section or sections of this Agreement. All words used in this
Agreement will be construed to be of such gender or number as the circumstances
require. Unless otherwise expressly provided, the word "including" does not
limit the preceding words or terms.
6.12 Time of Essence. With regard to all dates and time periods set
forth or referred to in this Agreement, time is of the essence.
6.13 Governing Law. This Agreement will be governed by the laws of the
State of California, without regard to conflicts of laws principles.
6.14 Counterparts. This Agreement may be executed in one or more
counterparts, each of which will be deemed to be an original copy of this
Agreement and all of which, when taken together, will be deemed to constitute
one and the same Agreement.
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the Effective Date.
Security Asset Capital Corporation,
a Nevada corporation
------------------------------------------
David R. Walton, President
33
<PAGE> 34
------------------------------------------
David S. Walton, Secretary
Universal View Corporation,
a Nevada corporation
------------------------------------------
Danilo Cacciamatta, President
and Secretary
"Shareholders"
of Universal View Corporation
------------------------------------------
Danilo Cacciamatta, an Individual
------------------------------------------
Suzanne Kerr Bryant, an Individual
------------------------------------------
Gary Bryant, an Individual
34
<PAGE> 35
EXHIBIT "A"
SHAREHOLDERS OF UNIVERSAL VIEW CORPORATION
<TABLE>
<CAPTION>
Number of
Title of Class Beneficial Owner Shares
- -------------- ---------------- ---------
<S> <C> <C>
Common Danilo Cacciamatta 1,810,000
Common Suzanne Kerr Bryant 1,000,000
Common Gary Bryant 120,000
---------
Total 2,930,000
</TABLE>
<PAGE> 36
Exhibit "B"
SHAREHOLDERS' RELEASE
THIS SHAREHOLDERS' RELEASE (this "Release") is executed and delivered in
accordance with Section 2.3(a)(ii) of that certain Stock Acquisition and
Reorganization Agreement which is effective the 22nd day of February, 2000
("Effective Date") (the "Agreement"), by and among Security Asset Capital
Corporation, a Nevada corporation ("Security Asset"), on the one hand, and
Universal View Corporation, a Nevada corporation ("Universal"), Danilo
Cacciamatta, an individual, Gary Bryant, an individual, and Suzanne Kerr Bryant,
an individual (each individually referred to as "Shareholder" and collectively
referred to as the "Shareholders"), on the other hand. Capitalized terms used in
this Release without definitions have the respective meanings given to them in
the Agreement.
Each Shareholder acknowledges that execution and delivery of this
Release is a condition to Security Asset's obligation to acquire the
Shareholders' shares of $.001 par common stock of Universal pursuant to the
Agreement and that Security Asset is relying on this Release in consummating the
Reorganization.
Each Shareholder, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and with the intent to be
obligated legally and equitably, in order to induce Security Asset to consummate
the Reorganization pursuant to the Agreement, hereby agrees as follows:
Each Shareholder, on behalf of himself and each of his Related Persons,
hereby unconditionally, irrevocably and forever releases, acquits and discharges
Security Asset and Universal, and each of them, and each of their respective
individual, joint or mutual, past, present and future Representatives,
affiliates, stockholders, controlling persons, Subsidiaries, successors and
assigns (individually, a "Releasee" and, collectively, "Releasees") from any and
all claims, demands, Proceedings, causes of action, Orders, obligations,
contracts, agreements, debts and liabilities whatsoever, whether known or
unknown, suspected or unsuspected, both at law and in equity, which such
Shareholder or any of such Shareholder's respective Related Persons now has,
have ever had or may hereafter have against the Releasees resulting
contemporaneously from or prior to the Effective Date or on account of or
resulting from any matter, cause or event occurring contemporaneously with or
prior to the Effective Date, including, but not limited to, any rights to
indemnification or reimbursement from Universal, whether pursuant to its
Organizational Documents, contract or otherwise and whether or not relating to
claims pending on, or asserted after, the Effective Date; provided, however,
that nothing specified in this Release shall operate to release any obligations
of (i) Security Asset or Universal resulting from the Agreement.
Each Shareholder hereby irrevocably shall refrain from, directly or
indirectly, asserting any claim or demand, or commencing, instituting or causing
to be commenced, any Proceeding against any Releasee, based upon any matter
released or purported to be released hereby.
<PAGE> 37
Without in any way limiting any of the rights and remedies otherwise
available to any Releasee, each Shareholder, jointly and severally, shall
indemnify and hold harmless each Releasee from and against all loss, liability,
claim, damage (including incidental and consequential damages) or expense
(including costs of investigation and defense and reasonable attorney's fees)
whether or not involving third party claims, resulting directly or indirectly
from or in connection with (i) the assertion by or on behalf of such Shareholder
or any of such Shareholder's Related Persons of any claim or other matter
purported to be released pursuant to this Release and (ii) the assertion by any
third party of any claim or demand against any Releasee resulting directly or
indirectly from, or in connection with, any assertion by or on behalf of such
Shareholder or any of such Shareholder's Related Persons against such third
party of any claims or other matters purported to be released pursuant to this
Release.
Each Shareholder, on behalf of himself and each of his Related Persons,
agrees that there is a risk that, subsequent to the execution and delivery of
this Release, losses, damages or injuries might be incurred by such Shareholder
which are unknown or unanticipated, for whatever reason, at the time of the
execution and delivery of this Release. It is none the less specifically agreed
that the releases specified in this Release are fully and completely effective
regardless of any present lack of knowledge on the part of any party as to any
claims, charges, complaints, liabilities, obligations, debts, suits, demands,
grievances, losses, damages, injuries costs, expenses, rights, actions or causes
of action, or as to any possible fact or circumstance relating in any manner to
the matters for which the releases specified in this Release are made. Each
Shareholder voluntarily, intentionally and expressly waives the benefits and
provisions of Section 1542 of the Civil Code of the State of California, and any
similar law of any state or territory of the United States of America or other
jurisdiction. Specifically, that Section 1542 specifies as follow:
"A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE
CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE
TIME OF EXECUTING THE RELEASE WHICH IF KNOW BY HIM MUST HAVE
MATERIALLY AFFECTED HIS SETTLEMENT WITH THE DEBTOR."
If any provision of this Release is determined to invalid or unenforceable by
any court of competent jurisdiction, the other provisions of this Release will
remain in full force and effect. Any provision of this Release determined to be
invalid or unenforceable only in part will remain in full force and effect to
the extent not determined to be invalid or unenforceable.
This Release may not be amended except in a writing signed by the person
against whose interest such amendment shall operate. This Release shall be
governed by and construed pursuant to the laws of the State of California,
without regard to principles of conflicts of law.
<PAGE> 38
All words used in this Release will be construed to be of such gender or
number as the circumstances require.
IN WITNESS WHEREOF, each of the undersigned have executed and delivered
this Release which shall be effective as of this 4th day of April, 2000.
Universal View Corporation,
a Nevada corporation
/s/ DANILO CACCIAMATTA
-----------------------------------------------
Danilo Cacciamatta, President and Secretary
"Shareholders" of Universal View Corporation
/s/ DANILO CACCIAMATTA
-----------------------------------------------
Danilo Cacciamatta, an Individual
/s/ GARY BRYANT
-----------------------------------------------
Gary Bryant, an Individual
/s/ SUZANNE KERR BRYANT
-----------------------------------------------
Suzanne Kerr Bryant, an Individual
<PAGE> 39
Exhibit "C"
FORM OF UNIVERSAL DISCLOSURE LETTER
February 22, 2000
Security Asset Capital Corporation
701 B Street, Suite 1775
San Diego, CA 92101
Gentlemen:
We refer to the Stock Acquisition and Reorganization Agreement (the
"Agreement") to be entered into effective today between myself ("Shareholders");
Universal View Corporation, a Nevada corporation ("Company"); and Security Asset
Capital Corporation, a Nevada corporation ("Security Asset"), pursuant to which
Shareholders exchanged with Security Asset and Security Asset acquired from
Shareholders 2,930,000 shares of $.001 par value common stock of the Company,
which is 100% of the issued and outstanding shares $.001 par value common stock
of the Company, on the terms and subject to the conditions specified in the
Agreement.
This letter constitutes the Universal Disclosure Letter referred to in
the Agreement. The representations and warranties of Universal and Shareholders
in the Agreement are made and given subject to the disclosures in this Universal
Disclosure Letter. The disclosures in this Universal Disclosure Letter are to be
taken as relating to the representations and warranties in the section of the
Agreement to which they expressly relate and to no other representation or
warranty in the Agreement.
Terms defined in the Agreement are used with the same meanings in this
Universal Disclosure Letter. By reference to Article 3 of the Agreement, the
Shareholders represent that all statements made in Universal's Form 10-SB filed
January 21, 2000.
Very truly yours,
Universal View Corporation,
a Nevada corporation
/s/ DANILO CACCIAMATTA
------------------------------------------
Danilo Cacciamatta, President
and Secretary
/s/ SUZANNE KERR BRYANT
------------------------------------------
Suzanne Kerr Bryant, an individual
/s/ GARY BRYANT
------------------------------------------
Gary Bryant, an individual
<PAGE> 1
EXHIBIT 3.1
EXHIBIT D
ARTICLES OF INCORPORATION
DATED SEPTEMBER 22, 1993
<PAGE> 2
CERTIFICATE
[THE GREAT
SEAL OF
STATE OF NEVADA STATE] SECRETARY OF STATE
I, CHERYL A. LAU, Secretary of State of the State of Nevada, do hereby
certify that SECURITY ASSET CAPITAL CORPORATION did on the TWENTY-SECOND day of
SEPTEMBER, 1993, file in this office the original Articles of Incorporation;
that said Articles are now on file and of record in the office of the Secretary
of State of the State of Nevada, and further, that said Articles contain all the
provisions required by the law of said State of Nevada.
[THE GREAT IN WITNESS WHEREOF, I have hereunto set my hand
SEAL OF and affixed the Great Seal of State, at my office
STATE] in Carson City, Nevada, this
TWENTY-SECOND day of SEPTEMBER, A.D. 1993
/s/ CHERYL A. LAU
--------------------------------------------------
Secretary of State
By /s/ [Signature Illegible]
--------------------------------------------------
Deputy
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FILED
IN THE OFFICE OF THE
SECRETARY OF STATE OF THE
STATE OF NEVADA
SEP 22 1993
[Illegible] SECRETARY OF STATE
[Illegible]
ARTICLES OF INCORPORATION
OF
SECURITY ASSET CAPITAL CORPORATION
KNOW ALL MEN BY THESE PRESENTS:
That we, the undersigned, have this day voluntarily associated ourselves
together for the purpose of forming a Corporation under and pursuant to the laws
of the State of Nevada, and we do hereby certify that:
ARTICLE I - NAME: The exact name of this Corporation is:
Security Asset Capital Corporation
ARTICLE II - RESIDENT AGENT:
The Resident Agent of the Corporation is Max C. Tanner, Esq., The Law
Offices of Max C. Tanner, 2950 East Flamingo Road, Suite G, Las Vegas, Nevada
89121.
ARTICLE III - DURATION: The Corporation shall have perpetual existence.
ARTICLE IV - PURPOSES: The purpose, object and nature of the business for which
this Corporation is organized are:
(a) To engage in any lawful activity;
(b) To carry on such business as may be necessary, convenient, or
desirable to accomplish the above purposes, and to do all other
things incidental thereto which are not forbidden by law or by
these Articles of Incorporation.
ARTICLE V - POWERS: The powers of the Corporation shall be those powers granted
by 78.060 and 78.070 of the Nevada Revised Statutes under which this corporation
in formed. In addition, the Corporation shall have the following specific
powers:
(a) To elect or appoint officers and agents of the Corporation and
to fix their compensation;
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(b) To act as an agent for any individual, association, partnership,
corporation or other legal entity;
(c) To receive, acquire, hold, exercise rights arising out of the
ownership or possession thereof, sell, or otherwise dispose of,
shares or other interests in, or obligations of, individuals,
associations, partnerships, corporations, or governments;
(d) To receive, acquire, hold, pledge, transfer, or otherwise
dispose of shares of the corporation, but such shares may only
be purchased, directly or indirectly, out of earned surplus;
(e) To make gifts or contributions for the public welfare or for
charitable, scientific or educational purposes, and in time of
war, to make donations in aid of war activities.
ARTICLE VI - CAPITAL STOCK:
Section 1. Authorized Shares. The total number of shares which this
Corporation is authorized to issue is 25,000,000 shares of Common Stock
at $.001 par value per share.
Section 2. Voting Rights of Shareholders. Each holder of the Common
Stock shall be entitled to one vote for each share of stock standing in
his name on the books of the Corporation.
Section 3. Consideration for Shares. The Common Stock shall be issued
for such consideration, as shall be fixed from time to time by the Board
of Directors. In the absence of fraud, the judgment of the Directors as
to the value of any property for shares shall be conclusive. When shares
are issued upon payment of the consideration fixed by the Board of
Directors, such shares shall be taken to be fully paid stock and shall
be non-assessable. The Articles shall not be amended in this particular.
Section 4. Pre-emptive Rights. Except as may otherwise be provided by
the Board of Directors, no holder of any shares of the stock of the
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.
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Section 5. Stock Rights and Options. The Corporation shall have the
power to create and issue rights, warrants, or options entitling the
holders thereof to purchase from the corporation any shares of its
capital stock of any class or classes, upon such terms and conditions
and at such times and prices as the Board of Directors may provide,
which terms and conditions shall be incorporated in an instrument or
instruments evidencing such rights. In the absence of fraud, the
judgment of the directors as to the adequacy of consideration for the
issuance of such rights or options and the sufficiency thereof shall be
conclusive.
ARTICLE VII - ASSESSMENT OF STOCK: The capital stock of this Corporation, after
the amount of the subscription price has been fully paid in, shall not be
assessable for any purpose, and no stock issued as fully paid up shall ever be
assessable or assessed. The holders of such stock shall not be individually
responsible for the debts contracts, or liabilities of the Corporation and shall
not be liable for assessments to restore impairments in the capital of the
Corporation.
ARTICLE VIII - DIRECTORS: For the management of the business, and for the
conduct of the affairs of the Corporation, and for the future definition,
limitation, and regulation of the powers of the Corporation and its directors
and shareholders, it is further provided:
Section 1. Size of Board. The members of the governing board of the
Corporation shall be styled directors. The number of directors of the
Corporation, their qualifications, terms of office, manner of election,
time and place of meeting, and powers and duties shall be such as are
prescribed by statute and in the by-laws of the Corporation. The name
and post office address of the directors constituting the first board of
directors, which shall be Three (3) in number are:
NAME ADDRESS
Darrell Musick 1823 Ivy Road
Oceanside, CA 92054
David Walton 4065 Tambor Road
San Diego, CA 92124
Kenneth Braid 3266 Via De Caballa
Encinitas, CA 92024
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Section 2. Powers of Board. In furtherance and not in limitation of the
powers conferred by the laws of the State of Nevada, the Board of
Directors is expressly authorized and empowered:
(a) To make, alter, amend, and repeal the By-Laws subject to the
power of the shareholders to alter or repeal the By-Laws made by
the Board of Directors.
(b) Subject to the applicable provisions of the ByLaws then in
effect, to determine, from time to time, whether and to what
extent, and at what times and places, and under what conditions
and regulations, the accounts and books of the Corporation, or
any of them, shall be open to shareholder inspection. No
shareholder shall have any right to inspect any of the accounts,
books or documents of the Corporation, except as permitted by
law, unless and until authorized to do so by resolution of the
Board of Directors or of the Shareholders of the Corporation;
(c) To issue stock of the Corporation for money, property, services
rendered, labor performed, cash advanced, acquisitions for other
corporations or for any other assets of value in accordance with
the action of the board of directors without vote or consent of
the shareholders and the judgment of the board of directors as
to value received and in return therefore shall be conclusive
and said stock, when issued, shall be fully-paid and
non-assessable.
(d) To authorize and issue, without shareholder consent, obligations
of the Corporation, secured and unsecured, under such terms and
conditions as the Board, in its sole discretion, may determine,
and to pledge or mortgage, as security therefore, any real or
personal property of the Corporation, including after-acquired
property;
(a) To determine whether any and, if so, what part, of the earned
surplus of the Corporation shall be paid in dividends to the
shareholders, and to direct and determine other use and
disposition of any such earned surplus;
(f) To fix, from time to time, the amount of the profits of the
Corporation to be reserved as working capital or for any other
lawful purpose;
(g) To establish bonus, profit-sharing, stock option, or other types
of incentive compensation plans for the employees, including
officers and directors, of the Corporation, and to fix the
amount of profits to be shared or distributed, and to determine
the persons to
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participate in any such plans and the amount of their respective
participations.
(h) To designate, by resolution or resolutions passed by a majority
of the whole Board, one or more committees, each consisting of
two or more directors, which, to the extent permitted by law and
authorized by the resolution or the By-Laws, shall have and may
exercise the powers of the Board;
(i) To provide for the reasonable compensation of its own members by
By-Law, and to fix the terms and conditions upon which such
compensation will be paid;
(j) In addition to the powers and authority herein before, or by
statute, expressly conferred upon it, the Board of Directors may
exercise all such powers and do all such acts and things as may
be exercised or done by the corporation, subject, nevertheless,
to the provisions of the laws of the State of Nevada, of these
Articles of Incorporation, and of the By-Laws of the
Corporation.
Section 3. Interested Directors. No contract or transaction between this
Corporation and any of its directors, or between this corporation and
any other corporation, firm, association, or other legal entity shall be
invalidated by reason of the fact that the director of the Corporation
has a direct or indirect interest, pecuniary or otherwise, in such
corporation, firm, association, or legal entity, or because the
interested director was present at the meeting of the Board of Directors
which acted upon or in reference to such contract or transaction, or
because he participated in such action, provided that: (1) the interest
of each such director shall have been disclosed to or known by the Board
and a disinterested majority of the Board shall have nonetheless
ratified and approved such contract or transaction (such interested
direct or directors may be counted in determining whether a quorum is
present for the meeting at which such ratification or approval is
given); or (2) the conditions of N.R.S. 78.140 are met.
ARTICLE IX - LIMITATION OF LIABILITY OF OFFICERS OR DIRECTORS: The personal
liability of a director or officer of the corporation to the corporation or the
Shareholders for damages for breach of fiduciary duty as a director or officer
shall be limited to acts or omissions which involve intentional misconduct,
fraud or a knowing violation of law.
ARTICLE X - INDEMNIFICATION: Each director and each officer of the corporation
may be indemnified by the corporation as follows:
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(a) The corporation may 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 he 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 him in connection with the action, suit
or proceeding, if he acted in good faith and in a manner which
he 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 his
conduct was unlawful. The termination of any action, suite or
proceeding, by judgment, order, settlement, conviction or upon a
plea of nolo contendere or its equivalent, does not of itself
create a presumption that the person did not act in good faith
and in a manner which he reasonably believed to be in or not
opposed to the best interests of the corporation, and that, with
respect to any criminal action or proceeding, he had reasonable
cause to believe that his conduct was unlawful.
(b) The corporation may 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 he 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 amounts paid in settlement
and attorneys' fees actually and reasonably incurred by him in
connection with the defense or settlement of the action or suit,
if he acted in good faith and in a manner which he reasonably
believed to be in or not opposed to the best interests of the
corporation. Indemnification may not be made for any claim,
issue or matter as to which such a person has been adjudged by a
court of competent jurisdiction, after exhaustion of all appeals
there from, to be liable to the corporation or for amounts paid
in settlement to the corporation, unless and only to the extent
that the court in which the action or suit was brought or other
court of competent jurisdiction determines upon application that
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in view of all the circumstances of the case the person is
fairly and reasonably entitled to indemnity for such expenses as
the court deems proper.
(c) To the extent that a director, officer, employee or agent 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 Article, or in defense of any
claim, issue or matter therein, he must be indemnified by the
corporation against expenses, including attorney's fees,
actually and reasonably incurred by him in connection with the
defense.
(d) Any indemnification under subsections (a) and (b) unless ordered
by a court or advanced pursuant to subsection (c), must be made
by the corporation only as authorized in the specific case upon
a determination that indemnification of the director, officer,
employee or agent is proper in the circumstances. The
determination must be made:
(i) By the stockholders;
(ii) By the board of directors by majority vote of a quorum
consisting of directors who were not parties to the act,
suit or proceeding;
(iii) If a majority vote of a quorum consisting of directors
who were not parties to the act, suit or proceeding so
orders, by independent legal counsel in a written
opinion; or
(iv) If a quorum consisting of directors who were not parties
to the act, suit or proceeding cannot be obtained, by
independent legal counsel in a written opinion.
(e) Expenses of officers and directors incurred in defending a civil
or criminal action, suit or proceeding must be paid by the
corporation as they are incurred and in advance of the final
disposition of the action, suit or proceeding, upon receipt of
an undertaking by or on behalf of the director or officer to
repay the amount if it is ultimately determined by a court of
competent jurisdiction that he is not entitled to be indemnified
by the corporation. The provisions of this subsection do not
affect any rights to advancement of expenses to which corporate
personnel other than directors or officers may be entitled under
any contract or otherwise by law.
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(f) The indemnification and advancement of expenses authorized in or
ordered by a court pursuant to this section:
(i) Does not exclude any other rights to which a person
seeking indemnification or advancement of expenses may
be entitled under the certificate or articles of
incorporation or any bylaw, agreement, vote of
stockholders or disinterested directors or otherwise,
for either an action in his official capacity or an
action in another capacity while holding his office,
except that indemnification, unless ordered by a court
pursuant to subsection (b) or for the advancement of
expenses made pursuant to subsection (a) may not be made
to or on behalf of any director or officer if a final
adjudication establishes that his acts or omissions
involved intentional misconduct, fraud or a knowing
violation of the law and was material to the cause of
action.
(ii) Continues for a person who has ceased to be a director,
officer, employee or agent and inures to the benefit of
the heirs, executors and administrators of such a
person.
ARTICLE XI - PLACE OF MEETING; CORPORATE BOOKS: Subject to the laws of the State
of Nevada, the shareholders and the Directors shall have power to hold their
meetings, and the Directors shall have power to have an office or offices and to
maintain the books of the Corporation outside the State of Nevada, at such place
or places as may from time to time be designated in the By-Laws or by
appropriate resolution.
ARTICLE XII - AMENDMENT OF ARTICLES: The provisions of these Articles of
Incorporation may be amended, altered or repealed from time to time to the
extent and in the manner prescribed by the laws of the State of Nevada, and
additional provisions authorized by such laws as are then in force may be
added. All rights herein conferred on the directors, officers and shareholders
are granted subject to this reservation.
ARTICLE XIII - INCORPORATOR: The name and address of the sole incorporator
signing these Articles of Incorporation is as follows:
NAME POST OFFICE ADDRESS
1. Max C. Tanner 2950 East Flamingo Road, Suite G
Las Vegas, Nevada 89121
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IN WITNESS WHEREOF, the undersigned incorporator has executed these
Articles of Incorporation this 22nd day of September, 1993.
/s/ MAX C. TANNER
------------------------------------------
Max C. Tanner
STATE OF NEVADA )
) SS:
COUNTY OF CLARK )
On September 22, 1993, personally appeared before me, a Notary Public,
Max C. Tanner, who acknowledged to me that he executed the foregoing Articles of
Incorporation for Security Asset Capital Corporation, a Nevada corporation.
/s/ JUNE Y. KELSAY
------------------------------------------
Notary Public
[SEAL]
NOTARY PUBLIC -- STATE OF NEVADA
COUNTY OF CLARK
JUNE Y. KELSAY
My Commission Expires
[Illegible]
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EXHIBIT 3.2
EXHIBIT C
BY-LAWS DATED SEPTEMBER 22, 1993
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BY-LAWS OF
SECURITY ASSET CAPITAL CORPORATION
ARTICLE I
SHAREHOLDERS
Section 1.01 Annual Meeting. The annual meeting of the shareholders
shall be held at such date and time as shall be designated by the board of
directors and stated in the notice of the meeting or in a duly-executed waiver
of notice thereof. If the corporation shall fail to provide notice of the annual
meeting of the shareholders as set forth above, the annual meeting of the
shareholders of the corporation shall be held during the month of November or
December of each year as determined by the Board of Directors, for the purpose
of electing directors of the corporation to serve during the ensuing year and
for the transaction of such other business as may properly come before the
meeting. If the election of the directors is not held on the day designated
herein for any annual meeting of the shareholders, or at any adjournment
thereof, the president shall cause the election to be held at a special meeting
of the shareholders as soon thereafter as is convenient.
Section 1.02 Special Meetings. Special meetings of the shareholders may
be called by the president or the Board of Directors and shall be called by the
president at the written request of the holders of not less than 51% of the
issued and outstanding shares of capital stock of the corporation.
All business lawfully to be transacted by the shareholders may be
transacted at any special meeting at any adjournment thereof. However, no
business shall be acted upon at a special meeting, except that referred to in
the notice calling the meeting, unless all of the outstanding capital stock of
the corporation is represented either in person or by proxy. Where all of the
capital stock is represented, any lawful business may be transacted and the
meeting shall be valid for all purposes.
Section 1.03 Place of Meetings. Any meeting of the shareholders of the
corporation may be held at its principal office in the State of Nevada or such
other place in or out of the United States as the Board of Directors may
designate. A waiver of notice signed by the shareholders entitled to vote may
designate any place for the holding of such meeting.
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Section 1.04 Notice of Meetings.
(a) The secretary shall sign and deliver to all shareholders of
record written or printed notice of any meeting at least ten (10) days,
but not more than sixty (60) days, before the date of such meeting;
which notice shall state the place, date and time of the meeting, the
general nature of the business to be transacted, and, in the case of any
meeting at which directors are to be elected, the names of nominees, if
any, to be presented for election.
(b) In the case of any meeting, any proper business may be
presented for action, except that the following items shall be valid
only if the general nature of the proposal is stated in the notice or
written waiver of notice:
(1) Action with respect to any contract or transaction
between the corporation and one or more of its directors or
another firm, association, or corporation in which one or more
of its directors has a material financial interest;
(2) Adoption of amendments to the Articles of
Incorporation; or
(3) Action with respect to the merger, consolidation,
reorganization, partial or complete liquidation, or dissolution
of the corporation.
(c) The notice shall be personally delivered or mailed by first
class mail to each shareholder of record at the last known address
thereof, as the same appears on the books of the corporation, and the
giving of such notice shall be deemed delivered the date the same is
deposited in the United States mail, postage prepaid. If the address of
any shareholder does not appear upon the books of the corporation, it
will be sufficient to address any notice to such shareholder at the
principal office of the corporation.
(d) The written certificate of the person calling any meeting,
duly sworn, setting forth the substance of the notice, the time and
place the notice was mailed or personally delivered to the several
shareholders, and the addresses to which the notice was mailed shall be
prima facie evidence of the manner and fact of giving such notice.
Section 1.05 Waiver of Notice. If all of the shareholders of the
corporation shall waive notice of a meeting, no notice shall be required, and,
whenever all of the shareholders shall meet in
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person or by proxy, such meeting shall be valid for all purposes without call or
notice and at such meeting any corporate action may be taken.
Section 1.06 Determination of Shareholders of Record
(a) The Board of Directors may at any time fix a future date as a record date
for the determination of the shareholders entitled to notice of any meeting or
to vote or entitled to receive payment of any dividend or other distribution or
allotment of any rights or entitled to exercise any rights in respect of any
other lawful action. The record date so fixed shall not be more than sixty (60)
days prior to the date of such meeting nor more than sixty (60) days prior to
any other action. When a record date is so fixed, only shareholders of record on
that date are entitled to notice of and to vote at the meeting or to receive the
dividend, distribution or allotment of rights, or to exercise their rights as
the case may be, notwithstanding any transfer of any shares on the books of the
corporation after the record date.
(b) If no record date is fixed by the Board of Directors, then (1) the record
date for determining shareholders entitled to notice of or to vote at a meeting
of shareholders shall be at the close of business on the business day next
preceding the day on which notice is given or, if notice is waived, at the close
of business on the day next preceding the day on which the meeting is held; (2)
the record date for determining shareholders entitled to give consent to
corporate action in writing without a meeting, when no prior action by the Board
of Directors is necessary, shall be the day on which written consent is given;
and (3) the record date for determining shareholders for any other purpose shall
be at the close of business on the day on which the Board of Directors adopts
the resolution relating thereto, or the sixtieth, (60th) day prior to the date
of such other action, whichever is later.
Section 1.07 Quorum: Adjourned Meetings.
(a) At any meeting of the shareholders, a majority of the issued and outstanding
shares of the corporation represented in person or by proxy, shall constitute a
quorum.
(b) If less than a majority of the issued and outstanding shares are
represented, a majority of shares so represented may adjourn from time to time
at the meeting, until holders of the amount of stock required to constitute a
quorum shall be in attendance. At any such adjourned meeting
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at which a quorum shall be present, any business may be transacted which might
have been transacted as originally called. When a shareholders' meeting is
adjourned to another time or place, notice need not be given of the adjourned
meeting if the time and place thereof are announced at the meeting at which the
adjournment is taken, unless the adjournment is for more than ten (10) days in
which event notice thereof shall be given.
Section 1.08 Voting.
(a) Each shareholder of record, such shareholder's duly authorized proxy
or attorney-in-fact shall be entitled to one (1) vote for each share of stock
standing registered in such shareholder's name on the books of the corporation
on the record date.
(b) Except as otherwise provided herein, all votes with respect to
shares standing in the name of an individual on the record date (included
pledged shares) shall be cast only by that individual or such individual's duly
authorized proxy or attorney-in-fact. With respect to shares held by a
representative of the estate of a deceased shareholder, guardian, conservator,
custodian or trustee, votes may be cast by such holder upon proof of capacity,
even though the shares do not stand in the name of such holder. In the case of
shares under the control of a receiver, the receiver may cast votes carried by
such shares even though the shares do not stand in the name of the receiver
provided that the order of the court of competent jurisdiction which appoints
the receiver contains the authority to cast votes carried by such shares. If
shares stand in the name of a minor, votes may be cast only by the
duly-appointed guardian of the estate of such minor if such guardian has
provided the corporation with written notice and proof of such appointment.
(c) With respect to shares standing in the name of a corporation on the
record date, votes may be cast by such officer or agents as the by-laws of such
corporation prescribe or, in the absence of an applicable bylaw provision, by
such person as may be appointed by resolution of the Board of Directors of such
corporation. In the event no person is so appointed, such votes of the
corporation may be cast by any person (including the officer making the
authorization) authorized to do so by the Chairman of the Board of Directors,
President or any Vice President of such corporation.
(d) Notwithstanding anything to the contrary herein contained, no votes
may be cast by shares owned by this corporation or its subsidiaries, if any. If
shares are held by this corporation or its subsidiaries, if any, in a
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fiduciary capacity, no votes shall be cast with respect thereto on any
matter except to the extent that the beneficial owner thereof possesses
and exercises either a right to vote or to give the corporation holding
the same binding instructions on how to vote.
(e) With respect to shares standing in the name of two or more
persons, whether fiduciaries, members of a partnership, joint tenants,
tenants in common, husband and wife as community property, tenants by
the entirety, voting trustees, persons entitled to vote under a
shareholder voting agreement or otherwise and shares held by two or more
persons (including proxy holders) having the same fiduciary relationship
respect in the same shares, votes may be cast in the following manner:
(1) If only one such person votes, the votes of such
person binds all.
(2) If more than one person casts votes, the act of the
majority so voting binds all.
(3) If more than one person casts votes, but the vote is
evenly split on a particular matter, the votes shall be deemed
cast proportionately as split.
(f) Any holder of shares entitled to vote on any matter may cast
a portion of the votes in favor of such matter and refrain from casting
the remaining votes or cast the same against the proposal, except in the
case of elections of directors. If such holder entitled to vote fails to
specify the number of affirmative votes, it will be conclusively
presumed that the holder is casting affirmative votes with respect to
all shares held.
(g) If a quorum is present, the affirmative vote of holders of
a majority of the shares represented at the meeting and entitled to vote
on any matter shall be the act of the shareholders, unless a vote of
greater number or voting by classes is required by the laws of the State
of Nevada, the Articles of Incorporation and these By-Laws.
Section 1.09 Proxies. At any meeting of shareholders, any holder of
shares entitled to vote may authorize another person or persons to vote by proxy
with respect to the shares held by an instrument in writing and subscribed to by
the holder of such shares entitled to vote. No proxy shall be valid after the
expiration of six (6) months from the date of execution thereof, unless coupled
with an interest or unless otherwise specified in the proxy. In no event shall
the term of a proxy exceed seven (7) years from the date of its execution. Every
proxy shall continue
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in full force and effect until its expiration or revocation. Revocation may be
effected by filing an instrument revoking the same or a duly-executed proxy
bearing a later date with the secretary of the corporation.
Section 1.10 Order of Business. At the annual shareholders meeting, the
regular order of business shall be as follows:
(1) Determination of shareholders present and existence of
quorum;
(2) Reading and approval of the minutes of the previous meeting
or meetings;
(3) Reports of the Board of Directors, the president, treasurer
and secretary of the corporation, in the order named;
(4) Reports of committee;
(5) Election of directors;
(6) Unfinished business;
(7) New business;
(8) Adjournment.
Section 1.11 Absentees Consent to Meetings. Transactions of any meeting
of the shareholders are as valid as though had at a meeting duly-held after
regular call and notice if a quorum is present, either in person or by proxy,
and if, either before or after the meeting, each of the persons entitled to
vote, not present in person or by proxy (and those who, although present, either
object at the beginning of the meeting to the transaction of any business
because the meeting has not been lawfully called or convened or expressly object
at the meeting to the consideration of matters not included in the notice which
are legally required to be included therein), signs a written waiver of notice
and/or consent to the holding of the meeting or an approval of the minutes
thereof. All such waivers, consents, and approvals shall be filed with the
corporate records and made a part of the minutes of the meeting. Attendance of
a person at a meeting shall constitute a waiver of notice of such meeting,
except when the person objects at the beginning of the meeting to the
transaction of any business because the meeting is not lawfully called or
convened and except that attendance at a meeting is not a waiver of any right to
object to the consideration of matters not included in the notice if such
objection is expressly made at the beginning. Neither the business to be
transacted at nor the purpose of any regular or special
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meeting of shareholders need be specified in any written waiver of notice,
except as otherwise provided in Section 1.04(b) of these By-Laws.
Section 1.12 Action Without Meeting. Any action which may be taken by
the vote of the shareholders at a meeting may be taken without a meeting if
consented to by the holders of a majority of the shares entitled to vote or such
greater proportion as may be required by the laws of the State of Nevada, the
Articles of Incorporation, or these ByLaws. Whenever action is taken by written
consent, a meeting of shareholders needs not be called or noticed.
ARTICLE II
DIRECTORS
Section 2.01 Number, Tenure and Qualification. Except as otherwise
provided herein, the Board of Directors of the corporation shall consist of at
least one (1) but no more than nine (9) persons, who shall be elected at the
annual meeting of the shareholders of the corporation and who shall hold office
for one (1) year or until their successors are elected and qualify.
Section 2.02 Resignation. Any director may resign effective upon giving
written notice to the chairman of the Board of Directors, the president, or the
secretary of the corporation, unless the notice specifies a later time for
effectiveness of such resignation. If the Board of Directors accepts the
resignation of a director tendered to take effect at a future date, the Board or
the shareholders may elect a successor to take office when the resignation
becomes effective.
Section 2.03 Reduction in Number. No reduction of the number of
directors shall have the effect of removing any director prior to the expiration
of his term of office.
Section 2.04 Removal.
(a) The Board of Directors or the shareholders of the
corporation, by a majority vote, may declare vacant the office of a
director who has been declared incompetent by an order of a court of
competent jurisdiction or convicted of a felony.
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Section 2.05 Vacancies.
(a) A vacancy in the Board of Directors because of death,
resignation, removal, change in number of directors, or otherwise may be
filled by the shareholders at any regular or special meeting or any
adjourned meeting thereof or the remaining director(s) by the
affirmative vote of a majority thereof. A Board of Directors consisting
of less than the maximum number authorized in Section 2.01 of ARTICLE II
constitutes vacancies on the Board of Directors for purposes of this
paragraph and may be filled as set forth above including by the election
of a majority of the remaining directors. Each successor so elected
shall hold office until the next annual meeting of shareholders or until
a successor shall have been duly-elected and qualified.
(b) If, after the filling of any vacancy by the directors, the
directors then in office who have been elected by the shareholders shall
constitute less than a majority of the directors then in office, any
holder or holders of an aggregate of five percent (5%) or more of the
total number of shares entitled to vote may call a special meeting of
shareholders to be held to elect the entire Board of Directors. The term
of office of any director shall terminate upon such election of a
successor.
Section 2.06 Regular Meetings. Immediately following the adjournment
of, and at the same place as, the annual meeting of the shareholders, the Board
of Directors, including directors newly elected shall hold its annual meeting
without notice, other than this provision, to elect officers of the corporation
and to transact such further business as may be necessary or appropriate. The
Board of Directors may provide by resolution the place, date and hour for
holding additional regular meetings.
Section 2.07 Special Meetings. Special meetings of the Board of
Directors may be called by the chairman and shall be called by the chairman upon
the request of any two (2) directors or the president of the corporation.
Section 2.08 Place of Meetings. Any meeting of the directors of the
corporation may be held at its principal office in the State of Nevada, or at
such other place in or out of the United States as the Board of Directors may
designate. A waiver or notice signed by the directors may designate any place
for the holding of such meeting.
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Section 2.09 Notice of Meetings. Except as otherwise provided in Section
2.06, the chairman shall deliver to all directors written or printed notice of
any special meeting, at least three (3) days before the date of such meeting, by
delivery of such notice personally or mailing such notice first class mail, or
by telegram. If mailed, the notice shall be deemed delivered two (2) business
days following the date the same is deposited in the United States mail, postage
prepaid. Any director may waive notice of any meeting, and the attendance of a
director at a meeting shall constitute a waiver of notice of such meeting,
unless such attendance is for the express purpose of objecting to the
transaction of business threat because the meeting is not properly called or
convened.
Section 2.10 Quorum: Adjourned Meetings.
(a) A majority of the Board of Directors in office shall
constitute a quorum.
(b) At any meeting of the Board of Directors where a quorum
is not present, a majority of those present may adjourn, from time to
time, until a quorum is present, and no notice of such adjournment shall
be required. At any adjourned meeting where a quorum in present, any
business may be transacted which could have been transacted at the
meeting originally called.
Section 2.11 Action Without Meeting. Any action required or permitted to
be taken at any meeting of the Board of Directors or any committee thereof may
be taken without a meeting if a written consent thereto is signed by all of the
members of the Board of Directors or of such committee. Such written consent or
consents shall be filed with the minutes of the proceedings of the Board of
Directors or committee. Such action by written consent shall have the same force
and effect as the unanimous vote of the Board of Directors or committee.
Section 2.12 Telephonic Meetings. Meetings of the Board of Directors may
be held through the use of a conference telephone or similar communications
equipment so long as all members participating in such meeting can hear one
another at the time of such meeting. Participation in such a meeting constitutes
presence in person at such meeting.
Section 2.13 Board Decisions. The affirmative vote of a majority of the
directors present at a meeting at which a quorum is present shall be the act of
the Board of Directors.
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Section 2.14 Powers and Duties.
(a) Except as otherwise provided in the Articles of
Incorporation or the laws of the State of Nevada, the Board of Directors
is invested with the complete and unrestrained authority to manage the
affairs of the corporation, and is authorized to exercise for such
purpose as the general agent of the corporation, its entire corporate
authority in such manner as it sees fit. The Board of Directors may
delegate any of its authority to manage, control or conduct the current
business of the corporation to any standing or special committee or to
any officer or agent and to appoint any persons to be agents of the
corporation with such powers, including the power to sub-delegate, and
upon such terms as may be deemed fit.
(b) The Board of Directors shall present to the shareholders at
annual meetings of the shareholders, and when called for by a majority
vote of the shareholders at a special meeting of the shareholders, a
full and clear statement of the condition of the corporation, and shall,
at request, furnish each of the shareholders with a true copy thereof.
(c) The Board of Directors, in its discretion, may submit any
contract or act for approval or ratification at any annual meeting of
the shareholders or any special meeting properly called for the purpose
of considering any such contract or act, provided a quorum is present.
The contract or act shall be valid and binding upon the corporation and
upon all the shareholders thereof, if approved and ratified by the
affirmative vote of a majority of the shareholders at such meeting.
(d) In furtherance and not in limitation of the powers conferred
by the laws of the State of Nevada, the Board of Directors is expressly
authorized and empowered to issue stock of the Corporation for money,
property, services rendered, labor performed, cash advanced,
acquisitions for other corporations or for any other assets of value in
accordance with the action of the Board of Directors without vote or
consent of the shareholders and the judgment of the Board of Directors
as to the value received and in return therefore shall be conclusive and
said stock, when issued, shall be fully-paid and non-assessable.
Section 2.15 Compensation. The directors shall be allowed and paid all
necessary expenses incurred in attending any meetings of the Board, but shall
not receive any compensation for their services as directors until such time as
the corporation is able to declare and pay dividends on its capital stock.
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Section 2.16 Board Officers.
(a) At its annual meeting, the Board of Directors shall elect,
from among its members, a chairman to preside at the meetings of the
Board of Directors. The Board of Directors may also elect such other
board officers and for such term as it may, from time to time, determine
advisable.
(b) Any vacancy in any board office because of death,
resignation, removal or otherwise may be filled by the Board of
Directors for the unexpired portion of the term of such office.
Section 2.17 Order of-Business. The order of business at any meeting of
the Board of Directors shall be as follows:
(1) Determination of members present and existence of
quorum;
(2) Reading and approval of the minutes of any previous
meeting or meetings;
(3) Reports of officers and committeemen;
(4) Election of officers;
(5) Unfinished business;
(6) New business;
(7) Adjournment.
ARTICLE III
OFFICERS
Section 3.01 Election. The Board of Directors, at its first meeting
following the annual meeting of shareholders, shall elect a president, a
secretary and a treasurer to hold office for one (1) year next coming and until
their successors are elected and qualify. Any person may hold two or more
offices. The Board of Directors may, from time to time, by resolution, appoint
one or more vice presidents, assistant secretaries, assistant treasurers and
transfer agents of the corporation as it may doom advisable; proscribe their
duties; and fix their compensation.
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Section 3.02 Removal; Resignation. Any officer or agent elected or
appointed by the Board of Directors may be removed by it whenever, in its
judgment, the best interest of the corporation would be served thereby. Any
officer may resign at any time upon written notice to the corporation without
prejudice to the rights, if any, of the corporation under any contract to which
the resigning officer is a party.
Section 3.03 Vacancies. Any vacancy in any office because of death,
resignation, removal, or otherwise may be filled by the Board of Directors for
the unexpired portion of the term of such office.
Section 3.04 President. The president shall be the general manager and
executive officer of the corporation, subject to the supervision and control of
the Board of Directors, and shall direct the corporate affairs, with full power
to execute all resolutions and orders of the Board of Directors not especially
entrusted to some other officer of the corporation. The president shall preside
at all meetings of the shareholders and shall sign the certificates of stock
issued by the corporation, and shall perform such other duties as shall be
prescribed by the Board of Directors.
Unless otherwise ordered by the Board of Directors, the president shall
have full power and authority on behalf of the corporation to attend and to act
and to vote at any meetings of the shareholders of any corporation in which the
corporation may hold stock and, at any such meetings, shall possess and may
exercise any and all rights and powers incident to the ownership of such stock.
The Board of Directors, by resolution from time to time, may confer like powers
on any person or persons in place of the president to represent the corporation
for these purposes.
Section 3.05 Vice President. The Board of Directors may elect one or
more vice presidents who shall be vested with all the powers and perform all the
duties of the president whenever the president is absent or unable to act,
including the signing of the certificates of stock issued by the corporation,
and the vice president shall perform such other duties as shall be prescribed by
the Board of Directors.
Section 3.06 Secretary. The secretary shall keep the minutes of all
meetings of the shareholders and the Board of Directors in books provided for
that purpose. The secretary shall attend to the giving and service of all
notices of the corporation, may sign with the president in the name of the
corporation all contracts authorized by the Board of Directors or appropriate
committee, shall have the custody of the corporate seal, shall affix the
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corporate seal to all certificates of stock duly issued by the corporation,
shall have charge of stock certificate books, transfer books and stock ledgers,
and such other books and papers as the Board of Directors or appropriate
committee may direct, and shall, in general perform all duties incident to the
office of the secretary. All corporate books kept by the secretary shall be open
for examination by any director at any reasonable time.
Section 3.07 Assistant Secretary. The Board of Directors may appoint an
assistant secretary who shall have such powers and perform such duties as may be
prescribed for him by the secretary of the corporation or by the Board of
Directors.
Section 3.08 Treasurer. The treasurer shall be the chief financial
officer of the corporation, subject to the supervision and control of the Board
of Directors, and shall have custody of all the funds and securities of the
corporation. When necessary or proper, the treasurer shall endorse on behalf of
the corporation for collection checks, notes and other obligations, and shall
deposit all monies to the credit of the corporation in such bank or banks or
other depository as the Board of Directors may designate, and shall sign all
receipts and vouchers for payments made by the corporation. Unless otherwise
specified by the Board of Directors, the treasurer shall sign with the president
all bills of exchange and promissory notes of the corporation, shall also have
the care and custody of the stocks, bonds, certificates, vouchers, evidence of
debts, securities and such other property belonging to the corporation as the
Board of Directors shall designate, and shall sign all papers required by law,
by these By-laws or by the Board of Directors to be signed by the treasurer. The
treasurer shall enter regularly in the books of the corporation, to be kept for
that purpose, full and accurate accounts of all monies received and paid on
account of the corporation and whenever required by the Board of Directors, the
treasurer shall render a statement of any or all accounts. The treasurer shall
at all reasonable times exhibit the books of account to any directors of the
corporation and shall perform all acts incident to the position of treasurer
subject to the control of the Board of Directors. The treasurer shall, if
required by the Board of Directors, give a bond to the corporation in such sum
and with such security as shall be approved by the Board of Directors for the
faithful performance of all the duties of the treasurer and for restoration to
the corporation in the event of the treasurer's death, resignation, retirement,
or removal from office, of all books, records, papers, vouchers, money and other
property belonging to the corporation. The expense of such bond shall be borne
by the corporation.
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Section 3.09 Assistant Treasurer. The Board of Directors may appoint an
assistant treasurer who shall have such powers and perform such duties as may be
prescribed by the treasurer of the corporation or by the Board of Directors, and
the Board of Directors may require the assistant treasurer to give a bond to the
corporation in such sum and with such security as it may approve for the
faithful performance of the duties of assistant treasurer, and for the
restoration to the corporation, in the event of the assistant treasurer's death,
resignation, retirement or removal from office, of all books, records, papers,
vouchers, money and other property belonging to the corporation. The expense of
such bond shall be borne by the corporation.
ARTICLE IV
CAPITAL STOCK
Section 4.01 Issuance. Shares of capital stock of the corporation shall
be issued in such manner and at such times and upon such conditions as shall be
prescribed by the Board of Directors.
Section 4.02 Certificates. Ownership in the corporation shall be
evidenced by certificates for shares of stock in such form as shall be
prescribed by the Board of Directors, shall be under the seal of the corporation
and shall be signed by the president or the vice president and also by the
secretary or an assistant secretary. Each certificate shall contain the name of
the record holder, the number, designation, if any, class or series of shares
represented, a statement of summary of any applicable rights, preferences,
privileges, or restrictions thereon, and a statement that the shares are
assessable, if applicable. All certificates shall be consecutively numbered. The
name and address of the shareholder, the number of shares, and the date of issue
shall entered on the stock transfer books of the corporation.
Section 4.03 Surrender; Lost or Destroyed Certificates. All certificates
surrendered to the corporation, except those representing shares of treasury
stock, shall be canceled and no new certificates shall be issued until the
former certificate for a like number of shares shall have been canceled, except
that in case of a lost, stolen, destroyed or mutilated certificate, a new one
may be issued therefor. However, any shareholder applying for the issuance of a
stock certificate in lieu of one alleged to have been lost, stolen, destroyed or
mutilated shall, prior to the issuance of a replacement, provide the corporation
with his, her or its affidavit of the facts surrounding the loss, theft,
destruction or mutilation and an indemnity bond in an amount and upon such terms
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as the treasurer, or the Board of Directors, shall require. In no case shall the
bond be in amount less than twice the current market value of the stock and it
shall indemnify the corporation against any loss, damage, cost or inconvenience
arising as a consequence of the issuance of a replacement certificate.
Section 4.04 Replacement Certificate. When the Articles of Incorporation
are amended in any way affecting the statements contained in the certificates
for outstanding shares of capital stock of the corporation or it becomes
desirable for any reason, including, without limitation, the merger or
consolidation of the corporation with another corporation or the reorganization
of the corporation, to cancel any outstanding certificate for shares and issue a
new certificate therefor conforming to the rights of the holder, the Board of
Directors may order any holders of outstanding certificates for shares to
surrender and exchange the same for new certificates within a reasonable time to
be fixed by the Board of Directors. The order may provide that a holder of any
certificate(s) ordered to be surrendered shall not be entitled to vote, receive
dividends or exercise any other rights of shareholders until the holder has
complied with the order provided that such order operates to suspend such rights
only after notice and until compliance.
Section 4.03 Transfer of Shares. No transfer of stock shall be valid as
against the corporation except on surrender and cancellation by the certificate
therefor, accompanied by an assignment or transfer by the registered owner made
either in person or under assignment. Whenever any transfer shall be expressly
made for collateral security and not absolutely, the collateral nature of the
transfer shall be reflected in the entry of transfer on the books of the
corporation.
Section 4.06 Transfer Agent. The Board of Directors may appoint one or
more transfer agents and registrars of transfer and may require all certificates
for shares of stock to bear the signature of such transfer agent and such
registrar of transfer.
Section 4.07 Stock Transfer Books. The stock transfer books shall be
closed for a period of ten (10) days prior to all meetings of the shareholders
and shall be closed for the payment of dividends as provided in Article V hereof
and during such periods as, from time to time, may be fixed by the Board of
Directors, and, during such periods, no stock shall be transferable.
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Section 4.08 Miscellaneous. The Board of Directors shall have the power
and authority to make such rules and regulations not inconsistent herewith as it
may deem expedient concerning the issue, transfer and registration of
certificates for shares of the capital stock of the corporation.
ARTICLE V
DIVIDENDS
Section 5.01 Dividends may be declared, subject to the provisions of the
laws of the State of Nevada and the Articles of Incorporation, by the Board of
Directors at any regular or special meeting and may be paid in cash, property,
shares of corporate stock, or any other medium. The Board of Directors may fix
in advance, a record date, as provided in Section 1.06 of these By-laws, prior
to the dividend payment for the purpose of determining shareholders entitled to
receive payment of any dividend. The Board of Directors may close the stock
transfer books for such purpose for a period of not more than ten (10) days
prior to the payment date of such dividend.
ARTICLE VI
OFFICERS; RECORDS; REPORTS; SEAL AND FINANCIAL MATTERS
Section 6.01 Principal Office. The principal office of the corporation
in the State of Nevada shall be the Law Offices of Max C. Tanner, 2950 East
Flamingo Road, Suite G, Las Vegas, Nevada 89121, and the corporation may have an
office in any other state or territory as the Board of Directors may designate.
Section 6.02 Records. The stock transfer books and a certified copy of
the By-laws, Articles of Incorporation, any amendments thereto, and the minutes
of the proceedings of the shareholders, the Board of Directors, and committees
of the Board of Directors shall be kept at the principal office of the
corporation for the inspection of all who have the right to see the same and for
the transfer of stock. All other books of the corporation shall be kept at such
places as may be prescribed by the Board of Directors.
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Section 6.03 Financial Report on Request. Any shareholder or
shareholders holding at least five percent (5%) of the outstanding shares of any
class of stock may make a written request for an income statement of the
corporation for the three (3) month, six (6) month, or nine (9) month period of
the current fiscal year ended more than thirty (30) days prior to the date of
the request and a balance sheet of the corporation as of the end of such period.
In addition, if no annual report for the last fiscal year has been sent to
shareholders, such shareholder or shareholders may make a request for a balance
sheet as of the end of such fiscal year and an income statement and statement of
changes in financial position for such fiscal year. The statement shall be
delivered or mailed to the person making the request within thirty (30) days
thereafter. A copy of the statements shall be kept on file in the principal
office of the corporation for twelve (12) months, and such copies shall be
exhibited at all reasonable times to any shareholder demanding an examination of
them or a copy shall be mailed to each shareholder. Upon request by any
shareholder, there shall be mailed to the shareholder a copy of the last annual,
semiannual or quarterly income statement which it has prepared and a balance
sheet as of the end of the period. The financial statements referred to in this
Section 6.03 shall be accompanied by the report thereon, if any, of any
independent accountants engaged by the corporation or the certificate of an
authorized officer of the corporation that such financial statements were
prepared without audit from the books and records of the corporation.
Section 6.04 Right of Inspection.
(a) The accounting books and records and minutes of proceedings
of the shareholders and the Board of Directors and committees of the
Board of Directors shall be open to inspection upon the written demand
of any shareholder or holder of a voting trust certificate at any
reasonable time during usual business hours for a purpose reasonably
related to such holder's interest as a shareholder or as the holder of
such voting trust certificate. This right of inspection shall extend to
the records of the subsidiaries, if any, of the corporation. Such
inspection may be made in person or by agent or attorney, and the right
of inspection includes the right to copy and make extracts.
(b) Every director shall have the absolute right at any
reasonable time to inspect and copy all books, records and documents of
every kind and to inspect the physical properties of the corporation
and/or its subsidiary corporations. Such inspection may be made in
person or by agent or attorney, and the right of inspection includes the
right to copy and make extracts.
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Section 6.05 Corporate Seal. The Board of Directors may, by resolution,
authorize a seal, and the seal may be used by causing it, or a facsimile, to be
impressed or affixed or reproduced or otherwise. Except when otherwise
specifically provided herein, any officer of the corporation shall have the
authority to affix the seal to any document requiring it.
Section 6.06 Fiscal Year. The fiscal year-end of the corporation shall
be the calendar year or such other term as may be fixed by resolution of the
Board of Directors.
Section 6.07 Reserves. The Board of Directors may create, by resolution,
out of the earned surplus of the corporation such reserves as the directors may,
from time to time, in their discretion, think proper to provide for
contingencies, or to equalize dividends or to repair or maintain any property of
the corporation, or for such other purpose as the Board of Directors may deem
beneficial to the corporation, and the directors may modify or abolish any such
reserves in the manner in which they were created.
ARTICLE VII
INDEMNIFICATION
Section 7.01 Indemnification. The corporation shall, unless prohibited
by Nevada Law, indemnify any person (an "Indemnitee") who is or was involved in
any manner (including, without limitation, as a party or a witness) or is
threatened to be so involved in any threatened, pending or completed action suit
or proceeding, whether civil, criminal, administrative, arbitrative or
investigative, including without limitation any action, suit or proceeding
brought by or in the right of the corporation to procure a judgment in its favor
(collectively, a "Proceeding") by reason of the fact that he 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, employee benefit plan or
other entity or enterprise, against all Expenses and Liabilities actually and
reasonably incurred by him in connection with such Proceeding. The right to
indemnification conferred in this Article shall be presumed to have been relied
upon by the directors, officers, employees and agents of the corporation and
shall be enforceable as a contract right and inure to the benefit of heirs,
executors and administrators of such individuals.
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Section 7.02 Indemnification Contracts. The Board of Directors is
authorized on behalf of the corporation, to enter into, deliver and perform
agreements or other arrangements to provide any Indemnitee with specific rights
of indemnification in addition to the rights provided hereunder to the fullest
extent permitted by Nevada Law. Such agreements or arrangements may provide (i)
that the Expenses of officers and directors incurred in defending a civil or
criminal action, suit or proceeding, must be paid by the corporation as they are
incurred and in advance of the final disposition of any such action, suit or
proceeding provided that, if required by Nevada Law at the time of such advance,
the officer or director provides an undertaking to repay such amounts if it is
ultimately determined by a court of competent jurisdiction that such individual
is not entitled to be indemnified against such expenses, (ii) that the
Indemnitee shall be presumed to be entitled to indemnification under this
Article or such agreement or arrangement and the corporation shall have the
burden of proof to overcome that presumption, (iii) for procedures to be
followed by the corporation and the Indemnitee in making any determination of
entitlement to indemnification or for appeals therefrom and (iv) for insurance
or such other Financial Arrangements described in Paragraph 7.02 of this
Article, all as may be deemed appropriate by the Board of Directors at the time
of execution of such agreement or arrangement.
Section 7.03 Insurance and Financial Arrangements. The corporation may,
unless prohibited by Nevada Law, purchase and maintain insurance or make other
financial arrangements ("Financial Arrangements") on behalf of any Indemnitee
for any liability asserted against him and liability and expenses incurred by
him in his capacity as a director, officer, employee or agent, or arising out of
his status as such, whether or not the corporation has the authority to
indemnify him against such liability and expenses. Such other Financial
Arrangements may include (i) the creation of a trust fund, (ii) the
establishment of a program of self-insurance, (iii) the securing of the
corporation's obligation of indemnification by granting a security interest or
other lien on any assets of the corporation, or (iv) the establishment of a
letter of credit, guaranty or surety.
Section 7.04 Definitions. For purposes of this Article:
Expenses. The word "Expenses" shall be broadly construed and,
without limitation, means (i) all direct and indirect costs incurred,
paid or accrued, (ii) all attorneys' fees, retainers, court costs,
transcripts, fees of experts, witness fees, travel expenses, food and
lodging expenses while traveling, duplicating costs, printing and
binding costs, telephone charges, postage, delivery service, freight or
other transportation fees and expenses, (iii) all other
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disbursements and out-of-pocket expenses, (iv) amounts paid in
settlement, to the extent permitted by Nevada Law, and (v) reasonable
compensation for time spent by the Indemnitee for which he is otherwise
not compensated by the corporation or any third party, actually and
reasonably incurred in connection with either the appearance at or
investigation, defense, settlement or appeal of a Proceeding or
establishing or enforcing a right to indemnification under any agreement
or arrangement, this Article, the Nevada Law or otherwise, provided,
however, that "Expenses" shall not include any judgments or fines or
excise taxes or penalties imposed under the Employee Retirement Income
Security Act of 1974, as amended ("ERISA") or other excise taxes or
penalties.
Liabilities. "Liabilities" means liabilities of any type
whatsoever, including, but not limited to, judgments or fines, ERISA or
other excise taxes and penalties, and amounts paid in settlement.
Nevada Law. "Nevada Law" means; Chapter 78 of the Nevada Revised
Statutes as amended and in affect from time to time or any successor or
other statutes of Nevada having similar import and effect.
This Article. "This Article" means Paragraphs 7.01 through 7.04
of these Bylaws or any portion of them.
Power of Stockholders. Paragraphs 7.01 through 7.04, including
this Paragraph, of these Bylaws may be amended by the stockholders only
by vote of the holders of sixty-six and two-thirds percent (66 2/3%) of
the entire number of shares of each class, voting separately, of the
outstanding capital stock of the corporation (even though the right of
any class to vote is otherwise restricted or denied); provided, however,
no amendment or repeal of this Article shall adversely affect any right
of any Indemnitee existing at the time such amendment or repeal becomes
effective.
Power of Directors. Paragraphs 7.01 through 7.04 and this Paragraph of
these Bylaws may be amended or repealed by the Board of Directors only
by vote of eighty percent (80%) of the total number of Directors and the
holders of sixty-six and two-thirds percent (66 2/3) of the entire
number of shares of each class, voting separately, of the outstanding
capital stock of the corporation (even though the right of any class to
vote is otherwise restricted or denied); provided, however, no amendment
or repeal of this Article shall adversely affect any right of any
Indemnitee existing at the time such amendment or repeal becomes
effective.
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ARTICLE VIII
BYLAWS
Section 8.01 Amendment. Amendments and changes of these Bylaws may be
made at any regular or special meeting of the Board of Directors by a vote of
not less than all of the entire Board, or may be made by a vote of, or a consent
in writing signed by the holders of a majority of the issued and outstanding
capital stock.
Section 8.02 Additional Bylaws. Additional bylaws not inconsistent
herewith may be adopted by the Board of Directors at any meeting of the Board of
Directors at which a quorum is present by an affirmative vote of a majority of
the directors present or by the unanimous consent of the Board of Directors in
accordance with Section 2.11 of these Bylaws.
CERTIFICATION
I, the undersigned, being the duly elected secretary of the Corporation,
do hereby certify that the foregoing Bylaws were adopted by the Board of
Directors on the 22nd day of September, 1993.
/s/ DAVID WALTON, SECRETARY
------------------------------------------
David Walton, Secretary
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<PAGE> 1
EXHIBIT 17.1
Board of Directors
Security Asset Capital Corporation
701 "B" Street, Suite 1775
San Diego, California 92101
Dear Board of Directors:
I, Danilo Cacciamatta, hereby resign as Presient, Chief Financial
Officer, Secretary and Director of Universal View Corporation, a Nevada
corporation.
Very truly yours,
/s/ DANILO CACCIAMATTA
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