Exhibit 10
Interim Funding Agreement
between UVS, MDS and WOF
UV SYSTEMS TECHNOLOGY INC.
TERM SHEET
June 5, 1998
1.0 SHARE STRUCTURE
The purpose of this term sheet is to summarize the principal terms and
conditions of the proposed third round financing of UV Systems Technology Inc.
("UVST" or the "Company") by Working Opportunity Fund (EVCC) Ltd. ("WOF" or the
"Fund"). The contents of this document cannot be conveyed under any
circumstances in any manner whatsoever to anyone other than the Company and its
Directors without the prior written consent of WOF.
This financing is one which will require concessions by all concerned if it is
to become effective and is made on the understanding that other shareholders are
unable to provide further financial support. The intention of the financing is
to help the Company finance operations for approximately 12 months and to
demonstrate that system customers are prepared to accept the Company's
technology. All shareholders may participate on a pro rata basis of this
transaction if they wish.
2.0 PROPOSED INVESTMENT: $900,000
The proposed investment will consist of a demand subordinated debenture on all
of the Company's assets, including but not limited to technology, subject only
to prior conventional chartered bank lending. The loan will bear interest at 10%
compounded annually, payable monthly. The principal amount is due in full five
years and one day from the date of disbursement or upon default. Repayable in
full upon sale of the Company, change of control of the Company, sale of all or
substantially all of the Company's assets or if SSI sells any of its shares in
the Company. Default will consist of late or no payment of interest, default
under any other financial obligation (except payables, may be extended to 60
days), upon action taken against the Company by any creditor or by inability to
meet financial obligations as they come due. Additional conditions of default
may be required as legal documentation proceeds.
3.0 USE OF PROCEEDS
Proceeds will be used to provide working capital for 12 months of operations in
accordance with the Company's cash flow projections. Financing will be staged
and released as the Company meets its budgets. Final terms and conditions of
staging will be defined prior to closing of this financing.
4.0 CONDITIONS PRECEDENT TO CLOSING
The following terms and conditions shall be agreed to and completed prior to or
at closing:
(28) MDS will sell one half of its common shares to WOF for a total of $1.00
and will sell $500,000 of its Class "A" Preferred Shares to WOF for a
total of $1.00.
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(29) All Shareholders will waive accrued interest on their shareholder loans.
(30) SSI will convert its shareholder loan (approximately $1,100,000) and MDS
will convert $500,000 of its Class "A" Preferred Shares to Class X
Preferred Shares. These shares will be retractable by the holders only
if there is a sale of the Company or an IPO which values the equity of
the Company, including WOF's Class "A" Preferred Shares, but excluding
the Class X Preferred Shares at $20 million. If not retracted within 4
years from the date of closing of this loan, the Preferred Shares will
be redeemable in full by the Company for $1.00 in total.
(31) Existing shareholder loans from WOF and MDS will rank pari passu behind
the $900,000 loan contemplated herein. Interest will be paid at the
rate of 10%, accruing for the first 18 months from the date of close of
the $900,000 loan. The all due date of the two shareholders loans will
be the same as for the $900,000 loan and default clauses will reflect
those of the $900,000 loan.
(32) Appropriate amendments will be made to the shareholders agreement. MDS
will continue to be entitled to such information as it deems necessary
and may attend Board meetings as an observer. The Fund may appoint 2
members to the Board of Directors SSI will appoint 1, and the Company's
CEO will be on the Board. The fifth member will be an outsider
acceptable to WOF and SSI.
(33) Further shareholders agreement amendments will be required by WOF as
they relate to piggyback, rights of first refusal and other items.
(34) In the event of default under its loans, the Fund will have the right to
sell the Company in its entirely, without the need to enforce its
security.
(35) WOF Board and regulatory approvals.
5.0 CONFIDENTIALITY
No disclosure or announcement, public or otherwise, in respect of this Term
Sheet or the transactions contemplated herein will be made by any party hereto
without the prior agreement of the other party as to timing, content and method,
provided that the obligations herein will not prevent any party from making,
after consultation with the other party, such disclosure as its counsel advises
is required by any applicable legislation. The Fund may issue a post closing
public notice of this transaction.
6.0 OBLIGATION
This Term Sheet is not meant to be legally binding and enforceable except for
Section 4 - Fees and Expenses, and Section 5 - Confidentiality. Until
negotiation and execution of definitive agreements relating to the transactions
contemplated herein, neither party shall be bound to the other for damages for
failure to agree upon formal and final definitive agreements but the Company
will be bound to pay, within 15 days from date of invoice, all of the Funds
expenses as outlined in Section 5 that were incurred in good faith in
expectation of Closing. Notwithstanding the foregoing, following the execution
of this document, the Fund will proceed with its due diligence investigation of
the Company and the parties herein will proceed in good faith toward Closing.
7.0 CLOSING
This transaction shall close no later than June 29, 1998.
This Term Sheet is open for acceptance until June 10, 1998.
Agreed to this 10th day of June, 1998
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"Xxxx Xxxxxxxx"
------------------------------------
Working Opportunity Fund (EVCC) Ltd.
"Xxx Xxxxxxxx"
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Service Systems International Ltd.
"X X Xxxxx"
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UV. Systems Technology Inc.
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