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 March 31, 1999
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 May 7, 1999, there were 13,739,519 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 2. CHANGES IN SECURITIES AND USE OF PROCEEDS 11
ITEM 5. OTHER INFORMATION 12
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 13
SIGNATURES 13
EXHIBIT INDEX 13
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
UNIVIEW TECHNOLOGIES CORPORATION and Subsidiaries
Consolidated Balance Sheets
March 31 June 30
1999 1998
----------- -----------
(Unaudited)
ASSETS
Cash & cash equivalents $ 1,190,022 $ 2,284,988
Accounts Receivable 1,271,599 1,726,900
Notes Receivable 97,453 129,902
Inventory, net 501,859 943,048
Prepaid Expenses 13,404 166,003
----------- -----------
Total Current Assets 3,074,337 5,250,841
----------- -----------
OTHER ASSETS
Software development costs, net 1,584,724 2,620,997
Licenses, net 165,000 1,054,703
Property and equipment, net 1,687,456 3,305,449
Trademark, net 3,637,695 3,820,874
Goodwill, net 1,591,963 1,557,559
Other 79,180 118,239
----------- -----------
Total other assets 8,746,018 12,477,821
----------- -----------
TOTAL ASSETS $ 11,820,355 $ 17,728,662
=========== ===========
See accompanying notes to
consolidated financial statements.
<PAGE>
UNIVIEW TECHNOLOGIES CORPORATION and Subsidiaries
Consolidated Balance Sheets
March 31 June 30
1999 1998
----------- -----------
LIABILITIES AND STOCKHOLDERS EQUITY (Unaudited)
CURRENT LIABILITIES
Current Maturities of long-term debt $ 1,356,422 $ 3,644,729
Current maturities of capital leases 67,627 50,666
Trade accounts payable 1,304,942 4,224,897
License fee payable -- 673,920
Accrued and other current liabilities 1,575,920 1,379,753
Deferred income -- 69,889
----------- -----------
Total Current Liabilities 4,304,911 10,043,854
----------- -----------
Long Term Debt
Obligations under notes payable,
less current maturities 2,562,553 15,495
Obligations under capital
leases, less current maturities 42,397 124,425
Warranty Provision 53,592 244,657
----------- -----------
Total Liabilities 6,963,453 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 and
3 shares outstanding at March 31, 1999
and June 30, 1998, respectively
(liquidation preference of $75,000 and $75,000) 3 3
Series Q, 60 shares issued and 41 and
60 shares outstanding at March 31, 1999
and June 30, 1998, respectively
(liquidation preference of $1,025,000 and
$1,500,000) 41 60
Series 1998-A1, 80 shares issued and 0 shares
and 80 shares outstanding at March 31, 1999
and June 30, 1998, respectively (liquidation 0 80
preference of $0 and $2,000,000)
Series 1999-B, 84 shares issued and 84 shares and
0 shares outstanding at March 31, 1999 and
June 30, 1998, respectively (liquidation
preference of $2,100,000 and $0) 84 0
Common stock, $.10 par value; 80,000,000 shares
authorized; 13,420,769 and 10,032,669 shares
issued and outstanding at March 31, 1999,
and June 30, 1998 1,342,077 1,003,267
Additional Paid In Capital 44,175,700 42,480,261
Accumulated Deficit (40,801,003) (36,323,440)
----------- -----------
Total Stockholders' Equity 4,856,902 7,300,231
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 11,820,355 $ 17,728,662
=========== ===========
See accompanying notes to consolidated financial statements.
<PAGE>
UNIVIEW TECHNOLOGIES CORPORATION and Subsidiaries
Consolidated Statements of Operations (Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
-------------------------- --------------------------
March 31 March 31 March 31 March 31
1999 1998 1999 1998
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
REVENUES
Revenues $ 2,510,921 $ 58,019 $ 9,256,336 $ 189,393
----------- ----------- ----------- -----------
Total Revenue 2,510,921 58,019 9,256,336 189,393
COST OF REVENUES 2,384,836 61,795 7,637,497 184,209
----------- ----------- ----------- -----------
Gross Profit 126,085 (3,776) 1,618,840 5,184
OPERATING EXPENSES 2,435,599 3,675,576 7,685,160 8,183,771
----------- ----------- ----------- -----------
Operating Loss (2,309,514) (3,679,352) (6,066,320) (8,178,587)
GAIN ON SALE OF SUBSIDIARIES -- -- 1,860,207 --
OTHER INCOME (EXPENSE)
Loss from sale of land (82,800) -- (82,800) --
Interest and other income 167,229 113,996 224,976 453,721
Interest expense (243,963) (113,578) (403,504) (146,187)
----------- ----------- ----------- -----------
Total Other Income (Expense) (159,534) 418 (261,328) 307,534
----------- ----------- ----------- -----------
NET LOSS $(2,469,048) $(3,678,934) $(4,467,442) $(7,871,053)
=========== =========== =========== ===========
Loss per share attributable to
common stockholders
Basic and Diluted (0.19) (0.70) (0.38) (1.70)
Weighted average common shares outstanding
Basic and Diluted 13,298,044 5,299,214 11,854,100 4,541,310
</TABLE>
See accompanying notes to
consolidated financial statements.
<PAGE>
UNIVIEW TECHNOLOGIES CORPORATION and Subsidiaries
Consolidated Statements of Cash Flows (Unaudited)
Nine Months Ended
--------------------------
March 31 March 31
1999 1998
----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES
Net Loss $ (4,467,442) $ (7,871,053)
Adjustments to reconcile net loss to cash
provided by (used in) operating activities:
Depreciation and Amortization 2,230,269 1,081,688
Provision for Bad Debt -- 84,710
Gain on sale of subsidiaries (1,860,207) --
Loss on sale of land 82,800 --
Changes in assets and liabilities,
net of effects from acquisitions
and dispositions:
Accounts payable and
accrued liabilities 34,044 3,456,258
Other liabilities -- (91,793)
Accounts receivable 31,066 (63,023)
Inventory 76,493 (186,207)
Prepaid expense 12,780 547,672
Other assets (39,045) 369,904
Cash provided by (used in) ----------- -----------
operating activities (3,899,242) (2,671,844)
=========== ===========
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment (62,365) (1,217,560)
Software Development -- (2,653,752)
Investments - other -- (12,500)
Proceeds from sale of investments -- 282,142
Proceeds from sale of land 250,000 --
Issuance of note receivable -- (350,894)
----------- -----------
Cash provided by (used in)
investing activities 187,635 (3,952,564)
=========== ===========
CASH FLOWS FROM FINANCING ACTIVITIES
Payments on notes receivable 100,657 243,795
Proceeds from long term debt 1,800,000 --
Principal payments on long-
term debt (60,000) (21,452)
Forgiveness of debt (250,000) --
Issuances of preferred and
common stock for cash: 1,025,983 5,720,000
----------- -----------
Cash provided by (used in)
financing activities 2,616,640 5,942,343
=========== ===========
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS (1,094,967) (682,065)
CASH AND CASH EQUIVALENTS, BEGINNING 2,284,988 800,346
----------- -----------
CASH AND CASH EQUIVALENTS, ENDING $ 1,190,021 118,281
=========== ===========
See accompanying notes to consolidated financial statements.
<PAGE>
UNIVIEW TECHNOLOGIES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1999 (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 AGREEMENT/NOTES PAYABLE
The Company's 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 March 31,
1999 totaled $697,300. 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.
Network America also had $256,700 short term debt outstanding at the end
of the period.
In March 1999, the Company received $1.8 million from a private
issue of 3 year notes. Other outstanding notes at the end of the period
were $1.165 million, including a note of $741,000 the maturity of which
was extended to March 31, 2002.
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 had
a gain of $1.86 million from the transaction, consisting primarily of a
reduction in liabilities associated with UMC.
FINANCING TRANSACTIONS
On January 26, 1999, the Company sold its Series 1999-B Preferred
Stock in the face amount of $2.1 million. In connection with the
transaction, the Company received additional funding of $400,000 in cash,
credited the outstanding balance of Series 1998-A1 Preferred Stock toward
the purchase, and canceled Series 1998-A1 Preferred Stock. Terms of
Series 1999-B Preferred Stock include a fixed conversion price, which
represents the market price of $0.625 per share on the date of the
transaction, and limitations on conversions into and sales of underlying
common stock by the holders.
<PAGE>
The Company obtained 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, and principal and interest
are convertible into common stock at a fixed conversion price, which
represents the market price of $0.625 per share on the date of the
transaction.
The Company obtained additional financing of $300,000 under a 1999
Convertible Debenture dated March 4, 1999. Terms of the debenture
include a six percent coupon rate and principal and interest are
convertible into common stock at a fixed conversion price of $0.625 per
share, which represents a discount from the market price of $1.06 per
share on the date of the transaction.
Previously in the second fiscal quarter the Company received
$550,000 from the issuance of common stock and $76,000 from the exercise
of warrants.
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.
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 March 31, 1999. 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.
<PAGE>
Results of Operations
Revenues. We had revenues of $2.51 million in the third fiscal
quarter, compared to $58,000 for the same quarter last year. We further
report revenues of $9.25 million for the nine months ended March 31,
1999, compared to $189,000 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 third fiscal quarter, we report
a gross profit of $126,000 compared to a loss of $3,776 for the same
quarter last year. For the nine months ended March 31, 1999, we report
gross profit of $1.6 million, compared to $5,184 for the same period last
year. This increase resulted primarily from the same factors as the
increase in revenues.
Operating Expenses. We report $2.4 million in operating expenses for
the third fiscal quarter of the current year as compared to $3.7 million
for the same period last year. We report $7.7 million in operating
expenses for the nine months ended March 31, 1999, compared to $8.2
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 increased
by $1.2 million, from $2.7 million used during the nine months ended
March 31, 1998 to $3.9 million used during the same period in 1999. This
increase is attributable to a reduction in payables and accrued
liabilities offset by increased depreciation and amortization.
Cash Used In Investing Activities. During the nine months ended
March 31, 1999, cash used in investing activities increased by $4.1
million from the same period last year, due to a reduction in software
development costs and reduced purchases of property and equipment.
Cash Flows from Financing Activities. We received $1.0 million
during the nine months ended March 31, 1999 from issuances of preferred
and common stock, compared to $5.7 million received during the same
period last year. We also paid $60,000 on long-term debt during the nine
<PAGE>
months ended March 31, 1999, compared to $21,000 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.
During the fiscal quarter ended March 31, 1999, we did not achieve a
positive cash flow from operations. Accordingly, we continue to rely on
available borrowing arrangements and continued sale of our common stock
and preferred stock to fund operations until a positive cash flow from
operations can be achieved. We believe that we have made significant
progress under our business plan and that cash flow from operations will
improve within the next several months. However, it may be necessary to
pursue additional funding as we continue to develop, license and
implement technologies and solutions for our existing and future
customers. We continually evaluate opportunities with various investors
to raise additional capital, without which, our growth and profitability
could be restricted. Although we believe that sufficient financing
resources are available, 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. Our assessment of the nature and extent of
our Year 2000 issues is ongoing, 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 estimate
our total cost of achieving Year 2000 compliance will be less than
$50,000. 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
On October 22, 1998, Raytheon Training, Inc., formerly known as
Hughes Training, Inc., filed an action against uniView Marketing
Corporation ("UMC") and the Company, alleging that UMC failed to pay
approximately $475,000 under a contract between the parties dated October
25, 1994. Although we sold UMC as of October 31, 1998, we retain a
contingent liability as guarantor of any amounts ultimately found to be
due under the contract. UMC and the Company filed a response to the
<PAGE>
claim, setting forth various defenses. We intend to vigorously defend
this action and believe that we will prevail on our defenses. However,
as with any action of this type, the timing and degree of any effect upon
the Company are uncertain. If Raytheon prevails on the guaranty, it
could have a material adverse effect upon the Company. The action is
currently pending in the 342nd District Court of Tarrant County, Texas,
under Case No. 342-175836-98, styled Raytheon Training, Inc. f/k/a Hughes
Training, Inc. v. uniView Marketing Corporation f/k/a Curtis Mathes
Marketing Corporation and uniView Technologies Corporation f/k/a Curtis
Mathes Holding Corporation.
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 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
Sales of equity securities during the reporting period that were not
registered under the Securities Act of 1933 consisted of the following:
On January 26, 1999 we placed with accredited investors a face
amount of $2.1 million of our Series 1999-B Preferred Stock, along with
warrants to purchase One Million shares of Common Stock (the "Warrants").
The investors paid $400,000 in cash and exchanged a face amount of $1.7
million of our Series 1998-A1 Preferred Stock, which was canceled. The
private placement was made pursuant to the exemption from registration
provided by Securities and Exchange Commission ("SEC") Regulation D. In
accordance with the terms and conditions of the placement, Series 1999-B
Preferred Stock is convertible into shares of our $.10 par value Common
Stock at various times at a fixed conversion price of $.625 per share,
which represents the market price of the Common Stock on the date of the
transaction. The warrants are exercisable into Common Stock for three
years at an exercise price of $1.00 per share. The placement further
provides for registration, from time to time, of portions of the Common
Stock underlying the warrants and Series 1999-B Preferred Stock. (A form
of the Certificate of Designation and a form of the Warrants for Series
1999-B Preferred Stock are filed herewith, as reflected in the Exhibit
Index of this Form 10-Q.)
On January 26, 1999 we also placed with accredited investors a
principal sum of $1.5 million of our 1999.1 Convertible Debenture. The
private placement was made pursuant to the exemption from registration
provided by SEC Regulation D. In accordance with the terms and
conditions of the placement, the 1999.1 Debenture is convertible into
shares of our $.10 par value Common Stock at various times at a fixed
conversion price of $.625 per share, which represents the market price of
the Common Stock on the date of the transaction. The placement further
provides for registration, from time to time, of portions of the Common
Stock underlying the 1999.1 Debenture. (A form of the Securities
Purchase Agreement for the 1999.1 Debenture is filed herewith, as
reflected in the Exhibit Index of this Form 10-Q.)
On March 4, 1999 we placed with accredited investors a principal sum
of $300,000 of our 1999.2 Convertible Debenture. The private placement
was made pursuant to the exemption from registration provided by provided
by SEC Regulation D. In accordance with the terms and conditions of the
<PAGE>
placement, the 1999.2 Debenture is convertible into shares of our $.10
par value Common Stock at various times at a fixed conversion price of
$.625 per share, which represents a discount from the market price of
$1.06 per share on the date of the transaction. The placement further
provides for registration, from time to time, of portions of the Common
Stock underlying the 1999.2 Debenture. (A form of the Securities
Purchase Agreement for the 1999.2 Debenture is filed herewith, as
reflected in the Exhibit Index of this Form 10-Q.)
On March 29, 1999 we issued 50,000 shares of our Common Stock to
accredited investors pursuant to conversion of a portion of our
outstanding Series Q Preferred Stock. The issuance was made pursuant to
the exemption from registration provided by SEC Regulation D. We
received no additional cash for the conversion, as we received cash upon
the purchase and issuance of the preferred shares in June 1998. Series Q
Preferred Stock is convertible into shares of our $.10 par value Common
Stock at a variable conversion price. (The terms and conditions of
Series Q Preferred Stock are contained in an exhibit previously filed
with the SEC, as reflected in the Exhibit Index of this Form 10-Q.)
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 previously notified us that our Common Stock price was not in
compliance with their minimum bid price requirement. Although, our stock
price has now achieved the required level, we will be deemed in
compliance only after Nasdaq determines that we have the ability to
sustain long term compliance in the future with all applicable Nasdaq
maintenance criteria. We believe that we have demonstrated to Nasdaq our
current compliance and our ability to sustain long term compliance with
all applicable listing criteria, but we make no assurance that Nasdaq
will agree.
If Nasdaq determines that we do not have the ability to sustain long
term compliance with all applicable Nasdaq 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.
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
Exhibits
Reference is made to the Exhibit Index beginning on page 14 of
this Form 10-Q for a list of all exhibits filed with and
incorporated by reference in this report.
(b) Reports on Form 8-K
During the three months ended March 31, 1999 the Company filed
no Current Reports on Form 8-K.
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: May 13, 1999
<PAGE>
UNIVIEW TECHNOLOGIES CORPORATION and Subsidiaries
EXHIBIT INDEX
Exhibit Number Description of Exhibits Sequential Page Number
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 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
4.6 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
4.7* Form of Series 1999-B Preferred Stock Certificate of
Designation. 15
4.8* Form of warrants issued in connection with Series 1999-B
Preferred Stock. 34
4.9 Form of Securities Purchase Agreement for 1999.1 and 1999.2
Convertible Debenture (filed as Exhibit "4.9" to the
Company's Quarterly Report on Form 10-Q for the fiscal quarter
ended December 31, 1998 and incorporated herein by reference.) N/A
27* Financial Data Schedule (for EDGAR filing purposes only.) 41
_______________
* Filed herewith.
<PAGE>
Form of
CERTIFICATE OF DESIGNATION OF
5% CONVERTIBLE PREFERRED STOCK, SERIES 1999-B
OF UNIVIEW TECHNOLOGIES CORPORATION
Pursuant to Article 2.13 of the
Texas Business Corporation Act
Section 1. Designation, Amount, Par Value, Stated Value and
Rank. The series of preferred stock shall be designated as Convertible
Preferred Stock, Series 1999-B (the "Series 1999-B Preferred Stock"), and
the number of shares so designated shall be 84 (which shall not be
subject to increase without the consent of the holders of the Series 1999-
B Preferred Stock ("Holder")). Each share of Series 1999-B Preferred
Stock shall have a par value of $1.00 per share and a stated value of
$25,000 per share (the "Stated Value").
The Series 1999-B Preferred Stock shall rank senior to the Junior
Securities (as defined below) and pari passu with all other series of
preferred stock of the Company issued and outstanding as to dividends,
distributions and upon liquidation, dissolution or winding up.
Section 2. Dividends.
(a) Holders of Series 1999-B Preferred Stock shall be entitled to
receive, when and as declared by the Board of Directors, out of funds
legally available therefor, and the Company shall pay, cumulative
dividends at the rate per share (as a percentage of the Stated Value per
share) equal to 5% per annum, payable in cash or shares of Common Stock
(as defined in Section 7) at (subject to the terms and conditions set
forth herein) the option of the Company. Dividends on the Series 1999-B
Preferred Stock shall be calculated on the basis of a 360-day year, shall
accrue daily commencing on the Original Issue Date (as defined in Section
7), and shall be deemed to accrue from such date and be cumulative
whether or not earned or declared and whether or not there are profits,
surplus or other funds of the Company legally available for the payment
of dividends. Accrued and unpaid dividends of the Series 1999-B
Preferred Stock shall be paid on the date on which such Series 1999-B
Preferred Stock is converted. The party that holds the Series 1999-B
Preferred Stock on an applicable record date for any dividend payment
will be entitled to receive such dividend payment and any other accrued
and unpaid dividends which accrued prior to such dividend payment date,
without regard to any sale or disposition of such Series 1999-B Preferred
Stock subsequent to the applicable record date but prior to the
applicable dividend payment date. Except as otherwise provided herein,
if at any time the Company pays less than the total amount of dividends
then accrued on account of the Series 1999-B Preferred Stock, such
payment shall be distributed ratably among the Holders of the Series 1999-
B Preferred Stock based upon the number of shares held by each Holder.
Payment of dividends on the Series 1999-B Preferred Stock is further
subject to the provisions of Section 5(c)(i). The Company shall provide
the Holders notice of its intention to pay dividends in cash or shares of
Common Stock. If dividends are paid in shares of Common Stock, the
number of shares of Common Stock payable as such dividend to each Holder
shall be equal to the cash amount of such dividend payable to such Holder
on such dividend payment date divided by the average closing bid price of
the Common Stock on the NASDAQ or such other registered national exchange
or over the counter market on which the Company's Common Stock primarily
trades for the five Trading Days prior to such dividend payment date.
<PAGE>
(b) Notwithstanding anything to the contrary contained herein, the
Company may not issue shares of Common Stock in payment of dividends (and
must deliver cash in respect thereof) on the Series 1999-B Preferred
Stock if:
(i) the number of shares of Common Stock at the time
authorized, unissued and unreserved for all purposes, or held as
treasury stock, is insufficient to pay such dividends in shares of
Common Stock;
(ii) the issuance of such shares would result in the recipient
thereof beneficially owning, in accordance with the provisions of
Rule 13d-3 promulgated under the Securities Exchange Act of 1934, as
amended (the "Exchange Act") as such provisions may be amended or
superseded, or any successor statute or rule promulgated by the
Commission, more than 4.999% of the issued and outstanding shares of
Common Stock; or
(iii) the Company has failed to timely satisfy its
obligations pursuant to any Conversion Notice (as defined in Section
5(a)(ii)).
(c) So long as any Series 1999-B Preferred Stock shall remain
outstanding, except pursuant to existing agreements of the Company,
neither the Company nor any subsidiary thereof shall redeem, purchase or
otherwise acquire directly or indirectly any Junior Securities (as
defined in Section 7), nor shall the Company directly or indirectly pay
or declare any dividend or make any distribution (other than a dividend
or distribution described in Section 5) upon, nor shall any distribution
be made in respect of, any Junior Securities, nor shall any monies be set
aside for or applied to the purchase or redemption (through a sinking
fund or otherwise) of any Junior Securities.
Section 3. Voting Rights. Except as otherwise provided herein
and as otherwise required by law, the Series 1999-B Preferred Stock shall
have no voting rights. However, so long as any shares of Series 1999-B
Preferred Stock are outstanding, the Company shall not and shall cause
its subsidiaries not to, without the affirmative vote of the holders of
all of the shares of the Series 1999-B Preferred Stock then outstanding,
(a) alter or change adversely the powers, preferences or rights given to
the Series 1999-B Preferred Stock, (b) alter or amend this Certificate of
Designation, (c) authorize or create any class of stock ranking as to
dividends or distribution of assets upon a Liquidation (as defined in
Section 4) or otherwise senior to the Series 1999-B Preferred Stock,
except for any series of Series 1999-B Preferred Stock issued and sold in
accordance with the Purchase Agreement, (d) amend its Articles of
Incorporation, bylaws or other charter documents so as to affect
adversely any rights of any holders, (e) increase the authorized number
of shares of Series 1999-B Preferred Stock, and (f) enter into any
agreement with respect to the foregoing.
Section 4. Liquidation. Upon any liquidation, dissolution or
winding-up of the Company, whether voluntary or involuntary (a
"Liquidation"), the Holders shall be entitled to receive out of the
assets of the Company, whether such assets are capital or surplus, for
each share of Series 1999-B Preferred Stock an amount equal to the Stated
Value plus all accrued but unpaid dividends per share, whether declared
or not, before any distribution or payment shall be made to the holders
of any Junior Securities, and if the assets of the Company shall be
<PAGE>
insufficient to pay in full such amounts, then the entire assets to be
distributed to the holders of Series 1999-B Preferred Stock shall be
distributed among the holders of Series 1999-B Preferred Stock and the
holders of all securities ranking pari passu to the Series 1999-B
Preferred Stock ratably in accordance with the respective amounts that
would be payable on such shares if all amounts payable thereon were paid
in full. A sale, conveyance or disposition of all or substantially all
of the assets of the Company or the effectuation by the Company of a
transaction or series of related transactions in which more than 50% of
the voting power of the Company is disposed of, or a consolidation or
merger of the Company with or into any other company or companies shall
not be treated as a Liquidation, but instead shall be subject to the
provisions of Section 5. The Company shall mail written notice of any
such Liquidation, not less than 45 days prior to the payment date stated
therein, to each record holder of Series 1999-B Preferred Stock.
Section 5. Conversion.
(a) (i) Each share of Series 1999-B Preferred Stock (in minimum
amounts of $50,000 or such lesser amounts as the holders of a
majority in interest of Series 1999-B Preferred Stock then
outstanding shall agree) shall be convertible into shares of Common
Stock (subject to reduction pursuant to Section 5(a)(iii) and
Section 5(a)(v) at the Conversion Ratio (as defined in Section 7) at
the option of the Holder in whole or in part at any time beginning
on July 26, 1999, and after, except that, before July 26, 1999, the
Holder of the Series 1999-B Preferred Stock may convert the Series
1999-B Preferred Stock at any time that the closing sale price of
the Company's Common Stock equals or exceeds $2.50 per share on the
Trading Day immediately preceding such proposed conversion. The
Holders shall effect conversions by surrendering the certificate or
certificates representing the shares of Series 1999-B Preferred
Stock to be converted to the Company, together with the form of
conversion notice attached hereto as Exhibit A (the "Holder
Conversion Notice"). Each Holder Conversion Notice shall specify
the number of shares of Series 1999-B Preferred Stock to be
converted and the date on which such conversion is to be effected,
which date may not be prior to the date the holder delivers such
Holder Conversion Notice by facsimile (the "Holder Conversion
Date"). If no Holder Conversion Date is specified in a Holder
Conversion Notice, the Holder Conversion Date shall be the date that
the Holder Conversion Notice is deemed delivered pursuant to Section
5(i). Subject to Sections 5(b) and 5(a)(iii) hereof, each Holder
Conversion Notice, once given, shall be irrevocable. If the Holder
is converting less than all shares of Series 1999-B Preferred Stock
represented by the certificate or certificates tendered by the
Holder with the Holder Conversion Notice, or if a conversion
hereunder cannot be effected in full for any reason, the Company
shall promptly deliver to such Holder (in the manner and within the
time set forth in Section 5(b)) a certificate for such number of
shares as have not been converted, or the Company shall carry the
balance of such remaining shares of Holder's Series 1999-B Preferred
Stock on the Company's preferred stock ledger without issuing a new
certificate, at Holder's option. In the absence of receipt by the
Company of Holder's election not to receive new certificates, the
Company shall deliver such certificate(s) as provided herein.
<PAGE>
(ii) On the third anniversary of the Original Issue Date, the
Company may require the conversion of all of the then outstanding
and unconverted shares of Series 1999-B Preferred Stock at the
Conversion Ratio (subject to reduction pursuant to Section
5(a)(iii)) by delivering to the Holder of such shares to be
converted a notice in the form attached hereto as Exhibit B (the
"Company Conversion Notice"), provided, that, no such conversion is
permitted unless at the time of the delivery of the Company
Conversion Notice and on the Company Conversion Date (as defined
below), (a) the Company shall have complied in all material respects
with its obligations under the Registration Rights Agreement, and
(b) the Company is in compliance with all of its obligations under
this Certificate of Designation, the Purchase Agreement and the
Registration Rights Agreement. Each Company Conversion Notice shall
specify the number of shares of Series 1999-B Preferred Stock to be
converted and the date on which such conversion is to be effected,
which date may not be prior to the day after the Company delivers
such Company Conversion Notice by facsimile (the "Company Conversion
Date"). If no Company Conversion Date is specified in a Company
Conversion Notice, the Company Conversion Date shall be the date
that the Company Conversion Notice is deemed delivered pursuant to
Section 5(i). A Holder Conversion Date and a Company Conversion
Date are sometimes referred to herein as the "Conversion Date" and a
Holder Conversion Notice and a Company Conversion Notice are
sometimes referred to as a "Conversion Notice." Any conversion
pursuant to this Section 5(a)(ii) shall be subject to Section 5(b)
with respect to consequences of the Company's failure to deliver
shares of Common Stock in respect of a conversion under this
Section. If the Company is converting less than all shares of
Series 1999-B Preferred Stock represented by the certificate or
certificates tendered by the Holder in response to a Company
Conversion Notice, or if a conversion hereunder cannot be effected
in full for any reason, the Company shall promptly deliver to such
tendering Holder (in the manner and within the time set forth in
Section 5(b)) a certificate for such number of shares as have not
been converted, or the Company shall carry the balance of such
remaining shares of Holder's Series 1999-B Preferred Stock on the
Company's preferred stock ledger without issuing a new certificate
at Holder's option. In the absence of receipt by the Company of
Holder's election not to receive new certificates, the Company shall
deliver such certificate(s) as provided herein.
(iii) If on the Conversion Date applicable to any
conversion, (A) the Common Stock is then listed for trading on the
Nasdaq Stock Market, the American Stock Exchange or the Nasdaq
SmallCap Market, (B) such exchange deems this agreement to be
subject to its shareholder approval requirements, (C) the Conversion
Price then in effect is such that the aggregate number of shares of
Common Stock that would then be issuable upon conversion of all
outstanding shares of Series 1999-B Preferred Stock, together with
any shares of Common Stock previously issued upon conversion of
Series 1999-B Preferred Stock and in respect of payment of dividends
hereunder, would exceed 19.9% of the number of shares of Common
Stock outstanding on the Original Issue Date (the "Issuable
Maximum"), and (D) the Company has not previously obtained
Shareholder Approval (as defined below), then the Company shall
issue to any Holder so requesting conversion of Series 1999-B
Preferred Stock its pro rata portion of the Issuable Maximum in the
same ratio that the number of shares of Series 1999-B Preferred
<PAGE>
Stock held by any such Holder bears to all shares of Series 1999-B
Preferred Stock then outstanding and, with respect to any shares of
Common Stock that otherwise would have been issuable to such Holder
in respect of the Holder Conversion Notice at issue or in respect of
payment of dividends hereunder in excess of the Issuable Maximum,
the Company shall, as promptly as possible, but in no event later
than 75 days after such Conversion Date, either, at the Company's
option, (i) convene a meeting of the holders of the Common Stock and
use its best efforts to obtain the Shareholder Approval, or (ii)
redeem, for an amount, paid in cash, equal to the Stated Value of
such shares, plus any accrued but unpaid dividends on such shares,
multiplied by 115% all or a portion of the shares of Series 1999-B
Preferred Stock to which such Holder Conversion Notice applies as
would cause the number of shares of Common Stock issuable upon such
conversion to exceed the Issuable Maximum. "Shareholder Approval"
means the approval by a majority of the total votes cast on the
proposal, in person or by proxy, at a meeting of the shareholders of
the Company held in accordance with the Company's Articles of
Incorporation and by-laws, of the issuance by the Company of shares
of Common Stock exceeding the Issuable Maximum as a consequence of
the conversion of Series 1999-B Preferred Stock into Common Stock at
a price less than the greater of the book or market value on the
Original Issue Date as and to the extent, if any, required pursuant
to Nasdaq Marketplace Rule 4310(c)(25)(H)(i)(d)(2) (or any successor
or replacement provision thereof). Notwithstanding anything in this
Certificate of Designation to the contrary, if such exchange deems
this agreement to be subject to its shareholder approval
requirements, the parties agree that the aggregate number of shares
of Common Stock which may be acquired by any Investor or all
Investors upon conversion of any or all of the shares of Series 1999-
B Preferred Stock pursuant to the terms set forth in this
Certificate of Designation shall in no event exceed the Issuable
Maximum, unless the Company has obtained prior Shareholder Approval.
(iv) In no event shall a Holder be permitted to convert any
shares of Series 1999-B Preferred Stock in excess of the number of
such shares upon the conversion of which, (x) the number of shares
of Common Stock beneficially owned by such Holder (other than shares
of Common Stock issuable upon conversion of shares of Series 1999-B
Preferred Stock) plus (y) the number of shares of Common Stock
issuable upon the conversion of such shares of Series 1999-B
Preferred Stock, would be equal to or exceed (z) 4.999% of the
number of shares of Common Stock then issued and outstanding,
including shares issuable on conversion of the Series 1999-B
Preferred Stock held by such Holder after application of this
Section 5(a)(iv). As used herein, beneficial ownership shall be
determined in accordance with Section 13(d) of the Exchange Act and
the rules thereunder. To the extent that the limitation contained
in this paragraph 5(a)(iv) applies, the determination of whether
shares of Series 1999-B Preferred Stock are convertible (in relation
to other securities owned by a Holder) and of which shares of Series
1999-B Preferred Stock are convertible shall be in the sole
discretion of such Holder, and the submission of shares of Series
1999-B Preferred Stock for conversion shall be deemed to be such
Holder's determination of whether such shares of Series 1999-B
Preferred Stock are convertible (in relation to other securities
owned by a Holder) and of which shares of Series 1999-B Preferred
Stock are convertible, in each case subject to such aggregate
percentage limitation, and the Company shall have no obligation to
<PAGE>
verify or confirm the accuracy of such determination. This
paragraph may be amended (i) in order to clarify an ambiguity or
otherwise to give effect to such limitation, by the Board of
Directors of the Company and the Holders of two-thirds (2/3) of the
shares of Series 1999-B Preferred Stock then outstanding and (ii)
for any other reason, with the further consent of the Holders of a
majority of the shares of Common Stock then outstanding, to the
extent permitted by applicable law and subject to the rights and
preferences of any securities ranking senior thereto. Nothing
contained herein shall be deemed to restrict the right of a Holder
to convert such shares of Series 1999-B Preferred Stock at such time
as such conversion will not violate the provisions of this
paragraph. The provisions of this Section 5(a)(iv) may be waived by
a Holder of Series 1999-B Preferred Stock as to itself (and solely
as to itself) upon not less than 65 days prior notice to the
Company, and the provisions of this Section 5(a)(iv) shall continue
to apply until such 65th day (or later, if stated in the notice of
waiver). The limitations of this Section 5(a)(iv) shall not apply
to any conversion pursuant to Section 5(a)(ii).
(b) Not later than three (3) Trading Days after any Conversion
Date, the Company will deliver to the holder (i) a certificate or
certificates which shall be free of restrictive legends and trading
restrictions (other than those required by Section 3.l(b) of the Purchase
Agreement) representing the number of shares of Common Stock being
acquired upon the conversion of shares of Series 1999-B Preferred Stock
(subject to reduction pursuant to Section 5(a)(iii) and Section 5(a)(iv),
(ii) one or more certificates representing the number of shares of Series
1999-B Preferred Stock not converted, unless the Holder otherwise elects
to instead have such ownership indicated on the Company's ledgers, (iii)
a bank check in the amount of accrued and unpaid dividends (if the
Company has elected to pay accrued dividends in cash) and (iv) if the
Company has elected to pay accrued dividends in shares of Common Stock,
certificates, which shall be free of restrictive legends and trading
restrictions (other than those required by the Purchase Agreement),
representing such number of Shares of Common Stock as equals such
dividend divided by the Conversion Price; provided, however, that the
Company shall not be obligated to issue certificates evidencing the
shares of Common Stock issuable upon conversion of any shares of Series
1999-B Preferred Stock until certificates evidencing such shares of
Series 1999-B Preferred Stock are either delivered for conversion to the
Company for the Series 1999-B Preferred Stock or Common Stock, or the
holder of such Series 1999-B Preferred Stock notifies the Company that
such certificates have been lost, stolen or destroyed and provides a bond
(or other adequate security) reasonably satisfactory to the Company to
indemnify the Company from any loss incurred by it in connection
therewith. The Company shall, upon request of the holder, use its best
efforts to deliver any certificate or certificates required to be
delivered by the Company under this Section electronically through the
Depository Trust Corporation or another established clearing corporation
performing similar functions. If in the case of any Conversion Notice
such certificate or certificates, including for purposes hereof, any
shares of Common Stock to be issued on the Conversion Date on account of
accrued but unpaid dividends hereunder, are not delivered to or as
directed by the applicable holder by the third Trading Day after the
Conversion Date, the holder shall be entitled by written notice to the
Company at any time on or before its receipt of such certificate or
certificates thereafter, to rescind such conversion, in which event the
Company shall immediately return the certificates representing the shares
<PAGE>
of Series 1999-B Preferred Stock tendered for conversion. If the Company
fails to deliver to the Holder such certificate or certificates pursuant
to this Section, including for purposes hereof, any shares of Common
Stock to be issued on the Conversion Date on account of accrued but
unpaid dividends hereunder, prior to the fifth Trading Day after the
Conversion Date (the "Delivery Date"), the Company shall pay to such
Holder, in cash, as liquidated damages and not as a penalty, $2,000 per
day for each of the first two days after the Delivery Date and $5,000 per
day thereafter until such certificates are delivered. Notwithstanding
the foregoing, for the first three occurrences of such a failure to
timely deliver such certificates on the Delivery Date, the Company shall
not be required to pay liquidated damages for the first five days after
the Delivery Date, but shall pay $2,000 per day for each of the first
five days after such initial five day period and $5,000 per day
thereafter. If the Company fails to deliver to the Holder such
certificate or certificates pursuant to this Section prior to the 15th
day after the Conversion Date, the Company shall, at the Holder's option
(i) redeem, from funds legally available therefor at the time of such
redemption, such number of shares of Series 1999-B Preferred Stock then
held by such Holder, as requested by such Holder, and (ii) pay all
accrued but unpaid dividends on account of the Series 1999-B Preferred
Stock for which the Company shall have failed to issue Common Stock
certificates hereunder, in cash. The redemption price shall be equal to
the sum of (A) the aggregate of all accrued but unpaid dividends, plus
(B) the number of shares of Series 1999-B Preferred Stock then held by
such Holder multiplied by (1) the average Per Share Market Value for the
five Trading Days immediately preceding (x) the Conversion Date or (y)
the date of payment in full by the Company of such prepayment price,
whichever is greater, multiplied by, (2) the Conversion Ratio calculated
on the Conversion Date. If the Holder has requested that the Company
redeem shares of Series 1999-B Preferred Stock pursuant to this Section
and the Company fails for any reason to pay the redemption price under
(2) above within seven days after such notice is deemed delivered
pursuant to Section 5(i), the Company will pay interest on the redemption
price at a rate of 15% per annum, in cash to such Holder, accruing from
such seventh day until the redemption price and any accrued interest
thereon is paid in full. Nothing herein shall limit a Holder's right to
pursue actual damages for the Company's failure to deliver certificates
representing shares of Common Stock upon conversion within the period
specified herein (including, without limitation, damages relating to any
purchase of shares of Common Stock by such Holder to make delivery on a
sale effected in anticipation of receiving certificates representing
shares of Common Stock upon conversion, such damages to be in an amount
equal to (A) the aggregate amount paid by such holder for the shares of
Common Stock so purchased minus (B) the aggregate amount of net proceeds,
if any, received by such Holder from the sale of the shares of Common
Stock issued by the Company pursuant to such conversion), and such Holder
shall have the right to pursue all remedies available to it at law or in
equity (including, without limitation, a decree of specific performance
and/or injunctive relief).
(c) (i) The conversion price for each share of Series 1999-B
Preferred Stock (the "Conversion Price") in effect on any Conversion
Date shall be $0.625, which represents 100% of the closing sale
price of the Common Stock on the Original Issue Date; provided,
however, that, (a) if any Underlying Shares Registration Statement
is not filed pursuant to the Registration Rights Agreement, or (b)
the Company fails to file with the Commission a request for
acceleration in accordance with Rule 12dl-2 promulgated under the
<PAGE>
Exchange Act within eight (8) Trading Days of the date that the
Company is notified (orally or in writing, whichever is earlier) by
the Commission that an Underlying Shares Registration Statement will
not be "reviewed," or not subject to further review, or (c) if such
Underlying Shares Registration Statement is filed with and declared
effective by the Commission but thereafter ceases to be effective as
to all Registrable Securities (as such term is defined in the
Registration Rights Agreement) at any time prior to the expiration
of the "Effectiveness Period" (as such term as defined in the
Registration Rights Agreement), without being succeeded within
fifteen Trading Days by a subsequent Underlying Shares Registration
Statement filed with the Commission, or (d) if trading in the Common
Stock shall be suspended for any reason for more than three Trading
Days in the aggregate, or (e) if the conversion rights of the
Holders are suspended for any reason, or (f) if the Company breaches
in a material respect any covenant or other material term or
condition to this Certificate of Designations, the Purchase
Agreement (other than a representation or warranty contained
therein), the Registration Rights Agreement or any other agreement,
document, certificate or other instrument delivered in connection
with the transactions contemplated thereby, and such breach
continues for a period of thirty days after written notice thereof
to the Company, or (g) if the Company elects to convene a
shareholders meeting pursuant to Section 5(a)(iii) and fails to
convene a meeting of shareholders within the time periods specified
in Section 5(a)(iii), or (h) if the Company has breached Section
3(p) of the Registration Rights Agreement (any such failure or
breach being referred to as an "Event," and for purposes of clauses
(a) and (e) the date on which such Event occurs, or for purposes of
clause (b) the date on which such eight day period is exceeded, or
for purposes of clause (c) the date which such fifteen Trading Day-
period is exceeded, or for purposes of clause (d) the date on which
such three Trading Day period is exceeded, or for clause (f) the
date on which such thirty day period is exceeded, being referred to
as "Event Date"), the Conversion Price shall be decreased by 2% as
of the Event Date and shall be decreased an additional 2% as of each
monthly anniversary of the Event Date until the earlier to occur of
the second month anniversary after the Event Date and such time as
the applicable Event is cured. If the applicable Event has not been
cured before the second month anniversary after the Event Date, then
commencing the second month anniversary after the Event Date, the
Company shall pay to the Holders $40,000 (each holder being entitled
to receive such portion of such amount as equals its pro rata
portion of the Series 1999-B Preferred Stock). Additionally, if the
Company has failed to file a registration statement as required by
the Registration Rights Agreement within 120 days after the date it
was required to file such registration statement pursuant to the
Registration Rights Agreement or if any registration statement
required to be filed by the Company pursuant to the Registration
Rights Agreement has not been declared effective by the Commission
within 240 days of the date it was required to file such
registration statement pursuant to the Registration Rights Agreement
or if the Company has let any registration statement required to be
filed pursuant to the Registration Rights Agreement lapse for a
period of 60 consecutive days, then each Holder shall have the
option to require the Company to redeem the balance of such Holder's
Series 1999-B Preferred Stock, together with all accrued but unpaid
dividends, in cash at a redemption price equal to the sum of (A) the
aggregate of all accrued but unpaid dividends, plus (B) the number
<PAGE>
of shares of Series 1999-B Preferred Stock then held by such holder
multiplied by (l) the average Per Share Market Value for the five
Trading Days immediately preceding (x) the date of the redemption
request notice or (y) the date of payment in full by the Company of
such prepayment price, whichever is greater, multiplied by, (2) the
Conversion Ratio calculated on the redemption date. If the Holder
has requested that the Company redeem shares of Series 1999-B
Preferred Stock pursuant to this Section and the Company fails for
any reason to pay the redemption price as calculated above within
seven days after such notice is deemed delivered, the Company will
pay interest on the redemption price at a rate of 15% per annum, in
cash to such holder, accruing from such seventh day until the
redemption price and any accrued interest thereon is paid in full.
The provisions of this Section are not exclusive and shall in no way
limit the Company's obligations under the Registration Rights
Agreement.
(ii) If the Company, at any time while any shares of Series
1999-B Preferred Stock are outstanding, (a) shall pay a stock
dividend or otherwise make a distribution or distributions on shares
of its Junior Securities payable in shares of Common Stock, (b)
subdivide outstanding shares of Common Stock into a larger number of
shares, (c) combine outstanding shares of Common Stock into a
smaller number of shares, or (d) issue by reclassification of shares
of Common Stock any shares of capital stock of the Company, the
Conversion Price shall be multiplied by a fraction of which the
numerator shall be the number of shares of Common Stock (excluding
treasury shares, if any) outstanding before such event and of which
the denominator shall be the number of shares of Common Stock
outstanding after such event. Any adjustment made pursuant to this
Section 5(c)(ii) shall become effective immediately after the record
date for the determination of shareholders entitled to receive such
dividend or distribution and shall become effective immediately
after the effective date in the case of a subdivision, combination
or re-classification.
(iii) If the Company, at any time while any shares of
Series 1999-B Preferred Stock are outstanding, shall issue rights or
warrants to all holders of Common Stock entitling them to subscribe
for or purchase shares of Common Stock at a price per share less
than the Per Share Market Value of Common Stock at the record date
mentioned below, the Conversion Price shall be multiplied by a
fraction, of which the denominator shall be the number of shares of
Common Stock (excluding treasury shares, if any) outstanding on the
date of issuance of such rights or warrants plus the number of
additional shares of Common Stock offered for subscription or
purchase, and of which the numerator shall be the number of shares
of Common Stock (excluding treasury shares, if any) outstanding on
the date of issuance of such rights or warrants plus the number of
shares which the aggregate offering price of the total number of
shares so offered would purchase at such Per Share Market Value.
Such adjustment shall be made whenever such rights or warrants are
issued, and shall become effective immediately after the record date
for the determination of shareholders entitled to receive such
rights or warrants. However, upon the expiration of any right or
warrant to purchase Common Stock the issuance of which resulted in
an adjustment in the Conversion Price pursuant to this Section
5(c)(iii), if any such right or warrant shall expire and shall not
have been exercised, the Conversion Price shall immediately upon
<PAGE>
such expiration be re-computed and effective immediately upon such
expiration be increased to the price which it would have been (but
reflecting any other adjustments in the Conversion Price made
pursuant to the provisions of this Section 5 after the issuance of
such rights or warrants) had the adjustment of the Conversion Price
made upon the issuance of such rights or warrants been made on the
basis of offering for subscription or purchase only that number of
shares of Common Stock actually purchased upon the exercise of such
rights or warrants actually exercised.
(iv) If the Company, at any time while shares of Series 1999-B
Preferred Stock are outstanding, shall distribute to all holders of
Common Stock (and not to holders of Series 1999-B Preferred Stock)
evidences of its indebtedness or assets or rights or warrants to
subscribe for or purchase any security (excluding those referred to
in Sections 5(c)(ii) and (iii) above), then in each such case the
Conversion Price at which each share of Series 1999-B Preferred
Stock shall thereafter be convertible shall be determined by
multiplying the Conversion Price in effect immediately prior to the
record date fixed for determination of shareholders entitled to
receive such distribution by a fraction of which the denominator
shall be the Per Share Market Value of Common Stock determined as of
the record date mentioned above, and of which the numerator shall be
such Per Share Market Value of the Common Stock on such record date
less the then fair market value at such record date of the portion
of such assets or evidence of indebtedness so distributed applicable
to one outstanding share of Common Stock as determined by the Board
of Directors in good faith; provided, however, that in the event of
a distribution exceeding ten percent of the net assets of the
Company, such fair market value shall be determined by a nationally
recognized or major regional investment banking firm or firm of
independent certified public accountants of recognized standing
(which may be the firm that regularly examines the financial
statements of the Company) (an "Appraiser") selected in good faith
by the holders of a majority in interest of the shares of Series
1999-B Preferred Stock then outstanding; and provided, further, that
the Company, after receipt of the determination by such Appraiser
shall have the right to select an additional Appraiser, in good
faith, in which case the fair market value shall be equal to the
average of the determinations by each such Appraiser. In either
case the adjustments shall be described in a statement provided to
the holders of Series 1999-B Preferred Stock of the portion of
assets or evidences of indebtedness so distributed or such
subscription rights applicable to one share of Common Stock. Such
adjustment shall be made whenever any such distribution is made and
shall become effective immediately after the record date mentioned
above.
(v) All calculations under this Section 5 shall be made to the
nearest cent or the nearest l/l00th of a share, as the case may be.
(vi) Whenever the Conversion Price is adjusted pursuant to
Section 5(c)(ii),(iii) or (iv), the Company shall promptly mail to
each holder of Series 1999-B Preferred Stock, a notice setting forth
the Conversion Price after such adjustment and setting forth a brief
statement of the facts requiring such adjustment.
<PAGE>
(vii) In case of any reclassification of the Common Stock,
any consolidation or merger of the Company with or into another
person pursuant to which (i) a majority of the Company's Board of
Directors will not constitute a majority of the board of directors
of the surviving entity or (ii) less than 65% of the outstanding
shares of the capital stock of the surviving entity will be held by
the same shareholders of the Company prior to such reclassification,
consolidation or merger, the sale or transfer of all or
substantially all of the assets of the Company or any compulsory
share exchange pursuant to which the Common Stock is converted into
other securities, cash or property, the holders of the Series 1999-B
Preferred Stock then outstanding shall have the right thereafter to
convert such shares only into the shares of stock and other
securities, cash and property receivable upon or deemed to be held
by holders of Common Stock following such reclassification,
consolidation, merger, sale, transfer or share exchange, and the
holders of the Series 1999-B Preferred Stock shall be entitled upon
such event to receive such amount of securities, cash or property as
the shares of the Common Stock of the Company into which such shares
of Series 1999-B Preferred Stock could have been converted
immediately prior to such reclassification, consolidation, merger,
sale, transfer or share exchange would have been entitled; provided,
however, that if such reclassification, consolidation or merger is
approved by the Company's Board of Directors, each Holder shall have
the option to require the Company to redeem, from funds legally
available therefor at the time of such redemption, its shares of
Series 1999-B Preferred Stock at a price per share equal to the
product of (i) the average Per Share Market Value for the five
Trading Days immediately preceding (1) the effective date, the date
of the closing or the date of the announcement, as the case may be,
of the reclassification, consolidation, merger, sale, transfer or
share exchange the triggering such redemption right or (2) the date
of payment in full by the Company of the redemption price hereunder,
whichever is greater, and (ii) the Conversion Ratio calculated on
the date of the closing or the effective date, as the case may be,
of the reclassification, consolidation, merger, sale, transfer or
share exchange triggering such redemption right, as the case may be.
The entire redemption price shall be paid in cash, and the terms of
payment of such redemption price shall be subject to the provisions
set forth in Section 6(b). The terms of any such consolidation,
merger, sale, transfer or share exchange shall include such terms so
as to continue to give to the holder of Series 1999-B Preferred
Stock the right to receive the securities, cash or property set
forth in this Section 5(c)(vii) upon any conversion or redemption
following such consolidation, merger, sale, transfer or share
exchange. This provision shall similarly apply to successive
reclassifications, consolidations, mergers, sales, transfers or
share exchanges.
(viii) If:
A. the Company shall declare a dividend (or any other
distribution) on its Common Stock; or
B. the Company shall declare a special non-recurring
cash dividend on or a redemption of its Common Stock;
or
<PAGE>
C. the Company shall authorize the granting to all
holders of the Common Stock rights or warrants to
subscribe for or purchase any shares of capital stock
of any class or of any rights; or
D. the approval of any shareholders of the Company shall
be required in connection with any reclassification
of the Common Stock of the Company, any consolidation
or merger to which the Company is a party, any sale
or transfer of all or substantially all of the assets
of the Company, of any compulsory share of exchange
whereby the Common Stock is converted into other
securities, cash or property; or
E. the Company shall authorize the voluntary or
involuntary dissolution, liquidation or winding up of
the affairs of the Company;
then the Company shall cause to be filed at each office or agency
maintained for the purpose of conversion of Series 1999-B Preferred
Stock, and shall cause to be mailed to the Holders of Series 1999-B
Preferred Stock at their last addresses as they shall appear upon
the stock books of the Company, at least 20 calendar days prior to
the applicable record or effective date hereinafter specified, a
notice stating (x) the date on which a record is to be taken for the
purpose of such dividend, distribution, redemption, rights or
warrants, or if a record is not to be taken, the date as of which
the holders of Common Stock of record to be entitled to such
dividend, distributions, redemption, rights or warrants are to be
determined or (y) the date on which such reclassification,
consolidation, merger, sale, transfer or share exchange is expected
to become effective or close, and the date as of which it is
expected that holders of Common Stock of record shall be entitled to
exchange their shares of Common Stock for securities, cash or other
property deliverable upon such reclassification, consolidation,
merger, sale, transfer or share exchange; provided, however, that
the failure to mail such notice or any defect therein or in the
mailing thereof shall not affect the validity of the corporate
action required to be specified in such notice. Holders are
entitled to convert shares of Series 1999-B Preferred Stock during
the 20-day period commencing the date of such notice to the
effective date of the event triggering such notice.
(ix) If the Company (i) makes a public announcement that it
intends to enter into a Change of Control Transaction (as defined
below) or (ii) any person, group or entity (including the Company,
but excluding a Holder or any affiliate of a Holder) publicly
announces a bona fide tender offer, exchange offer or other
transaction to purchase 50% or more of the Common Stock (such
announcement being referred to herein as a "Major Announcement" and
the date on which a Major Announcement is made, the "Announcement
Date"), then, in the event that a Holder seeks to convert shares of
Series 1999-B Preferred Stock on or following the Announcement Date,
the Conversion Price shall, effective upon the Announcement Date and
continuing through the earlier to occur of the consummation of the
proposed transaction or tender offer, exchange offer or other
transaction and the Abandonment Date (as defined below), be equal to
the Conversion Price in effect on the Conversion Date for such
Series 1999-B Preferred Stock. "Abandonment Date" means with
<PAGE>
respect to any proposed transaction or tender offer, exchange offer
or other transaction for which a public announcement as contemplated
by this paragraph has been made, the date upon which the Company (in
the case of clause (i) above) or the person, group or entity (in the
case of clause (ii) above) publicly announces the termination or
abandonment of the proposed transaction or tender offer, exchange
offer or another transaction which caused this paragraph to become
operative.
(d) If at any time conditions shall arise by reason of action taken
by the Company which in the opinion of the Board of Directors are not
adequately covered by the other provisions hereof and which might
materially and adversely affect the rights of the holders of Series 1999-
B Preferred Stock (different than or distinguished from the effect
generally on rights of holders of any class of the Company's capital
stock) or if at any time any such conditions are expected to arise by
reason of any action contemplated by the Company, the Company shall mail
a written notice briefly describing the action contemplated and the
material adverse effects of such action on the rights of the holders of
Series 1999-B Preferred Stock at least 20 calendar days prior to the
effective date of such action, and an Appraiser selected by the holders
of majority in interest of the Series 1999-B Preferred Stock shall give
its opinion as to the adjustment, if any (not inconsistent with the
standards established in this Section 5), of the Conversion Price
(including, if necessary, any adjustment as to the securities into which
shares of Series 1999-B Preferred Stock may thereafter be convertible)
and any distribution which is or would be required to preserve without
diluting the rights of the holders of shares of Series 1999-B Preferred
Stock; provided, however, that the Company, after receipt of the
determination by such Appraiser, shall have the right to select an
additional Appraiser, in good faith, in which case the adjustment shall
be equal to the average of the adjustments recommended by each such
Appraiser. The Board of Directors shall make the adjustment recommended
forthwith upon the receipt of such opinion or opinions or the taking of
any such action contemplated, as the case may be; provided, however, that
no such adjustment of the Conversion Price shall be made which in the
opinion of the Appraiser(s) giving the aforesaid opinion or opinions
would result in an increase of the Conversion Price to more than the
Conversion Price then in effect.
(e) The Company covenants that it will at all times reserve and
keep available out of its authorized and unissued Common Stock solely for
the purpose of issuance upon conversion of Series 1999-B Preferred Stock
and payment of dividends on Series 1999-B Preferred Stock, each as herein
provided, free from preemptive rights or any other actual contingent
purchase rights of persons other than the holders of Series 1999-B
Preferred Stock, not less than such number of shares of Common Stock as
shall (subject to any additional requirements of the Company as to
reservation of such shares set forth in the Purchase Agreement) be
issuable (taking into account the adjustments and restrictions of Section
5(c)) upon the conversion of all outstanding shares of Series 1999-B
Preferred Stock and payment of dividends hereunder. The Company
covenants that all shares of Common Stock that shall be so issuable
shall, upon issue, be duly and validly authorized, issued and fully paid,
nonassessable and freely tradable.
(f) Upon a conversion hereunder the Company shall not be required
to issue stock certificates representing fractions of shares of Common
Stock, but may if otherwise permitted, make a cash payment in respect of
<PAGE>
any final fraction of a share based on the Per Share Market Value at such
time. If the Company elects not, or is unable, to make such a cash
payment, the holder of a share of Series 1999-B Preferred Stock shall be
entitled to receive, in lieu of the final fraction of a share, one whole
share of Common Stock.
(g) The issuance of certificates for shares of Common Stock on
conversion of Series 1999-B Preferred Stock shall be made without charge
to the holders thereof for any documentary stamp or similar taxes that
may be payable in respect of the issue or delivery of such certificate.
(h) Shares of Series 1999-B Preferred Stock converted into Common
Stock shall be canceled and shall have the status of authorized but
unissued shares of undesignated stock.
(i) Any and all notices or other communications or deliveries to be
provided by the holders of the Series 1999-B Preferred Stock hereunder,
including, without limitation, any Conversion Notice, shall be in writing
and delivered personally, by facsimile or sent by a nationally recognized
overnight courier service, addressed to the attention of the Chief
Executive Officer and to the Secretary of the Company at the facsimile
telephone number or address of the principal place of business of the
Company as set forth in the Purchase Agreement. Any and all notices or
other communications or deliveries to be provided by the Company
hereunder shall be in writing and delivered personally, by facsimile or
sent by a nationally recognized overnight courier service, addressed to
each Holder of Series 1999-B Preferred Stock at the facsimile telephone
number or address of such holder appearing on the books of the Company,
or if no such facsimile telephone number or address appears, at the
principal place of business of the Holder. Any notice or other
communication or deliveries hereunder shall be deemed given and effective
on the earliest of (i) the date of transmission, if such notice or
communication is delivered via facsimile at the facsimile telephone
number specified in this Section prior to 7:00 p.m. (Eastern Time), (ii)
the date after the date of transmission, if such notice or communication
is delivered via facsimile at the facsimile telephone number specified in
this Section later than 7:00 p.m. (New York Time) on any date and
earlier than 11:59 p.m. (Eastern Time) on such date, (iii) upon receipt,
if sent by a nationally recognized overnight courier service, or (iv)
upon actual receipt by the party to whom such notice is required to be
given.
Section 6. Redemptions.
(a) All outstanding and unconverted shares of Series 1999-B
Preferred Stock on the third anniversary of the Original Issue Date shall
be converted pursuant to Section 5(a)(ii) or redeemed by the Company
pursuant to this Section 6(a), from funds legally available therefor at a
price per share equal to the product of (i) the average Per Share Market
Value for the five Trading Days immediately preceding (1) the third
anniversary of the Original Issue Date or (2) the date of payment in full
by the Company of the redemption price hereunder, whichever is greater,
and (ii) the Conversion Ratio calculated on the third anniversary of the
Original Issue Date, plus any accrued but unpaid dividends on such
shares. Thereafter, all shares of Series 1999-B Preferred Stock shall
cease to be outstanding and shall have the status of authorized but
undesignated stock. The entire redemption price shall be paid in cash.
<PAGE>
(b) If any portion of the applicable redemption price under Section
6(a) shall not be paid by the Company within seven calendar days after
the date due, interest shall accrue thereon at the rate of 15% per annum
until the redemption price plus all such interest is paid in full (which
amount shall be paid as liquidated damages and not as a penalty). In
addition, if any portion of such redemption price remains unpaid for more
than 7 calendar days after the date due, the holder of the Series 1999-B
Preferred Stock subject to such redemption may elect, by written notice
to the Company given within 30 days after the date due, to either (i)
demand conversion in accordance with the formula and the time frame
therefor set forth in Section 5 of all of the shares of Series 1999-B
Preferred Stock for which such redemption price, plus accrued liquidated
damages thereof, has not been paid in full (the "Unpaid Redemption
Shares"), in which event the Per Share Market Price for such shares shall
be the lower of the Per Share Market Price calculated on the date such
redemption price was originally due and the Per Share Market Price as of
the holder's written demand for conversion, or (ii) invalidate ab initio
such redemption, notwithstanding anything herein contained to the
contrary. If the holder elects option (i) above, the Company shall
within five Trading Days of its receipt of such election deliver to the
holder the shares of Common Stock issuable upon conversion of the Unpaid
Redemption Shares subject to such holder conversion demand and otherwise
perform its obligations hereunder with respect thereto; or, if the Holder
elects option (ii) above, the Company shall promptly, and in any event
not later than five Trading Days from receipt of holder's notice of such
election, return to the holder all of the Unpaid Redemption Shares.
Section 7. Definitions. For the purposes hereof, the following
terms shall have the following meanings:
"Common Stock" means the Company's common stock, $.10 par value per
share, of the Company and stock of any other class into which such shares
may hereafter have been reclassified or changed.
"Conversion Ratio" means, at any time, a fraction, of which the
numerator is Stated Value plus accrued but unpaid dividends (including
any accrued but unpaid interest thereon) but only to the extent not paid
in shares of Common Stock in accordance with the terms hereof, and of
which the denominator is the Conversion Price at such time.
"Junior Securities" means the Common Stock and all other equity
securities of the Company which are junior in rights and liquidation
preference to the Series 1999-B Preferred Stock.
"NASDAQ" means the National Association of Securities Dealers
Automated Quotation System.
"Original Issue Date" shall mean January 26, 1999, regardless of the
number of transfers of any particular shares of Series 1999-B Preferred
Stock and regardless of the number of certificates which may be issued to
evidence such Series 1999-B Preferred Stock.
"Per Share Market Value" means on any particular date (a) the
closing bid price per share of the Common Stock on such date on the
Nasdaq Stock Market or other registered national stock exchange on which
the Common Stock is then listed or if there is no such price on such
date, then the closing bid price on such exchange or quotation system on
the date nearest preceding such date, or (b) if the Common Stock is not
listed then on the Nasdaq Stock Market or any registered national stock
<PAGE>
exchange, the closing bid price for a share of Common Stock in the over-
the-counter market, as reported by the Nasdaq Stock Market or in the
National Quotation Bureau Incorporated or similar organization or agency
succeeding to its functions of reporting prices) at the close of business
on such date, or (c) if the Common Stock is not then reported by the
National Quotation Bureau Incorporated (or similar organization or agency
succeeding to its functions of reporting prices), then the average of the
"Pink Sheet" quotes for the relevant conversion period, as determined in
good faith by the holder, or (d) if the Common Stock is not then publicly
traded the fair market value of a share of Common Stock as determined by
an Appraiser selected in good faith by the holders of a majority in
interest of the shares of the Series 1999-B Preferred Stock; provided,
however, that the Company, after receipt of the determination by such
Appraiser, shall have the right to select an additional Appraiser, in
which case, the fair market value shall be equal to the average of the
determinations by each such Appraiser; and provided, further that all
determinations of the Per Share Market Value shall be appropriately
adjusted for any stock dividends, stock splits or other similar
transactions during such period.
"Person" means a corporation, an association, a partnership,
organization, a business, an individual, a government or political
subdivision thereof or a governmental agency.
"Purchase Agreement" means the Convertible Series 1999-B Preferred
Stock Purchase Agreement, dated as of the Original Issue Date, among the
Company and the original holders of the Series 1999-B Preferred Stock.
"Registration Rights Agreement" means the Registration Rights
Agreement, dated as of the Original Issue Date, by and among the Company
and the original Holders.
"Trading Day" means (a) a day on which the Common Stock is traded on
the Nasdaq Stock Market or other registered national stock exchange on
which the Common Stock has been listed, or (b) if the Common Stock is not
listed on the Nasdaq Stock Market or any registered national stock
exchange, a day or which the Common Stock is traded in the over-the-
counter market, as reported by the OTC Bulletin Board, or (c) if the
Common Stock is not quoted on the OTC Bulletin Board, a day on which the
Common Stock is quoted in the over-the-counter market as reported by the
National Quotation Bureau Incorporated (or any similar organization or
agency succeeding its functions of reporting prices); provided, however,
that in the event that the Common Stock is not listed or quoted as set
forth in (a), (b) and (c) hereof, then Trading Day shall mean any day
except Saturday, Sunday and any day which shall be a legal holiday or a
day on which banking institutions in the State of New York are authorized
or required by law or other government action to close.
"Underlying Shares" means the number of shares of Common Stock into
which the Shares are convertible and the shares or Common Stock issuable
upon payment of dividends thereon, in accordance with the terms hereof
and the Purchase Agreement.
Section 8. Notices. Except as otherwise provided in the event
of conversion of shares of Series 1999-B Preferred Stock, all notices or
other communications required hereunder shall be in writing and shall be
sent either (a) by courier, or (b) by telecopy as well as by registered
or certified mail, and shall be regarded as properly given in the case of
a courier upon actual delivery to the proper place of address; in the
<PAGE>
case of telecopy, on the day following the date of transmission if
properly addressed and sent without transmission error to the correct
number and receipt is confirmed by telephone within 48 hours of the
transmission; in the case of a letter for which a telecopy could not be
successfully transmitted or receipt of which could not be confirmed as
herein provided, three days after the registered or certified mailing
date if the letter is properly addressed and postage prepaid; and shall
be regarded as properly addressed if sent to the parties or their
representatives at the addresses given below:
To the Company: uniView Technologies Corporation
10911 Petal Street
Dallas, Texas 75238
Attn: Patrick A. Custer
To the Holders:
or such other address as any of the above may have furnished to the other
parties in writing by registered mail, return receipt requested.
RESOLVED FURTHER, that the President and Secretary of the Company
be, and they hereby are, authorized and directed to prepare, execute,
verify, and file with the Secretary of State of Texas, a Certificate of
Designation in accordance with these resolutions and as required by law.
IN WITNESS WHEREOF, uniView Technologies Corporation has caused its
corporate seal to be hereunto affixed and this certificate to be signed
by Patrick A. Custer, its President, and attested by Billy J. Robinson,
its Secretary, this 26th day of January, 1999.
UNIVIEW TECHNOLOGIES
Attest: CORPORATION
By: By:
_______________________________ _______________________________
Name: Billy J. Robinson Name: Patrick A. Custer
Title: Secretary Title: President
EXHIBIT A
NOTICE OF CONVERSION
AT THE ELECTION OF HOLDER
(To be Executed by the
Registered Holder in order to
Convert shares of Series 1999-B
Preferred Stock)
The undersigned hereby elects to convert the number of shares of
Series 1999-B Convertible Preferred Stock indicated below, into shares of
common stock, par value $.10 per share (the "Common Stock"), of uniView
Technologies Corporation (the "Company") according to the conditions
hereof, as of the date written below. If shares are to be issued in the
name of a person other than undersigned, the undersigned will pay all
transfer taxes payable with respect thereto and is delivering herewith
such certificates and opinions as reasonably requested by the Company in
accordance therewith. No fee will be charged to the holder for any
conversion, except for such transfer taxes, if any.
<PAGE>
Conversion calculations:
_____________________________________
Date to Effect Conversion
_____________________________________
Number of shares of Series 1999-B
Preferred Stock to be Converted
_____________________________________
Number of shares of Common Stock to
be Issued
_____________________________________
Applicable Conversion Price
_____________________________________
Signature
_____________________________________
Name
_____________________________________
Address
EXHIBIT B
NOTICE OF CONVERSION AT
THE ELECTION OF THE COMPANY
The undersigned in the name and on behalf of uniView Technologies
Corporation (the "Company") hereby notifies the addressee hereof that the
Company hereby elects to exercise its right to convert [____] shares of
its 5% Series 1999-B Convertible Preferred Stock (the "Series 1999-B
Preferred Stock") held by the Holder into shares of common stock, par
value $.10 per share (the "Common Stock") of the Company according to the
terms hereof, as of the date written below. No fee will be charged to
the Holder for any conversion hereunder, except for such transfer taxes,
if any which may be incurred by the Company if shares are to be issued in
the name of a person other than the person to whom this notice is
addressed.
Conversion calculations:
_____________________________________
Date to Effect Conversion
_____________________________________
Number of shares of Series 1999-B
Preferred Stock to be Converted
_____________________________________
Number of shares of Common Stock to
be Issued
_____________________________________
Applicable Conversion Price
_____________________________________
Name of Holder
_____________________________________
Address of Holder
<PAGE>
THIS WARRANT AND ANY SHARES ACQUIRED UPON THE EXERCISE OF THIS
WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933 OR UNDER ANY STATE SECURITIES OR BLUE SKY LAWS. NEITHER
THIS WARRANT NOR ANY OF SUCH SHARES MAY BE OFFERED, SOLD,
ASSIGNED, TRANSFERRED OR OTHERWISE DISPOSED OF IN THE ABSENCE
OF REGISTRATION UNDER SAID ACT AND UNDER APPLICABLE STATE
SECURITIES OR BLUE SKY LAWS OR EXEMPTIONS FROM SUCH
REGISTRATION
January 26, 1999 Warrant No. 1999-B.____
UNIVIEW TECHNOLOGIES CORPORATION
STOCK PURCHASE WARRANT
Registered Owner:
This certifies that, for value received, uniView Technologies
Corporation, a Texas corporation, the ("Company") grants the following
rights to the Registered Owner, or assigns, of this Warrant:
(a) Issue. Upon tender (as defined in section (e) hereof) to the
Company, the Company shall issue to the Registered Owner, or assigns, up
to the number of shares specified in paragraph (b) hereof of fully paid
and nonassessable shares of Common Stock that the Registered Owner, or
assigns, is otherwise entitled to purchase.
(b) Number of Shares. The total number of shares of Common Stock
that the Registered Owner, or assigns, of this Warrant is entitled to
receive upon exercise of this Warrant is ____________ shares, subject to
adjustment from time to time as set forth in paragraph (f) below. The
Company shall at all times reserve and hold available sufficient shares
of Common Stock to satisfy all conversion and purchase rights represented
by outstanding convertible securities, options and warrants, including
this Warrant. The Company covenants and agrees that all shares of Common
Stock that may be issued upon the exercise of this Warrant shall, upon
issuance, be duly and validly issued, fully paid and nonassessable, and
free from all taxes, liens and charges with respect to the purchase and
the issuance of the shares.
(c) Exercise Price. The exercise price of this Warrant, the price
at which the shares of stock purchasable upon exercise of this Warrant
may be purchased, is $1.00 per share, subject to adjustment from time to
time pursuant to the provisions of paragraph (f) below (the "Exercise
Price").
(d) Exercise Period. This Warrant may only be exercised beginning
on January 26, 1999 and up to and including January 26, 2002 three years
after the date of the Warrant, less one day. If not exercised during
this period, this Warrant and all rights granted under this Warrant shall
expire and lapse.
(e) Tender. This Warrant may be exercised, in whole or in part, by
actual delivery of (i) the Exercise Price in cash, (ii) a duly executed
Warrant Exercise Form, a copy of which is attached to this Warrant as
Exhibit A, properly executed by the Registered Owner, or assigns, of this
Warrant, and (iii) by surrender of this Warrant. The payment and Warrant
Exercise Form must be delivered, personally or by mail, to the registered
office of the Company. Documents sent by mail shall be deemed to be
delivered when they are received by the Company.
<PAGE>
(f) Adjustment of Exercise Price.
(i) If the Company, at any time while this Warrant is
outstanding, (a) shall pay a stock dividend on its Common Stock, (b)
subdivide outstanding shares of Common Stock into a larger number of
shares, (c) combine outstanding shares of Common Stock into a smaller
number of shares, or (d) issue by reclassification of shares of Common
Stock any shares of capital stock of the Company, the Exercise Price
shall be multiplied by a fraction of which the numerator shall be the
number of shares of Common Stock (excluding treasury shares, if any)
outstanding before such event and of which the denominator shall be the
number of shares of Common Stock outstanding after such event. Any
adjustment made pursuant to this paragraph (f)(i) shall become effective
immediately after the record date for the determination of shareholders
entitled to receive such dividend or distribution and shall become
effective immediately after the effective date in the case of a
subdivision, combination or re-classification.
(ii) If the Company, at any time while this Warrant is
outstanding, shall issue rights or warrants to all holders of Common
Stock entitling them to subscribe for or purchase shares of Common Stock
at a price per share less than the Per Share Market Value (as defined
below) of Common Stock at the record date mentioned below, the Exercise
Price shall be multiplied by a fraction, of which the denominator shall
be the number of shares of Common Stock (excluding treasury shares, if
any) outstanding on the date of issuance of such rights or warrants plus
the number of additional shares of Common Stock offered for subscription
or purchase, and of which the numerator shall be the number of shares of
Common Stock (excluding treasury shares, if any) outstanding on the date
of issuance of such rights or warrants plus the number of shares which
the aggregate offering price of the total number of shares so offered
would purchase at such Per Share Market Value. Such adjustment shall be
made whenever such rights or warrants are issued, and shall become
effective immediately after the record date for the determination of
shareholders entitled to receive such rights or warrants. However, upon
the expiration of any right or warrant to purchase Common Stock the
issuance of which resulted in an adjustment in the Exercise Price
pursuant to this paragraph (f)(ii), if any such right or warrant shall
expire and shall not have been exercised, the Exercise Price shall
immediately upon such expiration be re-computed and effective immediately
upon such expiration be increased to the price which it would have been
(but reflecting any other adjustments in the Exercise Price made pursuant
to the provisions of section (f) after the issuance of such rights or
warrants) had the adjustment of the Exercise Price made upon the issuance
of such rights or warrants been made on the basis of offering for
subscription or purchase only that number of shares of Common Stock
actually purchased upon the exercise of such rights or warrants actually
exercised.
(iii) If the Company, at any time while this Warrant is
outstanding, shall distribute to all holders of Common Stock evidences of
its indebtedness or assets or rights or warrants to subscribe for or
purchase any security (excluding those referred to in paragraphs (f)(i)
and (ii) above), then in each such case the Exercise Price at which the
Warrant shall thereafter be convertible shall be determined by
multiplying the Exercise Price in effect immediately prior to the record
date fixed for determination of shareholders entitled to receive such
distribution by a fraction of which the denominator shall be the Per
Share Market Value of Common Stock determined as of the record date
<PAGE>
mentioned above, and of which the numerator shall be such Per Share
Market Value of the Common Stock on such record date less the then fair
market value at such record date of the portion of such assets or
evidence of indebtedness so distributed applicable to one outstanding
share of Common Stock as determined by the Board of Directors in good
faith; provided, however, that in the event of a distribution exceeding
ten percent of the net assets of the Company, such fair market value
shall be determined by a nationally recognized or major regional
investment banking firm or firm of independent certified public
accountants of recognized standing (which may be the firm that regularly
examines the financial statements of the Company) (an "Appraiser")
selected in good faith by the holder of the Warrant; and provided,
further, that the Company, after receipt of the determination by such
Appraiser shall have the right to select an additional Appraiser, in good
faith, in which case the fair market value shall be equal to the average
of the determinations by each such Appraiser. In either case the
adjustments shall be described in a statement provided to the holder of
the Warrant of the portion of assets or evidences of indebtedness so
distributed or such subscription rights applicable to one share of Common
Stock. Such adjustment shall be made whenever any such distribution is
made and shall become effective immediately after the record date
mentioned above.
(iv) All calculations under this section (f) shall be made to
the nearest cent or the nearest l/l00th of a share, as the case may be.
(v) Whenever the Exercise Price is adjusted pursuant to
paragraphs (f)(i), (ii) or (iii), the Company shall promptly mail to the
holder of the Warrant, a notice setting forth the Exercise Price after
such adjustment and setting forth a brief statement of the facts
requiring such adjustment.
(vi) In case of any reclassification of the Common Stock, any
consolidation or merger of the Company with or into another person
pursuant to which (i) a majority of the Company's Board of Directors will
not constitute a majority of the board of directors of the surviving
entity or (ii) less than 65% of the outstanding shares of the capital
stock of the surviving entity will be held by the same shareholders of
the Company prior to such reclassification, consolidation or merger, the
sale or transfer of all or substantially all of the assets of the Company
or any compulsory share exchange pursuant to which the Common Stock is
converted into other securities, cash or property, the holder of the
Warrant shall have the right thereafter to convert the Warrant only into
the shares of stock and other securities, cash and property receivable
upon or deemed to be held by holders of Common Stock following such
reclassification, consolidation, merger, sale, transfer or share
exchange, and the holder of the Warrant shall be entitled upon such event
to receive such amount of securities, cash or property as the shares of
the Common Stock of the Company into which the Warrant could have been
converted immediately prior to such reclassification, consolidation,
merger, sale, transfer or share exchange would have been entitled;
provided, however, that if such reclassification, consolidation or merger
is approved by the Company's Board of Directors, the holder of the
Warrant shall have the option to require the Company to redeem, from
funds legally available therefor at the time of such redemption, the
Warrant at a price per share equal to the product of (i) the average Per
Share Market Value for the five Trading Days immediately preceding (1)
the effective date, the date of the closing or the date of the
announcement, as the case may be, of the reclassification, consolidation,
<PAGE>
merger, sale, transfer or share exchange the triggering such redemption
right or (2) the date of payment in full by the Company of the redemption
price hereunder, whichever is greater, and (ii) the Exercise Price
calculated on the date of the closing or the effective date, as the case
may be, of the reclassification, consolidation, merger, sale, transfer or
share exchange triggering such redemption right, as the case may be. The
entire redemption price shall be paid in cash. The terms of any such
consolidation, merger, sale, transfer or share exchange shall include
such terms so as to continue to give to the holder of the Warrant the
right to receive the securities, cash or property set forth in this
paragraph (f)(vi) upon any conversion or redemption following such
consolidation, merger, sale, transfer or share exchange. This provision
shall similarly apply to successive reclassifications, consolidations,
mergers, sales, transfers or share exchanges.
(vii) If:
A. the Company shall declare a dividend (or any other
distribution) on its Common Stock; or
B. the Company shall declare a special nonrecurring cash
dividend on or a redemption of its Common Stock; or
C. the Company shall authorize the granting to all holders of
the Common Stock rights or warrants to subscribe for or
purchase any shares of capital stock of any class or of
any rights; or
D. the approval of any shareholders of the Company shall be
required in connection with any reclassification of the
Common Stock of the Company, any consolidation or merger
to which the Company is a party, any sale or transfer of
all or substantially all of the assets of the Company, of
any compulsory share of exchange whereby the Common Stock
is converted into other securities, cash or property; or
E. the Company shall authorize the voluntary or involuntary
dissolution, liquidation or winding up of the affairs of
the Company;
then the Company shall cause to be filed at each office or agency
maintained for the purpose of conversion of this Warrant, and shall cause
to be mailed to the holder of this Warrant at its address as it shall
appear below, at least 20 calendar days prior to the applicable record or
effective date hereinafter specified, a notice stating (x) the date on
which a record is to be taken for the purpose of such dividend,
distribution, redemption, rights or warrants, or if a record is not to be
taken, the date as of which the holders of Common Stock of record to be
entitled to such dividend, distributions, redemption, rights or warrants
are to be determined or (y) the date on which such reclassification,
consolidation, merger, sale, transfer or share exchange is expected to
become effective or close, and the date as of which it is expected that
holders of Common Stock of record shall be entitled to exchange their
shares of Common Stock for securities, cash or other property deliverable
upon such reclassification, consolidation, merger, sale, transfer or
share exchange; provided, however, that the failure to mail such notice
or any defect therein or in the mailing thereof shall not affect the
validity of the corporate action required to be specified in such notice.
The holder of this Warrant is entitled to exercise all or a portion of
<PAGE>
this Warrant during the 20-day period commencing the date of such notice
to the effective date of the event triggering such notice.
(g) Per Share Market Value. Per Share Market Value means on any
particular date (i) the closing bid price per share of the Common Stock
on such date on the Nasdaq Stock Market or other registered national
stock exchange on which the Common Stock is then listed or if there is no
such price on such date, then the closing bid price on such exchange or
quotation system on the date nearest preceding such date, or (ii) if the
Common Stock is not listed then on the Nasdaq Stock Market or any
registered national stock exchange, the closing bid price for a share of
Common Stock in the over-the-counter market, as reported by the Nasdaq
Stock Market or in the National Quotation Bureau Incorporated or similar
organization or agency succeeding to its functions of reporting prices)
at the close of business on such date, or (iii) if the Common Stock is
not then reported by the National Quotation Bureau Incorporated (or
similar organization or agency succeeding to its functions of reporting
prices), then the average of the "Pink Sheet" quotes for the relevant
conversion period, as determined in good faith by the holder, or (d) if
the Common Stock is not then publicly traded the fair market value of a
share of Common Stock as determined by an Appraiser selected in good
faith by the holder of this Warrant; provided, however, that the Company,
after receipt of the determination by such Appraiser, shall have the
right to select an additional Appraiser, in which case, the fair market
value shall be equal to the average of the determinations by each such
Appraiser; and provided, further that all determinations of the Per Share
Market Value shall be appropriately adjusted for any stock dividends,
stock splits or other similar transactions during such period.
(h) Registration Rights. The Company will undertake the
registration of the Common Stock into which such Warrants are convertible
at such times and upon such terms pursuant to the provisions of the
Registration Rights Agreement dated January 26, 1999 by and among the
Company, Brown Simpson Strategic Growth Fund, L.P. and Brown Simpson
Strategic Growth Fund, Ltd.
(i) Notices. All notices or other communications required
hereunder shall be in writing and shall be sent either (i) by courier, or
(ii) by telecopy as well as by registered or certified mail, and shall be
regarded as properly given in the case of a courier upon actual delivery
to the proper place of address; in the case of telecopy, on the day
following the date of transmission if properly addressed and sent without
transmission error to the correct number and receipt is confirmed by
telephone within 48 hours of the transmission; in the case of a letter
for which a telecopy could not be successfully transmitted or receipt of
which could not be confirmed as herein provided, three days after the
registered or certified mailing date if the letter is properly addressed
and postage prepaid; and shall be regarded as properly addressed if sent
to the parties or their representatives at the addresses given below:
To the Company: uniView Technologies Corporation
10911 Petal Street
Dallas, Texas 75238
Attn: Patrick A. Custer
To the holder:
or such other address as any of the above may have furnished to the other
parties in writing by registered mail, return receipt requested.
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant to be
executed by its duly authorized officer as of the date first set forth
above.
UNIVIEW TECHNOLOGIES CORPORATION
By:
Patrick A. Custer
President
EXHIBIT A
Warrant Exercise Form
TO: UNIVIEW TECHNOLOGIES CORPORATION
The undersigned hereby: (1) irrevocably subscribes for and offers to
purchase _______ shares of Common Stock of uniView Technologies
Corporation, pursuant to Warrant No. 1999-B.___ heretofore issued to
_______________________________ on ________________, 1999; (2) encloses a
payment of $_________________ for these shares at a price of $1.00 per
share (as adjusted pursuant to the provisions of the Warrant); and (3)
requests that a certificate for the shares be issued in the name of the
undersigned and delivered to the undersigned at the address specified
below.
Date:
Investor Name:
Taxpayer Identification
Number:
By:
Printed Name:
Title:
Address:
Note: The above signature should correspond exactly
with the name on the face of this Warrant Certificate
or with the name of assignee appearing in assignment
form below.
AND, if said number of shares shall not be all the shares purchasable
under the within Warrant, a new Warrant Certificate is to be issued in
the name of said undersigned for the balance remaining of the shares
purchasable thereunder less any fraction of a share paid in cash and
delivered to the address stated above.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CONSOLIDATED
FINANCIAL STATEMENTS AT March 31, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FORM 10-Q FOR FISCAL QUARTER ENDED March 31, 1999.
</LEGEND>
<S> <C>
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-START> JUL-01-1998
<PERIOD-END> MAR-31-1999
<PERIOD-TYPE> 9-MOS
<CASH> 1,190,021
<SECURITIES> 0
<RECEIVABLES> 1,382,457
<ALLOWANCES> 0
<INVENTORY> 501,859
<CURRENT-ASSETS> 3,074,337
<PP&E> 4,999,186
<DEPRECIATION> 3,311,730
<TOTAL-ASSETS> 11,820,355
<CURRENT-LIABILITIES> 4,304,911
<BONDS> 2,658,542
0
140,128
<COMMON> 1,342,077
<OTHER-SE> 3,374,697
<TOTAL-LIABILITY-AND-EQUITY> 11,820,355
<SALES> 2,510,921
<TOTAL-REVENUES> 2,510,921
<CGS> 2,384,836
<TOTAL-COSTS> 2,384,836
<OTHER-EXPENSES> 2,435,599
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 243,963
<INCOME-PRETAX> (2,469,048)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,469,048)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,469,048)
<EPS-PRIMARY> (0.19)
<EPS-DILUTED> (0.19)
</TABLE>
