UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of Earliest Event Reported) March 17, 2005
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NOVO NETWORKS, INC.
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(Exact Name of Registrant as Specified in Its Charter)
Delaware 0-28579 75-2233445
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(State or Other (Commission (IRS Employer
Jurisdiction of Incorporation) File Number) Identification No.)
6440 North Central Expressway, Suite 620, 75206
Dallas, Texas
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(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code (214) 777-4100
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2311 Cedar Springs Road, Suite 400, Dallas, Texas 75201
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(Former Name or Former Address, if Changed Since Last Report)
Item 2.03. Creation of a Direct Financial Obligation or an
Obligation under an Off-Balance Sheet Arrangement of a Registrant
As previously reported, the Registrant entered into an asset
purchase agreement with Berliner Communications, Inc. ("Berliner")
and the Registrant's wholly owned subsidiary, BCI Communications,
Inc. ("BCI"), whereby BCI acquired substantially all of the assets
(the "Berliner Assets") and assumed certain of the liabilities of
Berliner (the "Transaction"). The Registrant acquired title to
the Berliner Assets subject to a lien on all such assets to secure
outstanding borrowings of approximately $432,000 (the "Outstanding
Amount") under a $1,250,000 credit facility between Presidential
Financial Corporation of Delaware Valley ("Presidential") and
Berliner. In order to facilitate the transition between Berliner
Communications and BCI after the Transaction, BCI agreed to enter
into a similar credit facility with Presidential, which is
described in more detail below. The effect of the arrangement
between BCI and Presidential is to transfer the Outstanding Amount
from Berliner to BCI.
On March 17, 2005, BCI, as borrower, became obligated under a
loan and security agreement (the "Loan Agreement") with
Presidential, as lender. Under the terms of the Loan Agreement,
BCI is entitled to request that Presidential make loans to BCI
from time to time in an amount up to (i) 81% of the value of
certain receivables owned by BCI and approved by Presidential as
collateral or (ii) a total of $1,250,000, with such amounts being
secured by a blanket security interest in favor of Presidential
that covers all of BCI's receivables, accounts and securities,
inventory, furniture, fixtures and equipment, other property and
proceeds of all of the foregoing. Advances by Presidential are at
its sole discretion.
In connection with the closing of the Loan Agreement, the
Registrant became obligated under a guaranty and suretyship
agreement (the "Guaranty") in favor of Presidential, pursuant to
which the Registrant unconditionally guaranteed the prompt and
punctual payment, when due, and at all times thereafter, of all
obligations and indebtedness of any and every kind and nature due
or payable to Presidential by BCI. In the event BCI is unable to
pay any amounts owed to Presidential, the Registrant would be
liable, pursuant to the Guaranty, for such amounts upon the same
terms and conditions as BCI would be liable.
Along with the Loan Agreement, BCI entered into a promissory
note (the "Note) as borrower, with Presidential, as lender,
pursuant to which, BCI agreed to repay Presidential the amount of
the borrowings under the Loan Agreement plus interest thereon and
certain fees and expenses. Under the Note, the outstanding
principal and interest is to be repaid to Presidential by BCI at
anytime after October 22, 2005, on demand, plus interest at the
rate of 2% per annum above the daily prime rate of interest as
quoted in The Wall Street Journal and calculated on the basis of a
360-day year. If neither BCI nor Presidential give notice to
terminate the Note within 60 days prior to October 22, 2005, the
outstanding principal and interest payable by BCI to Presidential
under the Note will not become payable on demand until the
expiration of another eight-month period, and for consecutive
eight-month periods after such time if notice to terminate is not
given by either party within 60 days prior to the expiration of
each such eight-month period.
Upon the occurrence of any one or more of the following, or
at any time thereafter, Presidential, at its option, may terminate
any obligation to extend any additional credit, make additional
advances or make any other financial accommodation to BCI and may
declare all of the
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obligations under the Loan Agreement and the Note to be immediately
due and payable: (i) failure of BCI or the Registrant to pay any
amounts due under the Loan Agreement when due or perform any
agreement, covenant or promise under the Loan Agreement or any other
agreement with Presidential; (ii) any default of BCI or the
Registrant in the payment or performance of any other liabilities to
any other creditor that results in the acceleration of such
liabilities; (iii) failure by BCI or the Registrant to furnish
current financial information to Presidential upon request; (iv)
failure by BCI or the Registrant to observe or perform any agreement,
covenant or promise contained in any agreement executed in connection
with the granting of a security interest in any of the collateral
under the Loan Agreement; (v) any warranty, representation or
statement made to Presidential by BCI or the Registrant in connection
with the extension of credit under the Note proving to have been false
in any material respect when made; (vi) any loss, theft, substantial
damage, destruction, sale, foreclosure or encumbrance to any of
the collateral under the Loan Agreement; (vii) the death,
dissolution, termination of existence, insolvency, business
failure, or appointment of a receiver for any part of the property
of BCI or the Registrant; (viii) any discontinuance or termination
of any guaranty of any of the obligations of BCI under the Loan
Agreement by the Registrant; (ix) any amendment or termination of
a financing statement naming BCI as debtor and Presidential as
secured party, or any corrective statement with respect thereto,
without the consent of Presidential; (x) any receivable remaining
unpaid for a period of 91 days from the date of any advance under
the Note with respect thereto; (xi) if the collateral declines in
value or, for any reason, becomes insufficient in Presidential's
sole and exclusive judgment to secure the repayment of the
obligations under the Loan Agreement and Note, and BCI, after
demand, fails or refuses to substitute or make additions to the
collateral, or pay down the obligations satisfactory to
Presidential; or (xii) Presidential deeming itself insecure as to
the ability of BCI to repay the obligations under the Note and
Loan Agreement, or as to the sufficiency of the collateral.
Furthermore, under the Note, interest is payable by BCI to
Presidential on the outstanding principal amount of all loans made
pursuant to the Note on the 15th and last day of each month. In
addition to the interest provided for under the Note, BCI must pay
a service charge equal to 1% of the gross amount of each
receivable invoice against which Presidential advances funds to
BCI. This percentage increases to 2% and 3% if the number of days
between the advance and repayment of the advance increases to 31-
60 days and 61-90 days, respectively (the "Applicable Percentage").
If the number of days between the advance and repayment of the
advance increases above 90 days, a 1.5% service charge over and
above the Applicable Percentage will accrue for each 15-day period
for which said advance remains unpaid. In the event that a notice
of termination is delivered by BCI to Presidential, and BCI fails
to repay all sums outstanding under the Note by the end of the
applicable time period, the 1% service charge increases to 1.25%,
multiplied by the invoice for each 30-day period up to 90 days,
after which time, the 1.5% service charge described above takes
effect. The minimum service charge due under the Note is $1,500
per month.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act
of 1934, as amended, the Registrant has duly caused this report to
be signed on its behalf by the undersigned hereunto duly
authorized.
NOVO NETWORKS, INC.
Date: March 23, 2005 By: /s/ Richard Berliner
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Name: Richard Berliner
Title: Chief Executive Officer
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