U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB
(Mark One)
X Quarterly report under Section 13 or 15(d) of the Securities Exchange
act of 1934
For the quarterly period ended July 31, 1999
__ Transition report under Section 13 or 15(d) of the Exchange Act
For the transition period from ____________ to ____________
Commission file number Securities Act Registration No. 33-75276
OMNI Rail Products, Inc.
------------------------
(Exact Name of Small Business Issuer as Specified in its Charter)
Delaware 68-0281098
-------- ----------
(State or Other Jurisdiction of (I.R.S. Employer Identification NO.)
Incorporation or Organization)
975 SE Sandy Blvd. Portland, Oregon 97214
-----------------------------------------
(Address of Principal Executive Offices)
(503)230-8034
-------------
(Issuer's Telephone Number, Including Area Code)
- --------------------------------------------------------------------------------
(Former Name, Former Address and Former Fiscal Year,
if Changed Since Last Report)
Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes X No
APPLICABLE ONLY TO ISSUERS INVOLVED IN
BANKRUPTCY PROCEEDINGS DURING THE
PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court.
Yes No
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date: 1,703,098 Common Shares at
$.01 par value outstanding as of August 31, 1999
<PAGE>
OMNI RAIL PRODUCTS, INC.
FORM 10-QSB
FOR THE QUARTERLY PERIOD ENDED JULY 31, 1999
INDEX
PART I. FINANCIAL
Item 1. Financial Statements
Unaudited Condensed Consolidated Balance Sheets.................1
Unaudited Condensed Consolidated Statements of Operations.......2
Unaudited Condensed Consolidated Statements of Cash Flows.......3
Notes to Unaudited Condensed Consolidated Financial
Statements......................................................4
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations...................8
PART II. OTHER INFORMATION..................................................11
Item 1. Legal Proceedings
Item 2. Changes in Securities
Item 3. Defaults Upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
SIGNATURES..................................................................12
<PAGE>
OMNI RAIL PRODUCTS, INC., & SUBSIDIARY
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
------
July 31, 1999 April 30, 1999
(Unaudited)
----------- -----------
Current Assets:
Cash $ 385,571 $ 36,280
Accounts receivable, net 1,526,199 1,478,337
Inventories, net 1,610,518 1,330,663
Prepaid expenses and deposits 64,776 51,241
----------- -----------
Total current assets 3,587,064 2,896,521
Real estate held for sale 1,400,000 1,400,000
Property, plant and equipment, net 1,889,917 1,904,156
----------- -----------
$ 6,876,981 $ 6,200,677
=========== ===========
LIABILITIES AND STOCKHOLDERS' DEFICIT
-------------------------------------
Current Liabilities:
Accounts Payable $ 1,624,359 $ 1,480,166
Accrued Liabilities 827,253 879,995
Notes Payable 1,923,166 1,693,135
Current portion of long-term debt 1,335,749 1,373,412
----------- -----------
5,710,527 5,426,708
Long-term debt, less current portion 1,478,463 1,403,115
Stockholders' deficit:
Common Stock 17,031 17,031
Preferred stock -- 1,956
Additional paid in capital 2,371,836 2,369,880
Accumulated deficit (2,700,876) (3,018,013)
----------- -----------
Total stockholders' deficit (312,009) (629,146)
----------- -----------
$ 6,876,981 $ 6,200,677
=========== ===========
See accompanying notes to unaudited condensed consolidated financial statements.
1
<PAGE>
OMNI RAIL PRODUCTS, INC. & SUBSIDIARY
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Quarter Quarter
Ended Ended
July 31 July 31
1999 1998
---- ----
Sales $ 3,420,789 $ 3,642,238
Cost of sales 2,468,620 2,697,852
----------- -----------
Gross profit 952,169 944,386
Selling expenses 222,785 319,698
Administrative expenses 311,620 291,630
Engineering 14,370 35,350
Restructuring charges -- (25,000)
----------- -----------
548,775 621,678
Earnings from operations 403,394 322,708
Other income (expense):
Interest expense (117,973) (161,853)
Miscellaneous income 31,716 59,323
----------- -----------
Total other expense (86,257) (102,530)
Earnings before income taxes 317,137 220,178
Income taxes -- --
----------- -----------
Net earnings $ 317,137 $ 220,178
=========== ===========
Basic earnings per share $ 0.19 $ 0.12
=========== ===========
Diluted earnings per share $ 0.10 $ 0.12
=========== ===========
Weighted average common shares outstanding 1,703,098 1,831,681
=========== ===========
Weighted average diluted shares outstanding 3,243,990 1,831,681
=========== ===========
See accompanying notes to unaudited condensed consolidated financial statements.
2
<PAGE>
OMNI RAIL PRODUCTS, INC. & SUBSIDIARY
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
Quarter Quarter
Ended Ended
July 31 July 31
1999 1998
---- ----
Cash Flows from Operating Activities
Net Earnings $ 317,137 $ 220,178
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Depreciation 44,898 39,849
Change in assets and liabilities:
Accounts receivable (47,862) 179,072
Inventories (279,855) 343,353
Prepaid expenses and deposits (13,535) (172,897)
Accounts payable 144,193 (120,213)
Accrued liabilities (52,742) (289,710)
--------- ---------
Net cash provided by operating activities 112,234 199,632
--------- ---------
Cash Flow from Investing Activities
Proceeds from sale of plant, property & equipment -- 101,276
Purchase of plant, property & equipment (30,659) (950)
--------- ---------
Net cash provided (used) in investing activities (30,659) 100,326
Cash Flows from Financing Activities
Common stock redemption -- (18,752)
Net borrowings (payments) on notes payable 230,031 (531,251)
Net borrowings on long term debt 37,685 --
--------- ---------
Net cash provided (used) by financing activities 267,716 (550,003)
--------- ---------
Net increase (decrease) in cash and cash equivalents 349,291 (250,045)
Cash and cash equivalents at beginning of period 36,280 393,877
--------- ---------
Cash and Cash equivalents at end of period $ 385,571 $ 143,832
========= =========
See accompanying notes to unaudited condensed consolidated financial statements.
3
<PAGE>
OMNI RAIL PRODUCTS, INC. & SUBSIDIARY
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(1) INTERIM FINANCIAL INFORMATION
The Company, pursuant to the rules and regulations of the Securities and
Exchange Commission, has prepared the accompanying unaudited condensed
consolidated financial statements of OMNI Rail Products, Inc. Certain
information and footnote disclosures normally included in consolidated
financial statements prepared in accordance with generally accepted
accounting principles have been omitted pursuant to such rules and
regulations. In the opinion of Management, the condensed consolidated
financial statements include all adjustments necessary in order to make the
consolidated financial statements not misleading. Results for the period
ended July 31, 1999 are not necessarily indicative of the results that may
be expected for the fiscal year ending April 30, 2000. For further
information, refer to the consolidated financial statements and footnotes
thereto, for the fiscal year ended April 30, 1999, included in the
Company's Form 10-KSB.
(2) DESCRIPTION OF THE COMPANY, BASIS OF PRESENTATION AND CHANGE IN REPORTING
ENTITY
OMNI Rail Products, Inc., formerly Creative Medical Development, Inc. (the
"Company"), was incorporated in the state of California on July 20, 1992,
and reincorporated in the state of Delaware on June 1, 1993. The Company
designed, developed, manufactured and marketed ambulatory infusion therapy
products under the "EZ Flow" trade name.
On September 13, 1995, the Company entered into an Asset Purchase Agreement
with Gish Biomedical, Inc. ("Gish") for sale of the EZ Flow Pump technology
and product line. Under its terms, substantially all of the Company's
manufacturing related assets (with a net book value of $680,957) were sold
for $600,000 cash and $2,000,000 of Gish Stock (240,240 shares). Pursuant
to the terms of the agreement, operation of the EZ Flow business was
transferred to Gish as of September 13, 1995 and the sale closed April 17,
1996.
On April 17, 1997, the Company entered into an agreement for merger and
reorganization with OMNI International Rail Products, Inc., ("OMNI") a
privately held company in the business of manufacturing and distributing
premium highway/rail grade crossing surface products in the United States
and internationally. The agreement provided for the merger of OMNI with a
wholly owned subsidiary of the Company formed for the purposes of the
transaction. Subject to certain adjustments, the Company was valued at
$2,000,000 and OMNI was valued at $4,000,000.
OMNI, an Oregon corporation, was formed in 1994 to acquire the premium
railroad grade crossing business, subject to certain limited liabilities,
from Reidel Environmental Technologies, Inc. That business was operated by
OMNI until the merger with the Company, and its operations continue under
the Company's wholly owned subsidiary corporation OMNI Products, Inc. At
the time of the merger, the OMNI executive officers became the executive
officers of the Company and the subsidiary and all but one of the OMNI
directors became directors of the Company and its subsidiary.
4
<PAGE>
The Company's transaction with OMNI closed April 30, 1997. Subsequently,
the Company changed its fiscal year to April 30, 1997 consistent with
OMNI's fiscal year to facilitate accounting and reporting financial
results. In February 1999, at the Company's annual meeting of shareholders,
the shareholders approved an amendment to the Company's certificate of
incorporation to change the Company's name from Creative Medical
Development, Inc. to OMNI Rail Products, Inc., to better match the Company
name with its continuing business.
The transaction between CMD and OMNI is considered a reverse acquisition
for financial reporting purposes and has been accounted for under the
purchase method of accounting.
(3) COMPANY RESTRUCTURING
During Fiscal 1998, the Company began a restructuring plan to reduce the
over-capacity in its recycled rubber manufacturing operations and to
increase its concrete production capabilities. The refocus of business
stems from changes in industry demand away from recycled rubber and more
toward virgin rubber and concrete crossings. The Company ceased production
of recycled rubber during fiscal 1998 at its Portland, Oregon, and
Lancaster, Pennsylvania, plants and liquidated its recycled rubber
manufacturing equipment and real estate at both locations during fiscal
1999. Some equipment, primarily concrete forms, was transferred to the
Company's remaining facilities. At the same time the Company extended
agreements with a pre-cast concrete company to produce the Company's
proprietary concrete and rubber grade crossings, and with an extruder of
virgin rubber products to make various rail product materials of virgin
rubber.
The Company, in conjunction with its restructuring, wrote down assets to be
liquidated, wrote-off excess and obsolete recycled rubber inventory and
accrued expected shutdown and liquidation costs. The asset write-down and
inventory write-off did not have an impact on the Company's liquidity.
Other charges were recorded as liabilities and were fully paid out during
fiscal year 1999.
(4) DEBT
On August 12, 1999, the Company entered into Amendment No. 11 to Loan and
Security Agreement ("Amendment") with its Senior lender Finova Capital
Corporation, ("Finova") that extends the due date of the Company's
borrowings until August 31, 2000. Under terms of the Amendment, the Company
has a reduced line of credit facility ($1.8 million total availability,
previously $3.5 million) with interest at 1-1/2 % over prime (previously
2-1/4% over prime). The Amendment also reinstates certain financial
covenants that were previously excused under the Forbearance Agreement that
include both senior debt and total debt coverage ratios and waives all
existing defaults as defined in the Forbearance Agreement. As part of the
Amendment an unused line fee equal to1/4% of the unused line replaces the
previous $12,500 annual fixed revolver fee.
5
<PAGE>
The Amendment also extends and increases the term note borrowings to
$608,000 with interest at 2.25% over prime and monthly payments based on a
five-year term. The new term note replaces the existing capital expenditure
note and provides for an additional $371,000 of term borrowings for the
Company's use in making capital expenditures. The Amendment also permits
the Company to borrow up to an additional $500,000 from other sources.
(5) BASIC AND DILUTED NET EARNINGS PER COMMOM SHARE
Net earnings per share ("EPS") is computed based on the provisions of
Statement of Financial Accounting Standards No. 128, Earnings per Share
("SFAS 128"). Under SFAS 128, Basic EPS is computed by dividing income
available to common shareholders by the weighted-average number of common
shares outstanding during the period. Contingently issuable shares, that
are issuable for little or no cash consideration are considered outstanding
common shares and included in the computation of basic EPS as of the date
that all necessary conditions have been satisfied. The computation of
diluted EPS is similar to the computation of basic EPS except that the
denominator is increased to include the number of additional common shares
that would have been outstanding if the dilutive potential common shares
had been issued.
The following table reconciles basic earnings per common share (EPS) to
diluted EPS for the first quarter ended July 31, 1999:
Weighted Average Per share
Income Shares amount
------ ------ ------
Income available to common
Shareholders $ 317,137 1,703,098 $ 0.19
Effect of dilutive securities:
Stock options 116,668 (0.01)
Convertible notes 5,503 1,424,224 (0.08)
---------- ---------- ------
Diluted EPS $ 322,640 3,243,990 $ 0.10
========== ========== ======
The calculation of diluted earnings per share for the quarter ended July
31, 1998 excludes any potentially dilutive shares as such shares would have
an antidilutive affect.
(6) CONVERTIBLE PREFERRED STOCK SERIES B
The Company had authorized 1,000,000 shares of Series B convertible
preferred stock, of which 195,619 were issued and outstanding at April 30,
1999. The Series B preferred stock was convertible into a like number of
common shares had the Company reported gross annual revenues of $20,000,000
or annual pre-tax earnings of $1,500,000 during either of the fiscal years
ended April 30, 1998 or 1999. The Company neither reported gross annual
6
<PAGE>
revenues of $20 million, nor annual pre-tax earnings of $1.5 million during
either of such fiscal years. Accordingly, the Company cancelled the series
B preferred stock effective as of the date of the issuance of its April 30,
1999 audited consolidated financial statements.
7
<PAGE>
Item 2 Management's Discussion and Analysis of Financial Condition and Results
of Operations Background
-------------------------------------------------------------------------
As mentioned in the notes to the unaudited condensed consolidated financial
statements, the Company, on April 30, 1997, completed an agreement and plan
of merger with OMNI International Rail Products, Inc. (OMNI). For financial
reporting purposes, the transaction is considered a reverse acquisition and
has been accounted for under the purchase method of accounting. Thus, the
operating results presented and discussed herein reflect only the activity
of OMNI.
Results of Operations
---------------------
The following Selected Financial Data for the periods ended July 31, 1999
and 1998 have been derived from the unaudited financial statements of the
Company. This Selected Financial Data should be read in conjunction with,
and is qualified in its entirety by reference to, the financial statements
and related notes thereto included elsewhere in this Report.
Except for the historical information contained herein, the matters set
forth in this Report include forward-looking statements within the meaning
of the "safe harbor" provisions of the Private Securities Litigation Reform
Act of 1995. These forward-looking statements are subject to risks and
uncertainties that may cause actual results to differ materially. These
risks and uncertainties are detailed throughout this Report and are
discussed from time to time in the Company's periodic reports filed with
the Securities and Exchange Commission. The forward-looking statements
included in this Report speak only as of the date hereof.
Results of Operations -- Quarter ended July 31, 1999 compared with the
Quarter ended July 31, 1998
As of and for the Quarters Ended
July 31
--------------------------------
1999 1998
---- ----
Revenue 3,420,789 3,642,238
- As a percent of revenue:
Gross Profit 27.8% 25.9%
Earnings from Operations 11.8% 8.9%
Net earnings 9.3% 6.0%
Basic earnings per share $ 0.19 $ 0.12
Diluted earnings per share $ 0.10 $ 0.12
REVENUE
The Company derives its revenue from the sale of premium highway-rail grade
crossings to railroads, general contractors and municipalities. Revenues for the
quarter ended July 31, 1999, decreased from the same quarter last year by
$221,449 or a decrease of 6%. Total concrete crossing sales were down 47% over
the same period last year, and virgin rubber crossing sales were up 100%.
8
<PAGE>
Approximately $100,000 of fiscal 1999 sales included the Company's discontinued
recycled rubber products. Sales of recycled rubber products were eliminated by
the end of the first quarter of fiscal 1999. The change in product sales mix is
the result of buying trends of the Company's major customers. Because the
Company's largest customers have different product preferences, the wide swings
in their individual annual buying patterns have a significant impact on the
Company's product sales mix.
By the end of the first quarter in fiscal 1999 (ended July 31, 1998) the Company
had liquidated all of its recycled rubber product line and closed two recycled
rubber operations. Virgin rubber products are produced at the Company's
processing facility in McHenry, Illinois, and are also purchased through an out
source provider of virgin rubber product. The Company's year to date orders
booked through July 1999, was about 31% greater than the same period last year
and total backorder level at the end of July were 36% greater than last year.
The increase in bookings and higher back order level reflect an increasing
demand for the Company's virgin rubber products and the declining demand for
concrete products beginning in the same period last year.
COST OF SALES
Cost of sales decreased from $2,697,852 in the quarter ended July 31, 1998, to
$2,468,620 in the quarter ended July 31, 1999, or a decrease of 8.5%. The
greatest part of this decrease is directly related to lower sales. At the same
time part of the decrease, and corresponding improvement in gross margin, are
due to greater higher margin virgin rubber sales and fewer lower margin concrete
sales.
SELLING EXPENSES
Selling expenses for the quarter ended July 31, 1999, were $222,785 compared to
$319,698 for the quarter ended July 31, 1998. Lower selling expenses are mainly
due to a more than $100,000 decline in salaries and sales commissions, due to
both lower sales and a reduced sales commission rate. At the same time,
advertising, marketing and promotional expenses increased by $15,729 for costs
incurred to promote the Company's virgin rubber and concrete products.
GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expenses for the quarter ended July 31, 1999,
increased to $311,620 representing a $19,990 or 7% increase over the same
quarter last year. In the first quarter of fiscal 1999, general and
administrative salaries were dramatically reduced when the Company's then Chief
Executive Officer and Vice President of Operations were terminated and the
Company's Chief Financial Officer resigned. The Company's interim Chief
Financial Officer was paid as a consultant until August of 1998 when he accepted
a full time officer position with the Company. In October 1998, the Company's
Vice President of sales and marketing was promoted to the Company's President
and Chief Operating Officer. Salaries are up due to the addition of these two
officer positions. At the same time, several other expenses are down from last
fiscal year including travel and entertainment, bank financing fees and
insurance costs. This decline was partially offset by $22,070 in unforeseen
environmental expenses incurred as part of the Company's withdrawal from the
recycled rubber business and final departure from its Portland Oregon facility.
9
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ENGINEERING
One of the Company's engineers was laid off after the first quarter of fiscal
1999. Lower Engineering costs reflect this termination.
INTEREST EXPENSE
Interest expense for the quarter ended July 31, 1999, was $117,973 as compared
to $161,853 for the quarter ended July 31, 1998. The decrease reflects the
Company's substantial reduction of its term debt and lower borrowing on the
Company's revolving line of credit (a nearly $1.2 million reduction in the
average debt outstanding between fiscal first quarter 2000 versus 1999). The
average interest rate for the period increased by1/4% due to the increase in the
prime interest rate.
LIQUIDITY AND CAPITAL RESOURCES
At July 31, 1999, the Company had a cash balance of $385,571. The Company's
operating activities generated cash of $112,234 during the first quarter.
The net working capital deficit at July 31, 1999, amounted to $2,123,463. The
Company's current debt maturities and other short-term commitments exceed the
Company's liquid assets available to pay such obligations. The Company's largest
mortgage is due in December 1999. The Company is actively trying to sell the
property that secures this mortgage.
On August 12, 1999, the Company entered into Amendment NO. 11 to Loan and
Security Agreement ("Amendment") with its senior lender Finova Capital
Corporation, ("Finova") that extends the due date of the Company's borrowings
until August 31, 2000. Under terms of the Amendment, the Company has a reduced
line of credit facility ($1.8 million total availability, previously $3.5
million) with interest at 1-1/2 % over prime (previously 2-1/4% over prime). The
Amendment also reinstates certain financial covenants that were previously
excused under the Forbearance Agreement that include both senior debt and total
debt coverage ratios and waives all existing defaults as defined in the
Forbearance Agreement. As part of the Amendment the previous $12,500 annual
fixed revolver fee is eliminated and an unused line fee equal to 1/4% of the
unused line is put in its place.
The Amendment also extends and increases the term note borrowings to $608,000
with interest at 2.25% over prime and monthly payments based on a five-year
term. The new term note replaces the existing capital expenditure note and
provides for an additional $371,000 of term borrowings for the Company's use in
making capital expenditures. The Amendment also permits the Company to borrow up
to an additional $500,000 from other sources. Finova's debt facility and the
opportunity for additional financing will permit the Company to expand its
operating capacity to meet future needs.
The Company's capital expenditures for the quarter were $30,659.
The Company's primary source of funds is from its operations. The Company is
restricted as to the amount it can borrow from Finova based on a percent of
eligible accounts receivable and inventory. Additionally, the Company likely
will need replacement debt or equity financing after the end of the Finova
agreement on August 31, 2000. The Company's debt will require restructuring or
additional financing must be found in the event sufficient funds are not
available to payoff certain debt that comes due in fiscal 1999. There can be no
10
<PAGE>
assurance the Company will be able to complete the sale of real estate noted
above prior to the mortgage maturity date, nor can there be any assurance that
the Company will generate sufficient funds from its operations to satisfy the
working capital deficit.
The Company's stock is traded on the OTC Electronic Bulletin Board under the
ticker symbol ORXR.
OTHER INFORMATION - PART II
Item 1. Legal Proceedings
- -------------------------
Not applicable.
Item 2. Changes in Securities
- -----------------------------
Not applicable
Item 3. Defaults on Senior Securities
- -------------------------------------
Not applicable
Item 4. Submission of Matters to a Vote of Security Holders
- -----------------------------------------------------------
Not applicable
Item 5. Other Information
- -------------------------
Not applicable
Item 6. Exhibits and Reports on Form 8-K
- ----------------------------------------
(a) Exhibits
--------
10.22 Filed herein, Amendment No. 11 to Loan and Security
Agreement between the Company and Finova Capital
Corporation, including exhibits
10.23 Filed herein, Term Loan A Promissory Note between the
Company and Finova Capital Corporation.
27 Financial Data Schedule July 31, 1999.
(b) Reports on Form 8-K
-------------------
None
11
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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.
OMNI Rail Products, Inc.
- ------------------------
Registrant
September 17, 1999 /s/ Robert E. Tuzik
- ------------------ -------------------
Date Robert E. Tuzik
President and Chief Operating Officer
September 17, 1999 /s/ M. Charles Van Rossen
- ------------------ -------------------------
Date M. Charles Van Rossen
Chief Financial Officer
12
EXHIBIT 10.22
AMENDMENT NO. 11 TO
LOAN AND SECURITY AGREEMENT
BY THIS AMENDMENT NO. 11 TO LOAN AND SECURITY AGREEMENT ("Amendment") dated
as of August 12, 1999, OMNI PRODUCTS, INC., an Oregon corporation ("Borrower")
and FINOVA CAPITAL CORPORATION, a Delaware corporation, formerly known as
Greyhound Financial Corporation, a Delaware corporation ("Lender"), for good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, hereby confirm and agree as follows:
ARTICLE 1 - INTRODUCTION
1.1 Borrower and Lender previously entered into a Loan and Security
Agreement dated as of April 26, 1994, as amended by a letter agreement dated
April 29, 1994, an Amendment No. 2 To Loan and Security Agreement dated March
20, 1995, an Amendment No. 3 To Loan and Security Agreement dated October 1,
1995, a letter agreement dated July 24, 1996, Amendment No. 5 To Loan and
Security Agreement dated September 17, 1996 (referred to herein as "Amendment
No. 5"), Amendment No. 6 To Loan and Security Agreement dated December 6, 1996,
Amendment No. 7 to Loan and Security Agreement dated as of April 1, 1997,
Consent to Merger dated April 29, 1997 (the "Consent"), Amendment No. 8 To Loan
and Security Agreement dated as of August 31, 1997, Amendment No. 9 To Loan and
Security Agreement dated as of November 1, 1997, Amendment No. 11 to Loan and
Security Agreement dated as of February 9, 1998, Forbearance Agreement dated as
of June 1, 1998 (as amended from time to time, the "Forbearance Agreement") and
that Amendment to Forbearance Agreement dated as of October 15, 1998 (such loan
agreement as amended and modified and as otherwise amended or modified from time
to time being referred to herein as the "Loan Agreement"). Unless otherwise
defined herein, terms defined in the Loan Agreement are used herein as therein
defined.
1.2 Borrower and Lender wish to amend the Loan Agreement as set forth
herein and subject to the terms and conditions hereof.
ARTICLE 2 - AGREEMENT
2.1 Existing Defaults Waived. The "Existing Defaults" (as defined in the
Forbearance Agreement) are hereby deemed waived. Further, the Temporary
Overadvance Facility as referred to in section 3.2 of the Forbearance Agreement
is hereby deemed terminated and of no further force or effect and no
Overadvances shall be made to Borrower thereunder.
<PAGE>
2.2 Revised Definitions.
2.2.1 The Cap Ex Note and the Term Note are hereby amended and
restated in their entirety to read as is set forth in Term Loan A Promissory
Note, which shall be in the form of Exhibit A attached hereto (the "Term Loan A
Note"), and the defined term "Term Note" in the Loan Agreement is hereby amended
to mean, on a collective basis, the Term Loan A Note and all Term Loan B Notes
by the Borrower in favor of Lender, with each Term Loan B Note in the form of
Exhibit B attached hereto, in connection with the making of additional Term Loan
facility advances, if any, after the date hereof.
2.2.2 Each of the terms "Revolver Interest Rate", "Term Loan Interest
Rate" and "Maturity Date" are hereby amended to read, respectively, as follows:
" 'Revolver Interest Rate' shall mean a variable rate per annum equal
to the Prime Rate plus 1.50%."
" 'Term Loan Interest Rate' shall mean a variable rate per annum equal
to the Prime Rate plus 2.25%."
" 'Maturity Date' shall mean August 31, 2000."
2.3 Revised Section 2.1.1. Section 2.1.1 of the Loan Agreement is hereby
amended in its entirety to read as follows:
"2.1.1 Amount of Loans.
(a) Term Loan. The current principal amount of the Term Loan as
of August 12, 1999 is $508,396.69 (such outstanding amount of the Term
Loan facility is referred to herein as "Term Loan A.") After August
12, 1999, Borrower may borrow, subject to the terms and conditions
hereof, up to an additional $100,000 under the Term Loan facility (the
loans made under this $100,000 portion of the Term Loan facility are
collectively referred to as the "Term Loan B," provided that Term Loan
A and all draws under Term Loan B are deemed to be the Term Loan
hereunder). Minimum individual draws under Term Loan B shall be
$50,000, which may be drawn by Borrower, subject to the terms and
conditions hereof, through the Maturity Date. Each proposed Term Loan
B draw shall relate to and be in amount not to exceed eighty percent
(80%) of the cost of capital equipment purchases made by Borrower
(excluding, however, any freight, tax, and commissions associated
relating thereto), which equipment purchases shall be acceptable to
Lender. Repayment of Term Loan A shall be in accordance with the Term
Note regarding Term Loan A; repayment of each Term Loan B draw shall
be in accordance with the Term Note regarding such Term Loan B draw.
<PAGE>
PLUS
----
(b) Revolver Loan.
(i) Advance Rates. Subject to the provisions of subclauses (ii),
(iii) hereof, the Revolver Principal Balance shall at no time be in an
amount which exceeds the lesser of (A) $1,800,000 (the "Maximum
Amount") or (B) the sum of (I) the product of 85%, multiplied by all
Eligible Accounts which exist as of the date upon which a request is
made by Borrower for a Revolver Advance, plus (II) the lesser of (1)
$800,000 or (2) the product of 50%, multiplied by all Eligible
Inventory which exists as of the date upon which a request is made by
Borrower for a Revolver Advance (the amount described in this
subclause (B) hereinafter is referred to as the "Borrowing Base").
(ii) Reduction of Advance Rates. Notwithstanding anything to the
contrary in subclause (i) above, Lender may reduce its advance rates
against Eligible Accounts and/or Eligible Inventory without declaring
an Event of Default if Lender determines, in its sole discretion, that
as a result of making any Revolver Advance, there may exist a Material
Adverse Effect.
(iii) Overadvances. If, at any time, the Revolver Principal
Balance exceeds the lesser of (A) the Maximum Amount or (B) the
Borrowing Base, including, without limitation, the restriction set
forth in subclause (i)(B)(II)(l) (any such excess hereinafter being
referred to as an "Overadvance"), Borrower immediately shall pay to
Lender the amount of such Overadvance; provided, however, that for so
long as such Overadvance shall remain outstanding, such Overadvance
shall be (x) deemed to constitute a portion of Borrower's Obligations
and (y) secured by the Security Interests."
2.4 Eligible Accounts Modification.
(a) Notwithstanding anything to the contrary stated in the definition of
"Eligible Accounts" in the Loan Agreement, (1) Accounts owing from Burlington
Northern, CSX Corporation, Inc. or Union Pacific that are otherwise deemed
Eligible Accounts in accordance with the Loan Agreement shall not be deemed
ineligible if such Accounts, on a several basis for each of the above account
debtors, constitute up to 40% of all Accounts and (2) Accounts owing from
Illinois Central or Long Island Railroad that are otherwise deemed Eligible
Accounts in accordance with the Loan Agreement shall not be deemed ineligible if
such Accounts, on a several basis for each of the above account debtors,
constitute up to 30% of all Accounts.
<PAGE>
(b) Clause (xii) of the definition of "Eligible Accounts" is hereby amended
to read as follows:
"(xii) the Accounts with an Account Debtor exceed 15% of all of the
accounts of Borrower, to the extent of such excess;"
2.5 Revolver Fee Deleted; Unused Line Fee. The Revolver Fee set forth in
section 2.8.1(a) of the Loan Agreement is hereby deleted and of no further force
or effect and in its stead section 2.8.1(a) is hereby amended to read as follows
with respect to the institution of an unused line fee:
"(a) Unused Line Fee. In the event, in any month (or portion thereof at the
beginning and end of the term hereof), the average daily principal balance
of the Revolving Loans outstanding during the quarter is less than
$1,800,000, Borrower shall pay Lender an unused line fee in an amount equal
to 0.25% per annum on the difference between $1,800,000 and the average
daily principal balance of the Revolver Loans outstanding during the month,
which unused line fee shall be computed and paid monthly, in arrears, on
the first day of the following month."
2.6 Prepayment Provision. Without limitation of the terms and conditions of
the Loan Agreement, the prepayment provisions of section 2.6.1(a) and (b) of the
Loan Agreement shall be deemed to continue to apply to prepayment prior to the
Maturity Date, as amended by this Agreement, such that the lowest percentage set
forth therein, the 1% amount of the portion of the Term Loan or Revolver Loan so
prepaid, shall apply to the Borrower's prepayment of the Revolver Loan and the
Term Loan after the date hereof and prior to the Maturity Date.
2.7 Revised Section 7.15.1. Section 7.15.1 of the Loan Agreement is hereby
amended to read as follows (with the understanding that the remainder of section
7.15 shall remain in effect):
"7.15. Capital Expenditures. Make Capital Expenditures except in
accordance with the following restrictions:
7.15.1 Annual Limitation. In an individual or aggregate amount in
excess of $500,000 during any fiscal year."
2.8 Financial Covenants. Borrower shall comply with all of the following
covenants. Compliance shall be determined by FINOVA as of the end of each
quarter:
<PAGE>
2.8.1 Senior Debt Service Coverage Ratio: As of the last day of each
fiscal quarter ended July 31, October 31, January 31 and April 30 of each year
commencing with quarter ending July 31, 1999, Borrower's Senior Debt Service
Coverage Ratio for the consecutive 12-month period ending as of such last day
must be at least 1.25 : 1.00, provided that all such determinations shall be
made on a consolidated basis.
2.8.2 Total Debt Service Coverage Ratio: Borrower shall maintain a
Total Debt Service Coverage Ratio of not less than 1.10 to 1, as of the end of
each fiscal quarter of Borrower with respect to the then immediately preceding
twelve month period.
For purposes of the foregoing financial covenants, the following terms
have the following meanings:
"Senior Debt Service Coverage Ratio" means the ratio of Borrower's
Operating Cash Flow to Senior Debt Service.
"Operating Cash Flow" shall mean Borrower's net income or loss,
determined in accordance with generally accepted accounting principles, plus the
following (to the extent they were deducted from revenues in the calculation of
net income): (i) depreciation; (ii) amortization; (iii) interest expense
incurred; (iv) income taxes paid or accrued; (v) accrued (but not yet paid)
severance costs; minus all actual unfinanced capital expenditures.
"Senior Debt Service" means principal and interest payments on the
Term Loans, interest payments on the Revolving Loans, and principal and interest
payments on all other Obligations.
"Total Debt Service Coverage Ratio" means the ratio of Borrower's
Operating Cash Flow to Total Debt Service.
"Total Debt Service" means Senior Debt Service plus all permitted
payments of principal and interest on all other Indebtedness (including without
limitation all Subordinated Debt and distributions to shareholders permitted
hereunder).
PROVIDED THAT the parties hereto agree and acknowledge that payments
by Borrower of the Obligations that arise solely from the proceeds of the sales
contemplated in section 2.10 hereof shall be excluded from the denominator of
the calculations of Senior Debt Service Coverage Ratio and Total Debt Service
Coverage Ratio.
2.9 Permitted Additional Indebtedness. Section 7.1 of the Loan Agreement is
hereby amended to permit the Borrower incur Indebtedness for Borrowed Money in
an amount not to exceed $500,000 at any one time outstanding, which amount shall
be considered in addition to any other already permitted Indebtedness for
Borrowed Money
<PAGE>
2.10 Fee. Borrower shall pay to Lender a fee in the amount of $24,084 in
connection with this Amendment, which shall be in addition to interest and all
other amounts payable under the Loan Agreement and which shall not be
refundable.
2.11 Sales of Certain Property. Borrower shall proceed to sell, or cause
its subsidiaries to sell, real estate located at 870 Gold Flat Road, Nevada
City, California 95959, excess assets and excess equipment, but only in good
faith arms' length transactions. The entire proceeds of said sales, net of
reasonable expenses in connection therewith (in the case of equipment not to
exceed 4% of the gross sale price), net of real property or personal property
taxes and net of the sums due on the first trust deeds or other liens or
assessments which have priority over FINOVA's lien, shall be applied first to
the unpaid principal payments on the Term Loan (in the inverse order of their
maturity), and next to the other Borrower's Obligations in such order as FINOVA
shall determine in its discretion. Sale of such real estate shall be subject to
the prior written approval of FINOVA, which shall not be unreasonably withheld.
No prepayment premium shall be applied to any payments made under this section.
2.12 Waiver of Equipment Appraisals. Lender hereby acknowledges that no
appraisals of equipment of Borrower are being required in connection with the
extension of the Maturity Date as set forth herein.
2.13 General. Borrower will execute and deliver such further instruments
and do such things as in the judgment of Lender are necessary or desirable to
effect the intent of this Amendment and to secure the Lender the benefits of all
rights and remedies conferred upon Lender by the terms of this Amendment and any
other documents executed in connection herewith, including, without limitation,
amendments to security loan documents and financing statements. This Amendment
may not be amended or otherwise modified except in a writing duly executed by
the parties hereto. If any one or more of the provisions of this Amendment is
held to be invalid, illegal or unenforceable in any respect or for any reason
(all of which invalidating laws are waived to the fullest extent possible), the
validity, legality and enforceability of any remaining portions of such
provision(s) in every other respect and of the remaining provision(s) of this
Amendment shall not be in any respect impaired. In lieu of each such
unenforceable provision, there shall be added automatically as a part of this
Amendment a provision that is legal, valid and enforceable and is similar in
terms to such unenforceable provisions as may be possible. This Amendment
constitutes the entire agreement and understanding of the parties with respect
to the subject matter hereof and this Amendment and the Loan Documents as
amended hereby, supersedes all prior written or oral understandings and
agreements between the parties in connection with its subject matter. This
Amendment may be executed in one or more counterparts, and any number of which
having been signed by all the parties hereto shall be taken as one original.
Borrower and Lender hereby ratify and confirm the Loan Agreement, as amended
hereby, in all respects; and, except as expressly amended hereby, the Loan
Agreement shall remain in full force and effect.
IN WITNESS WHEREOF this instrument is executed as of the date set forth
above.
"BORROWER"
OMNI PRODUCTS, INC.
By: /s/ M. Charles Van Rossen
-----------------------------
Print Name: M. Charles Van Rossen
Title: V.P. Finance and Treasurer
"LENDER"
FINOVA CAPITAL CORPORATION
By:
Print Name:
Title:
<PAGE>
CONSENT AND REAFFIRMATION:
The undersigned, as party to a deed of trust in favor of FINOVA Capital
Corporation in support of the obligations owing by Borrower to FINOVA Capital
Corporation hereby consents to the foregoing Amendment, and agree that the
documents and agreements executed by the undersigned in favor of FINOVA Capital
Corporation shall remain in full force and effect.
LBI, a California general partnership
By: /s/ John E. Hart
--------------------
Title: Secretary
<PAGE>
Exhibit A
---------
TERM LOAN A PROMISSORY NOTE
---------------------------
$508,396.69 Phoenix, Arizona
August 12, 1999
FOR VALUE RECEIVED, OMNI PRODUCTS, INC., an Oregon corporation ("Borrower")
promises to pay to the order of FINOVA CAPITAL CORPORATION, a Delaware
corporation ("FINOVA"), at its offices at 355 South Grand Avenue, Suite 2400,
Los Angeles, California 90071, or at such other place or places as FINOVA may
from time to time designate in writing, the principal sum of Five Hundred Eight
Thousand Three Hundred Ninety Six Dollars and Sixty-Nine Cents ($508,396.69) or
such other sum as is outstanding with respect to the Term Loan A (as defined in
the Loan Agreement, as defined below) from time to time outstanding, plus
interest in the manner and upon the terms and conditions set forth below.
This Term Loan A Promissory Note ("Note") is made pursuant to that certain
Loan and Security Agreement dated as of April 26, 1994 between the FINOVA and
Borrower, as amended from time to time, including, without that certain
Amendment No. 11 to Loan and Security Agreement dated August 12, 1999 (as so
amended from to time, the "Loan Agreement"), the provisions of which are
incorporated herein by this reference. Capitalized terms herein, unless
otherwise noted, shall have the meaning set forth in the Loan Agreement.
1.0 Schedule of Payments; Rate and Payment of Interest; Prepayment.
1.1 This Note shall be payable as follows (subject to section 1.2 below):
a. Fifty-Nine (59) successive monthly installments of principal in an
amount equal to $8,473.28 beginning on September 1, 1999, and continuing monthly
on the first day of each month thereafter through and including July 1, 2004;
and
b. A final installment on August 1, 2004 in the amount of the
outstanding and unpaid principal balance of the Term Loan, together with all
accrued and unpaid interest thereon.
Interest on the principal balance of the Term Loan outstanding from
time to time is payable monthly in arrears on the first day of each and every
month until payment in full, and payment of interest shall begin on September 1,
1999.
1.2 Prepayment may be made under this Note in whole but not in part,
subject to the prepayment provisions set forth in the Loan Agreement, provided
that such prepayment is preceded by not less than five (5) business days prior
written notice to FINOVA and accompanied by all accrued by unpaid interest and
the full amount of the fees applicable upon such prepayment as set forth in the
Loan Agreement. Notwithstanding anything herein to the contrary, in the event
the Loan Agreement is terminated by Borrower in an election by Borrower to not
renew or for any other reason, by' FINOVA or by any other person at any time,
then the entire unpaid principal balance of this Note, together with all accrued
and unpaid interest hereon and the full amount of any applicable prepayment
amount, shall become immediately due and payable in full on the effective date
of such termination, without presentment, notice or demand of any kind.
<PAGE>
1.3 Interest shall be computed on the basis of a 360-day year for the
actual number of days elapsed, and shall be at the rate of two and one-quarter
percentage points (2.25%) above the Prime Rate (as hereinafter defined) per
annum, computed on the basis of a 360-day year; provided, however, upon the
occurrence and during the continuance of an event of default (as hereinafter
defined), interest shall accrue on the outstanding principal balance of this
Note at a default rate (the "Default Rate ) of four and one-quarter percentage
points (4.25%) above the Prime Rate per annum, and shall be payable on demand.
"Prime Rate" means, for any day, the rate of interest per annum (over a year of
360 days) announced by Citibank, N.A. (the "Bank"), from time to time, as its
"base rate" (or any successor thereto) in effect on such day. The Prime Rate is
not necessarily the lowest rate charged by the Bank. As of the date of this
Note, the Prime Rate is Eight percent (8%) per annum. The applicable rate of
interest assessed hereunder will be increased or decreased from time to time
hereafter in an amount equal to any increase or decrease hereafter made by the
Bank in the Prime Rate. A change in the Prime Rate shall be effective on the
first day following such change.
2.0 Events of Defaults, Remedies.
2.1 The occurrence of any one of the following events shall constitute a
default by Borrower under this Note (hereinafter an "Event of Default"): (a) if
Borrower fails to pay to FINOVA an installment of principal or interest
hereunder when due; (b) if Borrower fails to pay any of its Obligations (as
defined in the Loan Agreement) to FINOVA when due and payable or declared due
and payable; (c) if Borrower fails or neglects to perform, keep or observe any
term, provision, covenant, warranty or representation contained in this Note or
the Loan Agreement (other than as referred to in (a) or (b) of this paragraph),
which is required to be performed, kept or observed by Borrower or if a default
occurs under the Loan Agreement, subject to any applicable cure periods as set
forth in the Loan Agreement; or (d) the occurrence of a default or an event of
default under any agreement, instrument or document heretofore, now or at any
time or times hereafter delivered to FINOVA by Borrower or by any guarantor of
part or all of Borrower's Obligations to FINOVA.
2.2 Upon the occurrence of any Event of Default hereunder, in addition to
FINOVA's right to charge interest on the Obligations at the Default Rate: (a) at
the option of FINOVA, the entire unpaid amount of all of the Obligations,
including without limitation any applicable prepayment amount as set forth in
the Loan Agreement, shall become immediately due and payable without demand,
notice or legal process of any kind; (b) FINOVA may, at its option, without
demand, notice or legal process of any kind, exercise any and all rights and
remedies granted to it by the Loan Agreement or by any other agreement now or
hereafter existing between FINOVA and Borrower or between FINOVA and any
guarantor of part or all of Borrower's liabilities to FINOVA; and (c) FINOVA may
at its option exercise from time to time any other rights and remedies available
to it under the Uniform Commercial Code or other law of the State of Arizona.
<PAGE>
2.3 The remedies of FINOVA as provided herein and in the Loan Agreement
shall be cumulative and concurrent, and may be pursued singularly, successively,
or together, at the sole discretion of FINOVA. No act of omission or commission
of FINOVA, including specifically any failure to exercise any right, remedy or
recourse, shall be deemed to be a waiver or release of the same, such waiver or
release to be effected only through a written document executed by FINOVA and
then only to the extent specifically recited therein. A waiver or release with
reference to any one event shall not be construed as continuing, as a bar to, or
as a waiver or release of, any subsequent right, remedy or recourse as to a
subsequent event.
3.0 General Provisions.
3.1 Borrower warrants and represents to FINOVA that Borrower has used and
will continue to use the loans and advances represented by this Note solely for
proper business purposes, and consistent with all applicable laws and statutes.
3.2 This Note is secured by the Collateral described in the Loan Agreement.
3.3 Borrower waives presentment, demand and protest, notice of protest
notice of presentment and all other notices and demands in connection with the
enforcement of FINOVA's rights hereunder, except as specifically provided and
called for by this Note or the Loan Agreement, and hereby consents to, and
waives notice of, the release, addition, or substitution, with or without
consideration, of any collateral or of any person liable for payment of this
Note. Any failure of FINOVA to exercise any right available hereunder or
otherwise shall not be construed as a waiver of the right to exercise the same
or as a waiver of any other right at any other time.
3.4 If this Note is not paid when due or upon the occurrence of an Event of
Default, Borrower further promises to pay all costs of collection, foreclosure
fees, reasonable attorneys fees and expert witness fees incurred by FINOVA,
whether or not suit is filed hereon, and the fees, costs and expenses as
provided in the Loan Agreement.
3.5 The contracted for rate of interest of the loan contemplated hereby,
without limitation, shall consist of the following: (i) the interest rate set
forth on the Schedule, calculated and applied to the principal balance of this
Note in accordance with the provisions of this Note: (ii) interest after an
Event of Default, calculated and applied to the amounts due under this Note in
accordance with the provisions hereof, and (iii) all Additional Sums (as herein
defined), if any. Borrower agrees to pay an effective contracted for rate of
interest which is the sum of the above-referenced elements. All examination
fees, reasonable attorneys fees, expert witness fees, letter of credit fees,
collateral monitoring fees, closing fees, facility fees, prepayment fees,
Minimum Interest Charges, other charges, goods, things in action or any other
sums or things of value paid or payable by Borrower (collectively, the
"Additional Sums"), whether pursuant to this Note, the Loan Agreement or any
other documents or instruments in any way pertaining to this lending
transaction, or otherwise with respect to this lending transaction, that under
any applicable law may be deemed to be interest with respect to this lending
transaction, for the purpose of any applicable law that may limit the maximum
amount of interest to be charged with respect to this lending transaction, shall
be payable by Borrower as, and shall be deemed to be, additional interest and
for such purposes only, the agreed upon and "contracte for rate of interest" of
this lending transaction shall be deemed to be increased by the rate of interest
resulting from the inclusion of the Additional Sums.
<PAGE>
3.6 It is the intent of the parties to comply with the usury law of the
State of Arizona (the "Applicable Usury Law"). Accordingly, it is agreed that
notwithstanding any provisions to the contrary in this Note, or in any of the
documents securing payment hereof or otherwise relating hereto, in no event
shall this Note or such documents require the payment or permit the collection
of interest in excess of the maximum Interest Rate, then in any such event (1)
the provisions of the paragraph shall govern and control, (2) neither Borrower
nor any other person or entity now or hereafter liable for the payment hereof
shall be obligated to pay the amount of such interest to the extent that it is
in excess of the Maximum Interest Rate, (3) any such excess which may have been
collected shall be either applied as a credit against the then unpaid principal
amount hereof or refunded to Borrower, at FINOVA's option, and (4) the effective
rate of interest shall be automatically reduced to the Maximum Interest Rate. It
is further agreed, without limiting the generality of the foregoing, that to the
extent permitted by the Applicable Usury Law; (x) all calculations of interest
which are made for the purpose of determining whether such rate would exceed the
Maximum Interest Rate shall be made by amortizing, prorating, allocating and
spreading during the period of the full stated term of the loan evidenced
hereby, all interest at any time contracted for, charged or received from
Borrower or otherwise in connection with such loan; and (y) in the event that
the effective rate of interest on the loan should at any time exceed the Maximum
Interest Rate, such excess interest that would otherwise have been collected had
there been no ceiling imposed by the Applicable Usury Law shall be paid to
FINOVA from time to time, if and when the effective interest rate on the loan
otherwise fall below the Maximum Interest Rate, until the entire amount of
interest which would otherwise have been collected had there been no ceiling
imposed by the Applicable Usury Law has been paid in full. Borrower further
agrees that should the Maximum Interest Rate be increased at any time hereafter
because of a change in the Applicable Usury Law, then to the extent not
prohibited by the Applicable Usury Law, such increases shall apply to all
indebtedness evidenced hereby regardless of when incurred; but, again to the
extent not prohibited by the Applicable Usury Law, should the maximum Interest
Rate be decreased because of a change in the Applicable Usury Law, such
decreases shall not apply to the indebtedness evidenced hereby regardless of
when incurred.
3.7 FINOVA may at any time transfer this Note and FINOVA's rights in any or
all collateral securing this Note, and FINOVA thereafter shall be relieved from
all liability with respect to such collateral arising after the date of such
transfer and which is not attributable to any intentional misconduct or gross
negligence of FINOVA relating thereto.
3.8 This Note shall be binding upon Borrower and its legal representatives,
successors and assigns. Wherever possible, each provision of this Note shall be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of the Note shall be prohibited by or invalid under such
law, such provision shall be severable, and be ineffective to the extent of such
prohibition or invalidity, without invalidating the remaining provision of this
Note.
<PAGE>
THIS NOTE HAS BEEN DELIVERED FOR ACCEPTANCE BY FINOVA IN PHOENIX, ARIZONA
AND SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS (AS
OPPOSED TO THE CONFLICTS OF LAW PROVISIONS) OF THE STATE OF ARIZONA, AS THE SAME
MAY FROM TIME TO TIME BE IN EFFECT, INCLUDING, WITHOUT LIMITATION, THE UNIFORM
COMMERCIAL CODE AS ADOPTED IN ARIZONA. BORROWER HEREBY (i) IRREVOCABLY SUBMITS
TO THE JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED IN MARICOPA COUNTY,
ARIZONA OVER ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY MATTER ARISING
FROM OR RELATED TO THIS NOTE; (ii) [reserved]; (iii) IRREVOCABLY WAIVES, TO THE
FULLEST EXTENT BORROWER MAY EFFECTIVELY DO SO, THE DEFENSE OF AN INCONVENIENT
FORUM TO THE MAINTENANCE OF ANY SUCH ACTION OR PROCEEDING; (iv) AGREES THAT A
FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE
ENFORCED IN ANY OTHER JURISDICTION BY SUIT ON THE JUDGMENT OR IN ANY OTHER
MANNER PROVIDED BY LAW; (v) AGREES NOT TO INSTITUTE ANY LEGAL ACTION OR
PROCEEDING AGAINST FINOVA OR ANY OF FINOVA'S DIRECTORS, OFFICERS, EMPLOYEES,
AGENTS OR PROPERTY, CONCERNING ANY MATTER ARISING OUT OF OR RELATING TO THIS
NOTE IN ANY COURT OTHER THAN ONE LOCATED IN MARICOPA COUNTY, ARIZONA; AND (vi)
IRREVOCABLY WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION ARISING UNDER OR
IN CONNECTION WITH THIS NOTE. NOTHING IN THIS PARAGRAPH SHALL AFFECT OR IMPAIR
FINOVA'S RIGHT TO SERVE LEGAL PROCESS IN ANY MANNER PERMITTED BY LAW OR FINOVA'S
RIGHT TO BRING ANY ACTION OR PROCEEDING AGAINST BORROWER OR BORROWER'S PROPERTY
IN THE COURTS OF ANY OTHER JURISDICTION.
OMNI PRODUCTS, INC.,
an Oregon corporation
By:___________________________________
Title:
Federal Taxpayer Identification No.: 93-1127197
Address: 975 S.E. Sandy Blvd., Suite 200
Portland, Oregon 97214
<PAGE>
Exhibit B
---------
TERM LOAN B PROMISSORY NOTE
---------------------------
$___________________ Phoenix, Arizona
___________ ___, 1999
FOR VALUE RECEIVED, OMNI PRODUCTS, INC., an Oregon corporation ("Borrower")
promises to pay to the order of FINOVA CAPITAL CORPORATION, a Delaware
corporation ("FINOVA"), at its offices at 355 South Grand Avenue, Suite 2400,
Los Angeles, California 90071, or at such other place or places as FINOVA may
from time to time designate in writing, the principal sum of
_________________________ ($___________________) or such other sum as is
outstanding with respect to the Term Loan B (as defined in the Loan Agreement,
as defined below) from time to time outstanding, plus interest in the manner and
upon the terms and conditions set forth below.
This Term Loan B Promissory Note ("Note") is made pursuant to that certain
Loan and Security Agreement dated as of April 26, 1994 between the FINOVA and
Borrower, as amended from time to time, including, without that certain
Amendment No. 11 to Loan and Security Agreement dated August 12, 1999 (as so
amended from to time, the "Loan Agreement"), the provisions of which are
incorporated herein by this reference. Capitalized terms herein, unless
otherwise noted, shall have the meaning set forth in the Loan Agreement.
1.0 Schedule of Payments; Rate and Payment of Interest; Prepayment.
1.1 This Note shall be payable as follows (subject to section 1.2 below):
a. Fifty-Nine (59) successive monthly installments of principal in an
amount equal to $________________ beginning on _______________, and continuing
monthly on the first day of each month thereafter through and including
__________________; and
b. A final installment on __________________ in the amount of the
outstanding and unpaid principal balance of the Term Loan, together with all
accrued and unpaid interest thereon.
Interest on the principal balance of the Term Loan outstanding from
time to time is payable monthly in arrears on the first day of each and every
month until payment in full, and payment of interest shall begin on
___________________.
1.2 Prepayment may be made under this Note in whole but not in part,
subject to the prepayment provisions set forth in the Loan Agreement, provided
that such prepayment is preceded by not less than five (5) business days prior
written notice to FINOVA and accompanied by all accrued by unpaid interest and
the full amount of the fees applicable upon such prepayment as set forth in the
Loan Agreement. Notwithstanding anything herein to the contrary, in the event
the Loan Agreement is terminated by Borrower in an election by Borrower to not
renew or for any other reason, by FINOVA or by any other person at any time,
then the entire unpaid principal balance of this Note, together with all accrued
and unpaid interest hereon and the full amount of any applicable prepayment
amount, shall become immediately due and payable in full on the effective date
of such termination, without presentment, notice or demand of any kind.
<PAGE>
1.3 Interest shall be computed on the basis of a 360-day year for the
actual number of days elapsed, and shall be at the rate of two and one-quarter
percentage points (2.25%) above the Prime Rate (as hereinafter defined) per
annum, computed on the basis of a 360-day year; provided, however, upon the
occurrence and during the continuance of an event of default (as hereinafter
defined), interest shall accrue on the outstanding principal balance of this
Note at a default rate (the "Default Rate ) of four and one-quarter percentage
points (4.25%) above the Prime Rate per annum, and shall be payable on demand.
"Prime Rate" means, for any day, the rate of interest per annum (over a year of
360 days) announced by Citibank, N.A. (the "Bank"), from time to time, as its
"base rate" (or any successor thereto) in effect on such day. The Prime Rate is
not necessarily the lowest rate charged by the Bank. As of the date of this
Note, the Prime Rate is ___________ percent (___%) per annum. The applicable
rate of interest assessed hereunder will be increased or decreased from time to
time hereafter in an amount equal to any increase or decrease hereafter made by
the Bank in the Prime Rate. A change in the Prime Rate shall be effective on the
first day following such change.
2.0 Events of Defaults, Remedies.
2.1 The occurrence of any one of the following events shall constitute a
default by Borrower under this Note (hereinafter an "Event of Default"): (a) if
Borrower fails to pay to FINOVA an installment of principal or interest
hereunder when due; (b) if Borrower fails to pay any of its Obligations (as
defined in the Loan Agreement) to FINOVA when due and payable or declared due
and payable; (c) if Borrower fails or neglects to perform, keep or observe any
term, provision, covenant, warranty or representation contained in this Note or
the Loan Agreement (other than as referred to in (a) or (b) of this paragraph),
which is required to be performed, kept or observed by Borrower or if a default
occurs under the Loan Agreement, subject to any applicable cure periods as set
forth in the Loan Agreement; or (d) the occurrence of a default or an event of
default under any agreement, instrument or document heretofore, now or at any
time or times hereafter delivered to FINOVA by Borrower or by any guarantor of
part or all of Borrower's Obligations to FINOVA.
2.2 Upon the occurrence of any Event of Default hereunder, in addition to
FINOVA's right to charge interest on the Obligations at the Default Rate: (a) at
the option of FINOVA, the entire unpaid amount of all of the Obligations,
including without limitation any applicable prepayment amount as set forth in
the Loan Agreement, shall become immediately due and payable without demand,
notice or legal process of any kind; (b) FINOVA may, at its option, without
demand, notice or legal process of any kind, exercise any and all rights and
remedies granted to it by the Loan Agreement or by any other agreement now or
hereafter existing between FINOVA and Borrower or between FINOVA and any
guarantor of part or all of Borrower's liabilities to FINOVA; and (c) FINOVA may
at its option exercise from time to time any other rights and remedies available
to it under the Uniform Commercial Code or other law of the State of Arizona.
<PAGE>
2.3 The remedies of FINOVA as provided herein and in the Loan Agreement
shall be cumulative and concurrent, and may be pursued singularly, successively,
or together, at the sole discretion of FINOVA. No act of omission or commission
of FINOVA, including specifically any failure to exercise any right, remedy or
recourse, shall be deemed to be a waiver or release of the same, such waiver or
release to be effected only through a written document executed by FINOVA and
then only to the extent specifically recited therein. A waiver or release with
reference to any one event shall not be construed as continuing, as a bar to, or
as a waiver or release of, any subsequent right, remedy or recourse as to a
subsequent event.
3.0 General Provisions.
3.1 Borrower warrants and represents to FINOVA that Borrower has used and
will continue to use the loans and advances represented by this Note solely for
proper business purposes, and consistent with all applicable laws and statutes.
3.2 This Note is secured by the Collateral described in the Loan Agreement.
3.3 Borrower waives presentment, demand and protest, notice of protest
notice of presentment and all other notices and demands in connection with the
enforcement of FINOVA's rights hereunder, except as specifically provided and
called for by this Note or the Loan Agreement, and hereby consents to, and
waives notice of, the release, addition, or substitution, with or without
consideration, of any collateral or of any person liable for payment of this
Note. Any failure of FINOVA to exercise any right available hereunder or
otherwise shall not be construed as a waiver of the right to exercise the same
or as a waiver of any other right at any other time.
3.4 If this Note is not paid when due or upon the occurrence of an Event of
Default, Borrower further promises to pay all costs of collection, foreclosure
fees, reasonable attorneys fees and expert witness fees incurred by FINOVA,
whether or not suit is filed hereon, and the fees, costs and expenses as
provided in the Loan Agreement.
3.5 The contracted for rate of interest of the loan contemplated hereby,
without limitation, shall consist of the following: (i) the interest rate set
forth on the Schedule, calculated and applied to the principal balance of this
Note in accordance with the provisions of this Note: (ii) interest after an
Event of Default, calculated and applied to the amounts due under this Note in
accordance with the provisions hereof, and (iii) all Additional Sums (as herein
defined), if any. Borrower agrees to pay an effective contracted for rate of
interest which is the sum of the above-referenced elements. All examination
fees, reasonable attorneys fees, expert witness fees, letter of credit fees,
collateral monitoring fees, closing fees, facility fees, prepayment fees,
Minimum Interest Charges, other charges, goods, things in action or any other
sums or things of value paid or payable by Borrower (collectively, the
"Additional Sums"), whether pursuant to this Note, the Loan Agreement or any
other documents or instruments in any way pertaining to this lending
transaction, or otherwise with respect to this lending transaction, that under
any applicable law may be deemed to be interest with respect to this lending
transaction, for the purpose of any applicable law that may limit the maximum
amount of interest to be charged with respect to this lending transaction, shall
be payable by Borrower as, and shall be deemed to be, additional interest and
for such purposes only, the agreed upon and "contracte for rate of interest" of
this lending transaction shall be deemed to be increased by the rate of interest
resulting from the inclusion of the Additional Sums.
<PAGE>
3.6 It is the intent of the parties to comply with the usury law of the
State of Arizona (the "Applicable Usury Law"). Accordingly, it is agreed that
notwithstanding any provisions to the contrary in this Note, or in any of the
documents securing payment hereof or otherwise relating hereto, in no event
shall this Note or such documents require the payment or permit the collection
of interest in excess of the maximum Interest Rate, then in any such event (1)
the provisions of the paragraph shall govern and control, (2) neither Borrower
nor any other person or entity now or hereafter liable for the payment hereof
shall be obligated to pay the amount of such interest to the extent that it is
in excess of the Maximum Interest Rate, (3) any such excess which may have been
collected shall be either applied as a credit against the then unpaid principal
amount hereof or refunded to Borrower, at FINOVA's option, and (4) the effective
rate of interest shall be automatically reduced to the Maximum Interest Rate. It
is further agreed, without limiting the generality of the foregoing, that to the
extent permitted by the Applicable Usury Law; (x) all calculations of interest
which are made for the purpose of determining whether such rate would exceed the
Maximum Interest Rate shall be made by amortizing, prorating, allocating and
spreading during the period of the full stated term of the loan evidenced
hereby, all interest at any time contracted for, charged or received from
Borrower or otherwise in connection with such loan; and (y) in the event that
the effective rate of interest on the loan should at any time exceed the Maximum
Interest Rate, such excess interest that would otherwise have been collected had
there been no ceiling imposed by the Applicable Usury Law shall be paid to
FINOVA from time to time, if and when the effective interest rate on the loan
otherwise fall below the Maximum Interest Rate, until the entire amount of
interest which would otherwise have been collected had there been no ceiling
imposed by the Applicable Usury Law has been paid in full. Borrower further
agrees that should the Maximum Interest Rate be increased at any time hereafter
because of a change in the Applicable Usury Law, then to the extent not
prohibited by the Applicable Usury Law, such increases shall apply to all
indebtedness evidenced hereby regardless of when incurred; but, again to the
extent not prohibited by the Applicable Usury Law, should the maximum Interest
Rate be decreased because of a change in the Applicable Usury Law, such
decreases shall not apply to the indebtedness evidenced hereby regardless of
when incurred.
3.7 FINOVA may at any time transfer this Note and FINOVA's rights in any or
all collateral securing this Note, and FINOVA thereafter shall be relieved from
all liability with respect to such collateral arising after the date of such
transfer and which is not attributable to any intentional misconduct or gross
negligence of FINOVA relating thereto.
3.8 This Note shall be binding upon Borrower and its legal representatives,
successors and assigns. Wherever possible, each provision of this Note shall be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of the Note shall be prohibited by or invalid under such
law, such provision shall be severable, and be ineffective to the extent of such
prohibition or invalidity, without invalidating the remaining provision of this
Note.
<PAGE>
THIS NOTE HAS BEEN DELIVERED FOR ACCEPTANCE BY FINOVA IN PHOENIX, ARIZONA
AND SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS (AS
OPPOSED TO THE CONFLICTS OF LAW PROVISIONS) OF THE STATE OF ARIZONA, AS THE SAME
MAY FROM TIME TO TIME BE IN EFFECT, INCLUDING, WITHOUT LIMITATION, THE UNIFORM
COMMERCIAL CODE AS ADOPTED IN ARIZONA. BORROWER HEREBY (i) IRREVOCABLY SUBMITS
TO THE JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED IN MARICOPA COUNTY,
ARIZONA OVER ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY MATTER ARISING
FROM OR RELATED TO THIS NOTE; (ii) [reserved]; (iii) IRREVOCABLY WAIVES, TO THE
FULLEST EXTENT BORROWER MAY EFFECTIVELY DO SO, THE DEFENSE OF AN INCONVENIENT
FORUM TO THE MAINTENANCE OF ANY SUCH ACTION OR PROCEEDING; (iv) AGREES THAT A
FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE
ENFORCED IN ANY OTHER JURISDICTION BY SUIT ON THE JUDGMENT OR IN ANY OTHER
MANNER PROVIDED BY LAW; (v) AGREES NOT TO INSTITUTE ANY LEGAL ACTION OR
PROCEEDING AGAINST FINOVA OR ANY OF FINOVA'S DIRECTORS, OFFICERS, EMPLOYEES,
AGENTS OR PROPERTY, CONCERNING ANY MATTER ARISING OUT OF OR RELATING TO THIS
NOTE IN ANY COURT OTHER THAN ONE LOCATED IN MARICOPA COUNTY, ARIZONA; AND (vi)
IRREVOCABLY WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION ARISING UNDER OR
IN CONNECTION WITH THIS NOTE. NOTHING IN THIS PARAGRAPH SHALL AFFECT OR IMPAIR
FINOVA'S RIGHT TO SERVE LEGAL PROCESS IN ANY MANNER PERMITTED BY LAW OR FINOVA'S
RIGHT TO BRING ANY ACTION OR PROCEEDING AGAINST BORROWER OR BORROWER'S PROPERTY
IN THE COURTS OF ANY OTHER JURISDICTION.
OMNI PRODUCTS, INC.,
an Oregon corporation
By:___________________________________
Title:
Federal Taxpayer Identification No.: 93-1127197
Address: 975 S.E. Sandy Blvd., Suite 200
Portland, Oregon 97214
Exhibit A
---------
EXHIBIT 10.23
TERM LOAN A PROMISSORY NOTE
---------------------------
$508,396.69 Phoenix, Arizona
August 12, 1999
FOR VALUE RECEIVED, OMNI PRODUCTS, INC., an Oregon corporation ("Borrower")
promises to pay to the order of FINOVA CAPITAL CORPORATION, a Delaware
corporation ("FINOVA"), at its offices at 355 South Grand Avenue, Suite 2400,
Los Angeles, California 90071, or at such other place or places as FINOVA may
from time to time designate in writing, the principal sum of Five Hundred Eight
Thousand Three Hundred Ninety Six Dollars and Sixty-Nine Cents ($508,396.69) or
such other sum as is outstanding with respect to the Term Loan A (as defined in
the Loan Agreement, as defined below) from time to time outstanding, plus
interest in the manner and upon the terms and conditions set forth below.
This Term Loan A Promissory Note ("Note") is made pursuant to that certain
Loan and Security Agreement dated as of April 26, 1994 between the FINOVA and
Borrower, as amended from time to time, including, without that certain
Amendment No. 11 to Loan and Security Agreement dated August 12, 1999 (as so
amended from to time, the "Loan Agreement"), the provisions of which are
incorporated herein by this reference. Capitalized terms herein, unless
otherwise noted, shall have the meaning set forth in the Loan Agreement.
1.0 Schedule of Payments; Rate and Payment of Interest; Prepayment.
1.1 This Note shall be payable as follows (subject to section 1.2 below):
a. Fifty-Nine (59) successive monthly installments of principal in an
amount equal to $8,473.28 beginning on September 1, 1999, and continuing monthly
on the first day of each month thereafter through and including July 1, 2004;
and
b. A final installment on August 1, 2004 in the amount of the
outstanding and unpaid principal balance of the Term Loan, together with all
accrued and unpaid interest thereon.
Interest on the principal balance of the Term Loan outstanding from
time to time is payable monthly in arrears on the first day of each and every
month until payment in full, and payment of interest shall begin on September 1,
1999.
1.2 Prepayment may be made under this Note in whole but not in part,
subject to the prepayment provisions set forth in the Loan Agreement, provided
that such prepayment is preceded by not less than five (5) business days prior
written notice to FINOVA and accompanied by all accrued by unpaid interest and
the full amount of the fees applicable upon such prepayment as set forth in the
Loan Agreement. Notwithstanding anything herein to the contrary, in the event
the Loan Agreement is terminated by Borrower in an election by Borrower to not
renew or for any other reason, by FINOVA or by any other person at any time,
then the entire unpaid principal balance of this Note, together with all accrued
and unpaid interest hereon and the full amount of any applicable prepayment
amount, shall become immediately due and payable in full on the effective date
of such termination, without presentment, notice or demand of any kind.
<PAGE>
1.3 Interest shall be computed on the basis of a 360-day year for the
actual number of days elapsed, and shall be at the rate of two and one-quarter
percentage points (2.25%) above the Prime Rate (as hereinafter defined) per
annum, computed on the basis of a 360-day year; provided, however, upon the
occurrence and during the continuance of an event of default (as hereinafter
defined), interest shall accrue on the outstanding principal balance of this
Note at a default rate (the "Default Rate ) of four and one-quarter percentage
points (4.25%) above the Prime Rate per annum, and shall be payable on demand.
"Prime Rate" means, for any day, the rate of interest per annum (over a year of
360 days) announced by Citibank, N.A. (the "Bank"), from time to time, as its
"base rate" (or any successor thereto) in effect on such day. The Prime Rate is
not necessarily the lowest rate charged by the Bank. As of the date of this
Note, the Prime Rate is Eight percent (8%) per annum. The applicable rate of
interest assessed hereunder will be increased or decreased from time to time
hereafter in an amount equal to any increase or decrease hereafter made by the
Bank in the Prime Rate. A change in the Prime Rate shall be effective on the
first day following such change.
2.0 Events of Defaults, Remedies.
2.1 The occurrence of any one of the following events shall constitute a
default by Borrower under this Note (hereinafter an "Event of Default"): (a) if
Borrower fails to pay to FINOVA an installment of principal or interest
hereunder when due; (b) if Borrower fails to pay any of its Obligations (as
defined in the Loan Agreement) to FINOVA when due and payable or declared due
and payable; (c) if Borrower fails or neglects to perform, keep or observe any
term, provision, covenant, warranty or representation contained in this Note or
the Loan Agreement (other than as referred to in (a) or (b) of this paragraph),
which is required to be performed, kept or observed by Borrower or if a default
occurs under the Loan Agreement, subject to any applicable cure periods as set
forth in the Loan Agreement; or (d) the occurrence of a default or an event of
default under any agreement, instrument or document heretofore, now or at any
time or times hereafter delivered to FINOVA by Borrower or by any guarantor of
part or all of Borrower's Obligations to FINOVA.
2.2 Upon the occurrence of any Event of Default hereunder, in addition to
FINOVA's right to charge interest on the Obligations at the Default Rate: (a) at
the option of FINOVA, the entire unpaid amount of all of the Obligations,
including without limitation any applicable prepayment amount as set forth in
the Loan Agreement, shall become immediately due and payable without demand,
notice or legal process of any kind; (b) FINOVA may, at its option, without
demand, notice or legal process of any kind, exercise any and all rights and
remedies granted to it by the Loan Agreement or by any other agreement now or
hereafter existing between FINOVA and Borrower or between FINOVA and any
guarantor of part or all of Borrower's liabilities to FINOVA; and (c) FINOVA may
at its option exercise from time to time any other rights and remedies available
to it under the Uniform Commercial Code or other law of the State of Arizona.
<PAGE>
2.3 The remedies of FINOVA as provided herein and in the Loan Agreement
shall be cumulative and concurrent, and may be pursued singularly, successively,
or together, at the sole discretion of FINOVA. No act of omission or commission
of FINOVA, including specifically any failure to exercise any right, remedy or
recourse, shall be deemed to be a waiver or release of the same, such waiver or
release to be effected only through a written document executed by FINOVA and
then only to the extent specifically recited therein. A waiver or release with
reference to any one event shall not be construed as continuing, as a bar to, or
as a waiver or release of, any subsequent right, remedy or recourse as to a
subsequent event.
3.0 General Provisions.
3.1 Borrower warrants and represents to FINOVA that Borrower has used and
will continue to use the loans and advances represented by this Note solely for
proper business purposes, and consistent with all applicable laws and statutes.
3.2 This Note is secured by the Collateral described in the Loan Agreement.
3.3 Borrower waives presentment, demand and protest, notice of protest
notice of presentment and all other notices and demands in connection with the
enforcement of FINOVA's rights hereunder, except as specifically provided and
called for by this Note or the Loan Agreement, and hereby consents to, and
waives notice of, the release, addition, or substitution, with or without
consideration, of any collateral or of any person liable for payment of this
Note. Any failure of FINOVA to exercise any right available hereunder or
otherwise shall not be construed as a waiver of the right to exercise the same
or as a waiver of any other right at any other time.
3.4 If this Note is not paid when due or upon the occurrence of an Event of
Default, Borrower further promises to pay all costs of collection, foreclosure
fees, reasonable attorneys fees and expert witness fees incurred by FINOVA,
whether or not suit is filed hereon, and the fees, costs and expenses as
provided in the Loan Agreement.
3.5 The contracted for rate of interest of the loan contemplated hereby,
without limitation, shall consist of the following: (i) the interest rate set
forth on the Schedule, calculated and applied to the principal balance of this
Note in accordance with the provisions of this Note: (ii) interest after an
Event of Default, calculated and applied to the amounts due under this Note in
accordance with the provisions hereof, and (iii) all Additional Sums (as herein
defined), if any. Borrower agrees to pay an effective contracted for rate of
interest which is the sum of the above-referenced elements. All examination
fees, reasonable attorneys fees, expert witness fees, letter of credit fees,
collateral monitoring fees, closing fees, facility fees, prepayment fees,
Minimum Interest Charges, other charges, goods, things in action or any other
sums or things of value paid or payable by Borrower (collectively, the
"Additional Sums"), whether pursuant to this Note, the Loan Agreement or any
other documents or instruments in any way pertaining to this lending
transaction, or otherwise with respect to this lending transaction, that under
any applicable law may be deemed to be interest with respect to this lending
transaction, for the purpose of any applicable law that may limit the maximum
amount of interest to be charged with respect to this lending transaction, shall
be payable by Borrower as, and shall be deemed to be, additional interest and
for such purposes only, the agreed upon and "contracte for rate of interest" of
this lending transaction shall be deemed to be increased by the rate of interest
resulting from the inclusion of the Additional Sums.
<PAGE>
3.6 It is the intent of the parties to comply with the usury law of the
State of Arizona (the "Applicable Usury Law"). Accordingly, it is agreed that
notwithstanding any provisions to the contrary in this Note, or in any of the
documents securing payment hereof or otherwise relating hereto, in no event
shall this Note or such documents require the payment or permit the collection
of interest in excess of the maximum Interest Rate, then in any such event (1)
the provisions of the paragraph shall govern and control, (2) neither Borrower
nor any other person or entity now or hereafter liable for the payment hereof
shall be obligated to pay the amount of such interest to the extent that it is
in excess of the Maximum Interest Rate, (3) any such excess which may have been
collected shall be either applied as a credit against the then unpaid principal
amount hereof or refunded to Borrower, at FINOVA's option, and (4) the effective
rate of interest shall be automatically reduced to the Maximum Interest Rate. It
is further agreed, without limiting the generality of the foregoing, that to the
extent permitted by the Applicable Usury Law; (x) all calculations of interest
which are made for the purpose of determining whether such rate would exceed the
Maximum Interest Rate shall be made by amortizing, prorating, allocating and
spreading during the period of the full stated term of the loan evidenced
hereby, all interest at any time contracted for, charged or received from
Borrower or otherwise in connection with such loan; and (y) in the event that
the effective rate of interest on the loan should at any time exceed the Maximum
Interest Rate, such excess interest that would otherwise have been collected had
there been no ceiling imposed by the Applicable Usury Law shall be paid to
FINOVA from time to time, if and when the effective interest rate on the loan
otherwise fall below the Maximum Interest Rate, until the entire amount of
interest which would otherwise have been collected had there been no ceiling
imposed by the Applicable Usury Law has been paid in full. Borrower further
agrees that should the Maximum Interest Rate be increased at any time hereafter
because of a change in the Applicable Usury Law, then to the extent not
prohibited by the Applicable Usury Law, such increases shall apply to all
indebtedness evidenced hereby regardless of when incurred; but, again to the
extent not prohibited by the Applicable Usury Law, should the maximum Interest
Rate be decreased because of a change in the Applicable Usury Law, such
decreases shall not apply to the indebtedness evidenced hereby regardless of
when incurred.
3.7 FINOVA may at any time transfer this Note and FINOVA's rights in any or
all collateral securing this Note, and FINOVA thereafter shall be relieved from
all liability with respect to such collateral arising after the date of such
transfer and which is not attributable to any intentional misconduct or gross
negligence of FINOVA relating thereto.
3.8 This Note shall be binding upon Borrower and its legal representatives,
successors and assigns. Wherever possible, each provision of this Note shall be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of the Note shall be prohibited by or invalid under such
law, such provision shall be severable, and be ineffective to the extent of such
prohibition or invalidity, without invalidating the remaining provision of this
Note.
THIS NOTE HAS BEEN DELIVERED FOR ACCEPTANCE BY FINOVA IN PHOENIX, ARIZONA
AND SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS (AS
OPPOSED TO THE CONFLICTS OF LAW PROVISIONS) OF THE STATE OF ARIZONA, AS THE SAME
MAY FROM TIME TO TIME BE IN EFFECT, INCLUDING, WITHOUT LIMITATION, THE UNIFORM
COMMERCIAL CODE AS ADOPTED IN ARIZONA. BORROWER HEREBY (i) IRREVOCABLY SUBMITS
TO THE JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED IN MARICOPA COUNTY,
ARIZONA OVER ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY MATTER ARISING
FROM OR RELATED TO THIS NOTE; (ii) [reserved]; (iii) IRREVOCABLY WAIVES, TO THE
FULLEST EXTENT BORROWER MAY EFFECTIVELY DO SO, THE DEFENSE OF AN INCONVENIENT
FORUM TO THE MAINTENANCE OF ANY SUCH ACTION OR PROCEEDING; (iv) AGREES THAT A
FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE
ENFORCED IN ANY OTHER JURISDICTION BY SUIT ON THE JUDGMENT OR IN ANY OTHER
MANNER PROVIDED BY LAW; (v) AGREES NOT TO INSTITUTE ANY LEGAL ACTION OR
PROCEEDING AGAINST FINOVA OR ANY OF FINOVA'S DIRECTORS, OFFICERS, EMPLOYEES,
AGENTS OR PROPERTY, CONCERNING ANY MATTER ARISING OUT OF OR RELATING TO THIS
NOTE IN ANY COURT OTHER THAN ONE LOCATED IN MARICOPA COUNTY, ARIZONA; AND (vi)
IRREVOCABLY WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION ARISING UNDER OR
IN CONNECTION WITH THIS NOTE. NOTHING IN THIS PARAGRAPH SHALL AFFECT OR IMPAIR
FINOVA'S RIGHT TO SERVE LEGAL PROCESS IN ANY MANNER PERMITTED BY LAW OR FINOVA'S
RIGHT TO BRING ANY ACTION OR PROCEEDING AGAINST BORROWER OR BORROWER'S PROPERTY
IN THE COURTS OF ANY OTHER JURISDICTION.
OMNI PRODUCTS, INC.,
an Oregon corporation
By: /s/ M. Charles Van Rossen
-----------------------------
Title: V.P. Finance and Treasurer
Federal Taxpayer Identification No.: 93-1127197
Address: 975 S.E. Sandy Blvd., Suite 200
Portland, Oregon 97214
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> APR-30-2000
<PERIOD-END> JUL-31-1999
<CASH> 385,571
<SECURITIES> 0
<RECEIVABLES> 1,566,199
<ALLOWANCES> 40,000
<INVENTORY> 1,610,518
<CURRENT-ASSETS> 3,587,064
<PP&E> 3,924,061
<DEPRECIATION> 634,144
<TOTAL-ASSETS> 6,876,981
<CURRENT-LIABILITIES> 5,710,527
<BONDS> 0
0
0
<COMMON> 17,031
<OTHER-SE> (329,040)
<TOTAL-LIABILITY-AND-EQUITY> 6,876,981
<SALES> 3,420,789
<TOTAL-REVENUES> 3,420,789
<CGS> 2,468,620
<TOTAL-COSTS> 548,775
<OTHER-EXPENSES> (31,716)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 117,973
<INCOME-PRETAX> 317,137
<INCOME-TAX> 0
<INCOME-CONTINUING> 317,137
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 317,137
<EPS-BASIC> .19
<EPS-DILUTED> .10
</TABLE>
