SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 1998
OR
[ ] 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 2-93668-FW
UNIVIEW TECHNOLOGIES CORPORATION
(Exact name of Registrant as specified in its charter)
Texas 75-1975147
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
10911 Petal Street, 75238
Dallas, Texas (Zip Code)
(Address of principal executive offices)
(214) 503-8880
(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 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 X NO
At January 31, 1999, there were 13,273,045 shares of Registrant's
common stock outstanding.
<PAGE>
GENERAL INDEX
Page Number
PART I.
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS 3
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 8
PART II.
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS 10
ITEM 5. OTHER INFORMATION 11
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 12
SIGNATURES 12
EXHIBIT INDEX 13
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
UNIVIEW TECHNOLOGIES CORPORATION and Subsidiaries
Consolidated Balance Sheets
December 31 June 30
1998 1998
ASSETS ----------- -----------
- ------ (Unaudited)
Current Assets
Cash and cash equivalents $ 35,692 $ 2,284,988
Accounts receivable 867,753 1,726,900
Notes receivable 676,545 129,902
Inventories 607,528 943,048
Prepaid expenses and other - 166,003
----------- -----------
Total current assets 2,187,518 5,250,841
----------- -----------
Other Assets
Software development costs, net 1,912,348 2,620,997
Licenses, net 178,750 1,054,703
Property and equipment, net 2,615,921 3,305,449
Trademark, net 3,719,108 3,820,874
Goodwill, net 1,638,963 1,557,559
Other 116,259 118,239
----------- -----------
Total other assets 10,181,349 12,477,821
----------- -----------
TOTAL ASSETS $12,368,867 $17,728,662
=========== ===========
See accompanying notes to consolidated financial statements.
<PAGE>
UNIVIEW TECHNOLOGIES CORPORATION and Subsidiaries
Consolidated Balance Sheets - Continued
December 31 June 30
1998 1998
LIABILITIES AND STOCKHOLDERS' EQUITY ----------- -----------
- ------------------------------------ (Unaudited)
Current Liabilities
Current maturities of long-term debt $ 3,409,346 $ 3,644,729
Current maturities of obligations
under capital leases 47,274 50,666
Trade accounts payable 1,125,630 4,224,897
License fees payable - 673,920
Accrued and other current liabilities 1,636,607 1,379,753
Deferred income - 69,889
----------- -----------
Total Current Liabilities 6,218,857 10,043,854
----------- -----------
Long Term Debt
Obligations under notes payable,
less current maturities - 15,495
Obligations under capital leases,
less current maturities 87,607 124,425
Warranty provision 136,163 244,657
----------- -----------
Total Liabilities 6,442,627 10,428,431
----------- -----------
Stockholders' Equity
Preferred stock, cumulative, $1.00 par
value; 1,000,000 shares authorized:
Series A, 140,000 shares issued
(liquidation preference of $140,000) 140,000 140,000
Series H, 55 shares issued and 3 shares
and 3 shares outstanding at December
31, 1998 and June 30, 1998, respectively
(liquidation preference of $75,000 and
$75,000) 3 3
Series Q, 60 shares issued and 42 shares
and 60 shares outstanding at December 31,
1998 and June 30, 1998, respectively
(liquidation preference $1,050,000 and
$1,500,000) 42 60
Series 1998-A1, 80 shares issued and 68
shares and 80 shares outstanding at December
31, 1998 and June 30, 1998, respectively
(liquidation preference $1,700,000 and
$2,000,000) 68 80
Common stock, $.10 par value; 80,000,000 shares
authorized; 13,273,045 and 10,032,669
shares issued and outstanding at
December 31, and June 30, 1998 1,327,304 1,003,267
Additional paid-in-capital 42,789,963 42,480,261
Accumulated deficit (38,331,140) (36,323,440)
----------- -----------
Total Stockholders' Equity 5,926,240 7,300,231
----------- -----------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $12,368,867 $17,728,662
=========== ===========
See accompanying notes to consolidated financial statements.
<PAGE>
UNIVIEW TECHNOLOGIES CORPORATION and Subsidiaries
Consolidated Statements of Operations (Unaudited)
Three Months Ended Six Months Ended
------------------------- -------------------------
December 31 December 31 December 31 December 31
1998 1997 1998 1997
----------- ----------- ----------- -----------
REVENUES
Sales Revenues $ 2,353,424 $ 57,305 $ 6,745,415 $ 131,375
----------- ----------- ----------- -----------
Total Revenue 2,353,424 57,305 6,745,415 131,375
COST OF SALES 1,796,132 56,537 5,252,661 122,415
----------- ----------- ----------- -----------
Gross Profit 557,292 768 1,492,754 8,960
OPERATING EXPENSES 2,431,004 2,145,642 5,249,561 4,508,195
----------- ----------- ----------- -----------
Operating Loss (1,873,712) (2,144,874) (3,756,807) (4,499,235)
GAIN ON SALE OF
SUBSIDIARIES 1,860,207 - 1,860,207 -
OTHER INCOME (EXPENSE):
Interest and other
income, net 80,440 334,968 57,746 339,725
Interest expense (76,270) (16,440) (159,541) (32,609)
----------- ----------- ----------- -----------
Total Other Income
(Expense) 4,170 318,528 (101,795) 307,116
----------- ----------- ----------- -----------
NET LOSS $ (9,335) $(1,826,346) $(1,998,395) $(4,192,119)
=========== =========== =========== ===========
Loss per share attributable
to common stockholders
Basic and Diluted $ (0.00) $ (0.40) $ (0.18) $ (1.00)
=========== =========== =========== ===========
Weighted average common
shares outstanding
Basic and Diluted 12,435,002 4,392,993 11,339,086 4,170,596
=========== =========== =========== ===========
See accompanying notes to consolidated financial statements.
<PAGE>
UNIVIEW TECHNOLOGIES CORPORATION and Subsidiaries
Consolidated Statements of Cash Flows (Unaudited)
Six Months Ended
-------------------------
December 31 December 31
1998 1997
----------- -----------
CASH FLOW FROM OPERATING ACTIVITIES
Net loss $(1,998,395) $(4,192,119)
Adjustments to reconcile net profit/(loss)
to net cash used by operating activities
Depreciation and amortization 1,400,618 313,038
Provision for bad debts - 18,418
Gain on sale of subsidiaries (1,860,207) -
Other assets (7,917) 344,671
Software development costs - (2,690,699)
Increase (decrease) in accounts payable,
accrued and other liabilities (159,815) 2,235,336
Decrease (increase) in accounts receivable 434,193 (110,326)
Decrease (increase) in inventories (29,176) (507,878)
Decrease (increase) in prepaid expense 26,184 510,600
Decrease (increase) in other liabilities - (194,112)
----------- -----------
Cash used in operating activities (2,194,515) (4,273,071)
CASH FLOW FROM INVESTING ACTIVITIES
Purchase of property and equipment (36,830) (1,170,936)
Proceeds from sale of marketable securities - 273,998
----------- -----------
Cash used for investing activities (36,830) (896,939)
----------- -----------
CASH FLOW FROM FINANCING ACTIVITIES
Payments on notes receivable 45,803 -
Payments on long-term debt (689,737) (12,558)
Issuances of preferred and common stock 625,983 5,392,086
----------- -----------
Cash provided (used) by financing activities (17,951) 5,379,528
----------- -----------
NET INCREASE (DECREASE) IN CASH (2,249,296) 209,518
CASH AT BEGINNING OF PERIOD 2,284,988 800,346
----------- -----------
CASH AT END OF PERIOD $ 35,692 $ 1,009,864
=========== ===========
See accompanying notes to consolidated financial statements.
<PAGE>
UNIVIEW TECHNOLOGIES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998
(Unaudited)
BASIS OF PRESENTATION
The interim financial statements and summarized notes included
herein were prepared, without audit, in accordance with generally
accepted accounting principles for interim financial information,
pursuant to rules and regulations of the Securities and Exchange
Commission. Because certain information and notes normally included in
complete financial statements prepared in accordance with generally
accepted accounting principles were condensed or omitted pursuant to such
rules and regulations, it is suggested that these financial statements be
read in conjunction with the Consolidated Financial Statements and the
Notes thereto, included in the Company's Annual Report on Form 10-K for
the preceding fiscal year. These interim financial statements and notes
hereto reflect all adjustments which are, in the opinion of management,
necessary for a fair statement of results for the interim periods
presented. Such financial results, however, should not be construed as
necessarily indicative of future earnings.
CREDIT AGREEMENTS
Subsidiary Network America, Inc. has a $2.15 million credit facility
with FINOVA Capital Corporation secured by its accounts receivable. The
outstanding balance under this agreement at December 31, 1998 totaled
$530,000. This facility contains various financial covenants, including
among other things, minimum net worth, maintenance of certain fixed
charge ratios and maximum allowable indebtedness to net worth, with all
of which Network America is currently in compliance. (See Exhibit 10.1
filed with this Form 10-Q Report.)
SALE OF SUBSIDIARIES
On October 31, 1998, the Company sold uniView Marketing Corporation
("UMC") and CompuNet Support Systems, Inc. ("CNSS"). In the transaction,
all of the issued and outstanding common stock of each of UMC and CNSS
was transferred to W. I. Technology Holding Company Inc. The Company
reports a gain of $1.86 million from the transaction, consisting
primarily of a reduction in liabilities associated with UMC.
SUBSEQUENT EVENTS
On January 26, 1999, the Company and its 1998-A1 Preferred Stock
holders agreed to restructure Series 1998-A1 Preferred Stock. In
connection with the restructure, the Company secured additional funding
from 1998-A1 Preferred Stock holders in the amount of $400,000. Under
the original agreement signed in June 1998, 1998-A1 preferred shares were
convertible into common shares at a conversion price equal to the average
of the four lowest closing bid prices of the common stock for the twenty
days immediately preceding the date of each conversion. The terms of the
restructure include a fixed conversion price of $0.625 per share and
limitations on sales of common stock by the holders of 1998-A1 Preferred
Stock. (See Exhibit 4.8 filed with this Form 10-Q Report.)
The Company also secured additional financing of $1.5 million under
a 1999 Convertible Debenture dated January 26, 1999. Terms of the
debenture include a six percent coupon rate, principal and interest are
convertible into common stock at a fixed conversion price of $0.625 per
share, and sales of common stock by the debenture holder are limited.
(See Exhibit 4.9 filed with this Form 10-Q Report.)
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Forward Looking Statements
This report may contain "Forward Looking Statements," which are our
expectations, plans, and projections which may or may not materialize,
and which are subject to various risks and uncertainties. When used in
this report, the words "plans," "believes," "expects," "anticipates,"
"estimates" and similar expressions are intended to identify forward-
looking statements. For a discussion of risk factors associated with
some of these expectations, please refer to the section entitled "Risk
Factors" contained in our most recent registration statement, as well as
our other SEC filings. These filings contain additional discussion about
those factors which could cause actual results or events to differ from
our expectations. These forward-looking statements speak only as of the
date of this report. We expressly disclaim any obligation or undertaking
to release publicly any updates or change in our expectations or any
change in events, conditions or circumstances on which any such statement
may be based, except as may be otherwise required by the securities laws.
Overview
uniView Technologies Corporation and its subsidiaries (the
"Company") develops, licenses and implements innovative technologies and
solutions for niche set-top box applications. We recently announced
contracts and alliances with new business partners that demonstrate how
our custom end-to-end solutions contribute to revolutionized business
operations in vertical markets. These markets include, among others,
multi-level marketing, utilities, education, banking, hotel, and medical.
We also provide complete information technology consulting, including
network consulting, system integration, Web site development and hosting,
and a full Internet service. More information about us can be found at
our Web site, www.uniview.net.
The following discussion provides information to assist in the
understanding of our financial condition and results of operations for
the fiscal quarter ended December 31, 1998. It should be read in
conjunction with the Consolidated Financial Statements and Notes thereto
appearing in our Annual Report on Form 10-K for fiscal year ended June
30, 1998.
Results of Operations
Revenues. We report revenues of $2.35 million in the second fiscal
quarter, compared to $57,000 for the same quarter last year. We further
report revenues of $6.75 million for the six months ended December 31,
1998, compared to $131,000 for the same period last year. Higher
revenues can be attributed to the rapid growth of our Advanced Systems
Group and ongoing contribution of our subsidiary, Network America.
Gross Profit. Gross Profit equals net sales less cost of goods sold
(both labor and material), non-direct, fixed manufacturing costs (such as
salaries, leasing costs, and depreciation charges related to production
operations), and non-direct, variable manufacturing costs (such as
supplies and employee benefits). In the second fiscal quarter, we report
a gross profit of 550,000 compared to $800 for the same quarter last
year. For the six months ended December 31, 1998, we report gross profit
of $1.5 million, compared to $9,000 for the same period last year. This
increase resulted primarily from the same factors as the increase in
revenues.
<PAGE>
Operating Expenses. We report $2.4 million in operating expenses for
the second fiscal quarter of the current year as compared to $2.1 million
for the same period last year. We report $5.2 million in operating
expenses for the six months ended December 31, 1998, compared to $4.5
million for the same period last year. We anticipate that operating
expenses will remain fairly consistent as we continue to develop and
expand our business.
Gain on Sale of Subsidiaries. As of October 31, 1998, we completed
the spin off of our retail marketing arm, uniView Marketing Corporation
("UMC"), and one of our computer consulting subsidiaries, CompuNet
Support Systems, Inc. ("CNSS"). UMC was originally established to create
a retail marketing presence for the uniViewr set-top box. Even though
this product was introduced and sold though several retailers, we elected
to focus on niche markets and not to pursue the direct retail market.
CNSS was acquired in a three company transaction and represented a lower
level duplication of our Advanced Systems Group ("ASG"). Many of the
clients of CNSS have been assimilated into ASG, where the potential for
growth and profitability is considered to be much greater. In connection
with the transaction, we report a gain of $1.86 million, which consists
primarily of a reduction in liabilities associated with UMC.
Liquidity and Capital Resources
Cash Used In Operations. Cash used in operating activities decreased
by $2 million, from $4.3 million used during the six months ended
December 31, 1997 to $2.2 million used during the same period in 1998.
This decrease is primarily attributable to a reduction in software
development costs.
Cash Used In Investing Activities. During the six months ended
December 31, 1998, cash used in investing activities declined by $860,000
from the same period last year, due primarily to a reduction in purchases
of property and equipment.
Cash Flows from Financing Activities. We received $625,000 during
the six months ended December 31, 1998 from issuances of preferred and
common stock, compared to $5.4 million received during the same period
last year. We also paid $690,000 on long-term debt during the six months
ended December 31, 1998, compared to $13,000 paid during the same period
last year. On October 30, 1998 subsidiary Network America, Inc. ("NWA")
replaced its then existing financing with a $2.15 million credit facility
with FINOVA Capital Corporation. The agreement provides NWA greater
flexibility in its daily operations by allowing inventory purchases for
pending contracts, secured by accounts receivable.
We have in the past relied on available credit arrangements and
continued sales of our common and preferred stock to supplement our
ongoing financial needs. As reflected in our improved financials for the
quarter ended December 31, 1998 we have made significant progress under
our current licensing and consulting business model. We expect to
continue growing our customer base and to continue making progress toward
becoming self-supporting. Due to events occurring subsequent to the
reporting period, we believe that we currently have sufficient cash
reserves to supplement our revenues without the need for additional
equity or debt financing. (See "Subsequent Events" in the notes to
consolidated financial statements, beginning on Page 7 of this Form 10-Q
Report). However, should unexpected financial needs arise in the
interim, additional equity or debt financing may be required. We have in
<PAGE>
the past been able to raise necessary financing to fund ongoing
operations. However, there can be no assurance that such resources will
continue to be available to us or that they will be available upon
favorable terms. An unexpected shortage or lack of sufficient financial
resources to fund operations until our business plan begins to produce
the expected returns could have a material adverse effect on our
business, operating results and financial condition.
Other Matters
Readiness for Year 2000. There has been no material change in our
Year 2000 readiness during the reporting period. We are continuing to
take steps to assess the nature and extent of our Year 2000 issues, but
we have not yet completed our assessment. We intend to work toward
making our internal information technology Year 2000 ready. This may
include replacing or updating existing computer systems as needed.
Additionally, we plan to evaluate the Year 2000 readiness of our
consultants, vendors, suppliers, and major customers. Where we determine
that critical consultants, vendors, suppliers, or customers are not Year
2000 ready, we will monitor their progress and take appropriate actions.
We intend to develop appropriate contingency plans should certain
critical systems utilized by us or our significant affiliates fail as a
result of Year 2000 issues. We believe we are taking the necessary steps
to resolve Year 2000 issues. Based on current progress and future plans,
we believe that Year 2000 issues will not significantly affect our
ability to deliver our technologies and services to our customers on a
timely basis. However, given the uncertain consequences of failure to
resolve significant Year 2000 issues, any one or more such failures could
have a material adverse effect on our business, operating results and
financial condition.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Former subsidiary uniView Marketing Corporation ("UMC"), was named
as a respondent by TVData Technologies, L.P. ("TVData") in an arbitration
proceeding filed on June 17, 1998. TVData alleges that UMC failed to pay
approximately $525,000 under a contract between the parties dated
December 1, 1996. TVData has also included a claim for a contract
"termination fee" of approximately $1.2 million. Although the Company
sold UMC as of October 31, 1998, the Company retains a contingent
liability as guarantor of any termination fee ultimately found to be due.
UMC filed a response to the arbitration claim, setting forth various
defenses, including a defense that the termination fee is unenforceable
as a penalty. The action is currently pending before the American
Arbitration Association under Case No. 30 199 00278 98, styled TVData
Technologies, L.P. and Curtis Mathes Marketing Corporation.
On January 15, 1999, TVData filed an action against the Company as
guarantor of any termination fee ultimately found to be due under the
contract. Management intends to vigorously defend this action and
believes that the Company will prevail on its defenses. However, as with
any action of this type, the timing and degree of any effect upon the
Company are uncertain. If TVData prevails on the guaranty, it could have
a material adverse effect upon the Company. The action is currently
pending in the United States District Court for the Northern District of
Texas, under Case No. 399CV0103-J, styled TV Data Technologies, L.P. v.
uniView Technologies Corporation, f/k/a Curtis Mathes Holding Corporation.
<PAGE>
The Company is routinely a party to ordinary litigation incidental
to its business, as well as to other litigation of a nonmaterial nature,
the outcome of which management does not expect, individually or in the
aggregate, to have a material adverse effect on the financial condition
or results of operations of the Company in excess of the amount accrued
for such purposes.
ITEM 5. OTHER INFORMATION
The Common Stock is currently listed on the Nasdaq SmallCap Market
("Nasdaq"). In order to continue to be listed on Nasdaq we must
maintain, among other things, a minimum bid price of $1.00 per share.
Nasdaq has notified us that our Common Stock price is not in compliance
with their minimum bid price requirement. We regain compliance after our
Common Stock price closes at or above the minimum requirement for at
least ten (10) consecutive trade days. Nasdaq initially allowed us until
January 13, 1999 to regain compliance with this standard or to request a
hearing to present our plan for doing so. On January 7, 1999, we
requested a hearing to present our plan for regaining compliance. Nasdaq
has set our hearing date for February 26, 1998. The stock will continue
to be listed during the interim. If our stock price reaches the required
level prior to the hearing date, a hearing may not be necessary. At the
hearing, we must demonstrate our ability to sustain long term compliance
with all applicable Nasdaq maintenance criteria. We expect that we will
be able to demonstrate such compliance, but we make no assurance that
this will occur.
If we fail to meet the minimum maintenance criteria, our securities
may be delisted from Nasdaq. Any trading of our securities after that
would have to be conducted in the non-Nasdaq over-the-counter market. If
that happens, an investor could find it more difficult to sell our
securities or to obtain accurate market quotations. Also, if the
securities are delisted and the trading price remains below $5.00 per
share, trading would be subject to certain other rules of the Exchange
Act. Such rules require additional disclosure by broker-dealers in
connection with any trades involving a stock defined as a "penny stock."
"Penny stock" is defined as any non-Nasdaq equity security that has a
market price of less than $5.00 per share, subject to certain exceptions.
Such rules require the delivery of a disclosure schedule explaining the
penny stock market and the risks associated with that market before
entering into any penny stock transaction. The rules also impose various
sales practice requirements on broker-dealers who sell penny stocks to
persons other than established customers and accredited investors. For
these types of transactions, the broker-dealer must make a special
suitability determination for the purchaser and must receive the
purchaser's written consent to the transaction prior to the sale. The
additional burdens imposed upon broker-dealers by such requirements could
discourage broker-dealers from effecting transactions in the securities.
This could severely limit the market liquidity of the securities and the
ability to sell the securities in the secondary market.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
Exhibits
Reference is made to the Exhibit Index beginning on page 13 of
this Form 10-Q for a list of all exhibits filed with and
incorporated by reference in this report.
<PAGE>
(b) Reports on Form 8-K
During the three months ended December 31, 1998 the Company
filed a Current Report on Form 8-K dated October 31, 1998
reporting the sale of subsidiaries uniView Marketing
Corporation and CompuNet Support Systems, Inc.; the Company
also filed a Current Report on Form 8-K dated December 1, 1998
reporting a change in the Company's certifying accountants.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
uniView Technologies Corporation
(Registrant)
By: /s/ Patrick A. Custer
Patrick A. Custer, President
(Principal Financial and Duly
Authorized Officer)
Date: February 16, 1999
<PAGE>
UNIVIEW TECHNOLOGIES CORPORATION
and Subsidiaries
EXHIBIT INDEX
Exhibit Number Description of Exhibits Sequential Page Number
2 Stock Purchase Agreement dated as of October 31, 1998
between the Company and W. I. Technology Holding Company
Inc. concerning the sale of subsidiaries uniView Marketing
Corporation and CompuNet Support Systems, Inc. (filed as
Exhibit "2" to the Company's Current Report on Form 8-K
dated October 31, 1998 and incorporated herein by
reference.) N/A
3(i) Articles of Incorporation of the Company, as amended
(filed as Exhibit "4.1" to the Company's Registration
Statement on Form S-3 filed with the Commission on May 13,
1998 and incorporated herein by reference.) N/A
3(ii) Bylaws of the Company, as amended (filed as Exhibit "3(ii)"
to the Company's Quarterly Report on Form 10-Q for
the fiscal quarter ended December 31, 1997 and
incorporated herein by reference.) N/A
4.1 Form of Common Stock Certificate of the Company (filed as
Exhibit "4.2" to the Company's annual report on Form 10-K
for the fiscal year ended June 30, 1994 and incorporated
herein by reference.) N/A
4.2 Series A Preferred Stock terms and conditions (filed as
Exhibit "4.3" to the Company's annual report on Form 10-K
for the fiscal year ended June 30, 1994 and incorporated
herein by reference.) N/A
4.3 Series H Preferred Stock terms and conditions (filed as
Exhibit "4.4" to the Company's Registration Statement on
Form S-3 originally filed with the Commission on June 20,
1996 and incorporated herein by reference.) N/A
4.4 Series Q Preferred Stock terms and conditions (filed as
Exhibit "4.6" to the Company's Current Report on Form 8-K
dated June 12, 1998 and incorporated herein by reference.)
N/A
4.5 Series 1998-A1 Preferred Stock terms and conditions
(filed as Exhibit "4.5" to the Company's Registration
Statement on Form S-3 filed with the Commission on July
20, 1998 and incorporated herein by reference.) N/A
4.6 Form of warrant issued in connection with Series 1998-A1
Preferred Stock (filed as Exhibit "4.7" to the Company's
Registration Statement on Form S-3 filed with the
Commission on July 20, 1998 and incorporated herein by
reference.) N/A
<PAGE>
4.7 Form of warrant issued in connection with the J.P. Carey
Agreement (filed as Exhibit "4.8" to the Company's
Registration Statement on Form S-3 filed with the
Commission on July 20, 1998 and incorporated herein by
reference.) N/A
4.8* First Addendum to Series 1998-A1 Preferred Stock terms and
conditions. 15
4.9* Form of Securities Purchase Agreement for 1999 Convertible
Debenture. 17
10.1* Loan and Security Agreement between Network America, Inc.
and FINOVA Capital Corporation. 29
27* Financial Data Schedule (for EDGAR filing purposes only.)
60
_______________
* Filed herewith.
<PAGE>
FIRST ADDENDUM TO
AGREEMENT FOR SALE OF UNIVIEW TECHNOLOGIES CORPORATION
5% CONVERTIBLE PREFERRED STOCK, SERIES 1998-A1
TO BROWN SIMPSON STRATEGIC GROWTH FUND, LTD. AND
BROWN SIMPSON STRATEGIC GROWTH FUND, L.P.
uniView Technologies Corporation ("UVEW"), Brown Simpson Strategic
Growth Fund, Ltd. and Brown Simpson Strategic Growth Fund, L.P.
(collectively, "Brown Simpson") agree to the following modifications to
the Convertible Preferred Stock Purchase Agreement, including the
Certificate of Designation of 5% Convertible Preferred Stock, Series 1998-
A1 of uniView Technologies Corporation heretofore executed by the parties
and dated as of June 30, 1998 (collectively, the "Agreement"):
Notwithstanding anything in the Agreement to the contrary, the
parties hereby agree as follows:
1. Brown Simpson hereby subscribes for and purchases an additional 16
shares of Series 1998-A1 Preferred Stock at a purchase price of
$400,000, as hereinafter allocated, with funding to occur no later
than the close of business on January 27, 1999;
2. Brown Simpson shall receive additional warrants, as hereinafter
allocated, to purchase One Million (1,000,000) shares of UVEW's
$.10 par value common stock, exercisable for three (3) years at
an exercise price of One Dollar ($1.00) per share;
3. The conversion price for all outstanding shares of Series 1998-A1
Preferred Stock, including the current investment, is hereby fixed
at $.625 per share;
4. Brown Simpson shall indemnify UVEW for any placement fees which may
otherwise accrue to Pacific Continental Securities Corp. because of
the additional funding;
5. Brown Simpson shall not convert any shares of 1998-A1 Preferred
Stock, shall not exercise any warrants, and shall not sell any shares
of UVEW $.10 par value common stock until July 26, 1999, unless on
the trading day immediately preceding any such proposed action, the
closing sale price of UVEW common shares equals or exceeds $2.50 per
share;
6. On or about April 26, 1999, and upon the expiration of each ninety
(90) day period thereafter, upon a thirty (30) day written request
from Brown Simpson, UVEW shall file a registration statement with
the Securities and Exchange Commission covering up to one-third
(1/3) of the number of common shares underlying Series 1998-A1
Preferred Stock, plus one-third (1/3) of the number of common shares
underlying the warrants referenced in item number two above; the
number of shares to be registered shall accumulate; and
7. It is the intent of the parties that this First Addendum shall
constitute a re-issuance of all outstanding shares of Series 1998-A1
Preferred Stock as of the date hereof and the parties agree to
execute and file such further documentation as may be reasonably
necessary to effect this intent; Brown Simpson acknowledges that
UVEW's Common Stock is currently subject to delisting from Nasdaq
and hereby waives any penalties and remedies for breach of any
covenant to maintain such listing, although UVEW agrees to use its
<PAGE>
best reasonable efforts to maintain such listing; the parties
further waive such penalties and remedies for any breach which may
have otherwise accrued under the Agreement since June 30, 1998.
The Agreement is, in all other respects, hereby ratified and
affirmed.
Dated as of January 26, 1999.
IN WITNESS WHEREOF, the parties hereto have caused this First
Addendum to the Agreement to be duly executed by their respective
authorized persons as of the date first indicated above.
UNIVIEW TECHNOLOGIES CORPORATION
By: /s/ Patrick A. Custer
Patrick A. Custer, President
BROWN SIMPSON STRATEGIC GROWTH FUND, LTD.
By: /s/ James R. Simpson
James R. Simpson, Principal
BROWN SIMPSON STRATEGIC GROWTH FUND, L.P.
By: /s/ James R. Simpson
James R. Simpson, Principal
Company:
uniView Technologies Corporation
10911 Petal Street
Dallas, Texas 75238
Attn: Patrick A. Custer
Purchasers:
Brown Simpson Strategic Growth Fund, Ltd.
152 West 57th Street, 40th Floor
New York, New York 10019
Portion of Series 1998-A1 Purchase Price - $_300,000_________
Series 1998-A1 Shares - _12________________
Warrants to purchase UVEW par value $.10 common stock 750,000________
Brown Simpson Strategic Growth Fund, L.P.
152 West 57th Street, 40th Floor
New York, New York 10019
Portion of Series 1998-A1 Purchase Price - $_100,000__________
Series 1998-A1 Shares - _4_________________
Warrants to purchase UVEW par value $.10 common stock 250,000_________
<PAGE>
The securities purchased hereunder have not been registered under the
Securities Act of 1933, as amended, and may be
offered and sold only if so registered or, in
the opinion of counsel acceptable to
the Company, an exemption from
registration is available.
1999 SECURITIES PURCHASE AGREEMENT
1999 SECURITIES PURCHASE AGREEMENT, dated as of January 26, 1999, by
and among uniView Technologies Corporation, a Texas corporation (the
"Company"), and the purchasers named on the signature pages hereto (the
"Purchasers").
PRELIMINARY STATEMENT
The Company desires to obtain funds by issuing to the Purchasers
convertible promissory notes to purchase common stock, and the Purchasers
have indicated that each desires to purchase such securities, subject to
the terms and conditions set forth in this Agreement.
ACCORDINGLY, in consideration of the preceding preliminary statement
and the mutual agreements, covenants, representations and warranties
contained in this Agreement, the parties hereto, intending to be legally
bound, now agree as follows:
STATEMENT OF AGREEMENT
ARTICLE 1. CERTAIN DEFINITIONS.
"Agreement" means this 1999 Securities Purchase Agreement, by and
among the Company and the Purchasers, as such may be amended,
supplemented, restated or otherwise modified from time to time.
"Business Day" means any day that is not a Saturday or Sunday or, as
the context requires (i) a day on which the applicable stock exchange or
market is required or permitted to be closed, or (ii) a day on which
banks are required or permitted to be closed in Dallas, Texas.
"Closing" and "Closing Date" have the meanings given to such terms
in Section 2.1 of this Agreement.
"Common Stock" means the common stock, par value $0.10 per share, of
the Company.
"Conversion" means the conversion pursuant to the terms of this
Agreement of any principal of or interest on a Note into Common Stock.
"Conversion Price" means $0.625 per share.
"Debentures" means the Note(s) as hereinafter defined.
"Documents" means this Agreement, the Escrow Agreement, and the
Securities, together with all amendments and supplements thereto, all
substitutions and replacements therefor, and all renewals, extensions,
increases, restatements, modifications, rearrangements and waivers
thereof from time to time.
"Event of Default" has the meaning given to such term in Section 8.1
of this Agreement.
<PAGE>
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, or any similar federal statute, and the rules and regulations of
the SEC thereunder, all as the same shall be in effect from time to time.
"Holder" and "Holders" both mean, as the context requires, the
holder or holders of the Notes from time to time under the terms of this
Agreement and the other Documents. As of the Closing Date, the
Purchasers are the only Holders.
"Majority Holders" means the Holders of a two-thirds (2/3) majority
in aggregate principal amount of Notes then outstanding (exclusive of
Notes held by the Company or its subsidiaries).
"Maturity Date" means three (3) years from the Closing Date.
"NASD" means the National Association of Securities Dealers, Inc.,
or any successor thereto.
"Note" and "Notes" both mean, as the context requires, the
convertible promissory notes to be made by the Company payable to the
Purchasers, such Notes being in the aggregate original principal amount
of $1,500,000, together with all amendments and supplements thereto, all
substitutions and replacements therefor, and all renewals, extensions,
increases, restatements, modifications, rearrangements and waivers
thereof from time to time.
"Person" means any individual, corporation, partnership, joint
venture, association, limited liability company, joint-stock company,
trust, unincorporated organization or government or any agency or
political subdivision thereof.
"Purchase Price" means (i) with respect to each Note, 100% of the
original principal amount of such Note.
"SEC" means the Securities and Exchange Commission of the United
States of America or any successor to the rights and duties thereof.
"Securities" means the Notes and Common Stock into which the Notes
are convertible.
"Securities Act" means the Securities Act of 1933, as amended, or
any successor U.S. Federal statute, and all rules and regulations
thereunder.
ARTICLE 2. ISSUANCE OF SECURITIES.
Section 2.1 Closing. The closing contemplated by this
Agreement (the "Closing") shall take place on January 26, 1999, or on
such other date or at such other time as the issuance of the Securities
and the payment of the Purchase Price therefor shall actually occur (the
"Closing Date"). The Company will deliver to the Escrow Agent for each
Purchaser the Note subscribed for by such Purchaser as noted on the
signature page hereof, each registered in the name of such Purchaser,
against payment of the Purchase Price therefor. At the Closing, the
Purchase Price shall be paid to the Escrow Agent by wire transfer.
<PAGE>
ARTICLE 3. PURCHASERS' REPRESENTATIONS AND WARRANTIES.
Each Purchaser hereby represents and warrants (with respect to
itself only) to the Company as follows as of the date hereof and as of
the Closing Date:
Section 3.1 Organization and Powers. Each Purchaser is, if a
business entity, (i) duly organized, validly existing and in good
standing under the laws of the jurisdiction of its formation, and
(ii) has the power and authority to execute, deliver and perform the
Documents to which it is a party.
Section 3.2 Authorization. The execution, delivery and
performance by each Purchaser of the Documents to which it is a party
have been duly authorized by each Purchaser by all requisite action
necessary to be taken by it.
Section 3.3 Validity and Binding Nature. The Documents to
which each Purchaser is a party have been duly executed and delivered by
such Purchaser and each is a legal, valid and binding obligation of such
Purchaser, enforceable against such Purchaser in accordance with its
terms.
Section 3.4 Acquisition for Investment. Each Purchaser is
acquiring the Securities (and all securities into which the Securities
are convertible) solely for its own account for the purpose of investment
and not with a view to or for sale in connection with any distribution
thereof, and no Purchaser has a present intention or plan to effect any
distribution of the Securities (or such other securities).
Notwithstanding anything in this Section to the contrary, the disposition
of each Purchaser's property shall be at all times within the control of
each Purchaser and subject to the rights of each Purchaser to dispose of
all or any of the Securities (or such other securities) pursuant to an
effective registration statement under the Securities Act or an exception
available under the Securities Act. Each Purchaser acknowledges that the
Securities (and such other securities) have not been registered under the
Securities Act and may be sold or disposed of in the absence of such
registration only pursuant to an exemption from such registration.
Section 3.5 Accredited Investor; Sophistication. Either
(i) each Purchaser is an "accredited investor" within the meaning of
Rule 501 under the Securities Act or (ii) each Purchaser is able to bear
the economic risk of this investment, at the present time, and is able to
afford a complete loss of such investment. By reason of each Purchaser's
business and financial experience, and the business and financial
experience of those Persons retained to advise each Purchaser with
respect to its investment in the Securities, each Purchaser, together
with such advisors, has such knowledge, sophistication and experience in
business and financial matters that it is capable of evaluating the
merits and risks of the prospective investment.
Section 3.6 No General Solicitation. To each Purchaser's
knowledge, the Securities were not offered to such Purchaser by means of
general solicitations, publicly disseminated advertisements or sales
literature.
Section 3.7 Address. The true and correct address of each
Purchaser's principal place of business is as set forth in this
Agreement. No Purchaser has a present intention of moving its principal
place of business to any other state or jurisdiction.
<PAGE>
ARTICLE 4. COMPANY'S REPRESENTATIONS AND WARRANTIES.
The Company hereby represents and warrants to the Purchasers as
follows as of the date hereof and as of the Closing Date:
Section 4.1 Organization and Powers. The Company (i) is a
corporation duly organized, validly existing and in good standing under
the laws of the State of Texas, (ii) has all requisite power and
authority to own its property and assets and to carry on its business as
now conducted and as proposed to be conducted, and (iii) has the power
and authority to execute, deliver and perform the Documents to which it
is a party.
Section 4.2 Authorization. The execution, delivery and
performance by the Company of the Documents to which it is a party
(i) have been duly authorized by the Company by all requisite action
necessary to be taken by it, (ii) will not violate and has not violated
in such a way as to have a material adverse effect on the Company (A) any
provision of law, statute, rule or regulation, (B) any applicable
judgment, writ, injunction, decree or other order of any governmental
authority, or (C) the articles of incorporation or bylaws of the Company,
or any material agreement to which the Company is a party, and (iii) will
not be or result in, and has not caused, a conflict with, a breach of or
(with notice or lapse of time or both) a default under any material
agreement to which the Company is a party.
Section 4.3 Validity and Binding Nature. This Agreement has
been duly executed and delivered by the Company and is, and each of the
other Documents, when executed and delivered by the Company will be, a
legal, valid and binding obligation of the Company, enforceable against
the Company in accordance with its terms (except as enforcement thereof
may be limited by bankruptcy, reorganization, insolvency, moratorium or
other laws or equitable principles affecting the enforcement of
creditors' rights generally).
Section 4.4 Consents, Licenses, Filings, Etc. Except as
required under the Securities Act and applicable state securities laws,
no action, consent or approval of, license or permit from, or
registration or filing with, or any other action by any governmental
authority or any other Person was or is required in connection with the
execution, delivery and performance by the Company of the Documents.
Section 4.5 Capitalization. As of January 26, 1999, the
authorized capital stock of the Company consisted of 80,000,000 shares of
Common Stock. All outstanding shares have been validly issued and are
fully paid and non-assessable. The Purchasers acknowledge that they have
had ample opportunity to review true and correct copies of the Company's
articles of incorporation and bylaws, and the Company's SEC filings.
Section 4.6 Issuance of Shares. The Common Stock issuable
upon conversion of the Notes has been duly authorized and when issued in
accordance with the terms of the Documents shall be validly issued, fully
paid and non-assessable.
Section 4.7 SEC Documents; Financial Statements. The Company
has filed all reports, schedules, forms, statements and other documents
required to be filed by it with the SEC pursuant to the reporting
requirements of the Exchange Act (all of the foregoing filed after such
date prior to the date hereof and all exhibits included therein and
<PAGE>
financial statements and schedules thereto and documents (other than
exhibits) incorporated by reference therein, being hereinafter referred
to herein as the "SEC Documents"). As of their respective dates, the SEC
Documents complied in all material respects with the requirements of the
Exchange Act and the rules and regulations of the SEC promulgated
thereunder applicable to such SEC Documents, and none of the SEC
Documents, at the time they were filed with the SEC, contained any untrue
statement of a material fact or omitted to state a material fact required
to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. As of their respective dates, the financial statements of
the Company included in the SEC Documents complied as to form in all
material respects with applicable accounting requirements and the
published rules and regulations of the SEC with respect thereto. Such
financial statements have been prepared in accordance with generally
accepted accounting principles applied on a consistent basis during the
periods involved (except (i) as may be otherwise indicated in such
financial statements or the notes thereto or (ii) in the case of
unaudited interim statements to the extent they may not include footnotes
or may be condensed or summary statements) and fairly present in all
material respects the consolidated financial position of the Company and
its consolidated subsidiaries as of the dates thereof and the
consolidated results of their operations and cash flows for the periods
then ended (subject, in the case of unaudited statements, to normal year-
end audit adjustments).
ARTICLE 5. PURCHASERS' CONDITIONS TO CLOSING.
Each Purchaser's obligation to purchase and pay for Securities at
the Closing is subject to the fulfillment to such Purchaser's
satisfaction, on or before the Closing Date, of each of the following
conditions:
Section 5.1 Representations and Warranties; Covenants; Events
of Default. (i) The representations and warranties of the Company
contained in this Agreement shall be true and correct in all material
respects on and as of the Closing Date with the same effect as though
such representations and warranties had been made on the Closing Date,
except to the extent of any changes caused by the transactions herein
contemplated, (ii) the Company shall not be in material breach of any
covenant contained in the Documents, and (iii) no Event of Default shall
have occurred and be continuing.
Section 5.2 Transactions Permitted by Applicable Laws. The
Closing and the other transactions contemplated by this Agreement shall
not violate any applicable law or governmental regulation or result in a
violation of any order of any court or governmental body applicable to
the Purchasers or the Company and shall not subject the Purchasers or the
Company to any tax, penalty or liability.
Section 5.3 No Adverse Action or Decision. There shall be no
action, suit, investigation or proceeding pending, or, to the best of the
Purchasers' knowledge, threatened against or affecting the Purchasers or
the Company or any of their respective properties that (i) seeks to
restrain, enjoin, prevent the consummation of or otherwise affect the
Closing or the other transactions contemplated by this Agreement, or
(ii) questions the validity or legality of any such transactions or seeks
to recover damages or to obtain other relief in connection with any such
transactions.
<PAGE>
Section 5.4 Approvals and Consents. The Company shall have
duly received all authorizations, consents, approvals, licenses,
franchises, permits and certificates by or of, and shall have made all
filings and effected all registrations and qualifications with, all
federal, state and local governmental authorities and other Persons
necessary for the consummation of the Closing and the other transactions
contemplated by this Agreement, and all such matters shall be in full
force and effect as of the Closing Date.
Section 5.5 Proceedings. All corporate and other proceedings
to be taken by the Company in connection with the transactions
contemplated hereby and all documents incident thereto shall be
reasonably satisfactory in substance and form to the Purchasers.
ARTICLE 6. COMPANY'S CONDITIONS TO CLOSING.
The obligation of the Company to issue and sell Securities to the
Purchasers is subject to the fulfillment to the satisfaction of the
Company, on or before the Closing Date, of each of the following
conditions:
Section 6.1 Representations and Warranties; Covenants. (i) The
representations and warranties of each Purchaser contained in this
Agreement shall be true and correct in all material respects on and as of
the Closing Date with the same effect as though such representations and
warranties had been made on the Closing Date, except to the extent of any
changes caused by the transactions herein contemplated, and (ii) the
Purchasers shall not be in material breach of any covenant contained in
the Documents.
Section 6.2 No Adverse Action or Decision. There shall be no
action, suit, investigation or proceeding pending, or, to the best of the
Company's knowledge, threatened against or affecting the Purchasers or
the Company or any of their respective properties before any court,
arbitrator or administrative or governmental body that (i) seeks to
restrain, enjoin, prevent the consummation of or otherwise affect the
Closing or the other transactions contemplated by this Agreement, or
(ii) questions the validity or legality of any such transactions or seeks
to recover damages or to obtain other relief in connection with any such
transactions.
Section 6.3 Approvals and Consents. The Company shall have
duly received all authorizations, consents, approvals, licenses,
franchises, permits and certificates by or of, and shall have made all
filings and effected all registrations and qualifications with, all
federal, state and local governmental authorities and other Persons
necessary for the consummation of the Closing and the other transactions
contemplated by this Agreement, and all such matters shall be in full
force and effect as of the Closing Date.
ARTICLE 7. COVENANTS.
The Company hereby covenants and agrees with the Holders that, so
long as the principal of or interest on any Note shall be unpaid:
Section 7.1 Compliance with Law; Maintenance of Properties.
The Company will do or cause to be done all things necessary (i) to
preserve and keep in full force and effect at all times the Company's
existence, and all rights, licenses and franchises that are material to
its business, (ii) to cause the Company to comply in all material
respects with all applicable laws, and all applicable rules, regulations
<PAGE>
and orders issued by any governmental authority, noncompliance with which
could have a material adverse effect on the business, operations,
prospects, assets and/or financial or other condition of the Company (but
the Company may contest in good faith by appropriate action any alleged
violation of any of the foregoing), and (iii) to preserve all material
property useful in the conduct of the Company's business and keep the
same in reasonably good repair, working order and condition, normal wear
and tear excepted, and from time to time make, or cause to be made, all
needful and proper repairs, renewals and replacements, and improvements
thereto so that the business carried on in connection therewith may be
properly and advantageously conducted at all times.
Section 7.2 Performance of Liabilities. The Company will
(i) duly pay and discharge all Indebtedness in such manner as shall be
necessary in order to prevent the occurrence of an Event of Default under
Section 8.1(d) hereof, and (ii) duly pay and discharge all taxes before
the same shall become in default, and all lawful claims for labor,
materials and supplies that have become due and payable which taxes and
other claims, if unpaid, might become a lien upon any of its properties
if the loss of such properties could have a material adverse effect on
the business, operations, prospects, assets and/or financial or other
condition of the Company.
ARTICLE 8. DEFAULT AND REMEDIES.
Section 8.1 Events of Default. An "Event of Default" occurs
if:
(a) the Company shall fail to observe or perform any covenant
or agreement contained in any Document and such default continues for 30
days after the Company has received written notice thereof; or
(b) any material representation or warranty made by the
Company in any Document shall prove to have been false or misleading in
any material respect when made;
Section 8.2 Remedies.
(a) If an Event of Default shall occur and be continuing, the
Majority Holders may declare by notice in writing given to the Company,
the entire unpaid principal amount of the Notes, together with accrued
but unpaid interest thereon, to be immediately due and payable, in which
case the Notes shall become immediately due and payable, both as to
principal and interest, without presentment, demand, default, notice of
intent to accelerate and notice of such acceleration, protest or notice
of any kind, all of which are hereby expressly waived, anything herein or
elsewhere to the contrary notwithstanding.
(b) If any Event of Default shall have occurred and is
continuing, the Holders may, subject to the consent of the Majority
Holders, proceed to protect and enforce their rights either by suit in
equity or by action at law, or both.
ARTICLE 9. CONVERSION.
Section 9.1 Right of Conversion. Any Holder shall have the
right, from time to time, at such Holder's option, to convert, subject to
<PAGE>
the terms and provisions of this Article 9, any or all of the principal
of and accrued but unpaid interest on any Note into fully paid and
nonassessable shares of Common Stock at the Conversion Price.
Section 9.2 Mechanics of Exercise. The right of Conversion
shall be exercised by the surrender of the Notes to be converted to the
Company during usual business hours at its principal place of business,
accompanied by written notice that the Holder elects to convert all or
part of the principal of and interest on such Notes and specifying the
name (with address) in which the certificate for Common Stock is to be
issued and, if the certificate is to be issued to a Person other than the
Holder, by a written instrument of transfer in form satisfactory to the
Company, duly executed by the Holder, duly authorized in writing. All
Notes surrendered for conversion shall be canceled (or, if only accrued
but unpaid interest is to be converted, annotated to reflect such
conversion), and, if appropriate, a new Note reflecting the conversion of
the converted principal shall be issued to the Holder.
Section 9.3 Issuance of Shares Time of Conversion. As
promptly as practicable after the surrender, as herein provided, of any
Note for conversion, the Company shall deliver or cause to be delivered
at the Company's office a certificate for the shares of Common Stock
issuable in connection with such conversion. To the extent permitted by
law, the rights of the Holders as Holders shall, to the extent of
principal and interest converted, cease with respect to such principal
and interest as of the date of actual receipt by the Company of the
surrendered Notes and written conversion request, and the Person entitled
to receive the Common Stock converted or paid in cash. The certificate
deliverable upon such conversion shall be treated for all purposes as
having become the record holder of such Common Stock at such time.
Section 9.4 No Fractional Shares. Instead of any fractional
share of Common Stock that would otherwise be issuable upon conversion of
any Note, the number of shares issuable upon conversion shall be rounded
up to the next whole share of Common Stock. If more than one Note shall
be surrendered for conversion by the same Holder, the number of shares
issuable upon conversion thereof shall be computed on the basis of the
aggregate amount of principal of and interest on the Notes so
surrendered.
Section 9.5 No Stockholder Rights. Prior to the issuance of
Common Stock upon conversion, the Holders shall not be entitled to any
rights of a shareholder with respect to the Common Stock, including
(without limitation) the right to vote such Common Stock, receive
dividends or other distributions thereon, exercise preemptive rights or
be notified of shareholder meetings, and such Holders shall not be
entitled to any notice or other communication concerning the business or
affairs of the Company except as contractually agreed to by the Company.
Section 9.6 Shares to be Reserved. The Company covenants
that it will at all times reserve and keep available out of its
authorized but unissued Common Stock, free from preemptive rights, solely
for the purpose of issue upon conversion of Notes as herein provided,
such number of shares of Common Stock as shall then be issuable upon the
conversion of all principal of and accrued but unpaid interest on the
then-outstanding Notes. The Company covenants that all Common Stock
which shall be so issuable shall, when issued, be duly and validly issued
and fully paid and nonassessable.
<PAGE>
Section 9.7 No Registration or Listing of Shares. The
shares of Common Stock issuable on conversion are not registered with any
governmental authority or listed on any exchange, and, except as
otherwise provided in this Agreement, the Company shall have no
obligation to register or list any Common Stock. The Company may cause
any Common Stock issued upon conversion of Notes to bear a restrictive
legend describing limitations of the transferability of such Common
Stock.
Section 9.8 Taxes and Charges. The issuance of certificates
for Common Stock upon the conversion of Notes shall be made without
charge to the converting Holder of Notes for such certificates or for any
tax in respect of the issuance of such certificates or the securities
represented thereby, and such certificates shall be issued in the
respective names of, or in such names as may be directed by, the Holders
of the Notes being converted; provided, however, that the Company shall
not be required to pay any tax which may be payable in respect of any
transfer involved in the issuance and delivery of any such certificate in
a name other than that of the Holder of the Note converted, and the
Company shall not be required to issue or deliver such certificates
unless or until the Person or Persons requesting the issuance thereof
shall have paid to the Company the amount of such tax or shall have
established to the satisfaction of the Company that such tax has been
paid.
ARTICLE 10. REGISTRATION RIGHTS.
(a) Piggyback Registration. If, at any time during the six (6)
month period following the Closing Date, the Company shall file a
registration statement with the SEC, the Company shall give Purchaser
prior notice of the filing of such registration statement. If requested
by Purchaser in writing within five (5) business days after receipt of
any such notice, the Company shall register all or, at Purchaser's
option, any portion of the Common Stock into which the Notes are
convertible, concurrently with the registration of such other securities,
all to the extent requisite to permit the public offering and sale of the
Common Stock through the facilities of the Nasdaq Stock Market, and will
use its best reasonable efforts through its officers, directors,
auditors, and counsel to cause such registration statement to become
effective as promptly as practicable. Notwithstanding the foregoing, if
the Company believes in good faith that the distribution of all or a
portion of the Common Stock requested to be included in the registration
concurrently with the securities being registered by the Company would
materially adversely affect the distribution of such securities by the
Company for its own account or pursuant to previous commitments made to
other investors, then Purchaser shall delay the offering and sale of the
Common Stock (or the portions thereof so designated) for such period.
(b) Demand Registration. If, at any time after the six (6)
month period following the Closing Date, the Company shall receive a
written request from Purchaser to register the sale of all or part of
such Common Stock, the Company shall, as promptly as practicable prepare
and file with the Commission a registration statement sufficient to
permit the public offering and sale of the Common Stock through the
facilities of the Nasdaq Stock Market, and will use its best reasonable
efforts through its officers, directors, auditors, and counsel to cause
such registration statement to become effective as promptly as
practicable. The registration statement filed by the Company pursuant to
<PAGE>
this section may include securities sold by the Company or on behalf of
persons other than Purchaser.
ARTICLE 11. MISCELLANEOUS.
Section 11.1 Payments. The Company agrees that, as long as
the Purchasers shall hold the Notes, all payments to be made on or in
connection with the Notes shall be made to the Purchasers at the
addresses set forth in this Agreement or such other places as the
Purchasers may designate in writing. All payments referred to under this
Agreement and the other Documents shall be in immediately available funds
in lawful money of the United States of America. The Holders agree that
prior to any delivery upon the sale or other disposition of all or any
part of the Notes, the Holders will promptly make or cause to be made a
notation on the Notes reflecting all payments thereon.
Section 11.2 Amendments. This Agreement and the other
Documents may be amended, modified, superseded or canceled, and any of
the terms, covenants, representations, warranties or conditions hereof
and thereof may be waived, only by a written instrument executed by the
Company and the Majority Holders at such time; except that each holder
must consent in writing to any amendment or waiver which adversely
affects the interest rate, maturity, prepayment or redemption provisions,
or the percentage required to amend the Debentures.
Section 11.3 No Waiver. The failure of any party at any time
or times to require performance of any provisions hereof shall in no
manner affect the right at a later time to enforce the same. No waiver
by any party of any condition, or of any breach of any term, covenant,
representation or warranty contained in this Agreement, in any one or
more instances, shall be deemed to be or construed as a further or
continuing waiver of any such condition or breach or a waiver of any
other condition or of any breach of any other term, covenant,
representation or warranty.
Section 11.4 Survival of Representations and Warranties. All
representations, warranties, covenants, indemnities and agreements
contained herein or made in writing by the Company in connection herewith
shall survive the execution and delivery of this Agreement, the sale and
purchase of the Securities and any disposition thereof.
Section 11.5 Successors and Assigns. All covenants and
agreements in this Agreement made by or on behalf of any of the parties
hereto shall bind and inure to the benefit of the Company, each Purchaser
and each Holder and their respective successors and permitted assigns.
The terms and provisions of this Agreement are intended solely for the
benefit of each party hereto and its respective successors and permitted
assigns, and it is not the intention of the parties to confer third-party
beneficiary rights upon any other Person. The Holders may not sell,
assign (by operation of law or otherwise), transfer, pledge, grant a
security interest in, or otherwise dispose of this Agreement or any other
Document or any portion hereof or thereof or any rights or obligations
hereunder or thereunder unless (i) the Company has granted its prior
written consent (which consent shall not be unreasonably withheld), and
(ii) the Company shall have received a written opinion of counsel
reasonably acceptable to the Company, addressed to the Company, to the
effect that any such proposed transfer or other disposition complies with
all applicable Federal and state securities laws, or other comfort
reasonably acceptable to the Company to the same effect.
<PAGE>
Section 11.6 Notices. All communications provided for
hereunder and under the Notes shall be sent by first class mail and
(i) if to a Purchaser, addressed to it at the address shown on the
signature pages hereof, or to such other address as such Purchaser may
have designated to the Company in writing, (ii) if to any subsequent
Holder, addressed to such Holder at the address of such Holder in the
record books of the Company, and (iii) if to the Company, addressed to it
at 10911 Petal Street, Dallas, Texas 75238, Attention: Patrick A. Custer,
or to such other address as the Company may have designated in writing to
the Holder.
Section 11.7 Descriptive Headings. The descriptive headings
of the articles, sections, subsections and paragraphs of the Documents
are inserted for convenience only and do not constitute a part of the
Documents.
Section 11.8 Governing Law. This Agreement and the validity
and enforceability hereof shall be governed by, and construed and
interpreted in accordance with, the laws of the State of Texas.
Section 11.9 Pro Rata Sharing. All payments (including, but
not limited to, payments by offset) made under this Agreement or the
Notes shall be made to the Holders pro rata in accordance with the
principal amount of Notes that such Holder owns. If any Holder shall
receive any payment in violation of this Section, such Holder shall pay
such excess funds over to other Holders or purchase Notes or interests
therein from other Holders in order to cause such excess payment to be
shared by the Holders on a pro rata basis.
Section 11.10 Entire Agreement. This Agreement and the other
Documents embody the entire agreement of the parties relating to the
subject matter hereof and supersede all prior proposals, negotiations,
agreements and understandings relating to such subject matter.
Section 11.11 Counterparts; Facsimile Signatures. This
Agreement may be executed in two or more counterparts, each of which when
so executed and delivered shall be deemed to be an original and all of
which when taken together shall constitute but one and the same
agreement. Facsimile signatures shall be binding on the parties.
IN WITNESS WHEREOF, this Agreement has been duly executed by the
parties hereto as of the day and year specified at the beginning hereof.
UNIVIEW TECHNOLOGIES CORPORATION
By:_____________________________
Patrick A. Custer
President and CEO
PURCHASER:
By:_____________________________
Original Principal Amount of Notes Purchased: $1,500,000
<PAGE>
INVESTOR ACKNOWLEDGMENTS
In order to induce the Company to accept the foregoing Securities
Purchase Agreement, the Investor expressly acknowledges the following by
placing the initials of an individual duly empowered to act for the
Investor in each of the spaces provided below:
The investor has received, has carefully reviewed information on the
company and has made an independent investigation and analysis of the
investment. The investor has carefully read the documents and in
particular, has carefully read and understands the investor's
representations and warranties made therein and confirms that all such
representations and warranties are true and correct.
THE INVESTOR QUALIFIES UNDER THE FOLLOWING CATEGORY OR CATEGORIES OF
DEFINITIONS OF "ACCREDITED INVESTOR" (INDICATE EACH APPLICABLE CATEGORY):
(1) The Investor is a natural person whose individual net worth, or
joint net worth with that person's spouse, exceeds $1,000,000.
(______) Yes (______) No
(2) The Investor is a natural person who had an individual income
in excess of $200,000 in each of the two most recent years or
joint income with that person's spouse in excess of $300,000 in
each of those years and has a reasonable expectation of
realizing the same income level in the current year.
(______) Yes (______) No
(3) The Investor is a broker or dealer registered pursuant to
Section 15 of the Securities Exchange Act of 1934, as amended.
(______) Yes (______) No
(4) The Investor is an insurance company, a registered securities broker
or dealer, a licensed Small Business Investment Company, a registered
investment company, a business development company as defined in Section
2(a)(48) of the Investment Company Act of 1940 or a private business
development company as defined in Section 202(a)(22) of the Investment
Advisers Act of 1940.
(______) Yes (______) No
(5) The Investor is an organization described in Section 501(c)(3)
of the Internal Revenue Code of 1986, as amended, or a
corporation, Massachusetts or similar business trust or
partnership, not formed for the specific purpose of acquiring
the Units, with total assets in excess of $5,000,000.
(______) Yes (______) No
(6) The Investor is a trust with total assets in excess of
$5,000,000, not formed for the specific purpose of acquiring
the Units offered, whose purchase is directed by a person who
has such knowledge and experience that he or she is capable of
evaluating the merits and risks of the proposed investment.
(______) Yes (______) No
<PAGE>
(7) The Investor is a bank, savings and loan association or similar
institution acting in its individual or fiduciary capacity, or
an employee benefit plan with total assets in excess of
$5,000,000.
(______) Yes (______) No
(8) The Investor is a Plan established and maintained by a state,
its political subdivisions, or any agency or instrumentality of
a state or its political subdivisions for the benefit of its
employees, with total assets in excess of $5,000,000.
(______) Yes (______) No
(9) The Investor is an employee benefit plan within the meaning of
the Employee Retirement Income Security Act of 1974 ("ERISA"),
the investment decisions for which are made by a plan
fiduciary, as defined in Section 3(21) of ERISA, which is
either a bank, savings and loan association, insurance company,
or registered investment adviser, or is an employee benefit
plan that has total assets in excess of $5,000,000.
(______) Yes (______) No
(10) The Investor is an entity in which all of the equity owners are
accredited investors or individuals who are accredited
investors (as defined above).
(______) Yes (______) No
IN WITNESS WHEREOF, the Investor has executed and delivered this
Investor Acknowledgment as of the day and year specified above.
Official Signatory of Investor:
By:_____________________________
<PAGE>
LOAN AND SECURITY AGREEMENT
NETWORK AMERICA, INC.
7116 SOUTH MINGO ROAD
TULSA, OKLAHOMA 74133
$2,150,000.00
Credit Limit
October 30, 1998
FINOVA BUSINESS CREDIT
THIS LOAN AND SECURITY AGREEMENT (collectively with the Schedule to Loan
Agreement (the "Schedule") attached hereto, the "Agreement") dated the
date set forth on the cover page, is entered into by and between the
borrower named on the cover page (jointly and severally, the "Borrower"),
whose address is set forth on the cover page and FINOVA Capital
Corporation ("FINOVA"), whose address is 355 South Grand Avenue, Suite
2400, Los Angeles, California 90071.
1. DEFINITIONS.
1.1 Defined Terms. As used in this Agreement, the following terms
have the definitions set forth below:
"ADA" has the meaning set forth in Section 4.1(aa) hereof.
"Additional Sums" has the meaning set forth in Section 2.8(a)
hereof.
"Affiliate" means any Person controlling, controlled by or under
common control with Borrower. For purposes of this definition, "control"
means the possession, directly or indirectly, of the power to direct or
cause direction of the management and policies of any Person, whether
through ownership of common or preferred stock or other equity interests,
by contract or otherwise. Without limiting the generality of the
foregoing, each of the following shall be an Affiliate: any officer,
director, employee or other agent of Borrower, any shareholder, member or
subsidiary of Borrower, and any other Person with whom or which Borrower
has common shareholders, officers or directors.
"Agreement" has the meaning set forth in the preamble.
"Annual Renewal Fee" has the meaning set forth in the Schedule.
"Applicable Usury Law" has the meaning set forth in Section 2.8(b)
hereof.
"Blocked Account" has the meaning set forth in Section 2.9(c)
hereof.
"Business Day" means any day on which commercial banks in both Los
Angeles, California and Phoenix, Arizona are open for business.
"Capital Expenditures" means all expenditures made and liabilities
incurred for the acquisition of any fixed asset or improvement,
replacement, substitution or addition thereto which has a useful life of
more than one year and including, without limitation, those arising in
connection with Capital Leases.
"Capital Lease" means any lease of property by Borrower that, in
accordance with GAAP, should be capitalized for financial reporting
purposes and reflected as a liability on the balance sheet of Borrower.
"Closing Fee" has the meaning set forth in the Schedule.
"Closing Date" means the date of the initial advance made by FINOVA
pursuant to this Agreement.
"Code" means the Uniform Commercial Code as adopted and in effect in
the State of Arizona from time to time.
"Collateral" has the meaning set forth in Section 3.1 hereof.
<PAGE>
"Collateral Monitoring Fee" has the meaning set forth in the
Schedule.
"Deposit Accounts" has the meaning set forth in Section 9105 of the
Code.
"Dominion Account" has the meaning set forth in Section 2.9(c)
hereof.
"Earnings Before Interest, Taxes, Depreciation and Amortization
(EBITDA)" for any fiscal period of Borrower means the net income of
Borrower for such fiscal period, plus interest expense, depreciation and
amortization and provision for income taxes for such fiscal period, and
minus non-recurring miscellaneous income and expenses, all calculated in
accordance with GAAP.
Eligible Inventory" means Inventory which FINOVA, in its Permitted
Discretion, deems Eligible Inventory, based on such considerations as
FINOVA may from time to time deem appropriate. Without limiting the
generality of the foregoing, no Inventory shall be Eligible Inventory
unless, in FINOVA's Permitted Discretion, such Inventory (i) consists of
raw materials and finished goods, in good, new and salable condition
which are not obsolete or unmerchantable, and are not comprised of work
in process, packaging materials, [inventory used by or the possession of
Borrower's engineers for service or design purposes, returned inventory,
inventory that has been loaned to customers] or supplies; (iii) meets all
standards imposed by any governmental agency or authority; (iv) conforms
in all respects to the warranties and representations set forth herein;
(v) is at all times subject to FINOVA's duly perfected, first priority
security interest; and (vi) is situated at a location in compliance with
Section 5.16 hereof.
"Eligible Receivables" means Receivables arising in the ordinary
course of Borrower's business from the sale of goods or rendition of
services, which FINOVA, in its Permitted Discretion, shall deem eligible
based on such considerations as FINOVA may from time to time deem
appropriate. Without limiting the foregoing, a Receivable shall not be
deemed to be an Eligible Receivable if (i) the account debtor has failed
to pay the Receivable within the period of ninety (90) days after
invoice date; (ii) the account debtor has failed to pay more than twenty
five percent (25%) of all outstanding Receivables owed by it to Borrower
within ninety (90) days after invoice date; (iii) the account debtor is
an Affiliate of Borrower; (iv) the goods relating thereto are placed on
consignment, guaranteed sale, "bill and hold," "COD" or other terms
pursuant to which payment by the account debtor may be conditional; (v)
the account debtor is not located in the United States, unless the
Receivable is supported by a letter of credit or other form of guaranty
or security, in each case in form and substance satisfactory to FINOVA;
(vi) the account debtor is the United States or any department, agency or
instrumentality thereof or any State, city or municipality of the United
States; (vii) Borrower is or may become liable to the account debtor for
goods sold or services rendered by the account debtor to Borrower; (viii)
except as otherwise set forth herein, the account debtor's total
obligations to Borrower exceed fifteen percent (15%) of all Eligible
Receivables, to the extent of such excess; (ix) the account debtor
disputes liability or makes any claim with respect thereto (up to the
amount of such liability or claim), or is subject to any insolvency or
bankruptcy proceeding, or becomes insolvent, fails or goes out of a
material portion of its business; (x) the amount thereof consists of late
charges or finance charges; (xi) the amount thereof consists of a credit
balance more than ninety (90) days past due; (xii) the face amount
thereof exceeds Seventy Thousand Dollars ($70,000), unless accompanied by
evidence of shipment of the goods relating thereto satisfactory to FINOVA
in its Permitted Discretion; (xiii) the invoice constitutes a progress
<PAGE>
billing on a project not yet completed, except that the final billing at
such time as the matter has been completed and delivered to the customer
may be deemed an Eligible Receivable; or (xiv) the amount thereof is not
yet represented by an invoice or bill issued in the name of the
applicable account debtor.
Notwithstanding the foregoing to the contrary with respect to
subsections (i) and (viii) in the definition of Eligible Receivables,
with respect to Receivables due from Fayetteville Public Schools or any
entity affiliated with Fayetteville Public Schools (collectively referred
to "Fayetteville Public Schools"), a Receivable shall not be deemed to be
an Eligible Receivable if (i) (a) Fayetteville Public Schools has failed
to pay the Receivable within the period of sixty (60) days after the
invoice date; and (ii) to the extent that Fayetteville Public Schools'
total obligations due to Borrower exceeds twenty-five percent (25%) of
the aggregate outstanding balance of all Eligible Receivables, to the
extent of such excess.
"Equipment" means all of Borrower's present and hereafter acquired
machinery, molds, machine tools, motors, furniture, equipment,
furnishings, fixtures, trade fixtures, motor vehicles, tools, parts,
dyes, jigs, goods and other tangible personal property (other than
Inventory) of every kind and description used in Borrower's operations or
owned by Borrower and any interest in any of the foregoing, and all
attachments, accessories, accessions, replacements, substitutions,
additions or improvements to any of the foregoing, wherever located.
"ERISA" means the Employment Retirement Income Security Act of 1974,
as amended, and the regulations thereunder.
"ERISA Affiliate" means each trade or business (whether or not
incorporated and whether or not foreign) which is or may hereafter become
a member of a group of which Borrower is a member and which is treated as
a single employer under ERISA Section 4001(b)(1), or IRC Section 414.
"Event of Default" means any of the events set forth in Section 7.1
of this Agreement.
"Examination Fee" has the meaning set forth in the Schedule.
"Excess Availability" means, as of the date of determination
thereof, the amount by which the average daily total principal balance of
the Revolving Credit Loans facility which Borrower would be permitted to
have outstanding over the prior 30 days, based on the formulas and
reserves set forth in the Schedule, exceeds the sum of the Receivable
Loans and the Inventory Loans then actually outstanding, such excess then
being reduced by an amount necessary to provide for the payment of all
accounts payable of Borrower which are more than 30 days past due date
and all book overdrafts.
"Facility Fee" has the meaning set forth in the Schedule.
"FINOVA Affiliate" has the meaning set forth in Section 9.22 hereof.
"GAAP" means generally accepted accounting principles in the United
States of America as in effect from time to time as set forth in the
opinions and pronouncements of the Accounting Principles Board and the
American Institute of Certified Public Accountants and the statements and
pronouncements of the Financial Accounting Standards Boards which are
applicable to the circumstances as of the date of determination
consistently applied, except that, for the financial covenants set forth
in this Agreement, GAAP shall be determined on the basis of such
principles in effect on the date hereof and consistent with those used in
the preparation of the audited financial statements delivered to Lender
prior to the date hereof.
"General Intangibles" means all general intangibles of Borrower,
whether now owned or hereafter created or acquired by Borrower,
including, without limitation, all choses in action, causes of action,
corporate or other business records, Deposit Accounts, inventions,
<PAGE>
designs, drawings, blueprints, Trademarks, Licenses and Patents, names,
trade secrets, goodwill, copyrights, registrations, licenses, franchises,
customer lists, security and other deposits, rights in all litigation
presently or hereafter pending for any cause or claim (whether in
contract, tort or otherwise), and all judgments now or hereafter arising
therefrom, all claims of Borrower against FINOVA, rights to purchase or
sell real or personal property, rights as a licensor or licensee of any
kind, royalties, telephone numbers, proprietary information, purchase
orders, and all insurance policies and claims (including without
limitation credit, liability, property and other insurance) tax refunds
and claims, computer programs, discs, tapes and tape files, claims under
guaranties, security interests or other security held by or granted to
Borrower to secure payment of any of the Receivables by an account
debtor, all rights to indemnification and all other intangible property
of every kind and nature (other than Receivables).
"Guarantor(s)" has the meaning set forth in the Schedule.
"Indebtedness" means all of Borrower's present and future
obligations, liabilities, debts, claims and indebtedness, contingent,
fixed or otherwise, however evidenced, created, incurred, acquired, owing
or arising, whether under written or oral agreement, operation of law or
otherwise, and includes, without limiting the foregoing (i) the
Obligations, (ii) obligations and liabilities of any Person secured by a
lien, claim, encumbrance or security interest upon property owned by
Borrower, even though Borrower has not assumed or become liable therefor,
(iii) obligations and liabilities created or arising under any lease
(including Capital Leases) or conditional sales contract or other title
retention agreement with respect to property used or acquired by
Borrower, even though the rights and remedies of the lessor, seller or
lender are limited to repossession, (iv) all unfunded pension fund
obligations and liabilities and (v) deferred taxes.
"Initial Term" has the meaning set forth on the Schedule.
"Inventory" means all of Borrower's now owned and hereafter acquired
goods, merchandise or other personal property, wherever located, to be
furnished under any contract of service or held for sale or lease, all
raw materials, work in process, finished goods and materials and supplies
of any kind, nature or description which are or might be used or consumed
in Borrower's business or used in connection with the manufacture,
packing, shipping, advertising, selling or finishing of such goods,
merchandise or other personal property, and all documents of title or
other documents representing them.
"Inventory Loans" has the meaning set forth in the Schedule.
"IRC" means the Internal Revenue Code of 1986, as amended, and the
regulations thereunder.
"Loans" has the meaning set forth in Section 2.2 hereof.
"Loan Documents" means, collectively, this Agreement, any note or
notes executed by Borrower and payable to FINOVA, and any other present
or future agreement entered into in connection with this Agreement,
together with all alterations, amendments, changes, extensions,
modifications, refinancings, refundings, renewals, replacements,
restatements, or supplements, of or to any of the foregoing.
"Loan Party" means Borrower, each Guarantor, each Subordinating
Creditor and each other party (other than FINOVA) to any Loan Document.
"Loan Reserves" means, as of any date of determination, such amounts
as FINOVA may from time to time establish and revise in good faith
reducing the amount of Revolving Credit Loans and letters of credit which
would otherwise be available to Borrower under the lending formula(s)
provided in the Schedule: (a) to reflect events, conditions,
contingencies or risks which, as determined by FINOVA in good faith, do
or may affect either (i) the Collateral or any other property which is
<PAGE>
security for the Obligations or its value, (ii) the assets, business or
prospects of Borrower or any Guarantor or (iii) the security interests
and other rights of FINOVA in the Collateral (including the
enforceability, perfection and priority thereof) or (b) to reflect
FINOVA's good faith belief that any collateral report or financial
information furnished by or on behalf of Borrower or any Guarantor to
FINOVA is or may have been incomplete, inaccurate or misleading in any
material respect or (c) in respect of any state of facts which FINOVA
determines in good faith constitutes an Event of Default or may, with
notice or passage of time or both, constitute an Event of Default."
"Loan Year" means each twelve month period commencing on the Closing
Date.
"Management Fees" has the meaning set forth in the Schedule.
"Maximum Interest Rate" has the meaning set forth in Section 2.8(c)
hereof.
"Multiemployer Plan" means a "multiemployer plan" as defined in
ERISA Sections 3(37) or 4001(a)(3) or IRC Section 414(f) which covers
employees of Borrower or any ERISA Affiliate.
"Net Worth" at any date means the Borrower's net worth as determined
in accordance with GAAP.
"Obligations" means all present and future loans, advances, debts,
liabilities, obligations, covenants, duties and indebtedness at any time
owing by Borrower to FINOVA, whether evidenced by this Agreement, any
note or other instrument or document, whether arising from an extension
of credit, opening of a letter of credit, banker's acceptance, loan,
guaranty, indemnification or otherwise, whether direct or indirect
(including, without limitation, those acquired by assignment and any
participation by FINOVA in Borrower's debts owing to others), absolute or
contingent, due or to become due, including, without limitation, all
interest, charges, expenses, fees, attorney's fees, expert witness fees,
Examination Fee, letter of credit fees, Collateral Monitoring Fee,
Closing Fee, Facility Fee, Termination Fee, Minimum Interest Charge and
any other sums chargeable to Borrower hereunder or under any other
agreement with FINOVA.
"Overadvance" has the meaning set forth in Section 2.3.
"Overline" has the meaning set forth in Section 2.3.
"PBGC" means the Pension Benefit Guarantee Corporation.
"Permitted Discretion" means FINOVA's judgment exercised in good
faith based upon its consideration of any factor which FINOVA believes in
good faith: (i) will or could adversely affect the value of any
Collateral, the enforceability or priority of FINOVA's liens thereon or
the amount which FINOVA would be likely to receive (after giving
consideration to delays in payment and costs of enforcement) in the
liquidation of such Collateral; (ii) suggests that any collateral report
or financial information delivered to FINOVA by any Person on behalf of
the Borrower is incomplete, inaccurate or misleading in any material
respect; (iii) materially increases the likelihood of a bankruptcy,
reorganization or other insolvency proceeding involving the Borrower, any
Loan Party or any of the Collateral, or (iv) creates or reasonably could
be expected to create an Event of Default. In exercising such judgment,
FINOVA may consider such factors already included in or tested by the
definition of Eligible Receivables or Eligible Inventory, as well as any
of the following: (i) the financial and business climate of the
Borrower's industry and general macroeconomic conditions, (ii) changes in
collection history and dilution with respect to the Receivables,
(iii) changes in demand for, and pricing of, Inventory, (iv) changes in
any concentration of risk with respect to Receivables and/or Inventory,
and (v) any other factors that change the credit risk of lending to the
Borrower on the security of the Receivables and Inventory. The burden of
<PAGE>
establishing lack of good faith hereunder shall be on the Borrower.
"Permitted Encumbrance" means each of the liens, mortgages and other
security interests set forth on the Schedule.
"Person" means any individual, sole proprietorship, partnership,
joint venture, trust, unincorporated organization, association,
corporation, limited liability company, government, or any agency or
political division thereof, or any other entity.
"Plan" means any plan described in ERISA Section 3(2) maintained for
employees of Borrower or any ERISA Affiliate, other than a Multiemployer
Plan.
"Prepared Financials" means the balance sheets of Borrower as of the
date set forth in the Schedule in the section entitled 'Reporting
Requirements' , and as of each subsequent date on which audited balance
sheets are delivered to FINOVA from time to time hereunder, and the
related statements of operations, changes in stockholder's equity and
changes in cash flow for the periods ended on such dates.
"Prime Rate" has the meaning set forth in the Schedule.
"Prohibited Transaction" means any transaction described in Section
406 of ERISA which is not exempt by reason of Section 408 of ERISA, and
any transaction described in Section 4975(c) of the IRC which is not
exempt by reason of Section 4975(c)(2) of the IRC.
"Receivable Loans" has the meaning set forth on the Schedule.
"Receivables" means all of Borrower's now owned and hereafter
acquired accounts (whether or not earned by performance), proceeds of any
letters of credit naming Borrower as beneficiary, contract rights,
chattel paper, instruments, documents and all other forms of obligations
at any time owing to Borrower, all guaranties and other security
therefor, whether secured or unsecured, all merchandise returned to or
repossessed by Borrower, and all rights of stoppage in transit and all
other rights or remedies of an unpaid vendor, lienor or secured party.
"Renewal Term" has the meaning set forth on the Schedule.
"Reportable Event" means a reportable event described in Section
4043 of ERISA or the regulations thereunder, a withdrawal from a Plan
described in Section 4063 of ERISA, or a cessation of operations
described in Section 4068(f) of ERISA.
"Revolving Credit Loans" has the meaning set forth in the Schedule.
"Revolving Credit Limit" has the meaning set forth in the Schedule.
"Revolving Interest Rate" has the meaning set forth in the Schedule.
"Schedule" has the meaning set forth in the preamble.
"Senior Contractual Debt Service" means, for any period, the sum of
payments made or required to be made by Borrower during such period for
(i) interest and scheduled principal payments due on the Term Loans
(excluding voluntary prepayment and payments made from Borrower's Excess
Cash Flow, as required pursuant to the Schedule), and (ii) interest only
payments due on the Revolving Credit Loans facility plus the Collateral
Monitoring Fee, the Facility Fee and the Unused Line Fee.
"Start Date" has the meaning set forth in the Schedule.
"Subordinated Debt" means liabilities of Borrower the repayment of
which is subordinated, to the payment and performance of the Obligations,
pursuant to a subordination agreement acceptable to FINOVA in its sole
discretion.
"Subordinating Creditor" has the meaning set forth in the Schedule.
"Term Loans" has the meaning set forth in the Schedule.
"Termination Fee" has the meaning set forth in Section 9.2(d)
hereof.
"Total Contractual Debt Service" means, for any period, the sum of
payments made (or, as to clause (i) of this sentence, required to be
made) by Borrower during such period for (i) Senior Contractual Debt
Service, (ii) pursuant to the Seller Note and/or Noncompete Agreement,
<PAGE>
and (iii) interest and scheduled principal payments due on any and all
other Indebtedness of Borrower, including without limitation the
Subordinated Indebtedness.
"Total Facility" has the meaning set forth in Section 2.1 hereof.
"Trademarks, Copyrights, Licenses and Patents" means all of
Borrower's right, title and interest in and to, whether now owned or
hereafter acquired: (i) trademarks, trademark registrations, trade names,
trade name registrations, and trademark or trade name applications,
including without limitation such as are listed on the Schedule attached
hereto and made a part hereof, as the same may be amended from time to
time, and (a) renewals thereof, (b) all income, royalties, damages and
payments now and hereafter due and/or payable with respect thereto,
including without limitation, damages and payments for past or future
infringements thereof, (c) the right to sue for past, present and future
infringements thereof, (d) all rights corresponding thereto throughout
the world, and (e) the goodwill of the business operated by Borrower
connected with and symbolized by any trademarks or trade names; (ii)
copyrights, copyright registrations and copyright applications, including
without limitation such as are listed on the Schedule attached hereto and
made a part hereof, as the same may be amended from time to time, and (a)
renewals thereof, (b) all income, royalties, damages and payments now and
hereafter due and/or payable with respect thereto, including without
limitation, damages and payments for past or future infringements
thereof, (c) the right to sue for past, present and future infringements
thereof, and (d) all rights corresponding thereto throughout the world;
(iii) license agreements, including without limitation such as are listed
on the Schedule attached hereto and made a part hereof, and the right to
prepare for sale, sell and advertise for sale any Inventory now or
hereafter owned by Borrower and now or hereafter covered by such
licenses; and (iv) patents and patent applications, registered or
pending, including without limitation such as are listed on the Schedule
attached hereto, together with all income, royalties, shop rights,
damages and payments thereto, the right to sue for infringements thereof,
and all rights thereto throughout the world and all reissues, divisions,
continuations, renewals, extensions and continuations-in-part thereof.
"Unused Line Fee" has the meaning set forth in the Schedule.
1.2 Other Terms. All accounting terms used in this Agreement,
unless otherwise indicated, shall have the meanings given to such terms
in accordance with GAAP. All other terms contained in this Agreement,
unless otherwise indicated, shall have the meanings provided by the Code,
to the extent such terms are defined therein.
2. LOANS; INTEREST RATE AND OTHER CHARGES.
2.1 Total Facility . Upon the terms and conditions set forth herein
and provided that no Event of Default or event which, with the giving of
notice or the passage of time, or both, would constitute an Event of
Default, shall have occurred and be continuing, FINOVA shall, upon
Borrower's request, make advances to Borrower from time to time in an
aggregate outstanding principal amount not to exceed the Total Facility
amount (the "Total Facility") set forth on the Schedule hereto, subject
to deduction of reserves for accrued interest and such other reserves as
FINOVA deems proper from time to time, and less amounts FINOVA may be
obligated to pay in the future on behalf of Borrower. The Schedule is an
integral part of this Agreement and all references to "herein",
"herewith" and words of similar import shall for all purposes be deemed
to include the Schedule.
<PAGE>
2.2 Loans. Advances under the Total Facility ("Loans" and
individually, a "Loan") shall be comprised of the amounts shown on the
Schedule.
2.3 Overlines; Overadvances . If at any time or for any reason the
outstanding amount of advances (including all letters of credit) extended
or issued pursuant hereto exceeds any of the dollar limitations
("Overline") or percentage limitations ("Overadvance") in the Schedule,
then Borrower shall, upon FINOVA's demand, immediately pay to FINOVA, in
cash, the full amount of such Overline or Overadvance which, at FINOVA's
option, may be applied to reduce the outstanding principal balance of the
Loans and/or cash collateralize all or any part of any outstanding
letters of credit. Without limiting Borrower's obligation to repay to
FINOVA on demand the amount of any Overline or Overadvance, Borrower
agrees to pay FINOVA interest on the outstanding principal amount of any
Overline or Overadvance, on demand, at the rate set forth on the Schedule
and applicable to the Revolving Credit Loans.
2.4 Loan Account. All advances made hereunder (including without
limitation all advances made by FINOVA under or in connection with any
Letter of Credit) shall be added to and deemed part of the Obligations
when made. FINOVA may from time to time charge all Obligations of
Borrower to Borrower's loan account with FINOVA.
2.5 Interest; Fees. Borrower shall pay FINOVA interest on the
daily outstanding balance of the Obligations at the per annum rate set
forth on the Schedule. Borrower shall also pay FINOVA the fees set forth
on the Schedule.
2.6 Default Interest Rate. Upon the occurrence and during the
continuation of an Event of Default, Borrower shall pay FINOVA interest
on the daily outstanding balance of the Obligations and any L/C Fee at a
rate per annum which is two percent (2%) in excess of the rate which
would otherwise be applicable thereto pursuant to the Schedule.
2.7 Examination Fee . Borrower agrees to pay to FINOVA the
Examination Fee in the amount set forth on the Schedule in connection
with each audit or examination of Borrower performed by FINOVA prior to
or after the date hereof. Without limiting the generality of the
foregoing, Borrower shall pay to FINOVA an initial Examination Fee in an
amount equal to the amount set forth on the Schedule. Such initial
Examination Fee shall be deemed fully earned at the time of payment and
due and payable upon the closing of this transaction, and shall be
deducted from any good faith deposit paid by Borrower to FINOVA prior to
the date of this Agreement.
2.8 Excess Interest.
(a) The contracted for rate of interest of the loan contemplated
hereby, without limitation, shall consist of the following: (i) the
interest rate set forth on the Schedule, calculated and applied to the
principal balance of the Obligations in accordance with the provisions of
this Agreement; (ii) interest after an Event of Default, calculated and
applied to the amount of the Obligations in accordance with the
provisions hereof; and (iii) all Additional Sums (as herein defined), if
any. Borrower agrees to pay an effective contracted for rate of interest
which is the sum of the above-referenced elements. The Examination Fee,
attorneys fees, expert witness fees, letter of credit fees, collateral
monitoring fees, closing fees, facility fees, Termination Fees, Minimum
<PAGE>
Interest Charges, other charges, goods, things in action or any other
sums or things of value paid or payable by Borrower (collectively, the
"Additional Sums"), whether pursuant to this Agreement or any other
documents or instruments in any way pertaining to this lending
transaction, or otherwise with respect to this lending transaction, that
under any applicable law may be deemed to be interest with respect to
this lending transaction, for the purpose of any applicable law that may
limit the maximum amount of interest to be charged with respect to this
lending transaction, shall be payable by Borrower as, and shall be deemed
to be, additional interest and for such purposes only, the agreed upon
and "contracted for rate of interest" of this lending transaction shall
be deemed to be increased by the rate of interest resulting from the
inclusion of the Additional Sums.
(b) It is the intent of the parties to comply with the usury laws of
the State of Arizona (the "Applicable Usury Law"). Accordingly, it is
agreed that notwithstanding any provisions to the contrary in this
Agreement, or in any of the documents securing payment hereof or
otherwise relating hereto, in no event shall this Agreement or such
documents require the payment or permit the collection of interest in
excess of the maximum contract rate permitted by the Applicable Usury Law
(the "Maximum Interest Rate"). In the event (a) any such excess of
interest otherwise would be contracted for, charged or received from
Borrower or otherwise in connection with the loan evidenced hereby, or
(b) the maturity of the Obligations is accelerated in whole or in part,
or (c) all or part of the Obligations shall be prepaid, so that under any
of such circumstances the amount of interest contracted for, shared or
received in connection with the loan evidenced hereby, would exceed the
Maximum Interest Rate, then in any such event (1) the provisions of this
paragraph shall govern and control, (2) neither Borrower nor any other
Person now or hereafter liable for the payment of the Obligations shall
be obligated to pay the amount of such interest to the extent that it is
in excess of the Maximum Interest Rate, (3) any such excess which may
have been collected shall be either applied as a credit against the then
unpaid principal amount of the Obligations or refunded to Borrower, at
FINOVA's option, and (4) the effective rate of interest shall be
automatically reduced to the Maximum Interest Rate. It is further
agreed, without limiting the generality of the foregoing, that to the
extent permitted by the Applicable Usury Law; (x) all calculations of
interest which are made for the purpose of determining whether such rate
would exceed the Maximum Interest Rate shall be made by amortizing,
prorating, allocating and spreading during the period of the full stated
term of the loan evidenced hereby, all interest at any time contracted
for, charged or received from Borrower or otherwise in connection with
such loan; and (y) in the event that the effective rate of interest on
the loan should at any time exceed the Maximum Interest Rate, such excess
interest that would otherwise have been collected had there been no
ceiling imposed by the Applicable Usury Law shall be paid to FINOVA from
time to time, if and when the effective interest rate on the loan
otherwise falls below the Maximum Interest Rate, to the extent that
interest paid to the date of calculation does not exceed the Maximum
Interest Rate, until the entire amount of interest which would otherwise
have been collected had there been no ceiling imposed by the Applicable
Usury Law has been paid in full. Borrower further agrees that should the
Maximum Interest Rate be increased at any time hereafter because of a
change in the Applicable Usury Law, then to the extent not prohibited by
the Applicable Usury Law, such increases shall apply to all indebtedness
evidenced hereby regardless of when incurred; but, again to the extent
not prohibited by the Applicable Usury Law, should the Maximum Interest
<PAGE>
Rate be decreased because of a change in the Applicable Usury Law, such
decreases shall not apply to the indebtedness evidenced hereby regardless
of when incurred.
2.9 Principal Payments; Proceeds of Collateral.
(a) Principal Payments. Except where evidenced by notes or other
instruments issued or made by Borrower to FINOVA specifically containing
payment provisions which are in conflict with this Section 2.10 (in which
event the conflicting provisions of said notes or other instruments shall
govern and control), that portion of the Obligations consisting of
principal payable on account of Loans shall be payable by Borrower to
FINOVA immediately upon the earliest of (i) the receipt by FINOVA or
Borrower of any proceeds of any of the Collateral, to the extent of said
proceeds, (ii) the occurrence of an Event of Default in consequence of
which FINOVA elects to accelerate the maturity and payment of such loans,
or (iii) any termination of this Agreement pursuant to Section 9.2
hereof; provided, however, that any Overadvance or Overline shall be
payable on demand pursuant to the provisions of Section 2.3 hereof.
(b) Collections. Upon notice by FINOVA to Borrower, Borrower may
make collection of all Receivables for FINOVA by directing all account
debtors and other third parties to remit all payments owing to Borrower
to the lockbox established in connection with the Blocked Account or in
the alternative a Dominion Account Upon FINOVA's establishment of a
lockbox, in the event Borrower shall nevertheless directly receive any
payments or other financial proceeds of any Collateral, Borrower shall
receive all payments as trustee of FINOVA and immediately deliver all
payments to FINOVA in their original form as set forth below, duly
endorsed in blank or cause the same to be deposited into a Blocked
Account Dominion Account. All items of payment shall be deemed applied
by FINOVA on account of the Obligations three (3) Business Days after
receipt by FINOVA of good funds which have been finally credited to
FINOVA's account, whether such funds are received directly from Borrower
or from the Blocked Account bank or the Dominion Account bank, pursuant
to Section 2.9(c) hereof, and this provision shall apply regardless of
the amount of the Obligations outstanding or whether any Obligations are
outstanding; provided, that if any such good funds are received after
12:00 p.m. noon, New York time on any Business Day or at any time on any
day not constituting a Business Day, such funds shall be deemed received
on the immediately following Business Day. FINOVA is not, however,
required to credit Borrower's account for the amount of any item of
payment which is unsatisfactory to FINOVA in its Permitted Discretion and
FINOVA may charge Borrower's loan account for the amount of any item of
payment which is returned to FINOVA unpaid.
(c) Establishment of a Lockbox Account or Dominion Account. Unless
Borrower shall be otherwise directed by FINOVA in writing, Borrower shall
cause all proceeds of Collateral to be deposited into a lockbox account,
or such other "blocked account" as FINOVA may require (each, a "Blocked
Account") pursuant to an arrangement with such bank as may be selected by
Borrower and be acceptable to FINOVA which proceeds, unless otherwise
provided herein, shall be applied in payment of the Obligations in such
order as FINOVA determines in its sole discretion. Borrower shall issue
to any such bank an irrevocable letter of instruction directing said bank
to transfer such funds so deposited to FINOVA, either to any account
maintained by FINOVA at said bank or by wire transfer to appropriate
account(s) of FINOVA. All funds deposited in a Blocked Account shall
immediately become the sole property of FINOVA and Borrower shall obtain
<PAGE>
the agreement by such bank to waive any offset rights against the funds
so deposited. FINOVA assumes no responsibility for any Blocked Account
arrangement, including without limitation, any claim of accord and
satisfaction or release with respect to deposits accepted by any bank
thereunder. Alternatively, FINOVA may establish depository accounts in
the name of FINOVA at a bank or banks for the deposit of such funds
(each, a "Dominion Account") and Borrower shall deposit all proceeds of
Receivables and all cash proceeds of any sale of Inventory or, to the
extent permitted herein, Equipment or cause same to be deposited, in
kind, in such Dominion Accounts of FINOVA in lieu of depositing same to
Blocked Accounts, and, unless otherwise provided herein, all such funds
shall be applied by FINOVA to the Obligations in such order as FINOVA
determines in its sole discretion.
(d) Payments Without Deductions. Borrower shall pay principal,
interest, and all other amounts payable hereunder, or under any other
Loan Document, without any deduction whatsoever, including, but not
limited to, any deduction for any setoff or counterclaim.
(e) Collection Days Upon Repayment. In the event Borrower repays
the Obligations in full at any time hereafter, such payment in full shall
be credited (conditioned upon final collection) to Borrower's loan
account three (3) Business Days after FINOVA's receipt thereof.
(f) Monthly Accountings. FINOVA shall provide Borrower monthly with
an account of advances, charges, expenses and payments made pursuant to
this Agreement. Such account shall be deemed correct, accurate and
binding on Borrower and an account stated (except for reverses and
reapplications of payments made and corrections of errors discovered by
FINOVA), unless Borrower notifies FINOVA in writing to the contrary
within thirty (30) days after each account is rendered, describing the
nature of any alleged errors or admissions.
2.11 Application of Collateral. Except as otherwise provided
herein, FINOVA shall have the continuing and exclusive right to apply or
reverse and re-apply any and all payments to any portion of the
Obligations in such order and manner as FINOVA shall determine in its
sole discretion. To the extent that Borrower makes a payment or FINOVA
receives any payment or proceeds of the Collateral for Borrower's benefit
which is subsequently invalidated, declared to be fraudulent or
preferential, set aside or required to be repaid to a trustee, debtor in
possession, receiver or any other party under any bankruptcy law, common
law or equitable cause, or otherwise, then, to such extent, the
Obligations or part thereof intended to be satisfied shall be revived and
continue as if such payment or proceeds had not been received by FINOVA.
2.12 Application of Payments. The amount of all payments or
amounts received by FINOVA with respect to the Loan shall be applied to
the extent applicable under this Agreement: (i) first, to accrued
interest through the date of such payment, including any Default
Interest; (ii) then, to any late fees, overdue risk assessments,
Examination Fee and expenses, collection fees and expenses and any other
fees and expenses due to FINOVA hereunder; and (iii) last, the remaining
balance, if any, to the unpaid principal balance of the Loan; provided
however, while an Event of Default exists under this Agreement, or under
any other Loan Document, each payment hereunder shall be (x) held as cash
collateral to secure Obligations relating to any letters of credit or
other contingent obligations arising under the Loan Documents and/or (y)
applied to amounts owed to FINOVA by Borrower as FINOVA in its sole
<PAGE>
discretion may determine. In calculating interest and applying payments
as set forth above: (a) interest shall be calculated and collected
through the date a payment is actually applied by FINOVA under the terms
of this Agreement; (b) interest on the outstanding balance shall be
charged during any grace period permitted hereunder; (c) at the end of
each month, all accrued and unpaid interest and other charges provided
for hereunder shall be added to the principal balance of the Loan; and
(d) to the extent that Borrower makes a payment or FINOVA receives any
payment or proceeds of the Collateral for Borrower's benefit that is
subsequently invalidated, set aside or required to be repaid to any other
Person, then, to such extent, the Obligations intended to be satisfied
shall be revived and continue as if such payment or proceeds had not been
received by FINOVA and FINOVA may adjust the Loan balances as FINOVA, in
its sole discretion, deems appropriate under the circumstances.
2.13 Notification of Closing. Borrower shall provide FINOVA with
at least forty-eight (48) hours prior written notice of the Closing Date,
to enable FINOVA to arrange for the availability of funds. In the event
the closing does not take place on the date specified in Borrower's
notice to FINOVA, other than through the fault of FINOVA, Borrower agrees
to reimburse FINOVA for FINOVA's costs to maintain the necessary funds
available for the closing, at the Term Interest Rate with respect to the
amount specified in the Schedule, and at the Revolving Interest Rate with
respect to an amount equal to the initial advance under the Revolving
Credit Loans facility which is to be made on the Closing Date, for the
number of days which elapse between the date specified in Borrower's
notice and the date upon which the closing actually occurs (which number
of days shall not include the date specified in Borrower's notice, but
shall include the Closing Date).
3. SECURITY.
3.1 Security Interest in the Collateral . To secure the payment and
performance of the Obligations when due, Borrower hereby grants to FINOVA
a first priority security interest (subject only to Permitted
Encumbrances) in all of Borrower's now owned or hereafter acquired or
arising Inventory, Equipment, Receivables, life insurance policies and
the proceeds thereof, Trademarks, Copyrights, Licenses and Patents,
Investment Property (as defined in Section 9-115 of the Code) and General
Intangibles, including, without limitation, all of Borrower's Deposit
Accounts, money, any and all property now or at any time hereafter in
FINOVA's possession (including claims and credit balances), and all
proceeds (including proceeds of any insurance policies, proceeds of
proceeds and claims against third parties), all products and all books
and records and computer data related to any of the foregoing (all of the
foregoing, together with all other property in which FINOVA may be
granted a lien or security interest, is referred to herein, collectively,
as the "Collateral").
3.2 Perfection and Protection of Security Interest. Borrower
shall, at its expense, take all actions requested by FINOVA at any time
to perfect, maintain, protect and enforce FINOVA's first priority
security interest and other rights in the Collateral and the priority
thereof from time to time, including, without limitation, (i) executing
and filing financing or continuation statements and amendments thereof
and executing and delivering such documents and titles in connection with
motor vehicles as FINOVA shall require, all in form and substance
satisfactory to FINOVA, (ii) maintaining a perpetual inventory and
complete and accurate stock records, (iii) delivering to FINOVA warehouse
<PAGE>
receipts covering any portion of the Collateral located in warehouses and
for which warehouse receipts are issued, and transferring Inventory to
warehouses designated by FINOVA, (iv) placing notations on Borrower's
books of account to disclose FINOVA's security interest therein and (v)
delivering to FINOVA all letters of credit on which Borrower is named
beneficiary. FINOVA may file, without Borrower's signature, one or more
financing statements disclosing FINOVA's security interest under this
Agreement. Borrower agrees that a carbon, photographic, photostatic or
other reproduction of this Agreement or of a financing statement is
sufficient as a financing statement. If any Collateral is at any time in
the possession or control of any warehouseman, bailee or any of
Borrower's agents or processors, Borrower shall notify such Person of
FINOVA's security interest in such Collateral and, upon FINOVA's request,
instruct them to hold all such Collateral for FINOVA's account subject to
FINOVA's instructions. From time to time, Borrower shall, upon FINOVA's
request, execute and deliver confirmatory written instruments pledging
the Collateral to FINOVA, but Borrower's failure to do so shall not
affect or limit FINOVA's security interest or other rights in and to the
Collateral. Until the Obligations have been fully satisfied and FINOVA's
obligation to make further advances hereunder has terminated, FINOVA's
security interest in the Collateral shall continue in full force and
effect.
3.3 Preservation of Collateral. FINOVA may, in its Permitted
Discretion, at any time discharge any lien or encumbrance on the
Collateral or bond the same, pay any insurance, maintain guards, pay any
service bureau, obtain any record or take any other action to preserve
the Collateral and charge the cost thereof to Borrower's loan account as
an Obligation.
3.4 Insurance . Borrower will maintain and deliver evidence to
FINOVA of such insurance as is required by FINOVA, written by insurers,
in amounts, and with lender's loss payee, additional insured, and other
endorsements, satisfactory to FINOVA. All premiums with respect to such
insurance shall be paid by Borrower as and when due. Accurate and
certified copies of the policies shall be delivered by Borrower to
FINOVA. If Borrower fails to comply with this Section, FINOVA may (but
shall not be required to) procure such insurance and endorsements at
Borrower's expense and charge the cost thereof to Borrower's loan account
as an Obligation.
3.5 Collateral Reporting; Inventory.
(a) Invoices. Borrower shall not re-date any invoice or sale from
the original date thereof or make sales on extended terms beyond those
customary in Borrower's industry, or otherwise extend or modify the term
of any Receivable. If Borrower becomes aware of any matter affecting any
Receivable, including information affecting the credit of the account
debtor thereon, Borrower shall promptly notify FINOVA in writing.
(b) Instruments. In the event any Receivable is or becomes
evidenced by a promissory note, trade acceptance or any other instrument
for the payment of money, Borrower shall immediately deliver such
instrument to FINOVA appropriately endorsed to FINOVA and, regardless of
the form of any presentment, demand, notice of dishonor, protest and
notice of protest with respect thereto, Borrower shall remain liable
thereon until such instrument is paid in full.
<PAGE>
(c) Physical Inventory. Borrower shall conduct a physical count of
the Inventory at such intervals as FINOVA reasonably requests, no more
frequently than annually, except in the Event of Default, and promptly
supply FINOVA with a copy of such accounts accompanied by a report of the
value (calculated at the lower of cost or market value) of the Inventory
and such additional information with respect to the Inventory as FINOVA
may request from time to time.
(d) Returns. For so long as no Event of Default has occurred and is
continuing and subject to the provisions of Section 3.6(b), if any
account debtor returns any Inventory to Borrower in the ordinary course
of its business, Borrower shall promptly determine the reason for such
return and promptly issue a credit memorandum to the account debtor
(sending a copy to FINOVA) in the appropriate amount. In the event any
attempted return occurs after the occurrence of any Event of Default,
Borrower shall (i) hold the returned Inventory in trust for FINOVA,
(ii) segregate all returned Inventory from all of Borrower's other
property, (iii) conspicuously label the returned Inventory as FINOVA's
property, and (iv) immediately notify FINOVA of the return of any
Inventory, specifying the reason for such return, the location and
condition of the returned Inventory, and on FINOVA's request deliver such
returned Inventory to FINOVA.
(e) Borrower shall not consign any Inventory.
3.6 Receivables.
(a) Eligibility. (i) Borrower represents and warrants that each
Receivable covers and shall cover a bona fide sale or lease and delivery
by it of goods or the rendition by it of services in the ordinary course
of its business, and shall be for a liquidated amount and FINOVA's
security interest shall not be subject to any offset, deduction,
counterclaim, rights of return or cancellation, lien or other condition.
If any representation or warranty herein is breached as to any Receivable
or any Receivable ceases to be an Eligible Receivable for any reason
other than payment thereof, then FINOVA may, in addition to its other
rights hereunder, designate any and all Receivables owing by that account
debtor as not Eligible Receivables; provided, that FINOVA shall in any
such event retain its security interest in all Receivables, whether or
not Eligible Receivables, until the Obligations have been fully satisfied
and FINOVA's obligation to provide loans hereunder has terminated.
(ii) FINOVA at any time shall be entitled to (i) establish and
increase or decrease reserves against Eligible Receivables and Eligible
Inventory, (ii) reduce the advance rates in the Schedule or restore such
advance rates to any level equal to or below the advance rates set forth
in the Schedule or (iii) impose additional restrictions (or eliminate the
same) to the standards of eligibility set forth in the definitions of
"Eligible Receivables" and "Eligible Inventory," in the exercise of its
Permitted Discretion. FINOVA may but shall not be required to rely on
the schedules an/or reports delivered to FINOVA in connection herewith in
determining the then eligibility of Receivables and Inventory. Reliance
thereon by FINOVA from time to time shall not be deemed to limit the
right of FINOVA to revise advance rates or standards of eligibility as
provided above.
(b) Disputes. Borrower shall notify FINOVA promptly of all disputes
or claims and settle or adjust such disputes or claims at no expense to
FINOVA, but no discount, credit or allowance shall be granted to any
<PAGE>
account debtor and no returns of merchandise shall be accepted by
Borrower without FINOVA's consent, except for discounts, credits and
allowances made or given in the ordinary course of Borrower's business.
FINOVA may, at any time after the occurrence of an Event of Default,
settle or adjust disputes or claims directly with account debtors for
amounts and upon terms which FINOVA considers advisable in its reasonable
credit judgment and, in all cases, FINOVA shall credit Borrower's loan
account with only the net amounts received by FINOVA in payment of any
Receivables.
3.7 Equipment. Borrower shall keep and maintain the Equipment in
good operating condition and repair and make all necessary replacements
thereto to maintain and preserve the value and operating efficiency
thereof at all times consistent with Borrower's past practice, ordinary
wear and tear excepted. Borrower shall not permit any item of Equipment
to become a fixture (other than a trade fixture) to real estate or an
accession to other property.
3.8 Other Liens; No Disposition of Collateral. Borrower
represents, warrants and covenants that except for FINOVA's security
interest, Permitted Encumbrances, and such other liens, claims and
encumbrances as may be permitted by FINOVA in its sole discretion from
time to time in writing, (a) all Collateral is and shall continue to be
owned by it free and clear of all liens, claims and encumbrances
whatsoever and (b) Borrower shall not, without FINOVA's prior written
approval, sell, encumber or dispose of or permit the sale, encumbrance or
disposal of any Collateral or all or any substantial part of any of its
other assets (or any interest of Borrower therein), except for the sale
of Inventory in the ordinary course of Borrower's business. In the event
FINOVA gives any such prior written approval with respect to any such
sale of Collateral, the same may be conditioned on the sale price being
equal to, or greater than, an amount acceptable to FINOVA. The proceeds
of any such sales of Collateral shall be remitted to FINOVA pursuant to
this Agreement for application to the Obligations.
3.9 Collateral Security. The Obligations shall constitute one loan
secured by the Collateral. FINOVA may, in its sole discretion, (i)
exchange, enforce, waive or release any of the Collateral, (ii) apply
Collateral and direct the order or manner of sale thereof as it may
determine, and (iii) settle, compromise, collect or otherwise liquidate
any Collateral in any manner without affecting its right to take any
other action with respect to any other Collateral.
4. CONDITIONS OF CLOSING.
4.1 Initial Advance. The obligation of FINOVA to make the initial
advance hereunder or to issue or arrange for the issuance of the initial
letter of credit hereunder is subject to the fulfillment, to the
satisfaction of FINOVA and its counsel, of each of the following
conditions on or prior to the date set forth on the Schedule:
(a) Loan Documents. FINOVA shall have received each of the
following Loan Documents: (i) the Agreement fully and properly executed
by Borrower; (ii) promissory notes in such amounts and on such terms and
conditions as FINOVA shall specify, executed by Borrower; (iii)
Guaranties executed by each of the Guarantors and/or Validity and Support
Agreements executed by the applicable parties; (iv) such security
agreements, intellectual property assignments, pledge agreements,
mortgages and deeds of trust as FINOVA may require with respect to this
<PAGE>
Agreement and any Guaranties, executed by each of the parties thereto
and, if applicable, duly acknowledged for recording or filing in the
appropriate governmental offices; (v) Subordination Agreements in form
and substance acceptable to FINOVA, executed by each of the Subordinating
Creditors, together with copies of all instruments subject thereto
showing a legend indicating such subordination; (vi) such Blocked
Account or Dominion Account agreements as it shall determine; and (vii)
such other documents, instruments and agreements in connection herewith
as FINOVA shall require, executed, certified and/or acknowledged by such
parties as FINOVA shall designate;
(b) Minimum Excess Availability. Borrower shall have Excess
Availability under the Revolving Credit Loans facility of not less than
the amount specified in the Schedule, after giving effect to the initial
advance hereunder and after giving effect to any applicable Loan Reserves
against borrowing availability under the Revolving Credit Loans.
(c) Terminations by Existing Lender. Borrower's existing lender(s)
shall have executed and delivered UCC termination statements and other
documentation evidencing the termination of its liens and security
interests in the assets of Borrower or a subordination agreement in form
and substance satisfactory to FINOVA in its sole discretion;
(d) Charter Documents. FINOVA shall have received copies of
Borrower's By-laws and Articles or Certificate of Incorporation, as
amended, modified, or supplemented to the Closing Date, certified by the
Secretary of Borrower;
(e) Good Standing. FINOVA shall have received a certificate of
corporate status with respect to Borrower, dated within ten (10) days of
the Closing Date, by the Secretary of State of the state of incorporation
of Borrower, which certificate shall indicate that Borrower is in good
standing in such state;
(f) Foreign Qualification. FINOVA shall have received certificates
of corporate status with respect to Borrower and each other Loan Party,
each dated within ten (10) days of the Closing Date, issued by the
Secretary of State of each state in which such party's failure to be duly
qualified or licensed would have a material adverse effect on its
financial condition or assets, indicating that such party is in good
standing;
(g) Authorizing Resolutions and Incumbency. FINOVA shall have
received a certificate from the Secretary of Borrower attesting to (i)
the adoption of resolutions of Borrower's Board of Directors, and
shareholders or members if necessary, authorizing the borrowing of money
from FINOVA and execution and delivery of this Agreement and the other
Loan Documents to which Borrower is a party, and authorizing specific
officers of Borrower to execute same, and (ii) the authenticity of
original specimen signatures of such officers;
(h) Insurance. FINOVA shall have received the insurance
certificates and certified copies of policies required by Section 3.4
hereof, in form and substance satisfactory to FINOVA and its counsel,
together with an additional insured endorsement in favor of FINOVA with
respect to all liability policies and a lender's loss payable endorsement
in favor of FINOVA with respect to all casualty and business interruption
policies, each in form and substance acceptable to FINOVA and its
counsel;
<PAGE>
(i) Title Insurance. FINOVA shall have received binding commitments
to issue such title insurance with respect to Collateral or security for
Guaranties which is comprised of real property as it shall determine;
(j) Searches; Certificates of Title. FINOVA shall have received
searches reflecting the filing of its financing statements and fixture
filings in such jurisdictions as it shall determine, and shall have
received certificates of title with respect to the Collateral which shall
have been duly executed in a manner sufficient to perfect all of the
security interests granted to FINOVA;
(k) Landlord, Bailee and Mortgagee Waivers. FINOVA shall have
received landlord, bailee and/or mortgagee waivers from the lessors,
bailees and/or mortgagees of all locations where any Collateral is
located;
(l) Fees. Borrower shall have paid all fees payable by it on the
Closing Date pursuant to this Agreement;
(m) Opinion of Counsel. FINOVA shall have received an opinion of
Borrower's counsel covering such matters as FINOVA shall determine in its
sole discretion;
(n) Officer Certificate. FINOVA shall have received a certificate
of the President and the Chief Financial Officer or similar official of
Borrower, attesting to the accuracy of each of the representations and
warranties of Borrower set forth in this Agreement and the fulfillment of
all conditions precedent to the initial advance hereunder;
(o) Solvency Certificate. If requested, FINOVA shall have received
a signed certificate of the Borrower's duly elected Chief Financial
Officer concerning the solvency and financial condition of Borrower, on
FINOVA's standard form;
(p) Blocked Account. The Blocked Account referred to in Section
2.10(c) hereof shall have been established to the satisfaction of FINOVA
in its sole discretion;
(q) Search and References. FINOVA shall have received and approved
the results of UCC, tax lien, litigation, judgment, and bankruptcy
searches regarding Buyer, Borrower, Seller, Investors and such members of
the senior management of Seller as shall remain with Borrower, and shall
have received satisfactory customer, vendor and credit reference checks
on Seller.
(r) Lease and Landlord's Consent. FINOVA shall require that the
Lease in favor of Borrower regarding Borrower's facility at the
location(s) listed in the Schedule shall be for a term (including renewal
options) through the Maturity Date. FINOVA shall further require that,
prior to the Closing Date, Seller enter in a Landlord's Consent Agreement
and Estoppel Certificate, in form and substance satisfactory to FINOVA to
cure defaults under such lease and continue in occupancy of such premises
in the event of defaults by Borrower pursuant either to the Lease or the
Loan Documents.]
(s) No Material Adverse Changes. Prior to the Closing Date, there
shall have occurred no material adverse change in the financial condition
of Borrower, or in the condition of the assets of Borrower, from that
shown on the draft financial statements for Borrower dated on the date
<PAGE>
set forth in the Schedule. At the closing, Borrower shall deliver to
FINOVA an officer's certification confirming that Borrower is unaware of
the existence of any such material adverse change in Borrower's financial
condition.
(t) Material Agreements. FINOVA shall have received, reviewed and
approved all material agreements to which Borrower shall be a party,
including any such agreements of Seller which Borrower shall assume.
(u) Projections. Borrower shall submit cash flow projections and
pro forma balance sheet with adjusting entries (i) showing that the
proposed financing will provide sufficient funds for the Borrower's
projected working capital needs, and (ii) showing: (1) that the Borrower
will have reasonably sufficient capital for the conduct of its business
following the initial funding, and (2) that the Borrower will not incur
debts beyond its ability to pay such debts as they mature.
(v) Opinions. To the extent any Person other than Borrower shall be
parties to the Loan Documents, FINOVA reserves the right to require
satisfactory opinions of counsel for each such Person concerning the
proper organization of such Person and the due authorization, execution,
delivery, enforceability, validity and binding effect of the Loan
Documents to which such Person is a party. Each such opinion of counsel
shall confirm, to the satisfaction of FINOVA, that the opinion is being
delivered to FINOVA at the instruction of the party represented by such
counsel, that FINOVA is entitled to rely on such opinion and that for
purposes of such reliance, FINOVA is deemed to be in privity with the
opining counsel.
(w) ADA Compliance. If necessary, as of the Closing Date, Borrower
shall be in compliance with the Americans with Disabilities Act of 1990
("ADA"), or, if any renovations of Borrower's facilities or modifications
of Borrower's employment practices shall be required to bring them into
compliance with the ADA, review and approval by FINOVA of Borrower's
proposed plan to come into such compliance. Borrower shall deliver
representations and warranties to FINOVA concerning Borrower's compliance
with the ADA, and no evidence shall have come to the attention of FINOVA
indicating that Borrower is not in compliance with the ADA (except to the
extent that FINOVA has reviewed and approved Borrower's plan to come into
compliance).
(x) Subordination and Intercreditor Agreements. FINOVA and each
Subordinating Creditor shall have entered into a Subordination Agreement,
in form and substance satisfactory to FINOVA.
(y) Schedule Conditions. Borrower shall have complied with all
additional conditions precedent as set forth in the Schedule attached
hereto.
(z) Other Matters. All other documents and legal matters in
connection with the transactions contemplated by this Agreement shall
have been delivered, executed and recorded and shall be in form and
substance satisfactory to FINOVA and its counsel.
4.2 Subsequent Advances. The obligation of FINOVA to make any
advance or issue or cause any letter of credit to be issued hereunder
(including the initial advance or Letter of Credit) shall be subject to
the further conditions precedent that, on and as of the date of such
advance or letter of credit issuance: (a) the representations and
<PAGE>
warranties of Borrower set forth in this Agreement shall be accurate,
before and after giving effect to such advance or issuance and to the
application of any proceeds thereof; (b) no Event of Default and no
event which, with notice or passage of time or both, would constitute an
Event of Default has occurred and is continuing, or would result from
such advance or issuance or from the application of any proceeds thereof;
(c) no material adverse change has occurred in the Borrower's business,
operations, financial condition, in the condition of the Collateral or
other assets of Borrower or in the prospect of repayment of the
Obligations; and (d) FINOVA shall have received such other approvals,
opinions or documents as FINOVA shall reasonably request.
5. REPRESENTATIONS AND WARRANTIES.
Borrower represents and warrants that:
5.1 Due Organization. It is a corporation duly organized, validly
existing and in good standing under the laws of the State set forth on
the Schedule, is qualified and authorized to do business and is in good
standing in all states in which such qualification and good standing are
necessary in order for it to conduct its business and own its property,
and has all requisite power and authority to conduct its business as
presently conducted, to own its property and to execute and deliver each
of the Loan Documents to which it is a party and perform all of its
Obligations thereunder, and has not taken any steps to wind-up, dissolve
or otherwise liquidate its assets;
5.2 Other Names. Borrower has not, during the preceding five (5)
years, been known by or used any other corporate or fictitious name
except as set forth on the Schedule, nor has Borrower been the surviving
corporation of a merger or consolidation or acquired all or substantially
all of the assets of any Person during such time;
5.3 Due Authorization. The execution, delivery and performance by
Borrower of the Loan Documents to which it is a party have been
authorized by all necessary corporate action and do not and shall not
constitute a violation of any applicable law or of Borrower's Articles or
Certificate of Incorporation or By-Laws or any other document, agreement
or instrument to which Borrower is a party or by which Borrower or its
assets are bound;
5.4 Binding Obligation. Each of the Loan Documents to which
Borrower is a party is the legal, valid and binding obligation of
Borrower enforceable against Borrower in accordance with its terms;
5.5 Intangible Property. Borrower possesses adequate assets,
licenses, patents, patent applications, copyrights, trademarks, trademark
applications and trade names for the present and planned future conduct
of its business without any known conflict with the rights of others, and
each is valid and has been duly registered or filed with the appropriate
governmental authorities; each of Borrower's patents, patent
applications, copyrights, trademarks and trademark applications which
have been registered or filed with any governmental authority (including
the U.S. Patent and Trademark Office and the Library of Congress) are
listed by name, date and filing number on the Schedule;
<PAGE>
5.6 Capital. Borrower has capital sufficient to conduct its
business, is able to pay its debts as they mature, and owns property
having a fair salable value greater than the amount required to pay all
of its debts (including contingent debts);
5.7 Material Litigation. Borrower has no pending or overtly
threatened litigation, actions or proceedings which would materially and
adversely affect its business, assets, operations, prospects or
condition, financial or otherwise, or the Collateral or any of FINOVA's
interests therein;
5.8 Title; Security Interests of FINOVA. Borrower has good,
indefeasible and merchantable title to the Collateral and, upon the
execution and delivery of the Loan Documents, the filing of UCC-1
Financing Statements, delivery of the certificate(s) evidencing any
pledged securities, the filing of any collateral assignments or security
agreements regarding Borrower, Trademarks, Copyrights, Licenses and/or
Patents, if any, with the appropriate governmental offices and the
recording of any mortgages or deeds of trust with respect to real
property, in each case in the appropriate offices, this Agreement and
such documents shall create valid and perfected first priority liens in
the Collateral, subject only to Permitted Encumbrances;
5.9 Restrictive Agreements; Labor Contracts. Borrower is not a
party or subject to any contract or subject to any charge, corporate
restriction, judgment, decree or order materially and adversely affecting
its business, assets, operations, prospects or condition, financial or
otherwise, or which restricts its right or ability to incur Indebtedness,
and it is not party to any labor dispute. In addition, no labor contract
is scheduled to expire during the Initial Term of this Agreement, except
as disclosed to FINOVA in writing prior to the date hereof;
5.10 Laws. Borrower is not in violation of any applicable statute,
regulation, ordinance or any order of any court, tribunal or governmental
agency, in any respect materially and adversely affecting the Collateral
or its business, assets, operations, prospects or condition, financial or
otherwise;
5.11 Consents. Borrower has obtained or caused to be obtained or
issued any required consent of a governmental agency or other Person in
connection with the financing contemplated hereby;
5.12 Defaults. Borrower is not in default with respect to any
note, indenture, loan agreement, mortgage, lease, deed or other agreement
to which it is a party or by which it or its assets are bound, nor has
any event occurred which, with the giving of notice or the lapse of time,
or both, would cause such a default;
5.13 Financial Condition. The Prepared Financials fairly present
Borrower's financial condition and results of operations and those of
such other Persons described therein as of the date thereof in accordance
with GAAP; there are no material omissions from the Prepared Financials
or other facts or circumstances not reflected in the Prepared Financials;
and there has been no material and adverse change in such financial
condition or operations since the date of the initial Prepared Financials
delivered to FINOVA hereunder;
<PAGE>
5.14 ERISA. None of Borrower, any ERISA Affiliate, or any Plan is
or has been in violation of any of the provisions of ERISA, any of the
qualification requirements of IRC Section 401(a) or any of the published
interpretations thereunder, nor has Borrower or any ERISA Affiliate
received any notice to such effect. No notice of intent to terminate a
Plan has been filed under Section 4041 of ERISA, nor has any Plan been
terminated under ERISA. The PBGC has not instituted proceedings to
terminate, or appointed a trustee to administer, a Plan. No lien upon
the assets of Borrower has arisen with respect to a Plan. No prohibited
transaction or Reportable Event has occurred with respect to a Plan.
Neither Borrower nor any ERISA Affiliate has incurred any withdrawal
liability with respect to any Multiemployer Plan. Borrower and each
ERISA Affiliate have made all contributions required to be made by them
to any Plan or Multiemployer Plan when due. There is no accumulated
funding deficiency in any Plan, whether or not waived;
5.15 Taxes. Borrower has filed all tax returns and such other
reports as it is required by law to file and has paid or made adequate
provision for the payment on or prior to the date when due of all taxes,
assessments and similar charges that are due and payable;
5.16 Locations; Federal Tax ID No. Borrower's chief executive
office and the offices and locations where it keeps the Collateral
(except for Inventory in transit) are at the locations set forth on the
Schedule, except to the extent that such locations may have been changed
after notice to FINOVA in accordance with Section 6.4 hereof; Borrower's
federal tax identification number is as shown on the Schedule;
5.17 Business Relationships. There exists no actual or threatened
termination, cancellation or limitation of, or any modification or change
in, the business relationship between Borrower and any customer or any
group of customers whose purchases individually or in the aggregate are
material to the business of Borrower, or with any material supplier, and
there exists no present condition or state of facts or circumstances
which would materially and adversely affect Borrower or prevent Borrower
from conducting such business after the consummation of the transactions
contemplated by this Agreement in substantially the same manner in which
it has heretofore been conducted; and
5.18 Reaffirmations. Each request for a loan made by Borrower
pursuant to this Agreement shall constitute (i) an automatic
representation and warranty by Borrower to FINOVA that there does not
then exist any Event of Default and (ii) a reaffirmation as of the date
of said request of all of the representations and warranties of Borrower
contained in this Agreement and the other Loan Documents.
6. COVENANTS.
6.1 Affirmative Covenants. Borrower covenants that, so long as any
Obligation remains outstanding and this Agreement is in effect, it shall:
6.1.1 Taxes. File all tax returns and pay or make adequate
provision for the payment of all taxes, assessments and other charges on
or prior to the date when due;
<PAGE>
6.1.2 Notice of Litigation. Promptly notify FINOVA in
writing of any litigation, suit or administrative proceeding which may
materially and adversely affect the Collateral or Borrower's business,
assets, operations, prospects or condition, financial or otherwise,
whether or not the claim is covered by insurance;
6.1.3 ERISA. Notify FINOVA in writing (i) promptly upon
the occurrence of any event described in Paragraph 4043 of ERISA, other
than a termination, partial termination or merger of a Plan or a transfer
of a Plan's assets and (ii) prior to any termination, partial termination
or merger of a Plan or a transfer of a Plan's assets;
6.1.4 Change in Location. Notify FINOVA in writing forty-
five (45) days prior to any change in the location of Borrower's chief
executive office or the location of any Collateral, or Borrower's opening
or closing of any other place of business;
6.1.5 Corporate Existence. Maintain its corporate
existence and its qualification to do business and good standing in all
states necessary for the conduct of its business and the ownership of its
property and maintain adequate assets, licenses, patents, copyrights,
trademarks and trade names for the conduct of its business;
6.1.6 Labor Disputes. Promptly notify FINOVA in writing of
any labor dispute to which Borrower is or may become subject and the
expiration of any labor contract to which Borrower is a party or bound;
6.1.7 Violations of Law. Promptly notify FINOVA in writing
of any violation of any law, statute, regulation or ordinance of any
governmental entity, or of any agency thereof, applicable to Borrower
which may materially and adversely affect the Collateral or Borrower's
business, assets, prospects, operations or condition, financial or
otherwise;
6.1.8 Defaults. Notify FINOVA in writing within five (5)
Business Days of Borrower's default under any note, indenture, loan
agreement, mortgage, lease or other agreement to which Borrower is a
party or by which Borrower is bound, or of any other default under any
Indebtedness of Borrower;
6.1.9 Capital Expenditures. Promptly notify FINOVA in
writing of the making of any Capital Expenditure materially affecting
Borrower's business, assets, prospects, operations or condition,
financial or otherwise, except to the extent permitted in the Schedule;
6.1.10 Books and Records. Keep adequate records and books
of account with respect to its business activities in which proper
entries are made in accordance with GAAP, reflecting all of its financial
transactions;
6.1.11 Leases; Warehouse Agreements. Provide FINOVA with
(i) copies of all agreements between Borrower and any landlord,
warehouseman or bailee which owns any premises at which any Collateral
may, from time to time, be located (whether for processing, storage or
otherwise), and (ii) without limiting the landlord, bailee and/or
mortgagee waivers to be provided pursuant to Section 4.1(j) hereof,
additional landlord, bailee and/or mortgagee waivers in form acceptable
to FINOVA with respect to all locations where any Collateral is hereafter
located;
<PAGE>
6.1.12 Additional Documents. At FINOVA's request, promptly
execute or cause to be executed and delivered to FINOVA any and all
documents, instruments or agreements deemed necessary by FINOVA to
facilitate the collection of the Obligations or the Collateral or
otherwise to give effect to or carry out the terms or intent of this
Agreement or any of the other Loan Documents. Without limiting the
generality of the foregoing, if any of the Receivables with a face value
in excess of $1,000 arises out of a contract with the United States of
America or any department, agency, subdivision or instrumentality
thereof, Borrower shall promptly notify FINOVA of such fact in writing
and shall execute any instruments and take any other action required or
requested by FINOVA to comply with the provisions of the Federal
Assignment of Claims Act; and
6.1.13 Financial Covenants. Comply with the financial
covenants set forth on the Schedule.
6.2 Negative Covenants. Without FINOVA's prior written consent,
which consent FINOVA may withhold in its sole discretion, so long as any
Obligation remains outstanding and this Agreement is in effect, Borrower
shall not:
6.2.1 Mergers. Merge or consolidate with or acquire any
other Person, or make any other material change in its capital structure
or in its business or operations which might adversely affect the
repayment of the Obligations;
6.2.2 Loans. Make advances, loans or extensions of credit
to, or invest in, any Person, except for loans or cash advances to
employees which are permitted in the Schedule;
6.2.3 Dividends. Declare or pay cash dividends upon any of
its stock or distribute any of its property or redeem, retire, purchase
or acquire directly or indirectly any of its stock;
6.2.4 Adverse Transactions. Enter into any transaction
which materially and adversely affects the Collateral or its ability to
repay the Obligations in full as and when due;
6.2.5 Indebtedness of Others. Guarantee or become directly
or contingently liable for the Indebtedness of any Person, except by
endorsement of instruments for deposit and except for the existing
guarantees made by Borrower prior to the date hereof, if any, which are
set forth in the Schedule;
6.2.6 Repurchase. Make a sale to any customer on a bill-
and-hold, guaranteed sale, sale and return, sale on approval,
consignment, or any other repurchase or return basis;
6.2.7 Name. Use any corporate or fictitious name other
than its corporate name as set forth in its Articles or Certificate of
Incorporation on the date hereof or as set forth on the Schedule;
6.2.8 Prepayment. Prepay any Indebtedness other than trade
payables and other than the Obligations;
<PAGE>
6.2.9 Capital Expenditure. Make or incur any Capital
Expenditure if, after giving effect thereto, the aggregate amount of all
Capital Expenditures by Borrower in any fiscal year would exceed the
amount set forth on the Schedule;
6.2.10 Compensation. Pay total compensation, including
salaries, withdrawals, fees, bonuses, commissions, drawing accounts and
other payments, whether directly or indirectly, in money or otherwise,
during any fiscal year to all of Borrower's executives, officers and
directors (or any relative thereof) in an amount in excess of the amount
set forth on the Schedule;
6.2.11 Indebtedness. Create, incur, assume or permit to
exist any Indebtedness (including Indebtedness in connection with Capital
Leases) in excess of the amount set forth on the Schedule, other than (i)
the Obligations, (ii) trade payables and other contractual obligations to
suppliers and customers incurred in the ordinary course of business, and
(iii) other Indebtedness existing on the date of this Agreement and
reflected in the Prepared Financials (except Indebtedness paid on the
date of this Agreement from proceeds of the initial advances hereunder),
and (iv) Subordinated Debt;
6.2.12 Affiliate Transactions. Except as set forth below,
sell, transfer, distribute or pay any money or property to any Affiliate,
or invest in (by capital contribution or otherwise) or purchase or
repurchase any stock or Indebtedness, or any property, of any Affiliate,
or become liable on any guaranty of the indebtedness, dividends or other
obligations of any Affiliate. Notwithstanding the foregoing, Borrower
may pay compensation permitted by Section 6.2.10 to employees who are
Affiliates and, if no Event of Default has occurred, Borrower may (i)
engage in transactions with Affiliates in the normal course of business,
in amounts and upon terms which are fully disclosed to FINOVA and which
are no less favorable to Borrower than would be obtainable in a
comparable arm's length transaction with a Person who is not an
Affiliate, and (ii) make payments to a Subordinating Creditor that is an
Affiliate, subject to and only to the extent expressly permitted in the
Subordination Agreement between such Subordinating Creditor and FINOVA;
6.2.13 Nature of Business. Enter into any new business or
make any material change in any of Borrower's business objectives,
purposes or operations;
6.2.14 FINOVA's Name. Use the name of FINOVA in connection
with any of Borrower's business or activities, except in connection with
internal business matters or as required in dealings with governmental
agencies and financial institutions or with trade creditors of Borrower,
solely for credit reference purposes; or
6.2.15 Margin Security. Borrower will not (and has not in the
past) engaged principally, or as one of its important activities, in the
business of extending credit for the purpose of purchasing or carrying
margin stock (within the meaning of Regulation G or Regulation U issued
by the Board of Governors of the Federal Reserve System), and no proceeds
of any Loan or other advance will be used to purchase or carry any margin
stock or to extend credit to others for the purpose of purchasing or
carrying any margin stock, or in any manner which might cause such Loan
or other advance or the application of such proceeds to violate (or
require any regulatory filing under) Regulation G, Regulation T,
Regulation U, Regulation X or any other regulation of the Board of
<PAGE>
Governors of the Federal Reserve System, in each case as in effect on the
date or dates of such Loan or other advance and such use of proceeds.
Further, no proceeds of any Loan or other advance will be used to acquire
any security of a class which is registered pursuant to Section 12 of the
Securities Exchange Act of 1934.
6.2.16 Real Property. Purchase or acquire any real property
without FINOVA's prior written consent, a condition of which consent
shall include delivery of appropriate environmental reports and analysis,
in form and substance satisfactory to FINOVA and its counsel.
7. DEFAULT AND REMEDIES.
7.1 Events of Default. Any one or more of the following events
shall constitute an Event of Default under this Agreement:
(a) Borrower fails to pay when due and payable any portion of the
Obligations at stated maturity, upon acceleration or otherwise;
(b) Borrower or any other Loan Party fails or neglects to perform,
keep, or observe any Obligation including, but not limited to, any term,
provision, condition, covenant or agreement contained in any Loan
Document to which Borrower or such other Loan Party is a party;
(c) Any material adverse change occurs in Borrower's business,
assets, operations, prospects or condition, financial or otherwise;
(d) The prospect of repayment of any portion of the Obligations or
the value or priority of FINOVA's security interest in the Collateral is
materially impaired;
(e) Any portion of Borrower's assets is seized, attached, subjected
to a writ or distress warrant, is levied upon or comes into the
possession of any judicial officer;
(f) Borrower shall generally not pay its debts as they become due or
shall enter into any agreement (whether written or oral), or offer to
enter into any agreement, with all or a significant number of its
creditors regarding any moratorium or other indulgence with respect to
its debts or the participation of such creditors or their representatives
in the supervision, management or control of the business of Borrower;
(g) Any bankruptcy or other insolvency proceeding is commenced by
Borrower, or any such proceeding is commenced against Borrower and
remains undischarged or unstayed for forty-five (45) days;
(h) Any notice of lien, levy or assessment is filed of record with
respect to any of Borrower's assets;
(i) Any judgments are entered against Borrower in an aggregate
amount exceeding $25,000.00 in any fiscal year;
(j) Any default shall occur under (i) any material agreement between
Borrower and any third party including, without limitation, any default
which would result in a right by such third party to accelerate the
maturity of any Indebtedness of Borrower to such third party, or (ii) any
Subordinated Debt;
<PAGE>
(k) Any representation or warranty made or deemed to be made by
Borrower, any Affiliate or any other Loan Party in any Loan Document or
any other statement, document or report made or delivered to FINOVA in
connection therewith shall prove to have been misleading in any material
respect;
(l) Any Guarantor dies, terminates or attempts to terminate its
Guaranty or any security therefor or becomes subject to any bankruptcy
or other insolvency proceeding which remains undischarged or unstayed for
forty-five (45) days;
(m) Any Prohibited Transaction or Reportable Event shall occur with
respect to a Plan which could have a material adverse effect on the
financial condition of Borrower; any lien upon the assets of Borrower in
connection with any Plan shall arise; Borrower or any of its ERISA
Affiliates shall fail to make full payment when due of all amounts which
Borrower or any of its ERISA Affiliates may be required to pay to any
Plan or any Multiemployer Plan as one or more contributions thereto;
Borrower or any of its ERISA Affiliates creates or permits the creation
of any accumulated funding deficiency, whether or not waived; or
(n) Any transfer of more than ten percent (10%) of the issued and
outstanding shares of common stock or other evidence of ownership of
Borrower.
NOTWITHSTANDING ANYTHING TO THE CONTRARY HEREIN, FINOVA RESERVES THE
RIGHT TO CEASE MAKING ANY LOANS DURING ANY CURE PERIOD STATED ABOVE, AND
THEREAFTER IF AN EVENT OF DEFAULT HAS OCCURRED.
7.2 Remedies. Upon the occurrence of an Event of Default, FINOVA
may, at its option and in its sole discretion and in addition to all of
its other rights under the Loan Documents, cease making Loans, terminate
this Agreement and/or declare all of the Obligations to be immediately
payable in full. Borrower agrees that FINOVA shall also have all of its
rights and remedies under applicable law, including, without limitation,
the default rights and remedies of a secured party under the Code, and
upon the occurrence of an Event of Default Borrower hereby consents to
the appointment of a receiver by FINOVA in any action initiated by FINOVA
pursuant to this Agreement and to the jurisdiction and venue set forth in
Section 9.25 hereof, and Borrower waives notice and posting of a bond in
connection therewith. Further, FINOVA may, at any time, take possession
of the Collateral and keep it on Borrower's premises, at no cost to
FINOVA, or remove any part of it to such other place(s) as FINOVA may
desire, or Borrower shall, upon FINOVA's demand, at Borrower's sole cost,
assemble the Collateral and make it available to FINOVA at a place
reasonably convenient to FINOVA. FINOVA may sell and deliver any
Collateral at public or private sales, for cash, upon credit or
otherwise, at such prices and upon such terms as FINOVA deems advisable,
at FINOVA's discretion, and may, if FINOVA deems it reasonable, postpone
or adjourn any sale of the Collateral by an announcement at the time and
place of sale or of such postponed or adjourned sale without giving a new
notice of sale. Borrower agrees that FINOVA has no obligation to
preserve rights to the Collateral or marshall any Collateral for the
benefit of any Person. FINOVA is hereby granted a license or other right
to use, without charge, Borrower's labels, patents, copyrights, name,
trade secrets, trade names, trademarks and advertising matter, or any
similar property, in completing production, advertising or selling any
Collateral and Borrower's rights under all licenses and all franchise
agreements shall inure to FINOVA's benefit. Any requirement of reasonable
<PAGE>
notice shall be met if such notice is mailed postage prepaid to Borrower
at its address set forth in the heading to this Agreement at least ten
(10) days before sale or other disposition. The proceeds of sale shall
be applied, first, to all attorneys fees and other expenses of sale, and
second, to the Obligations in such order as FINOVA shall elect, in its
sole discretion. FINOVA shall return any excess to Borrower and Borrower
shall remain liable for any deficiency to the fullest extent permitted by
law.
7.3 Standards for Determining Commercial Reasonableness. Borrower
and FINOVA agree that the following conduct by FINOVA with respect to any
disposition of Collateral shall conclusively be deemed commercially
reasonable (but other conduct by FINOVA, including, but not limited to,
FINOVA's use in its sole discretion of other or different times, places
and manners of noticing and conducting any disposition of Collateral
shall not be deemed unreasonable): Any public or private disposition: (i)
as to which on no later than the tenth calendar day prior thereto written
notice thereof is mailed or personally delivered to Borrower and, with
respect to any public disposition, on no later than the tenth calendar
day prior thereto notice thereof describing in general non-specific
terms, the Collateral to be disposed of is published once in a newspaper
of general circulation in the county where the sale is to be conducted
(provided that no notice of any public or private disposition need be
given to the Borrower or published if the Collateral is perishable or
threatens to decline speedily in value or is of a type customarily sold
on a recognized market); (ii) which is conducted at any place designated
by FINOVA, with or without the Collateral being present; and (iii) which
commences at any time between 8:00 a.m. and 5:00 p.m. Without limiting
the generality of the foregoing, Borrower expressly agrees that, with
respect to any disposition of accounts, instruments and general
intangibles, it shall be commercially reasonable for FINOVA to direct any
prospective purchaser thereof to ascertain directly from Borrower any and
all information concerning the same, including, but not limited to, the
terms of payment, aging and delinquency, if any, the financial condition
of any obligor or account debtor thereon or guarantor thereof, and any
collateral therefor.
8. EXPENSES AND INDEMNITIES
8.1 Expenses. Borrower covenants that, so long as any Obligation
remains outstanding and this Agreement remains in effect, it shall
promptly reimburse FINOVA for all costs, fees and expenses incurred by
FINOVA in connection with the negotiation, preparation, execution,
delivery, administration and enforcement of each of the Loan Documents,
including, but not limited to, the attorneys' and paralegals' fees of in-
house and outside counsel, expert witness fees, lien, title search and
insurance fees, appraisal fees, all charges and expenses incurred in
connection with any and all environmental reports and environmental
remediation activities, and all other costs, expenses, taxes and filing
or recording fees payable in connection with the transactions
contemplated by this Agreement, including without limitation all such
costs, fees and expenses as FINOVA shall incur or for which FINOVA shall
become obligated in connection with (i) any inspection or verification of
the Collateral, (ii) any proceeding relating to the Loan Documents or the
Collateral, (iii) actions taken with respect to the Collateral and
FINOVA's security interest therein, including, without limitation, the
defense or prosecution of any action involving FINOVA and Borrower or any
third party, (iv) enforcement of any of FINOVA's rights and remedies with
respect to the Obligations or Collateral and (v) consultation with
<PAGE>
FINOVA's attorneys and participation in any workout, bankruptcy or other
insolvency or other proceeding involving any Loan Party or any Affiliate,
whether or not suit is filed or the issues are peculiar to federal
bankruptcy or state insolvency laws. Borrower shall also pay all FINOVA
charges in connection with bank wire transfers, forwarding of loan
proceeds, deposits of checks and other items of payment, returned checks,
establishment and maintenance of lockboxes and other Blocked Accounts,
and all other bank and administrative matters, in accordance with
FINOVA's schedule of bank and administrative fees and charges in effect
from time to time.
9. MISCELLANEOUS.
9.1 Examination of Records; Financial Reporting.
(a) Examinations. FINOVA shall at all reasonable times have full
access to and the right to examine, audit, make abstracts and copies from
and inspect Borrower's records, files, books of account and all other
documents, instruments and agreements relating to the Collateral and the
right to check, test and appraise the Collateral. Borrower shall deliver
to FINOVA any instrument necessary for FINOVA to obtain records from any
service bureau maintaining records for Borrower. All instruments and
certificates prepared by Borrower showing the value of any of the
Collateral shall be accompanied, upon FINOVA's request, by copies of
related purchase orders and invoices. FINOVA may, at any time after the
occurrence of an Event of Default, remove from Borrower's premises
Borrower's books and records (or copies thereof) or require Borrower to
deliver such books and records or copies to FINOVA. FINOVA may, without
expense to FINOVA, use such of Borrower's personnel, supplies and
premises as may be reasonably necessary for maintaining or enforcing
FINOVA's security interest.
(b) Reporting Requirements. Borrower shall furnish FINOVA, upon
request, such information and statements as FINOVA shall request from
time to time regarding Borrower's business affairs, financial condition
and the results of its operations. Without limiting the generality of
the foregoing, Borrower shall provide FINOVA with: (i) FINOVA's standard
form collateral and loan report, daily, and upon FINOVA's request, copies
of sales journals, cash receipt journals, and deposit slips; (ii) upon
FINOVA's request, copies of sales invoices, customer statements and
credit memoranda issued, remittance advices and reports; (iii) copies of
shipping and delivery documents, upon request; (iv) on or prior to the
date set forth on the Schedule, monthly agings (aged from invoice date)
and reconciliations of Receivables (with listings of concentrated
accounts), payables reports, inventory reports, compliance certificates
and unaudited financial statements with respect to the prior month
prepared on a basis consistent with such statements prepared in prior
months and otherwise in accordance with GAAP; (v) audited annual
consolidated and consolidating financial statements, prepared in
accordance with GAAP applied on a basis consistent with the most recent
Prepared Financials provided to FINOVA by Borrower, including balance
sheets, income and cash flow statements, accompanied by the unqualified
report thereon of independent certified public accountants acceptable to
FINOVA, as soon as available, and in any event, within ninety (90) days
after the end of each of Borrower's fiscal years; and (vi) such
certificates relating to the foregoing as FINOVA may request, including,
without limitation, a monthly certificate from the president and the
chief financial officer of Borrower showing Borrower's compliance with
each of the financial covenants set forth in this Agreement, and stating
<PAGE>
whether any Event of Default has occurred or event which, with giving of
notice or the passage of time, or both, would constitute an Event of
Default, and if so, the steps being taken to prevent or cure such Event
of Default. All reports or financial statements submitted by Borrower
shall be in reasonable detail and shall be certified by the principal
financial officer of Borrower as being complete and correct.
(c) Guarantor's Financial Statements and Tax Returns. Borrower
shall cause each of the Guarantors to deliver to FINOVA such Guarantor's
annual financial statement (in form acceptable to FINOVA) and a copy of
such Guarantor's federal income tax return with respect to the
corresponding year, in each case on the date when such tax return is due
or, if earlier, on the date when available.
9.2 Term; Termination.
(a) Term. The Initial Term of the Revolving Credit Loans facility
and the obligation of FINOVA to made advances with respect thereto in
accordance with this Agreement shall be as set forth on the Schedule, and
the Revolving Credit Loans facility and this Agreement shall be
automatically renewed for one or more Renewal Term(s) as set forth in the
Schedule, unless earlier terminated as provided herein.
(b) Prior Notice. Each party shall have the right to terminate
this Agreement effective at the end of the Initial Term or at the end of
any Renewal Term by giving the other party written notice not less than
sixty (60) days prior to the effective date of such termination, by
registered or certified mail.
(c) Payment in Full. Upon the effective date of termination, the
Obligations shall become immediately due and payable in full in cash.
(d) Early Termination; Termination Fee. In addition to the
procedure set forth in Section 9.2(b), Borrower may terminate this
Agreement at any time but only upon sixty (60) days' prior written notice
and prepayment of the Obligations. Upon any such early termination by
Borrower or any termination of this Agreement by FINOVA upon the
occurrence of an Event of Default, then, and in any such event, Borrower
shall pay to FINOVA upon the effective date of such termination a fee
(the "Termination Fee") in an amount equal to the amount shown on the
Schedule.
9.3 Recourse to Security; Certain Waivers. All Obligations shall
be payable by Borrower as provided for herein and, in full, at the
termination of this Agreement; recourse to security shall not be required
at any time. Borrower waives presentment and protest of any instrument
and notice thereof, notice of default and, to the extent permitted by
applicable law, all other notices to which Borrower might otherwise be
entitled.
9.4 No Waiver by FINOVA . Neither FINOVA's failure to exercise any
right, remedy or option under this Agreement, any supplement, the Loan
Documents or other agreement between FINOVA and Borrower nor any delay by
FINOVA in exercising the same shall operate as a waiver. No waiver by
FINOVA shall be effective unless in writing and then only to the extent
stated. No waiver by FINOVA shall affect its right to require strict
performance of this Agreement. FINOVA's rights and remedies shall be
cumulative and not exclusive.
<PAGE>
9.5 Binding on Successor and Assigns. All terms, conditions,
promises, covenants, provisions and warranties shall inure to the benefit
of and bind FINOVA's and Borrower's respective representatives,
successors and assigns.
9.6 Severability. If any provision of this Agreement shall be
prohibited or invalid under applicable law, it shall be ineffective only
to such extent, without invalidating the remainder of this Agreement.
9.7 Amendments; Assignments. This Agreement may not be modified,
altered or amended, except by an agreement in writing signed by Borrower
and FINOVA. Borrower may not sell, assign or transfer any interest in
this Agreement or any other Loan Document, or any portion thereof,
including, without limitation, any of Borrower's rights, title,
interests, remedies, powers and duties hereunder or thereunder. Borrower
hereby consents to FINOVA's participation, sale, assignment, transfer or
other disposition, at any time or times hereafter, of this Agreement and
any of the other Loan Documents, or of any portion hereof or thereof,
including, without limitation, FINOVA's rights, title, interests,
remedies, powers and duties hereunder or thereunder. In connection
therewith, FINOVA may disclose all documents and information which FINOVA
now or hereafter may have relating to Borrower or Borrower's business.
To the extent that FINOVA assigns its rights and obligations hereunder to
a third party, FINOVA shall thereafter be released from such assigned
obligations to Borrower and such assignment shall effect a novation
between Borrower and such third party.
9.8 Integration . This Agreement, together with the Schedule (which
is a part hereof) and the other Loan Documents, reflect the entire
understanding of the parties with respect to the transactions
contemplated hereby.
9.9 Survival. All of the representations and warranties of
Borrower contained in this Agreement shall survive the execution,
delivery and acceptance of this Agreement by the parties. No termination
of this Agreement or of any guaranty of the Obligations shall affect or
impair the powers, obligations, duties, rights, representations,
warranties or liabilities of the parties hereto and all shall survive
such termination.
9.10 Evidence of Obligations. Each Obligation may, in FINOVA's
discretion, be evidenced by notes or other instruments issued or made by
Borrower to FINOVA. If not so evidenced, such Obligation shall be
evidenced solely by entries upon FINOVA's books and records.
9.11 Loan Requests. Each oral or written request for a loan by any
employee, officer or authorized agent of Borrower, specially designated
in writing by Borrower for that purpose, shall be made to FINOVA on or
prior to 11:00 a.m., Pacific time, on the Business Day on which the
proceeds thereof are requested to be paid to Borrower and shall be
conclusively presumed to be made by a Person authorized by Borrower to do
so and the crediting of a loan to Borrower's operating account shall
conclusively establish Borrower's obligation to repay such loan. Unless
and until Borrower otherwise directs FINOVA in writing, all loans shall
be wired to Borrower's operating account set forth on the Schedule.
9.12 Notices. Any notice required hereunder shall be in writing
and addressed to the Borrower and FINOVA at their addresses set forth at
the beginning of this Agreement. Notices hereunder shall be deemed
<PAGE>
received on the earlier of receipt, whether by mail, personal delivery,
facsimile, or otherwise, or upon deposit in the United States mail,
postage prepaid.
9.13 Brokerage Fees. Borrower represents and warrants to FINOVA
that, with respect to the financing transaction herein contemplated, no
Person is entitled to any brokerage fee or other commission and Borrower
agrees to indemnify and hold FINOVA harmless against any and all such
claims.
9.14 Disclosure. No representation or warranty made by Borrower in
this Agreement, or in any financial statement, report, certificate or any
other document furnished in connection herewith contains any untrue
statement of a material fact or omits to state any material fact
necessary to make the statements herein or therein not misleading. There
is no fact known to Borrower or which reasonably should be known to
Borrower which Borrower has not disclosed to FINOVA in writing with
respect to the transactions contemplated by this Agreement which
materially and adversely affects the business, assets, operations,
prospects or condition (financial or otherwise), of Borrower.
9.15 Publicity. FINOVA is hereby authorized to issue appropriate
press releases and to cause a tombstone to be published announcing the
consummation of this transaction and the aggregate amount thereof.
9.16 Captions. The Section titles contained in this Agreement are
without substantive meaning and are not part of this Agreement.
9.17 Injunctive Relief. Borrower recognizes that, in the event
Borrower fails to perform, observe or discharge any of its Obligations
under this Agreement, any remedy at law may prove to be inadequate relief
to FINOVA. Therefore, FINOVA, if it so requests, shall be entitled to
temporary and permanent injunctive relief in any such case without the
necessity of proving actual damages.
9.18 Counterparts; Facsimile Execution. This Agreement may be
executed in one or more counterparts, each of which taken together shall
constitute one and the same instrument, admissible into evidence.
Delivery of an executed counterpart of this Agreement by telefacsimile
shall be equally as effective as delivery of a manually executed
counterpart of this Agreement. Any party delivering an executed
counterpart of this Agreement by telefacsimile shall also deliver a
manually executed counterpart of this Agreement, but the failure to
deliver a manually executed counterpart shall not affect the validity,
enforceability, and binding effect of this Agreement.
9.19 Construction . The parties acknowledge that each party and its
counsel have reviewed this Agreement and that the normal rule of
construction to the effect that any ambiguities are to be resolved
against the drafting party shall not be employed in the interpretation of
this Agreement or any amendments or exhibits hereto.
9.20 Time of Essence. Time is of the essence for the performance
by Borrower of the Obligations set forth in this Agreement.
9.21 Limitation of Actions. Borrower agrees that any claim or
cause of action by Borrower against FINOVA, or any of FINOVA's directors,
officers, employees, agents, accountants or attorneys, based upon,
arising from, or relating to this Agreement, or any other present or
<PAGE>
future agreement, or any other transaction contemplated hereby or thereby
or relating hereto or thereto, or any other matter, cause or thing
whatsoever, whether or not relating hereto or thereto, occurred, done,
omitted or suffered to be done by FINOVA, or by FINOVA's directors,
officers, employees, agents, accountants or attorneys, whether sounding
in contract or in tort or otherwise, shall be barred unless asserted by
Borrower by the commencement of an action or proceeding in a court of
competent jurisdiction by the filing of a complaint within one year after
the first act, occurrence or omission upon which such claim or cause of
action, or any part thereof, is based and service of a summons and
complaint on an officer of FINOVA or any other Person authorized to
accept service of process on behalf of FINOVA, within 30 days thereafter.
Borrower agrees that such one-year period of time is a reasonable and
sufficient time for Borrower to investigate and act upon any such claim
or cause of action. The one-year period provided herein shall not be
waived, tolled, or extended except by a specific written agreement of
FINOVA. This provision shall survive any termination of this Loan
Agreement or any other agreement.
9.22 Liability. Neither FINOVA nor any FINOVA Affiliate shall be
liable for any indirect, special, incidental or consequential damages in
connection with any breach of contract, tort or other wrong relating to
this Agreement or the Obligations or the establishment, administration or
collection thereof (including without limitation damages for loss of
profits, business interruption, or the like), whether such damages are
foreseeable or unforeseeable, even if FINOVA has been advised of the
possibility of such damages. Neither FINOVA, nor any FINOVA Affiliate
shall be liable for any claims, demands, losses or damages, of any kind
whatsoever, made, claimed, incurred or suffered by the Borrower through
the ordinary negligence of FINOVA, or any FINOVA Affiliate. "FINOVA
Affiliate" shall mean FINOVA's directors, officers, employees, agents,
attorneys or any other Person or entity affiliated with or representing
FINOVA.
9.23 Notice of Breach by FINOVA. Borrower agrees to give FINOVA
written notice of (i) any action or inaction by FINOVA or any attorney of
FINOVA in connection with any Loan Documents that may be actionable
against FINOVA or any attorney of FINOVA or (ii) any defense to the
payment of the Obligations for any reason, including, but not limited to,
commission of a tort or violation of any contractual duty or duty implied
by law. Borrower agrees that unless such notice is fully given as
promptly as possible (and in any event within thirty (30) days) after
Borrower has knowledge, or with the exercise of reasonable diligence
should have had knowledge, of any such action, inaction or defense,
Borrower shall not assert, and Borrower shall be deemed to have waived,
any claim or defense arising therefrom.
9.24 Application of Insurance Proceeds. The net proceeds of any
casualty insurance insuring the Collateral, after deducting all costs and
expenses (including attorneys' fees) of collection, shall be applied, at
FINOVA's option, either toward replacing or restoring the Collateral, in
a manner and on terms satisfactory to FINOVA, or toward payment of the
Obligations. Any proceeds applied to the payment of Obligations shall be
applied in such manner as FINOVA may elect. In no event shall such
application relieve Borrower from payment in full of all installments of
principal and interest which thereafter become due in the order of
maturity thereof.
<PAGE>
9.25 Power of Attorney. Borrower appoints FINOVA and its
designees as Borrower's attorney, with the power to endorse Borrower's
name on any checks, notes, acceptances, money orders or other forms of
payment or security that come into FINOVA's possession; to sign
Borrower's name on any invoice or bill of lading relating to any
Receivable, on drafts against customers, on assignments of Receivables,
on notices of assignment, financing statements and other public records,
on verifications of accounts and on notices to customers or account
debtors; to send requests for verification of Receivables to customers or
account debtors; after the occurrence of any Event of Default, to notify
the post office authorities to change the address for delivery of
Borrower's mail to an address designated by FINOVA and to open and
dispose of all mail addressed to Borrower; and to do all other things
FINOVA deems necessary or desirable to carry out the terms of this
Agreement. Borrower hereby ratifies and approves all acts of such
attorney. Neither FINOVA nor any of its designees shall be liable for
any acts or omissions nor for any error of judgment or mistake of fact or
law while acting as Borrower's attorney. This power, being coupled with
an interest, is irrevocable until the Obligations have been fully
satisfied and FINOVA's obligation to provide loans hereunder shall have
terminated
9.26 Governing Law; Waivers. THIS AGREEMENT, INCLUDING WITHOUT
LIMITATION ENFORCEMENT OF THE OBLIGATIONS, SHALL BE INTERPRETED IN
ACCORDANCE WITH THE INTERNAL LAWS (AND NOT THE CONFLICT OF LAWS RULES) OF
THE STATE OF ARIZONA GOVERNING CONTRACTS TO BE PERFORMED ENTIRELY WITHIN
SUCH STATE. BORROWER HEREBY CONSENTS TO THE EXCLUSIVE JURISDICTION OF
ANY STATE OR FEDERAL COURT LOCATED WITHIN THE COUNTY OF MARICOPA IN THE
STATE OF ARIZONA OR, AT THE SOLE OPTION OF FINOVA, IN ANY OTHER COURT IN
WHICH FINOVA SHALL INITIATE LEGAL OR EQUITABLE PROCEEDINGS AND WHICH HAS
SUBJECT MATTER JURISDICTION OVER THE MATTER IN CONTROVERSY. BORROWER
WAIVES ANY OBJECTION OF FORUM NON CONVENIENS AND VENUE. BORROWER FURTHER
WAIVES PERSONAL SERVICE OF ANY AND ALL PROCESS UPON BORROWER, AND AGREE
THAT ALL SUCH SERVICE OF PROCESS MAY BE MADE BY REGISTERED MAIL DIRECTED
TO BORROWER AT THE ADDRESS(ES) SET FORTH IN SCHEDULE SECTION 9.26 AND
SERVICE SO MADE SHALL BE DEEMED TO BE COMPLETED UPON ACTUAL RECEIPT
THEREOF. BORROWER FURTHER WAIVES ANY RIGHT IT MAY OTHERWISE HAVE TO
COLLATERALLY ATTACK ANY JUDGMENT ENTERED AGAINST IT.
9.27 MUTUAL WAIVER OF RIGHT TO JURY TRIAL. FINOVA AND BORROWER
EACH HEREBY WAIVES THE RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING
BASED UPON, ARISING OUT OF, OR IN ANY WAY RELATING TO: (i) THIS
AGREEMENT; (ii) ANY OTHER PRESENT OR FUTURE INSTRUMENT OR AGREEMENT
BETWEEN FINOVA AND BORROWER; OR (iii) ANY CONDUCT, ACTS OR OMISSIONS OF
FINOVA OR BORROWER OR ANY OF THEIR DIRECTORS, OFFICERS, EMPLOYEES,
AGENTS, ATTORNEYS OR ANY OTHER PERSONS AFFILIATED WITH FINOVA OR
BORROWER; IN EACH OF THE FOREGOING CASES, WHETHER SOUNDING IN CONTRACT OR
TORT OR OTHERWISE.
Borrower:
NETWORK AMERICA, INC.
By: /s/ Patrick A. Custer
Patrick A. Custer, Chief Executive Officer
Subscribed and sworn before me on this the 30th day of October, 1998.
/s/ Mary E. Wood
Notary Public
FINOVA:
FINOVA CAPITAL CORPORATION
By:__/s/__Pete Martinez_________________
Pete Martinez, V.P.
<PAGE>
Schedule to
Loan and Security Agreement
Borrower: Network America, Inc.
Address: 7116 South Mingo Road
Tulsa, Oklahoma 74133
Date: October 30, 1998
This Schedule forms an integral part of the Loan and Security Agreement
between the above Borrower and FINOVA Capital Corporation dated the above
date, and all references herein and therein to "this Agreement" shall be
deemed to refer to said Agreement and to this Schedule.
DEFINITIONS (SECTION 1):
"Guarantor(s)" means uniView Technologies Corporation
"Subordinating Creditor" means uniView Technologies Corporation
TOTAL FACILITY (SECTION 2.1): $2,150,000.00
LOANS (SECTION 2.2):
Revolving Credit Loans: A revolving line of credit
consisting of loans against Borrower's Eligible
Receivables ("Receivable Loans") and against Borrower's
Eligible Inventory ("Inventory Loans") (the Receivable
Loans and the Inventory Loans shall be collectively
referred to as the "Revolving Credit Loans") in an
aggregate outstanding principal amount not to exceed the
lesser of (a) or (b) below:
(a) Two Million Dollars ($2,000,000.00) (the
"Revolving Credit Limit"), less any Loan Reserves, or
(b) the sum of
(i) an amount equal to (A) eighty percent (80%) of
the net amount of Eligible Receivables; plus
(ii) an amount not to exceed the lesser of:
(A) fifty percent (50%) of the value of
Borrower's Eligible Inventory, calculated at the
lower of cost or market value, or
(B) Seventy Hundred Fifty Thousand Dollars
($750,000.00); less,
(iii) any Loan Reserves.
Capital Expenditure Term Loans: one or more term loans
for the purpose of purchasing equipment ("Term Loans")
in an aggregate outstanding principal amount not to
exceed One Hundred Fifty Thousand Dollars ($150,000.00);
provided, that the Terms Loans, if any, shall be in such
amounts and on such terms as are set forth on separate
promissory notes of Borrower from time to time, each in
form and substance satisfactory to FINOVA in its sole
discretion. Advances under the Term Loan are limited to
seventy-five percent (75%) of the cost of the equipment
purchased, and are contingent upon complete covenant
compliance. All advances must be supported by sufficient
documentation required by FINOVA in its sole discretion.
Borrower shall pay monthly interest only for the first
six months after the execution date of such promissory
note. The principal balance shall be amortized over
eighteen (18) months thereafter, with the first (1st)
payment of principal beginning on the first (1st) day
of the seventh month and continuing on the first day of
each month thereafter, with each payment being in the
amount equal to 1/18th of the principal amount then
outstanding under such promissory note. Notwithstanding
the foregoing, the final installment shall be due and
payable on the second anniversary date of the closing
date, together with accrued, but unpaid interest.
Interest shall be payable monthly on the first day of
each and every month, beginning on the first (1st) day
of the month immediately following the execution date of
each promissory note.
INTEREST AND FEES (SECTION 2.6):
Revolving Interest Rate. Borrower shall pay FINOVA
interest on the daily outstanding balance of Borrower's
Revolving Credit Loans at a per annum rate of two and
one quarter percent (2.25%) in excess of the rate of
interest announced publicly by Citibank, N.A., (or any
successor thereto), from time to time as its "prime
rate" (the " Prime Rate") which may not be such
institution's lowest rate. The interest rate chargeable
hereunder in respect of the Revolving Credit Loans
(herein, the "Revolving Interest Rate") and the Term
Loans (herein, the "Term Interest Rate") (collectively,
the "Interest Rate") shall be increased or decreased, as
the case may be, without notice or demand of any kind,
upon the announcement of any change in the Prime Rate.
Each change in the Prime Rate shall be effective
hereunder on the first day following the announcement of
such change. Interest charges and all other fees and
charges herein shall be computed on the basis of a year
of three hundred and sixty (360) days and actual days
elapsed and shall be payable to FINOVA in arrears on the
first day of each month.
Collateral Monitoring Fee. At the closing of this
transaction and on the first day of each calendar month
thereafter, Borrower shall pay FINOVA a collateral
monitoring fee of Five Hundred Dollars ($500.00)
("Collateral Monitoring Fee"); provided however, that
Borrower agrees and acknowledges that each Loan Year a
full year's fee shall be deemed earned at the beginning
of the respective Loan Year.
Facility Fee. Borrower shall pay to
FINOVA a facility fee equal to one percent (1%) per
annum of the amount of the Total Facility ("Facility
Fee"). The Facility Fee shall be deemed fully earned at
the time when due and is otherwise due and payable
annually, commencing upon the first anniversary of the
date of this Agreement and due and payable on each
subsequent anniversary thereof.
Examination Fee. Borrower agrees to pay to
FINOVA an Examination Fee in the amount of Five Hundred
Dollars ($500.00) per person per day in connection with
each audit or examination of Borrower performed by
FINOVA prior to or after the date hereof, plus all costs
and expenses incurred in connection therewith (the
"Examination Fee"). Except in the Event of Default,
such examinations shall not occur more frequently than
four (4) times per annum. Without limiting the
generality of the foregoing, Borrower shall pay to
FINOVA an initial Examination Fee in an amount equal to
Five Hundred Dollars ($500.00) per person per day, plus
all costs and expenses incurred in connection therewith.
Such initial Examination Fee shall be deemed fully
earned at the time of payment and due and payable upon
the closing of this transaction, and shall be deducted
from any good faith deposit paid by Borrower to FINOVA
prior to the date of this Agreement.
ESTABLISHMENT OF LOCKBOX ACCOUNT OR DOMINION ACCOUNT (SECTION 2.9(c))
A Dominion Account shall be established for the collection
of funds.
CONDITIONS OF CLOSING (SECTION 4.1):
The obligation of FINOVA to make the initial advance
hereunder or to issue or arrange for the issuance of the
initial letter of credit hereunder is subject to the
fulfillment, to the satisfaction of FINOVA and its
counsel, of each of the following conditions, in
addition to the conditions set forth in Sections 4.1 and
4.2 above:
(a) Lease and Landlord's Consent (Section 4.1(k)). Location(s):
7116 South Mingo Road, Tulsa, Oklahoma 74133
2529 Gregg Street, Fayetteville, Arkansas 72703
205 West Hartford, Ponca City, Oklahoma 74601
(b) No Material Adverse Change (Section 4.1(s)).
Financial statements for Seller dated as of June 30,
1998. Further, no material adverse change has occurred
in the Borrower's business, operations, financial
condition, or assets or in the prospect of repayment of
the Obligations since June 30, 1998.
(c) Validity and Support Agreements. Patrick A. Custer
and Steven T. Douglas shall each have delivered a
Validity and Support Agreement in favor of FINOVA, and
in form and substance satisfactory to FINOVA.
Borrower shall cause the conditions precedent set forth
in Section 4.1 of this Agreement and set forth above in
this Schedule to be satisfied, and shall provide
evidence to FINOVA that all such conditions precedent
have been satisfied, on or before the Closing Date.
BORROWER INFORMATION:
Borrower's State of Incorporation (Section 5.1): Oklahoma
Borrower's copyrights, patents trademarks, and licenses (Section 5.5): None
Fictitious Names/Prior Corporate Names (Section
5.2):
Prior Corporate Names: Compu$ave (April 1994-
December 1997)
Fictitious Names: None
Borrower Locations (Section 5.16)
7116 Mingo Road, Tulsa, Oklahoma 74133
2529 Gregg Street, Fayetteville, Arkansas 72703
205 West Hartford, Ponca City, Oklahoma 74601
Permitted Encumbrances (Section 1.1):
uniView Technologies Corporation in the
original principal amount of Five Hundred
Ninety Thousand Dollars ($590,000.00), as
evidenced by the Revolving Credit and
Security Agreement dated June 15, 1998, a
Note of even date in the amount of Three
Hundred Thousand Dollars ($300,000.00), a
Note, dated August 12, 1998, in the amount
of Two Hundred Thousand Dollars
($200,000.00), and a Note, dated August 26,
1998, for Ninety Thousand Dollars
($90,000.00).
FINANCIAL COVENANTS (SECTION 6.1.13):
Borrower shall comply with all of the following
covenants. Compliance shall be determined as of the
end of each month or quarter (as determined by FINOVA
in its sole discretion), except as otherwise
specifically provided below:
Net Worth. Borrower shall maintain Net Worth as follows: Not
less than (a) Five Hundred Sixty Thousand Dollars
($560,000.00) from the Closing Date to June 29, 1999;
(b) Six Hundred Thousand Dollars ($600,000.00)
from June 30, 1999 thereafter.
NEGATIVE COVENANTS (SECTION 6.2):
Employee Advances: Borrower shall not make any
loans or advances to Employees except in the ordinary
course of business and consistent with past practices of
Borrower in an aggregate amount not exceeding at any time
Twenty Five Thousand Dollars ($25,000.00).
Existing Guaranties: [Borrower to describe on
separate Exhibit.]
Capital Expenditures: Borrower shall not make or incur any
Capital Expenditure if, after giving effect thereto, the
aggregate amount of all Capital Expenditures by Borrower
in any fiscal year (beginning with the 1998 fiscal year)
would exceed One Hundred Thousand Dollars ($100,000.00).
Compensation: Borrower shall not pay total compensation,
including salaries, withdrawals, fees, bonuses,
commissions, drawing accounts and other payments, whether
directly or indirectly, in money or otherwise, during any
fiscal year to all of Borrower's executives, officers and
directors (or any relative thereof) in an amount in excess
of one hundred fifteen percent (115%) of such total
compensation paid in the immediately preceding fiscal
year.
Indebtedness: Borrower shall not create, incur, assume or
permit to exist any Indebtedness (including Indebtedness
in connection with Capital Leases) in excess of Twenty
Five Thousand Dollars ($25,000.00) other than (i) the
Obligations, (ii) trade payables and other contractual
obligations to suppliers and customers incurred in the
ordinary course of business and (iii) other Indebtedness
existing on the date of this Agreement and reflected in
Exhibit ____ attached hereto (other than Indebtedness paid
on the date of this Agreement from proceeds of the initial
advances hereunder).
REPORTING REQUIREMENTS (SECTION 9.1):
1.Borrower shall provide FINOVA with monthly agings aged
by invoice date and reconciliations of Receivables
within ten (10) days after the end of each month.
2.Borrower shall provide FINOVA with monthly accounts
payable agings aged by invoice date, outstanding or
held check registers and inventory certificates within
ten (10) days after the end of each month.
3.Borrower shall provide FINOVA with monthly perpetual
inventory reports for the Inventory valued at the lower
of cost or market (in accordance with GAAP) or such
other inventory reports as are reasonably requested by
FINOVA, all within ten (10) days after the end of each
month.
4.Borrower shall provide FINOVA with monthly unaudited
financial statements within thirty (30) days after the
end of each month.
5.Borrower shall provide FINOVA with audited consolidated
and consolidating fiscal financial statements within
one hundred twenty (120) days after the end of each
fiscal year, as more specifically described in Section
9.1(b) hereof, and with an opinion issued by a
Certified Public Accountant which is acceptable to
FINOVA.
6.Borrower shall provide FINOVA with annual operating
budgets (including income statements, balance sheets
and cash flow statements, by month) for the upcoming
fiscal year of Borrower within thirty (30) days prior
to the end of each fiscal year of Borrower.
7.Borrower's balance sheets for purposes of the
definition of Prepared Financials shall be as of June
30, 1998.
TERM (SECTION 9.2):
The initial term of this Agreement
shall be two (2) year(s) from the date hereof (the
"Initial Term") and shall be automatically renewed for
successive periods of one (1) year each (each, a
"Renewal Term"), unless earlier terminated as provided
in Section 7 or 9.2 above or elsewhere in this
Agreement.
TERMINATION FEE (SECTION 9.2):
The Termination Fee applicable to the Revolving Credit
Loans facility and the Term Loans facility provided for
in Section 9.2(d) shall be an amount equal to the
following percentage of the Total Facility, as set forth
in Section 2.1 of this Schedule, as of the date of
notice of such termination:
(i) Four percent (4%), if such early termination
occurs on or prior to the first anniversary (1st) of
the date of this Agreement;
(ii) Two percent (2%), if such early termination
occurs after the first (1st) anniversary of the date
of this Agreement.
DISBURSEMENT (SECTION 9.11):
Unless and until Borrower otherwise directs FINOVA in
writing, all loans shall be wired to Borrower's
operating account.
ADDRESSES FOR SERVICE OF PROCESS (SECTION 9.26):
BORROWER: NETWORK AMERICA, INC.
ATTN: Steven T. Douglas
7116 South Mingo Road
Tulsa, Oklahoma 74133
GUARANTOR: UNIVIEW TECHNOLOGIES CORPORATION
ATTN: Patrick A. Custer
10911 Petal Street
Dallas, Texas 75238
AGENT FOR PROCESS: Billy J. Robinson
General Counsel
10911 Petal Street
Dallas, Texas 75238
Network America, Inc.
"Borrower"
__/s/ Patrick A. Custer_____________
Patrick A. Custer, Chief Executive Officer
Subscribed and sworn before me on this the 30th day of October,
1998.
_/s/_______________________________
Notary Public
FINOVA CAPITAL CORPORATION
/s/___________________________________
Name:_______________________________
Title:________________________________
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
CONSOLIDATED FINANCIAL STATEMENTS AT DECEMBER 31, 1998 AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FORM 10-Q FOR FISCAL QUARTER ENDED
DECEMBER 31, 1998.
</LEGEND>
<S> <C>
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-START> JUL-01-1998
<PERIOD-END> DEC-31-1998
<PERIOD-TYPE> 6-MOS
<CASH> 35,692
<SECURITIES> 0
<RECEIVABLES> 1,544,298
<ALLOWANCES> 0
<INVENTORY> 607,528
<CURRENT-ASSETS> 2,187,518
<PP&E> 5,556,451
<DEPRECIATION> 2,940,530
<TOTAL-ASSETS> 12,368,867
<CURRENT-LIABILITIES> 6,218,857
<BONDS> 0
0
140,113
<COMMON> 1,327,304
<OTHER-SE> 4,458,823
<TOTAL-LIABILITY-AND-EQUITY> 12,368,867
<SALES> 2,353,424
<TOTAL-REVENUES> 2,353,424
<CGS> 1,796,132
<TOTAL-COSTS> 1,796,132
<OTHER-EXPENSES> 2,431,004
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 76,270
<INCOME-PRETAX> (1,869,542)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,869,542)
<DISCONTINUED> 0
<EXTRAORDINARY> 1,860,207
<CHANGES> 0
<NET-INCOME> (9,335)
<EPS-PRIMARY> (0.00)
<EPS-DILUTED> (0.00)
</TABLE>
