UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------
FORM 10-QSB
(Mark one)
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended April 30, 1998
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________ to _____________
Commission file number 1-8460
UNIVERSAL MONEY CENTERS, INC.
(Exact name of small business issuer as specified in its charter)
Missouri 43-1242819
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
6800 Squibb Road, Shawnee Mission, Kansas 66202
(Address of principal executive offices)
(913) 831-2055
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities and Exchange Act during the past 12 months
(or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days. Yes __ No X
Number of shares outstanding of each of the issuer's classes of common
equity as of April 14, 1999: 39,293,069 shares of Common Stock, $.01 par value
per share
Transitional Small Business Disclosure Format: Yes __ No X
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NOTE CONCERNING THIS FILING
Concurrently with the filing of this Form 10-QSB, Universal Money Centers,
Inc. (the "Company") is also filing with the SEC certain periodic reports for
subsequent periods, including Quarterly Reports on Form 10-QSB for the fiscal
quarters ended July 31 and October 31, 1998. In addition, the Company intends to
file with the SEC its Annual Report on Form 10-KSB for the fiscal year ended
January 31, 1999 on or before its due date, May 3, 1999. Unless otherwise
indicated herein, this Form 10-QSB provides information concerning the Company
as of April 30, 1998 and for the period ended April 30, 1998. The discussion in
this Form 10-QSB should be read in conjunction with the discussions of
subsequent periods contained in the periodic reports described above.
NOTE CONCERNING FORWARD-LOOKING STATEMENTS
Certain statements contained in this Quarterly Report on Form 10-QSB that
are not statements of historical fact constitute forward-looking statements
within the meaning of Section 21E of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"). These statements involve risks and uncertainties
that may cause actual results to differ materially from those in such
statements. See Part I, Item 2 "Management's Discussion and Analysis or Plan of
Operation-Cautionary Statement Concerning Forward-Looking Statements" for
additional information and factors to be considered with respect to
forward-looking statements.
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
UNIVERSAL MONEY CENTERS, INC.
CONSOLIDATED BALANCE SHEETS
ASSETS
April 30, 1998 January 31, 1998
(unaudited)
------------- ------------
CURRENT ASSETS
Cash $ 114,273 $ 374,675
Notes receivable - affiliate 210,000 0
Accounts receivable - trade, less allowance
for doubtful accounts:
April 30, 1998 - $21,380;
January 31, 1998 - $21,380 28,594 87,256
Accounts receivable - affiliate 37,925 2,340
Inventories 300 300
Prepaid expenses and other 10,080 9,176
Interest receivable - affiliate 2,071 2,059
---------- -----------
Total Current Assets 403,243 475,806
---------- -----------
PROPERTY AND EQUIPMENT, At cost
Equipment 2,919,661 2,578,635
Leasehold improvements 117,803 117,803
Vehicles 9,722 9,722
---------- -----------
3,047,186 2,706,160
Less accumulated depreciation 1,576,691 1,475,325
---------- -----------
Total Property and Equipment 1,470,495 1,230,835
---------- -----------
OTHER ASSETS
Deferred income taxes 315,000 315,000
Other 32,383 12,383
---------- -----------
Total Other Assets 347,383 327,383
---------- -----------
Total Assets $2,221,121 $ 2,034,024
========== ===========
See Notes to Consolidated Financial Statements (Unaudited)
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UNIVERSAL MONEY CENTERS, INC.
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
April 30, 1998 January 31, 1998
(unaudited)
------------ ------------
CURRENT LIABILITIES
Current maturities of long-term debt
and capital lease obligations $ 166,089 $ 206,040
Accounts payable 247,759 296,455
Accounts payable - affiliate 0 35,551
Accrued expenses 219,392 223,496
------------ ------------
Total Current Liabilities 633,240 761,542
------------ ------------
LONG-TERM DEBT AND CAPITAL LEASE
OBLIGATIONS 662,553 392,945
----------- -----------
STOCKHOLDERS' EQUITY
Common stock; no par value;
$.01 stated value; 40,000,000 shares
authorized; 39,851,380 issued as of
4/30/98 and 1/31/98 398,514 398,514
Additional paid-in capital 18,593,430 18,593,430
Retained earnings (deficit) (16,404,308) (16,450,099)
------------ ------------
2,587,636 2,541,845
Less treasury stock, at cost;
common stock 558,311 shares as
of 4/30/98 and 1/31/98 (1,662,308) (1,662,308)
------------ ------------
Total Stockholders' Equity 925,328 879,537
------------ ------------
Total Liabilities and
Stockholders' Equity $2,221,121 $2,034,024
============ ============
See Notes to Consolidated Financial Statements (Unaudited)
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UNIVERSAL MONEY CENTERS, INC.
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
Three Months Three Months
Ended Ended
April 30, 1998 April 30, 1997
---------- ----------
NET REVENUES $ 1,155,420 $ 876,855
COSTS OF REVENUES 775,205 527,254
---------- ----------
GROSS PROFIT 380,215 349,601
OPERATING EXPENSES 307,631 222,238
---------- ----------
INCOME FROM OPERATIONS 72,584 127,363
---------- ----------
OTHER INCOME (EXPENSE)
Interest income 6,007 3,461
Interest expense (32,800) (18,410)
Other 0 0
---------- ----------
(26,793) (14,949)
---------- ----------
INCOME BEFORE INCOME TAXES 45,791 112,414
INCOME TAX PROVISION (CREDIT) --- ---
---------- ----------
NET INCOME $ 45,791 $ 112,414
=========== ============
BASIC AND DILUTED EARNINGS PER SHARE $ 0.0012 $ 0.0029
=========== ============
See Notes to Consolidated Financial Statements (Unaudited)
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UNIVERSAL MONEY CENTERS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Three Months Three Months
Ended Ended
April 30, 1998 April 30, 1997
---------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 45,791 $ 112,414
Items not requiring (providing) cash:
Depreciation 101,365 74,917
Loss on disposal of property -- 125
and equipment
Deferred income taxes -- --
Changes in:
Accounts receivable 23,065 (82,938)
Inventories -- 7,873
Prepaid expenses and other (20,903) 309
Accounts payable and accrued
expenses (88,351) 33,554
---------- ----------
Net cash provided by (used 60,967 146,254
in) operating activities ---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment (199,801) (105,513)
Increase from notes receivable -
affiliate (210,000) (202,000)
Proceeds from sale of property and -- --
equipment ---------- ----------
Net cash provided by (used in) (409,801) (307,513)
investing activities ---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments under long-term debt (61,048) (66,730)
and capital lease obligations
Proceeds from issuance of long-term 149,480 --
debt
Proceeds from issuance of common stock -- (2,747)
Purchase of treasury stock -- --
---------- ----------
Net cash provided by (used in) 88,432 (69,477)
financing activities ---------- ----------
INCREASE (DECREASE) IN CASH (260,402) (230,736)
CASH, BEGINNING OF PERIOD 374,675 325,646
---------- ----------
CASH, END OF PERIOD $ 114,273 $ 94,910
========== ==========
See Notes to Consolidated Financial Statements (Unaudited)
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UNIVERSAL MONEY CENTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. General
The consolidated financial statements include the accounts of Universal
Money Centers, Inc. (the "Company"), and its wholly-owned subsidiaries,
Electronic Funds Transfer, Inc., Corporate Payments Systems, Inc. (inactive) and
A.M. Corporation (inactive). All significant intercompany accounts and
transactions have been eliminated in consolidation.
The unaudited consolidated financial statements included herein have been
prepared by the Company pursuant to the rules and regulations of the Securities
and Exchange Commission. Accordingly, they reflect all adjustments that are, in
the opinion of management, necessary for a fair presentation of the financial
results for the interim periods. Certain information and notes normally included
in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to such rules and
regulations. The Company believes, however, that the disclosures are adequate to
make the information presented not misleading. These consolidated financial
statements should be read in conjunction with the consolidated financial
statements and the notes thereto included in the Company's Annual Report on Form
10-KSB for the fiscal year ended January 31, 1998.
2. Future Changes in Accounting Principles
In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments of
an Enterprise and Related Information." This Statement establishes standards for
reporting information about operating segments in annual financial statements of
public business enterprises and requires disclosure of selected information
about operating segments in interim financial reports. The Statement is
effective for financial statements for periods beginning after December 15,
1997. Management has elected to first apply this standard in the Company's 1999
fiscal year-end reporting and believes that the adoption of this Statement will
not have a material effect on the Company's financial reporting.
3. Earnings Per Share
The computation of earnings per share is based upon the weighted average
number of common shares outstanding during the respective period. For all
periods reflected in the Consolidated Financial Statements, the weighted average
number of common shares outstanding was 39,293,069 shares.
4. Supplemental Cash Flow Information
Non-cash items for the three months ended April 30, 1998 include purchases
of ATMs acquired under capital leases of approximately $141,224 during the
three-month period ended April 30, 1998.
Item 2. Management's Discussion and Analysis or Plan of Operation
Overview
Universal Money Centers, Inc. (the "Company") operates a regional network
of automated teller machines ("ATMs"). The ATMs provide holders of debit and
credit cards access to cash, account information and other services at
convenient locations and times. At April 30, 1998, the
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network consisted of approximately 250 ATMs owned by the Company and its
affiliate, Universal Funding Corporation ("Funding"), 64 ATMs owned by banks and
7 ATMs owned by third party merchants. ATMs in the Company's network are
principally installed in convenience stores and banks with locations
concentrated in the Kansas City and St. Louis, Missouri and El Paso, Texas
metropolitan areas, and the state of Kansas. The Company also provides ATM
network management services to banks and third parties owning ATMs in the
Company's ATM network.
The Company's revenues are principally derived from two types of fees,
which the Company charges for processing transactions on its ATM network. The
Company receives an interchange fee from the issuer of the credit or debit card
for processing a transaction when a cardholder uses an ATM in the Company's
network. In addition, in most cases the Company receives a surcharge fee from
the cardholder when the cardholder makes a cash withdrawal from an ATM in the
Company's network.
Interchange fees are processing fees that are paid by the issuer of the
credit or debit card used in a transaction. Interchange fees vary for cash
withdrawals, balance inquiries, account transfers or uncompleted transactions,
the primary types of transactions that are currently processed on ATMs in the
Company's network. The maximum amount of the interchange fees is established by
the national and regional card organizations and credit card issuers with which
the Company has a relationship. The Company (or its affiliate, Funding) receives
the full interchange fee for transactions on Company owned ATMs, but sometimes
rebates a portion of the fee to the owner of the ATM location under the
applicable lease for the ATM site. The Company also receives the full
interchange fee for transactions on ATMs owned by banks or third party vendors
included within the Company's network, but rebates a portion of each fee to the
bank or third party vendor based upon negotiations between the parties. The
interchange fees received by the Company vary from network to network and to
some extent from issuer to issuer, but generally range from $0.35 to $0.75 per
cash withdrawal. Interchange fees for balance inquiries, account transfers and
denied transactions are generally substantially less than fees for cash
withdrawals. The interchange fees received by the Company from the card issuer
are independent of the service fees charged by the card issuer to the cardholder
in connection with ATM transactions. Service fees charged by card issuers to
cardholders in connection with transactions through the Company's network range
from zero to as much as $2.50 per transaction. The Company does not receive any
portion of the service fees charged by the card issuer to the cardholder.
In most markets the Company imposes a surcharge fee for cash withdrawals.
The Company expanded its practice of imposing surcharge fees in April 1996 when
national debt and credit card organizations changed rules applicable to their
members to permit these fees. Subsequently, surcharge fees have been a
substantial additional source of revenue for the Company and other ATM network
operators. The surcharge fee for ATMs in the Company's network owned by or
located in banks ranges between $0.50 and $1.50 per withdrawal. The surcharge
fee for other ATMs in the Company's network ranges between $0.50 and $2.50 per
withdrawal. The Company receives the full surcharge fee for transactions on
Company owned ATMs, but sometimes rebates a portion of the fees to the owner of
the ATM location under the applicable lease for the ATM site. The Company also
receives the full surcharge fee for transactions on ATMs owned by banks and
third party vendors included within the Company's network, but rebates a portion
of each fee to the bank or third party vendor based upon a variety of factors,
including transaction volume and the party responsible for supplying vault cash
to the ATM.
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The Company's profitability is substantially dependent upon the imposition
of surcharge fees. Any changes in laws or card association rules materially
limiting the Company's ability to impose surcharge fees would have a material
adverse effect on the Company.
In addition to revenues derived from interchange and surcharge fees, the
Company also derives revenues from providing network management services to
banks and third parties owning ATMs included in the Company's ATM network. These
services include 24 hour transaction processing, monitoring and notification of
ATM status and cash condition, notification of ATM service interruptions, in
some cases, dispatch of field service personnel for necessary service calls and
cash settlement and reporting services. The fees for these services are paid by
the owners of the ATMs.
Interchange fees are credited to the Company by networks and credit card
issuers on a periodic basis which is generally either daily or monthly depending
upon the party. Surcharge fees are charged to the cardholder and credited to the
Company by networks and credit card issuers on a daily basis. The Company
periodically rebates the portion of these fees owed to ATM owners and owners of
ATM locations. Fees for network management services are generally paid to the
Company on a monthly basis.
Comparison of Results of Operations for the Three Months Ended April 30, 1998
and April 30, 1997.
Revenues. The Company's total revenues increased to $1,155,420 for the
three months ended April 30, 1998 ("first quarter 1999") from $876,855 for the
three months ended April 30, 1997 ("first quarter 1998"). This increase is
primarily attributable to an increase in the number of ATMs in the Company's
network on which the Company imposed surcharge fees for cash withdrawals. The
number of such ATMs increased to 298 in first quarter 1999 from 258 in first
quarter 1998. Surcharge fees increased to $669,957 or 58.0% of total revenues in
first quarter 1999 from $421,153 or 48.0% of total revenues in first quarter
1998. The increase in total revenues is also partially due to an increase in the
number of ATMs in the Company's network, from 288 in first quarter 1998 to 321
in first quarter 1999. The increase in the number of ATMs resulted in an
increase in the number of transactions processed on ATMs in the Company's
network. Revenues derived from interchange fees increased to $207,847 in first
quarter 1999 from $188,652 in first quarter 1998. Revenues received from Funding
under a Management Agreement between the Company and Funding decreased to
$169,070 in first quarter 1999 from $189,658 in first quarter 1998. See
"-Revenues from Funding" below. The Company's revenues from providing network
management services to banks and third parties increased to $108,546 in first
quarter 1999 from $77,392 in first quarter 1998.
Revenues from Funding. The Company has maintained a business relationship
with Funding since August 1989. The relationship began in 1989 as a result of
the Company's severe financial problems. The operation of the Company's ATM
network generally requires that the Company supply vault cash to ATMs owned by
the Company to fund cash withdrawals. As a result of the Company's financial
problems, lenders were generally unwilling to extend loans, partly because of
the concern that the Company's creditors would assert claims against cash
physically located in ATM's owned by the Company. The Company has not had
sufficient cash to supply the vault cash for these ATMs. In order to resolve
this problem and to permit the Company to continue to operate certain ATMs,
Funding was formed in 1989 by David S. Bonsal, the Chairman of the Company's
Board of Directors, John L. Settles, the President of the
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Company from April 1989 through late 1990, and William Smithson, a shareholder
of the Company. Each of these individuals has a one-third ownership interest in
Funding.
Under a Management Agreement between the Company and Funding, Funding
provides vault cash for certain ATMs in the Company's network that are owned by
the Company or Funding, and receives all interchange fees for transactions
processed on these ATMs. At April 30, 1998 and 1997, Funding had vault cash
located in approximately 213 and 201 ATMs, respectively, owned by Funding or the
Company. The Company receives a management fee from Funding under the Management
Agreement for providing services to Funding. The management fee paid to the
Company under the Management Agreement equals Funding's "net income." Funding's
"net income" is defined in the Management Agreement as revenues from interchange
fees, less armored security charges, interest expense on funds borrowed to
provide vault cash, ATM location expenses, debt service related to the purchase
of the ATMs, taxes or insurance on ATMs, and a monthly payment to each of
Funding's shareholders representing a return on their equity investment in
Funding. For additional information, see the Company's 1998 Annual Report on
Form 10-KSB, Item 12, "CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS -
Universal Funding Corporation."
Cost of Revenues. The Company's cost of revenues increased to $775,205 in
first quarter 1999 from $527,254 in first quarter 1998. The principal components
of cost of revenues are salaries, telecommunication services and transaction
processing charges, interchange and surcharge rebates, ATM site rentals,
maintenance and repairs, and depreciation and amortization. This increase is
principally due to an increase in interchange and surcharge rebates paid to
third party owners of ATMs included in the Company's ATM network and to ATM site
owners. Rebates generally increase approximately in proportion to increases in
total revenues from interchange and surcharge fees. The increase is also
attributable to increased depreciation associated with the larger number of ATMs
owned by the Company, and increased telecommunications expenses associated with
the larger number of ATMs in the Company's network.
Gross Margin. Gross profit as a percentage of revenues was 32.9% in first
quarter 1999 and 39.9% in first quarter 1998. The decrease in first quarter 1999
was caused by a number of factors, including increased interchange and surcharge
rebates, increased depreciation expense resulting from the purchase of new ATMs
and increased personnel expense and telecommunications charges resulting from
growth in the ATM network.
Operating Expenses. The Company's total operating expenses increased to
$307,631 in first quarter 1999 from $222,238 in first quarter 1998. The
principal components of operating expenses are administrative salaries and
benefits, occupancy costs, sales and marketing expenses and administrative
expenses. This increase is principally attributable to salary increases and
other personnel expenses.
Other Income (Expense). The Company extends short-term loans to Funding,
which uses the proceeds as vault cash in the ATMs owned by Funding. These loans
generally have a term of one month and bear interest at 12% per annum. Interest
income primarily represents the interest paid by Funding to the Company on the
outstanding balance of these loans. Interest income increased to $6,007 in first
quarter 1999 from $3,461 in first quarter 1999 as a result of higher average
outstanding balances.
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Interest Expense. Interest expense increased to $32,800 in first quarter
1999 from $18,410 in first quarter 1998. This increase was attributable to
increased capital lease obligations and notes payable related to the acquisition
of additional ATMs.
Income Taxes. The Company paid no income taxes for first quarter 1999 or
first quarter 1998, utilizing operating loss carryforwards to reduce taxable
income to zero. In addition, the Company has recorded a deferred tax credit of
$315,000 at January 31, 1998, which is primarily a result of operating loss
carryforwards which management believes are more likely than not to be realized
prior to their expiration between 2005 and 2012. Realization is dependent on
generating sufficient future taxable income to absorb the carryforwards. The
amount of the deferred tax credit considered realizable could be increased or
reduced in the near term if estimates of future taxable income during the
carryforward period change. As of April 30, 1998, the Company had approximately
$195,000 of tax credits available to offset future federal income taxes. These
credits expire between 1999 and 2002. The Company also has unused operating loss
carryforwards of approximately $1,600,000, which expire between 2005 and 2012.
Net Income. The Company had net income of $45,791, or $0.0012 per share,
in first quarter 1999, compared to net income of $112,414, or $0.0029 per share,
in first quarter 1998. Net income was lower in first quarter 1999 principally as
a result of higher costs of revenues and operating expenses, as described above.
Liquidity and Capital Resources
At April 30, 1998, the Company had a working capital deficit of $229,997,
compared to a working capital deficit of $285,736 at January 31, 1998. The ratio
of current assets to current liabilities improved to .64 at April 30, 1998 from
.62 at January 31, 1998.
The Company has funded its operations and capital expenditures from cash
flow generated by operations, capital leases and borrowings from lenders.
Operating activities provided net cash of $60,967 in first quarter 1999 and
$146,254 in first quarter 1998. Net cash provided by operating activities in
first quarter 1999 consisted primarily of net income of $45,791, depreciation of
$101,365 and a decrease in accounts receivable of $23,065, partially offset by
an increase of $20,903 in prepaid expenses and a decrease of $88,351 in accounts
payable. Net cash used in investing activities was $409,801 in first quarter
1999, compared to $307,513 in first quarter 1998. The increase in net cash used
in investing activities resulted primarily from loans to Funding to provide
vault cash and purchases of plant and equipment (principally ATMs) in first
quarter 1999. Net cash provided by financing activities was $88,432 in first
quarter 1999, as a result of increased borrowing by the Company, compared to net
cash used in financing activities of $69,477 in first quarter 1998. The Company
had cash and cash equivalents of $114,273 at April 30, 1998, compared to cash
and cash equivalents of $374,675 at January 31, 1998.
During first quarter 1999, the Company borrowed approximately $290,704
under loan agreements and capital leases for the purchase of approximately 39
additional ATMs. These obligations are in addition to existing capital leases
for 42 ATMs under capital lease agreements that expire between 2000 and 2001.
Management believes that the anticipated cash flow from operations will
provide the capital resources necessary to meet the Company's current working
capital needs and existing
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capital expenditure obligations. The Company expects that its capital
expenditures will increase in the future to the extent that the Company is able
to pursue its strategy of expanding its network and increasing the number of
installed ATMs. These increased expenditures are expected to be funded from cash
flow from operations, capital leases and additional borrowings, to the extent
financing is available. There can be no assurance that the Company will be able
to obtain financing under a credit facility on terms that are acceptable to the
Company or at all. The Company's expansion plans will be limited if the Company
is unsuccessful in obtaining a credit facility or other financing.
Impact of Inflation and Changing Prices
While subject to inflation, the Company was not impacted by inflation
during the past two fiscal years in any material respect.
Year 2000 Compliance
General Discussion. The Year 2000 issue is the result of computer code
being written using two digits to represent years rather than four digits, which
include the century designation. Without corrective action, it is possible that
computer programs could recognize a date using "00" as the year 1900 rather than
the year 2000. Additionally, certain equipment may contain embedded chips that
include date functions that may be affected by the transition to the Year 2000.
In some systems, Year 2000 problems could result in a system failure or
miscalculations causing disruptions of operations and an inability to process
transactions.
As the operator of an ATM network, the Company relies upon computers and
related telecommunications equipment for the operation of its business. The
Company acts as an intermediary for the transfer of data between its clients and
third parties, and in doing so supplies the operating and technical resources
necessary to cause electronic data to be transmitted. The Company also owns and
operates ATMs, which utilize computer hardware and software to operate.
The Company has initiated a Year 2000 Project ("Project2000") to locate
and address possible Year 2000 problems. The Company has assigned a project
coordinator for Project2000 who generally manages Project2000, ensures that
Project2000 meets or exceeds requirements set forth by banking regulatory
agencies including the Federal Deposit Insurance Corporation, the Federal
Reserve Bank, and the Office of the Comptroller of the Currency, and assists in
identifying points of concern and providing solutions.
Status of Year 2000 Readiness. The Company's Project2000 consists of the
following five phases: awareness, assessment, corrective action, validation and
implementation.
The awareness phase consists of defining the scope of the Year 2000
problem and establishing a corporate infrastructure and overall strategy to
perform compliance work. In the assessment phase, the Company attempts to
identify all hardware, software, networks, ATMs, other various processing
platforms and customer and vendor interdependencies affected by the Year 2000
problem. This assessment goes beyond information systems and includes equipment
and support systems that may be dependent on embedded microchips. The corrective
action phase involves code enhancements, hardware and software upgrades, system
replacements, vendor certification and other associated changes. The validation
phase involves the testing of
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incremental changes to hardware and software components. In the implementation
phase, systems are to be certified as Year 2000 compliant. For any systems that
are not determined to be compliant, the consequences must be assessed, and
corrective actions or contingency plans put into effect.
Awareness Phase. The Company's Project2000 encompasses an overall
strategy to address Year 2000 problems. The Company's Project2000 focuses
chiefly upon the in-house, real-time, on-line systems, but also includes
assessing and assuring year 2000 compliance from third parties. Because of the
seriousness of the year 2000 issues, the Company appointed a Project2000
Coordinator and established a Project2000 team consisting of the Coordinator,
all officers of the Company and the Accounting Manager.
To determine the size of the compliance project relating to internal
systems, the Company searched all of its production computer programs for
references to, and actions taken by reference to, the date (year in particular),
and compiled a list of those programs for evaluation for Project2000 issues. The
Company searched for date references that related to performing calculations or
that provided application program logic affecting the decision path of the
application, and date-driven calculations using "00" as an operand.
The Company also identified all third parties whose ability to comply
with Year 2000 problems might affect the Company's operations, which include
product and service vendors and suppliers, including card issuers and other
real-time connections, and clients.
The Company has completed the awareness phase.
Assessment Phase. The assessment phase involves three components: (1)
determining Year 2000 compliance of the Company's internal systems used to
process data and to transfer data between its clients and third parties,
including the Company's computer switch, (2) determining Year 2000 compliance of
its individual ATMs and (3) determining Year 2000 compliance of third party
vendors and clients.
Internal Systems. With respect to the Company's internal data
processing and transfer systems, in January 1985, as a result of incorrect
year-end date processing, the Company implemented a policy requiring all
production programs making date-related processing decisions to do so using
Julian dates. This form of date processing should not be sensitive to the
century rollover. Consequently, the Company's computer switch was developed
using a year 2000 compliant philosophy. The principal piece of equipment
comprising the computer switch is a Tandem computer. In 1997, the Company
entered into a lease for a new Tandem computer that the Company believes is Year
2000 compliant. The Company also believes that the operating software for the
new system is Year 2000 compliant. To assess its internal systems, the Company
evaluated all references to, and actions taken by reference to, the date (year
in particular), in its internal systems. The Company also examined systems and
equipment that may be dependent upon embedded microprocessors. The Company
concluded from the evaluation that its internal systems were Year 2000
compliant. In order to verify this conclusion, a comprehensive test was
completed on September 30, 1997 of all of the Company's critical applications.
Prior to cutting over from its old production system to its new production
system on that date, the Company had the opportunity to set the clock forward in
a controlled environment to test all internal systems and program functionality
with regard to the year 2000 rollover. The test revealed no Year 2000 problems.
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The Company believes its conclusion is supported by the fact that the
Company's system is not highly date-dependent. The Company processes
transactions in segments from 2:00 p.m. one day through 2:00 p.m. the next day.
Consequently, the Company believes that the window of risk for the Company's
internal systems from the year 2000 rollover should be limited to a maximum of
24 hours. Furthermore, the Company processes dates and makes all programmatic
date decisions based on a Julian representation of the date which should not be
vulnerable to the year 2000 rollover. The Company believes that its conclusion
is further supported by the fact that all of the application code was developed
in-house, all source code is intact and available, and the Company has the
in-house expertise to revise and maintain the software as needed for the year
2000 rollover.
Individual ATMs. The Company has assessed whether its individual ATMs
are Year 2000 compliant and determined that as of February 28, 1999
approximately 70% of the Company's individual ATMs are Year 2000 compliant or
can be made Year 2000 compliant with the purchase of software upgrades from the
manufacturer.
Third Party Compliance. The Company has attempted to obtain initial
certification from its "higher risk" vendors as to Year 2000 Compliance. The
Company has mailed questionnaires to these vendors to identify and, to the
extent possible, to resolve issues involving Year 2000 issues. Responses to
these questionnaires have been verified against information included with
current releases of vendors' products and services and on vendor web sites and
are shared with the Company's clients upon request. In addition, the Company has
engaged in joint testing with most of these vendors and service providers,
testing each party's system and the interface between the systems. The Company
believes that all mission critical vendors and service providers have completed
their internal Year 2000 corrective actions. Service providers, vendors and
suppliers whom the Company deems "no risk" will not be contacted. The Company is
also coordinating with its clients regarding their activities related to the
Year 2000 problem. Most of the Company's clients maintain their own application
programs, although they utilize the Company's computer and network resources.
The Company conducted its own testing on the systems of its largest clients, and
did not discover any Year 2000 problems.
The assessment phase is complete.
Corrective Action Phase. The corrective action phase involves
addressing compliance problems identified during the assessment phase.
Internal Systems. Because the assessment phase revealed no
material Year 2000 problems, the Company does not plan any system replacements,
code enhancements or hardware or software upgrades. However, the Company does
plan to implement "mature" releases of the Tandem operating system and to
monitor Tandem Year 2000 Compliance statements regarding such releases.
Individual ATMs. With respect to those ATMs that can be made Year
2000 compliant with the purchase of software upgrades from the manufacturer, the
Company expects to obtain software upgrades at no charge because of the recent
date of purchase of these ATMs. However, in the event the Company must purchase
ATM software upgrades, management estimates that the cost should not exceed
$50,000. With respect to the 30% of its ATMs that are not Year 2000 compliant
and cannot be upgraded, the Company expects to
Page - 14
<PAGE>
replace approximately half of these ATMs prior to the Year 2000 as part of an
ongoing program of replacing ATMs and other equipment for technology and
maintenance reasons. Some of these ATMs may be replaced with used Year 2000
compliant ATMs to minimize cost. The balance of the ATMs that are not Year 2000
compliant are located in marginally profitable locations, will not be replaced
and will be phased out.
Third Party Compliance. Because no material Year 2000 problems
have been discovered to date, the Company does not currently plan any corrective
action with respect to service providers, vendors, suppliers and clients.
The corrective action phase has been completed as to the Company's
internal systems and third party vendors, although as described below, the
Company intends to continue testing in these areas. The corrective action phase
with respect to individual ATMs will be completed prior to the Year 2000 when
all replacement or upgraded ATMs are expected to be in operation.
Validation Phase. During the validation phase, the Company will
continue to test its internal systems, test its new and upgraded ATMs for Year
2000 compliance and engage in further testing with certain third parties.
Internal Systems. The Company will test and validate all
incremental changes to hardware, software, and connections with other systems as
those changes (or additions) occur in the ordinary course of business prior to
Year 2000. All users of the Company's products and services have been asked to
validate the Company's Year 2000 compliance. All such testing should be complete
by August 31, 1999.
Individual ATMs. Year 2000 compliance of all replacement and
upgraded ATMs will be tested prior to or at the time such ATMs are brought on
line.
Third Party Compliance. During the first half of 1999, the
Company intends to review and possibly "re-validate" certifications from outside
service providers, vendors, and suppliers for compliance and will request each
to provide quarterly statements of compliance through the end of 1999.
The validation phase will be completed at the times described above.
Implementation Phase. The Company plans a final full internal system
test on or about September 1, 1999. Any resulting component failure (internal
and external) will be resolved to the Company's satisfaction prior to December
30, 1999, or the component will be (1) eliminated or replaced or (2) suspended
from production on December 30, 1999 and implemented after January 1, 2000 and
after re-certification.
Regulatory and Independent Assessment. In addition to developing an
internal risk assessment methodology with respect to Year 2000 issues, the
Company is subject to external examinations and project reviews by regulatory
agencies and governmental bodies of the federal government. To date, these
examinations have not identified any material issues regarding the Company's
Year 2000 compliance efforts.
Page - 15
<PAGE>
At this time, the Company does not anticipate obtaining verification
or validation by independent third parties to assess Year 2000 risk. The
Company's Project2000 team continues to review the Company's readiness for the
Year 2000.
Year 2000 Compliance of Support Systems. In addition to computers and
related systems, the operation of office and facilities equipment, such as fax
machines, photocopiers, security systems, air conditioning, fire systems and
other common devices may be affected by Year 2000 problems. The Company does not
expect to devote substantial resources or time to evaluating potential Year 2000
problems with respect to these systems, other than contacting the manufacturer
or provider of these systems to determine Year 2000 compliance and taking or
arranging for appropriate corrective action.
Costs of Year 2000 Compliance. The principal cost incurred by the
Company in connection with Project2000 will be the cost of replacing obsolete
ATM equipment as part of the Company's ongoing process of upgrading and
modernizing its ATMs. As of April, 1999, approximately 70 NCR model 1773 ATMs
currently in operation are not and will not be made Year 2000 compliant. These
ATMs are predominately in low volume sites, many of which do not support the
expense of replacement with new equipment. The Company expects to simply pull
out of the lowest tier of these sites, replace the medium volume sites with low
cost pre-owned equipment, and replace the highest volume sites with new and
higher end pre-owned equipment. The expected total cost of this project is
approximately $400,000 and the expected cost in fiscal year 2000 (prior to
December 31, 1999) is approximately $225,000.
The Company has not identified any other significant costs directly
relating to the Year 2000 problem. The cost of compliance testing of external
client systems is billed to the Company clients. Testing and repair, and the
day-to-day burden of Project2000 has consumed incremental overhead of managers
and executive officers of the Company. Such overhead has been effectively
absorbed with no material effect on budgets and operations.
Possible Consequences of Year 2000 Problems. It is not possible to predict
with any certainty the extent and nature of Year 2000 problems that the Company
may encounter. Management believes that the following are possible consequences
of Year 2000 problems that could arise:
o operational inconveniences and inefficiencies for the Company and its
clients which will divert management's time and attention and financial
and human resources from ordinary business activities;
o serious system failures that will cause material business disruptions or
require significant efforts by the Company or its clients to prevent or
alleviate material business disruptions;
o routine business disputes and claims for pricing adjustments or
penalties due to Year 2000 Problems incurred by clients, which would be
resolved in the ordinary course of business; and
o serious business disputes alleging that the Company failed to comply
with the terms of contracts or industry standards of performance, some
of which could result in litigation or contract termination.
Page - 16
<PAGE>
Contingency Plans. The Company has developed department-by-department
contingency plans to be implemented if its efforts to identify and correct Year
2000 Problems affecting its internal systems are not effective. Depending upon
the systems affected, these plans include accelerated replacement of affected
equipment or software; short- to medium-term use of backup sites, equipment, and
software, increased work hours for Company personnel; and similar approaches.
Disclaimer. Management of the Company believes that it is not possible to
determine with complete certainty that all Year 2000 problems affecting the
Company or its clients have been or will be identified or corrected. The number
of devices that could be affected and the interactions among these devices are
simply too numerous. In addition, no one can accurately predict how many Year
2000-related failures will occur or the severity, duration, or financial
consequences of any such failure.
The Company's policy is not to acquire hardware, software or other
technology that is not contractually represented by the vendor as Year 2000
compliant. However, the Company cannot be sure that all of these products are in
fact Year 2000 compliant. In addition, although the Company does not have any
contractual responsibility to ensure that its clients' application programs are
compliant, if its clients experience Year 2000 problems with such applications,
such clients may reduce or cease use of the Company's products and computing
resources. The successful operation of the Company's data processing and
transfer systems is dependent upon the proper functioning of the systems of
third parties that utilize the Company's services. Any failure of third parties
to resolve Year 2000 problems in a timely manner could materially adversely
affect the Company's operations.
There can be no assurance that the Company will identify and resolve all
Year 2000 issues in a timely manner. Any failure by the Company to adequately
resolve all Year 2000 issues could have a material adverse effect on the
Company's business, financial condition, and results of operation.
Forward-Looking Statements. Many of the statements contained in this
discussion of Year 2000 issues are "forward-looking statements." These
statements are not guarantees of future performance or results. They involve
risks, uncertainties and assumptions. Consequently, actual results may differ
materially from those discussed in these forward-looking statements. See Item 6
"Management's Discussion and Analysis OR PLAN OF OPERATION - Cautionary
Statement Concerning Forward-Looking Statements" for additional information and
factors to be considered with respect to forward-looking statements.
Future Changes in Accounting Principles
In June 1997, the FASB issued SFAS No. 131, "Disclosure about Segments of
an Enterprise and Related Information." This Statement establishes standards for
reporting information about operating segments in annual financial statements of
public business enterprises and requires disclosure of selected information
about operating segments in interim financial reports. The Statement is
effective for financial statements for periods beginning after December 15,
1997. Management has elected to first apply this standard in the Company's 1999
fiscal year-end reporting and believes that the adoption of this Statement will
not have a material effect on the Company's financial reporting.
Page - 17
<PAGE>
Cautionary Statement Concerning Forward-Looking Statements
Certain statements contained in this Quarterly Report on Form 10-QSB that
are not statements of historical fact constitute "forward-looking statements"
within the meaning of Section 21E of the Exchange Act. These statements are
subject to risks and uncertainties, as described below.
Examples of forward-looking statements include, but are not limited to:
(i) projections of revenues, income or loss, earnings or loss per share, capital
expenditures, the payment or non-payment of dividends, capital structure and
other financial items, (ii) statements of plans and objectives of the Company or
its management or Board of Directors, including plans or objectives relating to
the products or services of the Company, (iii) statements of future economic
performance, and (iv) statements of assumptions underlying the statements
described in (i), (ii) and (iii). Forward-looking statements can often be
identified by the use of forward-looking terminology, such as "believes,"
"expects," "may," "will," "should," "could," "intends," "plans," "estimates" or
"anticipates," variations thereof or similar expressions.
Forward-looking statements are not guarantees of future performance or
results. They involve risks, uncertainties and assumptions. The Company's future
results of operations, financial condition and business operations may differ
materially from those expressed in these forward-looking statements. Investors
are cautioned not to put undue reliance on any forward-looking statement.
There are a number of factors that could cause actual results to differ
materially from those discussed in the forward-looking statements, including
those factors described below. Other factors not identified herein could also
have such an effect. Among the factors that could cause actual results to differ
materially from those discussed in the forward-looking statements are the
following:
o Changes in laws or card association rules affecting the Company's
ability to impose surcharge fees, and continued customer willingness to
pay surcharge fees;
o The ability of the Company to form new strategic relationships and
maintain existing relationships with issuers of credit cards and
national and regional card organizations;
o The ability of the Company to expand its ATM base and transaction
processing business;
o The availability of financing at reasonable rates for vault cash and for
other corporate purposes, including funding the Company's expansion
plans;
o The ability of the Company to maintain its existing relationships with
two operators of combination convenience stores and gas stations at
which the Company maintains 44 and 34 ATMs, respectively, as of January
31, 1998;
o The ability of the Company to keep its ATMs at other existing locations
at reasonable rental rates and to place additional ATMs in preferred
locations at reasonable rental rates;
Page - 18
<PAGE>
o The extent and nature of competition from financial institutions, credit
card processors and third party operators, many of whom have
substantially greater resources than the Company;
o The ability of the Company to maintain its ATMs and information systems
technology without significant system failures or breakdowns;
o The ability of the Company to cause its ATMs and information systems to
be Year 2000 compliant and the extent to which the systems of card
issuers, card organizations, banks and other companies on which the
Company's systems rely are Year 2000 compliant;
o The extent of losses from errors and omissions, employee dishonesty and
vault cash losses, for which the Company does not maintain insurance;
o The ability of the Company to develop new products and enhance existing
products to be offered through ATMs, and the ability of the Company to
successfully market these products;
o The ability of the Company to identify suitable acquisition candidates,
to finance and complete acquisitions and to successfully integrate
acquired assets and businesses into existing operations;
o The ability of the Company to retain senior management and other key
personnel;
o Changes in general economic conditions.
Any forward-looking statement contained herein is made as of the date of this
document. The Company does not undertake to publicly update or correct any of
these forward-looking statements in the future.
PART II - OTHER INFORMATION
Item - 6 Exhibits and Reports on Form 8-K.
(a) Exhibits
The exhibits required by this item are listed in the Index to
Exhibits set forth at the end of this Form 10-QSB.
(b) Reports on Form 8-K
The Company did not file any reports on Form 8-K during the quarter
ended April 30, 1998.
Page - 19
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
UNIVERSAL MONEY CENTERS, INC.
(Registrant)
Date: April 28, 1999 By: /s/ David S. Bonsal
_____________________________
David S. Bonsal
Chairman of the Board
and Chief Executive Officer
Date: April 28, 1999 By: /s/ Dave A. Windhorst
_____________________________
Dave A. Windhorst
President
(Principal Financial and Accounting Officer)
Page - 20
<PAGE>
INDEX TO EXHIBITS
Exhibit
Number Description
3.1* Articles of Incorporation of the Company, as amended
3.2* Amended and Restated Bylaws of the Company
4.1* Promissory Note dated June 3, 1996 issued by the Company to Bank 21
(formerly The Farmers Bank)
4.2* Business Loan Agreement dated June 3, 1996 between the Company and
Bank 21 (formerly The Farmers State Bank)
4.3* Promissory Note dated August 26, 1996 issued by the Company to
Bank 21 (formerly The Farmers State Bank)
4.4* Business Loan Agreement dated August 26, 1996 between the Company
and Bank 21 (formerly The Farmers State Bank)
4.5* Commercial Security Agreement dated August 26, 1996 between the
Company and Bank 21 (formerly The Farmers State Bank)
4.6 Promissory Note dated April 9, 1998 issued by the Company to
Bank 21 (formerly The Farmers Bank)
4.7 Negative Pledge Agreement dated April 9, 1998 between the Company
and Bank 21 (formerly The Farmers State Bank)
4.8 Commercial Security Agreement dated April 9, 1998 between the
Company and Bank 21 (formerly The Farmers State Bank)
10.1* Agreement dated August 15, 1989 among the Company, Funding,
David S. Bonsal, John L. Settles and William Smithson
10.2* Addendum dated August 29, 1989 among the Company, Funding,
David S. Bonsal, John L. Settles and William Smithson
10.3* Letter Agreement dated June 12, 1997 between the Company and
Funding
10.4* Master Equipment Lease Agreement dated October 18, 1996 between
the Company and Newcourt Communications Finance Corporation
(formerly AT&T Credit Corporation)
Page - 21
<PAGE>
10.5* Master Equipment Lease Agreement Schedule dated December 30, 1996,
between the Company and Newcourt Communications Finance Corporation
(formerly AT&T Credit Corporation), as amended
10.6* Master Equipment Lease Agreement Schedule dated October 30, 1996,
between the Company and Newcourt Communications Finance Corporation
(formerly AT&T Credit Corporation)
10.7* Master Equipment Lease Agreement Schedule dated February 28, 1997,
between the Company and Newcourt Communications Finance Corporation
(formerly AT&T Credit Corporation)
10.8 Master Lease Agreement dated February 28, 1998 between the Company
and Diebold Credit Corporation
10.9 Lease Schedule dated April 20, 1998 between the Company and
Diebold Credit Corporation
27 Financial Data Schedule
* Incorporated by reference from the exhibit to the registrant's Annual Report
on Form 10-KSB for the fiscal year ended January 31, 1998 which bears the same
exhibit number.
22
PROMISSORY NOTE
- --------------------------------------------------------------------------------
Principal Loan Date Maturity Loan No Call Collateral Account Officer
$149,480.00 04-09-1998 04-01-2003 6717598-003 60 24 65175 CK
Initials
- --------------------------------------------------------------------------------
References in the shaded area are for Lender's use only and do not limit the
applicability of this document to any particular loan or item.
- -----------------------------------------------------------------------------
Borrower: UNIVERSAL MONEY CENTERS, INC. (TIN: Lender: BANK 21
43-124819) ONE WEST WASHINGTON ST.
6800 SQUIBB ROAD, P.O. BOX 29153 P.O. BOX 7
SHAWNEE MISSION, KS 66201-9153 CARROLL, MO 64663-0007
================================================================================
Principal Amount: $149,480.00 Interest Rate: 10.500%
Date of Note: April 9, 1998
PROMISE TO PAY. UNIVERSAL MONEY CENTERS, INC. ("Borrower") promises to pay to
BANK 21 ("Lender"), or order, in lawful money of the United States of America,
the principal amount of One Hundred Forty Nine Thousand Four Hundred Eighty &
00/100 Dollars ($149,480.00), together with interest at the rate of 10.500% per
annum on the unpaid principal balance from April 9, 1998, until
paid in full.
PAYMENT. Borrower will pay this loan on demand, or if no demand is made, in 60
payments of $3,217.21 each payment. Borrower's first payment is due May 1, 1998,
and all subsequent payments are due on the same day of each month after that.
Borrower's final payment will be due on April 1, 2003, and will be for all
principal and all accrued interest not yet paid. Payments include principal and
interest. The annual interest rate for the Note is computed on a 365/360 basis;
that is, by applying the ratio of the annual interest rate over a year of 360
days, multiplied by the outstanding principal balance, multiplied by the actual
number of days the principal balance is outstanding. Borrower will pay Lender at
Lender's address shown above or at such other place as Lender may designate in
writing. Unless otherwise agreed or required by applicable law, payments will be
applied first to accrued unpaid interest, then to principal, and any remaining
amount to any unpaid collection costs and late charges.
PREPAYMENT. Borrower agrees that all loan fees and other prepaid finance charges
are earned fully as of the date of the loan and will not be subject to refund
upon early payment (whether voluntary or as a result of default), except as
otherwise required by law. Except for the foregoing, Borrower may pay without
penalty all or a portion of the amount owed earlier than it is due. Early
payments will not, unless agreed to by Lender in writing, relieve Borrower of
Borrower's obligation to continue to make payments under the payment schedule.
Rather, they will reduce the principal balance due and may result in Borrower
making fewer payments.
LATE CHARGE. If a payment is 15 days or more late, Borrower will be charged
2.000% of the regularly scheduled payment or $25.00, whichever is less.
DEFAULT. Borrower will be in default if any of the following happens: (a)
Borrower fails to make any payment when due. (b) Borrower breaks any promise
Borrower has made to Lender, or Borrower fails to comply with or to perform when
due any other term, obligation, covenant, or condition contained in this Note or
any agreement related to this Note, or in any other agreement or loan Borrower
has with Lender. (c) Any representation or statement made or furnished to Lender
by Borrower or on Borrower's behalf is false or misleading in any material
respect either now or at the time made or furnished. (d) Borrower becomes
insolvent, a receiver is appointed for any part of Borrower's property, Borrower
makes an assignment for the benefit of creditors, or any proceeding is commenced
either by Borrower or against Borrower under any bankruptcy or insolvency laws.
(e) Any creditor tries to take any of Borrower's property on or in which Lender
has a lien or security interest. This includes a garnishment of any of
Borrower's accounts with Lender. (f) Any guarantor dies or any of the other
events described in this default section occurs with respect to any guarantor of
this Note. (g) A material adverse change occurs in Borrower's financial
condition, or Lender believes the prospect of payment or performance of the
Indebtedness is impaired. (h) Lender in good faith deems itself insecure.
If any default, other than a default in payment, is curable and if Borrower has
not been given a notice of a breach of the same provision of this Note within
the preceding twelve (12) months it may be cured (and no event of default will
have occurred) if Borrower, after receiving written notice from Lender demanding
cure of such default: (a) cures the default within twenty one (21) days; or (b)
if the cure requires more than twenty one (21) days, immediately initiates steps
which Lender deems in Lender's sole discretion to be sufficient to cure the
default and thereafter continues and completes all reasonable and necessary
steps sufficient to produce compliance as soon as reasonably practical.
LENDER'S RIGHTS. Upon default, Lender may declare the entire unpaid principal
balance on this Note and all accrued unpaid interest immediately due, without
notice, and then Borrower will pay that amount. Upon default, including failure
to pay upon final maturity, Lender, at its option, may also, if permitted under
applicable law, increase the interest rate on this Note 2.000 percentage points.
The interest rate will not exceed the maximum rate permitted by applicable law.
Lender may hire or pay someone else to help collect this Note if Borrower does
not pay. Borrower also will pay Lender that amount. This includes, subject to
any limits under applicable law, Lender's attorney's fees and Lender's legal
expenses whether or not there is a lawsuit, including attorney's fees and legal
expenses for bankruptcy proceedings (including efforts to modify or vacate any
automatic stay or injunction), appeals, and any anticipated post-judgment
collection services. If not prohibited by applicable law, Borrower also will pay
any court costs, in addition to all other sums provided by law. This Note has
been delivered to Lender and accepted by Lender in the State of Missouri. If
there is a lawsuit, Borrower agrees upon Lender" request to submit to the
jurisdiction of the courts of CARROLL County, the State of Missouri. Lender and
Borrower hereby waive the right to any jury trial in any action, proceeding, or
counterclaim brought by either Lender or Borrower against the other. This Note
shall be governed by and construed in accordance with the laws of the State of
Missouri.
DISHONORED ITEM FEE. Borrower will pay a fee to Lender of $15.00 if Borrower
makes a payment on Borrower's loan and the check or preauthorized charge with
which Borrower pays is later dishonored.
RIGHT OF SETOFF. Borrower grants to Lender a contractual possessory security
interest in, and hereby assigns, conveys, delivers, pledges and transfers to
Lender all Borrower's right, title and interest in and to, Borrower's accounts
with Lender (whether checking, savings, or some other account), including
without limitation all accounts held jointly with someone else and all accounts
Borrower may open in the future, excluding however all IRA and Keogh accounts,
and all trust accounts for which the grant of a security interest would be
prohibited by law. Borrower authorizes Lender, to the extent permitted by
applicable law, to charge or setoff all sums owing on this Note against any and
all such accounts.
GENERAL PROVISIONS. This Note is payable on demand. The inclusion of specific
default provisions or rights of Lender shall not preclude Lender's right to
declare payment of this Note on its demand. Lender may delay or forgo enforcing
any of its rights or remedies under this Note without losing them. Borrower and
any other person who signs, guarantees or endorses this Note, to the extent
allowed by law, waive presentment, demand for payment, protest and notice of
dishonor. Upon any change in the terms of this Note, and unless otherwise
expressly stated in writing, no party who signs this Note, whether as maker,
guarantor, accommodation maker or endorser, shall be released from liability.
All such parties agree that Lender may renew or extend (repeatedly and for any
length of time) this loan, or release any party or guarantor or collateral; or
impair, fail to realize upon or perfect Lender's security interest in the
collateral; and take any other action deemed necessary by Lender without the
consent of or notice to anyone. All such parties also agree that Lender may
modify this loan without the consent of or notice to anyone other than the party
with whom the modification is made.
PRIOR TO SIGNING THIS NOTE, BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS
OF THIS NOTE. BORROWER AGREES TO THE TERMS OF THE NOTE AND ACKNOWLEDGES
RECEIPT OF A COMPLETED COPY OF THE NOTE.
ORAL AGREEMENTS OR COMMITMENTS TO LOAN MONEY, EXTEND CREDIT OR TO FOREBEAR FROM
ENFORCING REPAYMENT OF A DEBT INCLUDING PROMISES TO EXTEND OR RENEW SUCH DEBT
ARE NOT ENFORCEABLE. TO PROTECT YOU (BORROWER(S)) AND US (CREDITOR) FROM
MISUNDERSTANDING OR DISAPPOINTMENT, ANY AGREEMENTS WE REACH COVERING SUCH
MATTERS ARE CONTAINED IN THIS WRITING, WHICH IS THE COMPLETE AND EXCLUSIVE
STATEMENT OF THE AGREEMENT BETWEEN US, EXCEPT AS WE MAY LATER AGREE IN WRITING
TO MODIFY IT.
BORROWER:
UNIVERSAL MONEY CENTERS, INC.
By: /s/ Dave A. Windhorst By: /s/ Pamela A. Glenn
----------------------------------- ------------------------------------
===============================================================================
Fixed Rate. Installment LASER PRO, Reg. U.S. Pat. & T.M. Off., Ver. 3.24(C)
1998 CFI ProServices, Inc. All rights reserved. [MO-D20 F3.24a UNIVM8AC.LN]
NEGATIVE PLEDGE AGREEMENT
- --------------------------------------------------------------------------------
Principal Loan Date Maturity Loan No Call Collateral Account Officer
$149,480.00 04-09-1998 04-01-2003 6717598-003 24 65175 CK
Initials
- --------------------------------------------------------------------------------
References in the shaded area are for Lender's use only and do not limit the
applicability of this document to any particular loan or item.
- --------------------------------------------------------------------------------
Borrower: UNIVERSAL MONEY CENTERS, INC. (TIN: Lender: BANK 21
43-1242819) ONE WEST WASHINGTON ST
6800 SQUIBB ROAD, P.O. BOX 29153 P.O. BOX 7
SHAWNEE MISSION, KS 66201-9153 CARROLL, MO
64633-0007
================================================================================
THIS NEGATIVE PLEDGE AGREEMENT between UNIVERSAL MONEY CENTERS, INC.
("Borrower") and BANK 21 ("Lender") is made and executed on the following terms
and conditions. Borrower has received prior commercial loans from Lender or has
applied to Lender for a commercial loan or loans and other financial
accommodations, including those which may be described on any exhibit or
schedule attached to this Agreement. All such loans and financial
accommodations, together with all future loans and financial accommodations from
Lender to Borrower, are referred to in this Agreement individually as the "Loan"
and collectively as the "Loans." Borrower understands and agrees that: (a) in
granting, renewing, or extending any Loan, Lender is relying upon Borrower's
representations, warranties, and agreements, as set forth in this Agreement; (b)
the granting, renewing, or extending of any Loan by Lender at all times shall be
subject to Lender's sole judgment and discretion; and (c) all such Loans shall
be and shall remain subject to the following terms and conditions of this
Agreement.
TERM. This Agreement shall be effective as of April 9, 1998, and shall continue
thereafter until all Indebtedness of Borrower to Lender has been performed in
full and the parties terminate this Agreement in writing.
DEFINITIONS. The following words shall have the following meanings when used in
this Agreement. Terms not otherwise defined in this Agreement shall have the
meanings attributed to such terms in the Uniform Commercial Code. All references
to dollar amounts shall mean amounts in lawful money of the United States of
America.
Agreement. The word "Agreement" means this Negative Pledge Agreement, as
this Negative Pledge Agreement may be amended or modified from time to time,
together with all exhibits and schedules attached to this Negative Pledge
Agreement from time to time.
Borrower. The word "Borrower" means UNIVERSAL MONEY CENTERS, INC.. The
word "Borrower" also includes, as applicable, all subsidiaries and
affiliates of Borrower as provided below in the paragraph titled
"Subsidiaries and Affiliates."
CERCLA. The word "CERCLA" means the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended.
Collateral. The word "Collateral" means and includes without limitation all
property and assets granted as collateral security for a Loan, whether real
or personal property, whether granted directly or indirectly, whether
granted now or in the future, and whether granted in the form of a security
interest, mortgage, deed of trust, assignment, pledge, chattel mortgage,
chattel trust, factor's lien, equipment trust, conditional sale, trust
receipt, lien, charge, lien or title retention contract, lease or
consignment intended as a security device, or any other security or lien
interest whatsoever, whether created by law, contract, or otherwise.
ERISA. The word "ERISA" means the Employee Retirement Income Security Act
of 1974, as amended.
Event of Default. The words "Event of Default" mean and include without
limitation any of the Events of Default set forth below in the section
titled "EVENTS OF DEFAULT."
Grantor. The word "Grantor" means and includes without limitation each and
all of the persons or entities granting a Security Interest in any
Collateral for the Indebtedness, including without limitation all Borrowers
granting such a Security Interest.
Guarantor. The word "Guarantor" means and includes without limitation
each and all of the guarantors, sureties, and accommodation parties in
connection with any Indebtedness.
Indebtedness. The word "Indebtedness" means and includes without limitation
all Loans, together with all other obligations, debts and liabilities of
Borrower to Lender, or any one or more of them, as well as all claims by
Lender against Borrower, or any one or more of them; whether now or
hereafter existing, voluntary or involuntary, due or not due, absolute or
contingent, liquidated or unliquidated; whether Borrower may be liable
individually or jointly with others; whether Borrower may be obligated as a
guarantor, surety, or otherwise; whether recovery upon such Indebtedness may
be or hereafter may become barred by any statute of limitations; and whether
such Indebtedness may be or hereafter may become otherwise unenforceable.
Lender. The word "Lender" means BANK 21, its successors and assigns.
Loan. The word "Loan" or "Loans" means and includes without limitation any
and all commercial loans and financial accommodations from Lender to
Borrower, whether now or hereafter existing, and however evidenced,
including without limitation those loans and financial accommodations
described herein or described on any exhibit or schedule attached to this
Agreement from time to time.
Note. The word "Note" means and includes without limitation Borrower's
promissory note or notes, if any, evidencing Borrower's Loan obligations in
favor of Lender, as well as any substitute, replacement or refinancing note
or notes therefor.
Related Documents. The words "Related Documents" mean and include without
limitation all promissory notes, credit agreements, loan agreements,
environmental agreements, guaranties, security agreements, mortgages, deeds
of trust, and all other instruments, agreements and documents, whether now
or hereafter existing, executed in connection with the Indebtedness.
Security Agreement. The words "Security Agreement" mean and include without
limitation any agreements, promises, covenants, arrangements, understandings
or other agreements, whether created by law, contract, or otherwise,
evidencing, governing, representing, or creating a Security Interest.
Security Interest. The words "Security Interest" mean and include without
limitation any type of collateral security, whether in the form of a lien,
charge, mortgage, deed of trust, assignment, pledge, chattel mortgage,
chattel trust, factor's lien, equipment trust, conditional sale, trust
receipt, lien or title retention contract, lease or consignment intended as
a security device, or any other security or lien interest whatsoever,
whether created by law, contract, or otherwise.
<PAGE>
04-09-1998 NEGATIVE PLEDGE AGREEMENT Page 2
Loan No. 6717598-0003 (Continued)
================================================================================
SARA. The word "SARA" means the Superfund Amendments and Reauthorization
Act of 1986 as now or hereafter amended.
REPRESENTATIONS AND WARRANTIES. Borrower represents and warrants to Lender, as
of the date of this Agreement, as of the date of each disbursement of Loan
proceeds, as of the date of any renewal, extension or modification of any Loan,
and at all times any Indebtedness exists:
Organization. Borrower is a corporation which is duly organized, validly
existing, and in good standing under the laws of the State of Kansas and is
validly existing and in good standing in all states in which Borrower is
doing business. Borrower has the full power and authority to own its
properties and to transact the businesses in which it is presently engaged
or presently proposes to engage. Borrower also is duly qualified as a
foreign corporation and is in good standing in all states in which the
failure to so qualify would have a material adverse effect on its businesses
or financial condition.
Authorization. The execution, delivery, and performance of this Agreement
and all Related Documents by Borrower, to the extent to be executed,
delivered or performed by Borrower, have been duly authorized by all
necessary action by Borrower; do not require the consent or approval of any
other person, regulatory authority or governmental body; and do not conflict
with, result in a violation of, or constitute a default under (a) any
provision of its articles of incorporation or organization, or bylaws, or
any agreement or other instrument binding upon Borrower of (b) any law,
governmental regulation, court decree, or order applicable to Borrower.
Financial Information. Each financial statement of Borrower supplied to
Lender truly and completely disclosed Borrower's financial condition as of
the date of the statement, and there has been no material adverse change in
Borrower's financial condition subsequent to the date of the most recent
financial statement supplied to Lender. Borrower has no material contingent
obligations except as disclosed in such financial statements.
Legal Effect. This Agreement constitutes, and any instrument or agreement
required hereunder to be given by Borrower when delivered will constitute,
legal, valid and binding obligations of Borrower enforceable against
Borrower in accordance with their respective terms.
Properties. Except as contemplated by this Agreement or as previously
disclosed in Borrower's financial statements or in writing to Lender and as
accepted by Lender, and except for property tax liens for taxes not
presently due and payable, Borrower owns and has good title to all of
Borrower's properties free and clear of all Security Interests, and has not
executed any security documents or financing statements relating to such
properties. All of Borrower's properties are titled in Borrower's legal
name, and Borrower has not used, or filed a financing statement under, any
other name for at least the last five (5) years.
NEGATIVE COVENANTS. Borrower covenants and agrees with Lender that while this
Agreement is in effect, Borrower shall not, without the prior written consent of
Lender:
Transfer and Liens. Fail to continue to own all of Borrower's assets, except
for routine transfers, use or depletion in the ordinary course of Borrower's
business. Borrower agrees not to create or grant to any person, except
Lender, any lien, security interest, encumbrance, cloud on title, mortgage,
pledge or similar interest in any of Borrower' property, even in the
ordinary course of Borrower's business. Borrower agrees not to sell, convey,
grant, lease, give, contribute, assign, or otherwise transfer any of
Borrower's assets, except for sales of inventory or leases of goods in the
ordinary course of Borrower's business.
Continuity of Operations. (a) Engage in any business activities
substantially different than those in which Borrower is presently engaged,
(b) cease operations, liquidate, merge, transfer, acquire or consolidate
with any other entity, change ownership, change its name, dissolve or
transfer or sell Collateral out of the ordinary course of business, (c) pay
any dividends on Borrower's stock (other than dividends payable in its
stock), provided, however that notwithstanding the foregoing, but only so
long as no Event of Default has occurred and is continuing or would result
from the payment of dividends, if Borrower is a "Subchapter S Corporation"
(as defined in the Internal Revenue Code of 1986, as amended), Borrower may
pay cash dividends on its stock to its shareholders from time to time in
amounts necessary to enable the shareholders to pay income taxes and make
estimated income tax payments to satisfy their liabilities under federal and
state law which arise solely from their status as Shareholders of a
Subchapter S Corporation because of their ownership of shares of stock of
Borrower, or (d) purchase or retire any Borrower's outstanding share or
alter or amend Borrower's capital structure.
Loans, Acquisitions and Guaranties. (a) Loan, invest in or advance money or
assets, (b) purchase, create or acquire any interest in any other enterprise
or entity, or (c) incur any obligation as surety or guarantor other than in
the ordinary course of business.
CESSATION OF ADVANCES. If Lender has made any commitment to make any Loan to
Borrower, whether under this Agreement or under any other agreement, Lender
shall have no obligation to make Loan Advances or to disburse Loan proceeds if:
(a) Borrower or any Guarantor is in default under the terms of this Agreement or
any of the Related Documents or any other agreement that Borrower of any
Guarantor has with Lender; (b) Borrower or any Guarantor becomes insolvent,
files a petition in bankruptcy or similar proceedings, or is adjudged a
bankrupt; (c) there occurs a material adverse change in Borrower's financial
condition, in the financial condition of any Guarantor, or in the value of any
Collateral securing any Loan; (d) any Guarantor seeks, claims or otherwise
attempts to limit, modify or revoke such Guarantor's guaranty of the Loan or any
other loan with Lender; or (e) Lender in good faith deems itself insecure, even
though no Event of Default shall have occurred.
RIGHT OF SETOFF. Borrower grants to Lender a contractual possessory security
interest in, and hereby assigns, coveys, delivers, pledges, and transfers to
Lender all Borrower's right, title and interest in and to, Borrower's accounts
with Lender (whether checking, savings, or some other account), including
without limitation all accounts held jointly with someone else and all accounts
Borrower may open in the future, excluding however all IRA and Keogh accounts,
and all trust accounts for which the grant of a security interest would be
prohibited by law. Borrower authorizes Lender, to the extent permitted by
applicable law, to charge or setoff all sums owing on the Indebtedness against
any and all such accounts.
EVENTS OF DEFAULT. Each of the following shall constitute an Event of
Default under this Agreement:
Default on Indebtedness. Failure of Borrower to make any payment when due
on the Loans.
Other Defaults. Failure of Borrower to comply with or to perform when due
any other term, obligation, covenant or condition contained in this
Agreement.
False Statements. Any warranty, representation or statement made or
furnished to Lender by or on behalf of Borrower or any Grantor under this
Agreement or the Related Documents is false or misleading in any material
respect at the time made or furnished, or becomes false or misleading at any
time thereafter.
Defective Collateralization. This Agreement or any of the Related Documents
ceases to be in full force and effect (including failure of any Security
Agreement to create a valid and perfected Security Interest) at any time and
for any reason.
<PAGE>
04-09-1998 NEGATIVE PLEDGE AGREEMENT Page 3
Loan No. 6717598-0003 (Continued)
================================================================================
Insolvency. The dissolution or termination of Borrower's existence as a
going business, the insolvency of Borrower, the appointment of a receiver
for any part of Borrower's property, any assignment for the benefit of
creditors, any type of creditor workout, or the commencement of any
proceeding under any bankruptcy or insolvency laws by or against Borrower.
Creditor or Forfeiture Proceedings. Commencement of foreclosure or
forfeiture proceedings, whether by judicial proceeding, self-help,
repossession or any other method, by any creditor of Borrower, any creditor
of any Grantor against any collateral securing the Indebtedness, or by any
governmental agency. This includes a garnishment, attachment or levy on or
of any of Borrower's deposit accounts with Lender.
Events Affecting Guarantor. Any of the preceding events occurs with respect
to any Guarantor of any of the Indebtedness or any Guarantor dies or becomes
incompetent, or revokes or disputes the validity of, or liability under, any
Guaranty of the Indebtedness. Lender, at its option, may, but shall not be
required to, permit the Guarantor's estate to assume unconditionally the
obligations arising under the guaranty in a manner satisfactory to Lender,
and, in doing so, cure the Event of Default.
Change in Ownership. Any change in ownership of twenty-five percent (25%)
of more or the common stock of Borrower.
Adverse Change. A material adverse change occurs in Borrower's financial
condition, or Lender believes the prospect of payment or performance of
the Indebtedness is impaired.
Insecurity. Lender, in good faith, deems itself insecure.
Right to Cure. If any default, other than a Default on Indebtedness, is
curable and if Borrower or Grantor, as the case may be, has not been given a
notice of a similar default within the preceding twelve (12) months, it may
be cured (and no Event of Default will have occurred) if Borrower or
Grantor, as the case may be, after receiving written notice from Lender
demanding cure of such default: (a) cures the default within twenty one (21)
days; or (b) if the cure requires more than twenty one (21) days,
immediately initiates steps which Lender deems in Lender's sole discretion
to be sufficient to cure the default and thereafter continues and completes
all reasonable and necessary steps sufficient to produce compliance as soon
as reasonably practical.
EFFECT OF AN EVENT OF DEFAULT. If any Event of Default shall occur, except where
otherwise provided in this Agreement or the Related Documents, all commitments
and obligations of Lender under this Agreement or the Related Documents or any
other agreement immediately will terminate and, at Lender's option, all
Indebtedness immediately will become due and payable, all without notice of any
kind to Borrower, except that in the case of an Event of Default of the type
described in the "Insolvency" subsection above, such acceleration shall be
automatic and not optional. In addition, Lender shall have all the rights and
remedies provided in the Related Documents or available at law, in equity, or
otherwise. Except as may be prohibited by applicable law, all of Lender's rights
and remedies shall be cumulative and may be exercised singularly or
concurrently. Election by Lender to pursue any remedy shall not exclude pursuit
of any other remedy, and an election to make expenditures or to take action to
perform an obligation or of any Grantor shall not affect Lender's right to
declare a default and to exercise its rights and remedies.
ORAL AGREEMENTS OR COMMITMENTS TO LOAN MONEY, EXTEND CREDIT OR TO FOREBEAR FROM
ENFORCING REPAYMENT OF A DEBT INCLUDING PROMISES TO EXTEND OR RENEW SUCH DEBT
ARE NOT ENFORCEABLE. TO PROTECT YOU (BORROWER(S)) AND US (CREDITOR) FORM
MISUNDERSTANDING OR DISAPPOINTMENT, ANY AGREEMENTS WE REACH COVERING SUCH
MATTERS ARE CONTAINED IN THIS WRITING, WHICH IS THE COMPLETE AND EXCLUSIVE
STATEMENT OF THE AGREEMENT BETWEEN US, EXCEPT AS WE MAY LATER AGREE IN WRITING
TO MODIFY IT.
BORROWER ACKNOWLEDGES HAVING READ ALL THE PROVISION OF THIS NEGATIVE PLEDGE
AGREEMENT, AND BORROWER AGREES TO ITS TERMS. THIS AGREEMENT IS DATED AS OF
APRIL 9, 1998.
BORROWER:
UNIVERSAL MONEY CENTERS, INC.
By:/s/ Dave A. Windhorst By: /s/ Pamela A. Glenn
____________________________ _______________________________
DAVE A. WINDHORST, PRESIDENT PAMELA A GLENN, SECRETARY
LENDER:
BANK 21
By:/s/ Bank 21
____________________________
Authorized Officer
COMMERCIAL SECURITY AGREEMENT
- --------------------------------------------------------------------------------
Principal Loan Date Maturity Loan No Call Collateral Account Officer
$149,480.00 4-9-1998 4/1/2003 6717598-003 60 24 65175 CK
Initials
- --------------------------------------------------------------------------------
References in the shaded area are for Lender's use only and do not limit the
applicability of this document to any particular loan or item.
- --------------------------------------------------------------------------------
Borrower: UNIVERSALE MONEY CENTER, INC. Lender: BANK 21
(TIN: 43-1242819) ONE WEST WASHINGTON ST
6800 SQUIBB ROAD, P.O. BOX 29153 P.O. BOX 7
SHAWNEE MISSION, KS 66201-9153 CARROLL, MO 64633-0007
===============================================================================
THIS COMMERCIAL SECURITY AGREEMENT is entered into between UNIVERSAL MONEY
CENTERS, INC. (referred to below as "Grantor"); and BANK 21 (referred to below
as "Lender"). For valuable consideration, Grantor grants to Lender a security
interest in the Collateral to secure the Indebtedness and agrees that Lender
shall have the rights stated in this Agreement with respect to the Collateral,
in addition to all other rights which Lender may have by law.
DEFINITIONS. The following words shall have the following meanings when used in
this Agreement. Terms not otherwise defined in this Agreement shall have the
meanings attributed to such terms in the Uniform Commercial Code. All references
to dollar amounts shall mean amounts in lawful money of the United States of
America.
Agreement. The word "Agreement" means this Commercial Security Agreement, as
this Commercial Security Agreement may be amended or modified from time to
time, together with all exhibits and schedules attached to this Commercial
Security Agreement from time to time.
Collateral. The word "Collateral" means the following described property of
Grantor, whether now owned or hereafter acquired, whether now existing or
hereafter arising, and wherever located:
All equipment, together with the following specifically described
property: PURCHASE MONEY INTEREST IN 28 TRITION 9600 SERIES ATM (AUTOMATIC
TELLER'S MACHINE) SERIAL NUMBERS 5112298, 5112544, 5112540, 5112281,
5112304, 5112296, 5112318, 5112358, 5112484, 5112485, 5111650, 5112489,
6900091, 5112300, 6900026, 6900017, 6900052, 6900014, 5112410, 5112394,
5112403, 5112399, 6900031, 5112545, 6900034, 5112292, 5112393, 5111721,
5010258, 5111678.
In addition, the word "Collateral" includes all the following, whether now
owned or hereafter acquired, whether now existing or hereafter arising, and
wherever located:
(a) All attachments, accessions, accessories, tools, parts, supplies,
increases, and additions to and all replacements of and substitutions for
any property described above.
(b) All products and produce of any of the property described in this
Collateral section.
(c) All accounts, general intangibles, instruments, rents, monies,
payments, and all other rights, arising out of a sale, lease, or other
disposition of any of the property described in this Collateral section.
(d) All proceeds (including insurance proceeds) from the sale,
destruction, loss, or other disposition of any of the property described
in this Collateral section.
(e) All records and data relating to any of the property described in this
Collateral section, whether in the form of a writing, photograph,
microfilm, microfiche, or electronic media, together with all of Grantor's
right, title, and interest in and to all computer software required to
utilize, create, maintain, and process any such records or data on
electronic media.
Event of Default. The words "Event of Default" mean and include without
limitation any of the Events of Default set forth below in the section
titled "Events of Default."
Grantor. The word "Grantor" means UNIVERSAL MONEY CENTERS, INC., its
successors and assigns.
Guarantor. The word "Guarantor" means and includes without limitation each
and all of the guarantors, sureties, and accommodation parties in
connection with the indebtedness.
Indebtedness. The word "Indebtedness" means the indebtedness evidenced by the
Note, including all principal and interest, together with all other
indebtedness and costs and expenses for which Grantor is responsible under
this Agreement or under any of the Related Documents. In addition, the word
"Indebtedness" includes all other obligations, debts and liabilities, plus
interest thereon, of Grantor, or any one or more of them, to Lender, as well
as all claims by Lender against Grantor, or any one or more of them, whether
existing now or later; whether they are voluntary or involuntary, due or not
due, direct or indirect, absolute or contingent, liquidated or unliquidated;
whether Grantor may be liable individually or jointly with others; whether
Grantor may be obligated as guarantor, surety, accommodation party or
otherwise; whether recovery upon such indebtedness may be or hereafter may
become barred by any statute of limitations; and whether such indebtedness
may be or hereafter may become otherwise unenforceable.
Lender. The word "Lender" means BANK 21, its successors and assigns.
Note. The word "Note" means the note or credit agreement dated April 9, 1998,
in the principal amount of $149,480.00 from UNIVERSAL MONEY CENTERS, INC. to
Lender, together with all renewals of, extensions of, modifications of,
refinancings of, consolidations of and substitutions for the note or credit
agreement.
Related Documents. The words "Related Documents" mean and include without
limitation all promissory notes, credit agreements, loan agreements,
environmental agreements, guaranties, security agreements, mortgages, deeds
of trust, and all other instruments, agreements and documents, whether now or
hereafter existing, executed in connection with the indebtedness.
RIGHT OF SETOFF. Grantor hereby grants Lender a contractual possessory security
interest in and hereby assigns, conveys, delivers, pledges, and transfers all of
Grantor's right, title and interest in and to Grantor's accounts with Lender
(whether checking, savings, or some other account), including all accounts held
jointly with someone else and all accounts Grantor may open in the future,
excluding, however, all IRA and Keogh accounts, and all trust accounts for which
the grant of a security interest would be prohibited by law. Grantor authorizes
Lender, to the extent permitted by applicable law, to charge or setoff all
Indebtedness against any and all such accounts.
OBLIGATIONS OF GRANTOR. Grantor warrants and covenants to Lender as follows:
Organization. Grantor is a corporation which is duly organized, validly
existing, and in good standing under the laws of the State of Kansas.
Authorization. The execution, delivery, and performance of this Agreement by
Grantor have been duly authorized by all necessary action by Grantor and do
not conflict with, result in a violation of, or constitute a default under
(a) any provision of its articles of incorporation or organization, or
bylaws, or any agreement or other instrument binding upon Grantor or (b) any
law, governmental regulation, court decree, or order applicable to Grantor.
Perfection of Security Interest. Grantor agrees to execute such financing
statements and to take whatever other actions are requested by Lender to
perfect and continue Lender's security interest in the Collateral. Upon
request of Lender, Grantor will deliver to Lender any and all of the
documents evidencing or constituting the Collateral, and Grantor will note
Lender's interest upon any and all chattel paper if not delivered to Lender
for possession by lender. Lender may at any time, and without further
authorization from Grantor, file a carbon, photographic or other reproduction
of any financing statement or of this Agreement for use as a financing
statement. Grantor will reimburse Lender for all expenses of the perfection
and the continuation of the perfection of Lender's security interest in the
Collateral. Grantor promptly will notify Lender before any change in
Grantor's name including any change to the assumed business names of Grantor.
This is a continuing Security Agreement and will continue in effect even
though all or any part of the Indebtedness is paid in full and even though
for a period of time Grantor may not be indebted to Lender.
No Violation. The execution and delivery of this Agreement will not violate
any law or agreement governing Grantor or to which Grantor is a party, and
its certificate or articles of incorporation and bylaws do not prohibit any
term or condition of this Agreement.
Enforceability of Collateral. To the extent the Collateral consists of
accounts, chattel paper, or general intangibles, the Collateral is
enforceable in accordance with its terms, is genuine, and complies with
applicable laws concerning form, content and manner of preparation and
execution, and all persons appearing to be obligated on the Collateral have
authority and capacity to contract and are in fact obligated as they appear
to be on the Collateral.
<PAGE>
04-09-1998 COMMERCIAL SECURITY AGREEMENT Page 2
Loan No. 6717598-003 (Continued)
================================================================================
Removal of Collateral. Grantor shall keep the Collateral (or to the extent
the Collateral consists of intangible property such as accounts, the records
concerning the Collateral) at Grantor's address shown above, or at such other
locations as are acceptable to Lender. Except in the ordinary course of its
business, including the sales of Inventory, Grantor shall not remove the
Collateral from its existing locations without the prior written consent of
Lender. To the extent that the Collateral consists of vehicles, or other
titled property, Grantor shall not take or permit any action which would
require application for certificates of title for the vehicles outside the
State of Kansas, without the prior written consent of Lender.
Transactions Involving Collateral. Except for inventory sold or accounts
collected in the ordinary course of Grantor's business, Grantor shall not
sell, offer to sell, or otherwise transfer or dispose of the Collateral.
Grantor shall not pledge, mortgage, encumber or otherwise permit the
Collateral to be subject to any lien, security interest, encumbrance, or
charge, other than the security interest provided for in this Agreement,
without the prior written consent of Lender. This includes security interests
even if junior in right to the security interests granted under this
Agreement. Unless waived by Lender, all proceeds from any disposition of the
Collateral (for whatever reason) shall be held in trust for Lender and shall
not be commingled with any other funds; provided however, this requirement
shall not constitute consent by Lender to any sale or other disposition. Upon
receipt, Grantor shall immediately deliver any such proceeds to Lender.
Title. Grantor represents and warrants to Lender that it holds good and
marketable title to the Collateral, free and clear of all liens and
encumbrances except for the lien of this Agreement. No financing statement
covering any of the Collateral is on file in any public office other than
those which reflect the security interest created by this Agreement or to
which Lender has specifically consented. Grantor shall defend Lender's rights
in the Collateral against the claims and demands of all other persons.
Collateral Schedules and Locations. Insofar as the Collateral consists of
equipment, Grantor shall deliver to Lender, as often as Lender shall require,
such lists, descriptions, and designations of such Collateral as Lender may
require to identify the nature, extent, and location of such Collateral. Such
information shall be submitted for Grantor and each of its subsidiaries or
related companies.
Maintenance and Inspection of Collateral. Grantor shall maintain all tangible
Collateral in good condition and repair. Grantor will not commit or permit
damage to or destruction of the Collateral or any part of the Collateral.
Lender and its designated representatives and agents shall have the right at
all reasonable times to examine, inspect, and audit the Collateral wherever
located. Grantor shall immediately notify Lender of all cases involving the
return, rejection, repossession, loss or damage of or to any Collateral; of
any request for credit or adjustment or of any other dispute arising with
respect to the Collateral; and generally of all happenings and events
affecting the Collateral or the value or the amount of the Collateral.
Taxes, Assessments and Liens. Grantor will pay when due all taxes,
assessments and liens upon the Collateral, its use or operation, upon this
Agreement, upon any promissory note or notes evidencing the Indebtedness, or
upon any of the other Related Documents. Grantor may withhold any such
payment or may elect to contest any lien if Grantor is in good faith
conducting an appropriate proceeding to contest the obligation to pay and so
long as Lender's interest in the Collateral is not jeopardized in Lender's
sole opinion. If the Collateral is subjected to a lien which is not
discharged within fifteen (15) days, Grantor shall deposit with Lender cash,
a sufficient corporate surety bond or other security satisfactory to Lender
in an amount adequate to provide for the discharge of the lien plus any
interest, costs, attorneys' fees or other charges that could accrue as a
result of foreclosure or sale of the Collateral. In any contest Grantor shall
defend itself and Lender and shall satisfy any final adverse judgment before
enforcement against the Collateral. Grantor shall name Lender as an
additional obligee under any surety bond furnished in the contest
proceedings.
Compliance With Governmental Requirements. Grantor shall comply promptly with
all laws, ordinances, rules and regulations of all governmental authorities,
now or hereafter in effect, applicable to the ownership, production,
disposition, or use of the Collateral. Grantor may contest in good faith any
such law, ordinance or regulation and withhold compliance during any
proceeding, including appropriate appeals, so long as Lender's interest in
the Collateral, in Lender's opinion, is not jeopardized.
Hazardous Substances. Grantor represents and warrants that the Collateral
never has been, and never will be so long as this Agreement remains a lien on
the Collateral, used for the generation, manufacture, storage,
transportation, treatment, disposal, release or threatened release of any
hazardous waste or substance, as those terms are defined in the Comprehensive
Environmental Response, Compensation, and Liability Act of 1980, as amended,
42 U.S.C. Section 9601, et seq. ("CERCLA"), the Superfund Amendments and
Reauthorization Act of 1986, Pub. L. No. 99-499 ("SARA"), the Hazardous
Materials Transportation Act, 49 U.S.C. Section 1801, et seq., the Resource
Conservation and Recovery Act, 42 U.S.C. Section 6901, et seq., or other
applicable state or Federal laws, rules, or regulations adopted pursuant to
any of the foregoing. The terms "hazardous waste" and "hazardous substance"
shall also include, without limitation, petroleum and petroleum by-products
or any fraction thereof, asbestos, mining waste, drilling fluids and other
wastes associated with the exploration, development and production of crude
oil, fly ash, bottom ash, slag and flue emissions, and cement kiln dust. The
representations and warranties contained herein are based on Grantor's due
diligence in investigating the Collateral for hazardous wastes and
substances. Grantor hereby (a) releases and waives any future claims against
Lender for indemnity or contribution in the event Grantor becomes liable for
cleanup or other costs under any such laws, and (b) agrees to indemnify and
hold harmless Lender against any and all claims and losses resulting from a
breach of this provision of this Agreement. This obligation to indemnify
shall survive the payment of the indebtedness and the satisfaction of this
Agreement.
Maintenance of Casualty Insurance. Grantor shall procure and maintain all
risks insurance, including without limitation fire, theft and liability
coverage together with such other insurance as Lender may require with
respect to the Collateral, in form, amounts, coverages and basis reasonably
acceptable to Lender and issued by a company or companies reasonably
acceptable to Lender. Grantor, upon request of Lender, will deliver to Lender
from time to time the policies or certificates of insurance in form
satisfactory to Lender, including stipulations that coverages will not be
cancelled or diminished without at least ten (10) days' prior written notice
to Lender and not including any disclaimer of the insurer's liability for
failure to give such a notice. Each insurance policy also shall include an
endorsement providing that coverage in favor of Lender will not be impaired
in any way by any act, omission or default of Grantor or any other person. In
connection with all policies covering assets in which Lender holds or is
offered a security interest, Grantor will provide Lender with such loss
payable or other endorsements as Lender may require. If Grantor at any time
fails to obtain or maintain any insurance as required under this Agreement,
Lender may (but shall not be obligated to) obtain such insurance as Lender
deems appropriate, including if it so chooses "single interest insurance,"
which will cover only Lender's interest in the Collateral.
Application of Insurance Proceeds. Grantor shall promptly notify Lender of
any loss or damage to the Collateral. Lender may make proof of loss if
Grantor fails to do so within fifteen (15) days of the casualty. All proceeds
of any insurance on the Collateral, including accrued proceeds thereon, shall
be held by Lender as part of the Collateral. If Lender consents to repair or
replacement of the damaged or destroyed Collateral, Lender shall, upon
satisfactory proof of expenditure, pay or reimburse Grantor from the proceeds
for the reasonable cost of repair or restoration. If Lender does not consent
to repair or replacement of the Collateral, Lender shall retain a sufficient
amount of the proceeds to pay all of the Indebtedness, and shall pay the
balance to Grantor. Any proceeds which have not been disbursed within six (6)
months after their receipt and which Grantor has not committed to the repair
or restoration of the Collateral shall be used to prepay the Indebtedness.
Insurance Reserves. Lender may require Grantor to maintain with Lender
reserves for payment of insurance premiums, which reserves shall be created
by monthly payments from Grantor of a sum estimated by Lender to be
sufficient to produce, at least fifteen (15) days before the premium due
date, amounts at least equal to the insurance premiums to be paid. If fifteen
(15) days before payment is due, the reserve funds are insufficient, Grantor
shall upon demand pay any deficiency to Lender. The reserve funds shall be
held by Lender as a general deposit and shall constitute a
non-interest-bearing account which Lender may satisfy by payment of the
insurance premiums required to be paid by Grantor as they become due. Lender
does not hold the reserve funds in trust for Grantor, and Lender is not the
agent of Grantor for payment of the insurance premiums required to be paid by
Grantor. The responsibility for the payment of premiums shall remain
Grantor's sole responsibility.
Insurance Reports. Grantor, upon request of Lender, shall furnish to Lender
reports on each existing policy of insurance showing such information as
Lender may reasonably request including the following: (a) the name of the
insurer; (b) the risks insured; (c) the amount of the policy; (d) the
property insured; (e) the then current value on the basis of which insurance
has been obtained and the manner of determining that value; and (f) the
expiration date of the policy. In addition, Grantor shall upon request by
Lender (however not more often than annually) have an independent appraiser
satisfactory to Lender determine, as applicable, the cash value or
replacement cost of the Collateral.
GRANTOR'S RIGHT TO POSSESSION. Until default, Grantor may have possession of the
tangible personal property and beneficial use of all the Collateral and may use
it in any lawful manner not inconsistent with this Agreement or the Related
Documents, provided that Grantor's right to possession and beneficial use shall
not apply to any Collateral where possession of the Collateral by Lender is
required by law to perfect Lender's security interest in such Collateral. If
Lender at any time has possession of any Collateral, whether before or after an
Event of Default, Lender shall be deemed to have exercised reasonable care in
the custody and preservation of the Collateral if Lender takes such action for
that purpose as Grantor shall request or as Lender, in Lender's sole discretion,
shall deem appropriate under the circumstances, but failure to honor any request
by Grantor shall not of itself be deemed to be a failure to exercise reasonable
care. Lender shall not be required to take any steps necessary to preserve any
rights in the Collateral against prior parties, nor to protect, preserve or
maintain any security interest given to secure the Indebtedness.
<PAGE>
04-09-1998 COMMERCIAL SECURITY AGREEMENT Page 3
Loan No. 6717598-003 (Continued)
================================================================================
EXPENDITURES BY LENDER. If not discharged or paid when due, Lender may (but
shall not be obligated to) discharge or pay any amounts required to be
discharged or paid by Grantor under this Agreement, including without limitation
all taxes, liens, security interests, encumbrances, and other claims, at any
time levied or placed on the Collateral. Lender also may (but shall not be
obligated to) pay all costs for insuring, maintaining and preserving the
Collateral. All such expenditures incurred or paid by Lender for such purposes
will then bear interest at the rate charged under the Note from the date
incurred or paid by Lender to the date of repayment by Grantor. All such
expenses shall become a part of the Indebtedness and, at Lender's option, will
(a) be payable on demand, (b) be added to the balance of the Note and be
apportioned among and be payable with any installment payments to become due
during either (i) the term of any applicable insurance policy or (ii) the
remaining term of the Note, or (c) be treated as a balloon payment which will be
due and payable at the Note's maturity. This Agreement also will secure payment
of these amounts. Such right shall be in addition to all other rights and
remedies to which Lender may be entitled upon the occurrence of an Event of
Default.
EVENTS OF DEFAULT. Each of the following shall constitute an Event of
Default under this Agreement:
Default on Indebtedness. Failure of Grantor to make any payment when due
on the Indebtedness.
Other Defaults. Failure of Grantor to comply with or to perform any other
term, obligation, covenant or condition contained in this Agreement or in any
of the Related Documents or in any other agreement between Lender and
Grantor.
False Statements. Any warranty, representation or statement made or furnished
to Lender by or on behalf of Grantor under this Agreement, the Note or the
Related Documents is false or misleading in any material respect, either now
or at the time made or furnished.
Defective Collateralization. This Agreement or any of the Related Documents
ceases to be in full force and effect (including failure of any collateral
documents to create a valid and perfected security interest or lien) at any
time and for any reason.
Insolvency. The dissolution or termination of Grantor's existence as a going
business, the insolvency of Grantor, the appointment of a receiver for any
part of Grantor's property, any assignment for the benefit of creditors, any
type of creditor workout, or the commencement of any proceeding under any
bankruptcy or insolvency laws by or against Grantor.
Creditor or Forfeiture Proceedings. Commencement of foreclosure or forfeiture
proceedings, whether by judicial proceeding, self-help, repossession or any
other method, by any creditor of Grantor or by any governmental agency
against the Collateral or any other collateral securing the Indebtedness.
This includes a garnishment of any of Grantor's deposit accounts with Lender.
However, this Event of Default shall not apply if there is a good faith
dispute by Grantor as to the validity or reasonableness of the claim which is
the basis of the creditor or forfeiture proceeding and if Grantor gives
Lender written notice of the creditor or forfeiture proceeding and deposits
with Lender monies or a surety bond for the creditor or forfeiture
proceeding, in an amount determined by Lender, in its sole discretion, as
being an adequate reserve or bond for the dispute.
Events Affecting Guarantor. Any of the preceding events occurs with respect
to any Guarantor of any of the Indebtedness or such Guarantor dies or becomes
incompetent. Lender, at its option, may, but shall not be required to, permit
the Guarantor's estate to assume unconditionally the obligations arising
under the guaranty in a manner satisfactory to Lender, and, in doing so, cure
the Event of Default.
Adverse Change. A material adverse change occurs in Grantor's financial
condition, or Lender believes the prospect of payment or performance of the
Indebtedness is impaired.
Insecurity. Lender, in good faith, deems itself insecure.
Right to Cure. If any default, other than a Default on Indebtedness, is
curable and if Grantor has not been given a prior notice of a breach of the
same provision of this Agreement, it may be cured (and no Event of Default
will have occurred) if Grantor, after Lender sends written notice demanding
cure of such default, (a) cures the default within twenty one (21) days; or
(b) if the cure requires more than twenty one (21) days, immediately
initiates steps which Lender deems in Lender's sole discretion to be
sufficient to cure the default and thereafter continues and completes all
reasonable and necessary steps sufficient to produce compliance as soon as
reasonably practical.
RIGHTS AND REMEDIES ON DEFAULT. If an Event of Default occurs under this
Agreement, at any time thereafter, Lender shall have all the rights of a secured
party under the Kansas Uniform Commercial Code. In addition and without
limitation, Lender may exercise any one or more of the following rights and
remedies:
Accelerate Indebtedness. Lender may declare the entire Indebtedness,
including any prepayment penalty which Grantor would be required to pay,
immediately due and payable, without notice.
Assemble Collateral. Lender may require Grantor to deliver to Lender all or
any portion of the Collateral and any and all certificates of title and other
documents relating to the Collateral. Lender may require Grantor to assemble
the Collateral and make it available to Lender at a place to be designated by
Lender. Lender also shall have full power to enter upon the property of
Grantor to take possession of and remove the Collateral. If the Collateral
contains other goods not covered by this Agreement at the time of
repossession, Grantor agrees Lender may take such other goods, provided that
Lender makes reasonable efforts to return them to Grantor after repossession.
Sell the Collateral. Lender shall have full power to sell, lease, transfer,
or otherwise deal with the Collateral or proceeds thereof in its own name or
that of Grantor. Lender may sell the Collateral at public auction or private
sale. Unless the Collateral threatens to decline speedily in value or is of a
type customarily sold on a recognized market, Lender will give Grantor
reasonable notice of the time and place of any public sale, or of the time
after which any private sale or any other intended disposition of the
Collateral is to be made. The requirements of reasonable notice shall be met
if such notice is given at least ten (10) days before the time of the sale or
disposition. All expenses relating to the disposition of the Collateral,
including without limitation the expenses of retaking, holding, insuring,
preparing for sale and selling the Collateral, shall become a part of the
Indebtedness secured by this Agreement and shall be payable on demand, with
interest at the Note rate from date of expenditure until repaid.
Appoint Receiver. To the extent permitted by applicable law, Lender shall
have the following rights and remedies regarding the appointment of a
receiver: (a) Lender may have a receiver appointed as a matter of right, (b)
the receiver may be an employee of Lender and may serve without bond, and (c)
all fees of the receiver and his or her attorney shall become part of the
Indebtedness secured by this Agreement and shall be payable on demand, with
interest at the Note rate from date of expenditure until repaid.
Collect Revenues, Apply Accounts. Lender, either itself or through a
receiver, may collect the payments, rents, income, and revenues from the
Collateral. Lender may at any time in its discretion transfer any Collateral
into its own name or that of its nominee and receive the payments, rents,
income, and revenues therefrom and hold the same as security for the
Indebtedness or apply it to payment of the Indebtedness in such order of
preference as Lender may determine. Insofar as the Collateral consists of
accounts, general intangibles, insurance policies, instruments, chattel
paper, choses in action, or similar property, Lender may demand, collect,
receipt for, settle, compromise, adjust, sue for, foreclose, or realize on
the Collateral as Lender may determine, whether or not Indebtedness or
Collateral is then due. For these purposes, Lender may, on behalf of and in
the name of Grantor, receive, open and dispose of mail addressed to Grantor;
change any address to which mail and payments are to be sent; and endorse
notes, checks, drafts, money orders, documents of title, instruments and
items pertaining to payment, shipment, or storage of any Collateral. To
facilitate collection, Lender may notify account debtors and obligors on any
Collateral to make payments directly to Lender.
Obtain Deficiency. If Lender chooses to sell any or all of the Collateral,
Lender may obtain a judgment against Grantor for any deficiency remaining on
the Indebtedness due to Lender after application of all amounts received from
the exercise of the rights provided in this Agreement. Grantor shall be
liable for a deficiency even if the transaction described in this subsection
is a sale of accounts or chattel paper.
Other Rights and Remedies. Lender shall have all the rights and remedies of a
secured creditor under the provisions of the Uniform Commercial Code, as may
be amended from time to time. In addition, Lender shall have and may exercise
any or all other rights and remedies it may have available at law, in equity,
or otherwise.
Cumulative Remedies. All of Lender's rights and remedies, whether evidenced
by this Agreement or the Related Documents or by any other writing, shall be
cumulative and may be exercised singularly or concurrently. Election by
Lender to pursue any remedy shall not exclude pursuit of any other remedy,
and an election to make expenditures or to take action to perform an
obligation of Grantor under this Agreement, after Grantor's failure to
perform, shall not affect Lender's right to declare a default and to exercise
its remedies.
MISCELLANEOUS PROVISIONS. The following miscellaneous provisions are a part
of this Agreement:
Amendments. This Agreement, together with any Related Documents, constitutes
the entire understanding and agreement of the parties as to the matters set
forth in this Agreement. No alteration of or amendment to this Agreement
shall be effective unless given in writing and signed by the party or parties
sought to be charged or bound by the alteration or amendment.
Applicable Law. This Agreement has been delivered to Lender and accepted
by Lender in the State of Missouri. If there is a lawsuit, Grantor agrees
upon Lender's request to submit to the jurisdiction of the courts of
CARROLL County the State of Missouri. Lender and Grantor hereby
<PAGE>
04-09-1998 COMMERCIAL SECURITY AGREEMENT Page 4
Loan No. 6717598-003 (Continued)
================================================================================
waive the right to any jury trial in any action, proceeding, or counterclaim
brought by either Lender or Grantor against the other. This Agreement shall
be governed by and construed in accordance with the laws of the State of
Missouri.
Attorneys' Fees; Expenses. Lender may pay someone else, who is not a salaried
employee of Lender, to help enforce this Agreement, and Grantor shall pay the
costs and expenses of such enforcement. Costs and expenses include all
reasonable costs incurred in the collection of the Indebtedness, including
but not limited to, court costs, attorneys' fees, and collection agency fees,
except that such costs of collection shall not include the recovery of both
attorneys' fees and collection agency fees.
Caption Headings. Caption headings in this Agreement are for convenience
purposes only and are not to be used to interpret or define the provisions
of this Agreement.
Multiple Parties; Corporate Authority. All obligations of Grantor under this
Agreement shall be joint and several, and all references to Grantor shall
mean each and every Grantor. This means that each of the persons signing
below is responsible for all obligations in this Agreement.
Notices. All notices required to be given under this Agreement shall be given
in writing, may be sent by telefacsimile (unless otherwise required by law),
and shall be effective when actually delivered or when deposited with a
nationally recognized overnight courier or deposited in the United States
mail, first class, postage prepaid, addressed to the party to whom the notice
is to be given at the address shown above. Any party may change its address
for notices under this Agreement by giving formal written notice to the other
parties, specifying that the purpose of the notice is to change the party's
address. To the extent permitted by applicable law, if there is more than one
Grantor, notice to any Grantor will constitute notice to all Grantors. For
notice purposes, Grantor will keep Lender informed at all times of Grantor's
current address(es).
Severability. If a court of competent jurisdiction finds any provision of
this Agreement to be invalid or unenforceable as to any person or
circumstance, such finding shall not render that provision invalid or
unenforceable as to any other persons or circumstances. If feasible, any such
offending provision shall be deemed to be modified to be within the limits of
enforceability or validity; however, if the offending provision cannot be so
modified, it shall be stricken and all other provisions of this Agreement in
all other respects shall remain valid and enforceable.
Successor Interests. Subject to the limitations set forth above on transfer
of the Collateral, this Agreement shall be binding upon and inure to the
benefit of the parties, their successors and assigns.
Waiver. Lender shall not be deemed to have waived any rights under this
Agreement unless such waiver is given in writing and signed by Lender. No
delay or omission on the part of Lender in exercising any right shall operate
as a waiver of such right or any other right. A waiver by Lender of a
provision of this Agreement shall not prejudice or constitute a waiver of
Lender's right otherwise to demand strict compliance with that provision or
any other provision of this Agreement. No prior waiver by Lender, nor any
course of dealing between Lender and Grantor, shall constitute a waiver of
any of Lender's rights or of any Grantor's obligations as to any future
transactions. Whenever the consent of Lender is required under this
Agreement, the granting of such consent by Lender in any instance shall not
constitute continuing consent to subsequent instances where such consent is
required and in all cases such consent may be granted or withheld in the sole
discretion of Lender.
GRANTOR ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS COMMERCIAL
SECURITY AGREEMENT, AND GRANTOR AGREES TO ITS TERMS. THIS AGREEMENT IS DATED
APRIL 9, 1998
GRANTOR:
UNIVERSAL MONEY CENTERS, INC.
/s/ Dave A. Windhorst /s/ Pamela a. Glenn
By:------------------------------ By:----------------------------
DAVE A. WINDHORST, PRESIDENT PAMELA A. GLENN, SECRETARY
MASTER LEASE AGREEMENT
DCC
Diebold Credit Corporation
Lessee Information
LESSEE (Complete Legal Name): UNIVERSAL MONEY CENTERS, INC.
BUSINESS PHONE: 913-831-2055
BILLING ADDRESS: 6800 SQUIBB RD
CITY: OVERLAND PARK
COUNTY: JOHNSON
STATE: KS
ZIP: 66202
EQUIPMENT ADDRESS
(if other than Billing Address): 6800 SQUIBB RD
CITY: OVERLAND PARK
COUNTY: JOHNSON
STATE: KANSAS
ZIP: 66202
Lease Acceptance
(Sign and initial here for both the Master Lease as well as for the first
Equipment Schedule, below)
AGREEMENT TO ALL TERMS OF THIS LEASE (both front and back sides). Use of the
equipment in production by Lessee may be treated by Lessor, in its discretion,
as conclusive evidence of acceptance of the Equipment. Regardless of the status
of the installation, the Equipment shall be deemed in all cases to be accepted,
and the Acceptance Date established, no later than 60 days after shipment of the
equipment.
THIS LEASE IS NON-CANCELABLE and consists of all terms on front and reverse
hereof. This lease is the full and final agreement and cannot be modified or
terminated except by written agreement signed both by Lessee and by a corporate
officer of Lessor.
/s/ Dave Windhorst
x_____________________________________
Signature(s) above and initial to right Acknowledged and Accepted:
x/s/ DW
Print Name Dave Windhorst Title President Print Initial
Guarantee for all Equipment Schedules under this Master Lease
In order to induce Lessor to enter into leases, conditional sales contracts, and
other agreements and to make advances, loans, extensions of credit or other
financial accommodation to Lessee
<PAGE>
and for other good and valuable consideration, the undersigned personally and
unconditionally guarantees payment and performance of, and agrees to be subject
to, all the terms and conditions of this Master Lease, together with Equipment
Schedules, until all obligations are fulfilled, including payment of collection
costs and attorney's fees. LESSOR MAY PROCEED AGAINST THE UNDERSIGNED IN THE
FIRST INSTANCE WITHOUT RESORTING TO OTHER CLAIMS OR COLLATERAL, AND THE
UNDERSIGNED WAIVES ANY STATUTORY OR OTHER RIGHT TO REQUIRE OTHERWISE. Each
undersigned hereby pledges the full sole and separate estate of each and waives
notice of any settlement, impairment, substitution, dishonor, modification,
amendment or extension under the Master Lease or any Equipment Schedule, and
waives demand, protest, presentment, and all related notices. This Guarantee
shall be valid and enforceable in connection with all Equipment Schedules
entered into under this Master Lease. THIS GUARANTEE IS NON-CANCELABLE.
Key Guarantor must sign here.
x______________________________________________________________________________
SIGNATURE: An individual (No Title) Print Name Social Security Number
Full Joint and Several Liability
x______________________________________________________________________________
SIGNATURE: An individual (No Title) Print Name Social Security Number
Full Joint and Several Liability
Equipment Schedule No. One
(If additional room is required, complete Schedule A and attach signed Schedule
A to this agreement.) This Equipment Schedule, as with all subsequent Equipment
Schedules between Lessor and Lessee, shall be deemed a part of this Master Lease
and shall be subject to all items and conditions set forth herein on both the
front and back hereof.
INITIAL TERM 60 Months
MONTHLY LEASE PAYMENT (In Advance) $1,038.77
ADVANCE PAYMENT $1,038.77
(How Applied) Lease Payment: 1,038.77
Months 60
EXCLUSIVE of Applicable Tax $1,038.77
DOCUMENTATION FEE $49.00
__ Security Deposit
__ Commitment Deposit
__ Advance Payment
- ----------------------------------------------------------------------
DESCRIPTION OF
EQUIPMENT
SALES ORDER NUMBER QUANTITY TO BE LEASED SERIAL NUMBER
- ----------------------------------------------------------------------
1 10641 FRONT LOAD ATM TO FOLLOW
- ----------------------------------------------------------------------
1 10641 FRONT LOAD ATM 047834128954
- ----------------------------------------------------------------------
1 10641 FRONT LOAD ATM 047834128955
- ----------------------------------------------------------------------
1 10641 FRONT LOAD ATM 047894128956
- ----------------------------------------------------------------------
2
<PAGE>
Equipment Acceptance and Purchase Authorization
AGENCY DISCLAIMER. Neither Supplier nor any Salesperson is an agent of Lessor
nor are they authorized to waive or alter in any way the terms of this Lease.
Their representations shall in no way affect or change rights and obligations as
set forth in this lease.
On behalf of Lessee, I hereby certify that all of the Equipment referred to in
the above Lease has been delivered to and has been received by the Lessee, that
all installation or other work necessary prior to the use thereof has been
completed, that the Equipment is accepted by the Lessee for all purposes under
the Lease. The Lease payment shall be due on the same date each month, which
date is set by lessor upon receipt and confirmation of this Authorization.
LESSEE ACKNOWLEDGES THAT THIS IS A "FINANCE LEASE" (defined in the Uniform
Personal Property Leasing Act) AND WARRANTS TO LESSOR THAT LESSEE HAS RECEIVED
OR REVIEWED SUPPLIER'S WRITTEN CONTRACT COVERING THE EQUIPMENT'S TERMS OF SALE
AND WARRANTIES, ACCORDINGLY, I AUTHORIZE LESSOR TO PURCHASE THE EQUIPMENT.
/s/ Dave Windhorst Dave Windhorst, President 2-28-98
_______________________________________________________________________________
Authorizing Signature of Lessee Print Name and Title Date
FOR LESSORS USE ONLY (Verification of Acceptance and Authorization to Purchase)
_______________________________________________________________________________
Given by To Date
For Diebold Credit Corp. Use Only
ACCEPTED BY DIEBOLD CREDIT CORPORATION, Lessor
NAME ROBERT J. WARREN
TITLE V.P. & TREASURER
DATE 2/11/98
MASTER LEASE NUMBER 10319
3
<PAGE>
Terms and Conditions
1. General. This Agreement between Diebold Credit Corp. (Lessor) and Lessee
shall consist of the Master Lease Agreement together with any and all
Schedules and Riders made a part hereof and shall be binding upon the
parties once properly executed. The terms and conditions of the Master
Lease Agreement, related Schedules, and Riders shall constitute the entire
contract for products or services and shall supersede all prior
negotiations, agreements, and understandings, whether oral or written,
unless specifically incorporated by reference.
Lessee agrees to update, upon written request, information provided
to Lessor and consents to credit investigations. Lessee authorizes Lessor
to insert in any Schedule and related documents the serial numbers or
other identification data when determined by Lessor and further authorizes
Lessor to add to any Schedule the tax due and owing, to correct clerical
errors, and to make any modifications to amounts scheduled which do not
materially alter Lessee's financial obligation.
If any provision of this Agreement is illegal, invalid, or void under
any applicable law, it shall be considered separable, with the remaining
provisions not being impaired. This Agreement may not be altered or any
obligation waived except in a writing signed by authorized agents of the
parties hereto. This Agreement and all Schedules and Riders shall be
applied and interpreted pursuant to the laws of the State of Ohio.
2. Remedies of Lessee. Lessee acknowledges and consents to Lessor's right to
assign all of Lessor's interests under this Agreement. Lessee agrees not
to assert against Lessor or assignee any defense, claim, or right of
set-off which Lessee may have against the vendor of the equipment set
forth for any schedule hereunder. Lessee further agrees to assert directly
against Vendor any claims it may have arising out of the equipment or its
use and agrees to continue payments to Lessor or its assignee under this
Agreement even if such claims are pending. Nothing shall relieve Lessee of
the obligation to make payments to or any other obligation to Lessor or
assignee under this agreement. Lessee agrees to accept the full
responsibility for the selection of equipment, its use, and the results
obtained. Lessee shall make any claims or account thereof solely against
the vendor. The Lessor or assignee makes no warranty, express or implied,
as to any aspect of the equipment whatsoever, and shall have no obligation
to install, test, operate, or service any equipment or software. No
salesperson is authorized to waive or alter any term or condition of this
paragraph. No representation as to the equipment or any other matter by
vendor or salesperson shall in any way affect Lessee's obligations toward
Lessor as assignee as set forth in this Agreement.
3. Payments. Prior to the commencement of periodic payments, Lessee shall
signify acceptance of equipment and software by execution of the Equipment
Acceptance on the face of this Agreement. Lessor shall not be bound to
provide a financing program if this Agreement has not been signed and
delivered to Lessor within thirty (30) days of equipment installation.
Payments begin on the first day of the month following equipment
acceptance (Rent Commencement Date) and continue subsequently thereafter.
4
<PAGE>
Lessee will be charged Interim Rent equal to 1/30th of the Monthly Lease
Payment multiplied by the number of days from and including the Acceptance
Date to the Rent Commencement Date. Payment obligations are not contingent
upon the Lessee's receipt of an invoice or other notice.
4. Late Charges. Lessee acknowledges that late payment to Lessor will give
rise to costs not contemplated by this Agreement. Accordingly, if any
payment or other sum due from Lessee is not received by Lessor within (10)
days after such amount shall be due, then without any requirement of
notice to Lessee, Lessee shall be liable to Lessor for a late charge equal
to (i) a one time late charge equal to five percent (5%) of such overdue
amount and (ii) a finance charge during every month after the first month
in which the sum is late computed daily on the amounts then due and unpaid
at a rate of 1-1/2% per month, or, if less, the highest applicable rate
permitted by law. The parties hereby agree that such late charge
represents a fair and reasonable computation of the costs incurred by
reason of late payment. Acceptance of such late charge shall in no event
constitute a waiver of Lessee's default or prevent Lessor from exercising
any other rights and remedies available to Lessor.
5. Ownership of the Equipment. Lessee shall not do anything prejudicing, or
fail to do anything reasonably necessary to protect Lessor's ownership of
the equipment. Lessee agrees to execute any document necessary to protect
Lessor's interest and ownership in equipment. Neither this Agreement nor
any equipment may be transferred, assigned or sublet by Lessee without
Lessor's prior written consent. As a precautionary measure, Lessor
reserves, and the Lessee hereby grants a security interest in each item of
the equipment in the amount of its purchase price. Lessor may file a
financing statement with appropriate state and/or local authorities in
order to perfect and protect Lessor's security interest. Lessee authorizes
Lessor to file a financing statement with respect to the Equipment and
grant Lessor the right to sign such financing statement on Lessee's
behalf.
6. Location and Use. The equipment shall be delivered to and shall not be
removed, without Lessor's prior written consent, from the location
designated on the pertinent Schedules. Lessor shall have the right to
inspect equipment at reasonable times. Lessor shall utilize the equipment
in a careful and proper manner and shall provide for maintenance as
necessary to keep it in good order and repair. Lessee shall not make any
unauthorized alterations to the equipment.
7. Loss or Damage. Lessee shall bear the entire risk of loss or damage to
equipment, and no loss or damage shall relieve Lessee of the obligation to
make the payments required by this Agreement. In the event of loss or
damage and at the option of Lessor, Lessee shall place the equipment in
good condition and repair, replace the same with like equipment in good
condition and repair, or pay to Lessor the balance due on the contract. In
this case, the Lessor will choose the least costly of the options. The
balance due shall be the sum of the remaining payments plus the residual
value of the equipment. Residual value means the estimated fair market
value of the equipment at the end of the lease term.
5
<PAGE>
8. Insurance. Lessee shall, for the full replacement value of the equipment,
keep in force insurance against loss, theft, or damage to the equipment
and insurance against public liability, property damage and liability
assumed by contract, with loss payable to Lessor. User shall provide to
Lessor certified copies or certificates of the policies of such insurance
upon request, and all insurance shall name both Lessee and Lessor as
parties insured.
9. Lessor's Right to Make Payment. Lessor shall have the right on behalf of
the Lessee, but shall not be obligated, to obtain insurance, affect lien
discharges, or pay taxes, if any. In such event, Lessee shall repay to
Lessor the cost thereof plus a handling charge of 10% of the cost thereof
upon receipt of an invoice. For property tax purposes, Lessee agrees to
show the equipment as "Leased Equipment" on tax returns and to pay all
Personal Property taxes assessed against the equipment.
10. Remedies. If Lessee shall commit any event of default, including but not
limited to: a) failing to make any payment when due or to perform any
obligation, and such failure shall continue for ten (10) days; b) becoming
insolvent or making an assignment for the benefit of creditors; c) making
a bulk transfer of its furniture, fixtures, furnishings, or other
equipment or inventory; or d) having a petition filed by or against the
Lessee under bankruptcy laws; the Lessor shall have the right to exercise
any one or more of the remedies hereinafter provided in addition to any
other right or remedy available to it.
If an event of default occurs, Lessor may, at its option, accelerate
the entire unpaid amounts or any portion thereof, including license fees,
for the balance of the terms of any and all Schedules made a part of this
Agreement, whereupon such amounts shall become immediately due and
payable. Lessor may enter into the premises where the equipment and
software may be found and take possession of and remove the same and all
rights of the Lessee in the equipment and software so removed shall
terminate absolutely. Lessor may sell at a private or public sale or may
lease any such equipment in mitigation of amounts due. Any amounts
received by Lessor from any sale or lease shall be applied first to pay
for the residual value of the equipment, as defined in Paragraph 7, and
then to reduce the other amounts due under this Agreement. Lessee shall
also be liable for and shall pay all expenses incurred by Lessor in
connection with the enforcement of any remedies, including reasonable
attorney's fees.
All remedies of Lessor are cumulative and may, to the extent
permitted by law, be exercised concurrently or separately, and the
exercise of any one remedy shall not be deemed to be an election of such
remedy and shall not preclude the exercise of any other remedy. No delay
in exercising any right or remedy shall operate as a waiver thereof or
modify the terms of this Agreement.
11. Surrender. Upon the expiration of any lease term upon demand by Lessor
made pursuant to paragraph 10 hereof, Lessee shall, at its expense, return
the equipment to Lessor in the same condition as when delivered,
reasonable wear and tear excepted, by a) delivering it to such location as
Lessor may then designate, or b) placing it on board such carrier as
Lessor may specify with shipping prepaid and properly packed for shipping.
6
<PAGE>
12. Renewal. Should Lessee fail to surrender the equipment in accordance with
paragraph 11 hereof, the term of that Lease shall be extended on a
month-to-month basis. Lessee shall continue to make payments in the
original payment amount shown on the pertinent Schedule, or as
renegotiated by written agreement.
13. Purchase. Provided no event of default exists at the end of the original
lease term under the Schedule, Lessee shall have the option to purchase
all equipment as described in the above mentioned Schedule, at the
expiration of the term or any extension for the then appraised Fair Market
Value - Fair Market Value being a price a willing buyer would pay to a
willing seller for the equipment.
Lessor or its assignee will transfer all of its rights, title, and
interest in the equipment purchased to the Lessee upon receipt of the
purchase price, any unpaid property taxes and late charges assessed for
the period of the initial lease term, or the renewal term. Equipment shall
be as is, where is, and without representation or warranty of any kind,
express or implied. Lessee must give Lessor or its assignee written notice
to exercise this purchase option at least 90 days before the expiration
date.
14. Early Terminations and Upgrades. If Lessee desires to prepay scheduled
payments or to upgrade equipment and/or software, Lessee must give Lessor
at least thirty (30) days prior written notice, and Lessor will notify
Lessee of the alternative terms and/or payments acceptable to Lessor.
Leases are non-cancelable, except as provided herein.
15. Notices. All notices to be given under this Agreement shall be made in
writing and mailed postage prepaid via first class U.S. mail to the other
party at its address set forth herein or at such address that may be
provided in writing. Any such notice shall be deemed to have been received
on the fifth business day following the date of mailing.
16. Commercial Use. Lessee represents and warrants that the equipment and
software procured by this Agreement will be used for commercial purposes
only.
17. Disputes. Any controversy or claim, whether based on contract, tort or
other legal theory, which shall include but not be limited to any claim of
fraud or misrepresentation, arising out of or related to this Agreement
and/or any contract entered into between Lessor and Lessee, or the
inducement or breach thereof, or the furnishing of any product or service
by Lessor to Lessee, will be resolved by arbitration in accordance with
the terms hereof.
The arbitration shall be pursuant to the then current rules and
supervision of the American Arbitration Association. The arbitration will
be conducted by a single arbitrator who is knowledgeable in equipment
leasing and financing and in business information and electronic data
processing systems and the decision and award of the arbitrator will be
final and binding and may be entered in any court having jurisdiction
thereof. The arbitration will be held in Canton, Ohio.
7
<PAGE>
The arbitrator will not be authorized to award punitive or exemplary
damages to either party. Each party shall bear its own attorney's fee
associated with the arbitration and other costs and expenses of the
arbitration shall be borne as provided by the rules of the American
Arbitration Association.
If court proceedings to stay litigation or compel arbitration under
the Federal Arbitration Act (Title 9, U.S.C.) or similar state legislation
are necessary, the party who unsuccessfully opposes such proceedings shall
pay all associated costs, expenses and attorney's fees which are
reasonably incurred by the other party.
No claim or action, regardless of form, arising out of or related to
this Agreement may be brought by either party more than one year after the
cause of action accrues A two year statute of limitations period shall
apply, however, when the default is not discoverable by the injured party
within a one year period or when the action is brought by Lessor for
nonpayment.
P.O. BOX 3077 BY EXECUTION HEREOF, THE
NORTH CANTON, OH 44720 UNDERSIGNED HEREBY CERTIFIES
THAT HE/SHE HAS READ THIS
AGREEMENT, INCLUDING THE REVERSE
SIDE HEREOF, AND THAT HE/SHE IS
DULY AUTHORIZED TO EXECUTE THIS
AGREEMENT.
Lessor: DIEBOLD CREDIT CORPORATION Lessee: UNIVERSAL MONEY CENTERS, INC.
__________________________________ _______________________________________
Signature: Signature:
/s/ Robert J. Warren /s/ Dave Windhorst
__________________________________ _______________________________________
Name (Print): Name (Print):
Robert J. Warren Dave Windhorst
Title:Vice President & Treasurer Title: President
Date: Date: 2-28-98
DIEBOLD CREDIT CORPORATION
LEASE SCHEDULE
Lease Schedule No. 002 Dated: April 20, 1998
Under Master Lease Agreement No. 10319 Dated: February 28, 1998
This Lease Schedule is executed pursuant to the subject Master Lease Agreement
("Master Lease"), the terms and conditions of which are incorporated herein by
reference. The equipment described in Schedule A hereto ("the Equipment") is
leased pursuant to the terms and conditions of this Lease Schedule and the
Master Lease.
LESSEE: LESSOR:
UNIVERSAL MONEY CENTERS, INC. DIEBOLD CREDIT CORPORATION
6800 SQUIBB RD 5995 MAYFAIR ROAD
OVERLAND PARK, KS 66202 NORTH CANTON, OH 44720
- --------------------------------------------------------------------------------
Equipment Description, Cost, and Location: Stated on Schedule A, attached hereto
and incorporated herein.
Stipulated Loss Value: Stated on Exhibit, 1 attached hereto and incorporated
herein.
Acceptance Date: As stipulated on the Acceptance Certificate referring to this
Lease Schedule to be separately executed by Lessee upon delivery and acceptance
of the Equipment and acknowledged by Lessor. Use of the Equipment in production
by Lessee may be treated by Lessor, in its discretion, as conclusive evidence of
acceptance of the Equipment. Regardless of the status of the installation, the
Equipment shall be deemed in all cases to be accepted, and the Acceptance Date
established, no later than 60 days after shipment of the Equipment to Lessee.
Lease Term: Commences on the Acceptance Date and continues for 60 months
after the Basic Rent Commencement Date.
Basic Rent Commencement Date: 1st day of the month immediately following the
Acceptance Date of the Lease Schedule.
Rent: An amount equal to the sum of:
(i) Interim Rent in an amount equal to 1/30th of the Basic Rent (defined
below) multiplied by the number of days from and including the Acceptance Date
to the Basic Rent Commencement Date, which amount shall be payable on the Basic
Rent Commencement Date and
(ii) 60 monthly rental payments each in the amount of $1,764.01 or, if
different, in the amount set forth on the Acceptance Certificate ("Basic Rent")
plus any applicable sales/use tax commencing on the Basic Rent Commencement Date
and on the 1st day of each month thereafter ("Rent Payment Date") for the entire
Lease Term.
In the event that the Basic Rent set forth in the Acceptance Certificate, as
prepared by Lessor, differs from that set forth herein, the Basic Rent shall be
as set forth in the Acceptance Certificate.
The parties agree that this lease is a "finance lease" as defined by Article
2A-103(g) of the Uniform Commercial Code. Lessee acknowledges that it has either
a) received, reviewed and approved any written supply contract from the
manufacturer or supplier ("Supplier") covering the Equipment purchased from
Supplier by Lessor for lease to Lessee, or b) has been informed of the identity
of the Supplier, that it may have rights under the supply contract, and that
Lessee may contact Supplier for a description of any such rights.
This Lease Schedule will apply only to Equipment accepted on or before
________________, (the "Commitment Expiration Date").
Dated as of _________________________ By execution hereof, the signer
certifies that he/she has read,
accepted and duly executed this Lease
Schedule to the Master Lease
Agreement on behalf of Lessee.
LESSOR: DIEBOLD CREDIT CORPORATION LESSEE: UNIVERSAL MONEY CENTERS, INC.
By: /s/ Robert J. Warren By: /s/ Dave Windhorst
_______________________________ ______________________________
Title: Vice President & Treasurer Title: President
_____________________________ ______________________________
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This Schedule Contains Summary
Financial Information Extracted From
the Unaudited Consolidated Balance Sheets as of
April 30, 1998 and Unaudited Consolidated
Statements Of Income For The Three Months
Ended April 30, 1998 and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1
<CURRENCY> United States
<CIK> 0000702167
<NAME> Universal Money Centers, Inc.
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-31-1998
<PERIOD-START> FEB-1-1998
<PERIOD-END> APR-30-1998
<EXCHANGE-RATE> 1
<CASH> 114,273
<SECURITIES> 0
<RECEIVABLES> 299,970
<ALLOWANCES> 21,380
<INVENTORY> 300
<CURRENT-ASSETS> 403,243
<PP&E> 3,047,186
<DEPRECIATION> 1,576,691
<TOTAL-ASSETS> 2,221,121
<CURRENT-LIABILITIES> 633,240
<BONDS> 662,553
0
0
<COMMON> 398,514
<OTHER-SE> 2,189,122
<TOTAL-LIABILITY-AND-EQUITY> 2,221,121
<SALES> 0
<TOTAL-REVENUES> 1,161,427
<CGS> 0
<TOTAL-COSTS> 307,631
<OTHER-EXPENSES> 32,800
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 32,800
<INCOME-PRETAX> 45,791
<INCOME-TAX> 0
<INCOME-CONTINUING> 72,584
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 45,791
<EPS-PRIMARY> .001
<EPS-DILUTED> .001
</TABLE>
