UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
( X ) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
( ) 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: 0-18271
MAGELLAN TECHNOLOGY, INC.
(Exact name of registrant as specified in its charter)
Utah 87-0467614
(State or other jurisdiction of (I.R.S. Employer identification No.)
Incorporation or organization
990 West Atherton Dr., Suite 205
Salt Lake City, Utah 84123
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (801) 262-1792
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
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date:
Outstanding at
Class June 30, 1996
Common Stock, $.0002 par value 7,978,790 shares
<PAGE>
FORM 10-QSB
Financial Statements and Schedules
Magellan Technology, Inc.
For the Quarter Ended June 30, 1996
The following financial statements and schedules of the registrant and its
consolidated subsidiaries are submitted herewith:
Part I - Financial Information
Item 1. Financial Statements
Condensed consolidated balance sheet 2
for June 30, 1996 and year-end
for Dec. 31, 1995
Condensed consolidated statement of
operations for the three and six months
ended June 30, 1996 and 1995 4
Condensed statement of cash flows for
the six months ended June 30,
1996 and 1995 5
Notes to condensed consolidated
financial statements 7
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 10
Item 3. Defaults Upon Senior Securities 10
Item 4. Submission of Matters to a Vote
of Securities Holders 10
Item 5. Other information 10
Item 6(a). Exhibits 10
Item 6(b). Reports on Form 8-K 10
<PAGE>
MAGELLAN TECHNOLOGY, INC.
AND SUBSIDIARIES
Condensed Consolidated Balance Sheet
June 30, 1996 Dec. 31, 1995
ASSETS (Unaudited) (Audited)
Current Assets:
Cash $16,909 $149,778
Accounts Receivable 383,382 355,263
Other current assets 48,735 7,088
------------- -------------
Current Assets 449,026 512,129
------------- -------------
Property and Equipment:
Software 46,242 31,323
Leasehold Improvements 66,923 65,018
Office Furniture 50,106 40,066
Computer Equipment 443,780 318,172
Assets Under Capital Lease 296,222 357,960
Accumulated Depreciation (431,129) (347,692)
------------- -------------
Net Property and Equipment 472,145 464,847
------------- -------------
Deposits 79,234 37,586
Capitalized Software (Net) 132,589 87,346
Equity Investment 300,000
------------- ------------
511,823 124,932
$1,432,993 $1,101,908
============= =============
MAGELLAN TECHNOLOGY, INC.
AND SUBSIDIARIES
Condensed Consolidated Balance Sheet
June 30, 1996 Dec. 31, 1995
LIABILITIES AND STOCKHOLDERS' EQUITY (Unaudited) (Audited)
--------------- ---------------
Current Liabilties:
Notes Payable $348,783 $193,595
Current Portion of long-term debt 171,063 182,958
Accounts Payable 135,305 168,246
Accrued liabilities 132,052 160,765
-------------- ---------------
Total current liabilities 787,203 705,564
Long-term debt 193,547 267,883
Deferred Revenue 346 1,439
-------------- ---------------
Total liabilities $981,095 $974,886
Stockholders' Equity:
Common Stock, par value $.0002 per
share; 25,000,000 shares authorized
7,978,790 issued and outstanding 1,596 1,419
Additional paid-in capital 2,896,878 2,587,055
Retained Deficit (2,446,576) (2,461,452)
-------------- --------------
Total stockholders equity
(deficit) 451,898 127,022
-------------- --------------
$1,432,993 $1,101,908
============== ==============
MAGELLAN TECHNOLOGY, INC.
AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
------------------------- -------------------------
1996 1995 1996 1995
---------- ---------- ---------- ----------
Revenue from sales: $473,311 $367,841 $985,916 $645,530
Cost of Sales: 304,112 236,050 625,549 418,743
---------- --------- --------- ---------
Gross Margin: 169,199 131,791 360,367 226,787
Operating Expenses:
Selling, General
and Administrative 109,585 84,675 212,601 166,512
Depreciation
& Amortization 45,531 28,652 117,601 55,863
R & D expenses 0 0 0 1,807
---------- ---------- ---------- ----------
Total operating
expenses 155,117 113,327 330,202 224,182
---------- ---------- ---------- ----------
Income (Loss)
from operations: 14,083 18,464 30,165 2,605
Other income and
expenses:
Other income 1,153 3,000 9,589 6,416
Interest Expense (8,600) (10,195) (24,878) (28,062)
---------- ---------- --------- ---------
Net Income(loss) $6,635 $11,269 $14,876 ($19,041)
========== ========== ========== =========
Net Income(loss)
per share ($0.00) ($0.00) (0.00) ($0.00)
========== ========== ========== =========
Weighted average
shares outstanding 7,535,933 11,775,878 7,535,933 11,775,878
MAGELLAN TECHNOLOGY, INC.
AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(Unaudited)
Six Months Ended
June 30,
------------------------
Cash flows from Operating Activities: 1996 1995
---------- ----------
Net Income (loss) $14,876 ($19,041)
Adjustments to reconcile net loss
to net cash used in operating activities:
Depreciation 83,437 55,863
Cash Reconcilation 11,406
Forgiveness of Debt 0 (11,772)
(Increase) decrease in:
Accounts Receivable (28,119) (63,989)
Other current assets (41,647) (59,995)
Cash Deposits (41,648) 7,857
Capitalized Software, Net (45,243) 0
Increase (decrease) in:
Accounts payable (32,941) (88,002)
Accrued liabilities (28,713) (22,141)
Deferred revenue (1,093) (547)
---------- ----------
Net cash used in operating activities (121,091) (190,361)
Cash flows from investing activities:
Proceeds from sales of equipment 0 0
Purchase of Machinery and equipment (90,734) (14,391)
Investment in Subsidiary (300,000) 0
Net cash used in investing activities (390,734) (14,391)
Cash flows from financing activities:
Proceeds from notes payable and long-term debt 348,783 17,072
Reduction of long-term debt (279,827) (167,803)
Proceeds from issuance of common stock 310,000 367,928
---------- ----------
Net cash provided by financing
activities 378,956 217,197
---------- ----------
Net increase (decrease) in cash (132,869) 12,445
Cash, beginning of period 149,778 16,305
Cash, end of period $16,909 $28,750
========== ==========
MAGELLAN TECHNOLOGY, INC.
AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(Unaudited)
Six Months Ended
June30,
--------------------------
1996 1995
Cash paid during the period for: ----------- -----------
Interest $16,330.00 $10,724.00
Income Taxes $0.00 $0.00
=========== ===========
Nonmonetary Financing and Investing Activities
MAGELLAN TECHNOLOGY, INC.
AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(1) The unaudited condensed consolidated financial statements include the
accounts of Magellan
Technology, Inc. and subsidiary and include all adjustments (consisting
of normal recurring
items)
which are, in the opinion of management, necessary to present fairly
the financial position
as of June
30, 1996 and the results of operations for the six months ended
June 30, 1996 and 1995 and
cash
flows for the six months ended June 30, 1996 and 1995. The results
of operations for the
six months
ended June 30, 1996 are not necessarily indicative of the results to be
expected for the entire year.
(2) (Loss) per share is based on the weighted average number of shares
outstanding at June 30,
1996
and 1995, respectively. Shares outstanding for 1995 and 1996
reflect the 2:1 reverse stock
split that
occurred on March 8, 1996.
(3) During the six months ending June 30, 1996, the Company entered
into additional long-term
debt for
furniture, fixtures and computer equipment totaling $30,060. These
funds were used to set
up a new
facility in Price, Utah in order to service new clients.
(4) The Company sold 1,442,857 shares of stock and used the proceeds to purchase
323,333 shares shares of Skyhook Technologies. This transaction has taken place
with four fundings -- two in the second quarter 1996 (885,744 shares of Magellan
stock sold) and two in the third quarter 1996 (557,143 shares of Magellan stock
sold).
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 2 - Management's Discussion and Analysis of Financial Condition and
Result of Operations
Three month period ended June 30, 1996 compared to the three month period ended
June 30, 1995
Sales for the quarter ended June 30, 1996, were $473,311 as compared with
$367,841 for the same quarter ended June 30, 1995. This represents a 29%
increase in revenues from 1995. This increase is attributable to increased
revenues from existing clients, including new clients from the first quarter.
The Company's revenues are down from projections due to a significant reduction
of work at the Jamaican facility. This is due to a temporary decrease in work
orders from one of our major clients. However, in spite of this significant
decrease, our gross margins have remained constant. This is indicative of the
Company's careful cost mangement.
Operating expenses increased $41,790 in the second quarter of 1996 as compared
with the second quarter of 1995. This is due to the growth the company is
experiencing. As sales increase, the need for additional personnel, testing,
equipment and office space has also increased. These steps have been taken to
enhance the Company's ability to service new client revenues and be better
positioned for future growth. Although the dollar amount of expenses has
increased for the second quarter of 1996 as compared to the same period in 1995,
as a percentage of sales they remained stable.
Selling, General and Administrative costs increased primarily due to the cost
associated with establishing and maintaining a national sales effort. However,
as a percentage of sales, they remained
constant.
Depreciation expense increased $14,485 or nearly 51% in the quarter ended June
30, 1996, as compared to the quarter ended June 30, 1995. This increase is due
to significant capital expansion in the Salt Lake, Castle Dale and Price
facilities in order to service the greater demands from existing clients.
Interest expense is down $1,595 in the second quarter 1996, as compared to the
second quarter 1995. During 1995 the Company paid off several lease obligations
and notes but has incurred additional long-term debt to finance the capital
expansions necessary to expand sales and increase revenues. The addition of this
debt has kept the interest expense in the quarter ended June 30, 1996,
comparable to the quarter ended June 30, 1995.
Six month period ended June 30, 1996 compared to the six month period ended June
30, 1995
Sales for the six month period ended June 30, 1996 were $985,916 as compared to
$645,530 for 1995. This significant 53% increase is primarily due to new client
revenues. Aetna Life Insurance Company accounts for over 41% of the increased
revenues. The gross profit margin for the first two quarters of 1996 was 37%
compared to 35% for the same period in 1995. The Company expects a continued
increase in sales through the end of the year.
Gross profit margin increased 1.5% to 36.6% in the six months ending June 30,
1996 compared to the same period in 1995. This is remarkable considering sales
increased 53% in the same period. The Company would normally expect a surge in
expenses to cover training costs. The average keyer can require up to 90 days to
be keying at a proficient rate so the Company expects additional future
improvements in gross margins.
Operating cost for the six month period ending June 30, 1996 increased by
$106,020 over the same period for 1995. However, as a percentage of sales,
operating costs for 1996 decreased slightly (34%) compared to 1995 (35%). The
Company expects this trend to continue due to the increased sales. Depreciation
expense increased due to the capital expansion necessary to support the
increased client revenues.
Interest expense is down $3,184 in the six months ended June 30, 1996. Again,
this is primarily due to the paydown of existing loans.
Liquidity and Capital Resources
The Company had a deficit in working capital in the six months ended June 30,
1996.
The Company issued common stock in order to purchase shares of a subsidiary,
Skyhook Technologies.
The Company presently is dependent on cash generated from operations and debt
issuances to pay operating expenses, fund capital expansions, and meet new
customer requirements. Management is aggressively pursuing new contracts for all
facilities to generate additional revenues. Management feels that increasing the
Company's capital resources is essential to continued operations.
In response to the Company's continuing need to increase its capital resources,
the Company has entered into an agreement with United Insurance Company, Inc.
(UICI) of Irving, Texas pursuant to which UICI will contribute $3 million cash
to the capital of a newly formed limited liability company to which the Company
will transfer the assets of the Company's wholly owned subsidiary, Satellite
Image Systems, and of which the Company will hold a 49% membership interest. See
"Item 5 -- Other Information."
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal proceedings: No Material Developments.
Item 2. Changes in Securities: None.
Item 3. Defaults Upon Senior Securities: None.
Item 4. Submission of Matters to a Vote of Security Holders: None
Item 5. Other information:
The Company entered into a Purchase Agreement dated as of May 13, 1996, a
copy of which is included as Exhibit 10.1 to this Form 10-QSB, to purchase an
aggregate of 323,334 shares of the common stock of Skyhook Technologies, Inc. a
Utah corporation for cash consideration of $485,000. As of the end of the period
covered by this Form 10-QSB, the Company had completed its purchase of 200,000
shares for cash consideration of $300,00.
Subsequent to the end of the fiscal quarter covered by this Form 10-QSB, on
August 1, 1996, the Company entered into an agreement (the "Agreement"), a copy
of which is included as Exhibit 10.2 to this Form 10-QSB, with United Insurance
Company, Inc. (UICI) of Irving, Texas. Pursuant to the Agreement the Company and
UICI have agreed to form a limited liability company to be named Strategic Image
System, LLC ("SIS LLC"). The Company will transfer the assets of the Company's
wholly owned subsidiary, Satellite Image Systems ("SIS"), to SIS LLC. UICI will
contribute $3 million cash to the capital of SIS LLC, and will make available to
SIS LLC a $2 million revolving line of credit pursuant to the terms and
conditions of the Revolving Credit Note to be entered into between UICI and SIS
LLC. The additional capital will be used to increase SIS's market share and
support expanding operations.
Item 6. Exhibits and Reports on Form 8-K:
(a) Exhibit 10.1 - Purchase Agreement dated as of May 13, 1996 between the
Company and Skyhook Technologies, Inc.
Exhibit 10.2 - Agreement dated as of August 1, 1996 between the Company
and United Insurance Compay, Inc.
(b) None.
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
MAGELLAN TECHNOLOGY, INC.
(Registrant)
/s/ Darwin Millet August 14, 1996
- ---------------------------- ----------------------
Darwin Millet Date
President
EXHIBIT 10.1
SKYHOOK TECHNOLOGIES, INC.
PURCHASE AGREEMENT
---------------------------
Dated as of May 13, 1996
---------------------------
TO: MAGELLAN TECHNOLOGY, INC.
990 W. Atherton Drive, Suite 205
Salt Lake City, Utah 84123
Gentlemen:
The undersigned, SkyHook Technologies, Inc., a Utah corporation (the
"Company"), and Magellan Technology, Inc., a Utah corporation (the "Investor")
hereby agree as follows:
1. Purchase and Sale of Securities; Closing.
(a) Purchase and Sale of Shares. The Company, subject to the terms and
conditions herein set forth, hereby agrees to sell to the Investor and the
Investor agrees to purchase from the Company the aggregate number of shares of
common stock, no par value (the "Shares"), set forth opposite Investor's name on
the signature page hereof for the purchase price of $1.50 per share, or the
aggregate purchase price specified therefor on the signature page.
(b) Closing. The initial purchase and delivery of Shares to be
purchased by Investor shall take place at a closing (the "Closing") at the
offices of Kimball, Parr, Waddoups, Brown & Gee at 2:00 P.M., local time, on May
13, 1996 (herein called the "Closing Date"). On the Closing Date, the Company
will deliver 100,000 Shares registered in the name of Investor, against receipt
of the purchase price therefor by check payable to the order of the Company or
by such other payment method as is mutually agreed to by Investor and the
Company. On subsequent closing dates, each a "Sale Date," the Company will
deliver the number of Shares registered in the name of Investor against receipt
of the purchase price as set forth below:
Number of
Sale Date Shares Purchase Price
June 09, 1996 100,000 $150,000
July 10, 1996 66,667 100,000
August 02, 1996 56,667 85,000
2. Conditions of Closing. Investor's obligation to
purchase and pay for the
Shares to be purchased
by Investor hereunder is subject to the satisfaction on or before the
Closing Date and at each Sale
Date, of the
following conditions:
(a) Representations and Warranties. The representations and warranties
contained in paragraph 4 hereof and those otherwise made in writing by or on
behalf of the Company in connection with the transaction contemplated by this
Agreement shall be true in all material respects when made and on and as of the
Closing Date and at each Sale Date, except to the extent of changes caused by
the transactions herein contemplated; and the Company shall have delivered to
the Investor an officers' certificate to such effect.
(b) Articles of Incorporation and Bylaws. Investor shall have received
a certificate dated the Closing Date, of the secretary of the Company attaching
a true and complete copy of the Articles of Incorporation of the Company with
all amendments thereto as filed with the Department of Commerce, Division of
Corporations, State of Utah, a true and complete copy of the Company's Bylaws in
effect as of such date, certificates of good standing of the appropriate
officials of the jurisdiction of the corporation of the Company of each state or
other jurisdiction which the Company is qualified to do business and is doing
business as a foreign corporation and resolutions of the Board of Directors of
the Company authorizing the execution and delivery of this Agreement and the
issuance of the Shares.
(c) Purchase Permitted by Applicable Laws. The purchase of and payment
for the Shares to be purchased by Investor hereunder shall not be prohibited by
any applicable law or government regulation and the offering and sale of the
Shares under this Agreement shall have complied with all applicable requirements
of federal and state securities laws.
(d) Approvals and Consents. The Company shall have duly received all
authorizations, consents, approvals, licenses, franchises, permits and
certificates by or of all federal, state and local governmental authorities
necessary for the issuance of the Shares and all shall be in full force and
effect at the time of each closing.
(e) Material Changes. Since March 31, 1996, there shall not have been
any changes in the business of the Company which shall, in the aggregate, have a
material adverse effect on the business, financial condition, results of
operations or prospects of the Company nor shall there have been any development
or discovery or any material contingency or other liability which has such
effect.
3. Affirmative Covenants.
(a) Financial Statements. The Company covenants that it will deliver to
Investor, as soon as practicable after the end of each quarterly and fiscal
period, the financial statements consisting of a statement of income, balance
sheet, change in stockholders' equity and change in financial position of the
Company as at the end of each period, setting forth in each case in comparative
form, figures for the corresponding periods in the preceding fiscal period, all
in reasonable detail and reasonably satisfactory to Investor and prepared in
accordance with generally acceptable accounting principals ("GAAP") on a basis
consistent with past practice, certified by the chief financial or chief
accounting officer of the Company as fairly presenting the financial condition
of the Company. The Company shall also provide to Investor, promptly upon
transmission thereof, copies of all financial statements, information circulars
and reports as the Company shall send to its stockholders and copies of all
registration statements or prospectuses and all reports which it or any of its
officers or directors may file with the Securities and Exchange Commission or
any other governmental body or agency and copies of all press releases or other
statements made available generally by the Company to the public concerning
material developments in the business of the Company.
(b) Books and Records; Inspection of Property. The Company will keep
books of record and accounts in which full, true and correct entries in
conformity with GAAP will be made of all dealings and transactions in relation
to its business and activities. The Company covenants that it will permit any
person representing the Investor and designated in writing by the Investor, at
the Investor's expense, to visit and inspect any of the properties of the
Company, to examine the corporate, financial and operating records of the
Company and make copies thereof of or extracts therefrom and discuss the
affairs, finances and accounts of the Company with the directors, officers and
independent accountants of the Company, all at reasonable times and as often as
the Investor may reasonably request; provided, however, that all such
information deemed confidential by the Company and designated as such to
Investor shall be received and maintained in confidence by Investor. Investor
agrees to maintain the confidentiality of all information and materials received
by it from the Company pursuant to paragraph (a) above and this paragraph (b) to
the extent such information and materials are not publicly known and the Company
considers them to be confidential.
(c) Additional Covenants Pending Closing. The Company covenants that
pending the Closing it will not, without prior written consent of Investor, take
any action which would result in any of the representations or warranties
contained in this Agreement not being true at and as of the time immediately
after such action or in any of the covenants contained in this Agreement
becoming unperformable. Pending the Closing, the Company will promptly advise
the Investor of any action or event of which it becomes aware which has the
affect of making incorrect any of such representations or warranties or which
has the effect of rendering unperformable any of such covenants.
(d) Corporate Existence; Maintenance of Properties. The Company
covenants that it will do or cause to be done all things necessary to preserve
and keep in full force and effect the corporate existence and rights of the
Company, will cause its licenses, permits, intellectual property rights and such
other properties which it may own or acquire to be maintained and keep in good
condition, will cause to be made all applications, improvements, repairs or
renewals, as in the judgement of the Company may be necessary so that the
business carried on in connection therewith may be properly and advantageously
conducted at all times.
(e) Right of Purchase. If at any time after the Closing Date the
Company proposes to sell equity securities of any kind (the term "equity
securities" shall include for these purposes any warrants, options or other
rights to acquire equity securities and debt securities convertible into equity
securities) of the Company (other than pursuant to a registration statement
filed with the Securities and Exchange Commission pursuant to the Securities Act
of 1933, as amended (the "1933 Act")), the Company shall give Investor written
notice setting forth in reasonable detail (a) the designation and all of the
terms and provisions of the equity securities proposed to be sold, including
where applicable, the voting powers, preferences and relative participating,
optional or other special rights and the qualification, limitations or
restrictions thereof and interest rate and maturity; (b) the price and other
terms of the proposed sale of such securities; (c) the amount of such securities
proposed to be sold and (d) such other information as the Investor may
reasonable request in order to evaluate the proposed sale. The Investor shall
have the prior right to purchase the securities proposed to be sold at the price
and upon the terms of the proposed sale described in such notice. The Investor
shall have thirty (30) days after receipt of such notice and the furnishing of
all reasonably requested information within which to notify the Company as to
whether and to what extent Investor elects to purchase the securities pursuant
to such proposed sale. The failure by the Investor to so notify the Company will
constitute an election by the Investor not to purchase any such securities.
Notwithstanding anything to the contrary contained herein, the right of purchase
hereby granted to Investor shall not apply to options and shares issued pursuant
to employee stock option plans provided that such options and shares, when added
to all options then outstanding and shares previously issued in respect of
employee stock options, do not exceed ten percent (10%) of the Company's common
stock outstanding (on a fully diluted basis).
If the Investor does not exercise its right of purchase with
respect to all of such equities securities, then the Company shall have the
right, at any time within ninety (90) days after the expiration of the thirty
(30) day period within which the Investor had the right to exercise its right of
purchase, to sell such equities securities (or any part thereof not purchased by
the Investor) to any other investor(s) at a price not lower than, and on terms
in the aggregate not more favorable than, the price and terms set forth in the
notice given to the Investor.
The election by Investor not to exercise its right of purchase
shall not affect its right of purchase as to any subsequent proposed sale. Any
sale of such securities by the Company without first giving Investor the right
of purchase described above shall be void and of no force or effect.
(f) Confidentiality Agreements. The Company covenants that it will
require employees who have access to confidential information and trade secrets
of the Company to sign confidentiality agreements as the same shall be approved
by the Board of Directors of the Company, such agreements to contain, among
other provisions, provisions whereby inventions of such employees relating to
the business of the Company will become the property of the Company.
(g) Further Assurances. The Company covenants that it will cooperate
with the Investor and execute such further instruments and documents as Investor
shall reasonably request to carry out to the satisfaction of such Investor the
transactions contemplated by this Agreement.
(h) Termination of Affirmative Covenants. The covenants in this Section
3 shall automatically terminate two (2) years after the date of this Agreement
or on and after the date of any bona fide public offering of securities of the
Company registered under the 1933 Act, whichever shall first occur.
4. Representations, Covenants and Warranties. The Company represents,
covenants and warrants to the Investor that:
(a) Organization, Qualification and Authority. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Utah. The Company has no subsidiaries. As of the Closing Date,
the Company will be duly qualified to do business as a foreign corporation and
in good standing in each jurisdiction in which the character of its properties
or the nature of its business makes such qualification necessary. The Company
has, and as of the Closing date will have, the corporate power to own its
properties and to carry on its business as is now being conducted. The Company
has all requisite corporate power and authority to enter into this Agreement and
each other agreement executed hereby and pursuant hereto and to issue and sell
the Shares. The execution, delivery and performance hereof has been duly
authorized by all necessary corporate action. This Agreement constitutes, and
each other agreement or instrument executed and delivered by the Company
pursuant hereto or in connection herewith will constitute valid, legal and
binding obligations of the Company enforceable against the Company, in
accordance with their respective terms.
(b) Financial Statements. The Company has furnished the Investor with
the following financial statements: (1) a balance sheet as of December 31, 1995
and March 31, 1996 and (2) statements of loss or deficit accumulated during the
development stage for the ten month and three month periods ended December 31,
1995 and March 31, 1996. Such financial statements have been compiled by the
Company in accordance with GAAP. Through the Closing Date, there have been no
material adverse changes in the condition (financial or other), results of
operations, business or prospects of the Company since March 31, 1996.
(c) Capital Stock and Related Matters. As of the Closing Date and after
giving effect to the transactions contemplated in this Agreement and the
conversion of outstanding indebtedness aggregating $75,000 at $1.50 per share,
the Company's authorized Capital Stock will consist of ten million shares of
common stock, no par value per share, of which 1,666,667 shares will be issued
and outstanding. No shares of common stock will be owned or held by or for the
account of the Company. The Company will not have outstanding any stock or other
securities convertible into or exchangeable for any shares of capital stock, any
rights to subscribe for or to purchase or any options for the purchase of, or
any agreements providing for the issuance (contingent or otherwise) of, or any
calls, commitments or claims of any other character relating to the issuance of
any capital stock, or any stock or securities convertible into or exchange for
any capital stock except warrants for the purchase of 75,000 shares of common
stock at a price of $.10 per share and except for antidilution rights with
respect to certain outstanding shares which rights correspond to those described
in Section 6 herein. The Company will not be subject to any obligation,
contingent or otherwise, to repurchase or otherwise acquire or retire any shares
of capital stock and the Company will not have filed or be required to file any
registration statement relating to any class of debt or equity securities.
(d) Actions Pending. There is no action, suit, investigation or
proceeding pending or, to the knowledge of the Company threatened against the
Company or any of its properties or rights by or before any Court, arbitrator or
administrative or governmental body and no such action, if adversely decided,
would have a materially adverse effect on the Company.
(e) Outstanding Debt. There exists no default which has not been
waived or cured, under
the provisions of any instrument evidencing indebtedness of the Company or
any agreement
relating thereto.
(f) Properties. The Company has good sufficient and legal title to all
of its properties and other assets including, without limitation, its
intellectual properties. The Company enjoys peaceful and undisturbed possession
under all leases necessary in any material respect for the operation of its
properties and assets and such leases are valid and subsisting and in full force
and effect.
(g) Taxes. The Company has filed all federal, state and other income
tax returns which are required to be filed and has paid all taxes as shown on
said returns and all assessments received by it to the extent that such taxes
have become due, except as are being contested in good faith. Financial
statements of the Company reflect accruals for tax liabilities in accordance
with GAAP.
Neither the execution or delivery of this Agreement or the Shares, the
offering, issuance and sale of the Shares or the fulfillment of or compliance
with the terms and provisions hereof will conflict with or result in the breach
of the terms, conditions or provisions of, or constitute a default under the
Articles or Bylaws of the Company or any agreement (including any agreement with
shareholders), instrument, order, judgment, decree, statute, law, rule or
regulation to which the Company is subject and no agreement to which the Company
is subject providing evidence of indebtedness or borrowed money contains
dividend or redemption limitations on any capital stock of the Company.
(h) Offering of Securities. The Company has not taken and will not take
any action which would subject the issuance or sale of any of the Shares
pursuant to the provisions of Section 5 of the 1933 Act or violate any of the
provisions of any such securities, blue sky law or similar law of any applicable
jurisdiction.
(i) Finder's Fee. No broker's or finder's fee or commission will
be payable by the
Company will respect to the issuance and sale of the Shares or the
transactions contemplated hereby.
(j) Patents, Etc. The Company owns or has the right to use all patents,
patent applications, trademarks, services marks, trade names, copyrights,
designs, licenses, trade secrets and other rights, free from burdens and
restrictions, which are necessary for the operation of its business
substantially as presently conducted and as contemplated in the Business Plan
(as hereinafter defined). Investor acknowledges that the Company has advised
Investor that much of the technology utilized by Company is in the public
domain. As of the Closing Date and after giving effect to the transaction
contemplated hereby (a) to the best knowledge of the Company, no process, method
or product presently contemplated to be sold by the Company in connection with
its business infringes upon any patent, patent application, trade mark, service
mark, trade name, copyright, license, trade secret or other right owned by any
other person; (b) there is not pending or threatened any claim or litigation
against the Company contesting its right to sell or use any such process, method
or product; or (c) to the best knowledge of the Company, there is not pending or
proposed any patent, patent application or principle or statute, law, rule,
regulation, standard or code which would prevent, inhibit or render obsolete the
production or sale of any products of, or substantially reduce the projected
revenue of, or otherwise materially adversely affect in any material respect the
business, condition or operations of the Company. The words "to the best
knowledge of the Company," as used in this paragraph means that the Company has
made reasonable inquiry of those persons responsible for development of the
Company's technology, has appropriate "shop rights" agreements with such
persons, and has not received any notice from any third party, including the
U.S. Patent and Trademark Office, of any information which would cause the
representations in this paragraph to be incorrect or untrue.
(j) Insurance Coverage. The properties and business of the Company are
or will be insured for the benefit of the Company in amounts deemed adequate by
the Company's management against risk usually insured against by Persons
operating businesses similar to those of the Company.
(k) Business Plan. The Business Plan, including financial forecasts,
dated April 18, 1996 (the "Business Plan") and the assumptions underlying the
same previously delivered to Investor, which forecasts and Business Plan have
been material to Investor in its decision to enter into this Agreement and
purchase the Shares hereunder, are reasonable in the best judgment of officers
of the Company based upon the best information available to the Company at the
time such forecasts and Business Plan were made.
5. Representations of Investor. The Investor represents, and in making the
sale to the Investor, it is specifically understood and agreed, that the
Investor is acquiring the Shares hereunder for its own account, for the purpose
of investment and not with the view to or sale in connection with any
distribution thereof; provided, however, that nothing herein contained shall
prevent the Investor from selling or transferring any Shares in any transaction
that, in the opinion of counsel for Investor which is satisfactory to the
Company, is exempt from the registration provisions of the 1933 Act. Investor
further acknowledges that (i) it has received the Business Plan of the Company
and has had an opportunity to ask questions of and receive answers from
principals of the Company with respect to the business of the Company, (ii) the
Shares are not being registered in this transaction and that the Company is
under no obligation to register the Shares, (iii) the Company has made no
representation as to the value of the Shares at the date hereof or at any future
date, (iv) Investor is capable of assessing the merits and risks of an
investment in the Shares and, in electing to purchase the Shares, is not relying
on the advice of any other person or entity.
6. Anti Dilution. If, at any time within three years after the Closing Date
(and other than in connection with a bona fide public offering registered under
the 1933 Act or pursuant to employee stock option plans described in paragraph
3(e) hereof), the Company shall issue equity securities (defined as set forth in
paragraph 3(e)) at a per share price which is less than the $1.50 per Share paid
by Investor hereunder (adjusted for any stock splits, dividends,
recapitalizations, etc.), the Company shall simultaneously issue to Investor an
additional number of Shares so that the total number of Shares issued to
Investor shall be equivalent to the number of Shares which would have been
issuable to Investor at the lower price as of the Closing Date.
7. Intent to Effect Business Combination. Each of the Company and Investor
acknowledge their non binding intention to enter into discussions which may lead
to a business combination of Company and Investor, whether by merger, purchase
of assets, consolidation or otherwise. Each of Company and Investor acknowledge
that in any such business combination shall be evidenced and bound only by a
definitive agreement containing such terms, conditions, representations,
covenants and other provisions as the Company and Investor shall agree upon.
8. Definitions. For the purpose of this Agreement and in addition to
terms defined elsewhere in
this Agreement, the following terms will have the following meanings:
(a) "Officers' Certificate" shall mean a certificate signed in the name
of the Company by its president, one of its vice presidents or its
secretary/treasurer.
(b) "Person" shall mean and include an individual, a partnership, a
joint venture, a corporation, a trust and unincorporated organization and a
government or any department or agency thereof.
9. Miscellaneous.
(a) Restrictive Legend. The Shares and any certificate evidencing
the Shares shall bear a
restrictive legend substantially as follows:
"THE SHARES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND HAVE BEEN ACQUIRED BY
THE ISSUEE FOR INVESTMENT PURPOSES. SAID SHARES MAY NOT BE SOLD OR
TRANSFERRED UNLESS (A) THEY HAVE BEEN REGISTERED UNDER SAID ACT, OR (B)
THE TRANSFER AGENT (OR THE COMPANY IF THEN ACTING AS ITS TRANSFER
AGENT) IS PRESENTED WITH EITHER A WRITTEN OPINION SATISFACTORY TO
COUNSEL FOR THE COMPANY OR A "NO ACTION" OR INTERPRETIVE LETTER FROM
THE SECURITIES AND EXCHANGE COMMISSION TO THE EFFECT THAT SUCH
REGISTRATION IS NOT REQUIRED UNDER THE CIRCUMSTANCES OF SUCH SALE OR
TRANSFER."
(b) Survival of Representations and Warranties. All representations and
warranties contained herein, made in writing by or on behalf of the Company or
Investor in connection herewith, shall survive the execution and delivery of
this Agreement regardless of any investigation made by the Investor or on its
behalf. However, all representations and warranties shall terminate and have no
further force or effect one year after the date of this Agreement, unless the
party claiming a breach notifies the other party of such breach within such one
year period and commences an action based upon such breach within six months
after giving such notice.
(c) Successors and Assigns. All covenants and agreements in this
Agreement contained by or on behalf of the parties hereto shall bind and inure
to the benefit to the respective successors and assigns of the parties hereto
whether so expressed or not.
(d) Notices. All communications provided for hereunder shall be sent by
registered or certified mail and if to Investor addressed to Investor at its
address on the first page hereof with a copy to Richard G. Brown at Kimball,
Parr, Waddoups, Brown & Gee and if to the Company, addressed to it at:
SKYHOOK, INC.
509 South 590 East
Orem, Utah 84058
or such other address with respect to any party as such parties shall notify the
other in writing.
(e) Descriptive Headings. The descriptive headings of the several
paragraphs of this Agreement are inserted for convenience only and do not
constitute a part of this Agreement.
(f) Satisfaction Requirement. If any agreement, certificate or other
writing or any action taken, or to be taken, is by the terms of this Agreement
required to be satisfactory to Investor, the determination of such satisfaction
shall be made by Investor in its sole and exclusive judgment exercised in good
faith.
(g) Governing Law.
(i) Consent to jurisdiction. This Agreement shall be construed and
enforced in accordance with, and the rights of the parties shall be governed by,
the laws of the State of Utah.
(ii) Remedies. In case any one or more of the covenants and/or
agreements set forth in this Agreement shall be been breached by the Company or
by Investor, the Company or Investor, as applicable, may proceed to protect and
enforce its rights, either by suit in equity and/or by action at law, including
but not limited to, an action for damages as a result of any such breach and/or
an action for specific performance of any such covenant or agreement contained
in this Agreement. Company or Investor, acting pursuant to this paragraph, shall
be indemnified against all liabilities, loss or damage, together with all
reasonable costs and expenses related thereto (including reasonable legal and
accounting fees and expenses).
(iii) Entire agreement. This Agreement contains the entire
agreement among the parties with respect to the subject matter hereof and
supersedes all prior and contemporaneous arrangements or understandings with
respect thereto.
(iv) Amendment. This Agreement may be amended and the observance
of any term of this Agreement may be waived, with the written consent of the
Company and the Investor.
If you are in agreement with the foregoing, please sign the form of
acceptance in the space provided below whereupon this letter shall become a
binding agreement between the parties hereto.
Very truly yours,
SKYHOOK TECHNOLOGIES, INC.
By
Its
ACCEPTED AND AGREED this _____ day of May, 1996.
MAGELLAN TECHNOLOGY, INC. Common Stock: 323,333 Shares
Purchase Price: $1.50/Share
Total: $485,000
By
Its
EXHIBIT 10.2
AGREEMENT
between
MAGELLAN TECHNOLOGIES, INC.
and
UICI
regarding
SATELLITE IMAGE SYSTEMS, INC.
1.0 This Agreement effective August 1, 1996, is intended to outline the terms
and conditions underwhich Magellan Technologies, Inc. (Magellan) will transfer
the business activities of SatelliteImage Systems (SIS) to Strategic Image
Systems, LLC (SIS, LLC), the basis on
which UICI will provide capital and financing and how membership in the LLC
will be allocated.
2.0.1 As of the effective date, UICI and
Magellan will establish a new limited liability company (LLC) in
the State of Texas, Strategic Image
Systems, LLC (SIS, LLC). SIS, LLC will assume responsibility
for all operating expenses and existing
liabilities, regardless of date incurred after the effective date.
2.0.2 Magellan represents that SIS's balance
sheet and income statements are true and correct and has
attached to this agreement financials for
the l2 month period ending 12/31/95 and the 5 month
period ending 5131/96. In addition
Magellan has provided the most recent audited financials for SIS.
2.1 SIS, LLC will receive all revenues due or which may become due to
SIS from all sources on or
after August 1, 1996. Any revenues received by SIS after the
effective date will be considered
revenues of SIS, LLC and will be made payable by SIS to SIS, LLC.
2.2 Personnel requirements after the effective date, necessary to
conduct the business of SIS, LLC,
will become the responsibility of SIS, LLC.
2.3 UICI will contribute cash to the capital of SIS, LLC in the amount of
$3,00O,000 (three million
dollars). UICI will receive a 51% membership interest in SIS, LLC.
2.4 Magellan will contribute the assets of SIS to SIS, LLC and receive a
49% membership
interest in
SIS, LLC.
2.5 UICI will make available additional funds in the form of loans to SIS, LLC
totaling $2 million as
required subject to the terms and
conditions of a separately executed Revolving Credit Note.
2.6 Any subsequent working capital
requirements, beyond the capital contribution of $3,000,000
and the
$2,000,000 Revolving Credit Note made by UICI,
will be shared proportionately by the
members. If
a member elects not to participate in the new working
capital financing, their proportionate
share of
ownership may be diluted by capital contributions
of the other members at the prevailing Fair
Market
Value of ownership.
2.7 UICI has agreed that SIS,LLC may use a portion of the
capital provided to repay any
outstanding
loans due to Principals of Magellan. When the
obligations are repaid, individuals receive the
funds
will acknowledge in writing that they have been "Paid In Full" and that
they have no future claim of
any type, character, etc. against SIS, LLC.
3.0 A "Managing Board" will be established consisting
of a representative of UICI, a
representative of
Magellan and a representative of management. The
representatives on the Managing Board
will be
entitled to vote on matters based upon their pro-rata ownership position in
SIS, LLC.
4.0 Magellan grants SIS, LLC the perpetual
exclusive rights to the name Satellite Image Systems
(SIS)
along with any other corporate identity that may
have been used by SIS without restriction
or
reservation of any future rights.
5.0 Key managers will have an opportunity to participate in the ownership of
SIS, LLC:
a. Management will receive a 5% share of ongoing
profits each year. This 5% share will be
recorded
in the Equity Account of Magellan (SIS, Inc.), and any cash
dividends declared will be paid
through
Magellan (SIS, Inc.) to the management.
b. Management will receive 5% ownership of SIS, LLC to be awarded in equal
amounts over the next 2 years on each August 1 st. At the time of the award
management will be 100% vested in the ownership interest, and management will be
given a bonus adequate to cover the year end tax liability as a result of the
award.
c. As management is awarded direct ownership,
their share of the ongoing profits referred
to in (a)
will be adjusted proportionately.
d. Darwin Millet will determine the participation
percentage among key management.
5.1 The membership interest percentages after the dilution for the key
management will be as follows:
* UICI 51%
* Management 5%
* Magellan 44%
6.0 As of the effective date, SIS, LLC will become an operating unit of UICI.
7.0 Magellan SIS agree to assign all rights to all
contracts in force with all parties relative to the
business
practices of SIS to SIS, LLC effective August 1, 1996 Buy/Sell
8.0 The Members have agreed to a Buy/Sell arrangement in the form of
a "Texas Draw" with
the
following provisions:
8.1 At any time after August 1, 1999, either UICI or Magellan may offer to
purchase all, but not less than
all, of the others
interest in SIS, LLC, by sending the offeree party written notice of such
offer to
purchase stating a cash
purchase price and all other essential terms of the offer. The offer
shall
provide that closing shall take place not more than ninety (90), and not
less than sixty (60) days after
the date of the notice.
8.2 Within ten (10) days after receipt of such notice, the offeree shall elect
to do one of the following:
(i) To sell its entire
interest in SIS, LLC to the offeror according to the terms of the
offer;
(ii) To purchase the offeror's entire interest in SIS? LLC upon terms
identical to those contained in the offer.
8.3 The offeree shall make
its election by sending written notice thereof to the offeror. The
offeree's
election shall become
binding upon both the offeror and the offeree as of the date and time
of such
notice. If the offeree
shall fail to make an election within the ten ( 10) day period provided,
the
offeree shall be deemed
to have elected to sell its entire interest in the SIS, LLC to the
offeror
according to the terms of the offer.
8.4 If the purchasing party
shall fail to close according to the terms elected by the offeree, then
the said
purchasing party
shall be in default hereunder, and the selling party, in addition to its other
rights and
remedies, may (i) continue
its participation in SIS, LLC as if such offer had never been
made, or (ii)
purchase the entire
interest in SIS, LLC from the defaulting party at a purchase price equal
to eighty
percent (80%) of the cash
purchase price stated in the original offer, upon terms otherwise
identical
to those elected by the offeree.
8.5 This provision shall be null
and void if and when SIS, LLC is restructured as a corporation
and files
a registration statement with the
Securities and Exchange Commission offering stock of SIS,
LLC to
the general public.
9.0 Darwin Millet is designated as "Manager" of the SIS, LLC.
9.1 The Manager has the formal title of President and Chief Executive
Officer of SIS, LLC, and
as such
will be responsible for:
strategic direction and planning; acquisitions, mergers and expansions;
day to
day operations; directing
employee efforts relative to client assignments; and acceptance or
rejection
of client projects as
appropriate for the growth of and effective operation of the business.
9.2 Manager represents that the
LLC is his full-time occupation and that 100% of his business
related
efforts will be dedicated to
advancing the objectives of the LLC or any related entity or
subsidiary.
10.0 UICI and aff~liated companies may have occasion
to sell contracts for the LLC
organizations in need
of LLC services. If UICI or
any aff~liated company sells contracts on behalf of the LLC,
UICI or the
aff~liate will be paid a reasonable
and customary commission as negotiated with
Manager.
10.1 UICI may require the LLC to pay a
monthly fee for certain centrally managed business
functions or
to cover other costs agreed upon by
Manager and UICI. Any fee will be specific and
identifiable.
UICI will provide other corporate
professional services at no charge to the LLC. UICI may
not make
any corporate allocations
or charge backs to the LLC as a result of operations, expenses or
losses
from other business units.
11.0 UICI has provided Manager with a copy of the United Companies Philosophy of
Management which
clearly sets forth that the Manager
is responsible for the operation of the business of the LLC
subject
to overall policy
direction of the Managing Board. Generally, the Managing Board will:
1) receive a Financial Statement within five (5) business days after each
month end; 2) be informed of purchase or lease or fixed assets of $50,000
or more and/or leased space at limits mutually agreed upon; 3) approve
incentive plans that are based on net earnings and/or incentive plans where
they are based on a percentage of net earnings and are intended to be paid
or implied to be paid for a period of more than one year; 4) approve the
hiring of executive level people where compensation is over $70,000 per
year; 5) approve the issuance of or promises to issue ownership equity in
LLC; 6) make available the UICI employee benefit programs for the employees
of the entity and bill the entity for the cost of these benefits; 7)
receive a monthly narrative report on non-financial business development
issues on the first of each month.
The agreement sets forth the essential elements of our understanding to
establish and operate the LLC.
by:
----------------------------- -------------------------
William Fresh W. Brian Harrigan
Chairman President and Chief Executive Officer
Magellan Technologies, Inc. UICI
Date: 7/29/96 Date: 7/29/96
Witness /s/ Witness /s/
by:
-----------------------------
Darwin Millet
President and Chief Executive Officer
Satellite Image Systems, Inc.
Date:_________________
Witness /s/
<PAGE>
REVOLVING CREDIT NOTE
FOR VALUE RECEIVED, Satellite Image Systems, LLC (SIS, LLC), a limited liability
company, promises to pay to the order of UICI, at 5215 N. O'Connor Blvd., Suite
300, Irving, Texas 75309, ( or such other place as the Payee may designate) in
United Sates Dollars, the lesser of Two Million Dollars ($2,000,000) or the
principal balance of the revolving line of credit extended hereby together with
interest on the unpaid balance from August l, 1996 on the terms and conditions
hereinafter set forth.
1. Definitions.
As used on this Note, the following terms shall have the respective meanings
indicated.
(a) "Maker" means SIS, LLC
(b) "Payee" means UICI
(c) "Stated Rate" means an interest rate of one percent (1%) per month. The
Stated Rate shall be charged on the outstanding balance hereunder.
(d) "Fixed Maturity Date" means August 1, 2001. (e) "Business Day" means
day the Payee is open for business. (f) "Loan Documents" means any and all
documents and instruments now or hereafter evidencing, securing or
guaranteeing all or any part of the indebtedness evidencing this Note of
Maker to Payee dated August 1, 1996.
2. Line of Credit.
(a) Payee hereby establishes a revolving line of credit in favor of Maker
subject to the terms and conditions hereof.
(b) Provided no default exists under this or any other Loan Document and
provided the condition for continuing the business of the Maker as provided in
the formation and operation of a new company, Maker may avail itself of the
revolving line of credit until the Fixed Maturity Date, subject to the maximum
amount available, as follows:
(i) Not less than three (3) days prior to the date the request is to be
funded,Maker must provide a draw request and certification duly executed by an
officer of Maker.
(ii) If the draw request if for more than $ 100,000, then the draw request
must be provided not less than ten (10) days prior to the date the request is to
be funded.
(iii) It is the intent of the parties that the outstanding principal at any
given time shall be less than, or equal to, the projected outstanding principal
balance outlined in the business plan presented by the Maker to the Payee for
the purpose of soliciting this Revolving Line of Credit. The preceding sentence
shall not be construed to limit the amount of draws or the outstanding principal
balance to the amounts projected in the Maker's business plan.
3. Computation of Interest.
All interest on this Note shall be computed as the product of the
Stated Rate
and balance outstanding as of the first day of each month.
4. Mandatory Payments.
(a) Commencing on the first day of the month following the month in which
the first draw request is paid, and on the first day of each month thereafter
until this Note is paid in full, Maker shall pay any and all interest,
calculated using the Stated Rate, due on the principal amount(s) drawn prior to
said date from the revolving line of credit.
(b) All amounts outstanding shall be due and paid in full on the Fixed
Maturity Date. On or before the Fixed Maturity Date, Maker may negotiate an
extended repayment schedule acceptable to the Payee. Any mutually extended
payment terms shall be evidenced in writing, executed bye the Maker and Payee,
and shall be considered an addendum to this Revolving Credit Note and other Loan
Documents shall not terminate on the Fixed Maturity Date but shall continue for
the duration of the extended payment period.
(c) All payments heron
made pursuant to the numbered paragraph shall be applied first to
accrued
interest, the balance to principal.
(d) If any payment provided for by this Note shall become due on a day
other than a Business Day, such payment may be made on the next succeeding
Business Day and such extension of time shall in such case be included in the
computation of interest on this Note.
5. Past Due Payments.
All payments for principal and interest on this Note which are past due
shall bear
interest at the Stated Rate plus six percent (6%) per annum.
6. Default. The occurrence of any one or more of the following events shall
constitute default under this Note, whereupon the owner or holder hereof may, at
its, his or her option, exercise any or all rights, powers and remedies afforded
under any of the Loan Documents, all other instruments evidencing, insuring or
guaranteeing this Note and by law, including the right to declare the unpaid
balance of principal and accrued interest on this Note at once mature and
payable.
(a) The following events shall constitute an immediate default:
(i) failure to make payments of interest due hereunder within five (5) days
of the date due, or
(ii) failure to make all other payments or performance required hereunder,
as the same becomes due and payable and/or performable, whether by acceleration
or otherwise.
(iii) should the Maker, (act) voluntarily suspend transaction of business;
(bb) become insolvent or unable to pay its debts as they mature; (cc) file a
voluntary petition of bankruptcy or a voluntary petition seeking reorganization
or to effect a plan or other arrangement with creditors; (dd) make an assignment
for the benefit of creditors; (ee) apply for consent to the appointment of any
receiver or trustee for any such party or of all or any substantial portion for
the property of any such party; or (95) make an assignment to an agent
authorizing to liquidate any substantial part of their assets; or
(iv) in respect to the Maker; (act) an involuntary petition shall be filed
with any court or authority seeking reorganization of a creditor's arrangement
of any such part of the adjudication of any such party bankrupt or insolvent;
(bb) an order of any court or other authority shall be entered appointing any
receiver or trustee for any such part; or (cc) a writ or warrant of attachment
of any similar petition shall be issued by any court or other authority against
all or any substantial portion of the property of any such party and such
petition seeking reorganization, creditor's arrangement or adjudication or such
order appointing a receiver or trustee is not vacated or stayed, or such writ,
warrant of attachment or similar process is not vacated released or bonded
within thirty (30) days after its entry or levy; or the dissolution, liquidation
or termination of the Maker.
(b) The following events, other than those listed in 6(a) above, shall
constitute a default on the 45th day after such event, unless prior to the 45th
day Maker cures such default or Payee in writing extends the cure period or
waives such default.
(i) failure to perform,
observe or comply with or default under any of theterms, convenants,
conditions
or provisions
contained in this Note, any of the other Loan Documents, or any other
agreement with
Payee; or
(ii) any representation or warranty made in
this Note, in any of the otherLoan Documents, in the Draw
Request, or in any other written report,
document or instrument now or hereafter delivered or given
to the payee pursuant to this Note, or
any of the other Loan Documents or misleading in any material
respect as of the date made or deemed
made; or
(iii) any one or more final judgments for the
payment of money in excess of an aggregate $100,000 shall
be rendered against the Maker and the
same shall remain unswayed or undischarged for a period of
ninety (90) days; or
(iv) the Maker shall be prevented or relieved
by any governmental authority from performing or
observing any material term, covenant
or condition of this Note or any of the other Loan Documents;
or
(v) any material adverse
change shall occur in the financial condition of the Maker; or
(vi) the Maker fails to provide Payee with
a copy of the annual financial statements within thirty (30)
days after the end of the year; or
(vii) the Maker fails to provide Payee with
a copy of the federal income tax return within fifteen (15) days
after it is filed with the Internal Revenue
Service; or
(viii) the Maker fails to provide Payee with
a copy of their internal financial statements within thirty (30)
days after a quarterly anniversary date.
7. No Waiver bv the Payee. No delay or omission of the Payee or any other
holder hereof to exercise any power, right or remedy accruing to the Payee or
any other holder hereof shall impair any such power, right or remedy or shall be
construed to be a waiver of the right to exercise any such power, right or
remedy.
8. Costs and Attorney's Fees. In addition to all principal and accrued interest
on this Note, the Maker agrees to pay (a) all reasonable costs and expense
incurred by all owners and holders of this Note in any probate, reorganization,
bankruptcy or any other proceedings for the establishment or collection of any
amount hereunder, or in collecting this Note through any such proceedings, and
(b) reasonable attorney's fees when and if this Note is placed in the hands of
an attorney for collection after default.
9. Waiver by Maker and Others. The Maker and any and all co-makers, endorsers,
grantors and sureties severally waive notice (including, but not limited to,
notice of intent to accelerate and notice of acceleration), demand presentation
for payment, protest and the filing of suit for the purpose of fixing liability
and consent that the time of payment hereof may be extended or re-extended from
time to time without notice to them, and each agrees that his, her, or its
liability on or with respect to this Note shall not be affected by any release
of or change in any security at any time existing or by any failure to perfect
or to maintain perfection of any lien on or security interest in any such
security.
10. Paragraph Headings.
Paragraph headings in this Note are for convenience reference only and
shall
not be used to interpret or limit the meaning of any provision of this Note.
11. Governing Law. This Note shall be governed by and construed in accordance
with the laws of the State of Texas and the United States of America from time
to time in effect. The Maker hereby irrevocably agrees that any legal proceeding
against Payee arising out of or in connection with the Note or any other Loan
Documents shall be brought in the district court of Dallas County, Texas or the
Unites States District of Texas.
12. Successor and Assigns.
This Note and all the covenants and agreements contained herein
shall be
binding upon,
and shall inure to the benefit of, the respective legal representatives, heirs,
successors and
assigns of the Maker and the Payee.
13. Records of Payments.
The record of interest rates and payments of the Payee shall be prima
facie
evidence of the amounts owing on this Note.
14. Brokers.
Payee acknowledges that Maker and Paved were not introduced by a broker under
contract
to Maker. Payee further
acknowledges that no Broker's fee will be paid out of the Loan funds.
15. Severabilitv. If any provisions of this Note shall be determined by any
court of competent jurisdiction to be illegal or unenforceable, then that
provision shall be of no force and effect and shall be deemed excised herefrom,
and the remainder of the provisions of this Note shall be enforced.
Satellite Image Systems, LLC UICI
/s/ /s/
Darwin Millet W. Brian Harrigan
President and Chief Executive Officer President and Chief Executive Officer
August 1. 1996 August 1, 1996
Date Date
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 16,909
<SECURITIES> 0
<RECEIVABLES> 432,117
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 449,026
<PP&E> 903,274
<DEPRECIATION> (431,129)
<TOTAL-ASSETS> 1,432,993
<CURRENT-LIABILITIES> 787,203
<BONDS> 0
0
0
<COMMON> 1,596
<OTHER-SE> 450,302
<TOTAL-LIABILITY-AND-EQUITY> 1,432,993
<SALES> 0
<TOTAL-REVENUES> 473,311
<CGS> 304,112
<TOTAL-COSTS> 459,229
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 8,600
<INCOME-PRETAX> 6,635
<INCOME-TAX> 0
<INCOME-CONTINUING> 6,635
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,635
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
